Item 1.01 Entry into a Material Definitive Agreement.
On
Merger Consideration
The consideration payable to Severn shareholders upon completion of the Proposed
Transaction (the "Merger Consideration") will consist of whole shares of SHBI
common stock, par value
Severn Options
Upon consummation of the Corporate Merger, each outstanding and unexercised
option to acquire shares of Severn Common Stock, whether vested or unvested,
will be canceled in exchange for the right to receive from Severn, immediately
prior to the effective time of the Corporate Merger, a single-lump sum cash
payment, equal to the product of (i) the number of shares of Severn Common Stock
subject to such Severn option immediately prior to the Effective Time, and (ii)
the excess, if any, of (A)
Shareholder Agreements
As an inducement for SHBI to enter into the Merger Agreement, each director and executive officer of Severn entered into a shareholder agreement with SHBI, pursuant to which he or she agreed, among other things, to vote their shares of Severn Common Stock in favor of adoption and approval of the Merger Agreement and any other matters required to be approved by Severn's shareholders for the consummation of the Proposed Transaction. These shareholders also agreed to certain restrictions on their ability to transfer their shares of Severn Common Stock until written consents reflecting at least a majority of all issued and outstanding shares of Severn Common Stock voting in favor of the Merger Agreement, the Proposed Transaction and the transactions contemplated thereby have been irrevocably delivered to Severn. In addition, subject to certain enumerated exceptions, those directors and executive officers of Severn who are not being retained by SHBI have also agreed to refrain from soliciting customers and employees of Severn or its subsidiaries for a period of one (1) year, subject to and following the closing of the Proposed Transaction. The shareholder agreement is substantially in the form included as Annex A to the Merger Agreement, which is attached to this Current Report on Form 8-K as Exhibit 2.1.
SHBI directors and executive officers have entered into agreements with Severn pursuant to which they have committed to vote their shares of SHBI Common Stock in favor of the issuance of shares of SHBI Common Stock to Severn shareholders in connection with the Proposed Transaction.
Assumption of Severn Indenture Obligation
In connection with the closing of the Proposed Transaction, SHBI will assume the
obligations under the indenture (the "Indenture") relating to Severn's junior
subordinated debentures due in 2035. In connection with the assumption of the
Indenture, SHBI and Severn will enter into a supplemental indenture or other
documents reasonably required by the trustee to make such assumption effective.
Severn had
Appointment of Directors
Pursuant to the terms of the Merger Agreement, SHBI is required to take all
action necessary to appoint or elect, effective as of the effective time of the
Proposed Transaction, four (4) individuals who are members of the Severn board
of directors immediately prior to the effective time of the Proposed
Transaction, each of whom must be mutually agreeable to SHBI and Severn and one
of whom shall be
Representations and Warranties
The Merger Agreement contains customary representations and warranties from Severn to SHBI, which are qualified by the confidential disclosure schedules provided by Severn to SHBI, and customary representations and warranties from SHBI to Severn.
Business Pending the Proposed Transaction
Severn is required under the Merger Agreement to conduct its business in the ordinary and usual course, consistent with past practice, to use reasonable best efforts to preserve its business organization, keep available the present services of its employees, and preserve for itself and SHBI the goodwill of the customers of Severn and others with whom business relations exist.
Conditions to the Proposed Transaction
The consummation of the Proposed Transaction is subject to a number of conditions, which include:
(i) the approval of the Merger Agreement by Severn's shareholders and the approval of the issuance of shares of SHBI Common Stock by SHBI's shareholders; (ii) the receipt of all necessary regulatory approvals for the Charter Conversion and the Proposed Transaction, without the imposition of conditions or requirements that would require SHBI or Severn to take any action or commit to take any action that would (x) reasonably be likely to have a Material Adverse Effect (as defined in the Merger Agreement) on SHBI or Severn, (y) reasonably be likely to impose a Burdensome Condition (as defined in the Merger Agreement) on SHBI or any of its subsidiaries (including, after the effective time of the Proposed Transaction, Severn and its subsidiaries) or (z) require the sale by SHBI or any of its subsidiaries (including, after the effective time of the Proposed Transaction, Severn and its subsidiaries) of any material portion of their respective assets; (iii) the absence of any regulation, judgment, decree, injunction or other order of a governmental authority which prohibits the consummation of the Proposed Transaction or which prohibits or makes illegal the consummation of the Proposed Transaction; (iv) the effective registration of the shares of SHBI Common Stock to be issued to Severn's shareholders with theSecurities and Exchange Commission (the "SEC") and the approval of such shares for listing on the Nasdaq Global Market; (v) all representations and warranties made by SHBI and Severn in the Merger Agreement must remain true and correct, except for certain inaccuracies that would not have, or would not reasonably be expected to have, a Material Adverse Effect; and (vi) SHBI and Severn must have performed their respective obligations under the Merger Agreement in all material respects. Termination
The Merger Agreement contains certain termination rights for both SHBI and
Severn, including if (i) the Corporate Merger is not consummated by
In certain circumstances, Severn may terminate the Merger Agreement, including
in the event that (i) the SHBI Average Share Price (as defined in the Merger
Agreement) is less than
Termination Fee
Severn must pay SHBI a termination fee in the amount of
Expenses of the Proposed Transaction
Each party will bear all expenses incurred by it in connection with the Merger . . .
