As filed with Securities and Exchange Commission on September 24, 1999.
Registration Statement No. 333-_______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
Form SB-2
Registration Statement Under The Securities Act of 1933
----------------------
Bay National Corporation
(Name of Small Business Issuer in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Maryland 6021 52-2083046
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
2328 West Joppa Road
Baltimore, Maryland 21093
410/494-2580
(Address and telephone number of principal executive offices and principal
place of business)
Hugh W. Mohler, President Copies To:
Bay National Corporation Kenneth B. Abel, Esquire
2328 West Joppa Road Frank C. Bonaventure, Jr., Esquire
Baltimore, Maryland 21093 Ober, Kaler, Grimes & Shriver
410/494-2580 A Professional Corporation
120 E. Baltimore Street
Baltimore, Maryland 21202
410/347-7394
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
DOLLAR PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PRICE PER UNIT PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 1,500,000 Shares $10.00 $15,000,000 $4,170
</TABLE>
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>
RED HERRING LEGEND:
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 1999
900,000 SHARES (MINIMUM)
1,500,000 SHARES (MAXIMUM)
BAY NATIONAL CORPORATION
[LOGO]
COMMON STOCK
$10.00 PER SHARE
---------------------------
This is an initial public offering of shares of common stock of Bay
National Corporation, and no public market currently exists for our common
stock. We are offering these shares to fund the start-up of a new national bank.
The offering price will be $10.00 per share. We will not apply for listing of
the common stock on any stock exchange or on The Nasdaq Stock Market.
Because we are selling these shares on a best efforts, minimum/maximum
basis, we will not sell any shares unless we receive subscriptions for at least
900,000 shares. Until we receive subscriptions for 900,000 shares, investors'
money will be deposited in an escrow account with Brown Brothers Harriman & Co.
The minimum share purchase is 1,000 shares, although we may permit smaller
purchases at our discretion. This offering will end on January 31, 2000, or
earlier if we sell all of the shares before that date. In addition, we have the
option to extend the offering until March 31, 2000. We will not extend the
offering beyond March 31, 2000.
---------------------------
INVESTING IN THE COMMON STOCK INVOLVES SUBSTANTIAL RISK. YOU SHOULD
READ CAREFULLY THE SECTION CALLED "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS
PROSPECTUS.
We will not engage a broker-dealer to sell the common stock in this
offering. Therefore, we will receive all of the offering proceeds without
deducting any commissions or fees.
<TABLE>
<CAPTION>
PER TOTAL TOTAL
SHARE MINIMUM MAXIMUM
------- --------- ----------
<S> <C> <C> <C>
Public Offering Price......................................$10.00 $9,000,000 $15,000,000
Underwriting Discounts and Commissions.....................None None None
Proceeds to Bay National Corporation.......................$10.00 $9,000,000 $15,000,000
</TABLE>
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THE COMMON STOCK DOES NOT REPRESENT A DEPOSIT ACCOUNT OR OTHER
OBLIGATION OF OUR PROPOSED BANKING SUBSIDIARY. THE COMMON STOCK IS NOT AND WILL
NOT BE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is ____________,1999.
<PAGE>
PROSPECTUS SUMMARY
Because this is a summary, it does not contain all of the information
that may be important to you. You should read carefully the entire prospectus,
including the information under "Risk Factors," before making any decision to
buy our common stock.
BAY NATIONAL CORPORATION AND BAY NATIONAL BANK
Bay National Corporation was incorporated in Maryland on June 3, 1999,
to operate as a bank holding company. Subject to regulatory approvals, we will
use at least $9,000,000 of the net proceeds of this offering and our
organizational offering to purchase all of the shares of the common stock of a
proposed federally-chartered commercial bank to be named Bay National Bank.
A group of individuals active in business, professional, banking,
financial and charitable activities in the Baltimore, Maryland metropolitan area
and the Eastern Shore of Maryland are organizing Bay National Bank because they
believe that the banking needs of certain segments of these communities are not
being served adequately by existing banks. In particular, Bay National Bank will
emphasize meeting the banking needs of small and mid-sized businesses, the
owners of these businesses and their employees, business professionals and high
net worth individuals. Bay National Bank has not yet opened and will not do so
unless we complete this offering and obtain the approvals of the Office of the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System and the Federal Deposit Insurance Corporation.
We anticipate that Bay National Bank will open in the first quarter of
2000, although we may encounter any number of delays. The main office of Bay
National Corporation and Bay National Bank is located at 2328 West Joppa Road,
Baltimore, Maryland 21093, and our telephone number is (410) 494-2580. In
addition, Bay National Bank will establish a branch office located at 109 Poplar
Hill Avenue, Salisbury, Maryland 21801. See "Proposed Business of Bay National
Corporation" and "Proposed Business of Bay National Bank" for more information
about us, our proposed banking subsidiary and our business plans.
THE OFFERING
Shares Offered Minimum of 900,000 and
maximum of 1,500,000 shares of
common stock. We must receive
acceptable subscriptions for a
minimum of 900,000 shares before we
will sell any shares in this
offering.
Subscription Price $10.00 per share.
Termination Date January 31, 2000, unless we
terminate the offering earlier or
extend it to a date not later than
March 31, 2000.
Minimum Subscription 1,000 shares ($10,000), although we
may permit smaller subscriptions at
our discretion.
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Maximum Subscription Twenty percent (20%) of the
total number of shares sold in the
offering. If an entity will own five
percent (5%) or more or an individual
will own ten percent (10%) or more of
the common stock outstanding after the
offering, the entity or individual must
file certain information or applications
with bank regulatory agencies prior to
purchasing shares in the offering. We
may reduce or reject, in whole or in
part, any subscription at our sole
discretion. See "The Offering."
Gross Proceeds of the Offering $9,000,000 if the minimum number of
shares are subscribed. $15,000,000 if
the maximum number of shares are
subscribed.
Use of Proceeds We will use at least $9,000,000 of the
net proceeds of this offering and our
organizational offering to purchase all
of the shares of common stock of Bay
National Bank. If we do not contribute
additional net proceeds to Bay National
Bank, we will invest those funds in
insured bank deposits and/or short-term
U.S. government and agency securities
until we use those funds for corporate
purposes or to make further
contributions to Bay National Bank's
capital.
Bay National Bank will spend the funds
received from Bay National Corporation
to pay certain organizational and
operating costs, to furnish and equip
facilities for Bay National Bank and for
working capital and general corporate
purposes of Bay National Bank. See "Use
of Proceeds."
RISK FACTORS
An investment in the common stock involves substantial risk. You should
carefully read the section called "Risk Factors."
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<PAGE>
RISK FACTORS
An investment in the common stock involves substantial risks. You
should carefully read the following, together with the other information in this
prospectus, before making a decision to purchase the common stock.
WE HAVE NO OPERATING HISTORY UPON WHICH TO EVALUATE OUR FUTURE SUCCESS,
AND WE DO NOT EXPECT TO BE PROFITABLE INITIALLY. Bay National Corporation and
Bay National Bank are in the process of organization and neither has any prior
operating history. Our profitability will depend on the results of operations of
our principal asset, Bay National Bank. We expect that Bay National Bank will
incur operating losses during its initial years of operation and may not achieve
profitability, if at all, for at least two years. If we decide to open
additional offices, that decision may further delay profitability because of the
increased expenses of expansion and because the new offices may not enhance our
results of operations as anticipated.
IF OUR REGULATORY APPROVALS ARE DELAYED OR DENIED, YOU COULD LOSE YOUR
INVESTMENT. If offering proceeds are released from escrow but Bay National Bank
fails to receive final regulatory approvals or does not open for any other
reason, we intend to propose that the stockholders approve a plan to liquidate
and dissolve Bay National Corporation. If Bay National Corporation is dissolved,
its net assets (generally consisting of the amounts received in this offering
and amounts received in our organizational offering, plus any interest earned on
those amounts, less the amount of all costs and expenses incurred by Bay
National Corporation) would be distributed to stockholders. The amounts
distributed in liquidation to stockholders may be substantially less than the
amount the stockholders paid for their shares of stock. See "The Offering" for
more information about the effect of a dissolution.
WE WILL DEPEND HEAVILY ON OUR KEY PERSONNEL, INCLUDING MR. HUGH W.
MOHLER, MR. JOHN S. DIPIETRO AND MR. THOMAS M. NEALE, AND OUR BUSINESS WOULD
SUFFER IF SOMETHING WERE TO HAPPEN TO ANY OF THESE OFFICERS OR IF ANY OF THEM
WERE TO LEAVE. Mr. Mohler will be the president and chief executive officer of
Bay National Bank, Mr. DiPietro will be the vice president - operations, senior
operating officer and senior financial officer of Bay National Bank and Mr.
Neale will be the vice president - client services and senior lending officer of
Bay National Bank. Each of these individuals will provide valuable services to
us and each would be difficult to replace. If any of these individuals were to
leave for any reason, our business would suffer. We intend to carry key man life
insurance on each of these officers, payable to Bay National Bank, in an amount
of $1,000,000 per officer. In addition, because our business will be
relationship driven, the loss of an employee who has primary contact with one or
more of our clients could have a material adverse effect on our operations.
OUR LENDING STRATEGY INVOLVES RISKS RESULTING FROM OUR CHOICE OF LOAN
PORTFOLIO. We expect that Bay National Bank's loan portfolio will be made up
largely of commercial business loans and commercial real estate loans for
owner-occupied properties. Bay National Bank will also offer construction loans,
consumer loans and mortgage loans for owner-occupied residential properties,
although we expect that most of the residential mortgage loans will be sold in
the secondary market. Commercial business and commercial real estate loans
generally carry a higher degree of credit risk than do residential mortgage
loans because of several factors including larger loan balances, dependence on
the successful operation of a business or a project
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<PAGE>
for repayment, or loan terms with a balloon payment rather than full
amortization over the loan term. See "Proposed Business of Bay National
Bank--Loan Portfolio" for more information about our proposed loan portfolio and
the associated lending risks.
FUTURE PROVISIONS FOR LOAN LOSSES COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS. Bay National Bank will maintain an allowance for loan losses to
provide for loan defaults and nonperformance. The allowance will be based on,
among other things, prior experience with loan losses and an evaluation of the
risks in the current portfolio. Because Bay National Bank is a new bank with no
prior loan experience, future adjustments may be necessary if economic,
operating and other conditions differ substantially from the assumptions used in
making the initial allowance determinations. In addition, we anticipate that Bay
National Bank's allowance for loan losses will increase in the future as it
expands its lending activities. Also, regulatory agencies may require Bay
National Bank to add to the allowance based on their judgments when they conduct
examinations of Bay National Bank.
WE CANNOT GUARANTEE THAT OUR EXPANSION STRATEGIES WILL BE SUCCESSFUL.
We may expand our business in the future by opening additional offices in
strategic market locations outside of North Baltimore and Salisbury, Maryland
and will consider other opportunities when they arise. At this time, we have not
identified any new market locations or other opportunities. Our success in
expanding our business will depend on, among other things, our ability to obtain
regulatory approvals, our access to capital, our ability to manage growth and
our ability to attract and train qualified employees. We cannot guarantee that
we will be able to do any of these things. See "Proposed Business of Bay
National Bank" for more information about our business plans.
GOVERNMENT REGULATION MIGHT NEGATIVELY IMPACT OUR OPERATING RESULTS.
Bay National Corporation and Bay National Bank will operate in a highly
regulated environment and will be subject to examination, supervision and
comprehensive regulation by several federal and state regulatory agencies.
Banking regulations, designed primarily for the safety of depositors, may limit
the growth of Bay National Bank and the return to investors by restricting
activities such as the payment of dividends; mergers with, or acquisitions by,
other institutions; investments; loans and interest rates; interest rates paid
on deposits and the creation of branch offices. Laws and regulations could
change at any time, and changes could adversely affect our business. In
addition, the cost of compliance with regulatory requirements could adversely
affect our ability to operate profitably. See "Supervision and Regulation" for
more information about applicable banking regulations.
OUR LENDING LIMIT MAY LIMIT OUR GROWTH. We will be limited in the
amount we can loan to a single borrower by the amount of Bay National Bank's
capital. Specifically, under current law, we may lend up to 15% of Bay National
Bank's unimpaired capital and surplus to any one borrower. Furthermore, until
Bay National Bank is profitable, our capital will decrease which will result in
a decrease to our lending limit. Our lending limit will be significantly less
than that of many of our competitors and may discourage potential borrowers who
have credit needs in excess of our lending limit to do business with us. We
intend to accommodate larger loans by selling participations in those loans to
other financial institutions, but this strategy may not succeed.
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<PAGE>
BAY NATIONAL BANK WILL FACE SUBSTANTIAL COMPETITION WHICH COULD
ADVERSELY AFFECT OUR GROWTH AND OPERATING RESULTS. Bay National Bank will
operate in a competitive market for financial services and will face intense
competition from other financial institutions both in making loans and in
attracting deposits. Many of these financial institutions have been in business
for many years, are significantly larger, have established customer bases, have
greater financial resources and lending limits than will Bay National Bank, and
are able to offer certain services that Bay National Bank will not be able to
offer. See "Proposed Business of Bay National Bank--Competition" for more
information about competition in our market area.
BAY NATIONAL BANK'S ABILITY TO COMPETE MAY SUFFER IF IT CANNOT TAKE
ADVANTAGE OF TECHNOLOGY BECAUSE IT WILL NOT HAVE A LARGE BRANCH NETWORK. Our
business strategy relies less on our customers' access to a large branch network
and more on access to technology and personal relationships. Further, the market
for financial services is increasingly affected by advances in technology,
including developments in telecommunications, data processing, computers,
automation, Internet-based banking, telephone banking, debit cards and so-called
"smart" cards. Our ability to compete successfully may depend on the extent to
which we can take advantage of technological changes and the extent to which our
customers embrace technology to do their banking transactions. More information
about our plans to provide these types of services appears under the caption
"Proposed Business of Bay National Bank--Other Banking and Financial Services."
THE COMPUTER SYSTEMS OF OUR DATA PROCESSING FIRM OR OUR BORROWERS COULD
FAIL TO OPERATE AS A RESULT OF THE YEAR 2000 ISSUE. The much publicized Year
2000 Issue is the result of computer programs using two digits rather than four
to define a year. Computer programs with date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. Problems with
software used for bank operations could cause disruptions to operations,
including the temporary inability to process transactions or engage in similar
routine business activities. In addition, the Year 2000 Issue increases
transaction risks with third parties, including customers. If we or our data
processing vendor fail to achieve Year 2000 compliance by the time we open for
business in 2000, our earnings, cash flows and overall financial condition could
be adversely affected. In addition to risks relating to internal Year 2000
compliance, we may be vulnerable to the failure of our borrowers to remedy their
own Year 2000 issues. We have provided more information about the Year 2000
Issue under the caption "Management's Plan of Operation--Year 2000."
OUR BOARD OF DIRECTORS ESTABLISHED AN ARBITRARY OFFERING PRICE, WHICH
MAY NOT REFLECT THE VALUE OF AN INVESTMENT IN OUR STOCK. Our board of directors
arbitrarily determined the offering price of the shares offered by this
prospectus. We did not engage an independent investment banking firm to assist
in determining the offering price. The $10.00 per share price bears no
relationship to the assets, earnings, book value or other established measures
of value of Bay National Corporation or Bay National Bank. In fixing the price,
the board considered primarily the subscription prices of securities offered by
other newly organized financial institutions and bank holding companies.
WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE. Bay
National Bank will be the wholly owned subsidiary of Bay National Corporation
and, initially, will be our principal source of revenue. We anticipate that Bay
National Bank will incur losses during its initial phase
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<PAGE>
of operations, and we do not expect to pay any dividends for at least the first
three years of our operations. Even if Bay National Bank and Bay National
Corporation have earnings in an amount sufficient to pay dividends, we intend to
reinvest earnings for the purpose of funding the growth of Bay National
Corporation and Bay National Bank. See "Dividend Policy" and "Supervision and
Regulation--Dividends" for information about factors affecting our ability to
pay dividends.
IF WE DON'T SELL THE MINIMUM OFFERING, YOU WILL HAVE LOST THE USE OF
YOUR SUBSCRIPTION FUNDS WHILE THEY ARE HELD IN ESCROW. The common stock is being
sold through certain directors and officers of Bay National Corporation. No
broker-dealer will assist us in the offering. Because the offering is not
underwritten, the sale of the minimum number of shares is not guaranteed. If the
minimum number of shares is not subscribed for, subscriber funds will be
returned with interest, but subscribers will have lost the ability to invest
their funds in a higher yielding investment during the offering.
WE MAY NOT BE SUCCESSFUL IN ESTABLISHING A NEW BANK. As a newly
organized institution we will rely or have relied on our officers and directors
to locate and establish appropriate facilities for Bay National Bank, hire
staff, develop and implement marketing and business development strategies and
identify and evaluate potential lines of business in addition to Bay National
Bank's core commercial banking functions. The Board of Directors and officers
will have substantial discretion in these matters, and we cannot guarantee that
they will be successful in establishing a new bank in a competitive market.
WE DO NOT EXPECT THAT OUR STOCK WILL HAVE AN ACTIVE TRADING MARKET.
While the common stock will be freely transferable by most investors in this
offering immediately upon issuance, we do not anticipate an active market for
trading following this offering. You should only invest in the common stock if
you have a long-term investment objective. If an active market does not develop,
you may not be able to sell your shares promptly or perhaps at all. At this
time, we do not intend to list the common stock on any national securities
exchange or on The Nasdaq Stock Market. See "The Offering--Limited Market for
Shares" for more information about trading of our shares.
BAY NATIONAL CORPORATION MANAGEMENT AND THEIR AFFILIATES MAY HAVE THE
POWER TO BLOCK CERTAIN STOCKHOLDER APPROVALS. Directors and officers of Bay
National Corporation have indicated their intention to purchase approximately
100,000 shares in the offering. The shares purchased in the offering, together
with shares of common stock currently owned by the directors and officers, would
result in the directors and officers owning approximately 17.53% of the shares
if the minimum number of shares is sold and approximately 11.01% of the shares
if the maximum number of shares is sold. Directors and officers or persons
related or affiliated with them may purchase additional shares in the offering
and may purchase shares upon the exercise of warrants or options which have or
may be granted to them. If more than 20% of the shares outstanding after the
offering are held by directors, officers and their affiliates, then this group
could, by voting against a proposal submitted to stockholders, block the
approval of any proposal which requires the affirmative vote of 80% of the
stockholders. Those proposals include certain business combinations and charter
amendments. See "Description of Capital Stock" for more information about
stockholder voting and other charter provisions.
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IF WE ISSUE ADDITIONAL STOCK IN THE FUTURE, YOUR PERCENTAGE OF
OWNERSHIP OF BAY NATIONAL CORPORATION WILL BE REDUCED. As a stockholder of Bay
National Corporation, you will not have preemptive rights with respect to the
issuance of additional shares of common stock or the issuance of any other class
of stock. This means that if we decide to issue additional shares of stock, you
will not automatically be entitled to purchase additional shares to maintain
your percentage ownership. If addition, if we sell additional shares in the
future, it is possible that those shares may be issued on terms more favorable
than the terms of this offering.
THE EXERCISE OF WARRANTS AND STOCK OPTIONS WILL CAUSE DILUTION AND MAY
ADVERSELY AFFECT THE VALUE OF THE COMMON STOCK. We have issued to purchasers in
the organizational offering warrants to purchase one share of common stock at
$10.00 per share for every two shares that they purchased in the organizational
offering. Because 112,500 shares of common stock were purchased in the
organizational offering, we issued warrants to purchase 56,250 shares of common
stock. In addition, after the offering, we will adopt a stock option plan which
will permit us to grant options to our officers, directors and employees. Under
the plan, we intend to grant options to Messrs. Mohler, DiPietro and Neale to
purchase an aggregate of 6% of the shares of common stock outstanding after the
offering at an exercise price of $10.00 per share. The exercise of warrants or
options would dilute your ownership interest in Bay National Corporation. See
"Certain Transactions" and "Management--Stock Option Plans" for more information
about the warrants and options.
Some of the information in this prospectus may include "forward-looking
statements." These statements use words such as "may," "will," "expect,"
"anticipate," "plan," "estimate" or similar words, and they discuss our future
expectations, projections of financial results or strategies that are subject to
risks and uncertainties. When you read a forward-looking statement, you should
keep in mind the risk factors described above and any other information
contained in this prospectus which identifies a risk or uncertainty. Our actual
results and the actual outcome of our expectations and strategies could be
different from what we have described in this prospectus because of these risks
and uncertainties.
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BAY NATIONAL CORPORATION AND BAY NATIONAL BANK
Bay National Corporation was incorporated under the laws of the State
of Maryland on June 3, 1999, to operate as a bank holding company. We will file
an application with the Board of Governors of the Federal Reserve System
("Federal Reserve Board") for approval to become a bank holding company pursuant
to the Bank Holding Company Act of 1956, and to purchase all of the capital
stock to be issued by Bay National Bank.
We will file an application to organize Bay National Bank with the
Office of the Comptroller of the Currency ("OCC"). The application will assume
the sale of all of the shares of Bay National Bank's common stock to Bay
National Corporation for an aggregate price of $9,000,000. Depending on the
amount of money we raise in the offering, we may purchase additional shares of
common stock of Bay National Bank, or otherwise contribute additional proceeds
to Bay National Bank, or retain a portion of the additional proceeds in Bay
National Corporation. See "Use of Proceeds." We also will file an application
for insurance of Bay National Bank's deposits with the Federal Deposit Insurance
Corporation ("FDIC").
We anticipate that Bay National Bank will open in the first quarter of
2000. However, our ability to meet the targeted opening date depends upon a
number of factors which may be beyond our control, including the timely
completion of this offering and the receipt of approvals by the bank regulatory
agencies. Any delay in the commencement of operations could increase the
estimated pre-opening expenses of Bay National Bank.
Bay National Corporation and Bay National Bank have not commenced
active business operations and neither will do so unless this offering is
successfully completed and Bay National Bank meets the conditions of the OCC to
commence the business of banking and of the FDIC to receive deposit insurance.
Bay National Corporation also must obtain approval from the Federal Reserve
Board to become a bank holding company.
THE OFFERING
GENERAL
We are offering for sale a minimum of 900,000 and a maximum of
1,500,000 shares of common stock at a price of $10.00 per share. No shares will
be sold unless we receive acceptable subscriptions for a minimum of 900,000
shares. We expect that directors and officers of Bay National Corporation and
Bay National Bank will purchase approximately 100,000 of the shares offered.
We must receive subscriptions to purchase shares no later than 5:00
p.m., Eastern time, on January 31, 2000, unless we elect to terminate or extend
the offering. We reserve the right to terminate the offering at any time prior
to January 31, 2000, or to extend the expiration date to March 31, 2000.
Investors must subscribe to purchase a minimum of 1,000 shares (for a minimum
investment of $10,000), subject to our right to permit smaller subscriptions at
our discretion. If an entity will own five percent (5%) or more or an individual
will own ten percent (10%) or more of the common stock outstanding after the
offering, the entity or individual must
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file certain information or applications with bank regulatory agencies prior to
purchasing shares in the offering.
We will not engage a broker-dealer and will not pay any underwriting
discounts or commissions for the sale of the shares. Directors and officers of
Bay National Corporation will solicit subscriptions from prospective
stockholders. The directors and officers will not receive any special
compensation for such services but will be reimbursed for reasonable expenses.
METHOD OF SUBSCRIPTION
If you wish to purchase shares, you must complete and sign the
Subscription Agreement accompanying this prospectus and deliver the completed
Subscription Agreement to Bay National Corporation prior to the termination date
of the offering, together with payment in full of the subscription price of all
shares subscribed for. Such payment must be by check or bank draft drawn upon a
U.S. bank, payable to "Brown Brothers Harriman & Co., Escrow Agent for Bay
National Corporation." If you wish to wire funds to our escrow account, you may
call Bay National Corporation at (410) 494-2580 to obtain wiring instructions.
IF PAYING BY UNCERTIFIED PERSONAL CHECK, YOU SHOULD ALLOW AT LEAST FIVE BUSINESS
DAYS PRIOR TO THE TERMINATION DATE FOR THE FUNDS TO CLEAR.
We will deposit all funds in the Bay National Corporation escrow
account. Pending closing of the offering, funds will be invested in bank
accounts, short-term certificates of deposit or short-term securities issued or
guaranteed by the United States government.
The address to which Subscription Agreements and payment of the
subscription price should be delivered is:
Bay National Corporation
2328 West Joppa Road
Suite 120
Baltimore, Maryland 21093
Attention: Hugh W. Mohler, President
Telephone No.: (410) 494-2580
WE RECOMMEND THAT YOU SEND YOUR SUBSCRIPTION AGREEMENT AND PAYMENT BY
REGISTERED MAIL, RETURN RECEIPT REQUESTED, AND ALLOW A SUFFICIENT NUMBER OF DAYS
FOR DELIVERY AND CLEARANCE OF PAYMENT PRIOR TO THE TERMINATION DATE OF THE
OFFERING. THE FULL SUBSCRIPTION PRICE FOR THE SHARES SUBSCRIBED FOR MUST BE
INCLUDED WITH THE SUBSCRIPTION AGREEMENT. FAILURE TO INCLUDE THE FULL
SUBSCRIPTION PRICE WITH THE SUBSCRIPTION AGREEMENT MAY CAUSE US TO REJECT THE
SUBSCRIPTION.
ESCROW ACCOUNT; RETURN OF FUNDS UPON FAILURE TO COMPLETE THE OFFERING OR UPON
LIQUIDATION
We established an escrow account at Brown Brothers Harriman & Co.,
Philadelphia, Pennsylvania, for deposit of all subscription funds. Brown
Brothers Harriman & Co. is a state
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chartered private commercial bank subject to examination and regulation by the
Department of Banking of the Commonwealth of Pennsylvania. Subscription funds
may be invested temporarily in bank accounts, short-term certificates of deposit
or short-term securities issued or guaranteed by the United States government.
If the offering is not completed for any reason, all subscription funds will be
returned to investors together with their respective pro-rata share of any
interest earned on the subscription funds.
We have the right to break escrow, receive the funds in the escrow
account and issue shares of common stock to subscribers at any time after we
receive acceptable subscriptions for 900,000 shares and the preliminary approval
of Bay National Bank's charter by the OCC. Such preliminary approval does not
authorize Bay National Bank to open for business. That authority will not be
granted until we obtain insurance of Bay National Bank's deposits by the FDIC
and satisfy any other conditions imposed by the OCC.
We cannot guarantee that Bay National Bank will receive final approval
to commence business from all applicable regulatory agencies. If we elect to
break escrow prior to Bay National Bank's receipt of final approvals to commence
business, but such approvals are not ultimately obtained, your funds will be
irrevocably invested in the common stock. However, we would not be able to
implement our plan to own and operate a newly formed bank. In that event, we
would likely begin liquidation proceedings and distribute investor funds,
without interest, as soon as possible after completion of those proceedings.
Prior to any distributions to investors, all incurred expenses would be
paid. Accordingly, the amounts distributed in liquidation to investors may be
substantially less than the amount the investors paid for their shares of stock.
We cannot estimate what the amount of liquidation proceeds would be.
ACCEPTANCE, CANCELLATION AND REFUNDING OF SUBSCRIPTIONS
Although subscribers may not revoke their subscriptions, Subscription
Agreements are not binding on us until we accept them and we authorize the
release of offering proceeds from escrow. We reserve the right to reject, at our
sole discretion, any Subscription Agreement or to allot a smaller number of
shares than the number for which a person has subscribed. In addition, we
reserve the right to cancel any subscription, for any reason in our sole
discretion, before we authorize the release of offering proceeds from escrow. In
determining the number of shares to allot to each subscriber in the event the
offering is oversubscribed or otherwise, we may take into account the order in
which subscriptions were received; a subscriber's potential to do business with,
or to direct customers to, Bay National Bank; our desire to have a broad
distribution of stock ownership and legal or regulatory restrictions.
If we reject all or a portion of any subscription, or if we cancel all
or a portion of any subscription before offering proceeds are released from
escrow, the escrow agent will promptly refund to the subscriber the amount
submitted, or the rejected or canceled portion thereof, without interest or
deduction. If for any reason the offering is not completed, all subscription
funds will be promptly refunded to subscribers together with their respective
pro-rata share of any interest earned on the subscription funds. After all
refunds have been made, the escrow
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agent, Bay National Corporation, Bay National Bank and their respective
directors, officers and agents will have no further liability to subscribers.
Certificates representing shares duly subscribed and paid for will be
issued by Bay National Corporation as soon as practicable after funds are
released to Bay National Corporation by the escrow agent.
LIMITED MARKET FOR SHARES
Except for shares held by Bay National Corporation's directors and
certain officers, the shares sold in the offering will be freely transferable
immediately upon issuance and will not be subject to any transfer restrictions.
However, we do not anticipate that an active trading market for the shares will
develop in the foreseeable future. After the offering, we will encourage
broker-dealers to match buy and sell orders, or "make a market" for our common
stock on the OTC Bulletin Board. Although we anticipate that one or more
broker-dealers will be willing to make a market in our common stock, as of the
date of this prospectus no broker-dealer has committed to doing so. The trading
markets for securities on the OTC Bulletin Board typically lack the depth,
liquidity and orderliness necessary to maintain a liquid market. A liquid public
market depends on having enough buyers and sellers at any given time. Because
this is a relatively small offering, we do not expect to have enough
stockholders or outstanding shares to support an active trading market.
USE OF PROCEEDS
The proceeds to Bay National Corporation from the sale of the shares
will be $9,000,000 if the minimum number of shares is sold and $15,000,000 if
the maximum number of shares is sold, before deducting expenses of the
offering, which include legal, accounting and filing expenses, and are estimated
at $165,000. The proceeds to Bay National Corporation from the organizational
offering was $1,125,000.
We will use $9,000,000 of the net proceeds of this offering and the
organizational offering to purchase all of the common stock of Bay National
Bank. We will pay all of the organizational and offering expenses and certain
operating costs of Bay National Corporation from the proceeds of this offering
and the organizational offering, in an estimated aggregate amount of $565,000.
The balance of the proceeds from this offering and the organizational offering,
estimated to be $560,000 if the minimum number of shares is sold, or $6,560,000
if the maximum number of shares is sold, will be retained by Bay National
Corporation for general corporate purposes. However, we may decide to contribute
all or a portion of the balance of the proceeds to Bay National Bank. As a
condition to the approval of Bay National Bank's charter or its establishment of
a Salisbury, Maryland, branch, bank regulators may require that we contribute
more than $9,000,000 to Bay National Bank's capital.
Bay National Bank will apply the proceeds from the sale of its
capital stock to Bay National Corporation to pay for certain of its
organizational and prepaid operating costs in an estimated amount of $41,000 and
to furnish and equip Bay National Bank's two offices at an estimated cost of
$745,000. The balance of the proceeds, estimated at $8,214,000, will be used
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to fund lending activities, to provide working capital for expansion and for
general corporate purposes, including the purchase of investment securities.
The following table reflects the anticipated allocation of the gross
proceeds of this offering and the organizational offering.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
MINIMUM NET MAXIMUM NET
AMOUNT PROCEEDS (1) AMOUNT PROCEEDS(1)
--------------- ------------ ------------ -----------
BAY NATIONAL CORPORATION:
<S> <C> <C> <C> <C>
Gross Offering Proceeds......................... $ 10,125,000 $16,125,000
Offering Expenses............................... $ 165,000 $ 165,000
--------------- -----------
Net Offering Proceeds........................... $ 9,960,000 100.00% $15,960,000 100.00%
Purchase of Stock of Bank/
Capital Contributions..................... $ 9,000,000 90.36% $ 9,000,000 56.39%
Salary and Benefits............................. $ 310,000 3.11% $ 310,000 1.94%
Other Pre-Opening Expenses...................... $ 90,000 0.91% $ 90,000 0.57%
Working Capital................................. $ 560,000 5.62% $ 6,560,000 41.10%
BAY NATIONAL BANK:
Proceeds of Capital Contributions
by Bay National Corporation............... $ 9,000,000 100.00% $ 9,000,000 100.00%
Leasehold and Equipment Acquisition............. $ 690,000 7.67% $ 690,000 7.67%
Other Pre-Opening and Occupancy
Expenses.................................. $ 55,000 0.61% $ 55,000 0.61%
Registration and Filing Fees.................... $ 15,000 0.17% $ 15,000 0.17%
Prepaid Operating Expenses...................... $ 26,000 0.29% $ 26,000 0.29%
Working Capital................................. $ 8,214,000 91.26% $8,214,000 91.26%
</TABLE>
(1) Percent of net proceeds, in the case of Bay National Bank, is
calculated on the basis of percent of net proceeds contributed to Bay
National Bank by Bay National Corporation.
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CAPITALIZATION
The following table shows Bay National Corporation's capitalization as
of August 31, 1999 and the pro forma consolidated capitalization of Bay National
Corporation and Bay National Bank as adjusted to give effect to (i) the sale of
900,000 shares and (ii) the sale of 1,500,000 shares, at a price of $10.00 per
share, less estimated offering expenses of $165,000 and estimated pre-opening
expenses (other than leasehold and equipment expenses and pre-paid operating
expenses of Bay National Bank) in an aggregate amount of $470,000.
<TABLE>
<CAPTION>
MINIMUM NUMBER OF MAXIMUM NUMBER OF
STOCKHOLDERS' EQUITY: AUGUST 31, 1999(1) SHARES SOLD SHARES SOLD
------------------ ----------------- ------------------
<S> <C> <C> <C>
Common Stock, $0.01 par value; 9,000,000
shares authorized; 112,500 shares
outstanding; 1,012,500 shares
outstanding (minimum offering); and
1,612,500 shares outstanding
(maximum offering)........................ $ 1,125 $ 10,125 $ 16,125
Preferred Stock, $0.01 par value;
1,000,000 shares authorized; no
shares outstanding........................ -- -- --
Additional paid-in capital(2).................. 1,123,875 9,949,875 15,943,875
Deficit accumulated during development
stage..................................... (109,909) (470,000) (470,000)
---------- ------------ -------------
Total stockholders' equity..................... $ 1,015,091 $ 9,490,000 $ 15,490,000
Net tangible book value per share $ 9.02 $ 9.37 $ 9.61
</TABLE>
(1) This represents shares of common stock sold in the organizational offering.
(2) Estimated offering expenses of $165,000 will be charged against this
account.
DIVIDEND POLICY
We expect that Bay National Corporation will retain all earnings, if
any, in order to provide more funds to operate and expand our business and,
therefore, we have no plans to pay any cash dividends for at least the first
three years of our operations. If we decide to pay dividends in the future, our
ability to do so will depend on the ability of Bay National Bank to pay
dividends to Bay National Corporation. Bay National Bank cannot pay dividends to
Bay National Corporation unless it complies with certain regulatory requirements
regarding the payment of dividends by a national bank. See "Supervision and
Regulation." In addition, we would consider a number of other factors, including
our earnings prospects, financial condition and cash needs before deciding to
pay dividends. If you are looking for an investment that pays dividends, you
should not invest in this offering.
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PROPOSED BUSINESS OF BAY NATIONAL CORPORATION
Bay National Corporation expects to file an application to become a
bank holding company with the Federal Reserve Board in the near future. We know
of no reason why the approval from the Federal Reserve Board would not be
received, but we cannot predict when such approval will be received, or if the
Federal Reserve Board will impose any conditions on its approval.
Our principal asset will be our investment in all of the issued and
outstanding capital stock of Bay National Bank and Bay National Bank's principal
business will be commercial banking. With the prior approval of the Federal
Reserve Board, we may engage in non-banking activities closely related to the
business of banking. For example, with such approval, we could make and service
loans through a consumer finance subsidiary, or provide other types of
commercial financing. Further, the Federal Reserve Board allows bank holding
companies to give investment or financial advice, lease personal or real
property, provide data processing and courier services, or invest in small
business investment companies, among other permissible activities. Other than
our intent to engage in commercial banking through Bay National Bank, we are not
actively seeking other business opportunities at this time. However, if a
favorable opportunity is presented, we would consider it.
PROPOSED BUSINESS OF BAY NATIONAL BANK
GENERAL
As of the date of this prospectus, Bay National Bank has not been
authorized to conduct its banking business and has not engaged in any
operations. The issuance of a charter by the OCC and the approval of deposit
insurance by the FDIC will be dependent upon Bay National Corporation's and Bay
National Bank's compliance with certain conditions and procedures, including the
sale of Bay National Bank's stock to Bay National Corporation, the completion of
Bay National Bank's business premises, the purchase of certain fidelity and
other insurance, the hiring of staff and the adoption of certain operating
procedures and policies. When all conditions have been satisfied, Bay National
Bank will open for business with its main office in North Baltimore, Maryland
and a branch office in Salisbury, Maryland. Bay National Bank will accept
checking and savings deposits and will offer a wide range of commercial and
industrial, real estate, consumer and residential mortgage loans.
MARKETING FOCUS
As a result of bank mergers over the past decade, many banks in the
Baltimore metropolitan area and the Eastern Shore of Maryland are local branches
of large regional and national banks. Although size gives the larger banks some
advantages in competing for business from large corporations, including
economies of scale and higher lending limits, we believe that these "megabanks"
have focused on a mass market approach which de-emphasizes personal contact and
service. We also believe that the centralization of decision-making power at
these large institutions has resulted in a lack of customer service. At many of
these institutions, determinations are made at the "home office" by individuals
who lack personal contact with
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customers as well as an understanding of the customers' needs and scope of the
relationship with the institution.
We believe that this trend has been particularly frustrating to owners
of small and mid-sized businesses, business professionals and high net worth
individuals who traditionally were accustomed to dealing directly with a bank
executive who had an understanding of their banking needs with the ability to
deliver a prompt response.
Bay National Bank will be a locally owned, locally managed commercial
bank that will meet the financial needs of a targeted population. Specifically,
we will target our commercial banking services to small and mid-sized businesses
and will target our retail banking services to the owners of these businesses
and their employees, to business professionals and high net worth individuals.
We will seek to distinguish ourselves by
o Developing personal relationships with our customers.
o Customizing our products to fit the needs of our customers
instead of adopting a "one size fits all" mentality.
o Streamlining the decision making process.
o Offering our customers additional complementary services, such
as insurance and investment advice, through relationships with
strategic partners.
We do not intend for our bank offices to be organized in the
traditional retail branch structure, which is transaction and "bank teller"
oriented. Instead, we plan to adopt a "sit-down" model where customers are
greeted by a personal banker and taken to a private desk. We believe that this
environment will make service more individualized and enhance the banker's
understanding of the customer's needs. Furthermore, our branch locations will
not focus on capturing every customer within the surrounding area. Instead, they
will be strategically located in areas convenient to our customer base.
BANK LOCATION AND MARKET AREA
Bay National Bank's headquarters will be located in North Baltimore,
Maryland. We intend to serve the Baltimore metropolitan area from that location,
with our primary service area being Towson, Lutherville-Timonium, Cockeysville,
Hunt Valley, Ruxton and Roland Park. This is a busy commercial area with a
stable population of over 125,000. We estimate that this area is home to at
least 5,000 businesses and over 80,000 employees. Towson, which is the county
seat of Baltimore County, is the center of this commercial activity.
We will also establish a branch office in Salisbury, Maryland, from
which we will service Maryland's Eastern Shore. Salisbury is located in Wicomico
County and has approximately 55,000 of Wicomico County's 80,000 residents.
Salisbury is the commercial center of
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Maryland's Eastern Shore, and Wicomico County, with approximately 3,200
businesses and over 38,000 employees, has more businesses than any of the other
counties in the region.
Bay National Bank's two locations will enable us to take advantage of
the significant ties that our management and our directors have to these two
areas.
LOAN PORTFOLIO
Bay National Bank will offer a full range of loans, including
commercial and industrial loans, real estate loans, consumer loans and
residential mortgage and home equity loans. We anticipate that commercial
business and commercial real estate loans for owner-occupied properties will be
Bay National Bank's primary loan products.
The goal of Bay National Bank's lending program will be to meet the
credit needs of our client base while using sound credit principles to protect
the quality of our assets. Our business and credit strategy will be relationship
driven, and Bay National Bank will strive to provide a reliable source of
credit, a variety of lending alternatives and sound financial advice.
Assuming the sale of the minimum number of shares in the offering, Bay
National Bank will have a legal lending limit of approximately $1,500,000 to any
one borrower, which would constitute approximately 15% of Bay National Bank's
unimpaired capital and surplus. We intend to originate loans and to participate
with other lenders in loans which exceed Bay National Bank's lending limits. We
do not believe that loan participations which Bay National Bank purchases will
necessarily pose any greater risk of loss than loans which Bay National Bank
originates.
The following is a description of the types of loans we expect to have
in our loan portfolio and the anticipated risks associated with each type of
loan:
o Commercial and industrial loans for business purposes including
working capital, equipment purchases, lines of credit and government
contract financing. Asset-based lending, accounts receivable financing
and lease financing also will be available. We estimate that commercial
loans will constitute approximately 80% of Bay National Bank's loan
portfolio. Initially, we intend to target small and mid-sized
businesses in our market area with credit needs in the range of up to
$5,000,000. Unlike residential mortgage loans, which generally are made
on the basis of the borrower's ability to repay using his or her
employment and other income and which are secured by real property
which can be valued easily, commercial business loans are riskier and
typically are made on the basis of the borrower's ability to make
repayment from the cash flow of the borrower's business. As a result,
the availability of funds for the repayment of commercial business
loans depends substantially on the success of the business itself.
Further, the collateral securing the loans may depreciate over time,
may be difficult to appraise and may fluctuate in value based on the
success of the business.
o Real estate loans, including land development and construction loan
financing, primarily for owner-occupied premises. We estimate that real
estate loans will constitute approximately 10% of Bay National Bank's
loan portfolio.
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Commercial real estate loans usually are larger and present
more risk than do residential mortgage loans. Because payments on loans
secured by commercial real estate depend on the successful operation or
management of the properties that secure the loans, repayment is
affected significantly by downturns in the real estate market or in the
economy.
Construction loans generally involve a higher degree of credit
risk than residential mortgage loans. Risk of loss on a construction
loan depends largely upon the accuracy of the initial estimate of the
property's value at completion of construction or development compared
with the estimated cost of construction and, in the case of
owner-occupied premises, the success of the owner's business. If the
estimate of value proves to be inaccurate, the value of the project
when completed could be insufficient to ensure full repayment of the
loan.
o Consumer loans including automobile and personal loans. In addition,
Bay National Bank will offer personal lines of credit. We estimate that
consumer loans will constitute approximately 5% of Bay National Bank's
loan portfolio. Our consumer loans will be targeted to business owners
and their employees, business professionals and high net worth
individuals.
Consumer loans may present greater credit risk than
residential mortgage loans because many consumer loans are unsecured or
are secured by rapidly depreciating assets, such as automobiles.
Repossessed collateral for a defaulted consumer loan may not provide an
adequate source of repayment of the outstanding loan balance because of
the greater likelihood of damage, loss or depreciation. Consumer loan
collections depend on the borrower's continuing financial stability. If
a borrower suffers personal financial difficulties, the loan may not be
repaid. Also, various federal and state laws, including bankruptcy and
insolvency laws, may limit the amount Bay National Bank can recover on
such loans.
o Residential mortgage loans, including first and second mortgage loans
and home equity loans secured by single-family owner-occupied
residences. Because we will sell most of these loans in the secondary
market, we estimate that residential mortgage loans will constitute
approximately 5% of Bay National Bank's loan portfolio. Like our
consumer loans, our residential mortgage loans will be targeted to
business owners and their employees, business professionals and high
net worth individuals.
We expect that the residential mortgage loans will adhere to
standards developed by FNMA/FHLMC. We intend to require private
mortgage insurance for loans in excess of 80% of a property's value
and, generally, do not anticipate making loans with loan-to-value
ratios in excess of 90%. We anticipate that fixed-rate, conforming
residential mortgage loans will be sold to the secondary market at
origination. We anticipate selling participations in nonconforming,
nonstandard loans, such as ARM loans. Therefore, we expect to sell
those loans which have a lower degree of risk relative to the other
types of loans that we expect to make.
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DEPOSITS
Bay National Bank will offer a wide range of interest bearing and
non-interest bearing accounts, including commercial and retail checking
accounts, money market accounts, individual retirement accounts, interest
bearing statement savings accounts and certificates of deposit with fixed and
variable rates and a range of maturity date options.
Bay National Bank will pay competitive interest rates on time and
savings deposits. As a new bank, we believe that we will have a competitive
advantage over some of the larger, more established banks in our market area
with respect to the interest rates paid on our deposits. Specifically, we may be
able to set our initial deposit rates higher than those of more established
banks because, unlike an existing bank, our rates will not have to compete
against the deposit rates earned by existing customers.
OTHER BANKING AND FINANCIAL SERVICES
We will offer commercial customers cash management services such as
sweep accounts, account reconciliation, lockbox services and wire transfers of
funds. Additionally, we will make available telephone banking, ATM/debit cards,
safe deposit boxes, after-hours deposit services, travelers checks, direct
deposit of payroll and automatic drafts for various accounts. These services
will be provided either directly by us or through correspondent banking
relationships. However, we do not intend to have an ATM machine at our main
office or our branch in Salisbury.
In addition, Bay National Bank's customers will be able to access
information about their accounts and view information about Bay National Bank's
services and products on Bay National Bank's website, which will be located at
http://www.baynationalbank.com. In the future, we expect, subject to regulatory
approval, that the website will permit customers to make transfers of funds
among accounts, pay bills, download information to financial software packages,
send e-mail to Bay National Bank personnel and apply for banking products, such
as the opening of an account.
We do not anticipate that Bay National Bank will exercise trust powers
during its initial years of operation. However, we plan on entering into
correspondent banking relationships with strategic partners that will provide
trust services to our customers.
We plan on offering, through strategic partners, investment advisory,
risk management and employee benefit services. Through these carefully
structured affiliations, we will be able to offer our clients a full range of
financial services, including investment advice, personal and business insurance
products and employee benefit products such as pension and 401K plan
administration. To the extent permitted by applicable regulations, the strategic
partners may share fees and commissions with Bay National Bank. When we develop
sufficient volume in any of these lines of business, we may provide these
services ourselves if permitted by applicable regulations. In all of our
relationships with our strategic partners, we will be the client's initial point
of contact in order to control service quality.
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Bay National Bank will consider offering additional banking products
and services as warranted by customer demand. We believe that our data
processing capability, which will be provided through a third party vendor, will
be more than adequate to support the introduction of new products and services.
We have engaged DGF Projects, Inc. to provide us with corporate
communications and investor relations services. Daniel G. Finney, a principal of
DGF, has over twenty years experience in marketing, corporate communications and
investor relations for companies in the financial services industry. DGF and Mr.
Finney will assist us with corporate communications and will assist Bay National
Bank with establishing an identity in its markets.
SOURCE OF BUSINESS
A philosophy of superior personal service and convenience drives the
formation of Bay National Bank's business development strategies. Initially, we
will build our customer base from stockholders, officers and directors. We also
expect to capitalize upon the extensive business and personal contacts and
relationships of our officers and directors. To introduce new customers to Bay
National Bank, we will aggressively market ourselves to business owners and
professionals and their organizations.
We believe that Bay National Bank has a unique opportunity to fill an
important niche in the marketplace with the potential to rise above the
competition.
ASSET MANAGEMENT
Consistent with Bay National Bank's objective to serve the needs of
small and mid-sized businesses, we expect that our assets will be concentrated
in commercial loans. In accordance with the requirements of prudent banking
practices, we also will invest assets, in amounts we believe to be adequate, in
high-grade securities to provide liquidity and safety. Loans will be targeted at
75% or less of deposits (excluding repurchase agreements), and structured
generally with variable rates and/or fixed rates with short maturities.
Investment securities will primarily be United States treasury securities and
securities of the United States government or "quasi-government" agencies and
certificates of deposits of FDIC-insured institutions.
The risk of nonpayment (or deferred payment) of loans is inherent in
commercial banking. Bay National Bank's marketing focus on small to mid-sized
businesses may result in Bay National Bank assuming lending risks that are
different from those associated with loans to larger companies. Management of
Bay National Bank will carefully evaluate all loan applications and will attempt
to minimize credit risk exposure by utilizing thorough loan application,
approval and monitoring procedures. However, we cannot guarantee that those
procedures will significantly reduce our lending risks.
COMPETITION
Deregulation of financial institutions and acquisitions of banks across
state lines has resulted in widespread changes in the financial services
industry. In both the Baltimore metropolitan area and on Maryland's Eastern
Shore, we will face strong competition from large
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banks headquartered within and outside of Maryland. In addition, we will compete
with other community banks, savings and loan associations, credit unions,
mortgage companies, finance companies and others providing financial services.
Many of our competitors can finance extensive advertising campaigns, maintain
extensive branch networks and technology investments, and offer services which
we cannot or will not offer initially. Also, larger institutions have
substantially higher lending limits than Bay National Bank will have. Some of
our competitors have other advantages, such as tax exemption in the case of
credit unions, and lesser regulation in the case of mortgage companies and
finance companies.
EMPLOYEES
We anticipate that Bay National Bank initially will employ
approximately 17 people, including officers of Bay National Bank. We anticipate
that approximately 13 people will operate from our headquarters in North
Baltimore and approximately four people from our Salisbury branch. We do not
expect to add more employees during the first year of Bay National Bank's
operation.
PROPERTIES
On July 16, 1999, Bay National Corporation entered into two lease
agreements for its main office which is located at 2328 West Joppa Road,
Baltimore, Maryland 21093.
The first lease, which commenced on July 26, 1999, is for 947 square
feet of space. This space, which is on the first floor of a three-story
building, will initially be used for administrative office space. Upon the
opening of Bay National Bank, this space will be used for Bay National Bank's
Baltimore branch operations. The lease term runs for five years and five months.
Bay National Corporation has the option to extend the term of this lease for one
five-year renewal term. During the initial lease term, Bay National Corporation
will pay monthly rent of approximately $1,900, which amount includes Bay
National Corporation's share of taxes and building operating costs.
The second lease will commence on December 1, 1999, or such later date
that all work to be performed on the leased premises is completed, but not later
than March 1, 2000. This lease is for 5,130 square feet of space and runs for
five years. Approximately 3,600 square feet of this space, which is on the third
floor of the same building, will be used for Bay National Corporation's and Bay
National Bank's administrative offices. Bay National Corporation also has the
option to extend the term of this lease for one five-year renewal term. During
the initial lease term, Bay National Corporation will pay monthly rent of
approximately $10,773, which amount includes Bay National Corporation's share of
taxes and building operating costs. Although we have not yet done so, we intend
to sublet approximately 1,500 square feet of this space for a three year term.
After that sublease, we intend to reassess whether Bay National Corporation or
Bay National Bank requires the use of this additional space for operations.
On September 16, 1999, Bay National Corporation entered into a lease
agreement for Bay National Bank's Salisbury, Maryland branch office which will
be located at 109 Poplar Hill Avenue, Salisbury Maryland 21801 in a two story
building containing approximately 2,500 square feet of office space. This lease,
which became effective as of September 1, 1999, is for a
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term of five years with Bay National Corporation having the option to extend the
term for three five-year renewal terms. During the initial lease term, Bay
National Corporation will pay monthly rent of approximately $1,980, plus all
real estate taxes and utilities. Pursuant to this lease, Bay National
Corporation has a right of first refusal to purchase the building in the event
the landlord receives a bona fide offer to sell.
MANAGEMENT'S PLAN OF OPERATION
GENERAL
As of the date of this prospectus, neither Bay National Corporation nor
Bay National Bank has commenced operations or engaged in any activities except
those related to the organization and capitalization of Bay National Corporation
and Bay National Bank. These limited activities have been financed solely by Bay
National Corporation's sale of an aggregate of 112,500 shares of common stock at
a purchase price of $10.00 per share in its organizational offering. We expect
that the capital provided by these sales will be sufficient to meet our needs
until the offering is completed. See "Certain Transactions."
Once Bay National Bank opens, expected in the first quarter of 2000, we
will begin the banking operations described in this prospectus under the caption
"Proposed Business of Bay National Bank." We expect that Bay National Bank will
incur approximately $260,000 in expenses in leasehold improvements for its
offices and for furniture, fixtures and equipment for the offices. We will
contract with an outside vendor for Bay National Bank's data processing. We
anticipate a one-time capital expenditure of $430,000, and annual costs in our
first year of operations of approximately $200,000, for data processing
services.
We believe that the proceeds of this offering ($9,000,000 if the
minimum number of shares are sold and $15,000,000 if the maximum number of
shares are sold) and the proceeds from the organizational offering will be
sufficient to fund the expenses of establishing and opening Bay National Bank,
and Bay National Bank's and Bay National Corporation's operations for at least
12 months after the offering. We do not anticipate a need to raise additional
capital during that period. See "Use of Proceeds."
YEAR 2000
The Year 2000 poses a significant challenge to all financial
institutions and other businesses because many automated systems may cease to
function normally in 2000 as a result of the way date files are maintained in
those systems. Federal banking regulators have taken a strong position relating
to the financial industry's obligations to manage so-called "Y2K risks." As a
new institution, we are focusing on making certain that any system put into
place is already Y2K compliant. It is our policy to require Y2K warranties on
all systems obtained and installed. Once we obtain warranties of compliance from
the system vendor, it will be our responsibility to verify the vendor's claim.
Our primary concern is the operation of our outside data processing service
because this service is the foundation of Bay National Bank's operations.
We anticipate that Bay National Bank will open in the first quarter of
2000, at which time we believe that much of the uncertainty surrounding the Year
2000 Issue should be resolved. As
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a result, we believe our risks associated with computer malfunctions related to
the Year 2000 Issue should be reduced. However, we will still seek to ensure
that our computer systems and our vendors' and clients' computer systems are Y2K
compliant and are functioning properly.
We will require that our contract with our data processing service
vendor include a warranty from the vendor that its systems are Y2K compliant and
that the transition to the Year 2000 or any other date will not materially
adversely affect the vendor's ability to provide services. In addition, we will
require that our data processing vendor provide us with testing procedures using
the actual databases of other financial institutions currently being serviced by
the vendor. If we deem it necessary, we will request Y2K testing using Bay
National Bank's database, once it is established. All internal data processing
systems, including hardware and software applications which have been or will be
obtained, have been or will be warranted as to Y2K compliance. We will test
internal stand-alone systems such as document preparation systems after
installation. All systems will be analyzed as to the potential disruptive impact
of the Year 2000 computer-related malfunctions, and testing procedures will be
established based upon the risk of non-compliance. When available, third party
testing results will also be obtained and reviewed for compatibility with Bay
National Bank's operations.
