As filed with the Securities and Exchange Commission on November 30, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COMMERCEFIRST BANCORP, INC..
(Name of small business issuer in its charter)
Maryland 6021 52-2180744
(State of other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number
organization) Code Number)
705 Melvin Avenue
Suite 104
Annapolis, Maryland 21401
410.280.6673
(Address and telephone number of principal executive offices)
Richard J. Morgan, President and
Chief Executive Officer
CommerceFirst Bancorp, Inc.
705 Melvin Avenue
Suite 104
Annapolis, Maryland 21401
410.280.6673
(Name, address, including zip code, and telephone number agent for service)
Copies to:
Noel M. Gruber, Esquire Stephen C. Hosea, Esquire
David H. Baris, Esquire Garth E. Beall, Esquire
Kennedy, Baris & Lundy, L.L.P. McNamee, Hosea, Jernigan & Kim, P.A.
4701 Sangamore Road, Suite P-15 6411 Ivy Lane, Suite 200
Bethesda, Maryland 20816 Greenbelt, Maryland 20770
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| ____________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ___________
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ___________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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Title of Shares to be Proposed Maximum Aggregate Amount of Registration Fee
Registered Offering Price
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Common stock $10,000,000 $2,780.00
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(1) Registration fee calculated in accordance with Rules 457(a).
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.
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<PAGE>
PROSPECTUS
800,000 SHARES OF COMMON STOCK
COMMERCEFIRST BANCORP, INC.
CommerceFirst Bancorp, Inc. is being organized to be the holding
company for a state chartered commercial bank in the process of organization,
CommerceFirst Bank, to be headquartered in Annapolis, Maryland. CommerceFirst is
offering to sell up to 800,000 shares of its common stock at a price of $10.00
per share. CommerceFirst may also sell up to an additional 200,000 shares of
common stock if the number of shares subscribed for exceeds the number of shares
offered. No shares will be sold unless acceptable subscriptions for at least
650,000 shares are received.
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SHARES OF COMMERCEFIRST'S COMMON STOCK ARE NOT DEPOSITS, SAVINGS ACCOUNTS, OR
OTHER OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. INVESTING IN
COMMON STOCK INVOLVES INVESTMENT RISKS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE COMMON STOCK OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE OF THIS PROSPECTUS.
<TABLE>
<CAPTION>
Total--Minimum Total--Maximum
number of shares number of shares
Per share subscribed for subscribed for
--------------- --------------------- ----------------------
<S> <C> <C> <C>
Price to public $10.00 $6,500,000 8,000,000
Gross proceeds of the offering $10.00 $6,500,000 $8,000,000
Underwriting discounts and commissions None N/A N/A
Net proceeds of the offering (before
expenses) N/A $6,500,000 $8,000,000
</TABLE>
The date of this prospectus is , 1999
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<PAGE>
SUMMARY
This summary presents selected information from this prospectus. You
should carefully read this entire document in order to understand this offering.
Items in this summary include page references that direct you to more complete
descriptions in this document of the topics discussed.
THE OFFERING
General. CommerceFirst Bancorp, Inc. is offering to sell up to 800,000
shares of its common stock at an offering price of $10.00 per share.
CommerceFirst may also sell up to an additional 200,000 shares of common stock
if the number of shares subscribed for exceeds the number of shares offered. No
shares will be sold unless acceptable subscriptions for at least 650,000 shares
are received. Share subscriptions for which the purchase price will be paid by
submitting shares purchased with organizer contributions will be counted in
determining whether the minimum is met. See "Management's Plan of Operation"
(page 18).
The minimum number of shares which may be subscribed for by any person
is 100. The maximum number of shares which any person, or group of affiliated or
related persons may subscribe is 5% of the total number of shares sold in the
offering, or 32,500 shares ($325,000) if the minimum number of shares is sold,
40,000 shares if the maximum number of shares is sold, and 50,000 shares
($500,000) if all of the oversubscription shares are sold. CommerceFirst may,
however, permit larger subscriptions in its discretion. It is currently the
intention of the CommerceFirst to permit larger subscriptions for certain of the
organizers. A person subscribing for 5% or more of the common stock may be
required to file applications with state or federal bank regulatory agencies as
a condition of the purchase. CommerceFirst reserves the right to reduce, or
reject, in whole or in part, any subscription which would require prior
regulatory application or approval if such approval is not obtained prior to the
termination of the offering. "The Offering--General" (page 9).
The offering is being conducted through the efforts of the organizing
directors and officers of CommerceFirst and CommerceFirst Bank, with the limited
assistance of Koonce Securities, Inc., a registered broker dealer, in order to
comply with the securities laws of the jurisdictions in which the common stock
will be offered. See "The Offering--Manner of Distribution" (page 12).
Proceeds of the Offering. If the maximum number of the shares being
offered is sold, the gross proceeds of the offering will be $8,000,000 and the
net proceeds of the offering will be $7,890,000, after estimated expenses of the
offering. If the minimum number of shares being offered are sold, the gross
proceeds of the offering will be $6,500,000, and the net proceeds will be
$6,390,000, after expenses. If all of the oversubscription shares are sold, then
the gross proceeds will be $10,000,000, and the net proceeds will be $9,890,000
after expenses.
Use of Proceeds. The first $6,000,000 of the net proceeds of the
offering will be used to purchase all of the then-issued shares of common stock
of CommerceFirst Bank. If applicable federal or state bank regulatory agencies
require or permit a different minimum capitalization for CommerceFirst Bank,
CommerceFirst may, but is not required to, purchase all of the then-issued
shares of common stock of CommerceFirst Bank for that greater or lesser amount.
Net proceeds in excess of $6,000,000 (or such other minimum amount that the
federal or state bank regulatory agencies may require or permit) will be
invested in short term U.S. government securities or other investments
authorized for bank holding companies, until such proceeds are used as working
capital or contributed to CommerceFirst Bank. In addition to acting as the
holding company for CommerceFirst Bank, CommerceFirst may engage in non-banking
activities permissible for bank holding companies, including but not limited to
leasing and mortgage banking activities. Whether or not CommerceFirst
contributes additional proceeds of the offering to CommerceFirst Bank will
depend on the total amount raised.
CommerceFirst Bank will use the funds contributed by CommerceFirst to
furnish and equip its facilities, to provide working capital, and for its
general corporate purposes, including use in its lending and investment
activities. See "Use of Proceeds" (page 12).
Termination of the Offering. The offering will run until _____ ____,
unless the Board of Directors of CommerceFirst elects to extend the offering to
a date not later than _______, ____. See
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"The Offering--General" (page 9).
Procedure for Subscribing to Shares. To subscribe for shares, you
should complete the subscription agreement accompanying this prospectus and
submit it, along with payment in full for the shares, to Koonce Securities,
Inc., the subscription agent for the offering, prior to the expiration of the
offering. You should carefully follow the instructions contained in this
prospectus under the caption "The Offering" and those included on the order
form. See "The Offering--Method of Subscription (page 9).
Escrow Account. Until a subscription is accepted, subscription funds
will be held in an in an escrow account under the control of an independent
escrow agent. If the offering is not completed, or if your subscription is not
accepted in whole or in part, your funds will be returned without interest or
deduction, except that interest will be paid to the extent that law, regulation
or administrative policy of the investor's state of residence specifically
requires. See "The Offering--Escrow Account; Release of Funds" (page 10).
COMMERCEFIRST BANCORP, INC.
COMMERCEFIRST BANCORP, INC.
705 Melvin Avenue
Suite 104
Annapolis, Maryland 21401
410.280.6673
CommerceFirst Bancorp, Inc. was incorporated under Maryland law on July
9, 1999, to be the bank holding company for CommerceFirst Bank. CommerceFirst
Bank is in the process of being chartered as a Maryland commercial bank and will
be headquartered in Annapolis, Maryland. Subject to receipt of regulatory
approvals, CommerceFirst Bank will be a member of the Federal Reserve System.
CommerceFirst will initially use $6,000,000 (or other minimum amount that may be
required or permitted by the applicable federal or state bank regulatory
agencies) of the proceeds of this offering to purchase all of the then-issued
shares of the common stock of CommerceFirst Bank. In addition to serving as the
holding company for CommerceFirst Bank, CommerceFirst may engage in other
business activities permitted for bank holding companies. See "Use of Proceeds"
(page 12) and "CommerceFirst Bancorp, Inc.--Supervision and Regulation" (page
19).
Neither CommerceFirst nor CommerceFirst Bank has commenced operations
and neither will do so unless this offering is completed and the approvals of
the Maryland Department of Financial Regulation, Board of Governors of the
Federal Reserve System and Federal Deposit Insurance Corporation are received.
As of October 31, 1999 CommerceFirst's assets were $230,500, consisting of cash
and equipment, and its total shareholders' equity was $230,500.
CommerceFirst's organizational activities have been funded by the
purchase of organizer shares by each of the 13 organizers. Each organizer
purchased 25 shares of common stock at a price of $1,000 per share, or an
aggregate of $325,000 and 325 shares of common stock. Organizers will purchase
additional shares of common stock at $1,000 per share as necessary to provide
additional funds for CommerceFirst's organizational activities prior to the
completion of this offering. Each of these shares will be used for the purchase
of 100 shares of common stock in the offering. The shares to be purchased in the
offering with the organizers shares will be counted in determining whether the
minimum number of shares is subscribed for in the offering. See "Management's
Plan of Operation" (page 18).
CommerceFirst Bank has not yet engaged in any business operations and
is in the process of obtaining the approvals necessary to commence operations as
a commercial bank. It is anticipated that CommerceFirst Bank, which will have a
primary market area in Anne Arundel County, Maryland, will open in the second
quarter of 2000, although we cannot be sure as to the date actual operations
will begin. See "CommerceFirst" (page 19).
CommerceFirst and CommerceFirst Bank are being organized by a group of
individuals active in business, professional, banking, financial and charitable
activities in Anne Arundel, Prince George's, Howard and Calvert Counties,
Maryland, and the surrounding areas, and a Pennsylvania financial institution
with which CommerceFirst Bank expects to work cooperatively in the future. Many
of the organizers and proposed Directors and Officers of CommerceFirst and
CommerceFirst Bank have significant prior experience and contacts from service
with other successful community banks. See "Management" (page 23). It is the
present intention of CommerceFirst to seek to establish branch offices of
CommerceFirst Bank as rapidly as possible in order to more effectively service
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<PAGE>
anticipated customer relationships, and better compete in a highly competitive
environment, including the establishment of two branch offices within thirty-six
months of opening for business. There can be no assurance that we will be able
to establish any additional branches, that any of the anticipated relationships
will materialize, or that CommerceFirst Bank will be able to compete
successfully.
Organizer Warrants. Upon completion of the offering, and subject to
regulatory approval, the organizers of CommerceFirst and CommerceFirst Bank will
receive warrants to purchase a number of shares of common stock equal to 15% of
the total number of shares sold in the offering (97,500 shares if the minimum
number of shares are sold, 120,000 shares if the maximum number of shares are
sold and 150,000 shares if all of the oversubscription shares are sold). In
general, the warrants will have a term of ten years and will vest over a three
year period. If not exercised, the warrants will be subject to mandatory
exercise or termination after the organizer ceases to be a director of
CommerceFirst Bank or CommerceFirst. The warrants will have an exercise price
equal to $10.00 per share. See "Executive Compensation and Certain Transactions
with Management--Organizer Warrants" (page 29).
Stock Options. Upon completion of the offering, and subject to
regulatory approval and approval a majority of the outstanding common stock
after this offering, CommerceFirst intends to adopt a Stock Option Plan to
attract and retain highly qualified personnel. The plan would be administered by
a committee appointed by the Board and would provide incentive options available
for grant to officers and key employees of CommerceFirst and CommerceFirst Bank.
The exercise price under each incentive stock option would not be less than 100%
of the fair market value of the shares on the date the option is granted. The
plan would have a ten year term, and the term of the options would be limited to
ten years. See "Executive Compensation and Certain Transactions with Management
- - Incentive Stock Option Plan" (page 29).
RISK FACTORS
Investment in the common stock involves certain risks, including but
not limited to the possibility that there will not be a trading market, active
or otherwise, for the common stock, the lack of an operating history of
CommerceFirst and CommerceFirst Bank and the fact that CommerceFirst Bank will
be faced with competition from other financial institutions that have
substantially greater financial resources than will CommerceFirst Bank.
Investors should carefully consider the information under "Risk Factors" (page
5).
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<PAGE>
RISK FACTORS
An investment in the common stock involves various risks. You should
carefully consider the risk factors listed below. These risk factors may cause
CommerceFirst's future earnings to be lower or its financial condition to be
less favorable than it expects. You should read this section together with the
other information in this prospectus.
NO ACTIVE PUBLIC MARKET FOR THE COMMON STOCK
SHAREHOLDERS MAY NOT BE ABLE TO EASILY SELL THEIR COMMON STOCK.
While the common stock will be freely transferable by most
shareholders, we do not expect that there will be an active market for trading
the common stock following the offering. We cannot be sure that an active or
established trading market will develop following completion of the offering, or
if one develops, that it will continue, or whether the price of the common stock
will be higher or lower than the offering price. While we currently intend to
list the common stock on The Nasdaq National Market, The Nasdaq SmallCap Market
or another securities market as soon as it meets the listing requirements, the
common stock will not be listed immediately after completion of the offering.
Additionally, even if qualified, future events may cause us to elect not to seek
listing on Nasdaq or another market. There can be no assurance that trading in
the over-the-counter market or through brokers or market makers will develop. As
a result, an investment in the common stock may be relatively illiquid. See "The
Offering--Limited Market for Common Stock" (page 11).
LACK OF OPERATING HISTORY AND PROFITABILITY
COMMERCEFIRST AND COMMERCEFIRST BANK DO NOT HAVE A PROVEN HISTORY OF
PROFITABILITY.
CommerceFirst and CommerceFirst Bank are in the process of
organization, and neither has any prior operating history. CommerceFirst will
not have any initial business activities other than acting as the holding
company for CommerceFirst Bank and investing the proceeds of the offering, and
its profitability will primarily depend on the results of operations of its
principal asset, CommerceFirst Bank. Although the organizing directors and
executive officers have significant experience and contacts in the market in
which CommerceFirst Bank will operate, it is expected that CommerceFirst Bank
will incur operating losses during its initial years of operation, and may not
achieve significant profitability, if at all, for at least three years. No
assurance can be given as to CommerceFirst Bank's long-term profitability. The
cost of opening branch offices may further delay profitability. There can be no
assurance that CommerceFirst Bank will receive approval to establish its first
two branches as planned. See "Business of CommerceFirst" (page 14).
SUBSTANTIAL OWNERSHIP CONCENTRATION
MANAGEMENT MAY BE ABLE TO ELECT THE ENTIRE BOARD OF DIRECTORS.
Directors and Officers of CommerceFirst and CommerceFirst Bank have
indicated that they and their affiliates intend to purchase at least 330,000
shares of common stock in the offering. These persons may purchase a greater or
lesser number of shares in the offering. If such persons purchase the number of
shares indicated, then at least 33% of the common stock (if all of the
oversubscription shares are sold), and as much as 50.77% of the common stock (if
the minimum number of shares are sold) will be owned by Directors and Officers
of CommerceFirst and CommerceFirst Bank and their affiliates. This level of
ownership may enable these persons to elect the entire Board of Directors, if
they voted together. See "Management " (page 23).
MANAGEMENT MAY BE ABLE TO BLOCK ACTION BY SHAREHOLDERS.
By voting against a proposal submitted to shareholders, the Directors
and Officers of CommerceFirst and CommerceFirst Bank, as a group, would be able
to block approval of any proposal submitted to shareholders which requires an
80% vote of shareholders (such as certain votes under Maryland's statute
regarding business combinations with certain "interested stockholders"), and
make approval more difficult for proposals requiring the vote of two-thirds of
shareholders (such as mergers, share exchanges, certain asset sales, and
amendments to CommerceFirst's Articles of Incorporation). See "Management" (page
23).
ARBITRARILY DETERMINED SUBSCRIPTION PRICE
THE BOARD OF DIRECTORS DETERMINED THE OFFERING PRICE IN ITS DISCRETION.
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The subscription price of the common stock has been arbitrarily
determined by the Board of Directors of CommerceFirst, and no independent
investment banking firm was retained to assist in such determination. The $10.00
per share price bears no relationship to the assets, earnings, book value or
other established measure of value; rather, in fixing the price the Board
considered, among other things, the subscription prices of securities offered by
other newly organized financial institutions and bank holding companies.
DIVIDEND RESTRICTIONS
THE ABILITY TO PAY DIVIDENDS IS LIMITED BY LAW AND THE ABILITY OF
COMMERCEFIRST BANK TO EARN A PROFIT.
CommerceFirst Bank will initially be the principal revenue producing
operation of CommerceFirst. As a result, CommerceFirst's ability to pay
dividends will largely depends on receiving dividends from CommerceFirst Bank.
The amount of dividends that CommerceFirst Bank may pay is limited by state and
federal laws and regulations. We expect that CommerceFirst Bank will incur
losses during its initial phase of operations, and therefore, it is not
anticipated that any dividends will be paid by CommerceFirst Bank or
CommerceFirst for at least three years and in the foreseeable future. Even if
CommerceFirst Bank or CommerceFirst have earnings in an amount sufficient to pay
dividends, the Board of Directors may decide to retain earnings for the purpose
of financing growth. No assurance can be given that CommerceFirst Bank's
earnings, if any, will ever permit the payment of any dividends to CommerceFirst
or that CommerceFirst's earnings, if any, will ever permit the payment of
dividends to shareholders. See "Description of Capital Stock--Limitations on
Payment of Dividends" (page 30) and "Limited Market for Common Stock" (page 11).
COMPETITION
COMMERCEFIRST WILL COMPETE WITH OTHERS FOR ITS BUSINESS.
CommerceFirst and CommerceFirst Bank will compete for loans, deposits,
and investment dollars with other banks and other kinds of financial
institutions and enterprises, such as securities firms, insurance companies,
savings and loan associations, credit unions, mortgage brokers, and private
lenders, many of which have substantially greater resources. The differences in
resources and regulations may make it harder for CommerceFirst and CommerceFirst
Bank to compete profitably, reduce the rates that they can earn on loans and
investments, increase the rates they must offer on deposits and other funds, and
adversely affect CommerceFirst's overall financial condition and earnings.
NON-UNDERWRITTEN OFFERING; EFFECT OF SALE OF MINIMUM NUMBER OF SHARES
NO BROKER HAS AGREED TO PURCHASE ANY OF THE COMMON STOCK AND
COMMERCEFIRST MAY NOT BE ABLE TO COMPLETE THE OFFERING. COMMERCEFIRST'S RESULTS
MAY BE ADVERSELY AFFECTED IF ONLY THE MINIMUM NUMBER OF SHARES IS SOLD.
The common stock is being sold directly, through the efforts of the
organizing Directors and Officers of CommerceFirst, with the limited assistance
of a registered broker-dealer for the purpose of compliance with the securities
laws of the jurisdictions in which the shares are being offered. No
broker-dealer which assists in the offering will have any obligation to
purchase, or find purchasers for, any shares of common stock. See "The Offering
- - Manner of Distribution" (page 12).
Because the offering is not underwritten, there can be no assurance
that the minimum number of shares will be sold. If the minimum number of shares
is not subscribed for, subscriber funds will be returned, without deduction, but
subscribers will have lost the use of their funds while the offering is being
conducted. See "The Offering--Escrow Account; Release of Funds" (page 10) and
- --Acceptance and Refunding of Subscriptions" (page 11).
If only the minimum number of shares are sold, CommerceFirst and
CommerceFirst Bank will have less capital to fund initial operating losses,
operations and expansion activities. While we believe that the proceeds of the
sale of the minimum number of shares will be sufficient to finance
CommerceFirst's business plans, the capital levels resulting from the sale of
only the minimum number of shares, in combination with adverse business
conditions, could result in restricted or slower growth for CommerceFirst Bank,
slower establishment of branches or non-banking activities, and lower
shareholder returns. CommerceFirst could be required to raise additional capital
earlier than it would if it sold the maximum number of shares.
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<PAGE>
SHARES AVAILABLE FOR SALE WITHOUT SHAREHOLDER ACTION
MANAGEMENT CAN SELL ADDITIONAL SHARES OF COMMON STOCK WITHOUT
CONSULTING SHAREHOLDERS AND WITHOUT OFFERING SHARES TO EXISTING SHAREHOLDERS,
WHICH COULD RESULT IN DILUTION OF SHAREHOLDERS' INTERESTS IN COMMERCEFIRST.
CommerceFirst's articles of incorporation authorize 4,000,000 shares of
common stock, 800,000 of which are offered in this offering (1,000,000 including
the oversubscription shares). The Board of Directors is authorized to issue
additional shares of common stock, at such times and for such consideration as
it may determine, without shareholder action. The existence of authorized shares
of common stock could have the effect of rendering more difficult or
discouraging hostile takeover attempts, or of facilitating a negotiated
acquisition and could affect the market for and price of the common stock. Any
future offering of capital stock could have a dilutive effect on holders of
common stock. See "Description of Capital Stock" (page 31).
RELIANCE ON MANAGEMENT
INVESTORS WILL BE RELYING ON THE JUDGMENT AND DISCRETION OF THE
DIRECTORS AND OFFICERS TO DEVELOP AND OPERATE COMMERCEFIRST'S AND COMMERCEFIRST
BANK'S BUSINESS.
As newly organized institutions which do not have existing operations,
facilities or business lines, CommerceFirst and CommerceFirst Bank will rely
upon their Officers and Directors to locate, establish and outfit appropriate
quarters for CommerceFirst Bank, hire staff, develop and implement marketing and
business development strategies and evaluate lines of businesses in addition to
CommerceFirst Bank's core commercial banking functions. We cannot be sure that
the Board of Directors, which, subject to the requirements of safe and sound
banking practices, will have substantial discretion in these matters, will be
successful in this regard.
DISCRETION OF MANAGEMENT
MANAGEMENT WILL HAVE DISCRETION IN ALLOCATING A SUBSTANTIAL PORTION OF
THE PROCEEDS OF THE OFFERING.
Subject to the anticipated requirement that at least $6,000,000 (or
such other minimum amount that the federal or state bank regulatory agencies may
require or permit) be contributed to the capital of CommerceFirst Bank, and the
requirements of safe and sound banking practices, the Board of Directors of
CommerceFirst Bank and CommerceFirst will have substantial discretion in
determining the use of offering proceeds. The discretion of the Board of
Directors and management to allocate the proceeds of the offering may result in
the use of the proceeds for non-banking activities permitted for bank holding
companies which are not specifically identified in this prospectus.
LIMITATION OF DIRECTOR LIABILITY
THE ABILITY TO RECOVER MONEY DAMAGES FROM THE DIRECTORS AND OFFICERS OF
COMMERCEFIRST IS LIMITED BY THE ARTICLES OF INCORPORATION.
The articles of incorporation of CommerceFirst provide that to the full
extent permitted by Maryland law, an officer or director of CommerceFirst will
not be liable to CommerceFirst or its shareholders for monetary damages. See
"Management" (page 23). This could result in monetary loss to CommerceFirst and
its shareholders as a result of the default of its Officers or Directors without
the ability to obtain compensation for that loss from the Officers or Directors.
MONETARY POLICY AND ECONOMIC CONDITIONS
COMMERCEFIRST'S PROFITABILITY WILL DEPEND ON ECONOMIC POLICIES AND FACTORS
BEYOND ITS CONTROL.
The operating income and net income of CommerceFirst Bank will depend
to a great extent on "rate differentials," i.e., the difference between the
interest yields CommerceFirst Bank receives on its loans, securities and other
interest bearing assets and the interest rates it pays on its interest bearing
deposits and other liabilities. These rates are highly sensitive to many factors
which are beyond the control of CommerceFirst Bank, including general economic
conditions and the policies of various governmental and regulatory authorities,
including the Board of Governors of the Federal Reserve System. See "Supervision
and Regulation--CommerceFirst Bank" (page 19).
REGULATORY RISK
GOVERNMENT REGULATION WILL SIGNIFICANTLY AFFECT COMMERCEFIRST'S
BUSINESS.
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The banking industry is heavily regulated. Banking regulations are
primarily intended to protect the federal deposit insurance funds and
depositors, not shareholders. CommerceFirst Bank will be regulated and
supervised by the Maryland Department of Financial Regulation, the Board of
Governors of the Federal Reserve System and the Federal Deposit Insurance
Corporation. CommerceFirst will be subject to regulation and supervision by the
Board of Governors of the Federal Reserve System. Changes in the laws,
regulations and regulatory practices affecting the banking industry could impose
additional costs on CommerceFirst, or could hurt its ability to compete
profitably with other financial institutions.
ALLOCATION OF SHARES WILL BE IN THE DISCRETION OF COMMERCEFIRST
COMMERCEFIRST CAN DECIDE TO NOT ACCEPT ALL OR A PART OF YOUR
SUBSCRIPTION.
CommerceFirst will have broad discretion in determining which
subscriptions, other than those of Directors and Officers of CommerceFirst and
CommerceFirst Bank, to accept, in whole or in part, including in the event the
offering is oversubscribed. In deciding which subscriptions to accept,
CommerceFirst may consider the order in which subscriptions are received, a
subscriber's potential to do business with, or to direct business to,
CommerceFirst Bank, and the desire to have a broad distribution of stock
ownership. As a result, a subscriber cannot be assured of receiving the full
number of shares subscribed for, and may forego use of all or a portion of such
subscriber's funds pending allocation of available shares. (See "The
Offering--General"; "--Acceptance and Refunding of Subscriptions" (page 11).
DELAY IN OPENING.
IF COMMERCEFIRST BANK DOES NOT OPEN WHEN EXPECTED, ORGANIZATION COSTS
MAY INCREASE AND SHAREHOLDER RETURNS MAY BE ADVERSELY AFFECTED.
As of the date hereof, a site for CommerceFirst Bank's main office has
not been identified. Delays in identifying and leasing satisfactory premises for
CommerceFirst Bank's main office, or in effecting renovations to such premises,
could result in the opening being delayed. Delay may also be experienced as a
result of the process of obtaining regulatory approvals. Delay in the
commencement of operations by CommerceFirst Bank may result in increased
aggregate organizational expense, reduced funds available for the conduct of
CommerceFirst's business, and possibly reduced returns.
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THE OFFERING
GENERAL
CommerceFirst is offering to sell up to 800,000 shares of its common
stock, at a price of $10.00 per share. CommerceFirst also reserves the right to
sell up to an additional 200,000 shares of common stock if the volume of
subscriptions exceeds the number of shares offered. No shares will be sold
unless acceptable subscriptions for a minimum of 650,000 shares are received. It
is expected that Directors and Officers of CommerceFirst and CommerceFirst Bank
and their affiliates will purchase at least 330,000 shares of common stock,
representing approximately 50.77% of the common stock if the minimum number of
shares are sold, 41.25% percent if the maximum number of shares are sold, and
33% if all of the oversubscription shares are sold. See "Management" (page 23).
Subscriptions to purchase shares must be received no later than 5:00
p.m., Eastern time, on , , unless the offering is terminated earlier or extended
by CommerceFirst. CommerceFirst reserves the right to terminate the offering at
any time prior to , , or to extend the termination date for periods of up to
thirty (30) days each, without notice to subscribers; however, under no
circumstances will the offering be extended beyond , . See "The Offering--
Method of Subscription" (page 9).
Investors must subscribe for the purchase of a minimum of 100 shares
(for a minimum investment of $1,000), subject to CommerceFirst's right to permit
smaller subscriptions in its discretion. The maximum number of shares any person
or group of affiliated persons will be permitted to purchase is five percent
(5%) of the total number of shares sold in the offering (32,500 shares if the
minimum number of shares is sold, 40,000 shares if the maximum number of shares
are sold, 50,000 shares if all of the oversubscription shares are sold).
CommerceFirst reserves the right, however, to permit larger purchases in its
discretion. It is the current intention of CommerceFirst to permit certain of
the organizers to purchase five (5%) or more of the total number of shares sold
in the offering. See "The Offering--Regulatory Limitation" (page 12).
COMMERCEFIRST RESERVES THE RIGHT TO ACCEPT OR REJECT ANY SUBSCRIPTION
IN WHOLE OR IN PART. IN DETERMINING WHETHER TO ACCEPT ANY SUBSCRIPTION, IN WHOLE
OR IN PART, THE DIRECTORS MAY, IN THEIR SOLE DISCRETION, TAKE INTO ACCOUNT THE
ORDER IN WHICH SUBSCRIPTIONS ARE RECEIVED, A SUBSCRIBER'S POTENTIAL TO DO
BUSINESS WITH, OR TO DIRECT CUSTOMERS TO, COMMERCEFIRST BANK AND COMMERCEFIRST'S
DESIRE TO HAVE A BROAD DISTRIBUTION OF STOCK OWNERSHIP, AS WELL AS LEGAL OR
REGULATORY RESTRICTIONS. NOTWITHSTANDING COMMERCEFIRST'S UNFETTERED RIGHT OF
REJECTION, ONCE RECEIVED BY COMMERCEFIRST, ALL SUBSCRIPTIONS ARE IRREVOCABLE BY
THE SUBSCRIBER.
METHOD OF SUBSCRIPTION
Investors who wish to participate in the offering and invest in
CommerceFirst may do so by completing and signing the subscription agreement
accompanying this prospectus and delivering the completed subscription agreement
to Koonce Securities, Inc. ("Koonce") prior to the termination of the offering,
together with payment in full of the offering price of all shares subscribed
for. Payment in full must be by (a) check or bank draft drawn upon a U.S. bank;
or (b) postal, telegraphic or express money order, in either case, payable to
"Bank of America, N.A., Escrow Agent for CommerceFirst Bancorp, Inc.". The
offing price will be deemed to have been received only upon (i) clearance of any
uncertified check, or (ii) receipt of any certified check or bank draft drawn
upon a U.S. bank or of any postal, telegraphic or express money order. A postage
paid, addressed envelope is included for the return of subscription agreement.
If paying by uncertified personal check, please note that the funds paid thereby
may take at least five business days to clear. Accordingly, investors who wish
to pay the offering price by means of uncertified personal check are urged to
make payment sufficiently in advance of the termination of the offering to
ensure that such payment is received and clears by such date. All funds received
in payment of the Subscription Price will be deposited at Bank of America, N.A.
in the CommerceFirst Bancorp, Inc. Escrow Account and, until closing of the
offering, will be invested at the direction of CommerceFirst .
The address to which subscription agreements and payment of the
offering price should be delivered is:
9
<PAGE>
Koonce Securities, Inc. (CommerceFirst Bancorp, Inc.)
6550 Rock Spring Drive
Suite 600
Bethesda, Maryland 20817
Telephone No.: (800) 368-2806 or (301) 897-9700
If the aggregate amount paid by a subscriber is insufficient to
purchase the number of shares that such person indicates are being subscribed
for, or if a subscriber does not specify the number of shares to be purchased,
then such subscriber will be deemed to have subscribed to purchase shares to the
full extent of the payment tendered (subject only to the reduction to the extent
necessary to comply with any regulatory limitation or conditions imposed by
CommerceFirst in connection with the offering). If the amount paid by a
subscriber exceeds the amount necessary to purchase the number of shares for
which such subscriber has indicated an intention to subscribe, then such
subscriber will be deemed to have subscribed to purchase shares to the full
extent of the excess payment tendered (subject only to reduction to the extent
necessary to comply with any regulatory limitation or conditions imposed by
CommerceFirst in connection with the offering). Notwithstanding the foregoing,
CommerceFirst reserves the right to reject, in whole or in part, any
subscription. In determining whether to accept any subscription, in whole or in
part, the Directors may, in their sole discretion, take into account the order
in which subscriptions are received, a subscriber's potential to do business
with, or to direct customers to, CommerceFirst Bank and CommerceFirst's desire
to have a broad distribution of stock ownership, as well as legal or regulatory
restrictions.
FAILURE TO INCLUDE THE FULL OFFERING PRICE WITH THE APPLICATION MAY
CAUSE COMMERCEFIRST TO REJECT THE SUBSCRIPTION.
The method of delivery of subscription agreements and payment of the
offering price will be at the election and risk of persons participating in the
offering, but if sent by mail, it is recommended that subscription agreements
and payments be sent by registered mail, return receipt requested, and that a
sufficient number of days be allowed to ensure delivery and clearance of payment
prior to the termination date.
All questions concerning the timeliness, validity, form and eligibility
of subscription agreements received will be determined by CommerceFirst, whose
determinations will be final and binding. CommerceFirst in its sole discretion
may waive any defect or irregularity, or permit any defect or irregularity to be
corrected within such time as it may determine, or reject the purported
subscription. Subscription agreements will not be deemed to have been received
or accepted until all irregularities have been waived or cured within such time
as CommerceFirst determines in its sole discretion. Neither CommerceFirst nor
any broker-dealer utilized by CommerceFirst will be under any duty to give
notification of any defect or irregularity in connection with the submission of
subscription agreements or incur any liability for failure to give such
notification.
Subscriptions for common stock which are received by CommerceFirst or
its broker-dealer may not be revoked by subscribers.
ESCROW ACCOUNT; RELEASE OF FUNDS
In connection with the sale of common stock by CommerceFirst, an escrow
account has been established at Bank of America, N.A. All funds submitted with
subscription agreements will be forwarded to Bank of America, N.A. by noon of
the following business day, for deposit in the escrow account. Koonce Securities
has agreed to deposit funds submitted with the subscriptions agreement into the
escrow account. Koonce Securities will receive a fee of $18.00 per deposit in
connection with depositing the funds submitted with the subscription agreements.
Subscription funds may be invested temporarily in short-term government
obligations and investments which are permissible under Commission rule 15c2-4.
The funds in the escrow account will be held by Bank of America, N.A. and will
not be released until the acceptance by CommerceFirst of subscriptions for not
less than 650,000 shares. In determining whether the minimum number of shares
has been subscribed for, shares to be acquired by organizers using organizer
shares as payment will be counted. See. Management's Plan of Operation".
In the event that the offering is not completed because the minimum
number of shares are not subscribed for,
10
<PAGE>
all regulatory approvals are not received, or otherwise, all subscription funds
will be returned to investors, without interest or deduction, except that
interest will be paid to the extent that law, regulation or administrative
policy of an investor's state of residence specifically requires.
Whether or not the offering is completed and shares sold, all interest
and other amounts earned on funds held in escrow representing accepted
subscriptions will be retained by CommerceFirst. By submitting a subscription,
subscribers will forego interest they otherwise could have earned on the funds
for the period during which their funds are held in escrow. Notwithstanding the
foregoing, interest will be paid to the extent that law, regulation or
administrative policy of an investor's state of residence specifically requires
in the event that the offering is not completed. Prior to the time the offering
is completed or terminated, CommerceFirst will be entitled to request, from time
to time, that the escrow agent distribute accrued earnings on the escrowed funds
to CommerceFirst for general corporate purposes.
ACCEPTANCE AND REFUNDING OF SUBSCRIPTIONS
Subscription agreements are not binding on CommerceFirst until accepted
by CommerceFirst, which reserves the right to reject, in whole or in part, in
its sole discretion, any subscription agreement or, if the offering is
oversubscribed, to allot a lesser number of shares than the number for which a
person has subscribed. In determining the number of shares to allot to each
subscriber in the event the offering is oversubscribed, the Directors, in their
sole discretion, may take into account the order in which subscriptions are
received, a subscriber's potential to do business with, or to direct customers
to, CommerceFirst Bank, and CommerceFirst's desire to have a broad distribution
of stock ownership, as well as legal or regulatory restrictions. CommerceFirst
will decide which subscription agreements to accept within three days after the
termination of the offering. Once made, a subscription is irrevocable by the
subscriber during the period of the offering, including extensions, if any.
In the event CommerceFirst rejects all or a portion of any
subscription, the escrow agent will promptly refund to the subscriber by check
sent by first-class mail all, or the appropriate portion of, the amount
submitted with the subscription agreement, without interest or deduction, except
that interest will be paid to the extent that law, regulation or administrative
policy of an investor's state of residence specifically requires. If the
offering is not completed, because CommerceFirst Bank does not receive its
charter to open for business, the minimum number of shares are not subscribed
for by the termination date, including extensions, if any, or for any other
reason, all subscription funds will be promptly refunded to subscribers without
interest or deduction, except that interest will be paid to the extent that law,
regulation or administrative policy of an investor's state of residence
specifically requires.
