Approval of the 2019 Equity Stock Incentive Plan
14, 2019, the stockholders of CBM Bancorp, Inc. ( the Company or CBM) approved the Companys 2019 Equity Incentive Plan to provide officers, employees and directors of CBM and Chesapeake Bank of Maryland (theBank) with additional incentives to promote the growth and performance of CBM and the Bank. The Board of Directors and the Compensation Committee believe that the 2019 Equity Incentive Plan is in the best interests of CBM and its stockholders as the 2019 Equity Incentive Plan will provide the Bank with the ability to retain and reward and, to the extent necessary, attract and incentivize its employees, officers and directors to promote growth, improve performance and further align their interests with those of CBMs stockholders through the ownership of additional Common Stock of CBM.
Many companies that we compete with for directors and management-level and other senior employees are public companies that offer equity compensation as part of their overall director and executive compensation programs. By approving the 2019 Equity Incentive Plan at the 2019 Annual Meeting of Stockholders (see Item 5.07), our stockholders have provided the flexibility we need to continue to attract and retain highly qualified officers, employees and directors by offering a competitive compensation program including a portion of compensation that is linked to the performance of our Common Stock. In addition, the 2019 Equity Incentive Plan is intended to further align the interests of our directors and management with the interests of our stockholders by potentially increasing the ownership interests of directors and officers in the Common Stock of CBM.
We completed our reorganization and stock offering on September
27, 2018, raising approximately $42.3
million in gross proceeds. A substantial majority of financial institutions that complete a mutual-to-stock reorganizations have adopted an equity-based incentive plan following the transaction. Our prospectus made clear our intent to adopt an equity incentive plan and described the regulatory requirements potentially applicable to a plan. Our prospectus also included the pro forma effect of awards which may be granted under an equity incentive plan.
Highlights of the 2019 Equity Incentive Plan
Share Reserve and Terms Consistent with Industry Standards
. In determining the size and terms of the 2019 Equity Incentive Plan, the Board of Directors and Compensation Committee considered a number of factors, including: (1)industry practices related to the adoption of equity-incentive plans by financial institutions following mutual holding company reorganization or a
conversion; and (2)applicable regulations related to the adoption of equity-incentive plans by converted financial institutions. The maximum number of shares of Common Stock that may delivered pursuant to the exercise of stock options is 10% of the number of shares of Common Stock issued in the reorganization and stock offering (a maximum of 423,200 shares to be subject to stock options) and the maximum number of shares of Common Stock that may be issued as restricted stock is 4.0% of the number of shares of Common Stock issued in the reorganization and stock offering (a maximum of 169,280 shares of restricted stock).
Minimum Vesting Periods for Awards
. Except in the event of death or disability of a participant or upon a change in control, the 2019 Equity Incentive Plan requires a minimum vesting rate for awards of 20% per year, with the first installment vesting on the
anniversary of the date of grant.
Limits on Grants to Directors
director who is in the service of CBM immediately following the 2019 Meeting of Stockholders will automatically be granted 21,160 stock options, which represents approximately 5.0% of the maximum number of stock options available for grant, and each
director will automatically be granted 8,464 restricted stock awards, which represents approximately 5.0% of the maximum number of restricted stock awards available for grant.
Limits on Grants to Employees
. The maximum number of shares of Common Stock that may be delivered to any one employee pursuant to the exercise of stock options and pursuant to restricted stock awards is 25% of the shares available for grant or award, respectively, under the 2019 Equity Incentive Plan.
. The 2019 Equity Incentive Plan provides that, if an award is forfeited or expires, the shares covered by the award will be available for future grant, while shares withheld to cover taxes or used to pay the exercise price of stock options will not be available for future grant.
or Repricing of Underwater Options
. The 2019 Equity Incentive Plan prohibits repricing of stock options, and there will not be any exchange of underwater options for cash or shares without stockholder approval.
Awards Subject to Clawback
. Awards granted under the 2019 Equity Incentive Plan are subject to recoupment by the Company if the Company is required to prepare an accounting restatement due to material noncompliance by the Company, as a result of misconduct with any financial reporting requirement under the federal securities laws or the forfeiture provisions of the Sarbanes-Oxley Act of 2002. Awards may also be subject to recoupment under any other policy adopted by the Company from time to time
Market Purchases of CBM Common Stock to Fund Restricted Stock Awards.
As described under Item 8.01 below, it is CBMs present intention to fund the Restricted Stock Awards through open-market purchases of its Common Stock, which will avoid any dilution to current stockholders. Such purchases may be made during the first year following CBMs reorganization and stock offering after written notice is made to the Board of Governors of the Federal Reserve System. CBM may also elect in the future to purchase Common Stock in the open-market for delivery upon the exercise of Stock Option Awards, which will avoid dilution of then current stockholders.
For further information regarding the key terms of the 2019 Equity Incentive Plan, see the Companys definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on April
8, 2019. The information included herein relating to the 2019 Equity Incentive Plan is qualified in its entirety by reference to the actual terms of the 2019 Equity Incentive Plan, which is included as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Submission of Matters to a Vote of Security Holders.
At the 2019 Annual Meeting of Stockholders, held on May
14, 2019, the persons listed below were elected to serve as directors of the Company, each for a term of three years; the appointment by the Audit Committee of Dixon Hughes Goodman LLP as the Companys independent registered public accounting firm for fiscal 2019 was ratified; and the Companys 2019 Equity Incentive Plan was approved.
The Inspector of Election reported the vote of stockholders at the Annual Meeting as follows:
PROPOSAL 1: Election of Directors
Gail E. Smith
William W. Witty, Jr.
In addition, there were 1,338,818 broker non-votes for each nominee.
PROPOSAL 2: Ratify Appointment of Dixon Hughes Goodman LLP
PROPOSAL 3: Approval of the Companys 2019 Equity Incentive Plan
In addition, there were 1,338,818 broker
On May14, 2019, the Board of Directors authorized a stock repurchase plan to fund the Restricted Stock Awards under the 2019 Equity Incentive Plan. The repurchase plan was adopted in accordance with guidelines specified in Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and the Companys Insider Trading Policy.
In accordance with Rule 10b5-1, the Company will have no discretion over the repurchase of Common Stock which will be administered through an independent broker. Stock repurchases also will be subject to the required manner, timing, price and volume conditions under Rule 10b-18.
Financial Statements and Exhibits.
CBM Bancorp, Inc. 2019 Equity Incentive Plan.
Form of Non-Qualified Stock Option Award Agreement for Non-Employee Director
Form of Restricted Stock Award Agreement for Non-Employee Director
Form of Restricted Stock Award Agreement for Officers and Employees
Form of Incentive Stock Option Agreement for Officers and Employees
Form of Non-Qualified Stock Option Agreement for Officers and Employees
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
DATE: May20, 2019
/s/ Joseph M. Solomon
Joseph M. Solomon
President and Chief Executive Officer
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