SHORE BANCSHARES INC appointed James M. Burke as new CEO

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. 


Board of Directors


At the Effective Time, in accordance with the terms of the Merger Agreement, SHBI and Shore United expanded the size of the SHBI Board of Directors (the "SHBI Board") and the Shore United Board of Directors (the "Shore United Board"), respectively, to 20 directors, including 12 of the directors of SHBI and Shore United immediately prior to the Effective Time and eight former directors of TCFC and CBC immediately prior to the Effective Time.


Resignation of Directors


As previously disclosed, in connection with the transactions contemplated by the Merger Agreement, Lloyd L. Beatty, Jr. and Jeffrey E. Thompson tendered their resignations as a member of the SHBI Board and Shore United Board and from all committees of the SHBI Board and Shore United Board, in each case effective as of the Effective Time. Such resignations did not involve any disagreement with SHBI management or the SHBI Board on any matter relating to SHBI's operations, policies or practices.


Continued Service of Directors; Appointment of Directors


The 12 directors of SHBI and Shore United designated by SHBI and Shore United, respectively, pursuant to the Merger Agreement, each of whom previously served, and continues to serve, as a member of the SHBI Board and Shore United Board, are as follows: Alan J. Hyatt, William E. Esham, III, John A. Lamon, Frank E. Mason, III, Esther A. Streete, David S. Jones, Clyde V. Kelly, III, David W. Moore, Dawn M. Willey, R. Michael Clemmer, Jr., James A. Judge and Konrad M. Wayson.


As previously disclosed, the eight directors designated by TCFC pursuant to the Merger Agreement, each of whom previously served as a member of the board of directors of TCFC and CBC, and were appointed by the SHBI Board and the Shore United Board, in each case effective as of the Effective Time, are as follows: Mary Todd Peterson, Rebecca M. McDonald to Class I, Michael B. Adams, James M. Burke, Austin J. Slater, Jr., Louis P. Jenkins, Jr. to Class II and Joseph V. Stone, Jr. and E. Lawrence Sanders, III to Class III (each, a "New Director" and, collectively, the "New Directors"). Biographical information related to the New Directors can be found in the annual report on Form 10-K/A filed by TCFC with the SEC on March 2, 2023 (the "TCFC 10-K/A").


With the exception of Mr. Burke, each of the New Directors 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 SEC on April 12, 2023. Biographical information for Mr. Burke and Mr. Capitani can be found in the TCFC 10-K/A.


Other than as previously described above and in the Registration Statement, there are no arrangements or understandings between any of the New Directors and any other person pursuant to which any of the New Directors 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.


Appointment of Vice Chairman


As previously disclosed, pursuant to the Merger Agreement and the Bylaws Amendment (as defined below), effective as of the Effective Time, Austin J. Slater, Jr., the former chairman of the TCFC board of directors, was appointed as the Vice Chairman of the SHBI Board and the Shore United Board.


Board Committee Assignments after the Merger


The Audit Committee, Compensation Committee, Nominating & Governance Committee, Risk Management Committee and Executive Committee of the SHBI Board are comprised of the following members, in each case effective as of the Effective Time:


Audit Committee Compensation Committee Nominating & Governance Committee Risk Management Committee Executive Committee 

 Mary Todd Peterson (Chair) Louis P. Jenkins, Jr. (Chair) Clyde V. Kelly, III (Chair) R. Michael Clemmer, Jr. (Chair) Alan J. Hyatt (Chair) 

 James M. Burke (ex-officio) James M. Burke (ex-officio) James M. Burke (ex-officio) James M. Burke (ex-officio) Michael B. Adams 

 Alan J. Hyatt (ex-officio) William E. Esham, III Alan J. Hyatt (ex-officio) Alan J. Hyatt (ex-officio) James M. Burke (ex-officio) 

 James A. Judge Alan J. Hyatt (ex-officio) Louis P. Jenkins, Jr. James A. Judge R. Michael Clemmer, Jr. 

 Rebecca M. McDonald David S. Jones David S. Jones Frank E. Mason William E. Esham, III 

 Austin J. Slater, Jr. (ex-officio) Clyde V. Kelly, III John A. Lamon Rebecca M. McDonald Louis P. Jenkins, Jr. 

 Esther A. Streete John A. Lamon Frank E. Mason E. Lawrence Sanders, III Clyde V. Kelly, III 

 Konrad M. Wayson David W. Moore Austin J. Slater, Jr. (ex-officio) Austin J. Slater, Jr. (ex-officio) Mary Todd Peterson 

 Dawn M. Willey Mary Todd Peterson Joseph V. Stone, Jr. Konrad M. Wayson Austin J. Slater, Jr. (ex-officio) 

 Austin J. Slater, Jr. (ex-officio) Dawn M. Willey Esther A. Streete 


Officer Appointments and Compensatory Arrangements 


Officer Appointments 


As previously disclosed, pursuant to the terms of the Merger Agreement, effective as of the Effective Time, James M. Burke, the former President and Chief Executive Officer of TCFC, was appointed as President and Chief Executive Officer of SHBI and Shore United and Todd L. Capitani, the former Chief Financial Officer of TCFC, was appointed as the Chief Financial Officer of SHBI and Shore United.


