SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2)) [ ]
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
James Monroe Bancorp, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): [X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
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4. Date Filed:
JAMES MONROE BANCORP INC.
3033 WILSON BOULEVARD
ARLINGTON, VIRGINIA 22201-3843
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 2004
TO THE SHAREHOLDERS OF JAMES MONROE BANCORP, INC.:
The Annual Meeting of Shareholders of James Monroe Bancorp, Inc. (the
"Company") will be held on Thursday, April 29, 2004, at
The Ritz - Carlton Hotel
Pentagon City
1250 South Hayes Street
Arlington, Virginia
at 6:30 P.M., for the following purposes:
(1) To elect eleven (11) persons to serve as directors until the next
annual meeting of shareholders and until their successors are duly
elected and qualified;
(2) To consider and approve an amendment to the Company's Articles of
Incorporation increasing the number of authorized shares of common
stock to 10,000,000; and
(3) To transact such other business as may properly come before the
meeting or any adjournment or postponement of the meeting.
ONLY SHAREHOLDERS OF RECORD AS OF MARCH 12, 2004 WILL BE ENTITLED TO
VOTE AT THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON,
BUT WILL ASSURE THAT YOUR VOTE IS COUNTED IF YOU ARE UNABLE TO ATTEND THE
MEETING.
By order of the Board of Directors
Richard I. Linhart, Secretary
March 17, 2004
JAMES MONROE BANCORP, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 2004
This proxy statement is being sent to shareholders of James Monroe
Bancorp, Inc., a Virginia corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders to be held at 6:30 p.m. on April 29, 2004 (the
"meeting"), and at any adjournment or postponement of the meeting. The purposes
of the meeting are:
(1) electing eleven (11) directors to serve until the next annual
meeting of shareholders and until their successors are duly elected
and qualified;
(2) considering and approving an amendment to the Company's Articles of
Incorporation increasing the number of authorized shares of common
stock to 10,000,000; and
(3) transacting such other business as may properly come before the
meeting or any adjournment or postponement of the meeting.
The meeting will be held at:
The Ritz - Carlton Hotel
Pentagon City
1250 South Hayes Street
Arlington, Virginia
This proxy statement and proxy card are being sent to shareholders of
the Company on or about March 17, 2004. A copy of the Annual Report to
Shareholders of James Monroe Bancorp, Inc. for the year ended December 31, 2003
also accompanies this proxy statement.
VOTING RIGHTS AND PROXIES
VOTING RIGHTS
Only shareholders of record at the close of business on March 12, 2004,
will be entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof. On that date, the Company had 2,955,929 shares of common
stock, par value $1.00 per share, outstanding, constituting the only class of
stock outstanding, held by approximately 489 shareholders of record. Each share
of common stock is entitled to one vote on all matters submitted to a vote of
the shareholders. Shareholders do not have the right to cumulate votes in the
election of directors. The presence, in person or by proxy, of not less than a
majority of the total number of outstanding shares of common stock is necessary
to constitute a quorum at the meeting.
PROXIES
Properly executed proxies which are received by the Company in time to
be voted at the meeting will be voted as specified by the shareholder giving the
proxy. In the absence of specific instructions, proxies received will be voted
FOR of the election of the nominees for election as directors, and FOR the
approval of the amendment to the Articles of Incorporation. Management does not
know of any matters that will be brought before the meeting, other than as
described herein. If other matters are properly brought before the meeting, the
persons named in the proxy intend to vote the shares to which the proxies relate
in accordance with their best judgment.
Votes cast by proxy or in person at the meeting will be tabulated by
the election inspectors appointed for the meeting who will determine whether or
not a quorum is present. Where, as to any matter submitted to shareholders for a
vote, proxies are marked as abstentions (or shareholders appear in person but
abstain from voting), such abstentions will be treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum, and
shares held in street name by brokers for which no voting instructions are given
("broker non-votes") will be treated as shares present and entitled to vote for
quorum purposes but as unvoted.
Please sign, date, mark and promptly return the enclosed proxy in the
postage paid envelope provided for this purpose, in order to assure that their
shares are voted. A proxy may be revoked at any time prior to the exercise of
the authority granted thereby by:
o delivering written notice of such revocation to the Company's
Secretary prior to the meeting,
o by granting and delivering a later dated proxy with respect to such
shares, or
o by attending the meeting in person and voting the shares.
Attendance at the meeting will not, in itself, revoke a proxy. If your shares
are not registered in your name, you will need additional documentation from
your recordholder in order to vote in person at the meeting. Please see the
voting form provided by your recordholder for additional information regarding
the voting of your shares.
Many shareholders whose shares are held in an account at a brokerage
firm or bank may have the option to submit their proxies or voting instructions
electronically through the Internet or by telephone. Shareholders should check
the voting form or instructions provided by their recordholder to see which
options are available. Shareholders submitting proxies or voting instructions
electronically should understand that there may be costs associated with
electronic access, such as usage charges from Internet access providers and
telephone companies, that would be borne by the shareholder. To revoke a proxy
previously submitted electronically, a shareholder may simply submit a new proxy
at a later date before the taking of the vote at the meeting, in which case, the
later submitted proxy will be recorded and the earlier proxy will be revoked.
The enclosed proxy is being solicited on behalf of the Board of
Directors of the Company, which will pay the entire cost of solicitation. In
addition to solicitation by mail, officers, directors and employees of the
Company may solicit proxies by telecopier, telegram, in person or otherwise.
Such persons will not receive any additional or special remuneration or payment
for such solicitation.
