<PAGE> 1
As filed with the Securities and Exchange Commission on October 18, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CENTURY BANCSHARES, INC.
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DELAWARE 6712 52-1489098
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
<TABLE>
<S> <C>
JOSEPH S. BRACEWELL
1275 PENNSYLVANIA AVENUE, N.W. 1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004 WASHINGTON, D.C. 20004
(202) 496-4000 (202) 496-4000
(Address, including zip code, and telephone number, including (Name, address, including zip code, and telephone number,
area code, of Registrant's principal executive offices) including area code, of agent for service)
</TABLE>
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Copy to:
JOHN R. BRANTLEY
BRACEWELL & PATTERSON, L.L.P.
711 LOUISIANA STREET, SUITE 2900
HOUSTON, TEXAS 77002-2781
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier 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 each class of Proposed maximum Amount of
securities to be registered aggregate offering price(1) registration fee
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Common Stock, par value $1.00 per share $999,999.75 $303.04
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(1) Estimated pursuant to Rule 457(o) solely for purposes of calculating the
registration fee. This amount includes (i) the 173,913 shares of Common
Stock initially issuable upon exercise of the Warrants described herein
(the "Warrants"), (ii) an additional 12,173 shares of Common Stock issuable
upon exercise of the Warrants as a result of a 7% stock dividend declared
by the Company in March 1996 and (iii) such indeterminable amount of
additional shares of Common Stock as may be issuable upon exercise of the
Warrants as a result of adjustments for stock dividends, stock splits, or
reclassification of shares, and certain reorganizations, consolidations and
mergers.
--------------------
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 THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED OCTOBER 18, 1996
CENTURY BANCSHARES, INC.
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* *
* Information contained herein is subject to completion or amendment. *
* A registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may *
* not be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************
186,086 Shares of Common Stock, $1.00 Par Value
Issuable Upon Exercise of Warrants to Purchase Common Stock
This Prospectus relates to the issuance of 186,086 shares of Common
Stock to be issued from time to time after November 14, 1996, upon exercise of
certain warrants (the "Warrants") to purchase shares of common stock, $1.00 par
value per share ("Common Stock"), issued on November 14, 1995 by Century
Bancshares, Inc., a Delaware corporation (the "Company"). The shares offered
hereby include 173,913 shares of Common Stock initially issuable upon exercise
of the Warrants, an additional 12,173 shares of Common Stock issuable to holders
of Warrants due to the declaration of a 7% stock dividend payable on March 31,
1996, and such additional shares of Common Stock as may become issuable as a
result of future stock splits, stock dividends, share reclassifications,
mergers or consolidations and certain other capital readjustments and events.
There is currently no established market for the Common Stock or the
Warrants, although limited and sporadic quotations with respect to, and trading
in, the Common Stock occur in the Washington, D.C. area. As of the date of
this Prospectus, there were 173,913 Warrants outstanding. Each Warrant is
exercisable at an exercise price of $5.75 and entitles the holder to receive
1.07 shares of Common Stock.
For a description of the Common Stock and the Warrants, see "Description
of Capital Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH ANY INVESTMENT IN THE COMMON STOCK.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE "FDIC") OR ANY OTHER FEDERAL OR
STATE AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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Underwriting Discounts Proceeds to the
Warrant Exercise Price and Commissions (1) Company (2)
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Per Warrant $5.75 None $5.75
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Total $999,999.75 None $999,999.75
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(1) No commissions or brokerage fees will be paid by the Company in
connection with the exercise of the Warrants.
(2) Before deducting expenses of this offering, which are estimated
to be $75,000.
The date of this Prospectus is _____________, 1996.
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
TRADING MARKET FOR THE COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
DIVIDEND POLICY OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SELECTED CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . 14
BUSINESS AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS . . . . . . . . . . . . . . 53
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS AND WITH QUARTERLY REPORTS CONTAINING UNAUDITED SUMMARY FINANCIAL
INFORMATION FOR EACH OF THE FIRST THREE QUARTERS OF EACH FISCAL YEAR.
NO DEALER, SALESMAN OR PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
UNTIL ________, 199__ (40 DAYS AFTER THE DATE OF THIS PROSPECTUS), 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.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and consolidated
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus. As used in this Prospectus, unless the context otherwise requires,
the term "Company" means Century Bancshares, Inc. and its subsidiary.
THE COMPANY. . . . . . . . Century Bancshares, Inc., a Delaware corporation
("Company"') and a registered bank holding
company under the Bank Holding Company Act of
1956, as amended, was incorporated and organized
in 1985. The Company began active operations in
April 1986 with the acquisition of its
subsidiary, Century National Bank ("Bank"), a
full service bank which opened for business in
May 1982. The Company's principal executive
offices are located at 1275 Pennsylvania Avenue,
N.W., Washington, D.C. 20004, and its phone
number at that address is (202) 496-4000.
THE OFFERING . . . . . . . The Prospectus relates to the issuance by the
Company of 186,086 shares of its common stock,
$1.00 par value ("Common Stock"), upon exercise
of the Company's outstanding warrants
("Warrant") to purchase one share of Common
Stock, at a price of $5.75 per Warrant, subject
to adjustment in certain circumstances.
WARRANTS . . . . . . . . . The Warrants were originally issued in an
offering to the Company's stockholders exempt
from registration under the Securities Act of
1933, as amended (the "Securities Act"). Each
Warrant entitles the holder thereof to purchase
one share of Common Stock at a price of $5.75
per share, subject to adjustment in certain
circumstances. Because the Company declared a
7% stock dividend on March 31, 1996, each
Warrant is currently exercisable for 1.07 shares
of Common Stock. The Warrants may be exercised
at any time after November 14, 1996 and prior to
5:00 p.m. Eastern Time on November 16, 1998
unless repurchased. The Warrants may be
repurchased by the Company at any time on and
after November 14, 1997 at a price of $.26 per
Warrant on not less than 30 days written notice
given by the Company. See "Description of
Capital Stock -- The Warrants."
USE OF PROCEEDS. . . . . . The estimated net proceeds of the Offering to be
received by the Company, assuming all Warrants
are exercised, and after deducting legal,
financial, accounting, printing and distribution
expenses incurred in connection with the
Offering, will be approximately $925,000. The
proceeds from the Offering will be used for
general corporate purposes. See "Use of
Proceeds."
COMMON STOCK
OUTSTANDING AFTER
THE OFFERING . . . . . . . Immediately after completion of the Offering,
excluding shares issuable upon exercise of
options heretofore granted under the Company's
stock option plans, and assuming that all
Warrants are exercised, there will be 1,309,771
shares of Common Stock outstanding. See
"Capitalization" and "Management --
Compensation."
RISK FACTORS . . . . . . . The Common Stock offered hereby involves certain
risks. Holders of Warrants should consider
carefully and thoroughly the information
contained in this Prospectus, and in particular,
the information contained under the caption
"Risk Factors."
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary consolidated financial data of the Company
should be read in conjunction with the Consolidated Financial Statements of the
Company and the Notes thereto appearing elsewhere in this Prospectus and the
information contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The selected historical consolidated
financial data as of and for the five years in the period ended December 31,
1995 are derived from the Company's Consolidated Financial Statements, which
have been audited by independent public accountants. The selected historical
consolidated financial data as of and for the six months ended June 30, 1996
and June 30, 1995 are unaudited.
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Six Months Ended
June 30, Year Ended December 31,
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(Dollars in thousands, except per share data)
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
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INCOME STATEMENT DATA:
Interest income . . . . . . . . . . . . . . $3,759 $3,441 $7,079 $5,711 $5,455 $6,016 $6,871
Interest expense . . . . . . . . . . . . . 1,331 1,200 2,562 1,902 1,987 2,486 3,458
Net interest income . . . . . . . . . . . 2,428 2,241 4,517 3,809 3,468 3,530 3,413
Provision for loan losses . . . . . . . . . -- 9 26 19 310 596 592
Net interest income after
provision for loan losses . . . . . . . . 2,428 2,232 4,491 3,790 3,158 2,934 2,821
Noninterest income . . . . . . . . . . . . 354 244 590 555 572 611 440
Noninterest expense . . . . . . . . . . . . 2,281 2,010 4,045 3,381 3,036 3,284 3,124
Income taxes . . . . . . . . . . . . . . . 192 178 357 374 264 89 100
Income before extraordinary item . . . . . 309 288 680 591 429 173 38
Extraordinary item . . . . . . . . . . . . -- -- -- -- -- 34 100
Net income . . . . . . . . . . . . . . . 309 288 680 591 429 207 138
COMMON SHARE DATA:(1)
Net income before extra-
ordinary item . . . . . . . . . . . . . . $.26 $.28 $.64 $.58 $.42 $.15 $0
Extraordinary item . . . . . . . . . . . -- -- -- -- -- .04 .11
Net income . . . . . . . . . . . . . . . .26 .28 .64 .58 .42 .19 .11
Book value(2) . . . . . . . . . . . . . . 5.81 5.24 5.53 4.60 4.77 4.38 4.19
Common and common equivalent shares
outstanding
End of period . . . . . . . . . . . . . 1,174,287 974,247 1,174,763 961,169 922,105 920,958 921,493
Weighted average during period . . . . 1,174,116 967,726 998,512 959,278 922,105 920,958 921,493
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . 96,568 88,949 101,639 90,129 86,286 77,258 84,137
Investments(3) . . . . . . . . . . . . . . 16,251 18,079 21,690 22,654 25,902 14,918 25,982
Total loans(4) . . . . . . . . . . . . . . 71,455 63,119 69,204 60,663 56,644 56,331 52,758
Allowance for loan losses . . . . . . . . . 830 669 740 740 730 744 946
Total deposits . . . . . . . . . . . . . . 83,330 78,561 90,539 82,081 79,982 71,113 78,032
Long term debt . . . . . . . . . . . . . . -- -- -- -- 207 540 540
Preferred equity(5) . . . . . . . . . . . . -- 460 -- 460 468 468 468
Common equity(6) . . . . . . . . . . . . . 6,820 5,102 6,499 4,417 4,403 4,033 3,862
Total stockholders' equity . . . . . . . . 6,820 5,562 6,499 4,877 4,871 4,501 4,330
PERFORMANCE DATA (%):
Return on average total assets(7) . . . . .67 .64 .75 .71 .52 .27 .19
Return on average total equity(7) . . . . 9.28 11.03 12.43 12.21 9.04 4.10 3.13
Net interest margin(7) . . . . . . . . . 5.74 5.36 5.42 4.90 4.55 4.94 4.80
Loans to deposits . . . . . . . . . . . . 85.75 80.34 76.44 73.90 70.82 79.21 67.61
ASSET QUALITY RATIOS (%):
Nonperforming assets to total assets . . 1.16 .23 .49 .70 .37 1.11 .77
Nonperforming loans to total loans . . . 1.31 .08 .45 1.04 .57 1.16 .78
Net loan charge-offs to average loans(7) (.25) .26 .04 .02 .59 1.40 .72
Allowance for loan losses to total loans 1.16 1.06 1.07 1.22 1.29 1.32 1.79
Allowance for loan losses to
nonperforming loans . . . . . . . . . . 89 1,262 240 118 227 114 230
BANK CAPITAL RATIOS (%):
Tier I risk-based capital . . . . . . . 9.22 9.82 9.29 10.12 10.64 9.58 8.15
Total risk-based capital . . . . . . . 10.40 11.05 10.41 11.37 11.89 10.83 9.41
Tier I leverage . . . . . . . . . . . . 7.33 6.00 6.83 5.74 5.24 6.09 4.93
(footnotes on following page)
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(continued from previous page)
______________
(1) All common share data has been adjusted for three (3) five percent (5%)
Common Stock dividends declared effective on July 31, 1993, March 31,
1994 and March 31, 1995, and one (1) seven percent (7%) Common Stock
dividend declared effective on March 31, 1996.
(2) Book value per common share is based on common equity, calculated in
the manner described in footnote (6) below, divided by the number of
common and common equivalent shares outstanding.
(3) Investments include federal funds sold and interest-bearing deposits
in other financial institutions.
(4) Net of unearned income.
(5) Preferred equity is calculated based on liquidation value of $7.50
per share of Preferred Stock. All shares of Preferred Stock outstanding
as of October 17, 1995 were redeemed by the Company on December 10, 1995.
(6) Common equity is total stockholders' equity less preferred equity.
(7) Ratios annualized for the six-month periods ended June 30, 1996 and 1995.
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RISK FACTORS
An investment in the Common Stock offered hereby involves certain risks.
The following factors, in addition to those discussed elsewhere in this
Prospectus, should be considered carefully in evaluating the Company and its
business.
ILLIQUID INVESTMENT
There is no active trading market in the Common Stock or the Warrants.
Although prices for the Common Stock from time to time are quoted in the "pink
sheets" of the National Association of Securities Dealers, Inc. (which set
forth the most recent "bid" and "ask" prices), only limited and sporadic
quotations are available for the Common Stock in the Washington, D.C. area.
Accordingly, holders of Common Stock may experience some difficulty in selling
the Common Stock. The most recent transaction in the Common Stock known to the
Company took place on August 21, 1996 and involved the sale of 231 shares of
Common Stock, at a price of $5.775 per share. Further, there is no assurance
that an active trading market in the Common Stock will develop. See "Trading
Market for the Common Stock."
POTENTIAL ADVERSE EFFECT OF REPURCHASE OF WARRANTS
The Warrants may be repurchased by the Company at a price of $.26 per
Warrant at any time on and after November 14, 1997 and prior to their
expiration at 5:00 p.m., Eastern Time, on November 16, 1998, on written notice
mailed by the Company to the registered holder thereof at least 30 days prior
to the date fixed for the repurchase. As a result, holders of the Warrants may
be forced either to accept the repurchase price for the Warrants or exercise
them and pay the exercise price at a time when it may be disadvantageous to the
holder to do so. There can be no assurance that, if the Company elects to
repurchase the Warrants, the Common Stock to be acquired upon the exercise
thereof will be trading at a price in excess of the exercise price then in
effect. See "Description of Capital Stock -- The Warrants."
RESTRICTIONS ON DIVIDENDS BY THE COMPANY
The Company has not paid any cash dividends on the Common Stock to date
and presently intends to retain any earnings available for dividends for use in
its business. The Company's ability to pay dividends to its shareholders is
dependent upon the dividends the Company receives from the Bank. Dividends
paid by the Bank are subject to restrictions under various banking laws. See
"Business and Regulation--Supervision and Regulation of the Bank." The shares
of Common Stock are not suitable for purchase by persons who desire dividend
income.
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<PAGE> 8
RESTRICTIONS ON DIVIDENDS BY THE BANK
The cash revenues of the Company are derived principally from dividends
paid to the Company by the Bank. Moreover, the payment of dividends by the
Bank is subject to certain restrictions imposed by national banking laws
applicable to the Bank. Dividends are restricted to the extent that no portion
of the Bank's capital stock or capital surplus may be withdrawn for the payment
of dividends. In addition, no dividends may be paid in an amount greater than
the net retained profits then on hand, less certain deductions for bad debts.
Approval by the Office of the Comptroller of the Currency ("OCC") is required
prior to the payment of dividends if the total of all dividends, including the
proposed dividend, declared by the Bank in any given calendar year exceeds the
Bank's net profits for that year combined with its retained net profits for the
preceding two years.
Under the Federal Deposit Insurance Act, an insured bank is prohibited
from paying dividends on its capital stock while in default on payment of any
assessment due to the Federal Deposit Insurance Corporation ("FDIC"), except in
those cases where the amount of the assessment is in dispute and the insured
bank has deposited satisfactory security. The Bank has timely paid all such
notices of assessment. In addition, banks are prohibited from paying dividends
if such dividends would cause them to be less than "adequately capitalized," as
defined by the Federal banking agencies. See "Business and Regulation --
Supervision and Regulation."
REGULATION
The Company and the Bank are subject to extensive governmental
regulation, including that of the Federal Reserve Board, the FDIC and the OCC.
These agencies' regulations, among other things, impose percentage limitations
on the acquisition of shares of Common Stock without prior agency approval,
require the satisfaction by the Bank of certain minimum capital standards and
limit the activities which may be conducted by the Company and the Bank. In
addition, other agencies regulate certain aspects of the Bank's lending
activities. All of these agencies can be expected to continue to propose new
regulatory and legislative actions which would affect the operations of the
Company and which may alter the competitive nature of the banking business.
See "Business and Regulation -- Supervision and Regulation."
MONETARY POLICY AND ECONOMIC CONDITIONS
The operating income and net income of the Bank, and, consequently, of
the Company will depend to a great extent on "rate differentials," the
difference between the income the Bank receives from its loans, investments and
other assets and the interest it pays on deposits and other liabilities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General." These rates are highly sensitive to many factors which
are beyond the control of the Company or the Bank, including general economic
conditions such as inflation, recession and unemployment, the supply and demand
for investable funds, interest rates and international
-7-
<PAGE> 9
economic conditions, as well as economic conditions affecting the
Washington, D.C. metropolitan area. See"Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Impact of Inflation,
Changing Prices and Monetary Policies."
COMPETITION
The Bank is subject to vigorous competition in all aspects and areas of
its business from banks and other financial institutions, including savings and
loan associations, savings banks, finance companies, credit unions and other
providers of financial services, such as money market mutual funds, brokerage
firms, consumer finance companies and insurance companies. The Bank competes
in its market area with a number of much larger financial institutions with
greater resources, lending limits, larger branch systems and a wider array of
commercial banking services. See "Business and Regulation -- Competition." The
Company believes the Bank has been able to compete effectively with other
financial institutions by emphasizing customer service, establishing long-term
customer relationships, building customer loyalty, and providing products and
services designed to address the specific needs of its customers. No assurance
may be given, however, that the Bank will continue to be able to compete
effectively with other financial institutions in the future.
DEPENDENCE ON KEY EMPLOYEES
To a large extent, the Company is dependent upon the experience and
abilities of certain key employees, including the services of Mr. Joseph S.
Bracewell, its President. Should the services of these employees become
unavailable for any reason, the business of the Company could be adversely
affected. The Company has entered into an Employment Agreement with Mr.
Bracewell effective September 1, 1996 providing for his continued employment
through August 1998. See "Management--Employment Agreements."
SHARES OF COMMON STOCK ARE NOT INSURED DEPOSITS
The securities offered pursuant to this Prospectus are not deposits and
are not insured by the FDIC or any other federal or state agency.
USE OF PROCEEDS
The estimated net proceeds of the Offering to be received by the
Company, assuming that all Warrants are exercised, and after deducting legal,
financial, accounting, printing and distribution expenses in connection with
the Offering, will be approximately $925,000. The net proceeds will be used by
the Company for general corporate purposes, including but not limited to, using
such proceeds as additional capital to support the Bank's growth and expansion
program. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Strategic Plan."
-8-
<PAGE> 10
TRADING MARKET FOR THE COMMON STOCK
There is no active trading market in the Company's Common Stock and no
assurance may be given that one will develop. Although the Company's shares of
Common Stock are quoted in the "pink sheets" of the National Association of
Securities Dealers, Inc. (which set forth the most recent "bid" and "ask"
prices), only limited and sporadic quotations are available for shares of the
Common Stock in the Washington D.C. area. Accordingly, investors who exercise
their Warrants may experience difficulty in selling the shares of Common Stock
received on exercise of Warrants. Each Warrant holder should consider the
Common Stock offered hereby only as a long-term investment, as it may be
difficult to promptly liquidate the investment at a reasonable price in the
event of personal financial emergency or upon the occurrence of some other
event which may result in an immediate requirement for cash. Further, there is
no assurance that transactions in the Common Stock to be acquired upon exercise
of the Warrants, can be effected at or above the exercise price of the
Warrants. See "Risk Factors -- Illiquid Investment."
Based on information available to the Company from a limited number of
sellers and purchasers of Common Stock, transactions in shares of Common Stock
during the past nine months took place at prices ranging from a low of $5.50 to
a high of $5.775. The most recent transaction in Common Stock known to the
Company took place on August 21, 1996 and involved the sale of 231 shares of
Common Stock at a price of $5.775 per share.
-9-
<PAGE> 11
CAPITALIZATION
The following table sets forth, as of June 30, 1996, (i) the
historical capitalization of the Company and (ii) the pro forma capitalization
of the Company as adjusted to give effect to the Offering, assuming that all
Warrants are exercised. See "Use of Proceeds."
<TABLE>
<CAPTION>
June 30, 1996
-------------------------
Pro Forma
Historical As Adjusted
---------- -----------
<S> <C> <C>
Common Stock, $1.00 par value, 2,000,000
shares authorized; 1,123,685 shares
issued and outstanding; 1,309,771
shares issued and outstanding as
adjusted . . . . . . . . . . . . . . . . $1,123,685 $1,309,771
Additional paid-in capital. . . . . . . . . . 4,827,935 5,566,849
Retained earnings . . . . . . . . . . . . . . 939,071 939,071
Unrealized loss on investment
securities available-for-sale, net of
tax effect . . . . . . . . . . . . . . . (70,383) (70,383)
---------- -----------
Total stockholders' equity . . . . . $6,820,308 $7,745,308
========= ==========
</TABLE>
DIVIDEND POLICY OF THE COMPANY
The Company has not paid cash dividends on its shares of Common Stock to
date and has no present intention to do so in the foreseeable future. The
declaration and payment of future cash dividends will depend on, among other
things, the Company's earnings, the general economic and regulatory climate,
the Company's liquidity and capital requirements, and other factors deemed
relevant by the Company's Board of Directors. The Company's ability to pay
dividends depends, to a large extent, upon the dividends received from the
Bank. Dividends paid by the Bank are subject to restrictions under various
federal banking laws. In addition, the Bank must maintain certain capital
levels in order to comply with legal and regulatory requirements, which may
also restrict its ability to pay dividends to the Company. See "Risk
Factors--Restrictions on Dividends by the Bank" and "Business and
Regulation--Supervision and Regulation."
Given the foregoing restrictions, and the Company's present intention to
accumulate retained earnings to support the Company's future growth, it is
unlikely that the Company will pay cash dividends with respect to the Common
Stock for the foreseeable future.
The Company has declared stock dividends from time to time in the past,
but has not adopted a policy with respect to future stock dividends. The most
recent stock dividend declared by the
-10-
<PAGE> 12
Company was a 7% stock dividend payable on March 31, 1996 on shares of Common
Stock held of record as of March 31, 1996. The declaration of future stock
dividends is at the discretion of the Board of Directors.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected financial data should be read in conjunction with
the Consolidated Financial Statements of the Company and the Notes thereto
appearing elsewhere in this Prospectus and the information contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The selected historical consolidated financial data as of and for
the five years ended December 31, 1995 are derived from the Company's
Consolidated Financial Statements, which have been audited by independent
public accountants. The selected historical consolidated financial data as of
and for the six months ended June 30, 1996 and June 30, 1995 have not been
audited but, in the opinion of management, contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the financial
position and results of operations of the Company as of such dates and for such
periods in accordance with generally accepted accounting principles. The
results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results of operations that may be expected for
the year ending December 31, 1996 or for any future periods.
-11-
<PAGE> 13
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------- -----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C>
INCOME STATEMENT DATA:
Interest income . . . . . . . . . . . . . . $3,759 $3,441 $7,079 $5,711 $5,455 $6,016 $6,871
Interest expense . . . . . . . . . . . . . 1,331 1,200 2,562 1,902 1,987 2,486 3,458
Net interest income . . . . . . . . . . . 2,428 2,241 4,517 3,809 3,468 3,530 3,413
Provision for loan losses . . . . . . . . . -- 9 26 19 310 596 592
Net interest income after
provision for loan losses . . . . . . . . 2,428 2,232 4,491 3,790 3,158 2,934 2,821
Noninterest income . . . . . . . . . . . . 354 244 590 555 572 611 440
Noninterest expense . . . . . . . . . . . . 2,281 2,010 4,045 3,381 3,036 3,284 3,124
Income taxes . . . . . . . . . . . . . . . 192 178 357 374 264 89 100
Income before extraordinary item . . . . . 309 288 680 591 429 173 38
Extraordinary item . . . . . . . . . . . . -- -- -- -- -- 34 100
Net income . . . . . . . . . . . . . . . 309 288 680 591 429 207 138
COMMON SHARE DATA:(1)
Net income before extra-
ordinary item . . . . . . . . . . . . . . $.26 $.28 $.64 $.58 $.42 $.15 $0
Extraordinary item . . . . . . . . . . . -- -- -- -- -- .04 .11
Net income . . . . . . . . . . . . . . . .26 .28 .64 .58 .42 .19 .11
Book value(2) . . . . . . . . . . . . . . 5.81 5.24 5.53 4.60 4.77 4.38 4.19
Common and common equivalent shares
outstanding
End of period . . . . . . . . . . . . . 1,174,287 974,247 1,174,763 961,169 922,105 920,958 921,493
Weighted average during period . . . . 1,174,116 967,726 998,512 959,278 922,105 920,958 921,493
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . 96,568 88,949 101,639 90,129 86,286 77,258 84,137
Investments(3) . . . . . . . . . . . . . . 16,251 18,079 21,690 22,654 25,902 14,918 25,982
Total loans(4) . . . . . . . . . . . . . . 71,455 63,119 69,204 60,663 56,644 56,331 52,758
Allowance for loan losses . . . . . . . . . 830 669 740 740 730 744 946
Total deposits . . . . . . . . . . . . . . 83,330 78,561 90,539 82,081 79,982 71,113 78,032
Long term debt . . . . . . . . . . . . . . -- -- -- -- 207 540 540
Preferred equity(5) . . . . . . . . . . . . -- 460 -- 460 468 468 468
Common equity(6) . . . . . . . . . . . . . 6,820 5,102 6,449 4,417 4,403 4,033 3,862
Total stockholders' equity . . . . . . . . 6,820 5,562 6,499 4,877 4,871 4,501 4,330
PERFORMANCE DATA (%):
Return on average total assets(7) . . . . .67 .64 .75 .71 .52 .27 .19
Return on average total equity(7) . . . . 9.28 11.03 12.43 12.21 9.04 4.10 3.13
Net interest margin(7) . . . . . . . . . 5.74 5.36 5.42 4.90 4.55 4.94 4.80
Loans to deposits . . . . . . . . . . . . 85.75 80.34 76.44 73.90 70.82 79.21 67.61
ASSET QUALITY RATIOS (%):
Nonperforming assets to total assets . . 1.16 .23 .49 .70 .37 1.11 .77
Nonperforming loans to total loans . . . 1.31 .08 .45 1.04 .57 1.16 .78
Net loan charge-offs to average loans(7) (.25) .26 .04 .02 .59 1.40 .72
Allowance for loan losses to total loans 1.16 1.06 1.07 1.22 1.29 1.32 1.79
Allowance for loan losses to
nonperforming loans . . . . . . . . . . 89 1,262 240 118 227 114 230
BANK CAPITAL RATIOS (%):
Tier I risk-based capital . . . . . . . . 9.22 9.82 9.29 10.12 10.64 9.58 8.15
Total risk-based capital . . . . . . . . 10.40 11.05 10.41 11.37 11.89 10.83 9.41
Tier I leverage . . . . . . . . . . . . . 7.33 6.00 6.83 5.74 5.24 6.09 4.93
(footnotes on following page)
</TABLE>
-12-
<PAGE> 14
(continued from previous page)
______________
(1) All common share data has been adjusted for three (3) five percent
(5%) Common Stock dividends declared effective on July 31, 1993,
March 31, 1994 and March 31, 1995, and one (1) seven percent (7%)
Common Stock dividend declared effective on March 31, 1996.
(2) Book value per common share is based on common equity, calculated
in the manner described in footnote (7) below, divided by the
number of common and common equivalent shares outstanding.
(3) Investments include federal funds sold and interest-bearing
deposits in other financial institutions.
(4) Net of unearned income.
(5) Preferred equity is calculated based on liquidation value of $7.50
per share of Preferred Stock. All shares of Preferred Stock
outstanding as of October 17, 1995 were redeemed by the Company on
December 10, 1995.
(6) Common equity is total stockholders' equity less preferred equity.
(7) Ratios annualized for the six-month periods ended June 30, 1996
and 1995.
-13-
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations of the Company, which analyzes the major elements of the
Company's consolidated statements of operations and financial condition, should
be read in conjunction with the detailed information and consolidated financial
statements, and the notes related thereto, included elsewhere herein.
References to the operations of the Company include the operations of the Bank,
unless the context otherwise requires.
GENERAL
The Company derives substantially all of its revenues and income from
the operation of the Bank, which provides a full range of commercial and
consumer banking services to small and middle market businesses and individuals
in the Washington, D.C. metropolitan area. As of June 30, 1996, the Company
had total assets of $96,567,552, net loans of $70,624,617, total deposits of
$83,330,209 and total stockholders' equity of $6,820,308. The Company had net
income of $679,598 for the year ended December 31, 1995, and $308,990 for the
six months ended June 30, 1996.
The Company holds deposits for individuals, businesses, and other
organizations, and provides certain services related thereto for the
convenience of its depositors. In most cases, the Company pays interest on
funds which it holds on deposit for customers, and it also charges fees for
certain services which it provides. The interest expense paid on deposits, and
the noninterest income earned from service charges, are primarily related to
the volume of deposits handled by the Company. The Company's primary source of
revenue is the interest income and fees which its earns by lending and
investing the funds which are held on deposit. Because loans generally earn
higher rates of interest than investments, the Company seeks to employ as much
of its deposit funds as possible in the form of loans to individuals,
businesses and other organizations. In the interest of liquidity, however, a
portion of the Company's deposits are maintained in cash, government
securities, deposits with other financial institutions, and overnight loans of
excess reserves (known as "federal funds sold") to large correspondent banks.
The revenue which the Company earns (prior to deducting its overhead expenses)
is essentially a function of the amount of the Company's loans and deposits, as
well as the profit margin ("interest spread") and fee income which can be
generated thereon.
The principal measures of the performance of banking institutions are
return on average equity and return on average assets. Return on average
equity ("ROE") is determined by dividing annual net income by average
stockholders' equity and indicates the effectiveness of an institution in
generating net income from the capital invested by its stockholders. For the
year ended December 31, 1995, and for the six months ended June 30, 1996 (on an
annualized basis), the Company's ROE was 12.4% and 9.3%, respectively. Return
on average assets ("ROA") measures net income in relation to total average
assets and generally indicates an institution's ability to use its assets
profitably. For
-14-
<PAGE> 16
the year ended December 31, 1995, and for the six months ended June 30, 1996
(on an annualized basis), the Company's ROA was 0.75% and 0.67%, respectively.
STRATEGIC PLAN
As the local economy has improved during the last four years, the Company
has devoted increasing effort and resources toward the stimulation of business
growth and the expansion of its customer base. The following are the key action
plans being pursued by the Company in the implementation of its growth and
expansion strategy:
Expanding the branch network. One of the methods by which the Company
plans to grow is to conduct business in multiple locations, including expansion
into the nearby Maryland and Virginia markets. For the foreseeable future, the
Company expects to acquire or establish branch offices in high-density
commercial districts, rather than residential areas, to further its objective of
increasing the volume of commercial accounts and loans. The Bank established
its first branch office in September 1994 by acquiring from the Resolution Trust
Corporation ("RTC") a branch of a failed savings and loan association. The
branch is located at 1275 Pennsylvania Avenue, N.W., in an area of downtown
Washington which is experiencing significant development. As of June 30, 1996,
the branch office had approximately 606 accounts with total deposits of
approximately $8 million. Effective January 1, 1996, the Bank established a
loan production office at 8201 Greensboro Drive in Tysons Corner, Virginia. On
September 20, 1996, the OCC approved the Bank's application to establish a full
service branch in Tysons Corner, which branch is expected to open for business
in early 1997.
Expanding products and services. In 1994, the Company commissioned a
professional market research firm to evaluate the satisfaction level, service
experience, and service needs among the Bank's current clients and certain
clients who had recently closed their accounts. The survey identified the
potential usage by existing clients of banking-related services not currently
offered by the Bank. In response to needs identified in the market survey, the
Bank established its own MasterCard/Visa credit card program, introduced two
new types of accounts (Basic Checking, designed for customers with low and
moderate incomes, and Century Pro, designed for higher-income professionals),
introduced two new electronic banking services (TeleBank for personal accounts
and ExecuBank for business accounts), established overdraft lines of credit for
small businesses (Century Reserve), developed a comprehensive no-charge banking
package for related accounts (Century Link), installed a remote ATM in the
International Square food court, developed a high-interest money market account
to compete with brokerage funds (Premier Investment Account), and introduced
check-image statements for all accounts in June of 1996. The Company's current
plan contemplates a continued emphasis on the development of commercial loan
and deposit business, including expansion of its commercial product line (i.e.,
cash management and electronic banking services) as well as increased business
development in the Maryland and Virginia markets.
-15-
<PAGE> 17
Exploring acquisition and merger opportunities. The Company has not
sought out opportunities to be acquired by larger financial institutions,
primarily because of its view that the long-term value of an independent
banking franchise in the nation's capital will increase, rather than diminish,
as consolidation trends continue. The Company does believe, however, that its
franchise value and operating profitability would be enhanced by a significant
increase in its asset size. For this reason, the Company in the past has
explored, and expects to continue to explore in the future, merger and
acquisition opportunities which would accelerate the Company's progress toward
the achievement of its strategic plan. There can be no assurance that any such
merger and acquisition opportunities will be realized in the future.
There can be no assurance that the Company will be successful in
implementing any of the future plans described above or that, even if
implemented, such actions will produce the desired financial results. The
foregoing matters should be taken into account when considering the more
specific discussion of the Company's financial performance set forth herein.
RESULTS OF OPERATIONS
NET INCOME
Net income was $308,990 ($0.26 per common share) for the first six
months of 1996, compared with net income of $287,610 ($0.28 per common share)
for the first six months of 1995, an increase of $21,380 or 7.4%. The increase
in net income for the first six months of 1996 compared with the first six
months of 1995 resulted principally from a $187,018 increase in net interest
income, and a $109,866 increase in noninterest income partially offset by a
$270,661 increase in noninterest expenses primarily attributable to costs
associated with the Bank's new computer systems, as well as processing costs in
support of new fee-generating products and services.
Net income was $679,598 for 1995 ($0.69 per common share), compared with
$590,904 for 1994 ($0.62 per common share), and $428,978 for 1993 ($0.45 per
common share). These improvements resulted primarily from reductions in
expenses relating to problem assets (provisions for losses on loans and other
real estate owned, legal expenses related to collection matters, and similar
expenses). As the local economy and the Company's asset quality have improved,
the Company has utilized some of the expense reductions in the problem asset
area to support new initiatives designed to stimulate quality asset growth,
such as the branch office and business development efforts described above.
In the above discussion, all "per share" amounts have been adjusted to
give effect to the Company's seven percent (7%) stock dividend which was
distributed to stockholders of record as of March 31, 1996, and the three (3)
five percent (5%) stock dividends which were distributed to stockholders of
record as of March 31, 1995, March 31, 1994 and July 31, 1993.
-16-
<PAGE> 18
NET INTEREST INCOME
Net interest income, which constitutes one of the principal sources of
income for the Company, represents the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities.
The net yield on total interest-earning assets, also referred to as interest
rate margin or net interest margin, represents net interest income divided by
average interest-earning assets. The Company's principal interest-earning
assets are loans, investment securities and federal funds sold.
Net interest income was $2,427,865 for the first six months of 1996, an
increase of $187,018 or 8.3% compared with the first six months of 1995. The
Company's average balance of net loans receivable and investment securities
increased approximately $9,347,000 and decreased approximately $8,657,000,
respectively, for the first six months of 1996 compared with the first six
months of 1995, resulting in a net increase of approximately $903,000 in the
Company's average total interest-earning assets. The Company's loan growth
resulted primarily from new commercial loans generated through the Bank's loan
production office in Tysons Corner, Virginia. The net interest margin of 5.74%
for the first six months of 1996 increased 38 basis points from 5.36% for the
first six months of 1995. The improvement in net interest margin resulted from
the Company's ability to adjust its yield on interest-earning assets more
rapidly, in response to rising market interest rates, than its cost of
interest-bearing liabilities. Additionally, the Company's increased emphasis
on commercial loans has increased the overall yield of the loan portfolio.
Net interest income was $4,517,423 for 1995, an increase of $707,839 or
18.6% compared with net interest income of $3,809,584 for 1994, which
represented an increase of $341,640 or 9.9% compared with net interest income
of $3,467,944 for 1993. The Company's average total interest-earning assets
increased from approximately $77,825,000 for 1994 to $83,348,000 for 1995,
representing a 7.1% increase resulting principally from an increase in loans.
The net interest margin of 5.42% for 1995 increased 52 basis points from 4.90%
for 1994.
The Company's net interest income is affected by changes in the amount
and mix of interest-earning assets and interest-bearing liabilities, referred
to as a "volume change." It is also affected by changes in yields earned on
interest-earning assets and rates paid on interest-bearing deposits and other
borrowed funds, referred to as a "rate change." The following tables set forth
for each category of interest-earning assets and interest-bearing liabilities,
the average amounts outstanding, the interest earned or paid on such amounts,
and the average rate earned or paid for the six months ended June 30, 1996 and
1995, and for the years ended December 31, 1995, 1994 and 1993. The tables
also set forth the average rate earned on total interest-earning assets, the
average rate paid on total interest-bearing liabilities, and the net interest
margin on average total interest-earning assets for the same periods.
-17-
<PAGE> 19
AVERAGE BALANCES AND INTEREST RATES:
INTERIM PERIODS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------------
1996 1995
---------------------------- --------------------------
Interest Interest
Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate
------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable, net $69,914 3,385 9.68% 60,567 $2,844 9.39%
Investment securities, taxable(1) 12,392 311 5.02% 20,058 514 5.12%
Investment securities, non-taxable(1)(2) 250 6 4.80% 1,241 36 5.82%
Federal funds sold 327 13 7.95% 1,236 36 5.75%
Interest-earning deposits with banks 1,661 44 5.30% 539 11 4.21%
------- ------- ------- -------
Total interest-earning assets(2) 84,544 3,759 8.89% 83,641 3,441 8.23%
NONINTEREST-EARNING ASSETS:
Cash and due from banks 4,159 3,698
Other assets 3,978 2,530
------- -------
Total noninterest-earning assets 8,137 6,228
------- -------
Total assets $92,681 $89,869
======= =======
INTEREST-BEARING LIABILITIES:
Deposits:
Interest-bearing demand (NOW) deposits $13,086 128 1.96% 12,820 131 2.05%
Savings deposits 2,286 30 2.62% 2,776 37 2.65%
Money market deposits 22,681 365 3.22% 25,885 387 2.99%
Time deposits 24,544 675 5.50% 22,699 589 5.19%
Short-term borrowings 4,640 133 5.73% 2,308 56 4.78%
------- ------ ------- -------
Total interest-bearing liabilities 67,237 1,331 3.96% 66,488 1,200 3.61%
NONINTEREST-BEARING LIABILITIES:
Noninterest-bearing deposits 17,486 16,535
Other liabilities 1,296 1,266
------- -------
Total noninterest-bearing liabilities 18,782 17,801
------ -------
Stockholders' equity 6,662 5,580
------- -------
Total liabilities and stockholders' equity $92,681 $89,869
======= =======
Net interest income $2,428 2,241
====== =====
Net interest margin(2) 5.74% 5.36%
- ------------------------
(1) Average balance and average rate for investment securities are computed based on book value of securities
held-to-maturity and cost basis of securities available-for-sale.
(2) Average rates on a fully taxable equivalent basis are as follows:
Investment securities, non-taxable . . . . . . 7.74% 9.93%
Total interest-earning assets . . . . . . . . . 8.90% 8.29%
Net interest margin . . . . . . . . . . . . . . 5.75% 5.42%
</TABLE>
-18-
<PAGE> 20
AVERAGE BALANCES AND INTEREST RATES:
ANNUAL PERIODS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1995 1994 1993
------------------------------------------------------------------------------
Interest Interest Interest
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS: . . . . . . . . .
Loans receivable, net . . . . . . . . . . $62,639 6,011 9.60% $57,855 4,802 8.30% 54,069 4,572 8.46%
Investment securities, taxable (1) . . . 18,297 918 5.02% 18,251 829 4.54% 13,737 607 4.42%
Investment securities, non-taxable (1)(2) 991 57 5.75% 127 6 4.45% 0 0 N/A
Federal funds sold . . . . . . . . . . . 428 37 8.64% 1,356 65 4.79% 6,101 182 2.99%
Interest-earning deposits with banks . . 993 56 5.64% 236 10 4.09% 2,319 94 4.02%
------- ------ ------- ------ ------- ------
Total interest-earning assets (2) . . . 83,348 7,079 8.49% 77,825 5,712 7.34% 76,226 5,455 7.16%
NONINTEREST-EARNING ASSETS:
Cash and due from banks . . . . . . . . . 3,854 3,851 4,389
Other assets . . . . . . . . . . . . . . 2,907 1,378 1,239
------- ------- -------
Total noninterest-earning assets . . . . . 6,761 5,229 5,628
------- ------- -------
Total assets . . . . . . . . . . . . . $90,109 $83,054 $81,854
======= ======= =======
INTEREST-BEARING LIABILITIES:
Deposits:
Interest-bearing demand (NOW) deposits $12,230 258 2.11% $11,926 248 2.08% 11,995 262 2.18%
Savings deposits . . . . . . . . . . . 2,526 67 2.65% 2,564 66 2.59% 2,137 60 2.80%
Money market deposits . . . . . . . . . 25,153 778 3.09% 24,784 618 2.49% 27,024 700 2.59%
Time deposits . . . . . . . . . . . . . 23,128 1,269 5.49% 20,738 922 4.44% 20,039 920 4.59%
Short-term borrowings . . . . . . . . . . 3,526 190 5.39% 1,102 43 3.93% 437 11 2.48%
Note payable . . . . . . . . . . . . . . 0 0 N/A 51 5 8.20% 374 34 9.00%
------- ------ -------- ------ ------- ------
Total interest-bearing liabilities . . . . 66,563 2,562 3.85% 61,165 1,902 3.11% 62,006 1,987 3.20%
NONINTEREST-BEARING LIABILITIES:
Noninterest-bearing deposits . . . . . . 16,841 16,159 14,756
Other liabilities . . . . . . . . . . . . 1,236 646 346
------- -------- -------
Total noninterest-bearing liabilities . . . 18,077 16,805 15,102
------- ------ -------
Stockholders' equity . . . . . . . . . . . 5,469 5,084 4,746
------- ------- -------
Total liabilities and stockholders' equity $90,109 $83,054 $81,854
======= ======= =======
Net interest income . . . . . . . . . . . . $4,517 $3,810 $3,468
====== ====== ======
Net interest margin (2) . . . . . . . . . . 5.42% 4.90% 4.55%
- ---------------------------
(1) Average balance and average rate for investment securities are computed
based on book value of securities held-to-maturity and cost basis of
securities available-for-sale.
(2) Average rates on a fully taxable equivalent basis are as follows:
Investment securities, non-taxable 9.27% 7.29% N/A
Total interest-earning assets 8.53% 7.34% 7.16%
Net interest margin 5.46% 4.90% 4.55%
</TABLE>
-19-
<PAGE> 21
Changes in interest income and interest expense can result from changes
in both volume and rate. The Company has an asset and liability management
policy designed to provide a proper balance between rate sensitive assets and
rate sensitive liabilities, to attempt to maximize interest margins and to
provide adequate liquidity for anticipated needs.
The following table sets forth for the periods indicated a summary of
the changes in interest earned and interest paid resulting from changes in
volume and rate. The allocation of the rate/volume variance has been made pro
rata based on the percentage that volume and rate variances produce in each
category.
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended Year Ended Year Ended
June 30, 1996 December 31, 1995 December 31, 1994
Compared With Compared With Compared With
June 30, 1995 December 31, 1994 December 31, 1993
Increase (Decrease) due to Increase (Decrease) due to Increase (Decrease) due to
----------------------------- ------------------------------ --------------------------------
Volume Rate Changes Volume Rate Changes Volume Rate Changes
------ ------- ----------- --------- ------- ----------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans receivable, net . . $446 95 541 428 781 1,209 (317) (87) (230)
Investment securities,
taxable . . . . . . . . (194) (9) (203) 2 87 89 202 20 222
Investment securities,
non-taxable . . . . . . (26) (4) (30) 45 6 51 3 3 6
Federal funds sold . . . (31) 8 (23) (62) 34 (28) (185) 67 (117)
Interest-earning
deposits with banks . . . 26 7 33 37 9 47 (84) 1 (84)
---- -- --- --- - ----- ---- - ---
Total interest income. . $221 97 318 450 917 1,368 253 4 257
---- -- --- --- --- ----- ---- -- ---
INTEREST PAID ON:
Interest-bearing (NOW)
deposits . . . . . . . . 3 (6) (3) 6 4 10 (2) (12) (14)
Savings deposits . . . . (6) (1) (7) (1) 2 1 12 (6) 6
Money market deposits (50) 28 22 10 150 160 (57) (25) (82)
Time deposits . . . . . 49 37 86 119 228 346 32 (30) 2
Short-term borrowings 62 15 77 113 34 147 21 11 32
Note payable . . . . . . -- -- -- (5) -- (4) (28) (1) (29)
---- -- --- --- --- ----- ---- -- ---
Total interest expense . 58 73 131 242 418 660 (22) (63) (85)
---- -- --- --- --- ----- ---- -- ---
Net interest income . . . . $163 24 187 208 499 708 275 67 342
==== == === === === ===== ==== == ===
</TABLE>
-20-
<PAGE> 22
PROVISION FOR LOAN LOSSES
Provisions for loan losses are charged to income to bring the total
allowance for loan losses to a level deemed appropriate by management of the
Company based on such factors as historical experience, the volume and type of
lending conducted by the Company, the amount of nonperforming assets,
regulatory policies, generally accepted accounting principles, general economic
conditions, and other factors related to the collectibility of loans in the
Company's portfolio.
The provision for loan losses for the first six months of 1996 was zero,
compared with $8,899 for the first six months of 1995. The provision for loan
losses was $26,347 for 1995 compared with $19,431 for 1994, representing an
increase of $6,916 or 36% from 1994, and a decrease of $290,839 compared with
the provision for loan losses of $310,270 for 1993, which represented a decrease
of $285,671 or 48% compared with the provision for loan losses of $595,941 for
1992. The prior reductions in the loan loss provision since 1992 reflect
improvement in national and local economic conditions as well as the quality of
the Company's asset portfolio. For the periods from 1992 to 1994, the decline in
the provision for loan losses relative to 1992 and prior periods was the primary
cause of the reported improvements in the Company's financial performance.
From January 1, 1994 through June 30, 1996, the Company's provisions
for loan losses have been modest compared to the provisions charged to income in
the preceding three years. The reasons for this are two-fold. First, the
Company has been able to recover sufficient monies on previously charged-off
loans to offset loan losses experienced since 1993, with the result that the
allowance has been maintained or increased with minimal provisions charged to
income. Second, improvements in national and local economic conditions, as well
as the Company's asset portfolio, have resulted in such allowance being deemed
adequate even though the overall size of the portfolio has increased
significantly.
In view of the Company's plans to continue its loan growth with increased
emphasis on commercial loans (which are generally considered to be more risky
than loans secured by real estate), it is unlikely that the Company will be able
to continue to maintain an adequate allowance for loan losses without increasing
the allowance through provisions charged to income. The Company does not
presently anticipate that such provisions will have a material adverse impact on
the Company's results of operations in future periods.
NONINTEREST INCOME
The Company's primary source of noninterest income is service charges on
deposit accounts. The remaining noninterest income is derived from
Mastercard/Visa, wire transfer, collection and cashier's check fees, mortgage
loan referral fees, and safe deposit box rentals. Also included in this
category are gains and losses realized on the sale of investment securities and
certain other items of income, whether recurring or not, which are not
elsewhere classified.
Noninterest income for the first six months of 1996 was $353,819, an
increase of $109,866 or 45% compared with noninterest income of $243,953 for
the first six months of 1995. This increase results primarily from fees
generated in connection with the Bank's Mastercard/Visa credit card program
which was initially established in March 1995.
Noninterest income was $590,339 for 1995, compared with $555,048 for
1994, an increase of $35,291 or 6.4% resulting primarily from fees associated
with the credit card program. Noninterest income of $555,048 for 1994
represented a decrease of $16,536 or 2.9% compared with noninterest income of
$571,584 for 1993, which represented a decrease of $39,755 or 6.5% compared
with noninterest income of $611,339 for 1992. Substantially all of the
decrease from 1993 to 1994 resulted from the $11,748 loss realized in 1994 in
connection with the sale of certain investment securities, compared with no
gains or losses on such sales in 1993. Noninterest income
-21-
<PAGE> 23
decreased from 1992 to 1993 principally as a result of $122,180 in gains on
sales of investment securities which were realized in 1992 but not repeated in
1993.
The following table sets forth the various categories of noninterest
income for the six months ended June 30, 1996 and 1995, and for the years ended
1995, 1994 and 1993.
NONINTEREST INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
----------------------- ------------------------------------------
1996 % Change 1995 1995 % Change 1994 % Change 1993
---- -------- ---- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts . . . . $217 25.4% 173 379 11.5% 340 -1.2% 344
Commission and fee income . . . . . . . . 126 106.6% 61 198 164.0% 75 -27.9% 104
Safe deposit box rentals . . . . . . . . . 11 120.0% 5 6 -60.0% 15 15.4% 13
Gain (loss) on sale of securities . . . . -0- -100.0% (3) (3) -75.0% (12) N/A 0
Other income . . . . . . . . . . . . . . -0- -100.0% 8 10 -92.7% 137 23.4% 111
---- ------- --- --- ------ --- ------ ---
Total noninterest income . . . . . . . . . $354 45.1% 244 590 6.3% 555 -3.0% 572
==== ======= === === ====== === ====== ===
</TABLE>
NONINTEREST EXPENSE
The Company's noninterest expense has been consistently higher in
relation to its asset size than the average for small community banks. As
described above under "-- Strategic Plan," the Company's strategy is to
increase its asset size significantly so that its level of noninterest expense
in relation to its assets is more in line with those of comparable
institutions.
To support an increased rate of asset growth, branch expansion and
increased product and service offerings, during 1995 and the first six months of
1996 the Company invested approximately $1 million to upgrade its telephone and
computer systems. In addition to these capital expenditures, the Company has
incurred consulting expenses associated with the installation, specialized
programming and security aspects of the computer system. As a result, the
Company's noninterest expenses during such periods have increased in
anticipation of a subsequent increase in total assets. In addition, to the
extent that asset growth results from branch expansion, noninterest expenses
can be expected to increase further as a result of rental, salary and other
operating expenses associated with such branches. No assurance may be given,
however, that the anticipated asset growth or branch expansions will occur.
Noninterest expense was $2,280,990 for the first six months of 1996,
an increase of $270,661 or 13.5% compared with noninterest expense of
$2,010,329 for the first six months of 1995. This increase resulted
principally from depreciation expenses associated with the Bank's new computer
and telephone systems and remote ATM, as well as data processing costs in
support of the credit card program.
Noninterest expense was $4,044,653 for 1995, compared with $3,380,751
for 1994, representing an increase of $663,902 or 19.6%, and which represented
an increase of $344,371 or 11.3% compared with noninterest expense of
$3,036,380 for 1993. The increases from 1993 to 1994 and from 1994 to 1995
were primarily attributable to increased personnel and occupancy expenses
associated with the Pennsylvania Avenue branch office, which was acquired on
September 16, 1994, together with increased expenses incurred in connection
with marketing programs.
-22-
<PAGE> 24
The following table sets forth the various categories of noninterest
expense for the six months ended June 30, 1996 and 1995, and for the years
ended 1995, 1994 and 1993.
NONINTEREST EXPENSE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
----------------------------------------------------------------------
1996 %Change 1995 1995 %Change 1994 %Change 1993
---- ------- ---- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits . . . . . . $951 4.2% 913 1,927 20.8% 1,595 12.6% 1,417
Occupancy and equipment expense . . . . . . 242 -4.7% 254 517 18.0% 438 21.3% 361
Depreciation and amortization . . . . . . . 189 170.0% 70 151 11.0% 136 130.5% 59
Professional fees . . . . . . . . . . . . . 239 58.3% 151 327 0.9% 324 0.9% 321
Data processing . . . . . . . . . . . . . . 217 112.7% 102 332 83.4% 181 -16.2% 216
Federal deposit insurance premiums . . . . 5 -95.0% 100 88 -47.9% 169 0.0% 169
Communications . . . . . . . . . . . . . . 105 36.4% 77 161 41.2% 114 6.5% 107
Marketing and public relations . . . . . . 97 56.5% 62 169 42.0% 119 2.6% 116
Branch expenses paid to RTC . . . . . . . . -0- -100.0% 21 21 -27.6% 29 N/A 0
Office and operations expenses . . . . . . 110 -24.1% 145 208 20.9% 172 18.6% 145
Insurance and lobby security . . . . . . . 49 16.7% 42 86 48.3% 58 11.5% 52
Provision for losses on OREO . . . . . . . 13 -72.3% 47 48 N/A 0 -100.0% 3
Other expenses . . . . . . . . . . . . . . 64 146.2% 26 10 -78.3% 46 -34.3% 70
------ ------ ----- ----- ------ ----- ------- -----
Total noninterest expense . . . . . . . . . $2,281 13.5% 2,010 4,045 19.6% 3,381 11.4% 3,036
====== ====== ===== ===== ====== ===== ======= =====
</TABLE>
INTEREST RATE SENSITIVITY MANAGEMENT
Net interest income, which constitutes one of the principal sources of
income for the Company, represents the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities.
The difference between the Company's interest-rate sensitive assets and
interest-rate sensitive liabilities for a specified time-frame is referred to
as "gap." Interest rate sensitivity reflects the potential effect on net
interest income of a movement in interest rates. A financial institution is
considered to be asset sensitive, or having a positive gap, when the amount of
its interest-earning assets maturing or repricing within a given period exceeds
the amount of its interest-bearing liabilities also maturing or repricing
within that time period. Conversely, a financial institution is considered to
be liability sensitive, or having a negative gap, when the amount of its
interest-bearing liabilities maturing or repricing within a given period
exceeds the amount of its interest-earning assets also maturing or repricing
within that time period. During a period of rising interest rates, a positive
gap would tend to increase net interest income, while a negative gap would tend
to have an adverse effect on net interest income. During a period of falling
interest rates, a positive gap would tend to have an adverse effect on net
interest income, while a negative gap would tend to increase net interest
income.
-23-
<PAGE> 25
Management of the Company seeks to maintain a balanced interest rate
risk position to protect its net interest margin from market fluctuations.
Toward this end, the Company maintains an Asset/Liability Committee (the "ALCO
Committee") which reviews, on a regular basis, the maturity and repricing of
the assets and liabilities of the Company. The ALCO Committee has adopted the
objective of achieving and maintaining a one-year cumulative ratio of interest-
earning assets to interest-bearing liabilities of 90% to 110%. On a
consolidated basis, the Company's one year cumulative ratio of interest-earning
assets to interest-bearing liabilities was 108% at the end of June 30, 1996.
The following table sets forth the interest-rate sensitive assets and
liabilities of the Company at June 30, 1996, which are expected to mature or
are subject to repricing in each of the time periods indicated.
INTEREST RATE SENSITIVE ASSETS AND LIABILITIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TERM TO REPRICING (at June 30, 1996)
-----------------------------------------------------------
90 Days 91-180 181 Days Over
or Less Days to 1 Year 1 Year Total
------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits $5,752 - - - 5,752
Investment securities, taxable 5,653 2,991 - 1,605 10,249
Investment securities, non-taxable - 85 - 165 250
Loans 30,278 7,338 12,449 21,479 71,544
------- ------ ------ ------ ------
Total interest-earning assets 41,683 10,414 12,449 23,249 87,795
Interest-bearing liabilities:
Interest-bearing demand and
NOW accounts(1) - 5,240 5,240 - 10,480
Savings deposits(1) - - 2,226 - 2,226
Money market deposits 23,772 - - - 23,772
Time deposits 8,142 3,697 8,523 5,264 25,633
Borrowed funds 2,581 - - 2,800 5,381
------- ------ ------ ------ ------
Total interest-bearing liabilities 34,502 8,937 15,989 8,064 67,492
------- ------ ------ ------ ------
Interest sensitivity gap per period $ 7,181 1,477 (3,540) 15,185 20,303
======= ====== ====== ====== ======
Cumulative gap $ 7,181 8,658 5,118 20,303 20,303
======= ====== ====== ====== ======
Cumulative gap as percent of total assets 7.44% 8.97% (5.30)% 21.02% 21.02%
======= ====== ====== ====== ======
Cumulative interest-earning
assets as percent of cumulative
interest-bearing liabilities 121% 120% 110% 130% 130%
=== === === === ===
</TABLE>
- -------------
(1) The repricing analysis set forth in the table above with respect to
interest-bearing demand and NOW accounts and savings deposits assumes,
based upon management's historical experience, that such
interest-bearing liabilities are generally insensitive to pricing
changes.
-24-
<PAGE> 26
ANALYSIS OF FINANCIAL CONDITION
LOANS AND ASSET QUALITY
The loan portfolio is the largest category of the Company's earning
assets. The Company presently is, and in the future expects to remain, a
middle market banking organization serving professionals and businesses with
interests in and around Washington, D.C. Management believes that the increase
in loans from $56,644,000 at the end of 1993 to $71,455,000 as of June 30,
1996, is primarily attributable to increased loan demand resulting from the
improving economy in the Washington, D.C. metropolitan area and the Company's
business development and marketing initiatives. The volume of the Company's
loans remained virtually unchanged during the three year period ended December
31, 1993, principally as a result of a weak local economy and an internal focus
on maintaining and improving the quality of the Company's loan portfolio.
Most of the Company's real estate lending is in the Washington, D.C.
metropolitan area, and a substantial portion of its loan portfolio is
collateralized by first mortgages and home equity lines of credit on
residences. This concentration is declining, however, as the Company continues
its emphasis on the development of new commercial loan business. As of June
30, 1996 and December 31, 1995, approximately $44,619,000 (62%) and $46,103,000
(67%) of the Company's total loan portfolio, respectively, consisted of loans
secured by real estate, of which one-to-four-family residential mortgage loans
and home equity lines of credit represented $26,849,000 (38%) and $30,561,000
(44%), respectively, of the Company's total loan portfolio.
The level of nonperforming loans is also relevant to the credit quality
of a loan portfolio. As of June 30, 1996, December 31, 1995 and December 31,
1994, nonperforming loans amounted to approximately $934,000, $308,000 and
$628,000 or 1.31%, 0.45% and 1.04% of total loans, respectively. The increase
in nonperforming loans from December 31, 1995 to June 30, 1996, resulted
primarily from the past due status of certain fully-secured real estate loans
originated prior to 1993. See "-- Nonperforming Assets." No loss is
anticipated with respect to these credits in excess of any specific reserves
established within the allowance for loan losses.
Loan concentrations are defined as aggregate credits extended to a
number of borrowers engaged in similar activities or resident in the same
geographic region, which would cause them to be similarly affected by economic
or other conditions. The Company, on a routine basis, evaluates these
concentrations for purposes of policing its concentrations and making necessary
adjustments in its lending practices to reflect current economic conditions,
loan to deposit ratios and industry trends. As a result of the Company's
existing branch locations, the Company has significant concentrations of
customers and assets in the metropolitan Washington, D.C. area.
The industry concentrations in excess of 10% of total loans, where the
borrowers as a group might be affected similarly by economic changes, consists
of loans to members of the legal
-25-
<PAGE> 27
profession $18,982,000, business services $11,156,000, and health care services
$9,791,000. The Company offers lines of credit, credit cards, home equity
lines, and mortgage loans to these groups. The amount of such loans which are
past due or considered by management to be potential problem loans is not
material.
Loans to directors, executive officers and principal stockholders of the
Company and to directors and officers of the Bank are subject to limitations
contained in the Federal Reserve Act, the principal effect of which is to
require that extensions of credit by the Bank to executive officers, directors,
and ten percent stockholders satisfy certain standards. The Bank routinely
makes loans in the ordinary course of business to certain directors and
executive officers of the Company and the Bank, their associates, and members
of their immediate families. In accordance with Federal Reserve Act
guidelines, these loans are made on substantially the same terms, including
interest rates and collateral, as those prevailing for comparable transactions
with others and do not involve more than normal risk of collectibility or
present other unfavorable features. As of June 30, 1996, loans and commitments
outstanding to directors and executive officers of the Company and the Bank,
their associates and members of their immediate families totaled $2,780,000
(net of participations sold to other banks on a non-recourse basis), which
represented approximately 3.1% of total loans and commitments outstanding as of
that date. As of June 30, 1996, none of these loans outstanding from the Bank
to related parties was on non-accrual, past due, restructured or considered by
management to be a potential problem loan.
-26-
<PAGE> 28
The following table sets forth the composition of the Company's loan
portfolio by type of loan on the dates indicated.
LOAN PORTFOLIO ANALYSIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
----------------- ------------------------------------------------------
1996 1995 1994 1993
----------------- ----------------- ----------------- -----------------
Aggregate Principal Amount
--------------------------
<S> <C> <C> <C> <C>
Type of loan:
1-4 family residential mortgage $ 20,889 24,921 26,024 25,282
Home equity loans 5,960 5,640 6,035 6,973
Multifamily residential 2,146 2,087 2,164 2,230
Construction 1,752 1,545 1,337 2,536
Commercial real estate 13,872 11,910 8,025 5,539
Commercial loans 15,710 13,213 9,229 8,199
Installment and credit card loans 10,552 9,023 6,475 5,536
Other loans 664 963 1,486 441
-------------- -------------- -------------- --------------
Gross loans 71,545 69,302 60,775 56,736
Less: Unearned income (90) (98) (112) (92)
-------------- -------------- -------------- --------------
Total loans, net of unearned $ 71,455 69,204 60,663 56,644
============== ============== ============== ==============
Percentage of Loan Portfolio
----------------------------
Type of loan:
1-4 family residential mortgage 29.20% 35.96% 42.82% 44.56%
Home equity loans 8.33% 8.14% 9.93% 12.29%
Multifamily residential 3.00% 3.01% 3.56% 3.93%
Construction 2.45% 2.23% 2.20% 4.47%
Commercial real estate 19.39% 17.18% 13.20% 9.76%
Commercial loans 21.95% 19.07% 15.19% 14.45%
Installment and credit card loans 14.75% 13.02% 10.65% 9.76%
Other loans 0.93% 1.39% 2.45% 0.78%
------------- ------------- ------------- -------------
Gross loans 100.00% 100.00% 100.0% 100.0%
============= ============= ============= =============
</TABLE>
-27-
<PAGE> 29
The following table sets forth the maturities of loans (based upon
contractual dates) outstanding as of June 30, 1996, and an analysis of
sensitivities of loans due to changes in interest rates. The Company's
portfolio of adjustable rate home mortgages consists of loans to regular
customers in the local market area. Such loans generally have balloon
maturities within ten years or less, with 2% annual and 6% lifetime "caps" on
interest rate changes. Borrowers have the right to prepay such loans without
penalty.
MATURITIES AND RATE SENSITIVITY OF LOANS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OVER 1 YEAR
THROUGH 5 YEARS OVER 5 YEARS
------------------- --------------------
ONE YEAR FIXED FLOATING FIXED FLOATING
OR LESS RATE RATE RATE RATE TOTAL
--------- ------ -------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Commercial . . . . . . . . . . . $12,853 2,692 - 165 - 15,710
Commercial real estate . . . . . 6,063 472 5,167 2,170 - 13,872
Residential mortgage/
home equity . . . . . . . . . . 25,331 989 1,846 507 322 28,995
Construction . . . . . . . . . . 1,493 259 - - - 1,752
Installment/credit card . . . . . 8,597 1,107 825 23 - 10,552
Other . . . . . . . . . . . . . . 664 - - - - 664
------- ----- ----- ----- --- ------
Total . . . . . . . . . . . $55,001 5,519 7,838 2,865 322 71,545
======= ===== ===== ===== === ======
</TABLE>
NONPERFORMING ASSETS
Generally, interest on loans is accrued and credited to income based
upon the principal balance outstanding. It is the Company's policy to
discontinue the accrual of interest income and classify a loan as non-accrual
when principal or interest is past due 90 days or more and the loan is not well
secured and in the process of collection, or when, in the opinion of
management, principal or interest is not likely to be paid in accordance with
the terms of the obligation. The Company will generally charge-off loans after
180 days of delinquency unless adequately collateralized and in the process of
collection. A loan is considered in the process of collection if, based on a
probable specific event, management believes that the loan will be repaid or
brought current within a reasonable period of time. Loans will not be returned
to accrual status until future payments of principal and interest appear
certain. Interest accrued and unpaid at the time a loan is placed on
non-accrual status is charged against interest income. Subsequent payments
received are applied to the outstanding principal balance.
-28-
<PAGE> 30
Real estate acquired by the Company as a result of foreclosure or
in-substance foreclosure is classified as other real estate owned ("OREO").
Such loans are reclassified to OREO and recorded at the lower of cost or fair
market value less estimated selling costs, and the estimated loss, if any, is
charged to the allowance for loan losses at that time. Further allowances for
losses are recorded as charges to other expenses at the time management
believes additional deterioration in value has occurred.
The following table sets forth certain information with respect to the
Company's non-accrual loans, OREO, and accruing loans which are contractually
past due 90 days or more as to principal or interest, for the periods
indicated.
NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, Year Ended December 31,
----------------- ------------------------------------------------------
1996 1995 1994 1993
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Non-accrual loans $934 8 628 322
Accruing past due 90+ days 0 300 0 0
------ --- --- -
Total nonperforming loans 934 308 628 322
Other real estate owned 185 193 0 0
----- --- --- -
Total nonperforming assets $1,119 501 628 322
====== === === ===
Nonperforming to total assets 1.16% 0.49% 0.70% 0.37%
====== ==== ==== ====
</TABLE>
The amount of interest on non-accrual loans which would have been
recorded as income under the original terms of such loans was approximately
$60,400 for the first six months of 1996, and approximately $1,000, $32,000 and
$2,000 for the years ended 1995, 1994 and 1993, respectively. The amount of
interest income recognized on non-accrual loans that was included in net income
for the first six months of 1996 and for the year ended 1995 was approximately
$24,300 and $3,500, respectively.
Non-accrual loans as of June 30, 1996 consisted primarily of five secured
real estate loans totaling $791,000, all of which were originated prior to 1993.
As of October 15, 1996, one of these loans in the amount of $134,000 had been
paid in full, two of the loans totaling $286,000 had been brought current or
renewed on a secured basis, and two loans totaling $371,000 remained past due
and on non-accrual status. One of the two non-accrual loans having a balance of
$300,000 is secured by a first lien on a single family home that is under
contract for sale, with settlement expected prior to December 31, 1996.
Other real estate owned as of June 30, 1996 consisted of one property
located in the District of Columbia, which the Company acquired through
foreclosure of a loan that was originated prior to 1993. As of October 15, 1996,
the property had been sold for cash and the Company had recovered the full
balance carried on its books at June 30, 1996.
In view of the fact that the recent increase in nonperforming assets is
primarily attributable to loans originated prior to 1993, management of the
Company does not view the increase in the ratio of nonperforming assets to total
assets as an indication of declining asset quality for loans originated during
the growth in the loan portfolio experienced during the past two years, or for
the loan portfolio as a whole.
ALLOWANCE FOR LOAN LOSSES
In originating loans, the Company recognizes that credit losses will be
experienced and the risk of loss will vary with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the quality of the collateral for such loan. The Company maintains an
allowance for loan losses based upon, among other things, such factors as
historical experience, the volume and type of lending conducted by the Company,
the amount of nonperforming assets, regulatory policies, generally accepted
accounting principles, general economic conditions, and other factors related
to the collectibility of loans in the Company's portfolios. In addition to
unallocated allowances,
-29-
<PAGE> 31
specific allowances are provided for individual loans when ultimate collection
is considered questionable by management after reviewing the current status of
loans which are contractually past due and considering the net realizable value
of the collateral for the loan.
Management actively monitors the Company's asset quality in a continuing
effort to charge-off loans against the allowance for loan losses when
appropriate and to provide specific loss allowances when necessary. Although
management believes it uses the best information available to make
determinations with respect to the allowance for loan losses, future
adjustments may be necessary if economic conditions differ from the assumptions
used in making the initial determinations. Based upon criteria consistently
applied during the period 1993 to 1995, the Company's allowance for loan losses
was $730,000 (or 1.29% of total loans) as of December 31, 1993, $740,000 (or
1.22% of total loans) as of December 31, 1994, and $740,000 (or 1.07% of total
loans) as of December 31, 1995. As of June 30, 1996, the allowance for loan
losses amounted to $830,000 (or 1.16% of total loans). The allowance for loan
losses as a percentage of nonperforming loans decreased from 240% as of
December 31, 1995 to 89% as of June 30, 1996, as a result of the increased
level of nonperforming loans discussed above.
-30-
<PAGE> 32
The following table sets forth an analysis of the Company's allowance
for loan losses for the periods indicated.
ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
<TABLE>
Six Months
Ended
June 30, Year Ended December 31,
-------------- ---------------------------------------------------
1996 1995 1994 1993
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Average loans outstanding $ 70,792 63,354 58,636 54,945
============== ============== ============== ==============
Loans outstanding at period-end 71,455 69,204 60,663 56,644
============== ============== ============== ==============
Total nonperforming loans 934 308 628 322
============== ============== ============== ==============
Beginning balance of allowance 740 740 730 744
Loans charged-off:
1-4 family residential mortgage 0 137 33 84
Home equity loans 0 0 61 0
Multifamily residential 0 0 0 0
Construction 0 0 0 0
Commercial real estate 0 0 0 0
Commercial loans 0 10 1 232
Installment & credit card loans 16 51 11 70
Other loans 0 0 0 1
-------------- -------------- -------------- --------------
Total loans charged-off: 16 198 106 387
Recoveries of previous charge-offs:
1-4 family residential mortgage 37 77 7 1
Home equity loans 0 0 14 0
Multifamily residential 0 0 0 0
Construction 0 0 0 0
Commercial real estate 0 0 0 0
Commercial loans 69 93 71 54
Installment & credit card loans 0 2 5 5
Other loans 0 0 0 3
-------------- -------------- -------------- --------------
Total recoveries 106 172 97 63
-------------- -------------- -------------- --------------
Net loans charged-off (recovered) (90) 26 9 324
Provisions for loan losses -- 26 19 310
-------------- -------------- -------------- --------------
Balance at period-end $ 830 740 740 730
============== ============== ============== ==============
Net charge-offs to average loans (0.25%) 0.04% 0.02% 0.59%
Allowance as percent of total loans 1.16% 1.07% 1.22% 1.29%
Nonperforming as % of total loans 1.31% 0.45% 1.04% 0.57%
Allowance as % of nonperforming 89% 240% 118% 227%
</TABLE>
-31-
<PAGE> 33
Although the Company considers the composition of its loan portfolio,
and the loss potential associated with different types of loans, in determining
the level of the allowance, the Company does not formally allocate its
allowance for loan losses by loan category.
INVESTMENT ACTIVITIES
The Company's investment portfolio increased significantly in 1993 as
loan growth lagged behind deposit growth. In 1994, all of the branch deposits
acquired by the Bank from the RTC were initially invested in U.S. Treasury and
agency securities, pending anticipated deposit runoff and eventual redeployment
of such deposits into the loan portfolio. The Company's investments of
$10,499,000 as of June 30, 1996 consisted primarily of U.S. Treasury
securities, federal agency obligations, and mortgage-backed securities. This
represented a decline of $3,179,000 or 23% compared to December 31, 1995, as
investment maturities were used to fund loan growth and cyclical deposit
runoff.
The following table sets forth the book value of the Company's
investment portfolio as of the dates indicated. Investment securities held to
maturity are stated at cost, adjusted for amortization of premium and accretion
of discount. Investment securities available for sale are stated at market in
accordance with SFAS No. 115, "Accounting For Certain Investments in Debt and
Equity Securities," which was adopted by the Company in 1994. Investments
classified as available for sale at December 31, 1993, prior to the adoption of
SFAS No. 115, were considered held for sale and carried at the lower of cost or
market value.
INVESTMENT PORTFOLIO COMPOSITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, Year Ended December 31,
-------------- ------------------------------------------------------
1996 1995 1994 1993
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasuries and agencies $ 6,965 9,968 18,323 14,866
Mortgage-backed securities 2,656 2,994 3,356 6,485
-------------- -------------- -------------- --------------
Total available for sale 9,621 12,962 21,679 21,351
Held to maturity:
State, county and municipal 250 250 250 0
Other 628 467 532 527
-------------- -------------- -------------- --------------
Total held to maturity 878 717 782 527
-------------- -------------- -------------- --------------
Total investment securities $ 10,499 13,679 22,461 21,878
============== ============== ============== ==============
</TABLE>
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<PAGE> 34
The following table sets forth the maturity distribution and weighted
average yield of the investment portfolio of the Company as of June 30, 1996.
The calculation of the weighted average yields is based on yield, weighted by
the respective book value of the securities, using cost basis in the case of
securities available for sale.
INVESTMENT PORTFOLIO--MATURITY AND YIELDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, 1996
------------------------------------------------------------------------
1 Year 1 Year to 5 Years to After
or Less 5 Years 10 Years 10 Years
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Maturity Distribution:
U.S. Treasury securities $ 1,997 0 0 0
U.S. Government agencies 3,991 976 0 0
Mortgage-backed securities 0 0 0 2,657
State, county and municipal 85 165 0 0
Other 0 0 0 628
-------------- -------------- -------------- --------------
Total $ 6,073 1,141 0 3,285
============== ============== ============== ==============
Weighted Average Yield:
U.S. Treasury securities 5.18% N/A N/A N/A
U.S. Government agencies 5.53% 6.33% N/A N/A
Mortgage-backed securities(1) N/A N/A N/A 6.33%
State, county and municipal 3.92% 4.31% N/A N/A
Fully taxable equivalent 6.03% 6.62% N/A N/A
Other N/A N/A N/A 6.61%
</TABLE>
- -----------------
(1) Mortgage-backed securities consist of floating rate debt securities
that reprice quarterly or more frequently.
DEPOSIT ACTIVITIES
Deposits are attracted through the offering of a broad variety of
deposit instruments, including checking accounts, money market accounts, NOW
accounts, savings accounts, certificates of deposit (including "jumbo"
certificates in denominations of $100,000 or more), and retirement savings
plans. To stimulate deposit growth in 1995, the Company has introduced
higher-rate deposit instruments, in the form of Investor Certificates of
Deposits and the Premier Investment Account, designed to attract local
institutional deposits in amounts of $100,000 or more.
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<PAGE> 35
The Company's average balance of total deposits was $80,083,000 for
the six months ended June 30, 1996, an increase of $205,000 or 0.3% compared
with the average balance of total deposits of $79,878,000 for the year ended
December 31, 1995. The average balance of total deposits of $79,878,000 for
the year ended December 31, 1995, represented an increase of $3,707,000 or 4.9%
compared with the average balance of total deposits of $76,171,000 for the year
ended December 31, 1994, which represented an increase of $220,000 or 0.3%
compared with the average balance of total deposits of $75,951,000 for the year
ended December 31, 1993.
The following table sets forth the average balances and weighted
average rates for the Company's categories of deposits for the periods
indicated.
AVERAGE DEPOSITS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended ---------------------------------------------------------------------------------
June 30, 1996 1995 1994 1993
---------------------------- ------------------------- --------------------------- ---------------------------
% of % of % of % of
Average Average Total Average Average Total Average Average Total Average Average Total
Balance Rate Deposits Balance Rate Deposit Balance Rate Deposit Balance Rate Deposits
--------- ------- ---------- ------- -------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest- $ 17,486 0.00% 21.83% 16,841 0.00% 21.08% 16,159 0.00% 21.21% 14,756 0.00% 19.44%
bearing
deposits
Interest-bearing 13,086 1.96% 16.34% 12,230 2.11% 15.31% 11,926 2.08% 15.66% 11,995 2.18% 15.79%
demand
(NOW) deposits
Savings deposits 2,286 2.62% 2.85% 2,526 2.65% 3.16% 2,564 2.59% 3.37% 2,137 2.80% 2.81%
Money market 22,681 3.22% 28.32% 25,153 3.09% 31.49% 24,784 2.49% 32.54% 27,024 2.59% 35.58%
deposits
Time deposits 24,544 5.50% 30.65% 23,128 5.49% 21.08% 20,738 4.44% 27.22% 20,039 4.59% 26.38%
--------- ---- ------ ------ ---- ------ ------ ---- ------ ------ ----- -------
Total $ 80,083 100.00 79,878 100.00% 76,171 100.00% 75,951 100.00%
========= ====== ====== ====== ====== ======= ====== =======
Weighted average rate 2.99% 2.43% 2.56%
==== ==== ==== ====
2.97%
====
</TABLE>
The Company seeks to rely primarily on core deposits from regular
customers to provide a stable and cost-effective source of funding to support
asset growth. From time to time, however, the Company has augmented such
deposits with short-term advances from the Federal Home Loan Bank of Atlanta
("FHLBA") and/or the generation of high yielding certificates of deposit
through advertising. The Company generally considers such funding sources to
be temporary in nature and does not rely on such advances or deposits to
support long-term asset growth. The Company's Asset/Liability Management
Policy limits total brokered deposits to ten percent (10%) of the Bank's total
liabilities. As of June 30, 1996, short-term FHLBA advances and brokered
deposits represented $2,000,000 (2%) and $5,331,000 (6%), respectively, of the
Company's total liabilities.
As of June 30, 1996, non-brokered time deposits over $100,000
represented 9.2% of total deposits, compared with 8.7% of total deposits as of
December 31, 1995, 9.4% as of December 31, 1994, and 10.6% as of December 31,
1993. As of June 30, 1996, total time deposits in excess of $100,000 accounted
for $12,980,000 or 16% of the Company's total deposits. Of this amount,
$6,569,000 had a term of six months or less.
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<PAGE> 36
The following table sets forth the amount of the Company's certificates
of deposit of $100,000 or more by time remaining until maturity as of June 30,
1996 and December 31, 1995.
TIME DEPOSITS OF $100,000 OR MORE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
------------------------- -------------------------
Maturity Period 1996 1995
--------------- ------------------------- -------------------------
<S> <C> <C>
Three months or less . . . . . . . . . . . . . . . . . . $ 5,021 5,405
Over three months through six months . . . . . . . . . . 1,548 2,320
Over six months through twelve months . . . . . . . . . . 4,891 2,142
Over twelve months . . . . . . . . . . . . . . . . . . . 1,520 3,141
------------- -------------
Totals . . . . . . . . . . . . . . . . . . . . . . . $ 12,980 13,018
============= =============
</TABLE>
RETURN ON EQUITY AND ASSETS
The following table sets forth the Company's performance ratios for
the periods indicated.
RETURN ON EQUITY AND ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
---------------------- -----------------------------------------------------
1996 1995 1994 1993
---------------------- -------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Return on average assets 0.67% 0.75% 0.71% 0.52%
Return on average equity 9.28% 12.43% 12.21% 9.04%
Period-end equity to total 7.06% 6.39% 5.41% 5.64%
</TABLE>
assets
LIQUIDITY
The Company's Asset/Liability Management Policy is intended to maintain
adequate liquidity for the Bank and thereby enhance its ability to raise funds
to support asset growth, meet deposit withdrawals and lending needs, maintain
reserve requirements and otherwise sustain operations. The Company
accomplishes this primarily through management of the maturities of its
interest-earning assets and interest-bearing liabilities. The Company believes
that the Bank's present liquidity position is adequate to meet its current and
future needs.
Asset liquidity is provided by cash and assets which are readily
marketable, or which can be pledged, or which will mature in the near future.
The asset liquidity of the Bank is maintained in the form of short-term
investment securities, demand deposits with commercial banks, vault cash and
federal funds sold. The Company's management monitors liquidity requirements
as warranted
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<PAGE> 37
by interest rate trends, changes in the economy and the maturity schedule and
interest rate sensitivity of the investment and loan portfolios and deposits.
Liability liquidity is provided by access to core funding sources,
principally various customers' interest- bearing and noninterest-bearing
deposit accounts in the Company's market area. The Bank does have the ability
to solicit brokered deposits. Federal funds purchased and short-term
borrowings by the Bank are additional sources of liquidity. These sources of
liquidity are short-term in nature and are used by the Bank as necessary to
fund asset growth and meet short-term liquidity needs. As a member of the
FHLBA, the Bank is authorized to borrow up to $13.3 million secured by a
blanket pledge of its portfolio of 1-to-4-family residential mortgage loans.
The Bank also has approved lines of credit from larger correspondent banks to
borrow excess reserves on an overnight basis (known as "federal funds
purchased") in the amount of $1.0 million and to borrow on a secured basis
("repurchase agreements") in the amount of $5.0 million. As of June 30, 1996,
the Bank had no federal funds purchased or sold, no repurchase agreements,
$2,000,000 in short-term borrowings from the FHLBA, and $2,800,000 in
fixed-rate term credit advances from the FHLBA maturing in 2006 at an average
cost of 6.90%. The Company utilizes fixed rate term credit advances from the
FHLBA to fund fixed rate real estate loans of comparable terms and maturities.