After all refunds have been made, the escrow agent, CommerceFirst,
CommerceFirst Bank and their respective Directors, Officers, and agents will
have no further liabilities to subscribers. Certificates representing shares
duly subscribed and paid for will be issued by CommerceFirst as soon as
practicable after funds are released to CommerceFirst by the escrow agent.
Interest for Pennsylvania Residents. Not in limitation of anything
contained herein, in the event that subscription funds of an investor residing
in Pennsylvania are returned (including upon a liquidation in the event that all
regulatory approvals required for CommerceFirst Bank to commence operations as a
subsidiary of CommerceFirst are not received after CommerceFirst has broken
escrow), such investors will be entitled to receive interest if their funds have
been held by CommerceFirst for more than ninety days.
LIMITED MARKET FOR COMMON STOCK
Except for common stock held by CommerceFirst's Directors and certain
Officers, the common stock will be freely transferable immediately upon issuance
and will not be subject to any transfer restrictions. Although the common stock
may be bought or sold in the over-the-counter market through securities brokers
and dealers, it is not anticipated that an active trading market will develop in
the foreseeable future. There can be no assurance that an over-the-counter
market will develop for the common stock. It is not anticipated that the common
stock will initially be listed on any stock exchange or be designated for
trading on the Nasdaq system, although CommerceFirst currently intends to list
the shares on The Nasdaq National Market, The Nasdaq Small Capitalization Market
or another market as
11
<PAGE>
soon as it meets the requirements therefor. There can be no assurance however,
that CommerceFirst will qualify for, or if qualified for will seek, listing on
any market.
Qualification requirements for The Nasdaq SmallCap Market currently
include net tangible assets of $4,000,000, market capitalization of $50 million
or Net Income (in latest fiscal year or 2 of last 3 fiscal years) of $750,000; a
public float of one million shares (exclusive of shares held directly or
indirectly by any Officer or Director of CommerceFirst and shares held by any
other person who is the beneficial owner of more than 10 percent of the total
shares outstanding); a market value of the public float of at least $5,000,000;
3 market makers; 300 shareholders holding a minimum of 100 shares each; one year
of operating history or $50,000,000 in market capitalization; a minimum bid
price of $4/share; distribution of annual and interim reports; a minimum of two
independent directors; An audit committee (a majority of which are independent
directors; an annual shareholder meeting; certain quorum requirements;
solicitation of proxies; review of conflicts of interest by the Nasdaq;
shareholder approval for certain corporate actions; and certain voting rights.
There can be no assurance that CommerceFirst common stock will qualify for
listing on The Nasdaq SmallCap Market or another securities market.
REGULATORY LIMITATION
The purchase of five percent (5%) or more of the common stock of
CommerceFirst may require the subscriber to provide certain information to, or
seek the prior approval of, state and federal bank regulators. CommerceFirst
will not be required to issue shares of common stock in the offering to any
person who, in the opinion of CommerceFirst, would be required to obtain prior
clearance or approval from any state or federal bank regulatory authority to own
or control such shares if, at the termination date, such clearance or approval
has not been obtained or any required waiting period has not expired.
CommerceFirst reserves the right to reduce or reject, in whole or in part, any
subscription which would require prior regulatory application or approval if
such has not been obtained prior to the termination date.
MANNER OF DISTRIBUTION
The Offering will be made through the efforts of the Officers and
Directors of CommerceFirst. The Officers and Directors will not receive any
special compensation for such services, but will be reimbursed for reasonable
out-of-pocket expenses, if any, incurred by them. Although all of the Officers
and Directors of CommerceFirst and CommerceFirst Bank will participate in the
Offering, Milton D. Jernigan, II, the Chairman of CommerceFirst and
CommerceFirst Bank, Richard J. Morgan, the President and Chief Executive Officer
of CommerceFirst and CommerceFirst Bank , and Lamont Thomas, Executive Vice
President and Chief Operating Officer of CommerceFirst and CommerceFirst Bank,
will have principal responsibility for coordination of investor development
activities, answering questions from investors and, participating in
informational meetings and coordinating the efforts of the Officers and
Directors in the Offering. CommerceFirst has retained Koonce, a registered
broker-dealer, to provide limited assistance to CommerceFirst in order to effect
sales of shares in compliance with the securities laws of the jurisdictions in
which the offering will be made. To the extent CommerceFirst seeks to offer
shares in jurisdictions in which Koonce is not registered, CommerceFirst may
effect sales through another registered broker-dealer.
Executed subscription documents (which will be promptly forwarded to
CommerceFirst) and subscription funds (which will be forwarded to the escrow
agent by noon of the business day following receipt) will be received by Koonce.
No broker-dealer who assists CommerceFirst in the offering, including Koonce,
will independently assess the information in this prospectus or determine the
value of the common stock or the reasonableness of the offering price. Koonce
will receive $15,000 for its services in connection with the offering, if the
offering is completed. Koonce will also receive reimbursement of its
out-of-pocket expenses, whether or not the offering is completed.
USE OF PROCEEDS
The gross proceeds to CommerceFirst from the sale of the common stock
offered hereby will be $6,500,000 if the minimum number of shares are sold,
$8,000,000 if the maximum number of shares are sold, and $10,000,000 if all of
the oversubscription shares are sold, in each case before deducting expenses of
the offering, which are estimated at $110,000.
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<PAGE>
CommerceFirst will initially use $6,000,000 of the net proceeds of the
offering to purchase all of the then-issued common stock of CommerceFirst Bank.
If applicable federal and state bank regulatory agencies require or permit a
minimum capitalization for CommerceFirst Bank either greater or less than
$6,000,000, CommerceFirst may, but is not required to, purchase all of the
then-issued shares of common stock of CommerceFirst Bank for such greater or
lesser amount. If more than $6,000,000 (or such other minimum amount as may be
required or permitted by applicable federal and state bank regulatory agencies)
of net proceeds is raised in the offering, CommerceFirst may use all or a
portion of the additional proceeds for purchase of more shares of CommerceFirst
Bank's common stock (or otherwise contribute such funds to CommerceFirst Bank)
or may retain all or a portion of the additional proceeds in CommerceFirst for
general corporate purposes, including permitting CommerceFirst to engage in
business activities permitted for bank holding companies, and to meet future
accounting, legal and regulatory expenses. See "CommerceFirst Bancorp, Inc. -
Supervision and Regulation" There can be no assurance that CommerceFirst will
not be required to contribute to the capital of CommerceFirst Bank more than the
amount currently anticipated as a condition to the approval of CommerceFirst
Bank's charter.
CommerceFirst Bank will apply the proceeds of the sale of its capital
stock to CommerceFirst to build-out, furnish and equip CommerceFirst Bank's
premises and CommerceFirst's offices (at an estimated cost of $380,000), to
provide working capital for expansion, to fund lending activities and for
general corporate purposes (including the investment of all or a portion of the
working capital funds in interest-bearing certificates of deposit or other
deposits with CommerceFirst Bank or other types of securities, such as
government bonds).
Set forth below is a tabular presentation reflecting the anticipated
allocation of the net proceeds of the offering, after deducting estimated
expenses of the offering of $110,000. The presentation assumes the sale of a
maximum of 800,000 shares, that no oversubscription shares are sold, the payment
of all pre-opening and organizational costs (other than bank premises and
equipment expense) by CommerceFirst, and in the case of the maximum number of
shares being sold, the contribution of all proceeds in excess of $6,500,000 to
CommerceFirst Bank.
<TABLE>
<CAPTION>
Minimum Maximum(1)
Amount % of Proceeds(1) Amount % of Proceeds(1)
-------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
COMMERCEFIRST:
Net Proceeds $6,390,000 100% $ 7,890,000 100%
Purchase of Stock of Bank/
Capital Contributions 6,000,000 93.90% 7,390,000 93.66%
Salary(2)(5) 150,000 2.35% 150,000 1.90%
Other pre-opening expense(3)(5) 142,000 2.22% 142,000 1.80%
Working Capital(5) 98,000 1.53% 208,000 2.64%
COMMERCEFIRST BANK
Proceeds of Capital Contributions
By Company 6,000,000 93.90% 7.390,000 93.66%
Premises and equipment expense(4)(5) 380,000 5.95% 380,000 4.82%
Working Capital(5) 5,400,000 87.95% 6,790,000 88.85%
</TABLE>
(1) Represents, in case of CommerceFirst Bank, percentage of total net
proceeds of Offering. CommerceFirst reserves the right to not
contribute to CommerceFirst Bank any portion of the proceeds of the
Offering in excess of $6,000,000 (or such other minimum amount as may
be required or permitted by applicable federal and state bank
regulatory agencies).
(2) Represents pre-opening salary and benefits for the Chairman,
President--Chief Executive Officer and Executive Vice President--Chief
Operating Officer of CommerceFirst Bank.
(3) Includes application costs and legal expense not related to the
offering, and office expense for pre-opening period.
(4) Represents estimated costs of outfitting main offices of CommerceFirst
Bank.
(5) Assumes that CommerceFirst Bank will open no later than May 1, 2000.
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<PAGE>
BUSINESS OF COMMERCEFIRST
CommerceFirst's application to become a bank holding company was filed
with the Federal Reserve Bank of Richmond on November __, 1999. CommerceFirst
knows of no reason why the approval of the Federal Reserve Board would not be
received, although no assurances can be given as to when, or if, such approval
will be received, and if received, whether it will be received without
conditions.
The principal asset of CommerceFirst will be its investment in all of
the issued and outstanding capital stock of CommerceFirst Bank. Future
operations of CommerceFirst have not been decided upon at this time but will be
closely evaluated and may be predicated on the availability of additional
business opportunities and/or acquisitions to be financed by dividends from
CommerceFirst Bank, borrowings, the sale of additional common stock, or any
combination thereof.
With the prior approval of the Federal Reserve Board, a bank holding
company may engage in non-banking activities closely related to the business of
banking. With such approval CommerceFirst could engage in the making and
servicing of loans, which would be made by companies engaged in consumer
finance, credit card issuance, making of mortgages, and 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 and invest in Small Business Investment
Companies, among others. If a favorable opportunity is presented, CommerceFirst
could engage in such activities, or other activities which the Federal Reserve
Board currently or in the future may consider closely related to banking, with
the prior approval of the Federal Reserve Board.
Although CommerceFirst has not determined the nature of any non-banking
activities it may engage in, and has no agreements or understandings pursuant to
which it would engage in any such non-banking activities, CommerceFirst
anticipates that it will explore the feasibility of engaging in leasing and
mortgage banking activities, either directly or through subsidiaries established
for the purpose. There can be no assurance that CommerceFirst will conduct such
activities, or if it does, that any such activities will be profitable or
successful for CommerceFirst.
Market Experience. While CommerceFirst and CommerceFirst Bank are newly
formed enterprises without existing operations, CommerceFirst believes that the
composition of its and CommerceFirst Bank's boards of directors will give them
substantial ability to successfully establish CommerceFirst Bank's business and
compete in the highly competitive and heavily banked Anne Arundel County market.
Prior to joining the organizing group, a majority of CommerceFirst's directors
were members of the Board of Directors of one or more commercial banks in the
Anne Arundel/Prince George's County area. The proposed President--Chief
Executive Officer and Executive Vice President--Chief Operating Officer of
CommerceFirst Bank each has over 29 years of banking and finance related
experience. Each of the organizers is a successful member of the business
community in CommerceFirst Bank's proposed market area, and has significant
business and personal relationships within that area. See "Management".
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<PAGE>
CAPITALIZATION OF COMMERCEFIRST
The following table sets forth the capitalization of CommerceFirst and
the pro forma consolidated capitalization of CommerceFirst at October 31, 1999,
after giving effect to the receipt of the estimated net proceeds of (i) the sale
of the minimum number of shares required to be sold in the offering; (ii) the
sale of all of the shares offered hereby, other than oversubscription shares;
and (iii) pre-opening expenses (other than premises and equipment expenses for
CommerceFirst Bank, but including expenses of the offering) of $110,000, and
based upon the assumptions set forth herein.
<TABLE>
<CAPTION>
October 31, 1999
-------------------------------------------------------
Actual Pro Forma 1 Pro Forma 2(2)
--------------- ------------- ---------------
<S> <C> <C> <C>
Stockholders' equity:
Common stock, $.01 par value; shares authorized,
4,000,000; shares outstanding, 325 actual;
650,000 pro forma 1; 800,000 pro forma 2 $ 3.25 $ 6,500 $ 8,000
Capital surplus $324,996.75 6,493,500 7,992,000
Retained earnings (deficit) ($94,500) ($292,000)(3) ($292,000) (3)
--------------- ------------- ---------------
Total stockholders' equity $230,500 $6,208,000 $7,708,000
=============== ============= ===============
Book value per share of common stock(1) $709.23 $9.55 $9.64
=============== ============= ===============
</TABLE>
(1) Book value per share of common stock is determined by dividing
CommerceFirst's consolidated equity and pro forma total consolidated
equities at October 31, 1999 by 325, 650,000 and 800,000 shares issued
and outstanding, respectively.
(2) If all of the oversubscription shares were sold, total stockholders'
equity and book value per share of common stock would be $9,708,000 and
$9.71, respectively.
(3) Represents estimated pre-opening expenses, other than expenses of the
offering (which are deducted from capital surplus). See "Use of
Proceeds" for a breakdown of the allocation of such funds.
BUSINESS OF COMMERCEFIRST BANK
As of the date of this prospectus, CommerceFirst Bank has not been
authorized to conduct banking business and has not engaged in banking business
or other operational activities. The issuance of a Charter by the Department of
Financial Regulation and approval of deposit insurance by the Federal Deposit
Insurance Corporation ("FDIC") will be dependent upon compliance with certain
conditions and procedures, including the sale of CommerceFirst Bank's stock to
CommerceFirst, the completion of CommerceFirst Bank's premises, the purchase of
certain fidelity and other insurance, the hiring of its staff and the adoption
of certain operating procedures and policies. Upon completion of this offering
and issuance of the Charter by the Department of Financial Regulation, and
subject to receipt of all required regulatory approvals, CommerceFirst Bank will
open for business with its main office in Annapolis, Maryland and will engage in
the business of commercial banking. It is currently intended that CommerceFirst
Bank will establish two branches within thirty-six months of opening, subject to
current market conditions, the results of CommerceFirst Bank's operations and
approval by applicable state and federal regulators. CommerceFirst Bank will
accept checking, savings and time deposits, offer a range of commercial,
installment and real estate loans and provide customary banking services
principally to corporations, partnerships, small and medium-sized businesses and
sole proprietorships.
CommerceFirst Bank will seek to operate as a local business bank
alternative to the superregional financial institutions which dominate its
primary market area. The cornerstone of CommerceFirst Bank's philosophy will be
to provide superior, personalized service to its customers. CommerceFirst Bank
will seek to focus on relationship banking, providing each customer with a
number of services, familiarizing itself with, and addressing itself to,
customer needs in a proactive, personalized fashion.
PRIMARY SERVICE AREA AND PROPOSED SERVICES
Bank Location and Market Area
CommerceFirst Bank's proposed main office and the headquarters of
CommerceFirst and CommerceFirst Bank will be located in Annapolis, Maryland. As
of the date hereof, CommerceFirst is in the process of reviewing and evaluating
at least four possible sites in the Annapolis area, and anticipates signing
either a letter of intent or a lease
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<PAGE>
before December 31, 1999. It is currently anticipated that two branches will be
established within thirty-six months of the opening of CommerceFirst Bank,
subject to current market conditions, the results of CommerceFirst Bank's
operations and approval by applicable state and federal regulators. As of this
date, no leases have been entered into.
The primary service area of CommerceFirst Bank is Anne Arundel County,
Maryland, with a secondary market area in the adjacent counties of Baltimore,
Howard, Prince George's, Queen Anne and Calvert counties.
CommerceFirst Bank's primary service area, Anne Arundel County, enjoys
a diverse and presently thriving economy. Anne Arundel County is the seat of the
State government, has 437 miles of shoreline, possesses an increasing number of
high technology firms, houses a major international airport and is home to the
United States Naval Academy. These factors combine to provide the residents of
Anne Arundel County a high quality of life that is attractive to increasing
numbers of businesses, tourists and residents. Annapolis serves as the cultural
and historic center of the region, attracting more than 25% of Maryland's total
tourism each year. Tourism has increased significantly since 1990 and has become
an effective economic development tool, increasing awareness of the area and
assisting in strategies to attract domestic and international business to Anne
Arundel County. Hotel tax revenues, which have increased 67% over the past four
years, confirm the trend of increasing tourism and overall strong growth.
A well-trained work force is a major competitive advantage for Anne
Arundel County's economy. Although Anne Arundel County enjoys a low 3.1%
unemployment rate compared to 3.6% for the State of Maryland, it also has
abundant labor resources. In the past few years, Anne Arundel County has
expanded its economy at a greater pace than many other regions in the United
States. Anne Arundel County initially developed as a bedroom labor community to
the larger Washington and Baltimore markets. Today, over 45% of all Anne Arundel
County residents still commute to other markets for employment. Many of these
commuting workers have significant high technology training and skills and
prefer to work close to where they live as congestion increases in adjacent
areas. As Anne Arundel County has increased its business base over the past
decade, companies relocating to this market have been attracted to the abundant,
highly skilled labor pool. The increasing influence of the high pay technology
sector can be measured by the growth in median family income.
Median family income for Anne Arundel County increased to a record
$61,351 in 1998, compared to the average $40,543 for the State of Maryland
during the same period.
The primary objective of CommerceFirst Bank is to acquire relationships
with the growing number of small to medium sized businesses located in its
primary and secondary service areas. Anne Arundel County is home to 11,500
businesses, 9% of all businesses in Maryland. Anne Arundel County-based firms
are generally small businesses, with over 90% employing less than 100 persons,
and nearly 75% employing less than 20 persons. By contrast, bank consolidations
and mergers have greatly impacted Anne Arundel County as super-regional banks
having acquired many local community and regional banks. Current market and
banking trends combine to provide an opportunity for CommerceFirst Bank to
execute a focused strategy of offering personal and customized services and
attract under-served and dissatisfied small business clients.
Description of Services
CommerceFirst Bank will offer full commercial banking services to its
business and professional clients. CommerceFirst Bank will primarily emphasize
providing commercial banking services to corporations, partnerships, small and
medium-sized businesses and sole proprietorships as well as to non-profit
organizations and associations.
CommerceFirst Bank will seek to develop a loan portfolio consisting
primarily of business loans with variable rates and/or short maturities. The
principal source of debt service will be the cash flow of the borrower with a
secondary emphasis on collateral. Where appropriate, the personal guarantees of
principals will be required. Real estate loans will generally be for commercial
purposes, with an emphasis on variable rate; fixed rate credit accommodations
with three to five year maturities. Traditional installment loans and personal
lines of credit will be available on a selective basis.
Principal credit services will include commercial loans for such
business purposes as working capital,
16
<PAGE>
equipment purchases, real estates acquisition, contract financing and working
capital lines of credit. CommerceFirst Bank intends to offer merchant credit
card services through an outside vendor.
The direct lending activities in which CommerceFirst Bank expects to
engage each carries the risk that the borrowers will be unable to perform on
their obligations. As such, interest rate policies of the Federal Reserve Board
and general economic conditions, nationally and in CommerceFirst Bank's primary
market area will have a significant impact on CommerceFirst Bank's and
CommerceFirst's results of operations. To the extent that economic conditions
deteriorate, business and individual borrowers may be less able to meet their
obligations to CommerceFirst Bank in full, in a timely manner, resulting in
decreased earnings or losses to CommerceFirst Bank. To the extent CommerceFirst
Bank makes fixed rate loans, general increases in interest rates will tend to
reduce CommerceFirst Bank's spread as the interest rates CommerceFirst Bank must
pay for deposits increase while interest income is flat. Economic conditions and
interest rates may also adversely affect the value of property pledged as
security for loans.
Deposit services will include checking accounts, NOW accounts, Money
Market accounts, certificates of deposits and savings accounts. CommerceFirst
Bank does not expect to accept brokered deposits.
Additionally, CommerceFirst Bank expects to provide various cash
management services such as sweep accounts, repurchase agreements, account
reconciliation, credit card depository, Automated Clearing House origination,
wire transfers, night depositories and, on a selective basis, daily messenger
service.
SOURCE OF BUSINESS
Management believes that the market segments targeted, small to medium
sized businesses of CommerceFirst Bank's market area, are demanding the
convenience and personal service that a smaller, independent financial
institution can offer. It will be those themes of convenience and personal
service that will form the basis for CommerceFirst Bank's business development
strategies. CommerceFirst Bank first plans to provide services from its main
office in Annapolis, Maryland, followed by branches in adjacent areas which it
believes will complement the needs of CommerceFirst Bank's customers, and will
provide prospects for additional growth and expansion. Subject to obtaining
necessary regulatory approvals, capital adequacy, the identification of
appropriate sites, then current business demand and other factors, CommerceFirst
presently plans for CommerceFirst Bank to establish two branches offices within
thirty-six months of opening for business. There can be no assurance that
CommerceFirst Bank will establish such branches or that they will be profitable.
CommerceFirst Bank expects to capitalize upon the extensive business
and personal contacts and relationships of its Directors and Executive Officers
to establish CommerceFirst Bank's initial customer base. To introduce new
customers to CommerceFirst Bank, early reliance will be on Directors' referrals,
officer-originated calling programs and customer and shareholder referrals.
Management intends to build a staff of competent, professional
associates to provide CommerceFirst Bank's customers with bankers sensitive to
customer needs and experienced in providing a level of personal and professional
service expected by the business community.
ASSET MANAGEMENT
Consistent with the objective of CommerceFirst Bank to serve the needs
of the business community, assets will be concentrated in commercial loans and
commercial real estate loans. To be consistent with the requirements of prudent
banking practices, adequate assets will be invested in high grade securities to
provide liquidity and safety. Loans will be targeted at 80% or less of deposits
(including 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 United States government or
"quasi-government" agencies.
The risk of nonpayment (or deferred payment) of loans is inherent in
commercial banking. CommerceFirst Bank's marketing focus on small to
medium-sized businesses may result in the assumption by CommerceFirst Bank of
certain lending risks that are different from those attendant to loans to larger
companies. Management of
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CommerceFirst Bank will carefully evaluate all loan applications and will
attempt to minimize its credit risk exposure by use of thorough loan
application, approval and monitoring procedures; however, there can be no
assurance that such procedures can significantly reduce such lending risks.
COMPETITION
Deregulation of financial institutions and holding company acquisitions
of banks across state lines has resulted in widespread, fundamental changes in
the financial services industry. This transformation, although occurring
nationwide, is particularly intense in Anne Arundel County, and the nearby
Washington DC and Baltimore metropolitan areas, because of the changes in the
area's economic base in recent years and changing state laws authorizing
interstate mergers and acquisitions of banks, and the interstate establishment
or acquisition of branches.
In Anne Arundel County, Maryland, competition is exceptionally keen
from large banking institutions headquartered outside of Maryland. In addition,
CommerceFirst Bank will compete with other community banks, savings and loan
associations, credit unions, mortgage companies, finance companies and others
providing financial services. Among the advantages that many of these
institutions have over CommerceFirst Bank are their abilities to finance
extensive advertising campaigns, maintain extensive branch networks and
technology investments, and to directly offer certain services, such as
international banking and trust services, which will not be offered directly by
CommerceFirst Bank. Further, the greater capitalization of the larger
institutions allows for substantially higher lending limits than CommerceFirst
Bank. Certain of these 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
Management anticipates that CommerceFirst Bank will initially employ
approximately 8 persons on a full time basis in addition to the senior executive
officers of CommerceFirst Bank, and 1 person on a part time basis. It is not
anticipated that CommerceFirst (as distinguished from CommerceFirst Bank) will
have any employees or officers during the first year of operations.
PREMISES
Neither a letter of intent nor a lease for a specific site location for
CommerceFirst Bank has been executed as of the date hereof. CommerceFirst is in
the process of reviewing and evaluating at least four possible sites in the
greater Annapolis area, two of which CommerceFirst has already carefully studied
and identified as suitable. A review and evaluation of other possible sites in
the Annapolis area is underway as well. CommerceFirst currently anticipates
signing a lease before December 31, 1999.
MANAGEMENT'S PLAN OF OPERATION
As of the date hereof, neither CommerceFirst nor CommerceFirst Bank has
commenced operations or engaged in any activities except those related to the
organization of CommerceFirst and CommerceFirst Bank and raising capital in this
Offering. Such limited activities have been financed solely by the proceeds of
the sale of 325 organizers shares of common stock, for aggregate proceeds of
$325,000. Organizers will purchase additional organizer shares at a price of
$1,000 per share as necessary to finance additional expenses of the organization
of CommerceFirst and CommerceFirst Bank. If the offering is not completed, no
person or entity is obligated to reimburse the organizers for their
contributions. This temporary funding source is expected to be sufficient to
meet CommerceFirst's needs until the sale of shares pursuant to the offering is
completed. Each organizer share will be submitted in payment of the purchase
price of 100 shares of common stock in the offering. These shares will be
counted in determining whether the minimum number of shares is subscribed for in
the offering.
It is anticipated that CommerceFirst Bank will incur approximately
$380,000 in expenses in leasehold improvements for its main office and in
furniture, fixtures and equipment for such offices, including vaults, teller
equipment, computer work stations, furniture for the branch lobby and
administrative offices and other equipment. CommerceFirst Bank will contract its
data processing requirements to an outside vendor. CommerceFirst had two full
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time employees at September 1, 1999, and expects to have 11employees at
CommerceFirst Bank after the main office has opened.
CommerceFirst believes that the proceeds of the offering, $6,500,000 if
the minimum number of shares are sold, $8,000,000 if the maximum number of
shares are sold, and $10,000,000 if all of the oversubscription shares are sold
(in each case without deduction for $110,000 estimated expenses of the
offering), will be sufficient to fund the expenses of establishing and opening
CommerceFirst Bank, and CommerceFirst Bank's and Company's operations for at
least twelve months after the offering, and does not anticipate a need to raise
additional capital during that period.
SUPERVISION AND REGULATION
COMMERCEFIRST
CommerceFirst will be a bank holding company registered under Bank
Holding Company Act of 1956, as amended, (the "Act") and will be subject to
supervision by the Federal Reserve Board. As a bank holding company,
CommerceFirst 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 pursuant to the Act. The Federal Reserve Board may also make
examinations of CommerceFirst and each of its subsidiaries.
The Act requires approval of the Federal Reserve Board for, 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. The Act also generally permits the acquisition by a bank
holding company of control or substantially all the assets of any bank located
in a state other than the home state of CommerceFirst Bank holding company,
except where CommerceFirst Bank has not been in existence for the minimum period
of time required by state law, but if CommerceFirst Bank is at least 5 years
old, the Federal Reserve Board may approve the acquisition.
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 to or
performing service for its authorized subsidiaries. A bank holding company may,
however, engage in or acquire an interest in, a company that engages 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
fiduciary or 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 the Federal Reserve Act on any extensions of credit to
the bank company or any of its subsidiaries, or investments in the stock or
other securities thereof, and on the taking of such stock or securities as
collateral for loans to any borrower. Further, a holding company and any
subsidiary bank are prohibited from engaging in certain tie-in arrangements in
connection with the extension of credit. A subsidiary bank may not extend
credit, lease or sell property, or furnish any services, or fix or vary the
consideration for any of the foregoing on the condition that: (i) the customer
obtain or provide some additional credit, property or services from or to such
bank other than a loan, discount, deposit or trust service; (ii) the customer
obtain or provide some additional credit, property or service from or to
CommerceFirst or any other subsidiary of CommerceFirst; or (iii) the customer
not obtain some other credit, property or service from competitors, except for
reasonable requirements to assure the soundness of credit extended.
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COMMERCEFIRST BANK
CommerceFirst Bank, as a Maryland chartered commercial bank which will
be a member of the Federal Reserve System (a "state member bank") and whose
accounts will be insured by the Bank Insurance Fund of the FDIC up to the
maximum legal limits of the FDIC, will be subject to regulation, supervision and
regular examination by the Department of Financial Institutions and the Federal
Reserve Board. If CommerceFirst elects to forego membership by CommerceFirst
Bank in the Federal Reserve System, which it reserves the right to do, then the
FDIC will be the primary federal regulator of CommerceFirst Bank. The FDIC will
regulate CommerceFirst Bank in substantially the same manner as the Federal
Reserve Board. The regulations of these various agencies govern most aspects of
CommerceFirst Bank's business, including required reserves against deposits,
loans, investments, mergers and acquisitions, borrowing, dividends and location
and number of branch offices. The laws and regulations governing CommerceFirst
Bank generally have been promulgated to protect depositors and the deposit
insurance funds, and not for the purpose of protecting stockholders.
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. As a result of federal and state legislation,
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. Additionally, legislation has
been proposed which may result in non-banking companies being authorized to own
banks, which could result in companies with resources substantially in excess of
CommerceFirst's entering into competition with CommerceFirst and CommerceFirst
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 CommerceFirst Bank's earnings. Thus, the earnings and growth of
CommerceFirst Bank will be subject to the influence of economic conditions
generally, both domestic and foreign, and also to the monetary and fiscal
policies of the United States and its agencies, particularly the Federal Reserve
Board, which regulates the supply of money through various means including open
market dealings in United States government securities. The nature and timing of
changes in such policies and their impact on CommerceFirst Bank cannot be
predicted.
Branching and Interstate Banking. The federal banking agencies are
authorized to approve interstate bank merger transactions without regard to
whether such 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 (the
"Riegle-Neal Act") by adopting a law after the date of enactment of the
Riegle-Neal Act and prior to June 1, 1997 which applies equally to all
out-of-state banks and expressly prohibits merger transactions involving
out-of-state banks. Interstate acquisitions of branches are permitted only if
the law of the state in which the branch is located permits such acquisitions.
Such interstate bank mergers and branch acquisitions are also subject to the
nationwide and statewide insured deposit concentration limitations described in
the Riegle-Neal Act.
The Riegle-Neal Act authorizes the federal banking agencies to approve
interstate branching de novo by national and state banks 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 and the FDIC
have adopted risk based capital adequacy guidelines pursuant to 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.
State member banks are 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 of 8%. At least half of this amount (4%)
should be in the form of core capital. These requirements apply to CommerceFirst
Bank and will apply to CommerceFirst (a bank holding company) once its total
assets equal $150,000,000 or more, it engages in certain highly leveraged
activities or it
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has publicly held debt securities.
Tier 1 Capital 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 for changes in the market value of
securities classified as "available for sale" in accordance with FAS 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.
In addition to the risk-based capital requirements, the Federal Reserve
Board has established a minimum 3.0% Leverage Capital Ratio (Tier 1 Capital to
total adjusted assets) requirement for the most highly-rated banks, with an
additional cushion of at least 100 to 200 basis points for all other banks,
which effectively increases the minimum Leverage Capital Ratio for such other
banks to 4.0%-5.0% or more. The highest-rated banks are those that 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 bank having less than the minimum Leverage Capital Ratio
requirement shall, within 60 days of the date as of which it fails to comply
with such requirement, submit a reasonable plan describing the means and timing
by which CommerceFirst Bank shall achieve its minimum Leverage Capital Ratio
requirement. A bank which fails to file such plan is deemed to be operating in
an unsafe and unsound manner, and could subject CommerceFirst Bank to a
cease-and-desist order. Any insured depository institution with a Leverage
Capital Ratio that is less than 2.0% is deemed to be operating in an unsafe or
unsound condition pursuant to Section 8(a) of the Federal Deposit Insurance Act
(the "FDIA") and is subject to potential termination of 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 to increase its Leverage Capital Ratio 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 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. Under Section 38 of the FDIA, each federal
banking agency is required to implement a system of prompt corrective action for
institutions which it regulates. The federal banking agencies have promulgated
substantially similar regulations to implement the system of prompt corrective
action established by Section 38 of the FDIA. Under the regulations, a bank
shall be deemed to be: (i) "well capitalized" if it has a Total Risk Based
Capital Ratio of 10.0% or more, a Tier 1 Risk Based Capital Ratio of 6.0% or
more, a Leverage Capital Ratio of 5.0% 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 8.0% or more, a Tier 1 Risk Based Capital Ratio of 4.0%
or more and a Tier 1 Leverage Capital Ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized;" (iii)
"undercapitalized" if it has a Total Risk Based Capital Ratio that is less than
8.0%, a Tier 1 Risk based Capital Ratio that is less than 4.0% or a Leverage
Capital Ratio that is less than 4.0% (3.0% under certain circumstances); (iv)
"significantly undercapitalized" if it has a Total Risk Based Capital Ratio that
is less than 6.0%, a Tier 1 Risk Based Capital Ratio that is less than 3.0% or a
Leverage Capital Ratio that is less than 3.0%; and (v) "critically
undercapitalized" if it has a ratio of tangible equity to total assets that is
equal to or less than 2.0%.
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. A federal banking agency must
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provide the institution with written notice of approval or disapproval within 60
days after receiving a capital restoration plan, subject to extensions by the
applicable agency.
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 shall be limited to the lesser of (i) an amount
equal to 5.0% 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 shall expire after the federal banking
agency notifies the institution that it has remained adequately capitalized for
each of four consecutive calendar 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, shall be subject to the restrictions in Section 38 of
the FDIA which are applicable to significantly undercapitalized institutions.
A "critically undercapitalized institution" is to 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 quarter after the date it
becomes critically undercapitalized must be placed in receivership. The general
rule is that the FDIC will be appointed as receiver within 90 days after a bank
becomes critically undercapitalized unless extremely good cause is shown and an
extension is agreed to by the federal regulators. In general, good cause is
defined as capital which has been raised and is imminently available for
infusion into CommerceFirst Bank except for certain technical requirements which
may delay the infusion for a period of time beyond the 90 day time period.
Immediately upon becoming undercapitalized, an institution shall become
subject to the provisions of Section 38 of the FDIA, 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. These and additional mandatory and permissive
supervisory actions may be taken with respect to significantly undercapitalized
and critically undercapitalized institutions.
Additionally, under Section 11(c)(5) of the FDIA, a conservator or
receiver may be appointed for an institution where: (i) an institution's
obligations exceed its assets; (ii) there is substantial dissipation of the
institution's assets or earnings as a result of any violation of law or any
unsafe or unsound practice; (iii) the institution is in an unsafe or unsound
condition; (iv) there is a willful violation of a cease-and-desist order; (v)
the institution is unable to pay its obligations in the ordinary course of
business; (vi) losses or threatened losses deplete all or substantially all of
an institution's capital, and there is no reasonable prospect of becoming
"adequately capitalized" without assistance; (vii) there is any violation of law
or unsafe or unsound practice or condition that is likely to cause insolvency or
substantial dissipation of assets or earnings, weaken the institution's
condition, or otherwise seriously prejudice the interests of depositors or the
insurance fund; (viii) an institution ceases to be insured; (ix) the institution
is undercapitalized and has no reasonable prospect that it will become
adequately capitalized, fails to become adequately capitalized when required to
do so, or fails to submit or materially implement a capital restoration plan; or
(x) the institution is critically undercapitalized or otherwise has
substantially insufficient capital.
Regulatory Enforcement Authority. Federal banking law grants
substantial enforcement powers to federal banking regulators. This enforcement
authority includes, 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
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and institution-affiliated parties. 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.
MANAGEMENT
The following table sets forth certain information concerning the
Directors and Officers of CommerceFirst, including the number and percentage of
the Common stock expected to be acquired in this offering by each individual
(directly and indirectly), each person who may acquire Common stock in this
offering in excess of 5%, all Directors and Officers of CommerceFirst as a
group, and all Directors and Officers of CommerceFirst and CommerceFirst Bank as
a group.