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SECURITIES OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND FIVE PERCENT BENEFICIAL OWNERS
The following table sets forth certain information as of March 12, 2004
concerning the number and percentage of shares of the common stock beneficially
owned by our directors and executive officers, and by all of our directors and
executive officers as a group, as well as information regarding each other
person known by the Company to own in excess of five percent of the outstanding
common stock. Except as otherwise indicated, all shares are owned directly, and
the named person possesses sole voting and sole investment power with respect to
all such shares. Except as set forth below, we are not aware of any other person
or persons who beneficially own in excess of five percent of the common stock.
We are not aware of any arrangement which at a subsequent date may result in a
change of control of the Company
Name Age Position Shares Beneficially Owned(1) Percentage
- ---------------------------------------------------------------------------------------------------------------------
Directors
Dr. Terry L. Collins 58 Director 119,991 4.03%
Norman P. Horn 72 Director 28,513 0.96%
Dr. David C. Karlgaard 57 Director 132,803 4.46%
Richard Linhart 60 Director, Executive Vice 48,687 1.64%
President and Chief Operating
Officer
Richard C. Litman 46 Director 79,566 2.67%
John R. Maxwell 43 Director, President & CEO 113,339 3.73%
Dr. Alvin E. Nashman 77 Director 64,788 2.19%
Helen L. Newman 60 Director 65,140 2.20%
Thomas L. Patterson 51 Director 44,717 1.51%
David W. Pijor 51 Chairman of the Board and 50,935 1.71%
Director
Russell E. Sherman 67 Director 34,452 1.16%
Executive Officers and Directors
as a Group (11 individuals) 782,931 24.47%
Principal Shareholders
Nino Vaghi 222,984 7.54%
c/o National Mailing Systems
1749 Old Meadow Road
McLean, VA 22101
- ------------------------------------
(1) The shares "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in
the General Rules and Regulations of the U.S. Securities and Exchange
Commission and may include shares owned by or for the individual's
spouse and minor children and any other relative of the individual who
lives in the same home, as well as shares to which the individual has,
or shares, voting or investment power, or has the right to acquire
beneficial ownership within sixty (60) days after March 12, 2004.
Beneficial ownership may be disclaimed as to certain of the shares.
Directors and executive officers beneficially own the following stock
options which are exercisable within 60-days following March 12, 2004:
Collins -- 18,741 shares; Horn -- 16,717 shares; Karlgaard -- 22,491
shares; Linhart -- 5,000 shares; Litman -- 22,116 shares; Maxwell --
84,150 shares; Nashman -- 5,538 shares; Newman -- 6,929 shares;
Patterson -- 14,054 shares; Pijor -- 29,991 shares; Sherman -- 18,217
shares.
(2) Includes 2,500 shares held individually by his spouse.
(3) Includes 49,722 shares of common stock held individually by Mrs. Newman
and 8,489 shares of common stock held individually by her spouse.
(4) Includes 9,503 shares held in various trusts which Mr. Patterson has
voting and/or investment power. Does not include 6,335 shares held by
Mr. Patterson's sibling for benefit of Mr. Patterson's son.
(5) Includes 13,738 shares held individually by Mr. Pijor, 6,706 shares
held jointly, and 500 shares held by his minor children.
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ELECTION OF DIRECTORS
Eleven (11) directors will be elected at the meeting for a one year
term extending until the next annual meeting of shareholders, or until their
successors shall have been elected and qualified. Each nominee currently serves
as a director of the Company. Unless authority is withheld, proxies received in
response to this solicitation will be voted for the nominees listed below.
Directors are elected by a plurality of the votes cast at the meeting. Each
nominee has indicated a willingness to serve, however, if any nominee becomes
unavailable to serve, proxies will be voted for a replacement nominee selected
in accordance with the best judgment of the proxy holders named therein. The
Board of Directors has determined that each director other than Messrs. Maxwell,
Linhart and Pijor is an "independent director" as that term is defined in Rule
4200(a)(15) of the National Association of Securities Dealers (the "NASD").
Vote Required and Recommendation of the Board of Directors. Nominees
receiving a plurality of the votes cast at the meeting in the election of
directors will be elected as directors in the order of the number of votes
received. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR EACH OF
THE NOMINEES FOR ELECTION AS DIRECTORS OF THE COMPANY.
NOMINEES FOR ELECTION AS DIRECTOR
The Board of Directors has fixed the number of persons constituting the
Board of Directors at eleven (11), Each of the following persons currently
serves as a director of the Company and James Monroe Bank, the Company's wholly
owned subsidiary (the "Bank"). Directors serve for a one year term and until
their successors have been elected and qualified.
Set forth below is a description of the principal occupation and
business experience of each of the directors and executive officers of the
Company. Except as expressly indicated below, each person has been engaged in
his principal occupation for at least five years. Each of the members of the
Board of Directors has served since the organization of the Company in 1999, and
has served as a director of the Bank since its inception in 1997, except Mr.
Linhart, who joined the Board of the Company in June 2000 and the Board of the
Bank in May 2000.
Dr. Terry L. Collins. Dr. Collins is the Co-Founder and President of
Argon Engineering Associates, founded in 1997 (Systems and Information
Technology Firm). He was also the Vice President and General Manager of the
Falls Church Operation of Raytheon E-Systems from 1989 to 1997.
Norman P. Horn. Mr. Horn retired in 1997 from his position as a
Principal in the Northern Virginia accounting firm, Homes, Lowry, Horn &
Johnson, Ltd.
Dr. David C. Karlgaard. Dr. Karlgaard is the Founder, Chairman and
President of PEC Solutions, Inc. an information technology firm (listed on the
Nasdaq National Market).
Richard I. Linhart. Mr. Linhart has been Executive Vice President and
Chief Operating Officer of the Bank since February 1998 and of the Company since
its formation.