As of June 30, 1996, $11,824,000 or 73% of the Company's total
investment portfolio, including interest bearing deposits held with other
financial institutions, was scheduled to mature within one year. The remainder
of the portfolio consists of $1,141,000 (7% of total portfolio) in U.S.
Government, agency, and municipal securities that will mature within two and
one half years, and $2,657,000 (16% of total portfolio) in federal agency
mortgage pass-through securities and collateralized mortgage obligations with
an estimated weighted average duration of approximately three years, and the
Bank's required stock investment in the FHLBA and the Federal Reserve Bank of
Richmond totaling $637,000. The unrealized gain contained in the
held-to-maturity portion of the investment portfolio as of June 30, 1996 was
less than $1,000.
In the ordinary course of business, the Bank enters into commitments to
make loans and fund letters of credit, and the Company is also a party to two
operating leases with respect to its banking quarters. Details of these
commitments may be found in the accompanying Notes to Consolidated Financial
Statements.
The Company had cash on hand in the amount of $53,747 as of June 30,
1996 at the holding company level. The Company anticipates using these funds,
together with dividends received from the Bank, as working capital to pay
normal operating expenses. As of June 30, 1996, the Company had no
indebtedness outstanding at the holding company level.
CAPITAL RESOURCES
Total stockholders' equity as of June 30, 1996 was $6,820,308, an
increase of $321,363 or 4.9% compared with stockholders' equity of $6,498,945
as of December 31, 1995. Net income for
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<PAGE> 38
the six months ended June 30, 1996 of $308,990 was augmented by a $12,373
increase in the market value of investment securities available-for-sale, net
of tax effect.
Total stockholders' equity was $4,877,000 as of December 31, 1994, an
increase of $6,000 or 0.1% compared with stockholders' equity of $4,871,000 as
of December 31, 1993. The increase in total stockholders' equity as of
December 31, 1994 was attributable to $591,000 of net income for 1994, offset
by a $37,000 preferred stock dividend and a $545,000 decline in the market
value of investment securities available-for-sale, net of tax effect.
There are no regulatory capital requirements applicable to the Company,
because it has total consolidated assets of less than $150 million. The Bank,
however, is required to comply with capital standards promulgated by the OCC.
The OCC has established certain minimum risk-based capital standards that apply
to national banks. The following table sets forth the capital standards
required by the OCC, as well as the capital ratios of the Bank as of the dates
indicated:
RISK-BASED CAPITAL RATIOS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Regulatory Capital Ratios
June 30, December 31, -------------------------
----------- ---------------------------------- Adequately Well
1996 1995 1994 1993 Capitalized Capitalized
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Tier I risk-based capital . . . . . . . $ 6,525 6,134 5,085 4,890
Tier II risk-based capital . . . . . . 830 740 629 599
----------- ---------- ----------- -----------
Total capital . . . . . . . . . . . . . 7,355 6,874 5,714 5,489
=========== ========== =========== ===========
Risk-weighted assets . . . . . . . . . 70,734 66,050 50,259 47,835
=========== ========== =========== ===========
Adjusted total assets . . . . . . . . . 89,065 89,789 88,594 93,350
=========== ========== =========== ===========
Capital Ratios
Tier I risk-based capital . . . . . 9.22% 9.29% 10.12% 10.22% 4.00% 6.00%
Total risk-based capital . . . . . . 10.40% 10.41% 11.37% 11.48% 8.00% 10.00%
Leverage ratio (Tier I risk-based
capital to adjusted total
assets) . . . . . . . . . . . . . 7.33% 6.83% 5.74% 5.24% 4.00% 5.00%
</TABLE>
ACCOUNTING MATTERS
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," which
will be effective for transactions occurring after December 31, 1996. This
Statement requires that, after a transfer of financial assets, an entity
recognize the financial and servicing assets it controls and the liabilities it
has incurred, and
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<PAGE> 39
derecognize financial assets when control has been surrendered. The transferor
has surrendered control over financial assets only if such assets have been
isolated from the transferor, the transferee obtains the right to pledge or
exchange the transferred assets, and any agreement to repurchase the
transferred assets can be satisfied by delivery of assets that are readily
obtainable. Liabilities and derivatives incurred or obtained in exchange for
transferred assets are initially measured at fair value. Servicing assets and
other retained interests in the transferred assets are measured by allocating
the carrying amount between the assets and the retained interests based on
their relative fair values. It is management's belief that the adoption of
this Statement will not have a material impact on the Company or its results of
operations.
IMPACT OF INFLATION, CHANGING PRICES AND MONETARY POLICIES
The financial statements and related financial data concerning the
Company presented herein have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation. The primary effect of inflation on the operations of the Company is
reflected in increased operating costs. Unlike industrial companies, virtually
all of the assets and liabilities of a financial institution are monetary in
nature. As a result, changes in interest rates have a more significant effect
on the performance of a financial institution than do the effects of changes in
the general rate of inflation and changes in prices. Interest rates do not
necessarily move in the same direction or in the same magnitude as the prices
of goods and services. Interest rates are highly sensitive to many factors
which are beyond the control of the Company, including the influence of
domestic and foreign economic conditions and the monetary and fiscal policies
of the United States government and federal agencies, particularly the Federal
Reserve Board. The Federal Reserve Board implements national monetary policy
such as seeking to curb inflation and combat recession by its open market
operations in United States government securities, control of the discount rate
applicable to borrowing by banks, and establishment of reserve requirements
against bank deposits. The actions of the Federal Reserve Board in these areas
influence the growth of bank loans, investments and deposits, and affect the
interest rates charged on loans and paid on deposits. The nature, timing and
impact of any future changes in federal monetary and fiscal policies on the
Bank and its results of operations are not predictable.
BUSINESS AND REGULATION
GENERAL
The Company is a registered bank holding company under the Bank Holding
Company Act of 1956 ("BHCA"), and conducts its operations through Century
National Bank, which it acquired in 1986. The Company was incorporated and
organized in 1985.
-38-
<PAGE> 40
The Bank provides a full range of banking-related services through its
main office located at 1875 Eye Street, N.W., Washington, D.C. and its branch
office located at 1275 Pennsylvania Avenue, N.W. Effective January 1, 1996,
the Company established a loan production office at 8201 Greensboro Drive in
Tysons Corner, Virginia. The Company's principal offices are located at 1275
Pennsylvania Avenue, N.W., Washington, D.C. 20004. The Company's telephone
number at its main office is (202) 496-4000. As of June 30, 1996, the Company
had approximately 270 stockholders and total assets of $96,567,552, total
deposits of $83,330,209 and stockholders' equity of $6,820,308.
The Bank provides a broad line of financial products and services to
small and medium sized businesses and consumers. Lending services are
concentrated in professional, service, and commercial business sectors located
in the metropolitan Washington, D.C. area.
COMPETITION
The Company is subject to vigorous competition in all aspects and areas
of its business from banks and other financial institutions, including savings
and loan associations, savings banks, finance companies, credit unions and
other providers of financial services, such as money market mutual funds,
brokerage firms, consumer finance companies and insurance companies. The
Company also competes with non-financial institutions that maintain their own
credit programs and governmental agencies that make available low cost or
guaranteed loans to certain borrowers. The principal methods of competition
include interest rates paid on deposits and charged on loans and the
availability of other banking products and services. The Company competes in
its market area with a number of much larger financial institutions that have
substantially greater resources, including larger lending limits, larger branch
systems and a wider array of commercial banking services. The Company has been
able to compete effectively with other financial institutions by emphasizing
customer services, establishing long-term customer relationships and building
customer loyalty, and by providing products and services designed to address
the specific needs of its customers.
PERSONNEL
At June 30, 1996, the Company employed 37 employees, including 29
employees at the Eye Street location, 7 employees at the Pennsylvania Avenue
location and 1 employee at the Tysons Corner, Virginia location.
LEGAL PROCEEDINGS
The nature of the business of the Company causes it (and the Bank) to be
involved in routine legal proceedings from time to time. Management of the
Company believes that there are no pending or threatened legal proceedings that
upon resolution would have a material adverse impact on the Company.
-39-
<PAGE> 41
SUPERVISION AND REGULATION
In addition to the generally applicable state and federal laws governing
business and employers, the Company and Bank are further regulated by special
federal and state laws and regulations applicable only to financial
institutions and their parent companies. Virtually all aspects of the
operations of the Company and the Bank are subject to specific requirements or
restrictions and general regulatory oversight, from laws regulating consumer
finance transactions, such as the Truth in Lending Act, the Home Mortgage
Disclosure Act and the Equal Credit Opportunity Act, to laws regulating
collections and confidentiality, such as the Fair Debt Collections Practices
Act, the Fair Credit Reporting Act and the Right to Financial Privacy Act.
With few exceptions, state and federal banking laws have as their principal
objective either the maintenance of the safety and soundness of financial
institutions and the federal deposit insurance system or the protection of
consumers or classes of consumers, rather than the specific protection of
stockholders of the Company. The following discussion sets forth the material
statutory and regulatory provisions governing the Company and the Bank. To the
extent such discussion describes statutory or regulatory provisions, it is
qualified in its entirety by reference to the particular statute or regulation.
Regulation of the Company
The Company is a bank holding company within the meaning of the BHCA,
and therefore is subject to regulation, supervision and examination by the
Federal Reserve Board. As such, the Company is required to file reports with
and to furnish such other information as the Federal Reserve Board may require
pursuant to the BHCA. The Federal Reserve Board has the authority to issue
orders to bank holding companies to cease and desist from unsound banking
practices and violations of conditions imposed by, or violations of agreements
with, the Federal Reserve Board. The Federal Reserve Board is also empowered
to assess civil money penalties against companies or individuals who violate
the BHCA or orders or regulations thereunder, to order termination of
non-banking activities of non-banking subsidiaries of bank holding companies,
and to order termination of ownership and control of a non-banking subsidiary
by a bank holding company. Certain violations may also result in criminal
penalties. The OCC is authorized to exercise comparable authority with respect
to the Bank.
The Federal Reserve Board takes the position that a bank holding company
is required to serve as a source of financial and managerial strength to its
subsidiary banks and may not conduct its operations in an unsafe or unsound
manner. In addition, it is the Federal Reserve Board's position that, in
serving as a source of strength to its subsidiary banks, a bank holding company
should stand ready to use available resources to provide adequate capital funds
to its subsidiary banks during periods of financial stress or adversity and
should maintain the financial flexibility and capital-raising capacity to
obtain additional resources for assisting its subsidiary banks. A bank holding
company's failure to meet its obligations to serve as a source of strength to
its subsidiary banks will generally be considered by the Federal Reserve Board
to be an unsafe and unsound banking practice or a violation of the Federal
Reserve Board regulations or both. This doctrine has become known
-40-
<PAGE> 42
as the "source of strength" doctrine. In addition, statutory changes in the
Federal Deposit Insurance Act (the "FDIA") made by the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), now require the
holding company parent of an undercapitalized bank to guarantee, up to certain
limits, the bank's compliance with a capital restoration plan approved by the
bank's primary federal supervisory agency.
The BHCA and the Change in Bank Control Act, together with regulations
promulgated by the Federal Reserve Board, require that, depending on the
particular circumstances, either Federal Reserve Board approval must be
obtained or notice must be furnished to the Federal Reserve Board and not
disapproved prior to any person or company acquiring "control" of a bank
holding company, such as the Company, subject to certain exemptions for certain
transactions. Control is conclusively presumed to exist if an individual or
company acquires 25% or more of any class of voting securities of the bank
holding company. Control is rebuttably presumed to exist if a person acquires
10% or more but less than 25% of any class of voting securities and either the
company has securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or no other person will own a greater
percentage of that class of voting securities immediately after the
transaction. The regulations provide a procedure for challenge of the
rebuttable control presumption.
As a bank holding company, the Company is required to obtain prior
approval to merge or consolidate with any other bank holding company, acquire
all or substantially all of the assets of any bank or acquire ownership or
control of shares of a bank or bank holding company if, after the acquisition,
the Company would directly or indirectly own or control 5% or more of the
voting shares of such bank or bank holding company.
The Company is also prohibited from acquiring a direct or indirect
interest in or control of more than 5% of the voting shares of any company that
is not a bank or bank holding company and from engaging directly or indirectly
in activities other than those of banking, managing or controlling banks or
furnishing services to its subsidiary banks, except that it may engage in and
may own shares of companies engaged in certain activities found by the Federal
Reserve Board to be so closely related to banking or managing and controlling
banks as to be a proper incident thereto. These activities include, among
others, operating a mortgage, finance, credit card, or factoring company;
performing certain data processing operations; providing investment and
financial advice; acting as an insurance agent for certain types of
credit-related insurance; leasing personal property on a full-payout,
non-operating basis; and providing certain stock brokerage and investment
advisory services. In approving acquisitions or the addition of activities,
the Federal Reserve Board considers whether the acquisition or the additional
activities can reasonably be expected to produce benefits to the public, such
as greater convenience, increased competition, or gains in efficiency, that
outweigh such possible adverse effects as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices. In considering any application for approval or an acquisition or
merger, the Federal Reserve Board is also required to consider the financial
and managerial resources of the companies and the banks concerned, as well as
the applicant's record of compliance with the Community Reinvestment Act (the
"CRA").
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<PAGE> 43
The BHCA generally imposes certain limitations on transactions by and
between banks and non-bank companies in the same holding company structure,
including limitations on extensions of credit (including guarantees of loans)
by the Bank to affiliates, investments in the stock or other securities of the
Company by the Bank, and the nature and amount of Company securities that the
Bank may accept from any affiliate to secure loans extended to the affiliate.
The Company, as an affiliate of the Bank, is also subject to these
restrictions. Under the BHCA and the Federal Reserve Board's regulations, a
bank holding company and its subsidiaries are prohibited from engaging in
certain tie-in arrangements in connection with any extension of credit, lease
or sale of property or furnishing of services.
Regulation of the Bank
The Bank is a national banking association and is therefore subject to
regulation, supervision, and examination by the OCC. The Bank is also a member
of the Federal Reserve System and the FDIC. Requirements and restrictions
under the laws of the United States include the requirement that reserves be
maintained against deposits, restrictions on the nature and the amount of loans
which can be made, restrictions on the business activities in which a bank may
engage, restrictions on the payment of dividends to stockholders, and minimum
capital requirements. See "Risk Factors--Restrictions on Dividends by the
Bank" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The OCC has enforcement authority over the Bank that
is similar to that of the Federal Reserve Board with respect to the Company.
In addition, upon making certain determinations with respect to the condition
of any insured national bank, such as the Bank, the FDIC may begin to terminate
a bank's federal deposit insurance.
There are certain statutory limitations on the payment of dividends by
national banks. Without approval of the OCC, dividends may not be paid in
excess of a bank's total net profits for that year, plus its retained profits
for the preceding two years, less any required transfers to capital surplus.
However, a national bank may not pay dividends in excess of total retained
profits, including current year's income. In some cases, the OCC may find a
dividend payment that meets these statutory requirements to be an unsafe or
unsound practice.
Banks are affected by the credit policies of other monetary authorities,
including the Federal Reserve Board, which affect the national supply of bank
credit. Such policies influence overall growth of bank loans, investments, and
deposits and may also affect interest rates charged on loans and paid on
deposits. The monetary policies of the Federal Reserve Board have had a
significant effect on the operating results of commercial banks in the past and
are expected to continue to do so in the future.
FDICIA requires the OCC to take "prompt corrective action" with respect
to any national bank which does not meet specified minimum capital
requirements. The applicable regulations establish five capital levels,
ranging from "well capitalized" to "critically undercapitalized," which require
or permit the OCC to take supervisory action. Under these regulations, a
national bank is
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<PAGE> 44
considered well capitalized if it has a total risk-based capital ratio of 10.0%
or greater, a Tier I risk-based capital ratio of 6.0% or greater, and a
leverage ratio of 5.0% or greater, and it is not subject to an order, written
agreement, capital directive, or prompt corrective action directive to meet and
maintain a specific capital level for any capital measure. A national bank is
considered adequately capitalized if it has a total risk-based capital ratio of
8.0% or greater, a Tier I risk-based capital ratio and leverage capital ratio
of 4.0% or greater (or a leverage ratio of 3.0% or greater if the institution
is rated composite 1 in its most recent report of examination, subject to
appropriate federal banking agency guidelines), and the institution does not
meet the definition of an undercapitalized institution. A national bank is
considered undercapitalized if it has a total risk-based capital ratio that is
less than 8.0%, a Tier I risk-based capital ratio that is less than 4.0%, or a
leverage ratio that is less than 4.0%. A significantly undercapitalized
institution is one which has a total risk-based capital ratio that is less than
6.0%, a Tier I risk-based capital ratio that is less than 3.0%, or a leverage
ratio that is less than 3.0%. A critically undercapitalized institution is one
which has a ratio of tangible equity to total assets that is equal to or less
than 2.0%. As of June 30, 1996, the Bank was classified as "well-capitalized."
The OCC is authorized by the legislation to take various enforcement
actions against any undercapitalized national bank and any national bank that
fails to submit an acceptable capital restoration plan or fails to implement a
plan accepted by the OCC. These powers include, among other things, requiring
the institution to be recapitalized, prohibiting asset growth, restricting
interest rates paid, requiring prior approval of capital distributions by any
bank holding company which controls the institution, requiring divestiture by
the institution of its subsidiaries or by the holding company of the
institution itself, requiring new election of directors, and requiring the
dismissal of directors and officers.
With certain exceptions, national banks will be prohibited from making
capital distributions or paying management fees if the payment of such
distributions or fees will cause them to become undercapitalized. Furthermore,
undercapitalized national banks will be required to file capital restoration
plans with the OCC. Undercapitalized national banks also will be subject to
restrictions on growth, acquisitions, branching and engaging in new lines of
business unless they have an approved capital plan that permits otherwise. The
OCC also may, among other things, require an undercapitalized national bank to
issue shares or obligations, which could be voting stock, to recapitalize the
institution or, under certain circumstances, to divest itself of any
subsidiary.
Significantly and critically undercapitalized national banks may be
subject to more extensive control and supervision. The OCC may prohibit any
such institutions from, among other things, entering into any material
transaction not in the ordinary course of business, amending their charter or
bylaws, or engaging in certain transactions with affiliates. In addition,
critically undercapitalized institutions generally will be prohibited from
making payments of principal or interest on outstanding subordinated debt.
Within 90 days of a national bank becoming critically undercapitalized, the OCC
must appoint a receiver or conservator unless certain findings are made with
respect to the prospect for the institution's continued viability.
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<PAGE> 45
Current Regulatory Issues
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Interstate Banking Act") authorizes the Federal Reserve Board to permit
adequately capitalized and adequately managed bank holding companies to acquire
all or substantially all of the assets of an out-of-state bank after September
29, 1995, subject to deposit concentration limits, state law limits on the time
period a target bank must be in existence and consideration of the acquiring
bank's compliance with Federal and state community reinvestment laws. Thus,
nationwide interstate banking became effective on September 29, 1995. The
Interstate Banking Act also authorizes banking subsidiaries of bank holding
companies to act as agent for depository institution affiliates in other states
when receiving deposits, renewing time deposits, closing loans, servicing
loans, or receiving payments on loans and other obligations; and the Interstate
Banking Act expressly states that banks acting in an agency capacity are not
branches. With respect to interstate branching by multi-state bank holding
companies, states have two options -- for the period from September 29, 1994
through June 1, 1997, states may enact legislation that either prohibits
interstate merger transactions involving out-of-state banks ("opt-out") or
permits interstate merger transactions prior to June 1, 1997 ("opt-in"), so
long as the law applies equally to all out-of-state banks. The Interstate
Banking Act also contained provisions addressing branch retention in interstate
merger transactions and de novo branching by out-of-state banks. Maryland,
Virginia, and the District of Columbia have each adopted "opt-in" provisions
permitting de novo branching prior to June 1, 1997.
In addition, there are several pieces of legislation relevant to the
banking industry that were recently enacted into law. On August 20, 1996,
President Clinton signed the Small Business Job Protection Act (the "Jobs
Act"). The Jobs Act contained several provisions that affect the banking
industry. First, the most significant part of the Jobs Act removed the
prohibition against banks, savings and loans and bank holding companies
electing to be treated as S corporations. This change is effective for tax
years beginning after December 31, 1996. Second, the Jobs Act gave qualifying
savings associations a tax break when they change their method of accounting
for bad debt reserves. This change will save the thrift industry approximately
$3,000,000,000 in tax liability and will facilitate the conversion of savings
associations into banks. Finally, the Jobs Act increased the IRA deduction
from $250 to $2,000 per year for a spouse that does not work outside the home,
subject to income eligibility limits.
On September 30, 1996, President Clinton signed the Economic Growth and
Regulatory Paperwork Reduction Act of 1996 (the "Growth Act"), which contained
a comprehensive approach to recapitalize the FDIC's Savings Association
Insurance Fund and to assure payment of the Financing Corporation ("FICO")
obligations. Most of the Bank's deposits are insured by the FDIC's Bank
Insurance Fund ("BIF"). Under the Growth Act, banks insured under the BIF are
required to pay a portion of the interest due on bonds that were issued by FICO
to help shore up the ailing Federal Savings and Loan Insurance Corporation in
1987. The amount of FICO debt service to be paid by all BIF-insured
institutions is approximately $322,000,000 per year from 1997 until the year
2000 when the obligation of BIF-insured institutions increases to approximately
$585,000,000 per
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<PAGE> 46
year through the year 2025. The Bank's portion of this amount has not yet been
determined. The Growth Act also contained provisions protecting banks from
liability for environmental clean-up costs; prohibiting credit unions sponsored
by Farm Credit System banks; easing application requirements for most bank
holding companies when they acquire a thrift or a permissible nonbank
operation; easing Fair Credit Reporting Act restrictions between bank holding
company affiliates; and reducing regulatory burden under the Real Estate
Settlement Procedures Act, the Truth-in-Savings Act, the Truth-in-Lending Act,
and the Home Mortgage Disclosure Act.
In 1994 the Bank acquired the deposits of a savings and loan branch.
These so-called "Oakar deposits" are insured under the FDIC's Savings
Association Insurance Fund ("SAIF"). Pursuant to a rule promulgated by the FDIC
on October 8, 1996, all institutions holding SAIF insured deposits will be
charged a one-time special assessment of 65.7 cents per $100 of SAIF insured
deposits. This special assessment will be collected on November 27, 1996. The
FDIC has also promulgated a proposed rule regarding the amount of premiums
payable as of January 1, 1997 by institutions holding SAIF-insured deposits.
Under the proposed rule, which is subject to final comments and could change,
institutions will be assessed with respect to SAIF-insured deposits anywhere
from zero for most safe and sound institutions to 27 cents per $100 of deposits
for the least safe and sound institutions. See Note 2 of Condensed Notes to
Consolidated Financial Statements.
EFFECT OF ECONOMIC ENVIRONMENT
The policies of regulatory authorities, including the monetary policy of
the Federal Reserve Board, have a significant effect on the operating results
of bank holding companies and their subsidiaries. Among the means available to
the Federal Reserve Board to affect the money supply are open market operations
in U.S. Government securities, changes in the discount rate on member bank
borrowings, and changes in reserve requirements against member bank deposits.
These means are used in varying combinations to influence overall growth and
distribution of bank loans, investment and deposits, and their use may affect
interest rates charged on loans or paid for deposits.
Federal Reserve Board monetary policies have materially affected the
operating results of commercial banks in the past and are expected to continue
to do so in the future. The nature of future monetary policies and the effect
of such policies on the business and income of the Company and the Bank cannot
be predicted.
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<PAGE> 47
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND THE BANK
Directors and Executive Officers of the Company
The directors and executive officers of the Company, all of whom are
elected annually, are as follows:
<TABLE>
<CAPTION>
Name Age Position(s) with the Company
---- --- ----------------------------
<S> <C> <C>
Mr. Joseph S. Bracewell 49 Chairman of the Board, President
and Chief Executive Officer
Dr. George Contis 63 Director
Mr. John R. Cope 54 Director, Vice President and General Counsel
Mr. Bernard J. Cravath 65 Director and Assistant Secretary
Mr. Neal R. Gross 53 Director
Mr. Joseph H. Koonz, Jr. 61 Director
Mr. William McKee 52 Director
Mr. William C. Oldaker 55 Director and Secretary
</TABLE>
Mr. Joseph S. Bracewell has been Chairman of the Board, President and
Chief Executive Officer of the Company and Chairman of the Board of the Bank
since 1985. Mr. Bracewell has also served as Chief Executive Officer of the
Bank since 1982 and as President of the Bank from 1982-1988 and since August
15, 1996. Mr. Bracewell serves on the Executive Loan Committee, the
Asset/Liability Committee, the Personnel Committee and the Marketing Committee.
Mr. Bracewell also serves on the Board of Directors of First University
Corporation, a bank holding company located in Houston, Texas.
Dr. George Contis was elected as a director of the Company in November,
1995. Dr. Contis has served as a member of the Board of Directors of the Bank
since 1988 and is currently Chairman of the Bank's Executive Loan Committee and
Legal Matters Review Committee. Dr. Contis is a physician and the President of
Medical Services Corporation International, an international contract provider
of medical services.
Mr. John R. Cope has served as a director and Vice President of the
Company since 1985. Since 1982, Mr. Cope has served on the Board of Directors
of the Bank, and he has served as Vice Chairman of the Board of the Bank since
1985. In addition, Mr. Cope serves as General Counsel to the Company and the
Bank. Mr. Cope is a partner with the law firm of Bracewell & Patterson,
L.L.P., who from time to time provides legal services to the Company and the
Bank.
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<PAGE> 48
Mr. Bernard J. Cravath has served as a director of the Company since
1987. In addition, Mr. Cravath is Chairman of the Audit Committee and serves
as a member of the Asset/Liability Committee. Mr. Cravath is president of
Reality Properties, Inc., a real estate investment firm.
Mr. Neal R. Gross was elected as a Director of the Company in October
1995. Mr. Gross has served as a member of the Board of Directors of the Bank
since 1992 and is a member of the Bank's Audit Committee. Mr. Gross serves as
Chairman of the Board and Chief Executive Officer of Neal R. Gross and Co.,
Inc., a corporation providing court reporting services to attorneys, law firms,
the federal government, and other private organizations and individuals.
Mr. Joseph H. Koonz, Jr. has served as a director of the Company since
1985. Mr. Koonz is a senior partner of the law firm of Koonz, McKenney,
Johnson & Regan.
Mr. William McKee has served as a director of the Company since 1992.
Mr. McKee is a partner with the law firm of King & Spalding in Washington, D.C.
Mr. William C. Oldaker has served the Company as a director since 1986.
In 1992, Mr. Oldaker was elected as Secretary. Since 1984, Mr. Oldaker has
served on the Board of Directors of the Bank. Mr. Oldaker also serves as
Chairman of the Personnel Committee. Mr. Oldaker is a partner with the
Washington, D.C. law firm of Oldaker, Ryan, Phillips & Utrecht.
Directors and Executive Officers of the Bank
The directors and executive officers of the Bank, all of whom are
elected annually, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mr. Joseph S. Bracewell 49 Chairman of the Board, President and Chief
Executive Officer
Hon. Iraline Barnes 49 Director
Mr. George Connors 37 Senior Vice President
Dr. George Contis 63 Director
Mr. John R. Cope 54 Vice Chairman of the Board and General
Counsel
Mr. Marvin Fabrikant 51 Director
Mr. Neal R. Gross 53 Director
Mr. Thomas B. Hoppin 57 Director
Mr. Robert W. Hutchins 50 Executive Vice President
Mr. Roger C. Johnson 44 Director
Dr. Michael E. Kossak 49 Director
Mr. William C. Oldaker 55 Director and Secretary
Ms. Ellen B. Safir 52 Director
Ms. Linda W. Townsend 49 Senior Vice President
</TABLE>
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<PAGE> 49
Hon. Iraline Barnes has served as a director of the Bank since January
1994 and is a member of the Bank's Executive Loan Committee. Ms. Barnes is a
former Judge of the D.C. Superior Court and currently serves as the Vice
President of Corporate Relations for Potomac Electric Power Co.
Mr. George Connors has served as Senior Vice President of the Bank since
July 8, 1996. He has been employed by the Bank since 1990 where he has been
involved principally in the generation and maintenance of commercial loan and
deposit relationships.
Mr. Marvin Fabrikant has served as a director of the Bank since 1994 and
is a member of the Bank's Executive Loan Committee. Mr. Fabrikant has been
engaged in private investments since 1991.
Mr. Thomas B. Hoppin has served as a member of the Board of Directors of
the Bank since 1988. Mr. Hoppin also served as the President and Chief
Operating Officer of the Bank from 1988 through August 14, 1996. Mr. Hoppin
also serves as a member of the Bank's Executive Loan Committee, Asset/Liability
Committee, and Legal Matters Review Committee. Mr. Hoppin is Executive Vice
President of Medical Services Corporation International.
Mr. Robert W. Hutchins has served as Executive Vice President of the
Bank since 1989. Mr. Hutchins has served as Chief Lending Officer of the Bank
since 1990. Mr. Hutchins also serves as a member of the Bank's Executive Loan
Committee and Asset/Liability Committee, and has been the Virginia Division
Manager since January 1996.
Mr. Roger C. Johnson has served as a director of the Bank since 1987.
Mr. Johnson also serves as Chairman of the Legal Matters Committee and is a
member of the Personnel Committee. Mr. Johnson is a senior partner with the
law firm of Koonz, McKenney, Johnson & Regan.
Dr. Michael E. Kossak has served as a director of the Bank since 1987.
Dr. Kossak also serves as a member of the Audit Committee as well as the
Marketing Committee. Dr. Kossak is a periodontist.
Ms. Ellen B. Safir has served the Company as a director since 1994. Ms.
Safir also serves a member of the Company's Asset/Liability Committee. Since
1986, Ms. Safir has been affiliated with the Howard Hughes Medical Institute,
and presently serves as the Institute's Managing Director of Investments.
Ms. Linda W. Townsend has been a Senior Vice President of the Bank since
August, 1996. She also served as an officer of the Bank from 1984-1990. Prior
to her rejoining the Bank, from 1991-1994, Ms. Townsend served as Senior Vice
President at Tysons National Bank, where she managed operations, retail,
accounting and human resources. From 1995-1996, Ms. Townsend served as a
business analyst for the banking services division of a financial services
group.
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<PAGE> 50
EXECUTIVE COMPENSATION
Executive Officer Compensation
The following table sets forth information regarding the compensation
for the Company's Chief Executive Officer and each other executive officer who
received compensation in excess of $100,000 for the year ended December 31,
1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------- -------------------------
Name and Principal Other Annual Securities Underlying
Position Year Salary Bonus Compensation Options
- ----------------------- ---- -------- ----- ------------ -------------------------
<S> <C> <C> <C> <C> <C>
Mr. Joseph S. Bracewell 1995 $182,300 $ 11,841 -0- 1,605
President and Chief
Executive Officer of
the Company; Chief
Executive Officer of
the Bank
Mr. Thomas B. Hoppin 1995 $117,200 10,643 -0- 1,605
President and Chief
Operating Officer of
the Bank(1)
- ------------------
(1) Mr. Hoppin resigned as President and Chief Operating Officer of the
Bank on August 14, 1996.
</TABLE>
Except as set forth herein, none of the named executive officers
received any other annual compensation, stock options, restricted stock awards,
stock appreciation rights, long term incentive plan payouts or any perquisites
or other personal benefits, securities or property that exceeded the lesser of
$50,000 or 10% of the total annual salary and bonus for such named executive
officer during the fiscal year ended December 31, 1995.
Director Compensation
Each member of the Board of Directors of the Company and/or the Bank
receives a retainer of $4,200 annually ($6,000 for those directors serving on
the Boards of both the Company and the Bank) provided the director attends at
least two-thirds of the meetings of the Board of Directors. No additional
compensation is paid for service on standing committees. Directors are
permitted to defer cash fees in lieu of a deferred compensation plan to provide
retirement income, as described below.
The Company has entered into Director Compensation Agreements (the
"Compensation Agreements"), with the directors of the Company and the Bank,
other than Mr. Fabrikant. Each director may elect to enter into a Compensation
Agreement in lieu of receiving director's fees in cash. The Compensation
Agreements generally provide for the purchase of life insurance for each
director with the deferred director's fees and the payment of a retirement
benefit for 180 months
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<PAGE> 51
following retirement, or in the case of an individual's death prior to
retirement, the payment of an amount for a period of months, generally 120-180
months following a director's death. The retirement benefit granted under the
Compensation Agreement vests pursuant to a schedule, with 20% of the pension
benefit vesting each year over a five year period.
Prior Stock Option Plans
In 1986, the Board of Directors of the Company approved an Incentive
Stock Option Plan for Key Employees, a Nonqualified Stock Option Plan for Key
Employees and a Nonqualified Stock Option Plan for Directors (collectively
referred to herein as the "1986 Plans"). The purpose of each of the plans was
to encourage ownership of the Company's Common Stock by key employees and
directors of the Company and its subsidiaries. A total of 130,000 shares of
Common Stock were reserved under the 1986 Plans. Under the 1986 Plans, the
exercise price of any option granted could not be less than the fair market
value of the Common Stock subject to the option on the date the option was
granted. All of the 1986 Plans were administered by various "option"
committees of the Board of Directors of the Company. The 1986 Plans expired
during 1992 and 1993; however, many of the options granted under the 1986 Plan
are still exercisable by the optionee. In April 1994, the 1986 Plans were
replaced by the Company's 1994 Stock Option Plan described below.
1994 Stock Option Plan
The Company has reserved 150,000 shares of its Common Stock for the
issuance of incentive stock options and nonqualified stock options to directors
and key employees under the Century Bancshares, Inc. 1994 Stock Option Plan
(the "1994 Plan"). The Board of Directors approved the 1994 Plan in April 1994
and it was approved by the Company's stockholders in May 1994. The 1994 Plan
provides for the issuance of stock options covering up to 150,000 shares of
Common Stock. The 1994 Plan is administered by the Company's Compensation
Committee and provides that the options granted under the 1994 Plan may be
either incentive stock options pursuant to Section 422A of the Internal Revenue
Code of 1986, as amended, or nonqualified options. Directors and certain key
employees are entitled to participate under the 1994 Plan.
Options granted under the 1994 Plan will terminate (i) ten years after
the date the option was granted, unless the option was granted for a shorter
period, (ii) five years from the date of grant in the case of an incentive
stock option granted to a 10% or more stockholder of the Company, (iii) three
months after the date on which employment with the Company was terminated, or
(iv) one year after the death or disability of an optionee. Options granted
under the 1994 Option Plan are not transferable by the optionee, other than by
will or the laws of descent and distribution.
As of September 30, 1996, options to purchase 168,207 shares of Common
Stock at exercise prices ranging from $1.61 to $6.00 were outstanding (including
56,285 options issued pursuant to the Company's 1986 Plans). There are 53,967
shares of Common Stock available for future grants under the 1994 Plan.
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<PAGE> 52
Options Granted to Certain Executives in Last Fiscal Year
During the fiscal year ended December 31, 1995, the Company granted the
following options to purchase the Company's Common Stock to the executive
officers of the Company and the Bank listed in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO PER SHARE OPTION TERM
OPTIONS/ SARS EMPLOYEES IN EXERCISE EXPIRATION ------------
NAME GRANTED(1) 1995 PRICE(1) DATE 5% 10%
---- ---------- ---- -------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Bracewell 1,605 4.6% $5.37 May 17, 2002 $3,509 $8,177
Thomas B. Hoppin 1,605 4.6% $5.37 May 17, 2002 3,509 $8,177
(1) Adjusted to give effect to a 7% stock dividend declared in March 1996.
</TABLE>
Options Exercised During Last Fiscal Year
During the fiscal year ended December 31, 1995, no options were
exercised by executive officers of the Company.
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<PAGE> 53
EMPLOYMENT AGREEMENTS
The Company and Mr. Bracewell have entered into an Employment
Agreement which became effective on September 1, 1996 and will terminate on
August 31, 1998 unless renewed by the parties on written notice. Under the
Employment Agreement, Mr. Bracewell receives an annual salary of $182,300, the
use of a Company car, the payment by the Company of life insurance premiums,
and certain country club dues. Upon termination of Mr. Bracewell's employment
during the term of the Employment Agreement (except by reason of his death or
upon termination by the Company for cause), Mr. Bracewell would be entitled to
receive a payment in an amount equal to twice his annual salary and all his
stock options will automatically vest. If Mr. Bracewell elects not to renew the
Employment Agreement upon its expiration, the Employment Agreement provides for
a severance payment in the amount of his annual salary. In the event of a
change of control, all of Mr. Bracewell's stock options automatically vest.
Under the Employment Agreement, a "change of control" means (i) the acquisition
by any person or group of persons of beneficial ownership of securities
representing more than fifty percent (50%) of the combined voting power of the
then outstanding voting securities of the Company or the Bank, (ii) a
reorganization with respect to which those persons who had been beneficial
owners of the voting securities of either the Bank or the Company immediately
prior to such reorganization do not, following such reorganization,
beneficially own shares representing more than 50% of the combined voting power
of the voting securities of the resulting corporation, (iii) a sale of
substantially all the assets of the Bank or Company, (iv) the cessation for any
reason of the individuals who constituted the Board of Directors of the Company
on the date of the agreement (the "Incumbent Board"), to constitute at least a
majority of the Incumbent Board, provided that any person becoming a director
subsequent to the date of the agreement whose election or whose nominations for
election by the Company's stockholders was approved by a majority vote of the
directors comprising the Incumbent Board are, for purposes of the agreement,
considered as though he or she were a member of the Incumbent Board, or (v) a
change in the Company's status requiring prior notice to the Board of Governors
of the Federal Reserve System and/or the OCC pursuant to the Change in Bank
Control Act of 1978 and regulations promulgated thereunder. Mr. Bracewell has
agreed not to compete with the Company for the term of the Employment
Agreement and for 12 months thereafter.
CERTAIN TRANSACTIONS
The Bank has and expects to have various loan transactions with
directors, officers and employees of the Company and the Bank. All loans that
have been made and any loans in the future will be made in the ordinary course
of business and on the same terms and conditions, including interest rates and
collateral, as those of comparable transactions prevailing at the time with
non-affiliated parties and, in the opinion of management do not and will not
involve more than the normal risk of collectability or otherwise present other
terms less favorable to the Bank than would otherwise be obtained with
unrelated persons.
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<PAGE> 54
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of September 30, 1996, the shares of
Common Stock beneficially owned by (i) any person who, to the knowledge of the
Company, beneficially owns more than 5% of such stock, (ii) the directors of
the Company and the executive officers of the Company and the Bank and (iii)
all directors of the Company and executive officers of the Company and the Bank
as a group.
Name and Address of
Beneficial Owner Number of Shares(1) Percent of Class
- -------------------- ------------------- ----------------
Joseph S. Bracewell 139,398(2) 10.82%
1875 Eye Street, N.W.
Washington, D.C. 20004
George Contis 56,462(3) 4.99%
1716 Wilson Boulevard
Arlington, Virginia 22209
John R. Cope 35,123(4) 3.11%
2000 K Street, N.W.
Suite 500
Washington, D.C. 20006
Bernard J. Cravath 70,741(5) 6.20%
9812 Falls Road, Suite 201
Potomac, Maryland 20854
Neal R. Gross 106,622(6) 9.43%
1323 Rhode Island Ave., N.W.
Washington, D.C. 20005
Thomas B. Hoppin 25,810(7) 2.27%
1875 Eye Street, N.W.
Washington, D.C. 20004
Robert W. Hutchins 18,058(8) 1.59%
1875 Eye Street, N.W.
Washington, D.C. 20004
Joseph H. Koonz, Jr. 67,760(9) 5.99%
2020 K. Street, N.W.
Washington, D.C. 20006
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<PAGE> 55
William S. McKee 60,637(10) 5.34%
1730 Pennsylvania Ave., N.W.
Washington, D.C. 20006
William C. Oldaker 66,780(11) 5.83%
818 Connecticut Ave., N.W.
Suite 1100
Washington, D.C. 20006
All directors of the Company and 647,391 55.57%
executive officers of the Company
and the Bank as a group (10 persons)
- -------------------------
(1) Unless otherwise indicated, the Company believes that all persons named
in the table have sole investment and voting power over the shares of
Common Stock and/or Preferred Stock owned.
(2) Includes 25,416 shares held directly by Mr. Bracewell, 3,288 shares held
by his children, 20,957 shares held as Trustee, 34,205 shares held for
the benefit of Mr. Bracewell in the 401(k) plan maintained by the Bank
and 6,441 shares of Common Stock held by Mr. Bracewell in individual
retirement accounts. Also includes 24,975 shares of Common Stock
issuable upon exercise of options which are exercisable within the next
sixty days and 24,116 shares issuable on the exercise of Warrants.
(3) Includes 7,089 shares of Common Stock issuable upon exercise of
currently exercisable options and 697 shares issuable on the exercise of
Warrants.
(4) Includes 6,209 shares of Common Stock issuable upon exercise of
currently exercisable options and 279 shares issuable on the exercise of
Warrants. Also includes 784 shares of Common Stock held by Mr. Cope's
wife, Jan Naylor Cope; 5,521 shares of Common Stock held by The Lloyd
Chapman Cope Family Trust; 2,315 shares of Common Stock held by the
Lloyd Chapman Cope Trust and 261 shares of Common Stock held by John
Cope, as Trustee for the Lloyd Chapman Cope Family Trust.
(5) Includes 1,237 shares of Common Stock held by Mr. Cravath's wife, Jeanne
Cravath. Also includes 7,894 shares of Common Stock issuable upon
exercise of currently exercisable options and 8,694 shares issuable on
the exercise of Warrants.
(6) Includes 6,718 shares of Common Stock issuable upon exercise of
currently exercisable options.
(7) Includes 15,221 shares of Common Stock issuable upon exercise of
currently exercisable options and 3,375 shares issuable on the exercise
of Warrants.
(8) Includes 9,663 shares of Common Stock issuable upon exercise of
currently exercisable options and 8,395 shares of Common Stock held for
the benefit of Mr. Hutchins in the 401(k) plan maintained by the Bank.
(9) Includes 7,894 shares of Common Stock issuable upon exercise of
currently exercisable options. Includes 59,866 shares of Common Stock
held as joint tenants with Ann G. Koonz.
(10) Includes 7,894 shares of Common Stock issuable upon exercise of
currently exercisable options and 4,194 shares issuable on the exercise
of Warrants.
(11) Includes 7,894 shares of Common Stock issuable upon exercise of
currently exercisable options and 14,469 shares issuable on the exercise
of the Warrants. Also includes 10,586 shares of Common Stock held in
individual retirement accounts for Mr. Oldaker's benefit.
-54-
<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 2,000,000 shares
of Common Stock, par value $1.00 per share, and 1,000,000 shares of preferred
stock, par value $1.00 per share, issuable in series. The terms of each series
of preferred stock may be fixed by the Board of Directors of the Company,
within certain limits set by the Company's Certificate of Incorporation, as
amended. As of June 30, 1996, there were 1,123,685 shares of Common Stock
outstanding, and no shares of preferred stock outstanding.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held
on all matters with respect to which the holders of Common Stock are entitled
to vote. The Common Stock has no preemptive or conversion rights and is not
subject to redemption. Holders of Common Stock are not entitled to cumulative
voting in the election of directors. In the event of dissolution or
liquidation, after payment of all creditors the holders of the Common Stock
(subject to the prior rights of the holders of any outstanding preferred stock)
will be entitled to receive pro rata any assets distributable to stockholders
in respect of the number of shares held by them.
The holders of shares of Common Stock are entitled to such dividends as
the Board of Directors, in its discretion, may declare out of funds legally
available therefor. Under the Delaware General Corporation Law, dividends may
not be paid if, after the payment, the Company's total assets would be less
than the sum of its total debts and stated capital, or if the Company would be
unable to pay its debts as they become due in the usual course of its business.
The Company has not paid dividends on shares of its Common Stock to date. The
Company does not anticipate paying dividends on the Common Stock in the
foreseeable future. The payment of dividends on Common Stock is subject to the
prior rights of the holders of preferred stock. Payment of future dividends on
both the Common Stock and any preferred stock, will be dependent upon, among
other things, the earnings and financial condition of the Company and the Bank,
the Company's other cash flow requirements and the general economic and
regulatory climate. See "Dividend Policy of the Company" and "Risk
Factors--Restrictions on Dividends by the Bank," and "Business and Regulation."
The Transfer Agent and Registrar for the Common Stock is Chase Mellon
Shareholder Services, Inc.
THE WARRANTS
The following discussion of the principal terms of the Warrants is
qualified in its entirety by reference to the form of Warrant which has been
filed as an exhibit to this Registration Statement.
-55-
<PAGE> 57
The Warrants are in registered form, with each such Warrant entitling
the registered owner thereof to purchase one share of Common Stock at an
exercise price of $5.75 per share, subject to antidilutive adjustments. The
Warrants will automatically expire at 5:00 p.m., Washington D.C. time, on
November 16, 1998 (the "Expiration Date"). The Warrants are exercisable after
November 14, 1996 at any time by surrendering the Warrants, with the
subscription form properly completed and duly executed, to the Company together
with the payment of the applicable exercise price in lawful money of the United
States of America, in cash or by certified check or bank draft payable to the
order of the Company.
The Company has the option, on and after November 14, 1997 and prior to
5:00 p.m. Washington, D.C. time on the Expiration Date to repurchase the
Warrants at a price equal to $.26 per Warrant (the "Warrant Call Price"). The
Company may exercise its right to repurchase the Warrants by mailing notice of
its election to do so to the record holder of the Warrant at least 30, but no
more than 50, days prior to the date fixed for such repurchase (the "Warrant
Call Date"). Each such notice shall specify (i) the Warrant Call Date, (ii)
the Warrant Call Price, (iii) the place for payment and for delivering this
Warrant certificate and transfer instrument(s) in order to receive the Warrant
Call Price, (iv) the number of Warrants to be repurchased, and (v) the then
effective exercise price and that the right of the holder of this Warrant to
exercise such Warrants shall terminate as to the Warrants specified in the
Warrant Call Notice at the close of business on the Warrant Call Date (provided
that no default by the Company in the payment of the applicable Warrant Call
Price shall have occurred and be continuing on the Warrant Call Date). Any
notice mailed in such manner shall be conclusively deemed to have been duly
given regardless of whether such notice is in fact received. If less than all
of the outstanding Warrants are to be repurchased, then the Company will select
the Warrants to be repurchased on a pro rata basis, by lot or by another
equitable method. In order to facilitate the repurchase of the Warrants, the
Board of Directors of the Company may fix a record date for determination of
holders of Warrants to be called, which shall not be more than 60 days prior to
the Warrant Call Date with respect thereto. If no record date is fixed by the
Board of Directors, the record date shall be the date the Warrant Call Notice
is mailed.
Provision is made in the Warrants for adjustment of the price and number
of shares of Common Stock purchasable upon exercise of the Warrant in the event
of a stock dividend, stock split, or reclassification of shares, and certain
reorganizations, consolidations and mergers. Holders of the Warrants as such
will not have voting, dividend or other rights as stockholders of the Company
unless and until their Warrants have been duly exercised.
PREFERRED STOCK
The preferred stock is available for issuance from time to time for
various purposes as determined by the Company's Board of Directors, including
without limitation, making future acquisitions and raising additional equity
capital. Subject to certain limitations set forth in the Company's
Certificate of Incorporation, as amended, the preferred stock may be issued on
such terms and conditions, and at such times and in such situations, as the
Board of Directors in its sole
-56-
<PAGE> 58
discretion determines to be appropriate, without any further approval or action
by the stockholders, unless otherwise required by laws, rules, regulations or
agreements applicable to the Company.
Because the Certificate of Incorporation of the Company does not
prescribe rights and preferences, the Board of Directors of the Company has
virtually unlimited authority to set rights and preferences of any series
established, including voting rights. The effects of the issuance of preferred
stock on the stockholders could include, among other things, (i) reduction of
the amount otherwise available for payments of dividends on Common Stock if
dividends are payable on a series of preferred stock; (ii) restrictions on
dividends on Common Stock if dividends on the series of preferred stock are in
arrears, (iii) dilution of the equity interest of holders of Common Stock if
the series of preferred stock is convertible, and is converted, into Common
Stock; and (iv) restrictions on the rights of holders of Common Stock to share
in the Company's assets upon liquidation until satisfaction of any liquidation
preference granted to the holders of the series of preferred stock.
ANTI-TAKEOVER PROTECTIONS
As described above, the Company's Certificate of Incorporation permits
the issuance of preferred stock in series by action of the Board of Directors.
Although the Company has no plans to utilize the issuance of shares of
preferred stock as a deterrent to possible takeover attempts, the power to
issue shares of preferred stock in series and to determine certain rights and
preferences with respect to each such series may have dilutive effect on the
value of shares of Common Stock and other ownership rights of the holders of
Common Stock, and may have the effect of discouraging attempts to acquire
control of the Company.
The Company's Certificate of Incorporation and Bylaws contain certain
provisions, in addition to the authority to issue preferred stock in series,
which may have the effect of delaying or preventing a change in control of the
Company. The Company's Certificate of Incorporation contains provisions which
prohibit stockholder action by written consent and which require certain
extraordinary corporate transactions, including amendment to the Certificate of
Incorporation, to be approved by the vote of the holders of two-thirds of the
outstanding shares of capital stock entitled to vote thereon, rather than a
majority. The effect of these provisions, when coupled with existing statutory
restrictions on the purchase of voting securities of a registered bank holding
company, may be to delay or prevent a change in control of the Company.
The Bylaws of the Company also impose certain procedural requirements on
stockholders who wish (a) to make nominations in the election of directors and
(b) to present any other proposal to the stockholders for action, including any
repeal or change in the Bylaws of the Company. The requirements include, among
other things, the timely delivery to the Company's Secretary of notice of the
nomination or proposal and evidence of (i) the stockholder's status as such,
(ii) the number of shares the stockholder beneficially owns, (iii) a list of
the persons with whom the stockholder is acting in concert and (iv) the number
of shares such persons beneficially own. The Bylaws further provide that when
nominating directors, the stockholder must also submit such information with
-57-
<PAGE> 59
respect to the nominee as would be required by a proxy statement and certain
other information. The Bylaws provide that failure to follow the required
procedures renders the nominee or proposal ineligible to be voted upon by the
stockholders.
The Company believes that the provisions noted above are prudent and
will reduce the Company's vulnerability to takeover attempts and certain other
transactions that are not negotiated with or approved by the Board of
Directors. In the judgment of the Company, its Board of Directors will be in
the best position to determine the true value of the Company and negotiate
effectively for what might be in the best interests of its stockholders.
Accordingly, the Company believes that it is in the best interests of the
Company and its stockholders to encourage potential acquirors to negotiate
directly with the Board of Directors, and that these provisions will both
encourage this negotiation and discourage hostile takeover attempts. It is
also the Company's view that these provisions should not discourage persons
from proposing mergers or other transactions at prices that reflect the true
value of the Company and are in the best interest of all of the stockholders.
PLAN OF DISTRIBUTION
The shares of Common Stock issuable upon the exercise of the Warrants
are being offered by the Company through its officers and directors who will
receive no commissions or other direct or indirect compensation in connection
therewith. This Prospectus will be delivered to all Warrant holders of record
as of the date hereof. Any supplement or amendment to this Prospectus will be
provided to all Warrant holders of record on the date the same is filed with or
declared effective by the Securities and Exchange Commission, as applicable.
The Warrants are exercisable at a price of $5.75 through November 16,
1998. Persons who wish to exercise their Warrants must deliver an executed
Warrant with the Subscription Form, duly executed and accompanied by payment in
check or money order payable to "Century Bancshares, Inc." (the "Warrant
Agent"). All payments must be received by the Warrant Agent prior to the
Expiration Date, and Warrants which are not exercised prior to the Expiration
Date will expire.
The Company may redeem the Warrants, in whole or in part, at any time
after November 14, 1997 until the Expiration Date.
EXPERTS
The consolidated statements of financial condition as of December 31,
1995 and 1994 and the consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three year
period ended December 31, 1995, included in this Prospectus have been included
herein in reliance upon the report of KPMG Peat Marwick LLP, Independent
Certified Public Accountants, given on the authority of that firm as experts in
accounting and auditing.
-58-
<PAGE> 60
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Bracewell &
Patterson, L.L.P., Houston, Texas. Mr. John R. Cope, a director and officer
of the Company as well as the Bank, is a partner in the law firm of Bracewell &
Patterson, L.L.P. Mr. Cope and other partners of Bracewell & Patterson, L.L.P.
own in the aggregate approximately 4% of the shares of Common Stock.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement
(together with all amendments and exhibits thereto, the "Registration
Statement"), on Form S-1 under the Securities Act with respect to the Common
Stock offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information set forth
in the Registration Statement, of which this Prospectus is a part. For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement, including the exhibits, annexes and schedules
thereto. Although the Prospectus contains a discussion of the terms of any
contracts or other documents referred to in the Prospectus that the Company
believes to be material to investors, statements contained in this Prospectus
are not necessarily complete. In each instance, if such contract is filed as
an exhibit, each such statement is qualified in its entirety by reference to
such exhibit. The Registration Statement and the exhibits and schedules
thereto may be inspected without charge at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and upon request at the Commission's regional offices located at:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Copies of such information may be accessed through the
Commission's Internet web site at http://www.sec.gov.
-59-
<PAGE> 61
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF
CENTURY BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
CENTURY BANCSHARES, INC. AND SUBSIDIARY,
CONSOLIDATED FINANCIAL STATEMENTS:
INTERIM PERIODS (UNAUDITED):
Consolidated Statement of Financial Condition as of June 30, 1996
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the six month periods
ended June 30, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statement of Stockholders' Equity for the six months
ended June 30, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Condensed Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . F-6
FULL FISCAL YEARS (AUDITED):
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
Consolidated Statements of Financial Condition as of December 31, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-16
</TABLE>
F-1
<PAGE> 62
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL
CONDITION
June 30, 1996
(unaudited)
<TABLE>
<S> <C>
Assets
------
Cash and due from banks $ 5,704,182
Interest-bearing deposits in other banks 5,751,493
Investment securities available-for-sale,
at fair value (Note 1) 9,621,531
Investment securities held to maturity, at cost,
fair value of $878,595 (Note 1) 877,719
Loans, net of unearned income 71,454,888
Less - allowance for loan losses (830,271)
-------------
Loans, net 70,624,617
Leasehold improvements, furniture, and equipment, net 1,571,799
Accrued interest receivable 611,334
Other real estate owned 184,657
Deposit premium (Note 2) 290,330
Other assets 1,329,890
-------------
$ 96,567,552
=============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits:
Noninterest-bearing $ 21,219,299
Interest-bearing 62,110,910
-------------
Total deposits 83,330,209
Short-term borrowings 5,380,806
Other liabilities 1,036,229
-------------
Total liabilities 89,747,244
-------------
Stockholders' equity (Note 3):
Preferred stock, issuable in series, 1,000,000 shares
authorized, no shares issued and outstanding --
Common Stock, $1 par value; 2,000,000 shares authorized;
1,123,685 shares issued and outstanding at June 30, 1996 1,123,685
Additional paid-in capital 4,827,935
Retained earnings 939,071
Unrealized loss on investment securities
available-for-sale, tax effect ( 70,383)
-------------
Total stockholders' equity 6,820,308
Commitments and contingencies
-------------
$ 96,567,552
=============
</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements.
F-2
<PAGE> 63
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loan $ 3,385,113 $ 2,843,961
Interest on federal funds sold 56,642 35,535
Interest on deposits in other banks 642 11,353
Interest on investment securities 316,858 549,756
----------- -----------
Total interest income 3,759,255 3,440,605
----------- -----------
Interest expense:
Interest on deposits:
Certificates $100,000 and over 355,381 285,680
Certificates under $100,000 320,240 303,748
NOW accounts 128,107 131,480
Savings accounts 29,585 36,731
Money market accounts 365,346 386,979
Interest on short-term borrowings 132,731 55,140
----------- -----------
Total interest expense 1,331,390 1,199,758
----------- -----------
Net interest income 2,427,865 2,240,847
Provision for loan losses -- 8,899
----------- -----------
Net interest income after
provision for loan losses 2,427,865 2,231,948
----------- -----------
Noninterest income:
Service charges on deposits accounts 213,157 173,118
Other operating income 140,662 74,032
Loss on sale of securities -- (3,197)
----------- -----------
Total noninterest income 353,819 243,953
----------- -----------
Noninterest expenses:
Salaries and employee benefits 950,814 922,855
Occupancy and equipment expense 242,083 254,224
Depreciation and amortization 188,667 70,367
Professional fees 265,738 151,325
Data processing 132,901 101,853
Federal deposit insurance premiums 27,039 99,739
Communications 93,992 77,020
Provision for losses on other real estate
owned -- 47,450
Other operating expenses 379,756 285,496
----------- -----------
Total noninterest expenses 2,280,990 2,010,329
----------- -----------
Income before income tax
expense 500,694 465,572
Income tax expense 191,704 177,962
----------- -----------
Net income 308,990 $ 287,610
=========== ===========
Income per common share
(Note 4) .26 $ .28
=========== ===========
Weighted average common and common
equivalent shares outstanding (Note 4) 1,174,116 967,726
=========== ===========
</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements
F-3
<PAGE> 64
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six Months ended December 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Unrealized
loss on
investment
Common Stock Additional securities
----------------------- paid-in- Retained available-
Shares Amount capital earnings for-sale Total
-------- ------------ ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,046,047 $1,046,047 $4,410,876 $1,110,086 $ (68,064) $6,498,945
Stock dividend (7% of
shares outstanding) 73,847 73,847 406,158 (480,005) -- --
Issuance of common stock on
exercise of stock options 3,791 3,791 10,901 -- -- 14,692
Net income -- -- -- 308,990 -- 308,990
Unrealized loss on investment
securities available for
sale, net of tax effect -- -- -- -- (2,319) (2,319)
--------- ------------ ----------- ---------- ------------ -----------
Balance, June 30, 1996 1,123,685 1,123,685 4,827,935 939,071 (70,383) 6,820,308
========= ============ =========== ========== ============ ===========
</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements.
F-4
<PAGE> 65
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
---- ----
<S> <C> <C>
Net Income $ 308,990 $ 287,610
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and Amortization 188,667 70,367
Provision for loan losses -- 8,899
Loans charged off (net of recoveries) (90,151) 79,597
Provision for losses on other real estate owned -- 111,281
Loss on sale of other real estate owned -- 11,883
Loss on sale of securities -- 3,197
(INCREASE) DECREASE IN:
Accrued interest receivable (22,204) 48,933
Other assets (447,828) (335,812)
INCREASE (DECREASE) IN:
Other liabilities 243,852 (5,299)
------------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 181,327 280,656
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan repayments (originations), net $ (2,071,501) $ (3,173,020)
Decrease in interest bearing deposits in other banks 280,207 170,694
Purchase (maturities) of securities 466,879 (1,132,060)
Maturities of securities available for sale 2,714,804 1,585,899
Proceeds from sale of investment securities -- 3,941,086
Deposit premium -- (62,845)
Purchase of leasehold improvements, furniture and equipment (280,456) (579,158)
Proceeds from sale of other real estate owned 8,001 707,082
------------- ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,117,934 1,457,678
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net maturities of certificates of deposit $ (633,194) $(1,722,212)
Net increase (decrease) in demand, savings and
money market deposits (6,575,909) (1,798,215)
Payment of dividend on preferred stock -- (18,398)
Proceeds from issuance of common stock 15,567 --
Increase in short term borrowings 1,572,896 1,660,501
------------- ------------
NET CASH USED BY FINANCING ACTIVITIES (5,620,640) (1,878,324)
------------ -----------
NET DECREASE IN CASH AND EQUIVALENTS (4,321,379) (139,990)
CASH AND CASH EQUIVALENT, BEGINNING OF YEAR 10,025,561 5,912,803
------------- ------------
CASH AND CASH EQUIVALENT, JUNE 30TH $ 5,704,182 $ 5,772,813
------------- ------------
INTEREST PAID ON DEPOSITS $ 1,349,389 $ 871,046
------------- ------------
INCOME TAXES PAID (REFUNDED) $ 408,000 $ (3,938)
------------- ------------
TRANSFER OF LOANS TO OTHER REAL ESTATE OWNED $ -- $ 993,496
------------- ------------
</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements.
F-5
<PAGE> 66
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED) JUNE 30, 1996 AND
1995
The unaudited consolidated financial statements as of and for the six
months ended June 30, 1996 and June 30, 1995 have not been audited but, in the
opinion of management, contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position and
results of operations of the Company as of such date and for such periods. The
unaudited consolidated financial statements should be read in conjunction with
the Consolidated Financial Statements of the Company and the Notes thereto
appearing elsewhere herein. The results of operations for the six months ended
June 30, 1996 are not necessarily indicative of the results of operations that
may be expected for the year ending December 31, 1996 or for any future
periods.
(1) Investment Securities
Investment securities available-for-sale, and their contractual
maturities, at June 30, 1996, are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Obligations of U.S. Treasury,
government agencies and
corporations:
Within one year $ 5,999,750 312 $11,938 $5,988,124
After one, but within five years 1,000,000 -0- 23,800 976,200
After ten years 992,050 -0- 21,638 970,412
----------- --- ------- ----------
Total 7,991,800 312 57,376 7,934,736
Collateralized mortgage obligations:
After ten years 1,738,015 -0- 51,220 1,686,295
----------- --- ------- ----------
Total investment securities
available-for-sale $ 9,729,815 312 $98,596 $9,621,531
=========== === ======= ==========
</TABLE>
F-6
<PAGE> 67
Investment securities held-to-maturity at June 30, 1996, are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Municipal securities:
Within one year $ 85,000 $ 68 -0- $ 85,068
After one, but within five years 164,865 808 -0- 165,673
-------- ------ ------- --------
Total $249,865 876 -0- 250,741
Federal Reserve Bank stock 119,350 -0- -0- 119,350
Federal Home Loan Bank stock 508,504 -0- -0- 508,504
-------- ------ ------- --------
Total investment securities
held-to-maturity $877,719 $ 876 -0- $878,595
======== ====== ======= ========
</TABLE>
(2) Deposit Premium and SAIF Insurance
Because it retained possession of the Pennsylvania Avenue branch lease
space previously occupied by the Resolution Trust Corporation ("RTC"), the
Company was obligated to purchase from the RTC all of the branch-related
furniture, fixtures, and equipment at the RTC's book value. This price exceeded
the fair value of certain assets purchased in 1994 by $62,045, which amount was
classified as an additional premium paid for the acquisition of the branch
deposits. The purchased deposits of the Pennsylvania Avenue branch are insured
by the Savings Association Insurance Fund ("SAIF"). These SAIF deposits will
be assessed a one-time insurance premium of approximately $21,000 as a result
of recent Federal legislation.
(3) Stock Option Plans
Stock option transactions for the six months ended June 30, 1996, are
summarized as follows:
<TABLE>
<CAPTION>
Total Options Option Price Per Share
------------- ----------------------
<S> <C> <C>
Outstanding, January 1, 1996 152,250 $1.61 to $5.37
Granted 32,485 $6.00
Forfeited -- $4.04 to $4.24
Exercised (3,791)
--------
Outstanding, June 30, 1996 180,944 $1.61 to $6.00
========
Exercisable, June 30, 1996 147,275 $1.61 to $6.00
========
</TABLE>
In connection with the 7% stock dividend effective March 31, 1996, the number
of shares subject to any outstanding options, as well as the exercise price per
share, have been appropriately and equitably adjusted, pursuant to the stock
option plans, so as to maintain the proportionate number of shares without
changing the aggregate option price. In the table above, the shares and prices
per share have been adjusted to reflect the stock dividend.
F-7
<PAGE> 68
(4) Income Per Common Share
On March 19, 1996, the Company declared a 7% stock dividend to Common
Stock holders of record as of March 29, 1995, resulting in the issuance of
73,151 shares of Common Stock on April 20, 1996. Weighted average shares
outstanding and income per common share have been restated for the effect of
the stock dividend.
F-8
<PAGE> 69
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Century Bancshares, Inc.:
We have audited the accompanying consolidated statements of financial condition
of Century Bancshares, Inc. and subsidiary as of December 31, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the years in the three-year period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Century Bancshares,
Inc. and subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
March 15, 1996
F-9
<PAGE> 70
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
December 31, 1995 and 1994
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 8,045,561 5,912,803
Federal funds sold 1,980,000 -
Interest bearing deposits in other banks 6,031,700 192,767
Investment securities available-for-sale, at fair value 12,961,735 21,679,053
Investment securities, at cost, fair value of $718,849 and $774,426 in 1995
and 1994, respectively 716,879 782,202
Loans, net of unearned income 69,203,965 60,663,208
Less - allowance for loan losses (740,000) (740,000)
- ----------------------------------------------------------------------------------------------------------------------------
Loans, net 68,463,965 59,923,208
- ----------------------------------------------------------------------------------------------------------------------------
Leasehold improvements, furniture, and equipment, net 1,454,056 239,622
Accrued interest receivable 589,130 581,621
Other real estate owned 192,658 -
Deposit premium 320,847 293,045
Other assets 882,062 524,821
- ----------------------------------------------------------------------------------------------------------------------------
$ 101,638,593 90,129,142
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
Liabilities:
Deposits:
Noninterest-bearing $ 24,712,204 20,122,284
Interest-bearing 65,827,158 61,958,975
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits 90,539,362 82,081,259
Short-term borrowings 3,807,910 2,200,000
Other liabilities 792,376 970,982
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 95,139,648 85,252,241
- ----------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, issuable in series, 1,000,000 shares authorized: Series A
cumulative preferred stock, $1 par value; $7.50 liquidation
preference (none in 1995 and $459,953 in 1994); no shares
issued and outstanding in 1995 and 66,500 shares
authorized, 61,327 shares issued and outstanding in 1994 - 61,327
Common stock, $1 par value; 2,000,000 shares authorized; 1,046,047
and 823,232 shares issued and outstanding at
December 31, 1995 and 1994, respectively 1,046,047 823,232
Additional paid in capital 4,410,876 3,855,651
Retained earnings 1,110,086 706,836
Unrealized loss on investment securities available-for-sale, net of
tax effect (68,064) (570,145)
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 6,498,945 4,876,901
- ----------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
$ 101,638,593 90,129,142
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE> 71
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 6,010,907 4,801,905 4,572,307
Interest on federal funds sold 37,145 64,967 182,451
Interest on deposits in other banks 56,258 9,622 93,211
Interest on securities available-for-sale 917,605 790,967 606,614
Interest on securities held to maturity 57,272 43,665 -
- -----------------------------------------------------------------------------------------------------
Total interest income 7,079,187 5,711,126 5,454,583
- -----------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits:
Certificates $100,000 and over 636,236 441,693 350,874
Certificates under $100,000 631,662 480,060 569,383
NOW accounts 258,428 248,148 261,651
Savings accounts 67,189 66,341 59,929
Money market accounts 777,954 617,731 700,348
Interest on loan payable - 4,246 33,622
Interest on short term borrowings 190,295 43,323 10,832
- -----------------------------------------------------------------------------------------------------
Total interest expense 2,561,764 1,901,542 1,986,639
- -----------------------------------------------------------------------------------------------------
Net interest income 4,517,423 3,809,584 3,467,944
Provision for loan losses 26,347 19,431 310,270
- -----------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 4,491,076 3,790,153 3,157,674
- -----------------------------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts 378,739 340,291 344,322
Other operating income 214,797 226,505 227,262
Loss on sale of securities (3,197) (11,748) -
- -----------------------------------------------------------------------------------------------------
Total noninterest income 590,339 555,048 571,584
- -----------------------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE> 72
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Noninterest expenses:
Salaries and employee benefits $ 1,926,939 1,594,625 1,417,496
Occupancy and equipment expense 516,617 438,355 360,678
Depreciation and amortization 151,471 136,180 58,857
Professional fees 327,174 324,431 320,850
Data processing 332,363 180,900 216,371
Federal deposit insurance premiums 88,146 169,185 169,117
Communications 161,090 113,802 106,994
Provision for losses on other real estate owned 48,445 - 3,393
Other operating expenses 492,408 423,273 382,624
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest expenses 4,044,653 3,380,751 3,036,380
- -----------------------------------------------------------------------------------------------------------------------------
Income before income tax expense 1,036,762 964,450 692,878
Income tax expense 357,164 373,546 263,900
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 679,598 590,904 428,978
- -----------------------------------------------------------------------------------------------------------------------------
Income per common share $ .69 .62 .45
- -----------------------------------------------------------------------------------------------------------------------------
Weighted average common and common equivalent shares
outstanding 933,222 896,522 861,780
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE> 73
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Preferred stock Common stock
---------------------- ---------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992 62,335 $ 62,335 743,837 $ 743,837
Stock dividend (5% of shares outstanding) - - 37,166 37,166
Issuance of common stock - - 1,313 1,313
Preferred stock dividend ($.60 per share) - - - -
Net income - - - -
Unrealized loss on investment securities
available-for-sale, net of tax effect - - - -
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 62,335 62,335 782,316 782,316
Stock dividend (5% of shares outstanding) - - 39,061 39,061
Repurchase of preferred stock (1,008) (1,008) - -
Issuance of common stock - - 1,855 1,855
Preferred stock dividend ($.60 per share) - - - -
Net income - - - -
Unrealized loss on investment securities
available-for-sale, net of tax effect - - - -
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 61,327 61,327 823,232 823,232
Stock options - - 7,831 7,831
Stock dividend (5% of shares outstanding) - - 41,072 41,072
Redemption of preferred stock (33,878) (33,878) - -
Exchange of preferred stock (27,449) (27,449) 35,814 35,814
Issuance of common stock - - 138,098 138,098
Preferred stock dividend - - - -
Net income - - - -
Unrealized gain on investment securities available-for-
sale, net of tax effect - - - -
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 - $ - 1,046,047 $ 1,046,047
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Additional Retained Unrealized loss on
paid-in earnings investment securities
capital (deficit) available-for-sale Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992 3,933,529 (238,849) - 4,500,852
Stock dividend (5% of shares outstanding) (37,166) - - -
Issuance of common stock 1,643 - - 2,956
Preferred stock dividend ($.60 per share) - (37,401) - (37,401)
Net income - 428,978 - 428,978
Unrealized loss on investment securities
available-for-sale, net of tax effect - - (24,844) (24,844)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 3,898,006 152,728 (24,844) 4,870,541
Stock dividend (5% of shares outstanding) (39,061) - - -
Repurchase of preferred stock (6,552) - - (7,560)
Issuance of common stock 3,258 - - 5,113
Preferred stock dividend ($.60 per share) - (36,796) - (36,796)
Net income - 590,904 - 590,904
Unrealized loss on investment securities
available-for-sale, net of tax effect - - (545,301) (545,301)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 3,855,651 708,836 (570,145) 4,876,901
Stock options 15,616 - - 23,447
Stock dividend (5% of shares outstanding) 195,092 (236,164) - -
Redemption of preferred stock (220,207) - - (254,085)
Exchange of preferred stock (8,365) - - -
Issuance of common stock 573,089 - - 711,187
Preferred stock dividend - (40,184) - (40,184)
Net income - 679,598 - 679,598
Unrealized gain on investment securities available-for-
sale, net of tax effect - - 502,081 502,081
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 4,410,876 1,110,086 (68,064) 6,498,945
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-13
<PAGE> 74
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 679,598 590,904 428,978
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 186,682 136,180 58,857
Provision for loan losses 26,347 19,431 310,270
Provision for losses on other real estate owned 48,445 - 3,393
Loss on sale of securities 3,197 11,748 -
Loss (gain) on sale of other real estate owned 11,883 - (23,395)
(Increase) decrease in accrued interest receivable (7,509) (82,396) (48,498)
Decrease (increase) in other assets (357,241) (117,490) 157,117
Increase (decrease) in other liabilities (178,606) (255,459) 121,951
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 412,796 302,918 1,008,673
Cash flows from investing activities:
Loan repayments and recoveries (originations), net (8,916,980) (4,077,823) (637,794)
Net decrease (increase) in interest_bearing deposits in
other banks (5,838,933) (169,388) 5,256,621
Purchases of securities available_for_sale (1,010,160) (10,454,516) (20,573,337)
Purchases of securities held to maturity - (254,852) -
Maturities of securities available-for-sale 6,553,254 7,404,794 7,300,000
Proceeds from sale of investment securities 3,738,431 2,164,757 -
Purchase of leasehold improvements, furniture and
equipment, net of disposals (1,366,073) (95,203) (73,109)
Proceeds from sale of other real estate owned 96,890 - 220,000
- -----------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (6,743,571) (5,482,231) (8,507,619)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
F-14
<PAGE> 75
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Net issuances (maturities) of certificates of deposit $ 3,868,183 2,072,464 (691,535)
Net increase in demand, savings, and
money market deposits 4,589,920 26,296 9,561,160
Deposit premium (62,845) (303,000) -
Repayments of loan payable - (207,000) (333,000)
Repurchase of preferred stock (254,085) (7,560) -
Issuance of common stock 734,634 5,113 2,956
Dividend paid on preferred stock (40,184) (36,796) (37,401)
Increase in short-term borrowings 1,607,910 2,200,000 -
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 10,443,533 3,749,517 8,502,180
Net increase (decrease) in cash and cash equivalents 4,112,758 (1,429,796) 1,003,234
Cash and cash equivalents, beginning of year 5,912,803 7,342,599 6,339,365
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 10,025,561 5,912,803 7,342,599
Supplemental disclosures of cash flow information:
Interest paid on deposits and borrowings $ 2,483,398 1,902,707 1,938,141
- ------------------------------------------------------------------------------------------------------------------
Income taxes paid (refunded) $ 19,222 (88,190) (67,694)
- ------------------------------------------------------------------------------------------------------------------
Transfer of loans to other real estate owned $ 946,366 - -
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE> 76
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
================================================================================
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The primary business of Century Bancshares, Inc. (the Company) and its
subsidiary, Century National Bank (Century Bank) is to attract
deposits from individual and corporate customers and to originate
loans secured by residential and commercial real estate, business
assets, and other personal property. The Company operates primarily in
the District of Columbia and targets individuals and businesses in
professional services as its clientele. The Company is subject to
competition from other financial institutions in attracting and
retaining deposits and in making loans. The Company and Century Bank
are subject to the regulations of certain agencies of the federal
government and undergo periodic examinations by those agencies.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements have been prepared on the accrual basis and
in conformity with generally accepted accounting principles. In
preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ significantly
from those estimates.
The consolidated financial statements include the accounts of the
Company and Century Bank. All significant intercompany accounts and
transactions have been eliminated in consolidation.
INVESTMENT SECURITIES
The Company classifies its debt and marketable equity securities in
one of three categories: trading, available-for-sale, or
held-to-maturity. Trading securities are bought and held principally
for the purpose of selling them in the near term. Held-to-maturity
securities are those securities that the Company has the ability and
intent to hold until maturity. All other securities not classified as
trading or held-to-maturity are classified as available-for-sale. The
Company does not engage in trading activities and, accordingly, has no
trading portfolio.
Available-for-sale and trading securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted
for the amortization or accretion of premiums or discounts. Unrealized
holding gains and losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and are
reported as a separate component of stockholders' equity until
realized.
A decline in the market value of any available-for-sale or
held-to-maturity security below cost that is deemed other than
temporary is charged to earnings, resulting in the establishment of a
new cost basis for the security.
(Continued)
F-16
<PAGE> 77
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(1) CONTINUED
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to yield using the effective
interest method. Dividend and interest income are recognized when
earned. Realized gains and losses for securities classified as
available-for-sale and held-to-maturity are included in earnings and
are derived using the specific identification method for determining
the cost of securities sold.
Prepayment of the mortgages securing the collateralized mortgage
obligations may affect the maturity date and yield to maturity. The
Company uses actual principal prepayment experience and estimates of
future principal prepayments in calculating the yield necessary to
apply the effective interest method.
INCOME RECOGNITION ON LOANS
Interest on loans is credited to income as earned on the principal
amount outstanding. When, in management's judgment, the full
collectibility of principal or interest on a loan becomes uncertain,
that loan is placed on a cash basis (nonaccrual) for purposes of
income recognition. Accrued but uncollected interest on nonaccrual
loans is charged against current income.
Interest accruals are resumed on such loans only when they are brought
fully current with respect to principal and interest and when, in the
judgment of management, the loans have demonstrated a new period of
performance and are estimated to be fully collectible as to both
principal and interest.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is a valuation allowance available for
losses incurred on loans. It is established through charges to
earnings in the form of provisions for loan losses. Loan losses are
charged to the allowance for loan losses when a determination is made
that collection is unlikely to occur. Recoveries are credited to the
allowance at the time of recovery.
Prior to the beginning of each year, and quarterly during the year,
management estimates whether the allowance for loan losses is adequate
to absorb losses that can be anticipated in the existing portfolio.
Based on these estimates, an amount is charged to the provision for
loan losses to adjust the allowance to a level determined to be
adequate to absorb currently anticipated losses.
(Continued)
F-17
<PAGE> 78
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(1) CONTINUED
Management's judgment as to the level of future losses on existing
loans involves management's internal review of the loan portfolio,
including an analysis of the borrowers' current financial position,
the consideration of current and anticipated economic conditions and
their potential effects on specific borrowers; an evaluation of the
existing relationships among loans, potential loan losses, and the
present level of the loan loss allowance; and results of examinations
by independent consultants. In determining the collectibility of
certain loans, management also considers the fair value of any
underlying collateral. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the
Company's allowances for losses on loans and other real estate owned.
Such agencies may require the Company to recognize additions to the
allowances based on their judgments about information available to
them at the time of their examination.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment
of a Loan, as amended by Statement 118, Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures
(collectively referred to as SFAS 114). SFAS 114 addresses the
accounting by creditors for the impairment of all loans except for
large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment, and certain other types of
loans specifically excluded by the Standard.
SFAS 114 requires that impaired loans be measured at the present value
of expected future cash flows discounted at the loan's effective
interest rate, or at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. A loan is
considered impaired when, based on current information and events, it
is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the original loan agreement. The
adoption of SFAS 114 did not have a significant effect on the
Company's financial statements.
LOAN FEES
Loan origination fees and direct loan origination costs are deferred
and recognized either upon the sale of a loan or amortized as an
adjustment to yield over the life of the loan.
LEASEHOLD IMPROVEMENTS, FURNITURE, AND EQUIPMENT
Leasehold improvements, furniture, and equipment are stated at cost,
less accumulated depreciation and amortization. Amortization of
leasehold improvements is computed using the straight-line method over
the estimated useful lives of the improvements or the lease term,
whichever is shorter. Depreciation of furniture and equipment is
computed using the straight-line method over their estimated useful
lives.
(Continued)
F-18
<PAGE> 79
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(1) CONTINUED
OTHER REAL ESTATE OWNED
Real estate acquired through foreclosure is recorded at the lower of
cost or fair value less estimated selling costs. Management
periodically evaluates the recoverability of the carrying value of
other real estate owned. Costs relating to property improvements are
capitalized, and costs relating to holding properties are charged to
expense. Gains or losses on the sale of other real estate owned are
recognized upon disposition of the property.
INCOME TAXES
The Company accounts for income taxes based upon the asset and
liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
INCOME PER COMMON SHARE
Income per common share is computed by dividing net income less
preferred stock dividends by the weighted average number of common and
common equivalent shares (when dilutive and significant) outstanding
during the year. Common equivalent shares result from stock options
and warrants outstanding and are computed using the treasury stock
method.
On March 23, 1994, the Company declared a 5 percent stock dividend to
common stock shareholders of record as of March 31, 1994, resulting in
the issuance of 39,061 shares. On March 14, 1995, the Company declared
a 5 percent stock dividend to common stock shareholders of record as
of March 31, 1995, resulting in the issuance of 41,072 shares.
Weighted average shares outstanding and income per common share have
been restated for the effect of the stock dividends.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company has defined cash and
cash equivalents as those amounts included in cash and due from banks
and federal funds sold.
(Continued)
F-19
<PAGE> 80
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(1) CONTINUED
NEW ACCOUNTING STANDARDS NOT YET IMPLEMENTED
During March 1995 the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long Lived Assets and For Long-Lived Assets to
be Disposed Of (SFAS 121). SFAS 121 provides guidance for recognition
and measurement of impairment of long-lived assets and certain
intangible assets. SFAS 121 is effective for fiscal years beginning
after December 15, 1995. Management does not expect that the adoption
of SFAS 121 will have a material impact on the Company's financial
condition or results of operations.
During May 1995 the FASB issued SFAS No. 122, Accounting for Mortgage
Servicing Rights. SFAS 122 is effective for fiscal years beginning
after December 15, 1995. Management does not expect that the adoption
of SFAS 122 will have a material impact on the Company's financial
condition or results of operations.
During October 1995 the FASB issued SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS 123 defines a fair value approach to
measuring employee stock options. In lieu of recording the value of
such options as compensation expense, companies may provide pro forma
disclosures quantifying the difference between compensation cost
included in net income as prescribed by current accounting standards
and the cost measured using the fair value approach. SFAS 123 is
effective for awards granted in fiscal years beginning after December
15, 1995. Management does not expect to change its current method of
accounting for stock options.
RECLASSIFICATIONS
Certain amounts for 1994 and 1993 have been reclassified to conform to
the presentation for 1995.
