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): April 19, 2010
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:
o
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR240.14d-2(b))
o
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR240.13e-4(c))
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Item
5.02
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Departure of Directors or
Certain Officers; Election of Directors;
Appointment of Certain
Officers; Compensatory Arrangements of Certain
Officers.
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(e) Compensatory
Arrangements.
On April 19, 2010, the Compensation
Committee of the Board of Directors of Shore Bancshares, Inc. (the “Company”)
adopted a Management Incentive Plan to provide non-equity (cash) incentive
compensation opportunities for certain executive officers of the Company and its
subsidiaries (the “MIP”). The MIP, which will continue in effect
until terminated by the Compensation Committee, replaces the
previously-disclosed annual incentive plan that was adopted each
year. The terms of the MIP are identical in all material respects to
the terms of the annual plan.
The MIP is administered by the
Compensation Committee, and executives chosen to participate will be recommended
by the Company’s President/CEO and approved by the Committee. The
Compensation Committee may amend or terminate the MIP at any time by giving
participants 30 days’ written notice.
Under the MIP, a participating
executive officer will receive an award payout if the Company meets its net
income target for the plan year and the participant meets his or her performance
target for the plan year. Each award opportunity is expressed as a
percentage of the participant’s prior year-end annual salary
level. Target awards are weighted between the Company’s net income
and the participant’s individual performance (see Schedule A of the MIP), and
each component is subject to an upward adjustment (up to 150%) when performance
exceeds targeted expectations and to a downward adjustment (down to 0%) when
performance falls below targeted expectations (see Schedule B of the MIP), all
as described in the MIP. The Company’s annual net income target and
the participant’s individual performance target will be approved by the
Compensation Committee at the beginning of each plan year after reviewing the
recommendations of the Company’s President/CEO and the Chairman of the
Compensation Committee.
Awards earned for a plan year will be
paid no later than March 15
th
of the
following year. If a participant’s employment terminates because of death, a
permanent disability, retirement or involuntary termination other than for
cause, then the participant or his or her estate will be eligible to receive a
pro rated award for the plan year, which will be paid at the time all other
awards are paid. A participant will forfeit an award opportunity if
he or she voluntarily terminates employment or if the Company terminates his or
her employment for cause.
If the Compensation Committee
terminates the MIP, then participants will be eligible to receive awards for
that plan year to the extent earned, which will be calculated as of the date of
termination and paid as soon as practicable after the end of the plan
year.
At the time the Compensation Committee
adopted the MIP, it also granted 2010 award opportunities to each of the
Company’s named executive officers (as defined in Item 402 of the Securities and
Exchange Commission’s Regulation S-K). For W. Moorhead Vermilye,
President/CEO, the incentive award was set at 75% of annual salary, weighted
50%/50% between the Company net income target and individual performance,
respectively. For Lloyd L. Beatty, COO, the incentive award was set
at 40% of annual salary, weighted 50%/50% between the Company net income target
and individual performance, respectively. For Susan E. Leaverton,
CFO, the incentive award was set at 40% of annual salary, weighted 40%/60%
between the Company net income target and individual performance,
respectively. For William W. Duncan, Jr., President/CEO of The Talbot
Bank of Easton, Maryland, the incentive award was set at 50% of annual salary,
weighted 40%/60% between the Company net income target and individual
performance, respectively. For F. Winfield Trice, Jr., President/CEO
of The CNB, the incentive award was set at 30% of annual salary, weighted
40%/60% between the Company net income target and individual performance,
respectively. The following table provides information about the
amounts that may be paid to the named executive officers for 2010:
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2010
GRANTS OF PLAN-BASED AWARDS
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Name
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Estimated
Possible Payouts Under
Non-Equity
Incentive Plan Awards
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Threshold
($)
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Target
($)
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Maximum
($)
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Mr.
Vermilye
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121,500
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243,000
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364,500
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Mr.