Richard C. Litman. Mr. Litman is a Registered Patent Attorney;
President of Litman Law Offices, Ltd.
John R. Maxwell. Mr. Maxwell has been President and Chief Executive
Officer of the Bank since April 1997 and of the Company since its formation.
Dr. Alvin E. Nashman. Dr. Nashman retired in 1991 from his position of
Head of the Systems Group of Computer Sciences Corporation which he held for
over 27 years.
Helen L. Newman. Mrs. Newman was Senior Vice President of Government
Operations for Gulfstream Aerospace Corporation until December 31, 2002. She is
currently retired.
Thomas L. Patterson. Mr. Patterson is an attorney with the law firm of
Linowes and Blocher, LLP. since May 2000. From November 1998 until May 2000, he
was an attorney with the firm of Venable, Baetjer, Howard &
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Civiletti (or Tucker, Flyer & Lewis, which became a part of that firm in 2000).
Mr. Patterson was Vice President - Real Estate Counsel of Federal Realty
Investment Trust from March 1997 until September 1998, and prior to that time
was an attorney in private practice.
David W. Pijor. Mr. Pijor has been Chairman of the Bank since February
1997 and Chairman of the Company since its formation. Mr. Pijor has been an
attorney in private practice for the past 26 years.
Russell E. Sherman. Mr. Sherman is the President of the law firm of
Sherman & Fromme, P.C.
MEETINGS, COMMITTEES AND PROCEDURES OF THE BOARD OF DIRECTORS
Meetings. The Board of Directors of the Company met four times in 2003
and the Board of Directors of the Bank met twelve times. All members of the
Board of Directors attended at least 75% of the meetings held by the Board of
Directors and by all committees on which such member served during the 2003
fiscal year.
Audit Committee. The Board of Directors has a standing Audit Committee.
The Audit Committee is responsible for the selection, review and oversight of
the Company's independent accountants, the approval of all audit, review and
attest services provided by the independent accountants, the integrity of the
Company's reporting practices and the evaluation of the Company's internal
controls and accounting procedures. It also periodically reviews audit reports
with Bancorp's independent auditors. The Audit Committee is currently comprised
of Messrs. Horn, Patterson and Karlgaard. Each of the members of the Audit
Committee is independent, as determined under the definition of independence
adopted by the NASD for audit committee members in Rule 4350(d)(2)(A). The Board
of Directors has adopted a written charter for the Audit Committee. During the
2003 fiscal year, the Audit Committee met three times. The Board of Directors
has determined that Mr. Horn is an "audit committee financial expert" as defined
under regulations of the Securities and Exchange Commission.
The audit committee is also responsible for the pre-approval of all
non-audit services provided by its independent auditors. Non-audit services are
only provided by the Company's auditors to the extent permitted by law.
Pre-approval is required unless a "de minimus" exception is met. To qualify for
the "de minimus" exception, the aggregate amount of all such non-audit services
provided to the Company must constitute not more than five percent of the total
amount of revenues paid by the Company to its independent auditors during the
fiscal year in which the non-audit services are provided; such services were not
recognized by the Company at the time of the engagement to be non-audit
services; and the non-audit services are promptly brought to the attention of
the committee and approved prior to the completion of the audit by the committee
or by one or more members of the committee to whom authority to grant such
approval has been delegated by the committee.
Nominations. The Board of Directors does not have a standing Nominating
Committee. It is the policy of the Board of Directors that all members of the
Board of Directors who are independent within the meaning of NASD Rule 4200
participate in the nomination of directors, in order that the broadest
viewpoints and perspectives may be brought into the evaluation of sitting
directors, the decision whether to invite new directors and the determination
and evaluation of potential candidates for nomination as director. The Board of
Directors has adopted a charter addressing the nominations process. A copy of
the charter is attached to this proxy statement as Appendix A.
To date the Board of Directors has had limited occasion to search for
new directors, expanding the Board on only two occasions, once to include Mr.
Linhart, the Company's Chief Financial Officer, and once to include a well
respected retired local banker, whose bank had recently been sold and who had
unique and valuable contacts, expertise and other skills. The procedure for
identifying potential candidates for election as a director is ad hoc, depending
in part on the basis for the determination that a candidate is required and the
desired skills, and may vary depending on particular needs. In general, the
Board would review, thorough candidate interviews with members of the Board and
management, consultation with the candidates associates and through other means,
a candidate's honesty, integrity, reputation in and commitment to the community,
judgment, personality and thinking style, willingness to invest in the company,
residence, willingness to devote the necessary time, potential conflicts of
interest, independence, understanding of financial statements and issues, and
the willingness and ability to engage in meaningful and constructive discussion
regarding company issues. The Board would review any special expertise, for
example, expertise that qualifies a person as an audit committee financial
expert, and membership or influence in a particular geographic or business
target market, or other relevant business experience. Potential sources of
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candidates include recommendations from existing directors and executive
officers, customers, business associates, the Company's outside advisors, and
shareholders. To date, the Company has not paid any fee to any third party to
identify or evaluate, or to assist it in identifying or evaluating, potential
nominees.
The Board of Directors, or those directors performing the nominating
function, will consider director candidates nominated by shareholders during
such times as the Company is actively considering obtaining new directors.
