Document:

Letter Agreement between Registrant & Bristol Investment Fund, Ltd.

 
EXHIBIT
10.127 
 
[LOGO OF CALYPTE BIOMEDICAL
CORPORATION] 
1265 Harbor Bay Parkway 
Alameda, California 94502 
 
February 28, 2003 
 
VIA FACSIMILE 
 
Paul Kessler 
Bristol Investment Fund, Ltd. 
6363 Sunset Boulevard 
Fifth Floor 
Hollywood, CA 90028 
 
Re: Letter Agreement 
 
Dear Mr. Kessler, 
 
In the spirit of resolving the issue related to the interpretation of the
Securities Purchase Agreement dated February 11, 2002 (the “Agreement”), and without prejudice to the Company’s interpretation of the Agreement, the within is to memorialize the understanding and agreement between Bristol Investment
Fund, Ltd. (“Bristol”) and Calypte Biomedical Corporation (“Calypte” or the “Company”) whereby Calypte will proceed immediately to process pursuant to the effective S-2 Registration Statement (File No. 333-84660) (the
“Registration Statement”) the conversion request of Bristol of certain debentures purchased under the Agreement as of February 18, 2003 without penalty to Calypte for any claimed delays in processing the conversion. 
 
Consistent with the tabular disclosure contained in the Registration
Statement, shares of common stock (“Original Shares”) issued upon conversion, subject to the Registration Statement will be based upon a conversion rate of 70% of the average of the lowest three (3) lowest-traded share prices of the common
stock during the 20 business days prior to the date that Bristol notifies the Company of its election to convert (the “Conversion Price”). The Company agrees that it will issue additional shares of its common stock upon receipt of a
further conversion notice (“Further Conversion Notice”) based upon the difference in the number of shares issuable upon a conversion rate of 60% of the average of the three (3) lowest closing bid prices of the common stock during the 22
business days prior to the date Bristol notifies the Company of its election to convert and the Conversion Price (the “Additional Shares”). The Further Conversion Notice will be issued by Bristol simultaneously with the filing of a post
effective amendment to the Registration Statement by the Company with the Securities and Exchange Commission. 
 
The Company further agrees to ensure that Bristol will not sustain any loss with respect to the Additional Shares. Specifically, in the event the closing price of the Company’s common stock at the
date of filing the post effective amendment to the Registration Statement is less than the closing price of the Company’s common stock at the date the Company is notified of the election of conversion for the Original Shares, the Company will
provide Bristol within three (3) business days, cash consideration for the lesser market value of the shares (the “Diminished Market Value”), or at the option of Bristol, the Company will provide in lieu of the cash consideration
additional shares of Calypte common stock representing the Diminished Market Value of the 
 

1 

Additional Shares based upon the closing price of Calypte’s common stock as of the filing date of the
post effective amendment to the Registration Statement. 
 
It is
understood that due to the age of the Company’s financial statements, the post effective amendment to the Registration Statement can not be filed until immediately following the filing of the Company’s 10-K for the fiscal year ended
December 31, 2002. The post effective amendment will include additional disclosure that states that the conversion rate of the debentures are subject to adjustment pursuant to certain price protections set forth in the Agreement. 
 
Please arrange for the agreement to be acknowledged by Bristol and return an
executed copy to my attention for countersignature along with a duplicate copy of the executed notice of conversion forwarded to the Company. 
 
AGREED TO AND ACCEPTED BY: 
 

	 BRISTOL INVESTMENT FUND, LTD.
	 	 	 	 CALYPTE BIOMEDICAL CORPORATION

	
	 By:
	 	   /s/     Paul Kessler

	 	 	 	 By:
	 	 /s/     Richard D Brounstein

	 Title:
	 	 Director
	 	 	 	 Title
	 	 EVP & CFO

 
 
 

2<PAGE>

                                                                   Exhibit 10 JJ

                          AGREEMENT AND GENERAL RELEASE

          This is an Agreement and General Release (Agreement) between
Mercantile Bankshares Corporation (Bankshares) and Mercantile-Safe Deposit and
Trust Company (Merc-Safe) (Bankshares and Merc-Safe are sometimes collectively
referred to herein as the Companies) and Jack E. Steil (Mr. Steil), dated as of
December 31, 2002 (the Effective Date). The parties agree as follows:

          1.   Severance Payments.

          (a)  Merc-Safe will pay Mr. Steil, in bi-weekly payments, his current
regular salary which is $400,000 annually (less all lawful deductions) for the
period from the effective date of this Agreement to December 31, 2004. This
obligation shall survive in the event of Mr. Steil's death prior to December 31,
2004, in which event any remaining payments shall be due and payable to Mr.
Steil's estate or such other beneficiary designated by Mr. Steil in a written
notice delivered to the Companies.

