8-K

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 15, 2009

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Maryland	0-22345	52-1974638
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(IRS Employer Identification No.)

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 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry Into a Material Definitive Agreement

The information set forth in Item 8.01 of this report is incorporated into this Item 1.01 by reference.

Item 8.01 Other Events.

On April 15, 2009, Shore Bancshares, Inc. (the “Company”) completed the repurchase of all 25,000 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Preferred Stock”) that were sold to the U.S. Department of the Treasury (the “Treasury”) on January 9, 2009 pursuant to the Troubled Asset Relief Program Capital Purchase Program.

In connection with this transaction, the Company and the Treasury entered into a letter agreement, in the form attached hereto as Exhibit 10.1 (the “Letter Agreement”). The Letter Agreement amends Section 4.4 of the Securities Purchase Agreement – Standard Terms, dated as of January 9, 2009 (the “Purchase Agreement”), that was executed in connection with the sale of the Preferred Stock to permit the Treasury, subject to applicable securities laws, to transfer all or a portion of the related warrant (covering 172,970 shares of the Company’s common stock) and/or exercise all or a portion of such warrant at any time and without limitation.  Prior to its amendment, Section 4.4 prohibited the Treasury from transferring a portion of the warrant with respect to, or exercising the warrant for, more than one-half of the warrant shares until the earlier of December 31, 2009 or the date on which the Company has received $25 million from one or more qualified equity offerings.  In addition, the Letter Agreement requires the Company, no later than April 30, 2009, to either (i) provide the Treasury with notice of its intent to repurchase the warrant at its fair market value or (ii) issue and deliver a substitute warrant that omits Section 13(H).  Section 13(H) of the warrant provides for a 50% reduction in the number of shares of common stock subject to the warrant in the event the Company receives $25 million in one or more qualified equity offerings.

Item 9.01. Financial Statements and Exhibits.

(c)           Exhibits.  The exhibits filed with this report are listed in the Exhibit Index which follows the signatures hereto, which index 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:  April 15, 2009	By:  /s/ W. Moorhead Vermilye
	W. Moorhead Vermilye
	President and CEO

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EXHIBIT INDEX

Exhibit	Description
10.1	Letter Agreement dated as of April 15, 2009 between the Company and the U.S. Department of the Treasury (filed herewith)
99.1	Press release dated April 15, 2009 (filed herewith).

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EX-10.1

Exhibit 10.1

UST No. 394

UNITED STATES DEPARTMENT OF THE TREASURY

1500 Pennsylvania Avenue, NW

Washington, D.C. 20220

April 15, 2009

Ladies and Gentlemen:

Reference is made to that certain Letter Agreement incorporating the Securities Purchase Agreement - Standard Terms (the "Securities Purchase Agreement"), dated as of the date set forth on Schedule A hereto, between the United States Department of the Treasury (the "Investor") and the company set forth on Schedule A hereto (the "Company"), Capitalized terms used but not defined herein shall have the meanings assigned to them in the Securities Purchase Agreement. Pursuant to the Securities Purchase Agreement, at the Closing, the Company issued to the Investor the number of shares of the series of its preferred stock set forth on Schedule A hereto (the "Preferred Shares") and a warrant to purchase the number of shares of its common stock set forth on Schedule A hereto (the "Warrant").

In connection with the consummation of the repurchase (the "Repurchase") by the Company from the Investor, on the date hereof, of the number of Preferred Shares listed on Schedule A hereto (the "Repurchased Preferred Shares"), as permitted by the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009:

(a) The Company hereby acknowledges receipt from the Investor of the share certificate(s) set forth on Schedule A hereto representing the Preferred Shares; and

(b) The Investor hereby acknowledges receipt from the Company of a wire transfer to the account of the Investor set forth on Schedule A hereto in immediately available funds of the aggregate purchase price set forth on Schedule A hereto, representing payment in full for the Repurchased Preferred Shares at a price per share equal to the Liquidation Amount per share, together with any accrued and unpaid dividends to, but excluding, the date hereof.

The Investor and the Company hereby agree that, notwithstanding Section 4.4 of the Securities Purchase Agreement, immediately following consummation of the Repurchase, but subject to compliance with applicable securities laws, the Investor shall be permitted to Transfer all or a portion of the Warrant or Substitute Warrant (as defined below) with respect to, and/or exercise the Warrant or Substitute Warrant for, all or a portion of the number of shares of Common Stock issuable thereunder, at any time and without limitation, and Section 4.4 of the Securities Purchase Agreement shall be deemed to be amended in order to permit the foregoing. The Company shall take all steps as may be reasonably requested by the Investor to facilitate any such Transfer.