Candidates recommended by shareholders will be evaluated based on the same
criteria described above. Shareholders desiring to suggest a candidate for
consideration should send a letter to the Company's Secretary and include: (a) a
statement that the writer is a shareholder (providing evidence if the person's
shares are held in street name) and is proposing a candidate for consideration;
(b) the name and contact information for the candidate; (c) a statement of the
candidate's business and educational experience; (d) information regarding the
candidates qualifications to be director, including but not limited to an
evaluation of the factors discussed above which the Board would consider in
evaluating a candidate; (e) information regarding any relationship or
understanding between the proposing shareholder and the candidate; (f)
information regarding potential conflicts of interest; and (g) a statement that
the candidate is willing to be considered and willing to serve as director if
nominated and elected. Because of the limited resources of the Company and the
limited opportunity to seek additional directors, there is no assurance that all
shareholder proposed candidates will be fully considered, that all candidates
will be considered equally, or that the proponent of any candidate or the
proposed candidate will be contacted by the Company or the Board, and no
undertaking to do so is implied by the willingness to consider candidates
proposed by shareholders.
Compensation. The Board has an Executive Compensation Committee that
met twice during 2003. The Committee is currently comprised of Messrs. Horn,
Litman, Nashman, Sherman, and Ms. Newman, all of whom are "independent
directors" within the meaning of NASD Rule 4200(a)(15). The Compensation
Committee is responsible for making recommendations to the Board of Directors
regarding the development and administration of the Company's Stock Option
Plans. The Committee also reviews and recommends executive compensation and
incentive compensation awards and plans. Commencing in 2004, compensation
decisions for the Company's executive officers will be made by all of the
members of the Board of Directors who are "independent directors".
Shareholders Communications with Board. Company shareholders who wish
to communicate with the Board of Directors or an individual director can write
to James Monroe Bancorp, 3033 Wilson Boulevard, Arlington, Virginia 22201,
Attention: Secretary/Board of Directors. You letter should indicate that you are
a shareholder, and whether you own your shares in street name. Depending on the
subject matter, management will: (a) forward the communication to the director
or directors to whom it is addressed; (b) handle the inquiry directly or
delegate it to appropriate employees, such as where the communication is a
request for information, a stock related matter, or a matter related to ordinary
course matters in the conduct of the Company's banking business; or (c) not
forward the communication where it is primarily commercial or political in
nature, or where it relates to an improper, frivolous or irrelevant topic.
Communications which are not forwarded will be retained until the next Board
meeting, where they will be available to all directors.
Director Attendance at the Annual Meeting. The Board believes it is
important for all directors to attend the annual meeting of shareholders in
order to show their support for the Company and to provide an opportunity for
shareholders to communicate any concerns to them. Accordingly, it is the policy
of the Company to encourage all directors to attend each annual meeting of
shareholders unless they are unable to attend by reason of personal or family
illness or pressing matters. Seven directors attended the 2003 annual meeting of
shareholders.
AUDIT COMMITTEE REPORT
The Audit Committee has been appointed to fulfill the Board's oversight
responsibilities by reviewing the financial information that will be provided to
the shareholders and others, the systems of internal controls establish by
management and the Board and the independence and performance of the Company's
audit process.
The Audit Committee has:
(1) reviewed and discussed with management the audited financial
statements included in the Company's Annual Report and Form 10-KSB;
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(2) discussed with Yount, Hyde & Barbour, P.C., the Company's
independent auditors, the matters required to be discussed by statement of
Auditing Standards No. 61, and has received the written disclosures and letter
from Yount, Hyde & Barbour, as required by Independence Standards Board Standard
No. 1; and
(3) discussed with Yount, Hyde & Barbour, its independence.
Based on these reviews and discussions, the Audit Committee has recommended to
the Board of Directors that the audited financial statements be included in the
Company's annual report on Form 10-KSB for the year ended December 31, 2003. The
Audit Committee has also considered whether the amount and nature of non-audit
services provided by Yount, Hyde & Barbour is compatible with the auditor's
independence.
Members of the Audit Committee
Norman P. Horn, Chairman
Thomas L. Patterson
Dr. David C. Karlgaard
DIRECTORS' COMPENSATION
During 2003 directors received $300 for attendance at meetings of the
Board of Directors of the holding Company or the Bank, and $100 for each
committee meeting, other than Mr. Pijor, the Chairman, who received a monthly
retainer of $2,500 in addition to regular meeting fees. Directors are entitled
to receive options under the 2003 Equity Compensation Plan. In 2003, each
non-employee director other than Messrs. Horn and Sherman was awarded options to
purchase 1,538 shares of common stock at an exercise price of $22.86 per share
under the 2003 Equity Compensation Plan. Messrs. Horn and Sherman each received
options to purchase 3,076 shares. In 2004, each non-employee director of the
Company was awarded options to purchase 4,000 shares of common stock at an
exercise price of $27.92 per share, and the one non-employee director of the
Bank who is not also a director of the Company was awarded options to purchase
2,000 shares at an exercise price of $27.92 per share.
EXECUTIVE COMPENSATION
The following table sets forth a comprehensive overview of the
compensation for Mr. Maxwell, the President of the Bank and the Company, and Mr.
Linhart, the only other executive officer who received total salary and bonuses
of $100,000 or more during the fiscal year ended December 31, 2003.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------ -------------------
SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- ---------------------------- ---- -------- ------- ------------------- -----------------
John R. Maxwell, 2003 $190,000 $80,000 -- Less than $10,000
President and Chief 2002 $170,000 $50,400 -- Less than $10,000
Executive Officer 2001 $145,833 $38,000 -- Less than $10,000
Richard I. Linhart, 2003 $137,000 $45,000 15,000 $118,808(2)
Executive Vice President 2002 $125,000 $35,000 3,375(1) Less than $10,000
and Chief Operating Officer 2001 $115,000 $27,000 3,375(1) Less than $10,000
- ----------------------------
(1) Adjusted to reflect the three-for-two stock split in the form of a 50% stock
dividend paid on July 25, 2002 and a five-for-four stock split in the form
of a 25% stock dividend paid on May 16, 2003.