          (b)  In addition, subject to the offset described in the following
sentence, Merc-Safe will pay Mr. Steil, in bi-weekly payments, the aggregate sum
of $94,400 (less all lawful deductions) during 2005 and the aggregate sum of
$86,533 (less all lawful deductions) for the period from January 1, 2006 to
November 30, 2006 (collectively, the Additional Payments). The obligation of
Merc-Safe to make any Additional Payments shall be reduced by the gross amount
of any income earned by Mr. Steil from employment (including self-employment)
during such periods (regardless of when such income is received), and an
accounting shall be conducted at the end of each such period to determine if any
amount of such Additional Payments previously paid to

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Mr. Steil must be repaid. Such Additional Payments shall terminate upon Mr.
Steil's death.

          2.   Additional Severance Payments. With respect to the Annual
Incentive Compensation Plan of Bankshares and its affiliates ("AICP"), Mr. Steil
shall be entitled to receive an incentive award for the 2002 Award Year in
accordance with and subject to the terms of the AICP, based on his 2002 annual
salary of $400,000 and his designation as a Class I participant for that year.
The amount of such award is $184,600 and will be payable no later than March 31,
2003, and shall be subject to all lawful deductions. The Companies agree that
Mr. Steil will be eligible to receive bonus payments for the 2003 Award Year
(payable in 2004) and 2004 Award Year (payable in 2005) to be calculated in
accordance with and subject to the terms of the AICP as if he were still a Class
I participant and based on his base annual salary of $400,000; provided,
however, that such bonus payments shall be made only if and to the same extent
that the Companies make incentive awards generally under the AICP to Class I
participants for the 2003 and 2004 Award Years, and the parties expressly agree
that if the AICP changes for Class I participants generally for the 2003 or 2004
Award Years, the calculation of any bonus payments to Mr. Steil for such Award
Years will change in a like manner. The obligations set forth in this paragraph
2 shall survive in the event of Mr. Steil's death prior to December 31, 2004, in
which event any remaining payments due under this paragraph 2 shall be due and
payable to Mr. Steil's estate or such other beneficiary designated by Mr. Steil
in a written notice delivered to the Companies.

          3.   Continuation of Employee Benefits. The Companies will provide Mr.
Steil his current level of employee benefits (exclusive of any retirement
benefits,

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which are covered elsewhere under this Agreement) during the period from January
1, 2003 through December 31, 2004. The Companies will provide these benefits to
Mr. Steil in the following areas: dental coverage, medical and vision coverage,
life insurance coverage, employee assistance program, blood program, annual
physical and checking account benefits. Payment for benefits and premiums for
benefit coverage will continue to be made in the same manner as prior to this
Agreement, and allowable deductions from Mr. Steil's bi-weekly payments as set
forth in paragraph 1 above shall be made for such payments. The Companies and
Mr. Steil will continue to make payment for benefits and benefit premiums in
substantially the same proportion as before this Agreement. The level of
benefits specified in this paragraph shall be at the same level as if Mr. Steil
remained employed in his current capacities for the Companies, except that the
parties expressly agree that if any of the benefit programs or plans change for
comparable employees of the Companies, Mr. Steil's level of benefits and
proportional share of payments or premiums will change in a like manner. After
December 31, 2004, should Mr. Steil elect to continue his medical, dental and
vision coverages, he will be responsible for all premiums, subject to certain
credits allowed under the Companies' retiree medical program.

          4.   Existing Cash Balance SERP. With respect to the Supplemental Cash
Balance Executive Retirement Plan (Cash Balance SERP) in which Mr. Steil
participated prior to the Effective Date, the Companies will continue to
allocate annual credits, in accordance with and subject to the terms and
conditions the Cash Balance SERP then in effect, for Mr. Steil through December
31, 2006 (or until his death, if earlier). The calculation of such annual
credits shall be made as set forth in Exhibit A

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attached hereto and made a part hereof. In all other respects, the terms of the
Cash Balance SERP will continue to apply to Mr. Steil; provided, however, that
for purposes of the Cash Balance SERP, Mr. Steil's termination of employment
will be deemed to occur on December 31, 2006 (or upon his death, if earlier) and
payment to Mr. Steil will be made or commence as soon as practicable after
December 31, 2006 (or upon his death, if earlier). Notwithstanding the
foregoing, nothing in this paragraph 4 or in Exhibit A shall be deemed to create
any obligation on the part of the Companies to pay any salary or bonus to Mr.
Steil after December 31, 2004 other than any bonus provided in paragraph 2 above
for the 2004 Award Year which is payable in 2005 and the Additional Payments as
defined in paragraph 1(b) above.