<TABLE>
<CAPTION>
% of Outstanding Shares
----------------------------
Number of
Name Age Position Shares(1) Minimum Maximum(2)
- --------------------------------- ----- --------------------------------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
CommerceFirst:
Director of CommerceFirst and
Edward B. Howlin, Jr. 63 CommerceFirst Bank 80,000 12.31% 10%
Chairman of the Board of Directors
of CommerceFirst and CommerceFirst
Milton D. Jernigan, II(3) 45 Bank 20,000 3.08% 2.5%
Vice Chairman of the Board of
Directors, Secretary and Treasurer of
Alvin R. Maier 66 CommerceFirst and CommerceFirst Bank 30,000 4.62% 3.75%
President, Chief Executive Officer
and Director
of CommerceFirst and CommerceFirst
Richard J. Morgan 52 Bank 5,000 0.77% 0.63%
Executive Vice President, Chief
Operating Officer and Director of
Lamont Thomas 59 CommerceFirst and CommerceFirst Bank 20,000 3.08% 2.5%
------------- ------------- -----------
All directors and officers of
CommerceFirst as a group (5
persons) 155,000 23.85% 19.38%
============= ============= ===========
All directors and officers of
CommerceFirst and CommerceFirst
Bank as a group (15 persons) 330,000 50.77% 41.25%
============= ============= ===========
All directors, officers and
organizers of CommerceFirst and
CommerceFirst Bank as a group (16
persons) 360,000 55.38% 45%
============= ============= ===========
</TABLE>
(1) Includes organizer shares. (page 3)
(2) Does not reflect sale of the oversubscription shares.
(3) Milton D. Jernigan, II is the son of Milton D. Jernigan, Sr., a
proposed director of CommerceFirst Bank. Intended share purchases shown
for Mr. Jernigan, II,. do not include intended purchases by Mr.
Jernigan, Sr.
CommerceFirst's Articles of Incorporation provide that the number of
Directors of CommerceFirst shall be not less than 3 nor more than 25. The Bylaws
provide that the number of Directors shall be fixed from time to time by the
majority vote of the Directors then in office. CommerceFirst's Bylaws provide
that the Board of Directors shall be divided into three classes, the first of
which shall serve for an initial one year term, the second of which shall serve
for an initial two year term and the third of which shall serve for an initial
three year term. Upon the expiration of the initial terms, directors shall be
elected for three year terms. The Board has fixed the current number of
Directors at 5, consisting of two directors in each of the first two classes and
one in the third class. The Bylaws may be amended by action of the Board of
Directors.
Directors of CommerceFirst may be removed only for cause upon the
affirmative vote of a majority of the combined voting power of all outstanding
shares of voting stock. Cause is defined as the willful and continuous failure
of a director substantially to perform his or her duties to CommerceFirst (other
than any failure resulting from incapacity due to physical or mental illness) or
the willful engaging by a director in gross misconduct materially and
demonstrably injurious to CommerceFirst.
CommerceFirst Bank's Bylaws will provide for a minimum of 5 and a
maximum of 20 Directors and will
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permit the Board of Directors to fix an exact number of Directors within that
range. The Board of Directors plans to initially fix the number of Directors at
15. Before CommerceFirst Bank opens for business, its sole stockholder,
CommerceFirst, will be required to elect Directors of CommerceFirst Bank,
subject to the approval of the Department of Financial Regulation and Federal
Reserve Board. Directors of CommerceFirst Bank will serve for one year and until
their successors are elected and qualified. CommerceFirst intends, together with
the 10 additional persons set forth under "Management -- Additional Information
About the Directors, Officers and Organizers of CommerceFirst and CommerceFirst
Bank--CommerceFirst Bank" to elect all of the 5 current Directors of
CommerceFirst to serve on the Board of CommerceFirst Bank.
Each of CommerceFirst Bank's Directors is required by law to own a
minimum of 50 shares of common stock of CommerceFirst.
The Articles of Incorporation of CommerceFirst provide that to the full
extent that the Maryland General Corporation Law (the "MGCL") permits the
limitation or elimination of the liability of directors or officers, a director
or officer of CommerceFirst shall not be liable to CommerceFirst or its
shareholders for monetary damages. The MGCL provides that the liability of a
director or officer in a proceeding brought by or in the right of shareholders,
or on behalf of shareholders may be eliminated, except that the liability of a
director or officer may not be eliminated if the officer or director received an
improper benefit or profit, or if a judgment against the director or officer is
based on a finding that such person's action or failure to act was the result of
active and deliberate dishonesty and was material to the cause of action against
such person. The Articles of Incorporation of CommerceFirst Bank will similarly
provide that to the full extent that the MGCL permits the limitation or
elimination of the liability of directors or officers, subject to federal law
limitations on that authority, a director or officer shall not be liable to
CommerceFirst Bank or its shareholders for monetary damages.
The Articles of Incorporation of CommerceFirst provide that to the full
extent permitted by the MGCL and other applicable law, CommerceFirst shall
indemnify a director or officer of CommerceFirst who is or was a party to any
proceeding by reason of the fact that he is or was such a director or officer,
and the Board of Directors of CommerceFirst may contract in advance to indemnify
any director or officer. The MGCL provides that except as limited by its
articles of incorporation, a corporation shall indemnify a director who entirely
prevails in the defense of any proceeding to which he was a party because he is
or was a director of the corporation against reasonable expenses incurred in
connection with the proceeding. The MGCL further provides that a corporation may
indemnify an individual made a party to a proceeding because he is or was a
director against liability incurred in the proceeding unless (i) the act or
omission was material to the matter giving rise to the proceeding and was
committed in bad faith or was the result of active and deliberate dishonesty;
(ii) the director actually received an improper personal benefit; or (iii) in
the case of any criminal proceeding, the director had reasonable cause to
believe the act or omission was unlawful, provided however, that if the
proceeding was by or in the right of the corporation, no indemnification may be
made if the director is adjudged liable to the corporation. The Board of
Directors may also indemnify an employee or agent of CommerceFirst who was or is
a party to any proceeding by reason of the fact that he is or was an employee or
agent of CommerceFirst.
The Articles of Incorporation and the Bylaws of CommerceFirst Bank
similarly will provide that, subject to limitations under federal statute or
regulation, to the full extent permitted by the MGCL, CommerceFirst Bank shall
indemnify a director or officer of CommerceFirst Bank who is or was a party to
any proceeding by reason of the fact that he is or was such a director or
officer.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Directors, Officers and persons controlling
CommerceFirst pursuant to the foregoing provisions, CommerceFirst has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
ADDITIONAL INFORMATION ABOUT THE DIRECTORS, OFFICERS AND ORGANIZERS OF
COMMERCEFIRST AND BANK
Set forth below is a description of the principal occupation and
business experience of each of the Directors, Officers, and organizers of
CommerceFirst and CommerceFirst Bank. Each of the Directors of
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CommerceFirst is also a Director of CommerceFirst Bank. Except as expressly
indicated below, each person has been engaged in his principal occupation for at
least five years.
CommerceFirst
Edward B. Howlin, Jr. Mr. Howlin, 63, is the Chairman and Chief
Executive Officer of Howlin Realty Management, Inc., a real estate holding,
management and development firm, and of Edward B. Howlin, Inc., a management and
holding company, and of its subsidiary companies, Dunkirk Supply, Inc. and
Howlin Concrete, Inc. Mr. Howlin is also Chief Executive Officer of Howlin
Construction Company, Inc. In addition to real estate management and
development, the Howlin companies construct residential subdivisions and design,
manufacture and sell construction components, systems and supplies to various
commercial, residential and government projects primarily in Southern Maryland.
Mr. Howlin is a founding organizer of CommerceFirst and a member of the Board of
Directors of CommerceFirst and CommerceFirst Bank.
Milton D. Jernigan, II. Mr. Jernigan, 45, an attorney engaged in
private practice since 1982 is the co-managing principal of the business and
corporate law firm of McNamee, Hosea, Jernigan & Kim, P.A. Mr. Jernigan is the
Resident Principal-in-Charge of the firm's Annapolis office. Mr. Jernigan's
practice areas have included banking and regulatory law and he has represented
banks and bank holding companies in matters before the Federal Deposit Insurance
Corporation, the Federal Reserve Board, the Federal Reserve Bank of Richmond,
the Federal Reserve Bank of Cleveland, the Office of the Comptroller of the
Currency, the Maryland State Bank Commissioner, the Securities and Exchange
Commission and the Maryland State Securities Commissioner. Mr. Jernigan was one
of the founding organizers and members of the Board of Directors of Commerce
Bank in College Park, Maryland ("Commerce Bank"). Commerce Bank was formed and
opened in 1989. Mr. Jernigan served as General Counsel to Commerce Bank from its
organization and until its acquisition by MainStreet BankGroup ("MainStreet") in
December, 1997. MainStreet was subsequently acquired by BB&T Corporation
("BB&T") in 1999. From 1989 until 1993, Mr. Jernigan served as a Member of the
Board of Directors of Commerce Bank and on its Executive Committee, Loan
Committee, Compensation Committee, and Strategic Planning Committee. Mr.
Jernigan is a resident of Annapolis, Maryland and is active in local chambers of
commerce, service and civic organizations. Mr. Jernigan is a founding organizer
of CommerceFirst and a member of the Board of Directors of CommerceFirst and
CommerceFirst Bank.
Alvin R. Maier. Mr. Maier, 66, is engaged in the business of
manufacturing and selling building supplies as President of Ernest Maier, Inc..
Mr. Maier has been a corporate officer of Ernest Maier, Inc. since 1955. Mr.
Maier was one of the original organizers and directors of Commerce Bank. Mr.
Maier served as Chairman of the Board of Commerce Bank (and following its
acquisition by MainStreet) from 1989 until the acquisition of MainStreet by BB&T
Corporation in 1999 and he served on the bank's Executive Committee, Loan
Committee, Compensation Committee and Strategic Planning Committee. A Korean War
veteran, Mr. Maier is a resident of Anne Arundel County and is active in several
local service and civic organizations, including Rotary International in which
he has a 28 year perfect attendance record. Mr. Maier is a founding organizer of
CommerceFirst and a member of the Board of Directors of CommerceFirst and
CommerceFirst Bank.
Richard J. Morgan. Mr. Morgan, 52, until joining CommerceFirst and
CommerceFirst Bank, was involved as a cabinet level officer in the County
Executive Administration, in the management of economic and community
development programs, focusing on marketing, project and financial management,
throughout Anne Arundel County as President and Chief Executive Officer of Anne
Arundel Economic Development Corporation ("AAEDC"), a position he held since
1997. Mr. Morgan was awarded the Service Excellence Award by the Anne Arundel
Trade Council in 1998 and County Business Leader of the Year in 1994. From 1990
to 1997, Mr. Morgan served as President and Chief Executive Officer of Annapolis
National Bank. Under Mr. Morgan's leadership, Annapolis National Bank became a
successful, well capitalized and profitable commercial bank and earned an
"Outstanding" CRA rating. Annapolis National Bank became one of Maryland's top
five SBA lenders and Mr. Morgan was selected as the SBA's Financial Services
Leader of the Year for the State of Maryland in 1994. Mr. Morgan's has also
served as Chief Financial Officer and Group Vice President of the Toddson
Company, Inc.; Chief Financial Officer and Group Vice President of the Phillips
Corporation, Regional Vice President and Loan Officer of Maryland National Bank
and served in commercial lending roles with Marine Midland Bank in New York from
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1970 to 1977. At Maryland National Bank, he was responsible for building
Maryland National Bank's commercial loan portfolio in the Maryland National
Bank's Washington suburban market from zero to $150 million. Mr. Morgan has over
29 of banking and financial management experience and has served on numerous
boards, commissions and community service groups in Annapolis and Anne Arundel
County including the United Way of Anne Arundel County; the Annapolis and Anne
Arundel Chamber of Commerce (formerly Trade Council); Scholarships for Scholars;
State of Maryland's Revitalization Loan Committee; Anne Arundel County
Conference and Visitors Bureau; Greater Baltimore Alliance Economic Development
Advisory Board; Greater Washington Initiative Economic Development Advisory
Board; and the Treasurer and member of the Executive Committee of the Maryland
Industrial Development Association. Mr. Morgan is a founding organizer of
CommerceFirst and a member of the Board of Directors of CommerceFirst and
CommerceFirst Bank.
Lamont Thomas. Mr. Thomas, 59, until joining CommerceFirst and
CommerceFirst Bank, served as the Executive Vice President and Treasurer of
Commerce Bank in College Park, Maryland from September, 1989 until June, 1999
serving as chief operating and financial officer. Mr. Thomas was one of the
original organizers and directors of Commerce Bank and served as a director
until MainStreet's acquisition by BB&T in 1999. As a director, Mr. Thomas served
on the Commerce Bank's Executive, Asset/Liability and Strategic Planning
Committees. From 1976 until the organization of Commerce Bank, Mr. Thomas
managed numerous corporate functions and supervised the Investment, Compliance,
Personnel, Proof and Discount Brokerage Departments of Citizens Bank of
Maryland, a then $1.8 billion commercial bank with a 100-plus branch network in
the Washington, D.C. area as its Vice President and Treasurer. Mr. Thomas was
also responsible for all liaisons with the Federal Deposit Insurance Corporation
and the Maryland State Banking Department and was Secretary to the Board of
Directors and the Executive Committee. Prior to 1976, Mr. Thomas served as
Treasurer of Citizens Bank, where his principal responsibilities involved the
investment portfolio and the daily cash position of Citizens Bank. Mr. Thomas is
a founding organizer of CommerceFirst and a member of the Board of Directors of
CommerceFirst and CommerceFirst Bank.
CommerceFirst Bank
Wilfred T. Azar, III, Mr. Azar, 38, is engaged in commercial real
estate ownership, development and management as President and Chief Executive
Officer of Empire Corporation, a managing member of Empire Management Services,
LLC and partner of Azar Brothers Partnership. Mr. Azar serves as an officer or
director of a number of other businesses located in and around Anne Arundel
County, including as a director of the Anne Arundel County Chamber of Commerce,
the North Arundel Health System, and the Mt. Washington Pediatric Hospital as
well as serving as a director and President of Pony Express, Inc., a documents
storage and services business. Mr. Azar is a member of the Board of Directors of
CommerceFirst Bank.
William F. Chesley. Mr. Chesley, 56, is engaged in residential and
commercial real estate sales, management and development in his capacity as
President of William F. Chesley Real Estate, Inc., Dee Corporation, Enterprise
Office Park, Inc. and Ridgley Builders, Inc., as Vice President of Builders &
Brokers Guarantee Program, Inc. and as a managing member of Builder's Advantage,
LLC. Mr. Chesley is also a partner in several local real estate partnerships
located in and around Anne Arundel County. Mr. Chesley is involved in a number
of charitable and professional associations, including both the national and
local Association of Realtors, Suburban Maryland Building Industry Association,
Kiwanis Club of Prince George's County, Bowie Health Center Foundation, Inc. and
as Chairman of the VIP Panel for United Cerebral Palsy. Mr. Chesley is a member
of the Board of Directors of CommerceFirst Bank.
Milton D. Jernigan, Sr. Mr. Jernigan, 69, until retiring in 1996, was
the founder, Chairman and President of AAA Rentals, Inc. and AAA Tools, Inc.,
equipment and party supplies rental and sale businesses with which he served for
thirty years. From 1969, Mr. Jernigan served as Chairman and President of the
companies until 1996 when the equipment company was sold. The companies that
acquired Mr. Jernigan's equipment company are now a part of a national, publicly
traded network of rental equipment companies headquartered in Connecticut. Mr.
Jernigan was one of the original organizers and directors of Commerce Bank and
served as a director of Commerce Bank from 1989 until its acquisition by
MainStreet in 1997. Mr. Jernigan also served on the Commerce Bank's
Asset/Liability Committee and its Business Development Committee. Mr. Jernigan
is a resident of Edgewater,
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Maryland in Anne Arundel County and is active in local service and civic
organizations, including the Rotary Club of Bladensburg and Woodmore Country
Club. Mr. Jernigan is a founding organizer of CommerceFirst and is a member of
the Board of Directors of CommerceFirst Bank.
Andrew R. Lombardo, CPA. Mr. Lombardo, 51, is a Member of the certified
public accounting firm of Sturn, Wagner, Sacclaris & Lombardo, LLC in Annapolis,
Maryland. In addition to being a certified public accountant, Mr. Lombardo holds
a certified valuation analyst designation. Mr. Lombardo is highly involved in
local business and civic groups. He is a Board member and Treasurer of the Anne
Arundel County Police Foundation, and President of the County's 21st Century
Foundation. He was a founding Board member of the Anne Arundel Economic
Development Corporation and served as its Treasurer from 1993 until 1999.
Additionally, Mr. Lombardo served two terms as President of the Anne Arundel
County Trade Council in 1994 and 1995. Mr. Lombardo is a resident of Anne
Arundel County. Mr. Lombardo is a member of the Board of Directors of
CommerceFirst Bank
Michael J. Miller. Mr. Miller, 41, is engaged in the business of road
construction, residential and commercial real estate ownership and construction
equipment leasing as Vice President of Concrete General, Inc. and Tri M Leasing
Corp. and as a partner of Tri M Properties. Mr. Miller is actively involved in
several industry associations, including the Maryland Highway Contractors
Association, the Public Works Contractors Association and is a member of
Associated Builders and Contractors. Mr. Miller is a founding organizer of
CommerceFirst and is a member of the Board of Directors of CommerceFirst Bank.
Robert R. Mitchell. Mr. Mitchell, 56, until retiring in 1988 was the
President of Mitchell Business Equipment, Inc., with which he served for over 25
years until its sale in 1988. Mitchell Business Equipment, Inc. represented
several nationally known brands of general business equipment, providing sales
and services to a wide range of clients, from small storefront retail operations
to billion dollar corporations. Mr. Mitchell was one of the original organizers
and directors of Commerce Bank and served as a director of Commerce Bank from
1989 until its acquisition by MainStreet in 1997. Mr. Mitchell served on
Commerce Bank's Executive, Loan, Business Development and Strategic Planning
Committees. Mr. Mitchell has served as an outside director of two privately held
local business firms and is active in local service and civic organizations,
including membership in Rotary International for 17 years, service on the Prince
George's Salvation Army Local Board for 15 years and membership in the Anne
Arundel Junior Golf Association for 3 years. Mr. Mitchell is a resident of
Harwood, Maryland. Mr. Mitchell is a founding organizer of CommerceFirst and is
a member of the Board of Directors of CommerceFirst Bank.
John A. Richardson. Mr. Richardson, 56, is engaged in electrical
equipment and fixture sales as President of Branch Electric Supply Company. Mr.
Richardson has served as its President since 1968. Mr. Richardson is also the
President of Crofton Bowling Center and is a partner in numerous real estate
investment partnerships located throughout Anne Arundel and Prince George's
Counties. Mr. Richardson is also involved in several professional associations,
including the National Association of Electrical Distributors and the National
Bowling Proprietors Association. Mr. Richardson is a resident of Anne Arundel
County. Mr. Richardson is a founding organizer of CommerceFirst and is a member
of the Board of Directors of CommerceFirst Bank.
George C. Shenk, Jr. Mr. Shenk, 47, is engaged in the business of
printing and graphics as the President of Whitmore Printing and Imaging, Inc.,,
an Annapolis based business. Mr. Shenk has served as its President since 1976.
Mr. Shenk is a past Chairman of the Printing Industries of Maryland association,
an active member of the Rotary Club of Annapolis and a past President of the
Maryland Hall Creative Arts association. Mr. Shenk was Chairman of County
Executive John Gary's transition team in 1994 and served on the Anne Arundel
County Planning Advisory Board from 1995 until 1998. Mr. Shenk is a resident of
Anne Arundel County. Mr. Shenk is a founding organizer of CommerceFirst and is a
member of the Board of Directors of CommerceFirst Bank.
Dale R. Watson, Mr. Watson, 45, is engaged in the business of computer
consulting as President of Alpha Engineering Associates, Inc., an Annapolis
headquartered business that Mr. Watson formed in 1991. Mr. Watson's firm
configures, installs and supports the computers and networks of local, small to
medium businesses. He is a member of Rotary International and the Anne Arundel
Chamber of Commerce. In addition Mr. Watson's firm has
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supported both local and wide area networks at the State, the County and the
local City of Annapolis government level. Before starting Alpha Engineering
Associates, Inc., Mr. Watson worked for a large international company as a high
level consultant developing large scale software solutions for various Federal
Agencies, the U.S. Military, State Governments, various multi-national companies
and private businesses. Mr. Watson is a founding organizer of CommerceFirst and
is a member of the Board of Directors of CommerceFirst Bank.
Jerome A. Watts. Mr. Watts, 57, is the owner of Plan Management, a
supplier of insurance and employee benefit plans in Lanham, Maryland. Mr. Watts
was one of the founding organizers and member of the Board of Directors of
Commerce Bank. Mr. Watts served as a Director of Commerce Bank from 1989 until
MainStreet's acquisition by BB&T in 1999 and also served on Commerce Bank's
Executive Committee and Loan Committee. Mr. Watts is a member of a number of
civic and professional associations, including the National Association of Life
Underwriters, the Association of Health Insurance Agents and the Prince George's
County Chamber of Commerce. Mr. Watts is a founding organizer of CommerceFirst
and is a member of the Board of Directors of CommerceFirst Bank.
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EXECUTIVE COMPENSATION AND
CERTAIN TRANSACTIONS WITH MANAGEMENT
It is not anticipated that following the opening for business of
CommerceFirst Bank, CommerceFirst will separately compensate any officers or
employees of CommerceFirst or CommerceFirst Bank for services rendered to
CommerceFirst. Prior to the opening of CommerceFirst Bank , Messrs. Jernigan,
Morgan and Thomas, the proposed Chairman, President--Chief Executive Officer and
Executive Vice President--Chief Operating Officer of CommerceFirst Bank will
receive compensation from the Company at annual rates of $30,000, $125,000 and
$120,000, respectively. Messrs. Jernigan, Morgan and Thomas have agreed to defer
40% of their annual compensation until the opening of CommerceFirst Bank.
CommerceFirst does not anticipate that it will provide its and
CommerceFirst Bank's directors with any fees for attending meetings of the Board
of Directors or its committees until it is profitable.
Chairman's Employment Agreement. Pursuant to a certain chairman
employment agreement between CommerceFirst and Mr. Jernigan, Mr. Jernigan will
serve as the Chairman of the Board of Directors of CommerceFirst and as Chairman
of the Board of Directors of CommerceFirst Bank. Under the chairman employment
agreement Mr. Jernigan will receive (i) an annual base salary of $30,000, and
(ii) a term life insurance policy in the amount of $100,000, (iii) 2,500 options
to purchase CommerceFirst stock upon the opening of CommerceFirst Bank (iv)
annual stock options in an amount to be determined by the Board of Directors of
CommerceFirst, and (v) an annual cash bonus in an amount to be determined by the
Board of Directors of CommerceFirst. The term of the chairman employment
agreement will expire on July 14, 2002 unless sooner terminated. If the
agreement is terminated by CommerceFirst without cause, CommerceFirst will
continue to pay Mr. Jernigan his annual compensation and benefits as severance
compensation for a period of 12 months. In the event of any sale or exchange of
stock resulting in a change in a controlling interest of CommerceFirst, Mr.
Jernigan may either continue his employment with CommerceFirst, execute a new
employment agreement on mutually agreeable terms or resign his employment. In
the event that Mr. Jernigan resigns his employment or is terminated within 12
months of the change in control, Mr. Jernigan will be entitled to the sum of
twice the base salary and bonuses paid to Mr. Jernigan during the 12 months
immediately preceding the change in control. See "Certain Transactions" (page
34).
President's Employment Agreement. Pursuant to a certain president
employment agreement between CommerceFirst and Mr. Morgan, Mr. Morgan will serve
as the President and Chief Executive Officer of CommerceFirst and CommerceFirst
Bank. Under the president employment agreement Mr. Morgan will receive (i) an
annual base salary of $125,000, and (ii) a term life insurance policy in the
amount of $300,000, (iii) 10,000 options to purchase CommerceFirst stock upon
the opening of CommerceFirst Bank, (iv) annual stock options in an amount to be
determined by the Board of Directors of CommerceFirst, and (v) an annual cash
bonus in an amount to be determined by the Board of Directors of CommerceFirst
and (vi) and participation in all other health, welfare, benefit, stock, option
and bonus plans, if any, generally available to officers or employees of the
CommerceFirst Bank or CommerceFirst. The term of the president employment
agreement will expire on August 2, 2004 unless sooner terminated. If the
agreement is terminated by CommerceFirst without cause, CommerceFirst will
continue to pay Mr. Morgan his annual compensation and benefits as severance
compensation for a period of 12 months. In the event of any sale or exchange of
stock resulting in a change in a controlling interest of CommerceFirst, Mr.
Morgan may either continue his employment with CommerceFirst, execute a new
employment agreement on mutually agreeable terms or resign his employment. In
the event that Mr. Morgan resigns his employment or is terminated within 12
months of the change in control, Mr. Morgan will be entitled to the sum of twice
the base salary and bonuses paid to Mr. Morgan during the 12 months immediately
preceding the change in control.
Executive Vice President's Employment Agreement. Pursuant to an
executive vice president employment agreement between CommerceFirst and Mr.
Thomas, Mr. Thomas will serve as the Executive Vice President and Chief
Operating Officer of CommerceFirst and CommerceFirst Bank. Under the executive
vice president employment agreement Mr. Thomas will receive (i) an annual base
salary of $120,000, and (ii) a term life insurance policy in the amount of
$200,000, (iii) 7,500 options to purchase CommerceFirst stock upon the opening
of CommerceFirst Bank (iv) annual stock options in an amount to be determined by
the Board of Directors of
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CommerceFirst, and (v) an annual cash bonus in an amount to be determined by the
Board of Directors of CommerceFirst and (vi) and participation in all other
health, welfare, benefit, stock, option and bonus plans, if any, generally
available to officers or employees of the CommerceFirst Bank or CommerceFirst.
The term of the executive vice president employment agreement will expire on
August 1, 2004 unless sooner terminated. If the agreement is terminated by
CommerceFirst without cause, CommerceFirst will continue to pay Mr. Thomas his
annual compensation and benefits as severance compensation for a period of 12
months. In the event of any sale or exchange of stock resulting in a change in a
controlling interest of CommerceFirst, Mr. Thomas may either continue his
employment with CommerceFirst, execute a new employment agreement on mutually
agreeable terms or resign his employment. In the event that Mr. Thomas resigns
his employment or is terminated within 12 months of the change in control, Mr.
Thomas will be entitled to the sum of twice the base salary and bonuses paid to
Mr. Thomas during the 12 months immediately preceding the change in control.
Incentive Stock Option Plan. To attract and retain highly qualified
personnel, it is the intention of the Directors of CommerceFirst to adopt a
Stock Option Plan which would be subject to approval by the holders of a
majority of the outstanding Common stock after this offering. It is intended
that the plan provide for incentive options which would be available for grant
to officers and key employees of CommerceFirst and CommerceFirst Bank. The
exercise price under each incentive stock option would not be less than 100% of
the fair market value of the shares on the date the option is granted. No
taxable income would be recognized by the optionee at the time an incentive
stock option is granted or at the time exercised, and correspondingly,
CommerceFirst would not be entitled to a compensation expense deduction for
federal income tax purposes. The aggregate fair market value of the Common stock
for which any one officer or employee may be granted incentive stock options in
any calendar year would not exceed $100,000 as provided in Section 422A of the
Internal Revenue Code, including the requirements which restrict the term of
such an option to ten years. Within three (3) months following termination of
employment for any reasons other than death, disability or retirement, or cause,
an optionee would be entitled to exercise his or her option to the extent such
option were exercisable on the date of termination. The plan would extend for a
period of ten years and be administered by a committee appointed by the Board.
Since the Plan has not yet been adopted, it is impossible at this time
to designate the identity of the recipients of stock options or the number of
options to be granted.
Warrant Plan. In order to encourage the continued involvement of the
organizers in the CommerceFirst Bank, the Directors of CommerceFirst has adopted
a Warrant Plan which will issue non-transferable warrants to each organizer. The
maximum of number warrants to be issued under the plan will equal 15% of the
total shares of stock sold by CommerceFirst in the offering (97,500 shares if
the minimum number of shares are sold, 120,000 shares if the maximum number of
shares are sold and 150,000 shares if all of the oversubscription shares are
sold). Each organizer would be allocated an number of warrants equal to the
number of shares purchased by the organizer in the offering. Each organizer will
initially receive 2,500 warrants in consideration of their initial capital
contribution to CommerceFirst. Remaining warrants will be allocated in the
proportion that the number of shares purchased by the organizer and its
affiliates bears to the total number of shares purchased by all organizers,
limited to the total number of shares purchased by the organizer and its
affiliates in the offering. The warrants will vest over 3 years at a rate of
30%, 30% and 40%, respectively and vested warrants will entitled the holder
thereof to purchase one share of stock. The exercise price of each warrant will
be $10.00 per share and must be exercised, unless earlier called by
CommerceFirst, within 10 years from the date of termination of the offering.
With the exception of Citizens, Inc., vested warrants will also expire 1 year
following the date that the organizer ceases to be a director of CommerceFirst
Bank. Warrants may be called by CommerceFirst in the event that a merger, sale,
acquisition, share exchange or other similar extraordinary event is approved by
the Board of Directors of CommerceFirst. Upon call by CommerceFirst, warrant
holders will have 90 days in which to exercise their warrants. If they are not
exercised, CommerceFirst will pay the warrant holder the difference between the
exercise price of the warrant and the fair market value of the stock of
CommerceFirst at the time of the closing of the transaction. In the event that
an applicable state or federal regulatory authority determine that CommerceFirst
Bank's capital fails to meet minimum capital requirements, such regulatory
authority may direct CommerceFirst to call all outstanding warrants. Any
warrants not exercised will be thereafter forfeited.
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CERTAIN TRANSACTIONS
It is anticipated that the Directors and Officers of CommerceFirst and
the business and professional organizations with which they are associated will
have banking transactions with CommerceFirst Bank in the ordinary course of
business. It is the policy of management 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 CommerceFirst 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.
Milton D. Jernigan, II, a founding organizer and Chairman of the Board
of Directors of CommerceFirst and Commerce First Bank is also a principal of
McNamee, Hosea, Jernigan & Kim, P.A. McNamee, Hosea, Jernigan & Kim, P.A has
been retained by CommerceFirst to perform certain legal and advisory services in
connection with the formation of CommerceFirst and CommerceFirst Bank, including
but not limited to, the preparation of regulatory applications, organizational
documents, employment agreements for the senior officers, including Mr.
Jernigan, and the organizers agreement and Warrant plan, and participating in
the preparation of this prospectus. CommerceFirst also leases its organizational
offices from McNamee, Hosea, Jernigan & Kim, P.A. for a rental of $1,500 per
month pursuant to an oral lease between McNamee, Hosea, Jernigan & Kim, P.A. and
CommerceFirst. It is anticipated that following the termination of the offering,
McNamee, Hosea, Jernigan & Kim, P.A. will serve as general corporate and
regulatory counsel for CommerceFirst and CommerceFirst Bank.
McNamee, Hosea, Jernigan & Kim, P.A. will not charge CommerceFirst for
any of Mr. Jernigan's time or efforts with respect to the offering or the
organization of CommerceFirst and CommerceFirst Bank. Mr. Jernigan has agreed
not to provide any legal services to CommerceFirst or CommerceFirst Bank.
McNamee, Hosea, Jernigan & Kim, P.A. has agreed to defer the payment of certain
legal fees pending the successful completion of this offering.
Other attorneys in the firm of McNamee, Hosea, Jernigan & Kim, P.A. may
subscribe for shares in the offering.
SHARES ELIGIBLE FOR FUTURE SALE
All shares sold in this offering will be freely tradable without
restriction or registration under the Securities Act of 1933, except for any
shares purchased by an "affiliate" of CommerceFirst, which will be subject to
the resale limitations set forth in Securities and Exchange Commission Rule 144.
All of CommerceFirst's Directors are considered "affiliates" within the
meaning of Rule 144 and will, therefore, be subject to the applicable resale
limitations with respect to the shares purchased in this offering. In general,
the number of shares that can be sold by each Director 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 the Company (6,500 shares if the
minimum number of shares are sold or 8,000 shares if the maximum number of
shares are sold), 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.
DESCRIPTION OF CAPITAL STOCK
CommerceFirst's authorized capital consists of 4,000,000 shares of
common stock, $.01 par value.
Holders of common stock are entitled to cast one vote for each share
held of record, to receive such dividends as may be declared by the Board of
Directors out of legally available funds, and to share ratably in any
distribution of CommerceFirst's assets after payment of all debts and other
liabilities, upon liquidation, dissolution or winding up. Shareholders do not
have cumulative voting rights or preemptive rights or other rights to subscribe
for additional shares, and the common stock is not subject to conversion or
redemption. The shares of common stock to be issued in
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this offering will be, when issued, fully paid and non-assessable. Three Hundred
Twenty-Five shares of common stock, issued to the organizers to finance
CommerceFirst's organizational efforts, are presently outstanding, each of which
will be used to purchase 100 shares of common stock in the offering.
Limitations on Payment of Dividends. The payment of dividends by
CommerceFirst will depend largely upon the ability of CommerceFirst Bank to
declare and pay dividends to CommerceFirst, as the principal source of
CommerceFirst's revenue will initially be from dividends paid by CommerceFirst
Bank. Dividends will depend primarily upon the Bank's earnings, financial
condition, and need for funds, as well as governmental policies and regulations
applicable to CommerceFirst and CommerceFirst Bank. It is anticipated that
CommerceFirst Bank will incur losses during its initial phase of operations, and
therefore, it is not anticipated that any dividends will be paid by
CommerceFirst Bank or CommerceFirst for at least three years and in the
foreseeable future. Even if CommerceFirst Bank and CommerceFirst have earnings
in an amount sufficient to pay dividends, the Board of Directors may determine
to retain earnings for the purpose of funding the growth of CommerceFirst Bank
and CommerceFirst.
Regulations of the Federal Reserve Board and Maryland law place limits
on the amount of dividends CommerceFirst Bank may pay to CommerceFirst without
prior approval. Prior regulatory approval is required to pay dividends which
exceed CommerceFirst Bank's net profits for the current year plus its retained
net profits for the preceding two calendar years, less required transfers to
surplus. State and federal bank regulatory agencies also have authority to
prohibit a bank from paying dividends if such payment is deemed to be an unsafe
or unsound practice, and the Federal Reserve Board has the same authority over
bank holding companies.
The Federal Reserve Board has established guidelines with respect to
the maintenance of appropriate levels of capital by registered bank holding
companies. Compliance with such standards, as presently in effect, or as they
may be amended from time to time, could possibly limit the amount of dividends
that CommerceFirst may pay in the future. In 1985, the Federal Reserve Board
issued a policy statement on the payment of cash dividends by bank holding
companies. In the statement, the Federal Reserve Board expressed its view that a
holding company experiencing earnings weaknesses should not pay cash dividends
exceeding its net income, or which could only be funded in ways that weaken the
holding company's financial health, such as by borrowing. As a depository
institution, the deposits of which are insured by the FDIC, the Bank may not pay
dividends or distribute any of its capital assets while it remains in default on
any assessment due the FDIC.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
Restrictions on Business Combinations with Interested Shareholders.
CommerceFirst's Articles of Incorporation provides that certain "business
combinations" (including, among various other transactions, a merger,
consolidation, or, in certain circumstances involving assets having a value
equal to 10% or more of CommerceFirst's equity, an asset transfer or issuance of
equity securities, and the adoption of certain plans of liquidation or
dissolution) involving and any person who beneficially owns at least 20% of the
corporation's stock and such persons, affiliates or associates (an "interested
shareholder"). Such a business combination must be: (a) approved by the
affirmative vote of at least (i) 80% of the voting power of all outstanding
shares of voting stock and (ii) a majority of the voting power of all
outstanding shares of voting stock which are not held by the interested
shareholder with whom the business combination is to be effected, unless, among
other things, the business combination is approved by a majority of the members
of the Board of Directors who are "disinterested directors," and the common
shareholders receive a price (as described in the articles) generally equal to
the higher of the "fair market value" of the common stock and the highest price
paid by the interested shareholders for any shares of common stock.