(2) Includes $112,808 of reimbursement for taxes incurred in connection with
exercise of nonqualified stock options granted under initial employment
agreement, in accordance with the terms of that agreement.
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OPTION GRANTS IN LAST FISCAL YEAR
Percent of Total
Number of Securities Options Granted to Exercise
Underlying Options Employees in Fiscal Price Per
Name Granted Year Share Expiration Date
- --------------------- ------------------------ ---------------------- -------------- ------------------
John R. Maxwell -- -- -- --
Richard I. Linhart 15,000 36.7% $23.00 11/10/2013
- ---------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR AND OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-The-Money Options at
December 31, 2003 December 31, 2003
Shares Acquired Value ------------------------- ----------------------------
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- --------------------- --------------- --------- ------------------------- ----------------------------
John R. Maxwell -- $-- 69,150/$-- $1,377,240/$--
Richard I. Linhart 27,750 $472,317 6,125/10,000 $28,271/$22,500
- ---------------------
(1) Based on $25.25 per share, the last sale price for the common stock as
of December 31, 2003.
EMPLOYMENT AGREEMENTS
John R. Maxwell. We have entered into an agreement with Mr. Maxwell,
pursuant to which he serves as President and Chief Executive Officer of the Bank
and the Company. Without cause or his consent, he may not be removed from these
positions, nor may any executive position higher than his be established. The
term of his agreement expires on December 31, 2005, and is subject to automatic
one year extensions on each January 1 thereafter, provided that neither we nor
Mr. Maxwell has given written notice of intention not to renew at least 90 days
prior to the renewal date. The agreement provides for the payment of cash and
other benefits to Mr. Maxwell, including a base salary of $190,000 during the
period January 1, 2003 to December 31, 2003. Mr. Maxwell's base salary for
subsequent periods is subject to annual review by the Board of Directors, and is
currently $215,000 for calendar year 2004. He is entitled to a bonus as
determined in the Board's discretion, after consultation with Mr. Maxwell.
Seventy-five percent of bonuses is to be based on objective performance
criteria. Mr. Maxwell is also entitled to $1,700,000 of life insurance at our
expense (subject to increase based upon the percentage increase in base salary),
use of a car and an automobile allowance, and is entitled to reimbursement of
reasonable business expenses. He is also entitled to reimbursement of income
taxes payable upon the exercise of 69,150 options (as adjusted for stock splits)
previously granted under a prior employment agreement, up to the amount of the
tax benefit we realize as a result of the exercise. Mr. Maxwell is entitled to
receive supplemental payments upon disability, in excess of those provided under
our generally applicable plan, to bring total payments to 100% of his base
salary for the first six months of the disability. Subsequently, he will be
entitled to receive only payments under our disability income plan, except he
shall not be subject to the generally applicable $5,000 monthly payment limit.
He is also entitled to participate in any pension, retirement, profit sharing,
stock purchase, stock option, insurance, deferred compensation and other benefit
plans provided to other executives or employees.
His agreement terminates as of the end of the initial or any renewal
terms if either party gives notice of non-renewal. If he elects not to renew the
agreement, he is not entitled to any additional payments, and is subject to a
two year non-competition restriction. If we elect not to renew the agreement,
Mr. Maxwell is entitled to receive continued salary, bonus and benefits for 18
months, and is subject to the non-competition restriction for that period. If,
within 12 months of a change in control (as defined), Mr. Maxwell terminates the
agreement after we materially change his status, duties or responsibilities,
discontinue compensation plans in which he is participating without providing a
comparable replacement plan, limit his outside activities, or assign the
agreement or our obligations under the agreement, without his consent, he will
be entitled to receive continued salary, bonus and benefits for 24 months, and
will be subject to the non-competition restriction for that period. If we
terminate the agreement in breach of the agreement, or Mr. Maxwell terminates
because of such breach, he will be entitled to receive continued salary, bonus
and benefits for 12 months, and outplacement assistance from an organization of
his choice, at our expense up to 18% of his base salary at the time of
termination, and he will not be subject to the non-competition
8
restriction. The agreement prohibits conflicts of interests, and requires that
Mr. Maxwell maintain the confidentiality of nonpublic information regarding us
and our customers.
Richard I. Linhart. We have entered into an agreement with Mr. Linhart,
pursuant to which he serves as Executive Vice President and Chief Operating
Officer. The current term of Mr. Linhart's agreement expires on December 31,
2006. The agreement provides for the payment of cash and other benefits,
including a base salary of $150,000 during the period January 1, 2004 to
December 31, 2004. Mr. Linhart's base salary is subject to annual review,
provided that the salary may not be less than his base salary for the prior
period. In connection with his new employment agreement, Mr. Linhart received
non-incentive options under the 1998 Stock Option Plan to purchase 15,000 shares
at $23 per share, vesting in three installments. He is also entitled to receive
non-incentive options to purchase 7,500 additional shares on each of October 15,
2004 and 2005 at exercise prices equal to the fair market value of the common
stock as of such dates, subject to adjustment in accordance with the 2003 Equity
Compensation Plan. These options will vest in equal installments over the period
from the date of grant through December 31, 2008, subject to acceleration of
vesting if Mr. Linhart retires after December 31, 2006. Mr. Linhart will be
deemed to be retired if he is not employed by, provided consulting services for
or received compensation from any person or entity for services rendered for six
months after December 31, 2006. He is entitled to disability payments in the
same manner as Mr. Maxwell, except that he is entitled to receive his full
salary for the first three months of disability. He is also entitled to major
medical health insurance as provided to other officers, to a car allowance in
the amount of $600 per month and to participate in any pension, retirement,
profit sharing, stock purchase, stock option, insurance, deferred compensation
and other benefit plans provided to other executives or employees.