          5.   Additional Cash Balance SERP. The parties acknowledge and agree
that after December 31, 2002 Mr. Steil shall not be eligible to participate in
the Bankshares qualified cash balance plan. The Companies agree to establish,
after the effective date of this Agreement, an additional cash balance SERP
(Additional SERP) for Mr. Steil. The Additional SERP will provide a benefit,
commencing at age 60, which, when added to Mr. Steil's vested benefit as of
December 31, 2002 under the qualified cash balance plan, will produce a combined
benefit equal to the benefit Mr. Steil would have been entitled to under the
qualified cash balance plan had he continued to be employed through, and then
retired at, age 60 and commenced receiving benefits at that time (i.e., $94,400
if Mr. Steil elected to take the lifetime annuity option).

          6.   Exisiting 401(k) SERP

               (a)  With respect to the Supplemental 401(k) Executive Retirement
Plan (401(k) SERP) in which Mr. Steil participated prior to the Effective Date,
the

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Companies will continue to allocate annual credits, in accordance with and
subject to the terms and conditions the 401(k) SERP then in effect, for Mr.
Steil through December 31, 2006 (or until his death, if earlier). The
calculation of such annual credits shall be made as set forth in Exhibit A
attached hereto and made a part hereof.

               (b)  In addition to the above allocations, the Companies also
will allocate annual credits for Mr. Steil under the 401(k) SERP through
December 31, 2006 (or until Mr. Steil's death, if earlier) for the maximum basic
contribution. The calculation of such annual credits shall be made as set forth
in Exhibit A attached hereto and made a part hereof.

               (c)  In addition to the above allocations, the Companies also
will allocate annual credits for Mr. Steil under the 401(k) SERP through
December 31, 2006 (or until Mr. Steil's death, if earlier) for the maximum
matching contribution. The calculation of such annual credits shall be made as
set forth in Exhibit A attached hereto and made a part hereof.

               (d)  In all other respects, the terms of the 401(k) SERP will
continue to apply to Mr. Steil; provided, however, that for purposes of the
401(k) SERP, Mr. Steil's termination of employment will be deemed to occur on
December 31, 2006 (or upon his death, if earlier) and payment to Mr. Steil will
be made as soon as practicable after December 31, 2006 (or upon his death, if
earlier). Furthermore, notwithstanding the foregoing, nothing in this paragraph
6 or in Exhibit A shall be deemed to create any obligation on the part of the
Companies to pay any salary or bonus to Mr. Steil after December 31, 2004 other
than any bonus provided in paragraph 2 above

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for the 2004 Award Year which is payable in 2005 and the Additional Payments as
defined in paragraph (b) above.

          7.   Automobile Use. The Companies will provide to Mr. Steil use of a
car through December 31, 2004, will provide insurance coverage on such vehicle,
and will reimburse him for the cost of gas and any scheduled maintenance or
repairs required or reasonably necessary in connection with the use of such
vehicle during such period, but only to the extent that the annual usage during
such period does not materially exceed the amount of annual usage by Mr. Steil
of his company-owned vehicle during 2002. His current automobile (2001 Toyota
Sequoia) will continue to be provided for his use, and when it reaches the
standard mileage limit of 70,000 miles, it will be traded for a new vehicle of
equivalent value (based on MSRP of a Toyota Sequoia at the time of such trade).
The title to this new vehicle on December 31, 2004 shall be transferred to Mr.
Steil. The Companies shall be responsible for transfer taxes incurred in this
transfer of title. After December 31, 2004, Mr. Steil will be solely responsible
for any insurance coverage on or related to the vehicle. The parties expressly
agree that the Companies, as of December 31, 2004, will cease all travel and
accident coverage applicable to Mr. Steil.

          8.   Memberships Dues. The Companies agree to pay the base monthly
dues for Mr. Steil's Center Club membership through December 31, 2004. Any
charges in addition to the base monthly dues and all charges subsequent to
December 31, 2004 shall be the sole responsibility of Mr. Steil.

          9.   Matching Gift Program. The Companies will allow Mr. Steil to be
eligible for participation in their matching gift program through December 31,
2004.

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          10.  Computer. The Companies agree to transfer ownership to Mr. Steil,
on the effective date of this Agreement, of the computer currently provided for
his use.