(2) RESTRICTED CASH
Under Federal Reserve Board regulations, banks are required to
maintain cash reserves against certain categories of deposit
liabilities. Cash balances qualified to meet these reserve
requirements consist of vault cash and balances on deposit with the
Federal Reserve Bank. Such restricted cash balances are included in
"Cash and due from banks" in the consolidated statements of financial
condition and amount to approximately $235,000 and $910,000 as of
December 31, 1995 and 1994, respectively.
(Continued)
F-20
<PAGE> 81
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(3) INVESTMENT SECURITIES
Investment securities available-for-sale, and their contractual
maturities, at December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995
----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of U.S. Treasury,
government agencies and
corporations:
Within one year $ 9,001,131 - 26,133 8,974,998
After one, but within five years 1,000,000 - 7,400 992,600
After ten years 1,116,701 - 15,669 1,101,032
-----------------------------------------------------------------------------------------------------------------------
Total 11,117,832 - 49,202 11,068,630
Collateralized mortgage obligations:
After ten years 1,948,619 - 55,514 1,893,105
-----------------------------------------------------------------------------------------------------------------------
Total investment securities available-for-sale $ 13,066,451 - 104,716 12,961,735
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1994
---------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of U.S. Treasury,
government agencies and
corporations:
Within one year $ 5,961,438 - 71,125 5,890,313
After one, but within five years 12,978,693 - 545,168 12,433,525
After ten years 1,323,396 - 61,749 1,261,647
-----------------------------------------------------------------------------------------------------------------------
Total 20,263,527 - 678,042 19,585,485
Collateralized mortgage obligations:
After ten years 2,292,672 - 199,103 2,093,568
-----------------------------------------------------------------------------------------------------------------------
Total investment securities available-for-sale $ 22,556,199 - 877,145 21,679,053
=======================================================================================================================
</TABLE>
(Continued)
F-21
<PAGE> 82
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(3) CONTINUED
Expected maturities may differ from contractual maturities of mortgage
backed securities and collateralized mortgage obligations because
borrowers have the right to prepay their obligations at any time.
Investment securities held-to-maturity at December 31, 1995 and 1994
are summarized as follows:
<TABLE>
<CAPTION>
1995
---------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal securities-maturing
Within one year $ 85,000 170 - 85,170
After one, but within five years 164,829 1,802 - 166,631
--------------------------------------------------------------------------------------------------------------------------
Total 249,829 1,972 - 251,801
Federal Reserve Bank stock 119,350 - - 119,350
Federal Home Loan Bank stock 347,700 - - 347,700
--------------------------------------------------------------------------------------------------------------------------
$ 716,879 1,972 - 718,851
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1994
---------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal securities - maturing after one but
within five years $ 249,752 - 7,776 241,976
Federal Reserve Bank stock 119,350 - - 119,350
Federal Home Loan Bank stock 413,100 - - 413,100
--------------------------------------------------------------------------------------------------------------------------
$ 782,202 - 7,776 774,426
==========================================================================================================================
</TABLE>
Securities carried at $1,000,866 and $1,002,560 at December 31, 1995
and 1994, respectively, were pledged to secure public deposits and for
other purposes as required by law.
(Continued)
F-22
<PAGE> 83
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(3) CONTINUED
As a member of the Federal Reserve and Federal Home Loan Bank Systems,
Century Bank is required to hold stock in the Federal Reserve Bank of
Richmond and the Federal Home Loan Bank of Atlanta. These stocks,
which have no stated maturity, are carried at cost since no active
trading markets exist.
During January 1995, Century Bank entered into a principal membership
agreement with Mastercard International for the credit card business
Century Bank established in 1995. As part of the agreement, Century
Bank pledged securities worth $1,000,000.
(4) LOANS RECEIVABLE
The loan portfolio consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1995 1994
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial $ 13,212,532 10,375,877
Real estate - residential 27,007,742 27,773,228
Real estate - commercial 11,910,244 9,357,921
Real estate - construction 1,545,143 788,310
Consumer 9,985,863 6,474,801
Home equity 5,640,012 6,003,519
-------------------------------------------------------------------------------------------------------------------------
69,301,536 60,773,656
Unearned income (97,571) (110,448)
-------------------------------------------------------------------------------------------------------------------------
69,203,965 60,663,208
Allowance for loan losses (740,000) (740,000)
-------------------------------------------------------------------------------------------------------------------------
Loans, net $ 68,463,965 59,923,208
=========================================================================================================================
</TABLE>
Loans on which the accrual of interest has been discontinued amounted
to approximately $8,000, $628,000, and $322,000 at December 31, 1995,
1994, and 1993, respectively. Interest lost on these nonaccrual loans
was approximately $1,000, $32,000, and $2,000 for 1995, 1994, and
1993, respectively. Interest paid on these nonaccrual loans was
approximately $3,500, $13,500, and $3,000 for 1995, 1994, and 1993,
respectively.
(Continued)
F-23
<PAGE> 84
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(4) CONTINUED
Analysis of the activity in the allowance for loan losses is as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------
1995 1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 740,000 730,000 744,422
Provision for loan losses 26,347 19,431 310,270
Loans charged off (198,126) (106,105) (386,586)
Recoveries 171,779 96,674 61,894
-------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 740,000 740,000 730,000
===================================================================================================================
</TABLE>
An analysis of the activity of loans to directors, officers, and their
affiliates during the years ended December 31, 1995 and 1994, is as
follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 2,566,970 1,868,931
Additions 1,550,080 1,629,291
Payments (796,937) (931,252)
-------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 3,320,113 2,566,970
===================================================================================================================
</TABLE>
In the opinion of management, all transactions entered into between
the Company and such related parties have been and are in the ordinary
course of business and made on the same terms and conditions as
similar transactions with unaffiliated persons.
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and standby letters of credit and financial guarantees.
Commitments to extend credit are agreements to lend to a customer so
long as there is no violation of any condition established in the
contract. Commitments usually have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of the contractual obligations by
a customer to a third party. The majority of these guarantees extend
until satisfactory completion of the customer's contractual
obligations. All standby letters of credit outstanding at December 31,
1995, are collateralized.
(Continued)
F-24
<PAGE> 85
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(4) CONTINUED
Those instruments may involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the
consolidated statements of financial condition. Credit risk is defined
as the possibility of sustaining a loss because the other parties to a
financial instrument failed to perform in accordance with the terms of
the contract. The Company's maximum exposure to credit loss under
standby letters of credit and commitments to extend credit is
represented by the contractual amounts of those instruments.
<TABLE>
<CAPTION>
Contractual or
notional amount
------------------------------------------------------------------------------------------------------------------
<S> <C>
Financial instruments whose contract amounts represent potential credit risk:
Commitments to extend credit $ 13,910,000
Standby letters of credit 882,000
==================================================================================================================
</TABLE>
At December 31, 1995, the Company did not have any financial
instruments whose notional or contractual amounts exceed the amount of
credit risk.
The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
The Company evaluates each customer's creditworthiness on a
case-by-case basis and requires collateral to support financial
instruments when deemed necessary. The amount of collateral obtained
upon extension of credit is based on management's evaluation of the
counterparty. Collateral held varies but may include deposits held by
the Company; marketable securities; accounts receivable; inventory;
property, plant and equipment; and income-producing commercial
properties.
Most of the Company's business activity is with customers located in
the District of Columbia, Maryland, and northern Virginia.
Accordingly, the ultimate collectibility of a substantial portion of
the Company's loan portfolio is susceptible to changes in conditions
in these markets.
Industry concentrations in excess of 10 percent of total loans where
the borrowers as a group might be affected similarly by economic
changes consist of loans to members of the legal profession, health
care profession, and service companies. Century offers lines of
credit, home equity lines, and mortgage loans to these groups. The
aggregate total of loans to such groups was approximately $13.9
million, $9.1 million, and $9.0 million respectively, as of December
31, 1995. The amount of such loans which are past due or considered by
management to be potential problem loans is not material.
(Continued)
F-25
<PAGE> 86
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(5) LEASEHOLD IMPROVEMENTS, FURNITURE, AND EQUIPMENT
Leasehold improvements, furniture, and equipment consist of the
following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1995 1994
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Leasehold improvements $ 1,233,384 888,963
Furniture and equipment 1,904,090 882,438
-------------------------------------------------------------------------------------------------------------------
3,137,474 1,771,401
Less accumulated depreciation and amortization (1,683,418) (1,531,779)
-------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 1,454,056 239,622
===================================================================================================================
</TABLE>
Depreciation and amortization expense was $151,471, $77,377, and
$58,857 for 1995, 1994, and 1993, respectively.
(6) DEPOSITS
Major classifications of deposits consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1995 1994
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Noninterest-bearing - demand deposits $ 24,712,204 20,122,284
-------------------------------------------------------------------------------------------------------------------------
Interest-bearing:
NOW accounts 15,132,526 12,083,692
Savings accounts 2,226,283 2,814,662
Money market accounts 22,144,836 24,986,673
Certificates of deposit:
Less than $100,000 12,407,734 14,197,539
$100,000 and over 13,915,779 7,876,409
-------------------------------------------------------------------------------------------------------------------------
65,827,158 61,958,975
-------------------------------------------------------------------------------------------------------------------------
Total deposits $ 90,539,362 82,081,259
=========================================================================================================================
</TABLE>
On September 16, 1994, Century Bank acquired deposit accounts of
approximately $9.1 million, for which it paid a premium of $366,000.
The premium is amortized over the estimated remaining lives of the
deposit account relationships on a straight-line basis.
(Continued)
F-26
<PAGE> 87
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(7) STOCKHOLDERS' EQUITY
On November 14, 1995, the Company issued 173,912 Units pursuant to an
Offering made on September 15, 1995, to existing holders of the
Company's Common and Preferred Stock. Each Unit consisted of one share
of Common Stock and one Warrant. The offering price was $5.75 per
Unit.
Each Warrant entitles the holder thereof to purchase one share of
Common Stock at a price of $5.75 per share, subject to adjustment. The
Warrants may be exercised at any time from November 15, 1996 through
November 16, 1998. The Warrants may be repurchased by the Company at
any time on and after November 14, 1997 at a price of $.26 per
Warrant.
Holders of the Company' Series A Cumulative Convertible Preferred
Stock were given the opportunity to exchange their Preferred Stock for
Units at an exchange ratio of 1.305 Units per share of Preferred
Stock. At the time of the Offering, there were 61,327 shares of
Preferred Stock outstanding. A total of 27,449 shares of Preferred
Stock were exchanged, resulting in the issuance of 35,814 Units and
the payment of $40 to redeem fractional shares.
The remaining 138,098 Units were sold for cash, yielding net proceeds
to the Company of $711,187 after payment of costs associated with the
Offering. The Company used a portion of such proceeds to redeem the
remaining 33,878 shares of Preferred Stock, which was callable at
$7.50 per share. All of the Preferred Stock was redeemed, or funds set
aside therefor, as of December 10, 1995, at an aggregate cost of
$254,085.
The holders of Preferred Stock were entitled to receive annual
cumulative dividends equal to $.60 per share per year, payable
semiannually. Regular dividends amounting to $36,796, $36,796. and
$37,401 were paid during 1995, 1994, and 1993, respectively.
Additional dividends paid during 1995, in the amount of $3,388,
represented accrued dividends through December 10, 1995, on shares
redeemed.
(8) STOCK OPTION PLANS
Pursuant to the Century Bancshares, Inc. 1994 Stock Option Plan ("1994
Plan") the Company in 1994 reserved 150,000 shares of its common stock
for the issuance of incentive stock options and nonqualified stock
options to directors and key employees. As of December 31, 1995, after
adjusting for stock dividends and stock option activity, there are
155,821 shares of stock reserved for issuance pursuant to the 1994
Plan, of which 83,277 shares are reserved for outstanding options and
72,544 shares are reserved for future option grants.
(Continued)
F-27
<PAGE> 88
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(8) CONTINUED
In addition, there remain outstanding certain options granted to
directors and key employees under two prior option plans ("Prior
Plans") which expired in 1992 and 1993. As of December 31, 1995, after
adjusting for stock dividends and stock option activity, there are
59,012 shares of stock reserved for issuance pursuant to options
granted under the Prior Plans, which options are still valid and were
not affected by the Plans' expiration. As of December 31, 1995, all
options granted under the Prior Plans are fully exercisable.
In 1994, the Company issued nonqualified stock options to certain key
employees to replace options intended to have been granted in 1992 and
1993, when no stock option plan was in effect, with the option price
for each such option being equal to the option price previously
intended. With the exception of these replacement options, all options
issued pursuant to the Prior Plans and the 1994 Plan are priced at no
less than 100 percent of the fair market value of the stock on the
date of the option grant.
In connection with the 5 percent stock dividend effective July 31,
1993, March 31, 1994, and March 31, 1995, the number of shares subject
to any outstanding options, as well as the exercise price per share,
have been appropriately and equitably adjusted, pursuant to the stock
option plans, so as to maintain the proportionate number of shares
without changing the aggregate option price. Additionally, in
connection with the 5 percent stock dividend effective March 31, 1995,
the number of shares reserved for the issuance of future options
pursuant to the 1994 Plan have been proportionately increased as
prescribed in the 1994 Plan. In the tables below, the shares and
prices per share have been adjusted to reflect the stock dividends.
(Continued)
F-28
<PAGE> 89
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(8) CONTINUED
Stock option transactions for the years ended December 31, 1995, 1994,
and 1993, are summarized as follows:
<TABLE>
<CAPTION>
Total options Option price per share
------------- --------------------------
<S> <C> <C> <C>
Outstanding December 31, 1992 97,709 $1.73 to $9.07
Granted 11,183 3.02 to 3.02
Forfeited (22,202) 1.73 to 9.07
Exercised (1,448) 1.73 to 4.10
------------------------------------------------------------------------------------
Outstanding December 31, 1993 85,242 1.73 to 9.07
Granted 62,324 2.16 to 4.52
Forfeited (14,553) 1.73 to 9.07
Exercised (2,241) 1.73 to 4.10
------------------------------------------------------------------------------------
Outstanding December 31, 1994 130,772 1.73 to 9.07
Granted 32,668 5.75 to 5.75
Forfeited (13,320) 2.16 to 9.07
Exercised (7,831) 1.73 to 4.52
------------------------------------------------------------------------------------
Outstanding December 31, 1995 142,289 1.73 to 5.75
------------------------------------------------------------------------------------
Exercisable, December 31, 1995 122,697 1.73 to 5.75
------------------------------------------------------------------------------------
</TABLE>
(Continued)
F-29
<PAGE> 90
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(9) INCOME TAXES
The provision for taxes on income for the years ended December 31,
1995, 1994, and 1993, consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal income tax $ 627,042 29,600 237,000
State income tax 127,114 (39,416) 53,900
-------------------------------------------------------------------------------------------------------------------
754,156 (9,816) 290,900
Deferred:
Federal income tax (benefit) (329,404) 289,682 (20,000)
State income tax (benefit) (67,588) 93,680 (7,000)
-------------------------------------------------------------------------------------------------------------------
(396,992) 383,362 (27,000)
-------------------------------------------------------------------------------------------------------------------
Total income tax $ 357,164 373,546 263,900
===================================================================================================================
</TABLE>
The difference between the statutory federal income tax rates and the
effective income tax rates for 1995, 1994, and 1993, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0 34.0
State income taxes, net of federal benefit 1.0 4.0 4.4
Nondeductible expenses - 0.7 0.4
Other (0.5) - (0.7)
-------------------------------------------------------------------------------------------------------------------
Effective income tax rate 34.5 38.7 38.1
===================================================================================================================
</TABLE>
(Continued)
F-30
<PAGE> 91
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(9) CONTINUED
The following is a summary of the tax effects of temporary differences
that give rise to significant portions of the deferred tax assets and
deferred tax liabilities at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Fixed assets $ 109,032 58,362
Book general loan loss reserve 432,395 432,395
Deferred rent expense 71,343 76,095
Deferred loan fees 39,936 30,012
Vacation pay accrual 29,631 21,073
Director' deferred compensation 53,970 36,625
-------------------------------------------------------------------------------------------------------------------
Deferred tax assets 736,307 654,562
-------------------------------------------------------------------------------------------------------------------
Liabilities:
Federal Home Loan Bank stock dividends (11,583) (14,039)
Tax bad debt reserve (269,393) (284,092)
Unrealized losses on investments designated as available-for-sale
recognized for tax purposes (37,043) (356,060)
Other (71,791) (50,866)
-------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities (389,810) (705,057)
-------------------------------------------------------------------------------------------------------------------
Net deferred tax asset (liability) attributable to operations 346,497 (50,495)
Unrealized losses on investments available-for-sale charged directly to
stockholders' equity 36,650 307,001
-------------------------------------------------------------------------------------------------------------------
Net deferred tax asset $ 383,147 256,506
==================================================================================================================
</TABLE>
Net deferred tax assets of $383,147 and $256,506 at December 31, 1995
and 1994, respectively, are included in other assets.
The Company has not established a valuation allowance for deferred tax
assets. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not some portion
or all of the deferred tax assets will not be realized. Based on the
level of historical taxable income during the carryback period and the
reversal of certain deferred tax liabilities, management believes it
is more likely than not the Company will realize the benefits of these
deductible differences.
(Continued)
F-31
<PAGE> 92
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(10) PROFESSIONAL FEES TO RELATED PARTIES
Included in professional fees are legal fees paid to law firms whose
partners are directors of the Company or the Bank, totaling
approximately $102,000, $81,000, and $129,000 for the years ended
December 31, 1995, 1994, and 1993, respectively.
(11) EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) plan which covers substantially all
employees. Participants may contribute up to 6 percent of their
compensation. The Company matches 50 percent of participant
contributions to the Plan. This matching contribution totaled
approximately $21,000 for each of the years ended December 31, 1995,
1994, and 1993.
(12) COMMITMENTS
The Company leases its banking facilities under operating leases
providing for payment of fixed rentals and providing for pass-through
of certain landlord expenses, with options to renew. Rental expense
was approximately $323,600, $301,000, and $223,000 for the years ended
December 31, 1995, 1994, and 1993, respectively. Total future minimum
rental payments at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
-------------------------------------------------------------
<S> <C>
1996 $ 352,000
1997 272,000
1998 238,000
1999 240,000
2000 240,000
Thereafter 528,000
-------------------------------------------------------------
1,870,000
=============================================================
</TABLE>
(13) DIVIDENDS FROM SUBSIDIARY
Dividends paid to the Company by Century Bank are subject to
restrictions by regulatory agencies. As of December 31, 1995,
approximately $1,539,000 was available to be paid to the Company in
dividends from Century Bank, pursuant to such regulatory restrictions.
As described in note 14, regulatory agencies have established laws and
guidelines with respect to the maintenance of appropriate levels of
bank capital that could further limit the amount available for payment
of dividends by Century Bank under regulatory restrictions if applied
in the future.
(Continued)
F-32
<PAGE> 93
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(14) CAPITAL AND LIQUIDITY
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) requires regulators to stratify depository institutions into
five quality tiers based upon their relative capital strengths and to
increase progressively the degree of regulation over the weaker ones,
limits the pass-through deposit insurance treatment of certain types
of accounts, adopts a "Truth in Savings" program, calls for the
adoption of risk-based premiums on deposit insurance, and requires
banks to observe insider credit underwriting procedures no less strict
than those applied to comparable non-insider transactions.
The Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) of 1989 requires depository institutions to maintain minimum
capital levels. In addition to its capital requirements, FIRREA
includes provisions for changes in the federal regulatory structure
for institutions, including a new deposit insurance system, increased
deposit insurance premiums, and restricted investment activities with
respect to noninvestment grade corporate debt and certain other
investments.
At December 31, 1995, the Company and Century Bank met regulatory
minimum capital levels. The key measures of capital are: (1) Tier I
capital (stockholders' equity less certain deductions) as a percent of
total risk adjusted assets; (2) Tier I capital as a percent of total
assets, and (3) total capital (Tier I capital plus the allowance for
loan losses up to certain limitations) as a percent of total risk
adjusted assets. The following table summarizes Century Bank's capital
position at December 31, 1995:
<TABLE>
<CAPTION>
(Unaudited)
------------------------------------------------------------------------------------------------
"Well "Adequately"
Century Bank capitalized" capitalized"
ratio minimum minimum
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier I/Assets 6.83% 5.00% 4.00%
Tier I/Risk Adjusted Assets 9.29% 6.00% 4.00%
Total Capital/Risk Adjusted Assets 10.41% 10.00% 8.00%
</TABLE>
During 1993, Century Bank entered into a line of credit arrangement
with the Federal Home Loan Bank of Atlanta. There was $2.2 million and
zero outstanding under the borrowing arrangement at December 31, 1995
and 1994, respectively; the amount available under such arrangement
totaled $13.3 million. The interest rate at December 31, 1995 was 6.10
percent; the balance matures in June 1996. The line of credit is
secured by a blanket lien on 1-4 family whole first mortgage loans.
(Continued)
F-33
<PAGE> 94
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(15) PARENT COMPANY-ONLY FINANCIAL STATEMENTS
The Century Bancshares, Inc. (parent company-only) condensed financial
statements are as follows:
<TABLE>
<CAPTION>
Statements of Financial Condition
--------------------------------------------------------------------------------------------------------------------
December 31, 1995 and 1994
ASSETS 1995 1994
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 56,769 167,519
Investment in Century Bank 6,430,174 4,808,492
Other assets 21,205 201,340
--------------------------------------------------------------------------------------------------------------------
$ 6,508,148 5,177,351
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------------------
Liabilities:
Notes payable $ - -
Other liabilities 9,203 300,450
--------------------------------------------------------------------------------------------------------------------
9,203 300,450
--------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock - 61,327
Common stock 1,046,047 823,232
Additional paid-in capital 4,410,876 3,855,651
Retained earnings 1,110,086 706,836
Unrealized loss on investment securities available-for-sale, net of tax
effect (68,064) (570,145)
--------------------------------------------------------------------------------------------------------------------
6,498,945 4,876,901
--------------------------------------------------------------------------------------------------------------------
$ 6,508,148 5,177,351
====================================================================================================================
</TABLE>
(Continued)
F-34
<PAGE> 95
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(15) CONTINUED
<TABLE>
<CAPTION>
Statements of Operations
------------------------------------------------------------------------------------------------------------------
Years ended December 31, 1995, 1994, and 1993
1995 1994 1993
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends from Century Bank $ - 140,000 111,000
Other income 929 1,336 84,661
------------------------------------------------------------------------------------------------------------------
929 141,336 195,661
------------------------------------------------------------------------------------------------------------------
Expenses:
Interest expense - 4,246 33,622
Other expenses 50,915 17,291 14,095
------------------------------------------------------------------------------------------------------------------
50,915 21,537 47,717
------------------------------------------------------------------------------------------------------------------
Net income (loss) before income tax benefit and equity
in undistributed earnings of bank subsidiary (49,986) 119,799 147,944
Income tax benefit (9,983) (8,203) (10,875)
------------------------------------------------------------------------------------------------------------------
Net income before equity in undistributed earnings of
bank subsidiary (40,003) 128,002 158,819
Equity in undistributed earnings of Century Bank 719,601 462,902 270,159
------------------------------------------------------------------------------------------------------------------
Net income $ 679,598 590,904 428,978
==================================================================================================================
</TABLE>
(Continued)
F-35
<PAGE> 96
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
===============================================================================
(15) CONTINUED
<TABLE>
<CAPTION>
Statements of Cash Flows
------------------------------------------------------------------------------------------------------------------
Years ended December 31, 1995, 1994, and 1993
1995 1994 1993
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 679,598 590,904 428,978
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Undistributed earnings of Century Bank (719,601) (462,902) (270,159)
Decrease in other assets 180,135 174,434 108,741
Increase (decrease) in other liabilities (291,247) 52,847 (111,867)
------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (151,115) 355,283 155,693
------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital contributions to Century Bank (400,000) - -
------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (400,000) - -
------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Repayments under notes payable - (207,000) (333,000)
Repurchase of preferred stock (254,085) (7,560) -
Issuance of common stock 734,634 5,113 2,956
Preferred stock dividends paid (40,184) (36,796) (37,401)
------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 440,365 (246,243) (367,445)
------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (110,750) 109,040 (211,752)
Cash and cash equivalents, beginning of year 167,519 58,479 270,231
------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 56,769 167,519 58,479
Supplemental disclosures of cash flow information:
Interest paid $ - 4,246 35,639
Income taxes paid (refunded) 11,222 (88,190) (67,694)
=================================================================================================================
</TABLE>
(Continued)
F-36
<PAGE> 97
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(16) FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosure About
Fair Value of Financial Instruments (FAS 107), requires the disclosure
of estimated fair values for financial instruments. Quoted market
prices, if available, are utilized as an estimate of the fair value of
financial instruments. Because no quoted market prices exist for a
portion of Century Bank's financial instruments, the fair value of
such instruments has been derived based on management's assumptions
with respect to future economic conditions, the amount and timing of
future cash flows and estimated discount rates. Different assumptions
could significantly affect these estimates. Accordingly, the net
realizable value could be materially different from the estimates
presented below. In addition, the estimates are only indicative of
individual financial instruments' values and should not be considered
an indication of the fair value of Century Bank taken as a whole.
CASH AND INTEREST BEARING DEPOSITS WITH OTHER BANKS
For cash and due from banks and interest-bearing deposits with other
banks, the carrying amount approximates fair value.
INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES
For these instruments, fair values are based on published market or
dealer quotes.
LOANS, NET
The fair value of loans is estimated by discounting the future cash
flows, including estimated prepayments of principal, using the current
rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
ACCRUED INTEREST RECEIVABLE
The carrying amount approximates fair value.
NONINTEREST-BEARING DEPOSITS
The fair value of these deposits is the amount payable on demand at
the reporting date.
INTEREST-BEARING DEPOSITS
The fair value of demand deposits, savings accounts, and money market
deposits with no defined maturity is the amount payable on demand at
the reporting date. The fair value of certificates of deposit is
estimated by discounting the future cash flows using the current rates
at which similar deposits would be accepted.
(Continued)
F-37
<PAGE> 98
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(16) CONTINUED
ADVANCE FROM FEDERAL HOME LOAN BANK OF ATLANTA AND OTHER BORROWINGS
The carrying amount for variable rate borrowings approximate the fair
values at the reporting date. The fair values of the fixed rate
borrowings are estimated by discounting the future cash flows using
interest rates currently available for borrowings with similar terms
and remaining maturities.
ADVANCE PAYMENTS BY BORROWERS FOR TAXES AND INSURANCE
The carrying amount approximates fair value.
ACCRUED INTEREST PAYABLE
The carrying amount approximates fair value.
OFF-BALANCE SHEET ITEMS
Century Bank has reviewed the unfunded portion of commitments to
extend credit, as well as standby and other letters of credit, and has
determined that the fair value of such instruments is not material.
(Continued)
F-38
<PAGE> 99
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
(16) CONTINUED
The estimated fair values of Century Bank's financial instruments
required to be disclosed under SFAS No. 107 at December 31, 1995
follows:
<TABLE>
<CAPTION>
Carrying Fair
Assets value value
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and interest-bearing deposits with other banks $ 8,045,561 8,045,561
Federal funds sold 1,980,000 1,980,000
Interest-bearing deposits with other banks 6,031,700 6,031,700
Investment securities 13,783,330 13,680,586
Loans, net 68,463,965 75,871,743
Accrued interest receivable 589,130 587,130
Liabilities
---------------------------------------------------------------------------------------------------
Noninterest-bearing deposits 24,712,204 24,712,204
Interest-bearing deposits 65,827,158 70,915,705
Short-term borrowings 3,807,910 3,807,910
Accured interest payable 157,882 157,882
</TABLE>
================================================================================
F-39
<PAGE> 100
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses in connection with the
shares of Common Stock being registered. All amounts shown below are
estimates, except the registration fee:
<TABLE>
<S> <C>
Registration fee of Securities and Exchange Commission . . . . $ 304
Accountants' fees and expenses . . . . . . . . . . . . . . . . $ *
--------
Legal fees and expenses . . . . . . . . . . . . . . . . . . . $ *
--------
Printing fees . . . . . . . . . . . . . . . . . . . . . . . . $ *
--------
Transfer Agent fees . . . . . . . . . . . . . . . . . . . . . $ *
--------
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . $ *
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ *
--------
</TABLE>
*To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware General Corporation Law
Section 145 of the Delaware General Corporation Law provides
generally that a person sued as a director, officer, employee or agent of a
corporation may be indemnified by the corporation for reasonable expenses,
including attorneys' fees, if in the case of other than derivative suits, such
person has acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation (and, in the
case of a criminal proceeding, had no reasonable cause to believe that such
person's conduct was unlawful). In the case of a derivative suit, an officer,
employee or agent of the corporation may be indemnified by the corporation for
reasonable expenses, including attorneys' fees, if such person has acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification shall be made in the case of a derivative suit in respect of
any claim as to which an officer, employee or agent has been adjudged to be
liable to the corporation unless that person is fairly and reasonably entitled
to indemnity for proper expenses. Indemnification is mandatory in the case of
a director, officer, employee, or agent who is successful on the merits in
defense of a suit against such person.
Certificate of Incorporation
Consistent with applicable law, the Company's Certificate of
Incorporation limits a director's monetary liability to the Company or its
stockholders for breach of fiduciary duty, except for breaches of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, unlawful dividend payments or acts
from which the director derived an improper personal benefit. The Company's
Certificate of Incorporation does not limit the availability of equitable
remedies based on breach of fiduciary duty and does not limit a director's
liability for violations of the federal
II-1
<PAGE> 101
securities laws. The Company believes that the foregoing provisions of its
Certificate of Incorporation may assist it in attracting and retaining qualified
individuals to serve on its Board of Directors.
Indemnification Agreements
The Company has entered into indemnification agreements with its
officers and directors. The indemnification agreements require the Company to
indemnify each of such persons to the full extent permitted by Delaware law and
provide for the advancement of expenses to them on receipt of an undertaking to
repay any advances to which such persons are later determined not to be
entitled.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On November 14, 1995, the Company issued and sold an aggregate
of 173,913 Units, each Unit consisting of one share of Common Stock and one
warrant to purchase Common Stock (the"Units"), in reliance upon the exemption
provided by Section 3(b) of the Securities Act of 1933, as amended and Rule 504
of Regulation D promulgated thereunder. The Units were offered and sold
exclusively to holders of record as of September 15, 1995 of shares of the
Company's Common Stock and shares of the Company's Preferred Stock. No other
person was permitted to subscribe for Units in the offering.
The Units were offered and sold for cash, at a price of $5.75 per
Unit, of which $5.49 represented the purchase price of the Common Stock, and
$.26 was attributable to the Warrant. In addition to cash subscriptions,
holders of the Company's Preferred Stock were given the opportunity to
subscribe for the Units by voluntarily exchanging shares of Preferred Stock for
Units.
During the past three fiscal years and the nine months ended
September 30, 1996 the Company has issued an aggregate of 19,024 shares of its
Common Stock upon the exercise of outstanding stock options granted to employees
or directors at prices ranging from $1.73 to $5.37 per share. All such sales
shares were made in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<S> <C>
3.1 Certificate of Incorporation, as amended of the Company.
3.2 Bylaws of the Company.
3.3 Articles of Association of the Bank.
4.1 Form of Warrant.
4.2 Form of Common Stock certificate.
5* Opinion and Consent of Bracewell & Patterson, L.L.P., as to the
validity of the Common Stock registered hereunder.
</TABLE>
II-2
<PAGE> 102
<TABLE>
<S> <C>
10.1 Century Bancshares, Inc. 1994 Stock Option Plan.
10.2 Incentive Stock Option Plan for Key Employees, as amended.
10.3 Nonqualified Stock Option Plan for Key Employees, as amended.
10.4 Nonqualified Stock Option Plan for Directors, as amended.
10.5 Form of Director Compensation Agreement between the Company and
its directors.
10.6 Form of Indemnity Agreement between Company and the persons named
therein.
10.7 Employment Agreement dated September 1, 1996, between the Company
and Mr. Joseph S. Bracewell.
10.8 Lease Agreement dated January 3, 1995, between the Bank and
Pennsylvania Building Associates.
10.9 Lease and Services Agreement dated November 17, 1995, between
ALLIANCE Greensboro, L.P., a Delaware limited partnership d/b/a/
ALLIANCE Business Centers, and the Bank.
10.10 Retail Lease dated January 14, 1982, between the Square 106
Associates and the Bank, as amended on March 14, 1984, December
18, 1991, February 12, 1992, October 27, 1995, and June 1, 1996.
10.11 Sublease Agreement, dated May 1, 1992, between the Company and the
Bank.
21 Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP, independent auditors of the
Company (See page II-8).
23.2* Consent of Bracewell & Patterson, L.L.P. (included in the opinion
filed as Exhibit 5 hereto).
24 Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
II-3
<PAGE> 103
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in this registration statement or any material change to such
information in this registration statement;
Provided, however, that the undertakings set forth in
paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(b) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment
should be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(d) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised
that in the opinion of the 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 whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
II-4
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has caused this Registration Statement or amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
District of Columbia on the 18th day of October, 1996.
CENTURY BANCSHARES INC.
(Registrant)
By: /S/ JOSEPH S. BRACEWELL
----------------------------------
Joseph S. Bracewell
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment has been signed by the following persons in
the capacities indicated and on the 18th day of October, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ JOSEPH S. BRACEWELL Chairman of the Board, President
- ---------------------------------- and Chief Executive Officer
Joseph S. Bracewell (Principal Financial and Accounting
Officer)
Director
- ----------------------------------
*George Contis
Director and Vice President
- ----------------------------------
*John R. Cope
Director and Assistant Secretary
- ----------------------------------
*Bernard J. Cravath
Director
- ----------------------------------
*Neal R. Gross
</TABLE>
II-5
<PAGE> 105
<TABLE>
<CAPTION>
Signature Position
--------- --------
<S> <C>
Director
- ----------------------------------
*Joseph H. Koonz, Jr.
Director
- ----------------------------------
*William McKee
Director and Secretary
- ----------------------------------
*William C. Oldaker
By: /s/ JOSEPH S. BRACEWELL
-------------------------------
Joseph S. Bracewell*
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 106
EXHIBIT INDEX
3.1 Certificate of Incorporation, as amended of the Company.
3.2 Bylaws of the Company.
3.3 Articles of Association of the Bank.
4.1 Form of Warrant.
4.2 Form of Common Stock certificate.
5* Opinion and Consent of Bracewell & Patterson, L.L.P., as to the
validity of the Common Stock registered hereunder.
10.1 Century Bancshares, Inc. 1994 Stock Option Plan.
10.2 Incentive Stock Option Plan for Key Employees, as amended.
10.3 Nonqualified Stock Option Plan for Key Employees, as amended.
10.4 Nonqualified Stock Option Plan for Directors, as amended.
10.5 Form of Director Compensation Agreement between the Company and
its directors.
10.6 Form of Indemnity Agreement between Company and the persons named
therein.
10.7 Employment Agreement dated September 1, 1996, between the Company
and Mr. Joseph S. Bracewell.
10.8 Lease Agreement dated January 3, 1995, between the Bank and
Pennsylvania Building Associates.
10.9 Lease and Services Agreement dated November 17, 1995, between
ALLIANCE Greensboro, L.P., a Delaware limited partnership d/b/a/
ALLIANCE Business Centers, and the Bank.
10.10 Retail Lease dated January 14, 1982, between the Square 106
Associates and the Bank, as amended on March 14, 1984, December
18, 1991, February 12, 1992, October 27, 1995, and June 1, 1996.
10.11 Sublease Agreement, dated May 1, 1992, between the Company and the
Bank.
21 Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP, independent auditors of the
Company (See page II-8).
23.2* Consent of Bracewell & Patterson, L.L.P. (included in the opinion
filed as Exhibit 5 hereto).
24 Powers of Attorney.
27 Financial Data Schedule.
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
CENTURY BANCSHARES, INC.
ARTICLE I
The name of the corporation is Century Bancshares, Inc.
ARTICLE II
The registered agent of the corporation is The Corporation Trust Company.
The address of such registered agent is 1209 Orange Street, County of New
Castle, Wilmington, Delaware 19801.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE IV
The total number of shares which the corporation shall have the authority
to issue is 3,000,000, of which 2,000,000 shares of the par value of $1.00 each
shall be shares of common stock, and 1,000,000 shares of the par value of $1.00
each shall be shares of preferred stock.
The corporation may issue one or more series of preferred stock. The
preferred stock of each such series shall have such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative,
participating, optional, redemption, conversion, exchange or other special
rights, and qualifications, limitations or restrictions thereof, as shall be
stated and
<PAGE> 2
expressed by the board of directors in the resolution or resolutions providing
for the issue of such series of preferred stock pursuant to the authority to do
so which is hereby expressly vested in the board of directors.
Except as otherwise provided in any resolution or resolutions of the board
of directors providing for the issue of any particular series of preferred
stock, the number of shares of stock of any such series so set forth in such
resolution or resolutions may be increased or decreased (but not below the
number of shares of such series then outstanding) by a resolution or
resolutions likewise adopted by the board of directors.
Except as otherwise provided in any resolution or resolutions of the board
of directors providing for the issue of any particular series of preferred
stock, preferred stock redeemed or otherwise acquired by the corporation shall
assume the status of authorized but unissued preferred stock and shall be
unclassified as to series and may thereafter, subject to the provisions of this
Article IV and to any restrictions contained in any resolution or resolutions
of the board of directors providing for the issue of any such series of
preferred stock, be reissued in the same manner as other authorized but
unissued preferred stock.
Except as otherwise specifically required by law or as specifically
provided in any resolution or resolutions of the board of directors providing
for the issue of any particular series of preferred stock, the exclusive voting
power of the corporation shall be vested in the common stock of the
corporation. Each share of common stock entitles the holder thereof to one vote
at all meetings of the stockholders of the corporation.
-2-
<PAGE> 3
ARTICLE V
The name and address of the incorporator of Century Bancshares, Inc. is as
follows:
Name Mailing Address
---- ---------------
William T. Luedke IV 2900 South Tower Pennzoil Place
Houston, Texas 77002
ARTICLE VI
The name and mailing address of each person who is to serve as a director
of the corporation until the first annual meeting of the stockholders of the
corporation or until a successor is elected and qualified is as follows:
Name Mailing Address
---- ---------------
Joseph S. Bracewell Century National Bank
1875 Eye Street, N.W.
Washington, D.C. 20006
John R. Cope Bracewell & Patterson
1825 Eye Street, 12th Floor
Washington, D.C. 20006
William H. Isaac T/I Associates
1910 K Street, N.W., Suite 800
Washington, D.C. 20006
Joseph H. Koonz, Jr. Koonz, McKenney & Johnson
2020 K Street, N.W., Suite 840
Washington, D.C. 20006
William C. Oldaker 1140 19th Street, N.W. Suite 900
Washington, D.C. 20463
-3-
<PAGE> 4
Douglas J. Patton Federal Election Commission
1325 K Street, N.W.
Washington, D.C. 20463
ARTICLE VII
In furtherance and not in limitation of the powers conferred by statute,
the board of directors is expressly authorized to adopt, amend or repeal the
by-laws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot unless the by-laws of
the corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes of the State of Delaware)
outside the State of Delaware at such place or places as may be designated from
time to time by the board of directors or in the by- laws of the corporation.
ARTICLE IX
The corporation reserves the right to amend, alter or repeal any provision
contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by the laws of the State of Delaware, and to add additional
provisions authorized by such laws as are then in force. All rights conferred
on the directors or stockholders of the corporation herein or in any amendment
hereof are granted subject to this reservation.
-4-
<PAGE> 5
I, THE UNDERSIGNED, being the incorporator hereinabove named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do hereby make this Certificate, hereby declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand this 17th of July, 1985.
/s/ WILLIAM T. LUEDKE IV
-------------------------------------
William T. Luedke IV
-5-
<PAGE> 6
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CENTURY BANCSHARES, INC.
Century Bancshares, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: That the Board of Directors of the Corporation (the "Board"), at a
meeting duly called and held on February 11, 1987 (the "Board Meeting"), at
which meeting a quorum was present and acting throughout, adopted a resolution
proposing and declaring advisable and in the best interest of the Corporation
that as permitted by Section 102 of the General Corporation Law of the State of
Delaware, the Corporation's Certificate of Incorporation ("Certificate") be
amended by adding thereto a new Article X which shall be and read in its
entirety as follows:
"ARTICLE X
No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that the foregoing clause
shall not apply to any liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. This Article X shall not
eliminate or limit the personal liability of a director for any action or
omission occurring prior to the date Article X becomes effective."
<PAGE> 7
SECOND: That at the Board Meeting, the Board adopted a resolution
proposing and declaring advisable and in the best interest of the Corporation
that the Certificate be amended by adding thereto a new Article XI which shall
be and read in its entirety as follows:
"ARTICLE XI
No action required to be taken or that may be taken at any annual or
special meeting of stockholders of the corporation may be taken by written
consent without a meeting, prior notice and a vote."
THIRD: That at the Board Meeting, the Board adopted a resolution
proposing. and declaring advisable and in the best interest of the Corporation
that the Certificate be amended by adding thereto a new Article XII which shall
be and read in its entirety as follows:
"ARTICLE XII
With respect solely to the following five corporate actions, for which
the Delaware General Corporation Law provides for the affirmative vote or
consent of the holders of a majority of the outstanding shares of capital
stock of the corporation or any class or series thereof entitled to vote
(and, with respect to any class or series of capital stock established by
resolution of the Board of Directors, subject to the provisions of the
resolutions establishing such class or series), to the extent, and only to
the extent, that such vote or consent is provided for by the Delaware
General Corporation Law, the affirmative vote or consent of the holders of
at least two-thirds, rather than a majority, of the outstanding shares of
capital stock of the corporation or such class or series thereof entitled
to vote shall be required to take such action: (i) the amendment of the
Certificate of Incorporation of the corporation; (ii) the merger or
consolidation of the corporation; (iii) the sale, lease, or exchange of all
or substantially all of the property and assets of the-corporation; (iv)
the adoption of any plan or proposal for the liquidation or dissolution of
the corporation; or (v) the revocation of a dissolution of the
corporation."
-2-
<PAGE> 8
FOURTH: That at the Board Meeting, the Board directed that the preceding
proposed amendments to the Certificate be presented to the stockholders of the
Corporation for their consideration and recommended the adoption of such
amendments by the stockholders of the Corporation.
FIFTH: That thereafter, at the annual meeting of the Corporation's
stockholders duly called and, upon notice in accordance with the provisions of
Section 222 of the General Corporation Law of the State of Delaware, held on
February 27, 1987 the holders of more than the majority of the outstanding
shares of capital stock of the Corporation entitled to vote thereon approved
each and all of the aforesaid amendments to the Certificate.
SIXTH: That the aforesaid amendments were duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Joseph S. Bracewell III, as President of the
Corporation, and Rosemary M. DeMark, as Assistant Secretary of the Corporation,
this 27th day of February, 1987.
CENTURY BANCSHARES, INC.
By: /s/ JOSEPH S. BRACEWELL III
------------------------------------
Joseph S. Bracewell III
President
-3-
<PAGE> 9
ATTEST:
/s/ ROSEMARY M. DEMARK
Rosemary M. DeMark
Secretary
-4-
<PAGE> 1
EXHIBIT 3.2
[COMPOSITE]
CENTURY BANCSHARES, INC.
BYLAWS
ARTICLE I.
Meetings of Stockholders
Section 1. The annual meeting of stockholders shall be held at such
date and time and at such place as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting, for the purposes of
electing directors and transacting such other business as may properly come
before the meeting.
Section 2. Special meetings of the stockholders may be called at any
time for any purpose or purposes (a) by the President of the Corporation, or
(b) by the Board of Directors of the Corporation, or (c) by the President or
Secretary of the Corporation (i) at the request in writing of a majority of the
Board of Directors, or (ii) at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Upon written request of any person or persons
who have duly called a special meeting, it shall be the duty of the Secretary
of the Corporation to mail written notice of such meeting to the stockholders
as provided in Section 4 hereof within five days after receipt of the request
and to give due notice hereof. If the Secretary shall neglect or refuse to fix
the date of the meeting and give notice thereof, the person or persons calling
the meeting may do so.
Section 3. To be properly brought before any meeting of stockholders for
consideration, business must be (a) specified in the notice of meeting given by
or at the direction of the President or the Board of Directors (or any
supplement thereto); (b) otherwise properly brought before the
<PAGE> 2
meeting by or at the direction of the Board of Directors; or (c) properly
brought before the meeting by a stockholder. If a stockholder desires to bring
business before a meeting for consideration, he must submit timely written
notice of the proposed business to the Secretary of the Corporation (the
"Secretary"), including with such notice the information specified below.
In the case of the annual meeting of stockholders, to be timely a
stockholder's notice must be delivered to or mailed and received at the
principal office of the Corporation, not less than sixty days in advance of the
date of the Corporation's notice of annual meeting given in connection with the
previous year's annual meeting. If, however, no annual meeting was held in the
previous year or the date of the annual meeting has been changed by more than
thirty days from the date contemplated at the time of the previous year's
notice of annual meeting, a proposal shall be received by the Corporation a
reasonable time before notice of the meeting (and any accompanying solicitation
of proxies) is made. In the case of a special meeting of stockholders, to be
timely a stockholders' notice must be received by the Corporation a reasonable
period of time prior to the date of the meeting to allow sufficient time for
the dissemination of information to stockholders; provided, however, that if at
least thirty calendar days notice of the meeting has been given to
stockholders, a stockholders' notice must be received by the Company no later
than the date which is ten days prior to the date of the meeting.
A stockholder's notice of proposed business shall set forth as to each
matter the stockholder proposes to bring before the meeting of stockholders the
following information:
(a) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at such
meeting;
-2-
<PAGE> 3
(b) the name and address of the stockholder proposing such
business;
(c) the class, series (if applicable) and number of shares of
the Corporation which are beneficially owned by the stockholder; and
(d) any material interest of the stockholder in the business
proposed.
In addition to the foregoing information, if the business which the stockholder
proposes to bring before the meeting of stockholders is the election to the
Board of Directors of a person or group of persons to be nominated by or on
behalf of the stockholder, the notice shall contain the information required by
Article II, Section 11 of these Bylaws.
After receipt of the stockholder's notice and prior to commencement of
the meeting of stockholders, the Board of Directors, to the extent allowed by
law, may consider the subject matter of the proposed business and reasons for
conducting such business at the meeting to determine if such business should be
considered.
Business timely submitted by a stockholder in accordance with the
foregoing procedures will be considered at the meeting of stockholders, unless
the Board of Directors determines that the proposed business should not be
conducted at such meeting. If the business will not be considered at the annual
meeting, the Board of Directors shall notify the presiding officer of the
annual meeting of such determination and the presiding officer shall declare to
the meeting that such proposed business is not properly before the meeting and
will not be considered.
With respect to any business to be considered, the presiding officer of
the meeting may determine that such business has not been brought properly
before the meeting in accordance with
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the provisions of this Section and, if such determination is made, such
business will not be considered.
Section 4. Every special meeting of the stockholders shall be held at
such place within or without the State of Delaware as the Board of Directors
may designate, or, in the absence of such designation, at the registered office
of the Corporation in the State of Delaware.
Section 5. Written notice of every meeting of the stockholders shall be
given by the Secretary of the Corporation to each stockholder of record
entitled to vote at the meeting, by placing such notice addressed to each
stockholder at his address appearing on the books of the Corporation or
supplied by him to the Corporation for the purpose of notice in the mail,
postage prepaid, not less than ten nor more than sixty days prior to the day
named for the meeting.
Section 6. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 7. The Board of Directors may fix a date, not less than ten nor
more than sixty days preceding the date of any meeting of stockholders, as a
record date for the determination of stockholders entitled to notice of, or to
vote at, any such meeting. The Board of Directors shall not close the books of
the Corporation against transfers of shares during the whole or any part of
such period.
Section 8. The notice of every meeting of the stockholders may be
accompanied by a form of proxy approved by the Board of Directors in favor of
such person or persons as the Board of Directors may select.
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Section 9. Except as otherwise provided by law or by the Certificate of
Incorporation of the Corporation, as from time to time amended, or by these
By-Laws, the presence in person or by proxy of the holders of a majority of the
outstanding shares of stock of the Corporation entitled to vote thereat shall
constitute a quorum at each meeting of the stockholders and all questions shall
be decided by vote of the majority of the shares so represented in person or by
proxy at the meeting and entitled to vote thereat. The stockholders present at
any duly organized meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
Section 10. Notwithstanding the other provisions of the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of
stock of the Corporation entitled to vote at any meeting, present in Person or
represented by proxy, whether or not a quorum is present, shall have. the power
to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
any such adjourned meeting at which a quorum shall be present any action may be
taken that could have been taken at the meeting originally called; provided,
that if the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the adjourned meeting.
Section 11. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall be entitled, at every meeting of the
stockholders, to one vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but no proxy shall be voted
after three years from its date, unless the proxy provides for a longer period.
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ARTICLE II.
Board of Directors
Section 1. The business, affairs and property of the Corporation shall
be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders. The
number of directors shall be as fixed in such manner as may be determined by
the vote of not less than a majority of the directors then in office, but shall
not be less than one. The directors shall be elected at the annual meeting of
stockholders, except as provided in Section 2 of this Article II. Each director
shall hold office until the next annual meeting of stockholders and until his
successor is duly elected and qualified or until his earlier death, resignation
or removal. A director need not be a stockholder of the Corporation.
Section 2. Any vacancy in the Board of Directors, including vacancies
resulting from an increase in the number of directors, shall be filled by a
majority of the remaining members of the Board though less than a quorum.
Directors elected to fill a vacancy shall hold office until the next annual
meeting of stockholders and until their successors have been duly elected and
qualified, or until their earlier death, resignation or removal.
Section 3. Any director may resign at any time by written notice to the
Corporation. Any such resignation shall take effect at the date of receipt of
such notice or at any later time specified therein, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
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Section 4. Regular meetings of the Board of Directors shall be held at
such place or places within or without the State of Delaware, at such hour and
on such day as may be fixed by resolution of the Board of Directors, without
further notice of such meetings. The time or place of holding regular meetings
of the Board of Directors may be changed by the President by giving written
notice thereof as provided in Section 6 of this Article II.
Section 5. Special meetings of the Board of Directors shall be held
whenever called by the President, by a majority of the directors or by
resolution adopted by the Board of Directors, at such place or places within or
without the State of Delaware as may be stated in the notice of the meeting.
Section 6. Written notice of the time and place of, and general nature
of the business to be transacted at, all special meetings of the Board of
Directors, and written notice of any change in the time or place of holding the
regular meetings of the Board of Directors, shall be given to each director
either personally or by mail or telegraph, telex, telecopy or similar means of
visual data transmission at least one day before the day of the meeting;
provided, however, that notice of any meeting need not be given to any director
if waived by him in writing, or if he shall be present at such meeting, except
when the director attends for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds
that the meeting is not lawfully called or convened.
Section 7. A majority of the directors in office shall constitute a
quorum of the Board of Directors for the transaction of business; but a lesser
number may adjourn from day to day until a quorum is present. Except as
otherwise provided by law or in these By-Laws, all questions shall be decided
by the vote of a majority of the directors present. Directors may participate
in any meeting
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of the directors, and members of any committee of directors may participate in
any meeting of such committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in such
meeting can hear each other, and such participation shall constitute presence
in person at any such meeting.
Section 8. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee. Such writing, which may be in
counterparts, shall be manually executed if practicable; provided, however,
that if circumstances so require, effect shall be given to written consent
transmitted by telegraph, telex, telecopy or similar means of visual data
transmission.
Section 9. Directors shall be entitled to such compensation for their
services as may be approved by the Board of Directors, including, if so
approved by resolution of the Board of Directors, a fixed sum and expenses of
attendance, if any, for attendance at each regular or special meeting of the
Board of Directors or any meeting of a committee of directors. No provision of
these By-Laws shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 10. Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors. The notice calling such meeting shall
state the intention to act upon such matter, and if the notice so provides,
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the vacancy or vacancies caused by such removal may be filled at such meeting
by a vote of the majority of shares entitled to vote at an election of
directors.
Section 11. Nominations of persons for election to the Board of
Directors of the Corporation at the annual meeting of stockholders or any
special meeting of stockholders called for the specific purpose of electing
Directors may be made at such meeting. of stockholders by or at the direction
of the Board of Directors, by any nominating committee or person appointed by
the Board to make such nominations, or by any stockholder of the Corporation
entitled to vote for the election of Directors at such meeting and who complies
with the nomination procedures set forth in this Section and in Article I,
Section 3 of these Bylaws.
Nominations by stockholders shall be made only pursuant to written
notice of stockholders' intent to nominate, given to the Secretary of the
Corporation by delivering such notice to the principal office of the
Corporation at the time and in the manner provided in Article I, Section 3 of
these Bylaws.
The stockholder's notice shall set forth as to each person whom the
stockholder proposes to nominate for election or reelection as Director
("Nominee"), (a) the Nominee's name, age, business and residence address; (b)
the principal occupation or employment of such Nominee; (c) the class, series,
if applicable, and number of shares of capital stock of the Corporation
beneficially owned by the Nominee and (d) any other information relating to the
Nominee that is required to be disclosed in solicitations of Proxies for
election of Directors pursuant to Regulation 14A of the Securities Exchange Act
of 1934 as amended (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected). The
Corporation may require
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any proposed Nominee to furnish such other information as may reasonably be
required by the Corporation to determine the eligibility of such proposed
Nominee to serve as a Director of the Corporation.
No person shall be eligible for Nomination as Director of the
Corporation at any meeting of stockholders unless nominated in accordance with
the procedures set forth herein. If the chairman of the meeting determines that
a nomination was not made in accordance with the foregoing procedure, he shall
indicate to the meeting that the defective nomination has been disregarded.
ARTICLE III.
Committees of Directors
Section 1. The Board of Directors may, by resolution Passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of two or more of the directors of the Corporation. The board may
designate one or more directors as alternate members of any committee. The
alternate members of any committee may replace any absent or disqualified
member at any meeting of the committee.
Any such committee, to the extent provided in a resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have such power or
authority in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
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Corporation or a revocation of a dissolution, or amending the by-laws of the
Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provide, no committee shall have the power or authority to declare
a dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
Section 2. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
Section 3. Members of special or standing committees shall be entitled
to receive such compensation for serving on such committees as the Board of
Directors shall determine.
ARTICLE IV.
Officers
Section 1. The officers of the Corporation shall be elected or
appointed by the Board of Directors and may include, at the discretion of the
Board, a Chairman of the Board, President, Secretary, Treasurer and such
Executive, Senior or other Vice Presidents and other officers as may be
determined by the Board. Any number of offices may be held by the same person.
All officers shall hold office until their successors are elected or appointed,
except that any officer may resign at any time by written notice to the
Corporation and that the Board of Directors may remove any officer at any time
at its discretion with or without cause.
Section 2. The officers of the Corporation shall have such powers and
duties as generally pertain to their offices, except as modified herein or by
the Board of Directors, as well as such powers and duties as from time to time
may be conferred by the Board of Directors. The Chairman
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of the Board, if one is elected, and otherwise the President, shall preside at
all meetings of the Board. The President shall preside at meetings of the
stockholders.
ARTICLE V.
Seal
The seal of the Corporation shall be in such form as the Board of
Directors shall prescribe.
ARTICLE VI.
Certificates of Stock
Section 1. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by, or in the name of the Corporation by, (a.)
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President and (b.) the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by him in the Corporation. Any of or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the
date of issue.
Section 2. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
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 or certificates, the Board of Directors may, in
its discretion and as a condition precedent to the
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issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or 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.
Section 3. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, and
subject to applicable federal and state securities laws and contractual
obligations, it shall be the duty of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
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 to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII.
Indemnification
Section 1. Subject to the provisions of Section 3 of this Article VII,
the Corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason of the fact
that he
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is or was a director, officer, employee or agent of the Corporation, 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 or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or Proceeding, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Subject to the provisions of Section 3 of this Article VII,
the Corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
Corporation 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 or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with such action or suit
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of the Corporation and except that no
indemnification shall be made in respect to
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any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Delaware Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all of
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
Section 3. Any indemnification under Sections 1 and 2 of this Article
VII (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circum-stances
because he had met the applicable standard of conduct set forth in said
Sections 1 and 2. Such determination shall be made (a) by the Board of
Directors, by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such quorum is not
obtainable, or, even if obtainable and a quorum of disinterested directors so
directs, by independent legal counsel (who may be counsel to the Corporation)
in a written opinion, or (c) by the stockholders.
Section 4. If a director, officer, employee or agent of the Corporation
has been successful on the merits or otherwise as a party to any action, suit
or proceeding, referred to in Sections 1 and 2 of this Article VII, or with
respect to any claim, issue or matter therein (to the extent that a portion of
his expenses can be reasonably allocated thereto), he may be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith.
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Section 5. Expenses incurred by each director, officer, employee or
agent in defending a civil or criminal action, suit or proceeding by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, 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 or other enterprise, shall be paid by the corporation in advance
of the final disposition of such action, suit or Proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized in this Article VII.
Section 6. By action of the Board of Directors, notwithstanding any
interest of the directors in the action, to the full extent permitted by
applicable law the Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article or of Section 145 of the
General Corporation Law of the State of Delaware.
Section 7. For purposes of this Article VII, references to the
"Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents,
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so that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture or other enterprise, shall stand
in, the same position under the provisions of this Article VII with respect to
the resulting or surviving Corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
Section 8. The indemnification provided pursuant to the provisions of
this Article VII shall not be deemed exclusive of any other rights to those
seeking indemnification may be entitled under any other by-law, agreement,
contract of insurance, statute, vote of stockholders or disinterested directors
or otherwise, both as to action in such person"s official capacity and as to
action in another capacity while holding such office, and shall continue as to
a person who has ceased to be a director, officer, employee or agent of the
Corporation or has ceased to be a director, officer, employee or agent of
another corporation, partnership, joint venture or other enterprise wherein
such person was serving at the request of the corporation and shall inure to
the benefit of the heirs, executors and administrators of such person.
ARTICLE VIII.
Amendments
These By-Laws may be altered, amended or repealed or new by-laws may be
adopted by the stockholders or by the Board of Directors (a.) at any regular
meeting of the stockholders or of the Board of Directors or (b.) at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration, amendment, repeal or adoption of new by-laws be contained in the
notice
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of such special meeting. The Power to adopt, amend or repeal by-laws conferred
upon the Board of Directors by the Certificate of Incorporation shall not
divest or limit the power of the stockholders to adopt, amend or repeal
by-laws.
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EXHIBIT 3.3
ARTICLES OF ASSOCIATION
For the purpose of organizing an Association to carry on the business
of banking under the laws of the United States, the undersigned do enter into
the following Articles of Association:
FIRST
This title of this Association shall be Century National Bank.
SECOND
The main office of the Association shall be in the District of
Columbia. The general business of the Association shall be conducted at its
main office and its branches.
THIRD
The Board of Directors of this Association shall consist of not less
than five nor more than twenty-five members, the exact number to be fixed and
determined from time to time by resolution of a majority of the full Board of
Directors or by resolution of the shareholders at any annual or special meeting
thereof. A majority of the full Board of Directors may increase the number of
directors between meetings of the shareholders, consistent with applicable
statutory and regulatory provisions, and fill the vacancies so created. Each
Director, during the full term of his directorship, shall own a minimum of
$1,000 par value of stock of this Association or of any other corporation which
is permitted by the Comptroller of the Currency. Any vacancy in the Board of
Directors may be filled by action of the Board of Directors,
FOURTH
There shall be an annual meeting of the shareholders the purpose of
which shall be the election of Directors and the transaction of whatever other
business may be brought before said meeting. It shall be held at the main
office or other convenient place as the Board of Directors may designate, on
the day of each year specified therefor in the Bylaws, but if no election is
held on that day, it may be held on any subsequent day according to such lawful
rules as may be prescribed by the Board of Directors.
<PAGE> 2
FIFTH
The authorized amount of capital stock of this Association shall be
410,000 shares of common stock of the par value of Five Dollars ($5.00) each;
but said capital stock may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States. Shares of
authorized but unissued capital stock may be issued from time to time at the
discretion of the Board of Directors, without the approval of the shareholders,
for purposes of raising additional capital funds for the Association, employee
compensation programs or other objectives of the Association duly approved by
the Board of Directors.
If the capital stock is increased by the sale of additional shares
thereof, each shareholder shall be entitled to subscribe for such additional
shares in proportion to the number of shares of said capital stock owned by
him/her at the time the increase is authorized by the shareholders, unless
another time subsequent to the date of the shareholders' meeting is specified
in a resolution by the shareholders at the time the increase is authorized.
The Board of Directors shall have the power to prescribe a reasonable period of
time within which the preemptive rights to subscribe to the new shares of
capital stock must be exercised.
The Association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of
the shareholders.
SIXTH
The Board of Directors shall appoint one of its members President of
this Association, who shall be Chairman of the Board, unless the Board appoints
another Director to be the Chairman. The Board of Directors shall have the
power to appoint one or more Vice Presidents, a Cashier and such other officers
and employees as may be required to transact the business of this Association.
The Board of Directors shall have the power to define the duties of
the officers and employees of the Association; to fix the
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salaries to be paid to them; to dismiss them; to require bonds from them and to
fix the penalty thereof; to regulate the manner in which any increase of the
capital of the Association shall be made; to manage and administer the business
and affairs of the Association; to make all Bylaws that it may be lawful for
them to make; and generally to do and perform all acts that it may be legal for
a Board of Directors to do and perform.
SEVENTH
Upon approval by the Comptroller of the Currency and the shareholders
owning two-thirds of the stock of the Association, the Board of Directors shall
have the power to change the location of the main office to any authorized
branch location not more than thirty miles from its present location. The
Board of Directors also shall have the power to establish or change the
location of any branch or branches of the Association to any other location,
without the approval of the shareholders but subject to the approval of the
Comptroller of the Currency.
EIGHTH
The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH
The Board of Directors of this Association, or any one or more
shareholders owning, in the aggregate, not less than twenty-five percent of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first-class mail, postage prepaid, mailed at
least ten days prior to the date of such meeting to each shareholder of record
at his address as shown upon the books of this Association.
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TENTH
As provided by the General Corporation Law of the state of Delaware,
the following provisions relating to indemnification shall govern with respect
to the Association.
Section 1. Subject to the provisions of Section 3 of this
Article Tenth, the Association may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Association) by
reason of the fact that he is or was a director, officer, employee or agent of
the Association, or is or was serving at the request of the Association as a
director, officer, employee or agent of another association, corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Association, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Association, and
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2. Subject to the provisions of Section 3 of this
Article Tenth, the Association may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Association to procure a judgment in
its favor by reason of the
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fact that he is or was a director, officer, employee or agent of the
Association or is or was serving at the request of the Association as a
director, officer, employee or agent of another association, corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of the
Association and except that no indemnification shall be made in respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Association unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all of the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
Section 3. Any indemnification under Sections 1 and 2 of this
Article Tenth (unless ordered by a court) shall be made by the Association only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he had met the applicable standard of conduct set forth in said Sections 1 and
2. Such determination shall be made (a) by the Board of Directors, by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such quorum is not obtainable, or, even
if obtainable and a quorum of disinterested directors so directs, by
independent legal counsel (who may be counsel to the Association) in a written
opinion, or (c) by the stockholders.
Section 4. If a director, officer, employee or agent of the
Association has been successful on the merits or otherwise as a party to any
action, suit or proceeding, referred to in Sections 1 and 2 of this Article
Tenth, or with respect to any
-5-
<PAGE> 6
claim, issue or matter therein (to the extent that a portion of his expenses
can be reasonably allocated thereto), he may be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 5. Expenses incurred by each director, officer, employee
or agent in defending a civil or criminal action, suit or proceeding by reason
of the fact that he is or was a director, officer, employee or agent of the
Association, or is or was serving at the request of the Association as a
director, officer, employee or agent of another association, corporation,
partnership, joint venture, trust or other enterprise, shall be paid by the
Association in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Association as
authorized in this Article Tenth.
Section 6. By action of the Board of Directors, notwithstanding
any interest of the directors in the action, to the full extent permitted by
applicable law, the Association may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Association, or is or was serving at the request of the Association, as a
director, officer, employee or agent of another association, corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Association would have the power to
indemnify him against such liability under the provisions of this Article or of
Section 145 of the General Corporation Law of the State of Delaware, except
that such insurance shall exclude coverage on behalf of any person who is or
was a director, officer, employee, or agent of the Association against
expenses, penalties, or other payments incurred in an administrative proceeding
or action instituted by an appropriate bank regulatory agency which proceeding
or action
-6-
<PAGE> 7
results in a final order assessing civil money penalties or requiring
affirmative action by an individual or individuals in the form of payments to
the Association.
Section 7. For purposes of this Article Tenth, references to the
"Association" shall include, in addition to the resulting association, any
constituent association or corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was
a director, officer, employee or agent of such constituent association or
corporation, or is or was serving at the request of such constituent
association or corporation as a director, officer, employee or agent of another
association, corporation, partnership, joint venture or other enterprise, shall
stand in the same position under the provisions of this Article Tenth with
respect to the resulting or surviving association or corporation as he would
have with respect to such constituent association or corporation if its
separate existence had continued.
Section 8. The indemnification provided pursuant to the
provisions of this Article Tenth shall not be deemed exclusive of any other
rights to those seeking indemnification may be entitled under any other by-law,
agreement, contract of insurance, statute, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent of the Association or has ceased to be a director,
officer, employee or agent of another association, corporation, partnership,
joint venture or other enterprise wherein such person was serving at the
request of the Association and shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 9. No director of the Association shall be personally
liable to the Association or its stockholders for
-7-
<PAGE> 8
monetary damages for breach of fiduciary duty as a director; provided, however,
that the foregoing clause shall not apply to any liability of a director (i)
for any breach of the director's duty of loyalty to the Association or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) under Section
174 of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. This
Section 9 of Article Tenth shall not eliminate or limit the personal liability
of a director for any action or omission occurring prior to the date Section 9
of Article Tenth becomes effective.
Section 10. The indemnification provided pursuant to the
provisions of this Article Tenth shall not be deemed to include the
indemnification of any person who is or was a director, officer, employee, or
agent of the Association against expenses, penalties, or other payments
incurred in an administrative proceeding or action instituted by an appropriate
bank regulatory agency which proceeding or action results in a final order
assessing civil money penalties or requiring affirmative action by an
individual or individuals in the form of payments to the Association.
ELEVENTH
These Articles of Association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
-8-
<PAGE> 1
EXHIBIT 4.1
CENTURY BANCSHARES, INC.
FORM OF WARRANT CERTIFICATE FOR PURCHASE
OF SHARES OF COMMON STOCK
THIS WARRANT CERTIFICATE MAY NOT BE TRANSFERRED BY THE HOLDER HEREOF
PRIOR TO FEBRUARY 15, 1996 AND IS VOID AFTER 5:00 P.M. ON NOVEMBER 16, 1998.
Number of Warrants:__________ Warrant No._________
This Warrant Certificate certifies that, for value received,
is the registered holder of the number of Warrants (the "Warrants") set forth
above. Each Warrant entitles the holder thereof to purchase from Century
Bancshares, Inc., a Delaware corporation ("Company"), at any time or from time
to time after November 14, 1996 and on or before 5:00 p.m., Easternt Time, on
November 16, 1998 ("Expiration Date"), one (1) share of fully paid and
nonassessable Common Stock, $1.00 par value ("Common Stock"), of the Company at
an exercise price of $5.75 per share, subject to adjustment as provided herein
("Exercise Price"), on the terms set forth herein. As used herein, the term
"Warrant Issuance Date" shall mean November 14, 1995.
1. EXERCISE OF WARRANTS. (a) At any time after November 14, 1996
and prior to the Expiration Date, the Warrants evidenced by this Warrant
Certificate may be exercised in whole or in part by presentation and surrender
of this Warrant Certificate at the office of the Company with the within
contained Subscription Form duly completed and executed and accompanied by
payment of the Exercise Price as then in effect by bank draft or cashier's
check for the number of Warrants being exercised. If the holder of this
Warrant Certificate at any time exercises less than all the Warrants evidenced
by this Warrant Certificate, the Company shall issue to such holder a warrant
certificate identical in form to this Warrant Certificate, but evidencing a
number of Warrants equal to the number of Warrants originally represented by
this Warrant Certificate less the number of Warrants previously exercised.
Likewise, upon the presentation and surrender of this Warrant Certificate at
the office of the Company and at the request of the holder, the Company will,
at the option of the holder, issue to the holder in substitution for this
Warrant Certificate one or more warrant certificates in identical form and for
an aggregate number of Warrants equal to the number of Warrants evidenced by
this Warrant Certificate.
(b) To the extent that the Warrants evidenced by this
Warrant Certificate have not been exercised on or before 5:00 p.m., Eastern
Time, on November 16, 1998, such Warrants shall expire and the rights of the
holder shall become void and of no effect.
2. REPURCHASE OF WARRANT. (a) If and to the extent the Warrants
evidenced by this Warrant Certificate have not theretofore been exercised in
full in the manner contemplated by Section 1 hereof, such Warrants may be
repurchased by the Company as a whole at any time on and
<PAGE> 2
after Friday, November 14, 1997 and prior to the Expiration Date, at the price
of $.26 per Warrant (the "Warrant Call Price"). The Company shall have no
obligation to establish a sinking fund in respect of the Warrants evidenced by
this Warrant Certificate.
(b) The Company may exercise its right to repurchase the
Warrants evidenced by this Warrant Certificate by mailing notice of its
election to do so to the record holder of this Warrant Certificate (the
"Warrant Call Notice") at least 30 but not more than 50 days prior to the date
fixed for such repurchase (the "Warrant Call Date"). Each such notice shall
specify (i) the Warrant Call Date, (ii) the Warrant Call Price, (iii) the place
for payment and for delivering this Warrant Certificate and transfer
instrument(s) in order to receive the Warrant Call Price, (iv) the number of
Warrants to be repurchased, (v) the then effective Exercise Price, and (vi)
that the right of the holder of the Warrants evidenced by this Warrant
Certificate to exercise such Warrants shall terminate as to the Warrants
specified in the Warrant Call Notice at the close of business on the Warrant
Call Date (provided that no default by the Company in the payment of the
applicable Warrant Call Price shall have occurred and be continuing on the
Warrant Call Date). Any notice mailed in such manner shall be conclusively
deemed to have been duly given regardless of whether such notice is in fact
received. In order to facilitate the repurchase of the Warrants, the Board of
Directors of the Company may fix a record date for determination of holders of
Warrants to be repurchased, which shall not be more than 60 days prior to the
Warrant Call Date with respect thereto. If no record date is fixed by the
Board of Directors, the record date shall be the date the Warrant Call Notice
is mailed.
(c) The holder of any Warrants as to which the Company
exercises its right contained in this Section 2 shall not be entitled to
receive payment of the Warrant Call Price for such Warrants until such holder
shall cause to be delivered to the place specified in the Warrant Call Notice
given with respect thereto, the Warrant Certificate or Certificates evidencing
the Warrant(s) with the within contained Transfer Form duly completed and
sufficient to transfer such Warrants to the Company free of any adverse
interest. No interest shall accrue on the Warrant Call Price.
(d) At the close of business on the Warrant Call Date for
any Warrant, such Warrant shall (provided the Warrant Call Price of such
Warrant has been paid or properly provided for) be deemed repurchased, shall
cease to be outstanding and all rights of any person other than the Company in
such Warrant shall be extinguished on the Warrant Call Date for such Warrant,
except for the right to receive the Warrant Call Price, without interest, for
such Warrant in accordance with the provisions of this Section 2, subject to
applicable escheat laws.
(e) In the event that any Warrants evidenced by this
Warrant Certificate shall be exercised prior to the Warrant Call Date, then (i)
the Company shall not have the right to repurchase such Warrants and (ii) any
funds which shall have been set aside for the payment of the Warrant Call Price
for such Warrants shall be released to the Company immediately after such
exercise.
-2-
<PAGE> 3
3. RESTRICTIONS ON TRANSFER. This Warrant Certificate, the
Warrants evidenced hereby and the shares of Common Stock or other securities
purchasable upon the exercise of the Warrants have not been registered under
the Securities Act of 1933, as amended, or under any state securities law
(collectively, the "Acts"), in reliance on exemptions from the registration
provisions thereof. The holder hereof acknowledges that this Warrant
Certificate, the Warrants evidenced hereby and the Common Stock or other
securities purchasable on the exercise of the Warrants may not be directly or
indirectly sold, transferred or otherwise disposed of (i) prior February 15,
1996, or (ii) in violation of the provisions of the Acts. Any purported sale,
transfer or other disposition of this Warrant Certificate, the Warrants
evidenced hereby or the shares of Common Stock or other securities purchasable
on exercise of the Warrants in violation of this provision shall be void and
the Company shall not be required to recognize the same. Compliance with this
provision is the responsibility of the holder. The Company shall deem and
treat the registered holder of this Warrant Certificate as the true and lawful
owner of the Warrants evidenced hereby for all purposes, any claims of another
person to the contrary notwithstanding.
4. ANTIDILUTIVE ADJUSTMENT. The shares of Common Stock
purchasable on exercise of the Warrants evidenced by this Warrant Certificate
are shares of Common Stock of the Company as constituted as of the Warrant
Issuance Date. The number and kind of securities purchasable on the exercise
of the Warrants evidenced by this Warrant Certificate, and the Exercise Price,
shall be subject to adjustment from time to time upon the happening of certain
events, as follows:
(a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In
case of any reclassification or change of outstanding securities issuable upon
exercise of the Warrants evidence by this Warrant Certificate at any time after
the Warrant Issuance Date (other than a change in par value, or from par value
to no par value, or from no par value to par value or as a result of a
subdivision or combination to which subsection 4(b) applies), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the surviving
corporation and which does not result in any reclassification or change [other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination to which
subsection 4(b) applies] of outstanding securities issuable upon exercise of
this Warrant), the holder of the Warrants evidenced by this Warrant Certificate
shall have, and the Company, or such successor corporation or other entity,
shall covenant in the constituent documents effecting any of the foregoing
transactions that such holder does have, the right to obtain upon the exercise
of the Warrants evidenced by this Warrant Certificate, in lieu of each share of
Common Stock, other securities, money or other property theretofore issuable
upon exercise of a Warrant, the kind and amount of shares of stock, other
securities, money or other property receivable upon such reclassification,
change, consolidation or merger by a holder of Common Stock, other securities,
money or other property issuable upon exercise of a Warrant as if the Warrants
evidenced by this Warrant Certificate had been exercised immediately prior to
such reclassification, change,
-3-
<PAGE> 4
consolidation or merger. The constituent documents effecting any such
reclassification, change, consolidation or merger shall provide for any
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in this subsection 4(a). The provisions of this
subsection 4(a) shall similarly apply to successive reclassifications, changes,
consolidations or mergers.
(b) SUBDIVISIONS AND COMBINATIONS. If the Company, at
any time after the Warrant Issuance Date, shall subdivide its shares of Common
Stock into a greater number of shares, the Exercise Price in effect immediately
prior to such subdivision shall be proportionately reduced, and the number of
shares of Common Stock purchasable upon exercise of the Warrants evidenced by
this Warrant Certificate shall be proportionately increased, as at the
effective date of such subdivision, or if the Company shall take a record of
holders of its Common Stock for the purpose of so subdividing, as at such
record date, whichever is earlier. If the Company, at any time after the
Warrant Issuance Date, shall combine its shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased, and the number of shares of
Common Stock purchasable upon exercise of the Warrants evidenced by this
Warrant Certificate shall be proportionately reduced, as at the effective date
of such combination, or if the Company shall take a record of holders of its
Common Stock for purposes of such combination, as at such record date,
whichever is earlier.
(c) DIVIDENDS AND DISTRIBUTIONS. If the Company at any
time after the Warrant Issuance Date shall declare a dividend on its Common
Stock payable in stock or other securities of the Company or of any other
corporation or other entity, or in property or otherwise than in cash, to the
holders of its Common Stock, the holder of a Warrant evidenced by this Warrant
Certificate shall, without additional cost, be entitled to received upon any
exercise of a Warrant evidenced by this Warrant Certificate, in addition to the
Common Stock to which such holder would otherwise be entitled upon such
exercise, the number of shares of stock or other securities or property which
such holder would have been entitled to receive if he had been a holder
immediately prior to the record date for such dividend (or, if no record date
shall have been established, the payment date for such dividend) of the number
of shares of Common Stock purchasable on exercise of such Warrant immediately
prior to such record date or payment date, as the case may be.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees
that:
(a) During the period within which the Warrants evidenced
by this Warrant Certificate may be exercised, the Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock, for the purpose of enabling it to
satisfy any obligation to issue shares of Common Stock upon the exercise of the
Warrants evidenced by this Warrant Certificate, the number of shares of Common
Stock issuable upon the exercise of such Warrants.
-4-
<PAGE> 5
(b) The Company shall pay all expenses, taxes (other than
stock transfer taxes or charges) and other charges payable in connection with
the preparation, issuance and delivery of new warrant certificates on transfer
of the Warrants evidenced by this Warrant Certificate.
(c) All Common Stock which may be issued upon exercise of
the Warrants evidenced by this Warrant Certificate shall upon issuance be
validly issued, fully paid, non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof.
(d) All original issue taxes payable in respect of the
issuance of shares of Common Stock to the registered holder hereof upon the
exercise of the Warrants evidenced by this Warrant Certificate shall be borne
by the Company; provided, that the Company shall not be required to pay any tax
or charge imposed in connection with any transfer involved in the issuance of
any certificate representing shares of Common Stock in any name other than that
of the registered holder hereof, and in such case the Company shall not be
required to issue or deliver any certificate representing shares of Common
Stock until such tax or other charge has been paid or it has been established
to the Company's satisfaction that no such tax or charge is due.
6. NO RIGHTS AS STOCKHOLDER. The holder of the Warrants
evidenced by this Warrant Certficate shall not, by virtue of holding such
Warrants, be entitled to any rights of a stockholder of the Company either at
law or in equity, and the rights of the holder of the Warrants evidenced by
this Warrant Certificate are limited to those expressed herein.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed this _____ day of ___________________, 199__ by its President and
Secretary, thereunto duly authorized.
CENTURY BANCSHARES, INC.
By:
----------------------------------
Joseph S. Bracewell
President
ATTEST:
- -------------------------
William C. Oldaker
Secretary
-5-
<PAGE> 6
SUBSCRIPTION FORM
[To be executed on exercise of the Warrants evidenced by this Warrant
Certificate]
TO: Century Bancshares, Inc.
The undersigned, the holder of the Warrants evidenced by the attached
Warrant Certificate, hereby irrevocably elects to exercise the purchase right
evidenced by such Warrant Certificate for, and to purchase thereunder,
__________ shares of Common Stock of Century Bancshares, Inc. and herewith
makes payment of ______________________________________ ($_______________) for
those shares, and requests that the certificate representing those shares be
issued in the name of _____________________ and delivered to
___________________________________, whose address is
___________________________________________.
.
Dated: __________ ________________________________________
________________________________________
Signature(s) of Registered
Holder(s) Note: The above
signature(s) must correspond with
the name as written on the face of
this Warrant Certificate in every
particular, without alteration or
enlargement or any change
whatsoever.
- --------------------------------------------------------------------------------
TRANSFER FORM
[To be executed only upon transfer of the Warrants evidenced by
this Warrant Certificate]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
______________________________________________________ the Warrants
represented by the within Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
_____________________________________ Attorney-in-Fact, to transfer same on the
books of the Company with full power of substitution in the premises.
Dated:____________
_____________________________________
_____________________________________
Signature(s) of Registered
Holder(s) Note: The above
signature(s) must correspond with
the name as written on the face of
this Warrant Certificate in every
particular, without alteration or
enlargement or any change
whatsoever.
WITNESS:
_____________________________
-6-
<PAGE> 1
EXHIBIT 4.2
[FACE OF CERTIFICATE]
CERTIFICATE NUMBER CENTURY COMMON SHARES
Bancshares, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SPECIMEN
- -------- THIS CERTIFICATE IS TRANSFERABLE IN WASHINGTON, D.C.
SEE REVERSE FOR INFORMATION
CONCERNING CERTAIN DEFINITIONS
AND RESTRICTIONS
This certifies that [SPECIMEN] is the owner of ______ FULLY PAID AND
NONASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE OF $1.00 PER SHARE OF
Century Bancshares, Inc. transferable on the books of the Corporation by the
holder hereof, in person, or by duly authorized attorney, upon surrender of
this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be subject to the provisions of the
laws of the State of Delaware and to all of the provisions of the Certificate
of Incorporation and the Bylaws of the Corporation, as amended from time to
time, to all of which the holder hereof by acceptance of this certificate
assents. This Certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar. Witness the facsimile seal of the
Corporation and the facsimile signatures of its duly authorized officers.
DATED
--------------------
[SEAL]
- ----------------------------------------- -------------------------------
SECRETARY CHAIRMAN
<PAGE> 2
[REVERSE OF CERTIFICATE]
The corporation will furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Any such request should be made to the Secretary of
the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the ------ --------
entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gifts to
right of survivorship Minors Act
and not as tenants
in common ------------------
(State)
Additional abbreviations may also be used though no in the above list.