If Mr. Linhart terminates the agreement for "good reason" (as defined)
within 12 months of a "change in control" (as defined), he will be entitled to
receive continued salary and benefits for 24 months. If we terminate the
agreement in breach of the agreement, or Mr. Linhart terminates as a result of
our breach, Mr. Linhart is entitled to receive continued salary, bonus and
benefits for the greater of 12 months or the remaining term of the agreement,
and outplacement assistance from an organization of his choice, at our expense
up to 18% of his base salary at the time of termination.
401(k) Retirement Plan. We maintain a 401(k) defined contribution plan
for all eligible employees. Employees who are at least 21 years of age, have
completed at least ninety days of continuous service with James Monroe Bank and
have completed at least 1,000 hours of work during any plan year are eligible to
participate. Under the plan, a participant may contribute up to 15% of his or
her compensation for the year, subject to certain limitations. We may also make,
but are not required to make, a discretionary contribution for each participant.
The amount of such contribution is determined annually by the Board of
Directors, and was 83.33% of employee contributions up to 6% of salary for 2003
and will be 100% of employee contributions up to 6% of salary in 2004. Company
contributions totaled $42,787 for the fiscal year ended December 31, 2003. Since
the second quarter of 2003, employees participating in the retirement plan may
allocate a portion of their available funds for the purchase shares of our
common stock. Shares are purchased on a quarterly basis, at market value, and
are expected to be issued out of authorized but unissued shares. An aggregate of
100,000 shares have been reserved for issuance under the plan, of which
approximately 5,233 have been issued to date.
Stock Option Plans. We maintain the 1998 Stock Option Plan for key
employees, pursuant to which options to purchase up to 172,275 shares of common
stock may be issued as either incentive stock options or nonincentive stock
options. As of December 31, 2003, 1,806 options remained available for issuance
under the 1998 plan.
We also maintain the 2003 Equity Compensation Plan, approved at the
2003 Annual Meeting of Shareholders. The purpose of the 2003 plan is to promote
our long term interests by motivating selected key personnel and directors
through the grant of equity compensation, in the form of stock options,
restricted stock awards, stock appreciation rights, phantom stock and
performance shares. Under this plan, 250,000 shares are available for issuance
upon the exercise of awards under the plan. As of December 31, 2003, options to
purchase 21,994 shares of common stock had been issued under the plan, and
options to purchase 15,000 shares had been reserved for issuance to Mr. Linhart
in accordance with his employment agreement. Subsequent to December 31, 2003,
options to purchase an aggregate of 78,000 shares of common stock were issued.
Mr. Maxwell received an award of options to purchase 40,000 shares at an
exercise price of $27.92, 15,000 of which vested immediately, and
9
the remainder of which will vest over five years at a rate of 5,000 per year.
Each outside director of the Company received immediately exercisable options to
purchase 4,000 shares at an exercise price of $27.92 per share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has had, and expects to have in the future, banking
transactions in the ordinary course of business with some of its directors,
officers, and employees and their associates. In the past, substantially all of
such transactions have been on the same terms, including interest rates,
maturities and collateral requirements as those prevailing at the time for
comparable transactions with non-affiliated persons and did not involve more
than the normal risk of collectibility or present other unfavorable features.
The maximum aggregate amount of loans to officers, directors and
affiliates of the Company during 2003 amounted to $13,447,241 representing
approximately 39.7% of the Company's total shareholders' equity at December 31,
2003. In the opinion of the Board of Directors, the terms of these loans are no
less favorable to the Company than terms of the loans from the Company to
unaffiliated parties. On December 31, 2003, $6,469,803 of loans were outstanding
to individuals who, during 2003, were officers, directors or affiliates of the
Company. At the time each loan was made, management believed that the loan
involved no more than the normal risk of collectibility and did not present
other unfavorable features. None of such loans were classified as Substandard,
Doubtful or Loss.
David W. Pijor has performed legal services for the Company and the
Bank in the ordinary course of their businesses, and the Company expects that he
will continue to perform services for the Company and the Bank. In 2003, the
aggregate fee paid to Mr. Pijor by the Company and the Bank was $135,772. In
2002 he received $78,857 for his services.
PROPOSAL 2 - AMENDMENT OF THE ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK
At the meeting, the shareholders are being asked to approve an
amendment to the Company's Articles of Incorporation which would increase the
number of authorized shares of common stock from 5,000,000 shares to 10,000,000
shares. The Board of Directors is proposing the amendment to ensure that a
sufficient amount of capital stock is available for issuance in the future by
the Company, upon action of the Board of Directors. The Board of Directors
believes that the proposed increase in the authorized common stock is in the
best interest of the Company and unanimously recommends a vote FOR the proposed
amendment.
The Amendment. The Board of Directors has approved, subject to
shareholder approval, the amendment of Article V of the Articles of
Incorporation to read in its entirety as follows:
"The aggregate shares which the Corporation shall have the
authority to issue and the par value per share are as follows:
10,000,000 shares of common stock, each share having a par value of One
Dollar ($1.00). Each share shall have one (1) non-cumulative vote.
Stockholders shall have no pre-emptive rights to acquire unissued or
treasury stock.
The Corporation may create or issue rights, options or
warrants for the purchase of shares of the Corporation upon such terms
and conditions and for such consideration, if any, and such purposes as
may be approved by the Board of Directors."