          11.  Cell Phone. The Companies agree to pay the base monthly charges,
through December 31, 2004, of the cell phone service plan provided to Mr. Steil
as of December 31, 2002. Any charges in addition to the base monthly charges and
all charges subsequent to December 31, 2004 shall be the sole responsibility of
Mr. Steil.

          12.  Stock Options. With respect to options ("Options") granted to Mr.
Steil prior to the date hereof pursuant to the Mercantile Bankshares Corporation
Omnibus Stock Plan (Omnibus Plan) and as reflected in Option Agreements dated
August 21, 1995, November 28, 2000 and May 7, 2002, Mr. Steil shall be deemed to
be employed by the Companies through December 31, 2005 (other than in the event
of his death prior to such date) solely for purposes of determining the
exercisability of the Options in accordance with the terms of such Option
Agreements. The vesting of such Options, to the extent applicable, shall
continue to remain subject to the satisfaction of the applicable financial
performance criteria. Notwithstanding the foregoing, such Option Agreements are
hereby amended to provide that any and all Options which are currently vested or
which vest subsequent to December 31, 2002 must be exercised by December 31,
2005, after which date they will expire. The parties acknowledge and agree that
attached hereto as Exhibit B is a schedule setting forth the current status of
all such options.

          13.  Restricted Stock. Further with respect to the Omnibus Stock Plan,
as to those shares subject to the Restricted Stock Award Agreement dated as of
April 29,

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2002 between Mr. Steil and Bankshares, such shares will vest in accordance with
the terms of such Agreement, and shall not be subject to forfeiture after such
vesting.

          14.  Miscellaneous Expenses. The Companies agree to pay Mr. Steil
through December 31, 2004 a monthly stipend in the amount of $850 to assist him
with office and parking expenses associated with the transitional activities
referenced in paragraph 15. In addition, the Companies agree to pay Mr. Steil's
reasonable legal expenses incurred in connection with the negotiation of this
agreement, not to exceed $5,000.

          15.  Resignation; Ongoing Obligations. Mr. Steil resigned his
positions with the Companies on December 31, 2002. Mr. Steil's positions as an
officer of the Companies, as an officer or director of any subsidiaries of the
Companies, and as a member of committees of the Companies and subsidiaries, and
their Boards of Directors have terminated. Mr. Steil shall, after the effective
date of this Agreement, not be required to perform any executive or line
management responsibilities for the Companies but he shall make himself
available for transitional activities during the period specified for salary
payments in paragraph 1(a) of this Agreement.

          16.  Release. Mr. Steil agrees that the benefits listed in paragraphs
1 through 14 are not benefits to which he is otherwise entitled by reason of his
employment, and that in consideration of the promises set forth in paragraphs 1
through 14, he will, and hereby does, forever and irrevocably release and
discharge the Companies, their officers, directors, employees, agents,
subsidiaries, affiliates, predecessors, successors, purchasers, assigns, and
representatives, of any and all grievances, claims, demands, debts, defenses,
actions or causes of action, obligations,

                                      -8-

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damages, and liabilities whatsoever which he now has, has had, or may have,
whether the same be at law, in equity, or mixed, in any way arising from or
relating to any act, occurrence, or transaction before the date of this
Agreement; provided, however, that nothing herein shall be construed as a
release by Mr. Steil of any claim relating to any benefit vested in favor of Mr.
Steil prior to the date hereof under any employee benefit or retirement plan
maintained by the Companies. This is a General Release. Mr. Steil expressly
acknowledges that this General Release includes, but is not limited to, Mr.
Steil's intent to release the Companies from any claim of age, race, sex,
religion, national origin or any other claim of employment discrimination under
the Age Discrimination in Employment Act (29 U.S.C. section 2000 et seq.), the
Employee Retirement Income Security Act (29 U.S.C. section 1001 et seq.),
Article 49B of the Maryland Annotated Code, and any other law prohibiting
employment discrimination or related to abusive discharge, or whistleblowing.
Mr. Steil agrees not to sue the Companies or to join in any lawsuit against the
Companies, or any other person or entity specified in this paragraph, concerning
any matter which arose on or before the effective date of this Agreement.

