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| IBCA > SEC Filings for IBCA > Form 8-K on 23-Dec-2008 | All Recent SEC Filings |
23-Dec-2008
Entry into a Material Definitive Agreement, Unregistered Sale of Equity
On December 23, 2008, Intervest Bancshares Corporation (the "Company") issued and sold to the United States Department of the Treasury (the "Treasury") 25,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the "Preferred Shares") with a liquidation preference of $1,000 per share, along with a ten year warrant (the "Warrant") to purchase at any time up to 691,882 shares of the Company's Class A common stock for $5.42 per share, for a total cash investment of $25 million from the Treasury. The exercise price was calculated based on the average of the closing prices of the Company's Class A common stock on the 20 trading days ending on the last trading day prior to the date of the Treasury's approval of the Company's application under the program.
This transaction was completed pursuant to, and is governed by, the U.S. Treasury's Capital Purchase Program (the "CPP"). The CPP is designed to attract broad participation by healthy institutions, to stabilize the financial system, and to increase lending for the benefit of the U.S. economy. The terms of the Preferred Shares are standardized across the industry and the investment qualifies as Tier 1 Capital for regulatory capital purposes. The Preferred Shares will carry a 5% dividend payable for each of the first five years of the investment, and 9% thereafter, unless the Company redeems the Preferred Shares earlier. The Company will invest the $25 million as a capital contribution into Intervest National Bank, the Company's wholly owned banking subsidiary.
In connection with this transaction, the Company entered into a letter agreement (the "Letter Agreement") with the Treasury which includes, a Securities Purchase Agreement-Standard Terms (the "SPA"). The designation, powers, preferences and rights of the Preferred Shares are set forth in the Certificate of Designations (the "Designation").
Significant terms of the Letter Agreement, the Designation, the Warrant, and the SPA, include the following:
a. The Preferred Shares carry a 5% per year cumulative preferred dividend rate, payable quarterly. The dividend rate increases to 9% after five years. Dividends compound if they accrue and are not paid. The Preferred Shares have a liquidation preference of $1,000 per share, plus accrued unpaid dividends
b. The Preferred Shares have no redemption date and the holder of the Preferred Shares has no right to compel the Company to purchase or redeem the Preferred Shares. The holder may have certain registration rights to facilitate a sale of the Preferred Shares upon written request to the Company. If requested by the Treasury, the Preferred Shares may need to be listed on a national securities exchange.
c. During the first three years after the transaction, the Company may not redeem the Preferred Shares except in conjunction with a qualified equity offering meeting certain requirements. After three years, the Company may redeem the Preferred Shares for $1,000 per share, plus accrued unpaid dividends, in whole or in part, subject to the approval of the Company's primary federal banking regulator.
d. During the time that the Preferred Shares are outstanding, a number of restrictions apply to the Company, including, among others:
(1) The Preferred Shares have a senior rank. The Company is not free to issue other preferred stock that is senior to the Preferred Shares.
(2) Until the third anniversary of the sale of the Preferred Shares, unless the Preferred Shares have been redeemed in whole or the Treasury has transferred all of the shares to a non-affiliated third party, the Company may not increase its common stock cash dividend or repurchase common stock or other equity shares (subject to certain limited exceptions) without the Treasury's approval.
(3) If the Company were to pay a cash dividend in the future, any such dividend would have to be discontinued if a Preferred Share dividend were missed. Thereafter, dividends on common stock could be resumed only if all Preferred Share dividends in arrears were paid. Similar restrictions apply to the Company's ability to repurchase common stock if Preferred Share dividends are missed.
(4) Failure to pay the Preferred Share dividend is not an event of default. However, a failure to pay a total of six Preferred Share dividends, whether or not consecutive, gives the holders of the Preferred Shares the right to elect two directors to the Company's Board of Directors. That right would continue until the Company pays all dividends in arrears.
(5) In conformity with requirements of the SPA and Section 111(b) of the . . .
The information set forth under Item 1.01 is incorporated herein by reference. The sale of the Preferred Shares and the Warrant to the Treasury on December 23, 2008 was not registered under the Securities Act of 1933, as amended, pursuant to Section 4(2) of the Act. The sale to the Treasury involved no public offering.
The information concerning executive compensation set forth under Item 1.01 is incorporated herein by reference.
On December 19, 2008, the Company filed with the Secretary of State of Delaware a Certificate of Designations to its Restated Certificate of Incorporation, establishing the terms of the Preferred Shares. The Certificate of Designations was effective immediately upon filing. A copy of the Certificate of Designations is attached hereto as Exhibit 3.1 and is incorporated by reference into this item 5.03.
Exhibits
3.1 Certificate of Designations dated December 18, 2008.
4.1 Warrant to purchase Class A Common Stock dated December 23, 2008.
10.1 Letter Agreement dated December 23, 2008, including Securities Purchase Agreement-Standard Terms between the Company and the United States Department of the Treasury.
10.2 Form of Waiver dated December 23, 2008 executed by Senior Executive Officers of the Company and its Subsidiaries.
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