Purpose of Amendment. The Articles of Incorporation currently authorize
the issuance of up to 5,000,000 shares of common stock. As of the record date
for the meeting, the Company had 2,955,929 shares of common stock outstanding
and 573,551 shares of common stock reserved for issuance and sale to directors,
officers and employees under the Company's stock option plans and 401(k) plan,
leaving only 1,470,520 available shares. If the shareholders approve the
proposed amendment, there will be 6,470,520 authorized, unissued and unreserved
shares of common stock available for issuance in capital raising transactions,
as stock dividends, stock splits, possible corporate acquisitions or other
transactions, possible future employee benefit plans or for other corporate
purposes.
10
While the Company currently does not have any plans to issue additional
capital stock (other than shares of common stock pursuant to various
compensation and benefit plans currently in existence and possible stock splits
or dividends on the common stock), the Board of Directors may determine that the
issuance of additional stock in the future, either in connection with capital
raising, a corporate acquisition or otherwise, is in the best interests of the
Company. In that event, the shares of common stock available as of the record
date could be insufficient. Therefore, the Board is proposing an amendment of
the Articles of Incorporation to increase the authorized common stock from
5,000,000 to 10,000,000 shares.
Authorized, unissued and unreserved capital stock may be issued from
time to time for any proper purpose without further action of the shareholders,
except as required by the Articles of Incorporation and applicable law. Each
share of common stock authorized for issuance has the same rights as, and is
identical in all respects to, each other share of common stock. The newly
authorized shares of common stock will not affect the rights, such as voting and
liquidation rights, of the shares of common stock currently outstanding.
Shareholders will not have preemptive rights to purchase any subsequently issued
shares of common stock, except as the Board of Directors may specifically
authorize in connection with a specific offering of shares.
The ability of the Board of Directors to issue additional shares of
capital stock without additional shareholder approval may be deemed to have an
anti-takeover effect, since unissued and unreserved shares of capital stock
could be issued by the Board of Directors in circumstances that may have the
effect of deterring takeover bids. The Board of Directors does not intend to
issue any additional shares of capital stock except on terms which it deems in
the best interests of the Company and its shareholders.
Vote Required and Recommendation of the Board of Directors. Approval of
the proposed amendment to the Articles of Incorporation requires the favorable
vote of at least two thirds of the outstanding shares entitled to vote. It is
expected that all of the 538,987 shares, or 18.23%, of the common stock
outstanding as of March 12, 2004, over which directors of the Company exercise
voting power will be voted for the proposed amendment. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE PROPOSED
AMENDMENT.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the common stock, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission, and
to provide the Company with copies of all Forms 3, 4, and 5 they file.
Based solely upon the Company's review of the copies of the forms which
it has received and written representations from the Company's directors,
executive officers and ten percent shareholder, the Company is not aware of any
failure of any such person to comply with the requirements of Section 16(a),
except that Forms 4 reporting the award in July 2003 of options to each of the
non-employee directors was reported late.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has selected the
independent certified public accounting firm of Yount, Hyde & Barbour, P.C. to
audit the accounts of the Company for the fiscal year ended December 31, 2004.
Representatives of Yount, Hyde & Barbour are expected to be present at the
meeting and available to respond to appropriate questions. The representatives
also will be provided with an opportunity to make a statement, if they desire.
FEES PAID TO INDEPENDENT ACCOUNTING FIRM
Audit Fees.
During 2003, the aggregate amount of fees billed to the Company by
Yount, Hyde and Barbour for services rendered by it for the audit of the
Company's financial statements and review of financial statements included in
the Company's reports on Form 10-QSB, and for services normally provided in
connection with statutory and regulatory filings was $55,620. In 2002, Yount
Hyde & Barbour billed $29,100 for such services. This category includes fees for
11
services necessary to perform the audit of the Company's financial statements
comfort letters and consents in connection with registration statements and
other filings with the Securities and Exchange Commission and assistance with
and review of documents filed with the Commission.
Audit-Related Fees.
During 2003, the aggregate amount of fees billed to the Company by
Yount, Hyde and Barbour for assurance and related services reasonably related to
the performance of the audit services rendered by it was $8,683. In 2002, Yount
Hyde & Barbour billed $476 for such services. These services were the audit of
the Company's information technology systems, public funds engagements and
assistance regarding financial accounting and reporting standards.
Tax Fees.
During 2003, the aggregate amount of fees billed to the Company by
Yount, Hyde and Barbour for tax advice, compliance and planning services was
$2,275. In 2002, Yount, Hyde & Barbour billed $1,350 for such services. These
services were the preparation of federal and state income tax returns and advice
regarding tax compliance issues.
All Other Fees.
During 2003 and 2002, Yount, Hyde and Barbour did not bill the Company
for any other services.
None of the engagements of Yount, Hyde & Barbour to provide services
other than audit services was made pursuant to the de minimus exception to the
pre-approval requirement contained in the rules of the Securities and Exchange
Commission and the Company's audit committee charter.
FORM 10-K ANNUAL REPORT
THE COMPANY WILL PROVIDE TO ANY SHAREHOLDER SOLICITED HEREBY, WITHOUT
CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER
31, 2003 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, UPON WRITTEN
REQUEST. REQUESTS SHOULD BE DIRECTED TO THE COMPANY'S CHIEF FINANCIAL OFFICER,
RICHARD I. LINHART, 3003 WILSON BOULEVARD, ARLINGTON, VIRGINIA 22207.
OTHER BUSINESS
Management is not aware of any other matters to be presented for action
by shareholders at the meeting. If, however, any other matters not now known are
properly brought before the meeting or any adjournment thereof, the persons
named in the accompanying proxy will vote such proxy in accordance with their
judgment on such matters.