          17.  Non-Disparagement.

               (a)  Mr. Steil agrees that for a period of three (3) years after
the effective date of the execution of this Agreement, he will not, either by
conversation or any other oral expression, by letter or any other written
expression, or by any other deed or act of communication (including, but not
limited to allowing himself to be referred to or quoted as the source of
information) to the public or to any individual person or entity or groups of
persons or entities, specifically including but not limited to such persons or
entities as are, have been, or may be, employees, Customers (as defined herein),
or

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business associates of the Companies, disparage, condemn or impugn the
reputation or character of the Companies or any of its officers or directors, or
any of the actions or writings, specifically including but not limited to any of
the policies, practices, procedures or advertisements, which are, have been or
may be taken or produced by the Companies or its predecessors, subsidiaries,
parents, successors, successors in interest, assigns, trustees, officers,
directors, agents, attorneys, servants or employees on behalf of the Companies.
Mr. Steil understands that by agreeing to the provisions of this Paragraph, he
is waiving rights guaranteed by the First Amendment of the United States
Constitution and State counterparts. Mr. Steil further agrees that a material
violation of the terms of this Paragraph, or repeated non-material violations
after written notice from the Company asserting a non-material violation, is a
material breach of this Agreement, entitling the Companies to recover any
payments made to Mr. Steil under this Agreement, to stop any payments or
obligations owing under this Agreement, to recover the costs and attorneys' fees
the Companies incurs to recover under this paragraph and to obtain injunctive,
monetary or other relief permitted by law.

               (b)  The Companies agree that for a period of three (3) years
after the effective date of the execution of this Agreement, they will use
reasonable efforts to ensure that their senior executive officers do not, either
by conversation or any other oral expression, by letter or any other written
expression, or by any other deed or act of communication (including, but not
limited to allowing themselves to be referred to or quoted as the source of
information) to the public or to any individual person or entity or groups of
persons or entities, disparage, condemn or impugn the reputation or character of
Mr. Steil. Notwithstanding the foregoing, nothing shall prevent any such senior

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executive officer from discussing business related matters concerning Mr. Steil
that are factually true where he or she reasonably believes that the disclosure
of such facts serves a reasonable business purpose.

          18.  Customers. The Parties agree and stipulate that as used herein
"Customer" means all persons, firms or entities that have either sought or
purchased the Companies' services, have contacted the Companies for the purpose
of seeking or purchasing the Companies' services, or have been contacted by the
Companies for the purpose of selling services during Mr. Steil's employment, and
all persons, firms, or entities subject to the control of those persons, firms,
or entities. The Customers covered by this Agreement shall include any Customer
of the Companies at any time during Mr. Steil's employment. The Parties further
stipulate and agree that the Companies' business is commercial banking.

          19.  Confidential Information. The Parties agree and stipulate that as
used herein "Confidential Information" means all non-public information which
becomes known to Mr. Steil as a consequence of his employment by the Companies
and which has been treated as confidential by the Companies or is generally
considered as confidential by corporations within the commercial banking
industry, and includes, but is not limited to, information about the Companies'
Customers, potential Customers, methods of operation, products, prices, costs,
discounts, business plans, prospective and executed contracts, trade secrets,
business contacts, customer lists, and all technological, business, financial,
accounting, statistical and personnel information regarding the Companies and
Customers or potential Customers of the Companies. The Parties further agree and
stipulate that this Confidential Information was developed by the Companies at

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considerable expense, that this information is a valuable asset to the Companies
and part of their goodwill, that this information is vital to the Companies'
success and is the sole property of the Companies.

          20.  Confidentiality; Non-Compete; Non-Solicitation.

          (a)  Mr. Steil recognizes and acknowledges that during his employment
by the Companies, Mr. Steil had access to, worked with and became familiar with
the Companies' Confidential Information, and that he was called upon to
establish close relationships with the Companies' Customers and co-workers.

          (b)  Mr. Steil recognizes and acknowledges that his experience,
skills, education and training are readily transferable and of such breadth that
he can employ them to his advantage in many other fields of endeavor, and that
consequently, the terms of this Agreement will not unreasonably impair Mr.
Steil's ability to engage in business or employment activities after the
effective date of this Agreement.

          (c)  Mr. Steil recognizes and acknowledges that the Companies are
engaged in a highly competitive enterprise, so that any unauthorized disclosure
or unauthorized use by Mr. Steil of the Confidential Information protected under
this Agreement, or any unauthorized competition, whether during his employment
with the Companies or after its termination, would cause immediate, substantial
and irreparable injury to the business and goodwill of the Companies.

          (d)  Mr. Steil agrees that upon the effective date of this Agreement
he will surrender to the Companies every item and every document that is the
Companies' property (including keys, records, computer files and disks, notes,
memoranda, models,

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inventory and equipment) or contains Confidential Information, in whatever form.
All of these materials are the sole and absolute property of the Companies.