We will lease our two banking offices, and we will evaluate any
existing systems within those offices for Y2K compliance. For example, in
addition to information systems, we will assess office equipment, security
systems, vault doors and other systems. All facility systems will be evaluated
with regard to the possible impact of the Year 2000. When a system is determined
to be date-sensitive, a further determination will be made as to the possible
adverse impact of the Year 2000. Where it is found that a risk does exist and
the effects of non-compliance are not acceptable to us, corrective actions will
be taken.
We also recognize that our customers' Y2K issues may affect our
operations. The ability of a major credit customer to honor a debt obligation
could be impaired if the customer has problems relating to Y2K. For an
appropriate period of time after January 1, 2000, we intend to ask our credit
customers for Y2K representations and make the representations part of our loan
documentation. Such representations will be supported by a documented evaluation
of the customer's Y2K position. A questionnaire will ask the commercial loan
customer to define how the Year 2000 will impact or has impacted its operations.
From that questionnaire and discussion with the customer, the loan officer will
rate the customer's vulnerability to Y2K risk. Risk characteristics will include
computer system capacities, business dependency on outside suppliers/vendors and
outsource partners who also have Y2K risk and whether the customer's industry is
computer-related. The loan officer will also evaluate the customer's
preparedness for the Year 2000. If it is determined that the customer's Y2K
actions are not satisfactory and represent potential credit risk to Bay National
Bank, this may be sufficient reason to decline the loan request.
SUPERVISION AND REGULATION
Bay National Corporation and Bay National Bank will be subject to
extensive regulation under state and federal banking laws and regulations. These
laws impose specific requirements and restrictions on virtually all aspects of
operations and generally are intended to protect depositors, not stockholders.
The following discussion is only a summary and you should refer
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to particular statutory and regulatory provisions for more detailed information.
During the past 10 years numerous regulatory requirements have been placed on
the banking industry, and additional changes have been proposed. We cannot
predict the nature or the extent of the effect on our business and earnings that
fiscal or monetary policies, economic conditions, or new federal or state
legislation may have in the future.
BAY NATIONAL CORPORATION
FEDERAL BANK HOLDING COMPANY REGULATION. Bay National Corporation will
be a bank holding company registered under the Bank Holding Company Act of 1956,
as amended, and will be subject to supervision by the Board of Governors of the
Federal Reserve System. As a bank holding company, Bay National Corporation will
be required to file with the Federal Reserve Board an annual report and such
other additional information as the Federal Reserve Board may require by
statute. The Federal Reserve Board may also examine Bay National Corporation and
each of its subsidiaries.
The status of Bay National Corporation as a registered bank holding
company under the Bank Holding Company Act does not exempt it from certain
federal and state laws and regulations applicable to corporations generally,
including, without limitation, certain provisions of the federal securities
laws.
The Federal Reserve Board must approve, among other things, the
acquisition by a proposed bank holding company of control of more than five
percent (5%) of the voting shares, or substantially all the assets, of any bank
or the merger or consolidation by a bank holding company with another bank
holding company. Under the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994, the restrictions on interstate acquisitions of banks by
bank holding companies were repealed as of September 29, 1995. The effect of the
repeal of these restrictions is that Bay National Corporation may acquire a bank
located in Maryland or any other state, and a bank holding company located
outside of Maryland can acquire any Maryland-based bank, in either case subject
to certain deposit requirements and other restrictions.
With certain limited exceptions, a bank holding company is prohibited
from acquiring control of any voting shares of any company which is not a bank
or bank holding company and from engaging directly or indirectly in any activity
other than banking or managing or controlling banks or furnishing services for
its authorized subsidiaries. A bank holding company may, however, engage in
activities which the Federal Reserve Board has determined by order or regulation
to be so closely related to banking or managing or controlling banks as to be
"properly incident thereto." In making such a determination, the Federal Reserve
Board is required to consider whether the performance of such activities can
reasonably be expected to produce benefits to the public, such as convenience,
increased competition or gains in efficiency, which outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices. The Federal
Reserve Board is also empowered to differentiate between activities commenced de
novo and activities commenced by the acquisition, in whole or in part, of a
going concern. Some of the activities that the Federal Reserve Board has
determined by regulation to be closely related to banking include making or
servicing loans, performing certain data processing services, acting as a
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fiduciary, investment or financial advisor, and making investments in
corporations or projects designed primarily to promote community welfare.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by statute on any extensions of credit to the bank holding
company or any of its subsidiaries, or investments in their stock or other
securities, and on taking such stock or securities as collateral for loans to
any borrower. Further, a bank holding company and any subsidiary bank are
prohibited from engaging in certain tie-in arrangements in connection with the
extension of credit. In 1997, the Federal Reserve Board adopted amendments to
its Regulation Y, creating exceptions to the Bank Holding Company Act's
anti-tying prohibitions that give bank subsidiaries of holding companies greater
flexibility in packaging products and services with their affiliates.
In accordance with Federal Reserve Board policy, Bay National
Corporation is expected to act as a source of financial strength to Bay National
Bank and to commit resources to support Bay National Bank in circumstances in
which Bay National Corporation might not otherwise do so. The Federal Reserve
Board may require a bank holding company to terminate any activity or relinquish
control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon
the Federal Reserve's determination that such activity or control constitutes a
serious risk to the financial soundness or stability of any subsidiary
depository institution of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank holding
company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition.
The Board of Governors of the Federal Reserve System has adopted a
risk-based capital measure to assist in the assessment of the capital adequacy
of bank holding companies. Bank holding companies over $150,000,000 in assets on
a consolidated basis are required to maintain a minimum ratio of total
qualifying capital (the sum of core capital (Tier 1) and supplementary capital
(Tier 2)) to risk-weighted assets of 8%. At least half of this amount (4%)
should be in the form of Tier 1 capital. Bank holding companies with less than
$150,000,000 in consolidated assets will have the measure applied on a bank-only
basis, unless (i) the bank holding company is engaged in nonbank activity
involving significant leverage, or (ii) the bank holding company has a
significant amount of outstanding public debt.
Although not required to adhere to the risk-based capital measure if
under $150,000,000 in consolidated assets, small bank holding companies must
remain adequately capitalized and be capable of retiring their debt within 25
years of the date the debt is incurred.
STATE BANK HOLDING COMPANY REGULATION. Bay National Corporation will be
a Maryland-chartered bank holding company and will be subject to various
restrictions on its activities as set forth in Maryland law, in addition to
those restrictions set forth in federal law. Under Maryland law, an existing
bank holding company that desires to acquire a Maryland state-chartered bank or
trust company, a federally-chartered bank with its main office in Maryland, or a
bank holding company that has its principal place of business in Maryland, must
file an application with the Maryland Commissioner of Financial Regulation (the
"Commissioner"). In approving the application, the Commissioner must consider
whether the acquisition may be detrimental to the safety and soundness of the
entity being acquired or whether the acquisition may result in an
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<PAGE>
undue concentration of resources or a substantial reduction in competition in
Maryland. The Commissioner may not approve an acquisition if, on consummation of
the transaction, the acquiring company, together with all its insured depository
institution affiliates, would control 30% or more of the total amount of
deposits of insured depository institutions in Maryland. The Commissioner has
authority to adopt by regulation a procedure to waive this requirement for good
cause. In a transaction for which the Commissioner's approval is not required
due to an exemption under Maryland law, or for which federal law authorizes the
transaction without application to the Commissioner, the parties to the
acquisition must provide written notice to the Commissioner at least 15 days
before the effective date of the acquisition.
In addition, a bank holding company and its Maryland state-chartered
bank or trust company cannot directly or indirectly acquire subsidiaries or
affiliates until the bank or trust company receives the approval of the
Commissioner. On application of the banking institution, the new affiliate will
be approved if the Commissioner determines that the approval is reasonably
required to protect the welfare of the general economy of Maryland and the
banking institution and is not detrimental to the public interest or to the
banking institution. The approval must impose the same conditions that federal
law requires or permits as to a national banking association and must comply
with applicable rules and regulations.
BAY NATIONAL BANK
GENERAL. Bay National Bank, as a national banking association whose
accounts will be insured by the Bank Insurance Fund ("BIF") of the FDIC up to
the maximum legal limits, will be subject to regulation, supervision and regular
examinations by the OCC. Bay National Bank will be a member of the Federal
Reserve System and, as such, will be subject to certain regulations issued by
the Federal Reserve Board. Bay National Bank also will be subject to applicable
banking provisions of Maryland law insofar as they do not conflict with or are
not preempted by federal law. The regulations of these various agencies govern
most aspects of Bay National Bank's business, including setting required
reserves against deposits, loans, investments, mergers and acquisitions,
borrowing, dividends and location and number of branch offices.
Competition among commercial banks, savings and loan associations and
credit unions has increased following enactment of legislation which greatly
expanded the ability of banks and bank holding companies to engage in interstate
banking or acquisition activities. Banks in the Washington,
D.C./Maryland/Virginia area can, subject to limited restrictions, acquire or
merge with a bank in another of the jurisdictions and can branch de novo in any
of the jurisdictions. Legislation has been proposed which may result in
nonbanking companies being authorized to own banks. This could permit companies
with resources substantially in excess of Bay National Corporation's to compete
with Bay National Corporation and Bay National Bank.
Banking is a business which depends on interest rate differentials. In
general, the differences between the interest paid by a bank on its deposits and
its other borrowings and the interest received by a bank on loans extended to
its customers and securities held in its investment portfolio constitute the
major portion of a bank's earnings. Thus, the earnings and growth of Bay
National Bank will be subject to the influence of economic conditions generally,
both domestic and foreign, and also on the monetary and fiscal policies of the
United States and its agencies, particularly the Federal Reserve Board, which
regulates the supply of money. We
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cannot predict the nature and timing of changes in such policies and their
impact on Bay National Bank.
BRANCHING AND INTERSTATE BANKING. Beginning on June 1, 1997, the
federal banking agencies were authorized to approve interstate bank merger
transactions without regard to whether such a transaction is prohibited by the
law of any state, unless the home state of one of the banks has opted out of the
interstate bank merger provisions of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994. Furthermore, under the Riegle-Neal Act,
interstate acquisitions of branches are permitted if the law of the state in
which the branch is located permits such acquisitions. The Riegle-Neal Act also
authorizes the OCC and FDIC to approve interstate branching de novo by national
and non-member banks, respectively, but only in states which specifically allow
for such branching.
The District of Columbia, Maryland and Virginia have all enacted laws
which permit interstate acquisitions of banks and bank branches and permit
out-of-state banks to establish de novo branches.
CAPITAL ADEQUACY GUIDELINES. The Federal Reserve Board, the OCC and the
FDIC have all adopted risk-based capital adequacy guidelines by which they
assess the adequacy of capital in examining and supervising banks and bank
holding companies and in analyzing bank regulatory applications. Risk-based
capital requirements determine the adequacy of capital based on the risk
inherent in various classes of assets and off-balance sheet items.
Since December 31, 1992, national banks have been expected to meet a
minimum ratio of total qualifying capital (the sum of core capital (Tier 1) and
supplementary capital (Tier 2)) to risk-weighted assets (a "Total Risk-Based
Capital Ratio) of 8%. At least half of this amount (4%) should be in the form of
core capital. These requirements apply to Bay National Bank.
Tier 1 capital for national banks generally consists of the sum of
common stockholders' equity and perpetual preferred stock (subject in the case
of the latter to limitations on the kind and amount of such stock which may be
included as Tier 1 capital), less goodwill, without adjustment in accordance
with Statement of Financial Accounting Standards 115. Tier 2 capital consists of
the following: hybrid capital instruments, perpetual preferred stock which is
not otherwise eligible to be included as Tier 1 capital, term subordinated debt
and intermediate-term preferred stock, and, subject to limitations, general
allowances for loan losses. Assets are adjusted under the risk-based guidelines
to take into account different risk characteristics, with the categories ranging
from 0% (requiring no risk-based capital) for assets such as cash, to 100% for
the bulk of assets which are typically held by a bank holding company, including
certain multi-family residential and commercial real estate loans, commercial
business loans and consumer loans. Residential first mortgage loans on
one-to-four-family residential real estate and certain seasoned multi-family
residential real estate loans, which are not 90 days or more past-due or
non-performing and which have been made in accordance with prudent underwriting
standards, are assigned a 50% level in the risk-weighing system, as are certain
privately issued mortgage-backed securities representing indirect ownership of
such loans. Off-balance sheet items also are adjusted to take into account
certain risk characteristics.
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In addition to the risk-based capital requirements, the OCC has
established a minimum 3% Leverage Capital Ratio (Tier 1 capital to total
adjusted assets) requirement for the most highly-rated national banks, with an
additional cushion of at least 100 to 200 basis points for all other national
banks, which effectively increases the minimum Leverage Capital Ratio for such
other banks to 4%-5% or more. Under the OCC's regulations, highest-rated banks
are those that the OCC determines are not anticipating or experiencing
significant growth and have well diversified risk, including no undue interest
rate risk exposure, excellent asset quality, high liquidity, good earnings and,
in general, those which are considered a strong banking organization. A national
bank that has less than the minimum Leverage Capital Ratio requirement must
submit to the applicable district office for review and approval a reasonable
plan describing the means and timing by which the bank will achieve its minimum
Leverage Capital Ratio requirement. A national bank which fails to file such a
plan is deemed to be operating in an unsafe and unsound manner and could be
subject to a cease-and-desist order. The OCC's regulations also provide that any
insured depository institution with a Leverage Capital Ratio less than 2% is
deemed to be operating in an unsafe or unsound condition. Operating in an unsafe
or unsound manner could lead the FDIC to terminate deposit insurance. However,
such an institution will not be subject to an enforcement proceeding solely on
account of its capital ratios if it has entered into and is in compliance with a
written agreement with the OCC to increase its Leverage Capital Ratio to such
level as the OCC deems appropriate and to take such other action as may be
necessary for the institution to be operated in a safe and sound manner. The
capital regulations also provide, among other things, for the issuance by the
OCC or its designee(s) of a capital directive, which is a final order issued to
a bank that fails to maintain minimum capital or to restore its capital to the
minimum capital requirement within a specified time period. Such directive is
enforceable in the same manner as a final cease-and-desist order.
PROMPT CORRECTIVE ACTION. Each federal banking agency is required to
implement a system of prompt corrective action for institutions which it
regulates. Under applicable regulations, a bank will be deemed to be: (i) "well
capitalized" if it has a Total Risk-Based Capital Ratio of 10% or more, a Tier 1
Risk-Based Capital Ratio of 6% or more, a Leverage Capital Ratio of 5% or more
and is not subject to any written capital order or directive; (ii) "adequately
capitalized" if it has a Total Risk-Based Capital Ratio of 8% or more, a Tier 1
Risk-Based Capital Ratio of 4% or more and a Leverage Capital Ratio of 4% or
more (3% under certain circumstances); (iii) "undercapitalized" if it has a
Total Risk-Based Capital Ratio that is less than 8%, a Tier 1 Risk-Based Capital
Ratio that is less than 4% or a Leverage Capital Ratio that is less than 4%
(3.3% under certain circumstances); (iv) "significantly undercapitalized" if it
has a Total Risk-Based Capital Ratio that is less than 6%, a Tier 1 Risk-Based
Capital Ratio that is less than 3% or a Leverage Capital Ratio that is less than
3%; and (v) "critically undercapitalized" if it has a ratio of tangible equity
to total assets that is equal to or less than 2%. We believe that Bay National
Bank will be a "well capitalized" bank if we sell either the minimum or maximum
number of shares in this offering.
An institution generally must file a written capital restoration plan
which meets specified requirements with an appropriate federal banking agency
within 45 days of the date the institution receives notice or is deemed to have
notice that it is undercapitalized, significantly undercapitalized or critically
undercapitalized. The federal banking agency must provide the institution with
written notice of approval or disapproval within 60 days after receiving the
capital restoration plan, subject to extensions by the applicable agency.
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An institution which is required to submit a capital restoration plan
must concurrently submit a performance guaranty by each company that controls
the institution. Such guaranty is limited to the lesser of (i) an amount equal
to 5% of the institution's total assets at the time the institution was notified
or deemed to have notice that it was undercapitalized or (ii) the amount
necessary at such time to restore the relevant capital measures of the
institution to the levels required for the institution to be classified as
adequately capitalized. Such a guaranty expires after the federal banking agency
notifies the institution that it has remained adequately capitalized for each of
four consecutive calender quarters. An institution which fails to submit a
written capital restoration plan within the requisite period, including any
required performance guaranty, or fails in any material respect to implement a
capital restoration plan, is subject to the restrictions in Section 38 of the
Federal Deposit Insurance Act which are applicable to significantly
undercapitalized institutions.
A critically undercapitalized institution will be placed in
conservatorship or receivership within 90 days unless the FDIC formally
determines that forbearance from such action would better protect the deposit
insurance fund. Unless the FDIC or other appropriate federal banking regulatory
agency makes specific further findings and certifies that the institution is
viable and is not expected to fail, an institution that remains critically
undercapitalized on average during the fourth calendar quarters after the date
it becomes critically undercapitalized must be placed in receivership.
Immediately upon becoming undercapitalized, an institution becomes
subject to statutory provisions which (i) restrict payment of capital
distributions and management fees; (ii) require that the appropriate federal
banking agency monitor the condition of the institution and its efforts to
restore its capital; (iii) require submission of a capital restoration plan;
(iv) restrict the growth of the institution's assets and (v) require prior
approval of certain expansion proposals. The appropriate federal banking agency
for an undercapitalized institution also may take any number of discretionary
supervisory actions if the agency determines that any of these actions is
necessary to resolve the problems of the institution at the least possible
long-term cost to the deposit insurance fund, subject in certain cases to
specified procedures. These discretionary supervisory actions include requiring
the institution to raise additional capital, restricting transactions with
affiliates, requiring divestiture of the institution or the sale of the
institution to a willing purchaser, and any other supervisory action that the
agency deems appropriate. Significantly undercapitalized and critically
undercapitalized institutions are subject to these and additional mandatory and
permissive supervisory actions..
REGULATORY ENFORCEMENT AUTHORITY. The Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA") included substantial
enhancement to the enforcement powers available to federal banking regulators.
This enforcement authority included, among other things, the ability to assess
civil money penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions against banking organizations and
institution-affiliated parties, as defined in FIRREA. In general, these
enforcement actions may be initiated for violations of laws and regulations and
unsafe or unsound practices. Other actions or inactions may provide the basis
for enforcement action, including misleading or untimely reports filed with
regulatory authorities. FIRREA significantly increased the amount of and grounds
for civil money penalties and requires, except under certain circumstances,
public disclosure of final enforcement actions by the federal banking agencies.
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DEPOSIT INSURANCE. The FDIC has adopted a risk-based deposit insurance
assessment system. The FDIC assigns an institution to one of three capital
categories based on the institution's financial information, as of the reporting
period ending seven months before the assessment period, consisting of (i) well
capitalized, (ii) adequately capitalized or (iii) undercapitalized, and one of
three supervisory subcategories within each capital group. The supervisory
subgroup to which an institution is assigned is based on a supervisory
evaluation provided to the FDIC by the institution's primary federal regulator
and information that the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds. An
institution's assessment rate depends on the capital category and supervisory
subcategory to which it is assigned. Assessment rates for BIF deposits currently
range from 0 basis points to 27 basis points. As a new bank, Bay National Bank
will initially be assigned to a capital and supervisory subcategory that has an
assessment rate of 0. The FDIC is authorized to raise the assessment rates in
certain circumstances, including to maintain or achieve the designated reserve
ratio of 1.25%, which requirement the BIF currently meets. The FDIC has
exercised its authority to raise rates in the past and may raise insurance
premiums in the future. If such action is taken by the FDIC, it could have an
adverse effect on the earnings of Bay National Bank.
Under the FDIA, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound practices,
is in an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC.
TRANSACTIONS WITH AFFILIATES AND INSIDERS. Bay National Bank will be
subject to the provisions of Section 23A of the Federal Reserve Act which place
limits on the amount of loans or extensions of credit to affiliates, investments
in or certain other transactions with affiliates and on the amount of advances
to third parties collateralized by the securities or obligations of affiliates.
Section 23A limits the aggregate amount of transactions with any individual
affiliate to ten percent (10%) of the capital and surplus of Bay National Bank
and also limits the aggregate amount of transactions with all affiliates to
twenty percent (20%) of capital and surplus. Loans and certain other extensions
of credit to affiliates are required to be secured by collateral in an amount
and of a type described in Section 23A, and the purchase of low quality assets
from affiliates is generally prohibited.
Bay National Bank also will be subject to the provisions of Section 23B
of the Federal Reserve Act which, among other things, prohibit an institution
from engaging in certain transactions with certain affiliates unless the
transactions are on terms substantially the same, or at least as favorable to
such institution and/or its subsidiaries, as those prevailing at the time for
comparable transactions with non-affiliated entities. In the absence of
comparable transactions, such transactions may only occur under terms and
circumstances, including credit standards, that in good faith would be offered
to or would apply to non-affiliated companies.
Bay National Bank also will be subject to the restrictions contained in
Section 22(h) of the Federal Reserve Act and the Federal Reserve Board's
Regulation O thereunder on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to a director, an executive officer or
a greater-than-10% stockholder of a bank as well as certain affiliated interests
of any of the foregoing may not exceed, together with all other outstanding
loans to
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such person and affiliated interests, the loans-to-one-borrower limit applicable
to national banks (generally 15% of the institution's unimpaired capital and
surplus), and all loans to all such persons in the aggregate may not exceed the
institution's unimpaired capital and unimpaired surplus. Regulation O also
prohibits the making of loans in an amount greater than $25,000 or 5% of capital
and surplus but in any event not over $500,000, to directors, executive officers
and greater-than-10% stockholders of a bank, and their respective affiliate,
unless such loans are approved in advance by a majority of the board of
directors of the bank with any "interested" director not participating in the
voting. Further, Regulation O requires that loans to directors, executive
officers and principal stockholders be made on terms substantially the same as
those that are offered in comparable transactions to other persons. Regulation O
also prohibits a depository institution from paying overdrafts over $1,000 of
any of its executive officers or directors unless they are paid pursuant to
written pre-authorized extension of credit or transfer of funds plans.
LOANS TO ONE BORROWER. As a national bank, Bay National Bank will be
subject to the statutory and regulatory limits on the extension of credit to one
borrower. Generally, the maximum amount of total outstanding loans that a
national bank may have to any one borrower at any one time is 15% of the bank's
unimpaired capital and surplus. A national bank may lend an additional 10% on
top of the 15% if the amount that exceeds 15% of the bank's unimpaired capital
and surplus is fully secured by readily marketable collateral.
LIQUIDITY. Bay National Bank will be subject to the reserve
requirements of Federal Reserve Board Regulation D, which applies to all
depository institutions. As of November 19, 1997, amounts in transaction
accounts above $4,700,000 and under $47,800,000 must have reserves held against
them in the ratio of three percent (3%) of the amount. Amounts above $47,800,000
require reserves of $1,434,000 plus 10% of the amount in excess of $47,800,000.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act ("CRA")
requires that, in connection with examinations of financial institutions within
their respective jurisdictions, the Federal Reserve Board, the FDIC, the OCC or
the Office of Thrift Supervision shall evaluate the record of the financial
institutions in meeting the credit needs of their local communities, including
low and moderate income neighborhoods, consistent with the safe and sound
operation of those institutions. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent with the CRA.
An institution's CRA activities are considered in, among other things,
evaluating mergers, acquisitions and applications to open a branch or facility.
The CRA also requires all institutions to make public disclosure of their CRA
ratings.
DIVIDENDS
The principal source of Bay National Corporation's revenues will be
derived from dividends received from Bay National Bank. The amount of dividends
that may be paid by Bay National Bank to Bay National Corporation depends on Bay
National Bank's earnings and capital position and is limited by statute,
regulations and policies. As a national bank, Bay National Bank may not pay
dividends from its paid-in surplus. All dividends must be paid out of undivided
profits then on hand, after deducting expenses, including provisions for loan
losses
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and bad debts. In addition, a national bank is prohibited from declaring a
dividend on its shares of common stock until its surplus equals its stated
capital, unless there has been transferred to surplus no less than one-tenth of
the bank's net profits for the preceding two consecutive half-year periods (in
the case of an annual dividend). The approval of the OCC is required if the
total of all dividends declared by a national bank in any calendar year exceeds
the total of its net profits for that year combined with its retained net
profits for the preceding two years, less any required transfers to surplus. In
addition, Bay National Bank may not pay a dividend if, after paying the
dividend, it would be undercapitalized.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Bay National Corporation's directors and executive officers and Bay
National Bank's proposed directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Hugh W. Mohler 54 President and Chief Executive Officer of Bay National Corporation and Bay
National Bank, Director of Bay National Corporation and Bay National Bank
John S. DiPietro 52 Vice President, Treasurer and Secretary of Bay National Corporation and
Vice President - Operations, Senior Operating Officer and Senior
Financial Officer of Bay National Bank
Thomas M. Neale 46 Vice President of Bay National Corporation and Vice President - Client
Services and Senior Lending Officer of Bay National Bank
James C. Alban, Jr. 81 Director of Bay National Corporation and Bay National Bank
Carroll A. Bodie 54 Director of Bay National Corporation and Bay National Bank
Charles E. Bounds 80 Director of Bay National Corporation and Bay National Bank
Richard C. Hackney, Jr. 52 Director of Bay National Corporation and Bay National Bank
John R. Lerch 55 Director of Bay National Corporation and Bay National Bank
H. Victor Rieger, Jr. 61 Director of Bay National Corporation and Bay National Bank
Margaret Knott Riehl 65 Director of Bay National Corporation and Bay National Bank
William B. Rinnier 58 Director of Bay National Corporation and Bay National Bank
Edwin A. Rommel, III 49 Director of Bay National Corporation and Bay National Bank
Charles H. Salisbury 59 Director of Bay National Corporation and Bay National Bank
Henry H. Stansbury 60 Director of Bay National Corporation and Bay National Bank
Kenneth H. Trout 51 Director of Bay National Corporation and Bay National Bank
Eugene M. Waldron, Jr. 56 Director of Bay National Corporation and Bay National Bank
</TABLE>
Bay National Corporation has a classified board of directors whereby
one-third of the members will be elected each year at Bay National Corporation's
Annual Meeting of Stockholders. Upon election, each director serves for a term
of three years. See "Description of Capital Stock--Anti-Takeover Provisions" for
more information about Bay National Corporation's classified board of directors.
Bay National Corporation's officers are appointed by
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the board of directors and hold office at the will of the board or as otherwise
provided in an employment agreement between an officer and Bay National
Corporation.
Each of Bay National Bank's proposed directors will, upon approval by
the OCC, serve until Bay National Bank's first stockholders' meeting, which will
be held shortly after Bay National Bank receives its bank charter. As Bay
National Corporation will be the sole stockholder of Bay National Bank, it is
expected that each interim director will be elected to serve as a director of
Bay National Bank. After the first stockholders meeting, directors of Bay
National Bank will serve for a term of one year and will be elected each year at
Bay National Bank's Annual Meeting of Stockholders. Bay National Bank's officers
will be appointed by its board of directors and will hold office at the will of
the board.
HUGH W. MOHLER serves as president and as a director of Bay National
Corporation and will serve as president and chief executive officer and as a
director of Bay National Bank. Mr. Mohler has more than 25 years' experience in
the financial services industry, holding positions in executive management,
commercial lending and business development. With an extensive background in
community banking and holding company management, he has particular expertise in
acquiring and growing new business. From 1977 to 1999, Mr. Mohler was affiliated
with Mercantile Bankshares Corporation, which is headquartered in Baltimore,
Maryland, most recently serving as executive vice president with responsibility
for 20 community banks in a three-state area. For 17 years, from 1978 to 1994,
he was president of Mercantile's Salisbury based affiliate, Peninsula Bank, the
largest financial institution on Maryland's Eastern Shore. Earlier he was a vice
president in commercial lending at First National Bank of Maryland.
A native of Baltimore, Mr. Mohler earned his undergraduate degree in
economics from Loyola College of Maryland and holds a master of business
administration degree from the University of Baltimore. He serves as president
of the board of trustees of Associated Catholic Charities, Inc. in the Roman
Catholic Archdiocese of Baltimore and is also a trustee of Loyola Blakefield and
Goucher College. Mr. Mohler's other civic commitments include membership on the
boards of United Way of Central Maryland, Leadership Maryland, Independent
College Fund of Maryland as well as the Board of Sponsors of the Sellinger
School of Business at Loyola College of Maryland.
Mr. Mohler's earlier civic experiences include: Chairman, Greater
Salisbury Committee; Chairman, Salisbury School and Chairman, Governor's Lower
Shore Economic Development Task Force. In addition, he has served on the boards
of Peninsula Regional Medical Center, Maryland Chamber of Commerce,
Salisbury-Wicomico Economic Development Committee and the Somerset County
Economic Development Committee. Mr. Mohler has also served as president of the
Maryland Bankers Association and on several committees of the American Bankers
Association.
JOHN S. DIPIETRO serves as a vice president, the secretary and the
treasurer of Bay National Corporation and will serve as vice president -
operations, senior operating officer and senior financial officer of Bay
National Bank. Mr. DiPietro has worked in the banking industry for more than 32
years, serving from November 1995 to June 1999 as senior vice president -
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<PAGE>
bank operations for Mercantile-Safe Deposit & Trust Company, the principal
subsidiary of Baltimore-based Mercantile Bankshares Corporation. From 1974 to
November 1995, he was associated with Mercantile's Peninsula Bank where he
served in various capacities, including executive vice president - operations
and executive vice president - administration. His background includes
significant experience in backroom operations, branch administration and
compliance issues.
A native of Laurel, Maryland, Mr. DiPietro earned a master of business
administration degree from Salisbury State University and currently serves as
co-chair of the university's board of visitors. He has served as a board member
for numerous community and civic organizations, among them the Coastal Hospice
and Junior Achievement of the Eastern Shore.
THOMAS M. NEALE serves as a vice president of Bay National Corporation
and will serve as vice president - client services and senior lending officer of
Bay National Bank. Mr. Neale has worked for over two decades in commercial
banking with line calling and management experience in both middle-market and
corporate lending at major East Coast financial institutions. From January 1999
to August 1999, Mr. Neale was managing director of First Union Corporation's
Maryland private client group where he specialized in meeting investment,
insurance and credit needs of high net worth individuals. From June 1994 to
January 1999, he was a senior vice president/corporate banking sales manager for
First Union in Richmond, Virginia. In that position, Mr. Neale was responsible
for marketing the full array of senior credit, capital management and cash
management services in Central and Eastern Virginia. He has also held senior
lending posts at both MNC Financial in Baltimore and Chase Manhattan Bank in New
York.
An alumnus of the University of Virginia, Mr. Neale earned a master of
business administration degree from the College of William and Mary. A Buffalo,
New York, native, he serves as chairman of the College of William and Mary MBA
Alumni Association and on the board of directors of the Boy Scouts of America,
Baltimore chapter and of Family and Children's Services of Central Maryland. Mr.
Neale has served on the board of directors of the University of Virginia's
Richmond chapter alumni association and of the Bull and Bear Club in Richmond,
Virginia.
JAMES C. ALBAN, JR. is a director of Bay National Corporation and will
be a director of Bay National Bank. Since 1983, Mr. Alban has been self-employed
as a private investor trading as The Alban Company. From 1938 to 1983 Mr. Alban
was with the Alban Tractor Company, Inc., a Baltimore-based dealer for the
Caterpillar Tractor Company. Since 1991, Mr. Alban has been a director of Palm
Beach National Bank & Trust Co., a national commercial bank. From 1965 to 1988,
Mr. Alban was a director of the Savings Bank of Baltimore, Equitable
Bancorporation and Equitable Trust Company. His other board experiences include
service as a director of PHH Group, Inc. from 1969 to 1990 and Club Car, Inc.
from 1977 to 1995.
A Baltimore native, Mr. Alban holds an undergraduate degree from Lehigh
University. Mr. Alban is a past chairman of the Salvation Army Advisory Board
and a former trustee of
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<PAGE>
Goucher College in Baltimore. In addition, he has participated in Baltimore's
Rotary Club for over forty years.
CARROLL A. BODIE is a director of Bay National Corporation and will be
a director of Bay National Bank. Mr. Bodie is vice president, general counsel
and secretary of Noxell Corporation, a Hunt Valley, Maryland-based subsidiary of
Procter & Gamble Company for which he also serves as associate general counsel.
Mr. Bodie has served in that capacity since 1987. Prior to joining Noxell, Mr.
Bodie spent more than two decades in the brewing industry, his most recent
position being with the Miller Brewing Company subsidiary of Philip Morris
Companies, Inc.
A Baltimore native, Mr. Bodie holds an undergraduate degree in
marketing from the University of Baltimore and earned his law degree from the
University of Baltimore School of Law. Admitted to practice before numerous
courts, including those in the State of Maryland and the United States Supreme
Court, he is a member of both the Baltimore County, Maryland Bar Association,
the American Bar Association and the American Corporate Counsel Association. Mr.
Bodie is chairman of the board of trustees of Loyola Blakefield and a board and
executive committee member for the Independent College Fund of Maryland. He is a
past director and board chairman for the YMCA of Central Maryland.
CHARLES E. BOUNDS is a director of Bay National Corporation and will be
a director of Bay National Bank. Mr. Bounds is a retired executive who served
from 1944 to 1969 as director of purchases and inventory for Symington Wayne
Corporation, an international conglomerate headquartered in Salisbury, Maryland,
which operated businesses in the United States and seven foreign countries. From
1969 to 1999, he was a vice president investments for Morgan Stanley Dean
Witter, working in the Salisbury, Maryland office of the investment banking
firm.
A native of Salisbury, Maryland, Mr. Bounds is past chairman of the
Salvation Army Boys Club in Salisbury, Maryland, and headed the Salisbury,
Maryland Salvation Army administrative board. He has also chaired fund raising
efforts for the Boy Scouts of America, Delmarva District. Mr. Bounds was an
original member of the Ward Foundation, which is a Salisbury, Maryland based
non-profit organization which operates The Ward Museum of Wildfowl Art. Mr.
Bounds is an alumnus of Beacom College.
RICHARD C. HACKNEY, JR. is a director of Bay National Corporation and
will be a director of Bay National Bank. Mr. Hackney has over 24 years
experience as an investment management executive, including experience in
portfolio management, research, client relations and business management. Since
1994, Mr. Hackney has been a principal, portfolio manager and research analyst
for Brown Investment Advisory & Trust Company, a Baltimore-based financial
advisory company. From 1992 to 1994, Mr. Hackney was president of Hackney
Capital Management, LP, a financial advisory joint venture with Alex. Brown &
Sons. From 1987 to 1992, Mr. Hackney was a principal with Alex. Brown & Sons,
and during that time he assisted with the formation of the Flag Investors
Emerging Growth mutual fund. From 1973 to 1987, Mr. Hackney was employed in the
trust and investment division of JP Morgan, Inc., New York, New York.
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<PAGE>
An Atlanta, Georgia native, Mr. Hackney serves as a member of the
Maryland Higher Education Investment Board, and as a trustee of the Maryland
Institute, College of Art, Baltimore, Maryland; the Fund for Educational
Excellence, Baltimore, Maryland; and the Wenner-Gren Foundation for
Anthropological Research, New York, New York. Mr. Hackney is a former trustee
and treasurer of the Associated Black Charities, Baltimore, Maryland and a
former chairman of the Alvin Ailey Dance Theater Foundation of Maryland. A
graduate of Morehouse College in Atlanta, Georgia, Mr. Hackney received a JURIS
DOCTOR from Boston College Law School and a master of business administration
degree from The Wharton School of Finance, University of Pennsylvania.
JOHN R. LERCH is a director of Bay National Corporation and will be a
director of Bay National Bank. Since January 1999, Mr. Lerch has been
self-employed as a private investor trading as the Chesapeake Venture Group.
From 1973 to January 1999, Mr. Lerch was president of Chesapeake Insurance-The
Harris Riggin Agency, an independent insurance agency based in Salisbury,
Maryland. Mr. Lerch began his business career in the securities industry,
serving as a stockbroker at firms in Washington, D.C. and Salisbury, Maryland.
Mr. Lerch is a past director of the Independent Insurance Agents of Maryland.
A native of Wilmington, Delaware, Mr. Lerch is an alumnus of Dickinson
College of Carlisle, Pennsylvania. He served as an officer in the U.S. Army and
holds a Bronze Star from his service in Vietnam. He is a past director of
Peninsula Bank, a subsidiary of Baltimore-based Mercantile Bankshares
Corporation. He is a past director and vice-chairman of the Greater Salisbury
Committee, past trustee of the Peninsula Regional Medical Center in Salisbury,
past president of Salisbury-Wicomico Economic Development Corporation and past
president and campaign chairman of the United Way of the Lower Eastern Shore. He
also has served as a director for the Mid-Delmarva Family YMCA and was a former
chairman and a current trustee for The Ward Foundation.
H. VICTOR RIEGER, JR. is a director of Bay National Corporation and
will be a director of Bay National Bank. Mr. Rieger retired from Signet Banking
Corporation, successor to Union Trust Company of Maryland, in December 1997
after nearly four decades of service. Mr. Rieger served in numerous capacities
for Signet, including regional executive vice president of international banking
and as part of Signet's Maryland commercial banking group. Mr. Rieger has
extensive experience in commercial relationship banking, credit administration
and loan policy.
An alumnus of Johns Hopkins University, Mr. Rieger is a graduate of the
Stonier School of Banking at Rutgers University. He is past president and a
current trustee of Family and Children's Services of Central Maryland, past
treasurer and board member of the National Flag Day Foundation and a past
vice-president and director of the Baltimore Junior Association of Commerce. He
is a former member of the loan committee for the Minority Small Business
Investment Company and a past advisory board member of the U.S. Small Business
Administration. Mr. Rieger also is past president of the Chesapeake Chapter of
Robert Morris Associates.
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<PAGE>
MARGARET KNOTT RIEHL is a director of Bay National Corporation and will
be a director of Bay National Bank. Ms. Riehl is a retired nurse and civic
volunteer. She is currently a trustee of the Marion I. and Henry J. Knott
Foundation, a Baltimore, Maryland-based philanthropic organization and has
served in that capacity from 1978 to 1985 and again from 1993 to present. She
serves as vice-chair of the board of trustees of Baltimore's Associated Catholic
Charities, Inc., and as chair of Friends of St. Mary's Seminary & University,
also in Baltimore. Mrs. Riehl is a former trustee of the Community Foundation of
Baltimore, Mercy Medical Center, the Institute of Notre Dame and St. Paul's
School for Girls. A Baltimore native, Ms. Riehl is an alumna of the Mercy
Hospital School of Nursing.
WILLIAM B. RINNIER is a director of Bay National Corporation and will
be a director of Bay National Bank. Mr. Rinnier is the owner and president of
Lamar Corporation, a Salisbury, Maryland based real estate development company
which specializes in the development and sale or management of resort
condominiums, multi-family apartments and commercial and industrial buildings.
He joined Lamar nearly three decades ago after his honorable discharge from the
U.S. Navy.
A native of Salisbury, Maryland, Mr. Rinnier earned a degree in
aerospace engineering from the Georgia Institute of Technology and attended the
Graduate School of Business at the University of Virginia. He is a board member
of the Greater Salisbury Committee and is past president of the
Salisbury-Wicomico Economic Development Corporation and the Coastal Board of
Realtors.
EDWIN A. ROMMEL is a director of Bay National Corporation and will be a
director of Bay National Bank. Mr. Rommel is a certified public accountant who,
since 1974, has been a partner in the Salisbury, Maryland, accounting firm of
Twilley, Rommel & Moore, P.A. Mr. Rommel has been certified as a valuation
analyst and accredited in business evaluation by the American Institute of
Certified Public Accountants.
A Baltimore native, Mr. Rommel earned his undergraduate degree from
Loyola College of Maryland. Mr. Rommel is a current director of the Greater
Salisbury Committee and past president of the Salisbury Area Chamber of
Commerce. He serves as a director of the Maryland Association of Certified
Public Accountants and an officer of its Eastern Shore Chapter. Mr. Rommel is
past president of the St. Francis de Sales Board of Trustees and past member of
the Wicomico County Democratic Central Committee.
CHARLES H. SALISBURY is a director of Bay National Corporation and will
be a director of Bay National Bank. Since 1998, Mr. Salisbury has been a private
investor in radio properties. From 1994 to 1998, Mr. Salisbury was an executive
vice president and member of the management committee of United Asset Management
Corporation, a Boston-based financial services holding company. From 1970 to
1993, Mr. Salisbury was employed by T. Rowe Price Associates, serving on the
firm's board of directors and, for more than a dozen years, heading its
institutional marketing group. He assisted in the organization and development
of the firm's fixed-income department, managed many of its major equity and
debit accounts and assisted with the formation of two major mutual funds. He was
later given responsibility as president and
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<PAGE>
chief investment officer of T. Rowe Price Trust Company and was a director of T.
Rowe Price's Retirement Plan Services subsidiary. He began his career with
Merrill Lynch Pierce Fenner & Smith after serving as a commissioned officer in
the U.S. Air Force.
A Baltimore native, Mr. Salisbury earned his undergraduate degree in
history from Hobart College and today chairs the board of trustees of Hobart and
William Smith Colleges. He holds a master of business administration degree from
Loyola College of Maryland. Mr. Salisbury chairs the investment committee of the
Maryland Institute, College of Art in Baltimore.
HENRY H. STANSBURY is a director of Bay National Corporation and will
be a director of Bay National Bank. Since 1975, Mr. Stansbury has been the chief
executive officer of Agency Services, Inc., the largest independently owned
premium finance company in the United States. Since 1989, Mr. Stansbury has been
the chief executive officer of Agency Insurance Company of Maryland, Inc., a
privately owned multi-line property/casualty insurance company. Mr. Stansbury is
president of the Maryland Association of Premium Finance Companies and is a past
president and current director of the National Association of Premium Finance
Companies.
Mr. Stansbury is a trustee of the Maryland Historical Society, a
trustee of the Ward Museum of Wildfowl Art, and a director of the Catonsville
Historical Society. He served as director and chairman of the museum committee
for the Lacrosse Hall of Fame at the Johns Hopkins University and is vice
president and a trustee of the St. Paul's School for Boys. He is also past
president and a current board member of ReVisions, Inc., a nonprofit
organization which serves the mentally ill. Mr. Stansbury is a graduate of
Leadership Maryland and a director of Leadership Baltimore County. He is the
author of LLOYD J. TYLER: FOLK ARTIST AND DECOY MAKER. Mr. Stansbury is an
alumnus of the University of Maryland and holds a master of business
administration degree from George Washington University.
KENNETH H. TROUT is a director of Bay National Corporation and will be
a director of Bay National Bank. Since January 1999, Mr. Trout has served as the
executive vice president and chief operating officer of Rosemore, Inc., a
Baltimore-based privately held investment company primarily engaged in the
business of oil and gas exploration and production. He also serves as a director
of Rosemore Holdings, Inc., Rosemore Calvert, Inc., Tema Oil and Gas Company and
Gateway Gathering and Marketing Company, which are all subsidiaries of Rosemore,
Inc. He is also a director of KCI Technologies, Inc. From 1970 to November 1997,
Mr. Trout was employed by Signet Banking Corporation. During his last five years
of tenure with Signet, he served as senior executive vice president - commercial
banking and as president and chief executive officer of Signet Bank - Maryland.
Mr. Trout was retired from December 1997 to December 1998.
A Bridgeton, New Jersey native, Mr. Trout received his undergraduate
degree in economics and business administration from Methodist College in North
Carolina. He is chairman of the board of governors of the National Aquarium in
Baltimore and is a trustee of the College of Notre Dame of Maryland.
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EUGENE M. WALDRON, JR. is a director of Bay National Corporation and
will be a director of Bay National Bank. Mr. Waldron is a chartered financial
analyst and since September 1998 has been a senior vice president in the
Washington, D.C., office of Capital Guardian Trust Company, an employee-owned
firm based in Los Angeles dedicated to international investing. From March 1994
to August 1998, Mr. Waldron was employed by Loomis, Sayles & Company, an
investment management firm. Mr. Waldron's more than three decades of investment
experience include employment at CS First Boston Asset Management, Fidelity
Management Trust Company, T. Rowe Price Associates and Baker, Watts & Company.
An alumnus of Mt. St. Mary's College, Emmitsburg, Maryland, Mr. Waldron
earned his master of business administration degree at the Bernard M. Baruch
College of the City University of New York. A native of Annapolis, Maryland, he
is a member of the Mt. St. Mary's Board of Trustees and the Newton,
Massachusetts Country Day School of the Sacred Heart's Endowment Committee.
Other than Mr. Mohler and Mr. Waldron who are first cousins, there are
no family relationships between any director or executive officer and any other
director or executive officer of Bay National Corporation.
DIRECTOR COMPENSATION
Bay National Corporation currently does not pay directors fees and does
not intend to pay directors fees until Bay National Bank is profitable. However,
we reserve the right to pay directors' fees. Directors will be reimbursed for
reasonable expenses incurred on behalf of Bay National Corporation.
EMPLOYMENT AND EXECUTIVE COMPENSATION ARRANGEMENTS
Bay National Corporation has entered into written employment agreements
with each of Mr. Mohler, Mr. DiPietro and Mr. Neale effective as of September
14, 1999. Under these agreements, Mr. Mohler will serve as the president of Bay
National Corporation at an initial annual base salary of $154,000, subject to
annual review, and Mr. DiPietro and Mr. Neale will serve as vice presidents of
Bay National Corporation at an initial annual base salary of $154,000 each,
subject to annual review. However, Mr. Mohler will not receive any compensation
pursuant to his employment agreement until January 2000.
Bay National Corporation may terminate each employment agreement
without cause upon 30 days' prior written notice and may terminate each
employment agreement for cause at any time without prior notice. Each of Mr.
Mohler, Mr. DiPietro and Mr. Neale may terminate his employment agreement at any
time upon 30 days' prior written notice. Mr. Mohler's, Mr. DiPietro's and Mr.
Neale's agreement with Bay National Corporation will terminate, unless extended
by the parties' mutual agreement, on the effective date of an employment
agreement between Mr. Mohler, Mr. DiPietro and Mr. Neale, as the case may be,
and Bay National Bank, or on the date Bay National Corporation's board of
directors decides to terminate this offering.
On the date that Bay National Bank opens for business, Mr. Mohler, Mr.
DiPietro and Mr. Neale will each enter into an employment agreement with Bay
National Bank. Under these
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agreements, Mr. Mohler will serve as the president of Bay National Bank at an
initial annual base salary of $154,000, subject to annual review, and Mr.
DiPietro and Mr. Neale will serve as vice presidents of Bay National Bank at an
initial annual base salary of $154,000 each, subject to annual review. Each
agreement will have an initial term of three years, automatically renewable for
one year terms unless written notice is provided by either party 90 days before
expiration of a term.
Bay National Bank may terminate each employment agreement without cause
upon 30 days' prior written notice and may terminate each employment agreement
for cause at any time without prior notice. Each of Mr. Mohler, Mr. DiPietro and
Mr. Neale may terminate his employment agreement at any time upon 30 days' prior
written notice. In the event Mr. Mohler, Mr. DiPietro or Mr. Neale is terminated
without cause, the terminated employee will continue to receive salary payments
for the remainder of his employment term or until such time as the employee has
found comparable employment. The terminated employee is required to use his best
efforts to obtain comparable employment.
Pursuant to these agreements, if Mr. Mohler, Mr. DiPietro or Mr. Neale
is employed by Bay National Bank on the date of a "change of control," he is
entitled to a payment of $446,000 from Bay National Bank. The employment
agreements define "change of control" as (i) the acquisition by any person of
forty percent (40%) or more of the outstanding shares of common stock of Bay
National Bank or Bay National Corporation; (ii) the election of a majority of
the members of the board of directors who were not approved or nominated by then
incumbent board or (iii) the approval by the stockholders of Bay National Bank
or Bay National Corporation of (a) a reorganization, merger or consolidation of
Bay National Bank or Bay National Corporation; (b) a liquidation or dissolution
of Bay National Bank or Bay National Corporation or (c) the sale or other
disposition of all or substantially all of the assets of Bay National Bank or
Bay National Corporation.
In the employment agreements with Bay National Bank, Mr. Mohler, Mr.
DiPietro and Mr. Neale each agree that for a period of six (6) months after
employment with Bay National Bank or any affiliate, he will not, directly or
indirectly, own, operate or otherwise be associated with, any financial
institution which is located in the Bank's market area. Mr. Mohler, Mr. DiPietro
and Mr. Neale each also agree that for a period of one (1) year after
employment with Bay National Bank or any affiliate, he will not (i) solicit any
person or entity which at the time of his termination was, or within one (1)
year prior thereto had been, a customer of Bay National Bank or any of its
affiliates or (ii) solicit the employment of any person who was employed by Bay
National Bank or any of its affiliates on a full or part time basis at the time
of his termination of employment, unless such person (a) was involuntarily
discharged by Bay National Bank or the affiliate or (b) voluntarily terminated
his relationship with Bay National Bank or the affiliate prior to Mr. Mohler's,
Mr. DiPietro's; or Mr. Neale's, as the case may be, termination of employment.
In addition, after the offering, Mr. Mohler will be granted options to
purchase 3% of the shares of common stock outstanding after the offering and Mr.
DiPietro and Mr. Neale each will be granted options to purchase 1.5% of the
shares of common stock outstanding after the offering. All of these options will
be exercisable at the public offering price of $10.00 per share
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<PAGE>
and will be granted pursuant to a stock option plan to be adopted by Bay
National Corporation's board of directors.
Bay National Corporation intends to purchase "key man" life insurance
on Mr. Mohler, Mr. DiPietro and Mr. Neale.
STOCK OPTION PLAN
GENERAL. Bay National Corporation's board of directors intends to adopt
a stock option plan as a performance incentive for executive employees, to
encourage ownership of Bay National Corporation stock by executive employees and
directors and to encourage such persons to remain employed by Bay National
Corporation or its subsidiaries, including Bay National Bank. The plan will
require the prior approval of the banking regulators and the approval of Bay
National Corporation's stockholders within one year from the plan's adoption by
the board of directors.
SHARES SUBJECT TO THE PLAN; ADMINISTRATION. The board of directors
intend to reserve for issuance upon the exercise of options granted under the
plan 12% of the shares of common stock outstanding after the offering.
Currently, we expect to grant options to purchase 6% of the shares of common
stock outstanding after the offering to Mr. Mohler, Mr. DiPietro and Mr. Neale.
The plan will be administered by a compensation committee appointed by
the board of directors. The compensation committee will be authorized to
determine and designate from time to time those persons to whom options are to
be granted. Options may be "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
non-qualified options. In general, the purchase price of each share of common
stock subject to an option will be equal to the share's fair market value on the
date of grant.
TERMS OF OPTIONS. The plan will have a 10-year term. Each incentive
stock option granted under the plan will expire not more than eight years from
the date the option was granted, except each incentive stock option granted
under the plan to an individual owning more than 10% of the outstanding common
stock of Bay National Corporation will expire not more than five years from the
date the option was granted. Non-qualified options granted under the plan will
expire on such date as the compensation committee determines.
Except as otherwise determined by the compensation committee, options
granted under the plan will vest in four equal installments, with the first
installment vesting three years from the date of the grant, the second
installment vesting four years from the date of the grant, the third installment
vesting five years from the date of the grant and the fourth installment vesting
six years from the date of the grant. Incentive stock options granted to an
individual who possesses more than 10% of the total combined voting power of all
classes of stock of Bay National Corporation will vest in two equal
installments, with the first installment vesting three years from the date of
the grant and the second installment vesting four years from the date of the
grant.
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the ownership of Bay National
Corporation's common stock by its directors, executive officers and persons
known to own more than five percent (5%) of the common stock as of the date of
this Prospectus. The table does not reflect the warrants or options granted or
to be granted to any of these persons. Unless otherwise noted below, we believe
that each person named in the table has or will have the sole voting and sole
investment power with respect to each of the shares of common stock reported as
owned by such person.
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner Number of Shares Percentage of Total
- --------------------- ---------------- -------------------
<S> <C> <C>
Carroll A. Bodie 5,000 4.44%
4005 Greenway
Baltimore, MD 21218
Charles E. Bounds 2,500 2.22%
1707 Upper Millstone Lane
Salisbury, MD 21801
John R. Lerch 10,000(1) 8.89%
618 Indian Lane
Salisbury, MD 21801
Hugh W. Mohler 10,000 8.89%
23 Buchanan Road
Baltimore, MD 21212
H. Victor Rieger, Jr. 5,000 4.44%
1015 Ivy Hill Road
Cockeysville, MD 21030
Margaret K. Riehl 5,000 4.44%
6200 Gentry Lane
Baltimore, MD 21210
William B. Rinnier 5,000 4.44%
616 Manor Drive
Salisbury, MD 21801
Edwin A. Rommel, III 5,000 4.44%
5281 Silver Run Lane
Salisbury, MD 21801
Charles H. Salisbury 10,000 8.89%
7209 Bellona Avenue
Baltimore, MD 21212
Henry H. Stansbury 10,000(2) 8.89%
6200 Foxhall Farm Road
Catonsville, MD 21228
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner Number of Shares Percentage of Total
- --------------------- ---------------- -------------------
<S> <C> <C>
Eugene M. Waldron, Jr. 10,000 8.89%
5309 Woodlawn Avenue
Chevy Chase, MD 20815
LFI Partnership 8,000(3) 7.11%
618 Indian Lane
Salisbury, MD 21801
Judith L. Stansbury 10,000(4) 8.89%
6200 Foxhall Farm Road
Catonsville, MD 21228
Executive Officers and Directors as a 77,500 68.89%
Group
</TABLE>
(1) Includes 6,000 shares held by LFI Partnership, of which Mr. Lerch is a
general partner. Also includes 2,000 shares held by Mr. Lerch's wife. Mr. Lerch
disclaims beneficial ownership as to the shares held by his wife.
(2) Includes 5,000 shares held by Mr. Stansbury's wife, Judith L. Stansbury. Mr.
Stansbury disclaims beneficial ownership as to the shares held by his wife.
(3) Includes 2,000 shares held by John R. Lerch, the general partner of LFI
Partnership.
(4) Includes 5,000 shares held by Mrs. Stansbury's husband, Henry H. Stansbury.
Mrs. Stansbury disclaims beneficial ownership as to the shares held by her
husband.