Consideration of Business Combinations. The Articles of Incorporation
provide that that where the Board of Directors evaluates any actual or proposed
business combination, the Board of Directors shall consider the following
factors: the effect of the business combination on CommerceFirst and any of its
subsidiaries, and their respective shareholders, employees, customers and the
communities which they serve; the timing of the proposed business combination;
the risk that the proposed business combination will not be consummated; the
reputation, management capability and performance history of the person
proposing the business combination; the current market price of the
corporation's capital stock; the relation of the price offered to the current
value of the corporation in a freely negotiated transaction and in relation to
the directors' estimate of the future value of CommerceFirst and its
32
<PAGE>
subsidiaries as an independent entity or entities; tax consequences of the
business combination to the corporation and its shareholders; and such other
factors deemed by the directors to be relevant. In such considerations, the
Board of Directors may consider all or certain of such factors as a whole and
may or may not assign relative weights to any of them. The foregoing is not
intended as a definitive list of factors to be considered by the Board of
Directors in the discharge of their fiduciary responsibility to CommerceFirst
and its shareholders, but rather to guide such consideration and to provide
specific authority for the consideration by the Board of Directors of factors
which are not purely economic in nature in light of the circumstances of the
corporation and its subsidiaries at the time of such proposed business
combination.
Amendment of the Articles of Incorporation. In general, the Articles of
Incorporation may be amended upon the vote of two thirds of the outstanding
shares of capital stock entitled to vote. The provisions of the Articles of
Incorporation relating to the vote required for business combinations and the
factors which shall be considered by the Board of Directors in considering
business combinations, and the provisions requiring the vote of eighty percent
of the combined voting power of the outstanding voting stock to adopt any change
to the Bylaws which is not approved by two thirds of the disinterested
directors, may be amended only upon the affirmative vote of 80% of the voting
power of the outstanding voting stock.
LITIGATION
To the knowledge of CommerceFirst and its Directors and Officers, there
is no pending or threatened litigation involving CommerceFirst.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
CommerceFirst by Kennedy, Baris & Lundy, L.L.P., Bethesda, Maryland. Members of
such firm may subscribe to purchase shares of common stock offered hereby.
EXPERTS
The audited financial statements of CommerceFirst Bancorp, Inc. (a
development stage company) for the period ending October 31, 1999 included in
this prospectus has been included herein in reliance upon the report of Trice &
Geary, L.L.C., independent certified public accountants, and upon the authority
of said firm as experts in accounting and auditing.
33
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditor's Report....................................................................................F-1
Audited Balance Sheet of the CommerceFirst at October 31, 1999..................................................F-2
Audited Statement of Operations.................................................................................F-3
Audited Statement of Changes in Stockholders' Deficit...........................................................F-4
Audited Statement of Cash Flows.................................................................................F-5
Notes to Audited Financial Statements...........................................................................F-6
</TABLE>
34
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
CommerceFirst Bancorp, Inc.
Annapolis, MD 21401
We have audited the accompanying balance sheet of CommerceFirst Bancorp, Inc. (a
Development Stage Company) as of October 31, 1999 and the related statements of
operations, changes in stockholders' equity and cash flows for the period July
9, 1999 (date of inception) to October 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 the 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 CommerceFirst Bancorp, Inc. (a
Development Stage Company) as of October 31, 1999 and the results of operations
and cash flows for the period July 9, 1999 (date of inception) to October 31,
1999 in conformity with generally accepted accounting principles.
/s/ Trice and Geary LLC
Salisbury, Maryland
November 16, 1999
F-1
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
OCTOBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash $ 226,901
Equipment (net) 3,599
---------
TOTAL ASSETS $ 230,500
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
TOTAL LIABILITIES $ -
---------
STOCKHOLDERS' EQUITY
Common Stock
$.01 par value, 4,000,000 shares outstanding,
325 shares issued and outstanding 3
Surplus 324,997
Deficit accumulated during the
development stage (94,500)
---------
TOTAL STOCKHOLDERS' EQUITY 230,500
---------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 230,500
=========
</TABLE>
See Accompanying Notes
F-2
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A Development Stage Company)
Statement of Operations
For the Period From July 9, 1999
(Date of Inception) to October 31, 1999
<TABLE>
<S> <C>
REVENUES: Interest income $ 2,394
----------
EXPENSES:
Depreciation 103
Legal 27,330
Salaries 49,768
Rent 3,000
Security placement agent fee 7,500
Marketing and consulting 4,434
Office supplies 1,938
Business development 1,171
Miscellaneous 1,650
----------
Total expenses 96,894
LOSS BEFORE INCOME TAX BENEFIT (94,500)
INCOME TAX BENEFIT -
NET LOSS $ (94,500)
==========
EARNINGS PER SHARE:
Basic net loss per share $ (291)
==========
Diluted net loss per share $ (291)
==========
</TABLE>
See Accompanying Notes
F-3
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the Period From July 9, 1999
(Date of Inception) to October 31, 1999
<TABLE>
<CAPTION>
Common Surplus Deficit Accumulated
Stock During the Development
Stage
<S> <C> <C> <C>
Balances at July 9, 1999 $ - $ - $ -
Issuance of Common Stock 3 324,997 325,000
Net Loss (94,500)
-------- ---------- ----------
BALANCES AT OCTOBER 31, 1999 $ 3 $ 324,997 $ 230,500
======== ========== ==========
</TABLE>
See Accompanying Notes
F-4
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A Development Stage Company)
Statement of Cash Flows
For the Period From July 9, 1999
(Date of Inception) to October 31, 1999
<TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net Loss $ (94,500)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation 103
---------
Net cash used by
operating activities (94,397)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (3,702)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
common stock to organizers 325,000
---------
NET INCREASE IN CASH 226,901
CASH AT BEGINNING OF PERIOD -
---------
CASH AT END OF PERIOD $ 226,901
=========
Supplemental Cash Flows Information:
Interest payments $ -
=========
Income tax payments $ -
=========
</TABLE>
See Accompanying Notes
F-5
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 9, 1999
(DATE OF INCEPTION) TO OCTOBER 31, 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
CommerceFirst Bancorp, Inc. (the "Company") was incorporated on July 9, 1999
under the laws of the State of Maryland to operate as a bank holding company of
a proposed new commercial bank with the name CommerceFirst 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 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 and approvals of the Maryland Department
of Financial Regulation and the Board of Governors of the Federal Reserve System
to receive its charter authorizing it to commence operations as a commercial
bank, has obtained the approval of the Federal Deposit Insurance Corporation
(FDIC) to insure its deposit accounts, and meets certain other regulatory
requirements.
The Proposed Bank will seek to operate as a local business bank alternative to
the superregional financial institutions which dominate its primary market area
within Anne Arundel County and surrounding areas. The Proposed Bank will focus
on relationship banking, providing each customer with a number of services,
familiarizing itself with, and addressing itself to, customer needs in a
proactive, personalized fashion. The accounting policies of the Company conform
to generally accepted accounting principles and general practices within the
banking industry.
Significant accounting policies not disclosed elsewhere in the financial
statements are as follows:
DEPRECIATION
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets.
CREDIT RISK
The Company has deposits in a financial institution in excess of amounts insured
by the FDIC, however, this institution is considered to be a sound institution
within the industry.
F-6
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) 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.
NOTE 2. INCOME TAXES
Federal and state income tax expense (benefit) consists of the following for the
period ended October 31, 1999:
<TABLE>
<CAPTION>
<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) $ --
===
</TABLE>
The following chart is a summary of the tax effect of temporary differences that
give rise to a significant portion of deferred tax assets:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Net operating loss carryforward $ 21,000
Less valuation allowance 21, 000
-------
Total deferred tax assets $ --
=======
</TABLE>
F-7
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. INCOME TAXES (CONTINUED)
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 carryforward if their realization is "more likely than
not".
NOTE 3. EMPLOYMENT CONTRACTS
The Company has signed employment agreements with the Chairman of the Board of
Directors, President, and Executive Vice President, which will expire July 14,
2002, August 2, 2004, and August 1, 2004, respectively. In the event the
agreements are terminated by the Company without cause, the Company will
continue to pay annual compensation and benefits as severance compensation for a
period of 12 months.
NOTE 4. ISSUANCE OF COMMON STOCK
The Company offered and sold 325 shares of its common stock, $.01 par value per
share for a price of $1,000 per share and received aggregate consideration of
$325,000 to be used for funding organizational activities.
The Company is offering to sell a minimum of 650,000 shares and up to 800,000
shares of its common stock, at a price of $10.00 per share. The Company reserves
the right to sell up to an additional 200,000 shares of common stock if the
volume of subscription exceeds the number of shares offered.
NOTE 5. WARRANTS AND OPTIONS
The Board of Directors of the Company adopted a Warrant Plan which will issue
non-transferable warrants to each organizer. The maximum number of warrants to
be issued under the plan will equal 15% of the total shares of stock sold by the
Company in the offering. Each organizer will be allocated a number of warrants
equal to the number of shares purchased by the organizer in the offering.
Remaining warrants for the organizers will be allocated in the proportion that
the number of shares purchased by the organizers bears to the total number of
shares purchased by all organizers, limited to the total number of shares
purchased by the
F-8
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. WARRANTS AND OPTIONS (CONTINUED)
organizers in the offering. The warrants will vest over 3 years at a rate 30%,
30% and 40%, respectively and vest warrants will entitle the holder thereof to
purchase one share of stock. The exercise price of each warrant will be $10 per
share and must be exercised, unless earlier called by the Company not later than
10 years from the date of termination of there offering. Generally, vested
warrants will also expire 1 year following the date that the organizer ceases to
be a director of the Proposed Bank. Warrants may be called by the Company in the
event that a merger, sale, acquisition, share exchange or other similar
extraordinary event is approved by the Board of Directors of the Company. Upon
call by the Company, warrant holders will have 90 days in which to exercise
their warrants. If they are not exercised, the Company will pay the warrant
holder the difference between the exercise price of the warrant and the fair
market value of the stock of the Company at the time of the closing of the
transaction. In the event that an applicable state or federal regulatory
authority determine that the Proposed Bank's capital fails to meet minimum
capital requirements, such regulatory authority may direct the Company to call
all outstanding warrants. Any warrants not exercised will be thereafter
forfeited.
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 officers and key
employees.
NOTE 6. RELATED PARTY TRANSACTIONS
The Company has incurred approximately $20,000 of legal expenses with a law firm
of which the Chairman of the Board of the Company is also a principal. The
Company also sub-leases office space in Annapolis, Maryland for $1,500 per month
from this law firm.
F-9
<PAGE>
================================================================================
TABLE OF CONTENTS
PAGE
Summary.......................................................................2
Risk Factors..................................................................5
The Offering..................................................................9
Use of Proceeds..............................................................12
Business of CommerceFirst....................................................14
Capitalization of CommerceFirst..............................................15
Business of CommerceFirst Bank...............................................15
Management's Plan of Operation...............................................18
Supervision and Regulation...................................................19
Management...................................................................23
Executive Compensation and Certain
Transactions with Management..............................................29
Shares Eligible for Future Sale..............................................31
Description of Capital Stock.................................................31
Legal Matters................................................................33
Experts......................................................................33
Index to Financial Statements................................................34
----------------
COMMERCEFIRST HAS NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ABOUT THE OFFERING THAT DIFFERS FROM, OR ADDS TO, THE INFORMATION
IN THIS PROSPECTUS OR IN ITS DOCUMENTS THAT ARE PUBLICLY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THEREFORE, IF ANYONE DOES GIVE YOU DIFFERENT
OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT. THE DELIVERY OF THIS
PROSPECTUS AND/OR THE SALE OF SHARES OF COMMON STOCK DO NOT MEAN THAT THERE HAVE
NOT BEEN ANY CHANGES IN COMMERCEFIRST'S CONDITION SINCE THE DATE OF THIS
PROSPECTUS. IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO SELL,
OR TO ASK FOR OFFERS TO BUY, THE SECURITIES OFFERED BY THIS PROSPECTUS, OR IF
YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT SUCH ACTIVITIES, THEN THE
OFFER PRESENTED BY THIS PROSPECTUS DOES NOT EXTEND TO YOU. THIS PROSPECTUS
SPEAKS ONLY AS OF ITS DATE EXCEPT WHERE IT INDICATES THAT ANOTHER DATE APPLIES.
UNTIL , ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
800,000 SHARES
COMMERCEFIRST BANCORP, INC.
COMMON STOCK
Prospectus
-----------, ------
-------------------
================================================================================
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Articles of Incorporation of CommerceFirst provide that
CommerceFirst may indemnify officers, directors, employees and agents of
CommerceFirst to the fullest extent permitted by the Maryland law (the "Maryland
law"). Pursuant to the Maryland law, CommerceFirst generally has the power to
indemnify its present and former directors, officers, agents and employees, or
persons serving as such in another entity at CommerceFirst's request, against
expenses (including attorneys' fees) and liabilities incurred by them in any
action, suit, or proceeding to which they are, or are threatened to be made, a
party by reason of their serving in such positions, so long as they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of CommerceFirst, or in the case of a criminal proceeding,
had no reasonable cause to believe their conduct was unlawful. In respect of
suits by or in the right of CommerceFirst, the indemnification is generally
limited to expenses (including attorneys' fees) and is not available in respect
of any claim where such person is adjudged liable to CommerceFirst, unless the
court determines that indemnification is appropriate. To the extent such person
is successful in the defense of any suit, action or proceeding, indemnification
against expenses (including attorneys' fees) is mandatory. CommerceFirst has the
power to purchase and maintain insurance for such persons and indemnification.
The indemnification provided by the Maryland law is not exclusive of other
rights to indemnification which any person may otherwise be entitled under any
bylaw, agreement, shareholder or disinterested director vote, or otherwise.
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses payable by CommerceFirst in connection with the
Offering described in this Registration Statement (other than underwriting
discounts and commissions) are as follows:
SEC registration fee $ 3,837
Blue Sky qualification fees and expenses 12,500
Printing, engraving & Edgar expenses 15,000
Registered Broker Dealer Fees 15,000
Legal fees and expenses 50,000
Accounting fees and expenses 10,000
Other 3,663
-----------
Total $ 110,000
===========
Item 26. Recent Sales of Unregistered Securities.
Between July 14, 1999 and October 18, 1999, CommerceFirst issued an
aggregate of 325 shares of common stock to organizers of CommerceFirst and
CommerceFirst Bank at a price of $1,000 per share in private placement
transactions exempted pursuant to Section 4(2) of the Securities Act of 1933,
pursuant to the terms of Organizer Agreements between CommerceFirst and the
organizers.
Item 27. Exhibits.
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
3(a) Articles of Incorporation of CommerceFirst, as amended
3(b) Bylaws of CommerceFirst
5(a) Opinion of Kennedy, Baris & Lundy, L.L.P.
10(a) Chairman Employment Agreement dated July 14, 1999 between Milton D. Jernigan, II and
CommerceFirst Bancorp, Inc.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
10(b) President Employment Agreement dated August 2, 1999 between Richard J. Morgan and
CommerceFirst Bancorp, Inc.
10(c) Executive Vice President Employment Agreement dated July 14, 1999 between Lamont
Thomas and CommerceFirst Bancorp, Inc.
23(a) Consent of Trice & Geary, L.L.C., Independent Auditors
23(b) Consent of Kennedy, Baris & Lundy, L.L.P., included in Exhibit 5
99(a) Form of Subscription Agreement
99(b) Amended and Restated Organizers Agreement
99(c) Form of Escrow Agreement
</TABLE>
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
notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of this
chapter) if, in the aggregate, the changes in the volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective 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-2
<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, thereunto duly
authorized, in the City of Annapolis, State of Maryland on November 29, 1999.
COMMERCEFIRST BANCORP, INC.
By: /s/ Richard J. Morgan
--------------------------------
Richard J. Morgan, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
- --------------------------------------------- Director _______, 1999
Edward B. Howlin, Jr.
/s/ Milton D. Jernigan II
- --------------------------------------------- Chairman of the Board of Directors November 29, 1999
Milton D. Jernigan II
- --------------------------------------------- Vice Chairman of the Board of Directors, _______, 1999
Alvin R. Maier Secretary and Treasurer
/s/ Richard J. Morgan Director, President--Chief Executive November 29, 1999
- --------------------------------------------- Officer
Richard J. Morgan (Principal Executive Officer)
/s/ Lamont Thomas Director, Executive Vice President-- November 29, 1999
- --------------------------------------------- Chief Operating Officer
Lamont Thomas (Principal Financial and Accounting Officer)
</TABLE>
Exhibit 3(a)
ARTICLES OF INCORPORATION
OF
COMMERCEFIRST BANCORP, INC.
AS AMENDED
------------------------------------------------------------------------
The undersigned incorporator, Milton D. Jernigan, II, whose address is
705 Melvin Avenue, Suite 102, Annapolis, Maryland 21401 and who is at least 18
years of age, does hereby form a corporation under the laws of the State of
Maryland.
ARTICLE I. NAME
The name of the corporation is: COMMERCEFIRST BANCORP, INC.
(hereinafter referred to as the "Corporation").
ARTICLE II. PURPOSE
The purpose of the Corporation is to engage in any lawful act or
business for which corporations may be formed under the Maryland General
Corporation Law.
ARTICLE III. CAPITAL STOCK
The number of shares which the Corporation shall have authority to
issue is Four Million (4,000,000), all of which shall be classified as voting
common stock, par value One Cent ($.01) per share. The aggregate par value of
all of the stock is Forty Thousand Dollars ($40,000).
ARTICLE IV. PREEMPTIVE RIGHTS
The holders of the capital stock of the Corporation shall not have any
preemptive or preferential rights to purchase or otherwise acquire any shares of
any class of capital stock of the Corporation, whether now or hereafter
authorized, except as the Board of Directors may specifically provide.
ARTICLE V. CUMULATIVE VOTING
The holders of the capital stock of the Corporation shall not have the
right to vote cumulatively in the election of directors.
ARTICLE VI. LIMITATION OF LIABILITY AND INDEMNIFICATION
(1) To the full extent permitted by Maryland General Corporation Law
and the Courts and Judicial Proceedings Article, a director or officer of the
Corporation shall not be liable to the Corporation or its shareholders for
monetary damages.
(2) To the full extent permitted and in the manner prescribed by
Maryland General Corporation Law and any other applicable law, the Corporation
shall indemnify a director or officer of the Corporation who is or was a party
to any proceeding (whether civil, criminal, administrative or investigative,
threatened, pending or completed (herein a "Proceeding") by reason of the fact
that he is or was such a director or officer or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise. The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested directors, to contract in advance to indemnify any
director or officer.
<PAGE>
(3) The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested directors, to cause the Corporation to indemnify or
contract in advance to indemnify any director or officer, and to cause the
Corporation to indemnify or contract in advance to indemnify any person not
specified in Section 2 of this Article VI who was or is a party to any
Proceeding, by reason of the fact that he is or was an employee or agent of the
Corporation, or is or was serving at the request of the Corporation as director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, to the same extent as if such
person were specified as one to whom indemnification is granted in Section 2 of
this Article VI.
(4) Notwithstanding any other provision in this Article VI, the
Corporation shall indemnify a director who entirely prevails in the defense of
any Proceeding to which he was a party because he is or was a director of the
Corporation against reasonable expenses incurred by him in connection with the
Proceeding.
(5) The Corporation may purchase and maintain insurance to indemnify it
against the whole or any portion of the liability assumed by it in accordance
with this Article VI and may also procure insurance, in such amounts as the
Board of Directors may determine, on behalf of any person who is or was a
director, officer, employee or agent of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against any liability asserted
against or incurred by any such person in any such capacity or arising from his
status as such, whether or not the Corporation would have power to indemnify him
against such liability under the provisions of this Article.
(6) In the event there has been a change in the composition of a
majority of the Board of Directors after the date of the alleged act or omission
with respect to which indemnification is claimed, any determination as to
indemnification and advancement of expenses with respect to any claim for
indemnification made pursuant to Section 2 of this Article VI shall be made by
special legal counsel agreed upon by the Board of Directors and the proposed
indemnitee. If the Board of Directors and the proposed indemnitee are unable to
agree upon such special legal counsel, the Board of Directors and the proposed
indemnitee each shall select a nominee and the nominees shall select such
special legal counsel.
(7) The provisions of this Article VI shall be applicable to all
actions, claims, suits or proceedings commenced after the adoption hereof,
whether arising from any action taken or failure to act before or after such
adoption. No amendment, modification or repeal of this Article shall diminish
the rights provided hereby or diminish the right to indemnification with respect
to any claim, issue or matter in any then pending or subsequent Proceeding that
is based in any material respect on any alleged action or failure to act prior
to such amendment, modification or repeal.
(8) The provisions of this Article VI shall not be exclusive of any
other indemnification to which such persons may be entitled under any bylaw,
agreement, statute, vote of shareholders or disinterested directors, or
otherwise.
(9) Reference herein to directors, officers, employees or agents shall
include former directors, officers, employees and agents and their respective
heirs, executors and administrators.
(10) Reference herein to directors, officers, employees or agents shall
include former directors, officers, employees and agents and their respective
heirs, executors and administrators.
ARTICLE VII. RESIDENT AGENT
The Corporation's initial resident agent shall be:
Milton D. Jernigan, II
705 Melvin Avenue, Suite 102
Annapolis, Maryland 21401
a citizen and resident of Maryland. The Corporation's resident
agent consents to his appointment by his signature hereto:
<PAGE>
------------------------------------
Milton D. Jernigan, II
ARTICLE VIII. PRINCIPAL OFFICE
The current address of the principal office of the Corporation is:
705 Melvin Avenue, Suite 104
Annapolis, Maryland 21401.
ARTICLE IX. DIRECTORS
Section 1. The initial Board of Directors shall consist of One (1)
director. The Corporation shall at all times have no more than Twenty-five (25)
directors. Following the issuance of stock, the Corporation shall at all times
have at least Three (3) directors unless the number of stockholders of the
Corporation drops below Three (3), at which time the number of directors shall
be no fewer than the number of stockholders pursuant to Section 2-402 of the
Corporations and Associations Article of the Annotated Code of Maryland.
Section 2. Newly created directorships resulting from any increase in
the number of directors may be filled by the Board of Directors, or as otherwise
provided in the Bylaws, and any vacancies on the Board of Directors resulting
from death, resignation, removal or other cause shall only be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors, or by a sole remaining
director, or as otherwise provided in the Bylaws. Any director elected in
accordance with the preceding sentence of this Section 2 shall hold officer for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
Section 3. Any director may be removed from office only for Cause, and
in such case, only by the affirmative vote of the holders of a majority of the
combined voting power of the then outstanding capital stock of all classes and
series of the Corporation entitled to vote generally in the election of
directors (the "Voting Stock") voting together as a single class. For the
purposes of this Section 3, "Cause" shall mean the willful and continuous
failure of a director substantially to perform such director's duties to the
Corporation (other than any such failure resulting from incapacity due to
physical or mental illness) or the willful engaging by a director in gross
misconduct materially and demonstrably injurious to the Corporation.
Section 4. In addition to any requirements of law and any other
provisions of these Articles of Incorporation, the affirmative vote of the
holders of Eighty Percent (80%) or more of the combined voting power of the then
outstanding Voting Stock, voting together as a single class, shall be required
to amend, alter or repeal, or adopt any provision inconsistent with this Article
IX.
ARTICLE X. FACTORS TO BE CONSIDERED IN CERTAIN TRANSACTIONS
Section 1. For the purposes of this Article X:
(a) A "person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
(b) "Interested Stockholder" shall men any person (other than
the Corporation or any Subsidiary) who or which:
(1) is the beneficial owner, directly or indirectly, of
Twenty Percent (20%) or more of the combined voting power of the
then outstanding Voting Stock; or
(2) is an Affiliate of the Corporation and at any time
within the Two (2) year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of
Twenty Percent (20%) of the then outstanding Voting Stock;
<PAGE>
(3) is an assignee or has otherwise succeeded to the
beneficial ownership of any Voting Stock which was at any time
within the Two (2) year period immediately prior to the date in
question beneficially owned by any Interested Stockholder, if
such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of
1933.
(c) "Disinterested Stockholder" shall mean a stockholder of the
Corporation (other than the Corporation or Subsidiary) who is not an
Interested Stockholder or an Affiliate or an Associate of an Interested
Stockholder.
(d) A person shall be a "beneficial owner" of any Voting Stock;
(1) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; or
(2) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangements or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (b) the right to vote or to direct the
vote pursuant to any agreement, arrangement or understanding, or
(3) which are beneficially owned, directly or indirectly,
by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any Voting Stock.
(e) For the purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph (b) of this Section 4, the
number of shares of Voting Stock deemed to be outstanding shall include
shares deemed owned by such person through application of Paragraph (d)
of this Section 4 but shall not include any other Voting Stock which
may be issuable to other persons pursuant to any agreement, arrangement
or understanding upon exercise of conversion rights, exchange rights,
warrants or options or otherwise.
(f) An "Affiliate" of, or a person "Affiliated" with, a
specified person, is a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under
common control with, the person specified.
(g) The term "Associate" used to indicate a relationship with
any person, means
(1) any corporation or organization (other than the
registrant or a majority-owned subsidiary of the registrant) of
which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any
class of equity securities,
(2) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity, and
(3) any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person or who is a
director or officer of the registrant or any of its parents or
subsidiaries.
(h) "Subsidiary" shall mean any corporation of which a majority
of the outstanding capital stock having ordinary voting power for the
election of directors is owned by the Corporation and one or more
Subsidiaries, provided, however, that for the purposes of the
definitions set forth in Paragraph (b) and (c) of this Section 4, the
term "Subsidiary" shall mean only a corporation of which a majority of
such class of equity security is owned by the Corporation, by a
Subsidiary or by the Corporation and one or more Subsidiaries.
<PAGE>
(i) "Disinterested Director" means any member of the Board of
Directors of the Corporation who is unaffiliated with, and not a
nominee of, the Interested Stockholder and was a member of the Board of
Directors prior to the time that the Interested Stockholder became an
Interested Stockholder, and any successor of a Disinterested Director
who is unaffiliated with, and not a nominee of, the Interested
Stockholder and who is recommended to succeed a Disinterested Director
by a majority of the Disinterested Directors of the Board of Directors.
(j) "Fair Market Value" means: (1) in the case of capital stock,
the highest closing sale price during the Thirty (30) calendar day
period immediately preceding the date in question of a share of such
capital stock on the New York Stock Exchange Composite Tape, or, if
such capital stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such capital stock is not listed on such
exchange, on the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such capital stock
is listed, or, if such capital stock is not listed on any such
exchange, the highest closing sales price or bid quotation with respect
to a share of such capital stock during the Thirty (30) calendar day
period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations system or any system then
in use, or if no such quotations are available, the fair market value
on the date in question of a share of such capital stock as determined
by a majority of the Disinterested Directors in good faith; and (2) in
the case of capital stock of any class or series which is not traded on
any securities exchange or in over-the-counter market or in the case of
property other than cash or capital stock, the fair market value of
such capital stock or property, as the case may be, on the date in
question as determined by a majority of the Disinterested Directors in
good faith.
(k) "Announcement Date" means the date of the first public
announcement of the proposed Business Combination.
(l) "Determination Date" means the date on which the Interested
Stockholder became an Interested Stockholder.
(m) "Voting Stock" means the then outstanding capital stock of
all classes and series of the Corporation entitled to vote generally in
the election of directors.
Section 2. Pursuant to Section 2-104 (b)(4) of the Corporations and
Associations Article of the Annotated Code of Maryland, the vote of Stockholders
required to approve Business Combinations (as hereinafter defined) shall be as
set forth in this Article X.
Section 3. The term "Business Combination" as used in this Article X
shall mean any transaction which is referred to in any one or more of Paragraphs
(a) through (e) of Section 4 of this Article X.
Section 4. In addition to any affirmative vote required by law or by
these Articles of Incorporation, and except as otherwise expressly provided in
Section 5 of this Article X:
(a) any merger or consolidation of the Corporation of the
Corporation or any Subsidiary with (i) any Interested Stockholder or
(ii) any other Corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be,
an Affiliate or Associate of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer, or
other disposition (in one or a series of transactions) to or with any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of any assets of the Corporation or of any Subsidiary
having and aggregate Fair Market Value equal to Ten Percent (10%) or
more of the consolidated stockholders' equity of the Corporation and
its subsidiaries as shown in the most recent audited consolidated
balance sheet of the Corporation and its consolidated subsidiaries; or
(c) the issuance, sale or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transaction) to any
Interested
<PAGE>
Stockholder or any Affiliate or Associate of any Interested Stockholder
of any securities of the Corporation or any Subsidiary in exchange for
cash, securities or other property (or a combination thereof) having an
aggregate Fair Market Value equal to Ten Percent (10%) or more of the
consolidated stockholders' equity of the Corporation and its
subsidiaries, other than the issuance of securities upon the conversion
of convertible securities of the Corporation or any Subsidiary which
were not acquired by such Interested Stockholder (or such Affiliate or
Associate) from the Corporation or Subsidiary; or
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder; or
(e) any reclassification of securities (including any reverse
stock split) or recapitalization of the Corporation or any merger or
consolidation of the Corporation with any of its Subsidiaries, or any
other transaction (whether or not with or into or otherwise involving
any interested Stockholder), which in any case has the effect, directly
or indirectly, of increasing the proportionate share of the outstanding
shares of any class or series of capital stock or securities
convertible into capital stock of the Corporation or any Subsidiary
which is directly or indirectly beneficially owned by an Interested
Stockholder or any Affiliate or Associate of any Interested
Stockholder.
shall not be consummated without (i) the affirmative vote of the holders of at
least Eighty Percent (80%) of the combined voting power of the then outstanding
Voting Stock and (ii) the affirmative vote of a majority of the combined voting
power of the then outstanding Voting Stock held by Disinterested Stockholders,
in each case voting together as a single class. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required or that a lesser
percentage may be specified, by law or these Articles of Incorporation or in any
agreement with any national securities exchange or otherwise.
Section 5. The provisions of Section 4 of this Article X shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of these Articles of Incorporation, if all of the conditions specified
in either of the following Paragraphs (a) or (b) are met:
(a) such Business Combination shall have been approved by a
majority of the Disinterested Directors pursuant to Section 6 of this
Article X.
(b) all the Six (6) conditions specified in the following
clauses (i) through (vi) shall have been met;
(i) the transaction constituting the Business Combination
shall provide for a consideration to be received by holders of
Common Stock in exchange for all their Common Stock, and the
aggregate amount of the cash and the Fair Market Value as of the
date of consummation of the Business Combination of any
consideration other than cash to be received per share by
holders of the Common Stock in such Business Combination shall
be at least equal to the higher of the following:
(A) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid to acquire any Common Stock
beneficially owned by the Interested Stockholder which was
acquired (i) within the Two (2) year period immediately
prior to the Announcement Date or (ii) in the transaction
in which it became an Interested Stockholder, whichever is
higher; and
(B) the Fair Market Value per share of the Common Stock
on the Announcement Date or on the Determination Date,
whichever is higher; and
(ii) if the transaction constituting the Business
Combination shall provide for a consideration to be received by
holders of any class or series of outstanding Voting Stock other
than Common Stock, the aggregate amount of the cash and the Fair
Market Value as of the date of
<PAGE>
the consummation of the Business Combination of any
consideration other than cash to be received per share by
holders of such Voting Stock shall be at least equal to the
highest of the following (it being intended that the
requirements of this clause (ii) shall be required to be met
with respect to every class and series of such outstanding
Voting Stock, whether or not the Interested Stockholder
beneficially owns any shares of a particular class or series of
Voting Stock);
(A) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid to acquire any Common Stock
beneficially owned by the Interested Stockholder which were
acquired (i) within the Two (2) year period immediately
prior to the Announcement Date or (ii) in the transaction
in which it became an Interested Stockholder, whichever is
higher; and
(B) (if applicable) the highest preferential amount per
share to which the holders of shares of such class or
series of Voting Stock are entitled in the event of the
redemption thereof or of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
and
(C) the Fair Market Value per share of such class or
series of Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher; and
(iii) the consideration to be received by holders of a
particular class or series of outstanding Voting Stock
(including Common Stock) shall be in cash or in the same form
as was previously paid to acquire shares of such class or
series of Voting Stock which are beneficially owned by the
Interested Stockholder and, if the Interested Stockholder
beneficially owns shares of any class or series of Voting
Stock which were acquired with varying forms of consideration,
the form of consideration to be received by holders of such
class or series of Voting Stock shall either be cash or the
form used to acquire the largest number of shares of such
class or series of Voting Stock beneficially owned by it; and
(iv) after such Interested Stockholder has become and
Interested Stockholder and prior to the consummation of such
Business Combination;
(A) except as approved by a majority of Disinterested
Directors, there shall have been no failure to pay at the
regular dates therefor the full amount of any dividends
(whether or not cumulative) payable on the Preferred Stock
or any class or series of capital stock having a preference
over the Common Stock as to dividends upon liquidation;
(B) there shall have been (1) no reduction in the
annual rate of dividends paid on the Common Stock (except
as necessary to reflect any subdivision of the Common
Stock), except as approved by a majority of the
Disinterested Directors, and (2) an increase in such annual
rate of dividends (as necessary to prevent any such
reduction) in the event of any reclassification (including
any reverse stock split), recapitalization, reorganization
or any similar transaction which has the effect of reducing
the number of outstanding shares of the Common Stock,
unless the failure so to increase such annual rate is
approved by a majority of the Disinterested Directors; and
(C) such Interested Stockholder shall not have become
the beneficial owner of any additional Voting Stock except
as part of the transaction in which it became in Interested
Stockholder; and
(v) after such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not
have received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances,
guarantees, pledges, or other financial
<PAGE>
assistance provided by the Corporation, whether in
anticipation of or in connection with such Business
Combination or otherwise; and
(vi) a proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
the stockholders at least Thirty (30) calendar days prior to
the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).
Section 6. Pursuant to Section 2-104(b)(9) of the Corporations and
Associations Article of the Annotated Code of Maryland, in the event the Board
of Directors shall evaluate a Business Combination (as hereinafter defined), the
directors shall consider, among other things, the following factors: the effect
of the Business Combination on the Corporation and any of its Subsidiaries, and
their respective shareholders, employees, customers and the communities which
they serve; the timing of the proposed Business Combination; the risk that the
proposed Business Combination will not be consummated; the reputation,
management capability and performance history of the person proposing the
Business Combination; the current market price of the Corporation's capital
stock; the relation of the price offered to the current value of the Corporation
in a freely negotiated transaction and in relation to the directors' estimate of
the future value of the corporation and its subsidiaries as an independent
entity or entities; tax consequences of the Business Combination to the
corporation and its shareholders; and such other factors deemed by the directors
to be relevant. In such considerations, the board of directors may consider all
or certain of such factors as a whole and may or may not assign relative weights
to any of them. The foregoing is not intended as a definitive list of factors to
be considered by the Board of Directors in the discharge of their fiduciary
responsibility to the Corporation and its shareholders, but rather to guide such
consideration and to provide specific authority for the consideration by the
Board of Directors of factors which are not purely economic in nature in light
of the circumstances of the Corporation and its Subsidiaries at the time of such
proposed Business Combination.
Section 7. A majority of the Disinterested Directors shall have the
power and duty to determine, on the basis of information known to them after
reasonable inquiry, all facts necessary to determine compliance with this
Article X, including, without limitation, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Voting Stock beneficially owned by any
person (c) whether a person is an Affiliate or Associate of another person, (d)
whether the requirements of Section 5 of this Article X have been met with
respect to any Business Combination, and (e) whether the assets which are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities of the Corporation or any subsidiary
in any Business Combination has, an aggregate Fair Market Value equal to or in
excess of Ten Percent (10%) of the consolidated stockholders' equity of the
Corporation and its subsidiaries reflected in the Corporation's most recent
audited consolidated balance sheet; and the good faith determination of a
majority of the Disinterested Directors on such matters shall be conclusive and
binding for all purposes in this Article X.
Section 8. Nothing contained in this Article X shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
Section 9. In addition to any requirements of law and any other
provisions of these Articles of Incorporation the affirmative votes of the
holders of Eighty Percent (80%) or more of the combined voting power of the then
outstanding Voting Stock, voting together as a single class, shall be required
to amend, alter or repeal, or adopt any provision inconsistent with this Article
X; provided, however, that the affirmative vote of a majority of the combined
voting power of the then outstanding Voting Stock held by the Disinterested
Stockholders (as defined in Section 1 of this Article X) voting together as a
single class, shall also be required to amend, alter, repeal or adopt any
provision inconsistent with this Article X.