For Value Received, hereby sell, assign and transfer unto
--------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Shares
----------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
--------------------------------------------------------------------
to transfer the said stocks on the books of the within named Corporation
with full power of substitution in the premises.
Dated
---------------------------------
-------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
-2-
<PAGE> 1
EXHIBIT 10.1
CENTURY BANCSHARES, INC.
1994 STOCK OPTION PLAN
SECTION 1. Purpose of the Plan. The purpose of this Century
Bancshares, Inc. 1994 Stock Option Plan ("Plan") is to encourage ownership of
common stock, $1.00 par value ("Common Stock"), of Century Bancshares, Inc., a
Delaware corporation (the "Company"), by eligible key employees and directors
of the Company and/or its bank subsidiaries (collectively, the "Bank") and to
provide increased incentive for such employees and directors to render services
and to exert maximum effort for the business success of the Company. In
addition, the Company expects that the Plan will further strengthen the
identification of employees and directors with the stockholders. Certain
options to be granted under this Plan are intended to qualify as Incentive
Stock Options ("ISOs") pursuant to Section 422 of the Internal Revenue Code of
1986, as amended ("Code"), while other options granted under this Plan will be
nonqualified options which are not intended to qualify as ISOs ("Nonqualified
Options"), either or both as provided in the agreements evidencing the options
as provided in Section 6 hereof.
SECTION 2. Administration of the Plan.
(a) Composition of Committee. The Plan shall be
administered by the Compensation Committee (the "Committee")
designated by the Board of Directors of the Company (the "Board"),
which shall also designate the Chairman of the Committee. If the
Company is governed by Rule 16b-3 promulgated by the Securities and
Exchange Commission ("Commission") pursuant to the Securities Exchange
Act of 1934, as amended ("Exchange Act"), no director shall serve as a
member of the Committee unless such director is a "disinterested
person" within the meaning of such Rule 16b-3.
(b) Committee Action. The Committee shall hold its
meetings at such times and places as it may determine. A majority of
its members shall constitute a quorum, and all determinations of the
Committee shall be made by not less than a majority of its members.
Any decision or determination reduced to writing and signed by a
majority of the members shall be fully effective as if it had been
made by a majority vote of its members at a meeting duly called and
held. The Committee may designate the Secretary of the Company or
other Company employees to assist the Committee in the administration
of the Plan,
-1-
<PAGE> 2
and may grant authority to such persons to execute award agreements or
other documents on behalf of the Committee and the Company. Any duly
constituted committee of the Board satisfying the qualifications of
this Section 2 may be appointed as the Committee.
(c) Committee Expenses. All expenses and liabilities
incurred by the Committee in the administration of the Plan shall be
borne by the Company. The Committee may employ attorneys,
consultants, accountants or other persons.
SECTION 3. Stock Reserved for the Plan. Subject to adjustment as
provided in Section 6(k) hereof, the aggregate number of shares of Common Stock
that may be optioned under the Plan is 150,000. The shares subject to the Plan
shall consist of authorized but unissued shares of Common Stock and such
number of shares shall be and is hereby reserved for sale for such purpose.
Any of such shares which may remain unsold and which are not subject to
outstanding options at the termination of the Plan shall cease to be reserved
for the purpose of the Plan, but until termination of the Plan or the
termination of the last of the options granted under the Plan, whichever last
occurs, the Company shall at all times reserve a sufficient number of shares to
meet the requirements of the Plan. Should any option expire or be cancelled
prior to its exercise in full, the shares theretofore subject to such option
may again be made subject to an option under the Plan.
SECTION 4. Eligibility. The persons eligible to participate in the
Plan as a recipient of options ("Optionee") shall include only key employees
and directors of the Company or the Bank at the time the option is granted. An
employee who has been granted an option hereunder may be granted an
additional option or options, if the Committee shall so determine.
SECTION 5. Grant of Options.
(a) Committee Discretion. The Committee shall have sole
and absolute discretionary authority (i) to determine, authorize, and
designate those key employees and directors of the Company or the Bank
who are to receive options under the Plan, (ii) to determine the
number of shares of Common Stock to be covered by such options and the
terms thereof, and (iii) to determine the type of option granted:
ISO, Nonqualified Option or a combination of ISO and Nonqualified
Options; provided that a director may not receive any ISOs. The
Committee shall thereupon grant options in accordance with such
determinations as evidenced by a written option agreement. Subject to
the express provisions of the Plan,
-2-
<PAGE> 3
the Committee shall have discretionary authority to prescribe, amend
and rescind rules and regulations relating to the Plan, to interpret
the Plan, to prescribe and amend the terms of the option agreements
(which need not be identical) and to make all other determinations
deemed necessary or advisable for the administration of the Plan.
(b) Stockholder Approval. All options granted under this
Plan are subject to, and may not be exercised before, the approval of
this Plan by the stockholders prior to the first anniversary date of
the Board meeting held to approve the Plan, by the affirmative vote of
the holders of a majority of the outstanding shares of the Company
present, or represented by proxy, and entitled to vote thereat or by
written consent in accordance with the laws of the State of Delaware;
provided that if such approval by the stockholders of the Company is
not forthcoming, all options previously granted under this Plan shall
be void.
(c) Limitation on Incentive Stock Options. The aggregate
fair market value (determined in accordance with Section 6(b) of this
Plan at the time the option is granted) of the Common Stock with
respect to which ISOs may be exercisable for the first time by any
Optionee during any calendar year under all such plans of the Company
and the Bank shall not exceed $100,000.
SECTION 6. Terms and Conditions. Each option granted under the Plan
shall be evidenced by an agreement, in a form approved by the Committee, which
shall be subject to the following express terms and conditions and to such
other terms and conditions as the Committee may deem appropriate.
(a) Option Period. The Committee shall promptly notify
the Optionee of the option grant and a written agreement shall
promptly be executed and delivered by and on behalf of the Company and
the Optionee, provided that the option grant shall expire if a written
agreement is not signed by said Optionee (or said Optionee's agent or
attorney) and returned to the Company within 60 days from date of
receipt by the Optionee of such agreement. The date of grant shall be
the date the option is actually granted by the Committee, even though
the written agreement may be executed and delivered by the Company and
the Optionee after that date. Each option agreement shall specify the
period for which the option thereunder is granted (which in no event
shall exceed ten years from the date of grant) and shall provide that
the option shall expire at the end of such period. If the original
term of an option is less than ten years from the date of
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<PAGE> 4
grant, the option may be amended prior to its expiration, with the
approval of the Committee and the Optionee, to extend the term so that
the term as amended is not more than ten years from the date of grant.
However, in the case of an ISO granted to an individual who, at the
time of grant, owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or the
Bank ("Ten Percent Stockholder"), the period for which the option
thereunder is granted shall not exceed five years from the date of
grant.
(b) Option Price. The purchase price of each share of
Common Stock subject to each option granted pursuant to the Plan shall
be determined by the Committee at the time the option is granted and,
in the case of ISOs, shall not be less than 100% of the fair market
value of a share of Common Stock on the date the option is granted, as
determined by the Committee. In the case of an ISO granted to a Ten
Percent Stockholder, the option price shall not be less than 110% of
the fair market value of a share of Common Stock on the date the
option is granted. The purchase price of each share of Common Stock
subject to a Nonqualified Option under this Plan shall be determined
by the Committee prior to granting the option. The Committee shall
set the purchase price for each share subject to a Nonqualified Option
at such price as the Committee in its sole discretion shall determine.
For all purposes under the Plan, the fair market value of a
share of Common Stock on a particular date shall be equal to the mean
of the reported high and low sales prices of the Common Stock on the
New York Stock Exchange Composite Tape on that date, or if no prices
are reported on that date, on the last preceding date on which such
prices of the Common Stock are so reported. If the Common Stock is
not traded on the New York Stock Exchange at the time a determination
of its fair market value is required to be made hereunder, its fair
market value shall be deemed to be equal to the average between the
closing bid and ask prices of the Common Stock on the most recent date
the Common Stock was publicly traded. In the event the Common Stock
is not publicly traded at the time a determination of its value is
required to be made hereunder, the determination of its fair market
value shall be made by the Committee in such manner as it deems
appropriate.
(c) Exercise Period. The Committee may provide in the
option agreement that an option may be exercised in whole,
immediately, or is to be exercisable in increments. However, no
portion of any option may be exercisable
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by an Optionee prior to the approval of the Plan by the stockholders of
the Company.
(d) Procedure for Exercise. Options shall be exercised
by the manner set out in this paragraph. Ten (10) days prior to
exercise of an option, the Optionee shall deliver to the Company by
the U.S. mails or by hand delivery an irrevocable written notice (a)
setting forth the number of shares with respect to which the option is
exercised and (b) specifying the address to which the shares are to be
mailed. Such notice shall be deemed to be received by the Company on
the date the notice was mailed, if sent through the U.S. mails, or on
the date actually received by the Company, if the notice is delivered
other than by the U.S. mails. Such notice shall be accompanied by
consideration equal to the option price for the shares to be acquired
by the exercise of the Option (the "Option Price Amount") in the form
of (i) cash, (ii) cashier's check, bank draft or postal or express
money order payable to the order of the Company, (iii) shares of
Common Stock already owned by the Optionee, duly endorsed to the order
of the Company, having a total fair market value (as determined by the
Committee) equal to the Optionee Price Amount, or (iv) any combination
of the above-described consideration equal to the Option Price Amount.
The Committee shall determine the value of any shares of the Company
stock paid to the Company to satisfy the Option Price Amount. Such
value shall be determined as of the date the notice is deemed to be
received by the Company. As promptly as practicable after receipt of
such written notice and the Option Price Amount, the Company shall
deliver to the Optionee certificates for the number of shares with
respect to which such option has been so exercised, issued in the
Optionee's name; provided, however, that such delivery shall be deemed
effected for all purposes when a stock transfer agent of the Company
shall have deposited such certificates in the United States mail,
addressed to the Optionee at the address specified in the notice.
(e) Termination of Employment. If an employee to whom an
option is granted ceases to be employed by the Company for any reason
other than death or disability or if a director to whom an option is
granted ceases to serve on the Board for any reason other than death
or disability, any option which is exercisable on the date of such
termination of employment or cessation from the Board shall expire
upon such date of such termination of employment or cessation from the
Board except as hereinafter provided. Any options which are
exercisable on the date of such termination may be exercised during
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<PAGE> 6
a three-month period beginning on such date; provided, however, if an
Optionee's termination of employment or cessation from the Board is
due to such Optionee's dishonesty, theft, embezzlement from the
Company or the Bank, disclosing trade secrets of the Company or the
Bank, willful violation of any rules of the Company or the Bank
pertaining to the conduct of individuals performing services for the
Company or the Bank, or the commission of a willful felonious act
while in the employment of the Company or the Bank or while serving on
the Board, then any option or unexercised portion thereof granted to
said Optionee, shall expire upon such termination.
(f) Disability or Death of Optionee. In the event of the
determination of disability or death of an Optionee under the Plan
while he or she is employed by the Company or while he or she serves
on the Board, the options previously granted to him may be exercised
(to the extent he or she would have been entitled to do so at the date
of the determination of disability or death) at any time and from time
to time, within a one year period after such determination of
disability or death, by the former employee or director, the guardian
of his or her estate, the executor or administrator of his or her
estate or by the person or persons to whom his or her rights under the
option shall pass by will or the laws of descent and distribution, but
in no event may the option be exercised after its expiration under the
terms of the option agreement. An Optionee shall be deemed to be
disabled if, in the opinion of a physician selected by the Committee,
he or she is incapable of performing services for the Company of the
kind he or she was performing at the time the disability occurred by
reason of any medically determinable physical or mental impairment
which can be expected to result in death or to be of long, continued
and indefinite duration. The date of determination of disability for
purposes hereof shall be the date of such determination by such
physician. The Committee, in its sole discretion, may allow an
Optionee to exercise all or a portion of the Options granted but
unexercised for a longer period than one year after disability or
death.
(g) Assignability. An option shall not be assignable or
otherwise transferable except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined in the Code or Title I of the Employee Retirement Income
Security Act, as amended, or the rules thereunder. During the
lifetime of an Optionee, an option shall be exercisable only by him.
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(h) Incentive Stock Options. Each option agreement may
contain such terms and provisions as the Committee may determine to be
necessary or desirable in order to qualify an option designated as an
incentive stock option.
(i) No Rights as Stockholder. No Optionee shall have any
rights as a stockholder with respect to shares covered by an option
until the option is exercised by the written notice and accompanied by
payment as provided in clause (d) above.
(j) Extraordinary Corporate Transactions. The existence
of outstanding options shall not affect in any way the right or power
of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, exchanges, or other
changes in the Company's capital structure or its business, or any
merger or consolidation of the Company, or any issuance of Common
Stock or other securities or subscription rights thereto, or any
issuance of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act
or proceeding, whether of a similar character or otherwise. If the
Company recapitalizes or otherwise changes its capital structure, or
merges, consolidates, sells all of its assets or dissolves (each of
the foregoing a "Fundamental Change"), then thereafter upon any
exercise of an option theretofore granted the Optionee shall be
entitled to purchase under such option, in lieu of the number of
shares of Common Stock as to which option shall then be exercisable,
the number and class of shares of stock and securities to which the
Optionee would have been entitled pursuant to the terms of the
Fundamental Change if, immediately prior to such Fundamental Change,
the Optionee had been the holder of record of the number of shares of
Common Stock as to which such option is then exercisable. If (i) the
Company shall not be the surviving entity in any merger or
consolidation (or survives only as a subsidiary of another entity),
(ii) the Company sells all or substantially all of its assets to any
other person or entity (other than a wholly-owned subsidiary), (iii)
any person or entity (including a "group" as contemplated by Section
13(d)(3) of the Exchange Act) acquires or gains ownership or control
of (including, without limitation, power to vote) more than 50% of the
outstanding shares of Common Stock, (iv) the Company is to be
dissolved and liquidated, or (v) as a result of or in connection with
a contested election of
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<PAGE> 8
directors, the persons who were directors of the Company before such
election shall cease to constitute a majority of the Board (each such
event in clauses (i) through (v) above is referred to herein as a
"Corporate Change"), the Committee, in its sole discretion, may
accelerate the time at which all or a portion of an Optionee's Options
may be exercised for a limited period of time before or after a
specified date.
(k) Changes in Company's Capital Structure. If the
outstanding shares of Common Stock or other securities of the Company,
or both, for which the option is then exercisable shall at any time be
changed or exchanged by declaration of a stock dividend, stock split,
or combination of shares, the number and kind of shares of Common
Stock or other securities which are subject to the Plan or subject to
any options theretofore granted, and the option prices, shall be
appropriately and equitably adjusted so as to maintain the
proportionate number of shares or other securities without changing
the aggregate option price.
SECTION 7. Amendments or Termination. The Board may amend, alter or
discontinue the Plan, but no amendment or alteration shall be made which would
impair the rights of any Optionee, without his or her consent, under any option
theretofore granted, or which, without the approval of the stockholders, would:
(i) except as is provided in Section 6(k) of the Plan, increase the total
number of shares reserved for the purposes of the Plan, (ii) change the class
of persons eligible to participate in the Plan as provided in Section 4 of the
Plan, (iii) extend the applicable maximum option period provided for in Section
6(a) of the Plan, (iv) extend the expiration date of this Plan set forth in
Section 14 of the Plan, (v) except as provided in Section 6(k) of the Plan,
decrease to any extent the option price of any option granted under the Plan or
(vi) withdraw the administration of the Plan from the Committee.
SECTION 8. Compliance With Other Laws and Regulations. The Plan, the
grant and exercise of options thereunder, and the obligation of the Company to
sell and deliver shares under such options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
governmental or regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to the completion of any registration or qualification of such shares under any
federal or state law or issuance of any ruling or regulation of any government
body which the Company shall, in its sole discretion, determine to be necessary
or advisable. Any adjustments provided for in subparagraphs 6(j), (k) and (l)
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<PAGE> 9
shall be subject to any shareholder action required by Delaware corporate law.
SECTION 9. Purchase for Investment. Unless the options and
shares of Common Stock covered by this Plan have been registered under
the Securities Act of 1933, as amended, or the Company has determined
that such registration is unnecessary, each person exercising an
option under this Plan may be required by the Company to give a
representation in writing that he or she is acquiring such shares for
his or her own account for investment and not with a view to, or for
sale in connection with, the distribution of any part thereof.
SECTION 10. Taxes.
(a) The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with any options granted under this Plan.
(b) Notwithstanding the terms of Paragraph 10(a), any
Optionee may pay all or any portion of the taxes required to be
withheld by the Company or paid by him in connection with the exercise
of a nonqualified option by electing to have the Company withhold
shares of Common Stock, or by delivering previously owned shares of
Common Stock, having a fair market value, determined in accordance
with Paragraph 6(b), equal to the amount required to be withheld or
paid. An Optionee must make the foregoing election on or before the
date that the amount of tax to be withheld is determined ("Tax Date").
All such elections are irrevocable and subject to disapproval by the
Committee.
SECTION 11. Replacement of Options. The Committee from time to time
may permit an Optionee under the Plan to surrender for cancellation any
unexercised outstanding option and receive from the Company in exchange an
option for such number of shares of Common Stock as may be designated by the
Committee. The Committee may, with the consent of the person entitled to
exercise any outstanding option, amend such option, including reducing the
exercise price of any option to not less than the fair market value of the
Common Stock at the time of the amendment and extending the term thereof.
SECTION 12. No Right to Company Employment. Nothing in this Plan or
as a result of any option granted pursuant to this Plan shall confer on any
individual any right to continue in the employ of the Company or interfere in
any way with the right of the Company to terminate an individual's employment
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<PAGE> 10
at any time. The option agreements may contain such provisions as the
Committee may approve with reference to the effect of approved leaves of
absence.
SECTION 13. Liability of Company. The Company and the Bank which is
in existence or hereafter comes into existence shall not be liable to an
Optionee or other persons as to:
(a) The Non-Issuance of Shares. The non-issuance or sale
of shares as to which the Company has been unable to obtain from any
regulatory body having jurisdiction the authority deemed by the
Company's counsel to be necessary to the lawful issuance and sale of
any shares hereunder; and
(b) Tax Consequences. Any tax consequence expected, but
not realized, by any Optionee or other person due to the exercise of
any option granted hereunder.
SECTION 14. Effectiveness and Expiration of Plan. The Plan shall be
effective on the date the Board adopts the Plan. If the stockholders of the
Company fail to approve the Plan within twelve months of the date the Board
approved the Plan, the Plan shall terminate and all options previously granted
under the Plan shall become void and of no effect. The Plan shall expire ten
years after the date the Board approves the Plan and thereafter no option shall
be granted pursuant to the Plan.
SECTION 15. Non-Exclusivity of the Plan. Neither the adoption by the
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including without limitation, the granting of restricted stock or stock options
otherwise than under the Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.
SECTION 16. Governing Law. This Plan and any agreements hereunder
shall be interpreted and construed in accordance with the laws of the State of
Delaware and applicable federal law.
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IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing by directors of the Company has caused these presents to be duly
executed in its name and behalf by its proper officers thereunto duly
authorized as of this day of ,1994.
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CENTURY BANCSHARES, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
ATTEST:
- -----------------------------
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<PAGE> 1
EXHIBIT 10.2
CENTURY BANCSHARES, INC.
INCENTIVE STOCK OPTION PLAN FOR KEY EMPLOYEES
1. History and Purpose of the Plan.
(a) History. Effective as of the 11th day of February,
1987, the Board of Directors of Century Bancshares, Inc., a Delaware
corporation (the "Company") hereby further amends and restates the
terms of the Century Bancshares, Inc. Incentive Stock Option Plan For
Key Employees (the "Plan") in order to take into account the changes
in the federal income tax laws enacted by the Tax Reform Act of 1986
(the "Act"). Century National Bank established the Century National
Bank 1982 Incentive Stock Option Plan ("Prior Plan") which was
separately amended, restated, superseded, replaced, and continued as
the Plan on April 10, 1986. The Board of Directors intends that the
options granted under the Plan constitute "incentive stock options"
within the meaning of Section 422A of the Internal Revenue Code of
1986 and prior law and that recipients of options under the Plan
qualify for the tax treatment described in such section of the Code.
As part of the April 10, 1986 restatement of the Plan, the Prior Plan
stock options awarded to employees before April 10, 1986 under the
Prior Plan have been (i) adjusted by reducing the stock option price
by $7.50 per share for purposes of reflecting the acquisition debt
assumption or Company preferred stock which was given to holders of
Bank (as that term is defined below) stock, as consideration in
addition to shares of Company common stock, and (ii) reissued and
dated under this Plan to provide for the date the stock option was
awarded under the Prior Plan.
(b) Purpose. The Plan has been established to encourage
ownership of the common stock $1.00 par value ("Common Stock"), of the
Company by eligible key employees of the Company or its bank
subsidiaries (the "Bank") and to provide increased incentive for such
employees to render services and to exert maximum effort for the
business success of the Company and the Bank. For purposes of this
Plan, any employee of a subsidiary of the Company shall be deemed to
be an employee of the Company.
2. Administration of the Plan. The Board of Directors of the Company
shall appoint and maintain a Stock Option Committee ("Committee") which shall
consist of at least three members of the Board of Directors who shall not have
been eligible to participate in the Plan at any time within one year prior to
appointment and shall serve without compensation at the pleasure of the Board
of Directors. No member of the Committee shall be eligible to receive stock
options under the Plan while serving on the Committee. The Committee shall
have full power and authority to designate participants and to interpret the
provisions and supervise the administration of the Plan. All decisions and
selections made by the Committee pursuant to the provisions of the Plan shall
be made by the affirmative vote of a majority of its members. Any decision
reduced to writing and
<PAGE> 2
signed by a majority of the members shall be fully effective as if it had been
made by a majority at a meeting duly held.
3. Stock Reserved for the Plan. Subject to adjustment as provided in
paragraph 5(j) hereof, a total of 50,000 shares of Common Stock shall be
subject to the Plan. The shares subject to the Plan shall consist of unissued
shares, and such amount of shares shall be and is hereby reserved for sale for
such purpose. Any of such shares which may remain unsold and which are not
subject to outstanding options at the termination of the Plan shall cease to be
reserved for the purpose of the Plan, but until termination of the Plan the
Company shall at all times reserve a sufficient number of shares to meet the
requirements of the Plan. Should any option expire or be cancelled prior to
its exercise in full, the shares theretofore subject to such option may again
be made subject to an option under the Plan.
4. Grant of Options. The persons eligible to participate in the Plan
as recipients of options shall include only key employees of the Company or the
Bank. The Committee shall, from time to time, determine and designate those
key employees of the Company or the Bank who are to receive options under the
Plan, the number of shares to be covered by such options and the terms thereof.
The Committee shall thereupon grant options in accordance with such
determinations as evidenced by a written option agreement as more fully
described in paragraph 5. An employee who has been granted an option hereunder
may be granted an additional option or options, if the Committee shall so
determine. In the case of options issued prior to January 1, 1987, the
Committee shall not grant to any employee in any calendar year options to
purchase shares of Common Stock the value of which on the date of grant exceeds
$100,000 plus any unused carryover limit (as that term is defined in Section
422A(c)(4) of the Code prior to the Act. In the case of options granted after
December 31, 1986, the Committee shall not grant to any employee options which
violate the following rule--the aggregate fair market value (determined at the
time the option is granted) of the shares of Common Stock with respect to which
options are granted after December 31, 1986 under this Plan or any other plans
maintained by the Company or members of its affiliated group which other plans
qualify as incentive stock option plans under Section 422A of the Code ("Other
Affiliated Plans") and which are exercisable for the first time under the terms
of this Plan or the terms of the Other Affiliated Plans by any employee during
any calendar year may not exceed $100,000.
5. Terms and Conditions. Each option granted under the Plan shall be
evidenced by an agreement, in a form approved by the Committee, which shall be
subject to the following express terms and conditions and to such other terms
and conditions, not inconsistent herewith, as the Committee may deem
appropriate.
(a) Option Period. Each option agreement shall specify the
period for which the option thereunder is granted (which in no event
shall exceed ten years from the date of grant)
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<PAGE> 3
and shall provide that the option shall expire at the end of such
period. If the optionee owns more than ten percent of the outstanding
stock of the Company (determined in accordance with Section 425(d) of
the Internal Revenue Code) on the date the option is granted to him,
the option period shall not exceed five years.
(b) Option Price. The purchase price of each share of Common
Stock subject to each option granted pursuant to the Plan shall be
determined by the Committee at the time the option is granted and
shall not be less than the fair market value of a share of Common
Stock on the date the option is granted, as determined by the
Committee. If the optionee owns more than ten percent of the
outstanding stock of the Company (determined in accordance with
Section 425(d) of the Internal Revenue Code) on the date the option is
granted to him, the option price shall not be less than 110 percent of
the fair market value of a share of Common Stock on such date.
(c) Exercise Period. No part of any option may be exercised
until the optionee shall have remained in the employ of the Company or
the Bank for such period after the date on which the option is granted
as the Committee may specify in the option agreement.
(d) Procedure for Exercise. Options shall be exercised by
the manner set out in this paragraph. Ten (10) days prior to exercise
of an option, the optionee shall deliver to the Company by the U.S.
mails or by hand delivery an irrevocable written notice (a) setting
forth the number of shares with respect to which the option is
exercised and (b) specifying the address to which the shares are to be
mailed. Such notice shall be deemed to be received by the Company on
the date the notice was mailed, if sent through the U.S. mails, or on
the date actually received by the Company, if the notice is delivered
other than by the U.S. mails. Such notice shall be accompanied by
consideration equal to the option price for the shares to be acquired
by the exercise of the Option (the "Option Price Amount") in the form
of (i) cash, (ii) cashier's check, bank draft, or postal or express
money order payable to the order of the Company, (iii) shares of
Common Stock already owned by the optionee, duly endorsed to the order
of the Company, having a total fair market value (as determined by the
Committee) equal to the Optionee Price Amount, or (iv) any combination
of the above-described consideration equal to the Option Price Amount.
The Committee shall determine the value of any shares of the Company
stock paid to the Company to satisfy the Option Price Amount. Such
value shall be determined as of the date the notice is deemed to be
received by the Company. As promptly as practicable after receipt of
such written notice and the Option Price Amount, the Company shall
deliver to the optionee certificates for the number of shares with
respect to which such option has been so exercised, issued in the
optionee's name; provided, however, that such delivery shall be deemed
effected for all
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<PAGE> 4
purposes when a stock transfer agent of the Company shall have
deposited such certificates in the United States mail, addressed to
the optionee at the address specified in the notice.
(e) Termination of Employment. If an employee to whom an
option has been granted ceases to be employed by the Company or the
Bank for any reason other than death or disability, the options
granted to him shall thereupon terminate. Notwithstanding the
foregoing, any options which are exercisable on the date of such
termination of employment may be exercised during a three-month period
beginning on such date.
(f) Disability or Death of Optionee. In the event of the
disability or death of the holder of an option under the Plan while he
is employed by the Company or the Bank, the options previously granted
to him may be exercised (to the extent he would have been entitled to
do so at the date of his disability or death) at any time and from
time to time, within a period of one year after his disability or
death, by the former employee, by the executor or administrator of his
estate or by the person or persons to whom his rights under the option
shall pass by will or the laws of descent and distribution, but in no
event may the option be exercised after its expiration. An employee
shall be deemed to be disabled if, in the opinion of a physician
selected by the Committee, he is incapable of performing services for
the Company or the Bank by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or to be of long, continued and indefinite duration.
(g) Assignability. An option shall not be assignable or
otherwise transferable except by will or by the laws of descent and
distribution. During the lifetime of an optionee, an option shall be
exercisable only by him.
(h) No Rights as Shareholder. No optionee shall have any
rights as a shareholder with respect to shares covered by an option
until the date of issuance of a stock certificate for such shares.
Except as provided in paragraph 5(j), no adjustment for dividends, or
otherwise, shall be made if the record date therefor is prior to the
date of issuance of such certificate.
(i) Extraordinary Corporate Transactions. If the Company is
dissolved or liquidated, or is merged or consolidated into or with
another corporation, other than by a merger or consolidation in which
the Company is the surviving corporation, the then exercisable but
unexercised options granted under the Plan shall not be exercisable
after the date of such dissolution, liquidation, merger or
consolidation, unless such other surviving corporation makes provision
for adoption of the Plan and the assumption of the Company's
obligations thereunder.
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<PAGE> 5
(j) Changes in Company's Capital Structure. The existence of
outstanding options shall not affect in any way the right or power of
the Company or its shareholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issuance of Common Stock or
subscription rights thereto, or any issuance of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a
similar character or otherwise. Provided, however, that if the
outstanding shares of Common Stock of the Company shall at any time be
changed or exchanged by declaration of a stock dividend, stock split,
combination of shares or recapitalization, the number and kind of
shares subject to the Plan or subject to any options theretofore
granted, and the option prices, shall be appropriately and equitably
adjusted so as to maintain the proportionate number of shares without
changing the aggregate option price.
(k) Investment Representation. The Company shall not be
required to sell or issue any shares of Common Stock under any option
unless (i) a registration statement under the Securities Act of 1933,
as now in effect or hereafter amended ("Securities Act"), is in effect
with respect to the shares of Common Stock covered by such option, or
(ii) the Board of Directors of the Company has received evidence
satisfactory to it to the effect that an exemption from registration
under the Securities Act and any applicable state securities laws is
available for the sale and issuance contemplated. In the case of
options granted prior to January 1, 1987, the receipt of such option
may be exercised only in the order in which such options were granted.
In the case of options granted after December 31, 1986, such options
may be exercised by the recipient in any order.
(l) Sequence of Exercise of Options. In the case of options
granted prior to January 1, 1987, the receipt of such options may be
exercised only in the order in which such options were granted. In
the case of options granted after December 31, 1986, such options may
be exercised by the recipient in any order.
6. Amendments or Termination. The Board of Directors of the Company
may amend, alter or discontinue the Plan, but no amendment or alteration shall
be made which would impair the rights of any participant under any option
theretofore granted without his consent, or which, without the approval of the
shareholders, would: (i) except as is provided in paragraph 5(j) of the Plan,
increase the total number of shares reserved for the purposes of the Plan or
decrease the option price provided for in paragraph 5(b) of the Plan; (ii)
change the class of persons eligible to participate in the Plan as provided in
paragraph 4 of the Plan; (iii) extend the option period provided for in
paragraph 5(a) of the Plan; or (iv) extend the expiration date of this Plan set
forth in paragraph 8 of the Plan.
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<PAGE> 6
7. Compliance With Other Laws and Regulations. The Plan, the grant
and exercise of options thereunder, and the obligation of the Company to sell
and deliver shares under such options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
governmental or regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to the completion of any registration or qualification of such shares under any
federal or state law, or any ruling or regulation of any government body which
the Company shall, in its sole discretion, determine to be necessary or
advisable.
8. Effectiveness and Expiration of Plan. The Plan as set forth in
this document shall be effective on the date the Board of Directors of the
Company adopts the amended Plan. If the shareholders of the Company fail to
approve the Plan within twelve months of the date the Board of Directors
approve the Plan, the Plan shall terminate and all options previously granted
under the Plan shall become void and of no effect. The Plan shall expire ten
years after the effective date of the Prior Plan and thereafter no option shall
be granted pursuant to this Plan.
Notwithstanding the above, options issued to employees under the Prior
Plan shall be recognized and effective under this Plan and shall not be subject
to shareholders' approval under this paragraph.
I, Rosemary M. DeMark, being the duly elected Assistant Secretary of
Century Bancshares, Inc. DO HEREBY CERTIFY, on this 5th day of March 1987, that
the preceding Incentive Stock Option Plan For Key Employees is a true and
complete copy of such Plan as amended and restated by the Board of Directors of
the Company at a meeting duly called and held on February 11, 1987 at which
meeting a quorum was present and acting through, and that said Plan, as amended
and restated above, is in full force and effect as of the date hereof.
/s/ ROSEMARY M. DEMARK
---------------------------
Rosemary M. DeMark
Assistant Secretary
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<PAGE> 1
EXHIBIT 10.3
CENTURY BANCSHARES, INC.
NON-QUALIFIED STOCK OPTION PLAN FOR KEY EMPLOYEES
(1) History and Purpose of the Plan.
(a) History. Effective as of the 11th day of February, l987, the Board of
Directors of Century Bancshares, Inc., a Delaware corporation (the "Company")
hereby further amends and restates the terms of the Century Bancshares, Inc.
Non-Qualified Stock Option Plan For Key Employees ("Plan") to provide that
options may be exercised by tendering shares of Common Stock (as that term is
defined below) already owned by the optionee. Century National Bank
established the Century National Bank 1982 Nonqualifying Stock Option Plan
("Prior Plan") which was separately amended, restated, superseded, replaced and
continued as the Plan on April 10, 1986. As part of the April 10, 1986
restatement of the Plan, the stock options awarded to employees before April
10, 1986 under the Prior Plan have been (i) adjusted by reducing the stock
option price by $7.50 per share for purposes of reflecting the acquisition debt
assumption for Company preferred stock which was given to holders of Bank
stock, as consideration in addition to shares of Company common stock, and (ii)
reissued and dated under this Plan to provide for the date the stock option was
awarded under the Prior Plan.
(b) Purpose. The Plan has been established to encourage ownership of the
common stock $1.00 par value ("Common Stock") of the Company by eligible key
employees of the Company or its bank subsidiaries (the "Bank") and to provide
increased incentive for such employees to render services and to exert maximum
effort for the business success of the Company and the Bank. The Plan is not
intended to constitute an Incentive Stock Option under section 422A of the
Internal Revenue Code of 1986 or its predecessors. For purposes of this Plan,
any employee of a subsidiary of the Company shall be deemed to be an employee
of the Company.
(2) Administration of the Plan. The Board of Directors of the Company
shall appoint and maintain a Stock Option Committee ("Committee") which shall
consist of at least three members of the Board of Directors who shall not have
been eligible to participate in the Plan at any time within one year prior to
appointment and shall serve without compensation at the pleasure of the Board
of Directors. No member of the Committee shall be eligible to receive stock
options under the Plan while serving on the Committee. The Committee shall
have full power and authority to designate participants and to interpret the
provisions and supervise the administration of the Plan. All decisions and
selections made by the Committee pursuant to the provisions of the Plan shall
be made by the affirmative vote of a majority of its members. Any decision
reduced to writing and signed by a majority of the members shall be fully
effective as if it had been made by a majority at a meeting duly held.
<PAGE> 2
(3) Stock Reserved for the Plan. Subject to adjustment as provided in
paragraph 5(j) hereof, a total of 10,000 shares of Common Stock shall be
subject to the Plan. The shares subject to the Plan shall consist of unissued
shares and such amount of shares shall be and is hereby reserved for sale for
such purpose. Any of such shares which may remain unsold and which are not
subject to outstanding options at the termination of the Plan shall cease to be
reserved for the purpose of the Plan, but until termination of the Plan the
Company shall at all times reserve a sufficient number of shares to meet the
requirements of the Plan. Should any option expire or be cancelled prior to
its exercise in full, the shares theretofore subject to such option may again
be made subject to an option under the Plan.
(4) Grant of Options. The persons eligible to participate in the Plan as
recipients of options shall include only key employees of the Company or the
Bank. The Committee shall, from time to time, determine and designate those
key employees of the Company or the Bank who are to receive options under the
Plan, the number of shares to be covered by such options and the terms thereof.
The Committee shall thereupon grant options in accordance with such
determinations as evidenced by a written option agreement as more fully
described in paragraph 5. An employee who has been granted an option hereunder
may be granted an additional option or options, if the Committee shall so
determine.
(5) Terms and Conditions. Each option granted under the Plan shall be
evidenced by an agreement, in a form approved by the Committee, which shall be
subject to the following express terms and conditions and to such other terms
and conditions, not inconsistent herewith, as the Committee may deem
appropriate.
(a) Option Period. Each option agreement shall specify the period for
which the option thereunder is granted (which in no event shall exceed ten
years from the date of grant) and shall provide that the option shall
expire at the end of such period.
(b) Option Price. The purchase price of each share of Common Stock
subject to each option granted pursuant to the Plan shall be determined by
the Committee at the time the option is granted and shall not be less than
the fair market value of a share of Common Stock on the date the option is
granted, as determined by the Committee.
(c) Exercise Period. No part of any option may be exercised until the
optionee shall have remained in the employ of the Company or the Bank for
such period after the date on which the option is granted as the Committee
may specify in the option agreement.
(d) Procedure for Exercise. Options shall be exercised in the manner
set out in this paragraph. Ten (10) days prior to exercise of an option,
the optionee shall deliver to the Company by the U.S. mails or by hand
delivery an irrevocable written notice (a) setting forth
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<PAGE> 3
the number of shares with respect to which the option is exercised and (b)
specifying the address to which the shares are to be mailed. Such notice
shall be deemed to be received by the Company on the date the notice was
mailed, if sent through the U.S. mails, or on the date actually received by
the Company, if the notice is delivered other than by the U.S. mails. Such
notice shall be accompanied by consideration equal to the option price for
the shares to be acquired by the exercise of the Option (the "Option Price
Amount") in the form of (i) cash, (ii) cashier's check, bank draft, or
postal or express money order payable to the order of the Company, (iii)
shares of Common Stock already owned by the optionee, duly endorsed to the
order of the Company, having a total fair market value (as determined by
the Committee) equal to the Optionee Price Amount, or (iv) any combination
of the above-described consideration equal to the Option Price Amount.
The Committee shall determine the value of any shares of the Company stock
paid to the Company to satisfy the Option Price Amount. Such value shall
be determined as of the date the notice is deemed to be received by the
Company. As promptly as practicable after receipt of such written notice
and the Option Price Amount, the Company shall deliver to the optionee
certificates for the number of shares with respect to which such option has
been so exercised, issued in the optionee's name; provided, however, that
such delivery shall be deemed effected for all purposes when a stock
transfer agent of the Company shall have deposited such certificates in the
United States mail, addressed to the optionee at the address specified in
the notice.
(e) Termination of Employment. If an employee to whom an option has
been granted ceases to be employed by the Company or the Bank for any
reason other than death or disability, the options granted to him shall
thereupon terminate. Notwithstanding the foregoing, any options which are
exercisable on the date of such termination of employment may be exercised
during a three-month period beginning on such date.
(f) Disability or Death of Optionee. In the event of the disability
or death of the holder of an option under the Plan while he is employed by
the Company or the Bank, the options previously granted to him may be
exercised (to the extent he would have been entitled to do so at the date
of his disability or death) at any time and from time to time, within a
period of one year after his disability or death, by the former employee,
by the executor or administrator of his estate or by the person or persons
to whom his rights under the option shall pass by will or the laws of
descent and distribution, but in no event may the option be exercised after
its expiration. An employee shall be deemed to be disabled if, in the
opinion of a physician selected by the Committee, he is incapable of
performing services for the Company or the Bank by reason of any medically
determinable physical or mental impairment which can be expected to result
in death or to be of long, continued and indefinite duration.
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<PAGE> 4
(g) Assignability. An option shall not be assignable or otherwise
transferable except by will or by the laws of descent and distribution.
During the lifetime of an optionee, an option shall be exercisable only by
him.
(h) No Rights as Shareholder. No optionee shall have any rights as a
shareholder with respect to shares covered by an option until the date of
issuance of a stock certificate for such shares; except as provided in
paragraph 5(j), no adjustment for dividends, or otherwise, shall be made if
the record date therefor is prior to the date of issuance of such
certificate.
(i) Extraordinary Corporate Transactions. If the Company is dissolved
or liquidated, or is merged or consolidated into or with another
corporation, other than by a merger or consolidation in which the Company
is the surviving corporation, the then exercisable but unexercised options
granted under the Plan shall not be exercisable after the date of such
dissolution, liquidation, merger or consolidation, unless such other
surviving corporation makes provision for adoption of the Plan and the
assumption of the Company's obligations thereunder.
(j) Changes in Company's Capital Structure. The existence of
outstanding options shall not affect in any way the right or power of the
Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, exchanges, or other changes in the
Company's capital structure or its business, or any merger or consolidation
of the Company, or any issuance of Common Stock or subscription rights
thereto, or any issuance of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
Provided, however, that if the outstanding shares of Common Stock of the
Company shall at any time be changed or exchanged by declaration of a stock
dividend, stock split, combination of shares, or recapitalization, the
number and kind of shares subject to the Plan or subject to any options
theretofore granted, and the option prices, shall be appropriately and
equitably adjusted so as to maintain the proportionate number of shares
without changing the aggregate option price.
(k) Investment Representation. The Company shall not be required to
sell or issue any shares of Common Stock under any option unless (i) a
registration statement under the Securities Act of 1933, as now in effect
or hereafter amended ("Securities Act"), is in effect with respect to the
shares of Common Stock covered by such option, or (ii) the Board of
Directors of the Company has received evidence satisfactory to it to the
effect that an
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<PAGE> 5
exemption from registration under the Securities Act and any applicable
state securities laws is available for the sale and issuance contemplated.
(6) Amendments or Termination. The Board of Directors of the Company may
amend, alter or discontinue the Plan, but no amendment or alteration shall be
made which would impair the rights of any participant under any option
theretofore granted, without his consent or which, without the approval of the
shareholders, would: (i) except as is provided in paragraph 5(j) of the Plan,
increase the total number of shares reserved for the purposes of the Plan or
decrease the option price provided for in paragraph 5(b) of the Plan, (ii)
change the class of persons eligible to participate in the Plan as provided in
paragraph 4 of the Plan, (iii) extend the option period provided for in
paragraph 5(a) of the Plan; or (iv) extend the expiration date of this Plan set
forth in paragraph 8 of the Plan.
(7) Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of options thereunder, and the obligation of the Company to sell and
deliver shares under such options, shall be subject to all applicable federal
and state laws, rules and regulations and to such approvals by any governmental
or regulatory agency as may be required. The Company shall not be required to
issue or deliver any certificates for shares of Common Stock prior to the
completion of any registration or qualification of such shares under any
federal or state law, or issuance of any ruling or regulation of any government
body which the Company shall, in its sole discretion, determine to be necessary
or advisable.
(8) Effectiveness and Expiration of Plan. The Plan as set forth in this
document shall be effective on the date the Board of Directors of the Company
adopts the amended Plan. If the shareholders of the Company fail to approve
the Plan within twelve months of the date the Board of Directors approves the
Plan, the Plan shall terminate and all options previously granted under the
Plan shall become void and of no effect. The Plan shall expire ten years after
the effective date of the Prior Plan and thereafter no option shall be granted
pursuant to this Plan.
Notwithstanding the above, options issued to employees under the Prior Plan
shall be recognized and effective under this Plan and shall not be subject to
shareholders' approval under this paragraph.
(9) No Right to Company Employment or Service. Nothing in this Plan or as
a result of any option pursuant to this Plan shall confer on any individual any
right to continue in the employ of the Company or interfere in any way with the
right of the Company to terminate an individual's employment or rendering of
service at any time. Options granted under this Plan shall not be affected by
any change of employment so long as the individual continues to perform
services for the Company. The option agreements may contain such provisions as
the Committee may approve
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<PAGE> 6
with reference to the effect of approved leaves of absence or the definition of
"services" to be rendered to the Company.
(10) Liability of Company. The Company, its parent or any subsidiary
which is in existence or hereafter comes into existence shall not be liable to
an optionee or other persons as to:
(a) The Non-Issuance of Shares. The non-issuance or sale of shares as
to which the Company has been unable to obtain from any regulatory body
having jurisdiction the authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any shares hereunder; and
(b) Tax Consequences. Any tax consequence expected, but not realized,
by any optionee or other person due to the exercise of any option granted
hereunder.
(11) Non-Exclusivity of the Plan. Neither the adoption of the Plan by
the Board nor the submission of the Plan to the shareholders of the Company for
approval shall be construed as creating any limitations of the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including without limitation, the granting of restricted stock or stock options
otherwise than under the Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.
(13) Governing Law. This Plan and any agreements hereunder, shall be
interpreted and construed in accordance with the laws of the State of Delaware
and applicable federal law.
I, Rosemary M. DeMark, being the duly elected Assistant Secretary of
Century Bancshares, Inc. DO HEREBY CERTIFY, on this 5th day of March 1987, that
the preceding Non-Qualified Stock Option Plan For Key Employees is a true and
complete copy of such Plan as amended and restated by the Board of Directors of
the Company at a meeting duly called and held on February 11, 1987 at which
meeting a quorum was present and acting through, and that said Plan, as amended
and restated above, is in full force and effect as of the date hereof.
/s/ ROSEMARY M. DEMARK
---------------------------------
Rosemary M. DeMark
Assistant Secretary
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<PAGE> 7
FIRST AMENDMENT TO THE CENTURY BANCSHARES, INC.
NON-QUALIFIED STOCK OPTION PLAN FOR KEY EMPLOYEES
W I T N E S S E T H:
WHEREAS, Century Bancshares, Inc. (the "Company") presently maintains the
Century Bancshares, Inc. Non-Qualified Stock Option Plan for Key Employees
("Plan") which became effective on February 11, 1987; and
WHEREAS, the Board of Directors of the Company, pursuant Section 6 of
the Plan, has the right to amend the Plan from time to time subject to certain
limitations.
NOW, THEREFORE, in order to make the revisions desired by the Board of
Directors of the Company, the Plan is hereby amended in the following manner:
1. Effective as of the date hereof, Section 2 is hereby amended
in its entirety to read as follows:
(2) Administration of the Plan. The Board of Directors
of the Company shall appoint and maintain a Stock Option Committee
("Committee") which shall consist of two or more members of the Board
of Directors who shall not have participated in the Plan or any other
plan of the Company or any of its Affiliates which entitles
participants to acquire stock appreciation rights or stock options of
the Company or its Affiliates at any time within one year prior to
appointment (except that such persons may participate in a formula
plan meeting the conditions of Rule 16b-3(c)(2)(ii) promulgated under
the Securities Exchange Act of 1934) and shall serve without
compensation at the pleasure of the Board of Directors. No member of
the Committee shall be eligible to receive stock appreciation rights
or stock options under the Plan or any other plan of the Company or
its Affiliates (except a Rule 16b- 3(c)(2)(ii) formula plan) while
serving on the Committee. The Committee shall have full power and
authority to designate participants and to interpret the provisions
and supervise the administration of the Plan. All decisions and
selections made by the Committee pursuant to the provisions of the
Plan shall be made by the affirmative vote of a majority of its
members. Any decision reduced to writing and signed by a majority of
the members shall be fully effective as if it had been made by a
majority at a meeting duly held. As used in the Plan, the term
"Affiliates" means any "parent corporation" and any "subsidiary
corporation" of the Company as defined in Sections 424(e) and (f),
respectively, of the Internal Revenue Code of 1986.
<PAGE> 8
2. Effective as of the date hereof, Section (5)(g) is hereby
amended in its entirety to read as follows:
(g) Assignability. An option shall not be assignable or
otherwise transferable except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined in the Internal Revenue Code of 1986 or Title I of the
Employee Retirement Income Security Act, or the rules thereunder.
IN WITNESS WHEREOF, the Company has executed this First Amendment to
the Century Bancshares, Inc. Non-Qualified Stock Option Plan for Key Employees
on this 18th day of March, 1992.
ATTEST: CENTURY BANCSHARES, INC.
/s/ FRANCES K. ROBERTS By: /s/ JOSEPH S. BRACEWELL
- ---------------------------- ----------------------------
Name: Joseph S. Bracewell
Title: Chairman of the Board
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<PAGE> 1
EXHIBIT 10.4
CENTURY BANCSHARES, INC.
NON-QUALIFIED STOCK OPTION PLAN FOR DIRECTORS
SECTION 1. History and Purpose of the Plan.
(a) History. Effective as of the 11th day of February, 1987, the Board
of Directors of Century Bancshares, Inc., a Delaware corporation (the
"Company") hereby further amends and restates the terms of the Century
Bancshares, Inc. Non-Qualified Stock Option Plan For Directors ("Plan") to
provide that option's may be exercised by tendering shares of Common Stock (as
that term is defined below) already owned by the optionee. The Plan was
established by the Company on November 19, 1986.
(b) Purpose. The purpose of the Plan is to encourage ownership of the
common stock, $1.00 par value ("Common Stock"), of the Company, by directors of
the Company and/or its bank subsidiaries (the "Bank") and to provide increased
incentive for such individuals to render services and to exert maximum effort
for the business success of the Company and the Bank.
SECTION 2. Administration of the Plan. The Board of Directors (the
"Board") of the Company shall appoint and maintain a Stock Option Committee
("Committee") which shall consist of at least three officers of one of the
Company's bank subsidiaries who shall not have been eligible to participate in
the Plan at any time within one year prior to appointment and shall serve
without compensation at the pleasure of the Board. No member of the Committee
shall be eligible to receive stock options under the Plan while serving on the
Committee. The Committee shall have full power and authority to designate
participants and to interpret the provisions and supervise the administration
of the Plan. All decisions and selections made by the Committee pursuant to
the provisions of the Plan shall be made by the affirmative vote of a majority
of its members. Any decision reduced to writing and signed by a majority of
the members shall be fully effective as if it had been made by a majority at a
meeting duly held.
SECTION 3. Stock Reserved for the Plan. Subject to adjustment as
provided in Section 6(i) hereof, the aggregate number of shares of Common Stock
that may be optioned under the Plan is 30,000. The shares subject to the Plan
shall consist of authorized but unissued shares of Common Stock of the Company
and such number of shares shall be and is hereby reserved for sale for such
purpose. Any of such shares which may remain unsold and which are not subject
to outstanding options at the termination of the Plan shall cease to be
reserved for the purpose of the Plan, but until termination of the Plan, the
Company shall at all times reserve a sufficient number of shares to meet the
requirements of the Plan. Should any option expire or be canceled prior to its
exercise in full,
<PAGE> 2
the shares theretofore subject to such option may again be made subject to an
option under the Plan.
SECTION 4. Eligibility. The persons eligible to participate in the
Plan as recipients of options shall be directors of the Company and/or the
Bank. An individual who has been granted an option hereunder shall remain
eligible to receive an additional option or options, if the Committee shall so
determine.
SECTION 5. Grant of Options. The Committee shall have the authority
(i) to determine, authorize, and designate those individuals of the Company or
the Bank who are to receive options under the Plan, and (ii) to determine the
number of shares to be covered by such options and the terms thereof. The
Committee shall thereupon grant options in accordance with such determinations
as evidenced by a written option agreement. Subject to the express provisions
of the Plan, to prescribe, amend and rescind rules and regulations relating to
it, the Committee shall have discretionary authority to interpret the Plan, to
prescribe and amend the terms of the option agreements (which need not be
identical) and to make all other determinations deemed necessary or advisable
for the administration of the Plan.
SECTION 6. Terms and Conditions. Each option granted under the Plan
shall be evidenced by an agreement, in a form approved by the Committee, which
shall be subject to the following express terms and conditions and to such
other terms and conditions as the Committee may deem appropriate.
(a) Option Period. Each option agreement shall specify the
period for which the option thereunder is granted (which in no event
shall exceed seven years from the date of grant) and shall provide that
the option shall expire at the end of such period.
(b) Option Price. The purchase price of each share of Common
Stock subject to each option granted pursuant to the Plan shall be
determined by the Committee at the time the option is granted and shall
not be less than the fair market value of a share of Common Stock on the
date the option is granted, as determined by the Committee.
(c) Exercise Period. Any option may be exercised on and after
the date on which the option is granted.
(d) Procedure for Exercise. Options shall be exercised by the
manner set out in this paragraph. Ten (10) days prior to exercise of an
option, the optionee shall deliver to the Company by the U.S. mails or
by hand delivery an irrevocable written notice (a) setting forth the
number of shares with respect to which the option is exercised and (b)
specifying the address to which the shares are to be mailed. Such
notice shall be deemed to be received by
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<PAGE> 3
the Company on the date the notice was mailed, if sent through the U.S.
mails, or on the date actually received by the Company, if the notice is
delivered other than by the U.S. mails. Such notice shall be
accompanied by consideration equal to the option price for the shares to
be acquired by the exercise of the Option (the "Option Price Amount") in
the form of (i) cash, (ii) cashier's check, bank draft, or postal or
express money order payable to the order of the Company, (iii) shares of
Common Stock already owned by the optionee, duly endorsed to the order
of the Company, having a total fair market value (as determined by the
Committee) equal to the Optionee Price Amount, or (iv) any combination
of the above-described consideration equal to the Option Price Amount.
The Committee shall determine the value of any shares of the Company
stock paid to the Company to satisfy the Option Price Amount. Such
value shall be determined as of the date the notice is deemed to be
received by the Company. As promptly as practicable after receipt of
such written notice and the Option Price Amount, the Company shall
deliver to the optionee certificates for the number of shares with
respect to which such option has been so exercised, issued in the
optionee's name; provided, however, that such delivery shall be deemed
effected for all purposes when a stock transfer agent of the Company
shall have deposited such certificates in the United States mail,
addressed to the optionee at the address specified in the notice.
(e) Termination of Service. If an individual to whom an option
has been granted ceases to render services for the Company or the Bank
for any reason other than death or disability, the options granted to
him shall thereupon terminate. However, options which are exercisable
on the date of such termination may be exercised during a three-month
period beginning on such date; provided further, if an optionee's
service is terminated because of the optionee's dishonesty, theft,
embezzlement from the Company or the Bank, disclosing trade secrets of
the Company or the Bank, willful violation of any rules of the Company
or the Bank pertaining to the conduct of individuals performing services
for the Company or the Bank, or the commission of a willful felonious
act while in the employment of the Company or the Bank or performing
services for the Company or the Bank, then any option or unexercised
portion thereof granted to said optionee, shall expire upon such
termination.
(f) Disability or Death of Optionee. In the event of the
disability or death of an optionee under the Plan while he is employed
or performing services for the Company or the Bank, the options
previously granted to him may be exercised (to the extent he would have
been entitled to do so at the date of his disability or death) at any
time and from time to time, within a period of one year after his
disability or death, by the former individual, by the executor or
administrator of his estate or by the person or persons to whom his
rights under the option shall pass by will or the laws of descent and
distribution, but in no event may the option be exercised after its
expiration under the terms of the option agreement. An individual shall
be deemed to be disabled if, in the opinion of a physician selected by
the
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<PAGE> 4
Committee, he is incapable of performing services for the Company or the
Bank by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of long,
continued and indefinite duration.
(g) Assignability. An option shall not be assignable or
otherwise transferable except by will or by the laws of descent and
distribution. During the lifetime of an optionee, an option shall be
exercisable only by him.
(h) Stock Options. Each option agreement shall contain such
terms and provisions as the Committee may determine to be necessary or
desirable.
(i) No Rights as Shareholder. No optionee shall have any rights
as a shareholder with respect to shares covered by an option until the
date of issuance of a stock certificate for such shares; except as
provided in Section 6(i), no adjustment for dividends, or otherwise,
shall be made if the record date therefor is prior to the date of
issuance of such certificate.
(j) Extraordinary Corporate Transactions. New option rights may
be substituted for the option rights granted under the Plan, or the
Company's duties as to options outstanding under the Plan may be
assumed, by an employer corporation other than the Company, or by a
parent or subsidiary of the Company or such employer corporation, in
connection with any merger, consolidation, acquisition, separation,
reorganization, liquidation or like occurrence in which the Company is
involved, including substitution or assumption which will allow any
stock options to continue to qualify as such. In the event such
employer corporation, or parent or subsidiary of the Company or such
employer corporation, does not substitute new option rights for, and
substantially equivalent to, the option rights granted hereunder, or
assume the option rights granted hereunder, the option rights granted
hereunder shall terminate and thereupon become null and void (i) upon
dissolution or liquidation of the Company, or similar occurrence, (ii)
upon any merger, consolidation, acquisition, separation, reorganization,
or similar occurrence, where the Company will not be a surviving entity
or (iii) upon a transfer of substantially all of the assets of the
Company or more than 50% of the outstanding Common Stock; provided,
however, that option granted under this Plan shall have the right
immediately prior to or concurrently with such dissolution, liquidation,
merger, consolidation, acquisition, separation, reorganization, or
similar occurrence, to exercise any unexercised option rights granted
hereunder.
(k) Changes in Company's Capital Structure. The existence of
outstanding options shall not affect in any way the right or power of
the Company or its shareholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, exchanges, or other
changes in the Company's capital structure or its business, or any
merger or consolidation
-4-
<PAGE> 5
of the Company, or any issuance of Common Stock or subscription rights
thereto, or any issuance of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise. However, if the outstanding shares of Common Stock of the
Company shall at any time be changed or exchanged by declaration of a
stock dividend, stock split, combination of shares, recapitalization, or
reorganization, the number and kind of shares subject to the Plan or
subject to any options theretofore granted, and the option prices, shall
be appropriately and equitably adjusted so as to maintain the
proportionate number of shares without changing the aggregate option
price.
(l) Investment Representation. Each option agreement shall
contain a provision that, upon demand by the Committee for such a
representation, the optionee (or any person acting under Section 6(d))
shall deliver to the Committee at the time of any exercise of an option
a written representation that the shares to be acquired upon such
exercise are to be acquired for investment and not for resale or with a
view to the distribution thereof. Upon such demand, delivery of such
representation prior to the expiration of the option period and prior to
the delivery of certificates representing shares issued upon exercise of
the option shall be a condition precedent to the right of the optionee
or such other person to purchase any shares.
SECTION 7. Amendments or Termination. The Board of Directors of the
Company may amend, alter or discontinue the Plan, but no amendment or
alteration shall be made which would impair the rights of any individual,
without his consent, under any option theretofore granted, or which, without
the approval of the shareholders, would: (i) except as is provided in Section
6(h) of the Plan, increase the total number of shares reserved for the purposes
of the Plan, (ii) change the class of persons eligible to participate in the
Plan as provided in Section 4 of the Plan, (iii) extend the option period
provided for in Section 6(a) of the Plan, (iv) extend the expiration date of
this Plan set forth in Section 11 of the Plan, (v) decrease to any extent the
option price of any option granted under the Plan or (vi) withdraw the
administration of the Plan from the Committee.
SECTION 8. Compliance With Other Laws and Regulations. The Plan, the
grant and exercise of options thereunder, and the obligation of the Company to
sell and deliver shares under such options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
governmental or regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to the completion of any registration or qualification of such shares under any
federal or state law or issuance of any ruling or regulation of any government
body which the Company shall, in its sole discretion, determine to be necessary
or advisable.
-5-
<PAGE> 6
SECTION 9. No Right to Company Employment or Service. Nothing in this
Plan or as a result of any option pursuant to this Plan shall confer on any
individual any right to continue in the employ of the Company or interfere in
any way with the right of the Company to terminate an individual's employment
or rendering of service at any time. Options granted under this Plan shall not
be affected by any change of employment so long as the individual continues to
perform services for the Company. The option agreements may contain such
provisions as the Committee may approve with reference to the effect of
approved leaves of absence or the definition of "services" to be rendered to
the Company.
SECTION 10. Liability of Company. The Company, its parent or any
subsidiary which is in existence or hereafter comes into existence shall not be
liable to an optionee or other persons as to:
(a) The Non-Issuance of Shares. The non-issuance or sale of
shares as to which the Company has been unable to obtain from any
regulatory body having jurisdiction the authority deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
shares hereunder; and
(b) Tax Consequences. Any tax consequence expected, but not
realized, by any optionee or other person due to the exercise of any
option granted hereunder.
SECTION 11. Effectiveness and Expiration of Plan. The Plan shall be
effective on the date the Board of Directors of the Company adopts the Plan.
If the shareholders of the Company fail to approve the Plan within twelve
months of the date the Board of Directors approved the Plan, the Plan shall
terminate and all options previously granted under the Plan shall become void
and of no effect. The Plan shall expire seven years after the date the Board
of Directors approves the Plan and thereafter no option shall be granted
pursuant to the Plan.
SECTION 12. Non-Exclusivity of the Plan. Neither the adoption of the
Plan by the Board nor the submission of the Plan to the shareholders of the
Company for approval shall be construed as creating any limitations of the
power of the Board to adopt such other incentive arrangements as it may deem
desirable, including without limitation, the granting of restricted stock or
stock options otherwise than under the Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
SECTION 13. Governing Law. This Plan and any agreements hereunder,
shall be interpreted and construed in accordance with the laws of the State of
Delaware and applicable federal law.
-6-
<PAGE> 7
I, Rosemary M. Demark, being the duly elected Assistant Secretary of
Century Bancshares, Inc. DO HEREBY CERTIFY, on this 5th day of March l987, that
the preceding Non-Qualified Stock Option Plan For Directors is a true and
complete copy of such Plan as amended and restated by the Board of Directors of
the Company at a meeting duly called and held on February 11, l987 at which
meeting a quorum was present and acting throughout, and that said Plan, as
amended and restated above, is in full force and effect as of the date hereof.
/s/ ROSEMARY M. DEMARK
---------------------------------------
Rosemary M. DeMark
Assistant Secretary
-7-
<PAGE> 8
FIRST AMENDMENT TO THE CENTURY BANCSHARES, INC.
NON-QUALIFIED STOCK OPTION PLAN FOR DIRECTORS
W I T N E S S E T H:
WHEREAS, Century Bancshares, Inc. (the "Company") presently maintains
the Century Bancshares, Inc. Non- Qualified Stock Option Plan for Directors
("Plan"), which became effective on November 19, 1986; and
WHEREAS, the Board of Directors of the Company, pursuant Section 7 of
the Plan, has the right to amend the Plan from time to time subject to certain
limitations.
NOW, THEREFORE, in order to make the revisions desired by the Board of
Directors of the Company, the Plan is hereby amended in the following manner:
1. Effective as of the date hereof, Section 2 is hereby amended
in its entirety to read as follows:
SECTION 2. Administration of the Plan. The Plan shall be
administered by the Board of Directors of the Company ("Committee").
Subject to the terms of the Plan, the Committee shall have the power
to interpret the provisions and supervise the administration of the
Plan. All decisions made by the Committee pursuant to the provisions
of the Plan shall be made by a majority of its members at a duly held
regular or special meeting or by written consent in lieu of any such
meeting. A majority of the directors in office shall constitute a
quorum and all decisions made by the Committee pursuant to the
provisions of the Plan shall be made by a majority of the directors
present at any duly held regular or special meeting at which a quorum
is present (unless the concurrence of a greater proportion is required
by law or by the articles or bylaws of the Company) or by the written
consent of all of the directors in lieu of any such meeting.
2. Effective as of the date hereof, Section 4 is hereby amended
in its entirety to read as follows:
SECTION 4. Eligibility. Each director of the Company and/or
Century National Bank who is not otherwise an employee of the Company
or any of the Company's subsidiaries (as defined in Section 424(f) of
the Internal Revenue Code of 1986) shall be eligible to participate in
the Plan as recipients of options.
3. Effective as of the date hereof, Section 5 is hereby deleted
in its entirety.
<PAGE> 9
4. Effective as of the date hereof, Section 6(a) is hereby
amended in its entirety to read as follows:
(a) Option Awards and Exercise Period. Each director of
the Company and/or Century National Bank who is eligible to receive
options under the Plan shall be granted one automatic and
nondiscretionary option to acquire the following number of shares of
Common Stock on the date of each Annual Meeting of Stockholders at
which he is elected or reelected to serve as a director of the Company
and/or Century National Bank:
(i) An amount equal to the total number of shares
of Common Stock reserved under the Plan which are not subject
to outstanding options, divided by the total number of
directors eligible to receive options under the Plan at such
Annual Meeting of Stockholders, or
(ii) 1,500 shares of Common Stock, whichever is
less.
Each option granted under the Plan shall provide that it shall
terminate and be of no force or effect with respect to any shares not
previously taken up by the optionee upon the expiration of seven years
from the date of grant.
5. Effective as of the date hereof, Section 6(b) is hereby
amended in its entirety to read as follows:
(b) Option Price. The purchase price of each share of
Common Stock subject to each option granted pursuant to the Plan shall
be equal to the greater of the par value of the Common Stock or 100%
of the fair market value of a share of Common Stock on the date the
option is granted. The fair market value of a share of Common Stock on
a particular date shall be deemed to be the average (mean) of the
reported "high" and "low" sales prices for such shares as reported in
The Wall Street Journal's NYSE-Composite Transactions listing for such
day (corrected for obvious typographical errors), or if such shares
are not reported in such listing, then the average of the reported
"high" and "low" sales prices on the largest national securities
exchange (based on the aggregate dollar value of securities listed) on
which such shares are listed or traded, or if such shares are not
listed or traded on any national securities exchange, then the average
of the reported "high" and "low" sales prices for such shares in the
over-the-counter market, as reported on the National Association of
Securities Dealers Automated Quotations System, or, if such prices
shall not be reported thereon, the average between the closing bid and
asked prices so reported, or, if such prices shall not be reported,
then the average closing bid and asked prices reported by the National
Quotation Bureau Incorporated, or, in all other cases, the value
established by the Board of Directors of the Company in good faith.
-2-
<PAGE> 10
6. Effective as of the date hereof, Section 5(g) is hereby
amended in its entirety to read as follows:
(g) Assignability. An option shall not be assignable or
otherwise transferable except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined in the Internal Revenue Code of 1986 or Title I of the
Employee Retirement Income Security Act, or the rules thereunder.
7. Effective as of the date hereof, Section 7 is hereby amended
by the addition of the following sentence as the last sentence thereof:
Notwithstanding the foregoing, to the extent but only to the
extent required in order that Rule 16b- 3(c)(2)(ii)(B), as promulgated
in SEC Release No. 34-28869, February 8, 1991, be complied with, the
Plan shall not be amended more than once every six months, other than
to comport with changes in the Internal Revenue Code of 1986, the
Employee Retirement Income Security Act, or the rules thereunder.
IN WITNESS WHEREOF, the Company has executed this First Amendment to
the Century Bancshares, Inc. Non-Qualified Stock Option Plan for Directors on
this 18th day of March, 1992.
ATTEST: CENTURY BANCSHARES, INC.
/s/ FRANCES K. ROBERTS By: /s/ JOSEPH S. BRACEWELL
---------------------- -----------------------------
Name: Joseph S. Bracewell
---------------------------
Title: Chairman of the Board
--------------------------
-3-
<PAGE> 1
EXHIBIT 10.5
SAMPLE AGREEMENT
DIRECTOR'S COMPENSATION AGREEMENT
This Agreement is entered into effective as of the _____ day of
_____________, between CENTURY NATIONAL BANK ("Bank"), CENTURY BANCSHARES, INC.
("Company") and ________________ ("Director").
WITNESSETH
WHEREAS, the Bank and the Company recognize that the competent and
faithful efforts of the Director on behalf of the Bank and the Company have
contributed significantly to the success and growth of the Bank and the
Company; and
WHEREAS, the Bank and the Company value the efforts, abilities and
accomplishments of the Director and recognize that the Director's continued
service is expected to contribute to the Bank's and the Company's continued
growth and success in the future; and
WHEREAS, the Bank and the Company desire to compensate the Director,
as set forth below, if elected to serve on the Board of Directors of the Bank
and/or the Company ("Board"); and
WHEREAS, the Director wishes to defer current director's fees under a
deferred compensation arrangement with the Bank and the Company pursuant to
which (a) the Director would be entitled to receive a retirement benefit for a
specified period after the Director retires from the Board or the Director's
term of service on the Board ends, and/or (b) the Director's family would be
entitled to such benefits from and after the Director's death; and
WHEREAS, the parties hereto wish to provide the terms and conditions
upon which the Bank and the Company shall pay such retirement benefits to the
Director after retirement or to the Director's family after the Director's
death;
NOW, THEREFORE, it is mutually agreed as follows:
1. Deferral of Fees: Subject to the terms and conditions of the
Agreement, the Bank, the Company and the Director agree to defer payment of
fees of which the Director would otherwise be entitled to be paid ("Deferred
Fees"), for a period of up to five years from the date hereof.
2. Retirement Benefit: The Bank and the Company agree to pay the
Director the total sum of $_________ payable in monthly installments of $______
for 180 consecutive months, commencing on the first day of the month following
the Director's 65th birthday ("Retirement Date"). Payments to the Director
will terminate when all such payments have been made or at the time of the
Director's death, whichever occurs first.
<PAGE> 2
DIRECTOR'S COMPENSATION AGREEMENT
Page 2
3. Death of Director Before Retirement Date: In the event the
Director should die before the Retirement Date, the Bank and the Company agree
to pay the total sum of $_________ payable in monthly installments of $______
for ___ consecutive months, commencing on the first day of the month following
the date of the Director's death, to the Director's then living Beneficiary
designated in writing to the Bank, if any, for the life of said Beneficiary; if
none, then to the Director's then living spouse, if any, for the life of said
spouse; if none, or from and after the death of said spouse, then to the then
living descendants of the Director, if any, in equal shares, per stirpes, for
their joint and survivor lives; and if none, or after their respective joint
and survivor lives, any balance thereof in one lump sum to the estate of the
Director.
4. Death Of Director After Retirement Date: If the Director dies
after the Retirement Date but prior to receiving all of the monthly
installments set forth in paragraph "2", the remaining monthly installments
will be paid to the Director's designated Beneficiary. The Beneficiary shall
receive all remaining installments which the Director would have received
designated Beneficiary. The Beneficiary shall receive all remaining
installments which the Director would have received until the total sum set
forth in paragraph "2" (as reduced by the provisions of paragraph "6" if
applicable) has been paid. If the Director fails to designate a Beneficiary in
writing to the Bank, the remaining monthly installments after the time of the
Director's death shall be paid to the legal representative of the estate of the
Director.
5. Early Retirement: If the Director, for any reason other than
death of the Director or change of control of the Company or the Bank, fails to
serve on the Board of Directors of either the Company or the Bank for five
consecutive years, the Director will receive monthly compensation (or the
Director's Beneficiary will receive a monthly benefit) which is reduced
proportionately based on the number of full months served in relation to the
required service of 60 months. For example, if the Director served only 30
months on the Board, the Director would be entitled to 30/60 or 50% of the
monthly compensation stated in paragraph "2". Similarly, in the above example,
if the Director died after leaving the Board but before the Retirement Date,
the Director's Beneficiary would be entitled to 30/60 or 50% of the monthly
benefit stated in paragraph "3". In determining consecutive years of service,
beginning _______________, no year shall be counted in which the Director fails
to attend at least two-thirds of the regularly scheduled meetings of the Board
of Directors, except pursuant to the circumstances set forth in paragraph "6"
below. In the event that there is a change of control of the Bank or the
Company while the Director is serving on the Board, there shall be no reduction
in compensation or benefits on account of the provisions of this paragraph,
except for any reduction resulting from the Director's failure to fulfill the
attendance requirement prior to the time the change of control takes place.
6. Interruption of Service: The service of the Director shall
not be deemed to have been terminated or interrupted due to absence from active
service on account of illness, disability, during any authorized vacation or
during temporary leaves of absence granted by the Bank and/or the
<PAGE> 3
DIRECTOR'S COMPENSATION AGREEMENT
Page 3
Company for reasons of professional advancement, education, health, or
government service, or during military leave for any period if the Director is
elected to serve on the Board following such interruption.
7. Prohibited Payment: The obligation of the Bank and the
Company, and their successors and assigns, to make payments pursuant to this
Agreement shall be reduced or eliminated to the extent required (i) to comply
with regulations or orders issued pursuant to Section 18(k)(1) of the Federal
Deposit Insurance Act, (ii) by any other law, rule, or regulation which is
binding on the Company or the Bank or (iii) by direction or instruction from a
federal regulatory authority.
8. Suicide: No payments will be made to the Director's
Beneficiary or estate in the event of death by suicide during the first three
years of this Agreement.
9. Status of Agreement: This Agreement does not constitute a
contract of employment between the parties, nor shall any provision of this
Agreement constitute an agreement by the Bank, the Company, or shareholders of
the Bank and the Company, to nominate or elect the Director as a director in
the future or restrict the right of the shareholders of the Bank or the Company
to remove the Director in accordance with the Bank's and the Company's charter
and by-laws. The Director retains the right to resign from the Board of
Directors or to decline to stand for reelection.
10. Assignment of Rights: Except as provided in this Agreement,
none of the rights to benefits under this Agreement are assignable by the
Director or any Beneficiary or designee of the Director and any attempt to
sell, transfer, assign, pledge, encumber or change the Director's right to
receive compensation shall be void.
11. Status of Director's Rights: The rights granted to the
Director or any designee or Beneficiary under this Agreement shall be solely
those of an unsecured creditor of the Bank.
12. Funding Vehicles: If the Bank and the Company shall acquire
an insurance policy or any other asset in connection with the liabilities
assumed by it hereunder, it is expressly understood and agreed that neither the
Director nor any Beneficiary shall have any right with respect to, or claim
against, such policy or other asset. Such policy or asset shall be and remain
a general, unpledged, unrestricted asset of the Bank or the Company and shall
not be deemed to be held under any trust for the benefit of the Director or any
Beneficiary or to be held in any way as collateral security for the fulfilling
of the obligations of the Bank under this Agreement, except as expressly
provided by the terms of such policy or other asset.
13. Governing Law: This Agreement, the rights and obligations of
the parties hereto, and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of the District of
Columbia (excluding the choice of law rules thereof).
<PAGE> 4
DIRECTOR'S COMPENSATION AGREEMENT
Page 4
14. Amendment; Modification; Waiver: No amendment, modification
or waiver of the terms of this Agreement shall be valid unless made in writing
and duly executed by the Director, the Bank and the Company. No delay or
failure at any time on the part of the Bank and the Company in exercising any
right, power or privilege under this Agreement, or in enforcing any provision
of this Agreement, shall impair any such right, power or privilege, or be
construed as a waiver of any default or as any acquiescence therein, or shall
affect the right of the Bank and the Company thereafter to enforce each and
every provision of this Agreement in accordance with its term.
15. Binding Effect: This Agreement shall be binding upon and
inure to the benefit of the parties hereto, the successors and assigns of the
Bank and the Company, and the heirs and legal representatives of the Director.
Any successor of the Bank and the Company shall be deemed substituted for the
Bank and the Company under the terms of this Agreement. As used herein, the
term "successor" shall include any person, corporation or other business entity
which at any time, whether by merger, purchase or otherwise, acquires all or
substantially all of the stock, assets or business of the Bank and/or the
Company.
IN WITNESS HEREOF, the parties have signed this Agreement effective as
of the day and year above written.
ATTEST CENTURY BANCSHARES, INC. ( "Company" )
By
- ------------------------- --------------------------------
President
ATTEST CENTURY NATIONAL BANK ("Bank")
By
- ------------------------- --------------------------------
Chairman of the Board
- ------------------------- --------------------------------
Witness ________________ ("Director")
<PAGE> 5
BENEFICIARY DESIGNATION
Date
---------------
Pursuant to Paragraph "3" and Paragraph "4" of the Director's
Compensation Agreement between CENTURY NATIONAL BANK, CENTURY BANCSHARES, INC.,
and _______________, dated as of ______________________, the undersigned hereby
requests that any death benefits payable under the provisions of said Agreement
be payable to (please provide full name and relationship):
<TABLE>
<CAPTION>
Beneficiary Relationship
----------- ------------
<S> <C> <C>
1.
------------------------------------------ ----------------------------------
2.
------------------------------------------ ----------------------------------
3.
------------------------------------------ ----------------------------------
4.
------------------------------------------ ----------------------------------
- --------------------------------------------------- ----------------------------------
WITNESS
</TABLE>
<PAGE> 1
EXHIBIT 10.6
INDEMNITY AGREEMENT
This Agreement made between Century Bancshares, Inc., a Delaware
corporation ("Company") and ______________________ ("Indemnitee").
The Company and Indemnitee desire that Indemnitee serve or continue to
serve as a director or officer of the Company, and the Company desires and
intends hereby to provide indemnification (including advancement of expenses)
against any and all liabilities asserted against Indemnitee to the fullest
extent permitted by the General Corporation Law of the State of Delaware. For
and in consideration of the premises and the covenants contained herein, the
Company and Indemnitee do hereby covenant and agree as follows:
1. Continued Service. Indemnitee will serve or continue to serve, at
the will of the Company or under separate contract, if such exists, as a
director and/or officer so long as he is duly elected and qualified in
accordance with the By-Laws of the Company or until he tenders his resignation.
2. Indemnification. The Company shall indemnify Indemnitee as
follows:
(a) The Company shall indemnify Indemnitee when he is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another
<PAGE> 2
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlements actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
(b) The Company shall indemnify Indemnitee when he is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit brought by or in the right of the Company to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him or on his behalf in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company and except that no indemnification shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnification for such expenses which the Court of Chancery or such other
court shall deem proper.
-2-
<PAGE> 3
(c) Any indemnification under paragraphs (a) and (b) of this
Section 2 (unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination (in accordance with
Section 3 hereof) that indemnification of Indemnitee is proper in the
circumstances because he has met the applicable standard of conduct set forth
in paragraphs (a) and (b) of this Section 2. Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
Indemnitee failed to act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(d) Expenses (including attorney fees) incurred by Indemnitee in
defending a civil or criminal action, suit or proceeding by reason of the fact
that he is or was a director or officer of the Company shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
within 14 days of the receipt by the Company of a sworn statement of request
for advancement of expenses substantially in the form of Exhibit 1 attached
hereto and made a part hereof ("Undertaking"), averring that (i) he has
reasonably incurred or will reasonably incur actual expenses in defending a
civil or criminal action, suit or proceeding, and (ii) he undertakes to repay
-3-
<PAGE> 4
such amount if it is ultimately determined that he is not entitled to be
indemnified by the Company under this Agreement or otherwise.
(e) The right to indemnification and advancement of expenses
provided by this Agreement shall not be deemed exclusive of any other rights to
which Indemnitee may be entitled under any statute, by-law, insurance policy,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue after Indemnitee has ceased to be
a director, officer, employee or agent and shall inure to the benefit of his
heirs, executors and administrators.
3. Determination of Right to Indemnification. For purposes of making
the determination in a specific case under paragraph (c) of Section 2 hereof
whether to make indemnification, the board of directors, independent legal
counsel, or stockholders, as the case may be, shall make such determination in
accordance with the following procedure:
(a) Indemnitee may submit to the board of directors a sworn
statement of request for indemnification substantially in the form of Exhibit 2
attached hereto and made a part hereof ("Indemnification Statement") averring
that he has met the applicable standard of conduct set forth in paragraphs (a)
and (b) of Section 2 hereof; and
(b) Submission of the Indemnification Statement to the board of
directors shall create a rebuttable presumption that Indemnitee is entitled to
indemnification under this Agreement, and the board of directors, independent
legal counsel, or stockholders, as the case may be, shall within 60 days after
submission of the Indemnification Statement specifically determine that
-4-
<PAGE> 5
Indemnitee is so entitled, unless it or they shall possess sufficient evidence
to rebut the presumption that Indemnitee has met the applicable standard of
conduct set forth in paragraph (a) or (b) of Section 2 hereof, which evidence
shall be disclosed to Indemnitee with particularity in a sworn written
statement signed by all persons who participated in the determination and voted
to deny indemnification.
4. Merger, Consolidation or Change in Control. In the event that the
Company shall be a constituent corporation in a consolidation or merger,
whether the Company is the resulting or surviving corporation or is absorbed,
or if there is a change in control of the Company as defined in Section 5
hereof, Indemnitee shall stand in the same position under this Agreement with
respect to the resulting, surviving or changed corporation as he would have
with respect to the Company if its separate existence had continued or if there
had been no change in the control of the Company.
5. Certain Definitions. For purposes of this Agreement, the following
definitions apply herein:
"other enterprises" shall include employee benefit plans, and
civic, non-profit, or charitable organizations, whether or not incorporated;
"fines" shall include any excise taxes assessed on Indemnitee with
respect to any employee benefit plan;
"serving at the request of the Company" shall include any service
at the request or with the express or implied authorization of the Company, as
a director, officer, employee or agent of the Company which imposes duties on,
or involves services by, Indemnitee with respect to a
-5-
<PAGE> 6
corporation or "other enterprises," its participants or beneficiaries; and if
Indemnitee acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of such "other enterprises,"
he shall be deemed to have acted in a manner "not opposed to the best interests
of the Company" as referred to in this Agreement; and
"change in control" shall include any change in the ownership of a
majority of the capital stock of the Company or in the composition of a
majority of the members of the board of directors of the Company.
6. Attorneys' Fees. In the event that Indemnitee institutes any legal
action to enforce his rights under, or to recover damages for breach of this
Agreement, Indemnitee, if he prevails in whole or in part, shall be entitled to
recover from the Company all attorneys' fees and disbursements incurred by him.
7. Severability. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, the remainder of this Agreement and the application of such provision
to other persons or circumstances shall not be affected.
8. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to its
conflict of laws rules.
9. Modification; Survival. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof. This Agreement
may be modified only by an instrument in writing signed by both parties hereto.
The provisions of this Agreement shall survive the termination of Indemnitee's
service as a director or officer of the Company.
-6-
<PAGE> 7
10. Deposit of Funds in Trust. In the event that the Company decides
to voluntarily dissolve or to file a voluntary petition for relief under
applicable bankruptcy, moratorium or similar laws, then not later than ten days
prior to such dissolution or filing, the Company shall deposit in trust for the
exclusive benefit of Indemnitee a cash amount equal to all amounts previously
authorized to be paid to Indemnitee hereunder, such amounts to be used to
discharge the Company's obligations to Indemnitee hereunder. Any amounts in
such trust not required for such purpose shall be returned to the Company.