Directors and officers of Bay National Corporation have indicated their
intention to purchase approximately 100,000 of the shares in the offering,
although they will not be obligated to purchase any shares. The directors and
officers may purchase additional shares in the offering if necessary to permit
Bay National Corporation to complete the minimum offering of 900,000 shares, and
they may purchase additional shares even if Bay National Corporation sells the
minimum offering. Any shares purchased by the directors and officers in excess
of their original commitments will be purchased for investment and not with a
view to the resale of those shares.
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CERTAIN TRANSACTIONS
Prior to this offering, the organizers of Bay National Corporation and
Bay National Bank and certain other investors purchased an aggregate of 112,500
shares of our common stock at a purchase price of $10.00 per share. These shares
were issued without registration under the Securities Act of 1933, as amended,
in reliance of the exemption provided by Section 4(2) of the Securities Act and
the rules of the Securities and Exchange Commission promulgated under Section
4(2). The primary purpose of this "organizational offering" was to provide Bay
National Corporation and Bay National Bank with the capital necessary to fund
some of our initial organizational and prepaid operating expenses.
In recognition of the financial and organizational risk undertaken by
the purchasers in the organizational offering, each purchaser in the
organizational offering received, for no additional consideration, a warrant to
purchase one share of common stock at $10.00 per share for every two shares that
they purchased in the organizational offering. As a result, we issued warrants
to purchase an aggregate of 56,250 shares of common stock to the purchasers in
the organizational offering.
The warrants become exercisable on the later of the date that Bay
National Bank opens for business or one year from the termination date of this
offering and are exercisable in whole or in part until that date which is five
years from the date of this prospectus. The warrants and the shares issuable
upon the exercise of the warrants are transferrable subject to compliance with
applicable securities laws. If the OCC issues a capital directive or other order
requiring Bay National Bank to obtain additional capital, the warrants are
forfeited if not immediately exercised.
Director John R. Lerch owns a 50% interest in the property being leased
for Bay National Bank's Salisbury, Maryland branch office. Pursuant to that
lease, which is for a five year term and commenced as of September 1, 1999, Bay
National Corporation agreed to pay Mr. Lerch and his partner monthly rent of
approximately $1,980 plus all real estate taxes and utilities. We believe that
the lease rate is at fair market value, based, in part, on an evaluation of the
lease terms by William E. Martin of ERA Martin Associates, a Salisbury based
real estate brokerage firm. We engaged Mr. Martin to review the lease terms for
the purpose of determining whether the terms were consistent with the lease
terms for similar properties in the downtown Salisbury area.
We anticipate that our directors and officers and the business and
professional organizations with which they are associated will have banking
transactions with Bay National Bank in the ordinary course of business. It will
be our policy that any loans and loan commitments will be made in accordance
with applicable laws and on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons of comparable credit standing. Loans to
directors and officers must comply with Bay National Bank's lending policies and
statutory lending limits, and directors with a personal interest in any loan
application will be excluded from considering any such loan application.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of nine million (9,000,000)
shares of common stock, $0.01 par value, and one million (1,000,000) shares of
preferred stock, $0.01 par value. As of the date of this prospectus, 112,500
shares of common stock are issued and outstanding and held by 23 stockholders of
record. The following summary of certain terms of the common stock and preferred
stock is not complete and you may refer to our charter and bylaws, copies of
which are available upon request for inspection, for further information.
In general, stockholders or subscribers for our stock have no personal
liability for the debts and obligations of Bay National Corporation because of
their status as stockholders or subscribers, except to the extent that the
subscription price or other agreed consideration for the stock has not been
paid.
COMMON STOCK
We are authorized to issue nine million (9,000,000) shares of common
stock, par value $0.01 per share. Upon completion of the offering, including the
shares of common stock currently issued and outstanding, a minimum of 1,012,500
and a maximum of 1,612,500 shares of common stock will be issued and
outstanding. The outstanding shares of common stock currently are, and the
shares of common stock to be issued in the offering will be, upon payment as
described in this prospectus, fully paid and nonassessable. Subject to all the
rights of holders of any other class or series of stock, holders of common stock
are entitled to receive dividends if and when the Board of Directors of Bay
National Corporation declares dividends from funds legally available. In
addition, holders of common stock share ratably in the net assets of Bay
National Corporation upon the voluntary or involuntary liquidation, dissolution
or winding up of Bay National Corporation, after distributions are made to
anyone with more senior rights.
In general, each outstanding share of common stock entitles the holder
to vote for the election of directors and on all other matters requiring
stockholder action, and each share is entitled to one vote. There is no
cumulative voting in the election of directors, which means that the holders of
a majority of the outstanding shares of common stock can elect all of the
directors then standing for election and the holders of the remaining shares
will not be able to elect any directors.
Holders of common stock have no conversion, sinking fund, redemption
rights or preemptive rights to subscribe to any securities of Bay National
Corporation or Bay National Bank.
Our charter grants to the board of directors the right to classify or
reclassify any unissued shares of common stock from time to time by setting or
changing the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption. Accordingly, the board of directors could authorize
the issuance of additional shares of common stock with terms and conditions
which could have the effect of discouraging a takeover or other transaction
which some of our stockholders might believe to be
45
<PAGE>
in their best interests or in which they might receive a premium for their
shares of common stock over the market price of such shares. As of the date
hereof, we have no plans to classify or reclassify any unissued shares of the
common stock.
PREFERRED STOCK
We are authorized to issue one million (1,000,000) shares of preferred
stock, par value $0.01 per share. Shares of preferred stock may be issued from
time to time by the board of directors in one or more series. Prior to issuance
of shares of each series of preferred stock, the board of directors is required
by the Maryland General Corporation Law ("MGCL") to fix for each series the
designation, preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption. The board of directors could authorize the issuance of
shares of preferred stock with terms and conditions which could have the effect
of discouraging a takeover or other transaction which some of our stockholders
might believe to be in their best interests or in which they might receive a
premium for their shares of common stock over the market price of such shares.
As of the date hereof, we have no present plans to issue any preferred stock.
ANTI-TAKEOVER PROVISIONS
EXTRAORDINARY TRANSACTIONS. Pursuant to the MGCL, a corporation
generally cannot amend its charter (except in compliance with specific
provisions of the MGCL), consolidate, merge, sell, lease or exchange all or
substantially all of its assets, engage in a share exchange or liquidate,
dissolve or wind-up unless such acts are approved by the affirmative vote of at
least two-thirds of the shares entitled to vote on the matter, unless a lesser
or greater percentage is set forth in the corporation's charter. Our charter
requires that some of these matters be approved by the affirmative vote at least
80% of all the votes entitled to be cast.
CLASSIFICATION OF THE BOARD OF DIRECTORS. Our charter and bylaws
provide that we shall have at least three (3) directors, and that the number of
directors may be increased or decreased by the board of directors. As of the
date of this prospectus, the board of directors has set the number of directors
at 14. At the first annual meeting of the stockholders, the directors will be
divided into three classes -- Class A, Class B and Class C -- each class to
consist of an equal number of directors, or as nearly equal as possible. Each
director will serve for a term ending on the date of the third annual meeting
following the annual meeting at which such director was elected. However, the
Class A directors first chosen will hold office for one year or until the first
annual meeting following their election, the Class B directors first chosen will
hold office for two years or until the second annual meeting following their
election and the Class C directors first chosen will hold office for three years
or until the third annual meeting following their election. We believe that
classification of the board of directors will help to assure the continuity and
stability of Bay National Corporation's business strategies and policies as
determined by the board of directors.
REMOVAL OF DIRECTORS. Our charter and bylaws provide that a director
may only be removed by the affirmative vote of at least 80% of the votes
entitled to be cast on the matter.
46
<PAGE>
Furthermore, the MGCL provides that if a corporation's directors are divided
into classes, a director may only be removed for cause.
SUMMARY OF ANTI-TAKEOVER PROVISIONS. The above-described provisions
included in our charter and bylaws are designed to encourage potential acquirors
to negotiate directly with our board of directors and to discourage takeover
attempts. Such provisions may discourage non-negotiated takeover attempts which
certain stockholders could deem to be in their best interests.
For example, the classified director provision could have the effect of
making the removal of incumbent directors more time consuming and difficult,
which could discourage a third party from making a tender offer or otherwise
attempting to obtain control of Bay National Corporation, even though such an
attempt might be beneficial to Bay National Corporation and its stockholders. In
general, more than one annual meeting of stockholders will be required to effect
a change in a majority of the board of directors. Thus, the classified board
provision could increase the likelihood that incumbent directors will retain
their positions. Holders of common stock have no right to cumulative voting for
the election of directors. Consequently, at each annual meeting of stockholders,
the holders of a majority of the shares of common stock will be able to elect
all of the successors of the class of directors whose term expires at that
meeting.
The charter and bylaw provision that directors may be removed only by
the affirmative vote of at least 80% of the votes entitled to be cast on the
matter, the provision of the MGCL that provides that class directors may only be
removed for cause and the provision in the Bylaws authorizing the board of
directors to fill vacant directorships, precludes stockholders from removing
incumbent directors except for cause and upon a substantial affirmative vote and
filling the vacancies created by such removal with their own nominees.
BUSINESS COMBINATIONS. Under the MGCL, certain "business combinations"
between a Maryland corporation and an "Interested Stockholder" (as described in
the MGCL) are prohibited for five years after the most recent date on which the
Interested Stockholder became an Interested Stockholder, unless an exemption is
available. Thereafter a business combination must be recommended by the board of
directors of the corporation and approved by the affirmative vote of at least:
(i) 80% of the votes entitled to be cast by holders of outstanding voting shares
of the corporation and (ii) two-thirds of the votes entitled to be cast by
holders of outstanding voting shares of the corporation other than shares held
by the Interested Stockholder with whom the business combination is to be
effected, unless the corporation's stockholders receive a minimum price (as
described in the MGCL) for their shares and the consideration is received in
cash or in the same form as previously paid by the Interested Stockholder for
its shares. These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of directors prior to
the time that the Interested Stockholder becomes an Interested Stockholder. They
also do not apply if the company has fewer than 100 beneficial owners of stock.
CONTROL SHARE ACQUISITIONS. The MGCL provides that "control shares" of
a Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent
47
<PAGE>
approved by a vote of two-thirds of the shares entitled to be voted on the
matter, excluding shares of stock owned by the acquiror or by officers or
directors who are employees of the corporation. "Control shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquiror, or in respect of which the acquiror is able
to exercise or direct the exercise of voting power except solely by virtue of a
revocable proxy, would entitle the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power: (i) one-fifth or
more but less than one-third; (ii) one-third or more but less than a majority or
(iii) a majority of all voting power. Control shares do not include shares the
acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses and delivery of an "acquiring person statement"), may compel the
corporation's board of directors to call a special meeting of stockholders to be
held within 50 days of demand to consider the voting rights of the shares. If no
request for a meeting is made, the corporation may itself present the question
at any stockholders' meeting.
Unless the charter or bylaws provide otherwise, if voting rights are
not approved at the meeting or if the acquiring person does not deliver an
acquiring person statement within 10 days following a control share acquisition
then, subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares (except those for which voting rights have
previously been approved) for fair value determined, without regard to the
absence of voting rights for the control shares, as of the date of the last
control share acquisition or of any meeting of stockholders at which the voting
rights of such shares are considered and not approved. Moreover, unless the
charter or bylaws provides otherwise, if voting rights for control shares are
approved at a stockholders' meeting and the acquiror becomes entitled to
exercise or direct the exercise of a majority or more of all voting power, other
stockholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition.
TRANSFER AGENT
At present, we intend to serve as our own transfer agent after the
offering.
SHARES ELIGIBLE FOR FUTURE SALE
No market exists now for our shares, and we do not expect one to
develop in the foreseeable future. However, if a market did develop, the sale of
a substantial number of shares in that market could decrease the prevailing
market price of our stock and also could impair our ability to raise more funds
in the future. All shares sold in this offering will be freely tradeable without
restriction, except for any shares purchased by an "affiliate" of Bay National
Corporation. Those shares, along with the 112,500 shares of our common stock
sold in the
48
<PAGE>
organizational offering, may not be resold unless they are registered or sold
pursuant to an exemption from registration including that set forth in
Securities and Exchange Commission Rule 144. The shares sold in the
organizational offering may be sold without restriction beginning in September
2001.
As of the date of this Prospectus, we have 112,500 shares of common
stock outstanding and have issued warrants to purchase up to 56,250 shares of
common stock. The shares issuable upon exercise of the warrants will constitute
"restricted securities" within the meaning of Rule 144.
All of Bay National Corporation's officers and directors are considered
"affiliates" within the meaning of Rule 144 and will, therefore, be subject to
the applicable resale limitations of that rule with respect to the shares
purchased in this offering. In general, the number of shares that can be sold by
each affiliate in brokers' transactions (as that term is used in Rule 144)
within any three month period may not exceed the greater of (i) one percent (1%)
of the outstanding shares as shown by the most recent report or statement
published by Bay National Corporation or (ii) the average weekly reported volume
of trading in the shares on all national securities exchanges and/or reported
through the automated quotation system of a registered securities association
during the four calendar weeks preceding the sale.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus
will be passed upon for Bay National Corporation by Ober, Kaler, Grimes &
Shriver, a Professional Corporation, Baltimore, Maryland.
EXPERTS
The audited financial statements of Bay National Corporation, Inc.
dated as of August 31, 1999, and for the period from June 3, 1999 (date of
inception) to August 31, 1999 included in this prospectus have been included in
reliance upon the report of Stegman & Company, independent certified public
accountants, and upon the authority of that firm as experts in accounting and
auditing.
HOW TO FIND ADDITIONAL INFORMATION
We are a newly organized company and to date have not engaged in any
business operations other than those activities necessary to engage in this
offering and to organize and capitalize Bay National Corporation and Bay
National Bank. We are not currently required to file reports with the Securities
and Exchange Commission, although we will do so after this offering. We will
furnish stockholders with annual reports containing audited financial
statements. We may also send other reports to keep stockholders informed of our
business.
We have filed a Registration Statement on Form SB-2 with the Securities
and Exchange Commission, and this prospectus was included in the Registration
Statement. This prospectus
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<PAGE>
does not contain all of the information contained in the Registration Statement.
You can read the Registration Statement and the exhibits to the Registration
Statement at the following public reference facilities of the Securities and
Exchange Commission: 450 Fifth Street, NW, Room 1024, Washington, DC 20549; 7
World Trade Center, Suite 1300, New York, New York 10048 and the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You
can obtain copies of the Registration Statement and the exhibits for a fee from
the Public Reference Room of the Securities and Exchange Commission, 450 Fifth
Street, NW, Room 1024,Washington, DC 20549. You may call 1-800-SEC-0330 to
obtain information on the operation of the Public Reference Rooms. These
materials also may be accessed via the Securities and Exchange Commission's
Internet website. The address of that website is http://www.sec.gov.
No one is authorized to give you information that is not included in
this prospectus. If someone gives you any other information, you should not rely
upon it because we may not have authorized the use of that information. We may
deliver this prospectus to a prospective investor and/or sell shares of common
stock in this offering even if the information in this prospectus changes after
the date on the cover of the prospectus.
This prospectus is not an offer to sell the common stock and is not a
solicitation of an offer to buy the common stock in any state where the offer or
sale is not permitted.
50
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report....................................F-2
Balance Sheet...................................................F-3
Statement of Operations ........................................F-4
Statement of Changes in Stockholders' Equity ...................F-5
Statement of Cash Flows ........................................F-6
Notes to Financial Statements...................................F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Bay National Corporation
Baltimore, Maryland
We have audited the accompanying balance sheet of Bay National
Corporation (a Development Stage Company) as of August 31, 1999 and the related
statements of operations, changes in stockholders' equity and cash flows for the
period June 3, 1999 (date of inception) to August 31, 1999. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Bay National
Corporation (a Development Stage Company) as of August 31, 1999 and the results
of operations and cash flows for the period June 3, 1999 (date of inception) to
August 31, 1999 in conformity with generally accepted accounting principles.
Stegman & Company
Baltimore, Maryland
September 13, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
BAY NATIONAL CORPORATION
(a Development Stage Company)
BALANCE SHEET
AS OF AUGUST 31, 1999
ASSETS
<S> <C>
Cash $1,048,218
Equipment - net 12,844
Other assets 25,325
-------------
TOTAL ASSETS $1,086,387
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accrued payroll and payroll taxes $ 11,535
Accrued professional fees 59,761
------------
Total liabilities 71,296
-------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par, 1,000,000 shares authorized;
no shares issued or outstanding -
Common stock, $.01 par, 9,000,000 shares authorized,
112,500 shares issued and outstanding 1,125
Surplus 1,123,875
Deficit accumulated during the development stage (109,909)
------------
Total stockholders' equity 1,015,091
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,086,387
=============
</TABLE>
See accompanying notes.
F-3
<PAGE>
BAY NATIONAL CORPORATION
(a Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JUNE 3, 1999
(DATE OF INCEPTION) TO AUGUST 31, 1999
REVENUES - Interest income $ 1,633
--------
EXPENSES:
Salaries and employee benefits 39,468
Professional fees 59,761
Rent 3,801
Other 8,512
--------
Total expenses 111,542
LOSS BEFORE INCOME TAX BENEFIT (109,909)
INCOME TAX BENEFIT -
NET LOSS $(109,909)
=========
EARNINGS PER SHARE:
Basic net loss per share $ (.98)
====
Diluted net loss per share $ (.98)
====
See accompanying notes.
F-4
<PAGE>
BAY NATIONAL CORPORATION
(a Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JUNE 3, 1999
(DATE OF INCEPTION) TO AUGUST 31, 1999
Deficit
Accumulated
During the
Common Development
Stock Surplus Stage
------------ ------------ -----------
BALANCES AT JUNE 3, 1999 $ - $ - $ -
ISSUANCE OF COMMON STOCK 1,125 1,123,875 -
NET LOSS - - (109,909)
----------- ------------ -----------
BALANCES AT AUGUST 31, 1999 $1,125 $1,123,875 $(109,909)
====== ========== =========
See accompanying notes.
F-5
<PAGE>
BAY NATIONAL CORPORATION
(a Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 3, 1999
(DATE OF INCEPTION) TO AUGUST 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (109,909)
Adjustments to reconcile net loss to net cash
used by operating activities:
Increase in other assets (25,325)
Increase in accrued payroll and payroll taxes 11,535
Increase in accrued professional fees 59,761
-----------
Net cash used by operating activities (63,938)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES -
Acquisition of equipment (12,844)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES -
Issuance of common stock 1,125,000
-----------
NET INCREASE IN CASH 1,048,218
CASH AT END OF PERIOD -
CASH AT END OF PERIOD $1,048,218
===========
Supplemental Cash Flows information:
Interest payments $ -
==========
Income tax payments $ -
==========
See accompanying notes.
F-6
<PAGE>
BAY NATIONAL CORPORATION
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 3, 1999
(DATE OF INCEPTION) TO AUGUST 31, 1999
1. NATURE OF BUSINESS
Bay National Corporation (the "Company") was incorporated on June 3,
1999 under the laws of the State of Maryland to operate as a bank holding
company of a proposed new national bank with the name Bay National Bank (the
"Proposed Bank"). It is intended that the Company will purchase all the shares
of common stock to be issued by the Proposed Bank. The Company's operations to
date have been limited to taking the necessary actions to organize and
capitalize the Company and the Proposed Bank. The Proposed Bank has not
commenced operations and will not do so unless the public offering of stock by
the Company is successful and the Proposed Bank meets the conditions of the
Office of the Comptroller of the Currency (the "OCC") to receive its charter
authorizing it to commence operations as a national bank, has obtained the
approval of the Federal Deposit Insurance Corporation to insure its deposit
accounts, and meets certain other regulatory requirements.
2. INCOME TAXES
<TABLE>
<CAPTION>
Federal and state income tax expense (benefit) consist of the
following for the period ended August 31, 1999:
<S> <C>
Current federal income tax $ -
Current state income tax -
Deferred federal income tax expense (benefit) -
Deferred state income tax expense (benefit) -
---------
Total income tax expense (benefit) $ -
=========
The following chart is a summary of the tax effect of temporary
differences that give rise to a significant portion of deferred tax assets:
Deferred tax assets:
Net operating loss carryforwards $19,400
Less valuation allowance (19,400)
Total deferred tax assets $ -
=========
</TABLE>
F-7
<PAGE>
No income tax benefit or deferred tax asset is reflected in the
financial statements. Deferred tax assets are recognized for future deductible
temporary differences and tax loss carryforwards if their realization is "more
likely than not".
3. LEASE COMMITMENTS
Operating lease commitments entered into by the Company bear initial
terms of five years. Minimum payments as of August 31, 1999 are as follows:
2000 $175,830
2001 175,830
2002 175,830
2003 175,830
2004 173,930
Thereafter 43,092
---------
Total minimum lease payments $920,342
=========
4. ISSUANCE OF COMMON STOCK
The Company offered and sold 112,500 shares of its common stock,
$0.01 par value per share, in a private placement organizational offering for a
price of $10 per share and received aggregate consideration of $1,125,000.
The planned initial public offering is on a best effort,
minimum/maximum basis, whereby no shares will be sold unless the Company
receives subscriptions for at least 900,000 shares at $10 per share and
satisfies certain other regulatory conditions. A maximum of 1,500,000 shares may
be sold in the initial public offering.
5. OPTIONS AND WARRANTS
The Board of Directors of the Company intends to adopt a stock option
plan as a performance incentive for its and the Proposed Bank's executive
employees and to encourage ownership of the Company's common stock by executive
employees and directors. The plan will require the prior approval of the OCC and
the approval of the Company's stockholders within one year from the plan's
adoption by the Board of Directors.
On August 31, 1999, the Board of Directors of the Company authorized
the issuance on September 10, 1999, to each stockholder of record of the Company
on August 31, 1999, of a warrant to purchase one share of common stock at $10
per share for every two shares that the stockholder purchased in the
organizational offering. As a result, the Company issued 56,250 warrants. The
warrants were issued in recognition of the financial and organizational risk
undertaken by the purchasers in the organizational offering. The warrants become
exercisable on the later of the date that the Proposed Bank opens for business
or one year from the termination date of the Company's initial public offering,
and are exercisable in whole or in part until that date which is five years from
the date of the Company's prospectus.
F-8
<PAGE>
6. EARNINGS PER SHARE
Basic net loss per common share is computed by dividing net loss
available to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted net loss per common share is computed by
dividing net loss available to common stockholders by the weighted average
number of common shares outstanding during the period, including any potential
dilutive common shares outstanding, such as options and warrants. No
consideration was given to the outstanding warrants because of their
anti-dilutive effect.
F-9
<PAGE>
EXHIBIT A
SUBSCRIPTION AGREEMENT
This Subscription Agreement is entered into in connection with the
offer and sale (the "Offering") of up to 1,500,000 shares (the "Shares") of
Common Stock, par value $0.01 per share, of Bay National Corporation, a
corporation incorporated under the laws of the State of Maryland (the
"Company"), for a purchase price of $10.00 per share.
WITNESSETH:
1. Purchase of Shares. The undersigned agrees to purchase the number of Shares
set forth below and tenders the amount required to purchase such number of
Shares by check, bank draft or money order drawn to the order of "Brown Brothers
Harriman & Co., Escrow Agent for Bay National Corporation."
2. Acknowledgments. The undersigned acknowledges and agrees that:
(a) The Company has established a minimum subscription of 1,000 shares
($10,000).
(b) The undersigned has received a copy of the Company's prospectus
dated _______________ (the "Prospectus"). By executing this Subscription
Agreement, the undersigned acknowledges and agrees to all of the terms and
conditions of the Offering as described in the Prospectus. This Subscription
Agreement is not binding on the Company until accepted by the Company and until
the Company authorizes the release of offering proceeds by the Escrow Agent. The
Company reserves the right to accept or reject, in whole or in part and at its
sole discretion, any Subscription Agreement. The Company shall notify the
subscriber by mail of its acceptance or rejection, in whole or in part, of this
Subscription Agreement.
(c) Subscriptions are binding on subscribers and may not be revoked by
subscribers except with the consent of the Company.
(d) The Company reserves the right to cancel accepted Subscription
Agreements at any time and for any reason until the satisfaction of the
conditions of the Offering.
(e) The Company may, in its sole discretion, allocate shares among
subscribers in the event of an oversubscription for the Shares.
3. Representations and Warranties. The undersigned represents and warrants that
he/she:
(a) Is aware that no federal or state agency has made any finding or
determination as to the fairness for public investment in, or any recommendation
or endorsement of, the Shares.
(b) Understands that the Company has no financial or operating history
and that the Shares, as an investment, involve a high degree of risk, as
described in the Prospectus.
A-1
<PAGE>
(c) Is aware that (i) there is no market for the Shares and that there
can be no assurance that a market will develop and (ii) it may not be possible
to liquidate his/her investment in the Shares readily.
(d) Has adequate means of providing for his/her current needs and
possible personal contingencies and has no need for liquidity in this
investment.
(e) Has carefully read the entire Prospectus, particularly the "Risk
Factors" section therein.
(f) Is a resident of Delaware, the District of Columbia, Florida,
Maryland, Pennsylvania or Virginia.
THE COMMON STOCK DOES NOT REPRESENT A DEPOSIT ACCOUNT OR OTHER
OBLIGATION OF OUR PROPOSED BANKING SUBSIDIARY. THE COMMON STOCK IS NOT AND WILL
NOT BE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
The Shares purchased by the undersigned shall be registered as
specified below. If Shares are to be issued in more than one name, please
specify whether ownership is to be as tenants in common, joint tenants with
right of survivorship, community property, etc. If Shares are to be held in
joint ownership, all joint owners should sign this Subscription Agreement. If
Shares are to be issued in the name of one person for the benefit of another,
please indicate whether registration should be as trustee or custodian for such
other person.
A-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on the date set forth below.
<TABLE>
<CAPTION>
<S> <C>
Date:_________________, ____ _____________________________(SEAL)
Signature of Subscriber
Number of Shares Subscribed for:_______
(at $10 per Share)
Total Subscription Price: $____________ ____________________________________
Print Name(s) in which Shares are to be
Registered
</TABLE>
Address of Subscriber:
- -----------------------------
- -----------------------------
Social Security/Taxpayer Identification Number
- ----------------------------------
Telephone Number with Area Code
( )
- ----------------------------------
ACCEPTANCE
The foregoing subscription is hereby acknowledged and accepted as to
_____________ shares.
Date: __________________, ____
Bay National Corporation
By:_________________________________
Authorized Officer
A-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
No one has been authorized to give any
information or to make any representations in BAY NATIONAL CORPORATION
connection with this offering, other than those [LOGO]
contained in this prospectus. You may not assume that COMMON STOCK
we have authorized any other information or
representations. The delivery of this prospectus and $10.00 PER SHARE
the sale of our common stock does not mean that there
has been no change in our affairs since the date of
this prospectus. This prospectus is not an offer to 900,000 SHARES (MINIMUM)
sell or a solicitation of an offer to buy securities 1,500,000 SHARES (MAXIMUM)
in any state where the offer or sale is not
permitted.
TABLE OF CONTENTS
Page
Prospectus Summary....................................1
Risk Factors..........................................3
Bay National Corporation and Bay National Bank........8
--------------------------------------------
The Offering..........................................8
Use of Proceeds......................................11 PROSPECTUS
Capitalization.......................................13
--------------------------------------------
Dividend Policy......................................13
Proposed Business of Bay National Corporation........14
Proposed Business of Bay National Bank...............14
Management's Plan of Operation.......................21
Supervision and Regulation...........................22
Management...........................................32
Securities Ownership of Certain Beneficial Owners and
Management...........................................42
Certain Transactions.................................44
Description of Capital Stock.........................45
Shares Eligible for Future Sale......................48
Legal Matters........................................49
Experts..............................................49 , 1999
---------------------------------------
How to Find Additional Information...................49
Index to Financial Statements.......................F-1
Exhibit A - Subscription Agreement..................A-1
</TABLE>
Until _____________________________, ____, all dealers that effect transactions
in these securities, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the dealers'
obligations to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Article Seventh of the Company's Articles of Incorporation provides that
Bay National Corporation shall, to the full extent permitted by the Maryland
General Corporation Law, indemnify a director or officer of Bay National
Corporation who is or was a party to any proceeding by reason of the fact that
he is or was a director or officer of Bay National Corporation.
The Maryland General Corporation Law provides, in pertinent part, as
follows:
2-418 Indemnification of directors, officers, employees and agents.
(a) DEFINITIONS. -- In this section the following words have the
meanings indicated.
(1) "Director" means any person who is or was a director of a
corporation and any person who, while a director of a corporation, is or was
serving at the request of the corporation 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.
(2) "Corporation" includes any domestic or foreign predecessor
entity of a corporation in a merger, consolidation, or other transaction in
which the predecessor's existence ceased upon consummation of the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a director, the office of
director in the corporation; and
(ii) When used with respect to a person other than a director
as contemplated in sub-section (j), the elective or appointive office in the
corporation held by the officer, or the employment or agency relationship
undertaken by the employee or agent in behalf of the corporation.
(iii) "Official capacity" does not include service for any
other foreign or domestic corporation or any partnership, joint venture, trust,
other enterprise, or employee benefit plan.
(5) "Party" includes a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(6) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, or investigative.
II-1
<PAGE>
(b) (1) PERMITTED INDEMNIFICATION OF DIRECTOR. -- A corporation may
indemnify any director made a party to any proceeding by reason of service in
that capacity unless it is established that:
(i) The act or omission of the director was material to the
matter giving rise to the proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate dishonesty;
or
(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.
(2) (i) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.
(ii) However, if the proceeding was one by or in the right of
the corporation, indemnification may not be made in respect of any proceeding in
which the director shall have been adjudged to be liable to the corporation.
(3) (i) The termination of any proceeding by judgment, order, or
settlement does not create a presumption that the director did not meet the
requisite standard of conduct set forth in this subsection.
(ii) The termination of any proceeding by conviction, or a
plea of nolo contendere or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttal presumption that the director did not meet
that standard of conduct.
(c) NO INDEMNIFICATION OF DIRECTOR LIABLE FOR IMPROPER PERSONAL BENEFIT.
- -- A director may not be indemnified under subsection (b) of this section in
respect of any proceeding charging improper personal benefit to the director,
whether or not involving action in the director's official capacity, in which
the director was adjudged to be liable on the basis that personal benefit was
improperly received.
(d) REQUIRED INDEMNIFICATION AGAINST EXPENSES INCURRED IN SUCCESSFUL
DEFENSES. -- Unless limited by the charter:
(1) A director who has been successful, on the merits or otherwise,
in the defense of any proceeding referred to in subsection (b) of this section
shall be indemnified against reasonable expenses incurred by the director in
connection with the proceeding.
II-2
<PAGE>
(2) A court of appropriate jurisdiction upon application of a
director and such notice as the court shall require, may order indemnification
in the following circumstances:
(i) If it determines a director is entitled to reimbursement
under paragraph (1) of this subsection, the court shall order indemnification,
in which case the director shall be entitled to recover the expenses of securing
such reimbursement; or
(ii) If it determines that the director is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not the director has met the standards of conduct set
forth in subsection (b) of this section or has been adjudged liable under the
circumstances described in subsection (c) of this section, the court may order
such indemnification as the court shall deem proper. However, indemnification
with respect to any proceeding by or in the right of the corporation or in which
liability shall have been adjudged in the circumstances described in subsection
(c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may be the same court in
which the proceeding involving the director's liability took place.
(e) (1) DETERMINATION THAT INDEMNIFICATION IS PROPER. -- Indemnification
under subsection (b) of this section may not be made by the corporation unless
authorized for a specific proceeding after a determination has been made that
indemnification of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in subsection (b) of this
section.
(2) Such determination shall be made:
(i) By the board of directors by a majority vote of a quorum
consisting of directors not, at the time, parties to the proceeding, or, if such
a quorum cannot be obtained, then by a majority vote of a committee of the board
consisting solely of two or more directors not, at the time, parties to such
proceeding and who were duly designated to act in the matter by a majority vote
of the full board in which the designated directors who are parties may
participate;
(ii) By special legal counsel selected by the board of
directors or a committee of the board by vote as set forth in subparagraph (i)
of this paragraph, or, if the requisite quorum of the full board cannot be
obtained therefor and the committee cannot be established, by a majority vote of
the full board in which directors who are parties may participate; or
(iii) By the stockholders.
(3) Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible. However, if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses shall be
made in the manner specified in subparagraph (ii) of paragraph (2) of this
subsection for selection of such counsel.
II-3
<PAGE>
(4) Shares held by directors who are parties to the proceeding may
not be voted on the subject matter under this subsection.
(f) (1) PAYMENT OF EXPENSES IN ADVANCE OF FINAL DISPOSITION OF ACTION. --
Reasonable expenses incurred by a director who is a party to a proceeding may be
paid or reimbursed by the corporation in advance of the final disposition of the
proceeding upon receipt by the corporation of:
(i) A written affirmation by the director of the director's
good faith belief that the standard of conduct necessary for indemnification by
the corporation as authorized in this section has been met; and
(ii) A written undertaking by or on behalf of the director to
repay the amount if it shall ultimately be determined that the standard of
conduct has not been met.
(2) The undertaking required by subparagraph (ii) of paragraph (1)
of this subsection shall be an unlimited general obligation of the director but
need not be secured and may be accepted without reference to financial ability
to make the repayment.
(3) Payments under this subsection shall be made as provided by the
charter, bylaws or contract or as specified in subsection (e) of this section.
(g) VALIDITY OF INDEMNIFICATION PROVISION.--The indemnification and
advancement of expenses provided or authorized by this section may not be deemed
exclusive of any other rights, by indemnification or otherwise, to which a
director may be entitled under the charter, the bylaws, a resolution of
stockholders or directors, an agreement or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(h) REIMBURSEMENT OF DIRECTOR'S EXPENSES INCURRED WHILE APPEARING AS
WITNESS.-- This section does not limit the corporation's power to pay or
reimburse expenses incurred by a director in connection with an appearance as a
witness in a proceeding at a time when the director has not been made a named
defendant or respondent in the proceeding.
(i) DIRECTOR'S SERVICE TO EMPLOYEE BENEFIT PLAN.-- For purposes of this
section:
(1) The corporation shall be deemed to have requested a director to
serve an employee benefit plan where the performance of the director's duties to
the corporation also imposes duties on, or otherwise involves services by, the
director to the plan or participants or beneficiaries of the plan:
(2) Excise taxes assessed on a director with respect to an employee
benefit plan pursuant to applicable law shall be deemed fines; and
(3) Action taken or omitted by the director with respect to an
employee benefit plan in the performance of the director's duties for a purpose
reasonably believed by the director to be in the interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
II-4
<PAGE>
(j) OFFICER, EMPLOYEE OR AGENT. -- Unless limited by the charter:
(1) An officer of the corporation shall be indemnified as and to the
extent provided in subsection (d) of this section for a director and shall be
entitled, to the same extent as a director, to seek indemnification pursuant to
the provisions of subsection (d);
(2) A corporation may indemnify and advance expenses to an officer,
employee, or agent of the corporation to the same extent that it may indemnify
directors under this section; and
(3) A corporation, in addition, 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 its charter, bylaws, general or
specific action of its board of director or contract.
(k) (1) INSURANCE OR SIMILAR PROTECTION. -- A corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was serving at the request of the
corporation 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 any liability asserted
against and incurred by such person in any such capacity or arising out of such
person's position, whether or not the corporation would have the power to
indemnify against liability under the provisions of this section.
(2) A corporation may provide similar protection, including a trust
fund, letter of credit, or surety bond, not inconsistent with this section.
(3) The insurance or similar protection may be provided by a
subsidiary or an affiliate of the corporation.
(l) REPORT OF INDEMNIFICATION TO STOCKHOLDERS.--Any indemnification
of, or advance of expenses to, a director in accordance with this section, if
arising out of a proceeding by or in the right of the corporation, shall be
reported in writing to the stockholders with the notice of the next
stockholders' meeting or prior to the meeting.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses payable by the Company in connection with the
offering described in this Registration Statement (other than underwriting
discounts and commissions) are as follows:
SEC Registration Fee $ 4,170
*Blue Sky Filing Fees and Expenses
(Including counsel fees)
*Legal Fees $85,000
*Broker-dealer Fees and Expenses
*Printing and Engraving
(Including Edgar filing expenses)
*Accounting Fees and Expenses
II-5
<PAGE>
*Other Expenses
*TOTAL $_______________
*To be provided by amendment
Item 26. Recent Sales of Unregistered Securities.
From June 18, 1999 to August 31, 1999, Bay National Corporation sold an
aggregate of 112,500 shares of its common stock to the organizers of Bay
National Corporation and Bay National Bank and certain other accredited
investors. The price per share was $10.00 for an aggregate purchase price of
$1,125,000. There were no underwriting discounts or commissions paid with
respect to these transactions. All sales were exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated
thereunder.
<TABLE>
Item 27. Exhibits.
<S> <C>
3.1 Articles of Incorporation of Bay National Corporation
3.2 Bylaws of Bay National Corporation
4.1 Rights of Holders of Common Stock (as contained in the Articles of
Incorporation included herein as Exhibit 3.1)
4.2 Form of Common Stock Certificate
4.3 Form of Warrant
5.1 Opinion of Ober, Kaler, Grimes & Shriver, a Professional Corporation, as to legality of
Common Stock
10.1 Form of Employment Agreement between Bay National Corporation and Hugh W. Mohler
10.2 Form of Employment Agreement between Bay National Corporation and John S. DiPietro
10.3 Form of Employment Agreement between Bay National Corporation and Thomas M. Neale
10.4 Form of Employment Agreement between Bay National Bank and Hugh W. Mohler
10.5 Form of Employment Agreement between Bay National Bank and John S. DiPietro
10.6 Form of Employment Agreement between Bay National Bank and Thomas M. Neale
10.7 Office Lease Agreement dated July 16, 1999 between Bay National Corporation and Joppa
Green II Limited Partnership
10.8 Office Lease Agreement dated July 16, 1999 between Bay National Corporation and Joppa
Green II Limited Partnership
10.9 Lease Agreement dated September 16, 1999 between Bay National Corporation and John R.
Lerch and Thomas C. Thompson
21.1 Subsidiaries of Bay National Corporation
23.1 Consent of Ober, Kaler, Grimes & Shriver, a Professional Corporation
(contained in their opinion included herein as Exhibit 5.1)
23.2 Consent of Stegman & Company
24 Power of Attorney (contained herein on page II-8)
27 Financial Data Schedules
99.1 Form of Subscription Agreement (contained herein on page A-1)
99.2 Form of Escrow Agreement between Bay National Corporation and Brown
Brothers Harriman & Co.
</TABLE>
II-6
<PAGE>
Item 28. Undertakings.
The Registrant hereby undertakes that it will:
(1) file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (i) include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) reflect in
the prospectus any facts or events which, individually or together represent a
fundamental change in the information in the registration statement; and (iii)
include any additional or changed material information on the plan of
distribution.
(2) for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") 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 Securities and
Exchange 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 of 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.
II-7
<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 of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Baltimore, Maryland on September 24, 1999.
BAY NATIONAL CORPORATION
By: /s/ Hugh W. Mohler
-----------------------------
Hugh W. Mohler
President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Hugh W. Mohler and John S.
DiPietro, and each of them, as his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any and all
amendments to the Registration Statement on Form SB-2 of Bay National
Corporation, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto each of said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or advisable to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in persons, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to
be done by virtue thereof. This power of attorney may be executed in
counterparts.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
NAME POSITION DATE
---- -------- ----
Director and President
/s/ Hugh W. Mohler (Principal Executive September 24, 1999
- --------------------------------- Officer)
Hugh W. Mohler
Treasurer
/s/ John S. DiPietro (Principal Accounting and September 24, 1999
- --------------------------------- Financial Officer)
John S. DiPietro
September 24, 1999
/s/ James C. Alban, Jr. Director
- ---------------------------------
James C. Alban, Jr.
II-8
<PAGE>
Name Position Date
---- --------- ----
/s/ Carroll A. Bodie Director September 24, 1999
- -------------------------
Carrol1 A. Bodie
/s/ Charles E. Bounds Director September 24, 1999
- -------------------------
Charles E. Bounds
/s/ John R. Lerch Director September 24, 1999
- -------------------------
John R. Lerch
/s/ H. Victor Rieger, Jr. Director September 24, 1999
- -------------------------
H. Victor Rieger, Jr.
/s/ Margaret Knott Riehl Director September 24, 1999
- -------------------------
Margaret Knott Riehl
/s/ William B. Rinnier Director September 24, 1999
- -------------------------
William B. Rinnier
/s/ Edwin A. Rommel, III Director September 24, 1999
- -------------------------
Edwin A. Rommel, III
/s/ Charles H. Salisbury Director September 24, 1999
- -------------------------
Charles H. Salisbury
/s/ Henry H. Stansbury Director September 24, 1999
- -------------------------
Henry H. Stansbury
Director
- --------------------------
Kenneth H. Trout
/s/ Eugene M. Waldron, Jr. Director September 24, 1999
- --------------------------
Eugene M. Waldron, Jr.
II-9
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
3.1 Articles of Incorporation of Bay National Corporation
3.2 Bylaws of Bay National Corporation
4.1 Rights of Holders of Common Stock (as contained in the Articles of
Incorporation included herein as Exhibit 3.1)
4.2 Form of Common Stock Certificate
4.3 Form of Warrant
5.1 Opinion of Ober, Kaler, Grimes & Shriver, a Professional Corporation, as to legality of
Common Stock
10.1 Form of Employment Agreement between Bay National Corporation and Hugh W. Mohler
10.2 Form of Employment Agreement between Bay National Corporation and John S. DiPietro
10.3 Form of Employment Agreement between Bay National Corporation and Thomas M. Neale
10.4 Form of Employment Agreement between Bay National Bank and Hugh W. Mohler
10.5 Form of Employment Agreement between Bay National Bank and John S. DiPietro
10.6 Form of Employment Agreement between Bay National Bank and Thomas M. Neale
10.7 Office Lease Agreement dated July 16, 1999 between Bay National Corporation and Joppa
Green II Limited Partnership
10.8 Office Lease Agreement dated July 16, 1999 between Bay National Corporation and Joppa
Green II Limited Partnership
10.9 Lease Agreement dated September 16, 1999 between Bay National Corporation and John R.
Lerch and Thomas C. Thompson
21.1 Subsidiaries of Bay National Corporation
23.1 Consent of Ober, Kaler, Grimes & Shriver, a Professional Corporation
(contained in their opinion included herein as Exhibit 5.1)
23.2 Consent of Stegman & Company
24 Power of Attorney (contained herein on page II-8)
27 Financial Data Schedule
99.1 Form of Subscription Agreement (contained herein on page A-1)
99.2 Form of Escrow Agreement between Bay National Corporation and Brown
Brothers Harriman & Co.
</TABLE>
II-10
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
BAY NATIONAL CORPORATION
FIRST: The undersigned, whose post office address is 23 Buchanan Road,
Baltimore, Maryland 21212, being at least eighteen (18) years of age, does
hereby form a corporation under and by virtue of the general laws of the State
of Maryland.
SECOND: The name of the corporation (the "Corporation") is
BAY NATIONAL CORPORATION
THIRD: The purposes for which Corporation is formed are as follows:
1. To own and hold the stock of financial institutions and otherwise
operate as a financial institution holding company and to carry on any and all
business activities permitted by law; and
2. To do anything permitted by Section 2-103 of the Maryland General
Corporation Law, as amended from time to time (the "MGCL").
FOURTH: The post office address of the principal office of the Corporation
in this State is 23 Buchanan Road, Baltimore, Maryland 21212. The name and post
office address of the resident agent of the Corporation in this State are Hugh
W. Mohler, 23 Buchanan Road, Baltimore, Maryland 21212. The resident agent is an
individual actually residing in this State.
FIFTH: The total authorized capital stock of the Corporation is Ten
Million (10,000,000) shares, consisting of Nine Million (9,000,000) shares of
common stock, with a par value of $0.01 per share, and One Million (1,000,000)
shares of preferred stock, with a par value of $0.01 per share.
The aggregate par value of all authorized shares is $100,000.
The designations and the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the shares of each class of capital stock are as
follows:
(a) Common Stock.Subject to all of the rights of holders of any
preferred stock established pursuant to paragraph (b) of this Article FIFTH,
each share of common stock shall possess all such rights and privileges as are
afforded to capital stock by applicable law in the absence of any express grant
of rights or privileges in the Corporation's Charter, including, but not limited
to, the following rights and privileges:
<PAGE>
(i) dividends may be declared and paid or set apart for
payment upon the common stock out of any assets or funds of the Corporation
legally available for the payment of dividends;
(ii) the holders of common stock shall have the right to vote
on all matters requiring stockholder action, each share being entitled to one
vote; and
(iii) upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the net assets of the Corporation
shall be distributed pro rata to the holders of the common stock in accordance
with their respective rights and interests.
(b) Preferred Stock. The preferred stock may be issued from time to
time by the Board of Directors as shares of one or more series. The description
of shares of each series of such preferred stock, including the designation,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or terms or conditions of redemption shall be as set
forth in resolutions adopted by the Board of Directors and in Articles
Supplementary filed as required by law from time to time prior to the issuance
of any shares of such series.
SIXTH: (a) At such time as the Corporation has stock outstanding, the
Corporation shall have three (3) directors, which number may be increased or
decreased pursuant to the Bylaws of the Corporation, but shall never be less
than three (3), unless the number of stockholders is less than three (3), in
which case the number of directors shall not be less than the number of
stockholders. The name of the director who shall act until his successors are
duly elected and qualify is Hugh W.
Mohler.
(b) At the first annual meeting of the stockholders, the directors
shall be divided into three classes, Class A, Class B and Class C, the number of
directors in each class to be as nearly equal in number as possible. Each
director shall serve for a term ending on the date of the third annual meeting
following the annual meeting at which such director was elected; provided,
however, that the Class A Directors first chosen shall hold office for one year
or until the first annual meeting following their election, the Class B
Directors first chosen shall hold office for two years or until the second
annual meeting following their election, and the Class C Directors first chosen
shall hold office for three years or until the third annual meeting following
their election. Each director elected shall hold office until his successor
shall be duly elected and shall qualify.
(c) Notwithstanding any provision to the contrary contained in the
MGCL, a director may only be removed from office upon the affirmative vote of
eighty percent (80%) of all of the votes entitled to be cast on the matter, at
any meeting of the stockholders called for the purpose.
(d) This Article SIXTH may not be amended except by the affirmative
vote, cast in person or by proxy, of the holders of record of eighty percent
(80%) of the shares of the capital stock of the Corporation entitled to vote
thereon.
2
<PAGE>
SEVENTH: (a) The Corporation shall indemnify and advance expenses to its
directors as and to the fullest extent permitted by the MGCL.
(b) The Corporation shall indemnify and advance expenses to its
officers and former officers to the same extent that it shall indemnify and
advance expenses to its directors.
(c) No amendment to the Charter of the Corporation or repeal of any
of its provisions shall limit or eliminate the protection afforded by this
Article SEVENTH to a director or officer or former officer with respect to any
act or omission that occurred prior to such amendment or repeal.
(d) For purposes of this Article SEVENTH, the word "director" shall
have the meaning ascribed to that word by Section 2-418 of the MGCL.
EIGHTH: The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
(a) The Corporation reserves the right to adopt from time to time
any amendment to its Charter, as now or thereafter authorized by law, including
any amendment that alters the contract rights, as expressly set forth in the
Charter, of any outstanding stock.
(b) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class or
series, whether now or hereafter authorized, or securities convertible into
shares of its stock of any class or classes or series, whether now of hereafter
authorized, for such consideration as the Board of Directors deems advisable;
and the Board of Directors may classify or reclassify any unissued shares or
securities by fixing or altering in any one or more respects, from time to time
before issuance of such shares or securities, the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption, of such shares or
securities.
The enumeration and definition of a particular power of the Board of Directors
included in this Article shall in no way be limited or restricted by reference
to or inference from the terms of any other clause of this or any other Article
of the Charter of the Corporation, or construed as or deemed by inference or
otherwise in any manner to exclude or limit any powers conferred upon the Board
of Directors under the General Laws of the State of Maryland now or hereafter in
force.
NINTH: (a) No proposed transaction resulting in a Business Combination
(hereinafter defined) shall be valid unless approved by the affirmative vote,
cast in person or by proxy, of the holders of record of eighty percent (80%) of
the shares of the capital stock of the Corporation entitled to vote thereon.
(b) This Article NINTH may not be amended except by the affirmative
vote, cast in person or by proxy, of the holders of record of eighty percent
(80%) of the shares of the capital stock of the Corporation entitled to vote
thereon.
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(c) "Business Combination" as used herein shall mean the following
proposed transactions:
(i) the merger or consolidation of the Corporation or any
subsidiary of the Corporation;
(ii) the sale, exchange, transfer or other disposition (in one
or a series of transactions) of substantially all of the assets of the
Corporation or any subsidiary of the Corporation; or
(iii) any offer for the exchange of securities of another
entity for the securities of the Corporation.
TENTH: To the fullest extent permitted by Maryland law, as amended or
interpreted from time to time, no director or officer or former director or
officer of the Corporation shall be personally liable to the Corporation or its
stockholders for money damages. No amendment to the Charter of the Corporation
or repeal of any of its provisions shall limit or eliminate the benefits
provided by this Article TENTH to the directors or former directors or officers
or former officers with respect to any act or omission that occurred prior to
such amendment or repeal.
IN WITNESS WHEREOF, I do hereby acknowledge these Articles of
Incorporation to be my act this 2nd day of June, 1999.
/s/ Hugh W. Mohler (SEAL)
------------------------
Hugh W. Mohler
I HEREBY CONSENT TO ACT AS RESIDENT AGENT IN MARYLAND FOR THE
ABOVE NAMED
/s/ Hugh W. Mohler June 2, 1999
------------------------------------ ------------
Hugh W. Mohler Date
4
EXHIBIT 3.2
BYLAWS
OF
BAY NATIONAL CORPORATION
ARTICLE I
OFFICES AND AGENTS
------------------
Section 1.1. Principal Office. The principal office of the Corporation
shall be located in the State of Maryland. The address of the principal office
may be changed from time to time pursuant to the Maryland General Corporation
Law.
Section 1.2. Other Offices. The Corporation may have such other offices
and places of business at such places within or without the State of Maryland as
the Board of Directors may determine from time to time.
Section 1.3. Resident Agent. The Corporation shall have at least one
resident agent who shall be either a citizen of the State of Maryland or a
Maryland corporation. The Corporation may designate or change its resident agent
pursuant to the Maryland General Corporation Law.
ARTICLE II
STOCKHOLDERS
------------
Section 2.1. Annual Meeting of Stockholders. The annual meeting of the
stockholders shall be held on a date fixed from time to time by the Board of
Directors during the month of May, provided notice of the date is duly set forth
in the notice of the meeting. The annual meeting shall be held for the purpose
of electing Directors and for transacting such other business as may be brought
before the meeting.
Section 2.2. Special Meetings. Special meetings of the stockholders may be
called at any time by the Chairman of the Board, the President or by a majority
of the Board of Directors. Special meetings of the stockholders shall be called
by the Secretary upon the written request of the holders of shares entitled to
cast not less than a majority of all the votes entitled to be cast at such
meeting. Such request shall state the purpose or purposes of such meeting and
the matters proposed to be acted on thereat. The Secretary shall inform such
requesting stockholders of the reasonably estimated cost of preparing and
mailing the notice of the meeting, and upon payment to the Corporation of such
cost, the Secretary shall give the required notice
Business transacted at all special meetings of stockholders shall be
confined to the purpose or purposes stated in the notice of the meeting. No
special meeting need be called to consider any matter that is substantially the
same as a matter voted upon at any special meeting of the
<PAGE>
stockholders held during the preceding twelve (12) months unless requested by
stockholders entitled to cast a majority of all the votes entitled to be cast at
such meeting.
Section 2.3. Place of Meetings. All meetings of stockholders shall be held
at the principal office of the Corporation in the State of Maryland or in such
other place within the United States as may be designated by the Board of
Directors from time to time provided notice of the location is duly set forth in
the notice of the meeting.
Section 2.4. Notice of Meetings. Not less than ten (10) nor more than
ninety (90) days before the date of a stockholders' meeting, the Secretary shall
give each stockholder entitled to vote at or to receive notice of each
stockholders' meeting, written or printed notice stating the date, hour and
place of the meeting and, in the case of a special meeting or a meeting at which
an action proposed to be taken requires advance notice of the purpose of such
action, the purpose or purposes for which the meeting is called, either by mail
or by presenting it to him in person or by leaving it at his residence or usual
place of business. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the stockholder at his post
office address as it appears on the records of the Corporation at the time of
such mailing, with postage thereon prepaid.
Section 2.5. Quorum; Action. Unless the Maryland General Corporation Law
or the Charter of the Corporation otherwise provide: (i) at any meeting of
stockholders, the presence in person or by proxy of stockholders entitled to
cast a majority of all the votes entitled to be cast thereat shall constitute a
quorum; and (ii) a majority of all 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 matter that properly comes before the meeting.
Section 2.6. Adjournment of Meetings. If at any annual or special meeting
of stockholders a quorum shall fail to attend in person or by proxy, a majority
in interest of the stockholders entitled to vote attending in person or by
proxy, may, without further notice, adjourn the meeting from time to time, not
exceeding 120 days at any one time, to the same place until a quorum shall
attend, and thereupon any business may be transacted that might have been
transacted at the meeting as originally called had the same been then held.
Section 2.7. Chairman. The Chairman of the Board or, in his absence, the
President or the Vice President, shall call meetings of the stockholders to
order and shall act as chairman of such meetings. In the absence of the Chairman
of the Board, the President and the Vice President, a chairman of the meeting
shall be chosen by the stockholders present.
Section 2.8. Secretary. The Secretary of the Corporation shall act as
secretary of all meetings of the stockholders, but, in the absence of the
Secretary of the Corporation, the presiding officer may appoint any person to
act as secretary of the meeting.
Section 2.9. Voting. At each meeting of the stockholders, every
stockholder then entitled to vote shall be entitled to vote in person or by
proxy as provided by the Maryland General Corporation Law. No proxy shall be
valid after eleven (11) months from its date, unless otherwise provided in the
proxy. A proxy purporting to be executed by or on behalf of a stockholder shall
be deemed valid unless challenged at or prior to its exercise.
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No share shall be entitled to any vote if any installment payable thereon
is overdue and unpaid. The votes for Directors and, upon demand of any
stockholder, the votes upon any questions before the meeting shall be by secret
ballot, unless otherwise determined at the meeting.
