THE COMMUNITY FINANCIAL CORPORATION Item 1.01 Entry into a Material Definitive Agreement.
On
Merger Consideration
The consideration payable to TCFC shareholders upon completion of the Proposed
Transaction (the "Merger Consideration") will consist of whole shares of SHBI
common stock, par value
Treatment of TCFC Equity Awards
TCFC Restricted Stock Awards. Each award in respect of a share of TCFC Common Stock subject to vesting, repurchase or other lapse restriction (a "TCFC Restricted Stock Award") that is outstanding immediately prior to the Effective Time will automatically be converted into a restricted stock award (a "SHBI Restricted Stock Award") in respect of that number of shares of SHBI Common Stock, equal to the product of the total number of shares of TCFC Common Stock subject to the TCFC Restricted Stock Award multiplied by the Exchange Ratio.
TCFC RSU Awards. Each time-vesting restricted stock unit award in respect of a share of TCFC Common Stock (a "TCFC RSU Award") that is outstanding immediately prior to Effective Time will automatically be converted into a time-vesting restricted stock unit award (a "SHBI RSU Award") in respect of that number of shares of SHBI Common Stock, equal to the product of the total number of shares of TCFC Common Stock subject to TCFC RSU Award multiplied by the Exchange Ratio.
TCFC PSU Awards. Each performance-vesting restricted stock unit award in respect
of a share of TCFC Common Stock (a "TCFC PSU Award") that is outstanding
immediately prior to the Effective Time will automatically be converted into a
SHBI RSU Award in respect of that number of shares of SHBI Common Stock equal to
the product of the total number of shares of TCFC Common Stock subject to the
TCFC PSU Award multiplied by the Exchange Ratio. The number of shares of TCFC
Common Stock subject to a TCFC PSU Award immediately prior to the Effective Time
shall be determined assuming performance goals are satisfied based on target
performance except with respect to each TCFC PSU Award for the performance
period ending
Shareholder Agreements
As inducement for SHBI to enter into the Merger Agreement, each director and executive officer of TCFC, who own in the aggregate approximately 7.1% of the outstanding shares of TCFC Common Stock, entered into a shareholder agreement with SHBI pursuant to which he or she agreed, among other things, to vote their shares of TCFC Common Stock in favor of the adoption and approval of the Merger Agreement and any other matters required to be approved by TCFC's shareholders for the consummation of the Proposed Transaction (collectively, the "TCFC Shareholder Agreement"). These shareholders also agreed to certain restrictions on their ability to transfer their shares of TCFC Common Stock, until at least two-thirds of all issued and outstanding shares of TCFC Common Stock voting in favor of the Merger Agreement, the Proposed Transaction and the transactions contemplated thereby have been irrevocably delivered to TCFC. The TCFC 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.
As inducement for TCFC to enter into the Merger Agreement, each director and executive officer of SHBI, who own in the aggregate approximately 11.7% of the outstanding shares of SHBI Common Stock, entered into a shareholder agreement with TCFC pursuant to which he or she agreed, among other things, to vote their shares of SHBI Common Stock in favor of the issuance of SHBI Common Stock to TCFC shareholders as the Merger Consideration and any other matters required to be approved by SHBI's shareholders for the consummation of the Proposed Transaction (collectively, the "SHBI Shareholder Agreement"). These shareholders also agreed to certain restrictions on their ability to transfer their shares of SHBI Common Stock, until at least a majority of all issued and outstanding shares of SHBI Common Stock have been irrevocably voted in favor of the issuance of SHBI Common Stock to TCFC shareholders as the Merger Consideration and any other matters required to be approved by SHBI's shareholders for the consummation of the Proposed Transaction. The SHBI Shareholder Agreement is substantially in the form included as Annex B to the Merger Agreement, which is attached to this Current Report on Form 8-K as Exhibit 2.1.