          (e)  Mr. Steil agrees that from the effective date of this Agreement
until December 31, 2004, he will not, on his own behalf or as a partner,
officer, director, employee, agent, or consultant of any other person or entity,
directly or indirectly, disclose the Companies' Confidential Information to any
person or entity other than agents of the Companies, and he will not use or aid
others in obtaining or using any such Confidential Information without the
express written permission of the President of the Companies.

          (f)  Mr. Steil agrees that from the effective date of this Agreement
until December 31, 2004, he will not, on his own behalf or as a partner,
officer, director, employee, agent, or consultant of any other person or entity,
directly or indirectly, engage or attempt to engage in the business of providing
services the same as or similar to the services of the Companies, i.e.
commercial banking, within Maryland, Virginia, Pennsylvania, Delaware or
Washington, D.C. Mr. Steil expressly acknowledges that the Companies are
entitled to a court order enjoining any violation of this paragraph even if Mr.
Steil has not personally solicited or serviced the Companies' Customers. Mr.
Steil agrees that the geographic, temporal, and other restrictions on his
ability to obtain other employment in this Agreement are reasonable, waives any
right to contest same and agrees in the future not to challenge these
restrictions.

          (g)  Mr. Steil agrees from the effective date of this Agreement until
December 31, 2004, he will not, on his own behalf or as a partner, officer,
director, employee, agent, or consultant of any other person or entity, directly
or indirectly contact

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any of the Companies' Customers or potential Customers for the purposes of
conducting any commercial banking business or solicit or induce (or attempt to
solicit or induce) any of the Companies' Customers or potential Customers not to
conduct business with the Companies, or to stop conducting business with the
Companies, or to conduct business with or contract with any other person or
entity for the commercial banking services then provided by the Companies.

          (h)  Mr. Steil agrees that from the effective date of this Agreement
until December 31, 2004, he will not, on his own behalf or as a partner,
officer, director, employee, agent, or consultant of any other person or entity,
directly or indirectly, contact, solicit or induce (or attempt to solicit or
induce) any employee of the Companies to leave their employment with the
Companies or consider employment with any other person or entity.

          (i)  The Parties agree that any breach by Mr. Steil of any of the
provisions contained in this paragraph 20 will cause the Companies immediate,
material and irreparable injury and damage, and there is no adequate remedy at
law for such breach. Accordingly, in the event of a breach of any of the
provisions of this paragraph 20 by Mr. Steil, in addition to any other remedies
it may have at law or in equity, the Companies shall be entitled immediately to
seek enforcement of this Agreement in a court of competent jurisdiction by means
of a decree of specific performance, an injunction without the posting of a bond
or the requirement of any other guarantee, any other form of equitable relief,
liquidated damages in the amount of $10,000.00 (ten thousand dollars), and the
Companies are entitled to recover from Mr. Steil the costs and attorneys' fees
it incurs to recover under or enforce this Agreement. In addition, all

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severance payments and other benefits, including options and restricted stock
grants, not vested at December 31, 2002, shall immediately cease and the
Companies shall have no further obligation to make any such payments or to grant
such rights. This provision is not a waiver of any other rights which the
Companies may have under this Agreement, including the right to receive money
damages.

          21.  No Waiver. The Parties agree that the failure of the Companies to
enforce any term of this Agreement (or any agreement with any other person)
shall not constitute a waiver of the Companies' rights or deprive the Companies
of the right to insist thereafter upon strict adherence to that or any other
term of this Agreement, nor shall a waiver of any breach of this Agreement
constitute a waiver of any preceding or succeeding breach, nor shall the passage
of any amount of time after the Companies becomes aware of a breach of this
Agreement constitute a waiver of the Companies' rights to enforcement. No waiver
of a right under any provision of this Agreement shall be binding on the
Companies unless expressly made in writing and signed by the President of the
Companies.

          22.  Enforceability; Severability. It is the intention of the Parties
that this Agreement shall be enforceable to the fullest extent allowed by law.
In the event that a court holds any provision of this Agreement to be
unenforceable, the Parties agree that, if allowed by law, that provision shall
be reduced to the degree necessary to render it enforceable without affecting
the rest of this Agreement, and, if such reduction is not allowed by law, the
Parties shall promptly agree in writing to a provision to be substituted
therefore which will have an effect as close as possible to the invalid
provision that is consistent with applicable law. The Parties agree that the
invalidity or unenforceability

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of any provision of this Agreement shall not affect or limit the validity and
enforceability of the other provisions hereof.

          23.  Non-Disclosure.

          (a)  Mr. Steil agrees that the existence of and terms of this
Agreement are strictly confidential and expressly covenants not to display,
publish, disseminate or disclose the existence or terms of this Agreement to any
person or entity, other than his spouse, any prospective employer, any bank or
other lending institution in connection with a loan application, or his
financial advisor and except as required by law.

          (b)  The Companies agree that the existence of and terms of this
Agreement are strictly confidential and expressly covenant not to display,
publish, disseminate or disclose the existence or terms of this Agreement to any
person or entity, except as the Companies may reasonably determine to be
required or necessary in connection with their respective businesses, and except
as required by law. Mr. Steil acknowledges that Mercshares may be required to
disclose the terms of this Agreement in its annual proxy statement and other
securities filings.

          24.  Prevailing Party. Mr. Steil agrees that he shall not be regarded
as the prevailing party for any purpose, including, but not limited to,
determining responsibility for or entitlement to attorneys' fees, under any
statute or otherwise.

          25.  Acknowledgement.

          (a)  Mr. Steil has received this Agreement on March 10, 2003. Mr.
Steil understands that he has twenty-one (21) days from his receipt of this
Agreement to consider his decision to sign it. By signing this Agreement, Mr.
Steil expressly acknowledges that his decision to sign this Agreement was of his
own free will. Mr. Steil

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understands that he may revoke this Agreement for up to and including seven (7)
days after his execution of the Agreement, and that the Agreement shall not
become effective until the expiration of seven days from its execution, the
effective date of this Agreement. Mr. Steil has been advised by the Companies to
consult an attorney regarding the terms of this Agreement before signing it.

          (b)  Mr. Steil expressly acknowledges and understands that this
Agreement is not an admission of liability under any statute or otherwise by the
Companies, and does not admit any violation of Mr. Steil's legal rights, but is
solely entered into as an exchange for the terms described above.

          (c)  Mr. Steil represents that he has read this Agreement, that he
understands all of its terms, and that he enters into this Agreement, after
consultation with counsel, voluntarily and with knowledge of its effect.

          26.  Miscellaneous.

          (a)  This Agreement shall be binding upon and inure to the benefit of
the assigns, heirs, executors, and administrators of Mr. Steil and the
Companies, their officers, directors, employees, agents, subsidiaries,
affiliates, predecessors, successors, purchasers, assigns, and representatives,
that this Agreement contains the entire agreement and understanding of the
parties, that there are no additional promises or terms among the parties other
than those contained herein, and that this Agreement shall not be modified
except in writing signed by each of the parties.

          (b)  This Agreement shall in all respects be interpreted, enforced,
and governed under the laws of the State of Maryland. The language of all parts
of this Agreement shall in all cases be construed as a whole, according to its
fair meaning.

                                      -17-

<PAGE>

March 12, 2003                          /s/ Jack E. Steil
---------------------------------       -----------------------------------
Date                                    Jack E. Steil

                                        MERCANTILE BANKSHARES
                                        CORPORATION

March 11, 2003                          By: /s/ Edward J. Kelly, III
---------------------------------          --------------------------------
Date                                       Edward J. Kelly, III
                                             Chairman, President and Chief
                                             Executive Officer

                                        MERCANTILE-SAFE DEPOSIT AND
                                        TRUST COMPANY

March 11, 2003                          By: /s/ Edward J. Kelly, III
---------------------------------          --------------------------------
Date                                       Edward J. Kelly, III
                                             Chairman and Chief Executive
                                             Officer

                                      -18-

<PAGE>

                                    Exhibit A

                        Calculation of Retirement Credits

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------

 Agreement
 Reference       Retirement Benefit       Covered Compensation (1) (2) (3)         Calculation of Annual Credits
---------------------------------------------------------------------------------------------------------------------
<S>           <C>                       <C>                                    <C>
              Existing Cash Balance     ($400,000 + actual bonus) minus then   18% of Covered Compensation in
Paragraph 4   SERP                      current IRS maximum                    applicable year
---------------------------------------------------------------------------------------------------------------------
              Additional Cash Balance   N/A                                    No annual credit or contribution.
Paragraph 5   SERP                                                             Strictly a contractual obligation to
                                                                               supplement current vested benefit
                                                                               under the qualified Cash Balance
                                                                               Plan so that the aggregate annual
                                                                               payment from the qualified cash
                                                                               balance plan and this additional cash
                                                                               balance SERP upon retirement at age
                                                                               60 will be $94,400 (4)
---------------------------------------------------------------------------------------------------------------------
              Existing 401(k) SERP      ($400,000 + actual bonus) minus then   3% of Covered Compensation in
Paragraph 6a                            current IRS maximum                    applicable year
---------------------------------------------------------------------------------------------------------------------
              Additional credits to     Then current IRS maximum               3% of Covered Compensation in
Paragraph 6b  Existing 401(k) SERP:                                            applicable year
              Maximum basic
              contribution
---------------------------------------------------------------------------------------------------------------------
              Additional credits to     Then current IRS maximum               3% of Covered Compensation in
Paragraph 6c  Existing 401(k) SERP:                                            applicable year
              Maximum matching
              contribution
---------------------------------------------------------------------------------------------------------------------
</TABLE>