Other than with respect to the Employment Agreements, the Burke Retention Agreement, the Capitani Retention Agreement (each defined below) and the Merger Agreement, there are no arrangements or understandings between Mr. Burke or Mr. Capitani and any person to which each was appointed as the President and Chief Executive Officer of SHBI and Chief Financial Officer of SHBI, respectively. There are no family relationships between any of Mr. Burke, Mr. Capitani and any of SHBI's directors or executive officers or persons nominated or chosen by SHBI to become a director of executive officer. Mr. Burke and Mr. Capitani are not a party to any transactions requiring disclosure under Item 404(a) of Regulation S-K.


Resignation of Chief Executive Officer


As previously disclosed, pursuant to the terms of the Merger Agreement, effective as of the Effective Time, Lloyd L. Beatty, Jr., the President and Chief Executive Officer of SHBI and Shore United, resigned from his positions as President and Chief Executive Officer of SHBI and Shore United. In connection with his resignation, Mr. Beatty received the benefits pursuant to his existing change in control agreement with SHBI, as described in the Registration Statement under the section titled "The Merger - Interests of Certain SHBI Directors and Executive Officers in the Merger - Change in Control Agreements" and SHBI's definitive proxy statement, filed with the SEC on April 12, 2023 under the section titled "Compensation Discussion and Analysis - Change in Control Agreements." Mr. Beatty executed a separation agreement, which includes a general release of claims in connection with the payment under his Change in Control Agreement with SHBI, which includes non-competition and non-solicitation covenants for one year following his termination of employment. Mr. Beatty's resignation is not due to a disagreement with SHBI management or the SHBI Board on any matter relating to SHBI's operations, policies or practices.


Termination of Chief Financial Officer


Pursuant to the terms of the Merger Agreement, effective as of the Effective Time, Vance W. Adkins, SHBI's and Shore United's Chief Financial Officer, terminated his employment with SHBI. Mr. Adkins received the benefits pursuant to his existing change in control agreement with SHBI, as described in the Registration Statement under the section titled "The Merger - Interests of Certain SHBI Directors and Executive Officers in the Merger - Change in Control Agreements." Mr. Adkins executed a separation agreement, which includes a general release of claims in connection with the payments under his change in control agreement with SHBI, which includes non-competition and non-solicitation covenants for one year following his termination of employment.


Assumption of Employment Agreements 


As described in the Registration Statement, pursuant to the terms of the Merger Agreement, effective as of the Effective Time, Mr. Burke and Mr. Capitani entered into an Assumption and Amendment of Employment Agreement (each an "Employment Agreement" and, collectively, the "Employment Agreements") pursuant to which SHBI agreed to assume all of the rights and obligations under each of their employment agreements with TCFC, which are described in the TCFC 10-K/A and attached thereto as Exhibits 10.57 and 10.56, respectively. Pursuant to the Employment Agreements, following the expiration of each of Mr. Burke's and Mr. Capitani's Employment Agreements on the second anniversary of the Effective Time, Mr. Burke and Mr. Capitani will be eligible to enter into a change of control agreement with SHBI, the form which was agreed upon prior to the Effective Time.


The foregoing description of the Employment Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of the Employment Agreements, which are attached hereto as Exhibits 10.1 and 10.2 and incorporated into this Item 5.02 by reference.


Retention Bonus Agreements 


As previously described in the Registration Statement in the sections titled "The Merger - Interests of Certain SHBI Directors and Executive Officers in the Merger" and "The Merger - Interests of Certain TCFC Directors and Executive Officers in the Merger," effective as of the Effective Time, SHBI entered into retention agreements with each of Mr. Burke (the "Burke Retention Agreement"), Mr. Capitani (the "Capitani Retention Agreement") and Ms. Donna Stevens (the "Stevens Retention Agreement").


The Burke Retention Agreement, Capitani Retention Agreement and Stevens Retention Agreement provide for a one-time cash retention award of $200,000, $43,998 and $45,566, respectively, and an equity grant of SHBI Restricted Stock Units ("RSUs"), with respect to 13,409, 10,727 and 3,942 shares of SHBI Common Stock, respectively, under the Company's 2016 Stock and Incentive Compensation Plan, which will vest 50% on each of the first and second anniversaries of the Effective Date subject to continued employment through such dates. If Mr. Burke's, Mr. Capitani's or Ms. Steven's employment is terminated by SHBI without "Cause" (as defined in the applicable agreement), prior to the applicable vesting date, the unvested RSUs shall vest and be paid within 30 days following the applicable termination date. In consideration of their continued employment, Mr. Burke, Mr. Capitani and Ms. Stevens waived "good reason" for terminations under their existing employment agreements that arise from changes in their responsibilities or duties pursuant to the Merger.


The foregoing descriptions of the Burke Retention Agreement, the Capitani Retention Agreement and the Stevens Retention Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of such agreements, which are attached hereto as Exhibits 10.3, 10.4 and 10.5, respectively and incorporated into this Item 5.02 by reference. 


Beatty Consulting Agreement


Effective as of the Effective Time, Shore United entered into a consulting agreement with Mr. Beatty (the "Consulting Agreement"). The term of the Consulting Agreement commenced as of the Effective Time of the Merger and continues for six months thereafter, unless terminated earlier in accordance with the terms of the Consulting Agreement. Mr. Beatty will not receive consideration for his services under the Consulting Agreement.