| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers |
As previously disclosed, on December 14,
2022, Shore Bancshares, Inc., a Maryland corporation (“SHBI”), entered into the Agreement and Plan of Merger,
dated December 14, 2022 (the “Merger Agreement”) with The Community Financial Corporation, a Maryland corporation
(“TCFC”), pursuant to which TCFC will be merged with and into SHBI, with SHBI as the surviving corporation (the “Corporate
Merger”). Promptly following the Corporate Merger, TCFC’s wholly-owned bank subsidiary, the Community Bank of the Chesapeake
(“CBC”), will be merged with and into Shore United Bank, N.A. (“Shore United”), which is the wholly-owned
subsidiary of SHBI, with Shore United as the surviving bank (the “Bank Merger”). The
Corporate Merger and the Bank Merger are collectively referred to in this Current Report on Form 8-K as the “Merger.”
The
Merger Agreement requires SHBI to take all action necessary, immediately prior to the effective time of the Merger (the “Effective
Time”), to cause three of SHBI and Shore United’s existing directors to resign and to appoint or elect eight
individuals who are members of the boards of directors of both TCFC and CBC as directors of SHBI and Shore United, with each such
resignation and appointment or election to be effective as of the Effective Time and subject to the closing of the
Merger. The Merger is currently expected to occur on or about July 1, 2023.
Ms. Blenda
Armistead resigned as a member of the SHBI Board of Directors (the “SHBI Board”) and the Shore United Board of Directors
(the “Shore United Board”) effective as of the 2023 Annual Meeting of SHBI Shareholders held on May 23, 2023 (the
“Annual Meeting”). Prior to her resignation, Ms. Armistead served as a member of the Audit and Nominating Committees
of the SHBI Board and Shore United Board. In connection with the Merger, on May 24, 2023, Mr. Jeffrey E. Thompson tendered his
resignation and will resign as a member of the SHBI Board and Shore United Board, effective as of the Effective Time and subject to the
closing of the Merger. Currently, Mr. Thompson serves as a member of the Compensation Committee of the SHBI Board and Shore United
Board. As previously announced, Mr. Lloyd L. Beatty, Jr. will be retiring upon the closing of the Merger including resigning
as a member of the SHBI Board and Shore United Board. Mr. Beatty serves as a member of the Executive and Risk Management Committees
of the SHBI Board and Shore United Board.
Pursuant
to the terms of the Merger Agreement and in accordance with SHBI’s Amended and Restated Articles of Incorporation and Shore
United’s Articles of Association, effective as of the Effective Time and subject to the closing of the Merger, the SHBI Board and
Shore United Board:
| • | increased the size of each of the respective boards from 14 to 20 members; |
| • | appointed Mary Todd Peterson, Rebecca M. McDonald, Michael B. Adams to Class I, James M.
Burke, Austin J. Slater, Louis P. Jenkins, Jr. to Class II and Joseph V. Stone, Jr., E. Lawrence Sanders, III to
Class III of the SHBI Board, each of whom currently serve as directors of TCFC and CBC (collectively, the “TCFC
Director Nominees”), to serve for a term that will coincide with the remaining term of that class and until his or her
successor is elected and qualified; and |
| • | appointed Austin J. Slater as Vice Chairman of the SHBI Board and Shore United Board. |
Each of the SHBI Board
and the Shore United Board has not yet determined on which committees of the SHBI Board and the Shore United Board the TCFC Director Nominees
will serve. With the exception of Mr. Burke, each of the TCFC Director Nominees will receive the same compensation as currently paid
to other SHBI Board and Shore United Board members. A description of SHBI’s standard non-employee
director compensation arrangement is contained under the heading “Compensation of Non-Employee Directors” in SHBI’s
Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission (“SEC”) on April 12,
2023 (the “Definitive Proxy Statement”).
Other than as previously
described above and in SHBI’s Registration Statement on Form S-4, as amended (File No. 333-271273) initially filed with
the SEC on April 14, 2023, there are no arrangements or understandings between any of the TCFC Director Nominees and any other person
pursuant to which any of the TCFC Director Nominees have been designated to serve on the SHBI Board and Shore United Board. Additionally,
there have been no transactions nor are there any proposed transactions between SHBI and any of the TCFC Director Nominees that would
require disclosure pursuant to Item 404(a) of Regulation S-K.
| Item 5.07. | Submission of Matters to a Vote of Security Holders. |
At the Annual Meeting, SHBI’s
shareholders voted on: (i) the election of four Class II directors to serve for a three-year term ending at the 2026
annual meeting of shareholders (Proposal 1); (ii) the ratification of the appointment of Yount, Hyde & Barbour, P.C.
as SHBI’s independent registered public accounting firm for the fiscal year ending December 31, 2023; (iii) the
adoption of a non-binding advisory resolution approving the compensation of SHBI’s named executive officers (“NEOs”)
(Proposal 3); and (iv) to recommend, on non-binding advisory basis, the frequency of future shareholder advisory votes on the
compensation of SHBI’s NEOs (Proposal 4). These matters were submitted to a vote through the solicitation of proxies. Each of
the proposals is described in further detail in SHBI’s Definitive Proxy Statement. Other than the four proposals addressed
below and described in the SHBI’s Definitive Proxy Statement filed with the SEC on April 12, 2023, no other proposal was
submitted at the Annual Meeting for shareholder action.