Section 2.10. Voting of Shares in the Name of the Corporation. Shares of
the Corporation's own stock owned directly or indirectly by the Corporation
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to vote at any given time, unless
held by it in a fiduciary capacity, in which case they may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
Shares of its own stock shall be deemed to be owned indirectly by the
Corporation if owned by another corporation in which the Corporation owns shares
entitled to cast a majority of all the votes entitled to be cast by all shares
outstanding and entitled to vote. Shares standing in the name of the
Corporation, when entitled to be voted, may be voted in person or by proxy by
the Chairman of the Board, the President or the Vice President, unless the Board
of Directors authorizes another person to do so.
Section 2.11. Telephone Meetings. Subject to the requirement of notice,
the stockholders may participate in and hold a meeting by means of a conference
telephone or similar communications equipment if all persons participating can
hear each other at the same time, and participation in the meeting shall
constitute presence in person at the meeting.
Section 2.12. 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 on the matter and if all other stockholders
entitled to notice of such meeting of stockholders but not entitled to vote
thereat have waived in writing any right to dissent from such action, and such
consent and waiver are filed with the records of stockholders meetings.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 3.1. Management The business, property and affairs of the
Corporation shall be managed under the direction of the Board of Directors,
which may exercise or authorize the exercise of all the powers of the
Corporation except those powers vested solely in the stockholders by law, by the
Corporation's Charter or by these Bylaws. The Board of Directors shall have
access at all reasonable times to the books of the Corporation.
Section 3.2. Number of Directors. The number of Directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the entire Board of Directors then in office; provided, however, that the
number of Directors shall in no event be fewer than three (3) except that the
number of Directors may be less than three (3) if there are less than three (3)
stockholders and the number of Directors is not less than the number of
stockholders. No reduction in the number of Directors by resolution of the Board
shall have the effect of removing any Director from office prior to the
expiration of his term. The stockholders shall not be entitled to fix the number
of members of the Board of Directors.
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Section 3.3. Election of Directors and Terms of Office. At the first
annual meeting of the stockholders, the Directors shall be divided into three
classes, Class A, Class B and Class C, the number of directors in each class to
be as nearly equal in number as possible. Each Director shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which such Director was elected; provided, however, that the Class A Directors
first chosen shall hold office for one year or until the first annual meeting
following their election, the Class B Directors first chosen shall hold office
for two years or until the second annual meeting following their election, and
the Class C Directors first chosen shall hold office for three years or until
the third annual meeting following their election. The Directors shall be
elected each year at the annual meeting of stockholders, except as provided
above, and each Director shall serve until his successor shall be elected and
shall qualify. Directors need not be stockholders of the Corporation.
Section 3.4. Resignation. A Director of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary of the Corporation. A
resignation shall take effect on the date specified in the notice of resignation
or, should an effective date not be specified, immediately upon receipt of the
notice of resignation. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 3.5. Removal. Notwithstanding any provision of the Maryland
General Corporation Law to the contrary, a Director may only be removed from
office upon the affirmative vote of eighty percent (80%) of all the votes of
stockholders entitled to be cast on the matter, at any meeting of the
stockholders called for the purpose.
Section 3.6. Vacancies. In the case of any vacancy on the Board of
Directors that results from (i) an increase in the number of Directors, a
majority of the entire Board of Directors then in office may fill the vacancy,
and (ii) any other cause, a majority of the remaining Directors, whether or not
sufficient to constitute a quorum, may fill the vacancy. A Director elected to
fill a vacancy shall serve until the next annual meeting of stockholders and
until his successor is elected and qualified. Newly created directorships
resulting from an increase in the number of directors shall be apportioned by
the Board of Directors among the three (3) classes of directors so as to
maintain the number of directors in each class as nearly equal in number as
possible.
Section 3.7. Annual and Regular Meetings. Immediately after the annual
meeting of stockholders, the Board of Directors shall meet to elect officers and
to transact such other proper business as may be brought before the meeting. The
Board of Directors from time to time may provide by resolution for the holding
of regular meetings.
Section 3.8. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, the President or at
the request of any two (2) Directors then in office.
Section 3.9. Place of Meetings. The Directors may hold their meetings and
may have one or more offices in such place or places in or outside of the State
of Maryland as the Board of Directors from time to time may determine.
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<PAGE>
Section 3.10. Notice. The Secretary shall give written notice of each
special meeting of the Board of Directors by mailing the same at least four (4)
days before the meeting, or by telegraphing, sending by facsimile or causing to
be delivered personally the same at least one (1) day before the meeting, to
each Director at his residence or regular place of business. If mailed, such
notice shall be deemed to be given when deposited in the U.S. mail, with postage
thereon prepaid. If sent by facsimile, such notice shall be deemed to be given
upon receipt by the Corporation of the facsimile transmission confirmation.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting. No notice shall be required for regular
meetings or the annual meeting; provided, however, that notice of any change in
the time or place of any regular meeting shall be sent promptly to each Director
not present at the meeting at which such change was made. Such notice shall be
in the manner provided for notice of special meetings.
Section 3.11. Quorum; Action. At all meetings of the Board of Directors,
the presence of a majority of the entire Board of Directors then in office shall
constitute a quorum for the transaction of business. If at any meeting of the
Board of Directors there be less than a quorum present, a majority of the
Directors present may adjourn the meeting from time to time, without further
notice, to the same place until a quorum shall attend and thereupon any business
may be transacted that might have been transacted at the meeting as originally
called had the same been then held. The action of a majority of the Directors
present at a meeting at which a quorum is present is the action of the Board of
Directors.
Section 3.12. Order of Business. At meetings of the Board of Directors,
business shall be transacted in such order as the Board of Directors may from
time to time determine.
Section 3.13. Directors Holding Over. In case of failure to hold an
election of Directors at the designated time, the Directors holding over shall
continue to manage the business and affairs of the Corporation until their
successors are duly elected and qualify.
Section 3.14. Informal Action by Directors. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if a written consent to such
action setting forth such action is signed by each member of the Board of
Directors or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board of Directors or such
committee.
Section 3.15. Dissent. A Director who is present at a meeting of the Board
of Directors at which action on any corporate matter is taken is presumed to
have assented to the action unless he announces his dissent at the meeting and
(i) the dissent is entered into the minutes of the meeting; (ii) he files his
written dissent to the action with the secretary of the meeting before the
meeting is adjourned; or (iii) he forwards his written dissent within
twenty-four (24) hours after the meeting is adjourned, by certified mail, return
receipt requested, to the secretary of the meeting or the Secretary of the
Corporation. A Director does not have a right to dissent if he voted in favor of
the action or failed to make his dissent known at the meeting.
Section 3.16. Compensation. Each Director shall be entitled to receive
compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for attending any regular or special meeting of the
Board of Directors or any committee thereof. Directors also may
5
<PAGE>
be reimbursed by the Corporation for all reasonable expenses incurred in
traveling to and from the place of a Board of Directors or committee meeting.
Section 3.17. Telephone Meetings. Subject to the requirement of notice,
members of the Board of Directors or of any committee thereof may participate in
and hold a meeting by means of a conference telephone or similar communications
equipment if all persons participating can hear each other at the same time, and
participation in the meeting shall constitute presence in person at the meeting.
ARTICLE IV
OFFICERS
--------
Section 4.1. Executive Officers. The Executive Officers of the Corporation
shall be a President, one or more Vice Presidents, a Secretary, and a Treasurer.
The Board of Directors may elect, but shall not be required to elect, a Chairman
of the Board for the same term as the Executive Officers.
Section 4.2. Election; Term of Office. The officers of the Corporation
shall be elected by the Board of Directors at its first meeting and thereafter
annually at its annual meeting. Each officer shall hold office for one (1) year
and until his successor shall have been elected and qualified.
Section 4.3. Number of Offices Held by One Person. Any two (2) or more
offices, except those of President and Vice President, may be held by the same
person. No person shall execute, acknowledge or verify any instrument in more
than one capacity if such instrument is required by law to be executed,
acknowledged or verified by more than one (1) officer.
Section 4.4. Subordinate Officers. The Board of Directors from time to
time may elect such other officers or agents as they may deem advisable, each of
whom shall have such title, hold office for such period, have such authority and
perform such duties as may be prescribed by the Board of Directors. The Board of
Directors may delegate the power to appoint and remove, with or without cause,
any such subordinate officers or agents and to prescribe their respective
authority and duties.
Section 4.5. Vacancies. The Board of Directors may fill a vacancy
occurring in any office.
Section 4.6. Removal. Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation will
be served thereby. Such removal shall be without prejudice to the contractual
rights, if any, of the person so removed.
Section 4.7. Resignation. Any officer may resign his office at any time by
delivering a written resignation to the Board of Directors, the Chairman of the
Board, the President or the Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 4.8. Chairman of the Board. The Chairman of the Board, if one is
elected, shall be the senior officer of the Corporation, shall preside at all
stockholders meetings and at all meetings of the Board of Directors. The
Chairman of the Board must be a member of the Board of Director.
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<PAGE>
The Chairman of the Board shall have such other powers and perform such other
duties as may be assigned to him from time to time by the Board of Directors.
Section 4.9. President. The President shall be the chief executive officer
of the Corporation and, subject to the supervision of the Board of Directors,
shall have the general direction over the business, affairs and property of the
Corporation and of its officers, employees and agents. In the absence of the
Chairman of the Board or if no Chairman of the Board has been chosen, the
President shall preside at all meetings of the stockholders and of the Board of
Directors and exercise the powers and perform the duties of the Chairman of the
Board. The President also shall exercise such other powers and perform such
other duties as from time to time may be assigned to him by the Board of
Directors.
Section 4.10. Vice Presidents. The Vice Presidents shall have such powers
and perform such duties as may be assigned to them by the President or by the
Board of Directors and, in the absence of the President, the most senior of the
Vice Presidents shall perform the duties of the President.
Section 4.11. Secretary; Assistant Secretaries. The Secretary shall keep
the minutes of all meetings of the Board of Directors and the minutes of all
meetings of the stockholders in books to be kept for that purpose. He shall
attend to the giving and serving of all notices of the Corporation and shall
have charge of the records of the Corporation and such other books and papers as
the Board of Directors may direct or as may be required by law and shall execute
such documents as may require his signature. He shall perform such other duties
as pertain to his office or as may be required by the Board of Directors.
The Board of Directors may elect one (1) or more Assistant Secretaries.
Each Assistant Secretary shall have such powers and shall perform such duties as
may be assigned to him by the Board of Directors, the President or the
Secretary, and in the absence of the Secretary, the most senior of the Assistant
Secretaries may perform all of the duties of the Secretary.
Section 4.12. Treasurer; Assistant Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he shall have general
supervision of the funds and property of the Corporation. He shall render to the
Board of Directors, whenever directed by the Board, an account of the financial
condition of the Corporation and of all his transactions as Treasurer, and as
soon as possible after the close of each financial year, he shall make and
submit to the Board of Directors a like report for such financial year. He shall
perform all the acts incident to the office of Treasurer, including the general
supervision and control of the accounts of the Corporation, subject to the
control of the Board of Directors. The Treasurer shall have custody of all funds
and securities of the Corporation. When necessary or proper, he shall endorse,
on behalf of the Corporation for collection, checks, notes and other obligations
and shall deposit the same to the credit of the Corporation, in such bank or
banks or depository as the Board of Directors may designate. All checks and
drafts for the payment of money by the Corporation may be signed in the name of
the Corporation by the Treasurer. He shall also perform such other duties as may
be required by the Board of Directors.
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The Board of Directors may elect one (1) or more Assistant Treasurers.
Each Assistant Treasurer shall have such powers and shall perform such duties as
may be assigned to him by the Board of Directors, the President or the Treasurer
and, in the absence of the Treasurer, the most senior of the Assistant
Treasurers may perform all of the duties of the Treasurer.
Section 4.13. Voting Stock in Other Corporations. The President shall have
full power and authority on behalf of the Corporation to attend and vote at any
meeting of the stockholders of any corporation in which the Corporation may hold
stock, and at any such meeting shall possess and may exercise (in person or by
proxy), any and all rights, powers and privileges incident to the ownership of
such stock, and which, as the owner thereof, this Corporation might have
possessed and exercised if present. The President may grant proxies on behalf of
the Corporation to any person or persons to act in his stead at such meetings.
Section 4.14. Surety Bonds. The Board of Directors may require any officer
or agent of the Corporation to execute a bond to the Corporation in such sum and
with such surety or sureties as the Board of Directors may determine,
conditioned upon the faithful performance of his duties to the Corporation,
including responsibility for negligence and for the accounting of any of the
Corporation's property, funds or securities that may come into his possession.
Section 4.15. Remuneration. The salaries or other compensation of the
Executive Officers of the Corporation shall be fixed from time to time by
resolution of the Board of Directors. The Board of Directors may by resolution
delegate to any person or group of persons the power to fix the salaries or
other compensation of any subordinate officers or agents.
ARTICLE V
CAPITAL STOCK
-------------
Section 5.1. Stock Certificates. Unless the Board of Directors authorizes
the issuance of certificateless shares and such issuance is not otherwise
prohibited by the Corporation's Charter, each stockholder shall be entitled to a
certificate or certificates that shall represent and certify the number of
shares of any class of stock owned by him in the Corporation. No certificate
shall be issued for any share of stock of any class until such share is fully
paid in accordance with the Maryland General Corporation Law.
Stock certificates of each class shall be in such form as shall be
prepared or approved by the Board of Directors. Each certificate shall be signed
by the President or a Vice President or the Chairman of the Board, and
countersigned by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer. The signatures may be either manual or facsimile
signatures. Such a certificate shall be valid and may be issued whether or not
an officer who signed it is still an officer when it is issued. The name of the
Corporation and of the person owning the shares represented thereby, with the
number and class of such shares and the date of issue, shall be on the face of
the certificate and entered on the Corporation's books at the time of issuance.
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Section 5.2. Regulations. The Board of Directors shall have the power and
authority to make such rules and regulations as it may deem expedient concerning
the issuance, transfer and registration of certificates for shares of stock of
any class of the Corporation.
Section 5.3. Record Date. The Board of Directors may fix in advance a date
as a record date for the determination of the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof; or to
express consent to corporate action in writing without a meeting; or to receive
payments of any dividend or other distribution or allotment of any rights; or to
exercise any rights in respect of any change, conversion or exchange of stock;
or for the purpose of any other lawful action, provided that such record date
shall not be a date more than ninety (90) days nor less than ten (10) days prior
to the date on which the particular action requiring such determination of
stockholders is to be taken. In such case, only such stockholders as shall be
stockholders of record on the record date so fixed shall be entitled to such
notice of, and to vote at, such meeting or adjournment; or to give such consent;
or to receive payment of such dividend or other distribution, or to receive such
allotment of rights; or to exercise such rights; or to take such other action,
as the case may be, notwithstanding any transfer of any shares on the books of
the Corporation after any such record date.
Section 5.4. Closing of Transfer Books. The Board of Directors shall have
the power at any time and from time to time to close the stock transfer books
for a period not to exceed twenty (20) days for the determination of the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof; or to express consent to corporate action in writing
without a meeting; or to receive payments of any dividend or other distribution
or allotment of any rights; or to exercise any rights in respect of any change,
conversion or exchange of stock; or for the purpose of any other lawful action,
provided that the date of such closing of the stock transfer books shall not be
a date less than ten (10) days prior to the date on which the particular action
requiring such determination of stockholders is to be taken. In such case, only
such stockholders as shall be stockholders of record on the date of such closing
of the stock transfer books shall be entitled to such notice of, and to vote at,
such meeting or adjournment; or to give such consent; or to receive payment of
such dividend or other distribution, or to receive such allotment of rights; or
to exercise such rights; or to take such other action, as the case may be.
Section 5.5. Transfer of Shares.
-------------------
(a) Transfers of shares of the stock of the Corporation shall be
made on the books of the Corporation by the holder of record thereof (in person
or by his attorney thereunto duly authorized by a power of attorney duly
executed in writing and filed with the Secretary of the Corporation) (i) if a
certificate or certificates have been issued, upon the surrender of the
certificate or certificates, properly endorsed or accompanied by proper
instruments of transfer, representing such shares; or (ii) as otherwise
prescribed by the Board of Directors.
(b) The Corporation shall be entitled to treat the holder of record
of any share of stock as the absolute owner thereof for all purposes, including,
without limitation, the rights to receive dividends or other distributions and
to vote as the owner, and the Corporation shall not be bound to recognize any
legal, equitable or other claim or interest in such share on the part of any
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other person, whether or not it shall have express or other notice thereof,
except as otherwise expressly provided by the laws of the State of Maryland.
(c) Notwithstanding anything to the contrary contained in Section
5.5(b) of these Bylaws, the Board of Directors may adopt by resolution a
procedure by which a stockholder of the Corporation may certify in writing to
the Corporation that any shares of stock registered in the name of the
stockholder are held for the account of a specified person other than the
stockholder. The resolution shall set forth the class of stockholders who may
make the certification; the purpose for which the certification may be made; the
form of certification and the information to be contained in it; if the
certification is with respect to a record date or closing of the stock transfer
books, the time after the record date or closing of the stock transfer books
within which the certification must be received by the Corporation; and any
other provisions with respect to the procedure which the Board considers
necessary or desirable. On receipt of a certification which complies with the
requirements established by the Board's resolution, the person specified in the
certification shall be, for the purpose set forth in the certification, the
holder of record of the specified stock in place of the stockholder who makes
the certification.
Section 5.6. Transfer Agent And Registrar. The Board of Directors may
appoint a transfer agent and/or registrar of transfers and may require that all
stock certificates representing shares of any class to bear the signatures of
such transfer agent or registrar of transfers, or the signatures of both.
Section 5.7. Lost, Stolen or Destroyed Certificates. Before issuing a new
certificate for stock of the Corporation alleged to have been lost, stolen or
destroyed, the Board of Directors or any officer authorized by the Board of
Directors may, in its discretion, require the owner of the lost, stolen or
destroyed certificate (or his legal representative) to give the Corporation a
bond or other indemnity, in such form and in such amount as the Board of
Directors or any such officer may direct and with such surety or sureties as may
be satisfactory to the Board of Directors or any such officer, sufficient to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
ARTICLE VI
COMMITTEES
----------
Section 6.1. Executive Committee. The Board of Directors may appoint from
among its members an Executive Committee of not less than one (1) member and
shall designate one of such members as chairman of the Executive Committee. When
the Board of Directors is not in session, the Executive Committee shall possess
and exercise all powers of the Board of Directors in the management of the
business and affairs of the Corporation that lawfully may be exercised by the
Executive Committee.
Section 6.2. Other Committees. The Board of Directors may also appoint
from among its members such other committees as the Board may determine, which
shall in each case consist of not less than one (1) Director and which shall
have such powers and duties as shall from time to time be prescribed by the
Board.
10
<PAGE>
Section 6.3. Committee Membership; Conduct of Business. The Board of
Directors also may designate one or more of its members as alternates to serve
as a member or members of the Executive Committee or any other committee in the
absence of a regular member or members, change the membership of any committee
at any time, fill vacancies therein and discharge any committee either with or
without cause at any time. Except as otherwise provided by law or by these
Bylaws, each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith. Adequate
provision shall be made for notice to members of all meetings; a majority of the
members shall constitute a quorum; and all matters shall be determined by the
majority vote of the members present. The members present at any committee
meeting, whether or not they constitute a quorum, may appoint a Director to act
in the place of an absent member.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.1. Insurance of Officers, Directors, Employees and Agents. The
Corporation may purchase and maintain insurance on behalf of any person who is
or was a Director, officer, employee or agent of the Corporation, or while a
Director, officer, employee or agent of the Corporation is or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan, against any liability asserted against and incurred by such person
in any such capacity or arising out of such person's position.
Section 7.2. Indemnification. The Corporation shall indemnify and advance
expenses to Directors and officers of the Corporation to the extent provided by
the Charter of the Corporation. Employees and agents who are not Directors or
officers of the Corporation may be indemnified and reasonable expenses may be
advanced to such employees or agents to the extent provided by action of the
Board of Directors or by contract.
Section 7.3. Books and Records. The Corporation shall keep correct and
complete books and records of its accounts and transactions and minutes of the
proceedings of its stockholders and Board of Directors and of any committee
thereof.
Section 7.4. Stock Ledger. The Corporation shall maintain, or shall cause
its transfer agent to maintain, at its principal office in Maryland, an original
or duplicate stock ledger containing the names and addresses of all stockholders
and the number of shares of each class held by each stockholder. Such stock
ledger may be in written form or any other form which can be converted within a
reasonable time into written form for visual inspection.
Section 7.5. Corporate Seal. The Board of Directors may provide for a
corporate seal. The corporate seal of the Corporation shall be circular in form
and shall bear the name of the Corporation, the year of its incorporation, and
the word "Maryland." The form of the seal shall be subject to alteration by the
Board of Directors and the seal may be used by causing it or a facsimile to be
impressed or affixed or printed or otherwise reproduced. Any officer or Director
of the
11
<PAGE>
Corporation shall have authority to affix the corporate seal of the Corporation
to any document requiring the same.
Section 7.6. Waiver of Notice. Whenever any notice of the date, hour,
place and/or purpose of any meeting of stockholders, Directors or a committee is
required to be given under the provisions of the Maryland General Corporation
Law or under the provisions of the Corporation's Charter or by these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice and filed with the records of the meeting, whether before or after the
holding thereof, or actual attendance at the meeting in person or, in the case
of a meeting of stockholders, by proxy, shall be deemed equivalent to the giving
of such notice to such person.
ARTICLE VIII
AMENDMENT OF BYLAWS
-------------------
Section 8.1. Power of Directors to Amend. The Board of Directors shall
have the exclusive power and authority to amend, alter or repeal these By-Laws
or any provision thereof, and may from time to time make additional By-Laws by
resolution adopted by a majority of all of the Directors, at any regular or
special meeting of the Board.
END OF BYLAWS
12
EXHIBIT 4.2
INCORPORATED UNDER THE LAWS OF
THE STATE OF MARYLAND
NUMBER SHARES
____________ ___________
BAY NATIONAL CORPORATION
9,000,000 Shares of Common Stock Authorized
THIS CERTIFIES That is the registered holder of
shares of the Common Stock of Bay National Corporation transferable only on the
books of the corporation by the holder hereof in person or by Attorney duly
authorized upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF the said Corporation has caused this Certificate to be signed
by its duly authorized officers and its Corporate Seal to be hereunto affixed
this day of A.D. 19 .
__________________________ ______________________
President Secretary
Shares $0.01 Par Value Each
REVERSE SIDE
For value received, _________ hereby sell, assign and transfer unto
(PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PRINT
OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_________________________________ Shares represented by the within Certificate,
and do hereby irrevocably constitute and appoint
_____________________________Attorney to transfer the said Shares on the books
of the within named Corporation with full power of substitution in the premises.
Dated ___________________________
In presence of
_________________________ _______________________
EXHIBIT 4.3
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS")
AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, ASSIGNED OR OTHERWISE
TRANSFERRED (WHETHER OR NOT FOR CONSIDERATION), IN WHOLE OR IN PART, BY
THE HOLDER, WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE ACTS OR THE ISSUANCE TO THE COMPANY OF AN OPINION OF
COUNSEL SATISFACTORY TO COUNSEL TO THE COMPANY AND/OR SUBMISSION TO THE
COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY,
IN EACH SUCH CASE, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN
VIOLATION OF THE ACT AND THE APPLICABLE STATE ACTS.
THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE ACT OR APPLICABLE STATE ACTS AND THIS WARRANT MAY NOT
BE EXERCISED AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, ASSIGNED OR OTHERWISE
TRANSFERRED (WHETHER OR NOT FOR CONSIDERATION), IN WHOLE OR IN PART, BY
THE HOLDER, WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE ACTS OR THE ISSUANCE TO THE COMPANY OF AN OPINION OF
COUNSEL SATISFACTORY TO COUNSEL TO THE COMPANY AND/OR SUBMISSION TO THE
COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY,
IN EACH SUCH CASE, TO THE EFFECT THAT ANY SUCH EXERCISE OR TRANSFER SHALL
NOT BE IN VIOLATION OF THE ACT AND THE APPLICABLE STATE ACTS.
WARRANT NO. A-
TO PURCHASE _______________ SHARES
OF COMMON STOCK
OF
BAY NATIONAL CORPORATION
(a Maryland Corporation)
Transferable and Exercisable Only
Upon Conditions Herein Specified
BAY NATIONAL CORPORATION, a Maryland corporation (the "Company"), hereby
certifies that ___________________________________________________________, such
holder's heirs, personal representatives, successors and/or assigns, registered
on the books of the Company
<PAGE>
maintained for such purposes as the registered holder hereof (the "Holder"), is
entitled to purchase from the Company the number of fully paid and
non-assessable shares of Common Stock of the Company stated above, par value
$0.01 per share (the "Shares"), at the purchase price of $10.00 per Share (the
"Exercise Price") (the number of Shares and Exercise Price being subject to
adjustment as hereinafter provided), upon the terms and conditions herein
provided.
1. EXERCISE OF WARRANTS.
(a) Subject to the provisions of subsection (b) and (c) of this
Section 1 and Section 4 hereof, upon presentation and surrender of this Warrant,
with the attached Notice of Exercise of Warrant duly executed, at the office of
the Company at 2328 West Joppa Road, Baltimore, Maryland 21093, or at such other
place as the Company may designate by notice to the Holder hereof, together with
a check payable to the order of the Company in the amount of the Exercise Price
times the number of Shares being purchased, the Company shall deliver to the
Holder hereof, as promptly as practicable, a certificate representing the Shares
being purchased. This Warrant may be exercised in whole or in part; and, in case
of exercise hereof in part only, the Company, upon surrender hereof, will
deliver to the Holder a new Warrant of like tenor entitling the Holder to
purchase the number of Shares as to which this Warrant has not been exercised.
(b) Subject to Section 1(c) hereof, this Warrant may be exercised in
whole or in part at any time after the later of the date that the Company's
proposed banking subsidiary, Bay National Bank (the "Bank"), opens for business,
or one year from the termination date of the Company's initial public offering
pursuant to a registration statement which will be filed on Form SB-2 with the
Securities Exchange Commission (the "Registration Statement").
(c) This Warrant shall be void and of no force or effect (i) if the
Company's initial public offering is terminated prior to completion; (ii) if the
Bank does not open for business within one year from the termination date of the
Company's initial public offering; (iii) if the Company determines, in its sole
discretion, that the existence of this Warrant will affect the ability of the
Company to conduct its initial public offering or the ability of the Company
and/or the Bank to obtain the regulatory authority necessary for the Bank to
commence banking operations; (iv) if the Bank's principal Federal regulatory
authority issues a capital directive or other order requiring the Bank to obtain
additional capital and this Warrant is not exercised within a time period set by
the Company or (v) after that date which is five years from the date of the
Company's prospectus which forms part of the Registration Statement.
2. RIGHTS AND OBLIGATIONS OF WARRANT HOLDER. No Holder of this
Warrant shall be entitled to any of the rights of a shareholder of the Company,
including, but not limited to, to the extent applicable, the right to vote, give
or withhold consent to any action by the Company, receive dividends,
subscription rights, or otherwise, nor shall anything contained in this Warrant
be construed to confer upon the Holder of this Warrant, as such, any of the
rights of a shareholder of the Company; provided, however, that upon exercise of
this Warrant, such Holder shall, for all purposes, be deemed to have become the
holder of record of such Shares on the date on which this Warrant, together with
a duly executed Notice of Exercise of Warrant, was surrendered
2
<PAGE>
and payment of the Exercise Price was made, irrespective of the date of delivery
of any Share certificate. The rights of the Holder of this Warrant are limited
to those expressed herein and the Holder of this Warrant, by its acceptance
hereof, consents to and agrees to be bound by and to comply with all the
provisions of this Warrant, including, without limitation, all the obligations
imposed upon the Holder hereof by Section 4 hereof. In addition, the Holder of
this Warrant, by accepting the same, agrees that the Company may deem and treat
the person in whose name this Warrant is registered on the books of the Company
maintained for such purpose as the absolute, true and lawful owner for all
purposes whatsoever, notwithstanding any notation of ownership or other writing
thereon, and the Company shall not be affected by any notice to the contrary.
3. SHARES UNDERLYING WARRANTS. The Company covenants and agrees that
all Shares delivered upon the exercise of this Warrant shall, upon delivery and
payment therefor, be duly and validly authorized and issued, fully-paid and
non-assessable, and free from all taxes, liens and charges with respect to the
purchase thereof.
4. RESTRICTIONS ON EXERCISE; DISPOSITION OF WARRANTS OR SHARES.
The Holder of this Warrant, by its acceptance hereof, hereby represents and
warrants that such Holder understands and agrees that (a) the Warrant and the
Shares issuable upon the exercise of this Warrant have not been registered under
either the Securities Act of 1933, as amended (the "Act"), or applicable state
securities laws (the "State Acts"), and the Company has no obligation to
register the Warrant or such Shares; (b) the Warrant may be exercised only if
the Shares underlying the Warrant have been registered under the Act and the
applicable State Acts or upon the issuance to the Company of an opinion of
counsel satisfactory to counsel to the Company and/or submission to the Company
of such evidence as may be satisfactory to counsel to the Company, in each such
case, to the effect that any such exercise shall not be in violation of the Act
and the applicable State Acts; (c) this Warrant may not be sold, pledged,
hypothecated, donated, assigned or otherwise transferred (whether or not for
consideration), in whole or in part, by the Holder, unless the Warrant has been
registered under the Act and the applicable State Act or upon the issuance to
the Company of an opinion of counsel satisfactory to counsel to the Company
and/or submission to the Company of such evidence as may be satisfactory to
counsel to the Company, in each such case, to the effect that any such transfer
shall not be in violation of the Act and the applicable State Acts and (d) the
Shares issuable upon the exercise of this Warrant may not be sold, pledged,
hypothecated, donated, assigned or otherwise transferred (whether or not for
consideration), in whole or in part, by the Holder, unless the Shares have been
registered under the Act and the applicable State Acts or upon the issuance to
the Company of an opinion of counsel satisfactory to counsel to the Company
and/or upon submission to the Company of such evidence as may be satisfactory to
counsel to the Company, in each such case, to the effect that any such transfer
shall not be in violation of the Act and the State Acts. The Holder hereby
agrees that the Company's obligation to deliver Shares upon exercise of this
Warrant is subject to the requirement that the Holder deliver to the Company, if
requested by the Company, such certificates, documents or other information as
the Company or its counsel may reasonably request for the purpose of
establishing compliance with the Act and applicable State Acts.
3
<PAGE>
5. ADJUSTMENTS. The number of Shares purchasable upon the exercise of this
Warrant and the Exercise Price therefor is subject to adjustment from time to
time upon the occurrence of any of the events enumerated below.
(a) Effect of Stock Changes. In the event that at any time during
the term of this Warrant the Company shall (i) pay a dividend in shares of its
Common Stock, (ii) subdivide outstanding shares of its Common Stock into a
greater number of shares, or (iii) combine outstanding shares of its Common
Stock into a smaller number of shares, the amount of shares purchasable upon the
exercise of this Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive upon exercise of the Warrant that number of
shares of Common Stock which such Holder would have owned or would have been
entitled to receive after the happening of such event had such Holder exercised
the Warrant immediately prior to the record date, in the case of such dividend,
or the effective date, in the case of any such subdivision or combination and
the Exercise Price shall be proportionately adjusted. An adjustment made
pursuant to this subparagraph (a) shall be made whenever any of such events
shall occur, but shall become effective retroactively after such record date or
such effective date, as the case may be, if this Warrant is exercised between
such record date or effective date and the date of happening of any such event.
(b) Merger; Dissolution; Etc. In the event that at any time during
the term of this Warrant there shall be (i) any capital reorganization or
reclassification of the Common Stock of the Company, (ii) a consolidation or
merger of the Company with another entity (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification or change of the Shares issuable upon exercise of
the Warrant); (iii) a share exchange in which the Common Stock of the Company
will be acquired; or (iv) the sale or lease of all or substantially all of the
assets of the Company; then, as a condition of the reorganization,
reclassification, consolidation, merger, share exchange, sale or lease, lawful
and fair provision shall be made whereby the Holder of this Warrant after the
transaction shall have the right to purchase and receive, upon the basis and
upon the terms and conditions specified in this Warrant and in lieu of the
shares of Common Stock of the Company purchasable and receivable immediately
prior to the transaction upon the exercise of the rights represented by this
Warrant, the shares of stock, securities or assets that may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares of Common Stock purchasable and receivable
immediately prior to the transaction upon the exercise of the rights represented
by the Warrant if the reorganization, reclassification, consolidation, merger,
share exchange, sale or lease had not taken place. Appropriate provisions shall
be made in connection with a reorganization, reclassification, consolidation,
merger, share exchange, sale or lease with respect to the rights and interests
of the Holder of this Warrant to the end that the provisions of this Warrant
(including, without limitation, provisions for adjustments of the Exercise Price
and of the number of Shares purchasable upon exercise of the Warrant) shall
immediately after the transaction be applicable as nearly as possible to any
shares of stock, securities or assets deliverable immediately after the
transaction upon the exercise of the Warrant. The Company shall not effect any
consolidation, merger, share exchange, sale or lease unless, prior to the
consummation of the transaction, the successor entity (if other than the
Company) resulting from the consolidation or merger, the entity acquiring the
shares of Common Stock in the share exchange, or the entity
4
<PAGE>
purchasing or leasing the assets, assumes by written instrument executed and
delivered to the Company, the obligation to deliver to the Holder of this
Warrant the shares of stock, securities or assets in accordance with the
foregoing provisions that the Holder may be entitled to purchase.
(c) Notice of Change in Warrant. Whenever the number of Shares
purchasable hereunder or the Exercise Price therefor is adjusted as herein
provided, the Company shall cause to be mailed to the Holder a notice (i)
stating that the number of Shares purchasable upon exercise of this Warrant
and/or the Exercise Price has been adjusted, (ii) setting forth the adjusted
number of Shares purchasable and/or the adjusted Exercise Price upon the
exercise of this Warrant and (iii) showing in reasonable detail the computations
and the facts upon which such adjustments are based. The Company's board of
directors, acting in good faith, shall determine the calculation.
(d) Other Notices. In case at any time (i) the Company pays any
dividends payable in stock upon its Common Stock or makes any distributions
(other than regular cash dividends) to the holders of its Common Stock; (ii) the
Company offers for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or any other rights; (iii) there is a
capital reorganization or reclassification of the Common Stock of the Company,
or a consolidation or merger of the Company with, or a share exchange in which
the Common Stock of the Company is being acquired by, or a sale or lease of all
or substantially all of its assets to, another entity; or (iv) there is a
voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in any one or more of these cases, the Company shall cause to be mailed to
the Holder of this Warrant notice of the date on which (i) the books of the
Company close or a record is taken for the dividend, distribution or
subscription rights, or (ii) the reorganization, reclassification,
consolidation, merger, share exchange, sale, lease, dissolution, liquidation, or
winding up shall take place. The notice also shall specify the date as of which
the holders of the Common Stock of record shall participate in dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon the
reorganization, reclassification, consolidation, merger, share exchange, sale,
lease, dissolution, liquidation, or winding up. The notice shall be given at
least ten (10) days prior to the closing of the transaction in question and not
less than ten (10) days prior to the record date or the date on which the
Company's transfer books are closed with respect to the transaction. Failure to
give the notice, or any defect in the notice, shall not affect the legality or
validity of any transaction covered or to be covered in the notice. On the date
of the dissolution, liquidation or winding up of the Company, if it actually
occurs, this Warrant and all rights existing under this Warrant shall terminate.
(e) Form of Warrant. Irrespective of any adjustment or change in the
number or class of shares purchasable under this Warrant or in the Exercise
Price per Share, this Warrant may continue to express the Exercise Price and the
number and class of Shares purchasable upon exercise of this Warrant as the
Exercise Price and the number and class of Shares purchasable were expressed in
this Warrant when it was initially issued.
6. FRACTIONAL SHARES. The Company shall not be required to issue any
fraction of a Share upon the exercise of this Warrant. In lieu of issuing a
fraction of a Share remaining after
5
<PAGE>
exercise of this Warrant as to the full shares covered hereby, the Corporation
shall make a cash payment for any fraction of a Share equal to the same fraction
of the Exercise Price.
7. LOSS OR DESTRUCTION. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement or bond satisfactory in form, substance and amount to the Company or,
in the case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
8. SURVIVAL. The various rights and obligations of the Holder hereof as
set forth herein shall survive the exercise and surrender of this Warrant.
9. NOTICES. Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid, and
will be deemed to have been given or delivered on the date such notice, purchase
price or other communication is so delivered or posted, as the case may be; and,
if to the Company, it will be addressed to the address specified in Section 1
hereof, or such other address as the Company may specify by written notice given
hereunder, and if to the Holder, it will be addressed to the registered Holder
at his address as it appears on the books of the Company from time to time.
10. AMENDMENTS. This Warrant may be amended or modified only by an
instrument in writing signed by the Holder and a duly authorized officer of the
Company.
11. GOVERNING LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Maryland (excluding choice of law
provisions thereof).
IN WITNESS WHEREOF, Bay National Corporation has caused this Warrant to be
executed on its behalf under seal as of this 10th day of September, 1999.
ATTEST: BAY NATIONAL CORPORATION
________________________________ By:___________________________(SEAL)
John S. DiPietro, Secretary Hugh W. Mohler, President
6
<PAGE>
NOTICE OF EXERCISE OF WARRANTS
TO: BAY NATIONAL CORPORATION
The undersigned hereby irrevocably elects to exercise the right,
represented by the attached Warrant dated as of September 1, 1999 (the
"Warrant"), to purchase ________________ shares of the Common Stock, par value
$0.01 per share, of Bay National Corporation (the "Company") and tenders
herewith payment in accordance with said Warrant.
The undersigned hereby confirms and acknowledges that (a) the shares of
Common Stock received upon exercise of the Warrants will bear a legend
restricting transfer and (b) all representations made by the undersigned in
Article 2 of the Subscription Agreement by and between the Company and the
undersigned are true as of the date hereof.
Please issue in the name of the undersigned a new warrant representing the
unexercised portion of the Warrant.
Please issue the stock certificate(s) in the names and denominations and
deliver them to the addresses set forth below:
_______________________________________
_______________________________________
_______________________________________
_______________________________________
Dated:______________________
By:_________________________
Payment: $ _______________________
EXHIBIT 5.1
September 23, 1999
Bay National Corporation
2328 West Joppa Road
Suite 120
Baltimore, Maryland 21093
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
We have acted as special counsel to Bay National Corporation (the
"Company"), in connection with the preparation and filing with the Securities
and Exchange Commission (the "SEC") of a Registration Statement on Form SB-2
(the "Registration Statement") relating to the registration under the Securities
Act of 1933, as amended (the "Act"), of 1,500,000 shares of the Company's Common
Stock, $.01 par value per share (the "Securities"). Capitalized terms defined in
the Registration Statement and not otherwise defined herein are used herein with
the meanings as so defined.
In so acting, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of the Registration Statement and such corporate
records, agreements, documents and other instruments, and such certificates or
comparable documents of public officials, of officers and representatives of the
Company as we have deemed relevant or necessary as a basis for the opinions
hereinafter set forth.
In such examination, we have assumed without independent verification the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of documents submitted to us
as certified or photostatic copies and the authenticity of the originals of such
latter documents. As to all questions of fact material to this opinion that have
not been independently established, we have relied upon certificates or
comparable documents of officers of the Company, and have relied upon the
accuracy and completeness of the
<PAGE>
relevant facts stated therein without independent verification.
Based on the foregoing, and subject to the qualifications stated herein,
we are of the opinion that, when:
(i) the Registration Statement has become effective under the Act, and
(ii) the Securities have been duly executed, paid for and issued and
delivered in the manner and for the consideration contemplated in the
Registration Statement, the Securities will be legally issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Legal
Matters" in the Prospectus. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Act.
Very truly yours,
/s/ OBER, KALER, GRIMES & SHRIVER,
a Professional Corporation
EXHIBIT 10.1
BAY NATIONAL CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of _________, 1999,
is entered by and between Bay National Corporation (the "Company") and Hugh W.
Mohler ("Employee").
The Company and Employee, in consideration of the mutual promises set
forth herein and for other valuable consideration the sufficiency of which is
hereby acknowledged and intending to be legally bound, agree as follows:
1. Employment. The Company agrees to employ Employee, and Employee agrees
to accept employment with the Company. Employee agrees to perform his duties and
responsibilities in accordance with the terms and conditions set forth herein.
1.1. Employment Term. The term of this Agreement (the "Employment Term")
shall commence on ________, ___ and, unless previously terminated in accordance
with Section 6 of this Agreement or extended by mutual agreement of the parties,
shall terminate on the effective date of an employment agreement in
substantially similar form as Exhibit A hereto between Bay National Bank (the
"Bank") and Employee or the date the board of directors of the Company makes a
determination to abandon efforts to raise capital for the purposes of chartering
the Bank.
1.2. Duties and Responsibilities.
(a) During the Employment Term, Employee shall serve as President of the
Company and shall perform in a satisfactory manner all duties and accept all
responsibilities incidental to such position or as may be assigned to him from
time to time by the Company's Board of Directors. Employee shall devote his
productive time, ability, attention, and energies to the fulfillment of said
duties during the Employment Term. During such time, the Employee shall not
directly or indirectly render any services of a business, commercial, or
professional nature to any other person or organization except for entities
affiliated with the Company, whether or not for compensation, without the prior
written consent of the Company.
(b) Employee represents to the Company that he is not subject or a party
to any employment, non-competition, non-disclosure or other agreement, covenant,
understanding or restriction which would prohibit Employee from executing this
Agreement and performing fully his duties and responsibilities hereunder, or
which would in any manner, directly or indirectly, limit or affect the duties
and responsibilities which may now or in the future be assigned to Employee by
the Company.
1
<PAGE>
1.3(a)Compensation. The Company shall pay Employee a base salary at the
annual rate of $154,000. The Company agrees that the Employee's base salary will
be reviewed annually by the Company's Board of Directors to determine, in light
of the performance of Employee and the Company, if an increase is appropriate.
Such increases shall be in the sole discretion of the Company's Board of
Directors. All compensation under this Agreement shall be paid less withholding
required by law or agreed to by Employee, and shall be payable as determined by
the Board of Directors of the Company. The Company also agrees to reimburse
Employee for reasonable expenses incurred by Employee in the discharge of his
duties.
1.3(b). Company and Employee agree that the Company will offer Employee an
incentive compensation plan, the terms of which to be agreed upon by the
parties.
2. Other Benefits.
2.1. Vacation. For the duration of the Employment Term, Employee shall be
entitled to vacation per the policies of the Company as applicable to
executive-level employees. Earned but unused vacation will be forfeited at the
end of each calendar year.
2.2. Plan Benefits. The Company shall provide Employee the following
benefits: family health, dental and vision insurance, life insurance equal to
one year's base salary and officers and directors liability insurance. The
foregoing benefits shall be provided to Employee at the same cost as such
benefits are provided to other employees of the Company. Employee shall be
eligible to participate in any exclusive stock option plan offered by the
Company or Bay National Bank as may be applicable. Employee shall receive
long-term and short-term disability insurance as such is provided to other
Company management employees.
3. Non-Disclosure of Confidential Information and Records.
3.1. During the term of his employment, Employee will have access to the
Company's proprietary information or information which is entrusted to the
Company, including information relating to business plans and to business as
conducted or anticipated to be conducted, and to past, current or anticipated
products, employees, and services ("Confidential Information").
3.2. In further consideration of Employee's employment and continued
employment, and other benefits provided to Employee by the Company, Employee
agrees as follows: (i) except as required by Employee's duties to the Company,
not to at any time directly or indirectly disclose to or use for others or
appropriate for his own personal use or cause to be used by others any
Confidential Information without first obtaining the written consent of the
Board of Directors of the Company to do so; (ii) all records and other writings
of Confidential Information prepared by Employee, or which come into his
possession or control, or which he has access to, are and shall remain the
exclusive property of the Company, and upon termination of Employee's
employment, Employee will not remove any such records or copies thereof, but all
shall be left with the Company, and any such records or copies not with the
Company in an Employee's possession or control, shall
2
<PAGE>
be, upon termination of employment, immediately returned to the Company along
with any other property of the Company.
3.3. The requirements of this Section 3 shall apply during the time of
Employee's employment with the Company and thereafter with no time limitation,
unless it can be demonstrated conclusively that such Confidential Information
has through no act or fault of Employee become part of the public domain.
4. No Solicitation. Employee agrees that, for a period of one (1) year
after the employment of the Employee by the Company or any of its affiliates has
ended (whether or not such employment is pursuant to this Agreement), he will
not either directly or indirectly, (i) call on or solicit any person,
institution, corporation, trust or other entity who or which at the time of such
termination was, or within one (1) year prior thereto had been, a customer of
the Company or any of its affiliates or (ii) solicit the employment of any
person who was employed by the Company or any of its affiliates on a full or
part time basis at the time of Employee's termination of employment, unless such
person (a) was involuntarily discharged by the Company or such affiliates, or
(b) voluntarily terminated his relationship with the Company or such affiliate
prior to Employee's termination of employment.
5. Equitable Relief.
5.1. Employee acknowledges that the restrictions contained in Sections 3
and 4 are reasonable and necessary to protect the legitimate interests of the
Company and its affiliates, that the Company would not have entered into this
Agreement in the absence of such restrictions and that any violation of any
provision of these Sections will result in irreparable injury to the Company and
its affiliates. Employee further represents and acknowledges that (i) he has
been advised by the Company to consult his own legal counsel in respect of this
Agreement, and (ii) that he has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with his counsel.
5.2. Employee agrees that the Company's remedy at law for a breach of
paragraphs 3 and 4 would be inadequate and that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of providing
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 3 and 4, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. In the event that any of the provisions of Sections 3
and 4 should ever be adjudicated to exceed the time, geographic or other
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic or other limitations permitted by applicable law.
5.3. Employee irrevocably and unconditionally (i) agrees that any suit,
action or other legal proceeding arising out of this Agreement, including
without limitation, any action commenced by the Company for preliminary and
permanent injunctive relief and other equitable relief, may be
3
<PAGE>
brought in the United States District Court for the District of Maryland, or if
such court does not have jurisdiction or will not accept jurisdiction, in any
court of general jurisdiction in Baltimore County, Maryland, (ii) consents to
the non-exclusive jurisdiction of any such court in any such suit, action or
proceeding, and (iii) waives any objection which Employee may have to the laying
of venue of any such suit. Employee also irrevocably and unconditionally
consents to the service of any process, pleadings, notices or other papers in a
manner permitted by the notice provisions of Section 10 of this Agreement.
5.4. Employee agrees that he will provide, and that the Company may
similarly provide, a copy of Sections 3 and 4 of this Agreement to any business
or enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, or control of, or (ii) with which he may be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or
otherwise, or in connection with which he may use or permit his name to be used;
provided, however, that this provision shall not apply in respect of Section 4
of this Agreement after expiration of the time periods set forth therein.
6. Termination. This Agreement shall terminate prior to the expiration of
its term set forth in Section 1.1 above, upon the occurrence of any one of the
following events:
6.1. Disability. In the event that Employee becomes unable to perform his
duties hereunder for a period of six (6) consecutive months or otherwise is
deemed to be disabled within the meaning of the Company's then existing
disability benefit program, this Agreement may be terminated by the Company and
the Company shall have no further liability or obligation to Employee for
compensation; provided, however, that if the Employee becomes disabled during
the Employment Term, the Company shall pay to him or his legal representatives
an amount equal to the installment of his salary set forth in Section 1.3 hereof
for the month in which he becomes disabled which have been earned but not yet
paid. This Section shall be interpreted in compliance with the Family Medical
Leave Act to the extent that the provisions of that law would apply.
6.2. Death. In the event that Employee dies during the Employment Term,
the Company shall pay to his executors, legal representatives or administrators
an amount equal to the installment of his salary set forth in Section 1.3 hereof
for the month in which he dies, which have been earned but not yet paid and
thereafter except as otherwise provided in this Agreement, the Company shall
have no further liability or obligation hereunder to his executors, legal
representatives, administrators, heirs or assigns or any other person claiming
under or through him, provided, however, that Employee's estate or designated
beneficiaries shall be entitled to receive the payments described for such
recipients under any death benefit plan which may be in effect for
executive-level employees of the Company and in which Employee participated.
6.3. Termination by Company For Cause. Nothing in this Agreement shall be
construed to prevent its termination by the Company at any time for "cause"
without prior notice. For purposes of this Agreement, "cause" shall mean the
failure of Employee to perform or observe any of the
4
<PAGE>
terms or provisions of this Agreement or to comply fully with the lawful
directives of the Directors of the Company, dishonesty, misconduct, conviction
of a crime or otherwise causing embarrassment to the Company and its public
reputation, substance abuse, misappropriation of funds, disparagement of the
Company or failure to comply with Company policy.
6.4. Termination by the Company Without Cause. This Agreement may be
terminated by the Company for any reason whatsoever, by giving 30 days' prior
written notice of termination to the other party. If Employee is terminated
without cause pursuant to this Section 6.4, Employee shall be entitled to the
base compensation earned prior to the date of termination as provided for in
this Agreement, computed pro-rata up to and including the date of termination
plus a continued salary (at the then current rate) which shall terminate on the
sooner of the expiration of the remaining term of this Agreement or at such time
as the Employee has found other employment comparable with Employee's employment
with the Company. Employee shall use his best efforts to obtain such employment.
6.5. Effect of Termination at Employee's Election. In the event of the
termination of this Agreement by Employee prior to the completion of the
Employment Term, Employee shall provide the Company with thirty (30) days prior
written notice and shall be entitled to the base compensation earned prior to
the date of termination as provided for in this Agreement under Section 1.3,
computed pro-rata up to and including the date of termination. The Employee
shall be entitled to no other compensation.
7. Survival. Notwithstanding the termination of employment under this
Agreement for any reason, the Employee's obligations under Sections 3 and 4
hereof shall survive and remain in full force and effect for the periods therein
provided, and the provisions for equitable relief in Section 5 of the Agreement
shall continue in force.
8. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of Maryland without giving effect to any conflict of
laws provisions.
9. Litigation Expenses. In the event of a lawsuit by either party to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to recover reasonable costs, expenses and attorney's fees from the other party.
Disputes arising under Section 6 of the Agreement shall be submitted to an
arbitrator (who is agreeable to both parties). The decision of the arbitrator
shall be binding on both parties and the fees (including legal fees) and cost
attributable to that arbitration process will be assessed as part of that
process by the arbitrator. Such arbitration shall be held in the Baltimore
metropolitan area and shall be conducted by the American Arbitration Association
(or other mutually selected arbitrators) ("AAA") by an arbitrator selected using
the AAA's procedures.
10. Notices. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been
5
<PAGE>
given when hand delivered or mailed by registered or certified mail, as follows
(provided that notice of change of address shall be deemed given only when
received);
If to the Company to: John DiPietro, Vice President
Bay National Corporation
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
copy to: Frank C. Bonaventure, Jr., Esquire
Ober, Kaler, Grimes & Shriver
120 East Baltimore Street
Baltimore, Maryland 21202
If to Employee, to: Hugh W. Mohler
Bay National Corporation
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
or to such other names and addresses as the Company or Employee, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
11. Contents of Agreement; Amendment and Assignment.
11.1. This Agreement supersedes all prior agreements and sets forth the
entire understanding among the parties with respect to the subject matter hereof
and cannot be changed, modified, extended or terminated except upon written
amendment approved by the Board of Directors of the Company. Without limitation,
nothing in this Agreement shall be construed as giving Employee any right to be
retained in the employ of the Company beyond the expiration of the Employment
Term and Employee specifically acknowledges that he shall be an employee-at-will
of the Company thereafter, and thus subject to discharge by the Company with or
without cause and without compensation of any nature unless a new Agreement is
executed by both parties (or employment is continued at will).
11.2. All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives, successors and assigns of the
parties, except that the duties and responsibilities of Employee hereunder are
of a personal nature and shall not be assignable or delegatable in whole or in
part by Employee.
6
<PAGE>
12. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstance is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction.
13. Remedies Cumulative; No Waiver. No remedy conferred upon the parties
by this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to any other remedy
given hereunder or now or hereafter existing at law or in equity. No delay or
omission by the parties in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver thereof, and any
such right, remedy or power may be exercised by the parties from time to time
and as often as may be deemed expedient or necessary by such party in its sole
discretion.
14. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in marking proof of this Agreement or any counterpart
to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.
Attest: BAY NATIONAL CORPORATION
______________________ By:___________________________________
Secretary Name:
Title:
Witness:
_______________________ _____________________________________
Hugh W. Mohler
7
EXHIBIT 10.2
BAY NATIONAL CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of _________, 1999,
is entered by and between Bay National Corporation (the "Company") and John S.
DiPietro ("Employee").
The Company and Employee, in consideration of the mutual promises set
forth herein and for other valuable consideration the sufficiency of which is
hereby acknowledged and intending to be legally bound, agree as follows:
1. Employment. The Company agrees to employ Employee, and Employee agrees
to accept employment with the Company. Employee agrees to perform his duties and
responsibilities in accordance with the terms and conditions set forth herein.
1.1. Employment Term. The term of this Agreement (the "Employment Term")
shall commence on ________, ___ and, unless previously terminated in accordance
with Section 6 of this Agreement or extended by mutual agreement of the parties,
shall terminate on the effective date of an employment agreement in
substantially similar form as Exhibit A hereto between Bay National Bank (the
"Bank") and Employee or the date the board of directors of the Company makes a
determination to abandon efforts to raise capital for the purposes of chartering
the Bank.
1.2. Duties and Responsibilities.
(a) During the Employment Term, Employee shall serve as Vice President of
the Company and shall perform in a satisfactory manner all duties and accept all
responsibilities incidental to such position or as may be assigned to him from
time to time by the Company's Board of Directors. Employee shall devote his
productive time, ability, attention, and energies to the fulfillment of said
duties during the Employment Term. During such time, the Employee shall not
directly or indirectly render any services of a business, commercial, or
professional nature to any other person or organization except for entities
affiliated with the Company, whether or not for compensation, without the prior
written consent of the Company.
(b) Employee represents to the Company that he is not subject or a party
to any employment, non-competition, non-disclosure or other agreement, covenant,
understanding or restriction which would prohibit Employee from executing this
Agreement and performing fully his duties and responsibilities hereunder, or
which would in any manner, directly or indirectly, limit or affect the duties
and responsibilities which may now or in the future be assigned to Employee by
the Company.
1
<PAGE>
1.3(a)Compensation. The Company shall pay Employee a base salary at the
annual rate of $154,000. The Company agrees that the Employee's base salary will
be reviewed annually by the Company's Board of Directors to determine, in light
of the performance of Employee and the Company, if an increase is appropriate.