ARTICLE XI. BYLAWS
Section 1. The Board of Directors may adopt, repeal, alter or amend the
Bylaws of the Corporation by the vote of a majority of the entire Board of
Directors. Without limiting its authority to adopt, repeal, alter or
<PAGE>
amend the Bylaws, the Board of Directors is expressly authorized to adopt Bylaws
which a majority of the entire Board of Directors may deem necessary or
desirable for the efficient conduct of the Corporation's affairs, including,
without limitation, provisions governing the conduct of and the matters which
may properly be brought before stockholders meetings and provisions specifying
the manner and extent to which prior notice shall be given of the submission of
proposals to be considered at any stockholders meeting or of nominations for the
election of directors to be held at any such meeting.
Section 2. In addition to any requirement of law and any other
provision of these Articles of Incorporation, the stockholders may not adopt,
amend, alter or repeal any provision of the Bylaws except by the affirmative
vote of the holders of Eighty Percent (80%) or more of the combined voting power
of the then outstanding Voting Stock, voting together as a single class, unless
recommended to the stockholders for their approval by two-thirds (2/3) of the
Disinterested Directors as such term is defined in Article X of these Articles
of Incorporation.
Section 3. In addition to any requirements of law and any other
provisions of these Articles of Incorporation, the affirmative vote of the
holders of Eighty Percent (80%) or more of the combined voting power of the then
outstanding Voting Stock, voting together as a single class, shall be required
to amend, alter, repeal, or adopt any provision inconsistent with this Article
XI.
Exhibit 3(b)
AMENDED AND RESTATED BYLAWS
OF
COMMERCEFIRST BANCORP, INC.
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ARTICLE I. PRINCIPAL OFFICE
The principal office of CommerceFirst Bancorp, Inc. (herein the
"Corporation") shall be at 705 Melvin Avenue, Suite 104, Annapolis, Maryland
21401 or such other place as the Board of Directors from time to time shall
determine.
ARTICLE II. MEETING OF SHAREHOLDERS
2.1 Place of Meetings. All annual and special meetings of shareholders
shall be held at the principal office of the Corporation or at such other place
within or without the State of Maryland as the Board of Directors may determine
and as designated in the notice of such meeting.
2.2 Annual Meeting. A meeting of the shareholders of the Corporation
for the election of directors and for the transaction of any other business of
the Corporation shall be held annually at such date and time as the Board of
Directors may determine.
2.3 Special Meetings. Special meetings of the shareholders for any
purpose or purposes may be called at any time by the majority of the Board of
Directors in accordance with the provisions of the Corporation's Articles of
Incorporation, or a special meeting may be called by the Secretary of the
Corporation upon the written request of the holders of not less than fifty
percent (50%) of all votes entitled to be cast at the meeting. Such written
request shall state the purpose or purposes of the meeting and the matters
proposed to be acted on at the meeting and shall be delivered at the principal
office of the Corporation addressed to the Chairman of the Board of Directors,
the President or the Secretary. The Secretary shall inform the shareholders who
make the request of the reasonably estimated costs of preparing and mailing a
notice of the meeting and, upon payment of these costs to the Corporation, the
Secretary shall then notify each shareholder entitled to notice of the meeting.
2.4 Conduct of Meetings. Annual and special meetings shall be conducted
in accordance with the rules and procedures established by the Board of
Directors. The Board of Directors shall designate, when present, either the
Chairman of the Board of Directors or the President to preside at such meetings.
2.5 Notice of Meeting. Written or printed notice stating the place, day
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called shall be given either personally or by
mail or at the direction of the Board of Directors, not less than Ten (10) days
nor more than Sixty (60) days before the date of the meeting to each shareholder
of record entitled to vote at such meeting and to each other shareholder
entitled to notice of the meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the shareholder
at his address as it appears on the stock transfer books of the Corporation as
of the record date prescribed in Section 6 of this Article II, with postage
thereon prepaid. If a shareholder be present at a meeting, or in writing waives
notice thereof before or after the meeting and such waiver is filed with the
records of the meeting of shareholders, notice of the meeting to such
shareholder shall be unnecessary. When any shareholders' meeting, either annual
or special, is adjourned for more than Thirty (30) days, notice of the adjourned
meeting shall be given as in the case of an original meeting. It shall not be
necessary to give any notice of the time and place of any meeting adjourned for
Thirty (30) or fewer days or of the business to be transacted at such adjourned
meeting, other than an announcement at the meeting at which such adjournment is
taken.
2.6 Fixing of Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders, or
any adjournment thereof, or shareholders entitled to receive payment of any
<PAGE>
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors shall fix in advance a date as the record
date for any such determination of shareholders. Such date in any case shall be
not more than Sixty (60) days and, in case of a meeting of shareholders, not
less than Ten (10) days prior to the date on which the particular action,
requiring such determination of shareholders is to be taken. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
2.7 Quorum. Unless otherwise provided in the Corporation's Articles of
Incorporation, a majority of the outstanding shares of the Corporation entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time and the meeting may be held as adjourned without
further notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
2.8 Proxies. At all meetings of shareholders, a shareholder may vote by
proxy executed in writing by the shareholder or by his duly authorized attorney
in fact. All proxies shall be signed and notarized by the shareholder and shall
be filed with, and verified by, the Secretary prior to the record date of any
meeting before being voted. Proxies solicited on behalf of the management shall
be voted as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the Board of Directors. No proxy shall be valid
after Eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. For the purpose of providing Notice of Meetings to
shareholders of record for whom valid proxies are on file with the Corporation,
notice shall be given to the shareholder, and not the proxy holder as provided
in Section 2.5.
2.9 Voting. At each election for directors, every shareholder entitled
to vote at such election shall be entitled to one vote for each share of stock
held by him. Unless otherwise provided by the Corporation's Articles of
Incorporation, these Bylaws, or the General Laws of the State of Maryland, a
majority of those votes cast by shareholders at a lawful meeting shall be
sufficient to pass on any transaction or matter.
2.10 Informal Action by Shareholders. Any action required or permitted
to be taken at a meeting of shareholders may be taken without a meeting if a
unanimous written consent to the action is signed by each shareholder entitled
to vote on the matter and a written waiver of any rights to dissent is signed by
each shareholder entitled to notice but not entitled to vote at the meeting. The
unanimous written consent and the written waiver, if any, shall be filed with
the records of the shareholders' meetings.
2.11 Voting of Shares in the Name of Two or More Persons. When
ownership of stock stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, at any meeting of the
shareholders of the Corporation any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose name shares of stock stand, the vote or votes to
which these persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
2.12 Voting of Shares by Certain Holders. Shares standing in the name
of another corporation may be voted by any officer, agent or proxy as the bylaws
of such corporation may provide, or, in the absence of such provision, as the
Board of Directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name. Shares standing in the name of a receiver
may be voted by such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer thereof into his
name if authority to do so is contained in an appropriate order of the court or
other public authority by which such receiver was appointed.
<PAGE>
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee on
the books of the Corporation and thereafter the pledgee shall be entitled to
vote the shares so transferred.
Treasury shares of its own stock held by the Corporation shall not be
voted at any meeting or counted in determining the total number of outstanding
shares at any given time for purposes of any meeting.
2.13 Inspectors of Election. In advance of any meeting of shareholders,
the Board of Directors may appoint any persons, other than nominees for office,
as inspectors of election at act at such meeting or any adjournment thereof. The
number of inspectors shall be either one or three. If the Board of Directors so
appoints either one or three inspectors, that appointment shall not be altered
at the meeting. If inspectors of election are not so appointed, the Chairman of
the Board of Directors or the President may make such appointment at the
meeting. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the Board of
Directors in advance of the meeting or at the meeting by the Chairman of the
Board of Directors or the President.
Unless otherwise prescribed by applicable law, the duties of such
inspectors shall include: determining the number of shares of stock and the
voting power of each share, the shares of stock represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining the result; and such acts as may
be proper to conduct the election or vote with fairness to all shareholders.
2.14 Nomination Procedures. The Board of Directors, or a committee
thereof appointed in accordance with Article IV hereof shall act as a nominating
committee for selecting the management nominees for election as directors.
Except in the case of a nominee substituted as a result of the death or other
incapacity of a management nominee, the nominating committee shall deliver
written nominations to the Secretary at least Twenty (20) days prior to the date
of the annual meeting.
Nominations for the election of directors may also be made by any
shareholder of the Corporation entitled to vote generally in the election of
directors. Such nominations by a shareholder must be made in writing and
delivered to the Secretary not later than Ninety (90) days prior to the month
and day that is One (1) year subsequent to the date that the proxy materials
regarding the last election of directors to the Board of Directors were mailed
to shareholders. Each such notice of nomination by a shareholder must set forth
(a) the full name, age and date of birth of each nominee proposed in the notice,
(b) the business and residence addresses and telephone numbers of each such
nominee, (c) the educational background and business experience of each such
nominee, including a list of positions held for at least the preceding five
years, and (d) a signed representation by each such nominee that the nominee
will timely provide any other information reasonably requested by the
Corporation for the purpose of preparing its disclosures in regard to the
solicitation of proxies for the election of directors. The name of each such
candidate for director must be placed in nomination at the annual meeting by a
shareholder present in person and the nominee must be present in person at the
meeting for the election of directors. Any vote cast for a person who has not
been duly nominated pursuant to this Article II, Section 14, shall be void.
2.15 New Business at Annual Meeting. At an annual meeting of the
shareholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
proposals for new business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors,
(b) otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
shareholder.
For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than Thirty (30) nor more than Ninety (90) days before the
date of any such annual meeting of shareholders; provided, however, that if less
than Forty-five (45) days' notice of the date of the meeting is given to
shareholders, such notice by a shareholder must be received by the Secretary not
later than the close of business on the Fifteenth (15th) day following the day
on which notice of the date of the meeting was mailed to shareholders or two (2)
days before the
<PAGE>
date of the meeting, whichever is earlier. Each such notice given by a
shareholder to the Secretary with respect to business proposals to be brought
before a meeting shall set forth (a) a brief description of the business and the
reasons for conducting such business at the meeting, (b) the name and address,
as they appear on the Corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of the Corporation that are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. Shareholder proposals that do not satisfy the
requirements of this Article II, Section 15, may, but need not, be considered
and discussed but not acted upon at an annual meeting.
ARTICLE III. BOARD OF DIRECTORS
3.1 General Powers. The business and affairs of the Corporation shall
be under the direction of its Board of Directors. In addition to other powers
specifically set out in these Bylaws or that apply under the General Laws of the
State of Maryland, the Board of Directors and any committees thereof shall have
the power to manage and administer the affairs of the Corporation and to do and
perform all lawful acts with respect to the affairs of the Corporation except
those that may be specifically reserved to the shareholders under the General
Laws of the State of Maryland. The Board of Directors shall annually elect a
Chairman of the Board of Directors, a Vice Chairman and a President from among
its members and shall designate, when present, either the Chairman of the Board
of Directors or the President to preside at its meetings.
3.2 Qualification of Directors. Each director must be the holder of
unencumbered or unhypothecated shares of common stock of the Corporation having
an aggregate par value of $500 or a fair market value of $500, or such greater
amounts as may be required, from time to time, under applicable law.
3.3 Number, Term and Election. The maximum number of directors is fixed
by the Corporation's Articles of Incorporation and may be altered only by
amendment thereto. The corporation shall at all times have at least Three (3)
directors if required in accordance with ss.2-402 of the Corporations and
Associations Article of the Annotated Code of Maryland unless the number of
stockholders drops below Three (3) at which time the number of directors shall
be no fewer than the number of stockholders pursuant to ss.2-402 of the
Corporations and Associations Article of the Annotated Code of Maryland. The
Board of Directors may, by a vote of a majority of the directors then in office,
between annual meetings of shareholders, increase or decrease the membership of
the Board of Directors within the limits allowed by the Articles of Corporation,
provided that no decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. The initial Board of Directors
shall consist of Three (3) directors. One (1) of the initial directors (the
"Class 2000" Director) shall serve an initial one (1) year term and his or her
successor shall be elected at the expiration of such initial one (1) year term
by the stockholders. One (1) of the initial directors (the "Class 2001"
Director) shall serve an initial Two (2) year term and his or her successor
shall be elected at the expiration of such initial Two (2) year term by the
stockholders. One (1) of the initial directors (the "Class 2002" Director) shall
serve an initial Three (3) year term and his or her successor shall be elected
at the expiration such initial Three (3) year term by the stockholders. Except
as provided above for initial terms of Class 2000, Class 2001 and Class 2002
directors, renewal terms of directors shall be for Three (3) years. Each class
of director shall hereafter be designated by the year during which the term of
such class expires. The Board of Directors may, by a vote of a majority of the
directors then in office, increase or decrease the membership of the Board of
Directors between annual meetings of shareholders, provided that any such
increase or decrease shall be done in a manner which attempts to allocate the
terms of the directors evenly between the classes of Directors and causes the
terms of Directors to expire simultaneously within each class of Director.
3.4 Regular Meetings. The annual meeting of the Board of Directors
shall be held without other notice than this Bylaw within Two (2) weeks after
the annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution.
3.5 Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board of Directors of the
Corporation, the President of the Corporation or by a majority of the directors.
The persons authorized to call special meetings of the Board of Directors may
fix any place as the place for holding any special meeting of the Board of
Directors called by such persons.
<PAGE>
3.6 Conference Telephone Meetings. Members of the Board of Directors
may participate in any meetings by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other. Such participation shall constitute presence in person.
3.7 Notice of Special Meetings. Written notice of any special meeting
stating the time and place of such meeting shall be given to each director at
least Forty-eight (48) hours previous thereto, unless waived. Every director
shall, at the request of the Chairman, designate in writing a telefax number to
which such notices and any other official notices may be sent. Confirmed
transmission of any such notice to such designated telefax number shall be
deemed lawful and binding notice for all purposes unless specifically prohibited
by law. Each director shall be responsible for the security and confidentiality
of any and all notices sent to his or her designated telefax number. Any
director may waive notice of any meeting by a writing filed with the Secretary.
The attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any meeting of the Board of Directors need by specified in the
notice or waiver of notice of such meeting.
3.8 Quorum. A majority of the directors shall constitute a quorum for
the transaction of business at any meeting of the Board of Directors. If less
than such majority is present at a meeting, a majority of the directors present
may adjourn the meeting from time to time. Notice of an adjourned meeting need
not be given if the time and place to which the meeting is adjourned are fixed
at the meeting at which the adjournment is taken.
3.9 Voting. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors,
unless the vote of a greater number is required by the Corporation's Articles of
Incorporation, these Bylaws, or the General Laws of the State of Maryland.
3.10 Action by Written Consent. Any action required or permitted to be
taken by the Board of Directors, or any committee thereof, at a meeting may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors and filed with the Secretary of
the Corporation for inclusion in the corporate minute book.
3.11 Resignation. Any director may resign at any time by sending a
written notice of such resignation to the principal office of the Corporation
addressed to the Chairman of the Board of Directors, the President, or the
Secretary. Unless otherwise specified in the notice, such resignation shall take
effect upon acceptance thereof by the Board of Directors.
3.12 Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent or abstention shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the Secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who votes in favor of such action.
3.13 Advisory Directors and Directors Emeritus. The Board of Directors
may by resolution appoint persons to serve as advisory directors, who may also
serve as directors emeritus, and shall have such authority and receive such
compensation and reimbursement as the Board of Directors shall provide. No
advisory director or director emeritus shall have the authority to participate
by vote in the transaction of business.
3.14 Contracts with Interested Directors. No contract or other
transaction between this Corporation and any other corporation shall be affected
by the fact that any director of this Corporation is interested in, or is a
director or officer of, such other corporation, and any director, individually
or jointly, may be a party to, or may be interested in, any contract or
transaction of this Corporation or in which this Corporation is interested; and
no contract, or other transaction, of this Corporation with any person, firm, or
corporation, shall be affected by the fact that any director of this Corporation
is a party to, or is interested in, such contract, act or transaction, or is in
any way connected with such person, firm, or corporation, and every person who
may become a director of this Corporation is hereby relieved from any liability
that might otherwise exist from contracting with the Corporation for the benefit
of himself or any firm, association, or corporation in which he may be in any
way interested.
<PAGE>
ARTICLE IV. COMMITTEES OF THE BOARD OF DIRECTORS
4.1 The Board of Directors may, by resolution passed by a majority of
the whole Board, designate one or more committees, as they may determine to be
necessary or appropriate for the conduct of the business of the Corporation, and
may prescribe the duties, constitution and procedures thereof. The Board of
Directors may delegate to an executive committee the power to exercise all the
authority of the Board of Directors in the management of the affairs and
property of the Corporation, except such authority as may be specifically
reserved to the full Board of Directors by the General Laws of the State of
Maryland. Each committee shall consist of one or more directors of the
Corporation. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not a quorum exists, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of the disqualified
or absent member.
4.2 The Board of Directors shall have power, by the affirmative vote of
a majority of the authorized number of directors, at any time to change the
members of, to fill vacancies in, and to discharge any committee of the Board.
Any member of any committee of the Board of Directors may be removed at any
time, either with or without cause, by the affirmative vote of a majority of the
authorized number of directors at any meeting of the Board called for that
purpose.
ARTICLE V. OFFICERS
5.1 Positions. The officers of the Corporation shall be a Chairman of
the Board of Directors, a Vice Chairman, a President, an Executive Vice
President, one or more Vice Presidents, a Secretary, a Treasurer and such other
officers as the Board of Directors shall from time to time deem necessary for
the conduct of the business of the Corporation. Any two or more offices may be
held by the same person. The Board of Directors may designate one or more Vice
Presidents as Senior Vice President. The officers shall have such authority and
perform such duties as the Board of Directors may from time to time authorize or
determine by resolution. In the absence of action by the Board of Directors, the
officers shall have such powers and duties as are generally incident to their
respective offices.
5.2 Election and Term of Office. The officers of the Corporation shall
be elected annually by the Board of Directors at the first meeting of the Board
of Directors held after each annual meeting of the shareholders. If the election
of officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until his successor shall
have been duly elected and qualified or until his death or until he shall resign
or shall have been removed in the manner hereinafter provided. Election or
appointment of an officer, employee or agent shall not of itself create contract
rights. The Board of Directors may authorize the Corporation to enter into an
employment contract with any officer in accordance with state law; but no such
contract shall impair the right of the Board of Directors to remove any officer
at any time in accordance with Section 4 of this Article V.
5.3 Resignation. Any officer may resign at any time by giving written
notice to the Chairman of the Board of Directors, the President, or the
Secretary. Any such resignation shall take effect at the time specified therein
or, if no time is specified, upon its acceptance by the Board of Directors.
5.4 Removal. Any officer may be removed by vote of a majority of the
Board of Directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal, other than for cause,
shall be without prejudice to the contract rights, if any, of the person so
removed.
5.5 Remuneration. The remuneration of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 Certificates for Shares. The shares of the Corporation shall be
represented by certificates signed by the Chairman of the Board of Directors or
by the Vice Chairman, the President or a Vice President and by the
<PAGE>
Treasurer or an assistant treasurer or by the Secretary or an assistant
secretary of the Corporation, and may be sealed with the seal of the Corporation
or a facsimile thereof. Any or all of the signatures upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the Corporation itself or an employee of
the Corporation. If any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
the certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer at the date of its issue.
6.2 Form of Certificates. All certificates representing shares issued
by the Corporation shall set forth upon the face or back that the Corporation
will furnish to any shareholder upon request and without charge a full statement
of the designations, preferences, limitations, and relative rights of the shares
of each class authorized to be issued, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined, and the authority of the Board of Directors to fix and
determine the relative rights and preferences of subsequent series.
Each certificate representing shares shall state upon the face thereof:
that the Corporation is organized under the laws of the State of Maryland; the
name of the person to whom issued; the number and class of shares; the date of
issue; the designation of the series, if any, which such certificate represents;
the par value of each share represented by such certificate, or a statement that
the shares are without par value. Other matters in regard to the form of the
certificates shall be determined by the Board of Directors.
6.3 Payment for Shares. No certificate shall be issued for any shares
until such share is fully paid. The consideration for the issuance of shares
shall be paid in accordance with the provisions of the Corporation's Articles of
Incorporation.
6.4 Transfer of Shares. Transfer of shares of capital stock of the
Corporation shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Corporation. Such transfer shall be made only on surrender for cancellation
of the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Corporation shall be deemed by the Corporation
to be the owner thereof for all purposes.
6.5 Stock Ledger. The stock ledger of the Corporation shall be the only
evidence as to who are the shareholders entitled to examine the stock ledger or
the books of the Corporation or to vote in person or by proxy at any meeting of
shareholders.
6.6 Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
6.7 Beneficial Owners. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not the Corporation shall have express or other
notice thereof, except as otherwise provided by law.
ARTICLE VII. FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the 31st day of
December of each year. The Corporation shall be subject to an annual audit as of
the end of its fiscal year by independent public accountants appointed by and
responsible to the Board of Directors.
ARTICLE VIII. DIVIDENDS
<PAGE>
Subject to the provisions of the Corporation's Articles of
Incorporation and applicable law, the Board of Directors may, at any regular or
special meeting, declare dividends on the Corporation's outstanding capital
stock. Dividends may be paid in cash, in property or in the Corporation's own
stock.
ARTICLE IX. CORPORATE SEAL
The corporate seal of the Corporation shall be in such form as the
Board of Directors shall prescribe.
ARTICLE X. NATIONAL DISASTER OR EMERGENCY
If, by reason of national disaster or emergency, it shall not be
possible to assemble a quorum of Directors, the available Director or Directors
shall have all of the powers and shall exercise all of the duties of the full
Board in the management of the business of the Bank and for the purpose of
continuing or resuming its business at its usual or other available quarters.
In the event of national disaster or emergency, the available officer
or officers of the Bank shall have and may exercise all powers necessary to
continue or resume the business of the Bank at its usual or other available
quarters, in the following order of seniority: (1) the Chairman of the Board;
(2) the Vice Chairman (3) the President; (4) the Executive Vice President; (5)
the Senior Vice President; (6) the Vice President; (7) the Treasurer; (8) the
Secretary. In the event that more than one officer of designated rank shall be
available, the officer with the higher salary shall have seniority. In the event
that two or more officers with the same rank shall have the same salary, that
officer who first attained such rank shall have seniority.
If, in the event of national disaster or emergency, none of the
officers designated above shall be available, or if, in the opinion of the
available Director or Directors of the Bank, it shall appear advisable to do so,
said Director or Directors may obtain the services or any officer, officers, or
other personnel of any other Bank or banking company affiliated with this Bank
through common stock ownership or otherwise, for the purpose of continuing or
resuming the operations of this Bank.
ARTICLE XI. AMENDMENTS
The Bylaws may be amended only as provided in the Articles of
Incorporation.
I HEREBY CERTIFY that the foregoing is a full, true and correct copy of
the Amended and Restated Bylaws of CommerceFirst Bancorp, Inc., a Maryland
Corporation as adopted and approved this _____ day of November, 1999.
---------------------------
Alvin R. Maier, Secretary
Exhibit 5
[LETTERHEAD]
November 29, 1999
Board of Directors
CommerceFirst Bancorp, Inc.
705 Melvin Avenue, Suite 104
Annapolis, Maryland 21401
Re: Registration Statement on Form SB-2
Gentlemen:
As counsel to CommerceFirst Bancorp, Inc. (the "Company") we have
participated in the preparation of the Company's Registration Statement on Form
SB-2 to be filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, relating to the proposed public offering,
through the efforts of certain directors and officers of CommerceFirst, of up to
1,000,000 shares of the Company's common stock (the "Shares").
As counsel to the Company, we have examined such corporate records,
certificates and other documents of the Company, and made such examinations of
law and inquiries of such officers of the Company, as we have deemed necessary
or appropriate for purposes of this opinion. Based upon such examinations we are
of the opinion that the Shares, when sold in the manner set forth in the
Registration Statement, will be duly authorized, validly issued, fully paid and
non-assessable shares of the common stock of the Company .
We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement on Form SB-2 filed by the Company and the reference to
our firm contained therein under "Legal Matters."
Sincerely,
/s/ Kennedy, Baris & Lundy
Exhibit 10(a)
CHAIRMAN EMPLOYMENT AGREEMENT
This Chairman Employment Agreement ("Agreement") is made this 14th day
of July 1999, between MILTON D. JERNIGAN, II, an individual residing at 309
Tucker Street, Annapolis, Maryland 21401 ("Mr. Jernigan") and CommerceFirst
Bancorp, Inc., a Maryland Corporation, with its principal place of business at
705 Melvin Avenue, Suite 102, Annapolis, Maryland 21401, its successors, and
assigns ("the Holding Company").
RECITALS
WHEREAS, the Holding Company is engaged in the business of organizing a
bank holding company and Maryland commercial bank (the "Bank"), to be wholly
owned by the Holding Company, whose principal office is located in Annapolis,
Maryland.
WHEREAS, Mr. Jernigan is willing to be employed by the Holding Company,
and the Holding Company is willing to employ Mr. Jernigan on the terms,
covenants, and conditions hereinafter set forth.
NOW THERFORE, for the reasons set forth above and in consideration of
the mutual promises and agreements set forth below, the Holding Company and Mr.
Jernigan agree as follows:
ARTICLE I. EMPLOYMENT
1.1 Employment by the Holding Company. The Holding Company employs Mr.
Jernigan as its Chairman, and Mr. Jernigan accepts such employment subject to
the general supervision, advice, and direction of the Board of Directors of the
Holding Company. At the discretion of the Stockholders of the Holding Company,
Mr. Jernigan will serve, during the term of his employment, as a member of the
Board of Directors of the Holding Company for no additional compensation except
as otherwise provided hereunder, but he will not participate in any decisions
concerning his employment relationship with the Holding Company.
1.2. Employment by the Bank. Upon the opening of the Bank, the Holding
Company shall cause the Bank to employ Mr. Jernigan as its Chairman and Mr.
Jernigan will perform such duties as are customarily performed by persons
holding such positions in the banking industry, including but not limited to the
following:
1.2.1 The coordination and leadership of the efforts of the
Bank to maintain any and all necessary and/or appropriate federal and state
regulatory approvals and permissions required for the successful operation of
the Bank, including coordination of the professional services of counsel,
accountants and bank consultants.
1.2.2 The provision of any and all services necessary,
appropriate and/or helpful to operations of the Holding Company and the Bank at
a minimum of additional cost or overhead to the Bank.
1.2.3 The promotion of the reputation and business of the Bank
within the community.
1.2.4 The advancement of the business purposes of the Bank,
including, but not limited to, business development, customer, deposit and
public relations.
1.2.5 Participation in and service upon such committees and
subcommittees as may be directed by the Board of Directors of the Bank without
additional compensation to that set forth hereinbelow.
1.3 Performance of Services. Mr. Jernigan agrees to use his best
efforts to perform all duties required of and from him by the Holding Company
and the Bank, respectively, pursuant to the express and implicit terms hereof,
to the reasonable satisfaction of the Holding Company and the Bank. Such duties
will be rendered at the Holding Company's principal office, the Bank's principal
office or other places as the interests, needs, business, or opportunity of the
Holding Company or the Bank require. Mr. Jernigan warrants and represents that
he has the training, experience, and knowledge to perform the duties of his
position, and that he is not restricted or limited in
<PAGE>
doing so by any contractual obligations, conflicts of interest, bank or
securities regulatory orders, rules, regulations, memoranda or otherwise.
ARTICLE II. TERM OF EMPLOYMENT
2.1 Term. This Agreement is effective beginning on the date of its
execution by both parties (the "Effective Date") and for a term of Three (3)
years thereafter, unless sooner terminated by either party pursuant to the terms
of this Agreement.
ARTICLE III. COMPENSATION
3.1 Annual Base Salary. Subject to the pre-opening deferral referred to
below, the aggregate initial Annual Base Compensation payable to Mr. Jernigan
for all of his services under this Agreement shall be THIRTY THOUSAND DOLLARS
($30,000.00) per annum. Until the Bank opens (the "Bank Opening Date"), all
compensation payable to Mr. Jernigan will be paid by the Holding Company.
Beginning on the Bank Opening Date, all compensation payable to Mr. Jernigan
hereunder will be paid by the Bank.
3.2 Pre-opening Deferral. Until the Bank Opening Date, Mr. Jernigan
agrees to defer Forty Percent (40%) of his Annual Base Salary and the Annual
Base Salary paid in cash to Mr. Jernigan by the Holding Company until the Bank
Opening Date shall be thereby adjusted.
3.3 Payment of Salary Deferral Upon Bank Opening. Within not more than
One (1) Month after the Bank Opening Date, the Bank shall pay to Mr. Jernigan,
the amount of Annual Base Salary pre-opening deferral referred to in Section
3.2, above provided that Mr. Jernigan is still employed by the Bank at such
time. Mr. Jernigan may elect to receive such deferred salary in cash or in stock
of the Holding Company.
3.4 Base Salary Increases. Beginning in December of 2000, the Board of
Directors of the Holding Company shall undertake an Annual Review of and will
adjust Mr. Jernigan's Base Salary according to plans, goals and criteria set by
the Board of Directors from time to time; provided that beginning on January 1,
2001, Mr. Jernigan's Annual Base Salary shall be at least Thirty One Thousand
Five Hundred Dollars ($31,500), and beginning on January 1, 2002, Mr. Jernigan's
Annual Base Salary shall be at least Thirty Three Thousand Dollars ($33,000).
3.5 Insurance. The Holding Company will purchase a term life insurance
policy to be owned by Mr. Jernigan in the amount of Fifty Thousand Dollars
($50,000) insuring the life of Mr. Jernigan. After the Bank Opening Date, such
benefit will be paid by the Bank.
3.6 Stock Options.
3.6.1 Granting of Annual Options. As soon as practicable
following the Bank Opening Date, the Holding Company will grant to Mr. Jernigan
non-transferable incentive stock options to purchase up to Two Thousand Five
Hundred (2,500) shares of the Holding Company's common stock at an exercise
price equal to the initial offering price per share (the "Initial Options"). The
Holding Company may provide additional non-transferable incentive stock options
to Mr. Jernigan annually (the "Annual Options") as soon as practicable following
the close of the calendar year. The exercise price per share of all Annual
Options granted will be calculated as the book value per share of the Holding
Company's common stock as of the end of the calendar year initially preceding
such grant. The number of Annual Options so provided will be determined by the
Board of Directors of the Holding Company on an Annual Basis according to plans,
goals and criteria set by the Board of Directors from time to time.
3.7 Annual Incentive Bonus. The Bank may pay an incentive cash bonus to
Mr. Jernigan annually (the "Annual Bonus") as soon as practicable following the
close of calendar year 2000 and each calendar year. Any such incentive bonus
shall be determined by the Board of Directors of the Holding Company on an
Annual Basis according to plans, goals and criteria set by the Board of
Directors from time to time.
ARTICLE IV. CONDITIONS OF AGREEMENT
<PAGE>
4.1 Approval By Federal and State Regulatory Agencies. This Agreement,
all of its terms and conditions and the employment of Mr. Jernigan by the
Holding Company and the Bank shall be subject to the ratification and approval
of any and all federal or state regulators or regulatory agencies whose approval
of the Bank, the Holding Company and/or its stock offering is a necessary
prerequisite to the successful organization of the Bank.
4.2 Compliance With Regulatory Requirements. Should any terms or
conditions of this Agreement, upon subsequent detailed review by legal counsel
and federal or state regulators, be found to be not in compliance with federal
or state regulations, or should any terms or conditions required to be included
herein by such regulations be absent, this Agreement may be terminated by the
Holding Company and the Bank if the parties hereto cannot agree upon such
additions or deletions as may be deemed necessary or appropriate under such
federal or state regulations and the interpretations thereof.
ARTICLE V. RIGHTS TO TERMINATE AGREEMENT
5.1 Failure to Successfully Open the Bank. At the option of the Holding
Company, this Agreement may be terminated if, for any reason, the Bank is not
successfully opened on or before August 1, 2000; in addition, if at any time
prior to that date the Holding Company formally abandons the project (including
the withdrawal of federal and state bank and/or holding company applications) of
attempting to organize and open the Bank, this Agreement may be terminated by
the Holding Company. In the event of a termination prior to the Bank Opening
Date, the Holding Company shall pay to Mr. Jernigan, including all amounts
actually paid to Mr. Jernigan during his employment by the Holding Company, an
aggregate amount of Six (6) months of Annual Base Salary at the pre-opening
deferral rate.
5.2 Breach or Default Under Agreement. Either party may terminate this
Agreement for breach or default as provided hereinbelow.
5.3 Termination Without Cause. If Mr. Jernigan is not in breach or
default of this Agreement and the Holding Company and/or the Bank terminates him
for any reason and under any procedure other than those specified in Section
5.1, above, or Section 5.4, below, then the Annual Base Salary and all Insurance
benefits provided for hereinabove shall continue for a period of Twelve (12)
months from and after the termination date if such termination be without cause.
5.4 Termination With Cause; Procedure.
5.4.1 Termination of Compensation. If the Holding Company
and/or the Bank terminates Mr. Jernigan for Cause as set forth in this Section
5.4, then the compensation payments provided for herein shall cease.
5.4.2 Definition of Cause. Under this Agreement, "Cause" shall
be defined to be:
(a) Any willful act or action on the part of Mr.
Jernigan done in connection with or associated with the services rendered by Mr.
Jernigan under this Agreement for which a criminal prosecution (other than
traffic and misdemeanor actions) is commenced by the prosecuting authorities in
the jurisdiction in which such act or action occurred. For the purposes of this
Agreement, the commencement of a criminal prosecution shall be deemed to have
occurred upon the filing of a criminal information against Mr. Jernigan or the
indictment of Mr. Jernigan by any local, state or federal authority.
(b) Any act of theft, fraud, deceit,
misrepresentation, assault or battery done by Mr. Jernigan in connection with or
associated with the services rendered by Mr. Jernigan to the Holding Company
and/or the Bank under this Agreement.
(c) Any act, action, failure to act or omission which
constitutes gross misconduct or gross negligence in connection with the services
rendered by Mr. Jernigan under this Agreement, provided that the procedures of
Section 5.4.3 are followed.
<PAGE>
(d) Any termination following a default of this
Agreement by Mr. Jernigan, pursuant to the provisions of Article X, below.
5.4.3 Procedure For Termination With Cause. The procedure
for termination with Cause shall be as follows:
(a) For any reason specified in Section 5.4.2(a), Mr.
Jernigan shall be terminated upon the commencement of prosecution, as of the
date of the act to which that Section applies.
(b) For any reason specified in Sections 5.4.2(b) or
5.4.2(c), the Holding Company and/or the Bank shall give Mr. Jernigan written
notice of the Cause alleged to be the basis for Mr. Jernigan's termination. Mr.
Jernigan shall, thereafter, have a period of Thirty (30) days from the date of
the receipt of the written notice in which to dispute and/or explain the
situation(s) referred to in the written notice. If Mr. Jernigan does not respond
to the written notice, Mr. Jernigan shall be deemed to have agreed to the
allegations contained therein and the termination shall be effective as of the
date of the written notice. If Mr. Jernigan disputes the allegations contained
in the written notice, Mr. Jernigan shall notify the Holding Company and/or the
Bank in writing within the time period set forth above and the Holding Company
and/or the Bank shall set up a meeting to discuss a resolution of the dispute.
If the parties do not reach agreement within Forty-five (45) days of the written
notice of the Bank and/or the Holding Company, the Bank and/or the Holding
Company, by a majority of their respective Board of Directors, shall have the
right to terminate Mr. Jernigan and to discontinue the compensation provided
hereunder to Mr. Jernigan. If Mr. Jernigan nevertheless still disagrees that his
termination was proper under the terms of this Agreement, both parties hereto by
their execution hereof agree to submit to binding arbitration under the rules,
regulations and procedures of the American Arbitration Association.