Item 8.01 Other Events.
On
FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K may contain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 regarding
the financial condition, results of operations, business plans and the future
performance of SHBI and Severn. Words such as "anticipates," "believes,"
"estimates," "expects," "forecasts," "intends," "plans," "projects," "could,"
"may," "should," "will" or other similar words and expressions are intended to
identify these forward-looking statements. These forward-looking statements are
based on SHBI's and Severn's current expectations and assumptions regarding
SHBI's and Severn's businesses, the economy, and other future conditions.
Because forward-looking statements relate to future results and occurrences,
they are subject to inherent uncertainties, risks, and changes in circumstances
that are difficult to predict. Any number of risks, uncertainties or other
factors such as the COVID-19 pandemic could affect SHBI's or Severn's future
financial results and performance and could cause actual results or performance
to differ materially from anticipated results or performance. Such risks and
uncertainties include, among others: the occurrence of any event, change or
other circumstances that could give rise to the right of one or both of the
parties to terminate the definitive agreement and plan of merger between SHBI
and Severn, the outcome of any legal proceedings that may be instituted against
SHBI or Severn, delays in completing the transaction, the failure to obtain
necessary regulatory approvals (and the risk that such approvals may result in
the imposition of conditions that could adversely affect the combined company or
the expected benefits of the transaction) and shareholder approvals or to
satisfy any of the other conditions to the transaction on a timely basis or at
all, the possibility that the anticipated benefits of the transaction are not
realized when expected or at all, including as a result of the impact of, or
problems arising from, the integration of the two companies or as a result of
the strength of the economy and competitive factors in the areas where SHBI and
Severn do business, the possibility that the transaction may be more expensive
to complete than anticipated, including as a result of unexpected factors or
events, diversion of management's attention from ongoing business operations and
opportunities, potential adverse reactions or changes to business or employee
relationships, including those resulting from the announcement or completion of
the transaction, the ability to complete the transaction and integration of SHBI
and Severn successfully, and the dilution caused by SHBI's issuance of
additional shares of its capital stock in connection with the transaction.
Except to the extent required by applicable law or regulation, each of SHBI and
Severn disclaims any obligation to update such factors or to publicly announce
the results of any revisions to any of the forward-looking statements included
herein to reflect future events or developments. Further information regarding
SHBI, Severn and factors which could affect the forward-looking statements
contained herein can be found in SHBI's Annual Report on Form 10-K for the
fiscal year ended
Additional Information About the Merger and Where to Find It
This Current Report on Form 8-K does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the Proposed Transaction.
In connection with the Proposed Transaction, a registration statement on Form
S-4 will be filed with the
Participants in the Solicitation
The directors, executive officers and certain other members of management and
employees of SHBI may be deemed to be participants in the solicitation of
proxies from the shareholders of SHBI in connection with the Proposed
Transaction. Information about SHBI's directors and executive officers is
included in the proxy statement for its 2020 annual meeting of SHBI's
shareholders, which was filed with the
The directors, executive officers and certain other members of management and
employees of Severn may also be deemed to be participants in the solicitation of
proxies from the shareholders of Severn in connection with the Proposed
Transaction. Information about the directors and executive officers of Severn is
included in the proxy statement for its 2020 annual meeting of Severn's
shareholders, which was filed with the
Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the joint proxy statement/prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described above.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits 2.1 Agreement and Plan of Reorganization, dated as ofMarch 3, 2021 , by and between Shore Bancshares, Inc. andSevern Bancorp, Inc. * 99.1 Press Release, datedMarch 3, 2021 .
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
* Schedules and certain exhibits omitted pursuant to Item 601(b)(2) of
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