Such increases shall be in the sole discretion of the Company's Board of
Directors. All compensation under this Agreement shall be paid less withholding
required by law or agreed to by Employee, and shall be payable as determined by
the Board of Directors of the Company. The Company also agrees to reimburse
Employee for reasonable expenses incurred by Employee in the discharge of his
duties.
1.3(b). Company and Employee agree that the Company will offer Employee an
incentive compensation plan, the terms of which to be agreed upon by the
parties.
2. Other Benefits.
2.1. Vacation. For the duration of the Employment Term, Employee shall be
entitled to vacation per the policies of the Company as applicable to
executive-level employees. Earned but unused vacation will be forfeited at the
end of each calendar year.
2.2. Plan Benefits. The Company shall provide Employee the following
benefits: family health, dental and vision insurance, life insurance equal to
one year's base salary and officers and directors liability insurance. The
foregoing benefits shall be provided to Employee at the same cost as such
benefits are provided to other employees of the Company. Employee shall be
eligible to participate in any exclusive stock option plan offered by the
Company or Bay National Bank as may be applicable. Employee shall receive
long-term and short-term disability insurance as such is provided to other
Company management employees.
3. Non-Disclosure of Confidential Information and Records.
3.1. During the term of his employment, Employee will have access to the
Company's proprietary information or information which is entrusted to the
Company, including information relating to business plans and to business as
conducted or anticipated to be conducted, and to past, current or anticipated
products, employees, and services ("Confidential Information").
3.2. In further consideration of Employee's employment and continued
employment, and other benefits provided to Employee by the Company, Employee
agrees as follows: (i) except as required by Employee's duties to the Company,
not to at any time directly or indirectly disclose to or use for others or
appropriate for his own personal use or cause to be used by others any
Confidential Information without first obtaining the written consent of the
Board of Directors of the Company to do so; (ii) all records and other writings
of Confidential Information prepared by Employee, or which come into his
possession or control, or which he has access to, are and shall remain the
exclusive property of the Company, and upon termination of Employee's
employment, Employee will not remove any such records or copies thereof, but all
shall be left with the Company, and any such records or copies not with the
Company in an Employee's possession or control, shall
2
<PAGE>
be, upon termination of employment, immediately returned to the Company along
with any other property of the Company.
3.3. The requirements of this Section 3 shall apply during the time of
Employee's employment with the Company and thereafter with no time limitation,
unless it can be demonstrated conclusively that such Confidential Information
has through no act or fault of Employee become part of the public domain.
4. No Solicitation. Employee agrees that, for a period of one (1) year
after the employment of the Employee by the Company or any of its affiliates has
ended (whether or not such employment is pursuant to this Agreement), he will
not either directly or indirectly, (i) call on or solicit any person,
institution, corporation, trust or other entity who or which at the time of such
termination was, or within one (1) year prior thereto had been, a customer of
the Company or any of its affiliates or (ii) solicit the employment of any
person who was employed by the Company or any of its affiliates on a full or
part time basis at the time of Employee's termination of employment, unless such
person (a) was involuntarily discharged by the Company or such affiliates, or
(b) voluntarily terminated his relationship with the Company or such affiliate
prior to Employee's termination of employment.
5. Equitable Relief.
5.1. Employee acknowledges that the restrictions contained in Sections 3
and 4 are reasonable and necessary to protect the legitimate interests of the
Company and its affiliates, that the Company would not have entered into this
Agreement in the absence of such restrictions and that any violation of any
provision of these Sections will result in irreparable injury to the Company and
its affiliates. Employee further represents and acknowledges that (i) he has
been advised by the Company to consult his own legal counsel in respect of this
Agreement, and (ii) that he has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with his counsel.
5.2. Employee agrees that the Company's remedy at law for a breach of
paragraphs 3 and 4 would be inadequate and that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of providing
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 3 and 4, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. In the event that any of the provisions of Sections 3
and 4 should ever be adjudicated to exceed the time, geographic or other
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic or other limitations permitted by applicable law.
5.3. Employee irrevocably and unconditionally (i) agrees that any suit,
action or other legal proceeding arising out of this Agreement, including
without limitation, any action commenced by the Company for preliminary and
permanent injunctive relief and other equitable relief, may be
3
<PAGE>
brought in the United States District Court for the District of Maryland, or if
such court does not have jurisdiction or will not accept jurisdiction, in any
court of general jurisdiction in Baltimore County, Maryland, (ii) consents to
the non-exclusive jurisdiction of any such court in any such suit, action or
proceeding, and (iii) waives any objection which Employee may have to the laying
of venue of any such suit. Employee also irrevocably and unconditionally
consents to the service of any process, pleadings, notices or other papers in a
manner permitted by the notice provisions of Section 10 of this Agreement.
5.4. Employee agrees that he will provide, and that the Company may
similarly provide, a copy of Sections 3 and 4 of this Agreement to any business
or enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, or control of, or (ii) with which he may be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or
otherwise, or in connection with which he may use or permit his name to be used;
provided, however, that this provision shall not apply in respect of Section 4
of this Agreement after expiration of the time periods set forth therein.
6. Termination. This Agreement shall terminate prior to the expiration of
its term set forth in Section 1.1 above, upon the occurrence of any one of the
following events:
6.1. Disability. In the event that Employee becomes unable to perform his
duties hereunder for a period of six (6) consecutive months or otherwise is
deemed to be disabled within the meaning of the Company's then existing
disability benefit program, this Agreement may be terminated by the Company and
the Company shall have no further liability or obligation to Employee for
compensation; provided, however, that if the Employee becomes disabled during
the Employment Term, the Company shall pay to him or his legal representatives
an amount equal to the installment of his salary set forth in Section 1.3 hereof
for the month in which he becomes disabled which have been earned but not yet
paid. This Section shall be interpreted in compliance with the Family Medical
Leave Act to the extent that the provisions of that law would apply.
6.2. Death. In the event that Employee dies during the Employment Term,
the Company shall pay to his executors, legal representatives or administrators
an amount equal to the installment of his salary set forth in Section 1.3 hereof
for the month in which he dies, which have been earned but not yet paid and
thereafter except as otherwise provided in this Agreement, the Company shall
have no further liability or obligation hereunder to his executors, legal
representatives, administrators, heirs or assigns or any other person claiming
under or through him, provided, however, that Employee's estate or designated
beneficiaries shall be entitled to receive the payments described for such
recipients under any death benefit plan which may be in effect for
executive-level employees of the Company and in which Employee participated.
6.3. Termination by Company For Cause. Nothing in this Agreement shall be
construed to prevent its termination by the Company at any time for "cause"
without prior notice. For purposes of this Agreement, "cause" shall mean the
failure of Employee to perform or observe any of the
4
<PAGE>
terms or provisions of this Agreement or to comply fully with the lawful
directives of the Directors of the Company, dishonesty, misconduct, conviction
of a crime or otherwise causing embarrassment to the Company and its public
reputation, substance abuse, misappropriation of funds, disparagement of the
Company or failure to comply with Company policy.
6.4. Termination by the Company Without Cause. This Agreement may be
terminated by the Company for any reason whatsoever, by giving 30 days' prior
written notice of termination to the other party. If Employee is terminated
without cause pursuant to this Section 6.4, Employee shall be entitled to the
base compensation earned prior to the date of termination as provided for in
this Agreement, computed pro-rata up to and including the date of termination
plus a continued salary (at the then current rate) which shall terminate on the
sooner of the expiration of the remaining term of this Agreement or at such time
as the Employee has found other employment comparable with Employee's employment
with the Company. Employee shall use his best efforts to obtain such employment.
6.5. Effect of Termination at Employee's Election. In the event of the
termination of this Agreement by Employee prior to the completion of the
Employment Term, Employee shall provide the Company with thirty (30) days prior
written notice and shall be entitled to the base compensation earned prior to
the date of termination as provided for in this Agreement under Section 1.3,
computed pro-rata up to and including the date of termination. The Employee
shall be entitled to no other compensation.
7. Survival. Notwithstanding the termination of employment under this
Agreement for any reason, the Employee's obligations under Sections 3 and 4
hereof shall survive and remain in full force and effect for the periods therein
provided, and the provisions for equitable relief in Section 5 of the Agreement
shall continue in force.
8. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of Maryland without giving effect to any conflict of
laws provisions.
9. Litigation Expenses. In the event of a lawsuit by either party to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to recover reasonable costs, expenses and attorney's fees from the other party.
Disputes arising under Section 6 of the Agreement shall be submitted to an
arbitrator (who is agreeable to both parties). The decision of the arbitrator
shall be binding on both parties and the fees (including legal fees) and cost
attributable to that arbitration process will be assessed as part of that
process by the arbitrator. Such arbitration shall be held in the Baltimore
metropolitan area and shall be conducted by the American Arbitration Association
(or other mutually selected arbitrators) ("AAA") by an arbitrator selected using
the AAA's procedures.
10. Notices. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been
5
<PAGE>
given when hand delivered or mailed by registered or certified mail, as follows
(provided that notice of change of address shall be deemed given only when
received);
If to the Company, to: Hugh W. Mohler, President
Bay National Corporation
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
copy to: Frank C. Bonaventure, Jr., Esquire
Ober, Kaler, Grimes & Shriver
120 East Baltimore Street
Baltimore, Maryland 21202
If to Employee, to: John S. DiPietro
Bay National Corporation
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
or to such other names and addresses as the Company or Employee, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
11. Contents of Agreement; Amendment and Assignment.
11.1. This Agreement supersedes all prior agreements and sets forth the
entire understanding among the parties with respect to the subject matter hereof
and cannot be changed, modified, extended or terminated except upon written
amendment approved by the Board of Directors of the Company. Without limitation,
nothing in this Agreement shall be construed as giving Employee any right to be
retained in the employ of the Company beyond the expiration of the Employment
Term and Employee specifically acknowledges that he shall be an employee-at-will
of the Company thereafter, and thus subject to discharge by the Company with or
without cause and without compensation of any nature unless a new Agreement is
executed by both parties (or employment is continued at will).
11.2. All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives, successors and assigns of the
parties, except that the duties and responsibilities of Employee hereunder are
of a personal nature and shall not be assignable or delegatable in whole or in
part by Employee.
6
<PAGE>
12. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstance is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction.
13. Remedies Cumulative; No Waiver. No remedy conferred upon the parties
by this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to any other remedy
given hereunder or now or hereafter existing at law or in equity. No delay or
omission by the parties in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver thereof, and any
such right, remedy or power may be exercised by the parties from time to time
and as often as may be deemed expedient or necessary by such party in its sole
discretion.
14. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in marking proof of this Agreement or any counterpart
to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.
Attest: BAY NATIONAL CORPORATION
______________________ By:___________________________________
Secretary Name:
Title:
Witness:
_______________________ ___________________________________
John S. DiPietro
7
EXHIBIT 10.3
BAY NATIONAL CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of _________, 1999,
is entered by and between Bay National Corporation (the "Company") and Thomas M.
Neale ("Employee").
The Company and Employee, in consideration of the mutual promises set
forth herein and for other valuable consideration the sufficiency of which is
hereby acknowledged and intending to be legally bound, agree as follows:
1. Employment. The Company agrees to employ Employee, and Employee agrees
to accept employment with the Company. Employee agrees to perform his duties and
responsibilities in accordance with the terms and conditions set forth herein.
1.1. Employment Term. The term of this Agreement (the "Employment Term")
shall commence on ________, ___ and, unless previously terminated in accordance
with Section 6 of this Agreement or extended by mutual agreement of the parties,
shall terminate on the effective date of an employment agreement in
substantially similar form as Exhibit A hereto between Bay National Bank (the
"Bank") and Employee or the date the board of directors of the Company makes a
determination to abandon efforts to raise capital for the purposes of chartering
the Bank.
1.2. Duties and Responsibilities.
(a) During the Employment Term, Employee shall serve as Vice President of
the Company and shall perform in a satisfactory manner all duties and accept all
responsibilities incidental to such position or as may be assigned to him from
time to time by the Company's Board of Directors. Employee shall devote his
productive time, ability, attention, and energies to the fulfillment of said
duties during the Employment Term. During such time, the Employee shall not
directly or indirectly render any services of a business, commercial, or
professional nature to any other person or organization except for entities
affiliated with the Company, whether or not for compensation, without the prior
written consent of the Company.
(b) Employee represents to the Company that he is not subject or a party
to any employment, non-competition, non-disclosure or other agreement, covenant,
understanding or restriction which would prohibit Employee from executing this
Agreement and performing fully his duties and responsibilities hereunder, or
which would in any manner, directly or indirectly, limit or affect the duties
and responsibilities which may now or in the future be assigned to Employee by
the Company.
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1.3(a)Compensation. The Company shall pay Employee a base salary at the
annual rate of $154,000. The Company agrees that the Employee's base salary will
be reviewed annually by the Company's Board of Directors to determine, in light
of the performance of Employee and the Company, if an increase is appropriate.
Such increases shall be in the sole discretion of the Company's Board of
Directors. All compensation under this Agreement shall be paid less withholding
required by law or agreed to by Employee, and shall be payable as determined by
the Board of Directors of the Company. The Company also agrees to reimburse
Employee for reasonable expenses incurred by Employee in the discharge of his
duties.
1.3(b). Company and Employee agree that the Company will offer Employee an
incentive compensation plan, the terms of which to be agreed upon by the
parties.
2. Other Benefits.
2.1. Vacation. For the duration of the Employment Term, Employee shall be
entitled to vacation per the policies of the Company as applicable to
executive-level employees. Earned but unused vacation will be forfeited at the
end of each calendar year.
2.2. Plan Benefits. The Company shall provide Employee the following
benefits: family health, dental and vision insurance, life insurance equal to
one year's base salary and officers and directors liability insurance. The
foregoing benefits shall be provided to Employee at the same cost as such
benefits are provided to other employees of the Company. Employee shall be
eligible to participate in any exclusive stock option plan offered by the
Company or Bay National Bank as may be applicable. Employee shall receive
long-term and short-term disability insurance as such is provided to other
Company management employees.
3. Non-Disclosure of Confidential Information and Records.
3.1. During the term of his employment, Employee will have access to the
Company's proprietary information or information which is entrusted to the
Company, including information relating to business plans and to business as
conducted or anticipated to be conducted, and to past, current or anticipated
products, employees, and services ("Confidential Information").
3.2. In further consideration of Employee's employment and continued
employment, and other benefits provided to Employee by the Company, Employee
agrees as follows: (i) except as required by Employee's duties to the Company,
not to at any time directly or indirectly disclose to or use for others or
appropriate for his own personal use or cause to be used by others any
Confidential Information without first obtaining the written consent of the
Board of Directors of the Company to do so; (ii) all records and other writings
of Confidential Information prepared by Employee, or which come into his
possession or control, or which he has access to, are and shall remain the
exclusive property of the Company, and upon termination of Employee's
employment, Employee will not remove any such records or copies thereof, but all
shall be left with the Company, and any such records or copies not with the
Company in an Employee's possession or control, shall
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be, upon termination of employment, immediately returned to the Company along
with any other property of the Company.
3.3. The requirements of this Section 3 shall apply during the time of
Employee's employment with the Company and thereafter with no time limitation,
unless it can be demonstrated conclusively that such Confidential Information
has through no act or fault of Employee become part of the public domain.
4. No Solicitation. Employee agrees that, for a period of one (1) year
after the employment of the Employee by the Company or any of its affiliates has
ended (whether or not such employment is pursuant to this Agreement), he will
not either directly or indirectly, (i) call on or solicit any person,
institution, corporation, trust or other entity who or which at the time of such
termination was, or within one (1) year prior thereto had been, a customer of
the Company or any of its affiliates or (ii) solicit the employment of any
person who was employed by the Company or any of its affiliates on a full or
part time basis at the time of Employee's termination of employment, unless such
person (a) was involuntarily discharged by the Company or such affiliates, or
(b) voluntarily terminated his relationship with the Company or such affiliate
prior to Employee's termination of employment.
5. Equitable Relief.
5.1. Employee acknowledges that the restrictions contained in Sections 3
and 4 are reasonable and necessary to protect the legitimate interests of the
Company and its affiliates, that the Company would not have entered into this
Agreement in the absence of such restrictions and that any violation of any
provision of these Sections will result in irreparable injury to the Company and
its affiliates. Employee further represents and acknowledges that (i) he has
been advised by the Company to consult his own legal counsel in respect of this
Agreement, and (ii) that he has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with his counsel.
5.2. Employee agrees that the Company's remedy at law for a breach of
paragraphs 3 and 4 would be inadequate and that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of providing
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 3 and 4, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. In the event that any of the provisions of Sections 3
and 4 should ever be adjudicated to exceed the time, geographic or other
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic or other limitations permitted by applicable law.
5.3. Employee irrevocably and unconditionally (i) agrees that any suit,
action or other legal proceeding arising out of this Agreement, including
without limitation, any action commenced by the Company for preliminary and
permanent injunctive relief and other equitable relief, may be
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brought in the United States District Court for the District of Maryland, or if
such court does not have jurisdiction or will not accept jurisdiction, in any
court of general jurisdiction in Baltimore County, Maryland, (ii) consents to
the non-exclusive jurisdiction of any such court in any such suit, action or
proceeding, and (iii) waives any objection which Employee may have to the laying
of venue of any such suit. Employee also irrevocably and unconditionally
consents to the service of any process, pleadings, notices or other papers in a
manner permitted by the notice provisions of Section 10 of this Agreement.
5.4. Employee agrees that he will provide, and that the Company may
similarly provide, a copy of Sections 3 and 4 of this Agreement to any business
or enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, or control of, or (ii) with which he may be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or
otherwise, or in connection with which he may use or permit his name to be used;
provided, however, that this provision shall not apply in respect of Section 4
of this Agreement after expiration of the time periods set forth therein.
6. Termination. This Agreement shall terminate prior to the expiration of
its term set forth in Section 1.1 above, upon the occurrence of any one of the
following events:
6.1. Disability. In the event that Employee becomes unable to perform his
duties hereunder for a period of six (6) consecutive months or otherwise is
deemed to be disabled within the meaning of the Company's then existing
disability benefit program, this Agreement may be terminated by the Company and
the Company shall have no further liability or obligation to Employee for
compensation; provided, however, that if the Employee becomes disabled during
the Employment Term, the Company shall pay to him or his legal representatives
an amount equal to the installment of his salary set forth in Section 1.3 hereof
for the month in which he becomes disabled which have been earned but not yet
paid. This Section shall be interpreted in compliance with the Family Medical
Leave Act to the extent that the provisions of that law would apply.
6.2. Death. In the event that Employee dies during the Employment Term,
the Company shall pay to his executors, legal representatives or administrators
an amount equal to the installment of his salary set forth in Section 1.3 hereof
for the month in which he dies, which have been earned but not yet paid and
thereafter except as otherwise provided in this Agreement, the Company shall
have no further liability or obligation hereunder to his executors, legal
representatives, administrators, heirs or assigns or any other person claiming
under or through him, provided, however, that Employee's estate or designated
beneficiaries shall be entitled to receive the payments described for such
recipients under any death benefit plan which may be in effect for
executive-level employees of the Company and in which Employee participated.
6.3. Termination by Company For Cause. Nothing in this Agreement shall be
construed to prevent its termination by the Company at any time for "cause"
without prior notice. For purposes of this Agreement, "cause" shall mean the
failure of Employee to perform or observe any of the
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terms or provisions of this Agreement or to comply fully with the lawful
directives of the Directors of the Company, dishonesty, misconduct, conviction
of a crime or otherwise causing embarrassment to the Company and its public
reputation, substance abuse, misappropriation of funds, disparagement of the
Company or failure to comply with Company policy.
6.4. Termination by the Company Without Cause. This Agreement may be
terminated by the Company for any reason whatsoever, by giving 30 days' prior
written notice of termination to the other party. If Employee is terminated
without cause pursuant to this Section 6.4, Employee shall be entitled to the
base compensation earned prior to the date of termination as provided for in
this Agreement, computed pro-rata up to and including the date of termination
plus a continued salary (at the then current rate) which shall terminate on the
sooner of the expiration of the remaining term of this Agreement or at such time
as the Employee has found other employment comparable with Employee's employment
with the Company. Employee shall use his best efforts to obtain such employment.
6.5. Effect of Termination at Employee's Election. In the event of the
termination of this Agreement by Employee prior to the completion of the
Employment Term, Employee shall provide the Company with thirty (30) days prior
written notice and shall be entitled to the base compensation earned prior to
the date of termination as provided for in this Agreement under Section 1.3,
computed pro-rata up to and including the date of termination. The Employee
shall be entitled to no other compensation.
7. Survival. Notwithstanding the termination of employment under this
Agreement for any reason, the Employee's obligations under Sections 3 and 4
hereof shall survive and remain in full force and effect for the periods therein
provided, and the provisions for equitable relief in Section 5 of the Agreement
shall continue in force.
8. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of Maryland without giving effect to any conflict of
laws provisions.
9. Litigation Expenses. In the event of a lawsuit by either party to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to recover reasonable costs, expenses and attorney's fees from the other party.
Disputes arising under Section 6 of the Agreement shall be submitted to an
arbitrator (who is agreeable to both parties). The decision of the arbitrator
shall be binding on both parties and the fees (including legal fees) and cost
attributable to that arbitration process will be assessed as part of that
process by the arbitrator. Such arbitration shall be held in the Baltimore
metropolitan area and shall be conducted by the American Arbitration Association
(or other mutually selected arbitrators) ("AAA") by an arbitrator selected using
the AAA's procedures.
10. Notices. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been
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given when hand delivered or mailed by registered or certified mail, as follows
(provided that notice of change of address shall be deemed given only when
received);
If to the Company, to: Hugh W. Mohler, President
Bay National Corporation
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
copy to: Frank C. Bonaventure, Jr., Esquire
Ober, Kaler, Grimes & Shriver
120 East Baltimore Street
Baltimore, Maryland 21202
If to Employee, to: Thomas M. Neale
Bay National Corporation
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
or to such other names and addresses as the Company or Employee, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
11. Contents of Agreement; Amendment and Assignment.
11.1. This Agreement supersedes all prior agreements and sets forth the
entire understanding among the parties with respect to the subject matter hereof
and cannot be changed, modified, extended or terminated except upon written
amendment approved by the Board of Directors of the Company. Without limitation,
nothing in this Agreement shall be construed as giving Employee any right to be
retained in the employ of the Company beyond the expiration of the Employment
Term and Employee specifically acknowledges that he shall be an employee-at-will
of the Company thereafter, and thus subject to discharge by the Company with or
without cause and without compensation of any nature unless a new Agreement is
executed by both parties (or employment is continued at will).
11.2. All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives, successors and assigns of the
parties, except that the duties and responsibilities of Employee hereunder are
of a personal nature and shall not be assignable or delegatable in whole or in
part by Employee.
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12. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstance is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction.
13. Remedies Cumulative; No Waiver. No remedy conferred upon the parties
by this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to any other remedy
given hereunder or now or hereafter existing at law or in equity. No delay or
omission by the parties in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver thereof, and any
such right, remedy or power may be exercised by the parties from time to time
and as often as may be deemed expedient or necessary by such party in its sole
discretion.
14. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in marking proof of this Agreement or any counterpart
to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.
Attest: BAY NATIONAL CORPORATION
______________________ By:___________________________________
Secretary Name:
Title:
Witness:
_______________________ ___________________________________
Thomas M. Neale
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EXHIBIT 10.4
BAY NATIONAL BANK
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of _________, 1999,
is entered by and between Bay National Bank, a national bank (the "Bank") and
Hugh W. Mohler ("Employee").
The Bank and Employee, in consideration of the mutual promises set forth
herein and for other valuable consideration the sufficiency of which is hereby
acknowledged and intending to be legally bound, agree as follows:
1. Employment. The Bank agrees to employ Employee, and Employee agrees to
accept employment with the Bank. Employee agrees to perform his duties and
responsibilities in accordance with the terms and conditions set forth herein.
1.1.(a) Employment Term. The term of this Agreement (the "Employment
Term") shall be for three years and commence on ________, ___ and, unless
previously terminated in accordance with Section 7 of this Agreement or extended
by mutual agreement of the parties, shall terminate on __________, ____ (the
third anniversary of such date) upon 90 days prior written notice by either
party. If neither party gives prior written notice of termination, this
Agreement shall automatically renew for a one-year term and successive one-year
terms thereafter until such time as one party gives 90 days prior written notice
by either party of a termination.
1.1.(b) Effective Date. The effective date of this Agreement is _______,
____.
1.2. Duties and Responsibilities.
(a) During the Employment Term, Employee shall serve as President of the
Bank and shall perform in a satisfactory manner all duties and accept all
responsibilities incidental to such position or as may be assigned to him from
time to time by the Bank's Board of Directors. Employee shall devote his
productive time, ability, attention, and energies to the fulfillment of said
duties during the Employment Term. During such time, the Employee shall not
directly or indirectly render any services of a business, commercial, or
professional nature to any other person or organization except for entities
affiliated with the Bank, whether or not for compensation, without the prior
written consent of the Bank.
(b) Employee represents to the Bank that he is not subject or a party to
any employment, non-competition, non-disclosure or other agreement, covenant,
understanding or restriction which would prohibit Employee from executing this
Agreement and performing fully his duties and responsibilities hereunder, or
which would in any manner, directly or indirectly, limit or affect the duties
and responsibilities which may now or in the future be assigned to Employee by
the Bank.
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1.3(a)Compensation. The Bank shall pay Employee a base salary at the
annual rate of $154,000. The Bank agrees that the Employee's base salary will be
reviewed annually by the Bank's Board of Directors to determine, in light of the
performance of Employee and the Bank, if an increase is appropriate. Such
increases shall be in the sole discretion of the Bank's Board of Directors. All
compensation under this Agreement shall be paid less withholding required by law
or agreed to by Employee, and shall be payable as determined by the Board of
Directors of the Bank. The Bank also agrees to reimburse Employee for reasonable
expenses incurred by Employee in the discharge of his duties.
1.3(b). Bank and Employee agree that the Bank will offer Employee an
incentive compensation plan, the terms of which to be agreed upon by the
parties.
2. Other Benefits.
2.1. Vacation. For the duration of the Employment Term, Employee shall be
entitled to vacation per the policies of the Bank as applicable to
executive-level employees. Earned but unused vacation will be forfeited at the
end of each calendar year.
2.2. Plan Benefits. The Bank shall provide Employee the following
benefits: family health, dental and vision insurance, life insurance equal to
one year's base salary and officers and directors liability insurance. The
foregoing benefits shall be provided to Employee at the same cost as such
benefits are provided to other employees of the Bank. Employee shall be eligible
to participate in any exclusive stock option plan offered by the Bank or Bay
National Corporation as may be applicable. Employee shall receive long-term and
short-term disability insurance as such is provided to other Bank management
employees.
3. Non-Disclosure of Confidential Information and Records.
3.1. During the term of his employment, Employee will have access to the
Bank's proprietary information or information which is entrusted to the Bank,
including information relating to business plans and to business as conducted or
anticipated to be conducted, and to past, current or anticipated products,
employees, and services ("Confidential Information").
3.2. In further consideration of Employee's employment and continued
employment, and other benefits provided to Employee by the Bank, Employee agrees
as follows: (i) except as required by Employee's duties to the Bank, not to at
any time directly or indirectly disclose to or use for others or appropriate for
his own personal use or cause to be used by others any Confidential Information
without first obtaining the written consent of the Board of Directors of the
Bank to do so; (ii) all records and other writings of Confidential Information
prepared by Employee, or which come into his possession or control, or which he
has access to, are and shall remain the exclusive property of the Bank, and upon
termination of Employee's employment, Employee will not remove any such records
or copies thereof, but all shall be left with the Bank, and any such records or
copies
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not with the Bank in an Employee's possession or control, shall be, upon
termination of employment, immediately returned to the Bank along with any other
property of the Bank.
3.3. The requirements of this Section 3 shall apply during the time of
Employee's employment with the Bank and thereafter with no time limitation,
unless it can be demonstrated conclusively that such Confidential Information
has through no act or fault of Employee become part of the public domain.
4. Non-Competition.
4.1. During the Employment Term and for a period of six (6) months after
the employment of the Employee by the Bank or any of its affiliates has ended
(whether or not such employment is pursuant to this Agreement), Employee will
not, unless acting pursuant thereto or with the prior written consent of the
Board of Directors of the Bank, directly or indirectly, own, manage, operate,
join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with or use
or permit his name to be used in connection with, any federally-chartered or
state-chartered bank, bank holding company, savings and loan, thrift, savings
and loan holding company or other financial institution offices which are
located in the Bank's market area (the "Area").
4.2. The foregoing restriction shall not be construed to prohibit the
ownership by Employee of not more than five percent (5%) of any class of
securities of any corporation which is engaged in the business of banking having
a class of securities registered pursuant to the Securities Exchange Act of
1934, provided that such ownership represents a passive investment and that
neither Employee nor any group of persons, including Employee in any way, either
directly or indirectly, manages or exercises control of any such corporation,
guarantees any of its financial obligations, otherwise takes any part in its
business, other than exercising his rights as a shareholder, or seeks to do any
of the foregoing.
4.3. This covenant not to compete is an inducement to cause the Bank to
execute this Agreement and is a condition to, and consideration for, such
employment and continued employment, raises, promotions, severance, and other
benefits provided to Employee by the Bank.
5. No Solicitation. Employee agrees that, for a period of one (1) year
after the employment of the Employee by the Bank or any of its affiliates has
ended (whether or not such employment is pursuant to this Agreement), he will
not either directly or indirectly, (i) call on or solicit any person,
institution, corporation, trust or other entity who or which at the time of such
termination was, or within one (1) year prior thereto had been, a customer of
the Bank or any of its affiliates or (ii) solicit the employment of any person
who was employed by the Bank or any of its affiliates on a full or part-time
basis at the time of Employee's termination of employment, unless such person
(a) was involuntarily discharged by the Bank or such affiliates, or (b)
voluntarily terminated his relationship with the Bank or such affiliate prior to
Employee's termination of employment.
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6. Equitable Relief.
6.1. Employee acknowledges that the restrictions contained in Sections 3,
4 and 5 are reasonable and necessary to protect the legitimate interests of the
Bank and its affiliates, that the Bank would not have entered into this
Agreement in the absence of such restrictions and that any violation of any
provision of these Sections will result in irreparable injury to the Bank and
its affiliates. Employee further represents and acknowledges that (i) he has
been advised by the Bank to consult his own legal counsel in respect of this
Agreement, and (ii) that he has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with his counsel.
6.2. Employee agrees that the Bank's remedy at law for a breach of
paragraphs 3, 4, and 5 would be inadequate and that the Bank shall be entitled
to preliminary and permanent injunctive relief, without the necessity of
providing actual damages, as well as an equitable accounting of all earnings,
profits and other benefits arising from any violation of Sections 3, 4, or 5,
which rights shall be cumulative and in addition to any other rights or remedies
to which the Bank may be entitled. In the event that any of the provisions of
Sections 3, 4, or 5 should ever be adjudicated to exceed the time, geographic or
other limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic or other limitations permitted by applicable law.
6.3. Employee irrevocably and unconditionally (i) agrees that any suit,
action or other legal proceeding arising out of this Agreement, including
without limitation, any action commenced by the Bank for preliminary and
permanent injunctive relief and other equitable relief, may be brought in the
United States District Court for the District of Maryland, or if such court does
not have jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in Baltimore County, Maryland, (ii) consents to the non-exclusive
jurisdiction of any such court in any such suit, action or proceeding, and (iii)
waives any objection which Employee may have to the laying of venue of any such
suit. Employee also irrevocably and unconditionally consents to the service of
any process, pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 12 of this Agreement.
6.4. Employee agrees that he will provide, and that the Bank may similarly
provide, a copy of Sections 3, 4, and 5 of this Agreement to any business or
enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, or control of, or (ii) with which he may be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or
otherwise, or in connection with which he may use or permit his name to be used;
provided, however, that this provision shall not apply in respect of Section 5
of this Agreement after expiration of the time periods set forth therein.
7. Termination. This Agreement shall terminate prior to the expiration of
its term set forth in Section 1.1 above, upon the occurrence of any one of the
following events:
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7.1. Disability. In the event that Employee becomes unable to perform his
duties hereunder for a period of six (6) consecutive months or otherwise is
deemed to be disabled within the meaning of the Bank's then existing disability
benefit program, this Agreement may be terminated by the Bank and the Bank shall
have no further liability or obligation to Employee for compensation; provided,
however, that if the Employee becomes disabled during the Employment Term, the
Bank shall pay to him or his legal representatives an amount equal to the
installment of his salary set forth in Section 1.3 hereof for the month in which
he becomes disabled which have been earned but not yet paid. This Section shall
be interpreted in compliance with the Family Medical Leave Act to the extent
that the provisions of that law would apply.
7.2. Death. In the event that Employee dies during the Employment Term,
the Bank shall pay to his executors, legal representatives or administrators an
amount equal to the installment of his salary set forth in Section 1.3 hereof
for the month in which he dies, which have been earned but not yet paid and
thereafter except as otherwise provided in this Agreement, the Bank shall have
no further liability or obligation hereunder to his executors, legal
representatives, administrators, heirs or assigns or any other person claiming
under or through him, provided, however, that Employee's estate or designated
beneficiaries shall be entitled to receive the payments described for such
recipients under any death benefit plan which may be in effect for
executive-level employees of the Bank and in which Employee participated.
7.3. Termination by Bank For Cause. Nothing in this Agreement shall be
construed to prevent its termination by the Bank at any time for "cause" without
prior notice. For purposes of this Agreement, "cause" shall mean the failure of
Employee to perform or observe any of the terms or provisions of this Agreement
or to comply fully with the lawful directives of the Directors of the Bank,
dishonesty, misconduct, conviction of a crime or otherwise causing embarrassment
to the Bank and its public reputation, substance abuse, misappropriation of
funds, disparagement of the Bank or failure to comply with Bank policy.
7.4. Termination by the Bank Without Cause. This Agreement may be
terminated by the Bank for any reason whatsoever, by giving 30 days' prior
written notice of termination to the other party. If Employee is terminated
without cause pursuant to this Section 7.4, Employee shall be entitled to the
base compensation earned prior to the date of termination as provided for in
this Agreement, computed pro-rata up to and including the date of termination
plus a continued salary (at the then current rate) which shall terminate on the
sooner of the expiration of the remaining term of this Agreement or at such time
as the Employee has found other employment comparable with Employee's employment
with the Bank. Employee shall use his best efforts to obtain such employment.
7.5. Effect of Termination at Employee's Election. In the event of the
termination of this Agreement by Employee prior to the completion of the
Employment Term, Employee shall provide the Bank with thirty (30) days prior
written notice and shall be entitled to the base compensation earned prior to
the date of termination as provided for in this Agreement under Section 1.3,
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computed pro-rata up to and including the date of termination. The Employee
shall be entitled to no other compensation.
8. Change of Control.
8.1 For purposes of this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (a "Person") of
beneficial ownership (within the meaning of the Federal Securities Laws) of
forty percent (40%) or more of either (i) the then outstanding shares of common
stock of the Bank or Bay National Corporation (the "Company") or (ii) the
combined voting power of the then outstanding voting securities of the Bank or
the Company entitled to vote generally in the election of directors provided,
however, that all transactions engaged in by the Company and/or the Bank in
connection with its formation activities, including, but not limited to the
Company's initial public offering and the Bank's sales of shares of its capital
stock to the Company, shall not constitute a "Change of Control"; or
(b) If the individuals who, as of the date hereof, constitute the Board of
Directors of the Bank (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Bank's stockholders, was approved by a majority
of the directors then comprising the Incumbent Board or a committee appointed by
a majority of the directors then comprising the Incumbent Board, shall be
considered as though such individual were a member of the Incumbent Board; or
(c) the approval by the stockholders of the Bank or the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Bank or the Company immediately prior
to such reorganization, merger or consolidation do not, immediately thereafter,
own, directly or indirectly, more than forty percent (40%) of the combined
voting power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, or of a liquidation or dissolution of the Bank or the Company or of
the sale or other disposition of all or substantially all of the assets of the
Bank or the Company.
8.2. Change of Control Payments.
(a) For purposes of this Section 8, the "Change of Control Date" shall
mean the first date on which a Change of Control occurs. Notwithstanding
anything to the contrary in this Agreement, if a Change of Control occurs and if
the Employee's employment with the Bank is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Employee that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect the Change of Control
or (ii) otherwise arose in connection with or anticipation of the Change of
Control, then for all purposes of this Agreement the "Change of Control Date"
shall mean the date immediately prior to the date of such termination of
employment.
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(b) Upon a Change of Control, if Employee is employed by the Bank on the
Change of Control Date, the Bank shall pay Employee $446,000.00, at Employee's
option, either (i) in a lump sum payment within five (5) days of the Change of
Control Date; (ii) in substantially equal bi-weekly payments over a period of
one (1) year, the first such payment commencing within five (5) days of the
Change of Control Date; or (iii) in substantially equal bi-weekly payments over
a period of two (2) full years, the first such payment commencing within five
(5) days of the Change of Control Date. Notwithstanding anything to the contrary
contained herein, the Bank shall not be obligated to pay Employee any amount as
a result of the Change of Control in excess of two hundred ninety percent (290%)
of Employee's "base amount" as such term is defined in Section 280 (b)(3) of the
Internal Revenue Code of 1986, as amended.
9. Survival. Notwithstanding the termination of employment under this
Agreement for any reason, the Employee's obligations under Sections 3 and 5
hereof shall survive and remain in full force and effect for the periods therein
provided, and the provisions for equitable relief in Section 6 of the Agreement
shall continue in force.
10. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of Maryland without giving effect to any conflict of
laws provisions.
11. Litigation Expenses. In the event of a lawsuit by either party to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to recover reasonable costs, expenses and attorney's fees from the other party.
Disputes arising under Section 7 of the Agreement shall be submitted to an
arbitrator (who is agreeable to both parties). The decision of the arbitrator
shall be binding on both parties and the fees (including legal fees) and cost
attributable to that arbitration process will be assessed as part of that
process by the arbitrator. Such arbitration shall be held in the Baltimore
metropolitan area and shall be conducted by the American Arbitration Association
(or other mutually selected arbitrators) ("AAA") by an arbitrator selected using
the AAA's procedures.
12. Notices. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when hand delivered or mailed by
registered or certified mail, as follows (provided that notice of change of
address shall be deemed given only when received);
If to the Bank, to: John DiPietro, Vice President
Bay National Bank
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
copy to: Frank C. Bonaventure, Jr., Esquire
Ober, Kaler, Grimes & Shriver
120 East Baltimore Street
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Baltimore, Maryland 21202
If to Employee, to: Hugh W. Mohler
Bay National Bank
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
or to such other names and addresses as the Bank or Employee, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
13. Contents of Agreement; Amendment and Assignment.
13.1. This Agreement supersedes all prior agreements and sets forth the
entire understanding among the parties with respect to the subject matter hereof
and cannot be changed, modified, extended or terminated except upon written
amendment approved by the Board of Directors of the Bank. Without limitation,
nothing in this Agreement shall be construed as giving Employee any right to be
retained in the employ of the Bank beyond the expiration of the Employment Term
and Employee specifically acknowledges that he shall be an employee-at-will of
the Bank thereafter, and thus subject to discharge by the Bank with or without
cause and without compensation of any nature unless a new Agreement is executed
by both parties (or employment is continued at will).
13.2. All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives, successors and assigns of the
parties, except that the duties and responsibilities of Employee hereunder are
of a personal nature and shall not be assignable or delegatable in whole or in
part by Employee.
14. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstance is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction.
15. Remedies Cumulative; No Waiver. No remedy conferred upon the parties
by this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to any other remedy
given hereunder or now or hereafter existing at law or in equity. No delay or
omission by the parties in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver thereof, and any
such right,
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remedy or power may be exercised by the parties from time to time and as often
as may be deemed expedient or necessary by such party in its sole discretion.
16. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in marking proof of this Agreement or any counterpart
to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.
Attest: BAY NATIONAL BANK
______________________ By:___________________________________
Secretary Name:
Title:
Witness:
_______________________ ___________________________________
Hugh W. Mohler
9
EXHIBIT 10.5
BAY NATIONAL BANK
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of _________, 1999,
is entered by and between Bay National Bank, a national bank (the "Bank") and
John S. DiPietro ("Employee").
The Bank and Employee, in consideration of the mutual promises set forth
herein and for other valuable consideration the sufficiency of which is hereby
acknowledged and intending to be legally bound, agree as follows:
1. Employment. The Bank agrees to employ Employee, and Employee agrees to
accept employment with the Bank. Employee agrees to perform his duties and
responsibilities in accordance with the terms and conditions set forth herein.
1.1.(a) Employment Term. The term of this Agreement (the "Employment
Term") shall be for three years and commence on ________, ___ and, unless
previously terminated in accordance with Section 7 of this Agreement or extended
by mutual agreement of the parties, shall terminate on __________, ____ (the
third anniversary of such date) upon 90 days prior written notice by either
party. If neither party gives prior written notice of termination, this
Agreement shall automatically renew for a one-year term and successive one-year
terms thereafter until such time as one party gives 90 days prior written notice
by either party of a termination.
1.1.(b) Effective Date. The effective date of this Agreement is _______,
____.
1.2. Duties and Responsibilities.
(a) During the Employment Term, Employee shall serve as Vice President of
the Bank and shall perform in a satisfactory manner all duties and accept all
responsibilities incidental to such position or as may be assigned to him from
time to time by the Bank's Board of Directors. Employee shall devote his
productive time, ability, attention, and energies to the fulfillment of said
duties during the Employment Term. During such time, the Employee shall not
directly or indirectly render any services of a business, commercial, or
professional nature to any other person or organization except for entities
affiliated with the Bank, whether or not for compensation, without the prior
written consent of the Bank.
(b) Employee represents to the Bank that he is not subject or a party to
any employment, non-competition, non-disclosure or other agreement, covenant,
understanding or restriction which would prohibit Employee from executing this
Agreement and performing fully his duties and responsibilities hereunder, or
which would in any manner, directly or indirectly, limit or affect the duties
and responsibilities which may now or in the future be assigned to Employee by
the Bank.
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<PAGE>
1.3(a)Compensation. The Bank shall pay Employee a base salary at the
annual rate of $154,000. The Bank agrees that the Employee's base salary will be
reviewed annually by the Bank's Board of Directors to determine, in light of the
performance of Employee and the Bank, if an increase is appropriate. Such
increases shall be in the sole discretion of the Bank's Board of Directors. All
compensation under this Agreement shall be paid less withholding required by law
or agreed to by Employee, and shall be payable as determined by the Board of
Directors of the Bank. The Bank also agrees to reimburse Employee for reasonable
expenses incurred by Employee in the discharge of his duties.
1.3(b). Bank and Employee agree that the Bank will offer Employee an
incentive compensation plan, the terms of which to be agreed upon by the
parties.
2. Other Benefits.
2.1. Vacation. For the duration of the Employment Term, Employee shall be
entitled to vacation per the policies of the Bank as applicable to
executive-level employees. Earned but unused vacation will be forfeited at the
end of each calendar year.
2.2. Plan Benefits. The Bank shall provide Employee the following
benefits: family health, dental and vision insurance, life insurance equal to
one year's base salary and officers and directors liability insurance. The
foregoing benefits shall be provided to Employee at the same cost as such
benefits are provided to other employees of the Bank. Employee shall be eligible
to participate in any exclusive stock option plan offered by the Bank or Bay
National Corporation as may be applicable. Employee shall receive long-term and
short-term disability insurance as such is provided to other Bank management
employees.
3. Non-Disclosure of Confidential Information and Records.
3.1. During the term of his employment, Employee will have access to the
Bank's proprietary information or information which is entrusted to the Bank,
including information relating to business plans and to business as conducted or
anticipated to be conducted, and to past, current or anticipated products,
employees, and services ("Confidential Information").
3.2. In further consideration of Employee's employment and continued
employment, and other benefits provided to Employee by the Bank, Employee agrees
as follows: (i) except as required by Employee's duties to the Bank, not to at
any time directly or indirectly disclose to or use for others or appropriate for
his own personal use or cause to be used by others any Confidential Information
without first obtaining the written consent of the Board of Directors of the
Bank to do so; (ii) all records and other writings of Confidential Information
prepared by Employee, or which come into his possession or control, or which he
has access to, are and shall remain the exclusive property of the Bank, and upon
termination of Employee's employment, Employee will not remove any such records
or copies thereof, but all shall be left with the Bank, and any such records or
copies
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<PAGE>
not with the Bank in an Employee's possession or control, shall be, upon
termination of employment, immediately returned to the Bank along with any other
property of the Bank.
3.3. The requirements of this Section 3 shall apply during the time of
Employee's employment with the Bank and thereafter with no time limitation,
unless it can be demonstrated conclusively that such Confidential Information
has through no act or fault of Employee become part of the public domain.
4. Non-Competition.
4.1. During the Employment Term and for a period of six (6) months after
the employment of the Employee by the Bank or any of its affiliates has ended
(whether or not such employment is pursuant to this Agreement), Employee will
not, unless acting pursuant thereto or with the prior written consent of the
Board of Directors of the Bank, directly or indirectly, own, manage, operate,
join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with or use
or permit his name to be used in connection with, any federally-chartered or
state-chartered bank, bank holding company, savings and loan, thrift, savings
and loan holding company or other financial institution offices which are
located in the Bank's market area (the "Area").
4.2. The foregoing restriction shall not be construed to prohibit the
ownership by Employee of not more than five percent (5%) of any class of
securities of any corporation which is engaged in the business of banking having
a class of securities registered pursuant to the Securities Exchange Act of
1934, provided that such ownership represents a passive investment and that
neither Employee nor any group of persons, including Employee in any way, either
directly or indirectly, manages or exercises control of any such corporation,
guarantees any of its financial obligations, otherwise takes any part in its
business, other than exercising his rights as a shareholder, or seeks to do any
of the foregoing.
4.3. This covenant not to compete is an inducement to cause the Bank to
execute this Agreement and is a condition to, and consideration for, such
employment and continued employment, raises, promotions, severance, and other
benefits provided to Employee by the Bank.
5. No Solicitation. Employee agrees that, for a period of one (1) year
after the employment of the Employee by the Bank or any of its affiliates has
ended (whether or not such employment is pursuant to this Agreement), he will
not either directly or indirectly, (i) call on or solicit any person,
institution, corporation, trust or other entity who or which at the time of such
termination was, or within one (1) year prior thereto had been, a customer of
the Bank or any of its affiliates or (ii) solicit the employment of any person
who was employed by the Bank or any of its affiliates on a full or part-time
basis at the time of Employee's termination of employment, unless such person
(a) was involuntarily discharged by the Bank or such affiliates, or (b)
voluntarily terminated his relationship with the Bank or such affiliate prior to
Employee's termination of employment.
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<PAGE>
6. Equitable Relief.
6.1. Employee acknowledges that the restrictions contained in Sections 3,
4 and 5 are reasonable and necessary to protect the legitimate interests of the
Bank and its affiliates, that the Bank would not have entered into this
Agreement in the absence of such restrictions and that any violation of any
provision of these Sections will result in irreparable injury to the Bank and
its affiliates. Employee further represents and acknowledges that (i) he has
been advised by the Bank to consult his own legal counsel in respect of this
Agreement, and (ii) that he has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with his counsel.
6.2. Employee agrees that the Bank's remedy at law for a breach of
paragraphs 3, 4, and 5 would be inadequate and that the Bank shall be entitled
to preliminary and permanent injunctive relief, without the necessity of
providing actual damages, as well as an equitable accounting of all earnings,
profits and other benefits arising from any violation of Sections 3, 4, or 5,
which rights shall be cumulative and in addition to any other rights or remedies
to which the Bank may be entitled. In the event that any of the provisions of
Sections 3, 4, or 5 should ever be adjudicated to exceed the time, geographic or
other limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic or other limitations permitted by applicable law.
6.3. Employee irrevocably and unconditionally (i) agrees that any suit,
action or other legal proceeding arising out of this Agreement, including
without limitation, any action commenced by the Bank for preliminary and
permanent injunctive relief and other equitable relief, may be brought in the
United States District Court for the District of Maryland, or if such court does
not have jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in Baltimore County, Maryland, (ii) consents to the non-exclusive
jurisdiction of any such court in any such suit, action or proceeding, and (iii)
waives any objection which Employee may have to the laying of venue of any such
suit. Employee also irrevocably and unconditionally consents to the service of
any process, pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 12 of this Agreement.
6.4. Employee agrees that he will provide, and that the Bank may similarly
provide, a copy of Sections 3, 4, and 5 of this Agreement to any business or
enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, or control of, or (ii) with which he may be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or
otherwise, or in connection with which he may use or permit his name to be used;
provided, however, that this provision shall not apply in respect of Section 5
of this Agreement after expiration of the time periods set forth therein.
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<PAGE>
7. Termination. This Agreement shall terminate prior to the expiration of
its term set forth in Section 1.1 above, upon the occurrence of any one of the
following events:
7.1. Disability. In the event that Employee becomes unable to perform his
duties hereunder for a period of six (6) consecutive months or otherwise is
deemed to be disabled within the meaning of the Bank's then existing disability
benefit program, this Agreement may be terminated by the Bank and the Bank shall
have no further liability or obligation to Employee for compensation; provided,
however, that if the Employee becomes disabled during the Employment Term, the
Bank shall pay to him or his legal representatives an amount equal to the
installment of his salary set forth in Section 1.3 hereof for the month in which
he becomes disabled which have been earned but not yet paid. This Section shall
be interpreted in compliance with the Family Medical Leave Act to the extent
that the provisions of that law would apply.
7.2. Death. In the event that Employee dies during the Employment Term,
the Bank shall pay to his executors, legal representatives or administrators an
amount equal to the installment of his salary set forth in Section 1.3 hereof
for the month in which he dies, which have been earned but not yet paid and
thereafter except as otherwise provided in this Agreement, the Bank shall have
no further liability or obligation hereunder to his executors, legal
representatives, administrators, heirs or assigns or any other person claiming
under or through him, provided, however, that Employee's estate or designated
beneficiaries shall be entitled to receive the payments described for such
recipients under any death benefit plan which may be in effect for
executive-level employees of the Bank and in which Employee participated.
7.3. Termination by Bank For Cause. Nothing in this Agreement shall be
construed to prevent its termination by the Bank at any time for "cause" without
prior notice. For purposes of this Agreement, "cause" shall mean the failure of
Employee to perform or observe any of the terms or provisions of this Agreement
or to comply fully with the lawful directives of the Directors of the Bank,
dishonesty, misconduct, conviction of a crime or otherwise causing embarrassment
to the Bank and its public reputation, substance abuse, misappropriation of
funds, disparagement of the Bank or failure to comply with Bank policy.
7.4. Termination by the Bank Without Cause. This Agreement may be
terminated by the Bank for any reason whatsoever, by giving 30 days' prior
written notice of termination to the other party. If Employee is terminated
without cause pursuant to this Section 7.4, Employee shall be entitled to the
base compensation earned prior to the date of termination as provided for in
this Agreement, computed pro-rata up to and including the date of termination
plus a continued salary (at the then current rate) which shall terminate on the
sooner of the expiration of the remaining term of this Agreement or at such time
as the Employee has found other employment comparable with Employee's employment
with the Bank. Employee shall use his best efforts to obtain such employment.
7.5. Effect of Termination at Employee's Election. In the event of the
termination of this Agreement by Employee prior to the completion of the
Employment Term, Employee shall provide
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<PAGE>
the Bank with thirty (30) days prior written notice and shall be entitled to the
base compensation earned prior to the date of termination as provided for in
this Agreement under Section 1.3, computed pro-rata up to and including the date
of termination. The Employee shall be entitled to no other compensation.
8. Change of Control.
8.1 For purposes of this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (a "Person") of
beneficial ownership (within the meaning of the Federal Securities Laws) of
forty percent (40%) or more of either (i) the then outstanding shares of common
stock of the Bank or Bay National Corporation (the "Company") or (ii) the
combined voting power of the then outstanding voting securities of the Bank or
the Company entitled to vote generally in the election of directors provided,
however, that all transactions engaged by the Company and/or the Bank in
connection with its formation activities, including, but not limited to the
Company's initial public offering and the Bank's sales of shares of its capital
stock to the Company, shall not constitute a "Change of Control"; or
(b) If the individuals who, as of the date hereof, constitute the Board of
Directors of the Bank (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Bank's stockholders, was approved by a majority
of the directors then comprising the Incumbent Board or a committee appointed by
a majority of the directors then comprising the Incumbent Board, shall be
considered as though such individual were a member of the Incumbent Board; or
(c) the approval by the stockholders of the Bank or the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Bank or the Company immediately prior
to such reorganization, merger or consolidation do not, immediately thereafter,
own, directly or indirectly, more than forty percent (40%) of the combined
voting power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, or of a liquidation or dissolution of the Bank or the Company or of
the sale or other disposition of all or substantially all of the assets of the
Bank or the Company.
8.2. Change of Control Payments.
(a) For purposes of this Section 8, the "Change of Control Date" shall
mean the first date on which a Change of Control occurs. Notwithstanding
anything to the contrary in this Agreement, if a Change of Control occurs and if
the Employee's employment with the Bank is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Employee that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect the Change of Control
or (ii) otherwise arose in connection with
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or anticipation of the Change of Control, then for all purposes of this
Agreement the "Change of Control Date" shall mean the date immediately prior to
the date of such termination of employment.
(b) Upon a Change of Control, if Employee is employed by the Bank on the
Change of Control Date, the Bank shall pay Employee $446,000.00, at Employee's
option, either (i) in a lump sum payment within five (5) days of the Change of
Control Date; (ii) in substantially equal bi-weekly payments over a period of
one (1) year, the first such payment commencing within five (5) days of the
Change of Control Date; or (iii) in substantially equal bi-weekly payments over
a period of two (2) full years, the first such payment commencing within five
(5) days of the Change of Control Date. Notwithstanding anything to the contrary
contained herein, the Bank shall not be obligated to pay Employee any amount as
a result of the Change of Control in excess of two hundred ninety percent (290%)
of Employee's "base amount" as such term is defined in Section 280 (b)(3) of the
Internal Revenue Code of 1986, as amended.
9. Survival. Notwithstanding the termination of employment under this
Agreement for any reason, the Employee's obligations under Sections 3 and 5
hereof shall survive and remain in full force and effect for the periods therein
provided, and the provisions for equitable relief in Section 6 of the Agreement
shall continue in force.
10. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of Maryland without giving effect to any conflict of
laws provisions.