5.5 Death or Disability. If Mr. Jernigan should be unable to perform
his professional duties due to death or disability (defined as Sixty (60)
consecutive days unavailable or unable to perform work), then the compensation
provided for hereinabove shall cease, but Mr. Jernigan shall not be liable to
the Holding Company and/or the Bank for any damages for advanced wages.
5.6 Revision of Provisions to Conform to Established Holding Company or
Bank Policy. The provisions of this Agreement relating to termination with cause
and the procedures therefore, and the provisions relating to the death or
disability of Mr. Jernigan shall be applicable to the Holding Company or Bank,
respectively, only until such time as the Holding Company and/or the Bank, as
the case may be, establishes formal personnel termination and disability
policies applicable to all employees or officers of the Holding Company or the
Bank, as the case may be. Upon the adoption of such policies, the provisions of
this Agreement shall be deemed modified and superseded by any such policies
which are inconsistent with the terms or conditions of this Agreement as it
relates to the Holding Company or the Bank.
5.7 Survival of Restrictions. In the event of a termination of this
Agreement, all covenants and restrictions contained herein shall survive the
termination and shall continue in full force and effect as provided for herein.
ARTICLE VI. REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Representations and Warranties of Mr. Jernigan. Mr. Jernigan
represents and warrants to the Holding Company and the Bank the following:
6.1.1 Information Supplied to the Holding Company and the
Bank. All information and data, including but not limited to, personal data,
work histories, salaries and responsibilities, represented and provided to the
Holding Company and/or the Bank by Mr. Jernigan in his application for the
position of Chairman of the Holding Company and/or the Bank prior to the
execution of this Agreement are true and correct in all material respects and
Mr. Jernigan has not stated any facts or circumstances to the Holding Company or
the Bank the statement or omission of which would cause Mr. Jernigan's
applications to be false or misleading in any material respect.
<PAGE>
6.1.2 Prior Employment Agreements. As of the date of execution
of this Agreement, Mr. Jernigan is not now a party to or bound by any employment
, consulting or other type of agreement, nor has he been a party to or bound by
any such agreement which would be breached by, or of which Mr. Jernigan would be
in default, by virtue of any provision contained in this Agreement.
6.1.3 Regulatory Approval. To the best of Mr. Jernigan's
knowledge, information and belief, there are no facts or circumstances contained
in Mr. Jernigan's personal or professional history which are likely to, or which
in fact will, cause any federal or state regulatory disapproval of Mr. Jernigan
for the eventual position of Chairman of the Holding Company and the Bank.
6.2 Covenants of Mr. Jernigan.
6.2.1 Agreement Not to Compete. For a period of time defined
as the "Noncompetition Period," from and after the last day Mr. Jernigan
performs services for compensation on behalf of the Holding Company and/or the
Bank, Mr. Jernigan covenants and agrees that he:
(a) Shall not accept employment by or on behalf of
any bank headquartered in Anne Arundel County, Maryland, nor in such capacity
shall he directly or indirectly request or advise any present or future
investors, depositors or customers of the Holding Company or the Bank, as the
case may be, to curtail or discontinue their business with the Holding Company
or the Bank, nor in this capacity shall he directly or indirectly induce, or
attempt to induce, any employee of the Holding Company or the Bank to terminate
his employment with the Holding Company or the Bank.
(b) Shall not directly or indirectly disparage the
business of the Holding Company or the Bank, nor disclose any information
relating to the business, processes, trade secrets, procedures, computer
software or other information of the Holding Company or the Bank learned by him
as an employee of the Holding Company or the Bank, to any person, firm or
corporation, whether such person, firm or corporation shall be a present or
former customer or employee of the Holding Company or the Bank.
(c) Shall not directly or indirectly or indirectly
discuss or disclose to any other person, firm or corporation the names of past,
present or future customers or employees of the Holding Company or the Bank.
6.2.2 Noncompetition Period Defined. The noncompetition period
shall be that amount of time equal to the length of time Mr. Jernigan has been
employed by the Holding Company and/or the Bank, up to a maximum of Twelve (12)
months.
ARTICLE VII. CONFIDENTIAL INFORMATION
7.1 Proprietary Information. Mr. Jernigan acknowledges that upon
acceptance of employment with the Holding Company and the Bank hereunder, he
will be making use of, acquiring and adding to the confidential and proprietary
information of the Bank and the Holding Company. Such confidential information
shall be of a special and unique nature and value relating to such matters as,
but not limited to the business operations, internal structure, financial
affairs, programs, software, systems, procedures, manuals, confidential reports,
and sales and marketing methods of the Holding Company and the Bank, as well as
the amount, nature and type of services, equipment and methods used and
preferred by the suppliers, and customers of the Holding Company and the Bank,
all of which shall be deemed to be confidential information. Mr. Jernigan
acknowledges that such confidential information has been and will continue to be
of central importance to the business of the Holding Company and the Bank,
respectively, and that disclosure of it or its use by others could cause
substantial loss to the Holding Company and/or the Bank. In consideration of his
anticipated and thereafter continued employment by the Holding Company and the
Bank, upon acceptance hereof, Mr. Jernigan agrees that during the entire period
of his employment with the Holding Company and/or the Bank, and upon and after
leaving the employ of the Holding Company and/or the Bank for any reason
whatsoever, Mr. Jernigan shall not, for any purpose whatsoever, directly or
indirectly, divulge, reveal, report, publish, transfer, or disclose to any
person or entity any of such confidential information which was obtained by Mr.
Jernigan as a result of Mr. Jernigan's employment with the Holding Company or
the Bank, as the case may
<PAGE>
be, nor shall Mr. Jernigan reveal to any person or entity any trade secrets of
the Holding Company or the Bank, but Mr. Jernigan shall hold all of the same
confidential and inviolate.
7.2 Property of the Bank. All contracts, agreements, forms, financial
books, records, instruments and documents, supplier lists, memoranda, data,
reports, programs, software, tapes, rolodexes, telephone and address books,
letters, research, listings, programming, and any other instruments, records or
documents relating or pertaining to the Holding Company or the Bank (hereinafter
referred to as "Records") shall at all times be and remain the property of the
Holding Company and the Bank respectively. Upon termination of Mr. Jernigan's
employment with the Holding Company and/or the Bank for any reason whatsoever,
Mr. Jernigan shall return to the Holding Company and/or the Bank all Records
(whether furnished by the Holding Company, the Bank, by a third party or
prepared by Mr. Jernigan), and Mr. Jernigan shall neither make nor retain any
copies of any such Records after such termination.
7.3 Inventions and Creations. All inventions and other creations,
whether or not patentable or copyrightable, and all ideas, reports and other
creative works, including, without limitation, innovations, manuals or other
materials, made or conceived in whole or in part by Mr. Jernigan while employed
by the Holding Company and/or the Bank, which relate in any manner whatsoever to
the business, existing or proposed of the Holding Company and/or the Bank or any
other business or research development effort in which the Holding Company, the
Bank or any of their respective subsidiaries or affiliates engages during Mr.
Jernigan's employment by the Holding Company and/or the Bank, will be disclosed
promptly by Mr. Jernigan to the Holding Company and/or the Bank and shall be the
sole and exclusive property of the Holding Company and the Bank.
ARTICLE VIII. CHANGE OF CONTROL
8.1 Change of Control of the Holding Company. In the event of a change
of control of the Holding Company (as herein defined), Mr. Jernigan will have
the option, exercisable within Twelve (12) months from the date of said change
of control, to elect either:
8.1.1 To continue his employment with the Bank and the Holding
Company under the terms of this Agreement with the consent of the Bank and the
Holding Company;
8.1.2 To execute a new employment agreement as Chairman of the
Holding Company and/or the Bank on terms mutually agreeable; or,
8.1.3 To resign his employment with Thirty (30) days written
notice and receive equal monthly payments over the subsequent Twelve (12) month
period Two (2) times the base salary and cash bonuses paid to Mr. Jernigan by
the Bank and the Holding Company during the Twelve (12) month period immediately
preceding said change of control of the Holding Company ("Change of Control
Payments"). In addition to the Change of Control Payments, Mr. Jernigan shall be
entitled to continued Insurance and other benefits provided for herein for a
period of Twelve (12) Months.
8.2. Termination Without Cause Following Change of Control. If the Bank
and/or the Holding Company terminate Mr. Jernigan without cause within Twelve
(12) months from a change of control of the Holding Company, the Bank and/or the
Holding Company will provide him with Change of Control Payments.
8.3 Termination With Cause, Death or Disability Following Change of
Control. If Mr. Jernigan's termination of employment with the Bank and/or the
Holding Company within Six (6) months of a change of control of the Holding
Company is for Cause, or due to his death, neither the Bank nor the Holding
Company will have no obligation to him under the terms of this Agreement.
8.4 Continued Employment Following Change of Control. In the event that
Mr. Jernigan remains employed by the Bank and the Holding Company under the
terms of this Agreement for more than Twelve (12) months following a change of
control of the Holding Company, the provisions of Article VI will apply to any
subsequent termination. This section does not apply in the event that Mr.
Jernigan becomes disabled and therefore subject to the terms of Section 5.5.
<PAGE>
8.5 Change of Control Defined. For purposes of this Agreement, a
"change of control of the Holding Company" is defined as:
8.5.1 A transaction or series of transactions occurring after
the Bank Opening Date in which any one person (other than any of the Organizers
as defined in an Organizer's Agreement of the Holding Company of the 14th day of
July, 1999), or more than one person acting as a group (excluding for this
purpose any of said Organizers, to the extent they participate in such a group),
acquires during any Twelve (12) month period more than Thirty Three Percent
(33%) of the total voting power of the Holding Company's stock; or.
8.5.2 A merger, consolidation, or other reorganization where
the Holding Company is not the surviving entity and where said Organizers do not
individually or as a group own more than Thirty Three Percent (33%) of the total
voting power of the surviving entity's stock.
8.5.3 A transaction or series of transactions occurring after
execution of this Agreement and before the Bank Opening Date in which any one
person (other than any of the Organizers as defined in an Organizer's Agreement
of the Holding Company of the 14th day of July, 1999), or more than one person
acting as a group (excluding for this purpose any of said Organizers, to the
extent they participate in such a group), acquires during any Twelve (12) month
period more than Fifty Percent (50%) of the total voting power of the Holding
Company's stock.
ARTICLE IX. INDEMNIFICATION
9.1 Indemnification of the Holding Company and the Bank. Mr. Jernigan
agrees to indemnify and hold harmless the holding Company and the Bank from and
against any and all claims made against the Holding Company or the Bank by any
party by virtue of Mr. Jernigan's past employment whether such claims are made
by a past employer or by another party with whom Mr. Jernigan has dealt in the
past.
9.2 Indemnification of Mr. Jernigan. The Holding Company and the Bank
will provide Mr. Jernigan with coverage under a standard directors' and
officers' liability insurance policy at its expense, or in lieu thereof, will
indemnify Mr. Jernigan to the fullest extent permitted under Maryland law
against all expenses and liabilities reasonably incurred by him in connection
with or arising out of any action, suit, or proceeding in which he may be
involved by reason of having been a director or officer of the Bank or the
Holding Company (whether or not he continues to be a director or officer at the
time of incurring such expenses or liabilities), such expenses and liabilities
to include, but not limited to, judgments, court costs and attorneys' fees, and
the cost of reasonable settlements.
ARTICLE X. BREACH; REMEDIES
10.1 Right to Cure; Default. In the event that either party shall be
alleged to be in breach of this Agreement, written notice shall be given by the
other party and a Ten (10) day opportunity to cure shall be provided. After such
Ten (10) day cure period, if the breach is not cured and remains as alleged, the
breaching party shall be deemed in default and this Agreement may be terminated
by written notice to the breaching or defaulting party.
10.2 Injunctive Relief. In the event of a breach of this Agreement, the
Holding Company and/or the Bank shall be entitled to injunctive relief
restraining Mr. Jernigan from taking or continuing any action which would
constitute a breach of the covenants contained herein. Such injunctive remedies
shall not be exclusive and shall be in addition to any and all other remedies
which may be available to the Holding Company and/or the Bank at law or equity,
including, without limitation, the recovery of direct, indirect, incidental,
consequential and/or punitive damages. If successful in obtaining any injunctive
relief, the Holding Company and/or the Bank shall be entitled to collect from
Mr. Jernigan their reasonable respective attorneys' fees and costs. The parties
agree to jurisdiction and venue and service by the Federal District Court of
Maryland and the Circuit Court of Anne Arundel County, Maryland.
10.3 Suspension of Benefits. In the event of a breach or default by Mr.
Jernigan of the covenants contained in this Agreement, the Holding Company
and/or the Bank shall have the right to suspend the payment of
<PAGE>
consideration provided for herein and/or to set-off against such payments the
damages claimed to be suffered by the Holding Company and/or the Bank as result
of such breach of this Agreement.
ARTICLE XI. MISCELLANEOUS
11.1 Entire Agreement. This Agreement represents the entire agreement
of the parties relating to the services of the Mr. Jernigan to the Holding
Company and the Bank. All prior negotiations between the parties are merged into
this Agreement and there are no understandings or agreements other than those
incorporated herein.
11.2 Severability; Court Enforcement. The parties hereto covenant and
agree that to the extent any provisions or portion of this Agreement shall be
held, found or deemed to be unreasonable, unlawful or unenforceable, by any
Court of law, then the parties hereto expressly covenant and agree that any such
provision or portion thereof shall be modified to the extent necessary in order
that any such provision or portion thereof shall be legally enforceable to the
fullest extent permitted by applicable law and that any court of competent
jurisdiction shall, and the parties hereto do hereby expressly authorize any
court of competent jurisdiction to, enforce any such provision or portion
thereof or to modify any such provision thereof shall be enforced by such court
to the fullest extent permitted by applicable law.
11.3 Waiver. The Holding Company, the Bank and Mr. Jernigan each
reserve the right to waive any of the terms of this Agreement which benefits the
party waiving same. Any such waiver must be in a writing signed by the party
waiving the same.
11.4 Choice of Law. It is the intention of the parties hereto that this
Agreement shall be governed by the laws of the State of Maryland.
11.5 Successors. The terms of this Agreement shall inure to the benefit
of and be binding upon the Holding Company, the Bank, their respective
successors and assigns, and upon the President, his heirs, guardians and
personal and legal representatives.
11.6 Gender. The use of the masculine gender herein shall be deemed to
be or include the feminine gender, wherever appropriate.
11.7 Notices. All notices, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally or if sent registered or certified mail, return receipt requested,
properly addressed and postage prepaid to the addresses set forth hereinabove.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.9 Headings. The Article and Section headings used herein are for
convenience and reference only and shall not enter into the interpretation
hereof.
11.10 Representation by Counsel.
11.10.1 Counsel for the Holding Company and the Bank. The
parties hereto acknowledge that Stephen C. Hosea, of the law firm of McNamee,
Hosea, Jernigan & Kim, P.A., 705 Melvin Avenue, Suite 102, Annapolis, Maryland
20770 has been formation and organizational counsel to the Holding Company and
the Bank. The parties hereto further acknowledge that Stephen C. Hosea, and
McNamee, Hosea, Jernigan & Kim, P.A. are anticipated to continue representation
of the Holding Company and the Bank following the execution of this Agreement.
11.10.2 Counsel for Mr. Jernigan. The parties hereto
acknowledge that Mr. Jernigan, for the purposes of this Agreement, has sought
and obtained, or acknowledges his right and opportunity to seek and obtain the
advice of his independent legal counsel with regard to the contents and
interpretation of this Agreement and each party hereto is fully and
independently apprised of the meaning and legal effect of this Agreement.
<PAGE>
11.11 Amendments. This Agreement may be amended or modified only by a
written instrument signed by both parties.
IN WITNESS WHEREOF, this Agreement has been executed by the Holding
Company and Mr. Jernigan as of the day and year first above written.
HOLDING COMPANY:
By:
-----------------------------------
Alvin R. Maier, Vice Chairman
MR. JERNIGAN:
-----------------------------------
Milton D.. Jernigan, II
Exhibit 10(b)
PRESIDENT EMPLOYMENT AGREEMENT
This President Employment Agreement ("Agreement") is made this 2nd day
of August 1999, between RICHARD J. MORGAN, an individual residing at 3455
Constellation Drive, Davidsonville, Maryland 21035 ("Mr. Morgan") and
CommerceFirst Bancorp, Inc., a Maryland Corporation, with its principal place of
business at 705 Melvin Avenue, Suite 102, Annapolis, Maryland 21401, its
successors, and assigns ("the Holding Company").
RECITALS
WHEREAS, the Holding Company is engaged in the business of organizing a
bank holding company and Maryland commercial bank (the "Bank"), to be wholly
owned by the Holding Company, whose principal office is located in Annapolis,
Maryland.
WHEREAS, Mr. Morgan is willing to be employed by the Holding Company,
and the Holding Company is willing to employ Mr. Morgan on the terms, covenants,
and conditions hereinafter set forth.
NOW THERFORE, for the reasons set forth above and in consideration of
the mutual promises and agreements set forth below, the Holding Company and Mr.
Morgan agree as follows:
ARTICLE I. EMPLOYMENT
1.1 Employment by the Holding Company. The Holding Company employs Mr.
Morgan as its President and Chief Executive Officer, and Mr. Morgan accepts such
employment subject to the general supervision, advice, and direction of the
Board of Directors of the Holding Company. At the discretion of the Stockholders
of the Holding Company, Mr. Morgan will serve, during the term of his
employment, as a member of the Board of Directors of the Holding Company for no
additional compensation except as otherwise provided hereunder, but he will not
participate in any decisions concerning his employment relationship with the
Holding Company.
1.2. Employment by the Bank. Upon the opening of the Bank, the Holding
Company shall cause the Bank to employ Mr. Morgan as its President and Chief
Executive Officer and Mr. Morgan will perform such duties as are customarily
performed by persons holding such positions in the banking industry, including
but not limited to the following:
1.2.1 The coordination and leadership of the efforts of the
Bank to maintain any and all necessary and/or appropriate federal and state
regulatory approvals and permissions required for the successful operation of
the Bank, including coordination of the professional services of counsel,
accountants and bank consultants.
1.2.2 The provision of any and all services necessary,
appropriate and/or helpful to operations of the Bank at a minimum of additional
cost or overhead to the Bank.
1.2.3 The provision of updates, status reports and such other
data and information as may be reasonably required by the Bank and federal and
state regulators.
1.2.4 Subject to the guidelines and/or criteria established by
the Bank, the hiring, promotion, supervision, retention and discharge of all
employees except for the President of the Bank.
1.2.5 The formulation and implementation of employee personnel
policies and benefits, subject to approval by the Board of Directors of the
Bank.
1.2.6 The promotion of the reputation and business of the Bank
within the community.
1.2.7 The advancement of the business purposes of the Bank,
including, but not limited to, business development, customer, deposit and
public relations.
<PAGE>
1.2.8 Participation in and service upon such committees and
subcommittees as may be directed by the Board of Directors of the Bank without
additional compensation to that set forth hereinbelow. At a minimum, it is
anticipated that Mr. Morgan will be elected to a seat on the Board of Directors
of the Bank and will serve on the Executive Committee of the Bank, although the
Board of Directors reserves the right to limit management to Two (2) seats on
the Board of Directors.
1.2.9 Supervision of the maintenance of the books and accounts
and the supervision and maintenance of accounts payable and expenses of the Bank
and the reporting of the status thereof to the Bank at each scheduled or called
meeting of the Board of Directors or any committee thereof; provided, however,
that all expenditures on behalf of the Bank shall be approved in accordance with
the terms and conditions of procedures established by the Bank.
1.2.10 To be present or available at the offices of the Bank
during normal business hours (which shall mean an average of not less than Forty
(40) hours per week) and such additional hours as may be necessary or
appropriate to work for the Bank and to assist, direct or supervise the
operations and other employees of the Bank upon such terms, conditions, rules,
policies and regulations as may be set by the Board of Directors of the Bank
from time to time.
1.3 Performance of Services. Mr. Morgan agrees to use his best
efforts to perform all duties required of and from him by the Holding Company
and the Bank, respectively, pursuant to the express and implicit terms hereof,
to the reasonable satisfaction of the Holding Company and the Bank. Such duties
will be rendered at the Holding Company's principal office, the Bank's principal
office or other places as the interests, needs, business, or opportunity of the
Holding Company or the Bank require. Mr. Morgan warrants and represents that he
has the training, experience, and knowledge to perform the duties of his
position, and that he is not restricted or limited in doing so by any
contractual obligations, conflicts of interest, bank or securities regulatory
orders, rules, regulations, memoranda or otherwise.
ARTICLE II. TERM OF EMPLOYMENT
2.1 Term. This Agreement is effective beginning on the date of its
execution by both parties (the "Effective Date") and for a term of Five (5)
years thereafter, unless sooner terminated by either party pursuant to the terms
of this Agreement.
ARTICLE III. COMPENSATION AND BENEFITS
3.1 Annual Base Salary. Subject to the pre-opening deferral referred to
below, the aggregate initial Annual Base Compensation payable to Mr. Morgan for
all of his services under this Agreement shall be ONE HUNDRED TWENTY-FIVE
THOUSAND DOLLARS ($125,000.00) per annum. Until the Bank opens (the "Bank
Opening Date"), all compensation payable to Mr. Morgan hereunder will be paid by
the Holding Company. Beginning on the Bank Opening Date, all compensation
payable to Mr. Morgan will be paid by the Bank.
3.2 Pre-opening Deferral. Until the Bank Opening Date, Mr. Morgan
agrees to defer Forty Percent (40%) of his Annual Base Salary and the Annual
Base Salary paid in cash to Mr. Morgan by the Holding Company until the Bank
Opening Date shall be thereby adjusted.
3.3 Payment of Salary Deferral Upon Bank Opening. Within not more than
One (1) Month after the Bank Opening Date, the Bank shall pay to Mr. Morgan, the
amount of Annual Base Salary pre-opening deferral referred to in Section 3.2,
above provided that Mr. Morgan is still employed by the Bank at such time. Mr.
Morgan may elect to receive such deferred salary in cash or in stock of the
Holding Company.
3.4 Vehicle or Vehicle Allowance. After the Bank Opening Date, the Bank
will provide to Mr. Morgan either a leased vehicle or a vehicle allowance in an
amount customary in the banking industry in the primary service area of the
Bank.
<PAGE>
3.5 Base Salary Increases. Beginning in December of 2000, the Board of
Directors of the Holding Company shall undertake an Annual Review of and will
adjust Mr. Morgan's Base Salary according to plans, goals and criteria set by
the Board of Directors from time to time; provided that beginning on January 1,
2001, Mr. Morgan's Base Salary shall be at least One Hundred Thirty Thousand
Dollars ($130,000), and beginning on January 1, 2002, Mr. Morgan's Annual Base
Salary shall be at least One Hundred Thirty Five Thousand Dollars ($135,000).
3.6 Insurance and Vacation. Until the Bank Opening Date, the Holding
Company will provide Mr. Morgan with non-contributory family health insurance,
reimbursement of reasonable business expenses, group benefits as provided to its
other executive officers, and Twenty (20) working days paid vacation annually.
Until such coverage can be instituted, the Holding Company will pay for COBRA
costs incurred by Mr. Morgan. Additionally, the Holding Company will purchase a
term life insurance policy to be owned by Mr. Morgan in the amount of Three
Hundred Thousand Dollars ($300,000) insuring the life of Mr. Morgan. After the
Bank Opening Date, such benefits shall be provided to Mr. Morgan by the Bank.
3.7 Stock Options.
3.7.1 Granting of Annual Options. As soon as practicable
following the Bank Opening Date, the Holding Company will grant to Mr. Morgan
non-transferable incentive stock options to purchase up to Ten Thousand (10,000)
shares of the Holding Company's common stock at an exercise price equal to the
initial offering price per share (the "Initial Options"). The Holding Company
will provide additional non-transferable incentive stock options to Mr. Morgan
annually (the "Annual Options") as soon as practicable following the close of
the calendar year. The exercise price per share of all Annual Options granted
will be calculated as the book value per share of the Holding Company's common
stock as of the end of the calendar year initially preceding such grant. The
number of Annual Options so provided will be determined by the Board of
Directors of the Holding Company on an annual basis according to plans, goals
and criteria set by the Board of Directors from time to time.
3.8 Annual Incentive Bonus. The Bank may pay an incentive cash bonus to
Mr. Morgan annually (the "Annual Bonus") as soon as practicable following the
close of calendar year 2000 and each calendar year thereafter. Any such
incentive bonus shall be determined by the Board of Directors of the Holding
Company on an Annual Basis according to plans, goals and criteria set by the
Board of Directors from time to time.
ARTICLE IV. OTHER EMPLOYMENT
4.1 Duty of Loyalty. The Holding Company and the Bank will be entitled
to all benefits, profits, or other issues arising from or incident to all work,
services, and advice of Mr. Morgan. Mr. Morgan will devote his full business and
productive time, ability, and attention to his duties for the Holding Company
and the Bank. Mr. Morgan will not, during the term hereof, be interested
directly or indirectly, in any manner, as a compensated partner, officer,
director, advisor, employee, or in any other similar capacity, in any other
business. This provision does not prohibit Mr. Morgan from:
4.1.1 Making passive investments;
4.1.2 Engaging in religious, charitable or other community or
nonprofit activities that do not impair his ability to fulfill his duties and
responsibilities under this Agreement; and
4.1.3 Serving with the approval of the Holding Company and the
Bank, on the board of directors of a company, subject to the prohibitions set
forth in Articles 8 and 9, and provided that Mr. Morgan will not render any
material services with respect to the operations or affairs of any such company.
ARTICLE V. CONDITIONS OF AGREEMENT
5.1 Approval By Federal and State Regulatory Agencies. This Agreement,
all of its terms and conditions and the employment of Mr. Morgan by the Holding
Company and the Bank shall be subject to the ratification and approval of any
and all federal or state regulators or regulatory agencies whose approval of the
Bank, the Holding Company and/or its stock offering is a necessary prerequisite
to the successful organization of the Bank.
<PAGE>
5.2 Compliance With Regulatory Requirements. Should any terms or
conditions of this Agreement, upon subsequent detailed review by legal counsel
and federal or state regulators, be found to be not in compliance with federal
or state regulations, or should any terms or conditions required to be included
herein by such regulations be absent, this Agreement may be terminated by the
Holding Company and the Bank if the parties hereto cannot agree upon such
additions or deletions as may be deemed necessary or appropriate under such
federal or state regulations and the interpretations thereof.
ARTICLE VI. RIGHTS TO TERMINATE AGREEMENT
6.1 Failure to Successfully Open the Bank. At the option of the Holding
Company, this Agreement may be terminated if, for any reason, the Bank is not
successfully opened on or before August 1, 2000; in addition, if at any time
prior to that date the Holding Company formally abandons the project (including
the withdrawal of federal and state bank and/or holding company applications) of
attempting to organize and open the Bank, this Agreement may be terminated by
the Holding Company. In the event of a termination prior to the Bank Opening
Date, the Holding Company shall pay to Mr. Morgan, including all amounts
actually paid to Mr. Morgan during his employment by the Holding Company, an
aggregate amount of Six (6) months of Annual Base Salary at the pre-opening
deferral rate.
6.2 Breach or Default Under Agreement. Either party may terminate this
Agreement for breach or default as provided hereinbelow.
6.3 Termination Without Cause. If Mr. Morgan is not in breach or
default of this Agreement and the Holding Company and/or the Bank terminates him
for any reason and under any procedure other than those specified in Section
6.1, above, or Section 6.4, below, then the Annual Base Salary and all Insurance
and other benefits provided for hereinabove shall continue for a period of
Twelve (12) months from and after the termination date if such termination be
without cause.
6.4 Termination With Cause; Procedure.
6.4.1 Termination of Compensation. If the Holding Company
and/or the Bank terminates Mr. Morgan for Cause as set forth in this Section
6.4, then the compensation payments provided for herein shall cease.
6.4.2 Definition of Cause. Under this Agreement, "Cause" shall
be defined to be:
(a) Any willful act or action on the part of Mr.
Morgan done in connection with or associated with the services rendered by Mr.
Morgan under this Agreement for which a criminal prosecution (other than traffic
and misdemeanor actions) is commenced by the prosecuting authorities in the
jurisdiction in which such act or action occurred. For the purposes of this
Agreement, the commencement of a criminal prosecution shall be deemed to have
occurred upon the filing of a criminal information against Mr. Morgan or the
indictment of Mr. Morgan by any local, state or federal authority.
(b) Any act of theft, fraud, deceit,
misrepresentation, assault or battery done by Mr. Morgan in connection with or
associated with the services rendered by Mr. Morgan to the Holding Company
and/or the Bank under this Agreement.
(c) Any act, action, failure to act or omission which
constitutes gross misconduct or gross negligence in connection with the services
rendered by Mr. Morgan under this Agreement, provided that the procedures of
Section 6.4.3 are followed.
(d) Any termination following a default of this
Agreement by Mr. Morgan, pursuant to the provisions of Article XI, below.
6.4.3 Procedure For Termination With Cause. The procedure for
termination with Cause shall be as follows:
<PAGE>
(a) For any reason specified in Section 6.4.2(a), Mr.
Morgan shall be terminated upon the commencement of prosecution, as of the date
of the act to which that Section applies.
(b) For any reason specified in Sections 6.4.2(b) or
6.4.2(c), the Holding Company and/or the Bank shall give Mr. Morgan written
notice of the Cause alleged to be the basis for Mr. Morgan's termination. Mr.
Morgan shall, thereafter, have a period of Thirty (30) days from the date of the
receipt of the written notice in which to dispute and/or explain the
situation(s) referred to in the written notice. If Mr. Morgan does not respond
to the written notice, Mr. Morgan shall be deemed to have agreed to the
allegations contained therein and the termination shall be effective as of the
date of the written notice. If Mr. Morgan disputes the allegations contained in
the written notice, Mr. Morgan shall notify the Holding Company and/or the Bank
in writing within the time period set forth above and the Holding Company and/or
the Bank shall set up a meeting to discuss a resolution of the dispute. If the
parties do not reach agreement within Forty-five (45) days of the written notice
of the Bank and/or the Holding Company, the Bank and/or the Holding Company, by
a majority of their respective Board of Directors, shall have the right to
terminate Mr. Morgan and to discontinue the compensation provided hereunder to
Mr. Morgan. If Mr. Morgan nevertheless still disagrees that his termination was
proper under the terms of this Agreement, both parties hereto by their execution
hereof agree to submit to binding arbitration under the rules, regulations and
procedures of the American Arbitration Association.
6.5 Death or Disability. If Mr. Morgan should be unable to perform his
professional duties due to death or disability (defined as Sixty (60)
consecutive days unavailable or unable to perform work), then the compensation
provided for hereinabove shall cease, but Mr. Morgan shall not be liable to the
Holding Company and/or the Bank for any damages for advanced wages.
6.6 Revision of Provisions to Conform to Established Holding Company or
Bank Policy. The provisions of this Agreement relating to termination with cause
and the procedures therefore, and the provisions relating to the death or
disability of Mr. Morgan shall be applicable to the Holding Company or Bank,
respectively, only until such time as the Holding Company and/or the Bank, as
the case may be, establishes formal personnel termination and disability
policies applicable to all employees or officers of the Holding Company or the
Bank, as the case may be. Upon the adoption of such policies, the provisions of
this Agreement shall be deemed modified and superseded by any such policies
which are inconsistent with the terms or conditions of this Agreement as it
relates to the Holding Company or the Bank.
6.7 Survival of Restrictions. In the event of a termination of this
Agreement, all covenants and restrictions contained herein shall survive the
termination and shall continue in full force and effect as provided for herein.
ARTICLE VII. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Representations and Warranties of Mr. Morgan. Mr. Morgan represents
and warrants to the Holding Company and the Bank the following:
7.1.1 Information Supplied to the Holding Company and the
Bank. All information and data, including but not limited to, personal data,
work histories, salaries and responsibilities, represented and provided to the
Holding Company and/or the Bank by Mr. Morgan in his application for the
positions of President and Chief Executive Officer of the Holding Company and/or
the Bank prior to the execution of this Agreement are true and correct in all
material respects and Mr. Morgan has not stated any facts or circumstances to
the Holding Company or the Bank the statement or omission of which would cause
Mr. Morgan's applications to be false or misleading in any material respect.
7.1.2 Prior Employment Agreements. As of the date of execution
of this Agreement, Mr. Morgan is not now a party to or bound by any employment ,
consulting or other type of agreement, nor has he been a party to or bound by
any such agreement which would be breached by, or of which Mr. Morgan would be
in default, by virtue of any provision contained in this Agreement.
7.1.3 Regulatory Approval. To the best of Mr. Morgan's
knowledge, information and belief, there are no facts or circumstances contained
in Mr. Morgan's personal or professional history which are likely to,
<PAGE>
or which in fact will, cause any federal or state regulatory disapproval of Mr.
Morgan for the eventual positions of President and Chief Executive Officer of
the Holding Company and the Bank.
7.2 Covenants of Mr. Morgan.
7.2.1 Agreement Not to Compete. For a period of time defined
as the "Noncompetition Period," from and after the last day Mr. Morgan performs
services for compensation on behalf of the Holding Company and/or the Bank, Mr.
Morgan covenants and agrees that he:
(a) Shall not accept employment by or on behalf of
any bank headquartered in Anne Arundel County, Maryland, nor in such capacity
shall he directly or indirectly request or advise any present or future
investors, depositors or customers of the Holding Company or the Bank, as the
case may be, to curtail or discontinue their business with the Holding Company
or the Bank, nor in this capacity shall he directly or indirectly induce, or
attempt to induce, any employee of the Holding Company or the Bank to terminate
his employment with the Holding Company or the Bank.
(b) Shall not directly or indirectly disparage the
business of the Holding Company or the Bank, nor disclose any information
relating to the business, processes, trade secrets, procedures, computer
software or other information of the Holding Company or the Bank learned by him
as an employee of the Holding Company or the Bank, to any person, firm or
corporation, whether such person, firm or corporation shall be a present or
former customer or employee of the Holding Company or the Bank.
(c) Shall not directly or indirectly or indirectly
discuss or disclose to any other person, firm or corporation the names of past,
present or future customers or employees of the Holding Company or the Bank.
7.2.2 Noncompetition Period Defined. The noncompetition period
shall be that amount of time equal to the length of time Mr. Morgan has been
employed by the Holding Company and/or the Bank, up to a maximum of Twelve (12)
months.
ARTICLE VIII. CONFIDENTIAL INFORMATION
8.1 Proprietary Information. Mr. Morgan acknowledges that upon
acceptance of employment with the Holding Company and the Bank hereunder, he
will be making use of, acquiring and adding to the confidential and proprietary
information of the Bank and the Holding Company. Such confidential information
shall be of a special and unique nature and value relating to such matters as,
but not limited to the business operations, internal structure, financial
affairs, programs, software, systems, procedures, manuals, confidential reports,
and sales and marketing methods of the Holding Company and the Bank, as well as
the amount, nature and type of services, equipment and methods used and
preferred by the suppliers, and customers of the Holding Company and the Bank,
all of which shall be deemed to be confidential information. Mr. Morgan
acknowledges that such confidential information has been and will continue to be
of central importance to the business of the Holding Company and the Bank,
respectively, and that disclosure of it or its use by others could cause
substantial loss to the Holding Company and/or the Bank. In consideration of his
anticipated and thereafter continued employment by the Holding Company and the
Bank, upon acceptance hereof, Mr. Morgan agrees that during the entire period of
his employment with the Holding Company and/or the Bank, and upon and after
leaving the employ of the Holding Company and/or the Bank for any reason
whatsoever, Mr. Morgan shall not, for any purpose whatsoever, directly or
indirectly, divulge, reveal, report, publish, transfer, or disclose to any
person or entity any of such confidential information which was obtained by Mr.
Morgan as a result of Mr. Morgan's employment with the Holding Company or the
Bank, as the case may be, nor shall Mr. Morgan reveal to any person or entity
any trade secrets of the Holding Company or the Bank, but Mr. Morgan shall hold
all of the same confidential and inviolate.
