UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): January 7,
2009
SHORE BANCSHARES,
INC.
(Exact
name of registrant as specified in its charter)
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Maryland
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0-22345
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52-1974638
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(State
or other jurisdiction of
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(Commission
file number)
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(IRS
Employer
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incorporation
or organization)
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Identification
No.)
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18 East Dover Street,
Easton, Maryland 21601
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (410)
822-1400
N/A
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligations of the registrant under any of the following
provisions:
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR240.14d-2(b))
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR240.13e-4(c))
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ITEM
1.01
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Entry
into a Material Definitive
Agreement.
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On
January 9, 2009, as part of the Troubled Asset Relief Program (“TARP”) Capital
Purchase Program, Shore Bancshares, Inc. (the “Company”) entered into a Letter
Agreement, and the related Securities Purchase Agreement – Standard Terms
(collectively, the “Purchase Agreement”), with the United States Department of
the Treasury (“Treasury”), pursuant to which the Company issued (i) 25,000
shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, liquidation
preference $1,000 per share (“Series A Preferred Stock”), and (ii) a warrant to
purchase 172,970 shares of the Company’s common stock, par value $.01 per share,
for an aggregate purchase price of approximately $3.75 million in cash (the
“Warrant”). The Purchase Agreement is attached as Exhibit 10.1 hereto
and is incorporated herein by reference.
The
Series A Preferred Stock will qualify as Tier 1 capital and will pay cumulative
dividends at a rate of 5% per annum until February 15,
2014. Beginning February 15, 2014, the dividend rate will increase to
9% per annum. On and after February 15, 2012, the Company may, at its
option, redeem shares of Series A Preferred Stock, in whole or in part, at any
time and from time to time, for cash at a per share amount equal to the sum of
the liquidation preference per share plus any accrued and unpaid dividends to
but excluding the redemption date. Prior to February 15, 2012, the
Company may redeem shares of Series A Preferred Stock only if it has received
aggregate gross proceeds of not less than $6,250,000 from one or more qualified
equity offerings, and the aggregate redemption price may not exceed the net
proceeds received by the Company from such offerings. The redemption
of the Series A Preferred Stock requires prior regulatory
approval. The restrictions on redemption are set forth in the
Articles Supplementary to the Company’s Articles of Incorporation (the “Articles
Supplementary”) described in Item 5.03 below.
The
Warrant is exercisable at $21.68 per share at any time on or before January 9,
2019. The number of shares of common stock issuable upon exercise of the Warrant
and the exercise price per share will be adjusted if specific events
occur. The Warrant is attached as Exhibit 4.2 hereto and is
incorporated herein by reference. Treasury has agreed not to exercise
voting power with respect to any shares of common stock issued upon exercise of
the Warrant (the “Warrant Shares”).
The
Series A Preferred Stock and the Warrant were issued in a transaction exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended. The Company has agreed to register the Series A Preferred
Stock, the Warrant, and the Warrant Shares as soon as practicable after the date
of the issuance of the Series A Preferred Stock and the
Warrant. Neither the Series A Preferred Stock nor the Warrant will be
subject to any contractual restrictions on transfer, except that Treasury may
not transfer a portion of the Warrant with respect to, or exercise the Warrant
for, more than one-half of the Warrant Shares prior to the earlier of (a) the
date on which the Company has received aggregate gross proceeds of not less than
$25,000,000 form one or more qualified equity offerings and (b) December 31,
2009.
The
Purchase Agreement also subjects the Company to certain of the executive
compensation limitations included in the Emergency Economic Stabilization Act of
2008. As a condition to the closing of the transaction, W. Moorhead
Vermilye, Susan E. Leaverton, Lloyd L. Beatty, Jr., W. William Duncan, Jr. and
F. Winfield Trice, Jr. (the “Senior Executive Officers”, as defined in the
Purchase Agreement) each voluntarily waived any claim against the Treasury or
the Company for any changes to such Senior Executive Officer’s compensation or
benefits that are required to comply with the regulation issued by the Treasury
under the TARP Capital Purchase Program as published in the Federal Register on
October 20, 2008 and acknowledged that the regulation may require modification
of the compensation, bonus, incentive and other benefit plans, arrangements and
policies and agreements (including so-called “golden parachute” agreements) as
they relate to the period the Treasury holds any equity or debt securities of
the Company acquired through the TARP Capital Purchase Program. The
form of waiver signed by each of the Senior Executive Officers is attached as
Annex B to the Purchase Agreement.
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ITEM
3.02
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Unregistered
Sales of Equity Securities.
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The
information set forth under “Item 1.01 Entry into a Material Definitive
Agreement” is incorporated by reference into this Item 3.02.
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ITEM
3.03
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Material
Modification to Rights of Security
Holders.
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Pursuant
to the terms of the Purchase Agreement, prior to the earlier of (i) January 9,
2012 or (ii) the date on which the Series A Preferred Stock has been redeemed in
full or Treasury has transferred all of the Series A Preferred Stock to
non-affiliates, the Company cannot increase its quarterly cash dividend above
$0.16 per share or repurchase any shares of its common stock or other capital
stock or equity securities or trust preferred securities without the consent of
Treasury.
In
addition, pursuant to the Articles Supplementary, so long as any shares of
Series A Preferred Stock remain outstanding, the Company may not declare or pay
any dividends or distributions on the Company’s common stock or any class or
series of the Company’s equity securities ranking junior, as to dividend rights
and/or rights on liquidation, dissolution or winding up of the Company, to the
Series A Preferred Stock (“Junior Stock”) (other than dividends payable solely
in shares of common stock) or on any other class or series of the Company’s
equity securities ranking pari
passu, as to dividend rights and/or rights on liquidation, dissolution or
winding up of the Company, with the Series A Preferred Stock (“Parity Stock”),
and may not repurchase or redeem any common stock, Junior Stock or Parity Stock,
unless all accrued and unpaid dividends for past dividend periods, including the
latest completed dividend period, have been paid or have been declared and a
sufficient sum has been set aside for the benefit of the holders of the Series A
Preferred Stock.
The
repurchase restrictions described above do not apply in certain limited
circumstances, including the repurchase of common stock in connection with the
administration of any employee benefit plan in the ordinary course of business
and consistent with past practice, but only to offset the increase in the number
of diluted shares outstanding resulting from the grant, vesting or exercise of
equity-based compensation.
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ITEM
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensation Arrangements of Certain
Officers.
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(e) Compensatory
Arrangements.
The information concerning executive
compensation set forth under “Item 1.01 Entry into a Material Definitive
Agreement” is incorporated by reference into this Item 5.02.
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ITEM
5.03
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Amendment
to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
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(a) Amendment
to Articles of Incorporation.
On
January 7, 2009, the Company filed Articles Supplementary with the State
Department of Assessments and Taxation of Maryland for the purpose of
classifying 25,000 shares of its common stock as 25,000 shares of the Series A
Preferred Stock and setting the rights, preferences and limitations of the
Series A Preferred Stock. The Articles Supplementary, which are
attached hereto as Exhibit 4.1 and incorporated herein by reference, are
considered to be part of, and, thus, an amendment to, the Company’s
charter.
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ITEM
8.01
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Other
Information.
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On
January 12, 2009, the Company issued a press release announcing the issuance of
the Series A Preferred Stock and the Warrant to Treasury pursuant to the
Purchase Agreement. The press release is furnished as Exhibit
99.1.
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ITEM
9.01
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Financial
Statements and Exhibits.
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(d) Exhibits.
The
exhibits filed or furnished with this report are listed on the Exhibit Index
which immediately follows the signatures hereto and is incorporated herein by
reference.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SHORE
BANCSHARES, INC.
Dated: January
13, 2009
By:
/s/
W.
Moorhead Vermilye
Name:
W. Moorhead Vermilye
Title:
President and CEO
EXHIBIT
INDEX
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Exhibit
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Number
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Description
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Articles
Supplementary filed on January 7, 2009 (filed herewith)
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Common
Stock Purchase Warrant dated January 9, 2009 issued to the U.S. Department
of Treasury (filed herewith)
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Letter
Agreement, including the related Securities Purchase Agreement – Standard
Terms (the “Securities Purchase Agreement”), dated January 9, 2009 by and
between the Company and the U.S. Department of Treasury (filed
herewith)
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10.2
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Form
of Senior Executive Officer Waiver (incorporated by reference to Annex B
of the Securities Purchase Agreement)
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Press
release dated January 12, 2009 (furnished herewith)
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