11. Litigation Expenses. In the event of a lawsuit by either party to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to recover reasonable costs, expenses and attorney's fees from the other party.
Disputes arising under Section 7 of the Agreement shall be submitted to an
arbitrator (who is agreeable to both parties). The decision of the arbitrator
shall be binding on both parties and the fees (including legal fees) and cost
attributable to that arbitration process will be assessed as part of that
process by the arbitrator. Such arbitration shall be held in the Baltimore
metropolitan area and shall be conducted by the American Arbitration Association
(or other mutually selected arbitrators) ("AAA") by an arbitrator selected using
the AAA's procedures.
12. Notices. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when hand delivered or mailed by
registered or certified mail, as follows (provided that notice of change of
address shall be deemed given only when received);
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<PAGE>
If to the Bank, to: Hugh W. Mohler, President
Bay National Bank
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
copy to: Frank C. Bonaventure, Jr., Esquire
Ober, Kaler, Grimes & Shriver
120 East Baltimore Street
Baltimore, Maryland 21202
If to Employee, to: John S. DiPietro
Bay National Bank
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
or to such other names and addresses as the Bank or Employee, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
13. Contents of Agreement; Amendment and Assignment.
13.1. This Agreement supersedes all prior agreements and sets forth the
entire understanding among the parties with respect to the subject matter hereof
and cannot be changed, modified, extended or terminated except upon written
amendment approved by the Board of Directors of the Bank. Without limitation,
nothing in this Agreement shall be construed as giving Employee any right to be
retained in the employ of the Bank beyond the expiration of the Employment Term
and Employee specifically acknowledges that he shall be an employee-at-will of
the Bank thereafter, and thus subject to discharge by the Bank with or without
cause and without compensation of any nature unless a new Agreement is executed
by both parties (or employment is continued at will).
13.2. All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives, successors and assigns of the
parties, except that the duties and responsibilities of Employee hereunder are
of a personal nature and shall not be assignable or delegatable in whole or in
part by Employee.
14. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstance is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement
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<PAGE>
which can be given effect without the invalid or unenforceable provision or
application and shall not invalidate or render unenforceable such provision or
application in any other jurisdiction.
15. Remedies Cumulative; No Waiver. No remedy conferred upon the parties
by this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to any other remedy
given hereunder or now or hereafter existing at law or in equity. No delay or
omission by the parties in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver thereof, and any
such right, remedy or power may be exercised by the parties from time to time
and as often as may be deemed expedient or necessary by such party in its sole
discretion.
16. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in marking proof of this Agreement or any counterpart
to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.
Attest: BAY NATIONAL BANK
______________________ By:___________________________________
Secretary Name:
Title:
Witness:
_______________________ ___________________________________
John S. DiPietro
9
EXHIBIT 10.6
BAY NATIONAL BANK
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of _________, 1999,
is entered by and between Bay National Bank, a national bank (the "Bank") and
Thomas M. Neale ("Employee").
The Bank and Employee, in consideration of the mutual promises set forth
herein and for other valuable consideration the sufficiency of which is hereby
acknowledged and intending to be legally bound, agree as follows:
1. Employment. The Bank agrees to employ Employee, and Employee agrees
to accept employment with the Bank. Employee agrees to perform his duties and
responsibilities in accordance with the terms and conditions set forth herein.
1.1.(a) Employment Term. The term of this Agreement (the "Employment
Term") shall be for three years and commence on ________, ___ and, unless
previously terminated in accordance with Section 7 of this Agreement or extended
by mutual agreement of the parties, shall terminate on __________, ____ (the
third anniversary of such date) upon 90 days prior written notice by either
party. If neither party gives prior written notice of termination, this
Agreement shall automatically renew for a one-year term and successive one-year
terms thereafter until such time as one party gives 90 days prior written notice
by either party of a termination.
1.1.(b)Effective Date. The effective date of this Agreement is _______,
____.
1.2. Duties and Responsibilities.
(a) During the Employment Term, Employee shall serve as Vice President of
the Bank and shall perform in a satisfactory manner all duties and accept all
responsibilities incidental to such position or as may be assigned to him from
time to time by the Bank's Board of Directors. Employee shall devote his
productive time, ability, attention, and energies to the fulfillment of said
duties during the Employment Term. During such time, the Employee shall not
directly or indirectly render any services of a business, commercial, or
professional nature to any other person or organization except for entities
affiliated with the Bank, whether or not for compensation, without the prior
written consent of the Bank.
(b) Employee represents to the Bank that he is not subject or a party
to any employment, non-competition, non-disclosure or other agreement, covenant,
understanding or restriction which would prohibit Employee from executing this
Agreement and performing fully his duties and responsibilities hereunder, or
which would in any manner, directly or indirectly, limit or affect the duties
and responsibilities which may now or in the future be assigned to Employee by
the Bank.
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1.3(a)Compensation. The Bank shall pay Employee a base salary at the
annual rate of $154,000. The Bank agrees that the Employee's base salary will be
reviewed annually by the Bank's Board of Directors to determine, in light of the
performance of Employee and the Bank, if an increase is appropriate. Such
increases shall be in the sole discretion of the Bank's Board of Directors. All
compensation under this Agreement shall be paid less withholding required by law
or agreed to by Employee, and shall be payable as determined by the Board of
Directors of the Bank. The Bank also agrees to reimburse Employee for reasonable
expenses incurred by Employee in the discharge of his duties.
1.3(b). Bank and Employee agree that the Bank will offer Employee an
incentive compensation plan, the terms of which to be agreed upon by the
parties.
2. Other Benefits.
2.1. Vacation. For the duration of the Employment Term, Employee shall
be entitled to vacation per the policies of the Bank as applicable to
executive-level employees. Earned but unused vacation will be forfeited at the
end of each calendar year.
2.2. Plan Benefits. The Bank shall provide Employee the following
benefits: family health, dental and vision insurance, life insurance equal to
one year's base salary and officers and directors liability insurance. The
foregoing benefits shall be provided to Employee at the same cost as such
benefits are provided to other employees of the Bank. Employee shall be eligible
to participate in any exclusive stock option plan offered by the Bank or Bay
National Corporation as may be applicable. Employee shall receive long-term and
short-term disability insurance as such is provided to other Bank management
employees.
3. Non-Disclosure of Confidential Information and Records.
3.1. During the term of his employment, Employee will have access to
the Bank's proprietary information or information which is entrusted to the
Bank, including information relating to business plans and to business as
conducted or anticipated to be conducted, and to past, current or anticipated
products, employees, and services ("Confidential Information").
3.2. In further consideration of Employee's employment and continued
employment, and other benefits provided to Employee by the Bank, Employee agrees
as follows: (i) except as required by Employee's duties to the Bank, not to at
any time directly or indirectly disclose to or use for others or appropriate for
his own personal use or cause to be used by others any Confidential Information
without first obtaining the written consent of the Board of Directors of the
Bank to do so; (ii) all records and other writings of Confidential Information
prepared by Employee, or which come into his possession or control, or which he
has access to, are and shall remain the exclusive property of the Bank, and upon
termination of Employee's employment, Employee will not remove any such records
or copies thereof, but all shall be left with the Bank, and any such records or
copies
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not with the Bank in an Employee's possession or control, shall be, upon
termination of employment, immediately returned to the Bank along with any other
property of the Bank.
3.3. The requirements of this Section 3 shall apply during the time of
Employee's employment with the Bank and thereafter with no time limitation,
unless it can be demonstrated conclusively that such Confidential Information
has through no act or fault of Employee become part of the public domain.
4. Non-Competition.
4.1. During the Employment Term and for a period of six (6) months after
the employment of the Employee by the Bank or any of its affiliates has ended
(whether or not such employment is pursuant to this Agreement), Employee will
not, unless acting pursuant thereto or with the prior written consent of the
Board of Directors of the Bank, directly or indirectly, own, manage, operate,
join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with or use
or permit his name to be used in connection with, any federally-chartered or
state-chartered bank, bank holding company, savings and loan, thrift, savings
and loan holding company or other financial institution offices which are
located in the Bank's market area (the "Area").
4.2. The foregoing restriction shall not be construed to prohibit the
ownership by Employee of not more than five percent (5%) of any class of
securities of any corporation which is engaged in the business of banking having
a class of securities registered pursuant to the Securities Exchange Act of
1934, provided that such ownership represents a passive investment and that
neither Employee nor any group of persons, including Employee in any way, either
directly or indirectly, manages or exercises control of any such corporation,
guarantees any of its financial obligations, otherwise takes any part in its
business, other than exercising his rights as a shareholder, or seeks to do any
of the foregoing.
4.3. This covenant not to compete is an inducement to cause the Bank to
execute this Agreement and is a condition to, and consideration for, such
employment and continued employment, raises, promotions, severance, and other
benefits provided to Employee by the Bank.
5. No Solicitation. Employee agrees that, for a period of one (1) year
after the employment of the Employee by the Bank or any of its affiliates has
ended (whether or not such employment is pursuant to this Agreement), he will
not either directly or indirectly, (i) call on or solicit any person,
institution, corporation, trust or other entity who or which at the time of such
termination was, or within one (1) year prior thereto had been, a customer of
the Bank or any of its affiliates or (ii) solicit the employment of any person
who was employed by the Bank or any of its affiliates on a full or part-time
basis at the time of Employee's termination of employment, unless such person
(a) was involuntarily discharged by the Bank or such affiliates, or (b)
voluntarily terminated his relationship with the Bank or such affiliate prior to
Employee's termination of employment.
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6. Equitable Relief.
6.1. Employee acknowledges that the restrictions contained in Sections 3,
4 and 5 are reasonable and necessary to protect the legitimate interests of the
Bank and its affiliates, that the Bank would not have entered into this
Agreement in the absence of such restrictions and that any violation of any
provision of these Sections will result in irreparable injury to the Bank and
its affiliates. Employee further represents and acknowledges that (i) he has
been advised by the Bank to consult his own legal counsel in respect of this
Agreement, and (ii) that he has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with his counsel.
6.2. Employee agrees that the Bank's remedy at law for a breach of
paragraphs 3, 4, and 5 would be inadequate and that the Bank shall be entitled
to preliminary and permanent injunctive relief, without the necessity of
providing actual damages, as well as an equitable accounting of all earnings,
profits and other benefits arising from any violation of Sections 3, 4, or 5,
which rights shall be cumulative and in addition to any other rights or remedies
to which the Bank may be entitled. In the event that any of the provisions of
Sections 3, 4, or 5 should ever be adjudicated to exceed the time, geographic or
other limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic or other limitations permitted by applicable law.
6.3. Employee irrevocably and unconditionally (i) agrees that any suit,
action or other legal proceeding arising out of this Agreement, including
without limitation, any action commenced by the Bank for preliminary and
permanent injunctive relief and other equitable relief, may be brought in the
United States District Court for the District of Maryland, or if such court does
not have jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in Baltimore County, Maryland, (ii) consents to the non-exclusive
jurisdiction of any such court in any such suit, action or proceeding, and (iii)
waives any objection which Employee may have to the laying of venue of any such
suit. Employee also irrevocably and unconditionally consents to the service of
any process, pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 12 of this Agreement.
6.4. Employee agrees that he will provide, and that the Bank may
similarly provide, a copy of Sections 3, 4, and 5 of this Agreement to any
business or enterprise (i) which he may directly or indirectly own, manage,
operate, finance, join, control or participate in the ownership, management,
operation, financing, or control of, or (ii) with which he may be connected as
an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which he may use or permit his
name to be used; provided, however, that this provision shall not apply in
respect of Section 5 of this Agreement after expiration of the time periods set
forth therein.
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7. Termination. This Agreement shall terminate prior to the expiration
of its term set forth in Section 1.1 above, upon the occurrence of any one of
the following events:
7.1. Disability. In the event that Employee becomes unable to perform his
duties hereunder for a period of six (6) consecutive months or otherwise is
deemed to be disabled within the meaning of the Bank's then existing disability
benefit program, this Agreement may be terminated by the Bank and the Bank shall
have no further liability or obligation to Employee for compensation; provided,
however, that if the Employee becomes disabled during the Employment Term, the
Bank shall pay to him or his legal representatives an amount equal to the
installment of his salary set forth in Section 1.3 hereof for the month in which
he becomes disabled which have been earned but not yet paid. This Section shall
be interpreted in compliance with the Family Medical Leave Act to the extent
that the provisions of that law would apply.
7.2. Death. In the event that Employee dies during the Employment Term,
the Bank shall pay to his executors, legal representatives or administrators an
amount equal to the installment of his salary set forth in Section 1.3 hereof
for the month in which he dies, which have been earned but not yet paid and
thereafter except as otherwise provided in this Agreement, the Bank shall have
no further liability or obligation hereunder to his executors, legal
representatives, administrators, heirs or assigns or any other person claiming
under or through him, provided, however, that Employee's estate or designated
beneficiaries shall be entitled to receive the payments described for such
recipients under any death benefit plan which may be in effect for
executive-level employees of the Bank and in which Employee participated.
7.3. Termination by Bank For Cause. Nothing in this Agreement shall be
construed to prevent its termination by the Bank at any time for "cause" without
prior notice. For purposes of this Agreement, "cause" shall mean the failure of
Employee to perform or observe any of the terms or provisions of this Agreement
or to comply fully with the lawful directives of the Directors of the Bank,
dishonesty, misconduct, conviction of a crime or otherwise causing embarrassment
to the Bank and its public reputation, substance abuse, misappropriation of
funds, disparagement of the Bank or failure to comply with Bank policy.
7.4. Termination by the Bank Without Cause. This Agreement may be
terminated by the Bank for any reason whatsoever, by giving 30 days' prior
written notice of termination to the other party. If Employee is terminated
without cause pursuant to this Section 7.4, Employee shall be entitled to the
base compensation earned prior to the date of termination as provided for in
this Agreement, computed pro-rata up to and including the date of termination
plus a continued salary (at the then current rate) which shall terminate on the
sooner of the expiration of the remaining term of this Agreement or at such time
as the Employee has found other employment comparable with Employee's employment
with the Bank. Employee shall use his best efforts to obtain such employment.
7.5. Effect of Termination at Employee's Election. In the event of the
termination of this Agreement by Employee prior to the completion of the
Employment Term, Employee shall provide
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the Bank with thirty (30) days prior written notice and shall be entitled to the
base compensation earned prior to the date of termination as provided for in
this Agreement under Section 1.3, computed pro-rata up to and including the date
of termination. The Employee shall be entitled to no other compensation.
8. Change of Control.
8.1 For purposes of this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (a "Person") of
beneficial ownership (within the meaning of the Federal Securities Laws) of
forty percent (40%) or more of either (i) the then outstanding shares of common
stock of the Bank or Bay National Corporation (the "Company") or (ii) the
combined voting power of the then outstanding voting securities of the Bank or
the Company entitled to vote generally in the election of directors, provided,
however, that all transactions engaged in by the Company and/or the Bank in
connections with its formation activities, including, but not limited to the
Company's initial public offering and the Bank's sales of shares of its capital
stock to the Company, shall not constitute a "Change of Control"; or
(b) If the individuals who, as of the date hereof, constitute the Board
of Directors of the Bank (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election; or
nomination for election by the Bank's stockholders, was approved by a majority
of the directors then comprising the Incumbent Board or a committee appointed by
a majority of the directors then comprising the Incumbent Board, shall be
considered as though such individual were a member of the Incumbent Board; or
(c) the approval by the stockholders of the Bank or the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Bank or the Company immediately prior
to such reorganization, merger or consolidation do not, immediately thereafter,
own, directly or indirectly, more than forty percent (40%) of the combined
voting power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, or of a liquidation or dissolution of the Bank or the Company or of
the sale or other disposition of all or substantially all of the assets of the
Bank or the Company.
8.2. Change of Control Payments.
(a) For purposes of this Section 8, the "Change of Control Date" shall
mean the first date on which a Change of Control occurs. Notwithstanding
anything to the contrary in this Agreement, if a Change of Control occurs and if
the Employee's employment with the Bank is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Employee that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect the Change of Control
or (ii) otherwise arose in connection with
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or anticipation of the Change of Control, then for all purposes of this
Agreement the "Change of Control Date" shall mean the date immediately prior to
the date of such termination of employment.
(b) Upon a Change of Control, if Employee is employed by the Bank on the
Change of Control Date, the Bank shall pay Employee $446,000.00, at Employee's
option, either (i) in a lump sum payment within five (5) days of the Change of
Control Date; (ii) in substantially equal bi-weekly payments over a period of
one (1) year, the first such payment commencing within five (5) days of the
Change of Control Date; or (iii) in substantially equal bi-weekly payments over
a period of two (2) full years, the first such payment commencing within five
(5) days of the Change of Control Date. Notwithstanding anything to the contrary
contained herein, the Bank shall not be obligated to pay Employee any amount as
a result of the Change of Control in excess of two hundred ninety percent (290%)
of Employee's "base amount" as such term is defined in Section 280 (b)(3) of the
Internal Revenue Code of 1986, as amended.
9. Survival. Notwithstanding the termination of employment under this
Agreement for any reason, the Employee's obligations under Sections 3 and 5
hereof shall survive and remain in full force and effect for the periods therein
provided, and the provisions for equitable relief in Section 6 of the Agreement
shall continue in force.
10. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of Maryland without giving effect to any conflict of
laws provisions.
11. Litigation Expenses. In the event of a lawsuit by either party to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to recover reasonable costs, expenses and attorney's fees from the other party.
Disputes arising under Section 7 of the Agreement shall be submitted to an
arbitrator (who is agreeable to both parties). The decision of the arbitrator
shall be binding on both parties and the fees (including legal fees) and cost
attributable to that arbitration process will be assessed as part of that
process by the arbitrator. Such arbitration shall be held in the Baltimore
metropolitan area and shall be conducted by the American Arbitration Association
(or other mutually selected arbitrators) ("AAA") by an arbitrator selected using
the AAA's procedures.
12. Notices. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when hand delivered or mailed by
registered or certified mail, as follows (provided that notice of change of
address shall be deemed given only when received);
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If to the Bank,to: Hugh W. Mohler, President
Bay National Bank
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
copy to: Frank C. Bonaventure, Jr., Esquire
Ober, Kaler, Grimes & Shriver
120 East Baltimore Street
Baltimore, Maryland 21202
If to Employee,to: Thomas M. Neale
Bay National Bank
Suite 120
2328 W. Joppa Road
Baltimore, Maryland 21093
or to such other names and addresses as the Bank or Employee, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
13. Contents of Agreement; Amendment and Assignment.
13.1. This Agreement supersedes all prior agreements and sets forth the
entire understanding among the parties with respect to the subject matter hereof
and cannot be changed, modified, extended or terminated except upon written
amendment approved by the Board of Directors of the Bank. Without limitation,
nothing in this Agreement shall be construed as giving Employee any right to be
retained in the employ of the Bank beyond the expiration of the Employment Term
and Employee specifically acknowledges that he shall be an employee-at-will of
the Bank thereafter, and thus subject to discharge by the Bank with or without
cause and without compensation of any nature unless a new Agreement is executed
by both parties (or employment is continued at will).
13.2. All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives, successors and assigns of the
parties, except that the duties and responsibilities of Employee hereunder are
of a personal nature and shall not be assignable or delegatable in whole or in
part by Employee.
14. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstance is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement
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<PAGE>
which can be given effect without the invalid or unenforceable provision or
application and shall not invalidate or render unenforceable such provision or
application in any other jurisdiction.
15. Remedies Cumulative; No Waiver. No remedy conferred upon the parties
by this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to any other remedy
given hereunder or now or hereafter existing at law or in equity. No delay or
omission by the parties in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver thereof, and any
such right, remedy or power may be exercised by the parties from time to time
and as often as may be deemed expedient or necessary by such party in its sole
discretion.
16. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in marking proof of this Agreement or any counterpart
to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.
Attest: BAY NATIONAL BANK
______________________ By:___________________________________
Secretary Name:
Title:
Witness:
_______________________ ___________________________________
Thomas M. Neale
9
EXHIBIT 10.7
OFFICE LEASE AGREEMENT
(FULL SERVICE)
THIS LEASE AGREEMENT, made this 16th day of July, 1999, by and between
JOPPA GREEN II LIMITED PARTNERSHIP, a Maryland limited partnership, hereinafter
called "Landlord" and BAY NATIONAL CORPORATION, hereinafter called "Tenant".
WITNESSETH:
That in consideration of the rents and covenants hereinafter set forth,
Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord,
premises in the Joppa Green II Building in Baltimore County, Maryland,
(hereinafter referred to as the "Building"). The Building and other facilities
are located upon a parcel of land (hereinafter referred to as the "Building
Area") as shown on the plat attached hereto and marked "Exhibit A". This Lease
shall be for the term, upon the rents, and subject to the terms and conditions
hereinafter set forth as follows:
1. LEASED PREMISES.
The portion of the Building leased hereunder is hereinafter referred to
as the "Leased Premises" and contains approximately 947 square feet of leasehold
space, as outlined in red on "Exhibit B", attached hereto and made a part hereof
(the "Floor Area"). The Floor Area is calculated by measuring from the outside
of any exterior walls of the Leased Premises to the center line of any
partitions constructed which separate the Leased Premises from the remaining or
adjacent premises of the Building.
2. TERM.
The term of this Lease shall commence on the later to occur of, (a)
July 1, 1999, or (b) if work is to be performed to the Premises, the date the
Leased Premises are "ready for occupancy as hereinafter defined," but no later
than August 1, 1999, and shall be for a period of five (5) years and five (5)
months (the "Lease Term") plus the part of the month, if any, from the date of
the commencement of the Lease term to the first day of the first full calendar
month thereof. The Leased Premises shall be considered "ready for occupancy" the
date that Landlord transmits notice to Tenant that Landlord has substantially
completed all work to be performed to the Leased Premises. After the execution
of this Agreement, each of the parties hereto agrees, upon demand of the other,
to execute a declaration in recordable form expressing the commencement and
termination dates of the lease term as soon as the commencement date has been
determined.
3. RENT.
Tenant covenants and agrees to pay to Landlord, as rental for the
Leased Premises, a base rental in the amount of TWENTY THOUSAND THREE HUNDRED
SIXTY DOLLARS AND FIFTY CENTS ($20,360.50) per annum, plus a public factor
charge equal to twelve percent (12%) of the base rental, the total sum of the
base rental and the public factor charge to be TWENTY-TWO THOUSAND EIGHT HUNDRED
THREE DOLLARS AND SEVENTY-SIX CENTS ($22,803.76) per annum (hereinafter the
"Base Rent") payable in twelve (12) equal monthly installments in advance on the
first day of each full calendar month during the term of this Lease Agreement,
the first such payment to include any prorated rental for the period from the
date of the commencement of the Lease Term to the first day of the first full
calendar month thereof. Base Rent and additional rent to be paid under this
Section or any other Section of this Lease shall be paid by Tenant without any
deductions or set-offs whatsoever and without demand.
The Tenant shall, on the signing and execution of this Agreement, pay
to Landlord, the sum of THREE THOUSAND EIGHT HUNDRED DOLLARS AND SIXTY-THREE
CENTS ($3,800.63) to be applied by the Landlord to the payment of rent for the
Leased Premises for the first and last months of the term of this Lease. It is
agreed between the respective parties hereto that this payment shall constitute
an advance rental, and that the Landlord shall have the unrestricted right to
the use of the funds herein provided to be paid.
Rent payable under this Section 3 shall be increased annually
commencing with the second year and each successive year thereafter during the
term of this Lease by an amount equal to four percent (4%) of the amount of rent
paid by Tenant during the year preceding each annual increase.
All rentals payable by Tenant to Landlord under this Agreement shall be
paid to Landlord at the office of Landlord herein designated by it for notices.
Tenant will promptly pay all rentals herein prescribed when and as the same
shall become due and payable, without notice, demand, abatement, deduction or
set-off. Tenant shall pay a "late charge" not in excess of eight percent (8%) of
any installment of rental (or any other charge or payment as may be considered
additional rental under this Lease) when paid more than five (5) days after the
due date thereof, to cover the extra expense involved in handling delinquent
payments. In addition to the eight percent (8%), Tenant agrees to pay reasonable
attorney fees, court costs or other costs incurred by Landlord as a result of
the Tenant's delinquent payment of rent. If Landlord after ten (10) days written
notice to Tenant,shall pay any monies, or incur any expenses in correction of
violation of covenants herein set forth, the amount so paid or incurred shall,
at Landlord's
Initials:
[ /s/ ] [ /s/ ]
Landlord Tenant
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option, and on written notice to Tenant, be considered additional rental payable
by Tenant with the first installment of rental thereafter becoming due and
payable, and may be collected or enforced as by law provided in the respective
rentals.
All additional costs and monies required to be paid by Tenant to
Landlord under the terms of this Lease, are interpreted and understood to
constitute additional rent for purposes of this Lease Agreement under the
provisions of the Real Property Article of the Annotated Code of Maryland.
4. USE.
The Leased Premises are leased to Tenant solely for the purpose of
conducting therein a general administrative office to include banking services.
Tenant shall not use or permit the Leased Premises or any part thereof to be
used for any purpose or purposes other than the purpose set forth herein. No use
shall be made or permitted to be made of the Leased Premises or acts done which
will increase the existing rate of insurance on the Building or the Building
Area or cause the cancellation of any insurance policy covering the Building or
the Building Area or any part thereof, nor shall Tenant sell or permit to be
kept, used or sold in or about the Leased Premises any article which may be
prohibited by the standard form of fire insurance policies. Tenant shall not
commit or suffer to be committed any waste upon the Leased Premises or any
public or private nuisance or any other act or thing which may disturb the quiet
enjoyment of any other tenant in the Building. Tenant shall not use the Leased
Premises or permit the same to be used in whole or in part for any purpose or
use that is deemed to be in violation of any of the laws, ordinances,
regulations or rules of any public authority or organization at any time.
5. COMMON AREA AND FACILITIES.
During the term of this Lease, Tenant shall have the right of
nonexclusive use, in common with others, of the driveways, footways and parking
area and other common areas, shown on "Exhibit A," provided that such use shall
be subject to such reasonable rules and regulations as Landlord may from time to
time prescribe governing the same; and provided that Landlord shall at all times
have full and exclusive control, management and direction thereof. Landlord
shall further have the right to police the same, to assign specific parking area
for tenants and for visitors; to close temporarily all or any portion of the
parking areas as may be required for proper maintenance and or repair; and, to
do and perform such other reasonable acts in and to such areas as, in the use of
its business judgment, the Landlord shall determine to be advisable in order to
improve the overall operation and/or make more convenient the use thereof by
Tenants of the Building. Landlord will, at its expense operate and maintain the
common areas and facilities in a manner deemed by Landlord, in its sole
discretion, to be reasonable and appropriate and for the best interests of the
tenants in the operation of the Building. Notwithstanding anything contained in
the above, Landlord agrees to use its best efforts not to interrupt Tenant's
business during required repairs or maintenance to the Leased Premises.
6. REAL ESTATE TAXES.
Landlord shall be responsible for and shall pay to each and all
appropriate taxing authorities or third parties, all taxes, with respect to the
Building. "Taxes" shall mean with respect to the Building (including all land,
buildings and improvements shown on Exhibits A and B, attached hereto) all
present and future real estate taxes, assessments, ad valorem charges, front
foot benefit charges and all other governmental impositions and/or levies,
whether or not now customary or within the contemplation of the parties hereto
and regardless of whether the same shall be extraordinary or ordinary, general
or special, foreseen or unforeseen, or similar or dissimilar to any of the
foregoing.
7. ELEVATORS, HEATING, AIR CONDITIONING AND CLEANING.
Landlord shall, if and insofar as existing facilities permit: (a)
provide necessary automatic elevator service seven (7) days per week 24 hours
per day; (b) furnish heat or air conditioning to the Leased Premises, when and
as required during normal business hours which is 8:00 A.M. to 6:00 P.M. Monday
through Friday, and on Saturdays from 8:00 A.M. to 1:00 P.M. (herein called
"normal business hours"); (c) cause the Leased Premises to be kept clean, by
providing standard office use janitorial services, provided the same are kept in
order by Tenant. Landlord shall have no responsibility to provide any services
under (b) above except during normal business hours. After-hours services or
services in addition to the scope of those set forth in (b) above shall be
provided at the expense of the Tenant and shall be made pursuant to terms and
conditions acceptable to Landlord and embodied in a written agreement between
Landlord and Tenant. Landlord reserves the right to stop service of the heating,
air conditioning, elevator, plumbing and electric systems, when necessary, by
reason of accident, or emergency, or for repairs or improvements, which in the
judgment of Landlord are desirable or necessary to be made. Landlord shall have
no responsibility or liability for failure to supply heat, air conditioning,
elevator, plumbing, cleaning, and electric service, during any period described
in the preceding sentence or when prevented from so doing by laws, orders, or
regulations of any Federal, State, County or Municipal authority or by strikes,
accidents, or by any other cause whatsoever beyond Landlord's control.
8. ELECTRICITY.
Landlord will furnish Tenant throughout the Lease Term a reasonable
amount of electric current at 110 volts for lighting purposes and for small
items of office equipment such as dictating machines, desktop computers,
typewriters, and copying machines. Landlord shall furnish electric power seven
(7) days per week, 24 hours per day as mentioned above, but for the operation of
any other electrical equipment or appliance, unless arrangements for such
after-hours operations, or for the installation of such electrical equipment or
appliance, shall have been made pursuant to terms and conditions acceptable to
Landlord and embodied in a written agreement between Landlord and Tenant.
9. INSURANCE.
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Landlord shall maintain at all times during the term of this Agreement
appropriate policies of insurance for the Building, which shall cover the
improvements to the Leased Premises, but which shall not include Tenant's
personal property or any other type of property of the Tenant located upon the
Leased Premises or within the Building. The insurance maintained by Landlord
will include fire and extended insurance coverage, rental insurance, umbrella
liability insurance, and any other insurance that may, from time to time, be
required by Landlord's mortgagee or lender.
10. PUBLIC LIABILITY INSURANCE.
With respect to the Leased Premises, Tenant will keep in force at its
own expense, so long as this Lease remains in effect, Comprehensive General
Liability Insurance (providing among other coverages; Blanket Contractual;
Personal Injury, Independent Contractors, Products/Completed Operations Hazard,
Automobile Liability/Comprehensive Form, and Workers' Compensation) with
companies and in a form acceptable to Landlord with a minimum of One Million
Dollars ($1,000,000.00) of combined single limit general liability coverage,
naming both Landlord and Tenant as insured parties; and Tenant will further
deposit the policy or policies of such insurance or certificates thereof, with
Landlord. A certificate of insurance with the aforementioned coverage must be
issued not later than ten (10) days prior to Tenant, its agents, or contractors
entering the Leased Premises for occupancy or to prepare the Leased Premises for
occupancy.
11. RULES AND REGULATIONS.
Tenant agrees to be bound by the Rules and Regulations as adopted,
promulgated and amended by Landlord pertaining to and for the purpose of
maintaining and operating the Building and the Building Area in a clean and
orderly manner, preserving the safety and good order thereof, and furthering the
convenience and welfare of all of the tenants in the Building Area. A copy of
these Rules and Regulations is attached hereto and said Rules and Regulations
may be reasonably amended from time to time by Landlord. Said Rules and
Regulations and any reasonable amendments, changes or additions thereto which
Landlord may hereafter make are hereby incorporated in this Lease and shall be
binding upon Tenant as if fully set forth herein. Landlord agrees to enforce all
Rules and Regulations uniformly against all tenants of the building.
12. REPAIRS.
Tenant will keep the interior of the Leased Premises in good order and
repair. Tenant will surrender the Leased Premises at the expiration of the term,
or at such other time as it may vacate the premises, in as good condition as
when received, excepting depreciation caused by ordinary wear and tear, and
damage by fire and other casualty.
Tenant will promptly repair at its own expense any damage to the Leased
Premises caused by bringing into the premises any property for Tenant's use or
by the installation or removal of such property, regardless of fault or by whom
such damage shall be caused, unless caused by Landlord, its agents, employees or
contractors; and, in default of such repairs by Tenant, Landlord after notice to
Tenant shall make the same and Tenant agrees to pay the cost to Landlord
promptly upon Landlord's demand therefor.
The Landlord shall be responsible for the maintenance, cleaning and
repair of the exterior portion of all exterior doors, exterior windows, and
exterior glass which comprise the Leased Premises. Landlord shall keep the
balance of the building, parking areas and grounds in good order and repair.
13. HAZARDOUS AND INFECTIOUS WASTE.
Tenant hereby agrees that (1) no activity will be conducted on the
Leased Premises that will produce any Hazardous Substance; (2) the Leased
Premises will not be used in any manner for the storage, generation or
production of any Hazardous Substances; (3) no portion of the Leased Premises
will be used as a landfill or a dump; (4) Tenant will not install any
underground tanks of any type; (5) Tenant will not allow any surface or surface
conditions to exist or come into existence that constitute, or with the passage
of time may constitute, a public or private nuisance; (6) Tenant will not permit
any Hazardous Substances to be brought into the Leased Premises; (7) Tenant
shall provide at its expense for proper disposal of all infectious wastes from
all parts of the Leased Premises, and (8) Tenant shall cause all infectious
wastes to be segregated from all other trash and refuse, and shall comply with
all requirements reasonably imposed by the Landlord or by law regarding the
storage and disposal of such infectious wastes. If any Hazardous Substance is so
brought or found in or on the Leased Premises, it shall be immediately removed
by Tenant, with proper disposal, and all required cleanup procedures shall be
diligently undertaken pursuant to all Environmental Laws, by Tenant, at Tenant's
sole expense. Landlord warrants that to the best of its knowledge, the Leased
Premises contain no hazardous and infections waste as of the day Tenant occupies
the Leased Premises. The Tenant shall indemnify, defend, and hold Landlord
harmless from and against and shall reimburse Landlord with respect to, any and
all expenses, losses, claims, demands, suits, actions, damages and liability
(including, but not limited to, costs and expenses of defending against all of
the aforesaid) arising (or alleged to arise) from (1) Tenant's failure to store
or dispose of infectious wastes in a safe and careful manner or to comply with
all federal, state and local laws regarding such matters, (2) Tenant's breach of
any of its obligations under this Section or (3) if the Leased Premises are
found to contain any Hazardous Substance. The foregoing indemnification shall
survive the expiration or earlier termination of this Lease. The term "Hazardous
Substances," as used in this Lease, shall mean pollutants, contaminants, toxic
or hazardous wastes, or any other substances, the removal of which is required
or the use or storage of which is restricted, prohibited, regulated or penalized
by any "Environmental Law," which term shall mean any federal, state, or local
law, ordinance or regulation relating to pollution or protection of the
environment.
14. ALTERATIONS BY TENANT.
Subject to the prior written consent of Landlord, which shall not be
unreasonably withheld, Tenant at Tenant's expense, may make alterations,
additions or improvements which are nonstructural and which do not affect
utility services or plumbing and
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electric lines, in or to the interior of the Leased Premises. All alternations,
improvements or additions shall remain upon the Leased Premises at the
expiration of this Lease and become the property of Landlord unless Landlord
shall, prior to such expiration or termination, have given Tenant not less than
fifteen (15) days prior written notice to remove the same, in which event Tenant
shall at its expense forthwith remove such alterations, improvements and
additions. Tenant may remove any of its trade fixtures installed at its expense.
Upon removal of any trade fixtures from the premises or upon removal of any
alterations, additions or improvements as may be required by Landlord, Tenant
shall immediately and at its expense, repair and restore the Leased Premises to
the condition existing prior to installation and repair any damage to the Leased
Premises or the Building due to such removal. Tenant shall be responsible to pay
all costs associated with any alteration, construction or reconstruction of the
Leased Premises required by any governmental authority in order to comply with
the provisions of the Americans with Disability Act of 1990 provided said
alterations, construction or reconstruction is caused by Tenant's occupancy. All
property permitted or required to be removed by Tenant at the end of the term
remaining in the Leased Premises after Tenant's removal shall be deemed
abandoned and may, at the election of Landlord, either be retained as Landlord's
property or may be removed from the premises by Landlord at Tenant's expense.
Tenant agrees to carry and shall cause Tenant's contractors and sub-contractors
to carry such workman's compensation, general liability, personal and property
damage insurance as Landlord may require. If any mechanic's lien is filed
against the Leased Premises, or the Building of which the same forms a part for
work claimed to have been done for, or materials furnished to Tenant whether or
not pursuant to this Section, the same shall be discharged or bonded by Tenant
within ten (10) days thereafter. Failure to discharge or bond any such lien
shall constitute a default hereunder.
15. DUTIES OF THE TENANT AT EXPIRATION OF TERM.
Tenant will surrender the Leased Premises at the expiration of the
term, or at such other time as it may vacate the Leased Premises, broom clean
and in as good condition as when received, excepting depreciation caused by
ordinary wear and tear. Tenant will promptly repair at its own expense any
damage to the Leased Premises caused by bringing into the premises any property
for Tenant's use or by the installation or removal of such property, regardless
of fault or by whom such damage shall be caused, unless caused by Landlord, and,
in default of such repairs by Tenant, Landlord shall make the same and Tenant
agrees to pay the cost thereof to Landlord promptly upon Landlord's demand
therefor.
16. SIGNS.
Tenant shall, at its sole cost and expense, affix a sign containing
Tenant's name, business practice and suite location upon or near the exterior
entrance door to the Leased Premises or other location designated by Landlord in
accordance with the Sign Policy of the Landlord attached hereto and made a part
hereof. Landlord does hereby grant Tenant the right to install an outside sign
to identify its dropbox. Said Sign Policy and any reasonable amendments, changes
or additions thereto which Landlord may hereafter make are hereby incorporated
in this Lease and shall be binding upon Tenant as if fully set forth herein,
provided that said policy shall in no way be in conflict with any of the terms
and conditions of this Lease. Any amendments, changes or additions to the Sign
Policy shall be effective upon written notice thereof to Tenant in the manner
provided in Section 28 hereof.
Other than as provided in Landlord's Sign Policy, Tenant will not place
or suffer to be placed or maintained on the exterior of the Leased Premises any
other sign, advertising matter, or any other thing of any kind whatsoever.
Tenant further agrees to maintain its entrance door or entry sign and any other
signs as may be approved by Landlord and provided for in Landlord's Sign Policy,
in good condition and repair at all times.
17. INDEMNITY BY TENANT.
Tenant will indemnify Landlord and save it harmless from and against
any expenses, loss or liability paid, suffered or incurred as the result of any
breach by Tenant, Tenant's agents, servants, employees, customers, contractors,
visitors or licensees, of any covenant or condition of this Lease, and any and
all claims, actions, damages, liability and expense in connection with loss of
life, personal injury and/or damage to property or costs associated with any
modifications to the Leased Premises required by any governmental authority,
arising from or out of the occupancy or use by Tenant of the Leased Premises or
any part thereof or any other part of the Building Area, or occasioned wholly or
in part by any act or omission of Tenant, Tenant's agents, servants, employees,
customers, contractors, visitors or licensees, provided, however, that this
indemnification shall not apply to any such injury, loss, damage or liability
arising from any omission, fault, negligence, or misconduct on the part of
Landlord, its agents, servants, employees, contractors or licensees.
18. LANDLORD EXCULPATION.
It is understood and agreed that Landlord is a Maryland partnership
and/or joint venture and that no partner of the partnership, as may now or
hereafter be constituted, shall have any liability to Tenant or any person
claiming under, by or through Tenant upon any action, claim, suit or demand
brought pursuant to the terms and conditions of this Lease arising out of the
occupancy by Tenant of the Leased Premises. The Landlord shall not be
responsible or liable to the Tenant for any injury or damage resulting from acts
or omissions of persons occupying property adjoining the Leased Premises or any
part of the Building of which the Leased Premises is a part, or for any injury
or damage resulting to the Tenant or its property from bursting, stoppage, or
leaking of water, gas sewer or steam pipes, or any other circumstance, except
where such loss or damage arises from the willful or negligent misconduct of the
Landlord.
19. FIRE OR OTHER CASUALTY.
If the Leased Premises, or any other portion of the Building, shall be
damaged by fire, the elements, unavoidable accident or other casualty, but the
Leased Premises are not thereby rendered untenantable in whole or in part,
Landlord shall promptly at its own expense cause such damage to
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be repaired, and the rent shall not be abated. If by reason of such occurrence,
the Leased Premises shall be rendered untenantable only in part, Landlord shall
promptly at its own expense cause the damage to be repaired, and the rent
meanwhile shall be abated proportionately as to the portion of the Leased
Premises rendered untenantable. If by reason of such occurrence (a) the Leased
Premises shall be rendered wholly untenantable or (b) the damage is not covered
by Landlord's insurance or (c) at 25% of the leasable area of the building is
damaged, Landlord may elect within 90 days after said occurrence not to
reconstruct the destroyed premises in which event this Lease and the tenancy
hereby created shall cease as of the date of said occurrence, the rental to be
adjusted as of such date. All of the above notwithstanding, if Landlord, in its
absolute discretion, shall desire, within a reasonable time after the occurrence
of any such accident or casualty (even though the Leased Premises may not have
been affected by the same) to demolish, rebuild or reconstruct the Building,
then, upon written notice from Landlord to Tenant, this Lease shall terminate on
a date to be specified in such notice, and all rent payable hereunder shall be
adjusted as of the time of the occurrence of any such accident or casualty.
Landlord and Tenant respectively waive and release each other from any
and all rights of recovery, claims, losses and/or damages arising or resulting
from any act or omission of either with respect to the Leased Premises to the
extent that such loss or damage should have been covered under their respective
insurance policies in accordance with this Lease Agreement. Furthermore,
Landlord and Tenant agree to waive any right of subrogation on behalf of any
party in whom such right may otherwise exist or accrue as a result of any of the
aforesaid incidents. Landlord shall not be liable in any event for interruption
to Tenant's business or damage to Tenant's property.
20. INSPECTION AND ENTRY BY LANDLORD.
The Tenant at any time during the term shall permit inspection of the
Leased Premises during reasonable hours after notice from Landlord by the
Landlord or the Landlord's agents or representatives, and by or on behalf of
prospective purchasers, and during the six months next preceding the expiration
of this Lease shall permit inspection thereof by or on behalf of prospective
tenants. The Tenant shall permit the Landlord to erect, use and maintain pipes
and conduits in and through the Leased Premises. The Landlord shall have the
right to change the arrangement and/or location of entrances or passageways,
doors, and doorways, corridors, stairs, toilets or any of the other public parts
of the building containing the Leased Premises, and after reasonable notice, to
change the name, number or designation by which said building is commonly known.
If at any time an entry shall be deemed necessary for protection of the
property, or for making any repair or decorations, whether for the benefit of
the Tenant or not, the Landlord or Landlord's agents may enter into the Leased
Premises, and accomplish such purposes and make such repairs or decorations. The
Tenant shall permit during the six months next preceding the expiration of this
Lease, signs or notices indicating that the Leased Premises are 'to let' or 'for
sale' to be posted and remain upon the Leased Premises.
If the Landlord is required by any law, ordinance, regulation or order
to make any structural alteration, change or addition in the building of which
the Leased Premises are part, and to carry out which it is reasonably necessary
to take some portion of the Leased Premises, the Landlord shall have the right
to do so and the rent herein reserved shall thereafter be proportionately
reduced and the Tenant shall not be entitled to any damages which may be
occasioned thereby. If such structural alteration, change or addition shall so
affect the Leased Premises as to make them substantially unusable for the
purpose herein set forth, either the Landlord or the Tenant, may terminate this
Lease on 30 days' written notice and effective upon the date set forth in such
notice this Lease shall then cease and expire as if such date were the date
herein fixed for the expiration of the term hereof.
21. ASSIGNMENT AND SUBLETTING.
Tenant shall not assign or transfer all or any portion of its interest
in this Lease or in the Leased Premises, nor sublet all or any portion of the
Leased Premises, without the prior written consent of Landlord not to be
unreasonably withheld or delayed. Any assignment, sublease or other such
transfer without Landlord's prior written consent shall be voidable, and, at
Landlord's election, shall constitute a Default of Tenant hereunder. Consent by
Landlord to one or more assignments or sublettings shall not operate as a waiver
of Landlord's rights with respect to any subsequent assignment or subletting. If
Tenant is a partnership, a withdrawal or change (voluntary, involuntary, or by
operation of law) of any partner owning twenty percent (20%) or more of the
partnership, or the dissolution or liquidation of the partnership, shall be
deemed an assignment of this Lease. If Tenant is a corporation, any dissolution,
merger, consolidation, or other reorganization of Tenant, or the sale or other
transfer of the controlling percentage of the capital stock of Tenant, or the
sale of fifty-one percent (51%) of the value of the assets of Tenant, shall be
deemed an assignment of this Lease. If Tenant consists of more than one person,
a purported assignment (voluntary, involuntary, or by operation of law) from any
of such persons to any other person or entity shall be deemed an assignment of
this Lease. Notwithstanding any assignment or subletting, Tenant and any
guarantor of Tenant's obligations under this Lease shall at all times remain
fully liable for the payment of all Rent and other obligations under this Lease.
Landlord shall have the right at any time to assign this Lease, in whole or in
part, to any third party.
22. NOTICE OF DEFAULT TO LANDLORD AND MORTGAGEE AND RIGHT TO CURE.
If Landlord shall fail to perform any covenant, term or condition of
this Agreement required to be performed by Landlord, Tenant shall give, by
certified mail, a notice of default to the Landlord, which shall specifically
set forth the nature of the nonperformance by the Landlord and shall give the
Landlord thirty (30) days within which to cure such default or nonperformance.
Said notice of default shall be a condition precedent to the institution by
Tenant of any judicial proceedings for nonperformance or default against the
Landlord. Tenant agrees to give any mortgagee and/or Trust Deed Holders, by
certified mail, a copy of any notice of default served upon the Landlord,
provided that prior to such notice, Tenant has been notified, in writing, of the
address of such mortgagees and/or Trust Deed Holders. Tenant further agrees that
if Landlord shall fail to cure such default within the time provided for in this
Lease Agreement, then the mortgagees and/or Trust Deed Holders shall have an
additional thirty (30) days within which to cure such default or, if such
default cannot be cured within that time, then such additional time as may be
necessary if within such thirty (30) days, any mortgagee and/or Trust Deed
Holders has commenced and is diligently pursuing the remedies necessary to cure
such default (including but not limited to commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this Lease shall
not be terminated while such remedies are being so diligently pursued.
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23. LIMITATION OF TENANT REMEDIES.
If Landlord shall fail to perform any covenant, term or condition of
this Agreement upon Landlord's part to be performed, and, as a consequence of
such default, Tenant shall recover a money judgment against Landlord, such
judgment shall be satisfied only (i) out of the proceeds of sale received upon
the execution of such judgment and levy thereon against the rights, title and
interest of Landlord in the property of which the demised premises are a part;
(ii) out of the rents or other income of the property of which the demised
premises are a part receivable by Landlord; and/or (iii) out of the
consideration received or receivable by Landlord from the sale or other
disposition of all or any part of Landlord's right, title and interest in the
property of which the demised premises are a part. In the event Landlord shall
sell, transfer, assign or in any manner dispose of its interest in the demised
premises which are the subject matter of this Lease, Landlord's right,
obligations and covenants contained in this Agreement, as to this Landlord,
shall thereupon cease and be no longer binding or effective.
24. PERFORMANCE BY TENANT.
Tenant covenants and agrees that it will perform all covenants and
agreements herein expressed on its part to be performed, and that it will
promptly upon receipt of written notice specifying action desired by Landlord in
connection with any such covenant or agreement, commence to comply with such
notice; and further, that if Tenant shall not commence and proceed diligently to
comply with such notice to the satisfaction of Landlord within ten (10) days
after delivery thereof, then Landlord may, at its option, enter upon the Leased
Premises and do the things specified in said notice, and Landlord shall not be
liable to Tenant for any loss or damage resulting in any way from such action by
Landlord, and Tenant agrees to pay as additional rent, promptly upon demand, any
expense incurred by Landlord in taking such action.
25. CONDEMNATION.
If the whole or any part of the Leased Premises shall be acquired or
condemned by way of condemnation, or under threat thereof, for any public or
quasi-public use or purpose, then in that event this Lease and the tenancy
created hereunder shall cease and terminate from the date of title vesting in
such proceeding and Tenant shall have no claim against Landlord or against any
award obtained for the value of any unexpired portion of the lease term or
otherwise, provided, that the rent payable hereunder shall be adjusted as of the
date of any such termination.
26. DEFAULT.
As used in this Lease, each of the following events shall constitute
and is hereinafter referred to as an "Event of Default" or "Default," with
notice from Landlord to Tenant of any right to cure; (a) if the Tenant (i) fails
to pay any Rent or any other sum which it is obligated to pay under this Lease
after ten (10) days written notice from Landlord, (ii) fails to perform any of
its other obligations under this Lease after twenty (20) days written notice
from Landlord, or (iii) breaches any of its covenants, representations,
warranties or agreements under this Lease after twenty (20) days written notice
from Landlord; or (b) if the Tenant fails to occupy and assume possession of the
Leased Premises on or before the 30th day after the Leased Premises are ready
for occupancy; or (c) a default occurs under any sublease of all or a portion of
the Leased Premises; or (d) if Tenant shall vacate the Leased Premises and
permit the same to remain unoccupied and unattended, or shall remove or attempt
to remove or manifest an intent to remove, not in the ordinary course of
business, Tenant's goods and property from or out of the Leased Premises.
Upon the occurrence of an Event of Default, Landlord shall have the
option, in addition to and not in limitation of any other remedy permitted by
law or by this Lease, to exercise any or all of the following remedies; (a)
terminate this Lease, in which event Tenant shall immediately surrender the
Leased Premises to Landlord, but if Tenant shall fail to so do, Landlord may,
without further notice and without prejudice to any other remedy Landlord may
have for possession or arrearages in rent, or damages for breach of contract,
enter upon the Leased Premises and remove Tenant, any other person occupying the
Leased Premises and their effects without being liable to prosecution or any
claim for damages; (b) enter the Leased Premises as the agent of Tenant, without
being liable to prosecution of any claim for damages and relet the Leased
Premises as the agent of Tenant and receive the rent therefor, and Tenant shall
pay Landlord any deficiency that may arise by reason of such reletting on
demand; (c) receive the rents from any subtenants of Tenant in the Leased
Premises; (d) perform any act Tenant is obligated to perform under the terms of
this Lease (and enter upon the Leased Premises in connection therewith if
necessary) in Tenant's name and on Tenant's behalf, without being liable for
prosecution or any claim for damages therefor, and Tenant agrees to reimburse
Landlord on demand for any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease (including, but not
limited to, collection costs and legal expenses), plus interest thereon at the
maximum rate permitted by law, and Tenant further agrees that Landlord shall not
be liable for any damages resulting to Tenant from such action; (e) alter all
locks and other security devices at the Leased Premises; (f) exercise the
provisions of applicable laws respecting the speedy recovery of tenements held
over by tenants of proceedings in forcible entry and detainer; (g) restrain any
default or violation, or attempted or threatened default or violation of any of
the terms, covenants, conditions or other provisions of this Lease, by
injunction, order of specific performance or other appropriate equitable relief.
The payment of such Rent shall not constitute a penalty or forfeiture or
liquidated damages, but shall constitute payment of Rent for the remainder of
the Term. Upon the payment by the Tenant of the entire amount of the Rent for
the remainder of the Term together with all other sums then due and owing the
Landlord, Tenant shall be entitled to receive from Landlord all rents received
by Landlord from other tenants on account of the Leased Premises during the
remainder of the Term of this Lease, if any; provided, however, that the monies
to which Tenant shall become so entitled shall in no event exceed the entire
amount payable by Tenant to Landlord as Rent. Any such claim for Rent by
Landlord shall not preclude Landlord from collecting the Additional Rent due
under this Lease or exercising any other remedy permitted by law, equity or by
this Lease.
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Following the occurrence of any Event of Default, Tenant shall also be
liable for and shall pay to Landlord as Additional Rent all costs and expenses
incurred by Landlord in enforcing or defending Landlord's rights and/or remedies
at law, equity or hereunder, including reasonable attorneys' fees, litigation
expenses, court costs and other necessary disbursements.
27. REMEDIES CUMULATIVE.
No mention in this Lease of any specific right or remedy shall preclude
Landlord or Tenant from exercising any other right or from having any other
remedy, or from maintaining any action to which it may otherwise be entitled
either at law or equity; and the failure of Landlord or Tenant to insist in any
one or more instances upon a strict performance of any covenant of this Lease or
to exercise any option or right herein contained shall not be construed as a
waiver of relinquishment for the future of such covenant, right or option, but
the same shall remain in full force and effect unless the contrary is expressed
in writing by Landlord.
28. SUCCESSORS AND ASSIGNS.
This Lease and the covenants and conditions herein contained shall
inure to the benefit of and be binding upon Landlord, its successors and
assigns, and shall be binding upon Tenant, its successors and assigns, and shall
inure to the benefit of Tenant and only such assigns of Tenant to whom the
assignment by Tenant has been consented to by Landlord, to the extent such
consent is required.
29. NOTICES.
All notices, demands and requests required under this Lease shall be in
writing. All such notices, demands and requests shall be deemed to have been
properly given if sent by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
(a) If to Landlord: With copies to:
c/o MacKenzie Commercial MacKenzie Services Corporation
Real Estate Services, LLC Suite 200
Suite 200 2328 West Joppa Road
2328 West Joppa Road Lutherville, MD 21093
Lutherville, MD 21093
(b) If to Tenant:
Bay National Corporation Ober/Kaler
2328 W. Joppa Road 120 E. Baltimore Street
Lutherville, Maryland 21093 Baltimore, Maryland 21202-1643
Attention: Robert E. Scher
Either party may designate a change of address by written notice to the
other party, and thereafter all notices to such parties shall be sent by
registered or certified mail to such substitute address.
30. APPLICABLE LAW.
This Lease shall be construed under the laws of the State of Maryland.
31. SUBORDINATION AND ATTORNMENT.
Tenant accepts this Lease, and the tenancy created hereunder, subject
and subordinate to the lien, operation and effect of each and every ground lease
and existing or future mortgage, deed of trust or other security instrument
constituting a lien upon or affecting the Building or the Building Area, or any
part thereof and to any renewals, extensions, consolidations, modifications or
refinancings thereof. Notwithstanding anything contained in the above, Landlord
will use its best efforts upon request by Tenant to obtain a non-disturbance
agreement from its lender or mortgagee with Tenant paying for any costs
associated with said non-disturbance agreement.