8.2 Property of the Bank. All contracts, agreements, forms, financial
books, records, instruments and documents, supplier lists, memoranda, data,
reports, programs, software, tapes, rolodexes, telephone and address books,
letters, research, listings, programming, and any other instruments, records or
documents relating or pertaining to the Holding Company or the Bank (hereinafter
referred to as "Records") shall at all times be and remain the property of the
Holding Company and the Bank respectively. Upon termination of Mr. Morgan's
<PAGE>
employment with the Holding Company and/or the Bank for any reason whatsoever,
the President shall return to the Holding Company and/or the Bank all Records
(whether furnished by the Holding Company, the Bank, by a third party or
prepared by Mr. Morgan), and Mr. Morgan shall neither make nor retain any copies
of any such Records after such termination.
8.3 Inventions and Creations. All inventions and other creations,
whether or not patentable or copyrightable, and all ideas, reports and other
creative works, including, without limitation, innovations, manuals or other
materials, made or conceived in whole or in part by Mr. Morgan while employed by
the Holding Company and/or the Bank, which relate in any manner whatsoever to
the business, existing or proposed of the Holding Company and/or the Bank or any
other business or research development effort in which the Holding Company, the
Bank or any of their respective subsidiaries or affiliates engages during Mr.
Morgan's employment by the Holding Company and/or the Bank, will be disclosed
promptly by Mr. Morgan to the Holding Company and/or the Bank and shall be the
sole and exclusive property of the Holding Company and the Bank.
ARTICLE IX. CHANGE OF CONTROL
9.1 Change of Control of the Holding Company. In the event of a change
of control of the Holding Company (as herein defined), Mr. Morgan will have the
option, exercisable within Twelve (12) months from the date of said change of
control, to elect either:
9.1.1 To continue his employment with the Bank and the Holding
Company under the terms of this Agreement with the consent of the Bank and the
Holding Company;
9.1.2 To execute a new employment agreement as President and
Chief Executive Officer of the Holding Company and/or the Bank on terms mutually
agreeable; or,
9.1.3 To resign his employment with Thirty (30) days written
notice and receive a one-time payment or equal monthly payments over the
subsequent Twelve (12) month period totaling Two (2) times the base salary and
cash bonuses paid to Mr. Morgan by the Bank and the Holding Company during the
Twelve (12) month period immediately preceding said change of control of the
Holding Company ("Change of Control Payments"). In addition to the Change of
Control Payments, Mr. Morgan shall be entitled to continued Insurance and other
benefits provided for herein for a period of Twelve (12) Months.
9.2. Termination Without Cause Following Change of Control. If the Bank
and/or the Holding Company terminate Mr. Morgan without cause within Twelve (12)
months from a change of control of the Holding Company, the Bank and/or the
Holding Company will provide him with Change of Control Payments.
9.3 Termination With Cause, Death or Disability Following Change of
Control. If Mr. Morgan's termination of employment with the Bank and/or the
Holding Company within Six (6) months of a change of control of the Holding
Company is for Cause, or due to his death, neither the Bank nor the Holding
Company will have any obligation to him under the terms of this Agreement.
9.4 Continued Employment Following Change of Control. In the event that
Mr. Morgan remains employed by the Bank and the Holding Company under the terms
of this Agreement for more than Twelve (12) months following a change of control
of the Holding Company, the provisions of Article VI will apply to any
subsequent termination. This section does not apply in the event that Mr.
Morgan becomes disabled and therefore subject to the terms of Section 6.5.
9.5 Change of Control Defined. For purposes of this Agreement, a
"change of control of the Holding Company" is defined as:
9.5.1 A transaction or series of transactions occurring after
the Bank Opening Date in which any one person (other than any of the Organizers
as defined in an Organizer's Agreement of the Holding Company of the 14th day of
July, 1999), or more than one person acting as a group (excluding for this
purpose any of said Organizers, to the extent they participate in such a group),
acquires during any Twelve (12) month period more than Thirty Three Percent
(33%) of the total voting power of the Holding Company's stock; or,
<PAGE>
9.5.2 A merger, consolidation, or other reorganization where
the Holding Company is not the surviving entity and where said Organizers do not
individually or as a group own more than Thirty Three Percent (33%) of the total
voting power of the surviving entity's stock; or,
9.5.3 A transaction or series of transactions occurring after
execution of this Agreement and before the Bank Opening Date in which any one
person (other than any of the Organizers as defined in an Organizer's Agreement
of the Holding Company of the 14th day of July, 1999), or more than one person
acting as a group (excluding for this purpose any of said Organizers, to the
extent they participate in such a group), acquires during any Twelve (12) month
period more than Fifty Percent (50%) of the total voting power of the Holding
Company's stock.
ARTICLE X. INDEMNIFICATION
10.1 Indemnification of the Holding Company and the Bank. Mr. Morgan
agrees to indemnify and hold harmless the holding Company and the Bank from and
against any and all claims made against the Holding Company or the Bank by any
party by virtue of Mr. Morgan's past employment whether such claims are made by
a past employer or by another party with whom Mr. Morgan has dealt in the past.
10.2 Indemnification of Mr. Morgan. The Holding Company and the Bank
will provide Mr. Morgan with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, will indemnify
Mr. Morgan to the fullest extent permitted under Maryland law against all
expenses and liabilities reasonably incurred by him in connection with or
arising out of any action, suit, or proceeding in which he may be involved by
reason of having been a director or officer of the Bank or the Holding Company
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not limited to, judgments, court costs and attorneys' fees, and the
cost of reasonable settlements.
ARTICLE XI. BREACH; REMEDIES
11.1 Right to Cure; Default. In the event that either party shall be
alleged to be in breach of this Agreement, written notice shall be given by the
other party and a Ten (10) day opportunity to cure shall be provided. After such
Ten (10) day cure period, if the breach is not cured and remains as alleged, the
breaching party shall be deemed in default and this Agreement may be terminated
by written notice to the breaching or defaulting party.
11.2 Injunctive Relief. In the event of a breach of this Agreement, the
Holding Company and/or the Bank shall be entitled to injunctive relief
restraining Mr. Morgan from taking or continuing any action which would
constitute a breach of the covenants contained herein. Such injunctive remedies
shall not be exclusive and shall be in addition to any and all other remedies
which may be available to the Holding Company and/or the Bank at law or equity,
including, without limitation, the recovery of direct, indirect, incidental,
consequential and/or punitive damages. If successful in obtaining any injunctive
relief, the Holding Company and/or the Bank shall be entitled to collect from
Mr. Morgan their reasonable respective attorneys' fees and costs. The parties
agree to jurisdiction and venue and service by the Federal District Court of
Maryland and the Circuit Court of Anne Arundel County, Maryland.
11.3 Suspension of Benefits. In the event of a breach or default by Mr.
Morgan of the covenants contained in this Agreement, the Holding Company and/or
the Bank shall have the right to suspend the payment of consideration provided
for herein and/or to set-off against such payments the damages claimed to be
suffered by the Holding Company and/or the Bank as result of such breach of this
Agreement.
ARTICLE XII. MISCELLANEOUS
12.1 Entire Agreement. This Agreement represents the entire agreement
of the parties relating to the services of the Mr. Morgan to the Holding Company
and the Bank. All prior negotiations between the parties are merged into this
Agreement and there are no understandings or agreements other than those
incorporated herein.
<PAGE>
12.2 Severability; Court Enforcement. The parties hereto covenant and
agree that to the extent any provisions or portion of this Agreement shall be
held, found or deemed to be unreasonable, unlawful or unenforceable, by any
Court of law, then the parties hereto expressly covenant and agree that any such
provision or portion thereof shall be modified to the extent necessary in order
that any such provision or portion thereof shall be legally enforceable to the
fullest extent permitted by applicable law and that any court of competent
jurisdiction shall, and the parties hereto do hereby expressly authorize any
court of competent jurisdiction to, enforce any such provision or portion
thereof or to modify any such provision thereof shall be enforced by such court
to the fullest extent permitted by applicable law.
12.3 Waiver. The Holding Company, the Bank and the President each
reserve the right to waive any of the terms of this Agreement which benefits the
party waiving same. Any such waiver must be in a writing signed by the party
waiving the same.
13.4 Choice of Law. It is the intention of the parties hereto that this
Agreement shall be governed by the laws of the State of Maryland.
12.5 Successors. The terms of this Agreement shall inure to the benefit
of and be binding upon the Holding Company, the Bank, their respective
successors and assigns, and upon the President, his heirs, guardians and
personal and legal representatives.
12.6 Gender. The use of the masculine gender herein shall be deemed to
be or include the feminine gender, wherever appropriate.
12.7 Notices. All notices, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally or if sent registered or certified mail, return receipt requested,
properly addressed and postage prepaid to the addresses set forth hereinabove.
12.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
12.9 Headings. The Article and Section headings used herein are for
convenience and reference only and shall not enter into the interpretation
hereof.
12.10 Representation by Counsel.
12.10.1 Counsel for the Holding Company and the Bank. The
parties hereto acknowledge that Stephen C. Hosea, of the law firm of McNamee,
Hosea, Jernigan & Kim, P.A., 705 Melvin Avenue, Suite 102, Annapolis, Maryland
20770 has been formation and organizational counsel to the Holding Company and
the Bank. The parties hereto further acknowledge that Stephen C. Hosea, and
McNamee, Hosea, Jernigan & Kim, P.A. are anticipated to continue representation
of the Holding Company and the Bank following the execution of this Agreement.
12.10.2 Counsel for Mr. Morgan. The parties hereto acknowledge
that the President, for the purposes of this Agreement, has sought and obtained,
or acknowledges his right and opportunity to seek and obtain the advice of his
independent legal counsel with regard to the contents and interpretation of this
Agreement and each party hereto is fully and independently apprised of the
meaning and legal effect of this Agreement.
12.11 Amendments. This Agreement may be amended or modified only by a
written instrument signed by both parties.
IN WITNESS WHEREOF, this Agreement has been executed by the Holding
Company and Mr. Morgan as of the day and year first above written.
HOLDING COMPANY:
<PAGE>
By:
-----------------------------------
Milton D. Jernigan, II, Chairman
MR. MORGAN:
-----------------------------------
Richard J. Morgan
Exhibit 10(c)
EXECUTIVE VICE PRESIDENT EMPLOYMENT AGREEMENT
This Executive Vice President Employment Agreement ("Agreement") is
made this 14th day of July, 1999, between LAMONT THOMAS, an individual residing
at 5512 Aspen Dale Court, Ellicott City, Maryland 21043 ("Mr. Thomas") and
CommerceFirst Bancorp, Inc., a Maryland Corporation, with its principal place of
business at 705 Melvin Avenue, Suite 102, Annapolis, Maryland 21401, its
successors, and assigns ("the Holding Company").
RECITALS
WHEREAS, the Holding Company is engaged in the business of organizing a
bank holding company and Maryland commercial bank (the "Bank"), to be wholly
owned by the Holding Company, whose principal office is located in Annapolis,
Maryland.
WHEREAS, Mr. Thomas is willing to be employed by the Holding Company,
and the Holding Company is willing to employ Mr. Thomas on the terms, covenants,
and conditions hereinafter set forth.
NOW THERFORE, for the reasons set forth above and in consideration of
the mutual promises and agreements set forth below, the Holding Company and Mr.
Thomas agree as follows:
ARTICLE I. EMPLOYMENT
1.1 Employment by the Holding Company. The Holding Company employs Mr.
Thomas as its Executive Vice President and Chief Operating Officer, and Mr.
Thomas accepts such employment subject to the general supervision, advice, and
direction of the Board of Directors of the Holding Company. At the discretion of
the Stockholders of the Holding Company, Mr. Thomas will serve, during the term
of his employment, as a member of the Board of Directors of the Holding Company
for no additional compensation except as otherwise provided hereunder, but he
will not participate in any decisions concerning his employment relationship
with the Holding Company.
1.2. Employment by the Bank. Upon the opening of the Bank, the Holding
Company shall cause the Bank to employ Mr. Thomas as its Executive Vice
President and Chief Operating Officer Mr. Thomas will report directly to the
President and Chief Executive Officer of the Bank (hereinafter the "President")
and shall be under the direction of the President and the Board of Directors.
1.3. General Duties. Mr. Thomas will perform such duties as are
customarily performed by persons holding such positions in the banking industry,
including but not limited to the following:
1.3.1 The coordination and participation in such meetings,
conferences and events as the President and/or Board of Directors may require
from time to time. Such meetings and/or conferences shall include meetings
and/or conferences with the Organizers of the Holding Company and/or the Bank,
suppliers of goods or services, federal and state regulators, potential and
active investors in the Holding Company, legal counsel, accountants and
consultants for the Holding Company and the Bank.
1.3.2 The coordination and leadership of the efforts of the
Holding Company and the Bank to achieve, maintain and continue any and all
necessary and/or appropriate federal and state regulatory approvals and
permissions prerequisite to the successful operation of the Holding Company and
the Bank, including the coordination of the professional services of legal
counsel, accountants and consultants for the Holding Company and the Bank.
1.3.3 The provision of any and all services necessary,
appropriate and/or helpful to operations of the Bank at a minimum of additional
cost or overhead to the Bank.
1.3.4 The preparation and provision of updates, status reports
and such other data and information as may be reasonably required by the Bank
and federal and state regulators.
<PAGE>
1.3.5 Subject to the guidelines and/or criteria established by
the Bank, the hiring, promotion, supervision, retention and discharge of all
employees within the departments or division headed by Mr. Thomas.
1.3.6 Assistance in the formulation and implementation of
employee personnel policies and benefits, subject to approval by the Board of
Directors of the Bank.
1.3.7 The promotion of the reputation and business of the Bank
within the community.
1.3.8 The advancement of the business purposes of the Bank,
including, but not limited to, business development, customer, deposit and
public relations.
1.3.9 Participation in and service upon such committees and
subcommittees as may be directed by the Board of Directors of the Bank without
additional compensation to that set forth hereinbelow. At a minimum, it is
anticipated that Mr. Thomas will be elected to a seat on the Board of Directors
of the Bank and will serve on the Executive Committee of the Bank, although the
Board of Directors reserves the right to limit management to Two (2) seats on
the Board of Directors.
1.3.10 Supervision of the maintenance of the books and
accounts and the supervision and maintenance of accounts payable and expenses of
the Bank and the reporting of the status thereof to the President and/or the
Board of Directors.
1.3.11 To be present or available at the offices of the Bank
during normal business hours (which shall mean an average of not less than Forty
(40) hours per week) and such additional hours as may be necessary or
appropriate to work for the Bank and to assist, direct or supervise the
operations and other employees of the Bank upon such terms, conditions, rules,
policies and regulations as may be set by the Board of Directors of the Bank
from time to time.
1.4 Performance of Services. Mr. Thomas agrees to use his best
efforts to perform all duties required of and from him by the Holding Company
and the Bank, respectively, pursuant to the express and implicit terms hereof,
to the reasonable satisfaction of the Holding Company and the Bank. Such duties
will be rendered at the Holding Company's principal office, the Bank's principal
office or other places as the interests, needs, business, or opportunity of the
Holding Company or the Bank require. Mr. Thomas warrants and represents that he
has the training, experience, and knowledge to perform the duties of his
position, and that he is not restricted or limited in doing so by any
contractual obligations, conflicts of interest, bank or securities regulatory
orders, rules, regulations, memoranda or otherwise.
ARTICLE II. TERM OF EMPLOYMENT
2.1 Term. This Agreement is effective beginning on August 1, 1999 (the
"Effective Date") and for a term of Five (5) years thereafter, unless sooner
terminated by either party pursuant to the terms of this Agreement.
ARTICLE III. COMPENSATION AND BENEFITS
3.1 Annual Base Salary. Subject to the pre-opening deferral referred to
below, the aggregate initial Annual Base Compensation payable to Mr. Thomas for
all of his services under this Agreement shall be ONE HUNDRED TWENTY THOUSAND
DOLLARS ($120,000.00) per annum. Until the Bank opens (the "Bank Opening Date"),
all compensation payable to Mr. Thomas hereunder will be paid by the Holding
Company. Beginning on the Bank Opening Date, all compensation payable to Mr.
Thomas will be paid by the Bank.
3.2 Pre-opening Deferral. Until the Bank Opening Date, Mr. Thomas
agrees to defer Forty Percent (40%) of his Annual Base Salary and the Annual
Base Salary paid in cash to Mr. Thomas by the Holding Company until the Bank
Opening Date shall be thereby adjusted.
3.3 Payment of Salary Deferral Upon Bank Opening. Within not more than
One (1) Month after the Bank Opening Date, the Bank shall pay to Mr. Thomas, the
amount of Annual Base Salary pre-opening deferral
<PAGE>
referred to in Section 3.2, above provided that Mr. Thomas is still employed by
the Bank at such time. Mr. Thomas may elect to receive such deferred salary in
cash or in stock of the Holding Company.
3.4 Vehicle or Vehicle Allowance. After the Bank Opening Date, the Bank
will provide to Mr. Thomas either a leased vehicle or a vehicle allowance in an
amount customary in the banking industry in the primary service area of the
Bank.
3.5 Base Salary Increases. Beginning in December of 2000, the Board of
Directors of the Holding Company shall undertake an Annual Review of and will
adjust Mr. Thomas's Base Salary according to plans, goals and criteria set by
the Board of Directors from time to time; provided that beginning on January 1,
2001, Mr. Thomas's Annual Base Salary shall be at least One Hundred Twenty Five
Thousand Dollars ($125,000), and beginning on January 1, 2002, Mr. Thomas's
Annual Base Salary shall be at least One Hundred Thirty Thousand Dollars
($130,000).
3.6 Insurance and Vacation. Until the Bank Opening Date, the Holding
Company will provide Mr. Thomas with non-contributory family health insurance,
reimbursement of reasonable business expenses, group benefits as provided to its
other executive officers, and Twenty (20) working days paid vacation annually.
Until such coverage can be instituted, the Holding Company will pay for COBRA
costs incurred by Mr. Thomas. Additionally, the Holding Company will purchase a
term life insurance policy to be owned by Mr. Thomas in the amount of Two
Hundred Thousand Dollars ($200,000) insuring the life of Mr. Thomas. After the
Bank Opening Date, such benefits shall be provided to Mr. Thomas by the Bank.
3.7 Stock Options.
3.7.1 Granting of Annual Options. As soon as practicable
following the Bank Opening Date, the Holding Company will grant to Mr. Thomas
non-transferable incentive stock options to purchase up to Seven Thousand Five
Hundred (7,500) shares of the Holding Company's common stock at an exercise
price equal to the initial offering price per share (the "Initial Options"). The
Holding Company will provide additional non-transferable incentive stock options
to Mr. Thomas annually (the "Annual Options") as soon as practicable following
the close of the calendar year. The exercise price per share of all Annual
Options granted will be calculated as the book value per share of the Holding
Company's common stock as of the end of the calendar year initially preceding
such grant. The number of Annual Options so provided will be determined by the
Board of Directors of the Holding Company on an Annual Basis according to plans,
goals and criteria set by the Board of Directors from time to time.
3.8 Annual Incentive Bonus. The Bank may pay an incentive cash bonus to
Mr. Thomas annually (the "Annual Bonus") as soon as practicable following the
close of calendar year 2000 and each calendar year. Any such incentive bonus
shall be determined by the Board of Directors of the Holding Company on an
Annual Basis according to plans, goals and criteria set by the Board of
Directors from time to time.
ARTICLE IV. OTHER EMPLOYMENT
4.1 Duty of Loyalty. The Holding Company and the Bank will be entitled
to all benefits, profits, or other issues arising from or incident to all work,
services, and advice of Mr. Thomas. Mr. Thomas will devote his full business and
productive time, ability, and attention to his duties for the Holding Company
and the Bank. Mr. Thomas will not, during the term hereof, be interested
directly or indirectly, in any manner, as a compensated partner, officer,
director, advisor, employee, or in any other similar capacity, in any other
business. This provision does not prohibit Mr. Thomas from:
4.1.1 Making passive investments;
4.1.2 Engaging in religious, charitable or other community or
nonprofit activities that do not impair his ability to fulfill his duties and
responsibilities under this Agreement; and
4.1.3 Serving with the approval of the Holding Company and the
Bank, on the board of directors of a company, subject to the prohibitions set
forth in Articles 8 and 9, and provided that Mr. Thomas will not render any
material services with respect to the operations or affairs of any such company.
<PAGE>
ARTICLE V. CONDITIONS OF AGREEMENT
5.1 Approval By Federal and State Regulatory Agencies. This Agreement,
all of its terms and conditions and the employment of Mr. Thomas by the Holding
Company and the Bank shall be subject to the ratification and approval of any
and all federal or state regulators or regulatory agencies whose approval of the
Bank, the Holding Company and/or its stock offering is a necessary prerequisite
to the successful organization of the Bank.
5.2 Compliance With Regulatory Requirements. Should any terms or
conditions of this Agreement, upon subsequent detailed review by legal counsel
and federal or state regulators, be found to be not in compliance with federal
or state regulations, or should any terms or conditions required to be included
herein by such regulations be absent, this Agreement may be terminated by the
Holding Company and the Bank if the parties hereto cannot agree upon such
additions or deletions as may be deemed necessary or appropriate under such
federal or state regulations and the interpretations thereof.
ARTICLE VI. RIGHTS TO TERMINATE AGREEMENT
6.1 Failure to Successfully Open the Bank. At the option of the Holding
Company, this Agreement may be terminated if, for any reason, the Bank is not
successfully opened on or before August 1, 2000; in addition, if at any time
prior to that date the Holding Company formally abandons the project (including
the withdrawal of federal and state bank and/or holding company applications) of
attempting to organize and open the Bank, this Agreement may be terminated by
the Holding Company. In the event of a termination prior to the Bank Opening
Date, the Holding Company shall pay to Mr. Thomas, including all amounts
actually paid to Mr. Thomas during his employment by the Holding Company, an
aggregate amount of Six (6) months of Annual Base Salary at the pre-opening
deferral rate.
6.2 Breach or Default Under Agreement. Either party may terminate this
Agreement for breach or default as provided hereinbelow.
6.3 Termination Without Cause. If Mr. Thomas is not in breach or
default of this Agreement and the Holding Company and/or the Bank terminates him
for any reason and under any procedure other than those specified in Section
6.1, above, or Section 6.4, below, then the Annual Base Salary and all Insurance
and other benefits provided for hereinabove shall continue for a period of
Twelve (12) months from and after the termination date if such termination be
without cause.
6.4 Termination With Cause; Procedure.
6.4.1 Termination of Compensation. If the Holding Company
and/or the Bank terminates Mr. Thomas for Cause as set forth in this Section
6.4, then the compensation payments provided for herein shall cease.
6.4.2 Definition of Cause. Under this Agreement, "Cause" shall
be defined to be:
(a) Any willful act or action on the part of Mr.
Thomas done in connection with or associated with the services rendered by Mr.
Thomas under this Agreement for which a criminal prosecution (other than traffic
and misdemeanor actions) is commenced by the prosecuting authorities in the
jurisdiction in which such act or action occurred. For the purposes of this
Agreement, the commencement of a criminal prosecution shall be deemed to have
occurred upon the filing of a criminal information against Mr. Thomas or the
indictment of Mr. Thomas by any local, state or federal authority.
(b) Any act of theft, fraud, deceit,
misrepresentation, assault or battery done by Mr. Thomas in connection with or
associated with the services rendered by Mr. Thomas to the Holding Company
and/or the Bank under this Agreement.
<PAGE>
(c) Any act, action, failure to act or omission which
constitutes gross misconduct or gross negligence in connection with the services
rendered by Mr. Thomas under this Agreement, provided that the procedures of
Section 6.4.3 are followed.
(d) Any termination following a default of this
Agreement by Mr. Thomas, pursuant to the provisions of Article XI, below.
6.4.3 Procedure For Termination With Cause. The procedure for
termination with Cause shall be as follows:
(a) For any reason specified in Section 6.4.2(a), Mr.
Thomas shall be terminated upon the commencement of prosecution, as of the date
of the act to which that Section applies.
(b) For any reason specified in Sections 6.4.2(b) or
6.4.2(c), the Holding Company and/or the Bank shall give Mr. Thomas written
notice of the Cause alleged to be the basis for Mr. Thomas's termination. Mr.
Thomas shall, thereafter, have a period of Thirty (30) days from the date of the
receipt of the written notice in which to dispute and/or explain the
situation(s) referred to in the written notice. If Mr. Thomas does not respond
to the written notice, Mr. Thomas shall be deemed to have agreed to the
allegations contained therein and the termination shall be effective as of the
date of the written notice. If Mr. Thomas disputes the allegations contained in
the written notice, Mr. Thomas shall notify the Holding Company and/or the Bank
in writing within the time period set forth above and the Holding Company and/or
the Bank shall set up a meeting to discuss a resolution of the dispute. If the
parties do not reach agreement within Forty-five (45) days of the written notice
of the Bank and/or the Holding Company, the Bank and/or the Holding Company, by
a majority of their respective Board of Directors, shall have the right to
terminate Mr. Thomas and to discontinue the compensation provided hereunder to
Mr. Thomas. If Mr. Thomas nevertheless still disagrees that his termination was
proper under the terms of this Agreement, both parties hereto by their execution
hereof agree to submit to binding arbitration under the rules, regulations and
procedures of the American Arbitration Association.
6.5 Death or Disability. If Mr. Thomas should be unable to perform his
professional duties due to death or disability (defined as Sixty (60)
consecutive days unavailable or unable to perform work), then the compensation
provided for hereinabove shall cease, but Mr. Thomas shall not be liable to the
Holding Company and/or the Bank for any damages for advanced wages.
6.6 Revision of Provisions to Conform to Established Holding Company or
Bank Policy. The provisions of this Agreement relating to termination with cause
and the procedures therefore, and the provisions relating to the death or
disability of Mr. Thomas shall be applicable to the Holding Company or Bank,
respectively, only until such time as the Holding Company and/or the Bank, as
the case may be, establishes formal personnel termination and disability
policies applicable to all employees or officers of the Holding Company or the
Bank, as the case may be. Upon the adoption of such policies, the provisions of
this Agreement shall be deemed modified and superseded by any such policies
which are inconsistent with the terms or conditions of this Agreement as it
relates to the Holding Company or the Bank.
6.7 Survival of Restrictions. In the event of a termination of this
Agreement, all covenants and restrictions contained herein shall survive the
termination and shall continue in full force and effect as provided for herein.
ARTICLE VII. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Representations and Warranties of Mr. Thomas. Mr. Thomas represents
and warrants to the Holding Company and the Bank the following:
7.1.1 Information Supplied to the Holding Company and the
Bank. All information and data, including but not limited to, personal data,
work histories, salaries and responsibilities, represented and provided to the
Holding Company and/or the Bank by Mr. Thomas in his application for the
positions of Executive Vice President and Chief Operating Officer of the Holding
Company and/or the Bank prior to the execution of this Agreement are true and
correct in all material respects and Mr. Thomas has not stated any facts or
circumstances to
<PAGE>
the Holding Company or the Bank the statement or omission of which would cause
Mr. Thomas's applications to be false or misleading in any material respect.
7.1.2 Prior Employment Agreements. As of the date of execution
of this Agreement, Mr. Thomas is not now a party to or bound by any employment ,
consulting or other type of agreement, nor has he been a party to or bound by
any such agreement which would be breached by, or of which Mr. Thomas would be
in default, by virtue of any provision contained in this Agreement.
7.1.3 Regulatory Approval. To the best of Mr. Thomas's
knowledge, information and belief, there are no facts or circumstances contained
in Mr. Thomas's personal or professional history which are likely to, or which
in fact will, cause any federal or state regulatory disapproval of Mr. Thomas
for the eventual positions of Executive Vice President and Chief Operating
Officer of the Holding Company and the Bank.
7.2 Covenants of Mr. Thomas.
7.2.1 Agreement Not to Compete. For a period of time defined
as the "Noncompetition Period," from and after the last day Mr. Thomas performs
services for compensation on behalf of the Holding Company and/or the Bank, Mr.
Thomas covenants and agrees that he:
(a) Shall not accept employment by or on behalf of
any bank headquartered in Anne Arundel County, Maryland, nor in such capacity
shall he directly or indirectly request or advise any present or future
investors, depositors or customers of the Holding Company or the Bank, as the
case may be, to curtail or discontinue their business with the Holding Company
or the Bank, nor in this capacity shall he directly or indirectly induce, or
attempt to induce, any employee of the Holding Company or the Bank to terminate
his employment with the Holding Company or the Bank.
(b) Shall not directly or indirectly disparage the
business of the Holding Company or the Bank, nor disclose any information
relating to the business, processes, trade secrets, procedures, computer
software or other information of the Holding Company or the Bank learned by him
as an employee of the Holding Company or the Bank, to any person, firm or
corporation, whether such person, firm or corporation shall be a present or
former customer or employee of the Holding Company or the Bank.
(c) Shall not directly or indirectly or indirectly
discuss or disclose to any other person, firm or corporation the names of past,
present or future customers or employees of the Holding Company or the Bank.
7.2.2 Noncompetition Period Defined. The noncompetition period
shall be that amount of time equal to the length of time Mr. Thomas has been
employed by the Holding Company and/or the Bank, up to a maximum of Twelve (12)
months.
ARTICLE VIII. CONFIDENTIAL INFORMATION
8.1 Proprietary Information. Mr. Thomas acknowledges that upon
acceptance of employment with the Holding Company and the Bank hereunder, he
will be making use of, acquiring and adding to the confidential and proprietary
information of the Bank and the Holding Company. Such confidential information
shall be of a special and unique nature and value relating to such matters as,
but not limited to the business operations, internal structure, financial
affairs, programs, software, systems, procedures, manuals, confidential reports,
and sales and marketing methods of the Holding Company and the Bank, as well as
the amount, nature and type of services, equipment and methods used and
preferred by the suppliers, and customers of the Holding Company and the Bank,
all of which shall be deemed to be confidential information. Mr. Thomas
acknowledges that such confidential information has been and will continue to be
of central importance to the business of the Holding Company and the Bank,
respectively, and that disclosure of it or its use by others could cause
substantial loss to the Holding Company and/or the Bank. In consideration of his
anticipated and thereafter continued employment by the Holding Company and the
<PAGE>
Bank, upon acceptance hereof, Mr. Thomas agrees that during the entire period of
his employment with the Holding Company and/or the Bank, and upon and after
leaving the employ of the Holding Company and/or the Bank for any reason
whatsoever, Mr. Thomas shall not, for any purpose whatsoever, directly or
indirectly, divulge, reveal, report, publish, transfer, or disclose to any
person or entity any of such confidential information which was obtained by Mr.
Thomas as a result of Mr. Thomas's employment with the Holding Company or the
Bank, as the case may be, nor shall Mr. Thomas reveal to any person or entity
any trade secrets of the Holding Company or the Bank, but Mr. Thomas shall hold
all of the same confidential and inviolate.
8.2 Property of the Bank. All contracts, agreements, forms, financial
books, records, instruments and documents, supplier lists, memoranda, data,
reports, programs, software, tapes, rolodexes, telephone and address books,
letters, research, listings, programming, and any other instruments, records or
documents relating or pertaining to the Holding Company or the Bank (hereinafter
referred to as "Records") shall at all times be and remain the property of the
Holding Company and the Bank respectively. Upon termination of Mr. Thomas's
employment with the Holding Company and/or the Bank for any reason whatsoever,
Mr. Thomas shall return to the Holding Company and/or the Bank all Records
(whether furnished by the Holding Company, the Bank, by a third party or
prepared by Mr. Thomas), and Mr. Thomas shall neither make nor retain any copies
of any such Records after such termination.
8.3 Inventions and Creations. All inventions and other creations,
whether or not patentable or copyrightable, and all ideas, reports and other
creative works, including, without limitation, innovations, manuals or other
materials, made or conceived in whole or in part by Mr. Thomas while employed by
the Holding Company and/or the Bank, which relate in any manner whatsoever to
the business, existing or proposed of the Holding Company and/or the Bank or any
other business or research development effort in which the Holding Company, the
Bank or any of their respective subsidiaries or affiliates engages during Mr.
Thomas's employment by the Holding Company and/or the Bank, will be disclosed
promptly by Mr. Thomas to the Holding Company and/or the Bank and shall be the
sole and exclusive property of the Holding Company and the Bank.
ARTICLE IX. CHANGE OF CONTROL
9.1 Change of Control of the Holding Company. In the event of a change
of control of the Holding Company (as herein defined), Mr. Thomas will have the
option, exercisable within Twelve (12) months from the date of said change of
control, to elect either:
9.1.1 To continue his employment with the Bank and the Holding
Company under the terms of this Agreement with the consent of the Bank and the
Holding Company;
9.1.2 To execute a new employment agreement as Executive Vice
President and Chief Operating Officer of the Holding Company and/or the Bank on
terms mutually agreeable; or,
9.1.3 To resign his employment with Thirty (30) days written
notice and receive a one-time payment or equal monthly payments over the
subsequent Twelve (12) month period totaling Two (2) times the base salary and
cash bonuses paid to Mr. Thomas by the Bank and the Holding Company during the
Twelve (12) month period immediately preceding said change of control of the
Holding Company ("Change of Control Payments"). In addition to the Change of
Control Payments, Mr. Thomas shall be entitled to continued Insurance and other
benefits provided for herein for a period of Twelve (12) Months.
9.2. Termination Without Cause Following Change of Control. If the Bank
and/or the Holding Company terminate Mr. Thomas without cause within Twelve (12)
months from a change of control of the Holding Company, the Bank and/or the
Holding Company will provide him with Change of Control Payments.
9.3 Termination With Cause, Death or Disability Following Change of
Control. If Mr. Thomas's termination of employment with the Bank and/or the
Holding Company within Six (6) months of a change of control of the Holding
Company is for Cause, or due to his death, neither the Bank nor the Holding
Company will have any obligation to him under the terms of this Agreement.
<PAGE>
9.4 Continued Employment Following Change of Control. In the event that
Mr. Thomas remains employed by the Bank and the Holding Company under the terms
of this Agreement for more than Twelve (12) months following a change of control
of the Holding Company, the provisions of Article VI will apply to any
subsequent termination. This section does not apply in the event that Mr.
Thomas becomes disabled and therefore subject to the terms of Section 6.5.
9.5 Change of Control Defined. For purposes of this Agreement, a
"change of control of the Holding Company" is defined as:
9.5.1 A transaction or series of transactions occurring after
the Bank Opening Date in which any one person (other than any of the Organizers
as defined in an Organizer's Agreement of the Holding Company of the 14th day of
July, 1999), or more than one person acting as a group (excluding for this
purpose any of said Organizers, to the extent they participate in such a group),
acquires during any twelve (12) month period more than Thirty Three (33%) of the
total voting power of the Holding Company's stock; or,
9.5.2 A merger, consolidation, or other reorganization where
the Holding Company is not the surviving entity and where said Organizers do not
individually or as a group own more than Thirty Three Percent (33%) of the total
voting power of the surviving entity's stock; or,
9.5.3 A transaction or series of transactions occurring after
execution of this Agreement and before the Bank Opening Date in which any one
person (other than any of the Organizers as defined in an Organizer's Agreement
of the Holding Company of the 14th day of July, 1999), or more than one person
acting as a group (excluding for this purpose any of said Organizers, to the
extent they participate in such a group), acquires during any Twelve (12) month
period more than Fifty Percent (50%) of the total voting power of the Holding
Company's stock.
ARTICLE X. INDEMNIFICATION
10.1 Indemnification of the Holding Company and the Bank. Mr. Thomas
agrees to indemnify and hold harmless the holding Company and the Bank from and
against any and all claims made against the Holding Company or the Bank by any
party by virtue of Mr. Thomas's past employment whether such claims are made by
a past employer or by another party with whom Mr. Thomas has dealt in the past.
10.2 Indemnification of Mr. Thomas. The Holding Company and the Bank
will provide Mr. Thomas with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, will indemnify
Mr. Thomas to the fullest extent permitted under Maryland law against all
expenses and liabilities reasonably incurred by him in connection with or
arising out of any action, suit, or proceeding in which he may be involved by
reason of having been a director or officer of the Bank or the Holding Company
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not limited to, judgments, court costs and attorneys' fees, and the
cost of reasonable settlements.