---------------
(1)  For purposes of determining covered compensation, $400,000 is the base
     salary for the 2003, 2004, 2005 and 2006 calculations. That amount is
     actually paid, however only in 2003 and 2004; it is used for calculation
     purposes only in 2005 and 2006. The $86,533 and $94,400 Additional Payments
     referred to in paragraph 1(b) of the Agreement are not included in covered
     compensation in any year.
(2)  For purposes of determining covered compensation, bonus is included for the
     2003, 2004, 2005 and 2006 calculations. Bonus is included in covered
     compensation for year in which it is paid (or would have been paid). Thus,
     bonus of $184,600 for 2002 but paid in 2003 is included in covered
     compensation for the 2003 calculation. Bonuses for 2003 and 2004 will count
     in the 2004 and 2005 calculations, respectively, but only if the bonuses
     are actually earned and paid. Bonus for 2005 will count in the 2006
     calculation if the bonus would have been earned under the incentive plan,
     but no bonus will actually be paid for 2005.
(3)  IRS maximum refers to the Internal Revenue Code Section 401(a)(17) limit.
     The current amount of such limit is $200,000. This amount may change.
     Calculation will be based on then current limit in effect for the
     applicable year.
(4)  The $94,400 number assumes that Mr. Steil elects to receive his aggregate
     cash balance benefit in the form of a single life annuity and beginning at
     age 60. Annual amount will differ if Mr. Steil elects a different payment
     option available under the cash balance plan (i.e, ten year certain and
     continuous, joint and 50% to surviving spouse, joint and 66.7% to surviving
     spouse, or joint and 100% to surviving spouse) and/or elects to begin
     payments earlier than age 60.

                                      -19-

<PAGE>

                                    Exhibit B

                            Summary of Stock Options

                                  As of 3/1/03

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                            Option Agreement Dated:
--------------------------------------------------------------------------------------------------------------------
                                                          8/21/95 (1)     11/28/00 (2)   5/29/02 (3)    TOTAL (4)
--------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>             <C>            <C>            <C>
Grant Date                                                  3/14/95          3/14/00       3/12/02         --
--------------------------------------------------------------------------------------------------------------------
Exercise Price                                              $14.583          $25.344        $44.99         --
--------------------------------------------------------------------------------------------------------------------
Expiration Date                                             3/13/05          3/13/10       3/11/12         --
--------------------------------------------------------------------------------------------------------------------
Performance Based                                             Yes              Yes            No           --
--------------------------------------------------------------------------------------------------------------------
Number Granted                                              37,500           40,000         15,000       92,500
--------------------------------------------------------------------------------------------------------------------
(Exercised)                                                 (1,688)           --0--         --0--        (1,688)
--------------------------------------------------------------------------------------------------------------------
(Forfeited)                                                 (2,813)         (19,000)         N/A        (21,813)
--------------------------------------------------------------------------------------------------------------------
Total Current Outstanding                                   32,999           21,000         15,000       68,999
--------------------------------------------------------------------------------------------------------------------
     Total Current Outstanding Vested                       32,999           11,000          5,000       48,999
--------------------------------------------------------------------------------------------------------------------
     Total Current Outstanding Non-Vested                    --0--           10,000         10,000       20,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>

----------------
(1)  All share amounts with respect to this Option Agreement have been adjusted
     to reflect the 3-for-2 stock split effected in June 1997.
(2)  Based on 2002 performance, on March 14, 2003 options for 8,000 shares will
     be forfeited and options for 2,000 shares will become exercisable under
     this Option Agreement. These actions are reflected in the chart
     information.
(3)  Assumes vesting of 5,000 shares on March 12, 2003, the anniversary date of
     the grant of these options.
(4)  Does not include 5,000 restricted shares granted 4/29/02.

                                      -20-

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