Beatty
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58,800
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117,600
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176,400
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Ms.
Leaverton
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31,320
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62,640
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93,960
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Mr.
Duncan
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71,025
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142,050
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213,075
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Mr.
Trice
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33,345
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66,690
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100,035
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A copy of the MIP, the schedules to
which set forth the award opportunities for 2010, is attached hereto as Exhibit
10.1 and incorporated herein by reference.
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ITEM
9.01.
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Financial
Statements and Exhibits.
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(d) Exhibits.
10.1 Shore
Bancshares, Inc. Management Incentive Plan (filed herewith)
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.
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SHORE
BANCSHARES, INC.
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Dated: April
19, 2010
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By:
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/s/
W. Moorhead Vermilye
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W.
Moorhead Vermilye
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President
and CEO
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EXHIBIT
INDEX
Exhibit
Number
Description
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10.1
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Shore
Bancshares, Inc. Management Incentive Plan (filed
herewith).
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Exhibit 10.1
Shore
Bancshares, Inc.
Management
Incentive Plan
ARTICLE
I
OBJECTIVE
OF THE PLAN
The
purpose of this Management Incentive Plan ("Plan") is to reward executives of
Shore Bancshares, Inc. (hereafter, the "Company") for creating value for the
Company by maximizing Company, Divisional and/or Individual performance
goals.
ARTICLE
II
PLAN
ADMINISTRATION
The
Compensation Committee of the Board shall administer the Plan and have final
authority on all matters and or disputes pertaining to this Plan.
The Plan,
effective in 2010, shall remain in effect until the Committee deems
otherwise. A new Plan year shall commence on the first business day
of the fiscal year.
ARTICLE
III
PARTICIPANTS
Participation
is limited to those executives recommended by the President & CEO and
approved by the Committee each Plan year.
ARTICLE
IV
PERFORMANCE
OBJECTIVES
Prior to
or at the beginning of each fiscal year, the Committee shall
establish:
(i) Plan
performance objectives for the Company, subsidiary or business unit of the
Company based on such criteria as may be recommended by the President & CEO,
and
(ii) the
award formula or matrix by which all incentive awards under this Plan shall be
calculated for Committee review and approval.
The
Chairman & CEO shall establish individual performance objectives for each
Plan participant and evaluate each participant’s performance against those
pre-established individual objectives.
ARTICLE
V
AWARD
CALCULATIONS
Each
executive shall be assigned an incentive award target, calculated as a
percentage of base salary at beginning of the plan year, which shall be awarded
if the Company and the executive achieve targeted performance
goals. The target awards and weights by executive position are
attached to the Plan as
Schedule A
. Target awards
shall be weighted between 1) Company Net Income and 2) Division / Individual
Goals. Target awards shall be leveraged up when performance exceeds
expectations, or down when performance is below expectations, as set forth in
Schedule B
of the
Plan. The achievement of goals and entitlement to leverage
adjustments shall be determined by the Compensation Committee.
ADMINISTRATIVE
MATTERS
The
Committee reserves the right to withhold awards provided that the Committee
gives written explanation to participants within a reasonable period of time
following their decision to withhold.
Incentive
awards shall be paid as soon as practicable following the end of the fiscal
year, however in no event shall awards be paid later than March 15th of the
subsequent fiscal year.
In the
event of death, permanent disability, retirement or involuntary termination
without cause, unpaid awards shall be calculated on a pro-rated basis by taking
the number of full months, including the month in which the terminating event
occurred, and dividing those months by twelve. Prorated awards will
be payable at the same time that normal award distributions occur.
Except in
the case of death, disability or retirement, a participant shall forfeit his
right to receive any Plan award in the event of voluntary or involuntary
termination for cause during the Plan year.
Interpolation
shall be used to calculate incentive awards when Company and Division /
Individual performance falls between levels detailed in Schedules
B.