This Section 10 shall not apply to dissolution of the Company in connection
with a transaction as to which Section 4 hereof applies.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and set their seals effective as of the ___ day of _______, ____.
CENTURY BANCSHARES, INC.
Attest: By:
----------------- ---------------------------------
Name/Title Name/Title
INDEMNITEE
(Corporate Seal)
------------------------------------
- -------------
-8-
<PAGE> 9
EXHIBIT 1
STATEMENT OF UNDERTAKING
STATE OF )
)
COUNTY OF )
I, ______________________, being first duly sworn do depose and say as
follows:
1. This Statement is submitted pursuant to the Indemnity Agreement
effective as of ______________________, between Century Bancshares, Inc., a
Delaware corporation (Company), and the undersigned.
2. I am requesting advancement of certain actual expenses which have
reasonably been incurred or will be reasonably incurred by me or on my behalf
in defending a civil or criminal action, suit or proceeding by reason of the
fact that I am or was a director or officer of the Company.
3. I hereby undertake to repay this advancement of expenses if it is
ultimately determined that I am not entitled to be indemnified by the Company.
-1-
<PAGE> 10
4. The expenses for which advancement is requested have been or will
be incurred in connection with the following action, suit or proceeding:
---------------------------
Subscribed and sworn to before me this ____ day of __________________,
19__.
-----------------------------------
Notary Public in and for said state
and county
My Commission Expires:
-------------
-2-
<PAGE> 11
Exhibit 2
STATEMENT OF REQUEST FOR INDEMNIFICATION
STATE OF )
)
COUNTY OF )
I, _____________________, being first duly sworn do depose and say as
follows:
1. This Statement is submitted pursuant to the Indemnity Agreement
effective ___________, ______, between Century Bancshares, Inc., a Delaware
corporation ("Company"), and the undersigned.
2. I am requesting indemnification against expenses (including
attorneys' fees) and, with respect to any action not by or in the right of the
Company, judgements, fines and amounts paid in settlement, all of which have
been actually and reasonably incurred by me or on my behalf in connection with
a certain action, suit or proceeding to which I am a party or am threatened to
be made a party by reason of the fact that I am or was a director or officer of
the Company.
-1-
<PAGE> 12
3. With respect to all matters related to any such action, suit or
proceeding, I acted in good faith and in a manner reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, I had no reason to believe that my conduct was
unlawful.
4. I am requesting indemnification in connection with the following
suit, action or proceeding:
-------------------------------
Subscribed and sworn to before me this _____ day of ____________, ______.
-------------------------------
Notary Public in and for said
state and county
My commission expires:
-2-
<PAGE> 1
EXHIBIT 10.7
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made and entered as of
the 1st day of September 1996, by and between CENTURY BANCSHARES, INC., a
Delaware corporation ("Employer"), and JOSEPH S. BRACEWELL, a District of
Columbia resident ("Employee").
WITNESSETH:
WHEREAS, Employee is employed by Employer and Employer desires Employee's
continued services as Chairman of the Board and Chief Executive Officer of
Employer and as a senior executive officer of its wholly-owned subsidiary,
CENTURY NATIONAL BANK, a national banking association ("Bank").
WHEREAS, Employee is willing to continue to provide services to Employer
upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and conditions set forth in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which each party
acknowledge, the parties intending to be legally bound agree as follows:
1. DUTIES AND RESPONSIBILITIES OF EMPLOYEE. By this Agreement Employer
employs Employee and Employee hereby accepts continued employment as Chairman
of the Board and Chief Executive Officer of Employer and as a senior executive
of the Bank. In such capacities, Employee shall devote his full time and
attention to the affairs of Employer, use his skill and best efforts in the
faithful performance of his duties, faithfully discharge his responsibilities,
and comply in all material respects with the bylaws, rules, regulations,
policies, and instruments established or issued by Employer and Bank. Employee
shall report to the Board of Directors of Employer and, as applicable, the
Board of Directors of Bank. Employee shall have such authority as shall be
required to enable him to preform the duties of his positions. Subject to
prior approval of the Board of Directors of Employer, Employee may participate
or serve as an investor or director of any other company or as an officer,
director, or member of any trade, social, or charitable organization where such
participation or service does not, in Employer's reasonable judgment, conflict
with Employer's interests or interfere with Employee's duties under this
Agreement.
2. TERM AND RENEWAL. Employee's employment under this Agreement shall
commence September 1, 1996, and shall continue until August 31, 1998 (the
"Initial Term"), unless extended in accordance with the following procedure.
Employee's employment shall be extended
<PAGE> 2
for additional one (1) year terms commencing September 1 and ending August 31
(the "Renewal Term(s)"), if Employer gives written notice to Employee at least
one hundred eighty (180) days before the end of the Initial or any Renewal Term
of such extension of this Agreement, and Employee, within sixty (60) days after
such notice, notifies Employer of his consent to such extension.
Notwithstanding anything in this Agreement to the contrary, Employer and
Employee may mutually agree to an acceleration of the expiration of the Initial
Term of any Renewal Term.
3. COMPENSATION.
3.1 SALARY. During the Initial Term or any Renewal Term of this
Agreement, Employer shall pay Employee a yearly salary of One Hundred
Eighty-Two Thousand Three Hundred Dollars ($182,300), payable under
Employer's customary payroll procedures, less withholdings required by law
or authorized by Employee. Payment of salary, benefits and other
compensation may be provided by Employer or, in its discretion, by Bank or
any other subsidiary or affiliate of Employer and, in such latter event,
any such payments shall constitute payment under this Agreement.
3.2 COMPENSATION REVIEWS. By January 1, 1997, and by January 1 of
each succeeding year of the Initial Term or any Renewal Term, Employer
shall review the yearly salary of Employee and may, in its business
judgment, increase such salary, effective on such date for the succeeding
year.
3.3 BONUSES AND PERQUISITES. Employee shall be entitled to
participate in or receive benefits from any and all incentive compensation
and bonus plans, retirement plans, pension plans, profit-sharing plans,
health and accident plans, medical and disability coverage, insurance
policies of any kind, stock option plans or agreements, vacation, sick
leave, and any other perquisites which Employer makes available to its
senior executives and/or key management employees as a group, subject to
and consistent with the terms, conditions and administration of such plans
and arrangements. Nothing in this Agreement shall obviate any existing or
future vested right of Employee in any other agreement with Employer,
including but not limited to Employee's rights under split-dollar insurance
programs, director compensation programs, or stock option programs.
3.4 REIMBURSEMENT OF EXPENSES; OTHER BENEFITS. Employer shall
continue to pay or reimburse Employee for (a) all reasonable professional
association dues and licenses, travel and other expenses, including
participation in trade or professional associations, approved by Employer
through its designated representative and incurred by Employee in
performing his duties in the lawful and ordinary course of business and
properly reported to Employer in accordance with its accounting procedures;
and (b) country club dues, life insurance premiums, automobile use, and
parking, as currently made available to Employee.
Page 2 of 15
<PAGE> 3
Employer shall continue to furnish Employee with the exclusive use of the
automobile now used by Employee or an equivalent luxury automobile.
Employer shall provide Employee with use of a new automobile on the earlier
of every three (3) years from the date such automobile was placed in use by
Employee or Forty-Five Thousand (45,000) miles of usage on such automobile.
3.5 DISABILITY. In the event Employee shall become disabled within
the meaning of this Agreement Employer shall continue to pay Employee's
salary and all other compensation and benefits provided under this
Paragraph 3 during the period of Employee's disability until the
Termination Date, as defined in Paragraph 5.5.
4. NON-COMPETITION.
4.1 EMPLOYER'S CUSTOMERS; BUSINESS. During the term of this Agreement
and for a period of twelve (12) months following the Termination Date,
Employee shall not, directly or indirectly, solicit any customer of
Employer, or any prospective customer with whom Employee has had
discussions during the term of his employment, for any business purpose
that is directly competitive with the business of Employer. In addition,
for a period of twelve (12) months following the Termination Date, Employee
shall not engage, directly or indirectly, whether as a principal or as an
agent, officer, director, employee, or consultant, along or in association
with any other person, corporation, or other entity, in any Competing
Business within the Washington, D.C. Metropolitan Area (as defined later in
this Paragraph 4.1), or within the area of any city or county outside the
Washington, D.C. Metropolitan Area in which Employer maintained an office
on the Termination Date (such areas within and outside the Washington, D.C.
Metropolitan Area being referred to in this Agreement as "Employer's Area
of Business Activity"). For purposes of this Paragraph 4.1, the term
"Competing Business" shall mean the business of independent commercial
banking and other activities permitted to be conducted by an independent
bank or independent bank holding company; provided, however, that the
phrase "independent bank or independent bank holding company" shall not
include any national or regional entity, but only an independent bank or
independent bank holding company that derives at least seventy-five (75%)
percent of its revenue, in the aggregate, from Employer's Area of Business
Activity. For purposes of this Paragraph 4.1, the term "Washington, D.C.
Metropolitan Area" shall include only the District of Columbia; Montgomery
County and Prince George's County within the State of Maryland; the City of
Alexandria, Arlington County and Fairfax County within the Commonwealth of
Virginia; and any incorporated city or township within such Maryland and
Virginia counties. Notwithstanding anything in this Agreement to the
contrary, this Paragraph 4.1 shall not prevent Employee from (a) personally
owning up to ten percent (10%) of the outstanding and issued stock of a
Competing Business; (b) engaging in the private practice of law with a
Competing Business as a client; or (c) becoming employed by
Page 3 of 15
<PAGE> 4
or engaging in any enterprise that is directly competitive with the
business of Employer as an independent bank or independent bank holding
company, if and so long as Employee's participation in such enterprise does
not involve any activity, directly or indirectly, that is directly
competitive with the business of Employer.
4.2 EMPLOYER'S EMPLOYEES. For a period of twelve (12) months
following the Termination Date, Employee shall not, directly or indirectly,
solicit or induce, or attempt to solicit or induce, any employee of
Employer to leave the employ of Employer for any reason whatsoever, or hire
any employee of Employer.
5. TERMINATION.
5.1 TERMINATION FOR DEATH OR DISABILITY.
5.1.1 DEATH. Employee's employment under this Agreement shall
terminate upon Employee's death.
5.1.2 DISABILITY. If Employee is subject to a Disability (as
defined later in this Paragraph 5.1.2) during a period or more than six (6)
consecutive months, Employer, by resolution of its Board of Directors, may
terminate Employer's employment under this Agreement upon twenty (20) days
prior written notice given to him at any time after the expiration of the
aforesaid six (6) month period. In addition, Employer, by resolution of
its Board of Directors, may terminate Employee's employment, upon twenty
(20) days prior written notice to Employee, in the event that Employee is
subject to Disability for more than nine (9) months, not necessarily
consecutive, during the term of this Agreement. Notwithstanding anything
in this Agreement to the contrary, if Employee is subject to a Disability,
Employer may relieve him of his responsibilities and appoint a temporary
successor. Should Employee sufficiently recover from his Disability prior
to the expiration of the six-month or nine-month period described above, he
shall then be permitted to resume his duties. For purposes of this
Agreement, Employee shall be considered to have a Disability: (a) if he is
under a legal decree of incompetency (the date of such decree being deemed
the date on which such mental incompetence occurred for purposes of this
Agreement), or (b) because of a "Medical Determination of Mental and/or
Physical Illness or Incapacity." A Medical Determination of Mental and/or
Physical Illness or Incapacity shall mean the written determination by a
physician selected by Employer and reasonably acceptable to Employee that,
because of a medically determinable mental and/or physical illness or
incapacity, Employee is unable to perform his material duties in connection
with his regular full-time employment with Employer. The date so specified
in any written determination shall be the date on which such mental and/or
physical illness or incapacity shall be deemed to have commenced for
purposes of this Agreement, if the written
Page 4 of 15
<PAGE> 5
determination concludes that Employee is disabled. In conjunction with
determining the existence of a Disability, Employee consents to such
examinations which are relevant to a determination of whether he has a
mental and/or physical illness or incapacity and which are required by the
aforesaid physician, and to furnish such medical information as may be
reasonably requested. Employee waives any applicable physician-patient
privilege that may arise because of such examination. The physician
selected pursuant to this Paragraph 5.1.2 shall be Board-certified in the
specialty most closely related to the nature of the mental and/or physical
illness or incapacity alleged to exist.
5.2 TERMINATION BY EMPLOYER.
5.2.1 FOR CAUSE. Employer may terminate this Agreement for
cause effective upon written notice to Employee and, notwithstanding
anything in this Agreement to the contrary, shall have no further
obligations under this Agreement except as set forth in Paragraph 6.2. The
term "for cause" as used in this Agreement shall mean (I) Employee's
willful failure faithfully and diligently to perform his duties as an
Employee or Employee's breach of any of the material terms or provisions of
this Agreement after written notice to him by the Board of Directors of
Employer specifying in detail such failure or breach, provided that such
cause shall have been found by a majority vote of all members of the Board
of Directors (exclusive of Employee), after at least thirty (30) days
written notice to Employee specifying in detail the cause proposed to be
claimed and after an opportunity for Employee to be heard at a meeting of
the Board of Directors; (ii) a conviction of Employee, whether upon a
verdict or plea of guilty or nolo contendere, of a felony or other offense
involving moral turpitude or fraud; (iii) a conviction of Employee in a
criminal proceeding, whether upon a verdict or plea of guilty or nolo
contendere, or a finding of violation or order of a court or administrative
agency in a civil proceeding restraining or imposing sanctions upon
Employee for violation of Federal banking law, Federal securities law, or
any other law directly related to the performance of his duties; (iv) a
final order for removal of Employee by a regulator having jurisdiction over
Employer or Bank; (v) Employee's theft or fraud with respect to the
business or affairs of Employer or Bank; or (vi) chronic alcohol abuse or
illegal drug abuse by Employee. An act or failure to act on the part of
Employee shall be considered "willful" if done, or omitted to be done, by
Employee in bad faith or without a reasonable belief that the act or
omission was in the best interests of Employer.
5.2.2 WITHOUT CAUSE. Employer may terminate this Agreement at
any time without cause, pursuant to a resolution adopted by the Board of
Directors of Employer, by giving at least twenty (20) days prior written
notice to Employee.
Page 5 of 15
<PAGE> 6
5.2.3 EFFECT ON INDEMNITY AGREEMENT. Nothing in this Agreement
shall be deemed to modify or otherwise effect the Indemnity Agreement,
dated February 27, 1987, between Employer and Employee.
5.3 TERMINATION BY EMPLOYEE.
5.3.1 FOR CAUSE. If Employer commits a material breach of any
provision of this Agreement and fails to cure such breach within thirty
(30) days after notice by Employee of such breach ("Cure Period"), Employee
may terminate this Agreement for cause by giving written notice of
termination to Employer, which notice shall be given within fifteen (15)
days after the end of the Cure Period (including any mutually agreed
extensions thereof) and specify an effective date of termination of no more
than thirty (30) days following the end of the Cure Period (including any
mutually agreed extensions thereof). For purposes of this Paragraph 5.3.1,
a "material breach" includes, but is not limited to (a) a failure by
Employer not attributable to the action or inaction of Employee to timely
pay or provide compensation or benefits to Employee under Paragraph 3; (b)
a material reduction in Employee's duties, responsibilities, status, or
authority; (c) the appointment of any other employee or consultant (other
than the Board of Directors) to supervise Employee's performance of his
duties; and (d) the removal of, or failure to reelect or reappoint,
Employee to any of the positions as set forth in Paragraph 1 unless (i) due
to Employee's promotion to a higher office with expanded duties,
responsibilities, status, and compensation, or (ii) effected pursuant to
Paragraphs 5.1 or 5.2.
5.3.2 FOR CHANGE OF CONTROL. Employee may terminate this
Agreement by reason of a Change of Control as defined in Paragraph 5.4 by
giving written notice of termination to Employer no later than sixty (60)
days after such Change of Control.
5.4 CHANGE OF CONTROL DEFINED. A "Change of Control" shall mean the
occurrence of: (a) a change in Employer's status requiring prior notice to
the Board of Governors of the Federal Reserve System and/or the Office of
the Comptroller of the Currency pursuant to the Change in Bank Control Act
of 1978 and regulations, 12 C.F.R. Sections 5.50 and 225.41, promulgated
thereunder, or (b) the acquisition by any person or group of persons (as
such terms are defined and used in Sections 3(a)(9) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) of beneficial ownership (as
defined in Rule 13d-3 issued under that Act), directly or indirectly, of
securities representing more than fifty percent (50%) of the combined voting
power of the then outstanding voting securities of Employer or Bank entitled
to vote generally in the election of directors ("Voting Securities"), or (c)
individuals who constitute the Board of Directors of Employer on the date of
this Agreement ("Incumbent Board") cease for any reason to constitute at
least a majority of that Board, provided that any person becoming a director
subsequent to the date of this
Page 6 of 15
<PAGE> 7
Agreement whose election or whose nominations for election by Employer's
stockholders was approved by a majority vote of the directors comprising
the Incumbent Board shall be, for purposes of this Agreement, considered as
though he or she were a member of the Incumbent Board; or (d) a
reorganization, merger, or consolidation with respect to which those
persons (as defined above) who were beneficial owners of the Voting
Securities of Bank or of Employer immediately prior to such reorganization,
merger, or consolidation do not, following such reorganization, merger, or
consolidation, beneficially own, directly or indirectly, shares
representing more than 50% of the combined voting power of the Voting
Securities of the corporation resulting from such reorganization, merger,
or consolidation; or (e) a sale of all or substantially all the assets of
Bank or Employer.
5.5 TERMINATION DATE DEFINED. "Termination Date" shall mean, as the
case may be: the date of Employee's death if termination occurs pursuant
to Paragraph 5.1.1; the effective date specified by written notice of
Employer if termination occurs pursuant to Paragraph 5.1.2 or 5.2; the
effective date specified by written notice of Employee if termination
occurs pursuant to Paragraph 5.3; or the date of expiration of the Initial
Term or any Renewal Term if the Agreement is not extended for an additional
term pursuant to Paragraph 2.
6. EFFECT OF TERMINATION, EXPIRATION, AND CHANGE OF CONTROL.
6.1 IN GENERAL. In the event of a failure to renew this Agreement or
a termination for any reason other than Employee's death pursuant to
Paragraph 5.1.1 or termination by Employer for cause pursuant to Paragraph
5.2.1, Employer shall (a) within ten (10) days after the Termination Date
pay to Employee all accrued and unpaid salary, bonuses, vacation, and other
amounts earned or otherwise due to Employee through the Termination Date,
less withholdings required by law; (b) maintain, at its own expense, for a
period of one (1) year after the Termination Date, Employee's group medical
and other health plans in which Employee and his immediate family were
participating on the Termination Date; (c) maintain, at its own expense,
for a period of one (1) year after the Termination Date, life insurance
coverages to which Employee was entitled on the Termination Date; (d)
permit Employee, at his own expense and upon full payment to Employer of
any cash surrender value, to continue any life insurance or health
coverages or benefits after such one (1) year term to the extent permitted
by the terms of such coverages or as may otherwise be required by law and
to purchase any split-dollar life insurance policies at Employer's book
value; (e) cause all stock options granted under agreements between
Employer and Employee to become fully vested as of the Termination Date
regardless of length of service; and (f) pay to Employee a Severance
Payment as prescribed in Paragraph 6.4. Except as otherwise set forth in
this Agreement, any other compensation
Page 7 of 15
<PAGE> 8
in the form of salary, bonuses, benefits, or perquisites due Employee
pursuant to this Agreement shall cease as of the Termination Date.
6.2 FOR CAUSE BY EMPLOYER. In the event of a termination by Employer
for cause pursuant to Paragraph 5.2.1, Employer's obligations under this
Agreement shall be limited to payment to Employee, within ten (10) days
after the Termination Date, of all accrued and unpaid salary, vacation,
bonuses, and any other amounts that were earned by or otherwise due to
Employee as of the Termination Date, less withholdings required by law.
Employee shall not be entitled to any bonuses for the year in which he is
terminated for cause.
6.3 EMPLOYEE'S DEATH. In the event of a termination by reason of
Employee's death pursuant to Paragraph 5.1.1, Employer shall within ten
(10) days after the Termination Date pay to Employee's personal
representative, or such other person as Employee shall have designated, all
accrued and unpaid salary, vacation, bonuses, and any other amounts earned
by or otherwise due to Employee as of the Termination Date, less
withholdings required by law. In addition, Employer shall maintain, at its
own expense, for a period of one (1) year after the Termination Date,
Employee's group medical and other health plans in which Employee and his
immediate family were participating on the Termination Date. Upon
expiration of the one (1) year term, Employer shall permit Employee's
family, at its own expense, to continue any such group medical and other
health plans to the extent permitted by the terms of such plans or as may
otherwise be required by law.
6.4 SEVERANCE PAYMENT.
6.4.1 IN GENERAL. For any event specified in Paragraph 6.1
except the circumstances specified in Paragraphs 6.4.2 and 6.4.3, the
amount of the Severance Payment shall be equal to two (2) times Employee's
yearly salary then in effect. Employer shall make such Severance Payment
in eight (8) equal quarterly installments, less applicable withholding,
beginning no later than ten (10) business days following the Termination
Date.
6.4.2 EMPLOYEE'S FAILURE TO EXTEND TERM. In the event Employee
does not consent to an extension of this Agreement pursuant to Paragraph 2,
the amount of the Severance Payment shall be equal to one (1) times
Employee's yearly salary then in effect. Employer shall make such
Severance Payment in four (4) equal quarterly installments, less applicable
withholding, beginning no later than ten (10) business days following the
Termination Date.
6.4.3 EMPLOYEE'S CONTINUED EMPLOYMENT AFTER CHANGE OF CONTROL.
The amount of the Severance Payment shall be zero if, after a termination
by Employee for
Page 8 of 15
<PAGE> 9
Change of Control pursuant to Paragraph 5.3.2, Employee continues to be
employed by any successor or assign of Employer on substantially the same
or better provisions than this Agreement. Employee's decision to continue,
discontinue, accept, or reject such employment shall be within Employee's
sole and absolute discretion.
6.4.4 OPTIONAL MANNER OF PAYMENT. Notwithstanding anything in
this Agreement to the contrary, for any event specified in Paragraph 6.1
except termination by Employer pursuant to Paragraph 5.1.2, at the option
of Employee, Employer shall pay the entire amount of the Severance Payment,
less applicable withholding, in a lump sum no later than ten (10) business
days following the Termination Date to Employee or to the trustee of a
trust provided by Employee.
6.5 CHANGE OF CONTROL. In the event of a Change of Control which
would render valueless any stock options granted by Employer to Employee
that are not fully vested, then, whether or not this Agreement is
terminated as a result of such Change of Control, Employer shall cause all
such stock options to become fully vested in Employee, regardless of length
of service, effective as of the date such Change of Control occurs or, if
applicable, such earlier time as may be necessary to allow Employee's
shares purchased pursuant to such options to be sold or exchanged in
connection with the transaction resulting in such Change of Control.
7. SUCCESSORS AND ASSIGNS.
7.1 EMPLOYEE'S PERSONAL SERVICES ASSIGNMENT. Employee's duties under
this Agreement are personal in nature and shall not be assignable or
otherwise transferable by either party. Employee shall be under no duty to
mitigate or otherwise reduce any compensation to which he is entitled under
this Agreement, by accepting any other employment or compensation for his
services rendered of any kind.
7.2 BINDING EFFECT, ETC. This Agreement, including all of its terms
and provisions, shall be binding upon and inure to the benefit of the
parties and their personal representatives and, in the case of Employer,
its successors and assigns (including without limitation any corporation
which might acquire all or substantially all of Employer's assets or
business, or with which Employer or a successor may be consolidated or
merged). The obligations of Employee under Paragraphs 4, 18, 19 and 22 and
the obligations of Employer under Paragraphs 6, 18, and 19 shall survive
any termination or expiration of this Agreement.
8. CHOICE OF LAW. This Agreement has been negotiated and executed, and
is to be substantially performed, in the District of Columbia. Any rights or
obligations of the parties shall
Page 9 of 15
<PAGE> 10
be governed by and construed under the internal laws of the District of
Columbia, but not its conflicts of laws.
9. NOTICES. All notices required under this Agreement shall be in
writing and shall be deemed effective upon receipt if hand delivered or upon
the lapse of three (3) business days, when mailed by certified or registered
mail, return receipt requested, as follows:
If to Employer: If to Employee:
-------------- --------------
Century Bancshares, Inc. Mr. Joseph S. Bracewell
Attention: Secretary 4554 Klingle Street, N.W.
1275 Pennsylvania Avenue, N.W. Washington, D.C. 20016
Washington, D.C. 20004
With copy to: With copy to:
Century National Bank William H. Shawn, Esq.
Attention: Secretary Shawn, Mann & Niedermayer, L.L.P.
1875 Eye Street, N.W. 1850 M Street, N.W., Suite 280
Washington, D.C. 20006 Washington, D.C. 20036-5803
Frederic T. Spindel, Esq.
Reed Smith Shaw & McClay
1301 K Street, N.W., Suite 1100
East Tower
Washington, D.C. 20005
or such other address as may be designated by either of the parties
in a written notice to the other party.
10. WAIVER AND SURVIVAL OF RIGHTS. No act, failure, omission, or
delay, in whole or in part, by any party in exercising any right, power, or
privilege under this Agreement shall be a waiver to exercise any such right,
power, or privilege. The rights and remedies in this Agreement are cumulative
and not exclusive of any rights or remedies provided at law or equity. All
covenants and rights of the parties shall survive expiration or termination of
this Agreement until all such covenants and rights shall have been performed in
full.
11. ENTIRE AGREEMENT; AMENDMENTS. This Agreement represents the
entire understanding between the parties, supersedes all prior negotiations
between the parties, and cannot be changed or amended, except by a written
agreement, which makes specific reference to this Agreement and is signed by
the parties.
Page 10 of 15
<PAGE> 11
12. SEVERABILITY. It is the intention of the parties that this
Agreement shall be enforceable to the fullest extent permissible under
applicable law, but that the unenforceability (or modification to conform to
applicable law) of any provision shall not render unenforceable, or impair, the
remainder of this Agreement. If any provision of this Agreement shall for any
reason be held or deemed to be, or shall in fact be, invalid, inoperative, or
unenforceable as applied to any particular case or circumstance, such case or
circumstance shall not have the effect of rendering the provision in question,
invalid, inoperative, or unenforceable in any other jurisdiction or in any
other case or circumstance, or of rendering any other provision or provisions
of this Agreement invalid, inoperative, or unenforceable to the extent that
such other provisions are not themselves actually in conflict, and this
Agreement shall be deemed amended to delete or modify the offending provision
so that it will be rendered valid, operative, and enforceable to the maximum
extent permitted in such jurisdiction or in such case.
13. COUNTERPARTS. This Agreement may be signed in multiple
counterparts, each of which shall have the same effect as originals, but all
such counterparts collectively shall constitute the same instrument.
14. HEADINGS. The headings to Paragraphs of this Agreement are
for information purposes only and shall not constitute a part of this
Agreement.
15. RECITALS. The recitals in this Agreement shall not constitute
a part of this Agreement.
16. TERMINOLOGY. All personal pronouns used in this Agreement,
whether in the masculine, feminine, or neuter genders, shall include all other
genders, and the singular shall include the plural and vice versa.
17. REPRESENTATION BY COUNSEL; INTERPRETATION. The parties
acknowledge that each party to this Agreement has been represented by counsel
in the negotiation, preparation, and execution of this Agreement and the
transactions contemplated by this Agreement. Accordingly, any rule of law,
including, but not limited to, the doctrine of contra proferentum, or any legal
decision which would require interpretation of any claimed ambiguities in this
Agreement against the drafting party has no application and is expressly
waived. The provisions of this Agreement shall be interpreted in a reasonable
manner to effect the intent of the parties.
18. DISPUTE RESOLUTION.
18.1 ARBITRATION. Except as otherwise provided in
Paragraph 18.3, any controversy or claim arising out of or relating to
this Agreement, or any breach thereof, shall be resolved by submission
to arbitration before a single arbitrator in accordance with the
Page 11 of 15
<PAGE> 12
rules of the American Arbitration Association, and confirmation of
such award rendered by the arbitrator may be entered in the Superior
Court of the District of Columbia. The arbitration shall be held in
the District of Columbia, or such other place as may be mutually
agreed upon at the time by the parties to the arbitration. The costs
and expenses of the arbitration ("Arbitration Costs"), including the
arbitrator's fee and expenses, shall be allocated between the parties
to the arbitration as determined by the arbitrator to be fair and
reasonable; provided, however, that each party shall pay for and bear
the cost of his or its own experts, evidence, and counsel.
Notwithstanding the foregoing, where a claim has been asserted or
defended against on grounds that the arbitrator deems frivolous, or
where the arbitrator determines, upon a clear and convincing showing,
that the non-prevailing party has engaged in unconscionable conduct to
delay or obstruct the proceedings, the arbitrator may assess all
Arbitration Costs upon the non-prevailing party, including the
prevailing party's attorneys' fees and expenses. No award of punitive
damages may be rendered by the arbitrator in such proceeding.
18.2 MEDIATION. At least sixty (60) days before a party
may deliver a demand for arbitration pursuant to Paragraph 18.1, such
party shall provide to the other party a written notice describing the
nature of his or its claim or controversy (the "Dispute Notice").
Following receipt of the Dispute Notice, each party shall use his or
its good faith efforts to reach a mutually acceptable resolution of
the dispute, and shall designate a representative not directly
involved in the dispute to exchange relevant information and meet with
the other party's representative. If the parties are unable to reach
a settlement within thirty (30) days, the parties shall endeavor to
settle the dispute by mediation pursuant to the Center for Public
Resources Model Procedure for Mediation of Business Disputes. For
this purpose, the parties shall, within ten (10) days, appoint a
mutually agreeable neutral person ("Neutral"), or failing agreement a
Neutral shall be selected with the assistance of the Center for Public
Resources, to facilitate resolution of the dispute. All discussions
between the parties shall be confidential and shall be treated as
inadmissable settlement negotiations under Rule 408 of the Federal
Rules of Evidence and similar rules. If the good faith efforts of the
parties fail to resolve the dispute within the sixty (60) day period
following delivery of the Dispute Notice, a party who provided the
Dispute Notice may initiate arbitration under Paragraph 18.1 and take
any other action available in connection with the dispute.
18.3 EQUITABLE RELIEF. Without limiting any rights or
remedies which Employer may otherwise have, in the event of a breach
or threatened breach of any of the provisions of Paragraphs 4 and 22,
Employer shall be entitled to institute judicial proceedings against
Employee for equitable relief, including, without limitation, a decree
of specific performance, a temporary restraining order and/or a
preliminary or permanent injunction to enforce and compel compliance
with such provisions, in the Superior Court for the District of
Columbia or the U.S. District Court for the District of Columbia.
Employee consents to
Page 12 of 15
<PAGE> 13
personal jurisdiction of such courts and waives only defenses based on
improper venue or inconvenient forum. Employee further acknowledges
and agrees that, for purposes of such judicial proceedings, a breach
of the provisions of Paragraph 4 or 22 shall be deemed to constitute
irreparable injury to Employer for which a remedy at law is
inadequate. No temporary restraining order, or preliminary or
permanent injunction, shall be granted by the court except upon a
showing that a breach of Paragraph 4 or 22 has occurred or is
imminently threatened.
19. FURTHER ASSURANCES. The parties to this Agreement shall
perform such acts and/or execute, acknowledge, and deliver to each other any
instruments which may be reasonably required to implement the purposes of this
Agreement.
20. GUARANTEE. Employer agrees, upon request of Employee, to use
its best efforts to cause Bank to guarantee the financial payments due to
Employee under the provisions of this Agreement.
21. NO SET-OFF OR DEMANDS. No payments owed or other obligations
owing to Employee under this Agreement shall be reduced by any amounts claimed
or other demands against Employee except for (a) bona fide loans and advances
from Employer to Employee documented in writing, (b) payments made by Employer
to third parties on Employee's behalf at his direction or with his approval and
documented in writing, and (c) any payments which Employee actually receives
under any short-term or long-term disability insurance coverages maintained by
Employer during the period of Employee's Disability prior to the Termination
Date or, if later, the date of the final payment due from Employer to Employee
pursuant to Paragraph 6. Nothing in this Agreement shall be deemed a waiver of
any claim Employer or Employee may have against the other or otherwise
prejudice the right of Employer or Employee or seek recovery of such claim.
22. CONFIDENTIAL INFORMATION.
22.1 NEED FOR CONFIDENTIALITY. Employee acknowledges
that: (a) in the course of his employment by Employer it will be
necessary for Employee to acquire, among other things, information
concerning Employer's internal structure, financial condition, sales,
prospective customers, identity of and strategies with respect to
sales, identity of and strategies with respect to customers and
prospective customers, Employer's computer programs, system
documentation, and hardware, Employer's manuals, lists, processes,
methods, ideas, and other confidential or proprietary information
belonging to Employer or relating to Employer's affairs (collectively
referred to herein as the "Confidential Information"); (b) the
Confidential Information is the property of Employer; (c) the misuse,
misappropriation, or unauthorized disclosure of the Confidential
Information would constitute a breach of trust and could cause
irreparable injury to Employer; and (d) it is
Page 13 of 15
<PAGE> 14
essential to the protection of the Employer's good will and to the
maintenance of Employer's competitive position that the Confidential
Information be kept secret and that Employee not disclose the
Confidential Information to Employer's disadvantage, Employee's own
advantage, or the advantage of others. For purpose of this Paragraph
22.1, Confidential Information shall not include information that (i)
becomes generally available to the public other than by reason of its
disclosure by Employee through breach of this Agreement; (ii) was
known by Employee prior to its receipt by him from Employer; (iii)
becomes available to Employee from a source other than Employer, and
Employee has no reasonable grounds to believe that such source is
bound by a confidentiality agreement with Employer or is or is
otherwise under a duty to protect the confidentiality of such
information; or (iv) is required by law to be disclosed, provided that
Employee shall give reasonable notice to Employer in advance of any
disclosure required by law and shall cooperate with Employer in the
event it seeks to prevent such disclosure through court order or
otherwise.
22.2 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee
shall hold and safeguard the Confidential Information in trust for
Employer, its successors and assigns and shall not for any reason,
without prior written consent of Employer, or except as reasonably
required in the performance of Employee's duties to Employer
hereunder, disclose or make available to anyone for use outside
Employer's organization at any time, either during his employment with
Employer or subsequent to his termination, any of the Confidential
Information, whether or not developed by Employee.
22.3 RETURN OF MATERIALS. Upon the termination of
Employee's employment with Employer for any reason, Employee shall
promptly deliver to Employer all correspondence, letters, notes,
notebooks, reports, financial statements, forecasts and analyses,
data, flowcharts, programs, proposals, tapes, card decks, listings,
programming documentation, or any other written, graphic or recorded
information relating or pertaining to Employer or any of its customers
or potential customers, or concerning products or processes used by
Employee and, without limiting the foregoing, will promptly deliver to
Employer any and all other documents or materials containing or
constituting Confidential Information.
22.4 WORK MADE FOR HIRE. Employee further recognizes and
understands that his duties at Employer may include the preparation of
materials, including written or graphic materials, and that any such
materials conceived or written by him shall be done as "work made for
hire" as defined and used in the Copyright Act of 1976, 17 U.S.C.
Section 1 et seq. In the event of publication of such materials,
including right of copyright, and that the Employer may, at its
discretion, on a case-by-case basis, grant Employee by-line credit on
such materials as Employer may deem appropriate.
Page 14 of 15
<PAGE> 15
IN WITNESS WHEREOF, the parties have duly executed this Agreement
under seal as of the day and year first written above.
CENTURY BANCSHARES, INC.
/s/ WILLIAM C. OLDAKER /s/ JOHN R. COPE (SEAL)
- ----------------------------- -----------------------------
Attest: William C. Oldaker By: John R. Cope
Secretary Title: Vice President
/s/ KATHY ROBERTS /s/ JOSEPH S. BRACEWELL
- ----------------------------- -----------------------------
Witness: JOSEPH S. BRACEWELL
Page 15 of 15
<PAGE> 1
EXHIBIT 10.8
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into this 3rd day of January,1995,
by and between CENTURY NATIONAL BANK, hereinafter referred to as "Tenant," and
PENNSYLVANIA BUILDING ASSOCIATES, a District of Columbia limited partnership,
hereinafter referred to as "Landlord."
WITNESSETH:
That for and in consideration of the rents herein reserved and to be paid
by the Tenant to the Landlord and of the covenants and agreements herein set
forth to be kept, performed and observed by the respective parties hereto, the
Landlord does hereby rent, demise and lease to the Tenant and the Tenant does
hereby take, lease and hire from the Landlord, upon the terms and conditions
hereinafter set forth, the following described premises situated in the
District of Columbia, namely:
Approximately 2,750 square feet of area in the "as is" condition located in
the building (the "building") having a street address of 1275 Pennsylvania
Avenue, N.W., Washington, D.C., more fully described in Exhibit "A" attached
hereto and made a part hereof, the premises demised hereunder being hereinafter
referred to as the "demised premises."
1. Premises and Term.
(A) Landlord does hereby grant, demise and lease unto Tenant, and
Tenant hereby accepts and leases form Landlord, for the term as hereinbelow
provided, and at the rental and upon the terms and conditions hereinafter set
forth, the demised premises.
(B) The term of this Lease shall be for a period of ten (10) years,
commencing on October 1, 1994 (the "effective commencement date"), and expiring
on the last day of the 120th consecutive full month following the effective
commencement date (September 30, 2004), or until such term shall sooner cease
and expire as hereinafter provided. Landlord and Tenant acknowledge the
effective commencement date, under the terms of this Agreement.
2. Possession of Premises.
Tenant has inspected and shall accept from Landlord possession of the
demised premises in "as is" condition, without the requirement of necessity of
Landlord to perform or provide any labor or material of any type, kind or
description.
<PAGE> 2
3. Rental.
(A) Rent. (i) Tenant's obligations to pay rent of any kind as
may be specified in this Lease shall begin on the effective commencement date.
Tenant hereby covenants and agrees to pay to Landlord for the demised premises
as basic annual rent (subject to adjustments and increases as below provided)
during the respective portions of the lease term as designated herein below the
following sums:
<TABLE>
<CAPTION>
Period Basic Annual Monthly
Rent Installment
(BAR)
<S> <C> <C>
10/1/94 - 9/30/94 $68,750.00 $5,729.17
10/1/95 - 9/30/96 $68,750.00 $5,729.17
10/1/96 - 9/30/97 $68,750.00 $5,729.17
10/1/97 - 9/30/98 $68,750.00 $5,729.17
10/1/98 - 9/30/99 $68,750.00 $5,729.17
10/1/99 - 9/30/00 $77,000.00 $6,416.17
10/1/00 - 9/30/01 $77,000.00 $6,416.17
10/1/01 - 9/30/02 $77,000.00 $6,416.17
10/1/02 - 9/30/03 $77,000.00 $6,416.17
10/1/03 - 9/30/04 $77,000.00 $6,416.17
</TABLE>
Provided Tenant is not in default of the Lease, Landlord shall abate
fifty percent (50%) of the monthly installment of Basic Annual Rent for the
period of October 1, 1994, through September 30, 1995. In the event Tenant
defaults the Lease, Landlord shall have the right to recover all abated rent,
together with other remedies pursuant to the Lease. Landlord shall credit
Tenant's rent to reflect overpayment of rent for the period of September 17,
1994 through September 30, 1994 in the amount of $2,287.33.
(ii) In addition to monthly installments of Basic Annual Rent
pursuant to Provisions of Paragraph (A)(i), herein, Tenant shall pay
Supplemental Quarterly Rent (determined by the Excess Deposit Percentage as
defined in paragraph 3(B)(v)), herein during the respective portions of the
Lease term as designated herein below for the following sums:
<PAGE> 3
<TABLE>
<CAPTION>
Quarter Benchmark Maximum
Ending Deposits Supplemental
Quarterly Rent
(BD) (MSQR)
<S> <C> <C>
Dec 31, 1994 $ 8,000,000 $ 5,000
Mar 31, 1995 $ 9,000,000 $ 5,000
June 30, 1995 $10,000,000 $ 5,000
Sept 30, 1995 $11,000,000 $ 5,000
Dec 31, 1995 $12,000,000 $ 6,000
Mar 31, 1996 $13,000,000 $ 6,000
June 30, 1996 $14,000,000 $ 6,000
Sept 30, 1996 $15,000,000 $ 6,000
Dec 31, 1996 $16,000,000 $ 7,000
Mar 31, 1997 $17,000,000 $ 7,000
June 30, 1997 $18,000,000 $ 7,000
Sept 30, 1997 $19,000,000 $ 7,000
Dec 31, 1997 $20,000,000 $ 8,000
Mar 31, 1998 $21,000,000 $ 8,000
June 30, 1998 $22,000,000 $ 8,000
Sept 30, 1998 $23,000,000 $ 8,000
Dec 31, 1998 $24,000,000 $ 9,000
Mar 31, 1999 $25,000,000 $ 9,000
June 30, 1999 $26,000,000 $ 9,000
Sept 30, 1999 $27,000,000 $ 9,000
Dec 31, 1999 $28,000,000 $ 8,000
Mar 31, 2000 $29,000,000 $ 8,000
June 30, 2000 $30,000,000 $ 8,000
Sept 30, 2000 $31,000,000 $ 8,000
Dec 31, 2000 $32,000,000 $ 9,000
Mar 31, 2001 $33,000,000 $ 9,000
June 30, 2001 $34,000,000 $ 9,000
Sept 30, 2001 $35,000,000 $ 9,000
Dec 31, 2001 $36,000,000 $10,000
Mar 31, 2002 $37,000,000 $10,000
June 30 2002 $38,000,000 $10,000
Sept 30, 2002 $39,000,000 $10,000
Dec 31, 2002 $40,000,000 $11,000
Mar 31, 2003 $41,000,000 $11,000
June 30, 2003 $42,000,000 $11,000
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
Sept 30, 2003 $43,000,000 $11,000
Dec 31, 2003 $44,000,000 $12,000
Mar 31, 2004 $45,000,000 $12,000
June 30, 2004 $46,000,000 $12,000
Sept 30, 2004 $47,000,000 $12,000
</TABLE>
(iii) Notwithstanding the provisions in Paragraph 3(A)(i) and (ii),
in the event the Average Branch deposits are $35,000,000.00 or higher for more
than four (4) consecutive quarters, monthly installments of the Basic Annual
Rent shall be adjusted to $7,333.33 (based upon $32.00 per square foot) and
shall continue through the term of the Lease, provided the Average Branch
Deposits do not at any time decrease below $35,000,000 for more than two (2)
consecutive quarters and the Maximum Supplemental Quarterly Rent due the
Landlord pursuant to Paragraph (A)(ii) shall be adjusted to credit difference
between the specified Basic Annual Rent per Paragraph (A)(i) and the increased
Basic Annual Rent herewith.
(iv) The following examples of rent calculation based upon
provisions of Paragraph (A)(i),(ii) and (iii) are for clarification only:
Example 1: First fifteen months:
a. December 31, 1994, Average Branch Deposits (ABD) exceeds $8,000,000.00
by 25%, Tenant obligated to pay: $22,187.51
($5,729.17 (Basic Rent per month) x 3 mos + $5,000
Maximum Supplemental quarterly Rent (MSQR)
b. March 31, 1995, ABD exceeds $9,000,000.00 by 25%.
Tenant obligated to pay:
$22,187.51 ($5,729.17 x 3 + $5,000)
c. June 30, 1995, ABD exceeds $10,000,000.00 by 10%.
Tenant obligated to pay:
$19,187.51 (($5,729.17 x 3) + .40 x $5,000)
d. September 30, 1995, ABD exceeds $10,000,000.00 but does not exceed
$11,000,000.00. Tenant obligated to pay:
$17,187.51 ($5,729.17 x 3)
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<PAGE> 5
e. December 31, 1995, ABD exceeds $12,000,000.00 by 25%
Tenant obligated to pay:
$23,187.51 ($5,729.17 x 3 + $6,000)
Example 2: In the event provisions of (iii) occur, the following will be
the rent calculation:
a. June 30, 1999, ABD continues to exceed $35,000,000 which means ABD
also exceeds BD of $26,000,000 by more than
25%. Tenant obligated to pay:
$26,187.49 ($7,333.33 x 3 + ($9,000 - 4,812.50))
The $4,812.50 is the product of 2,750 sf x $7.00 psf (difference between
$25.00 psf and $32.00 psf) on a quarterly
basis, which is credited against the $9,000 MSQR which would otherwise be
due.
b. September 30, 2000, ABD continues to exceed $35,000,000.00 and exceeds
$31,000,000 by 25%. Tenant obligated to
pay:
$27,250.00 ($7,333.33 x 3 + ($8,000 - $2,750))
The $2,750 is the product of 2,750 sf x $4.00 psf (difference between
$28.00 psf and $32.00 psf) on a quarterly
basis, which is credited against the $8,000.00 MSQR which would otherwise
be due.
c. March 31, 2001, ABD is $38,000,000 which exceeds BD of $33,000,000 by
15%, which means the Supplemental Rent
Percentage is 60%, and the Supplemental Quarterly Rent is $5,400.00 (60% of
$9,000 MSQR). Tenant obligated to pay:
$24,649.99 ($7,333.33 x 3 + ($5,400 - 2,750))
d. March 31, 2002, ABD is $36,500,000.00. Tenant obligated to pay:
$21,999.99 ($7,333.33 x 3)
In the event the effective commencement date shall occur on a date other
than the first day of a calendar month, basic monthly rent for such partial
calendar month shall be pro-rated using a thirty (30) day month and such
pro-rated sum shall be due and payable to Landlord no later than the expiration
of five (5) days following the effective commencement date.
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<PAGE> 6
(B) Definitions.
(i) "Lease Year" means each period of twelve (12) consecutive
months, commencing on the 1st day of October and ending on the last day of the
following September with the first such lease year to commence October 1, 1994.
(ii) "Average Branch Deposits" means, for a calendar quarter,
the mathematical average of Total Branch Deposits as of the lst day of the
month for each of the three months of the quarter. (for example, Average
Branch Deposits for the second quarter would be calculated by adding the Total
Branch Deposits as of April 30, May 31, and June 30, then dividing the sum by
three).
(iii) "Total Branch Deposits" means, as of a given date, the sum
of all the balances in Deposit Accounts which were either opened by the Tenant
at the demised premises or acquired by the Tenant pursuant to the Tenant's
Agreement with the Resolution Trust Corporation dated September 16, 1994.
(iv) "Deposit Accounts" means deposit liabilities of the Tenant
to its customers in all types of accounts (demand, NOW, money market, savings,
certificates of deposit, etc.) included within the definition of "Total
Deposits" for regulatory reporting purposes.
(v) "Excess Deposit Percentage" means, for a calendar quarter,
the quotient obtained by first subtracting Benchmark Deposits (as set forth in
the second column of Paragraph 3(A)(ii) herein) from Average Branch Deposits,
then dividing the result by Benchmark Deposits; provided, however, that if the
Excess Deposit Percentage is computed to be less than zero, it is defined as
zero, and if it is computed to be greater than 25%, it is defined as 25%.
(vi) "Supplemental Rent Percentage" means, for a calendar
quarter, the result obtained by multiplying the Excess Deposit Percentage by
four.
(vii) "Supplemental Quarterly Rent" means, for a calendar
quarter, the result obtained by multiplying the Supplemental Rent Percentage by
the Maximum Supplemental Rent, as set forth in the third column of Paragraph
3(A)(ii) herein. The Tenant will pay the Quarterly Supplemental Rent due for
each calendar quarter, if any, within thirty (30) days after the end of the
quarter.
(C) No Set Off or Waiver. Tenant will pay all monthly installments of
basic annual rent in advance without demand, deduction or set off, by check to
Landlord c/o Willco construction Co., Inc., 7811 Montrose Road, Potomac,
Maryland 20854, or to such other party or to such other address as Landlord may
designate from time to time by written notice to Tenant, on
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<PAGE> 7
or before the first day of each month during the term hereof, with the first
such installment of basic monthly rent to be paid to Landlord upon the
execution hereof by Tenant. If Landlord shall at any time or times accept said
rent after it shall become due and payable, such acceptance shall not excuse
delay upon subsequent occasions, or constitute a waiver of any or all of
Landlord's rights hereunder. If Tenant shall present to Landlord more than two
times during the term hereof any checks or drafts for payment of rent and/or
additional rent hereunder not honored by the institution upon which such checks
or drafts are issued, then Landlord, at its option, may require that all future
payments of rent and additional rentals and other sums thereafter payable by
Tenant be made by certified or cashier's check (in addition to and not in
limitation of any other remedies available to Landlord under this Lease).
(D) Late Charges. In the event that Tenant pays Landlord any
installment of basic monthly rental after the tenth (10th) day from the due
date, or any additional rent more than ten (10) days after billing therefor,
then and in such event Tenant shall pay to Landlord, together with and in
addition to said installment of rental or payment of additional rent, a late
charge of five percent (5%) of said installment of rental or additional rent
past due. Further, in the event that Tenant pays Landlord any installment of
rental after the expiration of twenty (20) days for which such installment is
due, or any installment of additional rent after twenty (20) days form billing
therefor by Landlord, then and in such event Tenant shall pay to Landlord
together with and in addition to said installment of rental or payment of
additional rent an additional late charge of five percent (5%) of said
installment past due. Any installments of basic monthly rent or payments of
adjustment rent not made within thirty (30) days from the date due shall, in
addition to the foregoing late charges, bear interest from the date due at the
rate of eighteen percent (18%) per annum.
(E) Additional Rent - Taxes. Tenant further covenants and agrees to
pay as additional rental during the term hereof, including any extensions or
renewal terms thereof its proportionate share (calculated to be 1.27%) of the
annual Taxes which may be levied, assessed or imposed against the land and
building comprising Lot 38 in Square 291 of the District of Columbia (said lot
including the building or any part thereof). For purposes hereof, the Tenant's
proportionate share shall mean that percentage found by dividing the Rentable
Area (2,750 square feet) by the total rentable square foot area of all
commercial and office space contained within the building (216,454 square
feet). In no event shall any garage space or storage space be considered to
constitute either commercial or office space for purposes of making the
foregoing determination. For purposes hereof, "Taxes" shall mean all taxes,
rates and assessments, general and special and including also any increases in
tax rate and/or in assessed valuation, which are now or at any time(s)
hereafter levied, assessed or imposed with respect to the building and all land
related or appurtenant thereto, and/or upon Landlord's leasehold interest (if
applicable) in the said land, and including also without limitation real estate
taxes, personal property taxes applicable to the personality in the building
owned by Landlord and used or usable in connection with the operation of the
building an/or land appurtenant thereto, vault rental, and assessments of any
and every kind and nature whatsoever, and
-7-
<PAGE> 8
shall also mean and include any and all unincorporated and other business
license and/or franchise taxes (except any such taxes calculated at Landlord's
net income), and any taxes, assessments or other levies which may at any time
be imposed and/or collected by any federal, state, county, municipal,
quasi-governmental or corporate entity in respect of bus, subway or other
public transportation facilities operating in the metropolitan area of the
District of Columbia, and including also any tax assessment or other charges in
the nature of a sales, use or other tax upon the Landlord, the demised
premises, the building, the land and/or the rents payable hereunder (except
income taxes, estate or inheritance taxes of the Landlord). If the system of
real estate taxation shall be altered or varied and any new tax or levy shall
be levied or imposed on the building and/or land and/or Landlord, in addition
to or in substitution for real estate taxes and/or personal property taxes
presently levied or imposed on immovables in the District of Columbia, and
including also without limitation any taxes on rents, then any such new tax or
levy shall be in included within the term "Taxes." If any such tax is levied
or assessed in such a manner that the amount thereof required to be paid by
Tenant hereunder in respect of the Tenant's proportionate share of the
aforesaid Taxes is not ascertainable because such tax relates to more than the
demised premises or to more than the rent payable hereunder, then the
proportionate share of said items to be paid by Tenant forming a part of the
Taxes aforesaid shall be determined by Landlord in the Landlord's reasonable
discretion. If any governmental authorities require that a tax, other than the
taxes above mentioned, be paid by Tenant, but collected by Landlord for and on
behalf of said governmental authorities, and from time to time forwarded by the
Landlord to said governmental authorities, the same shall be timely paid by
Tenant to Landlord, and such payment may be enforced by Landlord in the same
way and manner as provided for the enforcement of the payment of the basic
monthly rental and additional rent hereunder, and for the purpose of enforcing
such payment the same shall be deemed additional rent under this Lease. It
shall be the primary responsibility of Tenant to pay all taxes assessed or
imposed during the term of this Lease upon or against Tenant, or against
Tenant's income or interest in this Lease, or against personal property of any
kind owned by or in placed in, upon or about the demised premises by the
Tenant, including any penalty or interest assessed thereon in the event of late
payment. In the event that the taxing authority includes or calculates in the
over-all taxes the value of improvements or betterments made or installed by
the Tenant in the demised premises, or machinery, equipment, fixtures, or other
assets of the Tenant, then Tenant shall be responsible and liable for all taxes
to the extent applicable to such items. Tenant shall deliver to Landlord a
copy of all paid tax bills for taxes paid by Tenant within fifteen (15) days
after payment or upon request of Landlord. Copies of real estate tax bills
received by Landlord and sent to Tenant shall be deemed conclusive evidence as
of the amount of all such taxes as well as the items so taxed. All amounts
billed to Tenant by Landlord as additional rent pursuant to this paragraph
shall be due and payable within ten (10) days after billing.
(F) Additional Rent - Operating Expenses. Tenant further covenants
and agrees to pay as additional rental during the term hereof its aforesaid
proportionate share (28.80%) of any of the Operating Expenses which shall be
incurred by Landlord in connection with the
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ownership, management, servicing, repair, maintenance and/or operation of the
building, to the extent same are allocated by Landlord to the commercial space
contained within the building. Tenant's proportionate share for Operating
Expense purposes shall mean that percentage found by dividing the square foot
rentable area contained within the Premises (2,750 square feet), by the total
rentable square foot area of all commercial space contained within the building
(9,550 square feet). In no event shall any garage space or storage space be
considered to constitute commercial space for purposes of making the foregoing
determination. Such Operating Expenses shall include without limitation (to
the extent same are applicable to the commercial space) utilities for common
areas, management fees (not including brokerage fees) incurred for the
building, insurance for the building char and cleaning of common areas, water
and sewer charges, trash removal, maintenance and repair of building systems
and its structure, and all other expenses incurred by Landlord which would be
included in operating expenses in accordance with generally accepted management
practices and/or accounting principles in the Washington, D.C. metropolitan
area. Notwithstanding the foregoing, Operating Expenses shall not include any
expenses for solely the office areas of the building; capital improvements;
interest and principal amortization on mortgages; depreciation of the building;
Taxes (as defined hereinabove); and expenses reimbursed to Landlord by any
tenant within the building or by insurance; char and cleaning services provided
to any tenant or occupant of the building within their respective premises; any
income or franchise taxes assessed against the net income of Landlord from the
operation of the building; any expenses for repairs, restoration or other work
necessitated by fire or other casualty; or any leasing or brokerage commissions
or fees. To the best of its knowledge and belief, Landlord represents that the
operating expense amounts for prior years that have been disclosed in writing
to the Tenant are true and accurate.
(G) Payment of Additional Rent. All amounts billed to Tenant by
Landlord as additional rent pursuant to subparagraph 3(D) or 3(E) above, shall
be due and payable within ten (10) days after billing. Landlord shall be
entitled to estimate from time to time during the term hereof the liability of
Tenant hereunder for such additional rent, and in such event Tenant shall pay
concurrently with each installment of basic monthly rent due hereunder one-
twelfth (1/12th) of the amount so estimated by Landlord. Within forty-five
(45) days following the expiration of any fiscal year of the Landlord in which
Tenant paid monthly estimates, Landlord shall render to Tenant a computation
showing Tenant's liability under this paragraph for such fiscal year. In the
event the foregoing computation reveals that the estimated payments paid by
Tenant during the preceding fiscal year were less than the amount of Tenant's
liability hereunder, Tenant shall within ten (10) days pay any amounts due. In
the event the computation shall disclose that Tenant paid more than its
liability hereunder, Tenant shall receive credit therefor against the next
installment of basic monthly rent then due, provided that if the term hereof
shall have expired, Tenant shall in such event receive a refund for the excess
amount paid by Tenant. Notwithstanding the foregoing, Tenant's proportionate
share of Operating Expenses, as defined in Paragraph (F) herein (excluding
insurance and utilities for common area) shall not exceed an increase for each
calendar year of seven percent (7%) above the like Operating Expenses for the
calendar year immediately preceding.
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(H) Net Lease. Except as otherwise provided in Paragraph 5 with
respect to the maintenance of the structural portions of the building, the
Landlord shall not be required to pay any charges, or provide any services or
do any act in connection with the demised premises, including, but not limited
to furnishing heat, air conditioning, ventilation, or electricity; and Landlord
shall not be liable or accountable to the Tenant for any failure of water
supply or electric current or of any service by any utility, and the rent
hereunder shall be paid to the Landlord without any claim on the part of Tenant
for discontinuance or abatement. If Landlord shall incur any charge or expense
on behalf of Tenant under the terms of this Lease, such charge or expense shall
be considered as additional rent hereunder, and shall be repaid to Landlord
within ten (10) days after demand therefor. The provisions of this
subparagraph and of subparagraph (C) above shall be in addition to and not in
limitation of any other rights and remedies which Landlord may have and in the
event Tenant shall fail to pay any sums required under this Lease when due,
such non-payment shall entitle Landlord to all remedies available to it under
applicable law.
4. Use of Premises.
(A) Tenant hereby covenants and agrees that the demised premises shall
not be used for any purpose other than for a bank branch whose primary business
is the conduct of financial services, except as may be permitted under
Paragraph 12 below.
It is understood that Tenant shall conduct such business in a first-class
manner consistent with the operations customarily conducted in other
first-class developer-owned office buildings of high quality and image in the
downtown Washington, D.C. area. Tenant hereby covenants and agrees to
continuously conduct during the term hereof such business in good faith, in a
first-class manner, during ordinary commercial banking hours. In no event
shall the demised premises be used for any other purpose whatsoever, except as
may be permitted under Paragraph 12 below, without the prior written consent of
Landlord nor for any disorderly, unlawful or extra hazardous purpose.
(B) Tenant, at its own expense, shall comply with and carry out
promptly, all orders, requirements or conditions imposed by the ordinances,
laws and regulations of the District of Columbia and of all other governmental
authorities having jurisdiction over the demised premises, which are occasioned
by or required in the conduct of Tenant's business in the demised premises.
Tenant will indemnify Landlord and save it harmless of its business in the
demised premises. Tenant shall be responsible for obtaining all licenses,
permits, certificates of occupancy, variances, special exceptions or any other
permission necessary for use of the demised premises as contemplated herein,
and Landlord hereby makes no representation or warranty with regard thereto.
(C) Tenant shall not suffer or permit the demised premises or any
portion thereof to be used by the public without restriction or in such manner
as might reasonably tend to
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impair Landlord's title to the demised premises, or any portion thereof, or in
such manner as might reasonably make possible a claim or claims of adverse
usage or adverse possession by the public, as such, or of implied dedication of
the demised premises or any portion thereof. Tenant hereby expressly
recognizes that in no event shall it be deemed the agent of Landlord under
Title 38-101 of the District of Columbia code (1981 Edition), and no contractor
of Tenant shall by virtue of its contract be entitled to assert any lien
against the building or premises.
5. Operating Costs and Maintenance.
(A) Throughout the term of this Lease, and any renewal terms hereof,
the Tenant shall, at its sole cost and expense, keep the demised premises in
good repair and clean order and condition (and free of all building code
violations), and make all necessary repairs thereto, ordinary and
extraordinary, normal wear and tear from reasonable use excepted, as reasonably
determined by Landlord. The Tenant shall, at its sole cost and expense, keep
and maintain in good condition, repair and order, the plumbing, heating,
ventilating, and air conditioning equipment and systems, electrical wiring,
floor, interior walls, ceilings, plate glass and all interior and exterior
pipes, lines an conduits, to the extent they service the demised premises.
When used in this Paragraph 5 the term "repair" shall include all necessary
replacements, renewals, alterations, additions, betterments and any work
required as a condition to the continued use of the then existing improvements
or any work required by any order of any governmental agency. Provided,
however, that Tenant shall not be required to replace any major component
(i.e., costing in excess of $5,000, adjusted to reflect increases in the
Consumer Price Index elapsing during the Lease term) of the heating,
ventilating and/or air- conditioning equipment or systems servicing the demised
premises during the last Lease year of the term hereof. All repairs made by
Tenant shall be equal in quality and class to the original work, and shall be
performed in a good and workmanlike manner and in accordance with all
applicable governmental requirements.
(B) Landlord agrees to keep in good repair the roof, exterior walls,
and foundation of the building. Tenant shall advise Landlord in writing of the
need for any such repairs promptly. Landlord represents that all common areas
are in good repair and clean order and condition.
(C) From and after the date the Tenant shall obtain access to the
demised premises, and at all other times during the term hereof the Tenant
covenants and agrees to pay for all electric current, gas, telephones and all
other utilities (excepting water and sewer which shall be an Operating Expense
for purposes of Paragraph 3(E)) used or consumed in or on the demised premises,
including all costs to heat and air condition said demised premises. Tenant
shall be required to install at its expense appropriate meters or submeters for
determining Tenant's electricity usage within the premises, and following such
installation, Tenant's electricity usage shall be
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determined by such submeters. If such charges or rentals are not so paid, the
same shall be added to the next monthly installment of rental.
(D) Tenant shall have no authority to incur any debt or to make any
charge against Landlord, or to create any lien upon the demised premises for
any work or materials furnished the same, and if any such lien should be filed
against the demised premises on account of work done to or labor or materials
furnished on the demised premises at Tenant's request (whether or not Tenant
obtained Landlord's approval), Tenant shall have a period of thirty (30) days
from the date notice of such lien is brought to its attention to pay off said
lien and have the same discharged of record, or if Tenant disputes such lien or
the amount thereof, to post with the Court having appropriate jurisdiction
adequate bond required to release said lien of record.
6. Present Condition and Use.
The Tenant accepts the demised premises in its present condition, and
without any representation or warranty by Landlord as to the condition of said
demised premises or as to the use or occupancy which may be made thereof, and
the Landlord shall not be responsible for any latent defect in any structural
component of the demised premises or change of condition in the demised
premises. The rent hereunder shall in no case be withheld or denied on account
of any (i) defect in the demised premises, (ii) change in condition of the
demised premises, (iii) damage occurring within the demised premises, or (iv)
the existence of any defect within the demised premises.
7. Signs and Personal Property.
(A) Tenant agrees that no sign, awning, decal, sticker, graphics,
advertisement or notice shall be inscribed, affixed or displayed on any part of
the demised premises, or the building, with the exception of Tenant's
"permitted sign" and/or Tenant's "permitted decal" (as above defined in
Paragraph 7(B)) or which may in any manner be visible from the exterior of the
premises without Landlord's consent which shall not be unreasonably withheld
provided Tenant's proposed signage complies with applicable governmental
regulations and Pennsylvania Avenue Development Corporation, and is consistent
in quality and appropriateness with other bank branches in first-class office
buildings in the downtown business district of Washington, D.C.
Notwithstanding the foregoing sentence, Tenant's permitted sign, as defined
herein, must be in compliance with the approved design, attached hereto, in
regards to number of signs, size of sign box, height of letters and color of
sign box, background and letters. If any such sign, awning, decal, sticker,
graphics, advertisement or notice is inscribed, affixed or displayed without
Landlord's written consent, then and in such event Landlord shall have the
right to either cause Tenant to remove or to have immediately removed said item
or matter, in addition to any other rights or remedies provided under this
Lease. No cloth, paper, stamp, sticker, decal or other similar signs,
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advertising or other notices, nor any flashing lights or noise-making devices
which may be visible or audible from the exterior of the premises shall be
installed by Tenant. The provisions hereof shall not prohibit normal bank
interior signage not intended to be visible from the exterior of the demised
premises. For purposes of this Lease the term "display windows" shall mean and
refer to all windows which shall be in any manner visible from any portion of
the exterior thereof and shall be of a first-class nature, and shall be
subject to the Landlord's prior written consent. Tenant shall maintain any
items referred to hereinabove which are installed by it and which have been
approved by Landlord, in good repair and clean order and condition at all times
during the term hereof.
(B) Notwithstanding any provisions contained in Paragraph 7(A) to the
contrary, Tenant shall be entitled to install at its own cost and expense a
sign visible from the exterior of the premises containing solely Tenant's name,
which sign shall be of first-class quality and in conformity with the
specifications shown on Exhibit "B." Such sign is referred to herein as the
"permitted sign." In addition, Tenant shall be entitled to affix to the
display windows, any decal required under federal banking laws to be displayed.
Such decals are referred to herein as the "permitted decals."
(C) All personal property of the Tenant in the demised premises shall
be at the sole risk of the Tenant. The Landlord shall not be liable for any
accident or damage to the property of Tenant resulting from use or operation of
any heating, cooling, electrical, or plumbing system or equipment situated at
the demised premises. Landlord shall not, in any event, be liable, for damages
to property resulting form water, steam or other causes. Tenant hereby
expressly releases Landlord from any liability incurred or claimed by reason of
damage to Tenant's property, unless caused by the negligence of the Landlord.
(D) The Tenant covenants and agrees to maintain in good repair, clean
order and condition all the fixtures, equipment, and improvements to be
installed or to be made by Tenant within the demised premises, and will make
all repairs thereto and replacements thereof; and at the expiration or other
termination of this Lease, Tenant will fully account to the Landlord therefor
and surrender same to the Landlord in the same order and condition as when
received, usual and normal wear and tear, damage by fire or other casualty only
excepted. If any of said fixtures, equipment or improvements are destroyed or
so damaged that the same cannot be properly repaired, the Tenant shall, at its
own expense, replace the same with property of at least equal quality and
value. Notwithstanding the foregoing, provided Tenant shall not be in default
hereunder at the expiration of the basic term, Tenant shall be entitled to
remove all of its movable trade fixtures, equipment and furnishings not affixed
to the demised premises. Any damage caused by removal of same to the building,
including the demised premises, shall be promptly repaired at the cost and
expense of Tenant.
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8. Alterations.
Tenant shall not make any exterior or structural alterations,
installations, changes, replacements, additions or improvements in or to the
demised premises or any part thereof, except as required under Paragraph 5(A).
All other alternations, installations, changes, replacements, additions or
improvements in or to the demised premises or any part thereof, which are not
structural or exterior, may be made by Tenant, provided Landlord has first
expressly consented to same in writing. The consent of Landlord under this
paragraph may be granted, withheld or conditioned upon such terms as Landlord
may in its sole discretion determine appropriate. Tenant agrees to provide
Landlord with the name of any proposed contractor of Tenant, certificates of
liability insurance maintained by such contractor in amount reasonably
acceptable to Landlord and copies of all plans for such improvements at the
time request for Landlord's approval is made by Tenant. Upon approval by
Landlord of same, Tenant shall provide Landlord with a copy of all requisite
permits from District of Columbia prior to commencement of any such work. It
is distinctly understood that all structural alterations, installations,
changes, replacements, additions to or improvements, upon the demised premises
(whether with or without the Landlord's consent) made subsequent to the initial
leasehold improvements shall the election of the Landlord remain upon the
demised premises and be surrendered with the demised premises at the expiration
of this Lease without disturbance, molestation or injury. The foregoing shall
not apply with respect to Tenant's equipment, fixtures and non-structural
alterations, installations, changes, replacements, additions or improvements
to the demised premises without Landlord's prior written consent, provided that
no such work shall affect any of the mechanical, electrical or other systems
servicing the building, but Tenant shall provide Landlord with plans or working
drawings prior to the commencement of any non-structural alterations,
installations, changes, replacements, additions or improvements to the demised
premises costing in excess of Five Thousand Dollars ($5,000.00). All of
Tenant's aforesaid alterations, installations, changes, replacements, additions
or improvements shall be performed in a good and workmanlike manner and in
compliance with all applicable laws, codes, rules and ordinances. (However,
Landlord at its option and discretion may require the Tenant, at Tenant's
expense, to remove at the expiration or any termination of this Lease any or
all alterations to the demised premises made by Tenant, unless at the time that
Tenant shall have obtained Landlord's consent thereto, Landlord shall have
agreed in writing to waive its rights under the preceding provisions for the
removal of same.) Further, Landlord may at its option and discretion require
Tenant, at Tenant's expense, to repair any damage to the demised premises
caused by either the removal of the aforesaid alterations, or the removal of
any of Tenant's equipment or fixtures that are removable, and Tenant will
promptly comply with such directions. In addition to all legal, equitable and
other rights and remedies available to Landlord, it is greed that if Tenant
does not comply with its obligations under this paragraph or any other
provision or provisions of this lease, the Landlord shall have the right (but
not the obligation) to perform or cause to be performed Tenant's obligations,
duties and covenants, under this paragraph or any other provisions of this
Lease in which event Tenant shall reimburse to Landlord within ten (10) days
after demand all costs
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incurred by Landlord as a result thereof. It is understood that all
alternations, signs or other modifications proposed by Tenant shall be subject
to requisite governmental approvals.
9. Rules and Regulations.
The Tenant recognizes that, since the demised premises is situated in
a building containing premises which will be occupied by others, it is
imperative in the interests of the Landlord and of the other tenants and
occupants of the building that extreme care be exercised by the Tenant in
operating its business in said premises in a manner that will not detract from
the high standards of the building, or that will be objectionable to such other
tenants and occupants. Accordingly, the Tenant covenants and agrees to utilize
reasonable efforts to enforce and comply with the following rules and standards
throughout the term hereof. Landlord covenants and agrees to utilize
commercially reasonable measures to enforce all rules and regulations uniformly
on all commercial tenants.
(A) Garbage and trash shall not be permitted to accumulate in or about the
demised premises but shall be disposed of at least once during each day that
Tenant shall be open for business. No trash may be removed from the store
premises between the hours of 7:00 A.M. and 7:00 P.M. Proper and adequate
receptacles for collection of garbage and trash shall be maintained by Tenant
so that offensive odors shall not be permitted to exude therefrom at any time.
In no vent shall any trash be stored by Tenant in any area which would be
visible form the interior or exterior of the premises. Such garbage and trash
shall be placed in odor-free receptacles located in areas designated therefor
by the Landlord, and in no event shall any garbage or trash be stored in any
other portion of the building.
(B) Adequate exterminating service shall be employed and maintained at all
times by the Tenant, so that the demised premises shall at all times be
protected against and free of rodents, insects, pests and vermin, consistent
with the highest and best extermination services available in the greater
Washington, D.C. area.
(C) The Tenant shall provide, at its own cost and expense, adequate
janitorial and cleaning service so that the demised premises, shall at all
times be kept clean and orderly, recognizing the Landlord's desire to maintain
the first- class image of the building. Exterior surfaces of all windows shall
be cleaned daily by Tenant.
(D) Tenant will not cause or permit objectionable odors to emanate or be
dispelled from the demised premises.
(E) Tenant will not place or maintain any merchandise, equipment or
machinery or other articles in any vestibule or entry of the premises, on the
footwalks adjacent thereto or
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elsewhere on the exterior thereof, or any public corridors, lobby areas, halls
or stairwells or sidewalks adjacent thereto.
(F) Tenant shall not maintain or operate nor permit to be maintained or
operated in the demised premises or any portion thereof, any music machines or
other instruments emitting noises that are objectionable to other occupants or
tenants of the building.
(G) Tenant shall not install any automatic teller machines or other
equipment or machinery on the exterior of the building.
(H) Landlord reserves the right to promulgate additional reasonable rules
and regulations, from time to time, for the maintenance of standards of the
building in which the premises is situated, and which the Landlord reasonably
deems to be in the best interests of the building; and the Tenant expressly
covenants agrees to perform, observe and abide by such rules and regulations,
it being agreed that this Lease is granted to the Tenant in reliance on
Tenant's covenant to comply with the provisions hereof.
(I) Tenant shall, at its own cost, make all repairs required for the
interior of the demised premises promptly upon the occurrence of the necessity
therefor and will maintain said premises at a high standard of cleanliness (to
the satisfaction of Landlord) at Tenant's own expense. In no event shall
Landlord be required to provide any char or cleaning services for Tenant; it
being agreed that Tenant shall provide such services at its own expense daily
and in a proper and adequate manner. All elements of Tenant's interior design
shall be professionally designed and shall at all times during the term remain
subject to Landlord's prior written approval. Landlord reserves the right to
correct any non-conformity of Tenant throughout the term.
(J) The Landlord shall have the right at all times during the term hereof
to prescribe the manner in which Tenant shall comply with the provisions of
this Article 9. If, in the opinion of the Landlord, the Tenant does not
maintain said premises to the satisfaction of the Landlord, the Tenant shall
correct the fault complained of by the Landlord promptly after receipt of
notice from the Landlord.
10. Insurance.
(A) The Landlord assumes no liability or responsibility whatsoever
with respect to the conduct and operation of the business to be conducted
within the demised premises. The Landlord shall not be liable for any accident
or injury to any person or persons or property in or about the demised premises
which are caused by the conduct and operation of said business, or by virtue of
equipment or property of the Tenant in the demised premises. The Tenant agrees
to hold the Landlord harmless against all such claims. Furthermore, Tenant
shall and hereby does defend,
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indemnify and save harmless Landlord and Landlord's agents and employees
(collectively, "Indemnitees") from and against all liability (statutory or
otherwise), claims, suits, causes of action, demands, judgments, costs,
interest and expenses (including also reasonable counsel fees and disbursements
incurred in the defense thereof) to which any Indemnitees may (except insofar
as it arises out of the fault or neglect of such Indemnitees) be subject or
suffered, whether by reason of any claim for, any injury to, or death of, any
person or persons or damage to or loss of property (including also any loss of
use thereof) or otherwise, and arising from or in connection with the use by
Tenant of, or from any work or anything whatsoever done by Tenant (or any of
its officers, directors, agents, contractors, employees, licensees or while
within the premises, invitees) in any part of the demised premises (other than
by Landlord or its agents or contractors) during the term of this Lease, or
arising from any condition of the demised premises due to or resulting from any
default by Tenant in the keeping, observance or performance of any covenant or
agreement contained in this Lease or from any fault or neglect of Tenant or any
of its officers, directors, agents, contractors, employees, licensees or while
within the premises, invitees.
(B) In order to assure the indemnity referred to in Paragraph 10(A)
hereinabove, Tenant shall carry and keep in full force and effect at all times
during the terms of this Lease, for the protection of Landlord and Tenant and
naming both Landlord and Tenant as parties insured, public liability insurance
with limits for bodily injury or death of at least ONE MILLION DOLLARS
($1,000,000.00) for any one person and at least THREE MILLION DOLLARS
($3,000,000.00) for any one accident, and at least TWO HUNDRED FIFTY THOUSAND
DOLLARS ($250,000.00) for property damage. Landlord shall be entitled to
increase the aforesaid minimum amounts during the term hereof (but not more
than once in any lease year) to commercially reasonable amounts of coverage.
(C) Tenant shall carry fire and extended coverage insurance on all of
Tenant's furniture, equipment, decor and furnishings (collectively, the
"Furnishings") in an amount not less than eighty percent (80%) of the full
insurable replacement cost at all times. Tenant shall carry statutory
workman's compensation insurance covering its employees in, on and about the
premises, and plate glass insurance. In the event of any loss or damage to any
of the Tenant Furnishings or Tenant's plate glass, by fire or other casualty
for which Tenant is required to carry insurance, the proceeds of such insurance
shall be payable to Landlord and Tenant jointly, which proceeds shall be used
by Tenant towards the cost of replacing or repairing and property so damaged,
and Landlord agrees to release said insurance proceeds for that purpose.
(D) All insurance policies required to be obtained by Tenant shall be
issued by recognized and responsible insurance companies qualified to do
business in the District of Columbia, and shall provide that such policies
shall not be canceled without fifteen (15) days' prior written notice to
Landlord. Landlord shall be named as an additional insured on all such
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policies, with the exception of the statutory workmen's compensation coverage
referred to hereinabove. Tenant shall deliver to Landlord a copy of all such
insurance policies or a certificate thereof showing the same to be in full
force and effect.
(E) In the event Tenant shall fail to keep in force and maintain any
such policy of insurance, Landlord shall have the right, at its option, and at
the sole cost of Tenant, in addition to all other rights and remedies, to
purchase such policy or policies of insurance and to pay the premiums thereon,
and if not reimbursed to Landlord by Tenant within ten (10) days following
written request therefor, the amounts so paid, with interest thereon at the
rate of eighteen percent (18%) per annum, shall at the option of the Landlord
be added to the next installment of rent payable under provisions of the Lease.
11. Licenses and Permits.
Tenant shall at its own cost and expense promptly obtain from
appropriate governmental authorities (and maintain in full force and effect
throughout the term of this Lease), all permits, licenses, and the like
required to permit Tenant to occupy the demised premises for the purposes
stated in Paragraph 4 hereinabove. Landlord agrees to cooperate at no cost or
expense to Landlord with procurement of all permits requiring the joinder of
the Landlord, promptly following Tenant's request to Landlord. Landlord agrees
to maintain all of its permits and licenses for the building and Landlord's
operation thereof.
12. Assignment and Subletting.
(A) Tenant shall not assign, mortgage, or hypothecate this Lease or
any interest therein, or otherwise transfer any legal or equitable interest in
this Lease, nor shall Tenant sublet the demised premises or any part thereof,
whether voluntarily or involuntarily or by operation of law, without the prior
written consent of Landlord. Landlord may grant, withhold or condition its
consent upon such terms and provisions which Landlord in its sole and exclusive
discretion determine, unless otherwise below provided in Paragraph 12(B).
Further, Tenant shall not have any right hereunder to mortgage or encumber any
of Tenant's leasehold improvements to be made within the demised premises, and
all such improvements shall be installed free and clear of any and all liens or
encumbrances of any kind whatsoever. Any assignment or other transfer
consented to by Landlord shall not relieve Tenant for any of its obligations
under this Lease, and any such assignment or other transfer not first
consented to in writing by Landlord shall be null and void. Any attempted
assignment of this Lease by operation of any of the aforesaid events not
consented to by Landlord in writing shall be null and void. In the event
Landlord shall determine, in its sole and exclusive discretion, to approve a
proposed subtenant or assignee of Tenant, such assignee or subtenant shall in
any event be consistent with the type of tenants commonly found in other first-
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class developer-owned office buildings of the highest quality in Washington,
D.C. Consent of the Landlord to any such assignment or subletting shall not
operate as a waiver of the necessity for a consent to any subsequent assignment
or subletting, and the terms of such consent shall be binding upon any person
holding by, or through the Tenant.
(B) Notwithstanding the aforesaid provisions contained in Paragraph
12(A) of the Lease, the Landlord shall be required to consent to any proposed
assignment of this Lease or subletting (in whole) of the demised premises,
provided that the proposed assignment or subletting shall occur in connection
with any merger, acquisition or consolidation of Tenant whereby the party
succeeding to all (or substantially all) of Tenant's assets prior to such
merger, consolidation or acquisition shall succeed to Tenant's interest in this
Lease, and further provided that the party succeeding to such interest shall
execute and deliver unto Landlord such documents as Landlord shall reasonably
request in order to evidence its or their assumption of all of the obligations,
covenants, duties and agreements under this Lease of the Tenant, and further
that the use of the demised premises is in compliance with Paragraph 4, herein.
In the event of any such permitted transfer of this Lease as hereinabove
provided, the original named Tenant shall remain fully liable for all
obligations under this Lease and no such permitted transfer shall relieve any
such party of any liability hereunder. Tenant shall pay to Landlord upon
request, the administrative expenses and reasonable attorneys' and accountants'
fees incurred by Landlord in review of any proposed assignment or subletting,
and in preparing or reviewing any documents, financial data or other
information concerning a proposed assignment or subletting by Tenant.
13. Examination of Premises.
Tenant shall allow Landlord and its agents free access to the demised
premises upon reasonable advance notice, except in the case of an emergency,
for the purpose of examining the same to ascertain and determine if the demised
premises are in good repair and condition, and to exhibit the same to (i)
prospective purchasers at any reasonable time during the term hereof, and (ii)
to prospective tenants during the last six (6) months of the Lease term (as
same may be extended by Tenant). Notwithstanding the foregoing, Landlord's
access shall not unreasonably interfere with Tenant's business.
14. Subordination.
(A) Tenant agrees that this Lease shall be subject and subordinate to
the lien or liens of any mortgages, deed or deeds of trust, or other security
interests (collectively the "Interests") that may now be placed against the
demised premises, and, all such Interests which shall at any time hereafter be
placed against the demised premises. Tenant agrees, at any time hereafter, on
demand, to execute any instruments, releases or other documents that may be
required for the
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purpose of subjecting and subordinating this Lease to the lien of any mortgage
or mortgages or deed or deeds of trust, whether original or substituted.