In the event of any foreclosure sale or sales pursuant to the terms of
any mortgages or deeds of trust or other security instruments now or hereafter
constituting a lien upon or affecting the Building or Building Area of any part
thereof, by virtue of judicial proceedings or otherwise, this Lease Agreement
shall, at the option of the mortgagee or beneficiary under the deed of trust or
other security instrument or the foreclosure purchaser continue in full force
and effect and Tenant thereunder will, upon request, attorn to and acknowledge
the foreclosure purchaser or purchasers at such sale, as landlords hereunder.
Tenant shall, at any time hereafter, within ten (10) days of demand by
Landlord, execute any instrument, releases or other documents that may be
required by any mortgagee or mortgagor or over landlord for the purpose of
confirming such subordination and attornment. The failure of Tenant to execute
any such instruments, releases or documents, shall constitute a Default
hereunder.
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32. ESTOPPEL CERTIFICATES.
Tenant agrees at any time hereafter upon not less than ten (10) days
prior notice by Landlord, to execute, acknowledge and deliver to Landlord a
statement in writing certifying that this Lease Agreement is unmodified and in
full force and effect (or if there have been modifications, that the same is in
full force and effect as modified and stating the modifications). Such
certificate shall state the dates to which the rent and other charges have been
paid in advance, if any, and whether or not to the best knowledge of the signer
of such certificate Landlord is in default in performance of any covenant,
agreement or condition contained in this Lease Agreement; and if applicable,
specifying each such default of which the signer may have knowledge, it being
intended that any such statement delivered hereunder may be relied upon by third
parties not a party to this Lease.
33. QUIET ENJOYMENT.
If and so long as Tenant pays rent and additional rent reserved by this
Lease, and is not in Default hereunder, Tenant shall quietly enjoy the Leased
Premises, subject, however, to the terms and provisions hereof.
34. TERMINATION.
This Lease and the tenancy hereby created shall cease and determine at
the end of the Lease Term, or any extension or renewal thereof, without the
necessity of any notice from either Landlord or Tenant to terminate the same,
and Tenant hereby waives notice to vacate the Leased Premises and agrees that
Landlord shall be entitled to the benefit of all provisions of law respecting
the summary recovery of possession of premises from a tenant holding over to the
same extent as if statutory notice had been given.
35. HOLDING OVER.
Any holding over after the expiration of the Lease Term by Tenant shall
be deemed to be a tenancy from month to month and except for the term thereof,
and the rent payable during such term, shall be on the same terms and conditions
specified herein, so far as are applicable. Base Rent payable by a hold over
tenant shall be 1.5 times the Base Rent payable on a monthly basis under Section
3 hereof.
36. NO WAIVER.
The failure of Landlord or Tenant to insist, in any one or more
instances, upon a strict performance of any of the covenants of this Lease, or
to exercise any option herein contained, shall not be construed as a waiver, or
a relinquishment for the future, of such covenant or option, but the same shall
continue and remain in full force and effect. The receipt by Landlord of rent,
with knowledge of the breach of any covenant hereof, shall not be deemed a
waiver of such breach, and no waiver by Landlord of any provision hereof shall
be deemed to have been made unless expressed in writing and signed by Landlord.
37. ENTIRE AGREEMENT.
This writing is intended by the parties as a final expression of their
agreement and as a complete and exclusive statement of the terms thereof, all
negotiations, considerations and representations between the parties having been
incorporated herein. No course of prior dealings between the parties or their
affiliates shall be relevant or admissible to supplement, explain or vary any of
the terms of the Lease. Acceptance of, or acquiescence in, a course of
performance rendered under this or any prior agreement between the parties or
their affiliates shall not be relevant or admissible to determine the meaning of
any of the terms of this Lease. No representations, understandings or agreements
have been made or relied upon in the making of this Lease other than those
specifically set forth herein. This Lease can only be modified by a writing
signed by all of the parties hereto or their duly authorized agents.
38. APPROVAL OF MORTGAGEE.
This Lease Agreement is contingent upon the approval of any and all
mortgagees or other lenders of the Landlord. Landlord shall have five (5) days
from the execution of this Lease Agreement to obtain all necessary approvals
from its mortgagee or other lenders; and thereafter shall have the right to
extend said approval period an additional ten (10) days upon written notice to
Tenant. If said approvals cannot be obtained within the aforesaid period, this
Lease Agreement and the rights and duties of the parties hereunder, shall be
null and void and be of no further effect.
39. ZONING AND LICENSING APPROVALS.
Anything herein elsewhere contained to the contrary, this Lease and all
the terms, covenants, and conditions hereof are in all respects subject and
subordinate to all zoning restrictions affecting the Leased Premises, and the
Building in which they are located, and the Tenant agrees to be bound by such
restrictions. The Landlord further does not warrant that any license or
licenses, permit or permits, which may be required for the business to be
conducted by the Tenant on the Leased Premises will be granted, or, if granted,
will be continued in effect or renewed, and any failure to obtain such license
or licenses, permit or permits, or any revocation thereof or failure to renew
the same, shall not release the Tenant from its obligations under this Lease
Agreement.
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40. BROKERS.
Tenant represents that Tenant has dealt directly with Colliers Pinkard
and MacKenzie Commercial Real Estate Services, LLC, as broker in connection with
this Lease and insofar as Tenant knows, no other broker negotiated this Lease or
is entitled to any commissions in connection with its execution.
41. SEPARABILITY.
If any term or provision of this Lease or the application thereof to
any person or circumstances other than those as to which it is held invalid, or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
42. TENANT IMPROVEMENTS. [See Addendum No. 1]
43. TERM EXTENSION. [See Addendum No. 2]
44. ADDENDA.
Addenda consisting of one page, with addenda numbered Addendum No. 1
and 2 are attached hereto and made a part hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Agreement as of the day and year first above written.
WITNESS LANDLORD: JOPPA GREEN II LIMITED PARTNERSHIP
By: MacKenzie Properties, Inc.,
General Partner
By: /s/ Gary T. Gill (Seal)
- ------------------------- ---------------------------------
Gary T. Gill,
Executive Vice President
WITNESS: TENANT: BAY NATIONAL CORPORATION
/s/ John S. DiPietro By: /s/ Hugh Mohler (Seal)
-------------------- ---------------------------------
Hugh Mohler,
Director
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ADDENDUM NO. 1
--------------
Tenant and Landlord have reviewed and approved the design for the
layout of the Leased Premises, a copy of which is attached to the Lease as
Exhibit B-1, the "Scaled Plan". The Scaled Plan includes the location of all
partitions, interior doors, lighting fixtures, light pole switches, electrical
outlets and telephone receptacles or systems, plumbing fixtures together with
the specifications therefor and any other improvements Tenant desires to be made
thereto prior to the commencement of the Lease Agreement. Landlord, through its
agent, shall install all the above mentioned improvements with Landlord
contributing $7.00 per usable square foot towards those costs. Any costs for
improvements over and above the aforementioned allowance, including furniture
and fixtures, shall be at Tenant's sole cost and expense.
It is also understood and agreed that Landlord shall grant Tenant the
pre-approved right to install an exterior drop box into the Leased Premises with
Landlord having final approval on the location, size and style of said box. The
cost to install and purchase the drop box shall be the sole responsibility of
Tenant. Tenant also understands that it must restore the drop box location to
its original condition upon its vacancy of the Leased Premises at its sole cost
and expense.
ADDENDUM NO. 2
--------------
TERM EXTENSION RIDER
1. OPTION(S) TO EXTEND TERM.
Providing that Tenant is not in default under any of the terms,
covenants, and conditions of its Lease Agreement, Landlord hereby grants Tenant
the optional right(s) to extend the terms of this Lease for one (1) successive
period(s) of five (5) years as follows:
Each period added to the term of this Lease by exercise of an option
shall be called an "Extended Term." The term of this Lease will be the original
term plus each Extended Term. An option to create an Extended Term may be
exercised only by the Tenant giving written notice thereof to Landlord not less
than one hundred eighty (180) days prior to the expiration of the original term
or any prior Extended Term of this Lease. The written notice required hereunder
shall be certified mail, return receipt requested.
2. LIMITATIONS ON EXERCISE TO EXTEND TERM.
A. If any option to extend the term of this Lease is not
timely exercised, all unexercised options to extend shall automatically become
null and void.
B. Each right to extend the term of this Lease may be
exercised only by the undersigned Tenant for its continued use and occupancy of
the Leased Premises and only if it is in possession of the Leased Premises and
operating a permitted use there when it exercises the right. No such right shall
be conveyed or deemed conveyed to any assignee, subtenant, concessionaire or
licensee of the undersigned Tenant even though Landlord may have approved the
assignment, subletting, concession or license.
C. If Tenant is in default under the Lease, all unexercised
rights to extend the term of the Lease shall automatically be extinguished and
become null and void.
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3. LEASE PROVISIONS.
All terms, covenants, and conditions set forth in the Lease of even
date herewith with respect to the original terms shall apply to any Extended
Term: provided, however, that the rent or base annual rent as provided for in
this Lease shall be adjusted at the commencement of any Extended Term by an
amount equal to four percent (4%) over and above the base rent paid by Tenant in
the last year of the original lease term. Subsequent increases during the
remainder of the extended term shall equal four percent (4%) of the amount of
rent paid by Tenant during the year preceding each annual increase.
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EXHIBIT A
[GRAPHIC]
BY RECIPROCAL EASEMENT AGREEMENT, PARKING IS PERMITTED ON THE LOT ADJACENT.
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EXHIBIT B
[GRAPHIC]
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EXHIBIT B-1
[GRAPHIC]
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EXHIBIT D
RULES AND REGULATIONS
---------------------
1. Tenant will comply with all rules and regulations issued by all
governmental agencies whose jurisdiction affects the Leased Premises or the
Building of which the Leased Premises are a part (the "Building"). Tenant shall
not make any alterations to the Building without first obtaining the written
permission of Landlord which shall not be unreasonably withheld and all
appropriate and necessary governmental permits and/or licenses.
2. When electric wiring of any kind is introduced, it must be connected
as directed by Landlord, and no stringing or cutting of wires will be allowed,
except with the prior written consent of Landlord, and shall be done only by
contractors approved by Landlord. The number and location of telephones,
telegraph instruments, electric appliances, call boxes, etc., shall be subject
to Landlord's approval.
3. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed, printed or affixed on or to any part of the outside or
inside of the Building without the Tenant first obtaining the written consent of
Landlord which shall not be unreasonably withheld. Landlord shall have the right
to remove any such sign, placard, picture, advertisement, name or notice without
notice to and at the expense of Tenant. All approved signs or lettering on doors
shall be printed, painted, or affixed or inscribed at the expense of Tenant by a
person or company approved by the Landlord. Landlord shall not place anything or
allow anything to be placed near or on the glass of any window, door, partition
of wall which may appear unsightly from outside the premises.
4. No awning or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens shall be attached
to or hung in, or used in connections with, any window or door of the Leased
Premises, without the prior written consent of Landlord. Such curtains, blinds
or shades must be of a quality, type, design, and color, and attached in a
manner approved by the Landlord.
5. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenants or used by them for any purpose
other than for ingress to and egress from their respective premises. All halls,
passages, exits, entrances, elevators, stairways, balconies and roof are not for
the use of the general public and the Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence, in
the sole judgment of the Landlord, shall be prejudicial to the safety,
character, reputation and interest of the Building and its Tenants, provided
that nothing herein contained shall be construed to prevent such access to
persons with whom the Tenant normally deals in the ordinary course of business,
unless such persons are engaged in illegal activities. Unless making repairs
required to be made under the terms of the Lease to heating, ventilation or air
conditioning located thereon, neither Tenant nor any employees or invitees of
the Tenant shall have access to or go upon the roof of the Building without the
prior approval of the Landlord.
6. After regular business hours on weekdays, Saturdays, Sundays and
legal holidays, Tenant, its agents, servants, employees and invitees, shall
abide by such security rules and regulations as Landlord may promulgate.
7. Waterclosets and urinals shall not be used for any other purpose
other than those for which they were constructed; and no sweepings, rubbish,
ashes, newspaper or any other substances of any kind shall be thrown into them.
Waste and excessive or unusual use of electricity or water is prohibited.
8. A dumpster shall be provided to the Building site by the Landlord
for use by the Tenants with the cost to be borne by the Tenants on a pro-rata
share except when under a Full Service Lease Agreement. Abnormal amount of trash
or garbage generated by either Tenant's initial movement into and
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occupancy of the Leased Premises, or the purchase of equipment or fixtures
placed on the Leased Premises shall be removed by Tenant at his sole cost or
expense and shall not be placed in the dumpster provided by Landlord.
9. Tenant shall not make or permit to be made any loud or offensive
noises, keep any foul or noxious gas or substance or other disturbances of any
kind in the Leased Premises or within the Building. Tenant shall be responsible
for insuring that any office equipment and machinery is installed in such a
manner as to absorb and prevent the transmission of vibration and noise beyond
the confines of the Leased Premises so as to not to disturb other Tenants in the
Building.
10. No additional lock or locks shall be placed by Tenant on any door
in the Building, without prior written consent of Landlord. Ten (10) keys will
be furnished to Tenant by Landlord; two additional keys will be supplied to
Tenant by Landlord, upon request, without charge; any additional keys requested
by Tenant shall be paid for by Tenant. Tenant, its agents and employees, shall
not have any duplicate key made and shall not change any locks. All keys to
doors and washrooms shall be returned to Landlord at the termination of the
tenancy, and, and in the event of loss of any keys furnished, Tenant shall pay
Landlord the cost thereof.
11. The Tenant shall not use any other method of heating or air
conditioning than that provided by the Landlord, without first obtaining the
written consent of the Landlord.
12. No animals or birds of any kind shall be kept in or permitted on or
about the Leased Premises or any other part of the Building.
13. No cooking shall be done or permitted by any Tenant on the Leased
Premises excepting the use of microwave ovens and coffee makers; nor shall the
Premises be used for the storage of merchandise, washing clothes, lodging or for
any improper, objectional or immoral purposes.
14. Tenant shall not be permitted to use or keep explosives, kerosene,
cleaning fluid or any other illuminating, combustible or explosive material or
substance of any kind in the Building or the Leased Premises excepting those
products which are generally accepted for everyday cleaning, and excepting those
used in the operation of Tenant's business and used, stored and disposed of in
accordance with applicable laws.
15. Tenant shall not be permitted to keep food upon the Leased Premises
except in proper containers, cabinets and refrigerators and in strict accordance
with all applicable fuels, regulations and ordinances of all local health and
sanitation authorities.
16. Tenant shall comply with all Tenant requirements issued and
mandated by insurance companies insuring the Building.
17. Landlord reserves the right to institute energy management
procedures when applicable.
18. No vending, video, amusement machine or machines of any other
description shall be installed, maintained or operated upon the Leased Premises
or the Building without the prior written consent of the Landlord.
19. No Tenant shall lay linoleum, title, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Leased Premises
or the Building in any manner except as approved by the Landlord. The expense of
repairing any damage resulting from violation of this Rule 19 or of removing any
floor covering shall be borne and paid for by the Tenant who violated, either by
its own actions or the actions of its contractors of employers, this Rule.
20. Landlord shall inspect the Leased Premises prior to the vacation of
the Premises by the Tenant and the Tenant shall be responsible for any damage
done to the Leased Premises by Tenant in the course of its occupancy or vacation
of the Premises.
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21. No contract of any kind with any supplier of towels, water, ice,
toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal of waste
paper, rubbish or garbage, or other like service shall be entered into by Tenant
for the Leased Premises or any other portion of the Leased Premises without the
prior written approval of the Landlord, nor shall any vending machine of any
kind be installed in the Building, without prior written approval of the
Landlord.
22. Canvassing, soliciting and peddling in the Building are prohibited,
and Tenant shall cooperate with Landlord to prevent these practices.
23. There shall not be used in the Leased Premised or in the Building,
either by Tenant or by others in the delivery or receipt of merchandise, any
hand trucks except those equipped with rubber tires and side guards.
24. Landlord hereby reserves to itself any and all rights not granted
to Tenant hereunder, including, but not limited to, the following rights which
are reserved to Landlord for its purposes in operating the Building:
a. the exclusive right to use of the name of the Building for
all purposes, except that Tenant may use the name as its business address and
for no other purpose;
b. the right to change the name or address of the Building,
without incurring any liability to Tenant for so doing;
c. the right to install and maintain a sign or signs on the
exterior of the Building or within the Building Area;
d. the exclusive right to use or dispose of the use of the
roof of the Building;
e. the right to limit the space on the directory of the
Building to be allotted to Tenant; and
f. the right to grant to any one the right to conduct any
particular business or undertaking in the Building.
25. The Landlord reserves the right at any time to rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in the Landlord's judgement may, from time
to time, be necessary for the safety, care and cleanliness of the Building,
Building Area or any part thereof, and for the preservation of other herein.
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This exhibit is considered a part of the lease agreement.
The landlord has taken responsibility of providing these signs to maintain
continuity of appearance, materials and procedure.
The landlord will be reimbursed for costs incurred by the tenant within 15 days
after installation.
The tenant will provide the landlord with the graphics for the signs within 10
days after the lease is signed to facilitate production of signs.
TENANT PLAQUES
There is one type of suite plaque allowed for tenants of Joppa Green II. The
sign will be located on the wall nearest to the door opening hardware. The sign
will be fabricated with a polished brass frame mechanically fastened to the wall
and an inset polished brass laminate plaque with black screen printed copy. The
maximum number of lines permitted on the sign will be four (4). The type face
will be Americana Bold, in 1" caps and lower case letters. The maximum number of
characters on the line will be twelve (12) including spaces.
[GRAPHIC]
The sign shown here is the permissible sign approved for Joppa Green. No
deviations will be allowed, unless otherwise noted.
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EXHIBIT 10.8
OFFICE LEASE AGREEMENT
(FULL SERVICE)
THIS LEASE AGREEMENT, made this 16th day of July, 1999, by and between
JOPPA GREEN II LIMITED PARTNERSHIP, a Maryland limited partnership, hereinafter
called "Landlord" and BAY NATIONAL CORPORATION, hereinafter called "Tenant".
WITNESSETH:
That in consideration of the rents and covenants hereinafter set forth,
Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord,
premises in the Joppa Green II Building in Baltimore County, Maryland,
(hereinafter referred to as the "Building"). The Building and other facilities
are located upon a parcel of land (hereinafter referred to as the "Building
Area") as shown on the plat attached hereto and marked "Exhibit A". This Lease
shall be for the term, upon the rents, and subject to the terms and conditions
hereinafter set forth as follows:
1. LEASED PREMISES.
The portion of the Building leased hereunder is hereinafter referred to
as the "Leased Premises" and contains approximately 5,130 square feet of
leasehold space, as outlined in red on "Exhibit B", attached hereto and made a
part hereof (the "Floor Area"). The Floor Area is calculated by measuring from
the outside of any exterior walls of the Leased Premises to the center line of
any partitions constructed which separate the Leased Premises from the remaining
or adjacent premises of the Building.
2. TERM. [SEE ADDENDUM NO. 1]
The term of this Lease shall commence on the later to occur of, (a)
December 1, 1999, or (b) if work is to be performed to the Premises, the date
the Leased Premises are "ready for occupancy as hereinafter defined," but no
later than March 1, 2000 and shall be for a period of five (5) years (the "Lease
Term") plus the part of the month, if any, from the date of the commencement of
the Lease term to the first day of the first full calendar month thereof. The
Leased Premises shall be considered "ready for occupancy" the date that Landlord
transmits notice to Tenant that Landlord has substantially completed all work to
be performed to the Leased Premises. After the execution of this Agreement, each
of the parties hereto agrees, upon demand of the other, to execute a declaration
in recordable form expressing the commencement and termination dates of the
lease term as soon as the commencement date has been determined.
3. RENT.
Tenant covenants and agrees to pay to Landlord, as rental for the
Leased Premises, a base rental in the amount of ONE HUNDRED FIFTEEN THOUSAND
FOUR HUNDRED TWENTY FIVE DOLLARS ($115,425.00) per annum, plus a public factor
charge equal to twelve percent (12%) of the base rental, the total sum of the
base rental and the public factor charge to be ONE HUNDRED TWENTY NINE THOUSAND
TWO HUNDRED SEVENTY SIX DOLLARS ($129,276.00) per annum (hereinafter the "Base
Rent") payable in twelve (12) equal monthly installments in advance on the first
day of each full calendar month during the term of this Lease Agreement, the
first such payment to include any prorated rental for the period from the date
of the commencement of the Lease Term to the first day of the first full
calendar month thereof. Base Rent and additional rent to be paid under this
Section or any other Section of this Lease shall be paid by Tenant without any
deductions or set-offs whatsoever and without demand.
The Tenant shall, on the signing and execution of this Agreement, pay
to Landlord, the sum of TWENTY ONE THOUSAND FIVE HUNDRED FORTY SIX DOLLARS
($21,546.00) to be applied by the Landlord to the payment of rent for the Leased
Premises for the first and last months of the term of this Lease. It is agreed
between the respective parties hereto that this payment shall constitute an
advance rental, and that the Landlord shall have the unrestricted right to the
use of the funds herein provided to be paid.
Rent payable under this Section 3 shall be increased annually
commencing with the second year and each successive year thereafter during the
term of this Lease by an amount equal to four percent (4%) of the amount of rent
paid by Tenant during the year preceding each annual increase.
All rentals payable by Tenant to Landlord under this Agreement shall be
paid to Landlord at the office of Landlord herein designated by it for notices.
Tenant will promptly pay all rentals herein prescribed when and as the same
shall become due and payable, without notice, demand, abatement, deduction or
set-off. Tenant shall pay a "late charge" not in excess of eight percent (8%) of
any installment of rental (or any other charge or payment as may be considered
additional rental under this Lease) when paid more than five (5) days after the
due date thereof, to cover the extra expense involved in handling delinquent
payments. In addition to the eight percent (8%), Tenant agrees to pay reasonable
attorney fees, court costs or other costs incurred by Landlord as a result of
the Tenant's delinquent payment of rent. If Landlord after ten (10) days written
notice to Tenant,shall pay any monies, or incur any expenses in correction of
violation of covenants herein set forth, the amount so paid or incurred shall,
at Landlord's
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option, and on written notice to Tenant, be considered additional rental payable
by Tenant with the first installment of rental thereafter becoming due and
payable, and may be collected or enforced as by law provided in the respective
rentals.
All additional costs and monies required to be paid by Tenant to
Landlord under the terms of this Lease, are interpreted and understood to
constitute additional rent for purposes of this Lease Agreement under the
provisions of the Real Property Article of the Annotated Code of Maryland.
4. USE.
The Leased Premises are leased to Tenant solely for the purpose of
conducting therein a general administrative office to include banking services.
Tenant shall not use or permit the Leased Premises or any part thereof to be
used for any purpose or purposes other than the purpose set forth herein. No use
shall be made or permitted to be made of the Leased Premises or acts done which
will increase the existing rate of insurance on the Building or the Building
Area or cause the cancellation of any insurance policy covering the Building or
the Building Area or any part thereof, nor shall Tenant sell or permit to be
kept, used or sold in or about the Leased Premises any article which may be
prohibited by the standard form of fire insurance policies. Tenant shall not
commit or suffer to be committed any waste upon the Leased Premises or any
public or private nuisance or any other act or thing which may disturb the quiet
enjoyment of any other tenant in the Building. Tenant shall not use the Leased
Premises or permit the same to be used in whole or in part for any purpose or
use that is deemed to be in violation of any of the laws, ordinances,
regulations or rules of any public authority or organization at any time.
5. COMMON AREA AND FACILITIES.
During the term of this Lease, Tenant shall have the right of
nonexclusive use, in common with others, of the driveways, footways and parking
area and other common areas, shown on "Exhibit A," provided that such use shall
be subject to such reasonable rules and regulations as Landlord may from time to
time prescribe governing the same; and provided that Landlord shall at all times
have full and exclusive control, management and direction thereof. Landlord
shall further have the right to police the same, to assign specific parking area
for tenants and for visitors; to close temporarily all or any portion of the
parking areas as may be required for proper maintenance and or repair; and, to
do and perform such other reasonable acts in and to such areas as, in the use of
its business judgment, the Landlord shall determine to be advisable in order to
improve the overall operation and/or make more convenient the use thereof by
Tenants of the Building. Landlord will, at its expense operate and maintain the
common areas and facilities in a manner deemed by Landlord, in its sole
discretion, to be reasonable and appropriate and for the best interests of the
tenants in the operation of the Building. Notwithstanding anything contained in
the above, Landlord agrees to use its best efforts not to interrupt Tenant's
business during required repairs or maintenance to the Leased Premises.
6. REAL ESTATE TAXES.
Landlord shall be responsible for and shall pay to each and all
appropriate taxing authorities or third parties, all taxes, with respect to the
Building. "Taxes" shall mean with respect to the Building (including all land,
buildings and improvements shown on Exhibits A and B, attached hereto) all
present and future real estate taxes, assessments, ad valorem charges, front
foot benefit charges and all other governmental impositions and/or levies,
whether or not now customary or within the contemplation of the parties hereto
and regardless of whether the same shall be extraordinary or ordinary, general
or special, foreseen or unforeseen, or similar or dissimilar to any of the
foregoing.
7. ELEVATORS, HEATING, AIR CONDITIONING AND CLEANING.
Landlord shall, if and insofar as existing facilities permit: (a)
provide necessary automatic elevator service seven (7) days per week 24 hours
per day; (b) furnish heat or air conditioning to the Leased Premises, when and
as required during normal business hours which is 8:00 A.M. to 6:00 P.M. Monday
through Friday, and on Saturdays from 8:00 A.M. to 1:00 P.M. (herein called
"normal business hours"); (c) cause the Leased Premises to be kept clean, by
providing standard office use janitorial services, provided the same are kept in
order by Tenant. Landlord shall have no responsibility to provide any services
under (b) above except during normal business hours. After-hours services or
services in addition to the scope of those set forth in (b) above shall be
provided at the expense of the Tenant and shall be made pursuant to terms and
conditions acceptable to Landlord and embodied in a written agreement between
Landlord and Tenant. Landlord reserves the right to stop service of the heating,
air conditioning, elevator, plumbing and electric systems, when necessary, by
reason of accident, or emergency, or for repairs or improvements, which in the
judgment of Landlord are desirable or necessary to be made. Landlord shall have
no responsibility or liability for failure to supply heat, air conditioning,
elevator, plumbing, cleaning, and electric service, during any period described
in the preceding sentence or when prevented from so doing by laws, orders, or
regulations of any Federal, State, County or Municipal authority or by strikes,
accidents, or by any other cause whatsoever beyond Landlord's control.
8. ELECTRICITY.
Landlord will furnish Tenant throughout the Lease Term a reasonable
amount of electric current at 110 volts for lighting purposes and for small
items of office equipment such as dictating machines, desktop computers,
typewriters, and copying machines. Landlord shall furnish electric power seven
(7) days per week, 24 hours per day as mentioned above, but for the operation of
any other electrical equipment or appliance, unless arrangements for such
after-hours operations, or for the installation of such electrical equipment or
appliance, shall have been made pursuant to terms and conditions acceptable to
Landlord and embodied in a written agreement between Landlord and Tenant.
9. INSURANCE.
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Landlord shall maintain at all times during the term of this Agreement
appropriate policies of insurance for the Building, which shall cover the
improvements to the Leased Premises, but which shall not include Tenant's
personal property or any other type of property of the Tenant located upon the
Leased Premises or within the Building. The insurance maintained by Landlord
will include fire and extended insurance coverage, rental insurance, umbrella
liability insurance, and any other insurance that may, from time to time, be
required by Landlord's mortgagee or lender.
10. PUBLIC LIABILITY INSURANCE.
With respect to the Leased Premises, Tenant will keep in force at its
own expense, so long as this Lease remains in effect, Comprehensive General
Liability Insurance (providing among other coverages; Blanket Contractual;
Personal Injury, Independent Contractors, Products/Completed Operations Hazard,
Automobile Liability/Comprehensive Form, and Workers' Compensation) with
companies and in a form acceptable to Landlord with a minimum of One Million
Dollars ($1,000,000.00) of combined single limit general liability coverage,
naming both Landlord and Tenant as insured parties; and Tenant will further
deposit the policy or policies of such insurance or certificates thereof, with
Landlord. A certificate of insurance with the aforementioned coverage must be
issued not later than ten (10) days prior to Tenant, its agents, or contractors
entering the Leased Premises for occupancy or to prepare the Leased Premises for
occupancy.
11. RULES AND REGULATIONS.
Tenant agrees to be bound by the Rules and Regulations as adopted,
promulgated and amended by Landlord pertaining to and for the purpose of
maintaining and operating the Building and the Building Area in a clean and
orderly manner, preserving the safety and good order thereof, and furthering the
convenience and welfare of all of the tenants in the Building Area. A copy of
these Rules and Regulations is attached hereto and said Rules and Regulations
may be reasonably amended from time to time by Landlord. Said Rules and
Regulations and any reasonable amendments, changes or additions thereto which
Landlord may hereafter make are hereby incorporated in this Lease and shall be
binding upon Tenant as if fully set forth herein. Landlord agrees to enforce all
Rules and Regulations uniformly against all tenants of the building.
12. REPAIRS.
Tenant will keep the interior of the Leased Premises in good order and
repair. Tenant will surrender the Leased Premises at the expiration of the term,
or at such other time as it may vacate the premises, in as good condition as
when received, excepting depreciation caused by ordinary wear and tear, and
damage by fire and other casualty.
Tenant will promptly repair at its own expense any damage to the Leased
Premises caused by bringing into the premises any property for Tenant's use or
by the installation or removal of such property, regardless of fault or by whom
such damage shall be caused, unless caused by Landlord, its agents, employees or
contractors; and, in default of such repairs by Tenant, Landlord after notice to
Tenant shall make the same and Tenant agrees to pay the cost to Landlord
promptly upon Landlord's demand therefor.
The Landlord shall be responsible for the maintenance, cleaning and
repair of the exterior portion of all exterior doors, exterior windows, and
exterior glass which comprise the Leased Premises. Landlord shall keep the
balance of the building, parking areas and grounds in good order and repair.
13. HAZARDOUS AND INFECTIOUS WASTE.
Tenant hereby agrees that (1) no activity will be conducted on the
Leased Premises that will produce any Hazardous Substance; (2) the Leased
Premises will not be used in any manner for the storage, generation or
production of any Hazardous Substances; (3) no portion of the Leased Premises
will be used as a landfill or a dump; (4) Tenant will not install any
underground tanks of any type; (5) Tenant will not allow any surface or surface
conditions to exist or come into existence that constitute, or with the passage
of time may constitute, a public or private nuisance; (6) Tenant will not permit
any Hazardous Substances to be brought into the Leased Premises; (7) Tenant
shall provide at its expense for proper disposal of all infectious wastes from
all parts of the Leased Premises, and (8) Tenant shall cause all infectious
wastes to be segregated from all other trash and refuse, and shall comply with
all requirements reasonably imposed by the Landlord or by law regarding the
storage and disposal of such infectious wastes. If any Hazardous Substance is so
brought or found in or on the Leased Premises, it shall be immediately removed
by Tenant, with proper disposal, and all required cleanup procedures shall be
diligently undertaken pursuant to all Environmental Laws, by Tenant, at Tenant's
sole expense. Landlord warrants that to the best of its knowledge, the Leased
Premises contain no hazardous and infections waste as of the day Tenant occupies
the Leased Premises. The Tenant shall indemnify, defend, and hold Landlord
harmless from and against and shall reimburse Landlord with respect to, any and
all expenses, losses, claims, demands, suits, actions, damages and liability
(including, but not limited to, costs and expenses of defending against all of
the aforesaid) arising (or alleged to arise) from (1) Tenant's failure to store
or dispose of infectious wastes in a safe and careful manner or to comply with
all federal, state and local laws regarding such matters, (2) Tenant's breach of
any of its obligations under this Section or (3) if the Leased Premises are
found to contain any Hazardous Substance. The foregoing indemnification shall
survive the expiration or earlier termination of this Lease. The term "Hazardous
Substances," as used in this Lease, shall mean pollutants, contaminants, toxic
or hazardous wastes, or any other substances, the removal of which is required
or the use or storage of which is restricted, prohibited, regulated or penalized
by any "Environmental Law," which term shall mean any federal, state, or local
law, ordinance or regulation relating to pollution or protection of the
environment.
14. ALTERATIONS BY TENANT.
Subject to the prior written consent of Landlord, which shall not be
unreasonably withheld, Tenant at Tenant's expense, may make alterations,
additions or improvements which are nonstructural and which do not affect
utility services or plumbing and
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electric lines, in or to the interior of the Leased Premises. All alternations,
improvements or additions shall remain upon the Leased Premises at the
expiration of this Lease and become the property of Landlord unless Landlord
shall, prior to such expiration or termination, have given Tenant not less than
fifteen (15) days prior written notice to remove the same, in which event Tenant
shall at its expense forthwith remove such alterations, improvements and
additions. Tenant may remove any of its trade fixtures installed at its expense.
Upon removal of any trade fixtures from the premises or upon removal of any
alterations, additions or improvements as may be required by Landlord, Tenant
shall immediately and at its expense, repair and restore the Leased Premises to
the condition existing prior to installation and repair any damage to the Leased
Premises or the Building due to such removal. Tenant shall be responsible to pay
all costs associated with any alteration, construction or reconstruction of the
Leased Premises required by any governmental authority in order to comply with
the provisions of the Americans with Disability Act of 1990 provided said
alterations, construction or reconstruction is caused by Tenant's occupancy. All
property permitted or required to be removed by Tenant at the end of the term
remaining in the Leased Premises after Tenant's removal shall be deemed
abandoned and may, at the election of Landlord, either be retained as Landlord's
property or may be removed from the premises by Landlord at Tenant's expense.
Tenant agrees to carry and shall cause Tenant's contractors and sub-contractors
to carry such workman's compensation, general liability, personal and property
damage insurance as Landlord may require. If any mechanic's lien is filed
against the Leased Premises, or the Building of which the same forms a part for
work claimed to have been done for, or materials furnished to Tenant whether or
not pursuant to this Section, the same shall be discharged or bonded by Tenant
within ten (10) days thereafter. Failure to discharge or bond any such lien
shall constitute a default hereunder.
15. DUTIES OF THE TENANT AT EXPIRATION OF TERM.
Tenant will surrender the Leased Premises at the expiration of the
term, or at such other time as it may vacate the Leased Premises, broom clean
and in as good condition as when received, excepting depreciation caused by
ordinary wear and tear. Tenant will promptly repair at its own expense any
damage to the Leased Premises caused by bringing into the premises any property
for Tenant's use or by the installation or removal of such property, regardless
of fault or by whom such damage shall be caused, unless caused by Landlord, and,
in default of such repairs by Tenant, Landlord shall make the same and Tenant
agrees to pay the cost thereof to Landlord promptly upon Landlord's demand
therefor.
16. SIGNS.
Tenant shall, at its sole cost and expense, affix a sign containing
Tenant's name, business practice and suite location upon or near the exterior
entrance door to the Leased Premises or other location designated by Landlord in
accordance with the Sign Policy of the Landlord attached hereto and made a part
hereof. Landlord does hereby grant Tenant the right to install an outside sign
to identify its dropbox. Said Sign Policy and any reasonable amendments, changes
or additions thereto which Landlord may hereafter make are hereby incorporated
in this Lease and shall be binding upon Tenant as if fully set forth herein,
provided that said policy shall in no way be in conflict with any of the terms
and conditions of this Lease. Any amendments, changes or additions to the Sign
Policy shall be effective upon written notice thereof to Tenant in the manner
provided in Section 28 hereof.
Other than as provided in Landlord's Sign Policy, Tenant will not place
or suffer to be placed or maintained on the exterior of the Leased Premises any
other sign, advertising matter, or any other thing of any kind whatsoever.
Tenant further agrees to maintain its entrance door or entry sign and any other
signs as may be approved by Landlord and provided for in Landlord's Sign Policy,
in good condition and repair at all times.
17. INDEMNITY BY TENANT.
Tenant will indemnify Landlord and save it harmless from and against
any expenses, loss or liability paid, suffered or incurred as the result of any
breach by Tenant, Tenant's agents, servants, employees, customers, contractors,
visitors or licensees, of any covenant or condition of this Lease, and any and
all claims, actions, damages, liability and expense in connection with loss of
life, personal injury and/or damage to property or costs associated with any
modifications to the Leased Premises required by any governmental authority,
arising from or out of the occupancy or use by Tenant of the Leased Premises or
any part thereof or any other part of the Building Area, or occasioned wholly or
in part by any act or omission of Tenant, Tenant's agents, servants, employees,
customers, contractors, visitors or licensees, provided, however, that this
indemnification shall not apply to any such injury, loss, damage or liability
arising from any omission, fault, negligence, or misconduct on the part of
Landlord, its agents, servants, employees, contractors or licensees.
18. LANDLORD EXCULPATION.
It is understood and agreed that Landlord is a Maryland partnership
and/or joint venture and that no partner of the partnership, as may now or
hereafter be constituted, shall have any liability to Tenant or any person
claiming under, by or through Tenant upon any action, claim, suit or demand
brought pursuant to the terms and conditions of this Lease arising out of the
occupancy by Tenant of the Leased Premises. The Landlord shall not be
responsible or liable to the Tenant for any injury or damage resulting from acts
or omissions of persons occupying property adjoining the Leased Premises or any
part of the Building of which the Leased Premises is a part, or for any injury
or damage resulting to the Tenant or its property from bursting, stoppage, or
leaking of water, gas sewer or steam pipes, or any other circumstance, except
where such loss or damage arises from the willful or negligent misconduct of the
Landlord.
19. FIRE OR OTHER CASUALTY.
If the Leased Premises, or any other portion of the Building, shall be
damaged by fire, the elements, unavoidable accident or other casualty, but the
Leased Premises are not thereby rendered untenantable in whole or in part,
Landlord shall promptly at its own expense cause such damage to
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be repaired, and the rent shall not be abated. If by reason of such occurrence,
the Leased Premises shall be rendered untenantable only in part, Landlord shall
promptly at its own expense cause the damage to be repaired, and the rent
meanwhile shall be abated proportionately as to the portion of the Leased
Premises rendered untenantable. If by reason of such occurrence (a) the Leased
Premises shall be rendered wholly untenantable or (b) the damage is not covered
by Landlord's insurance or (c) at 25% of the leasable area of the building is
damaged, Landlord may elect within 90 days after said occurrence not to
reconstruct the destroyed premises in which event this Lease and the tenancy
hereby created shall cease as of the date of said occurrence, the rental to be
adjusted as of such date. All of the above notwithstanding, if Landlord, in its
absolute discretion, shall desire, within a reasonable time after the occurrence
of any such accident or casualty (even though the Leased Premises may not have
been affected by the same) to demolish, rebuild or reconstruct the Building,
then, upon written notice from Landlord to Tenant, this Lease shall terminate on
a date to be specified in such notice, and all rent payable hereunder shall be
adjusted as of the time of the occurrence of any such accident or casualty.
Landlord and Tenant respectively waive and release each other from any
and all rights of recovery, claims, losses and/or damages arising or resulting
from any act or omission of either with respect to the Leased Premises to the
extent that such loss or damage should have been covered under their respective
insurance policies in accordance with this Lease Agreement. Furthermore,
Landlord and Tenant agree to waive any right of subrogation on behalf of any
party in whom such right may otherwise exist or accrue as a result of any of the
aforesaid incidents. Landlord shall not be liable in any event for interruption
to Tenant's business or damage to Tenant's property.
20. INSPECTION AND ENTRY BY LANDLORD.
The Tenant at any time during the term shall permit inspection of the
Leased Premises during reasonable hours after notice from Landlord by the
Landlord or the Landlord's agents or representatives, and by or on behalf of
prospective purchasers, and during the six months next preceding the expiration
of this Lease shall permit inspection thereof by or on behalf of prospective
tenants. The Tenant shall permit the Landlord to erect, use and maintain pipes
and conduits in and through the Leased Premises. The Landlord shall have the
right to change the arrangement and/or location of entrances or passageways,
doors, and doorways, corridors, stairs, toilets or any of the other public parts
of the building containing the Leased Premises, and after reasonable notice, to
change the name, number or designation by which said building is commonly known.
If at any time an entry shall be deemed necessary for protection of the
property, or for making any repair or decorations, whether for the benefit of
the Tenant or not, the Landlord or Landlord's agents may enter into the Leased
Premises, and accomplish such purposes and make such repairs or decorations. The
Tenant shall permit during the six months next preceding the expiration of this
Lease, signs or notices indicating that the Leased Premises are 'to let' or 'for
sale' to be posted and remain upon the Leased Premises.
If the Landlord is required by any law, ordinance, regulation or order
to make any structural alteration, change or addition in the building of which
the Leased Premises are part, and to carry out which it is reasonably necessary
to take some portion of the Leased Premises, the Landlord shall have the right
to do so and the rent herein reserved shall thereafter be proportionately
reduced and the Tenant shall not be entitled to any damages which may be
occasioned thereby. If such structural alteration, change or addition shall so
affect the Leased Premises as to make them substantially unusable for the
purpose herein set forth, either the Landlord or the Tenant, may terminate this
Lease on 30 days' written notice and effective upon the date set forth in such
notice this Lease shall then cease and expire as if such date were the date
herein fixed for the expiration of the term hereof.
21. ASSIGNMENT AND SUBLETTING.
Tenant shall not assign or transfer all or any portion of its interest
in this Lease or in the Leased Premises, nor sublet all or any portion of the
Leased Premises, without the prior written consent of Landlord not to be
unreasonably withheld or delayed. Any assignment, sublease or other such
transfer without Landlord's prior written consent shall be voidable, and, at
Landlord's election, shall constitute a Default of Tenant hereunder. Consent by
Landlord to one or more assignments or sublettings shall not operate as a waiver
of Landlord's rights with respect to any subsequent assignment or subletting. If
Tenant is a partnership, a withdrawal or change (voluntary, involuntary, or by
operation of law) of any partner owning twenty percent (20%) or more of the
partnership, or the dissolution or liquidation of the partnership, shall be
deemed an assignment of this Lease. If Tenant is a corporation, any dissolution,
merger, consolidation, or other reorganization of Tenant, or the sale or other
transfer of the controlling percentage of the capital stock of Tenant, or the
sale of fifty-one percent (51%) of the value of the assets of Tenant, shall be
deemed an assignment of this Lease. If Tenant consists of more than one person,
a purported assignment (voluntary, involuntary, or by operation of law) from any
of such persons to any other person or entity shall be deemed an assignment of
this Lease. Notwithstanding any assignment or subletting, Tenant and any
guarantor of Tenant's obligations under this Lease shall at all times remain
fully liable for the payment of all Rent and other obligations under this Lease.
Landlord shall have the right at any time to assign this Lease, in whole or in
part, to any third party.
22. NOTICE OF DEFAULT TO LANDLORD AND MORTGAGEE AND RIGHT TO CURE.
If Landlord shall fail to perform any covenant, term or condition of
this Agreement required to be performed by Landlord, Tenant shall give, by
certified mail, a notice of default to the Landlord, which shall specifically
set forth the nature of the nonperformance by the Landlord and shall give the
Landlord thirty (30) days within which to cure such default or nonperformance.
Said notice of default shall be a condition precedent to the institution by
Tenant of any judicial proceedings for nonperformance or default against the
Landlord. Tenant agrees to give any mortgagee and/or Trust Deed Holders, by
certified mail, a copy of any notice of default served upon the Landlord,
provided that prior to such notice, Tenant has been notified, in writing, of the
address of such mortgagees and/or Trust Deed Holders. Tenant further agrees that
if Landlord shall fail to cure such default within the time provided for in this
Lease Agreement, then the mortgagees and/or Trust Deed Holders shall have an
additional thirty (30) days within which to cure such default or, if such
default cannot be cured within that time, then such additional time as may be
necessary if within such thirty (30) days, any mortgagee and/or Trust Deed
Holders has commenced and is diligently pursuing the remedies necessary to cure
such default (including but not limited to commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this Lease shall
not be terminated while such remedies are being so diligently pursued.
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23. LIMITATION OF TENANT REMEDIES.
If Landlord shall fail to perform any covenant, term or condition of
this Agreement upon Landlord's part to be performed, and, as a consequence of
such default, Tenant shall recover a money judgment against Landlord, such
judgment shall be satisfied only (i) out of the proceeds of sale received upon
the execution of such judgment and levy thereon against the rights, title and
interest of Landlord in the property of which the demised premises are a part;
(ii) out of the rents or other income of the property of which the demised
premises are a part receivable by Landlord; and/or (iii) out of the
consideration received or receivable by Landlord from the sale or other
disposition of all or any part of Landlord's right, title and interest in the
property of which the demised premises are a part. In the event Landlord shall
sell, transfer, assign or in any manner dispose of its interest in the demised
premises which are the subject matter of this Lease, Landlord's right,
obligations and covenants contained in this Agreement, as to this Landlord,
shall thereupon cease and be no longer binding or effective.
24. PERFORMANCE BY TENANT.
Tenant covenants and agrees that it will perform all covenants and
agreements herein expressed on its part to be performed, and that it will
promptly upon receipt of written notice specifying action desired by Landlord in
connection with any such covenant or agreement, commence to comply with such
notice; and further, that if Tenant shall not commence and proceed diligently to
comply with such notice to the satisfaction of Landlord within ten (10) days
after delivery thereof, then Landlord may, at its option, enter upon the Leased
Premises and do the things specified in said notice, and Landlord shall not be
liable to Tenant for any loss or damage resulting in any way from such action by
Landlord, and Tenant agrees to pay as additional rent, promptly upon demand, any
expense incurred by Landlord in taking such action.
25. CONDEMNATION.
If the whole or any part of the Leased Premises shall be acquired or
condemned by way of condemnation, or under threat thereof, for any public or
quasi-public use or purpose, then in that event this Lease and the tenancy
created hereunder shall cease and terminate from the date of title vesting in
such proceeding and Tenant shall have no claim against Landlord or against any
award obtained for the value of any unexpired portion of the lease term or
otherwise, provided, that the rent payable hereunder shall be adjusted as of the
date of any such termination.
26. DEFAULT.
As used in this Lease, each of the following events shall constitute
and is hereinafter referred to as an "Event of Default" or "Default," with
notice from Landlord to Tenant of any right to cure; (a) if the Tenant (i) fails
to pay any Rent or any other sum which it is obligated to pay under this Lease
after ten (10) days written notice from Landlord, (ii) fails to perform any of
its other obligations under this Lease after twenty (20) days written notice
from Landlord, or (iii) breaches any of its covenants, representations,
warranties or agreements under this Lease after twenty (20) days written notice
from Landlord; or (b) if the Tenant fails to occupy and assume possession of the
Leased Premises on or before the 30th day after the Leased Premises are ready
for occupancy; or (c) a default occurs under any sublease of all or a portion of
the Leased Premises; or (d) if Tenant shall vacate the Leased Premises and
permit the same to remain unoccupied and unattended, or shall remove or attempt
to remove or manifest an intent to remove, not in the ordinary course of
business, Tenant's goods and property from or out of the Leased Premises.
Upon the occurrence of an Event of Default, Landlord shall have the
option, in addition to and not in limitation of any other remedy permitted by
law or by this Lease, to exercise any or all of the following remedies; (a)
terminate this Lease, in which event Tenant shall immediately surrender the
Leased Premises to Landlord, but if Tenant shall fail to so do, Landlord may,
without further notice and without prejudice to any other remedy Landlord may
have for possession or arrearages in rent, or damages for breach of contract,
enter upon the Leased Premises and remove Tenant, any other person occupying the
Leased Premises and their effects without being liable to prosecution or any
claim for damages; (b) enter the Leased Premises as the agent of Tenant, without
being liable to prosecution of any claim for damages and relet the Leased
Premises as the agent of Tenant and receive the rent therefor, and Tenant shall
pay Landlord any deficiency that may arise by reason of such reletting on
demand; (c) receive the rents from any subtenants of Tenant in the Leased
Premises; (d) perform any act Tenant is obligated to perform under the terms of
this Lease (and enter upon the Leased Premises in connection therewith if
necessary) in Tenant's name and on Tenant's behalf, without being liable for
prosecution or any claim for damages therefor, and Tenant agrees to reimburse
Landlord on demand for any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease (including, but not
limited to, collection costs and legal expenses), plus interest thereon at the
maximum rate permitted by law, and Tenant further agrees that Landlord shall not
be liable for any damages resulting to Tenant from such action; (e) alter all
locks and other security devices at the Leased Premises; (f) exercise the
provisions of applicable laws respecting the speedy recovery of tenements held
over by tenants of proceedings in forcible entry and detainer; (g) restrain any
default or violation, or attempted or threatened default or violation of any of
the terms, covenants, conditions or other provisions of this Lease, by
injunction, order of specific performance or other appropriate equitable relief.
The payment of such Rent shall not constitute a penalty or forfeiture or
liquidated damages, but shall constitute payment of Rent for the remainder of
the Term. Upon the payment by the Tenant of the entire amount of the Rent for
the remainder of the Term together with all other sums then due and owing the
Landlord, Tenant shall be entitled to receive from Landlord all rents received
by Landlord from other tenants on account of the Leased Premises during the
remainder of the Term of this Lease, if any; provided, however, that the monies
to which Tenant shall become so entitled shall in no event exceed the entire
amount payable by Tenant to Landlord as Rent. Any such claim for Rent by
Landlord shall not preclude Landlord from collecting the Additional Rent due
under this Lease or exercising any other remedy permitted by law, equity or by
this Lease.
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Following the occurrence of any Event of Default, Tenant shall also be
liable for and shall pay to Landlord as Additional Rent all costs and expenses
incurred by Landlord in enforcing or defending Landlord's rights and/or remedies
at law, equity or hereunder, including reasonable attorneys' fees, litigation
expenses, court costs and other necessary disbursements.
27. REMEDIES CUMULATIVE.
No mention in this Lease of any specific right or remedy shall preclude
Landlord or Tenant from exercising any other right or from having any other
remedy, or from maintaining any action to which it may otherwise be entitled
either at law or equity; and the failure of Landlord or Tenant to insist in any
one or more instances upon a strict performance of any covenant of this Lease or
to exercise any option or right herein contained shall not be construed as a
waiver of relinquishment for the future of such covenant, right or option, but
the same shall remain in full force and effect unless the contrary is expressed
in writing by Landlord.
28. SUCCESSORS AND ASSIGNS.
This Lease and the covenants and conditions herein contained shall
inure to the benefit of and be binding upon Landlord, its successors and
assigns, and shall be binding upon Tenant, its successors and assigns, and shall
inure to the benefit of Tenant and only such assigns of Tenant to whom the
assignment by Tenant has been consented to by Landlord, to the extent such
consent is required.
29. NOTICES.
All notices, demands and requests required under this Lease shall be in
writing. All such notices, demands and requests shall be deemed to have been
properly given if sent by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
(a) If to Landlord: With copies to:
c/o MacKenzie Commercial MacKenzie Services Corporation
Real Estate Services, LLC Suite 200
Suite 200 2328 West Joppa Road
2328 West Joppa Road Lutherville, MD 21093
Lutherville, MD 21093
(b) If to Tenant:
Bay National Corporation Ober/Kaler
2328 W. Joppa Road 120 E. Baltimore Street
Lutherville, Maryland 21093 Baltimore, Maryland 21202-1643
Attention: Robert E. Scher
Either party may designate a change of address by written notice to the
other party, and thereafter all notices to such parties shall be sent by
registered or certified mail to such substitute address.
30. APPLICABLE LAW.
This Lease shall be construed under the laws of the State of Maryland.
31. SUBORDINATION AND ATTORNMENT.
Tenant accepts this Lease, and the tenancy created hereunder, subject
and subordinate to the lien, operation and effect of each and every ground lease
and existing or future mortgage, deed of trust or other security instrument
constituting a lien upon or affecting the Building or the Building Area, or any
part thereof and to any renewals, extensions, consolidations, modifications or
refinancings thereof. Notwithstanding anything contained in the above, Landlord
will use its best efforts upon request by Tenant to obtain a non-disturbance
agreement from its lender or mortgagee with Tenant paying for any costs
associated with said non-disturbance agreement.
In the event of any foreclosure sale or sales pursuant to the terms of
any mortgages or deeds of trust or other security instruments now or hereafter
constituting a lien upon or affecting the Building or Building Area of any part
thereof, by virtue of judicial proceedings or otherwise, this Lease Agreement
shall, at the option of the mortgagee or beneficiary under the deed of trust or
other security instrument or the foreclosure purchaser continue in full force
and effect and Tenant thereunder will, upon request, attorn to and acknowledge
the foreclosure purchaser or purchasers at such sale, as landlords hereunder.
Tenant shall, at any time hereafter, within ten (10) days of demand by
Landlord, execute any instrument, releases or other documents that may be
required by any mortgagee or mortgagor or over landlord for the purpose of
confirming such subordination and attornment. The failure of Tenant to execute
any such instruments, releases or documents, shall constitute a Default
hereunder.
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32. ESTOPPEL CERTIFICATES.
Tenant agrees at any time hereafter upon not less than ten (10) days
prior notice by Landlord, to execute, acknowledge and deliver to Landlord a
statement in writing certifying that this Lease Agreement is unmodified and in
full force and effect (or if there have been modifications, that the same is in
full force and effect as modified and stating the modifications). Such
certificate shall state the dates to which the rent and other charges have been
paid in advance, if any, and whether or not to the best knowledge of the signer
of such certificate Landlord is in default in performance of any covenant,
agreement or condition contained in this Lease Agreement; and if applicable,
specifying each such default of which the signer may have knowledge, it being
intended that any such statement delivered hereunder may be relied upon by third
parties not a party to this Lease.
33. QUIET ENJOYMENT.
If and so long as Tenant pays rent and additional rent reserved by this
Lease, and is not in Default hereunder, Tenant shall quietly enjoy the Leased
Premises, subject, however, to the terms and provisions hereof.
34. TERMINATION.
This Lease and the tenancy hereby created shall cease and determine at
the end of the Lease Term, or any extension or renewal thereof, without the
necessity of any notice from either Landlord or Tenant to terminate the same,
and Tenant hereby waives notice to vacate the Leased Premises and agrees that
Landlord shall be entitled to the benefit of all provisions of law respecting
the summary recovery of possession of premises from a tenant holding over to the
same extent as if statutory notice had been given.
35. HOLDING OVER.
Any holding over after the expiration of the Lease Term by Tenant shall
be deemed to be a tenancy from month to month and except for the term thereof,
and the rent payable during such term, shall be on the same terms and conditions
specified herein, so far as are applicable. Base Rent payable by a hold over
tenant shall be 1.5 times the Base Rent payable on a monthly basis under Section
3 hereof.