ARTICLE
VII
NO
ENTITLEMENT TO BONUS
Plan
participants are entitled to a distribution under this Plan only upon the
approval of the award by the Committee and no participant shall be entitled to
an award under the Plan unless the award is subject to the attainment of
performance objectives defined under the Plan.
ARTICLE
VIII
TERMINATION
OF PLAN
The
Committee reserves the right to amend or terminate the Plan at any time within
thirty days written notice to Plan participants. In the event of a
Plan termination, participants shall continue to be eligible for incentive
awards, if earned, for the current Plan year. Incentive awards shall
be calculated as of the date of the Plan termination and payable as soon as
practicable after the end of the Plan year.
ARTICLE
IX
PARTICIPANT'S
RIGHT OF ASSIGNABILITY
Participant
awards shall not be subject to assignment, pledge or other disposition, nor
shall such amounts be subject to garnishment, attachment, transfer by operation
of law, or any legal process.
Nothing
contained in this Plan shall confer upon participants any right to continued
employment, nor interfere with the right of the Company to terminate a
participant’s employment from the Company. Participation in the Plan
does not confer rights to participation in other company programs, including
annual or long-term incentive plans, non-qualified retirement or deferred
compensation plans or other perquisite programs.
ARTICLE
X
GOVERNING
LAW
The laws
of the State of Maryland shall govern the validity, construction, performance
and effect of the Plan.
IN
WITNESS WHEREOF, the parties have executed this Plan on the date written
below.
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/s/ W. Moorhead
Vermilye
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4/19/2010
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President
& CEO
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Date
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/s/ Christopher
Spurry
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Chairman,
Compensation Committee
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Schedule A:
Award Percentages
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Position/Title
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Award
Target
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Company
Net
Income
Weight
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Division/
Individual
Performance
Weight
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President
& CEO, Shore Bancshares
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75%
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50%
( %)
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50%
( %)
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COO,
Shore Bancshares
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40%
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50%
( %)
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50%
( %)
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CFO,
Shore Bancshares
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40%
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40%
( %)
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60%
( %)
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President,
Talbot Bank
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50%
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40%
( %)
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60%
( %)
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President,
CNB
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30%
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40%
( %)
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60%
( %)
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Senior
Lender, Talbot
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35%
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30%
( %)
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70%
( %)
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Senior
Lender, CNB
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20%
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30%
( %)
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70%
( %)
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CEO,
Insurance Division
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5%
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20%
( %)
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80%
( %)
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Schedule
B:
Award Leverage
Schedule
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Percent
of Company
Performance
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Percent
of Company
Award
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Percent
of
Division
/ Individual
Goal
Performance
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Percent
of
Division
/ Individual
Incentive
Award
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120%
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150%
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120%
or
(Exceeded All
Goals)
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150%
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110%
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120%
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110%
or
(Met All / Exceeded Some
Goals)
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120%
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100%
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100%
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100%
or
(Met Most
Goals)
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100%
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85%
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50%
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85%
or
(Met Some
Goals)
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50%
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Less
than 85%
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0%
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Less
than 85% or
(Did Not Meet
Goals)
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0%
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Award
Calculation Formula:
The
calculation example below assumes an executive has a base salary of $150,000
with a target award opportunity of 25% and goal weights of
60%
on Company Net
Income, and
40%
on Division / Individual goals. In addition, the example assumes Net
Income results are 110% of target performance and Division / Individual goals
are met. Please refer to Schedule B above when determining
appropriate leverage percentages.
(Base
Salary) x ((Company Award x Leverage %) + (Division / Individual Award x
Leverage %))
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Example:
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($150,000)
x ((25% x 60%) + (25% x 40%)) =
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($150,000)
x ((15%) + (10%)) =
($150,000)
x ((15% x 1.20) + (10% x 1.00)) =
($150,000)
x ((18%) + (10%)) =
($150,000)
x (28%) =
$42,000
Total Annual Incentive
Award