Tenant covenants and agrees in the event any proceedings are brought for the
foreclosure of any such mortgage or deed of trust, to attorn to the purchaser
upon any such foreclosure sale and to recognize such purchaser as the Landlord
under this Lease. Tenant agrees to execute and deliver at any time and from
time to time, upon the request of Landlord or of any such holder, any
instrument which, in the sole judgment of Landlord, may be necessary or
appropriate in any such foreclosure proceeding or otherwise to evidence such
attornment. Tenant further waives the provisions of any statute or rule of
law, now or hereafter in effect, which may give or purport to give Tenant any
right or election to terminate or otherwise adversely affect this Lease and the
obligations to Tenant hereunder in the event any such foreclosure proceeding is
brought, and agrees that this Lease shall not be affected in any manner
whatsoever by any such foreclosure proceedings.
(B) Landlord agrees to use reasonable best efforts to obtain for the
benefit of Tenant a non-disturbance and attornment agreement duly executed by
the holder of any first mortgage or ground lease new or hereafter affecting the
building, whereunder Tenant's rights under this Lease shall recognized,
notwithstanding any foreclosure by such holder.
15. Bankruptcy.
(A) For purposes of this Lease, the following shall be deemed "Events
of Bankruptcy" of Tenant: (i) if Tenant becomes "insolvent", as defined in
Title 11 of the United States Code, entitled "Bankruptcy", 11 U.S.C. Section
101 et. seq. (hereinafter called the "Bankruptcy Code"), or under the
insolvency laws of any state, district, commonwealth or territory of the United
States of America ("Insolvency Laws"); or (ii) if a receiver or custodian is
appointed for any or all of Tenant's property or assets, or there is instituted
a foreclosure action on any of Tenant's property; or (iii) if Tenant files a
voluntary petition under the Bankruptcy Code or Insolvency Laws; or (iv) if
there is filed an involuntary petition against Tenant as the subject debtor
under the Bankruptcy Code or Insolvency Laws, which is not dismissed within
thirty (30) days of filing, or results in issuance of an order for relief
against the debtor; or (v) if Tenant makes or consents to an assignment of its
assets, in whole or in part, for the benefit of creditors, or a common law
composition of creditors.
(B) Upon the occurrence of an Event of Bankruptcy, or if Tenant takes
advantage of any Insolvency Laws, then in any such event Landlord at its option
and sole discretion may terminate this Lease by written notice to Tenant
(subject, however, to applicable provisions of the Bankruptcy Code or
Insolvency Laws during the pendency of any action thereunder involving Tenant
as the subject debtor). If this Lease is terminated under this paragraph,
Tenant shall immediately surrender and vacate the demised premises, waive all
statutory or other notice to quit,
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and agree that Landlord's obligations under this Lease shall cease from
termination date, and Landlord may recover possession by process of law or in
any other lawful manner. Furthermore, if this Lease terminates under this
Paragraph, Landlord shall have all rights and remedies against Tenant provided
in case of default of Tenant in payment of rent.
(C) If Tenant becomes the subject debtor in a case pending under the
Bankruptcy Code, Landlord's right to terminate this Lease under this Paragraph
shall be subject to the applicable rights (if any) of the Trustee in Bankruptcy
to assume or assign this Lease as then provided for in the Bankruptcy Code.
However, the Trustee in Bankruptcy must give to Landlord and Landlord must
receive proper written notice of the Trustee's assumption or rejection of this
Lease, within sixty (60) days after the date of the Trustee's appointment; it
being agreed that failure of the Trustee to give notice of such assumption
hereof within said sixty (60) day period shall conclusively and irrevocably
constitute the Trustee's rejection of this Lease and waiver of any rights of
the Trustee to assume or assign this Lease. The Trustee shall not have the
right to assume or assign this Lease unless said Trustee (i) promptly and fully
cures all defaults under this Lease, (ii) promptly and fully compensates
Landlord for all monetary damages incurred as a result of such default, and
(iii) provides to Landlord "adequate assurance of future performance" (as
defined hereinbelow). Landlord and Tenant hereby agree in advance that
"adequate assurance of future performance", as used in this paragraph, shall
mean that all of the following minimum criteria must be met: (a) Tenant's
gross receipts in the ordinary course of its business during the thirty (30)
days immediately preceding the initiation of the case under the Bankruptcy Code
must be at least ten (10) times greater than the next payment of rent due under
this Lease, (b) both the average and median of Tenant's monthly gross receipts
in the ordinary course of its business during the six (6) months immediately
preceding initiation of the case under the Bankruptcy Code must be at least ten
(10) times greater than next payment of monthly rent due under this Lease, (c)
Tenant must pay to Landlord all rentals and other sums payable by Tenant
hereunder, and (d) the Tenant's business shall be conducted in a first class
manner, and that no liquidating sales, auctions, or other non-first class
business operations shall be conducted on the demised premises, and that the
use of the demised premises as stated in this Lease will remain unchanged, and
that the assumption or assignment of this Lease will not violate or affect the
rights of other lessees in the building. In the event Tenant is unable to: (i)
cure its defaults, (ii) reimburse Landlord for its monetary damages, (iii) pay
the rents due under this Lease or any other payments required of Tenant under
this Lease on time, or (iv) meet the criteria and obligations imposed by (a)
through (d) above in this Paragraph 15, the Tenant hereby agrees in advance
that it has not met its burden to provide adequate assurance of future
performance, and this Lease may be terminated by Landlord in accordance with
Paragraph 15(B) above.
(D) It is further stipulated and agreed that, in the event of the
termination of the term of this Lease by the happening of any such event
described in this Paragraph 15, Landlord shall forthwith, upon such
termination, and any other provisions of this Lease to the
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contrary notwithstanding, become entitled to recover as and for the liquidated
damages caused by such breach of the provisions of this Lease an amount equal
to the difference between the then cash value of the rent reserved hereunder
for the unexpired portion of the term hereby demised, and the then cash rental
value of the demised premises for such unexpired portion of the term hereby
demised, unless the statute which governs or shall govern the proceeding which
such damages are to be proved limits or shall limit the amount of such claim
capable of being so proved, in which case Landlord shall be entitled to prove
as and for liquidated damages as an amount equal to that allowed by or under
any such statute. The provisions of this paragraph of this Lease shall be
without prejudice to (a) Landlord's right to prove in full damages for rent
accrued prior to the termination of this Lease, but not paid, or (b) any rights
given to Landlord by any pertinent statute to prove for any amounts allowed
thereby. In making any such computation, the then cash rental value of the
demised premises shall be deemed prima facie to be the rental realized upon any
reletting, if such reletting can be accomplished by Landlord within a
reasonable time after such termination of this Lease, and the then present cash
value of the future rents hereunder reserved to Landlord for the unexpired
portion of the term hereby demised shall be deemed to be such sum, if invested
at six per centum (6%) simple interest, as will produce the future rent over
the period of time in question.
16. Default.
(A) In the event that (i) Tenant shall fail to pay when due any
payment of the rental or any other sum payable by Tenant hereunder, and such
failure shall continue for a period of five (5) days beyond the due date
thereof, or (ii) Tenant shall violate any other term, covenant or condition of
this Lease or neglect or fail to perform or to observe any of the other terms,
conditions or covenants herein contained on Tenant's part to be performed or
observed and Tenant shall fail to remedy the same within thirty (30) days after
Landlord shall have given Tenant written notice specifying such violation,
neglect or failure, or (iii) in the event that this Lease or the demised
premises or any part thereof shall be taken upon execution or by other process
of law directed against Tenant, or shall be taken upon or subject to any
attachment at the instance of any creditor of or claimant against Tenant, and
said attachment shall not be discharged or disposed of within thirty (30) days
after the levy thereof; or (iv) if Tenant shall abandon, vacate or desert the
demised premises, or fail to continuously operate the demised premises for the
purposes provided in Paragraph 4 hereof, then in any one or more of such
events, Landlord shall have the right, at its option, exercisable by sending
written notice thereof to Tenant, to terminate this Lease, in which event
Tenant agrees to immediately surrender possession of the demised premises,
without any notice to quit or demand for possession of the demised premises
whatsoever, notice to quit or intention to re-enter the same being hereby
expressly waived by Tenant, and Tenant hereby grants Landlord full and free
entrance to, into and upon the demised premises or any part thereof, or take
possession thereof with or without process of law and to expel and remove
Tenant or any other person occupying the demised premises or any part hereof,
and may repossess itself of the same as of its former estate, but such entry
shall
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not constitute a trespass or forcible entry or detainer, nor shall it cause a
forfeiture of rents due by virtue hereof nor waiver of any covenant, agreements
or promises of this Lease contained to be performed by Tenant. If this Lease
shall be terminated as aforesaid, the demised premises, or any part thereof,
may be re-let by Landlord for the account and benefit of Tenant, for such rent
and upon such terms and to such person or persons and for such period or
periods as may seem fit to Landlord and if a sufficient sum shall not be
received from such reletting to satisfy the rent reserved in this Lease, after
paying the expense of reletting and collection, including reasonable
commissions to agents and reasonable attorneys' fees, and any court costs,
Tenant agrees to pay and satisfy any and all such deficiencies; but the
acceptance of a tenant by Landlord in place of Tenant, shall not operate as a
release of Tenant from the performance of any covenant, promise or agreement
herein contained, and the performance of any substitute tenant by the payment
of rent, or otherwise, shall constitute only satisfaction pro-tanto of the
obligations of Tenant arising hereunder. Any damages or deficiencies, at the
option of Landlord, may be recovered by Landlord in separate actions, from time
to time, as Tenant's obligations to payment would have accrued if the term had
continued, or from time to time as said damages or deficiencies shall have been
made more easily ascertainable by relettings of the demised premises, or any
such action by Landlord may, at the option of Landlord, be deferred until the
expiration of the term.
(B) Tenant hereby expressly waives any provision of law now in force
or which hereafter may be enacted giving Tenant the right under any condition
after default to the redemption and repossession of the demised premises or any
part thereof.
(C) No payment by Tenant or receipt by Landlord of a lesser amount
than the monthly installments of rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed in accord and satisfaction, and the Landlord may
accept such check or payment without prejudice to the Landlord's right to
recover the balance of such rent or pursue any other remedy in this Lease
provided.
(D) Tenant shall reimburse Landlord any reasonable legal fees or other
costs incurred in the event of a default of Tenant hereunder, in pursuit of
Landlord's rights and remedies hereunder, whether or not suit shall be brought.
17. Effect of Waiver.
If, under the provisions of this Lease, a summons or other notice
shall, at any time, be served upon Tenant by Landlord and a compromise or
settlement shall be effected either before of after judgment or decree, whereby
Tenant shall be allowed or permitted to retain possession of the demised
premises, the same shall not constitute a waiver of any covenant or
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agreement herein contained, or of this Lease itself. No waiver by Landlord or
any breach of agreement herein contained shall be construed to be a waiver of
the covenant itself or of any subsequent breach hereof.
18. Estoppel Certificates.
Tenant agrees at any time and from time to time, upon not less than
ten (10) days' prior written notice by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying (1) that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the Lease is in full force and effect as modified and stating the
modifications), (2) the date to which the rent and other charges hereunder have
been paid by Tenant, (3) whether or not Landlord is in default in the
performance of any covenant, agreement or condition contained in this Lease,
and, if so, specifying each such default of which Tenant may have knowledge,
and (4) the address to which notices to Tenant should be sent. Any such
statement delivered pursuant hereto may be relied upon by any owner of the
demised premises, any mortgagee or prospective mortgagee of the demised
premises or of Landlord's interest therein or any prospective assignee of any
such interest.
19. Eminent Domain.
Tenant agrees that if the demised premises, or any part thereof, shall
be taken or condemned for public or quasi-public use or purpose by any
competent authority, Tenant shall have no claim against the Landlord and shall
not have any claim or right to any portion of the amount that may be awarded as
damages or paid as a result of any such condemnation; and all right of the
Tenant to damages thereof, if any, are hereby assigned by the Tenant to the
Landlord. And upon any condemnation or taking affecting all or any substantial
part of the demised premises, the term of this Lease shall cease and terminate
at the option of either Landlord or Tenant by written notice to the other from
the date of such governmental taking or condemnation. The Tenant shall have no
claim against the Landlord for the value of any unexpired term of this Lease.
If less than the whole of the demised premises is taken or condemned by any
governmental authority for any public or quasi-public use or purpose, and in
the event neither Landlord nor Tenant shall desire to terminate this Lease,
then and in such event the rent shall be equitably adjusted on the date when
title vests in such governmental authority and the Lease shall otherwise
continue in full force and effect. Tenant shall be entitled to pursue a
separate claim for the value of the Tenant's furnishings, equipment and movable
trade fixtures so taken, together with relocation expenses, provided such claim
shall in no manner diminish the award or other compensation to which Landlord
would otherwise be entitled.
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20. Quiet Enjoyment.
Landlord covenants and agrees that it has the right to execute this
Lease and that if the covenants and agreements on the part of Tenant shall be
kept, performed and observed by Tenant as in this Lease provided, Tenant shall
have the quiet, peaceable and uninterrupted possession and enjoyment of the
demises premises, subject to the terms and provisions contained herein.
21. Notices.
Until further notice by either party to the other, in writing, all
notices or communications required or permitted hereunder shall be sent by
registered or certified mail, return receipt requested, (a) if to Landlord,
addressed to:
c/o Willco Construction Co., Inc.
7811 Montrose Road
Potomac, MD 20854
and (b) if to Tenant, addressed to:
Century National Bank
1275 Pennsylvania Avenue, NW
Washington, DC 20004
22. Tenant Holdover. If the Tenant shall, with the knowledge and written
consent of the Landlord, continue to remain in the demised premises after the
expiration of the term of this Lease, then and in that event, Tenant shall, by
virtue of this agreement become a tenant by the month at the maximum monthly
rental payable (as specified in Paragraph 3, herein) in the last month of the
immediately preceding expired term hereof, commencing said monthly tenancy with
the first day next after the end of the term above demised; and said Tenant
shall give to the Landlord at least thirty (30) days' written notice of any
intention to quit the demised premises, and Tenant shall be entitled to thirty
(30) days' written notice to quite the demised premises, except in the event of
nonpayment of rent in advance or of the breach of any other covenant by the
said Tenant, in which event the said Tenant shall not be entitled to any notice
to quit, the statutory thirty (30) days' notice and all other notices to quit
being hereby expressly waived; provided, however, that in the event that the
Tenant shall hold over after the expiration of the term hereby created, and if
the Landlord shall desire to regain possession of the demised premises promptly
at the expiration of the term aforesaid, then at any time prior to Landlord's
acceptance of rent from the Tenant as a monthly tenant hereunder, the Landlord,
at Landlord's option, may forthwith re-enter and take possession of the demised
premises without process, or by any legal process in force. Notwithstanding
the foregoing,
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in the event Tenant shall wrongfully holdover subsequent to the expiration of
the term of this Lease, Landlord shall in lieu of rent be entitled to demand
and receive from Tenant monthly use and occupancy payments for each month in
which tenant shall wrongfully holdover subsequent to the expiration of the term
of this Lease, in an amount equal to twice the monthly rental payable in the
last month of the immediately preceding expired term of this Lease. Each such
use and occupancy payment shall be due on or before the first of each calendar
month in which Tenant shall wrongfully holdover hereunder. In no event shall
Landlord's demand or acceptance of such use and occupancy payments be
considered to constitute an acquiescence by Landlord to the extension of the
term hereof, and Landlord shall be entitled to obtain immediate possession of
the premises irrespective of any such demand or acceptance. In the event
Tenant shall pay monthly use and occupancy payments for any calendar month
following expiration of the term hereof, such payment shall be pro-rated upon
Tenant's surrender of full and exclusive possession of the premises to the
Landlord, free of all subtenants and other parties claimed by, through or under
the Tenant.
23. Damage by Casualty.
If the demised premises shall be partially or totally damaged or
destroyed, then Landlord shall diligently and as soon as practicable after such
damage occurs (taking into account the time necessary to effectuate a
satisfactory settlement with any insurance company, and reasonable delay on
account of "labor troubles" or any other causes beyond Landlord's control)
repair or rebuild the demised premises, provided, however, that in no event
shall Landlord be obligated to expend in such repair or rebuilding any sums in
excess of the amount of insurance proceeds paid to Landlord in connection
therewith, except for any deductible paid by the Landlord. The foregoing
notwithstanding, in no event shall Landlord be required to repair, restore or
rebuild any portions of the demised premises constituting a part of Tenant's
leasehold improvements or other tenant work, trade fixtures, equipment and
personal property. If the demised premises are rendered wholly or partially
untenantable by such damage or destruction, any such damage and destruction was
without the fault or neglect of the Tenant, its servants, employees, agents, or
licensees, then the basic monthly rent payable by Tenant under the Lease during
the period in which the demised premises are so untenantable shall be equitably
abated by the percentage that the unusable floor area of the demised premises
bears to the total floor area thereof. Except as set forth in this Article,
Landlord shall not be liable for any damages (including, without limitation,
business interruption) that may be suffered by Tenant by reasons of any
casualty to the demised premises and/or Landlord's repairing or rebuilding
thereof and/or the deprivation of Tenant's use and possession of the demised
premises. All of the foregoing provisions of this Article notwithstanding, if
the demised premises and/or the common area access to the demises premises, if
necessary to Tenant's business, are rendered wholly untenantable by fire or
other cause, and such damage cannot be repaired by Landlord within one hundred
eighty (180) days following the date of such casualty, then and in such event
Tenant, provided it is not in default hereunder, may, at its option, cancel and
terminate this Lease by giving
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to the Landlord, within two hundred ten (210) days from the date of such
damage, notice in writing of its intention to cancel this Lease. Further, in
the event the demised premises, together with any other substantial portion of
the building (i.e. 25% or more of the building) shall be damaged or destroyed
due to fire or other casualty, Landlord shall be entitled to terminate this
Lease, by giving written notice to Tenant within sixty (60) days following such
fire or other casualty. In the event of termination by either Landlord or
Tenant, as aforesaid, the term of this Lease shall cease and determine upon the
tenth day after such notice is given, and the Tenant shall vacate the demised
premises and surrender the same to the Landlord.
24. Jury Trial Waiver.
Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other one or in respect of any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant hereunder,
Tenant's use or occupancy of the demised premises, and/or claim of injury or
damage.
25. Landlord's Lien.
In the consideration of the mutual benefits arising under this Lease,
the Tenant hereby grants to Landlord a lien on all property of the Tenant in or
on the premises (except such part of any property that may be exchanged,
replaced or sold from time to time in the ordinary course of business operation
of the Tenant while not in default under this Lease), and such property shall
be and remain subject to the lien of Landlord for the payment of all monthly
rental and additional rent and any other sums agreed to be paid by the Tenant
herein. Said lien shall be in addition to any lien provided to the Landlord by
law.
26. General Provisions.
(A) Upon the expiration or sooner termination of the term hereof,
Tenant shall quit and surrender the demised premises to Landlord in good order
except for ordinary wear and tear, as reasonably determined by Landlord, and
shall comply with Paragraphs 7(c) and 8 hereof. Any damage to the demised
premises negligently caused or occasioned by Tenant in the removal of its
property from the demised premises shall be repaired at Tenant's sole cost and
expense.
(B) During the term of this Lease, Tenant shall not use the name of
Landlord in connection with any business operation which Tenant conducts on or
about the demised premises.
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(C) Nothing in this Lease shall be deemed or construed in any way as
constituting the consent or request of Landlord, expressed or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or
materialmen for the performance of any labor or the furnishing of any material
for any specific improvement, alteration or repair of the demised premises or
any part thereof.
(D) Nothing herein contained shall in any way be considered or
construed as creating the legal relation of a partnership or joint venture
between Landlord and Tenant, it being expressly understood and agreed by the
parties hereto that the relationship between the parties shall be one of
landlord and tenant.
(E) It is further understood and agreed that the covenants, agreements
and conditions herein contained shall be binding upon the Landlord and Tenant,
as well as their respective heirs, executors, administrators, successors and
permitted assigns.
(F) This Lease shall be governed and construed in accordance with the
laws of the District of Columbia.
(G) If any covenants or agreement of this Lease or the application
thereof to any person or circumstance shall be held to be invalid or
unenforceable, then and in each such event the remainder of this Lease or the
application of such covenant or agreement to any other person or any other
circumstance shall not be thereby affected, and each covenant and agreement
hereof shall remain valid and enforceable to the fullest extent permitted by
law.
(H) The captions and headings throughout this Lease are for
convenience and reference only, and the words contained in such captions shall
in no way be held or deemed to define, limit, describe, explain, modify,
amplify or add to the interpretation, construction or meaning of any provision
of this Lease.
27. Limitation on Right of Recovery Against Landlord.
It is specifically understood and agreed that there shall be no
personal liability of any shareholder, partner, director, trustee, officer,
employee, representative, or agent of Landlord, in respect to any of the
covenants, conditions or provisions of this Lease. In the event of a breach or
default by Landlord of any of its obligations under this Lease, Tenant shall
look solely to the equity of the Landlord in the Building for the satisfaction
of Tenant's remedies. Accordingly Tenant hereby agrees to look solely to
Landlord's equity in the Building for the satisfaction of any claim arising
from this Lease and shall not seek to impose personal liability on any
shareholder, trustee, partner, officer, employer, representative or agency of
Landlord.
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28. Renewal Term.
(A) Provided that Tenant shall have faithfully kept and performed all
of its obligations and agreements set forth in this Lease, Tenant shall have
the right to extend and renew the term of this Lease for one (1) additional
period of five (5) years commencing therefor upon expiration of the initial
term, and fully ending on the last day of the sixtieth calendar month
thereafter. The renewal term shall be upon the same terms and conditions as
set forth in this Lease with the exception of the following: (1) rent and
increases therein which shall be as set forth in subparagraph 28 (B) below, and
(2) there shall be no right to a further renewal term beyond the aforesaid
renewal term. Tenant shall be required to exercise this renewal term by
written notice delivered to Landlord no later than twelve (12) months prior to
the expiration of the initial lease term. In the absence of such notice, all
rights hereunder of Tenant to a renewal term shall be declared null and void.
(B) In the event Tenant shall exercise its rights to a renewal term,
as aforesaid, Tenant covenants and agrees to pay a basic annual rent during the
aforesaid first renewal term, a sum equal to the market rental for comparable
retail space within the geographical area of Washington, D.C. in which the
building is located, reasonably projected by the parties to be in effect as of
the commencement of the renewal period, together with increases therein
consistent with the prevailing market practices, and shall be agreed upon by
the parties within sixty (60) days following the last day upon which such
option may be exercised by Tenant under Paragraph 28(A) above. In the event
the parties are unable to agree upon the rate of rental and/or determination of
increases therein for such additional term, during the aforesaid sixty (60) day
period, then the basic annual rent and rate of increases therein shall be
determined by a board of three (3) licensed real estate brokers, one of whom
shall be named by the Landlord, one by the Tenant, and the third selected by
the two brokers selected by the Landlord and Tenant. All of said brokers shall
be licensed real estate brokers in Washington, D.C. specializing in commercial
leasing in the central business district having not less than ten (10) years
experience and recognized as ethical and reputable within their industry. The
parties agree to select their respective designated brokers within ten (10)
days after the expiration of the sixty (60) day period herein provided. The
third broker shall be selected within fifteen (15) days after both of the first
two (2) brokers have been selected. Within fifteen (15) days after the third
broker has been selected all of the brokers shall meet to attempt to agree upon
the base rate of rental. If they are unable to reach agreement, they shall
within said fifteen (15) day period submit in writing the rate of rental they
deem appropriate and the base rate of rental shall be the amount which is the
mean between the two (2) closest amounts determined by two (2) of the brokers.
In no event shall the base annual rent for the initial year of the renewal term
be less than the base annual rent in effect in the tenth (10th) year of the
initial term of the Lease. Upon determination of the new rental and rate of
increases therein for the renewal term, Tenant agrees to execute and deliver to
Landlord
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within ten (10) days following Landlord's request, and appropriate amendment to
this Lease confirming the renewal term and the revised basic annual rent and
determination of increases to remain in effect during the renewal term.
29. Entire Agreement.
It is understood and agreed by and between the parties hereto that
this Lease contains the final and entire agreement between the said parties and
they shall not be bound by any terms, statements, conditions or
representations, oral or written, not herein contained.
IN WITNESS WHEREOF, the Tenant has caused these presents to be signed and
sealed and Landlord has caused these presents to be signed and sealed by one of
its general partners, all as of the day and year first written hereinabove.
LANDLORD:
PENNSYLVANIA BUILDING ASSOCIATES
/s/ Illegible By: /s/ S. GREENHOOT FISCHER (SEAL)
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Witness S. Greenhoot Fischer, General
Partner
/s/ KRISTIE MCKILLIP By: /s/ RICHARD S. COHEN (SEAL)
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Witness Willco Associates, General
Partner, By Richard S. Cohen,
its General Partner
TENANT:
CENTURY NATIONAL BANK
/s/ F. KATHRYN ROBERTS By: /s/ JOSEPH S. BRACEWELL (SEAL)
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Witness Joseph Bracewell,
Chairman of the Board
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EXHIBIT 10.9
LEASE AND SERVICES AGREEMENT
LEASE AND SERVICES AGREEMENT ("Agreement"), made this 17th day of
November 1995, by and between ALLIANCE Greensboro, L.P., a Delaware partnership
d/b/a ALLIANCE Business Centers with principal offices at 8201 Greensboro
Drive, McLean, VA 22102 (the "Landlord") and Century National Bank, a District
of Columbia corporation with principal offices at 1875 Eye Street, NW,
Washington, D.C. 20006 (the "Tenant"), to lease the office(s) described below
and to purchase certain services described in this Agreement.
Agreement to Lease. Landlord hereby leases to Tenant, and Tenant rents from
Landlord, a portion of the Landlord's executive suite (the "Executive Suite")
located in the building known as 8201 Greensboro Drive, Suite 1000, McLean, VA
22102 (the "Building") identified as Office/Suite number(s) #1049 and
designated on the floor plan attached to this Agreement as Exhibit "A" (the
"Premises"). Premises shall be used by no more than one person. No adjustment
in the maximum number of persons occupying the Premises will be made without
Landlord's prior written consent. Changes in the number of persons occupying
The Premises shall result in a rental adjustment as stated in paragraph 6 of
this Agreement. Tenant shall pay the rent and other charges and perform all
other obligations required of Tenant in this Agreement without set-off or
deduction. The Basic Terms of this Agreement are also outlined in Exhibit "B &
D", attached.
1. Use of Office. During the term of this Agreement, provided
Tenant is not in default of any of the terms, covenants, conditions or
provisions of this Agreement, Tenant shall have the exclusive use of the
Premises. Landlord may take possession of the Premises and substitute other
space in the Executive Suite substantially comparable to the Premises by giving
written notice to Tenant at least thirty (30) days in advance, and Landlord
shall pay for all reasonable costs of relocation.
2. Rent and Other Charges. Tenant agrees to pay Fixed Monthly
Rental Charges of $880.00 in advance, on the first day of each calendar month
during the term of this Agreement, without notice or demand, and without set
off or deduction. The rent for the first month shall be paid upon the signing
of this Agreement. If any payment of rent or other charges due under this
Agreement is not received within five (5) calendar days after its due date, the
Tenant will also pay a late payment charge which shall be an amount equal to
10% of the past due payment for each and every month or part thereof that such
payment remains unpaid or $50.00, whichever is greater. The financial terms of
this Agreement are strictly confidential and Tenant agrees not to divulge this
information to any other Tenant or potential tenant of Landlord. All checks
must be drawn on a United States Bank or all fees or delays shall be charged to
Tenant.
3. Term. The term of this Agreement is for a period of
approximately twelve months, commencing on January 1, 1996 at 9:00 a.m. and
expiring on December 31, 1996 at 5:00 p.m.
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4. Security Deposit. Tenant shall deposit with Landlord $880.00 as
a non-interest bearing security deposit. Landlord may use the security deposit
to cure any default of Tenant under this Agreement, restore the Premises
including any and all furniture, fixtures and equipment provided by Landlord
and vendors at the Premises to their original condition, reasonable wear and
tear excepted, to pay for repairs to any damage to the Premises, Executive
Suite or Building, caused by Tenant or Tenant's guests, to pay any rent or
other charges which Tenant owes Landlord at or prior to the expiration of this
Agreement, and to reimburse Landlord for costs or expenses arising from any
other obligation of Tenant which Tenant has failed to perform. If Landlord
transfers control or ownership of the Premises and Landlord transfers the
security deposit to such purchaser, Tenant will look solely to the new Landlord
for the return of the security deposit, and the Landlord named in this
Agreement shall be released from all liability for the return of the security
deposit. The security deposit (less any sums used by Landlord) will be returned
within sixty (60) days after the termination of any services rendered or
expiration of the term hereof. The security deposit shall not be considered to
be the final payment of Fixed Monthly Rental charges or service charges under
this Agreement.
5. Services. Provided Tenant is not in default of any of the terms,
covenants, conditions or provisions of this Agreement, Landlord shall make
available to Tenant certain Services and Facilities ("Services") as more fully
described in Exhibit "C" attached to this Agreement. Such Services which are
described in Exhibit "C" as being subject to a separate charge are due and
shall be paid for by Tenant on the first day of each calendar month following
the period being billed during the term of this Agreement. If payment is not
received by Landlord within five (5) calendar days of first becoming due,
Tenant shall pay a late charge in an amount equal to 10% per month on the
unpaid balances, or $50.00, whichever is greater. All such Services shall be
performed or provided at rates which are from time to time established by
Landlord during the term of this Agreement. The current rates are listed on
Exhibit "C". Landlord reserves the right to change the rates and charges for
Services, or to discontinue any Services upon a default by Tenant of any of the
terms, covenants, conditions or provisions of this Agreement, or, after
providing thirty (30) days advance written notice to Tenant.
6. Multiple Occupancy/Use. The Fixed Monthly Rental Charges are
based on the Premises and services being used by one person only. If more than
one person habitually use the Premises or services, the Fixed Monthly Rental
Charges will be increased by a factor of $100.00 for each additional person.
Tenant has asked that the second occupant not receive personal answering.
7. Telecommunications.
a. Provided Tenant is not in default of any of the terms,
covenants, conditions or provisions of this Agreement, Landlord will make
available to Tenant, a telecommunications package which may consist of some
combination of telephone numbers, lines, optional features such as call
forwarding, conference calling, etc., voice mail, long distance, and directory
listing. All
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components of the telecommunications package including any telephone numbers
used by Tenant will remain at all times the property of Landlord and Tenant
will acquire no rights in the components beyond the term specified by Landlord.
In the event that any toll fraud is traceable to telecommunications services
employed by Tenant, Tenant will reimburse Landlord for all charges associated
with the toll fraud including, but not limited to, unauthorized use of calling
cards or telephone lines. It is expressly acknowledged and agreed that Landlord
shall be the sole and exclusive provider of telecommunication services to
Tenant.
b. Tenant waives its recourse to the Landlord for any claimed
liability arising from the provision of telecommunication services. The
liability of Landlord for direct damages including, without limitation,
injuries to persons or property, arising out of mistakes, omissions,
interruptions, delays, errors or defects in transmissions occurring in the
course of furnishing telecommunications services and not caused by the
negligence of the Tenant or Tenant-provided equipment, or arising out of the
failure of Landlord to maintain proper standards of maintenance and operation
and to exercise reasonable supervision shall not exceed an amount equivalent to
the proportionate telecommunications charge to the Tenant for the period of
time during which such mistake, omission, delay, error or defect in
transmission occurs as calculated on a pro rata basis in quarter hour
increments using a thirty (30) day month as the base period.
c. Landlord has granted an exclusive license to Fairchild
Communication Services Company to provide telephone equipment, voice and data
services and other telecommunication services for the Premises. Tenant shall
enter into a customer service agreement with Fairchild for telecommunication
services as described in and at the rates set out in the Service Order
Agreement which is attached hereto as Exhibit "F" and made a part hereof.
8. Furnishings. The Premises shall contain those items of furniture
and other items indicated on the Schedule of Furnishings attached hereto as
Exhibit "E" and made a part hereof ("furnishings"). All furniture and office
equipment supplied to Tenant for its exclusive use will be returned to Landlord
at the expiration of this contract in the same condition as first delivered to
Tenant, normal wear and tear excepted. If any repairs become necessary,
Landlord will cause the repairs to be made and, if repairs are necessitated by
Tenant's acts or negligence the repair charges will be billed to Tenant's
account. Tenant is not authorized to order any repairs or to make any repairs
itself.
9. Use of Office. Tenant will use the Premises only for general
office purposes. The type of business Tenant will conduct from the Premises is
Sales. Tenant will not conduct any other type of business from the Premises
without the prior written consent of Landlord. Tenant will not store or use
anything which will create a fire or theft hazard, cause noise, create an odor,
use abnormal amounts of electricity, create a nuisance, cause an increase in
Landlord's insurance premiums or cancellation of its insurance. Tenant will not
act in any manner which may offend Landlord or other tenants. Tenant will not
bring any pets into the office. If Tenant uses an impact
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or dot matrix printer, it will keep its office door closed during use. Smoking
is not permitted in the Executive Suite.
10. Alterations. Tenant will not make any alterations to the
Premises unless it obtains prior written approval from Landlord. Approval may
be conditioned on: (a) agreement that improvements will remain the property of
Landlord, at the termination of this Agreement; and/or (b) Tenant making a
security deposit; and/or (c) agreement by Tenant that it will return the
Premises to its original condition when it vacates.
11. Assignment/Subletting. Tenant shall not assign or encumber this
lease nor sublease all or a part of the Premises used by it.
12. Recruiting Landlord's Employees. Tenant acknowledges that
finding, hiring and training employees is time-consuming and expensive. Tenant
agrees that it will not, during the term of this Agreement and any renewals
thereof, or for a period of one year after the expiration or sooner termination
of this Agreement, hire or cause an offer to employ any person who is or has
been an employee of Landlord or Landlord's agent. If Tenant either (i) hires an
employee of Landlord or Landlord's agent; or (ii) hires any person who has been
an employee of Landlord or it's agent within six months prior to the time they
are hired by Tenant, Tenant will be liable to Landlord for liquidated damages
in an amount equal to six months' wages of the employee, at the rate last paid
that employee by Landlord. The provisions hereof shall survive the expiration
or sooner termination of the term hereof.
13. Personal Property Damage. Landlord shall not be liable for any
damage to personal property owned by Tenant, its guests, customers, invitees or
visitors, unless the damage is caused by the gross negligence of the Landlord
or its employees.
14. Personal Injury. Landlord shall not be liable for personal
injury suffered by Tenant, its guests, customers, invitees or visitors, unless
the injury is caused by Landlord's own gross negligence, or that of its
employees.
15. Tenant's Property. If Tenant vacates the Premises and leaves
behind any property, whatsoever, same will be considered abandoned by Tenant
and may be disposed of by Landlord at Tenant's expense. If Tenant defaults in
the payment of sums due to Landlord, and Landlord changes the locks, removes
Tenant's property, or otherwise denies access to Tenant, Landlord will not be
guilty of conversion.
16. Indemnity. If a claim is made against Landlord because of some
action or inaction of Tenant or its guests, customers, invitees or visitors,
Tenant will indemnify Landlord and hold it harmless from those claims. This
indemnity includes not only the amount of any such claim, but also all of
Landlord's costs in investigating and defending those claims including all
related fees charged
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by Landlord's Legal Counsel, plus a charge at the rate of $170.00 per hour for
any time spent by Landlord's officers in dealing with those claims. Further, in
the event that any of Landlord's employees travel off premises at the request
of Tenant and such travel results in damages or exposes Landlord to liability,
then Tenant will indemnify Landlord and hold it harmless from any such claims
or damages.
17. Insurance: Waiver of Claims.
a. Landlord has no obligation to and will not carry insurance
on Tenant's liability coverage, personal or business property or on the
Premises. Landlord will not be liable to Tenant or to any other person for
damages on account of loss, damage or theft, to any business or personal
property of Tenant. Tenant waives any claims against Landlord from any loss,
cost, liability or expense (including reasonable attorneys' fees) arising from
Tenant's use of the Premises or any common areas made available to Tenant by
Landlord or from the conduct of Tenant's business, or from any activity, work,
or thing done in the Premises or common areas by Tenant or Tenant's agents,
contractors, visitors or employees.
b. The Landlord shall not be liable or responsible to the
Tenant for any injury or damage resulting from the acts or omissions of
Landlord, its employees, persons leasing office space or obtaining services
from the Landlord, or other persons occupying any part of the Executive Suite
or Building, or for any failure of services provided such as water, gas or
electricity, or for any injury or damage to person or property caused by any
person (except for such loss or damage arising from the willful or grossly
negligent misconduct of the Landlord, its agents, servants, or employees) or
from the Landlord's failure to make repairs which it is obligated to make
hereunder. Neither Landlord or any of its agents, employees, officers or
directors shall be responsible for damages resulting from any error, omission
or defect in any typing, copying, assembling or other secretarial work, or work
performed or provided as part of the services rendered, whether uncompensated
services or compensated services are rendered.
c. Tenant shall provide Landlord with a certificate of
insurance evidencing General/Public Liability coverage with liability limits of
not less than One Million Dollars ($1,000,000) per occurrence for Bodily Injury
and/or Property Damage Liability and One Hundred Thousand Dollars ($100,000)
per occurrence for Fire/Legal Liability. Said insurance coverage shall remain
in force during the term of this Agreement and renewals thereof and the
Landlord shall be named as an additional insured. Tenant's failure to provide
or maintain such insurance shall not reduce or otherwise alter Tenant's
liability or responsibility to pay any judgment rendered against Tenant for
such Liability and Damages.
d. Tenant agrees to defend, indemnify and hold Landlord
harmless from and against any and all claims, damages, injury, loss and
expenses to or of any person or property
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resulting from the acts or negligence of Tenants, its agents, employees,
invitees and licensees while in the Building, Executive Suite and Premises.
18. Right of Entry. Landlord has the right without notice to enter
upon the Premises at any reasonable time to examine same, make repairs,
alterations or improvements, or to show the Premises to prospective tenants,
and in the ordinary course of providing services requested by Tenant.
Landlord's right of entry shall include the right to enter upon the Premises
for the purposes of inspection. Landlord shall have a key to the Premises.
19. Waiver. If Landlord allows any default or variance in this
Agreement, or does not enforce each and every provision of this Agreement, same
will not constitute a waiver of its rights. No matter how often Landlord allows
the default or variance, or a variety of defaults or variances by Tenant or
others, or does not enforce each and every provision of this Agreement, it may
still, without advance notice, require strict adherence to this Agreement or
prohibit future variances. Nothing will change the terms of this Agreement, or
extend it, or add to it, unless in writing and signed by Landlord and Tenant.
20. Holdover. If Tenant or any one claiming through Tenant holds
over in the Premises beyond the expiration or termination of the term of this
Agreement, then Tenant's occupancy may be continued, at Landlord's option, on a
month-to-month basis, at an increased rate equal to twice the Fixed Monthly
Rental Charges set forth in Paragraph 2 hereof. The Fixed Monthly Rental
Charges will be due on the first day of each month, and there will be no
pro-ration for a partial month of use.
21. Vacating. Upon the expiration or sooner termination of the term
of this Agreement, Tenant will promptly vacate the Promises in the same
condition as when first occupied by Tenant, normal wear and tear excepted, turn
in its keys, and provide Landlord with a forwarding address and telephone
number.
22. Mail Forwarding. After termination or expiration of the term of
this Agreement, Tenant shall notify all parties of Tenant's new address.
Landlord will forward mail to Tenant at its new address for a period of 15
days, and will bill Tenant for clerical, supplies and/or any cost of delivery
or any new postage necessary for the forwarding. Afterwards, mail forwarding
may be continued for a monthly fee of $50.00, plus 50 cents per piece handling
fee and any cost associated with delivery or postage. Tenant, if requested by
Landlord, shall pay a retainer against anticipated monthly forwarding charges.
Absent such an arrangement, mail will be returned.
23. Events of Default. The following are Events of "Default":
a. Fixed Monthly Rental Charges more than five days past due;
b. Any other costs or charges more than ten days past due;
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c. If Tenant becomes insolvent, makes an assignment for
benefit of creditors, or files a voluntary petition under
any bankruptcy or insolvency law, or has filed against it
an involuntary petition under any such law; or,
d. Default in any other terms of this Agreement or the
exhibits attached hereto, but only if Landlord gives
Tenant written notice of the default, and Tenant fails to
cure the default within five (5) days of the notice. In
the event of a recurring default, Landlord will give
Tenant five (5) days notice to cure for the first event of
default. Thereafter, Landlord need not give Tenant any
notice for a substantially similar default.
24. Remedies. On Default, Landlord may choose any or all of the
following remedies:
a. Terminate this Agreement;
b. Accelerate the Fixed Monthly Rental Charges, and demand
all sums due immediately;
c. Take possession of all property in the Premises and store
same, at Tenant's expense, until taken in full or partial
satisfaction of any lien or judgment;
d. Deny access to the Premises (as well as to the Executive
Suite) by Tenant and deny use of any of the services; and
e. Any other remedies allowed by law.
25. Additional Charges Upon Default. In the event of default, Tenant
will be liable for the following additional charges:
a. Attorneys' fees and expenses incurred by Landlord;
b. Time spent by any of Landlord's management or the
management of Landlord's agents, at the rate of $170.00
per hour;
c. Interest on unpaid sums at 18% per annum;
d. Any other costs incurred by Landlord as a result of the
default.
26. Other Consequences of Default. In the event of default, Landlord
may immediately cease providing Tenant with any or all services, including but
not limited to, telecommunications services.
27. Primary Lease. Tenant recognizes that by a Primary Lease
Agreement between the owner of the Building and Landlord, dated November 15,
1994, Landlord, ALLIANCE Greensboro, L.P., doing business as ALLIANCE Business
Centers, leased the Executive Suite. This Agreement is subject to the Primary
Lease Agreement.
28. Severability. In the event any one or more provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision were not contained herein.
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29. Notices. All notices excluding late notification, under this
Agreement shall be in writing and shall be deemed given if: (i) delivered by
hand, the receiving party having signed a receipt therefor, or (ii) mailed by
registered mail or certified mail, return receipt requested, first class
postage, or sent by overnight courier providing a receipt, if to the Landlord:
ALLIANCE Greensboro, L.P.
Attn: Lori Shackleton
8201 Greensboro Drive, Suite 1000
McLean, VA 22102
with a copy to: ALLIANCE Business Centers
Attn: Accounting
122 East 42nd Street, Suite 1700
New York, NY 10168
and if to Tenant: Century National Bank
1875 Eye Street, NW
Washington, D.C., 20006
30. Ambiguities. Tenant has had an opportunity to read this
Agreement and to ask questions. If Tenant later claims any ambiguities in the
Agreement, those ambiguities will be interpreted in favor of Landlord.
31. Guaranty. In consideration of the execution this Agreement by
the Landlord, the undersigned Guarantors, jointly and severally, do hereby
guarantee to the Landlord, its successors and assigns, payment of all or any
sums due or to become due under the terms and conditions of this Agreement and
the performance by Tenant of all of the undertakings, obligations and
liabilities imposed upon Tenant by this Agreement. The liability of the
guarantors hereunder shall be unconditional and shall not in any manner be
affected by any indulgence whatsoever granted or consented to by the Landlord,
including but not limited to, any extension of time, renewal, waiver or other
modification. Guarantors are liable for all sums due under this Agreement, any
Extensions, Amendments, or Addendums thereof, and for any other sums due from
Tenant to Landlord, no matter when or how incurred. Landlord does not have to
attempt collection from Tenant before proceeding against Guarantor. Guarantor
will not be released unless Landlord specifically releases Guarantor in writing
signed by Landlord.
32. Returned Check. If a Tenant check is returned for any reason at
all, Tenant will pay an additional charge of $100.00 per returned check and,
for the purposes of calculating late charges or events of default, it will be
as if the payment represented by the check had never been made.
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33. Entire Agreement. This Agreement, including Attachments and
Exhibits, expresses the entire understanding and all agreements of the parties.
Neither party has made or shall be bound by any agreement or representation to
the other party which is not expressly set forth herein. This Agreement may not
be modified orally or in any manner other than by an amendment in writing
signed by both the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated below.
Landlord:
ALLIANCE Greensboro, L.P.
a Delaware Partnership
Date: 12/18/95 By: /s/ LORI SHACKLETON
----------------------------------------------
EOG Greensboro, Inc.
General Partner
Lori Shackleton - General Manager
Tenant:
Century National Bank
Date: 12/15/95 By: /s/ ROBERT W. HUTCHINS
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Print: Robert W. Hutchins, EVP
-------------------------------------------
GUARANTORS:
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EXHIBIT A
[This exhibit is a floorplan of the Alliance Business Center
located at 8201 Greensboro Dr., Suite 1000, McLean, VA 22102.]
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EXHIBIT B
BASIC TERMS OF AGREEMENT
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TENANT: Century National Bank
LANDLORD: ALLIANCE Greensboro, L.P.
TERM: One Year Lease
MOVE IN DATE: January 1, 1996 MOVE OUT DATE: December 31, 1996
OFFICE/SUITE NO.(S): #1049
CONFERENCE ROOM USAGE ALLOWANCE: Up to 40 hours per month.
FIXED MONTHLY OFFICE RENTAL: $775.00
FIXED MONTHLY FURNITURE RENTAL: 105.00
FIXED MONTHLY PHONE CHARGE: See Exhibit "F"
FIXED MONTHLY ADD'L PEOPLE CHARGE: 0.00
FIXED MONTHLY PARKING: Complimentary for first lease term.
OTHER FIXED MONTHLY CHARGES:
DESCRIPTION:
REFUNDABLE SECURITY DEPOSIT:
Rent: $775.00
Furniture: 105.00
Services: (parking) 0.00
Keys (1 #of Set(s)): 45.00
Total Deposit: $925.00
PAYMENT DUE AT SIGNING:
1st Month's Office Rental $775.00
1st Month's Furniture Rental 105.00
1st Month's Parking 0.00
Initial Set-up Charge 75.00
Security Deposit Increase 925.00
TOTAL FIRST MONTH'S RENTAL AND CHARGES AND DEPOSIT . . . . . . . . . . . . . . . . . . . . . . $1880.00
Note: Please be sure to write a separate check for all deposits.
PAYMENT DUE ON THE FIRST OF EACH MONTH THEREAFTER:
Fixed Monthly Office Rental $775.00
Fixed Monthly Furniture Rental 105.00
State Tax on Furniture Rental (4.5%) 4.73
Other Fixed Monthly Charges 0.00
TOTAL FIXED MONTHLY RENTAL CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $884.73
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EXHIBIT B (CONTINUED)
FEATURES & SERVICES INCLUDED IN OFFICE RENT
1) Individual office(s) appointed with a set of office furniture
(if included in Exhibit E).
2) Cleaning and maintenance of office space and trash collection.
3) HVAC during normal business hours (per building regulations),
electric utility costs and real estate taxes per Agreement (Does not
include occupancy taxes if applicable.)
4) Twenty-four hour access to office.
5) Reasonable use of kitchen facilities.
6) Furnished reception area and a receptionist to greet and announce
guests.
7) Use of conference rooms and audio-visual equipment based on the
"Allowance" specified in Exhibit B and subject to availability.
8) Personalized telephone answering Monday through Friday from 8:30 a.m.
to 5:30 p.m.
9) Building directory listing, subject to availability.
10) Facsimile Number (usage to be billed at attached rates)
11) Normal Mail and package receiving.
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EXHIBIT C
SCHEDULE OF SERVICES
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A. ACCOUNTING
1) Establishing a second account for Tenant's convenience $ 25.00 each time
2) Clerical fee for processing payment using MC/VISA $ 25.00 each time
3) Clerical fee for processing payment using American Express $ 25.00 each time
4) Fax or send duplicate statement or records $ 5.00/copy/each
(plus postage and faxing costs)
5) Research, collection calls or processing Actual time billed as Clerical Service
(plus postage, faxing and telephone incurred charges)
B. ADMINISTRATIVE
1) Credit authorization fee per contract
(charged to all new Tenants/Clients) $ 75.00/contract (Full-time Tenant)
$ 50.00/contract (Identity)
2) Moving a Tenant from one suite to another, switching keys and cards $ 50.00/person
3) Additional employee initial set up $ 50.00 one-time charge
Recurring Monthly Charge $ 100.00/month
4) Painting and cleaning fee for a lease of less than six (6)
months including administrative coordination $ 200.00 per office
5) Lost security card, lost key $ 25.00 per item
6) Tenant Monthly Storage (boxes, other items) $ 40.00/month/closet
C. ANSWERING SERVICE (8:30 - 5:30 p.m.)(Mon. - Fri.)
1) Full-Time Tenant Included in Contract
2) Answering Service/Voice Mail Only $ 110.00 (Includes 2 persons,
one voice mail box)
(Hand written messages will be assessed a Clerical Service fee billed in 6 minute increments.)
D. CLERICAL SERVICE*
Standard Clerical Rate $ 22.00/Hour
(24-Hour Turnaround)
1) Proofreading/Editing, outgoing calls for Tenants, Clerical Service billed
typing forms, preparation of expense reports, payroll, in 6 minute increments
check reconciliation, light accounting, bill paying,
invoicing (bookkeeping), extensive fax transmission
travel, ordering office supplies, photocopying for
Tenants or visitors, bank deposits, arrange conference
calls and meetings, computer maintenance, research,
filing, project coordination.
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EXHIBIT C. (CONTINUED)
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2) The clerical services mentioned above will be billed at $ 44.00/Hour
200% per Clerical rate if performed before or after scheduled (l-8/Hour Turnaround)
working hours, or requested as a rush job. Clerical Service billed
in 6 minute increments
3) Notary Clerical Service billed
in 6 minute increments
4) Patching a call through to a seven-digit number not set 6 minutes Clerical per call plus
up with a patch service cost of call
E. CONCIERGE SERVICES
Arrangement for Business Supplies, Clerical Service billed
Catering, Meal order taking, etc. in 6 minute increments
(18 minute minimum)
F. CONFERENCE ROOMS
1) Rental Included for Full-Time Tenants
$ 25.00/Hour
$ 150.00/Day (1 - 12 Persons)
2) Seminar Room Included for Full-Time Tenants
$ 50.00/Hour
$ 300.00/Day (up to 40 Persons)
3) Cancellation, if not within 24 hours for conference room, Billed at 50% of time reserved
will be applied to Identity Tenants only.
4) Clean up after Client/Tenant in conference room Clerical Service billed
in 6 minute increments
(18 minute minimum)
G. DIRECTORY LISTING - Building Lobby
1) Full-Time Tenant Included
2) Identity Client or Additional Listings $ 40.00/line/one-time
H. FURNITURE
1) Moves/adds/changes including administrative coordination $ 25.00/piece
2) Additional Furniture Rental Price Based on Piece Requested
Standard Furniture Set $ 75.00/month/set
I. KITCHEN FACILITIES - Coffee, tea, etc.
1) Tenants/Clients per cup service Included
2) Pots for Conf. Room $ 10.00/pot
</TABLE>
-14-
<PAGE> 15
EXHIBIT C (CONTINUED)
<TABLE>
<S> <C>
J. MAIL SERVICES
1) Deliver parcel to Tenants office or distribute to client from front desk.
All parcels are called to Tenant.(If not picked up by 5:00 p.m., we (6 minutes Clerical Service)
will deliver to office.)
2) Prepare Certified, Express, or Courier (6 minutes Clerical Service)
3) Check mailbox/review mail by phone (6 minutes Clerical Service)
4) Prepare packages, such as label/wrap Clerical Services billed
in 6 minute increments
plus supplies
5) Trace Shipments (Fed Ex, UPS, etc.) (6 minutes Clerical Service plus
cost of call)
6) Mass mailings (folding, stuffing, posting, etc.) Varies depending upon size of
mailing.
K. MESSAGE HANDLING
1) Message taking for visitors or conference room use Clerical Services billed
in 6 minute increments
2) Tenant advertisements - recording messages Clerical Services (18 minute
minimum)
3) Relaying Tenant voice mail messages over the phone Clerical Services billed
in 6 minute increments
4) Advertisements - Newspaper/magazine/publish material, etc. $ 30.00/ad/month
L. OFFICE SUPPLIES
1) Minimum supplies are available on site through ALLIANCE or Cost + 20%
may be ordered. (See a Clerical Assistant for requests)
2) Weekly orders may be placed directly for Tenant Clerical Services billed
in 6 minute increments
(18 minute minimum)
M. PARKING
1) Surface Complimentary
2) Covered Parking Garage $ 50.00/pass/month
N. POSTAGE FEES
1) U.S. Mail/UPS Cost + 20%
2) Courier Service Cost + 20%
3) Federal Express Standard Rates
(Landlord shall serve as postal agent to all tenants and clients.)
</TABLE>
-15-
<PAGE> 16
EXHIBIT C (CONTINUED)
<TABLE>
<S> <C>
O. PRODUCTION AND COPYING
1) Binding, copying, transparencies Clerical Services billed
(production time only) in 6 minute increments
2) Photocopies $ .15/ea. (1-500)
$ .10/ea. (Production Rate)
3) Binding (Includes Spine, Cover & Backing) $ 3.50/ea.
(A medium volume copy machine is available for Tenants.)
P. TELECOMMUNICATIONS
1) Standard Phone Equipment $ 95.00/set per month
- Includes phone with built in speaker phone, DID phone number with 2 roll over lines, 1 line directory
listing, voice mail and other basic features of telephone system. Installation fee and set up not
included.
(Billed Directly from Fairchild Communications Services Company)
2) Phone, Fax or Dataline installation. $ 130.00/line
3) Fax or Data Line (Additional recurring charge each month) $ 40.00/line per month
4) Additional voice mail boxes/telephone answering $ 110.00/person per month
5) Splitting a phone number for additional voice mail boxes $ 10.00/each box per month
6) Voice mail; adding another personal box $ 10.00/each box per month
7) Programming voice mail to pager $ 25.00 programming fee per pager
8) Voice Mail Paging (Monthly) $ 10.00/each pager per month plus
call transfer fee (As charged by
local phone company)
9) Call Patching set up fee $ 25.00 per number (one time charge)
10) Call Patching (Monthly) $ 25.00/month plus call transfer
(Includes 40 patches) fee (Based on distance of call)
Additional patches $.75/ea.
11) Reconnect fee (after termination of service) $ 130.00/phone or data line
Q. TELECOPY/FAX - (Plain paper available)
1) Outgoing $ 2.00/page + Phone Call
2) Incoming $.50/page
(Clerical charges may be incurred for faxes sent after normal business hours.)
R. WORD PROCESSING/GRAPHICS*
1) Standard Word Processing Rate $ 26.00/hour
2) The Word Processing rate mentioned above will be billed at $ 52.00/hour
200% per this rate if performed before or after scheduled
working hours, or requested as a rush job.
3) Resumes:
Typing Only $ 40.00/1st page
$ 20.00/each additional page
4) Resume Writing Consultation Services $ 45.00/hour
</TABLE>
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<PAGE> 17
EXHIBIT C (CONTINUED)
<TABLE>
<S> <C>
5) Resumes supplied on diskette provided by Landlord $ 10.00/disk
6) Letters typed for outside Tenants (including cover letters
for resumes) $ 9.00/page
7) Letters, memos, proposals $ 26.00/hour billed in 6 minute
increments (18 minute minimum)
8) Tables, charts $ 35.00 - 80.00/hour billed
in 6 minute increments
(18 minute minimum)
9) Company Flyers, Pamphlets, Brochures Varies upon scope of project
10) Technical Design Varies upon scope of project
11) Flow Charts Varies upon scope of project
12) Logo Design Varies upon scope of project
13) Business Cards (consultation with Tenant and includes
3 designs-does not include print shop charges) Varies upon scope of project
14) Letterhead and/or envelope design
(consultation with Tenant and includes 5 designs--does
not include print shop charges) Varies upon scope of project
15) Spreadsheets $ 35.00-80.00/hour (Price may
vary depending upon complexity
of spreadsheet (i.e., formats)
</TABLE>
*Landlord shall bill in accordance with Industry Production Standards (IPS),
published by the National Association of Secretarial Services and the Executive
Suite Association. IPS are used for computing the time charged for document
production and non-keyboarding services. IPS are based on the average time
required to perform specific duties by a professional word processing operator.
This allows Tenant to know how much a project will cost regardless of how long
it takes to complete it.
-17-
<PAGE> 18
EXHIBIT D
RULES & REGULATIONS
1) Landlord shall assign Tenant a specific Client number, unique to Tenant
which Tenant shall use to obtain various services from Landlord
including: photocopies, typing, word processing and
dictation/transcription, clerical, concierge and assorted other services.
Tenant agrees to keep this Client number confidential and Tenant agrees
to pay all costs for services charged to this Client number. The Landlord
will maintain records that account for all such service charges for a
period of sixty (60) days after billing Tenant for these charges. These
records are available for review by Tenant upon request of at least three
(3) business days prior written notice.
2) Any special wiring, including any computer or printer networking wiring
desired by Tenant, must be approved in writing by the Landlord and
installed at Tenant's expense by an electrician approved by the Landlord.
Tenant shall bear the cost of removing such wiring at the expiration of
the Lease term.
3) Tenant shall not use hot plates, coffee makers, microwave ovens or
similar devices in the Premises nor shall Tenant at any time use in the
Premises any machine, equipment, or other article which, in Landlord's
judgment, creates an unreasonable risk of fire, explosion, or other
hazard, or requires excess electrical current.
4) The sidewalks, entries, passages, public corridors, stairways and other
parts of the Building and Executive Suite shall not be obstructed or used
for any other purpose than ingress or egress.
5) Tenant shall not install or permit the installation of mylar films or sun
filters on windows. Tenant shall not place any type of sign in the
Premises, Executive Suite or the Building.
6) Tenant agrees to conduct business in the Premises in a quiet and orderly
manner so as not to disturb other occupants. Loud music, noisy equipment
and other disturbing sounds are not permitted. Tenant agrees to take
whatever steps are necessary to correct or cease any violation of this
regulation immediately upon notification of such violation by Landlord.
7) Bicycles, motor scooters or any other type of vehicle shall not be
brought into the Building, Executive Suite or the Premises.
8) No animal shall be permitted within the Premises, Executive Suite or the
Building at any time, except if permission is granted in writing by
Landlord.
9) Tenant will not conduct any activity within the Premises, Executive Suite
or Building which in the sole judgment of the Landlord will create
excessive traffic or is inappropriate to the executive suite environment.
10) Without Landlord's specific prior written permission, Tenant is not
permitted to place "mass market", direct mail or advertising (i.e.
newspaper, classified advertisements, yellow pages, billboards) using
Tenant's assigned telephone number or take any such action that would
generate a significant number of incoming phone calls.
11) Immediately following Tenant's use of conference room space and/or
AudioVisual equipment, Tenant shall clean up and return the space and
equipment to the state and condition it was in prior to Tenant's use. If
not, Landlord may charge Tenant for the "clerical time" and any other
expenses required to restore the conference space and/or equipment to its
original condition.
12) Tenants who leave equipment "on" in the Premises overnight or for long
periods of time when they are not in the Premises will be subject to an
additional charge for excess electrical usage unless this usage was
approved in writing by the Landlord and specifically included in Tenant's
monthly rent.
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<PAGE> 19
EXHIBIT D (CONTINUED)
13) Tenant shall not provide or offer to provide any services to Landlord's
Tenants or it's other customers if such services are available from the
Landlord.
14) Cigar smoking is not permitted anywhere in the Building. Cigarette and/or
pipe smoking is permitted only in designated areas. Landlord has the
right to change designated smoking areas upon at least two (2) days prior
written notice.
15) Tenant shall not make any additional copies of any Landlord issued keys.
All keys and security cards are the property of Landlord and must be
returned upon request or by the close of the business on the expiration
or sooner termination of the Agreement term. Any lost or unreturned keys
or cards shall incur a $25.00 per item charge and the cost to re-key the
office.
16) Landlord must be notified in writing if Tenant desires to utilize the
conference room or other common areas of the Executive Suite during
weekend hours. Landlord may deny the Tenant access if the desired usage
is inappropriate and may disrupt normal operations.
17) Tenant shall not solicit other Tenants of the Executive Suite or
companies and their employees in the Building without first obtaining
Landlord's prior written approval.
18) Tenant is aware that employees of Landlord are not permitted to date
Tenants or their employees and Tenant shall so advise its employees.
19) Tenant's parking fights (if any) are defined by the Landlord's Lease
agreement with the owner of the Building. Landlord reserves the right to
modify parking arrangements if required to do so by Building management.
20) Tenant must abide by any rules and regulations set forth by the Building
in addition to those of the Landlord.
21) ALLIANCE Business Centers is a network of shared office facilities which
includes owned, Affiliate, and Associate locations. Due to the nature of
the network there may be periodic changes in membership. Consequently,
ALLIANCE cannot guarantee that any location that is currently in the
network will be a participant in the future.
22) ALLIANCE Business Centers is not a franchise and therefore does not in
any way dictate or control the operations of Affiliate or Associate
locations.
23) Without Landlord's specific prior written permission, Tenant shall not
install any equipment such as copiers and fax machines in the Premises.
24) Schedule D may be modified or amended at any time by the Landlord to
assure, in Landlord's sole judgment, a professional and cost effective
business operation of the Executive Suite within which the Premises are
contained.
-19-
<PAGE> 20
EXHIBIT E
SCHEDULE OF FURNISHINGS
<TABLE>
<CAPTION>
FURNITURE COLOR CONDITION CHARGE
- --------- ----- --------- ------
<S> <C> <C> <C>
1 Executive Desk(s) Mahogany Good
- ---- --------------------- ----------------- -----------------------
1 Credenza(s) Mahogany Good
- ---- --------------------- ----------------- -----------------------
0 Lateral File(s)
- ---- --------------------- ----------------- -----------------------
1 Bookcase(s) Mahogany Good
- ---- --------------------- ----------------- -----------------------
0 Round Conference Table(s)
- ---- --------------------- ----------------- -----------------------
1 Executive Chair(s) Teal Good
- ---- --------------------- ----------------- -----------------------
2 Guest Chair(s) Mahogany Good
- ---- --------------------- ----------------- -----------------------
0 Secretarial Chair(s)
- ---- --------------------- ----------------- -----------------------
1 Waste Basket(s) Tan Good
- ---- --------------------- ----------------- -----------------------
1 Floor Mat(s) Clear Good
- ---- --------------------- ----------------- -----------------------
ARTWORK: _________ FRAMED PICTURE(S)
- -------
(1) (2)
--------------------------------- ---------------------------------
(3) (4)
--------------------------------- ---------------------------------
(5) (6)
--------------------------------- ---------------------------------
ADDITIONS/DELETIONS: DATE:
----------------------------------------------------------- ------------------
COMMENTS ON CHANGES:
----------------------------------------------------------------------------------
Century National Bank
Tenant SIGNATURE: By: /s/ ROBERT W. HUTCHINS DATE: 12/15/95
-------------------------------------------------------------- ------------------
Robert W. Hutchins, EVP
Landlord SIGNATURE: By: /s/ LORI SHACKELTON DATE: 12/18/95
------------------------------------------------------------ ------------------
</TABLE>
-20-
<PAGE> 21
EXHIBIT E (CONTINUED)
One key each for file drawer in credenza and desk
1 key(s) for office/suite (#1049) door
- -----
1 security card for building #8201 (Card #_______________)
- -----
1 security key or card for 10th floor at 8201 Greensboro Drive
- -----
<TABLE>
<S> <C>
Century National Bank
Tenant SIGNATURE: By: /s/ ROBERT W. HUTCHINS DATE: 12/15/95
-------------------------------------------------------------- ------------------
Robert W. Hutchins, EVP
Landlord SIGNATURE: By: /s/ LORI SHACKELTON DATE: 12/18/95
------------------------------------------------------------ ------------------
</TABLE>
-21-
<PAGE> 1
EXHIBIT 10.10
RETAIL LEASE FOR
CENTURY NATIONAL BANK
1875 EYE STREET, N. W.
WASHINGTON, D. C.
<PAGE> 2
RETAIL LEASE
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEMISED PREMISES 1
2. TERM 1
3. USE 2
4. RENT 2
5. DEPOSIT 3
6. RENTAL ESCALATION FOR INCREASES IN EXPENSES 4
7. OPTION TO EXTEND 5
8. ASSIGNMENT AND SUBLETTING 6
9. PRE-OCCUPANCY TENANT WORK 7
10. ALTERATIONS 8
11. MECHANIC' S LIEN 9
12. WASTE OF DEMISED PREMISES 10
13. SIGNS AND ADVERTISEMENTS 10
14. DELIVERIES 10
15. ENTRY FOR REPAIRS AND INSPECTIONS 11
16. INSURANCE RATING 11
17. PLATE GLASS INSURANCE 11
18. PUBLIC LIABILITY INSURANCE 12
19. LESSEE'S EQUIPMENT INCLUDING VAULTS 12
20. SERVICES AND UTILITIES 13
21. TRASH COLLECTION 14
22. RESPONSIBILITY FOR CERTAIN DAMAGE AND BREAKAGE 15
23. LIABILITY FOR DAMAGE TO PERSONAL PROPERTY AND PERSON 15
24. DAMAGE TO THE BUILDING AND/OR DEMISED PREMISES 15
25. DEFAULT OF LESSEE 18
26. REPEATED DEFAULTS 19
27. WAIVER 19
28. SUBORDINATION 19
29. CONDEMNATION 20
30. RULES AND REGULATIONS 21
31. RIGHT OF LESSOR TO CURE LESSEE'S DEFAULT 21
32. NO PARTNERSHIP 22
33. NO REPRESENTATIONS BY LESSOR 22
34. BROKERS 22
35. WAIVER OF JURY TRIAL 22
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
36. ENFORCEMENT OF LEASE 22
37. NOTICES 23
38. ESTOPPEL CERTIFICATES 23
39. HOLDING OVER 23
40. CONTINUOUS OPERATION 24
41. APPROVAL OF LESSEE'S DECOR 24
42. COVENANTS OF LESSOR 25
43. LIEN FOR RENT 25
44. GENDER 25
45. BENEFIT AND BURDEN 25
46. GOVERNING LAW 25
47. ADVERTISING AND PROMOTIONAL FUND 26
48. LENDER APPROVAL 26
49. ENTIRE AGREEMENT 26
</TABLE>
-ii-
<PAGE> 4
LEASE
THIS LEASE, made and entered into on this 14th day of January 1982, by and
between The Square 106 Associates, hereinafter called "Lessor", and Century
National Bank, hereinafter called "Lessee".
WITNESSETH, That, for and in consideration of the rents, mutual covenants,
and agreements hereinafter set forth, the parties hereto do hereby mutually
agree as follows:
1. DEMISED PREMISES
Lessor does hereby lease to Lessee, and Lessee does hereby lease from
Lessor, for the term and upon the conditions hereinafter provided approximately
3,895 square feet of rentable area on the ground floor of the office building
situated at 1875 Eye Street, N. W., Washington, D. C., (such building being
hereinafter referred to as the "Building" and such area being hereinafter
referred to as the "Demised Premises"). The Demised Premises are outlined on
the floor plan attached hereto and made a part hereof as Exhibit A.
Lessee hereby hires the Demised Premises, upon and subject to the terms and
conditions herein set forth, in its "as is" condition existing on the date
possession is delivered to Lessee, with out requiring any further alterations,
improvements, repairs or decorations to be made by Lessor, or at Lessor's
expense, either at the time possession is given to Lessee or during the entire
term of this Lease, or any extension thereof. Notwithstanding the foregoing,
Lessor shall provide the demising walls of the Demised Premises, and Lessor
shall also replace the doors on 19th Street and the doors on Eye Street with
glass. In connection therewith, Lessee represents that it has thoroughly
examined the Building and the Demised Premises.
2. TERM
Subject to and upon the terms and conditions set forth herein, or in any
exhibit or addendum hereto, the term of this Lease, and therefore Lessee's and
Lessor's obligations thereunder, shall commence on the 1st day of January,
1982, or on the date Lessee shall first open for business, whichever shall
first occur (hereinafter called the "Commencement Date"), and shall expire on
the 30th day of April, 1992.
In the event Lessor cannot deliver possession of the Demised Premises by
said Commencement Date, Lessor, its agents and employees shall not be liable or
responsible for any claims, damages, or liabilities in connection therewith or
by reason thereof, nor shall Lessee be excused from its obligations under this
Lease, except that the payment of monthly rent shall be abated until the
extended Commencement Date. The Commencement Date shall be extended to the
<PAGE> 5
date Lessee accepts possession of the Demised Premises, at which time Lessor
and Lessee shall execute the "Declaration as to Date of Delivery and Acceptance
of Possession of Demised Premises," attached hereto as Exhibit C.
3. USE
Lessee will use and occupy the Demised Premises solely for the purpose of
operating a bank. The Demised Premises will not be used for any other purpose
without the prior written consent of Lessor. Lessee will not use or occupy the
Demised Premises for any unlawful purpose, and will comply with all present and
future laws, ordinances, regulations, and orders of all governments, government
agencies, and any other public authority having jurisdiction over the Demised
Premises.
4. RENT
Lessee's obligation to pay rent shall begin on the Commencement Date and
shall continue in effect for the entire term of the Lease.
Monthly rent for the Demised Premises on the Commencement Date of the
Lease, which Lessee hereby agrees to pay in advance to Lessor and Lessor hereby
agrees to accept, shall be as follows:
<TABLE>
<CAPTION>
Period Monthly Rent
- ------ ------------
<S> <C>
for any period prior to the commence-
ment of the first full calendar month
of the initial term of the Lease ($297.53/day)
for calendar months 1 through 4 abated
for calendar months 5 through 12 ($ 8,926.04)
for calendar months 13 through 24 ($ 9,250.62)
for calendar months 25 through 36 ($ 9,575.21)
for calendar months 37 through 48 ($ 9,899.79)
for calendar months 49 through 60 ($10,224.38)
</TABLE>
-2-
<PAGE> 6
<TABLE>
<S> <C>
for calendar months 61 through 72 ($10,548.96)
for calendar months 73 through 84 ($10,873.54)
for calendar months 85 through 96 ($11,198.12)
for calendar months 97 through 108 ($11,522.71)
for calendar months 109 through 120 ($11,847.29)
for calendar months 121 through the
expiration of the initial term of
the Lease ($12,171.88)
</TABLE>
Monthly rent as specified above shall be payable in advance on the first
day of each calendar month during the term of this Lease. Monthly rent shall
be increased as provided in the section of the Lease entitled RENTAL
ESCALATIONS FOR INCREASES IN EXPENSES.
If the Commencement Date and therefore the obligation under the Lease to
pay monthly rent hereunder begins on a day other than on the first day of a
calendar month, then the monthly rent from such date until the first day of the
following calendar month shall be prorated at the rate of one-thirtieth
(1/30th) of the monthly rent for each day of that month from and including the
Commencement Date, payable in advance, as specified above.
Lessee will make all payments of monthly rent by check, payable to the
Lessor's agent, The Oliver T. Carr Company, Agent, Suite 900, 1700 Pennsylvania
Avenue, N. W., Washington, D. C. 20006, or to such other party or to such other
address as Lessor may designate from time to time by written notice to Lessee,
without demand and without deduction, set-off or counterclaim. If Lessor shall
at any time or times accept said rent after it shall become due and payable,
such acceptance shall not excuse delay upon subsequent occasions, or
constitute, or be construed as, a waiver of any or all of Lessor's rights
hereunder.
5. DEPOSIT
Simultaneously with the execution of this Lease, Lessee shall deposit with.
Lessor the sum of Eight Thousand Nine Hundred Twenty-six and 04/100 Dollars
($8,926.04), as a deposit towards payment of the Fifth (5th) month's rent.
Such deposit, prior to its being applied to the payment of rent, shall be
security for the payment and performance by Lessee of all Lessee's obligations,
covenants, conditions and agreements under this Lease, and Lessor shall have
the right, but shall not
-3-
<PAGE> 7
be obligated, to apply all or any portion of the deposit to cure any default by
Lessee, in which event Lessee shall be obligated to promptly deposit with
Lessor the amount necessary to restore the deposit to its original amount. In
the event Lessee fails to perform its obligations and to take possession of the
Demised Premises on the appropriate Commencement Date provided herein, said
deposit shall not be deemed liquidated damages and Lessor may apply the deposit
to reduce Lessor's damages and such application of the deposit shall not
preclude Lessor from recovering from Lessee all additional damages incurred by
Lessor.
6. RENTAL ESCALATION FOR INCREASES IN EXPENSES
In the event the operating expenses of the Building increase during any
calendar year after the calendar year 1981, hereinafter referred to as the
"base year", Lessee shall pay to Lessor, as a part of rent, Lessee's
proportionate share of the increase in such operating expenses. The
proportionate share to be so paid by Lessee shall be the percentage which the
total square feet of the Demised Premises bears to the total square feet of all
office and store space in the Building of which the Demised Premises are a
part, which is 1.53%, and the amount of said percentage to be paid by the
Lessee shall be the percentage of the calendar year said Demised Premises were
leased by Lessee. The term "operating expenses" is defined as meaning (i) any
and all expenses, charges and fees incurred in connection with the management,
operation, maintenance, servicing, insuring and repair of the Building and
related exterior appurtenances of which the Demised Premises are a part, (ii)
ground rent increases, if any, and (iii) real estate taxes and impositions,
general and special, of whatever kind or description levied against the
Building or land. Operating expenses shall not include the costs and expenses
of capital improvements, electricity (which shall be separately metered for
Lessee), any cleaning contract, cleaning supplies, window cleaning services,
trash removal, elevator maintenance, painting or decorating other than public
areas, interest and amortization of mortgages, depreciation of the Building,
compensation paid to officers or executives of the Lessor or Agent and income
or franchise taxes or other such taxes imposed or measured by the income of the
Lessor from the operation of the Building.
Commencing with the first day of May in calendar year 1983 and on the first
day of May of each calendar year of the Lease thereafter, Lessee will pay to
Lessor as additional rent with monthly rent one-twelfth (1/12th) of ninety
percent (90%) of Lessee' s proportionate share of any increases, over the base
year, of operating expenses during the prior calendar year. Lessee shall
continue to make said payment monthly thereafter on the first day of each
calendar month until the amount of such payment is adjusted on May 1 of the
following calendar year because of increases in Lessee's proportionate share of
operating expenses.
Within ninety (90) days after the expiration of each calendar year, a firm
of certified public accountants, selected by Lessor, shall audit the books and
records of Lessor and a determination shall
-4-
<PAGE> 8
subsequently be made by Lessor of the increases (if any) in the operating
expenses of the Building for such calendar year over the operating expenses of
the Building for the base year. Lessor shall submit to Lessee a statement of
the aforesaid determination, including Lessee's aforesaid proportionate share
of such increases. Within thirty (30) days after the delivery of such
statement (including any statement delivered after the expiration or
termination of the term of this Lease), Lessee shall pay to Lessor an amount
equal to its proportionate share of the amount of the difference between the
amount of the increases (if any) in operating expenses for the calendar year
over the base year operating expenses, less the aggregate amount of that
portion of the monthly rent paid by Lessee between May 1st and April 30th
attributable to payment of increases in operating expenses. If the aggregate
amount of the portion of monthly rent that represents payment for increases in
operating expenses, paid by Lessee during the May 1st through April 30th
period, exceeds Lessee's proportionate share of increases in operating expenses
for the previous calendar year, the excess shall be credited toward the next
payment of monthly rent to be paid by Lessee after Lessee receives said
statement of operating expenses from Lessor. Lessee, at its expense, shall
have the right at all reasonable times to audit Lessor's books and records
relating to this Lease for the base year and for the last three (3) years for
which payments increases in operating expenses become due. Said operating
expenses shall be computed on the accrual basis.
7. OPTION TO EXTEND
Lessee shall have the option to extend the term of this Lease for two (2)
successive additional five (5) year terms, respectively commencing on the date
immediately following the expiration of the initial term and the date
immediately following the expiration of the first extension term, provided the
options to extend are properly exercised by Lessee as provided herein, and
there are no uncured defaults by Lessee under the terms of this Lease. Lessee
may exercise each option to extend only by giving written notice to Lessor of
its election to exercise the option to extend one (1) year prior to the
expiration date of the initial term or one (1) year prior to the expiration
date of the first extension term, whichever is applicable, and by Lessor and
Lessee mutually agreeing upon the amount of rent to be paid during the
applicable extension term within sixty (60) days from the date of said written
notice to extend. If Lessee properly exercises its options, the terms of this
Lease (including without limitation the provisions of the Section entitled
RENTAL ESCALATION FOR INCREASE IN EXPENSES) shall continue in full force and
effect during said additional term or terms. In the event Lessor and Lessee
are unable to mutually agree upon the rent to be paid by Lessee during the
applicable extension term, within sixty (60) days from the date of said written
notice to extend, the option to extend shall be null and void, and Lessor shall
be free to lease the Demised Premises to any person upon any terms and for any
purpose.
-5-
<PAGE> 9
8. ASSIGNMENT AND SUBLETTING
Lessee will not assign or otherwise transfer this Lease, or sublet
(including permitting occupancy or use by another party) the Demised Premises,
or any part thereof, without giving the Lessor thirty (30) days prior written
notice of Lessee' s intention to assign this Lease or sublet all or any part of
the Demised Premises. Within thirty (30) days after receipt of said notice,
Lessor shall have the option (i) to elect to terminate the Lease, if Lessee
desires to assign this Lease, or (ii) to terminate the Lease with regard to
that portion of the Demised Premises which Lessee seeks to sublet, or
alternately to sublet that portion of the Demised Premises from Lessee for the
term Lessee desires to sublet that portion of the Demised Premises, at the rate
and upon the same terms and conditions as Lessee is leasing the Demised
Premises from Lessor. Lessor may exercise the option by giving Lessee written
notice of its election to exercise the option within said thirty (30) day
period. The effective date of termination, or the effective date of
commencement of the sublease to Lessor, shall be mutually agreed upon by Lessor
and Lessee, and, if they cannot agree upon a termination date or sublease
commencement date, the termination or sublease commencement date will be sixty
(60) days from the date Lessor received the notice that Lessee desires to
assign the Lease or sublet all or any portion of the Demised Premises. Upon
termination, all of the rights and obligations of Lessor and Lessee under the
terms of this Lease shall be terminated, or terminated with regard to that
portion of the Demised Premises Lessee notified Lessor that Lessee desires to
sublet, except that Lessee shall continue to be obligated to pay rent and all
other charges for the Demised Premises which accrue to the date of termination.
If Lessor does not exercise its option to terminate or sublet, Lessee may
assign this Lease or sublet all or any part of the Demised Premises after first
obtaining the prior written consent of Lessor, which consent will not be
unreasonably withheld, contingent upon the assignee or sublessee being similar
in kind and character to Lessee and financially reliable. No assignment of
this Lease shall be effectuated by operation of law or otherwise without the
prior written consent of Lessor. The transfer and/or issuance of more than
fifty percent (50%) of the voting stock of Lessee to any persons or entities
that are not stockholders of Lessee on the date of execution of this Lease,
shall be deemed an assignment of this Lease that will give Lessor the option of
terminating this Lease as provided above.
Notwithstanding any other provision of this Lease to the contrary, Lessee
has the right to assign this Lease or sublet the Demised Premises in whole or
in part to any subsidiary, affiliate or successor corporation or partnership,
without Lessor's consent, upon giving Lessor ten (10) days prior written notice
of such assignment or subletting. A "subsidiary" of Lessee shall mean any
corporation not less than fifty percent (50%) of whose outstanding voting stock
shall, at the time, be owned, directly or indirectly, by Lessee. An
"affiliate" of Lessee shall mean any corporation which, directly or indirectly,
controls or is controlled by or is under common control with Lessee. For
purpose of the definition of "affiliate", the word "control" (including
"controlled by" and "under common control with"), as used with respect to any
corporation, partnership, or association shall
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mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policy of a particular corporation,
partnership or association, whether through the ownership of voting securities
or by contract or otherwise. A "successor corporation or partnership" shall
mean any corporation or partnership into which Lessee is merged or with which
Lessee is consolidated or to which all or a substantial portion of Lessee's
assets are transferred.
The consent by Lessor to any assignment or subletting to any party other
than Lessor, including a subsidiary, affiliate or successor corporation or
partnership shall not be construed as a waiver or release of Lessee from the
terms of any covenant or obligation under this Lease, nor shall the collection
or acceptance of rent from any such assignee or subtenant constitute a waiver
or release of Lessee of any covenant or obligation contained in this Lease, nor
shall any such assignment or subletting be construed to relieve Lessee from
giving Lessor said thirty (30) days notice or from obtaining the consent in
writing of Lessor to any further assignment or subletting. In the event that
Lessee defaults hereunder, Lessee hereby assigns to Lessor the rent due from
any subtenant of Lessee and hereby authorizes each such subtenant to pay said
rent directly to Lessor.
Lessee will not mortgage or encumber this Lease without the prior written
consent of Lessor.
9. PRE-OCCUPANCY TENANT WORK
Lessee shall perform all pre-occupancy tenant work on the Demised Premises.
Lessor shall provide only the demising walls for the Demised Premises.
Construction by Lessee of pre-occupancy tenant work on the Demised Premises
shall not commence until (i) this Lease is executed, (ii) the design and
working drawings of all tenant work and installations to be undertaken by
Lessee, certified to by a registered architect or engineer, have been submitted
to and approved in writing by Lessor and Lessor' s architect or supervising
engineer, it being understood that Lessor will diligently review Lessee's
design and working drawings, and (iii) Lessee's contractors have been approved
by Lessor in writing. Lessee shall not make any changes to said design and
working drawings without the written approval of Lessor.