STOCKHOLDER PROPOSALS
All proposals of shareholders to be presented for consideration at the
next annual meeting and included in the Company's proxy materials must be
received by the Company no later than November 7, 2004. Shareholder proposals
and nominations not sought to be included in the Company's proxy materials must
be received by the Company not later than January 29, 2005, and must include the
information required by the Company's bylaws, a copy of which are available as
an exhibit to the Company's Registration Statement on Form SB-2 (No. 333-38098)
available through the SEC's website www.sec.gov, or from the Company's
Secretary.
By Order of the Board of Directors
JAMES MONROE BANCORP INC.
/s/ Richard I. Linhart
-----------------------------------
March 17, 2004 Richard I. Linhart
Secretary
12
APPENDIX A
JAMES MONROE BANCORP, INC.
NOMINATIONS PROCESS CHARTER
In order that the broadest viewpoints and perspectives may be brought
into the evaluation of sitting directors, the decision whether to invite new
directors and the determination and evaluation of potential candidates for
nomination as director, the responsibility for identifying, evaluating and
designating persons to stand for nomination or election as members of the Board
of Directors of the Company shall reside collectively in all of the members of
the Board of Directors who are "independent directors" as defined in Rule
4200(a)(15) of The Nasdaq Stock Market, Inc. (or successor rule or the listing
standards of any other securities exchange or market on which the Company's
securities are listed or eligible for trading), and who are otherwise
independent for purposes of such duties under other applicable law and
regulation. Such directors are referred to in this Charter as the "Nominating
Directors".
In its determination of whether or not to recommend a director for
nomination, the Nominating Directors should consider whether or not such
director meets the minimum criteria for board membership based upon the
individual's honesty, integrity, reputation in and commitment to the community,
judgment, personality and thinking style, willingness to invest in the company,
residence, willingness to devote the necessary time; potential conflicts of
interest, independence, understanding of financial statements and issues, and
the willingness and ability to engage in meaningful and constructive discussion
regarding company issues. The Nominating Directors should also review any
special expertise, for example, expertise that qualifies a person as an audit
committee financial expert, and membership or influence in a particular
geographic or business target market, or other relevant business experience, the
candidate's record, if any, of past service as a director of the Company, and
may consider additional factors it deems appropriate.
The Nominating Directors shall meet at such times as are established by
the full Board of Directors or the Nominating Directors.
The Nominating Directors may consider director candidates nominated by
shareholders, other directors, officers, employees or other sources. In general,
the Nominating Directors need consider such nominees only during such times as
the Company is actively considering obtaining new directors, but the Nominating
Directors shall have discretion to consider and evaluate any candidate at any
time.
Candidates recommended by shareholders should be evaluated based on the
same criteria as other candidates. Shareholders desiring to suggest a candidate
for consideration should send a letter to the Company's Secretary and include:
(a) a statement that the writer is a shareholder (providing evidence if the
person's shares are held in street name) and is proposing a candidate for
consideration; (b) the name and contact information for the candidate; (c) a
statement of the candidate's business and educational experience; (d)
information regarding the candidates qualifications to be director, including
but not limited to an evaluation of the factors discussed above which the Board
would consider in evaluating a candidate; (e) information regarding any
relationship or understanding between the proposing shareholder and the
candidate; (f) information regarding potential conflicts of interest; and (g) a
statement that the candidate is willing to be considered and willing to serve as
director if nominated and elected.
The Nominating Directors may establish reasonable rules for the conduct
of meetings, subject to the requirements of this charter. In the absence of such
rules, the Nominating Directors shall conduct business in accordance with the
same rules and standards utilized by the full Board of Directors. The Nominating
Directors may meet by conference call or in person, and also may act by
unanimous consent. A majority of the Nominating Directors constitutes a quorum.
Minutes of meeting of the Nominating Directors shall be kept in the same manner
as minutes of the full Board of Directors.
FRONT
REVOCABLE PROXY
JAMES MONROE BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby makes, constitutes and appoints David W. Pijor
and John R. Maxwell and each of them (with the power of substitution), proxies
for the undersigned to represent and to vote, as designated below, all shares of
common stock of James Monroe Bancorp, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Shareholders of James Monroe Bancorp, Inc. to be held on April 29, 2004 and at
any adjournment or postponement of the meeting.
BACK
1. ELECTION OF DIRECTORS
[ ] FOR all nominees
[ ] WITHHOLD AUTHORITY for all nominees
[ ] FOR all except (see instruction below)
Nominees: Dr. Terry L. Collins
Norman P. Horn
Dr. David C. Karlgaard
Richard I. Linhart
Richard C. Litman
John R. Maxwell
Dr. Alvin E. Nashman
Helen L. Newman
Thomas L. Patterson
David W. Pijor
Russell E. Sherman
Instruction: To withhold authority to vote for any individual
nominee(s),mark "FOR ALL EXCEPT" and fill in the circle next to each
nominee you wish to withhold
2. To consider and approve an amendment to the Company's Articles of
Incorporation increasing the number of authorized shares of Common
Stock
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR all of the nominees set forth above, and FOR the approval of the
amendment of the Articles of Incorporation. In addition, this proxy will be
voted at the discretion of the proxy holder(s) upon any other matter which may
properly come before the Meeting or any adjournment or postponement of the
Meeting.
Important: Please date and sign your name as addressed, and return this proxy in
the enclosed envelope. When signing as executor, administrator, trustee,
guardian, etc., please give full title as such. If the shareholder is a
corporation, the proxy should be signed in the full corporate name by a duly
authorized officer whose title is stated.
--------------------------------------------------
Signature of Shareholder
--------------------------------------------------
Signature of Shareholder
Dated: , 2004
-------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
[ ] Please check here if you plan to attend the Annual Meeting.