36. NO WAIVER.
The failure of Landlord or Tenant to insist, in any one or more
instances, upon a strict performance of any of the covenants of this Lease, or
to exercise any option herein contained, shall not be construed as a waiver, or
a relinquishment for the future, of such covenant or option, but the same shall
continue and remain in full force and effect. The receipt by Landlord of rent,
with knowledge of the breach of any covenant hereof, shall not be deemed a
waiver of such breach, and no waiver by Landlord of any provision hereof shall
be deemed to have been made unless expressed in writing and signed by Landlord.
37. ENTIRE AGREEMENT.
This writing is intended by the parties as a final expression of their
agreement and as a complete and exclusive statement of the terms thereof, all
negotiations, considerations and representations between the parties having been
incorporated herein. No course of prior dealings between the parties or their
affiliates shall be relevant or admissible to supplement, explain or vary any of
the terms of the Lease. Acceptance of, or acquiescence in, a course of
performance rendered under this or any prior agreement between the parties or
their affiliates shall not be relevant or admissible to determine the meaning of
any of the terms of this Lease. No representations, understandings or agreements
have been made or relied upon in the making of this Lease other than those
specifically set forth herein. This Lease can only be modified by a writing
signed by all of the parties hereto or their duly authorized agents.
38. APPROVAL OF MORTGAGEE.
This Lease Agreement is contingent upon the approval of any and all
mortgagees or other lenders of the Landlord. Landlord shall have five (5) days
from the execution of this Lease Agreement to obtain all necessary approvals
from its mortgagee or other lenders; and thereafter shall have the right to
extend said approval period an additional ten (10) days upon written notice to
Tenant. If said approvals cannot be obtained within the aforesaid period, this
Lease Agreement and the rights and duties of the parties hereunder, shall be
null and void and be of no further effect.
39. ZONING AND LICENSING APPROVALS.
Anything herein elsewhere contained to the contrary, this Lease and all
the terms, covenants, and conditions hereof are in all respects subject and
subordinate to all zoning restrictions affecting the Leased Premises, and the
Building in which they are located, and the Tenant agrees to be bound by such
restrictions. The Landlord further does not warrant that any license or
licenses, permit or permits, which may be required for the business to be
conducted by the Tenant on the Leased Premises will be granted, or, if granted,
will be continued in effect or renewed, and any failure to obtain such license
or licenses, permit or permits, or any revocation thereof or failure to renew
the same, shall not release the Tenant from its obligations under this Lease
Agreement.
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40. BROKERS.
Tenant represents that Tenant has dealt directly with Colliers Pinkard
and MacKenzie Commercial Real Estate Services, LLC, as broker in connection with
this Lease and insofar as Tenant knows, no other broker negotiated this Lease or
is entitled to any commissions in connection with its execution.
41. SEPARABILITY.
If any term or provision of this Lease or the application thereof to
any person or circumstances other than those as to which it is held invalid, or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
42. TENANT IMPROVEMENTS. [See Addendum No. 2]
43. LETTER OF CREDIT. [See Addendum No. 3]
44. RIGHT OF FIRST REFUSAL. [See Addendum No. 4]
45. ADDENDA.
Addenda consisting of one page, with addenda numbered Addendum No. 1
and 2 is (are) attached hereto and made a part hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Agreement as of the day and year first above written.
WITNESS LANDLORD: JOPPA GREEN II LIMITED PARTNERSHIP
By: MacKenzie Properties, Inc.,
General Partner
By: /s/ Gary T. Gill (Seal)
- ------------------------ ---------------------------------
Gary T. Gill,
Executive Vice President
WITNESS: TENANT: BAY NATIONAL CORPORATION
/s/ John S. DiPietro By: /s/ Hugh Mohler (Seal)
-------------------- ---------------------------------
Hugh Mohler,
Director
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ADDENDUM NO. 1
--------------
It is understood and agreed that the portion of the Leased Premises
containing approximately 2,019 square feet, hatched in red on the attached
Exhibit "B", commencement date shall be no later than January 1, 2000 or the
date the Leased Premises shall be ready for occupancy as verified by the
issuance of an occupancy permit from Baltimore County to Landlord.
ADDENDUM NO. 2
--------------
Tenant and Landlord have reviewed and approved the design for the
layout of the Leased Premises, a copy of which is attached to the Lease as
Exhibit B-1, the "Scaled Plan". The Scaled Plan includes the location of all
partitions, interior doors, lighting fixtures, light pole switches, electrical
outlets, and telephone receptacles or systems, plumbing fixtures, together with
the specifications therefor and any other improvements Tenant desires to be made
thereto prior to the commencement of the Lease Agreement. Landlord, through its
agent, shall install all of the above mentioned improvements with Landlord
contributing $7.00 per usable square foot towards those costs. Any costs for
improvements over and above aforementioned allowance, including furniture and
fixtures, shall be at Tenant's sole cost and expense.
ADDENDUM NO. 3
--------------
It is understood and agreed that Landlord will require Tenant to post a
Letter of Credit equal to the total of Tenant's first year rent plus Landlord's
cost associated with the Leased Premises to include the tenant improvement
monies and commission. Said Letter of Credit shall be posted only if Tenant has
not secured its bank charter and been fully funded through its initial public
offering on or before the commencement of the Leased Agreement.
ADDENDUM NO. 4
--------------
It is understood and agreed that Landlord shall grant Tenant the Right
of First Refusal on any contiguous square footage on the third floor. Tenant
shall have three (3) business days to exercise said right after presentation to
Tenant from Landlord of a letter of intent from a third party to lease the
"Right of First Refusal Space". Tenant's terms and conditions for the Right of
First Refusal Space shall equal the rent being paid by Tenant at the time of
said expansion with the Tenant Improvements being pro-rated to the amount of
time left on the lease.
ADDENDUM NO. 5
--------------
TERM EXTENSION RIDER
1. OPTION(S) TO EXTEND TERM.
Providing that Tenant is not in default under any of the terms,
covenants, and conditions of its Lease Agreement, Landlord hereby grants Tenant
the optional right(s) to extend the terms of this Lease for one (1) successive
period(s) of five (5) years as follows:
Each period added to the term of this Lease by exercise of an option
shall be called an "Extended Term." The term of this Lease will be the original
term plus each Extended Term.
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An option to create an Extended Term may be exercised only by the Tenant giving
written notice thereof to Landlord not less than one hundred eighty (180) days
prior to the expiration of the original term or any prior Extended Term of this
Lease. The written notice required hereunder shall be certified mail, return
receipt requested.
2. LIMITATIONS ON EXERCISE TO EXTEND TERM.
A. If any option to extend the term of this Lease is not
timely exercised, all unexercised options to extend shall automatically become
null and void.
B. Each right to extend the term of this Lease may be
exercised only by the undersigned Tenant for its continued use and occupancy of
the Leased Premises and only if it is in possession of the Leased Premises and
operating a permitted use there when it exercises the right. No such right shall
be conveyed or deemed conveyed to any assignee, subtenant, concessionaire or
licensee of the undersigned Tenant even though Landlord may have approved the
assignment, subletting, concession or license.
C. If Tenant is in default under the Lease, all unexercised
rights to extend the term of the Lease shall automatically be extinguished and
become null and void.
3. LEASE PROVISIONS.
All terms, covenants, and conditions set forth in the Lease of even
date herewith with respect to the original terms shall apply to any Extended
Term: provided, however, that the rent or base annual rent as provided for in
this Lease shall be adjusted at the commencement of any Extended Term by an
amount equal to four percent (4%) over and above the base rent paid by Tenant in
the last year of the original lease term. Subsequent increases during the
remainder of the extended term shall equal four percent (4%) of the amount of
rent paid by Tenant during the year preceding each annual increase.
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EXHIBIT A
[GRAPHIC]
BY RECIPROCAL EASEMENT AGREEMENT, PARKING IS PERMITTED ON THE LOT ADJACENT.
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EXHIBIT B
[GRAPHIC]
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EXHIBIT B-1
[GRAPHIC]
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EXHIBIT D
RULES AND REGULATIONS
---------------------
1. Tenant will comply with all rules and regulations issued by all
governmental agencies whose jurisdiction affects the Leased Premises or the
Building of which the Leased Premises are a part (the "Building"). Tenant shall
not make any alterations to the Building without first obtaining the written
permission of Landlord which shall not be unreasonably withheld and all
appropriate and necessary governmental permits and/or licenses.
2. When electric wiring of any kind is introduced, it must be connected
as directed by Landlord, and no stringing or cutting of wires will be allowed,
except with the prior written consent of Landlord, and shall be done only by
contractors approved by Landlord. The number and location of telephones,
telegraph instruments, electric appliances, call boxes, etc., shall be subject
to Landlord's approval.
3. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed, printed or affixed on or to any part of the outside or
inside of the Building without the Tenant first obtaining the written consent of
Landlord which shall not be unreasonably withheld. Landlord shall have the right
to remove any such sign, placard, picture, advertisement, name or notice without
notice to and at the expense of Tenant. All approved signs or lettering on doors
shall be printed, painted, or affixed or inscribed at the expense of Tenant by a
person or company approved by the Landlord. Landlord shall not place anything or
allow anything to be placed near or on the glass of any window, door, partition
of wall which may appear unsightly from outside the premises.
4. No awning or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens shall be attached
to or hung in, or used in connections with, any window or door of the Leased
Premises, without the prior written consent of Landlord. Such curtains, blinds
or shades must be of a quality, type, design, and color, and attached in a
manner approved by the Landlord.
5. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenants or used by them for any purpose
other than for ingress to and egress from their respective premises. All halls,
passages, exits, entrances, elevators, stairways, balconies and roof are not for
the use of the general public and the Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence, in
the sole judgment of the Landlord, shall be prejudicial to the safety,
character, reputation and interest of the Building and its Tenants, provided
that nothing herein contained shall be construed to prevent such access to
persons with whom the Tenant normally deals in the ordinary course of business,
unless such persons are engaged in illegal activities. Unless making repairs
required to be made under the terms of the Lease to heating, ventilation or air
conditioning located thereon, neither Tenant nor any employees or invitees of
the Tenant shall have access to or go upon the roof of the Building without the
prior approval of the Landlord.
6. After regular business hours on weekdays, Saturdays, Sundays and
legal holidays, Tenant, its agents, servants, employees and invitees, shall
abide by such security rules and regulations as Landlord may promulgate.
7. Waterclosets and urinals shall not be used for any other purpose
other than those for which they were constructed; and no sweepings, rubbish,
ashes, newspaper or any other substances of any kind shall be thrown into them.
Waste and excessive or unusual use of electricity or water is prohibited.
8. A dumpster shall be provided to the Building site by the Landlord
for use by the Tenants with the cost to be borne by the Tenants on a pro-rata
share except when under a Full Service Lease Agreement. Abnormal amount of trash
or garbage generated by either Tenant's initial movement into and
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occupancy of the Leased Premises, or the purchase of equipment or fixtures
placed on the Leased Premises shall be removed by Tenant at his sole cost or
expense and shall not be placed in the dumpster provided by Landlord.
9. Tenant shall not make or permit to be made any loud or offensive
noises, keep any foul or noxious gas or substance or other disturbances of any
kind in the Leased Premises or within the Building. Tenant shall be responsible
for insuring that any office equipment and machinery is installed in such a
manner as to absorb and prevent the transmission of vibration and noise beyond
the confines of the Leased Premises so as to not to disturb other Tenants in the
Building.
10. No additional lock or locks shall be placed by Tenant on any door
in the Building, without prior written consent of Landlord. Ten (10) keys will
be furnished to Tenant by Landlord; two additional keys will be supplied to
Tenant by Landlord, upon request, without charge; any additional keys requested
by Tenant shall be paid for by Tenant. Tenant, its agents and employees, shall
not have any duplicate key made and shall not change any locks. All keys to
doors and washrooms shall be returned to Landlord at the termination of the
tenancy, and, and in the event of loss of any keys furnished, Tenant shall pay
Landlord the cost thereof.
11. The Tenant shall not use any other method of heating or air
conditioning than that provided by the Landlord, without first obtaining the
written consent of the Landlord.
12. No animals or birds of any kind shall be kept in or permitted on or
about the Leased Premises or any other part of the Building.
13. No cooking shall be done or permitted by any Tenant on the Leased
Premises excepting the use of microwave ovens and coffee makers; nor shall the
Premises be used for the storage of merchandise, washing clothes, lodging or for
any improper, objectional or immoral purposes.
14. Tenant shall not be permitted to use or keep explosives, kerosene,
cleaning fluid or any other illuminating, combustible or explosive material or
substance of any kind in the Building or the Leased Premises excepting those
products which are generally accepted for everyday cleaning, and excepting those
used in the operation of Tenant's business and used, stored and disposed of in
accordance with applicable laws.
15. Tenant shall not be permitted to keep food upon the Leased Premises
except in proper containers, cabinets and refrigerators and in strict accordance
with all applicable fuels, regulations and ordinances of all local health and
sanitation authorities.
16. Tenant shall comply with all Tenant requirements issued and
mandated by insurance companies insuring the Building.
17. Landlord reserves the right to institute energy management
procedures when applicable.
18. No vending, video, amusement machine or machines of any other
description shall be installed, maintained or operated upon the Leased Premises
or the Building without the prior written consent of the Landlord.
19. No Tenant shall lay linoleum, title, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Leased Premises
or the Building in any manner except as approved by the Landlord. The expense of
repairing any damage resulting from violation of this Rule 19 or of removing any
floor covering shall be borne and paid for by the Tenant who violated, either by
its own actions or the actions of its contractors of employers, this Rule.
20. Landlord shall inspect the Leased Premises prior to the vacation of
the Premises by the Tenant and the Tenant shall be responsible for any damage
done to the Leased Premises by Tenant in the course of its occupancy or vacation
of the Premises.
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21. No contract of any kind with any supplier of towels, water, ice,
toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal of waste
paper, rubbish or garbage, or other like service shall be entered into by Tenant
for the Leased Premises or any other portion of the Leased Premises without the
prior written approval of the Landlord, nor shall any vending machine of any
kind be installed in the Building, without prior written approval of the
Landlord.
22. Canvassing, soliciting and peddling in the Building are prohibited,
and Tenant shall cooperate with Landlord to prevent these practices.
23. There shall not be used in the Leased Premised or in the Building,
either by Tenant or by others in the delivery or receipt of merchandise, any
hand trucks except those equipped with rubber tires and side guards.
24. Landlord hereby reserves to itself any and all rights not granted
to Tenant hereunder, including, but not limited to, the following rights which
are reserved to Landlord for its purposes in operating the Building:
a. the exclusive right to use of the name of the Building for
all purposes, except that Tenant may use the name as its business address and
for no other purpose;
b. the right to change the name or address of the Building,
without incurring any liability to Tenant for so doing;
c. the right to install and maintain a sign or signs on the
exterior of the Building or within the Building Area;
d. the exclusive right to use or dispose of the use of the
roof of the Building;
e. the right to limit the space on the directory of the
Building to be allotted to Tenant; and
f. the right to grant to any one the right to conduct any
particular business or undertaking in the Building.
25. The Landlord reserves the right at any time to rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in the Landlord's judgement may, from time
to time, be necessary for the safety, care and cleanliness of the Building,
Building Area or any part thereof, and for the preservation of other herein.
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This exhibit is considered a part of the lease agreement.
The landlord has taken responsibility of providing these signs to maintain
continuity of appearance, materials and procedure.
The landlord will be reimbursed for costs incurred by the tenant within 15 days
after installation.
The tenant will provide the landlord with the graphics for the signs within 10
days after the lease is signed to facilitate production of signs.
TENANT PLAQUES
There is one type of suite plaque allowed for tenants of Joppa Green II. The
sign will be located on the wall nearest to the door opening hardware. The sign
will be fabricated with a polished brass frame mechanically fastened to the wall
and an inset polished brass laminate plaque with black screen printed copy. The
maximum number of lines permitted on the sign will be four (4). The type face
will be Americana Bold, in 1" caps and lower case letters. The maximum number of
characters on the line will be twelve (12) including spaces.
[GRAPHIC]
The sign shown here is the permissible sign approved for Joppa Green. No
deviations will be allowed, unless otherwise noted.
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EXHIBIT 10.9
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT ("Lease"), made this 16th day of September, 1999, by
and between JOHN R. LERCH AND THOMAS C. THOMPSON (hereinafter referred to as
"Landlord") and BAY NATIONAL CORP. (hereinafter referred to as "Tenant"),
WITNESSETH:
For and in consideration of the rent reserved, and the mutual covenants
and agreements contained in this Agreement, the parties hereto do hereby
covenant and agree as follows:
1. TERM AND RENT. Landlord does hereby rent, demise and lease unto the
Tenant the property and facilities located at the northeast corner of Market
Street and Poplar Hill Avenue, sometimes being referred to as 109 Poplar Hill
Avenue in the City of Salisbury, Wicomico County, Maryland, for a term of five
(5) years, commencing on September 1, 1999 ("Commencement Date"), through
July 31, 2004, to be occupied as and for the purposes of a commercial bank,
financial services, professional offices, any use permitted for a national bank,
a bank holding company, a subsidiary or affiliate of either or associated uses
for a rental in the amount of Twenty-Three Thousand Seven Hundred Fifty and
00/100 Dollars ($23,750.00) per year, payable in monthly installments of One
Thousand Nine Hundred Seventy-Nine and 66/100 Dollars ($1,979.66) per month,
payable on the first of each month in advance directly to Landlord at the
addresses set forth herein.
2. LEASE OPTIONS. Tenant shall have the privilege and option to extend the
term of this Lease for three (3) additional terms of five (5) years each,
commencing immediately upon the expiration of the original or previous option
term, by giving Landlord written notice not less than ninety (90) days prior to
the expiration of the original or previous option term. If exercised, the lease
option shall be upon the same terms and conditions as the initial term, except
that the rent
<PAGE>
shall be as follows: (a) for the initial option term commencing August 1, 2004,
through July 31, 2009, rent shall be in the amount of Twenty-Seven Thousand Five
Hundred and 00/100 Dollars ($27,500.00) per year payable in monthly installments
of Two Thousand Two Hundred Ninety-One and 66/100 ($2,291.66) per month; (b) for
the second option term commencing on August 1, 2009, through July 31, 2014, rent
shall be in the amount of Thirty-One Thousand Two Hundred Fifty and 00/100
Dollars ($31,250.00) per year payable in monthly installments of Two Thousand
Six Hundred Four and 17/100 Dollars ($2,604.17) per month; and (c) for the third
option term commencing on August 1, 2014, through July 31, 2019, rent shall be
in the amount of Thirty Five Thousand and 00/100 Dollars ($35,000) per year
payable in monthly installments of Two Thousand Nine Hundred Sixteen and 67/100
Dollars ($2,916.67) per month.
3. TENANT'S USE OF PREMISES. Tenant agrees that the premises shall be used
for the uses specified in paragraph 1 of this Lease only. No other business
shall be carried on upon the premises without the express written consent of the
Landlord in advance which shall not be unreasonably withheld or delayed. Tenant
shall conduct its business and the use of the demised premises in accordance
with any and all applicable laws, regulations, and ordinances. Tenant shall not
do, suffer or permit anything to be done in or about the premises which will
contravene the policy of insurance against loss by fire or other hazard with the
premises or which will cause any increase in the fire hazard in said premises
without Landlord's written consent.
4. PROPERTY CONDITION; MAINTENANCE. Except as provided herein, by taking
possession of the property, Tenant accepts the premises "as is" and agrees
conclusively that the property is in good and tenantable condition. The Landlord
hereby represents and warrants to the Tenant that no Hazardous Substance (as
defined below) presently exists in or on the premises demised herein. The
Landlord further represents and warrants to the Tenant that no violation has
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occurred with respect to the premises demised herein of any federal, state or
local statute, ordinance, rule, regulation or other law pertaining to Hazardous
Substances, and that there is no action or proceeding pending before or
appealable from any court, quasi-judicial body or administrative agencies
relating to Hazardous Substances affecting or alleged to be affecting the
premises. Landlord agrees to hold harmless, indemnify and defend the Tenant and
its assignees from and against any claim, demand, penalty, fee, lien, damage,
loss, expense or liability from a third party resulting from (i) any breach of
the representations or warranties made by it in this Paragraph 4, including
reasonable attorney's fees and costs of, or in preparation for, any trial or
appellate review, and (ii) any actual Hazardous Substance contamination,
including the clean-up of Hazardous Substances from the premises demised herein
not caused by any action of Tenant which directly or indirectly results in the
premises or any other property being contaminated with Hazardous Substances. In
the event that there is any actual Hazardous Substance contamination as
described above, Landlord shall have the option to: (1) remove any Hazardous
Substances in the premises demised herein at its sole cost and expense or (2) if
the cost of the aforesaid removal exceeds 50% of the value of the premises
demised herein, terminate this Lease and upon the termination date, pay to
Tenant the then book value of all improvements made by tenant and reasonable
moving expenses. If the cost of the aforesaid removal does not exceed 50% of the
value of the premises demised herein, Landlord shall, as set forth herein,
remove any Hazardous substances . In the event Landlord exercises the option in
this Paragraph 4 to terminate this Lease, all indemnification referenced in this
Lease and any extensions and/or modifications thereof shall survive the
termination of this Lease and shall continue to inure to the benefit of the
Tenant, notwithstanding any assignment of its other rights hereunder. As used
herein, "Hazardous Substance" shall mean any hazardous, toxic or dangerous
substances, waste or material that is or
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may become regulated under any federal, state or local statute, ordinance, rule,
regulation or other law now or hereafter in effect pertaining to environmental
protection, contamination or clean-up, including, without limitation, the
Comprehensive Environment Response. Compensation and Liability Act (42 U.S.C.
ss.ss.9601 et seq.), the Superfund Amendments and Reauthorization Act of 1986
(42 U.S.C. ss.9601(20)(D)), the Resource Conservation and Recovery Act (42
U.S.C. ss.ss.6901 et seq.), the Federal Water Pollution Control Act as amended
by the Clean Water Act of 1977 (33 U.S.C. ss.ss.1251 et seq.) and the Clean Air
Act of 1966 (42 U.S.C. ss.ss.7401 et seq.), and the Toxic Substances Control Act
(15 U.S.C. ss.2601 et seq.). Tenant shall take good care of the property,
maintain the same in its condition when delivered, except for additions and
improvements made by Tenant as Tenant deemed necessary, and suffer no waste,
keep the plumbing works, pipes, fixtures and other interior and exterior
facilities therein in good repair, and at the expiration of occupancy, deliver
up the premises in good order and condition, natural wear and tear only
excepted. Landlord represents and warrants that all mechanical systems are in
good working condition as of the Commencement Date of this Lease. All
alterations, additions and improvements (except for trade fixtures put in at the
expense of Tenant, which may be removed by Tenant at the end of the term,
provided same may be removed without damage to the demised premises) shall be at
the sole cost and expense of Tenant, but shall become the property of Landlord
and shall remain upon and be surrendered with the premises as a part thereof at
the termination of this Lease.
5. UTILITIES. Tenant shall arrange for and pay for any and all utility
services to the premises, including without limitation, all costs of heating and
air-conditioning, gas, electric, water and sewer, telephone, cable television
and other like charges and fees for public utility services. In addition, Tenant
agrees to pay the maintenance and repair costs during the term of this
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Lease and any extension hereof in respect to the heating, air-conditioning,
interior lighting equipment or other systems of said building. If during such
term any of such equipment requires replacement, Tenant shall bear the cost of
such replacement, except that if such equipment requires replacement within
twelve (12) months of the end of the original term or any additional term and
Tenant at such time notifies Landlord that it will not exercise any options to
renew or if the Lease is in its final option period, Landlord shall reimburse
Tenant 75% of any replacement cost. In the event that Tenant replaces any such
equipment within twelve (12) months of the end of the original term or any
additional term and Tenant provides the above-referenced notice to Landlord,
Tenant shall inform Landlord of the cost and description of the equipment being
replaced prior to making such replacement.
6. TAXES AND CASUALTY INSURANCE. Tenant agrees to pay as they shall become
due and payable all real estate taxes, and any other public or recorded charges
against the demised premises or against Landlord in connection with the demised
premises which come due or attach during the term of this Lease. Landlord hereby
gives Tenant the authority to proceed in its name to contest or challenge the
imposition or amount of any real estate taxes or any other public or recorded
charges against the demised premises. Landlord shall property execute and/or
provide any documentation required by Tenant in such challenge. In addition,
Tenant shall pay any and all fire or other casualty insurance premiums on the
demised premises, such insurance policies to be adequate in amount to insure the
value of the demised premises and duly endorsed to protect Landlord's interest
in the demised premises. In the event that Tenant fails to procure said
insurance or to maintain same in force, Landlord shall have the right to obtain
such insurance in the place of Tenant and to add the costs or premium thereof to
the amounts otherwise owing under this Lease as additional rent hereunder.
5
<PAGE>
7. TENANT'S LIABILITY INSURANCE. Tenant agrees to insure, for its
protection and for the protection of the Landlord, against public liability from
the use and operation of the demised premises by obtaining and maintaining
during the term of this Lease coverage of not less than $1,000,000 single limit,
"all risks" liability policy and to maintain Landlord as a named insured thereon
at all times; and Tenant agrees to furnish Landlord suitable certificates of
such insurance coverage; and in the event that the Tenant fails to procure said
insurance or to maintain same in force, Landlord shall have the right to obtain
such insurance in the place of Tenant and to add the cost or premium thereof to
the amounts otherwise owing under this Lease as additional rent hereunder.
8. INDEMNIFICATION. Tenant agrees to defend and hold harmless the Landlord
from any liability for damages to any personal property in or upon the said
demised premises, including the property of the Tenant and employees and all
persons in or upon the said demised premises at the invitation or with the
consent of the Tenant; provided however, that this indemnification shall not be
applicable in the event of damages caused by or as a result of the negligence,
acts or omission of Landlord, its agents, servants, employees or contractors. It
is mutually agreed by the parties hereto that all property kept, stored or
maintained in or upon the said demised premises shall be so kept, stored or
maintained at the sole risk of the Tenant. The Tenant agrees not to suffer or
give cause for the filing of any lien against the demised premises by any person
for any reason whatsoever.
9. DAMAGE AND DESTRUCTION. If the building containing the demised premises
should be destroyed by fire, earthquake, act of God, or the elements during the
term of this Lease Agreement, or damaged to such an extent that it cannot be
repaired within thirty (30) working days at the option of Landlord to be
exercised within thirty (30) days after such damage or destruction,
6
<PAGE>
this Lease Agreement shall terminate, and the rental shall abate from and after
the date of destruction or damage. If, however, the building is only partially
destroyed by any of the above causes and the damage to the building can be
repaired within the 30-day period, Landlord shall, with all reasonable dispatch,
proceed to repair the building and place it substantially in the same condition
as it was prior to the damage. Tenant shall pay rent to Landlord for the damaged
premises if, and to the extent that, they are fit for occupancy during the time
of repair. If the demised premises are not fit for occupancy during the time of
repair, then the rental shall abate during such time.
10. ASSIGNMENT AND SUBLETTING. Except as provided herein, Tenant shall not
assign or sublet this Agreement without the prior written consent of the
Landlord which will not be unreasonably withheld or delayed. Tenant shall have
the right to assign or sublet this Lease to any of its subsidiaries or
affiliates.
11. SIGNS. Tenant shall be entitled to place, at Tenant's expense, a sign
or signs (the size, design, placement, and configuration of which shall be
subject to Landlord's approval which shall not be unreasonably withheld or
delayed) on the demised premises. Any such signs or other advertising material
placed by Tenant on any part of the demised premises shall comply with any and
all applicable laws, ordinances and regulations.
12. ALTERATIONS. Any construction, alterations, additions, improvements or
modifications, both interior and exterior, to the demised premises must first be
approved by the Landlord in writing which shall not be unreasonably withheld or
delayed.
13. PLATE GLASS. Tenant, and not Landlord, shall be fully responsible for
the replacement of any broken plate glass during the term of this Lease.
7
<PAGE>
14. LANDLORD'S RIGHT OF ENTRY. Landlord shall have the right to enter the
demised premises during reasonable business hours for the purpose of inspection
upon reasonable advance notice to Tenant.
15. NOT A PARTNERSHIP. Notwithstanding any provision hereof, this Lease
and the tenancy hereby created do not and shall not create a partnership or
joint venture between Landlord and Tenant. Both parties hereby expressly deny
any intent to form any joint venture or partnership between them.
16. DEFAULT; REMEDIES. In case of default by Tenant in the payment of rent
or in any of the covenants herein, the Landlord may at its discretion and in
addition to any other remedies at law or in equity, at once, without notice to
the Tenant or to any other person, declare the lease forfeited; and thereupon,
unless Tenant shall have completely cured the default, this Lease shall
terminate and Landlord's agent or attorney shall have the right, without notice
or demand, to re-enter and remove all persons and Tenant's property therefrom
without being deemed guilty of any manner of trespass. Upon termination,
Landlord shall make reasonable efforts to relet the demised premises which
efforts are defined in this Paragraph 16 as listing the demised premises with a
local real estate broker with expertise in commercial real estate. Any financial
liability of Tenant to Landlord that exists shall be offset by the collection of
rent in the aforesaid reletting. Tenant expressly waives the service of any
notice of intention to terminate this Lease or to re-enter said premises. If on
account of the default by Tenant of any of the obligations hereunder it shall
become necessary for Landlord to employ an attorney to enforce or defend any of
Landlord's rights or remedies hereunder, then, in any event, Tenant shall be
liable, over and above any amount otherwise owing unto Landlord, for any
reasonable amount incurred by Landlord as attorney's fees.
8
<PAGE>
17. QUIET ENJOYMENT. Tenant may have and quietly enjoy the demised
premises during the term of this Lease provided Tenant complies with the
provisions of this Lease Agreement.
18. ADDRESSES AND NOTICES. The monthly installments of rent shall be
divided equally and paid by separate checks to Landlord at the following
addresses: one-half (1/2) to Landlord Lerch at his address at 618 Indian Lane,
Salisbury, Maryland 21801; and the other one-half (1/2) to Landlord Thompson at
his address at 638 River Oak Court, Salisbury, Maryland 21801. All notices from
Tenant to Landlord required or permitted by any provision of this Lease
Agreement shall be directed to each Landlord at the same addresses. All notices
from Landlord to Tenant so required or permitted shall be directed to Tenant, at
the following address: 109 Poplar Hill Avenue, Salisbury, Maryland 21801. Any
party to this Lease Agreement (including either of the parties comprising of the
State Landlord) may, at any time or from time to time, designate in writing a
substitute address for that above set forth, and thereafter rent installments
and/or notices shall be directed to such substitute address.
19. MISCELLANEOUS.
--------------
A. Time is of the essence.
B. This Lease Agreement shall be interpreted and enforced in
accordance with the law of the State of Maryland.
C. The captions or headings herein are included for ease of
reference only and shall not be construed to limit or restrict any provision or
term hereof.
D. This Lease shall not be amended or modified except by the written
agreement of the parties executed with the same formalities as this original.
9
<PAGE>
E. This Lease Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective personal representatives or
successors and assigns.
20. RIGHT TO PURCHASE. During the term of this Lease or any renewals
thereof, upon receipt by Landlord of any bona fide offer ("Offer") to purchase
the premises demised herein and Landlord's acceptance thereof subject to this
Paragraph 20, Tenant shall have the right to purchase the premises on the same
terms and conditions contained in the Offer, with the exception of the date of
closing. Tenant shall have fifteen (15) days from the date it receives a copy of
any Offer or contract received by Landlord regarding a sale of the premises to
notify Landlord whether it will purchase the premises. If Tenant does notify
Landlord of its desire to purchase the premises, it will close such purchase
within forty-five (45) days of sending such notice to Landlord.
IN WITNESS WHEREOF the parties hereto have set their hands and seals the
day and year first above written.
WITNESS:
/s/ John R. Lerch (SEAL)
- ----------------------- --------------------------------------
John R. Lerch
/s/ Thomas C. Thompson (SEAL)
- ----------------------- --------------------------------------
Thomas C. Thompson
- LANDLORD -
10
<PAGE>
ATTEST:
BAY NATIONAL CORP.
By: /s/ Hugh W. Mohler (SEAL)
- ------------------------ ---------------------------------
Hugh W. Mohler, President
- TENANT-
11
EXHIBIT 21.1
Bay National Bank will be a wholly-owned subsidiary of Bay National
Corporation.
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Registration Statement on Form SB-2 of
our report dated September 13, 1999 relating to the financial statements of Bay
National Corporation as of August 31, 1999 and for the period from June 3, 1999
(date of inception) to August 31, 1999 and to the reference of our Firm under
the caption "Experts" in the Prospectus.
/s/ Stegman & Company
Baltimore, Maryland
September 20, 1999
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUN-03-1999
<PERIOD-END> AUG-31-1999
<CASH> 1,048,218
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 1,086,387
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 71,296
<LONG-TERM> 0
0
0
<COMMON> 1,125
<OTHER-SE> 1,013,966
<TOTAL-LIABILITIES-AND-EQUITY> 1,086,387
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 1,633
<INTEREST-TOTAL> 1,633
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 1,633
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 111,542
<INCOME-PRETAX> (109,909)
<INCOME-PRE-EXTRAORDINARY> (109,909)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (109,909)
<EPS-BASIC> (0.98)
<EPS-DILUTED> (0.98)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
EXHIBIT 99.2
BAY NATIONAL CORPORATION
A Minimum of
900,000 Shares of Common Stock @ $10.00 per Share ($9,000,000)
Up To A Maximum of
1,500,000 Shares of Common Stock @ $10.00 per Share ($15,000,000)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
September 15, 1999, by and between Bay National Corporation, a Maryland
corporation, Suite 120, 2328 W. Joppa Road, Baltimore, Maryland 21093 (the
"Corporation"), and Brown Brothers Harriman & Co., a bank chartered under the
laws of the Commonwealth of Pennsylvania (the "Escrow Agent").
WHEREAS: The Corporation proposes to offer for sale and to sell, pursuant
to an initial public offering (the "Offering"), a minimum of 900,000 and up to a
maximum of 1,500,000 shares (the "Shares") of its common stock, $0.01 per share
(the "Common Stock"), at a price of Ten Dollars ($10.00) per Share; and
WHEREAS: The Corporation desires to establish an Escrow Account (as
defined herein) in which funds from subscribers will be deposited pending
completion of the Escrow Period (as defined herein) and Brown Brothers Harriman
& Co. agrees to serve as Escrow Agent in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Escrow. On or prior to the date of the commencement of the Offering
(the "Effective Date"), the Corporation shall establish an interest-bearing
escrow account with the Escrow Agent, which escrow account shall be entitled
"Brown Brothers Harriman & Co., Escrow Agent for Bay National Corporation" (the
"Escrow Account"). The Escrow Agent shall receive and disburse the proceeds from
the sale of Shares in accordance with the terms of this Agreement. The Company
will provide instructions to subscribers to make checks for subscriptions
payable to the order of "Brown Brothers Harriman & Co., Escrow Agent for Bay
National Corporation" or to wire funds directly to the Escrow Account. Any
checks received by the Escrow Agent that are made payable to a party other than
the Escrow Agent shall be returned to the Corporation.
2. Escrow Deposits and Subscriber Information. The Corporation shall
promptly deliver all monies received from subscribers for the payment of Shares
directly to the Escrow Agent together
<PAGE>
with a written account of each sale, which account shall set forth, among other
things, the subscriber's name, address, social security number or taxpayer
identification number, the number of Shares purchased, the amount paid therefor,
and whether the consideration received was in the form of a check, draft or
money order. In addition, the Corporation shall promptly provide such
information to the Escrow Agent for all subscriptions made by wire transfer.
Fractional payments and incomplete accounts shall not be delivered to the Escrow
Agent. During the Escrow Period (as defined herein), the Escrow Agent shall
deposit all monies received into the Escrow Account, and all monies so deposited
are hereinafter referred to as the "Escrow Amount."
The period during which funds shall be held in escrow (the "Escrow
Period") shall begin on the Effective Date and shall terminate upon the earlier
to occur of the following dates:
A. The Escrow Release Date (as defined in Section 5) assuming
that as of such date the Escrow Agent has received at least
$9,000,000 in Collected Funds (as defined in Section 5).
B. 5:00 P.M. EST, January 31, 2000 (unless extended by the
Corporation to not later than 5:00 P.M., March 31, 2000); or
C. The date upon which a determination is made by the Corporation
to terminate the Offering prior to the sale of 900,000 Shares,
and the Escrow Agent is notified in writing by the Corporation
of such termination.
During the Escrow Period, the Corporation is aware and understands that
the Corporation is not entitled to any funds properly received into escrow and
accepted by the Escrow Agent and no amounts deposited in the Escrow Account
shall become the property of the Corporation or any other entity, or be subject
to the debts of the Corporation or any other entity, unless and until such funds
are transferred by the Escrow Agent to the Corporation subject to the provisions
of this Agreement.
3. Collection of Checks. During the Escrow Period, the Escrow Agent is
hereby authorized to forward each check for collection and, upon collection of
the proceeds of each check, deposit the collected proceeds in the Escrow
Account. As an alternative, the Escrow Agent may telephone the bank on which the
check is drawn to confirm that the check has been paid. Any check returned
unpaid shall be returned to the Corporation.
If the Corporation rejects all or part of any subscription for which the
Escrow Agent has already collected funds, the Escrow Agent shall promptly issue
a refund check in the amount of the rejected subscription to the rejected
subscriber. If the Corporation rejects all or part of any subscription for which
the Escrow Agent has not yet collected funds but has submitted the subscriber's
check for collection, the Escrow Agent shall promptly issue a check in the
amount of the rejected subscription to the rejected subscriber after the Escrow
Agent has cleared such funds. If the Escrow Agent has not yet submitted a
rejected subscriber's check for collection, the Escrow Agent shall promptly
remit the subscriber's check directly to the subscriber. In any such event, the
<PAGE>
Corporation shall deliver a "Notice of Rejection" to Escrow Agent substantially
in the form of Exhibit A, attached hereto and incorporated by reference herein,
and the Escrow Agent shall not take any action pursuant to this paragraph unless
it is in receipt of a Notice of Rejection.
4. Investment of Escrow Amount. The Escrow Amount shall be invested by the
Escrow Agent at the written direction of the Corporation only in bank accounts,
including savings accounts and bank money-market accounts, short-term
certificates of deposit issued by a bank or short-term securities issued or
guaranteed by the United States Government. In no event shall the Escrow Amount
be invested in instruments that would mature after January 31, 2000 or such date
not later than March 31, 2000 (in the event the Offering is extended by the
Corporation).
5. Escrow Release Date. "Qualifying Subscriptions" as used herein shall
mean all subscriptions that have been received and accepted by the Corporation.
If, at any time prior to the termination of the Escrow Period, the Corporation
has received Qualifying Subscriptions for at least $9,000,000 of Shares and
preliminary approval by the Office of the Comptroller of the Currency (the
"OCC") of the charter of the Corporation's proposed banking subsidiary, Bay
National Bank (the "Bank"), has been received, then the Corporation shall notify
the Escrow Agent and by instructions which shall accompany such notice (such
notice and such instructions to be referred to herein as the "Escrow Closing
Notice") given at least one (1) business day in advance of the date on which the
Corporation intends to obtain a release of funds from the Escrow Account (the
"Escrow Release Date"), shall specify the Escrow Release Date (which must be not
more than ten (10) days after the termination of the Escrow Period) and the
amount of Qualifying Subscriptions accepted by the Corporation as of the date of
the Escrow Closing Notice. The Escrow Closing Notice shall be substantially in
the form attached hereto and incorporated by reference herein as Exhibit B.
On the Escrow Release Date, the Escrow Agent, upon receipt of a
certificate (the "Closing Certificate" from the Corporation certifying that the
Corporation has accepted Qualifying Subscriptions for at least $9,000,000 in
Shares and that the OCC has granted preliminary approval to the Bank's charter,
shall pay to the Corporation the amount specified in the Escrow Closing Notice,
and shall additionally pay to the Corporation the interest earned on all
subscriptions. The Escrow Agent shall pay the Corporation in the form of the
Escrow Agent's check or a wire transfer directly to a non-escrow deposit account
(the "Deposit Account") established by the Corporation at the Escrow Agent or at
another depositary institution identified to the Escrow Agent. The Closing
Certificate shall be substantially in the form of Exhibit C, attached hereto and
incorporated by reference herein.
Notwithstanding anything to the contrary in this Agreement, in no event
will the Escrow Agent pay over any amount to the Corporation unless the Escrow
Agent has received at least $9,000,000 in Collected Funds. For purposes of this
Agreement, the term "Collected Funds" shall mean all funds received by the
Escrow Agent which have cleared normal banking channels and are in the form of
cash.
<PAGE>
6. Subscriptions Received After Escrow Release Date. After the Escrow
Release Date, any subscriptions received by the Escrow Agent shall be endorsed
by the Escrow Agent to the Corporation and deposited directly into the Deposit
Account. Assuming the acceptance of such subscriptions, such deposits, upon
clearing normal banking channels, shall be immediately available for use by the
Corporation and the Escrow Agent shall have no obligations with respect to such
deposits.
7. Failure to Meet Conditions. If, prior to the termination of the Escrow
Period, the Escrow Agent has not received the Escrow Closing Notice, the Closing
Certificate and $9,000,000 in Collected Funds, then the Escrow Agent, upon
instructions from the Corporation (the "Refund Instructions") as to the name and
address of each subscriber, the subscription funds in the Escrow Account from
each subscriber and the interest earned by each subscriber on the subscriber's
subscription funds (such subscription funds and interest being referred to
herein as the "Refund Amount"), shall promptly refund to each subscriber the
subscriber's Refund Amount, without deduction, penalty, or expense to the
subscriber, in the form of the Escrow Agent's check and the Escrow Agent shall
inform the Corporation of its distribution of the funds. Interest received from
the investment of the Escrow Amount shall be credited to the subscribers in
proportion to the amounts deposited with respect to each subscriber and in
proportion to the number of days the collected Escrow Amount from each
subscriber was held in the Escrow Account. The purchase money returned to each
subscriber shall be free and clear of any and all claims of the Corporation or
any of its creditors. The Refund Instructions shall be substantially in the form
of Exhibit D, attached hereto and incorporated by reference herein.
8. Duties of Escrow Agent. Escrow Agent shall have no liability or
obligation with respect to the Escrow Amount except for Escrow Agent's willful
misconduct or gross negligence. Escrow Agent's sole responsibility shall be for
the safekeeping and delivery of the Escrow Amount in accordance with the terms
of this Agreement. Escrow Agent shall have no implied duties or obligations and
shall not be charged with knowledge or notice of any fact or circumstance not
specifically set forth herein. Escrow Agent may rely upon any instrument, not
only as to its due execution, validity and effectiveness, but also as to the
truth and accuracy of any information contained therein, which Escrow Agent in
good faith believe to be genuine, to have been signed or presented by the person
or parties purporting to sign the same and to conform to the provisions of this
Agreement. In no event shall Escrow Agent be liable for incidental, indirect,
special, consequential or punitive damages. Escrow Agent shall not be obligated
to take any legal action or commence any proceeding in connection with the
Escrow Amount, any account in which the Escrow Amount is deposited or this
Agreement, or to appear in, prosecute or defend any such legal action or
proceeding. Escrow Agent may consult legal counsel selected by it in the event
of any dispute or question as to the construction of any of the provisions
hereof or of any other agreement or of its duties hereunder, and shall incur no
liability and shall be fully protected from any liability whatsoever in acting
in accordance with the opinion or instruction of such counsel. The Corporation
shall promptly pay, upon demand, the reasonable fees and expenses of any such
counsel.
<PAGE>
9. Resignation and Removal of Escrow Agent. Escrow Agent may resign from
the performance of its duties hereunder at any time by giving ten (10) days'
prior written notice to the Corporation, or may be removed, with or without
cause, by the Corporation by written direction of the Corporation to Escrow
Agent at any time by the giving of ten (10) days' prior written notice to Escrow
Agent. Such resignation or removal shall take effect upon the appointment of a
successor Escrow Agent as provided hereinbelow. Upon any such notice of
resignation or removal, the Corporation shall appoint a successor Escrow Agent
hereunder, which shall be an entity authorized by applicable law to serve as an
escrow agent for the Offering. Upon the acceptance in writing of any appointment
as Escrow Agent hereunder by a successor Escrow Agent, such successor Escrow
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Escrow Agent, and the retiring Escrow
Agent shall be discharged from its duties and obligations under this Agreement,
but shall not be discharged from any liability for actions taken as Escrow Agent
hereunder prior to such succession. After any retiring Escrow Agent's
resignation or removal, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Escrow
Agent under this Agreement.
10. Indemnification of Escrow Agent. From and at all times after the date
of this Agreement, the Corporation shall, to the fullest extent permitted by law
and to the extent provided herein, indemnify and hold harmless Escrow Agent and
each director, officer, partner, employee, attorney, agent and affiliate of
Escrow Agent (collectively, the "Indemnified Parties") against any and all
actions, claims (whether or not valid), losses, damages, liabilities, costs and
expenses of any kind or nature whatsoever (including without limitation
reasonable attorneys' fees, costs and expenses) incurred by or asserted against
any of the Indemnified Parties from and after the date hereof, whether direct,
indirect, or consequential, as a result of or arising from or in any way
relating to any claim, demand, suit, action or proceeding (including any inquiry
or investigation) by any person, whether threatened or initiated, asserting a
claim for any legal or equitable remedy against any person under any statute or
regulation, including, but not limited to, any federal or state securities laws,
or under any common law or equitable cause or otherwise, arising from or in
connection with the negotiation, preparation, execution, performance or failure
of performance of this Agreement or any transactions contemplated herein,
whether or not any such Indemnified Party is a party to any such action,
proceeding, suit or the target of any such inquiry or investigation; provided,
however, that no Indemnified Party shall have the right to be indemnified
hereunder for any liability finally determined by a court of competent
jurisdiction, subject to no further appeal, to have resulted solely from the
gross negligence or willful misconduct of such Indemnified Party. If any such
action or claim SHALL be brought or asserted against any Indemnified Party, such
Indemnified Party shall promptly notify the Corporation, in writing, and the
Corporation shall assume the defense thereof, including the employment of
counsel and the payment of all expenses, provided, however, that such counsel
shall be reasonably acceptable to Indemnified Party. Such Indemnified Party
shall, in its sole discretion, have the right to employ separate counsel in any
such action and to participate in the defense thereof, and the fees and expenses
of such counsel shall be paid by such Indemnified Party unless (a) the
Corporation agrees to pay such fees and expenses, or (b) the Corporation shall
fail to assume the defense of such action or proceeding or shall fail, in the
reasonable judgment of such Indemnified Party, to employ counsel satisfactory to
the Indemnified
<PAGE>
Party in any such action or proceeding, or (c) the named parties to such action
or proceeding (including any impleaded parties) include both Indemnified Party
and the Corporation and Indemnified Party shall have been advised by counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the Corporation. All such fees and
expenses payable by the Corporation pursuant to the foregoing sentence shall be
paid from time to time as incurred, both in advance of and after the final
disposition of such action or claim. All of the foregoing losses, damages, costs
and expenses of the Indemnified Parties shall be payable by the Corporation upon
demand by such Indemnified Party. The obligations of the Corporation under this
Section 10 shall survive any termination of this Agreement and the resignation
or removal of Escrow Agent.
11. Remuneration. The Corporation agrees to pay to the Escrow Agent and
the Escrow Agent agrees to accept as remuneration for services rendered as
Escrow Agent hereunder, a set-up fee of in the amount of Five Thousand Dollars
($5,000) and such other fees for services as the Corporation and the Escrow
Agent may agree. In addition, in the event that the Escrow Agent is required to
remit to the subscribers the respective amounts of their funds received under
this Agreement in accordance with Section 3 or Section 7 hereof, the Corporation
agrees to pay to the Escrow Agent an additional amount sufficient to reimburse
the Escrow Agent for its actual costs in disbursing such funds. However, no
fees, reimbursement for costs and expenses, indemnification for any damages, or
any monies whatsoever shall be paid out of or chargeable to the funds on deposit
in the Escrow Account.
12. Disputes. If the Corporation and/or any other party disagree on any
matter connected with the Escrow Account (a) the Escrow Agent may wait for a
settlement by appropriate legal proceedings or other means that the Escrow Agent
may require, and in such event the Escrow Agent will not be liable for interest
or damage, (b) the Escrow Agent will be entitled to such reasonable compensation
for services, costs and attorneys' fees as a court may award if the Escrow Agent
intervenes in or is made a party to any legal proceedings, (c) the Escrow Agent
shall be entitled to hold documents and funds deposited in the Escrow Account
pending settlement of the disagreement by any of the above means, and (d) the
Escrow Agent shall be entitled to file an interpleader action and deposit any
funds or property with an appropriate court.
13. Notices to Escrow Agent. Any written notice required to be given or
delivered to the Escrow Agent shall be deemed conclusively given and delivered
hereunder if the written notice is mailed, by registered or certified mail or by
overnight delivery service, addressed as follows:
Harry R. Madeira, Jr.
Brown Brothers Harriman & Co.
1531 Walnut Street
Philadelphia, PA 19102
<PAGE>
14. Assignment. This Agreement may be assigned by a party hereto only with
the consent of the other party, and shall be binding on the successors and
permitted assigns of each of the parties.
15. Governing Law. This Agreement shall be governed, construed and
enforced in accordance with laws of the State of Maryland, without regard to the
principles of conflicts of laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BAY NATIONAL CORPORATION
By:_________________________________
Hugh W. Mohler, President
BROWN BROTHERS HARRIMAN & CO.
By:_________________________________
Harry R. Madeira, Jr., Manager
<PAGE>
EXHIBIT A
---------
[BAY NATIONAL CORPORATION LETTERHEAD]
[DATE]
Brown Brothers Harriman & Co.
1531 Walnut Street
Philadelphia, PA 19102
Attn: Harry R. Madeira, Jr.
Dear Gary:
This letter is being sent to you pursuant to Section 3 of that certain
Escrow Agreement (the "Escrow Agreement") dated as of September __, 1999 by and
between Brown Brothers Harriman & Co. ("Escrow Agent") and Bay National
Corporation (the "Corporation"). This letter shall constitute a Notice of
Rejection pursuant to said section. All capitalized terms used but not otherwise
defined in this letter shall have the meaning ascribed to the term in the Escrow
Agreement.
Please be advised that the Corporation has rejected the subscription of
_____________, [name and address] (the "Subscriber") in the amount of __________
(the "Rejection Amount"). Subscription funds from the Subscriber were forwarded
to the Escrow Agent on _____________ [date].
Accordingly, (i) if the Escrow Agent has already collected funds from the
Subscriber's subscription, the Escrow Agent shall promptly issue a refund check
in the Rejection Amount to the Subscriber; (ii) if the Escrow Agent has not yet
collected funds from the Subscriber's subscription, but has submitted the
Subscriber's check for collection, the Escrow Agent shall promptly issue a
refund check in the Rejection Amount to the Subscriber after the Escrow Agent
has cleared such funds; and (iii) if the Escrow Agent has not yet submitted the
Subscriber's check for collection, the Escrow Agent shall promptly remit the
Subscriber's check directly to the Subscriber.
Please call me if you have any questions regarding the foregoing.
Sincerely,
Hugh W. Mohler, President,
Bay National Corporation
<PAGE>
EXHIBIT B
---------
[BAY NATIONAL CORPORATION LETTERHEAD]
[DATE]
Brown Brothers Harriman & Co.
1531 Walnut Street
Philadelphia, PA 19102
Attn: Harry R. Madeira, Jr.
Dear Gary:
This letter is being sent to you pursuant to Section 5 of that certain
Escrow Agreement (the "Escrow Agreement") dated as of September __, 1999 by and
between Brown Brothers Harriman & Co. ("Escrow Agent") and Bay National
Corporation (the "Corporation"). This letter shall constitute the Escrow Closing
Notice referred to in said section. All capitalized terms used but not otherwise
defined in this letter shall have the meaning ascribed to the term in the Escrow
Agreement.
As of _________ [date], the Company has received Qualifying Subscriptions
for $______ in Shares and has received preliminary approval by the OCC of the
Bank's charter.
Accordingly, it is now appropriate for the subscription funds to be
released from escrow. We request that $___________, which represents funds for
Qualifying Subscriptions accepted as of the date of this letter, along with
interest that has accrued on such amount, be released from the Escrow Account on
___________ [date] at _____________ p.m. (the "Escrow Release Date") to the
Company's account at ____________________ (Account No. _______________).
Please call me if you have any questions regarding the foregoing.
Sincerely,
Hugh W. Mohler, President,
Bay National Corporation
<PAGE>
EXHIBIT C
---------
CERTIFICATE OF BAY NATIONAL CORPORATION
The undersigned, the duly elected and acting President of Bay National
Corporation, a Maryland corporation (the "Corporation"), hereby certifies to
Brown Brothers Harriman & Co. (the "Escrow Agent") to the best of the
undersigned's knowledge, information and belief, that, as of the date hereof,
the Corporation has accepted Qualifying Subscriptions for at least $9,000,000 in
Shares and the OCC has granted preliminary approval to the Bank's charter.
All capitalized terms used but not otherwise defined in this Certificate
shall have the meaning ascribed to the term in that certain Escrow Agreement
dated as of September __, 1999 by and between the Escrow Agent and the
Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate, under
seal, as of the __ day of ___________, 1999.
____________________________
Hugh W. Mohler, President,
<PAGE>
EXHIBIT D
---------
[BAY NATIONAL CORPORATION LETTERHEAD]
[DATE]
Brown Brothers Harriman & Co.
1531 Walnut Street
Philadelphia, PA 19102
Attn: Harry R. Madeira, Jr.
Dear Gary:
This letter is being sent to you pursuant to Section 7 of that certain
Escrow Agreement (the "Escrow Agreement") dated as of September __, 1999 by and
between Brown Brothers Harriman & Co. ("Escrow Agent") and Bay National
Corporation (the "Corporation"). This letter shall constitute the Refund
Instructions pursuant to said section. All capitalized terms used but not
otherwise defined in this letter shall have the meaning ascribed to the term in
the Escrow Agreement.
Please send to each subscriber named on Attachment A hereto a check drawn
from the Escrow Account in the amount of the subscriber's subscription funds and
interest earned on such funds (such amounts being set forth on Attachment A).
Please advise us upon your distribution of the appropriate checks to the persons
named on Attachment A.
Please call me if you have any questions regarding the foregoing.
Sincerely,
Hugh W. Mohler, President,
Bay National Corporation
<PAGE>
ATTACHMENT A
------------
Name and Address Subscriber's
of Subscriber Subscription Funds Interest Refund Due
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