Lessee shall have the right to retain contractors to perform its
pre-occupancy tenant work, subject only to obtaining prior written approval of
Lessor. Approval of a contractor by Lessor, which will not be unreasonably
withheld, shall be based upon the contractor being properly licensed, his
financial posture, experience and past job performance. If a contractor
retained by Lessee and approved by Lessor is a non-union contractor, and said
contractor's retention or presence causes Lessor's general contractor or other
subcontractors present in the Building to experience labor problems, Lessee
agrees to take action as necessary to eliminate said labor problems by (a)
adjusting Lessee's contractor's work schedules, or (b) deferring the work of
Lessee's contractor until the
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general contractor and other subcontractors' work in the Demised Premises and
the Building has been completed, or (c) terminating Lessee' s contractor.
Lessor reserves the right to inspect and approve all pre-occupancy tenant
work performed by Lessee's contractors, and Lessor may correct, at Lessee's
expense, any work defectively performed by Lessee's contractor that, in
Lessor's sole discretion, affects the structure of the Building or the Demised
Premises, or affects the mechanical, plumbing or electrical systems of the
Building or the Demised Premises.
Upon completion of Lessee's pre-occupancy tenant work, Lessee shall submit
to Lessor invoices totalling the costs of all such work plus a waiver of
mechanic's liens by all contractors or subcontractors employed by Lessee.
Lessor shall verify and approve all said invoices and, after inspection and
approval by Lessor of Lessee's pre-occupancy work as specified above, Lessor
shall pay to Lessee a lump sum payment in the amount of Sixty-Two Thousand
Three Hundred Twenty Dollars ($62,320.00), representing a cash allowance for
performance of pre-occupancy tenant work by Lessee. Failure by Lessee or its
contractors to complete pre-occupancy tenant work in the Demised Premises, for
whatever reason or cause, shall in no way or manner delay the Commencement Date
of the Lease or Lessee' s obligation under the Lease, except as specifically
provided for herein.
10. ALTERATIONS
After Lessee's initial occupancy of the Demised Premises and installation
of Lessee's approved pre-occupancy tenant work, Lessee shall make no
alterations, installations, additions or improvements (herein collectively
called Alterations) in or to the Demised Premises or the Building without
Lessor's prior written consent. Consent by Lessor to Lessee's Alterations
shall not be unreasonably withheld, except that Lessor may withhold its consent
for any reason with regard to requested Alterations by Lessee which affect the
structure of the Building or the mechanical, plumbing or electrical systems of
the Building. Lessee, at its sole cost and expense, must provide Lessor with a
copy of the original or revised full floor mechanical and electrical plans for
the floor or floors on which the Alterations are to be made, revised by the
Building architect and engineers to show Lessee's proposed Alterations. If any
such Alterations are made without the prior written consent of Lessor, Lessor
may correct or remove the same, and Lessee shall be liable for any and all
expenses incurred by Lessor in the performance of this work. All Alterations
shall be made at Lessee' s sole expense, at such times and in such manner as
Lessor may designate, and only by such contractors or mechanics as are approved
in writing by Lessor. Approval of contractors or mechanics by Lessor, which
approval will not be unreasonably withheld, shall be based upon the contractors
or mechanics being properly licensed, their financial posture, experience and
past job performance.
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All Alterations to the Demised Premises, whether made by Lessor or Lessee,
and whether at Lessor's or Lessee's expense, or the joint expense of Lessor and
Lessee, shall be and remain the property of Lessor, except that any
Alterations, fixtures or any other property installed in the Demised Premises
at the sole expense of Lessee and with respect to which Lessee has not been
granted any credit or allowance by Lessor, and which can be removed without
causing material damage to the Building or the Demised Premises, shall be and
remain the property of Lessee. Any replacements of any property or
improvements of Lessor, whether made at Lessee's expense or otherwise, shall be
and remain the property of Lessor.
Lessor, at the expiration or earlier termination of the term of the Lease,
may elect to require Lessee to remove all or any part the Alterations made by
Lessee subsequent to the Commencement Date, unless Lessor agrees in writing not
to require the removal of any Alterations at the time Lessor consents to the
Alterations. Removal of Lessee's Alterations shall be at Lessee's cost and
expense and Lessee shall, at its cost and expense, repair any damage to the
Demised Premises or the Building caused by such removal.
Lessee shall remove, at its sole expense, all of Lessee's property,
including Lessee's bank vault, at the expiration or earlier termination of the
Lease. In the event Lessee does not remove Lessee's property at the expiration
or earlier termination of the Lease, such property shall become the property of
Lessor.
In the event Lessee fails to remove its property or the Alterations
requested to be removed by Lessor on or before the expiration, or earlier
termination, of the term of the Lease, then and in such event, Lessor may
remove Lessee's property and Alterations from the Demised Premises at Lessee's
expense and Lessee hereby agrees to reimburse Lessor, as additional rent, for
the cost of such removal together with any and all damages which Lessor may
suffer and sustain by reason of the failure of Lessee to remove the same. Said
amount of additional rent and the cost of Lessor's damages shall be due and
payable upon receipt by Lessee of a written statement of costs from Lessor.
11. MECHANIC'S LIEN
If any mechanic's lien is filed against the Demised Premises, or the
Building of which the Demised Premises are a part, for work claimed to have
been done for Lessee or materials claimed to have been furnished to Lessee,
such mechanic's lien shall be discharged by Lessee, at its sole cost and
expense, within ten (10) days from the date Lessee receives written demand from
Lessor to discharge said lien, by the payment thereof or by filing any bond
required by law. If Lessee shall fail to discharge any such mechanic's lien,
Lessor may, at its option, discharge the same and treat the cost thereof as
additional rent, due and payable upon receipt by Lessee of a written statement
of costs
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from Lessor. It is hereby expressly covenanted and agreed that such discharge
of any mechanic's lien by Lessor shall not be deemed to waive or release Lessee
from its default under the Lease for failing to discharge the same. Lessee
will indemnify and hold harmless Lessor from and against any and all expenses,
liens, claims or damages to person or property which may or might arise as a
result of Lessee undertaking pre-occupancy tenant work in the Demised Premises
at its own cost and under its own control and direction, or making any
Alterations to the Demised Premises.
12. WASTE OF DEMISED PREMISES
Lessee will keep the Demised Premises and the fixtures and equipment
therein in clean, safe and sanitary condition, will take good care thereof,
will suffer no waste or injury thereto, and will, at the expiration or other
termination of the term of this Lease, surrender the same broom clean and in
the same order and condition in which they were on the commencement of the term
of this Lease, ordinary wear and tear and damage by the elements, fire and
other casualty excepted. Lessee shall provide its own cleaning and char
services and supplies. Lessee shall clean, maintain and, where appropriate,
polish all windows and other elements of the Demised Premises which are in
public view, including but not limited to doors, signs and advertisements and,
in the event Lessee shall fail to do so, Lessor shall have the right to clean,
maintain and polish the same, and any charge or cost incurred by Lessor shall
be deemed additional rent due and payable by Lessee upon receipt by Lessee of a
written statement of costs from Lessor.
13. SIGNS AND ADVERTISEMENTS
No sign, advertisement or notice shall be inscribed, painted, affixed or
displayed on any part of the outside or the inside of the Building, including
the windows and doors of the Demised Premises, except a standard building sign
and signs, advertisements and notices which have been approved by Lessor in
writing. Any installation, placement or construction of an approved sign,
advertisement or notice shall be at the sole expense and cost of the Lessee.
Lessor shall have the right to prohibit any published advertisement or notice
of Lessee which in its opinion tends to impair the reputation of the Building
or its desirability as a high-quality office building, and, upon written notice
from Lessor, Lessee shall immediately refrain from and discontinue any such
advertisement or notice.
14. DELIVERIES
All inventory, supplies, furniture and equipment shall be delivered to and
received by Lessee at the loading dock area of the Building and transported to
the Demised Premises through the service corridors. No deliveries of
inventory, supplies, furniture and equipment shall be made from the abutting
street through the front door of the Demised Premises without the prior written
consent of
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Lessor. If Lessor consents to deliveries through the front door of the Demised
Premises, Lessee agrees promptly to remove from the sidewalks adjacent to the
Building or from public areas of the Building, any of the Lessee's inventory,
supplied furniture and equipment there delivered or deposited. All moving of
inventory, supplies, furniture, equipment and other material within the public
areas and in elevators shall be made before 8:00 A.M. or after 6:00 P.M. and
shall be under the direct control and supervision of Lessor who shall, however,
not be responsible for any damage to or charges for moving the same.
15. ENTRY FOR REPAIRS AND INSPECTIONS
Lessee will permit Lessor, or its representative to enter the Demised
Premises, at all reasonable times, without charge therefore to Lessor and
without diminution of the rent payable by Lessee, to examine, inspect and
protect the same, and upon one (1) day written notice, to make such repairs as
in the judgment of Lessor may be deemed necessary to maintain or protect the
Demised Premises or the Building, or to exhibit the same to prospective tenants
during the last one hundred twenty (120) days of the term of this Lease.
Lessor shall use reasonable efforts to minimize interference to Lessee's
business when making repairs, but Lessor shall not be required to perform the
repairs at a time other than during normal working hours.
In the event of an emergency, Lessor may enter the Demised Premises without
notice and make whatever repairs are necessary to protect the Demised Premises
or Building.
16. INSURANCE RATING
Lessee will not conduct or permit to be conducted any activity or place any
equipment in or about the Demised Premises, which will increase in any way the
rate of fire insurance or other insur-ance on the Building; and if any increase
in the rate of fire insurance or other insurance is stated by any insurance
company or by the applicable Insurance Rating Bureau to be due to activity or
equipment in or about the Demised Premises, such statement shall be conclusive
evidence that the increase in such rate is due to such activity or equipment
and, as a result thereof, Lessee shall be liable for such increase. Any cost
to Lessor because of said increase shall be deemed additional rent and shall be
due and payable to Lessor by Lessee upon receipt by Lessee of a written
statement of costs from Lessor. Lessee may contest any insurance rate
increase, at its sole cost and expense, provided such action by Lessee will not
adversely affect the insurance coverage of Lessor.
17. PLATE GLASS INSURANCE
Lessee will, during the full term of this agreement or any renewal or
extension thereof, carry with a standard insurance company, full coverage
insurance on all plate glass in said premises and
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cause same to be replaced if chipped, cracked or broken; said insurance policy
or certificate from Lessee's insurance company to be deposited with Lessor or
his Agent; and such policy shall provide that it shall not be cancelled for any
reason unless and until Lessor or his Agent is given fifteen (15) days' notice
in writing by the insurance company.
18. PUBLIC LIABILITY INSURANCE
Lessee agrees that it will indemnify and save harmless the Lessor from any
and all liability, damage, expense, cause of action, suits, claims, judgments
and cost of defense arising from injury to person or personal property in and
on the Demised Premises or upon any adjoining sidewalks or public areas of the
Building which arise out of the act, failure to act or negligence of Lessee,
its agents or employees. In order to assure such indemnity, Lessee agrees to
carry and keep in full force and effect at all times during the term of this
Lease for the protection of Lessor and Lessee, public liability insurance with
limits of at least One Million Dollars ($1,000,000.00) with respect to injury
or death to any one person and One Million Dollars ($1,000,000.00) with respect
to injury or death to more than one person in any one occurrence, and property
damage insurance with a minimum limit of Fifty Thousand Dollars ($50,000.00).
Public liability insurance shall be obtained from a good and responsible
insurance company. Lessee shall deliver to Lessor a copy of said policy or a
certificate of insurance showing the same to be in force and effect with a
clause requiring not less than fifteen (15) days notice to be given to Lessor
by the insurance company prior to termination of the policy.
19. LESSEE'S EQUIPMENT INCLUDING VAULTS
Lessor shall have the right to prescribe the weight and position of all
heavy equipment and fixtures, including, but not limited to, heavy display
shelves and cabinets, record and file systems, vaults and safes, which Lessee
intends to install or locate within the Demised Premises. Lessee shall deliver
to the Lessor by January 24, 1982, its requirements for additional weight
loading capabilities of the floor slab for any equipment which will exceed the
building's design of 100 pound dead load and 100 pound live load. The
information to be submitted to the Lessor shall include, but not necessarily be
limited to a floor plan indicating the exact location of vaults, safes,
equipment, etc., the manufacturer's data and anticipated load materials to be
stored in the equipment. Lessee shall obtain Lessor's prior review and approval
before installing or locating heavy equipment and fixtures in the Demised
Premises. If Lessor approves such plans in writing, and if installation or
location of such equipment or fixtures, in Lessor's opinion, requires
structural modifications or reinforcement of any portion of the Demised
Premises or the Building, then the Lessor's engineers and contractors shall
make the necessary modifications to the Building. Lessee shall reimburse
Lessor for all costs in excess of standard Building costs related to
construction of the necessary modifications to the Building to accommodate
Lessee's load requirements, including the preparation of special
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<PAGE> 16
specifications and drawings and for all construction and incidental costs, of
standard Building costs. Such modifications or reinforcements shall be
completed prior to Lessee installing or locating such equipment or fixtures in
the Demised Premises. Lessee shall reimburse Lessor within thirty (30) days of
receipt of any statement setting forth those costs.
If the use of Lessee's equipment shall result in electrical demand in
excess of the capacity of the electrical system in the Demised Premises,
additional transformers, distribution panel and wiring may be required and, if
so required, shall be installed by the Lessor at the cost and expense of
Lessee. Lessee shall not install any equipment of any kind or nature whatsoever
which will or may necessitate any changes, replacements or additions to, or in
the use of, the water system, heating-system, plumbing system, air-conditioning
system, or electrical system of the Demised Premises or the Building without
first obtaining prior written consent of Lessor. Business machines and
mechanical equipment belonging to Lessee which cause noise or vibration that
may be transmitted to the structure of the Building or to any space therein to
such a degree as to be objectionable to Lessor or to any tenant in the Building
shall be installed and maintained by Lessee, at Lessee's expense, on vibration
eliminators or other devices sufficient to eliminate such noise and vibration.
20. SERVICES AND UTILITIES
A. Lessor shall be responsible for the following utilities and services
and Lessor's costs for providing said utilities and services shall be
considered operating expenses of the Building:
(1) Water and sewer service at the wet stacks in the Building.
(2) Installation of a separate heating and air-conditioning system for
the Demised Premises.
(3) Maintenance, painting and electricity service for all public areas
in the Building.
B. Lessee shall be responsible for the following utilities and services,
and shall pay all costs and charges incurred:
(1) Installation and maintenance of a separate electric meter for the
Demised Premises, at Lessee's expense, in order to permit separate metering of
Lessee's electricity usage. The charges for electricity used by Lessee in the
Demised Premises measured by Lessee's separate electric meter shall be paid by
Lessee directly to the electric company.
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<PAGE> 17
(2) Cleaning and char services for the Demised Premises, including
window cleaning and trash removal.
(3) Operation, maintenance and repair, including replacement parts, of
heating and air-conditioning system of the Demised Premises.
(4) Installation and maintenance of bathroom facilities as may be
required by applicable District of Columbia codes and regulations, including
appropriate and necessary plumbing to connect the facilities in the Demised
Premises to the wet stacks of the Building.
C. In the event any public utility supplying energy, or any government
law, regulation, executive or administrative order results in a requirement
that Lessor or Lessee must reduce or maintain at a certain level the
consumption of electricity for the Demised Premises or Building, which affects
the heating, air-conditioning, lighting, or hours of operation of the Demised
Premises or Building, Lessor and Lessee shall each adhere to and abide by said
laws, regulations or executive orders without any reduction in rent.
D. Lessor's inability to furnish any services it is required to furnish
under the provisions of this Lease, or any cessation thereof, shall not render
Lessor liable for damage to either person or property, nor be construed as an
eviction of Lessee, nor, work an abatement of rent, nor relieve Lessee from the
obligation to fulfill any covenant or agreement hereof, but Lessor shall be
obligated to use reasonable diligence in making all repairs, obtaining
replacement parts or installing new equipment if necessary. In the event the
heating, air-conditioning, electric or plumbing systems of the Demised Premises
are adversely affected or cease to function because of any break down or
malfunction of the Building equipment, machinery or electric or plumbing
systems, then Lessor shall use reasonable diligence to repair or replace the
same promptly, but Lessee shall have no claim for rebate of monthly rent or
damages on account of any interruptions in service occasioned thereby or
resulting therefrom.
21. TRASH COLLECTION
Lessor will enter into a trash removal contract for the Building with a
company selected by Lessor. Based upon said trash removal contract, Lessor and
Lessee will mutually agree upon the amount Lessee shall pay Lessor monthly, as
additional rent, for trash removal. In the event Lessor and Lessee cannot
agree upon the amount Lessee will pay Lessor for trash removal, Lessee shall be
responsible for making arrangements for trash collection, subject to the
approval and regulation by Lessor and Lessee shall pay all trash collection
charges.
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22. RESPONSIBILITY FOR CERTAIN DAMAGE AND BREAKAGE
All injury breakage or damage to the Demised Premises or the Building of
which they are a part, done by Lessee or the agents, servants, employees and
visitors of Lessee shall be repaired by Lessor, at the sole expense of Lessee.
Payment of the cost of such repairs by Lessee shall be due as additional rent
with the next installment of monthly rent after Lessee receives a bill for such
repairs from Lessor. This provision shall be construed as an additional remedy
granted to the Lessor and not in limitation of any other rights and remedies
which the Lessor has or may have in such circumstances.
23. LIABILITY FOR DAMAGE TO PERSONAL PROPERTY AND PERSON
All personal property of the Lessee, its employees, agents, business
invitees, licensees, customers, clients, family members, guests or trespassers,
in and on said Demised Premises, shall be and remain on the Demised Premises at
their sole risk. Lessor shall not be liable to any such person or party for
any damage to, or loss of personal property arising from any act of any other
persons, or from the leaking of the roof, or from the bursting, leaking or
overflowing of water, sewer or steam pipes, or from heating or plumbing
fixtures, or from electrical wires or fixtures, or from air- conditioning
failure, nor shall Lessor be liable for the interruption or loss to Lessee's
business arising from any of the above described acts or causes, Lessee
especially agreeing to save Lessor harmless in all such cases.
Lessor shall not be liable for any personal injury to Lessee, Lessee's
employees, agents, business invitees, licensees, customers, clients, family
members, guests or trespassers arising from the use, occupancy and condition of
the Demised Premises, unless such party establishes that there has been
negligence or a willful act or failure to act on the part of Lessor, its agents
or employees.
24. DAMAGE TO THE BUILDING AND/OR THE DEMISED PREMISES
Lessor shall obtain and subsequently maintain fire and extended casualty
insurance covering the Building. If the Demised Premises shall be damaged by
fire or other casualty insured against by Lessor's fire and extended coverage
insurance policy covering the Building, and the Demised Premises can be fully
repaired in Lessor's opinion within 180 days from the date of such damage,
Lessor, at Lessor's expense, shall repair such damage; provided, however,
Lessor shall have no obligation to repair any damage to, or to replace Lessee's
non-building standard tenant improvements or any other property located in the
Demised Premises. Except as otherwise provided herein, if the entire Demised
Premises shall be rendered untenantable by reason of any such damage, the
monthly rent shall abate for the period from the date of such damage to the
date when such damage shall have been repaired, and if only a part of the
Demised Premises shall be so rendered untenantable, then the
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<PAGE> 19
monthly rent shall abate for such period in the proportion which the area of
the part of the Demised Premises so rendered untenantable bears to the total
area of the Demised Premises; provided, however, if, prior to the date when all
of such damage shall have been repaired, any part of the Demised Premises so
damaged shall be rendered tenantable and shall be used or occupied by Lessee or
any person claiming through or under Lessee, then the amount by which the
monthly rent shall abate shall be equitably apportioned for the period from the
date of any such use or occupancy to the date when all such damage shall have
been repaired. No compensation or claim or reduction of monthly rent will be
allowed or paid by Lessor by reason of inconvenience, annoyance, or injury to
business arising from the necessity of repairing the Demised Premises or any
portion of the Building of which they are a part.
Notwithstanding the provisions above, if, prior to or during the term of
this Lease (a) the Demised Premises shall be so damaged that in Lessor's
opinion, the Demised Premises cannot be fully repaired within 180 days from the
date the damage occurred, or (b) the Building shall be so damaged by fire or
other casualty that, in Lessor's opinion, substantial repair or reconstruction
of the Building shall be required (whether or not the Demised Premises shall
have been damaged or rendered untenantable), then, in any of such events,
Lessor, at its option, may give to Lessee, within sixty (60) days after such
fire or other casualty, a thirty (30) days' notice of termination of this Lease
and, in the event such notice is given, this Lease shall terminate (whether or
not the term shall have commenced) upon the expiration of such thirty (30) days
with the same effect as if the date of expiration of such thirty (30) days were
the date definitely fixed for expiration of the term of the Lease, and the then
applicable monthly rent shall be apportioned as of such date, including any
rent abatement as provided above.
Lessor shall attempt to obtain and maintain, throughout the term, in
Lessor's fire insurance policies, provisions to the effect that such policies
shall not be invalidated should the insured waive, in writing, prior to a loss,
any or all right of recovery against any party for loss occurring to the
Building. In the event that at any time Lessor's fire insurance carriers shall
exact an additional premium for the inclusion of such or similar provisions,
Lessor shall give Lessee notice thereof, and, if Lessee agrees, in writing, to
reimburse Lessor for such additional premium for the remainder of the term,
Lessor shall require the inclusion of such or similar provisions by Lessor's
fire insurance carriers. So long as such or similar provisions are included in
Lessor's fire insurance policies then in force, Lessor hereby waives (a) any
obligation on the part of Lessee to make repairs to the Demised Premises
necessitated or occasioned by fire or other casualty that is an insured risk
under such policies, and (b) any right of recovery against Lessee, any other
permitted occupant of the Demised Premises, and any of their servants,
employees, agents, or contractors, for any loss occasioned by fire or other
casualty that is an insured risk under such policies. In the event that at any
time Lessor's fire insurance carriers shall not include such or similar
provisions in Lessor's fire insurance policies, the waivers set forth in the
foregoing sentence shall, upon notice given by Lessor
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to Lessee, be deemed of no further force or effect. Except to the extent
expressly provided herein, nothing contained in this Lease shall relieve Lessee
of any liability to Lessor or to its insurance carriers which Lessee may have
under law or the provisions of this Lease in connection with any damage to the
Demised Premises or the Building by fire or other casualty. Notwithstanding
the provisions above, if any such damage, occurring after any date when the
waivers set forth above are no longer in force and effect, is due to the fault
or neglect of Lessee, any person claiming through or under Lessee, or any of
their servants, employees, agents, contractors, visitors or licensees, then
there shall be no abatement of monthly rent by reason of such damage.
Lessee shall obtain and subsequently maintain throughout the term of the
Lease fire and extended casualty insurance, insuring against loss to the
Lessee's tenant improvements and property in and about the Demised Premises.
In addition, Lessee shall attempt to have included, during the term of the
Lease, in Lessee's fire and casualty insurance policies, or in any other type
of insurance policy insuring Lessee's use and occupancy of the Demised Premises
and/or Lessee's business income (and shall cause any other permitted occupants
of the Demised Premises to attempt to obtain in similar policies), provisions
to the effect that such policies shall not be invalidated should the insured
waive, in writing, prior to a loss, any or all right of recovery against any
party for loss occasioned by fire or other casualty which is an insured risk
under such policies. In the event that at any time the fire insurance carriers
issuing such policies shall exact an additional premium for the inclusion of
such or similar provisions, Lessee shall give Lessor notice thereof, and, if
Lessor agrees, in writing, to reimburse Lessee or any person claiming through
or under Lessee, as the case may be, for such additional premium for the
remainder of the term, Lessee shall require the inclusion of such or similar
provisions by such fire insurance carriers. As long as such or similar
provisions are included in such fire insurance policies then in force, Lessee
hereby waives (and agrees to cause any other permitted occupants of the Demised
Premises to execute and deliver to Lessor written instruments waiving) any
right of recovery against Lessor, any lessors under any ground or underlying
leases, any other tenants or occupants of the Building, and any servants,
employees, agents, or contractors of Lessor, or of any such lessor, or of any
such other tenants or occupants, for any loss occasioned by fire or other
casualty which is an insured risk under such policies. In the event that at any
time such fire insurance carriers shall not include such or similar provisions
in any such fire insurance policy, the waiver set forth in the foregoing
sentence shall, upon notice given by Lessee or Lessor, be deemed of no further
force and effect with respect to any insured risks under such policy from and
after the giving of such notice. During any period while the foregoing waiver of
right of recovery is in effect, Lessee, or any other permitted occupant of the
Demised Premises, as the case may be, shall look solely to the proceeds of such
policies to compensate Lessee or such other permitted occupant for any loss
occasioned by fire or other casualty which is an insured risk under such
policies.
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25. DEFAULT OF LESSEE
This Lease shall, at the option of Lessor, cease and terminate if (i)
Lessee shall fail to pay rent including any installment of monthly rent, costs
of preoccupancy tenant work, or any additional rent or other charges, although
no legal or formal demand has been made, and such failure to pay rent shall
continue for a period of five (5) days after written notice has been delivered
by Lessor to Lessee, or (ii) Lessee shall violate or fail to perform any of the
other conditions, covenants or agreements of this Lease made by Lessee, and any
violation or failure to perform any of those conditions, covenants or
agreements shall continue for a period of ten (10) days, after written notice
thereof has been delivered by Lessor to Lessee, or in cases where the violation
or failure to perform cannot be corrected within ten (10) days, Lessee does not
begin to correct the violation or failure to perform within ten (10) days after
receiving Lessor's written notice and/or Lessee thereafter does not diligently
pursue the correction of the violation or failure to perform. Any said
violation or failure to perform or to pay any rent, if left uncorrected, shall
operate as a notice to quit, any further notice to quit or notice of Lessor's
intention to re-enter being hereby expressly waived. Lessor may hereafter
proceed to recover possession under and by virtue of the provisions of the laws
of the District of Columbia or by such other proceedings, including re-entry
and possession, as may be applicable. If Lessor elects to terminate this Lease,
everything herein contained on the part of Lessor to be done and performed
shall cease without prejudice to the right of Lessor to recover from Lessee all
accrued rent up to the time of termination or recovery of possession by Lessor,
whichever is later. Should this Lease be terminated before the expiration of
the term of this Lease by reason of Lessee's default as hereinabove provided,
or if Lessee shall abandon or vacate the Demised Premises before the expiration
or termination of the term of this Lease, the Demised Premises may be relet by
Lessor for a monthly rent and upon such terms as are not unreasonable under the
circumstances and, if the full monthly rent provided for in this Lease shall
not be realized by Lessor, Lessee shall be liable for all damages sustained by
Lessor, including, without limitation, deficiency in rent and other payments,
reasonable attorneys' fees, brokerage fees, and expenses of placing the Demised
Premises in first class rentable condition. Any damage or loss of monthly rent
sustained by Lessor may be recovered by Lessor, at Lessor's option, at the time
of the reletting, or in separate actions, from time to time, as said damage
shall have been made more easily ascertainable by successive relettings, or, at
Lessor's option, may be deferred until the expiration of the term of this
Lease, in which event the cause of action shall not be deemed to have accrued
until the date of expiration of said term. The provisions contained in this
section shall be in addition to and shall not prevent the enforcement of any
claim Lessor may have against Lessee for anticipatory breach of the unexpired
term of this Lease.
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26. REPEATED DEFAULTS
If Lessee shall be in default of this Lease for the same or substantially
the same reason more than twice during any twelve (12) month period during the
term of this Lease, then, at Lessor's election, Lessee shall not have any right
to cure such repeated default, the terms and conditions of the section of this
Lease entitled DEFAULT hereof notwithstanding. In the event of Lessor's
election not to allow a cure of a repeated default, Lessor shall have all of
the rights provided for in this Lease for an uncured default.
27. WAIVER
If Lessor shall institute legal or administrative proceedings against
Lessee and a compromise or settlement thereof shall be made, the same shall not
constitute a waiver of Lessee's obligations to comply with any covenant,
agreement or condition, nor of any of Lessor's rights hereunder. No waiver by
Lessor of any breach of any covenant, condition, or agreement specified herein
shall operate as an invalidation or as a continual waiver of such covenant,
condition or agreement itself, or of any subsequent breach thereof. No payment
by Lessee or receipt by Lessor of a lesser amount than the monthly rent shall
be deemed to be other than on account of the earliest stipulated rent, nor
shall any endorsement or statement on any check or letter accompanying a check
for payment of such rent be deemed an accord and satisfaction and Lessor may
accept such check or payment without prejudice to Lessor's right to recover the
balance of such rent or to pursue any other remedy provided for in this Lease
or in the governing law of the jurisdiction in which the Building is located.
No re-entry by Lessor, and no acceptance by Lessor of keys from Lessee, shall
be considered an acceptance of a surrender of the Lease.
28. SUBORDINATION
This Lease is subject and subordinate to the lien of all and any mortgages
(which term "mortgages" shall include both construction and permanent financing
and shall include deeds of trust and similar security instruments) which may
now or hereafter encumber or otherwise affect the real estate (including the
Building) of which the Demised Premises is a part, or Lessor's leasehold
interest therein, and to all and any renewals, extensions, modifications,
recastings or refinancings thereof. In confirmation of such subordination,
Lessee shall, at Lessor's request, promptly execute any requisite or
appropriate certificate or other document. Lessee hereby constitutes and
appoints Lessor as Lessee's attorney-in-fact to execute any such certificate or
other document for or on behalf of Lessee if Lessee does not execute said
certificate or document within five (5) days from receipt thereof.
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<PAGE> 23
Lessee agrees that in the event that any proceedings are brought for the
foreclosure of any such mortgage, Lessee shall attorn to the purchaser at such
foreclosure sale, if requested to do so by such purchaser. Lessee shall also
recognize such purchaser as the Lessor under this Lease. Lessee waives the
provisions of any statute or rule of law, now or hereafter in effect, which may
give or purport to give Lessee any right to terminate or otherwise adversely
affect this Lease and the obligations of Lessee hereunder in the event that any
such foreclosure proceeding is prosecuted or completed.
If the Building, the Demised Premises or any part respectively thereof is
at any time subject to a mortgage or a deed of trust or other similar
instrument and this Lease or the rentals are assigned to such mortgagee,
trustee or beneficiary and the Lessee is given written notice thereof,
including the post office address of such assignee, then Lessee shall not
terminate this Lease for any default on the part of Lessor without first giving
written notice by certified or registered mail, return receipt requested, to
such Assignee, Attention: Mortgage Loan Department. The notice shall specify
the default in reasonable detail, and afford such assignee a reasonable
opportunity to make performance, at its election, for and on behalf of Lessor.
29. CONDEMNATION
If the whole or a substantial part of the Demised Premises, or the Building
shall be condemned or acquired in lieu of condemnation by any governmental
authority for any public or quasi-public use or purpose, then the term of this
Lease shall cease and terminate as of the date when title vests in such
governmental authority. Lessee shall have no claim against Lessor or the
condemning authority for any portion of the amount of the condemnation award or
settlement that may be claimed as damages by Lessee as a result of such
condemnation or acquisition, or for the value of any unexpired term of the
Lease. Lessee may make a separate claim against the condemning authority for a
separate award for the value of any of Lessee's tangible personal property and
trade fixtures, for moving and relocation expenses and for such business
damages and/or consequential damages as may be allowed by law, provided the
same shall not diminish Lessor's award.
If less than a substantial part of the Demised Premises is condemned or
acquired in lieu of condemnation by any governmental authority for any public
or quasi-public use or purpose, the rent shall be equitably adjusted on the
date when title vests in such governmental authority and the Lease shall
otherwise continue in full force and effect. For purposes of this section, a
"substantial part of the Demised Premises" shall be considered to have been
taken if twenty- five percent (25%) or more of the Demised Premises are
condemned or acquired in lieu of condemnation, or if less than twenty-five
percent (25%) of the Demised Premises is taken and the portion of the Demised
Premises taken renders the entire Demised Premises untenantable for the conduct
of Lessee's business.
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<PAGE> 24
If twenty-five percent (25%) or more of the Building is condemned (whether
or not the Demised Premises shall have been condemned) and Lessor elects to
demolish the remainder of the Building, Lessor may elect to terminate this
Lease.
30. RULES AND REGULATIONS
Lessee, its agents and employees shall abide by and observe the rules and
regulations attached hereto as Exhibit B. Lessee, its agent and employees,
shall abide by and observe such other reasonable rules and regulations from the
time of actual notice as may be promulgated from time to time by Lessor for the
operation and maintenance of the Building provided a copy thereof is sent to
Lessee. Nothing contained in this Lease shall be construed to impose upon
Lessor any duty or obligation to enforce such rules and regulations, or the
terms, conditions or covenants contained in any other lease as against any
other tenant, and Lessor shall not be liable to Lessee for violation of the
same by any other tenant, any other tenant's employees, agents, business
invitees, licensees, customers, clients, family members or guests. Lessor shall
not discriminate against Lessee in the enforcement of any rule or regulation.
31. RIGHT OF LESSOR TO CURE LESSEE'S DEFAULT
If Lessee defaults in the making of any payment to any third party or in
the doing of any act required to be made or done by Lessee, then Lessor may,
but shall not be required to, make such payment or do such act, and the amount
of the expense thereof, if made or done by Lessor, with interest thereon at the
then applicable prime rate of interest per annum as fixed by The Riggs National
Bank accruing from the date paid by Lessor, shall be paid by Lessee to Lessor
and shall constitute additional rent hereunder due and payable by Lessee upon
receipt by Lessee of a written statement of costs from Lessor. The making of
such payment or the doing of such act by Lessor shall not operate to cure
Lessee's default nor shall it prevent Lessor from the pursuit of any remedy to
which Lessor would otherwise be entitled.
Any installments of rent, including monthly rent, additional rent, costs of
pre-occupancy tenant work, or other charges to be paid by Lessee, pursuant to
this Lease, which are not paid by Lessee within ten (10) days after the same
becomes due and payable, shall bear interest at the then prime rate of interest
per annum as fixed by The Riggs National Bank accruing from the date such
installment or payment became due and payable to the date of payment thereof by
Lessee. Such interest shall constitute additional rent due and payable to
Lessor by Lessee upon the date of payment of the delinquent payment referenced
above.
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<PAGE> 25
32. NO PARTNERSHIP
Nothing contained in this Lease shall be deemed or construed to create a
partnership or joint venture of or between Lessor and Lessee, or to create any
other relationship between the parties hereto other than that of Lessor or
Lessee.
33. NO REPRESENTATIONS BY LESSOR
Neither Lessor nor any agent or employee of Lessor has made any
representations or promises with respect to the Demised Premises or the
Building except as herein expressly set forth, and no rights, privileges,
easements or licenses are acquired by Lessee except as herein set forth.
Lessee, by taking possession of the Demised Premises, shall accept the same in
the then "as is" condition, except for latent defects and punch list items,
said items being those identified in a list delivered to Lessor within five (5)
days after Lessee takes possession of the Demised Premises. Taking of
possession of the Demised Premises by Lessee shall be conclusive evidence that
the Demised Premises and the Building are in good and satisfactory condition at
the time of such taking of possession, as provided for in Exhibit C.
34. BROKERS
Lessor and Lessee each represent and warrant one to another that, except as
hereinafter set forth, neither of them has employed any broker in carrying on
the negotiations relating to this Lease. Lessor shall indemnify and hold
Lessee harmless, and Lessee shall indemnify and hold Lessor harmless, from and
against any claim or claims for brokerage or other commission arising from or
out of any breach of the foregoing representation and warranty by the
respective indemnitors. Lessor recognizes The Oliver T. Carr Company as its
exclusive agent.
35. WAIVER OF JURY TRIAL
Lessor and Lessee hereby waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against the other on or in
respect of any matter whatsoever arising out of or in any way connected with
this Lease, the relationship of Lessor and Lessee hereunder, Lessee's use or
occupancy of the Demised Premises, and/or any claim of injury or damage.
36. ENFORCEMENT OF LEASE
In the event Lessor is required or elects to take legal action to enforce
against Lessee the performance of Lessee's obligations under this Lease, then
Lessee shall immediately reimburse
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<PAGE> 26
Lessor for all expenses, including, without limitation, reasonable attorneys'
fees, incurred by Lessor in any such successful legal action.
37. NOTICES
All notices or other communications hereunder shall be in writing and shall
be deemed duly given if delivered in person, by certified mail return receipt
requested, or by registered mail postage prepaid, (i) if to Lessor, c/o The
Oliver T. Carr Company, Suite 900, 1700 Pennsylvania Avenue, N. W., Washington,
D. C., and (ii) if to Lessee, prior to the Commencement Date 1850 K Street
N.W., Suite 500, Wash., D.C. 20006, and at the Demised Premises thereafter.
The party to receive notices and the place notices are to be sent for either
Lessor or Lessee may be changed by notice given pursuant to the provisions of
this section.
38. ESTOPPEL CERTIFICATES
Lessee agrees, at any time and from time to time, upon not less than five
(5) days prior written notice by Lessor, to execute, acknowledge and deliver to
Lessor a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or if there have been modifications, that the Lease
is in full force and effect as modified and stating the modifications), (ii)
stating the dates to which the rent and other charges hereunder have been paid
by Lessee, (iii) stating whether or not, to the best knowledge of Lessee,
Lessor is in default in the performance of any covenant, agreement or condition
contained in this Lease, and, if so, specifying each such default of which
Lessee may have knowledge, (iv) stating the address to which notices to Lessee
should be sent and, if Lessee is a corporation, the name of its registered
agent in the jurisdiction in which the Building is located, and (v) agreeing
not to pay rent more than thirty (30) days in advance or to amend the Lease
without the consent of the mortgage lender. Any such statement delivered
pursuant hereto may be relied upon by any owner of the Building, any
prospective purchaser of the Building, any mortgagee or prospective mortgagee
of the Building or of Lessor's interest, or any prospective assignee of any
such mortgage.
39. HOLDING OVER
In the event that Lessee shall not immediately surrender the Demised
Premises on the date of expiration of the term of this Lease or any extension
period thereof, Lessee shall, by virtue of this section, become a lessee by the
month at the monthly rent in effect during the last month of the term of this
Lease. The month to month tenancy shall commence with the first day next after
the expiration of the term of this Lease. Lessee as a month to month tenant
shall continue to be subject to all of the conditions and covenants of this
Lease. Lessee shall give to Lessor at least thirty (30) days' written notice
of any intention to quit the Demised Premises. Lessee shall be entitled to
thirty
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<PAGE> 27
(30) days' written notice to quit the Demised Premises, except in the event of
nonpayment of the monthly rent in advance, in which event Lessee shall not be
entitled to any notice to quit, the usual thirty (30) days' notice to quit
being hereby expressly waived. Any notice given pursuant to this Section may
be given on any day of the month, and such notice period shall commence on such
a day.
Notwithstanding the foregoing provisions of this section, in the event that
Lessee shall hold over after the expiration of the term, or the Lease or
extension period thereof, and if Lessor shall desire to regain possession of
the Demised Premises promptly at the expiration of the term of this Lease, or
extension period thereof, then at any time prior to Lessor's acceptance of rent
from Lessee as a month to month tenant hereunder, Lessor, at its option, may
forthwith re-enter and take possession of the Demised Premises without process,
or by any legal process in force in the jurisdiction in which the Building is
located. Furthermore, in the event Lessee continues to occupy the Demised
Premises after the date of expiration of the term or any extension period and
after receipt of written notice from Lessor that Lessor desires possession of
the Demised Premises upon expiration of the term of this Lease or any extension
period, Lessee hereby agrees to pay to Lessor, as a penalty but not as
liquidated damages, an amount equal to twice the amount of the then applicable
monthly rent including the portion of monthly rent pursuant to the section of
this Lease, entitled RENTAL ESCALATION FOR INCREASES IN OPERATING EXPENSES, for
each month or part of a month Lessee occupies the Demised Premises after the
date of expiration of the term of this Lease or any extension period thereof.
40. CONTINUOUS OPERATION
The Lessee shall keep the premises open for business during the hours of
each business day generally observed by similar banking institutions in the
vicinity of the Demised Premises. During such hours Lessee shall maintain
access to the Demised Premises at the corner of 19th and Eye Streets and from
the Building lobby.
41. APPROVAL OF LESSEE'S DECOR
It is the intent of the Lessor to maintain a high quality of decor
throughout the Building and, in furtherance thereof, Lessee shall submit to
Lessor its plans for both exterior and interior design of the Demised Premises,
including decorations, graphics and furnishings for the Demised Premises, and
Lessee shall not commence construction of any exterior or interior design work
prior to written approval from Lessor of Lessee's design plans, and Lessee
shall not change the design, decoration or furnishings of the Demised Premises
without having first obtained the written consent of Lessor.
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<PAGE> 28
42. COVENANTS OF LESSOR
Lessor covenants that it has the right to make this Lease for the term
aforesaid, and that if Lessee shall pay all rents and other payments and
perform all of the covenants, terms and conditions of this Lease to be
performed by Lessee, Lessee shall, during the term hereby created, freely,
peaceably and quietly occupy and enjoy the full possession of the Demised
Premises without molestation or hindrance by Lessor or any party claiming
through or under Lessor.
43. LIEN FOR RENT
In consideration of the mutual benefits arising under this agreement,
Lessee hereby grants to Lessor, a lien on all property of Lessee now or
hereafter placed in or on the premises (except such part of any property as may
be exchanged, replaced, or sold from time to time in the ordinary course of
business operation or trade) and such property shall be and remain subject to
such lien of Lessor for payment of all rent and other sums agreed to be paid by
Lessee herein. Said lien shall be in addition to and cumulative upon the
Lessor's liens provided by law. Said lien shall be second in priority to the
rights of the equipment Lessor under any equipment lease or the rights of the
seller under any conditional sales contract.
44. GENDER
Feminine or neuter pronouns shall be substituted for those of the masculine
form, and the plural shall be substituted for the singular number, in any place
or places herein in which the context may require such substitution or
substitutions.
45. BENEFIT AND BURDEN
The terms and provisions of this Lease shall be binding upon and shall
inure to the benefit of the parties hereto and each of their respective
representatives, successors and assigns. Lessor may freely and fully assign
its interest hereunder.
46. GOVERNING LAW
This Lease and the rights and obligations of Lessor and Lessee hereunder
shall be governed by the laws of the jurisdiction in which the Building is
located.
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<PAGE> 29
47. ADVERTISING AND PROMOTIONAL FUND
Lessor may establish and administer an Advertising and Promotional Fund,
the purpose of which will be to furnish and maintain advertising and promotions
for the benefit of the merchants of International Square, Phases I, II, and
III. Lessor agrees that, if such Fund is established, Lessor will contribute
not less than Fifteen Thousand Dollars ($15,000.00) at the commencement of the
Fund and the same amount at the commencement of each calendar year thereafter.
Lessee agrees that, if Lessor establishes such Fund, Lessee shall pay to the
Advertising and Promotional Fund, as additional rent, an amount equal to
Thirty-Five Cents ($0.35) per square foot of floor area of the Demised Premises
per year, payable by Lessee in equal monthly installments with each payment of
monthly rent.
If the Fund is established, Lessee agrees to participate in all joint
advertising and promotional activities sponsored by the Fund. A committee
composed of a representative of Lessor and one (1) representative from each of
no fewer than four (4) merchant/retail tenants of International Square shall be
formed to consult with and advise Lessor on the advertising and promotional
activities sponsored by the Fund.
All monies contributed to the Fund shall be administered by Lessor and
shall be used solely for the purposes of advertising and promotional services
for International Square, Phases I, II, and III. If at any time after Lessor
establishes the Fund, Lessor decides to terminate the Fund, Lessor may do so
unilaterally. Upon termination of the Fund, Lessor's and Lessee's obligation
to contribute to the Fund shall cease, and Lessor shall return to Lessee
Lessee's proportionate share of any monies remaining in the Fund as of the date
the Fund is terminated.
48. LENDER APPROVAL
The terms and provisions of this Lease are contingent upon the consent of
Lessor's construction and/or permanent lender(s).
49. ENTIRE AGREEMENT
This Lease, together with Exhibits A, B, and C attached hereto and made a
part hereof, contain and embody the entire agreement of the parties hereto, and
no representations, inducements, or agreements, oral or otherwise between the
parties not contained and embodied in said Lease and exhibits, shall be of any
force and effect, and the same may not be modified, changed or terminated in
whole or in part in any manner other than by an agreement in writing duly
signed by all parties hereto.
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<PAGE> 30
IN WITNESS WHEREOF, said Lessor has caused these presents to be signed in
its name by Oliver T. Carr, Jr., Managing Venturer, and does hereby constitute
and appoint Oliver T. Carr, Jr., its true and lawful Attorney-in-Fact for it
and in its name as such Managing Venturer to acknowledge and deliver these
presents as the act and deed of The Square 106 Associates.
IN WITNESS WHEREOF, said Lessee has caused its corporate name to be signed
hereto by its Chairman of the Board, Charles Emmett Lucey, Esq., attested to by
its Secretary, and caused its seal to be affixed hereto, and does hereby
appoint as its Attorney-in-Fact Charles Emmett Lucey, Esq., to acknowledge
these presents as its act and deed.
LESSOR:
THE SQUARE 106 ASSOCIATES
By: /s/ OLIVER T. CARR, JR. (SEAL)
-----------------------------
Oliver T. Carr, Jr.,
Managing Venturer
LESSEE:
Attest: CENTURY NATIONAL BANK
/s/ ROBERT [illegible] By: /s/ CHARLES EMMETT LUCEY
- -------------------------- ----------------------------------
Secretary Chairman of the Board
SEAL:
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<PAGE> 31
Lessor's Notary Acknowledgment
DISTRICT OF COLUMBIA, to wit:
I, Olivia M. Kerr, a Notary Public in and for the District of Columbia, do
hereby certify that Oliver T. Carr, Jr., who is personally well known to me as
the person who executed the foregoing and annexed Lease, as a Managing Venturer
of The Square 106 Associates, the Lessor in sale annexed Lease, bearing date on
the 14th day of January, 1982, personally appeared before me in said District
and acknowledged the said Lease to be the act and deed of The Square 106
Associates.
GIVEN under my hand and seal this 1st day of February, 1982.
/s/ OLIVIA M. KERR
---------------------------
Notary Public, D.C.
My commission expires: November 30, 1986
Lessee' s Notary Acknowledgment
DISTRICT OF COLUMBIA, to wit:
I, Jane B. Shapiro, a Notary Public in and for the District of Columbia, do
hereby certify that Charles Emmett Lucey, who is personally well known to me as
the person named as attorney-in-fact for Lessee in the foregoing and annexed
Lease, dated the 14th day of January, 1982, to acknowledge the same, personally
appeared before me in said District and as attorney-in-fact as aforesaid, and
by virtue of the power and authority in him vested by the aforesaid Lease,
acknowledged the same to be the act and deed of Century National Bank, a
corporation, and delivered the same as such.
GIVEN under my hand and seal this 12th day of January, 1982.
/s/ JANE B. SHAPIRO
---------------------------
Notary Public, D.C.
My commission expires: June 14, 1984
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<PAGE> 32
EXHIBIT "A"
[This exhibit is a floor plan of the ground floor of International Square.]
<PAGE> 33
EXHIBIT "B"
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls or other parts of the Building not occupied by
any Lessee shall not be obstructed or encumbered by any Lessee or used for any
purpose other than ingress and egress to and from the demised premises and if
demised premises are situated on the ground floor of the building the Lessee
thereof shall, at said Lessee's own expense, keep the sidewalks and curb
directly in front of said demised premises clean and free from ice and snow.
Lessor shall have the right to control and operate the public portions of the
Building and the facilities furnished for the common use of' the Lessees in
such manner as Lessor deems best for the benefit of the Lessees generally. No
Lessee shall permit the visit to the demised premises of persons in such
numbers or under such conditions as to interfere with the use and enjoyment by
other Lessees of the entrances, corridors, elevators and other public portions
or facilities of the Building.
2. No awnings or other projections shall be attached to the outside walls
of the Building without the prior written consent of the Lessor. No drapes,
blinds, shades, or screens shall be attached to or hung in, or used in
connection with any window or door of the demised premises, without the prior
written consent of the Lessor. Such awnings, projections, curtains, blinds,
shades, screens or other fixtures must be of a quality, type, design and color,
and attached in the manner approved by Lessor.
3. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Lessee on any part of the outside or
inside of the demised premises or building without the prior written consent of
the Lessor. In the event of the violation of the foregoing by any Lessee,
Lessor may remove same without any liability, and may charge the expense
incurred by such removal to the Lessee or Lessees violating this rule.
Interior signs on doors and directory tablet shall be inscribed, painted or
affixed for each Lessee by the Lessor at the expense or such Lessee, and shall
be of a size, color and style acceptable to the Lessor.
4. No show cases or other articles shall be put in front of or affixed to
any part of the exterior of the building, nor placed in the halls, corridors or
vestibules without the prior written consent or the Lessor.
5. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by the Lessee
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same.
<PAGE> 34
6. There shall be no marking, painting, drilling into or in any way
defacing any part of the demised premises or the Building. No boring, cutting
or stringing of wires shall be permitted. Lessee shall not construct, maintain,
use or operate within the demised premises or elsewhere within or on the
outside of the Building, any electrical device, wiring or apparatus in
connection with a loud speaker system or other sound system.
7. No bicycles, vehicles or animals, birds or pets of any kind shall be
brought into or kept in or about the premises, and no cooking shall be done or
permitted by any Lessee on said premises. No Lessee shall cause or permit any
unusual or objectionable odors to be produced upon or permeate from the demised
premises.
8. No space in the building shall be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods or property of
any kind at auction.
9. No Lessee shall make, or permit to be made, any unseemingly or
disturbing noises or disturb or interfere with occupants of this or neighboring
buildings or premises of those having business with them whether by the use of
any musical instrument, radio, talking machine, unmusical noise, whistling,
singing, or in any other way. No Lessee shall throw anything out of the doors
or windows or down the corridors stairs.
10. No inflammable, combustible or explosive fluid, chemical or substance
shall be brought or kept upon the demised premises.
11. No additional locks or bulbs of any kind shall be placed upon any of
the doors, or windows by any Lessee, nor shall any changes be made in existing
locks or the mechanism thereof. The doors leading to the corridors or main
halls shall be kept closed during business hours except as they may be used for
ingress or egress. Each Lessee shall, upon the termination of his tenancy,
restore to Lessor all keys of stores, offices, storage, and toilet rooms either
furnished to, or otherwise procured by, such Lessee, and in the event of the
loss of any keys so furnished such Lessee shall pay to the Lessor the cost
thereof.
12. All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place during the hours
which the Lessor or its Agent may determine from time to time. The Lessor
reserves the right to inspect all freight to be brought into the building and
to exclude from the building all freight which violates any of these Rules and
Regulations or the lease of which these Rules and Regulations are a part.
13. Any person employed by any Lessee to do janitor work within the
demised premises must obtain Lessor's consent and such person shall, while in
the Building and outside of said demised premises, comply with all instructions
issued by the Superintendent of the Building. No
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<PAGE> 35
Lessee shall engage or pay any employees on the demised premises, except those
actually working for such Lessee on said premises.
14. No Lessee shall purchase spring water, ice, coffee, soft drinks,
towels, or other like service, from any company or persons not approved by the
Lessor.
15. Lessor shall have the right to prohibit any advertising by any Lessee
which, in Lessor's opinion, tends to impair the reputation of the building or
its desirability as a building for offices, and upon written notice from
Lessor, Lessee shall refrain from or discontinue such advertising.
16. The Lessor reserves the right to exclude from the building at all
times any person who is not known or does not properly identify himself to the
building management or watchman on duty. Lessor may at his option require all
persons admitted to or leaving the building between the hours of 6 P.M. and 8
A.M., Monday thru Saturday, Sundays and legal holidays to register. Each
Lessee shall be responsible for all persons for whom he authorizes entry into
or exit out of the building, and shall be liable to the Lessor for all acts of
such persons.
17. The premises shall not be used for lodging or sleeping or for any
immoral or illegal purpose.
18. Each Lessee, before closing and leaving the demised premises at any
time, shall see that all windows are closed and all lights turned off.
19. The requirements of Lessees will be attended to only upon application
at the office of the building. Employees shall not perform any work or do
anything outside of the regular duties, unless under special instruction from
the management of the building.
20. Canvassing, soliciting and peddling in the Building is prohibited and
each Lessee shall cooperate to prevent the same.
21. No water cooler, plumbing or electrical fixtures shall be installed by
any Lessee.
22. There shall not be used in any space, or in the public halls of the
Building, either by any Lessee or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires and side guards.
23. Access plates to underfloor conduits shall be left exposed. Where
carpet is installed, carpet shall be cut around access plates. Where Lessee
elects not to provide removable plates in their carpet for access into the
underfloor duct system, it shall be the Lessee's responsibility to pay for the
-3-
<PAGE> 36
removal and replacement of the carpet for any access needed into the duct
system at any time in the future.
24. Mats, trash or other objects shall not be placed in the public
corridors.
25. The Lessor does not maintain or clean suite finishes which are
non-standard, such as kitchens, bathrooms, wallpaper, special lights, etc.
However, should the need for repairs arise, the Lessor will arrange for the
work to be done at the Lessee's expense.
26. Drapes installed by the Lessee for their use which are visible from
the exterior of the building must be approved by Lessor in writing and be
cleaned by the Lessee.
27. The Lessor will furnish and install light bulbs for the building
standard flourescent or incandescent fixtures only. For special fixtures the
Lessee will stock his own bulbs, which will be installed by the Lessor when so
requested by the Lessee.
28. Violation of these rules and regulations, or any amendments thereto,
shall be sufficient cause for termination of this Lease at the option of the
Lessor.
29. The Lessor may, upon request by any Lessee, waive the compliance by
such Lessee of any of the foregoing rules and regulations, provided that (i) no
waiver shall be effective unless signed by Lessor or Lessor's authorized agent,
(ii) any such waiver shall not relieve such Lessee from the obligation to
comply with such rule or regulation in the future unless expressly consented to
by Lessor, and (iii) no waiver granted to any Lessee shall relieve any other
Lessee from the obligation of complying with the foregoing rules and
regulations unless such other Lessee has received a similar waiver in writing
from Lessor.
-4-
<PAGE> 37
EXHIBIT "C"
DECLARATION AS TO DATE OF DELIVERY
AND ACCEPTANCE OF POSSESSION OF
DEMISED PREMISES
Attached to and made a part of the Lease, dated the 14th day of January,
1982, entered into by and between The Square 106 Associates, as Lessor, and
Century National Bank, as Lessee.
Lessor and Lessee do hereby declare and evidence that possession of the
Demised Premises in its "as is" condition was accepted by Lessee on the 18th
day of January, 1982. The Lease is now in full force and effect. For the
purpose of this Lease, the Commencement Date is established as beginning on the
1st day of January, 1982. As of the date of delivery and acceptance of
possession of the Demised Premises as herein set forth, there is no right of
set-off against rents claimed by Lessee against Lessor.
Lessee, if a corporation, states that its registered agent is Charles
Emmett Lucey, Esquire, having an address at 1850 K Street, N.W., Suite 500,
Washington, D. C. 20006, and that it is a corporation in good standing in the
jurisdiction in which the Building is located.
LESSOR:
THE SQUARE 106 ASSOCIATES
By: /s/ OLIVER T. CARR, JR. (SEAL)
---------------------------
Oliver T. Carr, Jr.,
Managing Venturer
LESSEE:
Attest: CENTURY NATIONAL BANK
/s/ ROBERT [illegible] By: /s/ CHARLES EMMETT LUCEY
- -------------------------- ---------------------------------
Secretary Chairman of the Board
SEAL:
<PAGE> 38
Lease Addendum No. 1
This Lease Addendum No. 1 is made and entered into this 14th day of March,
1984, Associates, hereinafter called "Lessor," and Century National Bank,
hereinafter called "Lessee."
W I T N E S S E T H:
WHEREAS, by Lease dated the 14th day of January, 1982, Lessor leased to
Lessee approximately 3,895 square feet of rentable area on the ground floor of
the office building situated at 1875 Eye Street, N.W., Washington, D.C. (said
premises hereinafter referred to as the "Demised Premises," and said building
herein-after referred to as the "Building");
WHEREAS, Lessee desires to lease additional rentable area on the metro
level of said building and Lessor agrees to lease said rentable area to Lessee;
WHEREAS, Lessor and Lessee desire to formally reflect their understanding
and agreement whereby Lessee will lease this additional rentable area from
Lessor, and therefore to revise and modify the Lease accordingly, with respect
to the following provisions:
1. Demised Premises
2. Term
3. Rent
4. Rental Escalation for Increases in Expenses
5. Lessee's Improvements
6. Option to Extend
7. Advertising and Promotional Fund
8. Other Terms and Provisions
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
1. Demised Premises. Lessee agrees to lease from Lessor, and Lessor
agrees to lease to Lessee additional rentable square feet amounting to
approximately 5,038 square feet of rentable area on the metro level of the
Building, the additional area being identified on the floor plan attached
hereto and made a part hereof as Exhibit A (said rentable area being
hereinafter referred to as "Additional Demised Premises"). The Demised Premises
and the Additional Demised Premises shall be collectively referred to as the
"Demised Premises Expanded," and shall amount to a total rentable area of
approximately 8,933 square feet.
<PAGE> 39
Lessee accepts possession of the Additional Demised Premises in its "as is"
condition, as specified in Exhibit B, existing on the date possession is
delivered to Lessee, without requiring any alterations, improvements, or
decorations to be made by Lessor at Lessor's expense, provided that Lessor
agrees to vacuum clean the carpet therein prior to the delivery of the
Additional Demised Premises to Lessee.
Lessee represents that it has thoroughly examined the Building and the
Additional Demised Premises and is aware of and accepts the existing condition
of the Additional Demised Premises and the Building.
2. Term. The term of the Lease with regard to the Additional Demised
Premises shall commence on March 1, 1984 (hereinafter called the "Commencement
Date"), and shall be coterminous with the term of the Lease.
In the event Lessor is unable to deliver possession of the Additional
Demised Premises to Lessee by the Commencement Date, Lessor, its agents, and
employees, shall not be liable or responsible for any claims, damages or
liabilities arising in connection therewith or by reason thereof, nor shall
Lessee be excused or released from this Lease Addendum No. 1, because of
Lessor's inability to deliver the Additional Demised Premises. The Commencement
Date with regard to the Additional Demised Premises shall be extended to the
date Lessor delivers possession of the Additional Demised Premises, and
Lessee's obligations, including rent, pursuant to this Lease Addendum No. 1
shall commence thereon.
When Lessee accepts possession of the Additional Demised Premises, Lessor
and Lessee shall execute the "Declaration as to Date of Delivery and Acceptance
of Possession of Additional Demised Premises," attached hereto as Exhibit D,
which shall specify the Commencement Date.
For the purposes of this Lease Addendum No. 1, the term "Commencement Date"
shall also mean any extended Commencement Date which may be established
pursuant to the operation of the provisions of this section of this Lease
Addendum.
3. Rent: Monthly rent attributable to the Additional Demised Premises
shall be as follows:
<TABLE>
<CAPTION>
MONTHLY RENT FOR
PERIOD ADDITIONAL DEMISED PREMISES
------ ---------------------------
<S> <C>
Month of March, 1984* $230.23/day
For calendar months
1 through 24 ($7,137.16/mo.)
</TABLE>
<PAGE> 40
<TABLE>
<S> <C>
*April, 1984 is defined as "calendar month 1"
For calendar months
25 through 36 ($7,976 83/mo.)
For calendar months
37 through 48 ($8,816.50/mo.)
For calendar months
49 through 60 ($9,656.16/mo.)
For calendar months
61 through 72 ($10,495.83/mo.)
For calendar months
73 through 84 ($11,335.50/mo.)
For calendar months 85
through the expiration
of the initial term of
the Lease ($12,175.16/mo.)
</TABLE>
The obligation to pay monthly rent attributable to the Additional Demised
Premises shall arise as of the Commencement Date as set forth herein.
Notwithstanding the foregoing, provided Lessee is not in default of its
obligations hereunder, Lessor agrees to forgive and abate monthly rent
attributable to the Additional Demised Premises, for the first two (2) full
calendar months of the initial term of the Lease, the total amount of such
abatement to be equal to the sum of Fourteen Thousand Two Hundred Seventy-four
and 32/100ths Dollars ($14,274.32).
Monthly rent shall be payable as provided for in the Lease. Monthly rent
shall be subject to escalation as provided in the section of the Lease entitled
"RENTAL ESCALATION FOR INCREASES IN EXPENSES," as the same may be amended by
this Lease Addendum. If the obligation of Lessee to pay monthly rent hereunder
begins on a day other than on the first day of a calendar month, monthly rent
from such date until the first day of the following calendar month shall be
prorated at the rate of one-thirtieth (1/30) of the amount of monthly rent
payable for the first full calendar month, for each day, payable in advance.
-3-
<PAGE> 41
4. Rental Escalation for Increases in Expenses. Lessee's obligation to
pay as a part of rent for the Demised Premises, its proportionate share of the
increases in operating expenses for the Building as set forth in the section of
the Lease entitled "RENTAL ESCALATION FOR INCREASES IN EXPENSES" shall remain
unchanged.
In addition, Lessee shall also pay to Lessor, as a part of rent for the
Additional Demised Premises, its proportionate share of the increases in
operating expenses for the Building in excess of expenses incurred in calendar
year 1983, such year being hereinafter referred to as the "base year."
Lessee's obligation to pay rental escalations for increases in operating
expenses attributable to the Additional Demised Premises shall begin on the
Commencement Date of this Addendum and shall continue in effect for the entire
term of the Lease. The proportionate share to be so paid by Lessee shall be the
percentage which the total square feet of the Additional Demised Premises bears
to the total square feet of all office and store space in the Building of which
the Additional Demised Premises are a part, which is 1.99%, and the amount of
said percentage to be paid by Lessee shall be the percentage of the calendar
year said Additional Demised Premises were leased by Lessee.
Commencing with the first day of May in calendar year 1985 and on the first
day of May of each calendar year of the Lease thereafter, Lessee will pay to
Lessor as additional rent attributable to the Additional Demised Premises with
monthly rent, one-twelfth (1/12th) of ninety percent (90%) of Lessee's
proportionate share of any increases, over the base year, of operating expenses
during the prior calendar year. Lessee shall continue to make said payment
monthly thereafter on the first day of each calendar month until the amount of
such payment is adjusted on May 1 of the following calendar year because of
increases in Lessee's proportionate share of operating expenses.
Notwithstanding the foregoing, provided Lessee is not in default of its
obligations hereunder, Lessee shall be entitled to an abatement of its
obligation with respect to increases in operating expenses during calendar year
1984 in an amount equal to one-half ( 1/2) of the product of .0199 multiplied
by the difference between operating expenses of the Building during calendar
year 1984 and operating expenses of the Building during the base year. Within
ninety (90) days after the expiration of each calendar year, a firm of
certified public accountants, selected by Lessor, shall audit the books and
records of Lessor and a determination shall subsequently be made by Lessor of
the increases (if any) in the operating expenses of the Building for such
calendar year over the operating expenses of the Building for the base year.
Lessor shall submit to Lessee a statement of the aforesaid determination,
including Lessee's aforesaid proportionate share of such increases. Within
thirty (30) days after the delivery of such statement (including any statement
delivered after the expiration or termination of the term of this Lease),
Lessee shall pay to Lessor an amount equal to its proportionate share of the
amount of the difference between the amount of the increases (if any) in
operating expenses for the calendar year over the base year operating expenses,
less the
-4-
<PAGE> 42
aggregate amount of that portion of the monthly rent paid by Lessee between May
1st and April 30th attributable to payment of increases in operating expenses.
If the aggregate amount of the portion of monthly rent that represents payment
for increases in operating expenses, paid by Lessee during the May 1st through
April 30th period, exceeds Lessee's proportionate share of increases in
operating expenses for the previous calendar year, the excess shall be credited
toward the next payment of monthly rent to be paid by Lessee after Lessee
receives said statement of operating expenses from Lessor. Lessee, at its
expense, shall have the right at all reasonable times to audit Lessor's books
and records relating to this Lease for the base year and for the last three (3)
years for which payments increases in operating expenses become due. Said
operating expenses shall be computed on the accrual basis.
5. Lessee's Improvements. Lessee shall have the right to construct at
its sole cost, a stairway connecting the Demised Premises with the Additional
Demised Premises (said stairway hereinafter referred to as the "Improvements").
Prior to commencement of construction of the Improvements, Lessee's plans must
be approved in writing by Lessor's architect and structural engineer. If
Lessee installs the stairway as aforesaid, Lessee shall be entitled to and
shall receive an additional abatement of monthly rent, in the amount of
Thirty-five Thousand Six Hundred Eighty-five and 80/100 Dollars ($35,685.80).
Such right to said abatement is conditioned upon Lessor having inspected the
Improvements and confirmed that they have been constructed in accordance with
the approved plans and specifications. Such abatement of monthly rent shall
commence on the first day of the calendar month following such inspection.
Provided, however, if Lessor, pursuant to the section of the Lease entitled
"DEFAULT OF LESSEE," terminates the Lease prior to April 30, 1992, Lessee
shall, at its sole expense, remove the Improvements and restore the Demised
Premises Expanded to the condition that existed on the date possession of the
Additional Demised Premises was delivered to Lessee.
6. Option to Extend. The option to extend the terms of the Lease granted
in the section of the Lease entitled "OPTION TO EXTEND" shall, by this Lease
Addendum No. 1, be made applicable to the Demised Premises Expanded as a whole
rather than to the Demised Premises only.
7. Advertising and Promotional Fund. The provisions of the section of the
Lease entitled "ADVERTISING AND PROMOTIONAL FUND" shall by this Lease Addendum
No. 1, be made applicable to the Demised Premises Expanded as a whole rather
than to the Demised Premises only.
8. Other Terms and Provisions. All provisions of the Lease shall be
fully applicable to the Additional Demised Premises and are hereby reaffirmed
as if fully set forth herein. If any provision of Lease Addendum No. 1
conflicts with any provision of the Lease with regard to the Additional Demised
Premises, the provisions of this Lease Addendum No. 1 shall control.
-5-
<PAGE> 43
IN WITNESS WHEREOF, said Lessor has caused this Lease Addendum No. 1 to be
signed in its name by Oliver T. Carr, Jr., Managing Venturer, and does hereby
constitute and appoint Oliver T. Carr, Jr., its true and lawful
Attorney-in-Fact for it and in its name as such Managing Venturer to
acknowledge and deliver this Lease Addendum No. 1 as the act and deed of The
Square 106 Associates.
IN WITNESS WHEREOF, said Lessee has caused its corporate name to be signed
hereto by its President, Joseph S. Bracewell, attested to by its Cashier, and
its Attorney-in-Fact Joseph S. Bracewell, to acknowledge this Lease Addendum
No. 1 as its act and deed.
LESSOR:
THE SQUARE 106 ASSOCIATES
By:
---------------------------------
Oliver T. Carr, Jr.
Managing Venturer
LESSEE:
Attest: CENTURY NATIONAL BANK
By: /s/ PAMELA MUSSENDEN By: /s/ JOSEPH S. BRACEWELL
-------------------------- ---------------------------------
Cashier President
-6-
<PAGE> 44
Lease Addendum No. 2
This Lease Addendum No. 2 is made and entered into this 18th day of
December, 1991, by and between The Square 106 Associates, hereinafter called
"Lessor," and Century National Bank, hereinafter called "Lessee."
W I T N E S S E T H:
WHEREAS, by Lease dated the 14th day of January, 1982, Lessor leased
to Lessee approximately 3,895 square feet of rentable area on the ground floor
of the office building situated at 1875 Eye Street, N.W., Washington, D.C.
(said premises hereinafter referred to as the "Demised Premises," and said
building hereinafter referred to as the "Building");
WHEREAS, by Lease Addendum No. 1 ("Lease Addendum No. 1") dated the
14th day of March, 1984, Lessor leased to Lessee additional rentable area
amounting to approximately 5,038 square feet on the metro level of the Building
(said Lease and Lease Addendum No. 1 hereinafter collectively referred to as
the "Lease" and said additional rentable area, referred to in the Lease
Addendum No. 1 as the "Additional Demised Premises," hereinafter referred to as
the "Metro Level Space").
WHEREAS, Lessee desires to lease additional rentable area on the metro
level of the Building and Lessor agrees to lease said rentable area to Lessee;
WHEREAS, Lessor and Lessee desire to formally reflect their
understanding and agreement whereby Lessee will lease this additional rentable
area from Lessor, and therefore to revise and modify the Lease accordingly,
with respect to the following provisions:
1. Demised Premises
2. Term
3. Rent
4. Rental Escalation for Increases in Expenses
5. Option to Extend
6. Advertising and Promotional Fund
7. Other Terms and Provisions.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
<PAGE> 45
1. Demised Premises. Lessee agrees to lease from Lessor, and
Lessor agrees to lease to Lessee additional rentable area amounting to
approximately 248 square feet of rentable area on the metro level of the
Building, the additional area being identified on the floor plan attached
hereto and made a part hereof as Exhibit A (said additional area hereinafter
referred to as the "Additional Metro Level Space"). The Metro Level Space and
the Additional Metro Level Space shall be collectively referred to as the
"Metro Level Space Expanded," and shall amount to a total rentable area of
approximately 5,286 square feet. The Demised Premises and the Metro Level Space
Expanded shall be collectively referred to as the "Demised Premises Enlarged"
and shall amount to a total rentable area of approximately 9,181 square feet.
Lessee accepts possession of the Additional Metro Level Space in its
"as is" condition, as specified in Exhibit B, existing on the date possession
is delivered to Lessee, without requiring any alterations, improvements, or
decorations to be made by Lessor at Lessor's expense.
Lessee represents that it has thoroughly examined the Additional Metro
Level Space and is aware of and accepts the existing condition of the
Additional Metro Level Space.
2. Term. The term of the Lease with regard to the Additional
Metro Level Space shall commence on September 1, 1984 (hereinafter referred to
as the "Commencement Date"), and shall be coterminous with the term of the
Lease.
3. Rent. For purposes of determining Monthly Rent attributable
to the Metro Level Space Expanded, April, 1984 is defined as "calendar Month 1"
(as set forth in the Lease Addendum No. 1). Monthly rent attributable to the
Metro Level Space Expanded shall be as follows:
<TABLE>
<CAPTION>
MONTHLY RENT FOR THE
PERIOD METRO LEVEL SPACE EXPANDED
------ --------------------------
<S> <C>
For calendar months
6 through 24 ($7,488.50/mo.)
For calendar months
25 through 36 ($8,369.50/mo.)
For calendar months
37 through 48 ($9,250.50/mo.)
For calendar months
49 through 60 (10,131.50/mo.)
</TABLE>
-2-
<PAGE> 46
<TABLE>
<S> <C>
For calendar months
61 through 72 ($11,012.50/mo.)
For calendar months
73 through 84 ($11,893.50/mo.)
For calendar months 85
through the expiration
of the initial term of
the Lease ($12,774.50/mo.)
</TABLE>
The obligation to pay monthly rent attributable to the Metro Level Space
Expanded shall arise as of the Commencement Date of the term with regard to the
Additional Metro Level Space. Monthly rent attributable to the Metro Level
Space Expanded shall be payable as provided for in the Lease and shall be
subject to escalation as provided in the section of the Lease entitled, "RENTAL
ESCALATION FOR INCREASES IN EXPENSES," as the same may be amended by this Lease
Addendum No. 2.
Pursuant to the section of the Lease Addendum No. 1 entitled,
"Lessee's Improvements," Lessor recognizes that Lessee has installed a stairway
connecting the Demised Premises with the Metro Level Space. Pursuant to said
same section of the Lease Addendum No. 1, Lessor hereby agrees to abate and
forgive the payment of monthly rent for the Metro Level Space Expanded for the
months of June, July, August, September and October of 1985, in the amount of
Thirty-Five Thousand Six Hundred Eighty-Five and 80/100ths Dollars
($35,685.80), plus an additional abatement of One Thousand Seven Hundred
Fifty-Six and 70/100ths Dollars ($1,756.70), reflecting the addition of the
Additional Metro Level Space, for a total abatement of Thirty-Seven Thousand
Four Hundred Forty Two and 50/100ths Dollars ($37,442.50) .
4. Rental Escalation for Increases in Expenses. Lessee's
obligation to pay as a part of rent for the Demised Premises, its proportionate
share of the increases in operating expenses for the Building as set forth in
the section of the Lease entitled, "RENTAL ESCALATION FOR INCREASES IN
EXPENSES" shall remain unchanged.
With the addition to the Metro Level Space of the Additional Metro
Level Space, Lessee's share of increases in operating expenses, as set forth in
the section of the Lease Addendum No. 1 entitled "Rental Escalation for
Increases in Expenses," shall be increased from 1.99% to 2.09%, payable in
accordance with said same section of the Lease Addendum No. 1. Said increase in
the percentage of Lessee's share of increases in Operating Expenses shall
become effective as of the Commencement Date of the term with regard to the
Additional Metro Level Space, and Lessee's share of increases in Operating
Expenses for calendar year 1984 shall be calculated accordingly.
-3-
<PAGE> 47
5. Option to Extend. The option to extend the term of the Lease
granted in the section of the Lease entitled, "OPTION TO EXTEND," shall, by
this Lease Addendum No. 2, be made applicable to the Demised Premises Enlarged.
7. Advertising and Promotional Fund. The provisions of the
section of the Lease entitled, "ADVERTISING AND PROMOTIONAL FUND," shall, by
this Lease Addendum No. 2, be made applicable to the Demised Premises Enlarged.
8. Other Terms and Provisions. All provisions of the Lease shall
be fully applicable to the Additional Metro Level Space and are hereby
reaffirmed as if fully set forth herein. If any provision of this Lease
Addendum No. 2 conflicts with any provision of the Lease with regard to the
Additional Metro Level, Space, the provision of this Lease Addendum No. 2 shall
control.
IN WITNESS WHEREOF, said Lessor has caused this Lease Addendum No. 2
to be signed in its name by Oliver T. Carr, Jr., Managing Venturer, to
acknowledge and deliver this Lease Addendum No. 2 as the act and deed of The
Square 106 Associates.
IN WITNESS WHEREOF, said Lessee has caused its corporate name to be
signed hereto by its President, Joseph S. Bracewell, attested to by its
Secretary, to acknowledge this Lease Addendum No. 2 as its act and deed.
*Lessor and Lessee acknowledge and agree that prior to the date of this Lease
Addendum No. 2 Lessor and Lessee have abided by the terms and conditions hereof
and fully performed their respective obligations accruing hereunder prior to
the date hereof.
LESSOR:
THE SQUARE 106 ASSOCIATES
By: /s/ OLIVER T. CARR, JR. (SEAL)
---------------------------
Oliver T. Carr, Jr.
Managing Venturer
-4-
<PAGE> 48
Lessor's Notary Acknowledgment
DISTRICT OF COLUMBIA, to wit:
I, Olivia M. Kerr, a Notary Public in and for the District of
Columbia, do hereby certify that Oliver T. Carr, Jr., who is personally well
known to me as the person who executed the foregoing and annexed Lease Addendum
No. 2, as Managing Venturer of The Square 106 Associates, Lessor in said
annexed Lease Addendum No. 2, bearing date on the 18th day of December, 1991,
personally appeared before me in said District and acknowledged said Lease
Addendum No. 2 to be the act and deed of The Square 106 Associates and
delivered the same as such.
GIVEN under my hand and seal this 6th day of January 1992.
/s/ OLIVIA M. KERR
--------------------------------
Notary Public, D .C.
My commission expires: November 30, 1996
LESSEE:
Attest: CENTURY NATIONAL BANK
/s/ ROSEMARY DEMARK By: /s/ JOSEPH S. BRACEWELL
- ----------------------- ---------------------------
Secretary Chairman
(Corporate Seal)
Lessee's Notary Acknowledgment
DISTRICT OF COLUMBIA, to wit:
I, Maria Lina Gonzalez, a Notary Public in and for the District of
Columbia, do hereby certify that Joseph S. Bracewell who is personally well
known to me to be the person who executed the foregoing and annexed Lease
Addendum No. 2, dated the 18th day of December, 1991, to acknowledge the same,
personally appeared before me in said District and acknowledged the same to be
the act and deed of Century National Bank and delivered the same as such.
-5-
<PAGE> 49
GIVEN under my hand and seal this 18th day of December, 1991.
/s/ MARIA LINA GONZALEZ
--------------------------------
Notary Public, D.C.
My commission expires: May 14, 1994
-6-
<PAGE> 50
EXHIBIT "B"
LEASE ADDENDUM NO. 2 BY AND BETWEEN
THE SQUARE 106 ASSOCIATES AND CENTURY NATIONAL BANK
Pre-occupancy Tenant Work to be provided by and at the expense of
Lessor and included within the monthly rent:
(NONE)
Lessee accepts possession of the Additional Metro Level Space in its
"as is" condition existing on the date possession is delivered to Lessee,
without requiring any alterations, improvements, or decorations to be made by
Lessor at Lessor's expense.
-7-
<PAGE> 51
LEASE ADDENDUM NO. 3
THIS LEASE ADDENDUM NO. 3 is made and entered into this 12th day of
February, 1992, by and between The Square 106 Associates, a District of
Columbia joint venture, hereinafter called "Lessor," and Century Bancshares,
Inc., a Delaware corporation, hereinafter called "Lessee."
W I T N E S S E T H:
WHEREAS, by Lease dated the 14th day of January, 1982, Lessor leased to
Century National Bank ("Century Bank"), Lessee's predecessor-in-interest,
approximately 3,895 square feet of rentable area on the ground floor of the
office building situated at 1875 Eye Street, N.W., Washington, D.C., 20006
(said premises hereinafter referred to as the "Ground Floor Demised Premises,"
and said building hereinafter referred to as the "Building");
WHEREAS, by Lease Addendum No. 1 dated the 14th day of March, 1984, Lessor
leased to Century Bank additional rentable area in the Building comprising
approximately 5,038 square feet of rentable area on the metro level of the
Building;
WHEREAS, by Lease Addendum No. 2 dated the 18th day of December, 1991,
Lessor leased to Century Bank approximately 248 square feet of additional
rentable area on the metro level of the Building (said Lease, Lease Addendum
No. 1 and Lease Addendum No. 2 hereinafter collectively referred to as the
"Lease");
WHEREAS, the rentable area on the metro level of the Building is
hereinafter collectively referred to as the "Metro Level Demised Premises," and
shall amount to a total rentable area of five thousand two hundred eighty-six
(5,286) square feet, and the Metro Level Demised Premises and the Ground Floor
Demised Premises are hereinafter collectively referred to as the "Demised
Premises," and shall amount to a total rentable area of nine thousand one
hundred eighty-one (9,181) square feet;
WHEREAS, Lessee is the successor by merger to Century Bank, and Lessee has
assumed all of Century Bank's interest, rights and obligations under the Lease;
WHEREAS, Lessee desires to extend the term of the Lease, and Lessor and
Lessee have agreed upon the terms and conditions whereby the term of the Lease
shall be extended; and
WHEREAS, Lessor and Lessee desire to reflect formally their understanding
and agreement whereby the term of the Lease shall be extended, and therefore to
revise and modify the Lease accordingly, with respect to the following
provisions:
<PAGE> 52
1. Term;
2. Use;
3. Rent;
4. Rental Escalation for Increases in Expenses;
5. Option to Extend;
6. Options to Extend;
7. Option to Expand;
8. Alterations;
9. Brokers;
10. Advertising and Promotional Fund; and
11. Other Terms and Provisions.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and intending to be legally bound, the parties hereto do
hereby mutually agree as follows:
1. Term.
(A) Subject to and upon the covenants, agreements and conditions of Lessor
and Lessee set forth in the Lease and this Lease Addendum No. 3, the term of
the Lease with respect to the Ground Floor Demised Premises shall be extended
for a period of ten (10) years commencing on May 1, 1992 (hereinafter the
"Extension Commencement Date") and expiring on the 30th day of April, 2002.
Such period shall hereinafter be referred to as "Ground Floor Extension Period
1." In connection therewith, Lessor shall not be obligated to perform any
alterations, improvements or decorations to the Ground Floor Demised Premises.
(B) Subject to and upon the covenants, agreements and conditions of Lessor
and Lessee set forth in the Lease and this Lease Addendum No. 3, the term of
the Lease with respect to the Metro Level Demised Premises shall be extended
for a period of five (5) years commencing on the Extension Commencement Date
and expiring on the 30th day of April, 1997. Said period shall hereinafter be
referred to as "Metro Level Extension Period 1." In connection therewith,
Lessor shall not be obligated to perform any alterations, improvements or
decorations to the Metro Level Demised Premises.
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<PAGE> 53
2. Use.
Lessee may use and occupy the Metro Level Demised Premises for general
office purposes in addition to the use allowed within such space pursuant to
the section of the Lease entitled "USE."