Assumption of TCFC Debt Obligations
In connection with the closing of the Proposed Transaction, SHBI will assume
TCFC's obligations under the 4.75% fixed-to-floating rate subordinated notes due
2030 (the "Subordinated Notes"), the variable rate junior subordinated
debentures due 2034 (the "2034 debentures") and the variable rate junior
subordinated debentures due 2035 (the "2035 debentures," and together with the
2034 debentures, the "Subordinated Debentures"). In connection with the
assumption of the Subordinated Notes and Subordinated Debentures, SHBI and TCFC
will enter into any supplemental indentures or other documents reasonably
required by the trustee to make such assumption effective. As of
Certain Governance Matters
Effective as of the Effective Time, SHBI's Amended and Restated Articles of Incorporation will be amended to increase the number of authorized shares of SHBI Common Stock.
The Merger Agreement also provides that (i) the headquarters of SHBI and Shore
United will be located in
Appointment of Directors and Officers
Pursuant to the terms of the Merger Agreement, SHBI is required to take all action necessary to, immediately prior to the Effective Time, (i) cause three (3) of SHBI's existing directors to resign and. effective as of the Effective Time, (ii) increase the number of members of SHBI's Board of Directors (the "Board") from fifteen (15) members to twenty (20) members and (iii) appoint or elect, effective as of the Effective Time, eight (8) individuals who are members of the TCFC board of directors immediately prior to the Effective Time (the "TCFC Nominees"), each of whom must be mutually agreeable to SHBI and TCFC. Each such individual will be assigned to a board class and will serve a term that shall coincide with the remaining term of that class and until his or her successor is elected and qualified., and SHBI has further undertaken to include such individual whose terms shall expire at the first annual meeting of shareholders of SHBI following the Effective Time on the list of nominees for director presented by the board and for which the board shall solicit proxies at the first annual meeting of shareholders of SHBI following the Effective Time.
In addition, effective as of the Effective Time, (i) Mr.
Representations and Warranties
The Merger Agreement contains customary representations and warranties from TCFC to SHBI, which are qualified by the confidential disclosure schedules provided by TCFC to SHBI, and customary representations and warranties from SHBI to TCFC, which are qualified by the confidential disclosure schedules provided by SHBI to TCFC.
Business Pending the Proposed Transaction
Each of SHBI and TCFC is required under the Merger Agreement to conduct its business in the ordinary course of business, consistent with past practice, and . . .
Item 8.01 Other Events.
On
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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 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 such
as the COVID-19 pandemic 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 definitive agreement and plan of merger between SHBI and TCFC; the
outcome of any legal proceedings that may be instituted against SHBI or TCFC;
delays in completing the Proposed 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 Proposed Transaction) or shareholder approvals, or to
satisfy any of the other conditions to the Proposed Transaction 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
Proposed Transaction; the possibility that the anticipated benefits of the
Proposed 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 TCFC do business; the possibility that the Proposed
Transaction may be more expensive to complete than anticipated, including as a
result of unexpected factors or events; the possibility that revenues following
the Proposed Transaction may be lower than expected; the impact of certain
restrictions during the pendency of the Proposed Transaction 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 Proposed Transaction; the ability to complete the Proposed Transaction 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
Proposed Transaction; and the potential impact of general economic, political or
market factors on the companies or the Proposed Transaction 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
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 2022 annual meeting of SHBI's
shareholders, which was filed with the
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 Proposed Transaction from the shareholders of
TCFC. Information about the directors and executive officers of TCFC is included
in the proxy statement for its 2022 annual meeting of TCFC shareholders, which
was filed with the
Additional information regarding the interests of those participants and other persons who may be deemed participants in the Proposed Transaction may be obtained by reading the joint proxy statement/prospectus regarding the Proposed Transaction when it becomes available. Free copies of this document may be obtained as described above.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits Number Description
2.1 Agreement and Plan of Merger, dated as of
between Shore Bancshares, Inc. and The Community Financial Corporation *
99.1 Press Release, dated
99.2 Investor Presentation, dated
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Schedules and certain exhibits omitted pursuant to Item 601(b)(2) of
Regulation S-K. The registrant agrees to furnish supplementally a copy of any
omitted schedule or exhibit to the
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