On the record date for the Annual Meeting, there
were 19,898,388 shares of SHBI common stock issued, outstanding and entitled to vote. Shareholders holding 16,893,505 shares of SHBI common
stock were present at the Annual Meeting, in person or represented by proxy.
Each of the four proposals that were voted on
at the Annual Meeting were approved by SHBI’s shareholders. The results of the votes are set forth below:
Proposal
1 – To elect four Class II directors to serve for a three-year term ending at the 2026 annual meeting of shareholders.
| | |
For | |
Against | |
Abstain | |
Broker Non-Votes |
| Clyde V. Kelly, III | |
11,740,483 | |
3,029,533 | |
78,746 | |
2,044,743 |
| David W. Moore | |
13,095,893 | |
1,678,870 | |
73,999 | |
2,044,743 |
| Dawn M. Willey | |
13,128,876 | |
1,684,651 | |
35,235 | |
2,044,743 |
| David S. Jones | |
13,161,062 | |
1,671,923 | |
15,777 | |
2,044,743 |
Proposal
2 – To ratify the appointment of Yount, Hyde & Barbour, P.C. as SHBI’s independent registered public
accounting firm for the fiscal year ending December 31, 2023.
| For | |
Against | |
Abstain | |
Broker Non-Votes |
| 16,802,314 | |
46,847 | |
44,344 | |
― |
Proposal
3 – To adopt a non-binding advisory resolution approving the compensation of SHBI’s NEOs.
| For | |
Against | |
Abstain | |
Broker Non-Votes |
| 13,120,593 | |
1,685,663 | |
42,504 | |
2,044,745 |
Proposal
4 – To recommend, on non-binding advisory basis, the frequency of future shareholder advisory votes on the compensation
of SHBI’s NEOs.
| 1 Year | |
2 Years | |
3 Years | |
Abstain | |
Broker Non-Votes |
| 13,833,134 | |
8,421 | |
960,691 | |
46,514 | |
2,044,745 |
FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K contains
“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 TCFC. 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 TCFC’s
current expectations and assumptions regarding SHBI’s and TCFC’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 could affect SHBI’s or TCFC’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 Merger Agreement; the outcome of any legal proceedings that may
be instituted against SHBI or TCFC; delays in completing the Merger; the failure to obtain necessary shareholder approvals, or to satisfy
any of the other conditions to the Merger on a timely basis or at all, including the ability of SHBI and TCFC to meet expectations regarding
the timing, completion and accounting and tax treatments of the Merger; the possibility that the anticipated benefits of the Merger 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 TCFC do business; the possibility that
the Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; the possibility
that revenues following the Merger may be lower than expected; the impact of certain restrictions during the pendency of the Merger on
the parties’ ability to pursue certain business opportunities and strategic transactions; 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 Merger; the ability to complete the Merger and integration of SHBI and TCFC
successfully; the dilution caused by SHBI’s issuance of additional shares of its capital stock in connection with the Merger; and
the potential impact of general economic, political or market factors on the companies or the Merger and other factors that may affect
future results of SHBI or TCFC. Except to the extent required by applicable law or regulation, each of SHBI and TCFC 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, TCFC 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 December 31, 2022, its Quarterly
Report on Form 10-Q for the period ended March 31, 2023, and its other filings with the SEC, and in TCFC’s Annual Report
on Form 10-K and Amendment No. 1 to TCFC’s Annual Report on Form 10-K/A for the fiscal year ended December 31,
2022, TCFC’s Quarterly Report on Form 10-Q for the period ended March 31, 2023 and its other filings with the SEC. SEC
filings are available free of charge on the SEC’s website at www.sec.gov.
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 Merger.
In connection with the Merger, a registration
statement on Form S-4 containing a joint proxy statement/prospectus of TCFC and SHBI and a prospectus of SHBI was declared effective
by the SEC on May 8, 2023. INVESTORS AND SECURITY HOLDERS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS
(AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT/PROSPECTUS)
BECAUSE SUCH DOCUMENTS CONTAIN IMPORTANT INFORMATION REGARDING THE MERGER AND RELATED MATTERS. Investors and security holders may obtain
these documents, and any other documents SHBI and TCFC have filed with the SEC, free of charge at the SEC’s website, www.sec.gov,
or by accessing SHBI’s website at www.shorebancshares.com under the “Investor Relations” link and then
under the heading “Documents,” or by accessing TCFC’s website at https://www.cbtc.com/about/investor-relations/.
In addition, documents filed with the SEC by SHBI or TCFC will be available free of charge by (1) writing Shore at 18 East Dover
Street, Easton, MD 21601, Attention: Vance W. Adkins, or (2) writing TCFC at 3035 Leonardtown Road, Waldorf, MD 20601, Attention:
Todd Capitani.
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 Merger. Information about SHBI’s directors and executive officers is included in the definitive proxy
statement for SHBI’s 2023 annual meeting of shareholders, which was filed with the SEC on April 12, 2023.
The directors, executive officers and certain
other members of management and employees of TCFC may also be deemed to be participants in the solicitation of proxies in connection with
the Merger from the shareholders of TCFC. Information about the directors and executive officers of TCFC is included in Amendment No. 1 to the Annual Report for the year ended December 31, 2022
on Form 10-K/A, which was filed with the SEC on April 14, 2023.
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 Merger. Free copies of this document may be obtained as described above.