3. Rent.
(A) The monthly rent for the Ground Floor Demised Premises (hereinafter
"Ground Floor Monthly Rent") as of the Extension Commencement Date, which
Lessee hereby agrees to pay monthly in advance to Lessor and Lessor hereby
agrees to accept, shall be as follows:
<TABLE>
<CAPTION>
Period Monthly Rent
------ ------------
<S> <C>
May 1, 1992 through April 30, 1997 ($12,496.46)
May 1, 1997 through April 30, 2002 ($14,119.38)
</TABLE>
Ground Floor Monthly Rent as specified above shall be payable in
accordance with the payment of monthly rent for the Demised Premises pursuant
to the terms of the section of the Lease entitled "RENT"; provided, however,
Lessor agrees to forgive and abate the payment of Ground Floor Monthly Rent for
the first three (3) full calendar months of Ground Floor Extension Period 1.
(B) The monthly rent for the Metro Level Demised Premises (hereinafter
"Metro Level Monthly Rent") as of the Extension Commencement Date, which Lessee
hereby agrees to pay monthly in advance to Lessor and Lessor hereby agrees to
accept, shall be as follows:
<TABLE>
<CAPTION>
Period Monthly Rent
------ ------------
<S> <C>
May 1, 1992 through April 30, 1997 ($10,131.50)
</TABLE>
Metro Level Monthly Rent as specified above shall be payable in
accordance with the payment of monthly rent for the Demised Premises pursuant
to the terms of the section of the Lease entitled "RENT," provided however,
Lessor agrees to forgive and abate the payment of Metro Level Monthly Rent for
the first five (5) full calendar months of Metro Level Extension Period 1.
(C) Ground Floor Monthly Rent and Metro Level Monthly Rent are hereinafter
referred to collectively as "Monthly Rent," and all references to monthly rent
in the Lease shall be applicable
-3-
<PAGE> 54
to Ground Floor Monthly Rent and Metro Level Monthly Rent. In addition to the
payment of Monthly Rent, Lessee shall make payments toward additional rent
provided for in the paragraph of this Lease Addendum No. 3 entitled "Rental
Escalation for Increases In Expenses."
4. Rental Escalation for Increases in Expenses.
(A) Prior to the Extension Commencement Date, Lessee shall continue to pay
additional rent to Lessor pursuant to the section of the Lease entitled "RENTAL
ESCALATION FOR INCREASES IN EXPENSES."
(B) As of the Extension Commencement Date, the provisions of the section
of the Lease entitled "RENTAL ESCALATION FOR INCREASES IN EXPENSES" shall not
apply to the leasing of the Demised Premises from and after the Extension
Commencement Date, and in lieu thereof, the following provisions shall apply to
the leasing of the Demised Premises from and after the Extension Commencement
Date:
"(A) If the Operating Expenses (as defined below) of the Building
increase during any calendar year after calendar year 1992 (hereafter
called the "Base Year"), Lessee shall pay to Lessor, as additional rent,
Lessee's proportionate share of the increase in such Operating Expenses.
Lessee's proportionate share shall be the percentage which the total square
feet of the Demised Premises bears to the total square feet of all office
and retail rentable areas in the Building, which percentage as of the date
of the Extension Commencement Date (as defined in the Lease Addendum No. 3)
is 3.62%. The amount of such percentage to be paid by Lessee for any
calendar year shall be prorated by the percentage of the calendar year the
Demised Premises (or any portion thereof) were leased by Lessee.
(B) The term "Operating Expenses" shall mean (i) any and all expenses,
charges and fees incurred in connection with managing, operating,
maintaining, servicing, insuring and repairing the Building, atrium (if
any) and related exterior appurtenances; and (ii) real estate taxes and ad
valorem taxes, surcharges, special assessments and impositions, general and
special, ordinary and extraordinary, foreseen or unforeseen, of any kind
levied against the Building or land upon which the Building is located, or
in connection with the use thereof (collectively, "Real Estate Taxes").
Any transit, personal property, sales, rental, use, gross receipts and
occupancy tax and other similar charges levied upon Lessor shall also be
deemed Real Estate Taxes included in Operating Expenses. Lessor represents
that the current management fee for the Building is two percent (2%) of the
gross income of the Building. Operating Expenses shall not include (a) the
cost and expenses of capital improvements (except the costs and expenses of
capital improvements reasonably intended
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<PAGE> 55
to reduce Operating Expenses or required by public authorities to bring the
Building in compliance with applicable laws or regulations, with the costs
and expenses of those improvements being amortized over the useful life of
those improvements and with only the amortized amount of the costs and
expenses of those improvements attributable to a calendar year being an
element of Operating Expenses in that particular calendar year), of the
cleaning contract as it relates to office suites, of cleaning supplies to
the extent used for office suites, of the elevator maintenance contracts,
of electricity to the extent supplied to office suites, of water to the
extent supplied to office suites, of electrical, HVAC, plumbing, electronic
access control and mechanical supplies and repairs to the extent supplied
to office suites and painting or decoration of other than public and common
areas of the Building, (b) interest and amortization of mortgages or other
debt of Lessor not resulting from an incurred Operating Expense, (c) ground
rent (if any), (d) depreciation of the Building, (e) compensation paid to
officers or executives of Lessor or Agent, (f) leasing commissions, costs
and other expenses, including attorney's fees, incurred in connection with
negotiating leases with tenants, other occupants or potential occupants of
the Building (including Lessee), (g) income or franchise taxes or other
such taxes imposed or measured by Lessor's income from the operation of the
Building, (h) all costs for which Lessor is reimbursed from any source
other than by tenants of the Building under a method or provision similar
or substantially similar to the pro rata provisions of this Lease relating
to Operating Expenses, (i) expenses or costs incurred by Lessor resulting
from the violation by Lessor, or by any tenant of the Building other than
Lessee, of the terms and conditions of any lease or other rental
arrangement for space within the Building, but only to the extent that the
expenses and costs incurred to cure such violation would not otherwise be
deemed Operating Expenses, (j) advertising and promotional expenses
incurred during the leasing or any sale of the Building or an interest
therein and (k) any fines or penalties incurred due to violations by Lessor
or any tenant in the Building other than Lessee of any federal, state or
local law, statute or ordinance, or any rule, regulation, judgment or
decree of any governmental rule or authority, (1) costs for artwork
displayed in the Building, (m) the cost of utilities to tenants which are
separately metered for such utilities and expenses attributable solely to
tenants in the food court of the Building, and (n) general overhead and
administrative expenses of Lessor, except expenses incurred in the
operation of the property management office and related facilities serving
the Building (which office and facilities do not include the corporate
offices of Lessor's Agent).
(C) Lessor shall notify Lessee prior to the beginning of calendar year
1993 and each calendar year thereafter of Lessor's reasonable estimate of the
amount of Operating Expenses (the "Estimated Operating Expenses") that Lessor
likely will incur for the Building during the coming calendar year, and
pursuant to paragraph (D) hereof, shall advise Lessee of the amount of its
Estimated Payments for the coming calendar year.
-5-
<PAGE> 56
(D) Lessee shall pay to Lessor, as additional rent, an amount equal to
one-twelfth (1/12th) of Lessee's proportionate share of the increases in
Estimated Operating Expenses over the Operating Expenses for the Base Year (the
"Estimated Payment"). Lessee shall make its first Estimated Payment on the
first day of January following the Extension Commencement Date. Thereafter,
Lessee shall make its Estimated Payment on the first day of each calendar
month. Lessee shall pay the same amount of the Estimated Payment until the
amount is adjusted, effective the next succeeding January 1, based upon
Lessor's determination of the Estimated Operating Expenses for the following
calendar year.
(E) Within ninety (90) days after the expiration of each calendar year
(including the calendar years in which the Extension Commencement Date and
expiration or earlier termination of the Lease occurs), a firm of certified
public accountants selected by Lessor, shall audit Lessor's books and records
for the Building. Thereafter, Lessor shall determine any increase in the
Operating Expenses for such calendar year over the Operating Expenses for the
Base Year. The Operating Expenses for each calendar year (including the Base
Year) shall be those actually incurred; provided, however, that if the Building
was not at least eighty-five percent (85%) occupied during the entire calendar
year, then only those Operating Expenses that vary according to the occupancy
of the Building shall be adjusted to project the Operating Expenses as if the
Building were eighty-five percent (85%) occupied.
(F) Lessor shall submit to Lessee a statement setting forth Lessor's
determination of (i) any increases in Operating Expenses over the Operating
Expenses for the Base Year; (ii) Lessee's proportionate share of such
increases; and (iii) Lessee's net obligation for such Operating Expenses for
the calendar year ("Lessee's Net Obligation") which reflects the credit of
Lessee's Estimated Payments during the prior calendar year. Lessor shall
endeavor to provide Lessee with such statement no later than April 15th during
each applicable calendar year, but in any event Lessor shall deliver such
statement no later than December 31 of such calendar year. Within thirty (30)
days after the delivery of such statement (including any statement delivered
after the expiration or earlier termination of the Lease), Lessee shall pay
Lessor the full stated amount of Lessee's Net Obligation. If the aggregate
amount of Lessee's Estimated Payments during the prior calendar year exceeds
Lessee's proportionate share of the increases in Operating Expenses, the
excess, at Lessor's option, shall be refunded to Lessee or credited to Lessee's
next Estimated Payment(s) or payment(s) of Monthly Rent, until such excess is
fully refunded to Lessee. Upon Lessee's written request, Lessor agrees to
provide Lessee with a line-item statement of the Operating Expenses for the
Building for the current calendar year.
(G) Lessee, at its expense, may, at reasonable times, audit Lessor's books
and records for the Building relating to Lessor's determination of any increase
or decrease in the Operating Expenses for (i) the calendar year for which
Lessor's current determination is being made, (ii) the two (2) prior
-6-
<PAGE> 57
calendar years, and (iii) the Base Year. In the event that a review performed
by an independent, certified public accounting firm employed by Lessee for such
calendar year shows that Lessee has made an overpayment of its proportionate
share of Operating Expenses (after the annual reconciliation set forth in
paragraph (F) above) then such report shall be reviewed by Lessor and its
accountants. If after reviewing both reports, Lessor and Lessee disagree with
each other's reports, then the respective accounting firms of Lessor and Lessee
shall meet to resolve any mathematical discrepancies between the respective
reports and any difference in classification of costs and expenses as properly
and appropriately included as Operating Expenses in that calendar year. The
resolution of the two auditors or accountants shall be binding upon the
parties. In no event shall any interpretation of any provision of this Lease
by either or both accounting firms be binding upon Lessor or Lessee. In the
event the resolution shows any overpayment, Lessor shall refund the overpayment
within thirty (30) days thereafter. In the event such resolution shows that
Lessor has overstated the aggregate amount of Operating Expenses by five
percent (5%) or more, Lessor shall along with the refund reimburse Lessee for
the reasonable and necessary accounting fees Lessee incurred in its review, to
the extent such costs do not exceed the amount of the overpayment. Lessor
shall compute the Operating Expenses on the accrual basis.
5. Option to Extend.
The section of the Lease entitled "OPTION TO EXTEND" is hereby deleted in
its entirety.
6. Options to Extend.
(A) With regard to the Metro Level Demised Premises, Lessor grants to
Lessee three (3) consecutive options to extend the term of the Lease, each
option being for a period of five (5) years, as set forth below, provided
Lessee exercises each such option as set forth below, and provided further that
Lessee is not in default under the Lease beyond any applicable notice and cure
period either on the date Lessee notifies Lessor of its intent to exercise the
applicable option or at any time thereafter up to and including the date upon
which the applicable extension period is to commence. The extension periods
shall be from May 1, 1997 through April 30, 2002 ("Metro Level Extension Period
2"); from May 1, 2002 through April 30, 2007 ("Metro Level Extension Period
3"); and from May 1, 2007 through April 30, 2012 ("Metro Level Extension Period
4"). Each such five (5) year period may also be hereinafter called "Metro
Level Extension Period."
Lessee may exercise each such option to extend only by serving on Lessor,
no later than fourteen (14) months, nor earlier than twenty (20) months, prior
to the commencement of each applicable Metro Level Extension Period, written
notice of Lessee's intent to exercise the then applicable option to extend.
-7-
<PAGE> 58
The Metro Level Monthly Rent for Metro Level Extension Period 2 shall be
equal to one twelfth (1/12th) of the product of (i) the number of square feet
of rentable area comprising the Metro Level Demised Premises, times (ii)
Twenty-Eight and 00/100ths Dollars ($28.00). Metro Level Monthly Rent for the
first four (4) full calendar months of Metro Level Extension Period 2 shall be
forgiven and abated.
The Metro Level Monthly Rent for Metro Level Extension Period 3 and for
Metro Level Extension Period 4 shall each be determined by the mutual agreement
of Lessor and Lessee within sixty (60) days after the date Lessor receives
Lessee's notice of its election to extend the term of the Lease for the
applicable Metro Level Extension Period. The Metro Level Monthly Rent for each
such Metro Level Extension Period shall be based upon the Market Rent (as
hereafter defined) for the Metro Level Demised Premises. However, the Metro
Level Monthly Rent for Metro Level Extension Period 3 shall be no less than the
Metro Level Monthly Rent in effect during April 2002; and the Metro Level
Monthly Rent for Metro Level Extension Period 4 shall be no less than the Metro
Level Monthly Rent in effect during April 2007.
If Lessor and Lessee are unable to agree within the applicable sixty (60)
day period upon the Market Rent for the Metro Level Demised Premises in order
to determine the Metro Level Monthly Rent for the applicable Metro Level
Extension Period, then the Market Rent (upon which the Metro Level Monthly Rent
for the applicable Metro Level Extension Period will be based) shall be
determined by a board of three (3) licensed real estate brokers. Lessor and
Lessee shall each appoint one (1) broker within ten (10) days after expiration
of the sixty (60) day period, or sooner if mutually agreed upon. The two so
appointed shall select a third within fifteen (15) days after they both have
been appointed. Each broker on said board shall be licensed in the District of
Columbia as a Real Estate Broker, specializing in the field of commercial
leasing in the central business district having no less than ten (10) years
experience in such field, and recognized as ethical and reputable within his or
her field.
Each broker, within fifteen (15) days after the third broker is selected,
shall submit his or her determination of Market Rent. Market Rent shall be the
mean of the two (2) closest rental rate determinations (or the middle of the
three if there are no two closest determinations), and the Metro Level Monthly
Rent for the applicable Metro Level Extension Period shall be based upon the
Market Rent as so determined by the brokers; provided, however, if the Market
Rate determination produces a Metro Level Monthly Rent for Metro Level
Extension Period 3 less than the Metro Level Monthly Rent in effect for April
2002, then the Metro Level Monthly Rent for Metro Level Extension Period 3
shall be the Metro Level Monthly Rent in effect for April 2002; and provided
further, that if the Market Rent determination produces a Metro Level Monthly
Rent for Metro Level Extension Period 4 less than the Metro Level Monthly Rent
in effect during April 2007, then the Metro Level Monthly Rent for Metro Level
Extension Period 4 shall be the Metro Level Monthly Rent in effect for April
2007.
-8-
<PAGE> 59
"Market Rent" shall mean the effective base rent (i.e. taking into account
any tenant concessions which may be in the marketplace, such as, but not
limited to, rent abatements and improvement allowances) that would be received
by landlords reletting space in renewal transactions of quality, size and
location comparable to the Metro Level Demised Premises, in comparable
buildings in the central business district of the District of Columbia for a
comparable term commencing on or about the date of the commencement of the
applicable Metro Level Extension Period, adjusted to reflect that the
provisions of the section of this Lease Addendum No. 3 entitled "Rental
Escalation for Increases in Expenses" shall continue uninterrupted and without
modification and that Metro Level Monthly Rent shall not be adjusted during the
applicable Metro Level Extension Period.
If the Market Rent for any Metro Level Extension Period, determined in
accordance with this section of this Lease Addendum No. 3, is less than the
Metro Level Monthly Rent in effect for the month of April immediately preceding
the commencement of the applicable Metro Level Extension Period, Lessee shall
have the right, at its sole option, to terminate the Lease with regard to the
Metro Level Demised Premises. To exercise this termination option, Lessee
shall serve on Lessor written notice of its election to exercise such
termination option no later than thirty (30) days following the receipt of the
brokers' determination of Market Rent for the applicable Metro Level Extension
Period pursuant to this section. If Lessee exercises its option to terminate
the Lease with regard to the Metro Level Demised Premises as aforesaid, then
notwithstanding anything contained in the Lease or herein to the contrary, the
Lease with regard to the Metro Level Demised Premises shall terminate and
become of no further force or effect on the later of (i) the then applicable
expiration date of the Lease with respect to the Metro Level Demised Premises,
or (ii) the date ("Revised Metro Level Expiration Date") which is the last day
of the twelfth month following the date Lessee serves Lessor with such notice,
except as to obligations of Lessee accruing in each case on or before such
expiration date which shall remain obligations of Lessee until satisfied. If
the Revised Metro Level Expiration Date becomes the effective date of
expiration of the term of the Lease with respect to the Metro Level Demised
Premises, the term of the Lease with regard to the Metro Level Demised Premises
shall automatically be extended for a period commencing on the date the term
would have expired ("Original Metro Level Expiration Date") but for this
paragraph, and expiring on the Revised Metro Level Expiration Date (such period
called the "Limited Metro Level Extension Period"), and all of the terms,
covenants and conditions of the Lease and this Lease Addendum No. 3 shall
remain in full force and effect, except that the Metro Level Monthly Rent for
the Limited Metro Level Extension Period shall equal the Metro Level Monthly
Rent in effect during the last full calendar month immediately preceding the
commencement of the Limited Metro Level Extension Period. The Lease with
regard to the Ground Floor Demised Premises shall be unaffected by any such
termination and shall continue in full force and effect.
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<PAGE> 60
(B) With regard to the Ground Floor Demised Premises, Lessor grants to
Lessee two (2) consecutive options to extend the term of the Lease, each option
being for a period of five (5) years, as set forth below, provided Lessee
exercises each such option as set forth below, and provided further that Lessee
is not in default under the Lease beyond any applicable notice and cure period
either on the date Lessee notifies Lessor of its intent to exercise the
applicable option or at any time thereafter up to and including the date upon
which the applicable extension period is to commence. The extension periods
shall be from May 1, 2002 through April 30, 2007 ("Ground Floor Extension
Period 2"); and from May 1, 2007 through April 30, 2012 ("Ground Floor
Extension Period 3"). Each such five (5) year period may also be called
"Ground Floor Extension Period."
Lessee may exercise each such option to extend only by serving on Lessor,
no later than fourteen (14) months, nor earlier than twenty (20) months, prior
to the commencement of each applicable Ground Floor Extension Period, written
notice of Lessor's intent to exercise the then applicable option to extend.
The Ground Floor Monthly Rent for Ground Floor Extension Period 2 and for
Ground Floor Extension Period 3 shall each be determined by the mutual
agreement of Lessor and Lessee within sixty (60) days after the date Lessor
receives Lessee's notice of its election to extend the term of the Lease for
the applicable Ground Floor Extension Period. The Ground Floor Monthly Rent
for each such Ground Floor Extension Period shall be based upon the Market Rent
(as hereafter defined) for Ground Floor Demised Premises. However, the Ground
Floor Monthly Rent for Ground Floor Extension Period 2 shall be no less then
the Ground Floor Monthly Rent in effect during April 2002; and the Ground Floor
Monthly Rent for Ground Floor Extension Period 3 shall be no less than the
Ground Floor Monthly Rent in effect during April, 2007.
If Lessor and Lessee are unable to agree within the applicable sixty (60)
day period upon the Market Rent for the Ground Floor Demised Premises in order
to determine the Ground Floor Monthly Rent for the applicable Ground Floor
Extension Period, then the Market Rent (upon which the Ground Floor Monthly
Rent for the applicable Ground Floor Extension Period will be based) shall be
determined by a board of three (3) licensed real estate brokers. Lessor and
Lessee shall each appoint one (1) broker within ten (10) days after expiration
of the sixty (60) day period, or sooner if mutually agreed upon. The two so
appointed shall select a third within fifteen (15) days after they both have
been appointed. Each broker on said board shall be licensed in the District of
Columbia as a Real Estate Broker, specializing in the field of commercial
leasing in the central business district having no less than ten (10) years
experience in such field, and recognized as ethical and reputable within his or
her field. Each broker, within fifteen (15) days after the third broker is
selected, shall submit his or her determination of Market Rent. Market Rent
shall be the mean of the two (2) closest rental rate determinations (or the
middle of the three if there are no two (2) closest determinations), and the
Ground Floor Monthly Rent for the applicable Ground Floor Extension
-10-
<PAGE> 61
Period shall be based upon the Market Rent as so determined by the brokers;
provided, however, if the Market Rent determination produces a Ground Floor
Monthly Rent for Ground Floor Extension Period 2 less than the round Floor
Monthly Rent in effect for April 2002, then the Ground Floor Monthly Rent for
Ground Floor Extension Period 2 shall be the Ground Floor Monthly Rent in
effect for April, 2002; and provided further, that if the Market Rent
determination produces a Ground Floor Monthly Rent for Ground Floor Extension
Period 3 less than the Ground Floor Monthly Rent in effect during April 2007,
then the Ground Floor Monthly Rent for Ground Floor Extension Period 3 shall be
the Ground Floor Monthly Rent in effect for April 2007.
"Market Rent" shall mean the effective base rent (i.e. taking into account
any tenant concessions which may be in the marketplace, such as, but not
limited to, rent abatements and improvement allowances) that would be received
by landlords reletting space in renewal transactions of quality, size and
location comparable to the Ground Floor Demised Premises, in comparable
buildings in the central business district of the District of Columbia for a
comparable term commencing on or about the date of the commencement of the
applicable Ground Floor Extension Period, adjusted to reflect that the
provisions of the section of this Lease Addendum No. 3 entitled "Rental
Escalation for Increases in Expenses" shall continue uninterrupted and without
modification and that Ground Floor Monthly Rent shall not be adjusted during
the applicable Ground Floor Extension Period.
If the Market Rent for any Ground Floor Extension Period, determined in
accordance with this section of this Lease Addendum No. 3, is less than the
Ground Floor Monthly Rent in effect for the month of April immediately
preceding the commencement of the next applicable Ground Floor Extension
Period, Lessee shall have the right, at its sole option, to terminate the Lease
for the Demised Premises. To exercise this termination option, Lessee shall
serve on Lessor written notice of its election to exercise such termination
option no later than thirty (30) days following the receipt of the brokers'
determination of Market Rent for the applicable Ground Floor Extension Period
pursuant to this section. If Lessee exercises its option to terminate the
Lease as aforesaid, then notwithstanding anything contained in the Lease or
herein to the contrary, the Lease shall terminate and become of no further
force or effect on the later of (i) the then applicable expiration date of the
Lease, or (ii) the date ("Revised Expiration Date") which is the last day of
the twelfth month following the date Lessee serves Lessor with such notice,
except as to obligations of Lessee accruing in each case on or before each
expiration date which shall remain obligations of Lessee until satisfied. If
the Revised Expiration Date becomes the effective date of expiration of the
term of the Lease, the term of the Lease shall automatically be extended for a
period commencing on the date the term would have expired ("Original Expiration
Date") but for this paragraph, and expiring on the Revised Expiration Date
(such period called the "Limited Extension Period"), and all of the terms,
covenants and conditions of the Lease and this Lease Addendum No. 3 shall
remain in full force and effect, except that the Ground Floor Monthly Rent and
the Metro Level Monthly Rent (if applicable)
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<PAGE> 62
for the Limited Extension Period shall equal the Ground Floor Monthly Rent and
the Metro Level Monthly Rent, respectively, in effect during the last full
calendar month immediately preceding the commencement of the Limited Extension
Period.
(C) Lessee's exercise of any option for any Metro Level Extension Period
shall not be a condition precedent to Lessee's right to exercise its option to
extend the term of the Lease for any Ground Floor Extension Period. If Lessee
fails to exercise timely or properly, or elects not to exercise its option to
extend the Lease for any Metro Level Extension Period, then from and after the
expiration of the term of the Lease for the Metro Level Demised Premises, (i)
the Demised Premises shall consist solely of the Ground Floor Demised Premises,
(ii) Lessee's proportionate share of increases in Operating Expenses payable by
Lessee pursuant to the section of this Lease Addendum No. 3 entitled "Rental
Escalation for Increases in Expenses" shall be 1.53%, and (iii) Lessee shall
have no further rights to lease from Lessor, and Lessor shall have no further
obligations to lease to Lessee, the Metro Level Demised Premises.
If Lessee fails to exercise timely or properly, or elects not to exercise
its option to extend for any Ground Floor Extension Period, Lessee shall have
no option to extend the term of the Lease for the Demised Premises, and Lessee
shall have no further rights to lease the Demised Premises from Lessor, and
Lessor shall have no further obligations to lease to Lessee the Demised
Premises after the expiration of the then applicable term of the Lease.
(D) Additional rent for Operating Expenses as set forth in the section of
this Lease Addendum No. 3 entitled "Rental Escalation for Increases in
Expenses" shall continue uninterrupted, through each successive Metro Level
Extension Period set forth in this section, and through each successive Ground
Floor Extension Period set forth in this section. However, Lessee's
proportionate share of increases in Operating Expenses shall be appropriately
adjusted to reflect the then current area of the Demised Premises. All other
terms and provisions of the Lease shall remain in full force and effect during
each Metro Level Extension Period and Ground Floor Extension Period properly
and timely exercised by Lessee.
(E) In the event the brokers' determination system is utilized by Lessor
and Lessee, Lessor and Lessee shall each pay the fee of the broker selected by
it and they shall share equally the payment of the fee of the third broker.
(F) An addendum setting forth the term of the applicable extension period,
the applicable monthly rent and any other appropriate terms and conditions
consistent with this Lease Addendum No. 3 shall be executed by Lessor and
Lessee within ten (10) days after the parties' agreement, or in the
alternative, within thirty (30) days after the brokers' determination of Market
Rent for the applicable extension period.
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<PAGE> 63
(G) This section of Lease Addendum No. 3 shall become null and void and of
no force and effect if Lessee assigns the Lease or subleases any portion of the
Demised Premises to a party other than a subsidiary, affiliate, successor
corporation or partnership (as such terms are defined in the section of the
Lease entitled "ASSIGNMENT AND SUBLETTING").
7. Option to Expand.
Subject and subordinate to the rights of existing tenants of the Expansion
Space (as hereinafter defined) as of the date of this Lease Addendum No. 3,
Lessor grants to Lessee during Metro Level Extension Period 1 an option to
expand the Metro Level Demised Premises to include an area on the metro level
of the Building, having a rentable area of approximately 1,612 square feet
(said area is hereinafter referred to as the "Expansion Space" and is outlined
on Exhibit A-1 attached hereto), provided Lessee exercises this option as set
forth below, and provided further that Lessee is not in default under the Lease
beyond any applicable notice and cure period either on the date Lessee notifies
Lessor of its intent to exercise this option or at any time thereafter up to
and including the commencement date of the term of the Lease with respect to
the Expansion Space (the "Expansion Space Commencement Date"). Except as noted
above, the option to expand granted herein shall be superior to the rights of
all other parties with regard to the leasing or use and occupancy of any or all
of the Expansion Space.
Provided all such existing tenants have either waived or elected not to
exercise any and all rights such tenants may have for the Expansion Space,
Lessor shall notify Lessee in writing at such time during Metro Level Extension
Period 1 as the Lessor is able to lease the Expansion Space to Lessee, and
shall specify the anticipated delivery date of the Expansion Space which date
shall be no earlier than ninety (90) days following the delivery of such notice
from Lessor to Lessee. Lessee may exercise this option to expand only by
delivering written notice to Lessor, no later than ninety (90) days after
Lessee's receipt of Lessor's notice specifying the availability of the
Expansion Space, stating its intent to exercise this option. In such event,
the Expansion Space Commencement Date, and the date Lessor shall deliver
possession of the Expansion Space to Lessee, shall be the date specified in
Lessor's notice to Lessee as provided above. In the event Lessor is unable to
deliver possession of the Expansion Space to Lessee by the date specified in
Lessor's notice, Lessor, its agents and employees, shall not be liable or
responsible for any claims, damages or liabilities arising in connection
therewith or by reason thereof. In such event, Lessee's option to expand shall
remain in effect, and Lessor shall notify Lessee in writing no less than ten
(10) days prior to the date Lessor is able to deliver possession of the
Expansion Space to Lessee. Unless Lessee notifies Lessor of Lessee's desire to
withdraw the exercise of its option to expand in writing and such notice is
received by Lessor within ten (10) days after the specified delivery date, any
delay in the delivery of possession of the Expansion Space beyond the date
specified in Lessor's notice will not excuse or release Lessee from its
obligation to accept possession of the Expansion Space, pay rent for the
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<PAGE> 64
Expansion Space, and perform all of Lessee's obligations under the Lease with
respect to the Expansion Space. The Expansion Space Commencement Date shall be
extended to the earlier of (i) the date Lessor delivers possession of the
Expansion Space, provided Lessor has given Lessee ten (10) days prior written
notice of the date of such delivery, or (ii) the date Lessee enters into
possession of the Expansion Space.
Lessee's exercise of this option to expand shall be subject to the
following conditions:
(i) Lessee shall accept the Expansion Space, as part of the Demised
Premises, in its then "as is" condition;
(ii) the term of the Lease with respect to the Expansion Space shall
commence on the Expansion Space Commencement Date, and said term shall be
coterminous with the term of this Lease as it applies to the Metro Level
Demised Premises and any extension thereof;
(iii) Lessee's obligation to pay monthly rent for the Expansion Space,
in advance, shall commence on the Expansion Space Commencement Date;
(iv) monthly rent for the Expansion Space shall be an amount equal to
the product of the number of square feet of rentable area attributable to the
Expansion Space, multiplied by the Metro Level Monthly Rent per square foot of
rentable area attributable to the Metro Level Demised Premises in effect during
the first full calendar month following the Expansion Space Commencement Date;
(v) the percentage of Lessee's proportionate shares of operating expenses
shall be increased to reflect the addition of the Expansion Space to the
Demised Premises (with the Base Year remaining calendar year 1992), in
accordance with the calculation of such percentages set forth in the section of
the Lease Addendum No. 3 entitled, "Rental Escalation for Increases in
Expenses," such revised percentages to become effective as of the Expansion
Space Commencement Date, with appropriate pro rata adjustments being made in
the calculation of Lessee's proportionate share of Operating Expenses for the
calendar year in which the Expansion Space Commencement Date occurs;
(vi) monthly rent for the Expansion Space shall be abated from and
following the Expansion Space Commencement Date for up to five (5) full
calendar months, provided the actual number of months of abatement of such
monthly rent shall be reduced by the number of lease years of the Lease that
have expired in Metro Level Extension Period 1 at the time the Expansion Space
Commencement Date occurs. By example, and assuming the Extension Commencement
Date is May 1, 1992, if the Expansion Space Commencement Date occurs on June 1,
1995, Lessee shall be
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<PAGE> 65
entitled to two (2) months of abatement of monthly rent attributable to the
Expansion Space; if the Expansion Space Commencement Date occurs on January l,
1995, Lessee shall be entitled to three (3) months of such abatement.
(vii) Lessor shall provide to Lessee an improvement allowance, not to
exceed Forty Thousand Three Hundred and 00/100ths Dollars ($40,300.00), (the
"Expansion Allowance") for (a) the purchase and installation of Lessee's
Alterations within the Expansion Space during the first six (6) full calendar
months following the Expansion Space Commencement Date, and (b) ancillary costs
directly related to Lessee's occupancy of the Expansion Space (including, but
not limited to, furniture purchases and relocation expenses). The Expansion
Allowance shall first be used as a credit to reduce or satisfy any payments due
from Lessee. In the event any portion of the Expansion Allowance remains
unapplied after crediting amounts due from Lessee, Lessee may submit to Lessor,
but on a monthly basis only, invoices for such costs incurred by Lessee under
(a) and (b) above. Lessee shall also provide appropriate signed waivers of
mechanic's liens executed by all contractors or subcontractors installing
Alterations in the Expansion Space or providing other qualified services on
behalf of Lessee. After inspection and approval of the portion of the
Alterations installed as reflected by such invoices, and verification of the
invoices and waivers submitted, Lessor shall pay to Lessee (or any other party
on Lessee's behalf at Lessee's written request) the lesser of (c) the total
amount of such approved invoices or (d) the Expansion Allowance. In no event
however shall Lessor be obligated to reimburse Lessee (or pay to any other
party on Lessee's behalf at Lessee's written request) for any amount, where
Lessor's liability for amounts applied by Lessor or reimbursed exceed in the
aggregate the amount of the Expansion Allowance specified above. In the event
any portion of the Expansion Allowance remains after the first six (6) full
calendar months following the Expansion Space Commencement Date, such remaining
portion shall be credited to Lessee's next due payment(s) of Monthly Rent. In
the event Lessee employs the services of Lessor as a construction manager for
Lessee's Alterations in the Demised Premises, Lessee shall pay to Lessor seven
percent (7%) of the cost of such Alterations installed in the Demised Premises,
such fee being compensation for Lessor's general conditions, overhead and
profit;
(viii) by the exercise of the option to expand the Metro Level Demised
Premises to include the Expansion Space, Lessee shall be deemed to have
exercised its option to extend the term of the Lease for Metro Level Extension
Period 2, pursuant to paragraph (A) of the section of this Lease Addendum No. 3
entitled "Options to Extend";
(ix) for the purposes of this Lease, during any subsequent Metro Level
Extension Period, the Expansion Space shall be deemed part of, and included
within the definition of, the Metro Level Demised Premises; and
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<PAGE> 66
(x) all other terms and conditions of the Lease shall apply to the
Expansion Space, except as the same are specifically modified by the mutual
agreement of Lessor and Lessee.
Within thirty (30) days after Lessee exercises this option, Lessor and
Lessee shall execute an addendum to this Lease setting forth the terms and
conditions for the leasing of the Expansion Space consistent with this Lease
Addendum No. 3.
When Lessee accepts possession of the Expansion Space, Lessor and Lessee
shall execute the "Declaration as to Date of Delivery and Acceptance of
Possession of Expansion Space," attached hereto as Exhibit B, which shall
specify the Expansion Space Commencement Date.
8. Alterations.
(A) Lessor shall provide to Lessee an improvement allowance, not to exceed
One Hundred Ninety Thousand Five Hundred Seventy-Five and 00/l00ths Dollars
($190,575.00) (the "Allowance"), for (i) the purchase and installation of
Lessee's Alterations (as defined in the Lease) within the Demised Premises
during the first six (6) calendar months following the Extension Commencement
Date, and (ii) ancillary costs directly related to Lessee's occupancy of the
Demised Premises (including, but not limited to, furniture purchases and
relocation expenses). Lessee may submit to Lessor, but on a monthly basis
only, invoices for such costs incurred by Lessee under (i) and (ii) above.
Lessee shall also provide appropriate signed waivers of mechanic's liens
executed by all contractors or subcontractors installing Alterations in the
Demised Premises or providing other qualified services on behalf of Lessee.
After inspection and approval of the portion of the Alterations installed as
reflected by such invoices, and verification of the invoices and waivers
submitted, Lessor shall pay to Lessee (or any other party on Lessee's behalf at
Lessee's written request) the lesser of (i) the total amount of such approved
invoices or (ii) the Allowance. In no event however shall Lessor be obligated
to reimburse Lessee (or any other party on Lessee's behalf at Lessee's written
request) for any amount, where Lessor's liability for amounts applied by Lessor
or reimbursed exceed in the aggregate the amount of the Allowance specified
above. In the event a portion of the Allowance remains after the first six (6)
full calendar months following the Extension Commencement Date, such remaining
portion shall be credited to Lessee's next due payment(s) of Monthly Rent. In
the event Lessee employs the services of Lessor as a construction manager for
Lessee's Alterations in the Demised Premises, Lessee shall pay to Lessor seven
percent (7%) of the cost of such Alterations installed in the Demised Premises,
such fee being compensation for Lessor's general conditions, overhead and
profit.
(B) Lessee shall not be required by Lessor to remove (i) the tenant
improvements located in the Ground Floor Demised Premises and the Metro Level
Demised Premises in place as of the date of this Addendum as first hereinabove
set forth, or (ii) the Alterations installed pursuant to
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<PAGE> 67
either (a) this paragraph 8 of Addendum No. 3, or (b) subparagraph 7(vii) of
Addendum No. 3, at the expiration or earlier termination of the term of the
Lease; provided that in any case and notwithstanding the foregoing Lessee shall
have the responsibility to remove those tenant improvements unique to Lessee's
banking operations and use, including but not limited to automatic teller
machines, after hours depository and vaults. Lessee will not be required to
remove doors or walls. The provisions of the Lease as to Alterations shall
otherwise cover Lessee's obligations for repairs to the Ground Floor Demised
Premises and the Metro Level Demised Premises where Lessee removes or is
required to remove tenant improvements.
(C) In the event Lessee does not elect to exercise its option to extend
the term of the Lease for the then applicable Metro Level Extension Period, and
provided that Lessee is not in default under the Lease beyond any applicable
notice and cure periods, Lessor will remove, or cause to be removed, the
internal staircase within the Demised Premises, promptly after the expiration
of the term of the Lease with respect to the Metro Level Demised Premises. In
the area of the Ground Floor Demised Premises so affected by such removal,
Lessor shall restore such area with Building standard flooring and floor
covering at Lessor's cost and expense. Lessee shall not be entitled to any
abatement of rent arising from such restoration by Lessor.
(D) Lessee shall have the responsibility to comply with and undertake at
its expense any physical modifications to the Demised Premises required due to
the nature of Lessee's business operations, use of the Demised Premises, or
both, by application of any law, statute, ordinance or regulation.
9. Brokers
Lessor and Lessee each represent and warrant one to another that, except as
hereinafter set forth, neither of them has had any dealings with any broker or
employed any broker with respect to this Lease Addendum No. 3. Lessee
represents that it has employed The Rome Group, Inc. as its broker, and Lessor
represents that it has employed The Oliver Carr Company as its broker. Lessor
further agrees to pay the commissions accruing to each identified broker
pursuant to certain outside agreement(s). Lessor shall indemnify and hold
Lessee harmless, and Lessee shall indemnify and hold Lessor harmless, from and
against any claim or claims for brokerage or other commission arising from or
out of any breach of the foregoing representation and warranty by the
respective indemnitors.
10. Advertising and Promotional Fund.
Effective as of the Extension Commencement Date, the section of the Lease
entitled "ADVERTISING AND PROMOTIONAL FUND" is hereby deleted in its entirety.
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<PAGE> 68
11. Other Terms and Provisions.
All provisions of the Lease are hereby reaffirmed as if fully set forth
therein, except as they are modified or restated by the provisions of this
Lease Addendum No. 3. If any provision of this Lease Addendum No. 3 conflicts
with any provision of the Lease, the provision of this Lease Addendum No. 3
shall control. All terms and conditions of the Lease, except as otherwise
stated in this Lease Addendum No. 3, are fully applicable to the Additional
Demised Premises.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Addendum No. 3
to be signed in their names by their duly authorized representatives and
delivered as their act and deed, intending to be legally bound by its terms and
provisions.
LESSOR:
THE SQUARE 106 ASSOCIATES
By: /s/ OLIVER T. CARR, JR.
-------------------------------
Oliver T. Carr, Jr.,
Managing Venturer
DISTRICT OF COLUMBIA, to wit:
I, Olivia M. Kerr, a Notary Public in and for the District of Columbia do
hereby certify that Oliver T. Carr, Jr., who is personally well known to me as
the person who executed the foregoing and annexed Lease Addendum No. 3, dated
the 12th day of February, 1992, on behalf of the Lessor, to acknowledge the
same, personally appeared before me in said District and acknowledged said
Lease Addendum No. 3 to be the act and deed of The Square 106 Associates, and
delivered the same as such.
GIVEN under the hand and seal this 28th day of February, 1992.
/s/ OLIVIA M. KERR
----------------------------------
Notary Public, D.C.
My commission expires: November 30, 1996
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<PAGE> 69
LESSEE:
Attest: CENTURY BANCSHARES, INC.
/s/ ROSEMARY GAINES By: /s/ JOSEPH S. BRACEWELL
- ------------------------------ ---------------------------
Name: Rosemary Gaines Name: Joseph S. Bracewell
Title: Acting Secretary Title: President
( Corporate Seal )
The District of Columbia )
) to wit:
- ---------------------------
)
- ---------------------------
I, Mark A. Hayes, a Notary Public in and for the aforesaid jurisdiction do
hereby certify that Joseph S. Bracewell, who is personally well known to me as
the person who executed the foregoing and annexed Lease Addendum No. 3, dated
the 12th day of February, 1992, on behalf of the Lessee, to acknowledge the
same, personally appeared before me in said jurisdiction and acknowledged said
Lease Addendum No. 3 to be the act and deed of Century Bancshares, Inc., and
delivered the same as such.
GIVEN under the hand and seal this 13th day of February, 1992.
/s/ MARK A. HAYES
------------------------------
Notary Public
My commission expires: July 31, 1993
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<PAGE> 70
EXHIBIT A
[This exhibit is a floor plan of the ground floor of
International Square indicating with a crosshatch the
existing office space leased to Century Bancshares, Inc.]
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<PAGE> 71
EXHIBIT A-1
[This exhibit is a floor plan of the metro level of International
Square indicating with vertical lines the existing office space
leased to Century Bancshres, Inc. and indicating with a crosshatch
the expansion area being leased under Lease Addendum No. 3.]
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<PAGE> 72
ADDENDUM NO. 4 TO LEASE
THIS ADDENDUM NO. 4 dated the 27th day of October, 1995, by and between
Carr Realty, L.P., a Delaware limited partnership (hereinafter referred to as
"Lessor"), and Century Bancshares, Inc., a Delaware corporation, (hereinafter
referred to as "Lessee").
WHEREAS, by Lease dated the 14th day of January, 1982, The Square 106
Associates, predecessor in interest of Lessor ("Prior Lessor"), leased to
Century National Bank ("Century Bank"), Lessee's predecessor-in-interest,
approximately 3,895 square feet of rentable area on the ground floor of the
office building situated at 1875 Eye Street, N.W., Washington, D.C., 20006
(said premises hereinafter referred to as the "Ground Floor Demised Premises,"
and said building hereinafter referred to as the "Building");
WHEREAS, by Lease Addendum No. 1 dated the 14th day of March, 1984, Prior
Lessor leased to Century Bank additional rentable area in the Building
comprising approximately 5,038 square feet of rentable area on the metro level
of the Building;
WHEREAS, by Lease Addendum No. 2 dated the 18th day of December, 1991,
Prior Lessor leased to Century Bank approximately 248 square feet of additional
rentable area on the metro level of the Building;
WHEREAS, the rentable area on the metro level of the Building is
hereinafter collectively referred to as the "Metro Level Demised Premises," and
shall amount to a total rentable area of five thousand two hundred eighty-six
(5,286) square feet, and the Metro Level Demised Premises and the Ground Floor
Demised Premises are hereinafter collectively referred to as the "Demised
Premises," and shall amount to a total rentable area of nine thousand one
hundred eighty-one (9,181) square feet;
WHEREAS, Lessee is the successor by merger to Century Bank, and Lessee has
assumed all of Century Bank's interest, rights and obligations under the Lease;
WHEREAS, by Lease Addendum No. 3 dated the 12th day of February, 1992, the
term of the Lease was extended pursuant to the provisions thereof (said Lease,
Lease Addendum No. 1, Lease Addendum No. 2 and Lease Addendum No. 3 hereinafter
collectively referred to as the "Lease");
WHEREAS, Lessor has notified Lessee of the availability of approximately 65
square feet of additional rentable area on the metro level of the Building, and
Lessor and Lessee have successfully negotiated mutually agreeable terms and
conditions for the leasing of said area by Lessee;
<PAGE> 73
WHEREAS, Lessor and Lessee desire to formally reflect their understandings
and agreements whereby the Demised Premises will be expanded, and therefore to
revise and modify the Lease accordingly, with respect to the following
provisions:
1. Additional Rentable Area
2. Broker and Agent
3. Other Terms and Provisions
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
1. ADDITIONAL RENTABLE AREA
Lessee agrees to lease from Lessor, and Lessor agrees to lease to Lessee,
additional rentable square feet amounting to approximately 65 square feet of
rentable area on the metro level of the Building, the additional area being
identified on the attached floor plan and made part of this Addendum No. 4 as
Exhibit A (said rentable area being hereinafter referred to as the "Additional
Rentable Area"). The Demised Premises and the Additional Rentable Area shall be
collectively referred to as the "Demised Premises Expanded", and said amount to
a total rentable area of approximately 9,246 square feet.
Subject to and upon the covenants, agreements and conditions of Lessor and
Lessee set forth herein, or in any Exhibit hereto, the term of the Lease with
respect to the Additional Rentable Area shall commence on November 1, 1995
(hereinafter called the "Additional Rentable Area Commencement Date"), and
shall be coterminous with the term of the Lease as it applies to the Ground
Floor Demised Premises * see page 3.
Lessor shall deliver, and Lessee shall accept, the Additional Rentable Area
in its "as-is" condition.
The initial Monthly Rent for the Additional Rentable Area, as of the
Additional Rentable Area Commencement Date, which Lessee hereby agrees to pay
in advance to Lessor, and Lessor hereby agrees to accept, shall be Four Hundred
Dollars ($400.00). Such Monthly Rent shall, however, be increased on each
November 1, commencing on November 1, 1996, by multiplying the then Monthly
Rent by one hundred three percent (103%). Lessor agrees to abate such Monthly
Rent in the aggregate amount of One Thousand Two Hundred Dollars ($1,200.00),
such abatement to be applied against such Monthly Rent from November 1, 1995 to
January 31, 1996.
<PAGE> 74
As of the Additional Rentable Area Commencement Date, Lessee's
proportionate share of increases in Operating Expenses shall be increased by
0.02%, from 3.62% to 3.64%. Lessee's obligations with respect to 1995 shall be
pro-rated accordingly.
All Alterations to the Additional Rentable Area shall be performed in
accordance with the section of the Lease entitled "ALTERATIONS," and in
connection therewith Lessee shall submit for Lessor's approval all design and
construction documents.
2. BROKER AND AGENT
Lessor and Lessee each represent and warrant one to another that, except as
hereinafter set forth, neither of them has employed any broker in carrying on
the negotiations, or had any dealings with any broker, relating to this
Addendum No. 4. Lessor represents that it has employed Carr Real Estate
Services as its broker. Lessor, pursuant to a separate agreement, has agreed to
pay the commission of such identified broker. Lessor shall indemnify and hold
Lessee harmless, and Lessee shall indemnify and hold Lessor harmless, from and
against any claim or claims for brokerage or other commission arising from or
out of any breach of the foregoing representation and warranty by the
respective indemnitors.
3. OTHER TERMS AND CONDITIONS
All other provisions of the Lease shall remain in effect and unchanged
except as modified herein, and all terms, covenants and conditions shall remain
in effect as modified by this Addendum No. 4. If any provision of this Addendum
No. 4 conflicts with the Lease, the provisions of this Addendum No. 4 shall
control.
*including options to extend; provided, however, that the options to extend
shall apply separately to the Ground Floor Demised Premises and the
Additional Rentable Area.
-3-
<PAGE> 75
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Addendum No. 4
to be signed in its name under seal by its duly authorized representative and
delivered as its act and deed, intending to be legally bound by all its terms
and conditions.
LESSOR:
CARR REALTY, L.P.
Attest: By: Carr Realty Corporation
General Partner
/s/ ANDREA FISH BRADLEY By: /s/ THOMAS A. CARR
- -------------------------- -----------------------------
NAME: Andrea Fish Bradley Thomas A. Carr
---------------------------- President
TITLE: Vice President, General
---------------------------
Counsel and Corporate Secretary
LESSEE:
Attest: CENTURY BANCSHARES, INC.
By:
/s/ PAUL P. SCHAUS /s/ JOSEPH S. BRACEWELL
- --------------------------------- -------------------------------
NAME: Paul P. Schaus NAME: Joseph S. Bracewell
--------------------------- --------------------------
TITLE: Senior Vice President/CFO TITLE: Chairman of the Board
-------------------------- ------------------------
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<PAGE> 76
DISTRICT OF COLUMBIA, to wit:
I, Olivia M. Kerr, a Notary Public in and for the District of Columbia, do
hereby certify that Thomas A. Carr, who is personally well known to me to be
the person who executed the foregoing and annexed Lease Addendum No. 4, bearing
date on the 27th day of October, 1995, on behalf of Lessor, personally appeared
before me in said District and acknowledged the said Lease Addendum No. 4 to be
the act and deed of Carr Realty, L.P., and delivered the same as such.
GIVEN under my hand and seal this 9th day of November, 1995.
/s/ OLIVIA M. KERR
-------------------------
Notary Public, Inc.
My commission expires: November 30, 1996
)
- -------------
)
- -------------
)
- -------------
I, Debra M. Johnson , a Notary Public in and for the jurisdiction
aforesaid, do hereby certify that Joseph S. Bracewell, who is personally well
known to me to be the person who executed the foregoing and annexed Lease
Addendum No. 4, dated the 27th day of October,1995, on behalf of Lessee, to
acknowledge the same, personally appeared before me in said jurisdiction and
acknowledged said Lease Addendum No. 4 to be the act and deed of Century
Bancshares, Inc. and delivered the same as such.
GIVEN under my hand and seal this 27th day of October, 1995.
/s/ DEBRA M. JOHNSON
------------------------
Notary Public
My commission expires: April 30, 2000
-5-
<PAGE> 77
November 13, 1995
Mr. Paul P. Schaus
Senior Vice President and Chief Financial Officer
Century Bancshares, Inc.
1875 Eye Street, N.W.
Washington, D.C. 20006
Re: Addendum No. 4 to Lease
Century Bancshares, Inc.
1875 Eye Street. N.W.
Dear Mr. Schaus:
Enclosed please find your fully executed original of the above-referenced
document.
If you have any questions, please feel free to contact me at (202)
624-1725.
Very truly yours,
CARR REAL ESTATE SERVICES
/s/ DOUGLAS D. OLSON
Douglas D. Olson
Director of Retail Leasing
DDO/kac
Enclosure
cc: Mr. Jerry Masotti (w/enclosure)
Mr. Larry Goodwin (w/enclosure)
Ms. Kimberly Falck (w/enclosure)
Robert N. Weinstock, Esquire (w/enclosure)
-6-
<PAGE> 78
EXHIBIT A
[This exhibit is a floor plan of the metro level of International Square.]
-7-
<PAGE> 79
LEASE ADDENDUM NO. 5
THIS LEASE ADDENDUM NO. 5 ("Addendum No. 5) dated as of the first
(1st) day of June, 1996, by and between Carr Realty, L.P., a Delaware limited
partnership (hereinafter referred to as "Lessor"), and Century Bancshares,
Inc., a Delaware corporation (hereinafter referred to as "Lessee").
WHEREAS, by Lease dated the 14th day of January, 1982, The Square 106
Associates, Lessor's predecessor-in-interest ("Prior Lessor"), leased to
Century National Bank ("Century Bank"), Lessee's predecessor-in-interest,
approximately 3,895 square feet of rentable area on the ground floor of the
office building situated at 1875 Eye Street, N.W., Washington, D.C., 20006
(said premises hereinafter referred to as the "Ground Floor Demised Premises,"
and said building hereinafter referred to as the "Building");
WHEREAS, by Lease Addendum No. 1 dated the 14th day of March, 1984,
Prior Lessor leased to Century Bank additional rentable area in the Building
comprising approximately 5,038 square feet of rentable area on the metro level
of the Building;
WHEREAS, by Lease Addendum No. 2 dated the 18th day of December, 1991,
Prior Lessor leased to Century Bank approximately 248 square feet of additional
rentable area on the metro level of the Building (said area together with the
approximately 5,038 square feet of rentable area on the metro level of the
building is collectively referred to as the "Metro Level Demised Premises"
amounting to a total rentable area of approximately 5,286 square feet of
rentable area);
WHEREAS, Lessee is the successor by merger to Century Bank, and Lessee
has assumed all of Century Bank's interest, fights and obligations under the
Lease;
WHEREAS, by Lease Addendum No. 3 dated the 12th day of February, 1992,
the term of the Lease was extended pursuant to the provisions thereof;
WHEREAS, by Addendum No. 4 to Lease dated the 27th day of October,
1995, Lessor leased to Lessee approximately 65 square feet of additional
rentable area on the metro level of the Building (said area hereinafter
referred to as the "Additional Rentable Area");
WHEREAS, the above-described Lease, Lease Addendum No. 1, Lease
Addendum No. 2, Lease Addendum No. 3 and Addendum No. 4 to Lease are
hereinafter collectively referred to as the "Lease";
<PAGE> 80
WHEREAS, the Ground Floor Demised Premises, the Metro Level Demised
Premises and the Additional Rentable Area are hereinafter collectively referred
to as the "Demised Premises" and shall amount to a total rentable area of
approximately 9,246 square feet;
WHEREAS, Lessee has requested that the term of the Lease with respect
to the Metro Level Demised Premises be extended for an additional term of five
years, and Lessor, upon receipt of Lessee's request, has agreed to the
requested extension of the term of the Lease upon the terms and conditions
hereinafter set forth in the body of this Addendum No. 5;
WHEREAS, Lessor and Lessee desire to reflect their understandings and
agreements formally whereby the term of the Lease will be extended with respect
to the Metro Level Demised Premises, and therefore to revise and modify the
Lease accordingly, with respect to the following provisions:
<TABLE>
<S> <C>
1. Term
2. Rent
3. Options to Extend
4. Alterations
5. Option to Partially Terminate
6. Broker and Agent
7. Other Terms and Provisions
</TABLE>
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties agree as follows:
1. TERM
The term of the Lease with respect to the Metro Level Demised Premises
shall be extended for a period of five (5) years, such period to commence on
May 1, 1997 (the "Metro Level Extension Period 2 Commencement Date"), and to
expire on April 30, 2002 (the "Metro Level Extension Period 2 Expiration
Date"). This period is hereinafter referred to as the "Metro Level Extension
Period 2."
2. RENT
Effective as of June 1, 1996 (the "Effective Date") Lessee shall pay
to Lessor and Lessor shall accept from Lessee as monthly rent for the Metro
Level Demised Premises (the "Metro Level Monthly Rent"), without setoff,
deduction or demand, the following:
-2-
<PAGE> 81
<TABLE>
<CAPTION>
Annual
Rate Per Rentable
Period Monthly Rent Square Foot
------ ------------ -----------------
<S> <C> <C>
June 1, 1996 -May 31, 1997 $ 8,810.00 $ 20.00
June 1, 1997 -May 31, 1998 9,030.25 20.50
June 1, 1998 -May 31, 1999 9,254.91 21.01
June 1, 1999 -May 31, 2000 9,488.37 21.54
June 1, 2000 -May 31, 2001 9,726.24 22.08
June 1, 2001 -April 30, 2002 9,968.52 22.63
</TABLE>
3. OPTIONS TO EXTEND
Lessee's rights as set forth in this Addendum No. 5 shall be in lieu
of and in full satisfaction of Lessee's rights with respect to Metro Level
Extension Period 2 as set forth in Addendum No. 3. Lessee's rights with respect
to Metro Level Extension Period 3 and Metro Level Extension Period 4, each as
set forth in Addendum No. 3, shall continue in full force and effect.
4. ALTERATIONS
(A) Lessor, at Lessor's sole expense, shall make the renovations
to the Metro Level Demised Premises described in the space plans and
specifications attached hereto as Exhibit A ("Preliminary Drawing and
Specifications") (the "Renovations"). Lessor's obligations shall include
without limitation, any and all costs associated with the design or
construction of the Renovations, including the costs of permits and licenses
and construction management fees, life safety systems and sprinkler
installations, space planning, engineering architectural and design fees phone
and computer cabling and installation costs, and costs of fixtures,
furnishings, and equipment. As part of the Renovations, and included in the
cost thereof, Lessor shall restore Lessee's HVAC to good working condition for
use in the Metro Level Demised Premises. Lessor currently estimates the costs
of the Renovations shall equal approximately $45,000. Notwithstanding such
estimate, Lessor agrees that it shall be solely responsible for any costs to
perform and complete the Renovations in excess of said estimate except to the
extent such excess costs are caused by changes to the Renovations requested by
Lessee in writing. Notwithstanding anything contained in the Lease to the
contrary, Lessor shall maintain and repair the HVAC system in the Metro Level
Demised Premises, but only to the extent such maintenance and repair is not
covered by the service contract required to be obtained by Lessee for such
system pursuant to the Lease.
(B) All Renovations shall be performed by a general contractor
selected by Lessor in Lessor's discretion ("Lessor's General Contractor"),
shall consist solely of new materials and shall be of good quality and
workmanship. The Renovations shall be purchased and installed by Lessor
-3-
<PAGE> 82
or Lessor's General Contractor. All Renovations shall be and shall remain the
property of Lessor. After the Effective Date, any replacement of any property,
fixtures or improvements of Lessor, whether made at Lessee's expense or
otherwise, shall be and shall remain the property of Lessor.
(C) As part of the Renovations, Lessor's staff architect shall
prepare design and architectural drawings which shall be subject to the written
approval of Lessor and Lessee and shall be consistent with the Preliminary
Drawings and Specifications. Lessor shall also prepare mechanical and
electrical working drawings ("Working Drawings"). The Working Drawings shall
be based upon the architectural drawings, and Lessor shall obtain Lessee's
approval of the Working Drawings.
(D) Lessor shall use, and shall cause Lessor's General Contractor
to use, reasonable efforts not to interfere with Lessee's business but shall be
granted access to the Demised Premises during business hours for the purpose of
performing the Renovations. Lessor shall use reasonable efforts to obtain all
necessary permits and licenses for the performance and completion of the
Renovations as soon as reasonably practicable following the execution and
delivery of this Addendum No. 5. Lessor shall use reasonable efforts to cause
Lessor's General Contractor to commence the Renovations within 10 days after
such permits and licenses are issued and to complete the Renovations within 30
days thereafter. In no event shall Lessee be entitled to any rent abatement as
a result of the performance of the Renovations. Lessor shall indemnify and hold
harmless Lessee from any property damage or bodily injury to Lessee, its
employees, agents or customers caused by Lessor or Lessor's General Contractor,
or their respective employees, agents or subcontractors, in the course of
completing the Renovations. In no event will Lessor be responsible for
consequential damages, including but not limited to business interruption.
5. OPTION TO PARTIALLY TERMINATE
Lessee shall have, and is hereby given, the option to terminate this
Lease with respect to the Metro Level Demised Premises at any time during the
term of this Lease, provided Lessee is not in default of its obligation to pay
rent, or of any other material term or condition of this Lease, either on the
date Lessee notifies Lessor of its intent to exercise this option or (at
Lessor's option) at any time up to and including the date upon which the Lease
is to terminate with respect to the Metro Level Demised Premises (the "Metro
Level Demised Premises Termination Date"). Lessee may exercise this option to
terminate only by serving upon Lessor written notice of such election no later
than twelve (12) months prior to the Metro Level Demised Premises Termination
Date (the "Required Election Date"). Lessee shall, as a condition to such
termination, pay to Lessor an "Unamortized Loan Amount Termination Fee" as
hereinafter defined. The Unamortized Loan Amount Termination Fee shall be due
and payable on or before the Metro Level Demised Premises Termination Date, and
the payment thereof shall be a condition of the effectiveness of the
termination of this Lease with respect to the Metro Level Demised Premises.
-4-
<PAGE> 83
The "Unamortized Loan Amount Termination Fee" shall be the
then-current balance of the "Assumed Loan" (as hereinafter defined) as of the
Metro Level Demised Premises Termination Date. The Assumed Loan shall be a
hypothetical loan made by Lessor to Lessee as of the Effective Date. The
original principal amount of the Assumed Loan shall be deemed to be all costs
and expenses incurred by Lessor in connection with the Renovations. Interest
shall be deemed to accrue from time to time on the outstanding principal
balance of the Assumed Loan at an annual rate of eight percent (8%) compounded
monthly. For each full monthly payment of Monthly Rent paid by Lessee to
Lessor, Lessee shall be deemed to have paid concurrently with such monthly
payment to Lessor that amount which, in seventy-one (71) equal consecutive
monthly installments of such amount, would fully amortize the original
principal amount of the Assumed Loan and all interest earned thereon.
In the event Lessee elects to terminate the Lease with respect to the
Metro Level Demised Premises pursuant to this section of the Lease, Lessee
shall, in addition, remain fully obligated for all rent and other charges,
including Lessee's prorated share of increases in Operating Expenses
attributable to the Metro Level Demised Premises and incurred under the Lease
through the Metro Level Demised Premises Termination Date, including amounts
billed subsequent to the Metro Level Demised Premises Termination Date relating
to the period prior thereto.
In the event Lessee properly exercises this option, Lessor shall
prepare and the parties shall execute a Termination of Metro Level Lease
Agreement within thirty (30) days following the date on which Lessee exercises
its option to terminate.
6. BROKER AND AGENT
Lessor and Lessee each represents and warrants one to the other that,
except as hereinafter set forth, it has not employed any broker in carrying on
the negotiations, or had any dealings with any broker, relating to this
Addendum No. 5. Lessor represents that it has employed Carr Real Estate
Services as its broker. Lessor, pursuant to a separate agreement, has agreed to
pay the commission of such identified broker. Lessor shall indemnify and hold
Lessee harmless, and Lessee shall indemnify and hold Lessor harmless, from and
against any claim or claims for brokerage or other commission arising from or
out of any breach of the foregoing representation and warranty by the
respective indemnitors.
7. OTHER TERMS AND CONDITIONS
All other provisions of the Lease shall remain in effect and unchanged
except as modified herein, and all terms, covenants and conditions shall remain
in effect as modified by this Addendum No. 5. Specifically, this Addendum No. 5
shall have no effect on Lessee's obligations with regard to the Ground Floor
Demised Premises. If any provision of this Addendum No. 5 conflicts with the
Lease, the provisions of this Addendum No. 5 shall control.
-5-
<PAGE> 84
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Addendum
No. 5 to be signed in its name under seal by its duly authorized representative
and delivered as its act and deed, intending to be legally bound by all its
terms and conditions.
LESSOR:
CARR REALTY, L.P.
By: CarrAmerica Realty Corporation
Attest: General Partner
By:
- --------------------------- ---------------------------
NAME: Thomas A. Carr
---------------------- President
TITLE:
---------------------
LESSEE:
Attest: CENTURY BANCSHARES, INC.
/s/ F. KATHRYN ROBERTS By: /s/ JOSEPH S. BRACEWELL
- --------------------------- ----------------------------
NAME: F. Kathryn Roberts Joseph S. Bracewell
---------------------- Chairman of the Board
TITLE: Corporate Secretary
---------------------
-6-
<PAGE> 85
DISTRICT OF COLUMBIA, to wit:
I, , a Notary Public in and for the District of
-----------------------
Columbia do hereby certify that Thomas A. Carr, who is personally well known
to me to be the person who executed the foregoing and annexed Lease Addendum
No. 5, dated as of the first day of June, 1996, on behalf of Lessor, personally
appeared before me in said District and acknowledged the said Lease Addendum
No. 5 to be the act and deed of Carr Realty, L.P., and delivered the same as
such.
GIVEN under my hand and seal this day of ,1996.
--------- --------------------
-------------------------------
Notary Public
My commission expires:
---------------------
District of Columbia )
)
- --------------------------
)
- --------------------------
I, Debra M. Johnson, a Notary Public in and for the jurisdiction
aforesaid, do hereby certify that Joseph S. Bracewell, who is personally well
known to me to be the person who executed the foregoing and annexed Lease
Addendum No. 5, dated as of the first day of June, 1996, on behalf of Lessee,
to acknowledge the same, personally appeared before me in said jurisdiction and
acknowledged said Lease Addendum No. 5 to be the act and deed of Century
Bancshares, Inc. and delivered the same as such.
GIVEN under my hand and seal this 1st day of October, 1996.
/s/ DEBRA M. JOHNSON
-------------------------------
Notary Public
My commission expires: April 30, 2000
-7-
<PAGE> 1
EXHIBIT 10.11
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("Sublease") is made and entered into as of the
1st day of May, 1992, by and between CENTURY BANCSHARES, INC., a Delaware
corporation, hereinafter called "Sublessor," and CENTURY NATIONAL BANK, a
national banking association, hereinafter called "Sublessee."
W I T N E S S E S T H:
WHEREAS, by Lease dated the 14th of January, 1982, The Square 106
Associates, a District of Columbia joint venture, hereinafter called "Lessor",
leased to Sublessee, Sublessor's predecessor in interest, approximately 3,895
square feet of rentable area on the ground floor of the office building
situated at 1875 Eye Street, N.W., Washington, D.C. 20006 (said premises
hereinafter referred to as the "Ground Floor Demised Premises" and said
building hereinafter referred to as the "Building");
WHEREAS, by Lease Addendum No. 1 dated the 14th of March, 1984, Lessor
leased to Sublessee additional rentable area in the Building comprising
approximately 5,038 of square feet of rentable area on the metro level of the
Building;
WHEREAS, by Lease Addendum No. 2 dated the 18th day of December, 1991,
Lessor leased to Sublessee approximately 248 square feet of additional rentable
area on the metro level of the Building (said Lease, Lease Addendum No. 1 and
Lease Addendum No. 2 hereinafter collectively referred to as the "Lease");
WHEREAS, by Lease Addendum No. 3 dated the 12th day of February, 1992,
Sublessor, the successor to Sublessee and having assumed all of Sublessee's
interests, rights and obligations under
<PAGE> 2
the Lease, extended the term of the Lease with respect to the Ground Floor
Demised Premises for a period of ten (10) years commencing on May 1, 1992 and
expiring on April 30, 2002, and extended the term of the Lease with respect to
the total rentable area on the metro level of the Building leased by Sublessor
totaling approximately 5,286 square feet (said premises hereinafter referred to
as the "Metro Level Demised Premises") for a period of five (5) years
commencing on May 1, 1992 and expiring on April 30, 1997 (the Lease and said
Lease Addendum No. 3 hereinafter collectively referred to as the "Master
Lease");
WHEREAS, Sublessor desires to sublease to Sublessee approximately 3,755
square feet of the rentable area on the Ground Floor Demised Premises and
approximately 5,286 square feet of the rentable area on the Metro Level Demised
Premises (said subleased premises hereinafter collectively referred to as the
"Subleased Premises") which Subleased Premises are crosshatched on Exhibit A
attached hereto; and
WHEREAS, Sublessor and Sublessee desire to reflect formally their
understanding and agreement whereby the Subleased Premises shall be subleased;
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and intending to be legally bound, the parties hereto do
hereby mutually agree as follows:
1. Subleased Premises. Subject to and upon the terms and conditions
set forth herein, Sublessor hereby subleases unto Sublessee the Subleased
Premises.
2. Term. The term of this Sublease shall commence on the first day
of May, 1992 ("Commencement Date"), and shall expire on the date thirty (30)
days after written notice of
-2-
<PAGE> 3
termination is given by Sublessor to Sublessee or by Sublessee to Sublessor;
provided, however, that subject to the option of the Sublessee to extend the
period of this Sublease in accordance with Paragraph 6 hereof, the term of this
Sublease shall not extend, with respect to the portion of the Subleased
Premises within the Ground Floor Demised Premises, beyond the 29th day of
April, 2002, and with respect to the portion of the Subleased Premises within
the Metro Level Demised Premises, beyond the 29th day of April, 1997.
3. Use. Sublessor will use and occupy the Subleased Premises
solely for the purpose of operating a bank and general office purposes. The
Subleased Premises will not be used for any other purposes without the prior
written consent of Sublessor.
4. Base Rent.
A. Beginning on the Commencement Date, and continuing throughout the
term of this Sublease, Sublessee hereby agrees and promises to pay monthly in
advance to Sublessor for the portion of the Subleased Premises within the
Ground Floor Demised Premises, without demand therefor and without deduction or
setoff, at Sublessor's address as provided herein, and Sublessor hereby agrees
to accept, base rent as follows:
<TABLE>
<CAPTION>
Period Monthly Rent
------ ------------
<S> <C>
May 1, 1992 through April 30, 1997 $12,309.01
May 1, 1997 through March 31, 2002 $13,907.59
April 1, 2002 through April 29, 2002 $13,259.84
</TABLE>
-3-
<PAGE> 4
In the event that Sublessee exercises its option to extend the term of this
Sublease under Paragraph 6 hereof, monthly base rent for the term so extended
shall be adjusted in accordance with the provisions of Paragraph 6 hereof.
B. Beginning on the Commencement Date, and continuing throughout the
term of this Sublease, Sublessee hereby agrees and promises to pay monthly in
advance to Sublessor for the portion of the Subleased Premises within the Metro
Level Demised Premises, without demand therefor and without deduction or
setoff, at Sublessor's address as provided herein, and Sublessor hereby agrees
to accept, rent as follows:
<TABLE>
<CAPTION>
Period Monthly Rent
------ ------------
<S> <C>
May 1, 1992 through March 31, 1997 $10,131.50
April 1, 1997 through April 29, 1997 $ 9,659.62
</TABLE>
In the event that Sublessee exercises its option to extend the term of this
Sublease under Paragraph 6 hereof, monthly base rent for the term so extended
shall be adjusted in accordance with the provisions of Paragraph 6.
5. Additional Rent. Throughout the term of this Sublease, Sublessee
agrees and promises to pay to Sublessor, as additional rent hereunder, within
ten (10) days after receipt of Sublessor's statement therefor, and without
deduction or setoff, its pro rata share of expenditures incurred by Sublessor
pursuant to sections in the Master Lease entitled "Rental Escalation for
Increases in Expenses." For all purposes hereof, Sublessee's pro rata share
shall be deemed to be 98.50%.
-4-
<PAGE> 5
6. Option to Extend. In the event that Sublessor exercises any of
its options under the Master Lease to extend the term of the Master Lease with
regard to the Ground Floor Demised Premises and/or the Metro Level Demised
Premises, Sublessor shall serve upon Sublessee written notice of Sublessor's
exercise any such option to extend within thirty (30) days of such exercise,
and Sublessee shall have the option to extend the term of this Sublease for the
term of the extension period granted to Sublessor under the Master Lease less
one day. Sublessee may exercise any such option to extend only by serving on
Sublessor, no later than thirty (30) days after receipt from Sublessor of
notice of Sublessor's exercise of its option(s) to extend under the Master
Lease, written notice of Sublessee's intent to exercise its option to extend.
The monthly base rent and additional rent for the term of this Sublease
as so extended shall be determined by Sublessor and Sublessee based on the
rental payable by Sublessor determined in accordance with sections in the
Master Lease entitled "Options to Extend."
7. Acceptance of Subleased Premises. Sublessee accepts the
Subleased Premises from Sublessor in an "as is" condition and agrees not to
make any improvements, additions, changes or modifications in or to the
Subleased Premises during the term hereof without the prior written consent of
Sublessor.
8. Sublessor's Liability. Sublessor does not agree to perform or
assume any obligations of Lessor under the provisions of the Master Lease, but
shall exercise due diligence in attempting to cause Lessor to perform its
obligations under the Master Lease for the benefit of Sublessor and Sublessee.
-5-
<PAGE> 6
9. Sublessee's Indemnity of Sublessor. Sublessee agrees to
indemnify and hold harmless Sublessor from all damages resulting from any
default of Sublessee under this Sublease. If Sublessee defaults in its
obligations under this Sublease and Sublessor pays any sums due or performs any
of Sublessee's other obligations or duties under this Sublease in order to
prevent Sublessor from being in default under the terms of the Master Lease,
Sublessee shall immediately reimburse Sublessor for the amount of such sums and
all other costs incurred by Sublessor in fulfilling Sublessee's obligations
under this Sublease together with interest on such sums at the interest rate of
twelve percent (12%) per annum.
10. Sublessor Remedies Against Sublessee. In the event Sublessee
defaults under the terms of this Sublease, Sublessor shall have all of the
rights and remedies against the Sublessee that are available by law and those
reserved by Lessor in the Master Lease in the event of a default by Sublessor
thereunder. These rights and remedies include, without limitation,
Sublessor's right to proceed to recover possession of the Subleased Premises
from the Sublessee under and by virtue of the provisions of the laws of the
District of Columbia or by such other proceedings, including re-entry and
possession, as may be applicable.
11. Master Lease. This Sublease is subject to all of the terms and
provisions of the Master Lease and Sublessee shall not suffer any act or
omission which will violate any of the provisions of the Master Lease. To the
extent the Master Lease does not conflict with the terms and conditions of this
Sublease, the Master Lease is hereby incorporated into this Sublease by
reference as if fully set forth herein, and Sublessee hereby promises Sublessor
to perform all of the obligations of Sublessor
-6-
<PAGE> 7
to Lessor under the Master Lease and agrees to be bound by the terms and
conditions of the Master Lease to the extent they are not expressly modified or
limited by the terms of this Sublease and to the extent that they apply to the
Subleased Premises. However, Sublessee in no way assumes or promises Lessor to
perform any of the obligations of Sublessor to Lessor under the Master Lease.
In the event the Master Lease terminates, this Sublease shall automatically
terminate and the parties shall be relieved from all liabilities and
obligations under this Sublease.
12. Surrender of the Premises Upon Termination of this Lease. Upon
termination of this Sublease, Sublessee shall surrender the Subleased Premises
and all improvements thereon and therein which have been made by Sublessee to
Sublessor in accordance with the terms of the Master Lease.
13. Assignment/Sublease. Sublessee shall not assign this Sublease nor
sublet the Subleased Premises in whole or in part, and shall not permit
Sublessee's interest in this Sublease to be vested in any third party by
operation of law or otherwise.
14. Notices. All notices or other communications hereunder shall be
in writing and shall be deemed duly given if delivered in person, or by
certified or registered mail, return receipt requested, postage prepaid, (1) if
to Sublessor, at 1875 Eye Street, N.W., Washington, D.C. 20006, Attention:
Chairman, and (3) if to Sublessee, at 1875 Eye Street, N.W., Washington, D.C.
20006, Attention: President. The party to receive notices and the place notices
are to be sent for Sublessor or Sublessee may be changed by notice given
pursuant to the provisions hereof.
-7-
<PAGE> 8
15. Miscellaneous.
A. Nothing herein shall be deemed or construed by the parties hereto
or by any third party as creating the relationship of principal-agent,
partnership or joint venture between any of the parties hereto.
B. The headings of the several paragraphs contained herein are for
convenience only and do not define, limit or construe the contents of such
paragraphs.
C. Sublessee represents that it has read and is familiar with all of
the terms of the Master Lease.
D. Words of any gender used in this Sublease shall be held and
construed to include any other gender and words in the single number shall be
held to include the plural, unless the context requires otherwise.
E. This Sublease, together with the terms of the Master Lease
incorporated herein and Exhibit A attached hereto and made a part hereof,
contain the entire agreement between the parties and this Sublease may be
modified or amended only by a written agreement executed by the parties hereto.
F. This instrument shall be binding upon and inure to the benefit to
all of the parties hereto, their successors, legal representatives, and (to the
extent permitted hereunder) assigns.
IN WITNESS WHEREOF, Sublessor and Sublessee have caused this Sublease to
be signed in their names under seal by their duly authorized officers and
deliveredd as their act and deed, intending to be legally bound by its terms
and provisions.
-8-
<PAGE> 9
SUBLESSOR:
ATTEST: CENTURY BANCSHARES, INC.
/s/ WILLIAM C. OLDAKER /s/ JOSEPH S. BRACEWELL
- ---------------------------- ----------------------------
Name: William C. Oldaker Joseph S. Bracewell
Title: Secretary Chairman
(Corporate Seal)
SUBLESSEE:
ATTEST: CENTURY NATIONAL BANK
/s/ ROSEMARY GAINES /s/ THOMAS B. HOPPIN
- ---------------------------- ----------------------------
Name: Rosemary Gaines Name: Thomas B. Hoppin
Title: Vice President Title: President
(Corporate Seal)
-9-
<PAGE> 10
DISTRICT OF COLUMBIA to wit:
I, Maria Lina Gonzalez, notary public in and for the aforesaid
jurisdiction, do hereby certify that Joseph S. Bracewell, who is personally
well known to me as the person who executed the foregoing and annexed Sublease
dated as of the 1st day of May, 1992, on behalf of the Sublessor, to
acknowledge the same, personally appeared before me in said jurisdiction and
acknowledged said Sublease to be the act and deed of Century Bancshares, Inc.
and delivered the same as such.
Given under the hand and seal this 12th day of August, 1992.
/s/ MARIA LINA GONZALEZ
-----------------------------------
Notary Public, District of Columbia
My commission expires: May 14, 1994.
------------
-10-
<PAGE> 11
DISTRICT OF COLUMBIA to wit:
I, Maria Lina Gonzalez, a notary public in and for the aforesaid
jurisdiction, do hereby certify that Thomas B. Hoppin who is personally well
known to me as the person who executed the foregoing and annexed Sublease dated
as of the 1st day of May, 1992, on behalf of the Sublessee, to acknowledge the
same, personally appeared before me in said jurisdiction and acknowledged said
Sublease to be the act and deed of Century National Bank and delivered the same
as such.
GIVEN under the hand and seal this 12th day of August, 1992.
/s/ MARIA LINA GONZALEZ
-----------------------------------
Notary Public, District of Columbia
My commission expires: May 14, 1994.
------------
-11-
<PAGE> 12
EXHIBIT "A"
[Two pages, each bearing a drawing by Oliver Carr Co. depicting "International
Square," bordered by Eye St., 19th St., K St. and 18th St., and identifying
with cross hatches the Subleased Premises on the Ground Floor and Metro Level,
respectively].
-12-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Century National Bank, incorporated under the laws of the United States.
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
The Board of Directors
Century Bancshares, Inc.:
We consent to the use of our report dated March 15, 1996, included
herein, and to the reference to our firm under the heading "Experts" in the
Prospectus.
KPMG Peat Marwick LLP
Washington, D.C.
October 18, 1996
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or
director of Century Bancshares, Inc., a Delaware corporation (the "Company"),
hereby constitutes and appoints Joseph S. Bracewell the undersigned's true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for the undersigned and in the undersigned's name, place and
stead, in any and all capacities (until revoked in writing), to sign, execute
and file with the Securities and Exchange Commission the Company's Registration
Statement on Form S-1 (or other appropriate form), together with all amendments
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said
attorney-in-fact and agent, or his substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 14th day of October, 1996.
/s/ BERNARD J. CRAVATH
-----------------------------------
Bernard J. Cravath
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or
director of Century Bancshares, Inc., a Delaware corporation (the "Company"),
hereby constitutes and appoints Joseph S. Bracewell the undersigned's true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for the undersigned and in the undersigned's name, place and
stead, in any and all capacities (until revoked in writing), to sign, execute
and file with the Securities and Exchange Commission the Company's Registration
Statement on Form S-1 (or other appropriate form), together with all amendments
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said
attorney-in-fact and agent, or his substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 15th day of October, 1996.
/s/ GEORGE CONTIS
------------------------------------
George Contis
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or
director of Century Bancshares, Inc., a Delaware corporation (the "Company"),
hereby constitutes and appoints Joseph S. Bracewell the undersigned's true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for the undersigned and in the undersigned's name, place and
stead, in any and all capacities (until revoked in writing), to sign, execute
and file with the Securities and Exchange Commission the Company's Registration
Statement on Form S-1 (or other appropriate form), together with all amendments
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said
attorney-in-fact and agent, or his substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 15th day of October, 1996.
/s/ JOSEPH H. KOONZ, JR.
------------------------------------
Joseph H. Koonz, Jr.
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or
director of Century Bancshares, Inc., a Delaware corporation (the "Company"),
hereby constitutes and appoints Joseph S. Bracewell the undersigned's true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for the undersigned and in the undersigned's name, place and
stead, in any and all capacities (until revoked in writing), to sign, execute
and file with the Securities and Exchange Commission the Company's Registration
Statement on Form S-1 (or other appropriate form), together with all amendments
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said
attorney-in-fact and agent, or his substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 14th day of October, 1996.
/s/ WILLIAM McKEE
------------------------------------
William McKee
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or
director of Century Bancshares, Inc., a Delaware corporation (the "Company"),
hereby constitutes and appoints Joseph S. Bracewell the undersigned's true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for the undersigned and in the undersigned's name, place and
stead, in any and all capacities (until revoked in writing), to sign, execute
and file with the Securities and Exchange Commission the Company's Registration
Statement on Form S-1 (or other appropriate form), together with all amendments
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said
attorney-in-fact and agent, or his substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 15th day of October, 1996.
/s/ WILLIAM C. OLDAKER
------------------------------------
William C. Oldaker
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or
director of Century Bancshares, Inc., a Delaware corporation (the "Company"),
hereby constitutes and appoints Joseph S. Bracewell the undersigned's true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for the undersigned and in the undersigned's name, place and
stead, in any and all capacities (until revoked in writing), to sign, execute
and file with the Securities and Exchange Commission the Company's Registration
Statement on Form S-1 (or other appropriate form), together with all amendments
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said
attorney-in-fact and agent, or his substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 15th day of October, 1996.
/s/ NEAL R. GROSS
------------------------------------
NEAL R. Gross
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or
director of Century Bancshares, Inc., a Delaware corporation (the "Company"),
hereby constitutes and appoints Joseph S. Bracewell, the undersigned's true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for the undersigned and in the undersigned's name, place and
stead, in any and all capacities (until revoked in writing), to sign, execute
and file with the Securities and Exchange Commission the Company's Registration
Statement on Form S-1 (or other appropriate form), together with all amendments
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said
attorney-in-fact and agent, or his substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 15th day of October, 1996.
/s/ JOHN R. COPE
------------------------------------
John R. Cope
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