In addition, the Company agrees that within 15 calendar days of the date hereof the Company shall either (a) deliver to the Investor a notice of intent to repurchase the Warrant in accordance with Section 4.9(b) of the Securities Purchase Agreement (the "Warrant Repurchase Notice"), or (b) issue and deliver to the Investor a new warrant, in substantially the form of the Warrant, except with the deletion of Section 13(H) thereof, to purchase the number of shares of Common Stock into which the Warrant is then exercisable (the "Substitute Warrant"), which Substitute Warrant shall be deemed the "Warrant" for all purposes under the Securities Purchase Agreement.

In the event that the Company delivers a Warrant Repurchase Notice and the Company and the Investor fail to agree on the Fair Market Value of the Warrant pursuant to the procedures (including the Appraisal Procedure), and in accordance with the time periods, set forth in Section 4.9(c) of the Securities Purchase Agreement or the Company revokes the delivery of such Warrant Repurchase Notice, then the Company shall deliver a Substitute Warrant to the Investor within 5 calendar days of the earlier of the failure to agree on the Fair Market Value and the revocation of the Warrant Repurchase Notice.

Effective as of the date of receipt of the Substitute Warrant, if applicable, the Investor hereby provides notice, pursuant to Section 4.5(p) of the Securities Purchase Agreement, of its intention to sell the Substitute Warrant.

This letter agreement will be governed by and construed in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.

This letter agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. Executed signature pages to this letter agreement may be delivered by facsimile and such facsimiles will be deemed sufficient as if actual signature pages had been delivered.

[Remainder of this page intentionally left blank]

In witness whereof, the parties have duly executed this letter agreement as of the date first written above.

UNITED STATES DEPARTMENT OF

THE TREASURY

By: /s/ Neal Kashkari            
Name: Neal KashKari
Title: Interim Assistant Secretary For Financial Stability

COMPANY: SHORE BANCSHARES, INC.

By:  /s/ W. Moorhead Vermilye        
Name: W. Moorhead Vermilye
Title: President & CEO

SCHEDULE A

UST No. 394

General Information:

Date of Letter Agreement incorporating the Securities

Purchase Agreement: January 9, 2009

Name of the Company: Shore Bancshares, Inc.

Corporate or other organizational form of the

Company: Corporate

Jurisdiction of organization of the Company: Maryland

Number and series of preferred stock issued to the

Investor at the Closing: 25,000 Fixed Rate Cumulative Perpetual Preferred Stock, Series A

Number of Initial Warrant Shares: 172,970

Terms of the Repurchase:

Number of Preferred Shares repurchased by the

Company: 25,000

Share certificate number (representing the Preferred

Shares previously issued to the Investor at the

Closing): PA-1

Per share Liquidation Amount of Preferred Shares: $1,000

Accrued and unpaid dividends on Preferred Shares: $208,333.33

Aggregate purchase price for Repurchased Preferred

Shares: $25,208,333.33

Investor wire information for payment of purchase price:	ABA Number:
	Bank:
	Account Name:
	Account
	Account Number:
	Beneficiary: Ref:

EX-99.1

Exhibit 99.1

Shore Bancshares, Inc.

18 E. Dover Street

Easton, Maryland 21601

Phone 410-822-1400

PRESS RELEASE

Shore Bancshares, Inc. Completes Repurchase of Preferred Stock

Under the Treasury's Capital Purchase Program

Easton, MD (04/15/2009) – On April 15, 2009, Shore Bancshares, Inc. (Nasdaq: SHBI) completed the repurchase of all 25,000 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, with a liquidation value of $1,000 per share, that were sold to the U.S. Department of the Treasury (the “Treasury”) on January 9, 2009 pursuant to the Troubled Asset Relief Program (TARP) Capital Purchase Program. The repurchase price was $25 million, plus accrued dividends of $208,333.33.  The repurchase was approved by the Treasury following consultation with and approval from the Federal Reserve Bank of Richmond and the Federal Deposit Insurance Corporation.

Shore Bancshares Information

Shore Bancshares, Inc. is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland's Eastern Shore. It is the parent company of three banks, The Talbot Bank of Easton, Maryland, The Centreville National Bank of Maryland, and The Felton Bank; three insurance producer firms, The Avon-Dixon Agency, LLC, Elliott Wilson Insurance, LLC and Jack Martin and Associates, Inc; a wholesale insurance company, TSGIA, Inc; two insurance premium finance companies, Mubell Finance, LLC and ESFS, Inc; a registered investment adviser firm, Wye Financial Services, LLC; and a mortgage broker subsidiary, Wye Mortgage Group, LLC.

For more information, contact:

W. Moorhead Vermilye, President and CEO of Shore Bancshares, Inc. (410/822-1400)

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