ARTICLE XI. BREACH; REMEDIES
11.1 Right to Cure; Default. In the event that either party shall be
alleged to be in breach of this Agreement, written notice shall be given by the
other party and a Ten (10) day opportunity to cure shall be provided. After such
Ten (10) day cure period, if the breach is not cured and remains as alleged, the
breaching party shall be deemed in default and this Agreement may be terminated
by written notice to the breaching or defaulting party.
11.2 Injunctive Relief. In the event of a breach of this Agreement, the
Holding Company and/or the Bank shall be entitled to injunctive relief
restraining Mr. Thomas from taking or continuing any action which would
constitute a breach of the covenants contained herein. Such injunctive remedies
shall not be exclusive and shall be in addition to any and all other remedies
which may be available to the Holding Company and/or the Bank at law or equity,
including, without limitation, the recovery of direct, indirect, incidental,
consequential and/or punitive damages. If successful in obtaining any injunctive
relief, the Holding Company and/or the Bank shall be entitled to collect from
Mr. Thomas their reasonable respective attorneys' fees and costs. The parties
agree to jurisdiction and
<PAGE>
venue and service by the Federal District Court of Maryland and the Circuit
Court of Anne Arundel County, Maryland.
11.3 Suspension of Benefits. In the event of a breach or default by Mr.
Thomas of the covenants contained in this Agreement, the Holding Company and/or
the Bank shall have the right to suspend the payment of consideration provided
for herein and/or to set-off against such payments the damages claimed to be
suffered by the Holding Company and/or the Bank as result of such breach of this
Agreement.
ARTICLE XII. MISCELLANEOUS
12.1 Entire Agreement. This Agreement represents the entire agreement
of the parties relating to the services of the Mr. Thomas to the Holding Company
and the Bank. All prior negotiations between the parties are merged into this
Agreement and there are no understandings or agreements other than those
incorporated herein.
12.2 Severability; Court Enforcement. The parties hereto covenant and
agree that to the extent any provisions or portion of this Agreement shall be
held, found or deemed to be unreasonable, unlawful or unenforceable, by any
Court of law, then the parties hereto expressly covenant and agree that any such
provision or portion thereof shall be modified to the extent necessary in order
that any such provision or portion thereof shall be legally enforceable to the
fullest extent permitted by applicable law and that any court of competent
jurisdiction shall, and the parties hereto do hereby expressly authorize any
court of competent jurisdiction to, enforce any such provision or portion
thereof or to modify any such provision thereof shall be enforced by such court
to the fullest extent permitted by applicable law.
12.3 Waiver. The Holding Company, the Bank and Mr. Thomas each reserve
the right to waive any of the terms of this Agreement which benefits the party
waiving same. Any such waiver must be in a writing signed by the party waiving
the same.
12.4 Choice of Law. It is the intention of the parties hereto that this
Agreement shall be governed by the laws of the State of Maryland.
12.5 Successors. The terms of this Agreement shall inure to the benefit
of and be binding upon the Holding Company, the Bank, their respective
successors and assigns, and upon Mr. Thomas, his heirs, guardians and personal
and legal representatives.
12.6 Gender. The use of the masculine gender herein shall be deemed to
be or include the feminine gender, wherever appropriate.
12.7 Notices. All notices, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally or if sent registered or certified mail, return receipt requested,
properly addressed and postage prepaid to the addresses set forth hereinabove.
12.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
12.9 Headings. The Article and Section headings used herein are for
convenience and reference only and shall not enter into the interpretation
hereof.
12.10 Representation by Counsel.
12.10.1 Counsel for the Holding Company and the Bank. The
parties hereto acknowledge that Stephen C. Hosea, of the law firm of McNamee,
Hosea, Jernigan & Kim, P.A., 705 Melvin Avenue, Suite 102, Annapolis, Maryland
20770 has been formation and organizational counsel to the Holding Company and
the Bank. The parties hereto further acknowledge that Stephen C. Hosea, and
McNamee, Hosea, Jernigan & Kim, P.A. are anticipated to continue representation
of the Holding Company and the Bank following the execution of this Agreement.
<PAGE>
12.10.2 Counsel for Mr. Thomas. The parties hereto acknowledge
that Mr. Thomas, for the purposes of this Agreement, has sought and obtained, or
acknowledges his right and opportunity to seek and obtain the advice of his
independent legal counsel with regard to the contents and interpretation of this
Agreement and each party hereto is fully and independently apprised of the
meaning and legal effect of this Agreement.
12.11 Amendments. This Agreement may be amended or modified only by a
written instrument signed by both parties.
IN WITNESS WHEREOF, this Agreement has been executed by the Holding
Company and Mr. Thomas as of the day and year first above written.
HOLDING COMPANY:
By:
-----------------------------------
Milton D. Jernigan, II, Chairman
MR. THOMAS:
-----------------------------------
Lamont Thomas
Exhibit 11
Statement Regarding Computation of Earnings Per Share
<TABLE>
<CAPTION>
Period from July 9, 1999
to October 31, 1999
<S> <C>
Earnings (loss) Per Common Share
Basic $(291)
Average Shares 325
Diluted $(291)
Average Shares 325
</TABLE>
Exhibit 23(a)
Consent of Independent Public Accountant
November 22, 1999
Board of Directors
CommerceFirst Bancorp, Inc.
705 Melvin Avenue, Suite 104
Annapolis, Maryland 21401
RE: Registration Statement on Form SB-2
We hereby consent to the incorporation by reference of our report dated November
16, 1999 included or incorporated by reference in the Registrant's form SB-2
Registration Statement under the Securities Act of 1933 for the period July 9,
1999 (date of inception) to October 31, 19999 and to the reference to our firm
under the heading "Experts".
Sincerely,
/s/ Trice & Geary, LLC
Trice & Geary LLC
Exhibit 99(a)
COMMERCEFIRST BANCORP, INC.
SUBSCRIPTION AGREEMENT FOR OFFERING OF SHARES OF COMMON STOCK
THE TERMS AND CONDITIONS OF THE OFFERING ARE SET FORTH IN THE ACCOMPANYING
PROSPECTUS. PERSONS WHO WISH TO PURCHASE SHARES OF COMMON STOCK IN THE OFFERING
ARE URGED TO CAREFULLY READ THE PROSPECTUS IN ITS ENTIRETY PRIOR TO SUBMITTING
THIS SUBSCRIPTION AGREEMENT. ALL SUBSCRIPTIONS, ONCE SUBMITTED, ARE IRREVOCABLE
BY THE SUBSCRIBER.
IF YOU HAVE QUESTIONS ABOUT HOW TO COMPLETE THIS SUBSCRIPTION AGREEMENT, CONTACT
KOONCE SECURITIES, INC. AT :
(800) 368-2806 or (301) 897-9700
I. Subscription for Shares of Common Stock. The undersigned hereby irrevocably
subscribes for _______________________________ shares of Common Stock of
CommerceFirst Bancorp, Inc. at the purchase price of 10.00 per share. (1)
II. Purchase Price and Manner of Payment. The undersigned submits herewith, by
means of a check, bank draft or money order in the amount of
$_______________________ ($10.00 multiplied by the total number of shares
subscribed for in part I above), payable to "_______________, Escrow Agent for
CommerceFirst Bancorp, Inc."
III. (a) Registration Instructions. This part must be completed with respect to
all shares purchased. If shares subscribed for are to be registered in more than
one manner, complete as many Subscription Agreements as there are registrations,
or attach separate sheets providing all of the information required below with
respect to each registration, and indicating number of shares subject to each
registration.
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Address, including Street, City, County, State and ZIP Code)
Taxpayer identification or Social Security Number: ____________________
Manner in which securities are to be owned:
|_|Individual
|_|Tenants in Common
|_|Joint Tenants
|_|Retirement Account (Trustee signature and authorization
required)
|_|Uniform Transfer to Minors
|_|Other _______________________ (for example, corporation,
trust or estate. If shares are purchased for a trust, the
date of the trust agreements and trust title must be
included).
(b) Special Delivery Instructions: If certificate(s) representing the
shares subscribed for is to be delivered to an address other than as indicated
in III.(a) above, please provide the delivery address below.
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Address, including Street, City, County, State and ZIP Code)
- ----------------------
(1) Subject to a minimum subscription of 100 shares and a maximum subscription
of 5% of the total number of shares actually sold in the offering. Subject to
reduction in the event that the offering is oversubscribed.
<PAGE>
IV. Deadline. This Subscription Agreement and payment in full of the purchase
price must be actually received by Koonce Securities, Inc., Suite 600, 6550 Rock
Spring Drive, Bethesda, Maryland 20817, NO LATER THAN 5:00 P.M., Eastern time,
on , 2000, (the "Termination Date") subject to extension or earlier termination
as set forth in the Prospectus.
V. In order that we CommerceFirst and Koonce Securities may fulfill our
obligations under the laws, rules and regulations governing the offering and us,
please answer the following questions by circling the appropriate responses
below.
1. Yes No Are you a member of the National Association of
Securities Dealers, Inc. ("NASD") or otherwise a
securities broker or dealer?
2. Yes No Are you a foreign securities broker, dealer or bank?
3. Yes No Are you a domestic2 bank, domestic branch of a
foreign bank, trust company or other conduit for an
undisclosed principal?
4. Yes No Are you an officer, director, general partner,
employee or agent of any member of the NASD or any
other securities broker or dealer?
5. Yes No Are you an "associated person" (as defined below)
of any member of the NASD or any other securities
broker or dealer?
(a) Yes No If yes, is the member engaged solely in the
purchase or sale of either investment
company/variable contracts securities or direct
participation program securities?
6. Yes No Are you a member of the "immediate family" (as
defined below) of any person described in questions 4
or 5 above?
(a) If yes, are you:
(i) Yes No Supported, either directly or indirectly, to a
material extent, by that family member?
(ii) Yes No Supported, either directly or indirectly, but not to
a material extent, by that family member?
(iii) Yes No Not supported, either directly or indirectly, by that
family member?
If you answered yes to question
6(a)(i) or 6(a)(ii), please provide the name of the
broker or dealer with which that person is affiliated
or associated:
7. Yes No Are you a finder with respect to the offering?
8. Yes No Are you a person (such as an attorney, accountant or
financial consultant) acting in a fiduciary capacity
to any managing underwriter of the offering, or to
CommerceFirst with respect to the offering?
9. Yes No Are you a senior officer of any of the following: a
bank; savings and loan institution; insurance
company; investment company; investment advisory
firm; or any other institutional type account
(including, but not limited to, hedge funds,
investment partnerships, investment corporations or
investment clubs), domestic or foreign?
- ----------------------
(2) For purposes of this questionnaire, the term "domestic" shall mean an
entity or individual, as appropriate domiciled or located in the United States:
"foreign" shall mean an entity or individual, as appropriate, domiciled in a
county other than the United States.
<PAGE>
10. Yes No Do you work in the securities department of any bank,
savings and loan institution, insurance company,
investment company, investment advisory firm or other
institutional type account, domestic or foreign?
11. Yes No Are you employed by any bank, savings and loan
institution, insurance company, investment company,
investment advisory firm or other institutional type
account, domestic or foreign, where you have
influence in or are engaged in activities directly or
indirectly involving or relating to the function of
buying or selling securities?
12. Yes No Are you in any other way able to influence or are
engaged in activities directly or indirectly
involving or relating to the function of buying or
selling securities by any bank, savings and loan
institution, insurance company, investment advisory
firm or other institutional type account, domestic or
foreign?
13. Yes No Are you a person who is supported directly or
indirectly, to a material extent, by any person
specified in questions 7 through 12 above?
14. Yes No If you answered yes to any of questions 6(a)(i),
6(a)(ii) or 7 through 13, do you normally purchase
securities from time to time from a broker, dealer or
underwriter in public offerings, directly or
indirectly (for example, through an investment
partnership)?
15. Yes No If you are a domestic or foreign investment company
or partnership, investment club, hedge fund, or other
collective investment vehicle, would any person or
entitles having a beneficial ownership interest in
you answer yes to any of questions 1 through 13?
16. Name of Employer:________________________________________________
17. Nature of Business:________________________________________________
An "associated person" of a broker-dealer is any individual engaged in
the investment banking or securities business who directly or indirectly
controls or is controlled by a broker-dealer. A person who owns or has
contributed more than 10% to a broker-dealer's capital generally is considered
to be an associated person. A person who owns or has contributed 10% or less to
a broker-dealer's capital also is generally considered to be an associated
person, unless: (a) that ownership interest is a passive investment, (b) the
person does not receive hot issues from the broker-dealer in which he or she has
the interest, and (c) that broker-dealer is not in a position to direct hot
issues to the person.
The "immediate family" of a person includes that person's parents,
spouse, brothers, sisters, children, mother-in-law, father-in-law,
brothers-in-law, sisters-in-law, sons-in-law, daughters-in-law, and other
persons supported, directly or indirectly, to a material extent, by that person.
[Remainder of page intentionally blank]
<PAGE>
By signing and submitting this Subscription Agreement the undersigned
hereby represents and warrants that the responses to the questions in Section V
of this agreement are true and correct, and agrees to notify Koonce Securities,
Inc. immediately in writing if responses to any of the above questions change.
Name(s) of Subscriber(s):
- --------------------------------------------------------------------------------
Daytime Telephone Number:
------------------------------------------------------
Evening Telephone Number:
------------------------------------------------------
SIGNATURE(S):
- --------------------------------------------------------------------------------
(Signature(s) of subscriber(s) exactly as name(s) appear above)
Dated:
----------------------------
If signature is by trustee(s), executor(s), administrator(s), guardian(s),
attorney(s)-in-fact, agent(s), officer(s) of a corporation or another acting in
a fiduciary or representative capacity, please provide the following information
as to such person.
Name (please print):
-----------------------------------------------------------
Capacity (Full title):
---------------------------------------------------------
Address (including ZIP Code):
--------------------------------------------------
Business Telephone Number including area code):
--------------------------------
Taxpayer identification or Social Security Number:
-----------------------------
IN DETERMINING WHETHER TO ACCEPT ANY SUBSCRIPTION, IN WHOLE OR IN PART,
COMMERCEFIRST MAY, IN ITS SOLE DISCRETION, TAKE INTO ACCOUNT THE ORDER IN WHICH
SUBSCRIPTIONS ARE RECEIVED, A SUBSCRIBER'S POTENTIAL TO DO BUSINESS WITH, OR TO
DIRECT CUSTOMERS TO, COMMERCEFIRST BANK AND THE DESIRE TO HAVE A BROAD
DISTRIBUTION OF STOCK OWNERSHIP, AS WELL AS LEGAL OR REGULATORY RESTRICTIONS.
Exhibit 99(b)
COMMERCEFIRST BANCORP, INC.
REVISED AND RESTATED
ORGANIZERS' AGREEMENT
THIS REVISED AND RESTATED ORGANIZERS' AGREEMENT (hereinafter referred
to as the "Agreement") is made this 6th day of October, 1999 by and between the
undersigned parties (hereinafter referred to collectively as the "Organizers")
and CommerceFirst Bancorp, Inc., a Maryland Corporation (hereinafter referred to
as the "Holding Company")
WITNESSETH
WHEREAS, the Organizers are actively involved in business,
professional, banking, financial and charitable activities in the Maryland
counties of Anne Arundel, Prince George's, Howard and Calvert; and,
WHEREAS, the Organizers desire to form a State Bank authorized to do
business as a Commercial Bank (hereinafter referred to as the "Bank") under the
laws of the State of Maryland; and,
WHEREAS, the Holding Company has been formed to wholly own the shares
of the Bank; and,
WHEREAS, the formational process of the Bank will require the
expenditure of funds by the Holding Company in payment of application fees,
consulting fees, deposits upon leased real property and equipment, attorney's
fees, officers' salaries, and other expenses incidental to the formation
process; and,
WHEREAS, the Organizers desire to provide the funds necessary for the
Holding Company to successfully achieve the formation and operation of the Bank;
and,
WHEREAS, the Organizers have entered into an Organizers' Agreement
dated the 14th day of July, 1999; and
WHEREAS, the Organizers wish to revise and restate that Agreement.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. Effect of Agreement. This Revised and Restated Agreement amends and
replaces the Organizers' Agreement dated the 14th day of July, 1999.
2. Stock Purchase, Duties and Responsibilities of Organizers: The
contributions, duties and responsibilities of Organizers shall be as follows:
(a) Initial Stock Purchase: Each Organizer shall purchase
Twenty-five (25) shares of stock of the Common Stock of the Holding Company (the
"Initial Stock Purchase Price") at One Thousand Dollars ($1,000.00) per share
for an aggregate purchase price of Twenty Five Thousand Dollars ($25,000.00)
(the "Initial Purchase Price").
(b) Duties and Responsibilities: Each Organizer shall:
(1) Supply any and all personal information as required by regulatory
agencies or other parties if necessary and incidental to the formation
of the Bank;
(2) Attend meetings, conferences and other functions necessary or
incidental to the operation of the Holding Company and the formation of
the Bank; and,
<PAGE>
(3) Make reasonable efforts to obtain subscribers for the purchase of the
stock of the Holding Company.
(c) Qualified Investments. The term "Qualified Investments,"
as used herein, includes investments made by: the Organizer personally; IRAs and
retirement accounts of the Organizer; the spouse of the Organizer; IRA and
retirement accounts of the spouse of the Organizer; and, trusts for which the
Organizer is the trustee or a co-trustee and the beneficiary or beneficiaries is
or are such or the spouse, children or grandchildren of such Organizer.
3. Board of Directors of the Holding Company. The Initial Directors of
the Holding Company consists of:
<TABLE>
<S> <C>
Class 2000 Director (initial one year term): Lamont Thomas
Class 2001 Director (initial two year term): Alvin R. Maier
Class 2002 Director (initial three year term): Milton D. Jernigan, II
</TABLE>
4. Term. This Agreement shall remain in full force and effect until the
earlier of: the opening of the Bank for business (the "Opening"); the
affirmative vote of two-thirds (2/3) of the Organizers; or three (3) years from
the date of this Agreement.
5. Restrictions on Transferability of Shares. Each Organizer covenants,
promises and agrees that, until such time as the Holding Company offers shares
to individuals other than Organizers or Additional Organizers (the "Offering"),
he shall not sell, hypothecate, pledge, assign, or otherwise transfer with or
without consideration (hereinafter collectively referred to as a "Transfer") any
or all of the shares of Common Stock of the Holding Company owned of record or
beneficially by him, or any of his or her rights hereunder, to any other person,
corporation, partnership, association, limited liability company, trust or any
other entity whatsoever except pursuant to the terms and conditions of this
Agreement without the prior written consent of two thirds (2/3) of the
Organizers. Each Organizer hereby acknowledges the reasonableness of the
restrictions of Transfers imposed by this Agreement in view of the purposes of
the Holding Company and the relationships of the Organizers. All certificates
representing shares of Common Stock issued pursuant to this Agreement shall be
conspicuously legended as follows:
"The shares of stock represented by this Certificate are
restricted as to transfer by the terms, conditions and
covenants of an Agreement with respect thereto dated the 14th
day of July, 1999, a copy of which is on file with the
Corporation (as revised and restated by an Agreement dated the
6th day of October, 1999, a copy of which is on file with the
Corporation). The Corporation will gratuitously furnish a copy
of said Agreement to any party having a valid interest
therein. Any transfer of stock other than in accordance with
said Agreement shall be absolutely null and void."
The Organizers agree that shares of Common Stock of the Holding Company which
were issued pursuant to the Organizers Agreement dated the 14th day of July,
1999 are restricted by the terms, conditions and covenants of this Revised and
Restated Organizers' Agreement.
6. Death of an Organizer. During the Term of this Agreement, upon the
death of an Organizer (hereinafter referred to as the "Decedent"), the
Decedent's successors in interest shall be entitled to receive, as provided in
this Agreement, the number of Warrants which the Decedent would be entitled to
receive upon an Offering. However, the Decedent's successors in interest shall
not become Organizers and shall not be required or entitled to make a Secondary
Stock Purchase in the event that such a purchase is required.
7. Secondary Stock Purchase. If the Holding Company, in the opinion of
a majority of the Organizers thereof, requires an additional infusion of
operating capital, the Holding Company may sell additional shares in the Company
to Organizers (the "Secondary Stock Purchase") for One Thousand Dollars
($1,000.00) per share (the "Secondary Stock Purchase Price"). The offer to sell
additional shares to the Organizers shall consist of a
<PAGE>
total number of shares which is equally divisible by the total number of
Organizers. Each Organizer electing to purchase shares in the Secondary Stock
Purchase shall be entitled to purchase the offered shares on a pro rata basis.
8. Exchange Rights of Organizers. Upon an Offering, Organizers shall
exchange shares of the Common Stock of the Holding Company purchased pursuant to
this Agreement for the number of shares in the Holding Company which equal the
total purchase price paid by the Organizer pursuant to this Agreement divided by
the per share purchase price of the shares in the Offering (the "Offering
Price"). As an example, if an Organizer purchases Twenty-five (25) shares in the
Holding Company for Twenty Five Thousand Dollars ($25,000.00) pursuant to this
Agreement and the Offering Price is Ten dollars ($10.00) per share, the
Organizer shall be entitled to exchange each share of the Common Stock of the
Holding Company purchased pursuant to this Agreement for One Hundred (100)
shares of the common stock of the Holding Company.
9. Warrant Rights of Organizers. The Organizers shall receive Warrants
as pursuant to the terms of a Warrant Plan which is attached hereto as Exhibit
1.
10. Liquidation Preference. If, prior to the expiration of the Term of
this Agreement, a majority of the Board of Directors of the Holding Company
elect to liquidate, the Holding Company shall purchase in full the Shares of the
Company purchased by Organizers pursuant to this Agreement in the following
order of preference:
10.1 Those Shares purchased by Organizers pursuant to a
Secondary Stock Purchase;
10.2 Those Shares purchased by Organizers pursuant to an
Initial Stock Purchase;
11. Amendment. This Agreement may be amended or terminated only upon
the vote of Two-thirds (2/3) of the Organizers. Organizers shall have no rights
to dissent.
12. Applicable State Law. Except as required by federal banking and
securities law, this Agreement shall be construed in accordance with the laws of
the State of Maryland.
13. Severability of Clauses. Should any term, provision or covenant of
this Agreement or the application thereof to any person or circumstance be
invalid or unenforceable, the remainder of this Agreement or the application of
such term, provision or covenant to persons or circumstances other than those to
which it is held invalid or unenforceable shall not be affected thereby and each
term, provision or covenant shall be valid and enforceable to the fullest extent
permitted by law.
14. Arbitration. Any dispute arising hereunder shall be submitted and
settled by binding arbitration under and pursuant to the Maryland Uniform
Arbitration Act and the rules and regulations of the American Arbitration
Association, and the decision or award of the arbitrator or arbitrators in such
arbitration shall be final, conclusive and binding upon each of the parties and
judgment may be entered thereon in any court of competent jurisdiction. The
parties hereby agree that all costs of arbitration are to be borne by the
non-prevailing party.
15. Counterparts. This Agreement may be executed in counterparts, all
of which collectively shall be deemed one original.
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
ATTEST: COMMERCEFIRST BANCORP, INC.
- ------------------------------ ------------------------------------
Milton D. Jernigan, II, Chairman
<PAGE>
WITNESS/ATTEST: ORGANIZERS:
CITIZENS, INC.,
a Pennsylvania Corporation
By:___________________________ By:___________________________
S. J. Irvine, III, Chairman
- ------------------------------ ------------------------------
Edward B. Howlin, Jr.
- ------------------------------ ------------------------------
Milton D. Jernigan, II
- ------------------------------ ------------------------------
Milton D. Jernigan, Sr.
- ------------------------------ ------------------------------
Alvin R. Maier
- ------------------------------ ------------------------------
Michael J. Miller
- ------------------------------ ------------------------------
Robert R. Mitchell
- ------------------------------ ------------------------------
Richard J. Morgan
- ------------------------------ ------------------------------
John A. Richardson, Sr.
- ------------------------------ ------------------------------
Lamont Thomas
- ------------------------------ ------------------------------
Dale R. Watson
- ------------------------------ ------------------------------
Jerome A. Watts
Exhibit 99(c)
ESCROW AGREEMENT
This ESCROW AGREEMENT is made and entered into this ____ day of , 1999,
by and between CommerceFirst Bancorp, Inc., a Maryland corporation (the
"Company"), and (the "Escrow Agent").
BACKGROUND. Pursuant to a prospectus forming a part of a Registration
Statement on Form SB-2 filed by the Company with the Securities and Exchange
Commission (the "Prospectus") the Company is offering for sale, with the limited
assistance of Koonce Securities, Inc., a registered broker dealer ("Koonce") or
another broker-dealer in jurisdictions in which Koonce is not registered, the
services of Capitol Investment group as finder, and through the efforts of
certain of its organizers, a minimum of 650,000 and a maximum of 800,000 shares
of its common stock, $.01 par value per share, of the Company (the "Common
Stock"), plus an oversubscription allotment of an additional 200,000 shares, at
a price of $10.00 per share (the "Offering"). Those persons who desire to
purchase shares are required to execute and deliver a subscription agreement and
are required to pay the full purchase price of the shares subscribed for at the
time of subscription, by cash, check, bank draft or money order. The Prospectus
provides that all subscriptions should be delivered to Koonce, and that all
checks or other orders are to be made payable to the Escrow Agent as escrow
agent for the Company.
The sale of any shares in the Offering is subject to various
conditions, including the receipt of acceptable subscriptions and payment in
respect of at least 650,000 shares of Common Stock. Pending closing upon the
sale of shares or termination of the Offering, all monies received from
subscribers on account of the purchase of shares are to be deposited in an
escrow account with the Escrow Agent. The parties hereto wish to set forth
herein the terms and conditions governing the escrow account and the funds being
delivered to and held by the Escrow Agent.
NOW THEREFORE, in consideration of the mutual promises herein
contained, each intending to be legally bound hereby, the parties hereto agree
as follows:
1. ESCROW AGENT. The Company hereby designates and appoints , as Escrow
Agent to serve in accordance with the terms and conditions of this Escrow
Agreement and the Escrow Agent agrees to act as such Escrow Agent in accordance
with the terms and conditions of this Escrow Agreement.
2. CREATION OF ESCROW. At any time and from time to time after the date
hereof until completion of the Offering and Closing thereunder, the Company
shall deliver, or cause to be delivered by Koonce, to the Escrow Agent funds
representing the purchase price of shares subscribed for by subscribers. The
Escrow Agent shall accept and hold in escrow all such funds received by it from
the Company or Koonce for deposit in escrow hereunder (the "Escrowed Funds")
until released as set forth herein.
3. INVESTMENT OF ESCROWED FUNDS. Pending release from Escrow, the
Escrowed Funds shall, not later then the first business day following receipt,
be invested by the Escrow Agent in an interest bearing Repurchase Agreement
secured by United States government securities. All interest accrued on the
Escrowed Funds or interest earned on the Escrowed Funds shall be retained by the
Escrow Agent until released in accordance with the provisions of this Escrow
Agreement. It is acknowledged and agreed that the Escrowed Funds, including any
interest or earnings thereon, are not assets of the Escrow Agent, but constitute
funds placed with the Escrow Agent for deposit, safekeeping and investment
pending disbursement in accordance with provisions of this Escrow Agreement.
4. INFORMATION. From time to time upon the request of the Company, the
Escrow Agent shall furnish to the Company a statement of the amount of Escrowed
Funds held by the Escrow Agent, the approximate amount of any accrued interest
thereon, and such other information as the Company may reasonably request. The
Escrow Agent shall immediately notify the Company if any check representing
Escrowed Funds or other purported transfer of Escrowed Funds fails to result in
the delivery of funds to the Escrow Agent.
5. RELEASE OF ESCROWED FUNDS.
<PAGE>
(a) Release of Escrowed Funds to the Company. (i) Immediately
upon the receipt of the certificate of the Company as described below, the
Escrow Agent shall release and deliver to the Company such portion of the
Escrowed Funds as represents payment of the purchase price of shares in respect
of which the Company has accepted subscriptions. Except as provided in Section
5(b) hereof, the Escrow Agent shall not release any portion of the Escrowed
Funds to the Company until it has received: (1) a certification of any two of
Milton D. Jernigan II, Richard J. Morgan and/or Lamont Thomas, Chairman,
President and Executive Vice President/Treasurer , respectively, of the Company,
or the then serving Chairman, President and Executive Vice President/treasurer,
to the effect that (i) the Company has received acceptable subscriptions
(including payment in full of the purchase price) with respect to not less than
650,000 shares, and has accepted subscriptions with respect to not less than
650,000 shares; and (ii) the Company has received final approval to become a
bank holding company, and the Company's proposed bank subsidiary has received
final approval to commence business as a bank. Such certification shall indicate
the exact number of shares with respect to which subscriptions have been
accepted. Notwithstanding anything to the contrary contained herein, the
delivery of the foregoing certification shall be in the sole discretion of
Messrs. Jernigan, Morgan and/or Thomas and nothing contained herein shall
constitute any obligation, express or implied, of Messrs. Jernigan, Morgan
and/or Thomas to deliver such certification, or to deliver it at any specified
time; and (2) the certification of an appropriate officer of Koonce to the
effect that the Company has received subscriptions (including payment in full of
the purchase price) with respect to not less than the number of shares for which
the release of funds is sought.
(ii) In the event that the Offering shall continue with respect to
additional shares following the release of funds described in (a)(i) above, then
the Escrow Agent shall, immediately upon the receipt from time to time of one or
more certificates of: (1) any two of Messrs. Jernigan, Morgan and/or Thomas, or
the then serving Chairman, President and Executive Vice President/Treasurer of
the Company, stating that the Company has received acceptable subscriptions
(including payment in full of the purchase price) with respect to a specified
number of additional shares, and has accepted subscriptions with respect to such
number of additional shares; and (2) the appropriate officers of Koonce to the
effect that the Company has received subscriptions (including payment in full of
the purchase price) with respect to at least that number of additional shares,
release and deliver to the Company such portion of the Escrowed Funds as
represents payment of the purchase price of such number of additional shares in
respect of which the Company has accepted subscriptions.
(b) Release of Escrowed Funds to Subscribers. Immediately
after receiving a certification of any two of Messrs. Jernigan, Morgan and/or
Thomas, or the then serving Chairman, President and Executive Vice
President/Treasurer, to the effect that the Company has either (i) terminated
the Offering in whole or in part; or (ii) rejected, revoked or cancelled in
whole or in part any subscription payment in respect of all or a portion of
which has been received by the Escrow Agent, then the Escrow Agent shall return
to the subscriber whose subscription shall have been rejected, revoked or
cancelled, in whole or in part, as a result of termination of the Offering or
otherwise, Escrowed Funds representing such subscriber's payments, or all
subscribers' payments in the event of termination of the Offering as a whole,
and shall release to the Company, all interest or other earnings accrued on such
portion of the Escrowed Funds. It is expressly agreed that, in the event any
release of escrowed funds to subscribers is required for any reason, the Company
will provide, as part of its certification, complete information to enable such
action to be completed in a prompt and timely manner.
(c) Release of Earnings. On the first day of each month during
which there shall be any Escrowed Funds in escrow hereunder, or at such other
time or times as the Company may in writing direct, the Escrow Agent shall
release that portion of the Escrowed Funds which represent interest or other
earnings on any portion of the Escrowed Funds, to the Company. Such release
shall be effected by the deposit of such interest or other earnings to the
Company's transaction account maintained at __________________.
6. LIMITATION OF LIABILITY. It is agreed that the duties of the Escrow
Agent are limited to those herein specifically provided and are ministerial in
nature. It is further agreed that the Escrow Agent shall incur no liability
whatever except by reason of its willful misconduct, gross negligence or bad
faith. The Escrow Agent shall be under no obligation in respect to amounts held
in escrow hereunder other than faithfully to follow the instructions herein
contained or delivered to the Escrow Agent in accordance with this Escrow
Agreement. It shall not be required to institute legal proceedings of any kind.
It shall have no responsibility for computations to be made in accordance
herewith or for the genuineness or validity of any document or other item
deposited with it, and it shall be fully protected in acting in accordance with
the Escrow Agreement upon any written instructions given to it and reasonably
believed by it to have been duly executed by the Company in accordance herewith.
The Company shall indemnify and
<PAGE>
hold the Escrow Agent harmless against any claims, demands, damages or losses
with respect to any thing done by the Escrow Agent in good faith in any and all
matters covered by this Agreement in accordance with the instructions or
provisions set forth herein, except such as may arise through or be caused by
the willful misconduct or gross negligence of the Escrow Agent.
7. COMPENSATION. The Company shall pay all reasonable and customary
compensation, expenses and other charges of the Escrow Agent relating to its
services hereunder for so long as the Escrow Agent holds any amount in Escrow
hereunder. The Escrow Agent and the Company agree that such compensation shall
be as described in Schedule A hereto.
8. RESIGNATION. The Escrow Agent, or any successor to it hereafter
appointed, may at any time resign by giving thirty (30) day advance notice in
writing to the Company and, upon the appointment of a successor Escrow Agent as
hereinafter provided, shall be discharged from any further duties hereunder. In
the event of such resignation, a successor Escrow Agent, which shall be a bank
or trust company organized under the laws of the United States of America, shall
be appointed by the Company. Any such successor Escrow Agent shall deliver to
the Company a written instrument accepting such appointment hereunder, and
thereupon it shall succeed to all of the unaccrued rights and duties of the
Escrow Agent hereunder and shall be entitled to receive all of the then
remaining amounts held in escrow hereunder.
9. TERMINATION. This Escrow Agreement shall terminate upon the earlier
of: (i) the receipt by the Escrow Agent of a written notice of termination
signed by the Company accompanied by sufficient certifications or other
documentation to verify that all subscriptions to which the Escrowed Funds
relate shall have been accepted and certificates representing such shares issued
or rejected in whole; or (ii) the distribution of all of the Escrowed Funds,
including all undistributed interest or earnings in accordance with this Escrow
Agreement following termination or completion of the Offering. Upon termination
pursuant to clause (i) above, the Escrow Agent shall deliver any Escrowed Funds
remaining after return to subscribers of Escrowed Funds representing rejected
subscriptions as instructed in such notice of termination.
10. NOTICES. Except as otherwise provided in this Agreement, any notice
or other communication hereunder shall be in writing and shall be deemed
delivered upon personal delivery or upon receipt if sent by facsimile
transmission, express delivery service or mailed by registered or certified
first class mail, postage prepaid, and addressed as follows:
To the Company: To the Escrow Agent:
Richard J. Morgan
CommerceFirst Bancorp, Inc.
705 Melvin Avenue
Suite 104
Annapolis, Maryland 21401
or to such other addresses or persons as the parties, from time to time, may
furnish one another by notice given in accordance with this section.
11. MISCELLANEOUS.
(a) Assignment. This Escrow Agreement and the rights of the
parties hereunder may not be assigned by the Escrow Agent without the consent of
the Company, which consent may be withheld in the absolute discretion of the
Company, and any attempted assignment in violation of this Section 11(a) shall
be void. This Escrow Agreement and all action taken hereunder in accordance with
its terms shall be binding upon and inure to the benefit of each of the parties
hereto and its respective successors, permitted assigns, heirs, and legal
representatives.
(b) Amendment. This Escrow Agreement may be amended upon
written notice to the Escrow Agent at any time by the Company but the duties,
responsibilities or compensation of the Escrow Agent may not be modified without
its consent.
<PAGE>
(c) Waiver. Waiver of any term or condition of this Escrow
Agreement by any party shall not be construed as a waiver of a subsequent breach
or failure of the same term or condition, or a waiver of any other term or
condition of this Escrow Agreement.
(d) Governing Law. This Escrow Agreement shall be governed by
and construed in accordance with the laws of the State of Maryland, without
reference to the conflicts or choice of law principles thereof.
(e) Integration. This Escrow Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof,
and supersedes any prior agreement with respect to the subject matter hereof,
and there are no other agreements, covenants, representations or warranties
except as set forth herein.
(f) Authority. Each party executing this Escrow Agreement
warrants its authority to execute this Escrow Agreement.
(g) Counterparts. This Escrow Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be signed the day and year first above written.
ATTEST: COMMERCEFIRST BANCORP, INC.
By
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Name: Name: Richard J. Morgan
Title: Title: President
ATTEST:
By
- ------------------------ ----------------------------------
Name: Name:
Title: Title:
