PLAN AND AGREEMENT TO MERGE
TABLE OF CONTENTS
1. Effective Date 1
2. Events Preceding Effectiveness 1
3. Representations and Warranties of Shore Bancshares 2
3.1. Organization, Standing, and Capitalization of Shore Bancshares and the Shore Subsidiaries 2
3.2. Financial Statements 4
3.3. Taxes 4
3.4. No Undisclosed Liabilities 4
3.5. Absence of Certain Changes or Events 5
3.6. Complete and Accurate Disclosure 5
3.7. Title to properties; Absence of Liens and Encumbrances; Compliance with Laws 5
3.8. Contracts 6
3.9. Litigation, Etc. 7
3.10. Environmental Matters 8
3.11. Labor Matters 10
3.12. Pension and Welfare Matters 10
3.13. Related Party Transactions 14
3.14. No Conflict with Other Documents 14
3.15. Compliance with Laws; Governmental Authorizations 14
3.16. Authority; Enforceability 15
3.17. Insurance 15
3.18. Financial Institutions Bond 15
3.19. Brokers; Financial Advisor 16
3.20. Beneficial Ownership of Talbot Bancshares Common Stock 16
3.21. Year 2000 16
3.22. Reports 16
3.23. Agreements with Regulatory Agencies 17
3.24. State Takeover Laws and Control Share Acquisition Act 17
4. Representations and Warranties of Talbot Bancshares 17
4.1. Organization, Standing, and Capitalization of Talbot Bancshares and the Talbot Subsidiaries. 17
4.2. Financial Statements 18
4.3. Taxes 19
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4.4. No Undisclosed Liabilities 19
4.5. Absence of Certain Changes or Events 19
4.6. Complete and Accurate Disclosure 20
4.7. Title to Properties; Absence of Liens and Encumbrances; Compliance with Laws 20
4.8. Contracts 21
4.9. Litigation, Etc. 22
4.10. Environmental Matters 22
4.11. Labor Matters 24
4.12. Pension and Welfare Matters 24
4.13. Related Party Transactions 27
4.14. No Conflict with Other Documents 28
4.15. Compliance with Laws; Governmental Authorizations 28
4.16. Authority; Enforceability 29
4.17. Insurance 29
4.18. Financial Institutions Bond 29
4.19. Brokers; Financial Advisor 29
4.20. Beneficial Ownership of Shore Bancshares Common Stock 29
4.21. Year 2000 30
4.22. Reports 30
4.23. Agreements with Regulatory Agencies 30
4.24. State Takeover Laws and Control Share Acquisition Act 30
5. Covenants of Shore Bancshares 31
5.1. Information 31
5.2. Events Preceding Effectiveness 32
5.3. Meeting of Stockholders of Shore Bancshares 32
5.4. Conduct of Business 32
5.5. Reservation of Shares 33
5.6. Regulatory Matters; Document Preparation 33
5.7. Consents 34
5.8. Current Information; Advice of Changes 34
5.9. No Solicitation of Other Offers 34
5.10. Affiliate and Support Agreements 35
5.11. Pooling-of-Interests 35
5.12. Taxes 35
5.13. Public Announcements 36
6. Covenants of Talbot Bancshares 36
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6.1. Information 36
6.2. Events Preceding Effectiveness 37
6.3. Meeting of Stockholders of Talbot Bancshares 37
6.4. Conduct of Business 37
6.5. Reservation of Shares 38
6.6. Regulatory Matters; Document Preparation 38
6.7. Consents 39
6.8. Current Information; Advice of Changes 39
6.9. No Solicitation of Other Offers 40
6.10. Affiliate and Support Agreements 40
6.11. Pooling-of-Interests 41
6.12. Taxes 41
6.13. Public Announcements 41
7. Conditions Precedent to Shore Bancshares' Obligations 41
7.1. Representations, Warranties, and Covenants 41
7.2. No Adverse Changes 42
7.3. Events Preceding the Effective Date 42
7.4. Other Evidence 42
7.5. No Adverse Proceedings, Events, or Regulatory Requirements 42
7.6. Consents, Etc. 43
7.7. Fairness Opinion 43
7.8. Opinion of Counsel 43
7.9. Pooling-of-Interests Accounting 43
8. Conditions Precedent to Talbot Bancshares' Obligations 43
8.1. Representations, Warranties, and Covenants 44
8.2. No Adverse Changes 44
8.3. Events Preceding the Effective Date 44
8.4. Other Evidence 44
8.5. No Adverse Proceedings, Events, or Regulatory Requirements 45
8.6. Consents, Etc. 45
8.7. Fairness Opinion 45
8.8. Opinion of Counsel 45
8.9. Pooling-of-Interests Accounting 45
9. Terms of the Merger 46
9.1. Structure of the Merger 46
9.2. Conversion of Stock 46
9.3. Exchange Procedure 47
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9.4. Stock Options 47
9.5. Charter of the Successor Bancshares 48
9.6. By-Laws of the Successor Xxxxxxxxxx 00
00. Boards of Directors and Employment Matters 48
11. Indemnification; Directors' and Officers' Insurance 49
12. Amendment of this Plan 50
13. Abandonment of this Plan; Effect Thereof 50
14. Expenses 52
15. Notices 52
16. Entire Agreement; Effect 52
17. Representations, Warranties, and Agreements 52
18. Governing Law 53
19. General 53
APPENDIX I List of Information 55
APPENDIX II Form of Articles of Merger 58
APPENDIX III Form of Shore Bancshares Amended and Restated By-Laws 72
APPENDIX IV Form of Shore Bancshares Stock Option Agreement 85
APPENDIX V Form of Talbot Bancshares Stock Option Agreement 94
APPENDIX VI Shore Bancshares Affiliate Memorandum 103
APPENDIX VII Talbot Bancshares Affiliate Memorandum 106
APPENDIX VIII Shore Bancshares Stockholders Support Agreement 110
APPENDIX IX Talbot Bancshares Stockholders Support Agreement 115
APPENDIX X Form of Opinion of Tax Counsel 120
APPENDIX XI Form of Opinion of Shore Bancshares Counsel 122
APPENDIX XII Form of Opinion of Talbot Bancshares Counsel 125
APPENDIX XIII Form of Employment Agreement 128
APPENDIX XIV Successor Bancshares Board and Executive Officer Assignments 136
APPENDIX XV Form of Termination and Release of Employment Agreement 137
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PLAN AND AGREEMENT TO MERGE
PLAN AND AGREEMENT TO MERGE (this "Plan"), dated as of July 25, 2000 by and
between TALBOT BANCSHARES, INC. ("Talbot Bancshares"), a Maryland corporation,
and SHORE BANCSHARES, INC. ("Shore Bancshares"), a Maryland corporation.
W I T N E S S E T H:
WHEREAS, Talbot Bancshares is a financial holding company and the holder of
all of the issued and outstanding capital stock of The Talbot Bank of Easton,
Maryland ("Talbot Bank"), a Maryland commercial bank; and Shore Bancshares is a
bank holding company and the holder of all of the issued and outstanding capital
stock of The Centreville National Bank of Maryland ("Centreville Bank"), a
national banking association; and
WHEREAS, Shore Bancshares and Talbot Bancshares each desires to have Talbot
Bancshares merge with Shore Bancshares in such a manner that, upon the merger
becoming effective, Shore Bancshares will be the surviving Maryland corporation;
and all of the issued and outstanding shares of the Common Stock of Talbot
Bancshares will be converted into the right to receive the Merger Consideration
(as defined in Section 9.2) from Shore Bancshares, subject to the terms and
conditions and based upon Shore Bancshares' and Talbot Bancshares'
representations, warranties, and covenants hereinafter set forth (the "Merger").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and the mutual benefits to be derived herefrom, the parties
agree as follows:
1. Effective Date. Pursuant to Md. General Corporation Law (S) 3-113(a),
the effective date of this Plan and the Merger (the "Effective Date") shall be
either (a) the first day of the month following the month in which the last of
the events in Section 2, Section 7, and Section 8 occurs; or (b) such other date
as Talbot Bancshares and Shore Bancshares may agree upon. Talbot Bancshares and
Shore Bancshares will prepare and execute Articles of Merger in substantially
the form attached as Appendix II which will set forth the Effective Date, and
will file the Articles of Merger with the Maryland State Department of
Assessments and Taxation.
2. Events Preceding Effectiveness. On or before the Effective Date the
following shall have occurred:
(a) A majority of the Boards of Directors of each of Shore
Bancshares and Talbot Bancshares shall have approved and agreed to this
Plan and the Merger;
(b) A majority of the Board of Directors of each of Shore
Bancshares and of Talbot Bancshares, respectively, shall have approved and
agreed to the Stock Option Agreements (the "Stock Option Agreements") in
the forms attached as Appendix IV and Appendix V; and Shore Bancshares and
Talbot Bancshares, respectively, shall have authorized and reserved an
adequate number of shares of its Common Stock for issuance upon exercise of
the option
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granted by such Stock Option Agreements, and taken all actions necessary to
fulfill its obligations thereunder;
(c) the Boards of Directors of each of Shore Bancshares and
Talbot Bancshares shall call a meeting of the stockholders of each of Shore
Bancshares and Talbot Bancshares. Notice of the time and place of the
meeting shall be provided in accordance with Md. General Corporation Law
(S) 2-504, and this Plan and the Merger shall have been ratified and
confirmed by the affirmative vote of not less than two-thirds of the issued
and outstanding voting stock of Shore Bancshares at its meeting and not
less than two-thirds of the issued and outstanding voting stock of Talbot
Bancshares at its meeting, in accordance with Md. General Corporation Law
(S) 3-105(e);
(d) Shore Bancshares and Talbot Bancshares shall have procured
the required approval, consent, waiver, or other administrative action with
respect to this Plan and the transactions contemplated hereby by the Board
of Governors of the Federal Reserve System (the "Federal Reserve") under
Section 3(a)(5) of the Bank Holding Company Act of 1956, as amended;
(e) Shore Bancshares and Talbot Bancshares shall have procured
the required approval, consent, waiver, or other administrative action with
respect to this Plan and the transactions contemplated hereby by the
Maryland Commissioner of Financial Regulation under Md. Fin. Ins. Code (S)
5-904;
(f) Talbot Bank shall have procured the required approval,
consent, waiver, or other administrative action with respect to this Plan
and the transactions contemplated hereby by the Maryland Commissioner of
Financial Regulation under Md. Fin. Ins. Code (S) 5-403; and
(g) the parties shall have procured all other regulatory
approvals, consents, waivers, or administrative actions of governmental
entities or other persons or agencies that are necessary or appropriate to
the consummation of the transactions contemplated by this Plan, and no
approval, consent, waiver, or administrative action referred to in this
Section 2(g) shall have included any condition or requirement that would
result in a materially adverse effect on Talbot Bancshares or Shore
Bancshares or Talbot Bank or Centreville Bank.
3. Representations and Warranties of Shore Bancshares. Shore Bancshares
represents and warrants to Talbot Bancshares as follows:
3.1. Organization, Standing, and Capitalization of Shore Bancshares
and the Shore Subsidiaries. (a) Shore Bancshares is a duly organized and validly
existing corporation and is in good standing under the laws of the State of
Maryland. Shore Bancshares has the corporate power and authority to own and hold
its material properties and to carry on its business as it is now being
conducted. Shore Bancshares is a bank holding company under the Bank Holding
Company Act of 1956, as amended. Shore Bancshares has no subsidiaries or
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directly or indirectly affiliated companies and is not a party to any joint
venture or partnership other than as set forth on a list previously provided to
Talbot Bancshares (collectively, excluding Delmarva Bank Data Processing Center,
Inc., the "Shore Subsidiaries").
(b) Centreville Bank is a duly organized and validly existing
national banking association and is in good standing under the laws of the
United States. The deposits of Centreville Bank are insured under the provisions
of the Federal Deposit Insurance Act, as amended (85.3% by the bank insurance
fund and 14.7% by the savings association insurance fund). Each of the other
Shore Subsidiaries is a duly organized and validly existing corporation or other
entity and is in good standing under the laws of the jurisdiction of its
incorporation or organization as set forth on the list previously provided to
Talbot Bancshares. Centreville Bank does not exercise any fiduciary powers. Each
of the Shore Subsidiaries has the power (corporate or other) and authority to
own and hold its material properties and to carry on its business as it is now
being conducted. All outstanding shares of capital stock or other equity
interests of all of the Shore Subsidiaries are validly issued, fully paid, and
non-assessable. Except as set forth on a list previously provided to Talbot
Bancshares, each of the Shore Subsidiaries is wholly owned by its parent. There
are no outstanding options, warrants, rights, or obligations of any kind
entitling the holder thereof to acquire shares of the capital stock or other
equity interests of any of the Shore Subsidiaries, and there are no outstanding
securities or instruments of any kind that are convertible into shares of the
capital stock or other equity interests of any of the Shore Subsidiaries. Except
as set forth on a list previously provided to Talbot Bancshares, none of the
Shore Subsidiaries is a party to any joint venture or partnership.
(c) Copies of all organizational documents and by-laws of Shore
Bancshares and each of the Shore Subsidiaries have been previously provided to
Talbot Bancshares, and all such copies are true and correct as of the date
hereof. The minute books of Shore Bancshares and each of the Shore Subsidiaries,
which have been made available to Talbot Bancshares for inspection, are complete
in all material respects and accurately record the actions taken by the
stockholders and directors of Shore Bancshares and each of the Shore
Subsidiaries.
(d) The authorized capital stock of Shore Bancshares consists
exclusively of 10,000,000 shares of Common Stock, par value $.01 per share,
1,914,132 of which shares are outstanding at July 25, 2000. All outstanding
shares of Shore Bancshares Common Stock are validly issued, fully paid, and non
assessable. Shore Bancshares has reserved 83,547 shares of its Common Stock for
issuance under its stock option and employee stock purchase plans. On July 25,
2000, there were outstanding options to purchase 15,999 shares of Shore
Bancshares Common Stock at prices ranging from $17.85 to $32.00 pursuant to
these stock option and employee stock purchase plans. Except for the option to
be granted to Talbot Bancshares pursuant to the Stock Option Agreement attached
as Appendix IV and as set forth on a list previously provided to Talbot
Bancshares, there are no other outstanding options, warrants, rights, or
obligations of any kind entitling the holder thereof to acquire shares of the
Common Stock of Shore Bancshares, and there are no outstanding securities or
instruments of any kind that are convertible into shares of the Common Stock of
Shore Bancshares.
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3.2. Financial Statements. Shore Bancshares has previously provided
to Talbot Bancshares copies of the Consolidated Financial Statements of Shore
Bancshares and the Shore Subsidiaries at December 31, 1995, 1996, 1997, 1998,
and 1999 and for each of the years then ended, as reported upon by Xxxxxxx &
Company, and at March 31, 1999 and 2000 and for each of the three month periods
then ended, all of which are true and complete in all material respects, have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods covered by such consolidated
financial statements and present fairly the financial position, results of
operations, cash flows, and changes in stockholders' equity of Shore Bancshares
and the Shore Subsidiaries at the dates of and for the periods covered by such
financial statements.
3.3. Taxes. Copies of the tax returns for federal, state, county,
municipal, or foreign taxing authorities for the taxable year ended December 31,
1995 and all taxable years through and including December 31, 1999 for Shore
Bancshares and the Shore Subsidiaries have been previously provided to Talbot
Bancshares. Shore Bancshares and the Shore Subsidiaries have filed with
appropriate federal, state, county, municipal, or foreign taxing authorities all
tax returns required to be filed (taking any applicable extensions into
consideration) and have paid or reserved for all taxes shown to be due on such
returns and all penalties and interest payable in respect thereof. Except as
disclosed in writing to Talbot Bancshares, since January 1, 1995 neither Shore
Bancshares nor any of the Shore Subsidiaries have received from any taxing
authority any notice of deficiency or assessment of additional taxes not paid or
any notice of an intention to commence an examination or audit of its tax
returns, and no tax audits by any taxing authority are in process. Except as
disclosed in writing to Talbot Bancshares, since January 1, 1995 neither Shore
Bancshares nor any of the Shore Subsidiaries have granted any waiver of any
statute of limitations or otherwise agreed to any extension of a period for the
assessment of any federal, state, county, municipal, or foreign income tax. The
accruals and reserves reflected in the consolidated financial statements which
Shore Bancshares has provided to Talbot Bancshares as described in Section 3.2
are adequate to cover all taxes (including interest and penalties, if any,
thereon) that are payable or accrued as a result of the operations of Shore
Bancshares and the Shore Subsidiaries for all periods prior to the date of such
consolidated financial statements. For purposes of this Section 3.3, any
reference to the Shore Subsidiaries shall be deemed to include any entity
previously identified on the list delivered to Talbot Bancshares pursuant to
3.1(a) and 3.1(b).
3.4. No Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the consolidated financial statements delivered
under Section 3.2, neither Shore Bancshares nor any of the Shore Subsidiaries at
the dates of such consolidated financial statements had any material liabilities
or obligations (whether accrued, absolute, or contingent) required under
generally accepted accounting principles to be reflected thereon which would
materially and adversely affect the fair presentation of such financial
statements. Neither Shore Bancshares nor any of the Shore Subsidiaries has
incurred any liability since the date of the consolidated financial statements
delivered under Section 3.2 (including any liability for taxes) which would
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business, or operations of Shore Bancshares and the Shore
Subsidiaries, taken as a whole, other than liabilities which have been incurred
in the ordinary course of business.
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3.5. Absence of Certain Changes or Events. Except as previously
disclosed in writing to Talbot Bancshares, since December 31, 1999 there has not
been:
(a) Any materially adverse change in the financial position,
results of operations, assets, liabilities, or business of Shore Bancshares
or the Shore Subsidiaries, other than changes in the ordinary course of
business;
(b) any increase in salaries or wages of directors, officers, or
employees of Shore Bancshares or the Shore Subsidiaries other than in the
ordinary course of business; or any establishment or increase of any
employment, compensation, bonus, pension, option, incentive or deferred
compensation, retirement payments, profit sharing, or similar agreement or
benefit, authorized, granted, or accrued to any directors, officers, or
employees of Shore Bancshares or the Shore Subsidiaries other than in the
ordinary course of business; or
(c) any declaration, payment, or set aside by Shore Bancshares
of any dividend or distribution in respect of its Common Stock (other than
regular quarterly cash dividends), or any purchase, issuance, or sale by
Shore Bancshares of any of its Common Stock.
3.6. Complete and Accurate Disclosure. Neither this Plan (insofar as
it relates to Shore Bancshares and the Shore Subsidiaries, the Common Stock of
Shore Bancshares, and the involvement of Shore Bancshares in the transactions
contemplated hereby) nor any financial statement, schedule, certificate, or
other statement or document previously disclosed in writing under this Agreement
delivered by Shore Bancshares to Talbot Bancshares in connection with this Plan,
when considered in the aggregate, contains any statement which, at the time and
in light of the circumstances under which it is made, is false or misleading
with respect to any material fact or omits to state any material fact necessary
to make the statements contained herein or therein not false or misleading.
3.7. Title to Properties; Absence of Liens and Encumbrances;
Compliance with Laws. Except as previously disclosed in writing to Talbot
Bancshares, Shore Bancshares and each of the Shore Subsidiaries has good and
marketable title to all of their respective properties and assets, including
those reflected in the consolidated financial statements delivered pursuant to
Section 3.2, except as sold or otherwise disposed of for fair value and only in
the ordinary course of business, free and clear of all liens and encumbrances,
except (i) with respect to property as to which they are lessees, (ii) with
respect to real estate owned by Shore Bancshares or the Shore Subsidiaries, for
use, occupancy, and similar restrictions of public record that may be observed
by an inspection of the property, and such other utility and other easements and
encumbrances as do not materially adversely affect the fair market value of such
real property, and (iii) liens to secure borrowings, liens to secure
governmental deposits, and liens for current taxes not yet due and payable.
Neither Shore Bancshares nor any of the Shore Subsidiaries owns or leases real
property except as previously disclosed in writing to Talbot Bancshares, and is
not in default under any material lease of real or personal property to which it
is a party. As of the date hereof, except as previously disclosed in writing to
Talbot Bancshares, the real properties, structures, buildings, equipment, and
the tangible personal property owned,
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operated, or leased by Shore Bancshares or any of the Shore Subsidiaries are (x)
in good repair, order, and condition, except for depletion, depreciation, and
ordinary wear and tear, (y) suitable for the uses for which they were intended,
and (z) free from any known structural defects. As of the date hereof, there are
no laws, conditions of record, or other impediments which materially interfere
with the intended uses by Shore Bancshares or any of the Shore Subsidiaries of
the real property or tangible personal property owned or leased by it, except as
previously disclosed in writing to Talbot Bancshares. Neither Shore Bancshares
nor any of the Shore Subsidiaries have received any notice of any violation of
any applicable law, building code, zoning ordinance, or other similar law. Shore
Bancshares and the Shore Subsidiaries own or have the rights to use all real and
personal properties and assets that are material to the conduct of the business
as now conducted of Shore Bancshares and the Shore Subsidiaries, taken as a
whole.
3.8. Contracts. Except for the plans, contracts, and agreements of
Shore Bancshares and the Shore Subsidiaries (or of any plan under Section
3.8(b)) set forth on the list previously provided to Talbot Bancshares, neither
Shore Bancshares nor any of the Shore Subsidiaries (nor any plan under Section
3.8(b)) is a party to or subject to:
(a) Any employment, consultation, or compensation contract or
arrangement (other than those terminable at will) with any current or
former officer, consultant, director, agent or employee (or beneficiary of
any of them);
(b) any plan, contract, program, understanding, or agreement
providing for bonuses, pensions, severance pay, executive compensation,
options, stock purchases, or any other form of retirement, incentive or
deferred compensation, retirement payments, death benefits, profit sharing,
branch closing benefits, workers' compensation, tuition reimbursement or
scholarship program, any plans providing benefits or payments in the event
of a change in control, change in ownership, or sale of a substantial
portion (including all or substantially all) of the assets of Shore
Bancshares or any of the Shore Subsidiaries, or any health, accident,
disability, sick leave, vacation pay, life insurance, or other welfare
benefit, or any other employee or retired employee benefit (including,
without limitation, any "employee benefit plan" as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) in which any current or former officer, consultant, employee,
director, or agent (or beneficiary of any of them) of Shore Bancshares or
any of the Shore Subsidiaries is or was, within the last six years,
entitled to participate;
(c) any contract or agreement with any labor union;
(d) any lease of real or personal property with annual rentals
in excess of $15,000;
(e) any agreement for services in excess of $30,000 per year
(other than any employment, arbitration or compensation contract or
arrangement with any current or former officer, consultant, director, agent
or employee) or any agreement for the purchase or disposition of any
equipment or supplies except
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individual purchase orders for office supplies incurred in the ordinary
course of business of $10,000 or less;
(f) any instrument evidencing or relating to indebtedness for
borrowed money except for customer accounts, deposits, certificates of
deposit, federal funds purchased, repurchase agreements and the like which
may be construed as borrowings and except for loans made by Centreville
Bank as lender in the ordinary course of its business;
(g) any lease or other contract containing covenants not to
enter into or consummate the transactions contemplated hereby or which
provides for payments in excess of $2,000 and will be terminated or
violated by the Merger or in respect of which the Merger would cause a
default or acceleration of obligations; or
(h) any other contract or agreement not of the type covered by
any of the other specific terms of this Section 3.8 obligating Shore
Bancshares or any Shore Subsidiary to expenditures in excess of $25,000.
Each of the instruments set forth on the list previously provided to Talbot
Bancshares is valid and in full force and effect. Neither Shore Bancshares nor
any of the Shore Subsidiaries are in default nor have any of them received any
notice that they are in default, nor to their actual knowledge is any other
party in default, under any material agreements, instruments, or obligations to
which Shore Bancshares or any of the Shore Subsidiaries is a party or by which
they are bound.
3.9. Litigation, Etc. Except as set forth on the list previously
provided to Talbot Bancshares, (a) there is no litigation, proceeding, or
investigation pending or, to the knowledge of Shore Bancshares, threatened
against Shore Bancshares or any of the Shore Subsidiaries which would result in
any materially adverse change in the condition (financial or otherwise), assets,
liabilities, business, operations, or future prospects of Shore Bancshares and
the Shore Subsidiaries, taken as a whole; (b) there are no outstanding orders,
writs, injunctions, judgments, decrees, directives, consent agreements, or
memoranda of understanding issued by any federal, state, or local court or
governmental authority or arbitration tribunal issued against or with the
consent of Shore Bancshares or any of the Shore Subsidiaries that materially and
adversely affect the condition (financial or otherwise), assets, liabilities,
business, operations, or future prospects or that in any manner restrict Shore
Bancshares' right to carry on its business or that of the Shore Subsidiaries as
now conducted; and (c) Shore Bancshares is aware of no fact or condition now
existing that might give rise to any litigation, investigation, or proceeding
which, if determined adversely to Shore Bancshares or any of the Shore
Subsidiaries, would materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business, operations, or future prospects of
Shore Bancshares and the Shore Subsidiaries, taken as a whole, or would restrict
in any manner Shore Bancshares' right to carry on its business or that of the
Shore Subsidiaries as now conducted. Shore Bancshares has set forth on the list
previously provided to Talbot Bancshares all litigation in which Shore
Bancshares or any of the Shore Subsidiaries is involved as a party (other than
bankruptcy proceedings in which Shore
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Bancshares or any of the Shore Subsidiaries has filed proofs of claim or routine
collection and foreclosure suits initiated in the ordinary course of business).
3.10. Environmental Matters. (a) The following terms shall have the
indicated meaning:
"Property" or "Properties" means all branch properties now or
formerly owned or operated, all other real property now owned or operated,
and any real properties owned or operated on or after January 1, 1990 and
subsequently disposed of.
"Environmental Law" means (i) any applicable federal, state, or
local statute, law, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, directive,
requirement, or agreement with any court, governmental authority, or other
regulatory or administrative agency or commission, domestic or foreign
("Governmental Entity") concerning protection or preservation of the
environment, human health or natural resources, including without
limitation, those relating to the use, storage, treatment, generation,
transportation, processing, handling, labeling, production, release, or
disposal of Hazardous Substances, each as amended, or (ii) any common law
that may impose liability or obligations for injuries or damages due to the
presence of or exposure to any Hazardous Substance.
"Hazardous Substance" means any substance, whether liquid,
solid, or gas, listed, defined, designated, or classified as hazardous,
toxic, radioactive, or dangerous under any applicable Environmental Law,
whether by type or by quantity, and any other substance, waste or material
(regardless of physical form or concentration) which is hazardous,
dangerous, damaging or toxic to living things or the environment. Hazardous
Substance includes, without limitation, any "hazardous substance" as
defined in the Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"), and any other substance regulated or
subject to any Environmental Law, including, but not limited to the Toxic
Substance Control Act, Clean Water Act, Clean Air Act, Oil Pollution Act
and Resource Conservation and Recovery Act, or a similar state statute,
regardless of the amount of the Hazardous Substance.
(b) Except as previously disclosed in writing to Talbot Bancshares
or as would not individually or in the aggregate have a materially adverse
effect on the condition (financial or otherwise), assets, liabilities, business,
or operations of Shore Bancshares and the Shore Subsidiaries, taken as a whole:
(i) neither Shore Bancshares nor any of the Shore Subsidiaries
has received any written notices, demand letters, or written requests for
information from any Governmental Entity or any third party indicating that
Shore Bancshares
-8-
or any Shore Subsidiary may be in violation of, or liable under, any
Environmental Law;
(ii) there are no civil, criminal, or administrative actions,
suits, demands, claims, hearings, investigations, or proceedings pending or
to the knowledge of Shore Bancshares threatened against Shore Bancshares or
any Shore Subsidiary alleging that they may be in violation of, or liable
under, any Environmental Law;
(iii) no reports have been filed with any Governmental Entity,
nor to the knowledge of Shore Bancshares are any reports required to be
filed with any Governmental Entity, concerning the release of any Hazardous
Substance or the violation of any Environmental Law on or at any of the
Properties of Shore Bancshares or any of the Shore Subsidiaries;
(iv) except as previously disclosed in writing to Talbot
Bancshares, there are no underground storage tanks on, in, or under any of
the Properties of Shore Bancshares or any of the Shore Subsidiaries, and no
underground storage tanks have been closed or removed from any Property of
Shore Bancshares or any of the Shore Subsidiaries while such Property was
owned or operated by Shore Bancshares or any of the Shore Subsidiaries;
(v) except as previously disclosed in writing to Talbot
Bancshares, no Hazardous Substance has been generated, used, stored,
processed, disposed of, or discharged on or into any of the Properties of
Shore Bancshares or any of the Shore Subsidiaries, except for the lawful
storage and use of such hazardous substances as are used in the everyday
business of a bank office; and
(vi) except as previously disclosed in writing to Talbot
Bancshares, no materials containing asbestos have been used or incorporated
in any building or other structure or improvement located on any of the
Properties of Shore Bancshares or any of the Shore Subsidiaries.
(c) There are no permits or licenses or agency filings or reports
required under any Environmental Law in respect of any operation of Shore
Bancshares or any of the Shore Subsidiaries or in respect of the Properties of
Shore Bancshares or any of the Shore Subsidiaries the absence or violation of
which could, individually or in the aggregate, have a materially adverse effect
on the condition (financial or otherwise), assets, liabilities, business, or
operations of Shore Bancshares and the Shore Subsidiaries, taken as a whole.
(d) Shore Bancshares and each of the Shore Subsidiaries are and have
been in compliance with all Environmental Laws except for such noncompliance as
would not, individually or in the aggregate, have a materially adverse effect on
the condition (financial or otherwise), assets, liabilities, business or
operations of Shore Bancshares and the Shore Subsidiaries, taken as a whole.
-9-
(e) Shore Bancshares has previously provided to Talbot Bancshares a
copy of any current policy regarding compliance with Environmental Laws and its
policies on screening proposed collateral for potential environmental
liabilities.
(f) Copies of each environmental site assessment report possessed or
available to Shore Bancshares prepared in connection with any of the Properties
of Shore Bancshares or any of the Shore Subsidiaries have been previously
provided to Talbot Bancshares.
(g) Neither Shore Bancshares nor any of the Shore Subsidiaries is an
"owner or operator" of any property in which it or they hold or have held a
security interest, as that term is defined under CERCLA.
3.11. Labor Matters. To Shore Bancshares' knowledge, no organization
effort with respect to any of the employees of Shore Bancshares or any of the
Shore Subsidiaries is pending or threatened, and no labor dispute, strike, work
stoppage, employee action, or labor relation problem which may materially affect
Shore Bancshares or any of the Shore Subsidiaries currently is pending or
threatened. Since January 1, 1995, Shore Bancshares and each of the Shore
Subsidiaries have at all times in all material respects complied with all
applicable employee termination notice and similar laws. Since January 1, 1995,
Shore Bancshares and each of the Shore Subsidiaries have at all times complied
in all material respects with all applicable family medical leave and similar
laws. If applicable, Shore Bancshares and each of the Shore Subsidiaries have at
all times complied in all material respects with all applicable requirements of
the Worker Adjustment and Retraining Notification Act and all similar state
laws.
3.12. Pension and Welfare Matters. With respect to the plans,
contracts, programs, understandings, or agreements identified pursuant to
Sections 3.8(a) and (b) (for purposes of this Section 3.12, the "plans"):
(a) Shore Bancshares has clearly identified on the list
previously provided to Talbot Bancshares all of the plans which are (i)
Multiemployer Plans (as defined in (l) below), (ii) multiple employer plans
subject to Sections 4063 and 4064 of ERISA ("Multiple Employer Plans"),
(iii) plans other than Multiemployer Plans and Multiple Employer Plans that
are subject to Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code"), (iv) plans intended to qualify under Section 401(a) of the
Code, and (v) "welfare benefit plans" within the meaning of Section 3(1) of
ERISA which provide for continuing benefits or coverage for any participant
or any beneficiary of a participant after such participant's termination of
employment except coverage or benefits required by Section 4980B of the
Code if paid 100% by the participant;
(b) true, correct and complete copies of the following
documents, with respect to each of the plans have been made available or
delivered to Talbot Bancshares: (i) all plan documents, including trust
agreements, insurance policies, loan documents, and service agreements and
amendments thereto, (ii) the most recent Forms 5500 and any financial
statements attached thereto and those
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for the prior three years, (iii) the last Internal Revenue Service
determination letter and the application with respect thereto, (iv) summary
plan descriptions, (v) the most recent actuarial statements and those for
the prior three years, (vi) written descriptions of all non-written
agreements relating to any such plan, as applicable, for Shore Bancshares
and each of the Shore Subsidiaries, and (vii) all filings with a
governmental agency or entity within the last three years, including,
without limitation, filings under the voluntary compliance programs of the
U.S. Department of Labor or the Internal Revenue Service;
(c) each of the plans has been operated in all material respects
in accordance with its terms and in accordance with all previously and
currently effective laws applicable to such plans, including, but not
limited to, ERISA, the Code, the Consolidated Omnibus Budget Reconciliation
Act of 1985, the Health Insurance Portability and Accountability Act of
1996, and state health care continuation laws;
(d) all reporting and disclosure requirements of ERISA imposed
upon each such plan have been complied with in all material respects, and
all required governmental filings, including registration and other filings
under applicable securities law, have been made with respect to the plans;
(e) none of (i) the plans, (ii) the Shore Subsidiaries, and
(iii) Shore Bancshares, and to Shore Bancshares' knowledge, (x) no current
or former director, officer, employee, agent, or representative of Shore
Bancshares or any of the Shore Subsidiaries, and (y) no fiduciary, "party
in interest" (as defined in Section 3(14) of ERISA) or "disqualified
person" (as defined in Section 4975 of the Code) with respect to any of the
plans has engaged in any non-exempt "prohibited transaction" in connection
with any of the plans within the meaning of Section 4975 of the Code or
Title I, Part 4 of ERISA as to which the applicable statute of limitations
has not run;
(f) none of the plans has any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or
not waived, with respect to the latest five plan years, nor any liability
to the Pension Benefit Guaranty Corporation (the "PBGC") (other than normal
premium payments);
(g) with respect to plans which are pension plans (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA, the assets of each
such funded plans equal or exceed the liabilities (as defined in Section
4001(a)(16) of ERISA) under such plans when such liabilities are valued on
a termination basis using PBGC interest and other assumptions;
(h) no contributions to any of the plans from Shore Bancshares
or any of the Shore Subsidiaries are currently past due and, if applicable,
all past service and other liabilities currently existing but payable in
the future, if any, are
-11-
reflected in the latest actuarial report in accordance with sound actuarial
principles;
(i) no audits, proceedings, investigations, filings, or other
matters (excluding any determination letter application that has been or
may be filed prior to the Effective Date) are pending before the Internal
Revenue Service (the "IRS"), the Department of Labor, the PBGC, or other
public or quasi-public body in connection with any such plans;
(j) each plan intended to qualify under Section 401(a) of the
Code is so qualified and the trust maintained pursuant thereto is exempt
from taxation under Section 501 of the Code and nothing has occurred with
respect to the operation or administration of such plan which would cause
the loss of such qualification or exemption or the imposition of any
liability, penalty, or tax under ERISA or the Code that could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), assets, liabilities, business, or operations of Shore
Bancshares and the Shore Subsidiaries, taken as a whole, or on such plan;
(k) except as previously disclosed in writing to Talbot
Bancshares, through the Effective Date, there will be no changes in the
operation of the plans or in the documents constituting or affecting the
plans except for amendments and operational changes required by applicable
law which do not materially increase the cost of such plans;
(l) no employees, former employees, or retired employees of
Shore Bancshares or any of the Shore Subsidiaries, as a result of their
employment with Shore Bancshares or any of the Shore Subsidiaries, are
participants in any "multiemployer plan" which is a "pension plan," as such
terms are defined in Sections 3(37) and 3(2) of ERISA, respectively,
("Multiemployer Plan") and neither Shore Bancshares nor any of the Shore
Subsidiaries has any current, contingent or potential liability with
respect to any such plan;
(m) no "reportable event," as such term is defined in Section
4043(c) of ERISA, has occurred with respect to any plan since the effective
date of ERISA, other than a reportable event for which the 30 days notice
requirement under regulations of the PBGC has been waived;
(n) there are no pending or threatened claims by or disputes
with any participants or beneficiaries of the plans, except plan benefit
claims arising in the normal course of the operations of the plans (other
than terminated plans) and as to which no dispute exists;
(o) Shore Bancshares has no knowledge of any facts which could
give rise to any claims against any plan or any fiduciary of any plan,
except for
-12-
plan benefit claims which arise in the normal course of the operations of
the plans (other than terminated plans) and are not disputed;
(p) neither Shore Bancshares nor any of the Shore Subsidiaries
nor any fiduciary of any plan has given notice to any fiduciary liability
insurer of any claims or potential claims in connection with any of the
plans;
(q) except as previously disclosed in writing to Talbot
Bancshares as plans that cannot be amended or terminated, each of the plans
may effectively be terminated or amended, in any manner and at any time,
without further accrual of liability to its participants, by its sponsoring
or participating employer;
(r) neither Shore Bancshares nor any of the Shore Subsidiaries
has provided, nor is required to provide, security to any pension plan or
to any single-employer plan pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA;
(s) there has been no announcement or legally binding
commitment by Shore Bancshares or any of the Shore Subsidiaries to create
an additional plan, or to amend a plan except for amendments required by
applicable law which do not materially increase the cost of such plan;
(t) as to any terminated plans, all obligations for plan
benefits or other liabilities have been satisfied in full;
(u) none of the plans contains any provision which would
prohibit the transactions contemplated by this Plan or which, except as
previously disclosed in writing to Talbot Bancshares, would give rise to
any severance, termination, or other payments or liabilities, or any
forgiveness of indebtedness, vesting, distribution, increase in benefits,
or obligations to fund benefits as a result of the transactions
contemplated by this Plan; no payment that is owed or may become due any
director, officer, employee, independent contractor or agent of Shore
Bancshares or any of the Shore Subsidiaries in connection with a plan will
be non-deductible to the payor under Section 280G of the Code, and none of
the Shore Subsidiaries, Talbot Subsidiaries (as defined in Section 4.1),
Shore Bancshares and Talbot Bancshares will be required to "gross up" or
otherwise compensate any person in connection with a plan because of the
imposition of any excise tax under Section 4999 of the Code; and
(v) no plan is funded by, associated with, or related to a
"voluntary employees' beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
3.13. Related Party Transactions. Except as disclosed on a list
previously provided to Talbot Bancshares, neither Shore Bancshares nor any of
the Shore Subsidiaries has any contract, extension of credit, business
arrangement, or other relationship of any kind with
-13-
any of the following persons: (a) any executive officer or director of Shore
Bancshares or any of the Shore Subsidiaries; (b) any stockholder owning five
percent or more of the outstanding Common Stock of Shore Bancshares; or (c) any
"affiliate" (as defined in the Securities and Exchange Commission (the "SEC")
Rule 405) of the foregoing persons or any business in which any of the foregoing
persons is an officer, director, employee, or five percent or greater equity
owner.
3.14. No Conflict with Other Documents. Except as disclosed on a list
previously provided to Talbot Bancshares, neither the execution and delivery of
this Plan nor the carrying out of the transactions contemplated hereunder will
result in any violation, termination, or default or acceleration of, or be in
conflict with, any terms of any contract or other instrument to which Shore
Bancshares or any of the Shore Subsidiaries is a party, or of any judgment,
decree, or order applicable to Shore Bancshares or any of the Shore
Subsidiaries, or result in the creation of any lien, charge, or encumbrance upon
any of their properties or assets, except for any of the foregoing which would
not have a material adverse effect upon the condition (financial or otherwise),
assets, liabilities, business, or operations of Shore Bancshares and the Shore
Subsidiaries, taken as a whole.
3.15. Compliance with Laws; Governmental Authorizations. (a) Except
where noncompliance would not have a material and adverse effect upon the
condition (financial or otherwise), assets, liabilities, business, or operations
of Shore Bancshares and the Shore Subsidiaries, taken as a whole, (i) Shore
Bancshares and each of the Shore Subsidiaries are in compliance with all
statutes, laws, ordinances, rules, regulations, judgments, orders, decrees,
directives, consent agreements, memoranda of understanding, permits,
concessions, grants franchises, licenses, and other governmental authorizations
or approvals applicable to Shore Bancshares, the Shore Subsidiaries, or any of
their properties; and (ii) all permits, concessions, grants, franchises,
licenses, and other governmental authorizations and approvals necessary for the
conduct of the business of Shore Bancshares and the Shore Subsidiaries as now
conducted have been duly obtained and are in full force and effect, and there
are no proceedings pending or, to Shore Bancshares' knowledge, threatened which
may result in the revocation, cancellation, suspension, or materially adverse
modification of any thereof. Except as disclosed on a list previously provided
to Talbot Bancshares, neither Shore Bancshares nor any of the Shore Subsidiaries
engages in any business or owns any assets that may not be engaged in or owned
by a registered bank holding company, a national banking association, or their
subsidiaries or affiliates.
(b) Since January 1, 1995, Shore Bancshares has filed all reports
that it was required to file with the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), all of which complied in all material
respects with all applicable requirements of the Exchange Act and the rules and
regulations adopted thereunder. As of their respective dates, each such report,
statement, form, or other document, including without limitation, any financial
statements or schedules included therein, did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading,
-14-
provided, that information as of a later date shall be deemed to modify
information as of an earlier date.
3.16. Authority; Enforceability. The execution, delivery, and
performance of this Plan by Shore Bancshares have been duly and validly
authorized by its Board of Directors, subject only to requisite approval by the
stockholders of Shore Bancshares and appropriate governmental regulatory
authorities. This Plan is a valid and binding agreement of Shore Bancshares,
enforceable against it in accordance with its terms, subject as to enforcement
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
3.17. Insurance. All insurance policies held by Shore Bancshares and
the Shore Subsidiaries relating to their operations (except for title insurance
policies), including without limitation all financial institutions bonds, are
set forth on a list previously provided to Talbot Bancshares. All such policies
are in full force and effect. Neither Shore Bancshares nor any of the Shore
Subsidiaries has received any notice of cancellation with respect to any such
policies and has no reason to expect that it will receive a notice of
cancellation from any of its present insurance carriers; provided, however, that
Shore Bancshares makes no representation as to the effect of this Plan or the
Merger on its present financial institutions bond or bonds.
3.18. Financial Institutions Bond. Since April 1, 1994, Shore
Bancshares and the Shore Subsidiaries have continuously maintained in full force
and effect one or more financial institutions bonds insuring Shore Bancshares
and the Shore Subsidiaries against acts of dishonesty by each of their
employees. No claim has been made under any such bond since such date, and Shore
Bancshares is not aware of any fact or condition now existing which forms the
basis of a claim under any such bond. Shore Bancshares and the Shore
Subsidiaries have no reason to expect that their present financial institutions
bond or bonds will not be renewed by their carrier on substantially the same
terms as those now in effect; provided, however, that Shore Bancshares makes no
representation as to the effect of this Plan or the Merger on its present
financial institutions bond or bonds.
3.19. Brokers; Financial Advisor. All negotiations relating to this
Plan and the transactions contemplated hereunder have been carried on by Shore
Bancshares directly or through its counsel or financial advisor, and there has
been no intervention of any person as the result of any action of Shore
Bancshares (and, so far as known to Shore Bancshares, no intervention of any
other person) in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission, finder's fee, or other like
payment (other than to its financial advisor, Xxxxxxx XxXxxxxxx & Associates,
Inc. ("GM&A")). A copy of the agreement with GM&A which has been engaged by
Shore Bancshares as its financial advisor and to deliver an opinion as to the
fairness of the transactions contemplated by this Plan to Shore Bancshares has
been previously delivered to Talbot Bancshares.
3.20. Beneficial Ownership of Talbot Bancshares Common Stock. As of
the date hereof, Shore Bancshares does not beneficially own any shares of Talbot
Bancshares Common Stock or have any option, warrant, or right of any kind to
acquire the beneficial ownership of any Talbot Bancshares Common Stock.
-15-
3.21. Year 2000. Shore Bancshares has carried out a review to
evaluate the extent to which the business or operations of Shore Bancshares or
any of the Shore Subsidiaries will be affected by the Year 2000 Problem (as
defined below). As a result of such review, Shore Bancshares has no reason to
believe, and does not believe, that the Year 2000 Problem will have a material
adverse effect on the condition (financial or otherwise), assets, liabilities,
business, or operations of Shore Bancshares and the Shore Subsidiaries, taken as
a whole. Shore Bancshares reasonably believes that the suppliers, vendors,
customers or other material third parties used or served by Shore Bancshares and
the Shore Subsidiaries are addressing or will address the Year 2000 Problem in a
timely manner. Shore Bancshares is in compliance with all applicable
requirements of any Governmental Entity relating to the Year 2000 Problem and
has not received any correspondence from or provided any written information to
any Governmental Entity relating to the Year 2000 Problem. "Year 2000 Problem"
means the risk that computer hardware or software applications will not record,
store, process, calculate and present calendar dates falling on and after
January 1, 2000, and calculate information dependent upon or relating to such
dates, in the same manner and with the same functionality, data integrity and
performance as such products record, store, process, calculate and present
calendar dates falling on or before December 31, 1999, and calculate information
dependent on or relating to such dates.
3.22 Reports. Shore Bancshares and each of the Shore Subsidiaries
have timely filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since January 1, 1995 with (i) the Federal Reserve, (ii) the Federal
Deposit Insurance Corporation ("FDIC") and/or Office of the Comptroller of the
Currency ("OCC"), (iii) any state banking commissions or any other state
regulatory authority (each a "State Regulator") and (iv) and any self-regulatory
organization ("SRO") (collectively, the "Regulatory Agencies"), and have paid
all fees and assessments due and payable in connection therewith. Except for
normal examinations conducted by a Regulatory Agency in the regular course of
the business of Shore Bancshares and the Shore Subsidiaries, and no Regulatory
Agency has initiated any proceeding or investigation into the business or
operations of Shore Bancshares or the Shore Subsidiaries since January 1, 1995.
There is no unresolved material violation, criticism, or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations of Shore Bancshares or the Shore Subsidiaries.
3.23 Agreements with Regulatory Agencies. Neither Shore Bancshares
nor the Shore Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of (each "Company Regulatory Agreement"), any
Regulatory Agency or other Governmental Entity that restricts the conduct of its
business or that in any manner relates to its capital adequacy, its credit
policies, its management or its business, nor has Shore Bancshares or the Shore
Subsidiaries been advised in writing by any Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting any Company
Regulatory Agreement.
-16-
3.24 State Takeover Laws and Control Share Acquisition Act. The Board
of Directors of Shore Bancshares has approved this Plan, the Shore Bancshares
Option Agreement and the transactions contemplated hereby prior to the date of
this Plan such that the provisions of Sections 3-602 and 3-702 of the MGCL will
not apply to this Plan, or the Shore Bancshares Option Agreement or any of the
transactions contemplated hereby or thereby.
4. Representations and Warranties of Talbot Bancshares. Talbot Bancshares
represents and warrants to Shore Bancshares as follows:
4.1. Organization, Standing, and Capitalization of Talbot Bancshares
and the Talbot Subsidiaries. (a) Talbot Bancshares is a duly organized and
validly existing corporation and is in good standing under the laws of the State
of Maryland. Talbot Bancshares has the corporate power and authority to own and
hold its material properties and to carry on its business as it is now being
conducted. Talbot Bancshares is a financial holding company under the Bank
Holding Company Act of 1956, as amended. Talbot Bancshares has no subsidiaries
or directly or indirectly affiliated companies and is not a party to any joint
venture or partnership other than as set forth on a list previously provided to
Shore Bancshares (collectively, the "Talbot Subsidiaries").
(b) Talbot Bank is a duly organized and validly existing Maryland
commercial bank and is in good standing under the laws of the State of Maryland.
The deposits of Talbot Bank are insured under the provisions of the Federal
Deposit Insurance Act, as amended (100% by the bank insurance fund). Each of the
other Talbot Subsidiaries is a duly organized and validly existing corporation
or other entity and is in good standing under the laws of the jurisdiction of
its incorporation or organization as set forth on the list previously provided
to Shore Bancshares. Talbot Bank does not exercise any fiduciary powers. Each of
the Talbot Subsidiaries has the power (corporate or other) and authority to own
and hold its material properties and to carry on its business as it is now being
conducted. All outstanding shares of capital stock or other equity interests of
all of the Talbot Subsidiaries are validly issued, fully paid, and non-
assessable. Except as set forth on a list previously provided to Shore
Bancshares, each of the Talbot Subsidiaries is wholly owned by its parent. There
are no outstanding options, warrants, rights, or obligations of any kind
entitling the holder thereof to acquire shares of the capital stock or other
equity interests of any of the Talbot Subsidiaries, and there are no outstanding
securities or instruments of any kind that are convertible into shares of the
capital stock or other equity interests of any of the Talbot Subsidiaries.
Except as set forth on a list previously provided to Shore Bancshares, none of
the Talbot Subsidiaries is a party to any joint venture or partnership.
(c) Copies of all organizational documents and by-laws of Talbot
Bancshares and each of the Talbot Subsidiaries have been previously provided to
Shore Bancshares, and all such copies are true and correct as of the date
hereof. The minute books of Talbot Bancshares and each of the Talbot
Subsidiaries, which have been made available to Shore Bancshares for inspection,
are complete in all material respects and accurately record the actions taken by
the stockholders and directors of Talbot Bancshares and each of the Talbot
Subsidiaries.
-17-
(d) The authorized capital stock of Talbot Bancshares consists
exclusively of 25,000,000 shares of Common Stock, par value $.01 per share,
1,194,876 of which shares are outstanding at July 25, 2000. All outstanding
shares of Talbot Bancshares Common Stock are validly issued, fully paid, and non
assessable. Talbot Bancshares has reserved 125,000 shares of its Common Stock
for issuance under its stock option plans. On July 25, 2000, there were
outstanding options to purchase 37,344 shares of Talbot Bancshares Common Stock
at prices ranging from $19.50 to $25.00 pursuant to these stock option plans.
Except for the option to be granted to Shore Bancshares pursuant to the Stock
Option Agreement attached as Appendix V and as set forth on a list previously
provided to Shore Bancshares, there are no other outstanding options, warrants,
rights, or obligations of any kind entitling the holder thereof to acquire
shares of the Common Stock of Talbot Bancshares, and there are no outstanding
securities or instruments of any kind that are convertible into shares of the
Common Stock of Talbot Bancshares.
4.2. Financial Statements. Talbot Bancshares has previously provided
to Shore Bancshares copies of the Consolidated Financial Statements of Talbot
Bancshares and the Talbot Subsidiaries at December 31, 1995, 1996, 1997, 1998,
and 1999 and for each of the years then ended, as reported upon by Xxxxxxx &
Company, and at March 31, 1999 and 2000 and for each of the three month periods
then ended, all of which are true and complete in all material respects, have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods covered by such consolidated
financial statements and present fairly the financial position, results of
operations, cash flows, and changes in stockholders' equity of Talbot Bancshares
and the Talbot Subsidiaries at the dates of and for the periods covered by such
financial statements.
4.3. Taxes. Copies of the tax returns for federal, state, county,
municipal, or foreign taxing authorities for the taxable year ended December 31,
1995 and all taxable years through and including December 31, 1999 for Talbot
Bancshares and the Talbot Subsidiaries have been previously provided to Shore
Bancshares. Talbot Bancshares and the Talbot Subsidiaries have filed with
appropriate federal, state, county, municipal, or foreign taxing authorities all
tax returns required to be filed (taking any applicable extensions into
consideration) and have paid or reserved for all taxes shown to be due on such
returns and all penalties and interest payable in respect thereof. Except as
disclosed in writing to Shore Bancshares, since January 1, 1995 neither Talbot
Bancshares nor any of the Talbot Subsidiaries have received from any taxing
authority any notice of deficiency or assessment of additional taxes not paid or
any notice of an intention to commence an examination or audit of its tax
returns, and no tax audits by any taxing authority are in process. Except as
disclosed in writing to Shore Bancshares, since January 1, 1995 neither Talbot
Bancshares nor any of the Talbot Subsidiaries have granted any waiver of any
statute of limitations or otherwise agreed to any extension of a period for the
assessment of any federal, state, county, municipal, or foreign income tax. The
accruals and reserves reflected in the consolidated financial statements which
Talbot Bancshares has provided to Shore Bancshares as described in Section 4.2
are adequate to cover all taxes (including interest and penalties, if any,
thereon) that are payable or accrued as a result of the operations of Talbot
Bancshares and the Talbot Subsidiaries for all periods prior to the date of such
consolidated financial statements. For purposes of this Section 4.3, any
-18-
reference to the Talbot Subsidiaries shall be deemed to include any entity
previously identified on the list delivered to Shore Bancshares pursuant to
4.1(a) and 4.1(b).
4.4. No Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the consolidated financial statements delivered
under Section 4.2, neither Talbot Bancshares nor any of the Talbot Subsidiaries
at the dates of such consolidated financial statements had any material
liabilities or obligations (whether accrued, absolute, or contingent) required
under generally accepted accounting principles to be reflected thereon which
would materially and adversely affect the fair presentation of such financial
statements. Neither Talbot Bancshares nor any of the Talbot Subsidiaries has
incurred any liability since the date of the consolidated financial statements
delivered under Section 4.2 (including any liability for taxes) which would
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business, or operations of Talbot Bancshares and the Talbot
Subsidiaries, taken as a whole, other than liabilities which have been incurred
in the ordinary course of business.
4.5. Absence of Certain Changes or Events. Except as previously
disclosed in writing to Shore Bancshares, since December 31, 1999 there has not
been:
(a) Any materially adverse change in the financial position,
results of operations, assets, liabilities, or business of Talbot
Bancshares or the Talbot Subsidiaries, other than changes in the ordinary
course of business;
(b) any increase in salaries or wages of directors, officers, or
employees of Talbot Bancshares or the Talbot Subsidiaries other than in the
ordinary course of business; or any establishment or increase of any
employment, compensation, bonus, pension, option, incentive or deferred
compensation, retirement payments, profit sharing, or similar agreement or
benefit, authorized, granted, or accrued to any directors, officers, or
employees of Talbot Bancshares or the Talbot Subsidiaries other than in the
ordinary course of business; or
(c) any declaration, payment, or set aside by Talbot Bancshares
of any dividend or distribution in respect of its Common Stock (other than
regular quarterly cash dividends), or any purchase, issuance, or sale by
Talbot Bancshares of any of its Common Stock.
4.6. Complete and Accurate Disclosure. Neither this Plan (insofar as
it relates to Talbot Bancshares and the Talbot Subsidiaries, the Common Stock of
Talbot Bancshares, and the involvement of Talbot Bancshares in the transactions
contemplated hereby) nor any financial statement, schedule, certificate, or
other statement or document previously disclosed in writing under this Agreement
delivered by Talbot Bancshares to Shore Bancshares in connection with this Plan,
when considered in the aggregate, contains any statement which, at the time and
in light of the circumstances under which it is made, is false or misleading
with respect to any material fact or omits to state any material fact necessary
to make the statements contained herein or therein not false or misleading.
-19-
4.7. Title to Properties; Absence of Liens and Encumbrances;
Compliance with Laws. Except as previously disclosed in writing to Shore
Bancshares, Talbot Bancshares and each of the Talbot Subsidiaries has good and
marketable title to all of their respective properties and assets, including
those reflected in the consolidated financial statements delivered pursuant to
Section 4.2, except as sold or otherwise disposed of for fair value and only in
the ordinary course of business, free and clear of all liens and encumbrances,
except (i) with respect to property as to which they are lessees, (ii) with
respect to real estate owned by Talbot Bancshares or the Talbot Subsidiaries,
for use, occupancy, and similar restrictions of public record that may be
observed by an inspection of the property, and such other utility and other
easements and encumbrances as do not materially adversely affect the fair market
value of such real property, and (iii) liens to secure borrowings, liens to
secure governmental deposits, and liens for current taxes not yet due and
payable. Neither Talbot Bancshares nor any of the Talbot Subsidiaries owns or
leases real property except as previously disclosed in writing to Shore
Bancshares, and is not in default under any material lease of real or personal
property to which it is a party. As of the date hereof, except as previously
disclosed in writing to Shore Bancshares, the real properties, structures,
buildings, equipment, and the tangible personal property owned, operated, or
leased by Talbot Bancshares or any of the Talbot Subsidiaries are (x) in good
repair, order, and condition, except for depletion, depreciation, and ordinary
wear and tear, (y) suitable for the uses for which they were intended, and (z)
free from any known structural defects. As of the date hereof, there are no
laws, conditions of record, or other impediments which materially interfere with
the intended uses by Talbot Bancshares or any of the Talbot Subsidiaries of the
real property or tangible personal property owned or leased by it, except as
previously disclosed in writing to Shore Bancshares. Neither Talbot Bancshares
nor any of the Talbot Subsidiaries have received any notice of any violation of
any applicable law, building code, zoning ordinance, or other similar law.
Talbot Bancshares and the Talbot Subsidiaries own or have the rights to use all
real and personal properties and assets that are material to the conduct of the
business as now conducted of Talbot Bancshares and the Talbot Subsidiaries,
taken as a whole.
4.8. Contracts. Except for the plans, contracts, and agreements of
Talbot Bancshares and the Talbot Subsidiaries (or of any plan under Section
4.8(b)) set forth on the list previously provided to Shore Bancshares, neither
Talbot Bancshares nor any of the Talbot Subsidiaries (nor any plan under Section
4.8(b)) is a party to or subject to:
(a) Any employment, consultation, or compensation contract or
arrangement (other than those terminable at will) with any officer,
consultant, director, or employee;
(b) any plan, contract, program, understanding, or agreement
providing for bonuses, pensions, severance pay, executive compensation,
options, stock purchases, or any other form of retirement, incentive or
deferred compensation, retirement payments, death benefits, profit sharing,
branch closing benefits, workers' compensation, tuition reimbursement or
scholarship program, any plans providing benefits or payments in the event
of a change in control, change in ownership, or sale of a substantial
portion (including all or substantially all) of the assets of Talbot
Bancshares or any of the Talbot Subsidiaries, or any
-20-
health, accident, disability, sick leave, vacation pay, life insurance, or
other welfare benefit, or any other employee or retired employee benefit
(including, without limitation, any "employee benefit plan" as defined in
Section 3(3) of ERISA) in which any current or former employee, director,
or agent (or beneficiary of any of them) of Talbot Bancshares or any of the
Talbot Subsidiaries is or was, within the last six years, entitled to
participate;
(c) any contract or agreement with any labor union;
(d) any lease of real or personal property with annual rentals
in excess of $15,000;
(e) any agreement for services in excess of $30,000 per year or
for the purchase or disposition of any equipment or supplies except
individual purchase orders for office supplies incurred in the ordinary
course of business of $10,000 or less;
(f) any instrument evidencing or relating to indebtedness for
borrowed money except for customer accounts, deposits, certificates of
deposit, federal funds purchased, repurchase agreements and the like which
may be construed as borrowings and except for loans made by Talbot Bank as
lender in the ordinary course of its business;
(g) any lease or other contract containing covenants not to
enter into or consummate the transactions contemplated hereby or which
provides for payments in excess of $2,000 and will be terminated or
violated by the Merger or in respect of which the Merger would cause a
default or acceleration of obligations; or
(h) any other contract or agreement not of the type covered by
any of the other specific terms of this Section 4.8 obligating Talbot
Bancshares or any Talbot Subsidiary to expenditures in excess of $25,000.
Each of the instruments set forth on the list previously provided to Shore
Bancshares is valid and in full force and effect. Neither Talbot Bancshares nor
any of the Talbot Subsidiaries are in default nor have any of them received any
notice that they are in default, nor to their actual knowledge is any other
party in default, under any material agreements, instruments, or obligations to
which Talbot Bancshares or any of the Talbot Subsidiaries is a party or by which
they are bound.
4.9. Litigation, Etc. Except as set forth on the list previously
provided to Shore Bancshares, (a) there is no litigation, proceeding, or
investigation pending or, to the knowledge of Talbot Bancshares, threatened
against Talbot Bancshares or any of the Talbot Subsidiaries which would result
in any materially adverse change in the condition (financial or otherwise),
assets, liabilities, business, operations, or future prospects of Talbot
Bancshares and the Talbot Subsidiaries, taken as a whole; (b) there are no
outstanding orders, writs, injunctions, judgments,
-21-
decrees, directives, consent agreements, or memoranda of understanding issued by
any federal, state, or local court or governmental authority or arbitration
tribunal issued against or with the consent of Talbot Bancshares or any of the
Talbot Subsidiaries that materially and adversely affect the condition
(financial or otherwise), assets, liabilities, business, operations, or future
prospects or that in any manner restrict Talbot Bancshares' right to carry on
its business or that of the Talbot Subsidiaries as now conducted; and (c) Talbot
Bancshares is aware of no fact or condition now existing that might give rise to
any litigation, investigation, or proceeding which, if determined adversely to
Talbot Bancshares or any of the Talbot Subsidiaries, would materially and
adversely affect the condition (financial or otherwise), assets, liabilities,
business, operations, or future prospects of Talbot Bancshares and the Talbot
Subsidiaries, taken as a whole, or would restrict in any manner Talbot
Bancshares' right to carry on its business or that of the Talbot Subsidiaries as
now conducted. Talbot Bancshares has set forth on the list previously provided
to Shore Bancshares all litigation in which Talbot Bancshares or any of the
Talbot Subsidiaries is involved as a party (other than bankruptcy proceedings in
which Talbot Bancshares or any of the Talbot Subsidiaries has filed proofs of
claim or routine collection and foreclosure suits initiated in the ordinary
course of business).
4.10. Environmental Matters. (a) Except as previously disclosed
in writing to Shore Bancshares or as would not individually or in the aggregate
have a materially adverse effect on the condition (financial or otherwise),
assets, liabilities, business, or operations of Talbot Bancshares and the Talbot
Subsidiaries, taken as a whole:
(i) neither Talbot Bancshares nor any of the Talbot
Subsidiaries has received any written notices, demand letters, or written
requests for information from any Governmental Entity or any third party
indicating that Talbot Bancshares or any Talbot Subsidiary may be in
violation of, or liable under, any Environmental Law;
(ii) there are no civil, criminal, or administrative actions,
suits, demands, claims, hearings, investigations, or proceedings pending or
to the knowledge of Talbot Bancshares threatened against Talbot Bancshares
or any Talbot Subsidiary alleging that they may be in violation of, or
liable under, any Environmental Law;
(iii) no reports have been filed with any Governmental Entity,
nor to the knowledge of Talbot Bancshares are any reports required to be
filed with any Governmental Entity, concerning the release of any Hazardous
Substance or the violation of any Environmental Law on or at any of the
Properties of Talbot Bancshares or any of the Talbot Subsidiaries;
(iv) except as previously disclosed in writing to Shore
Bancshares, there are no underground storage tanks on, in, or under any of
the Properties of Talbot Bancshares or any of the Talbot Subsidiaries, and
no underground storage tanks have been closed or removed from any Property
of Talbot Bancshares or any of the Talbot Subsidiaries while such Property
was owned or operated by Talbot Bancshares or any of the Talbot
Subsidiaries;
-22-
(v) except as previously disclosed in writing to Shore
Bancshares, no Hazardous Substance has been generated, used, stored,
processed, disposed of, or discharged on or into any of the Properties of
Talbot Bancshares or any of the Talbot Subsidiaries, except for the lawful
storage and use of such hazardous substances as are used in the everyday
business of a bank office; and
(vi) except as previously disclosed in writing to Shore
Bancshares, no materials containing asbestos have been used or incorporated
in any building or other structure or improvement located on any of the
Properties of Talbot Bancshares or any of the Talbot Subsidiaries.
(b) There are no permits or licenses or agency filings or reports
required under any Environmental Law in respect of any operation of Talbot
Bancshares or any of the Talbot Subsidiaries or in respect of the Properties of
Talbot Bancshares or any of the Talbot Subsidiaries the absence or violation of
which could, individually or in the aggregate, have a materially adverse effect
on the condition (financial or otherwise), assets, liabilities, business, or
operations of Talbot Bancshares and the Talbot Subsidiaries, taken as a whole.
(c) Talbot Bancshares and each of the Talbot Subsidiaries are and
have been in compliance with all Environmental Laws except for such
noncompliance as would not, individually or in the aggregate, have a materially
adverse effect on the condition (financial or otherwise), assets, liabilities,
business or operations of Talbot Bancshares and the Talbot Subsidiaries, taken
as a whole.
(d) Talbot Bancshares has previously provided to Shore Bancshares a
copy of any current policy regarding compliance with Environmental Laws and its
policies on screening proposed collateral for potential environmental
liabilities.
(e) Copies of each environmental site assessment report possessed or
available to Talbot Bancshares prepared in connection with any of the Properties
of Talbot Bancshares or any of the Talbot Subsidiaries have been previously
provided to Shore Bancshares.
(f) Neither Talbot Bancshares nor any of the Talbot Subsidiaries is
an "owner or operator" of any property in which it or they hold or have held a
security interest, as that term is defined under CERCLA.
4.11. Labor Matters. To Talbot Bancshares' knowledge, no
organization effort with respect to any of the employees of Talbot Bancshares or
any of the Talbot Subsidiaries is pending or threatened, and no labor dispute,
strike, work stoppage, employee action, or labor relation problem which may
materially affect Talbot Bancshares or any of the Talbot Subsidiaries currently
is pending or threatened. Since January 1, 1995, Talbot Bancshares and each of
the Talbot Subsidiaries have at all times in all material respects complied with
all applicable employee termination notice and similar laws. Since January 1,
1995, Talbot Bancshares and each of the Talbot Subsidiaries have at all times
complied in all material respects with all applicable family medical leave and
similar laws. If applicable, Talbot Bancshares and each of the Talbot
Subsidiaries have at all times complied in all material respects with all
-23-
applicable requirements of the Worker Adjustment and Retraining Notification Act
and all similar state laws.
4.12. Pension and Welfare Matters. With respect to the plans,
contracts, programs, understandings, or agreements identified pursuant to
Sections 4.8(a) and (b) (for purposes of this Section 4.12, the "plans"):
(a) Talbot Bancshares has clearly identified on the list
previously provided to Shore Bancshares all of the plans which are (i)
Multiemployer Plans, (ii) Multiple Employer Plans, (iii) plans other than
Multiemployer Plans and Multiple Employer Plans that are subject to Section
412 of the Code, (iv) plans intended to qualify under Section 401(a) of the
Code, and (v) "welfare benefit plans" within the meaning of Section 3(1) of
ERISA which provide for continuing benefits or coverage for any participant
or any beneficiary of a participant after such participant's termination of
employment except coverage or benefits required by Section 4980B of the
Code if paid 100% by the participant;
(b) true, correct and complete copies of the following
documents, with respect to each of the plans have been made available or
delivered to Shore Bancshares: (i) all plan documents, including trust
agreements, insurance policies, loan documents, and service agreements and
amendments thereto, (ii) the most recent Forms 5500 and any financial
statements attached thereto and those for the prior three years, (iii) the
last Internal Revenue Service determination letter and the application with
respect thereto, (iv) summary plan descriptions, (v) the most recent
actuarial statements and those for the prior three years, (vi) written
descriptions of all non-written agreements relating to any such plan, as
applicable, for Talbot Bancshares and each of the Talbot Subsidiaries, and
(vii) all filings with a governmental agency or entity within the last
three years, including, without limitation, filings under the voluntary or
other compliance programs of the U.S. Department of Labor or the Internal
Revenue Service;
(c) each of the plans has been operated in all material respects
in accordance with its terms and in accordance with all applicable laws
including, but not limited to, ERISA, the Code, the Consolidated Omnibus
Budget Reconciliation Act of 1985, the Health Insurance Portability and
Accountability Act of 1996, and state health care continuation laws;
(d) all reporting and disclosure requirements of ERISA imposed
upon each such plan have been complied with in all material respects, and
all required governmental filings, including registration and other filings
under applicable securities law, have been made with respect to the plans;
(e) none of (i) the plans, (ii) the Talbot Subsidiaries, and
(iii) Talbot Bancshares, and to Talbot Bancshares' knowledge, (x) no
current or former director, officer, employee, agent, or representative of
Talbot Bancshares or any of the Talbot Subsidiaries, and (y) no fiduciary,
"party in interest" (as
-24-
defined in Section 3(14) of ERISA) or "disqualified person" (as defined in
Section 4975 of the Code) with respect to any of the plans has engaged in
any non-exempt "prohibited transaction" in connection with any of the plans
within the meaning of Section 4975 of the Code or Title I, Part 4 of ERISA;
(f) none of the plans has any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or
not waived, with respect to the latest five plan years, nor any liability
to the PBGC (other than normal premium payments);
(g) with respect to plans which are pension plans (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA, the assets of each
such funded plans equal or exceed the liabilities (as defined in Section
4001(a)(16) of ERISA) under such plans when such liabilities are valued on
a termination basis using PBGC interest and other assumptions;
(h) no contributions to any of the plans from Talbot Bancshares or
any of the Talbot Subsidiaries are currently past due and, if applicable,
all past service and other liabilities currently existing but payable in
the future, if any, are reflected in the latest actuarial report in
accordance with sound actuarial principles;
(i) no audits, proceedings, investigations, filings, or other matters
(excluding any determination letter application that has been or may be
filed prior to the Effective Date) are pending before the IRS, the
Department of Labor, the PBGC, or other public or quasi-public body in
connection with any such plans;
(j) each plan intended to qualify under Section 401(a) of the Code is
so qualified and the trust maintained pursuant thereto is exempt from
taxation under Section 501 of the Code and nothing has occurred with
respect to the operation or administration of such plan which would cause
the loss of such qualification or exemption or the imposition of any
liability, penalty, or tax under ERISA or the Code that could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), assets, liabilities, business, or operations of Talbot
Bancshares and the Talbot Subsidiaries, taken as a whole, or on such plan;
(k) except as previously disclosed in writing to Shore Bancshares,
through the Effective Date, there will be no changes in the operation of
the plans or in the documents constituting or affecting the plans except
for amendments and operational changes required by applicable law which do
not materially increase the cost of such plans;
(l) no employees, former employees, or retired employees of Talbot
Bancshares or any of the Talbot Subsidiaries, as a result of their
employment with Talbot Bancshares or any of the Talbot Subsidiaries, are
-25-
participants in any Multiemployer Plan and neither Talbot Bancshares nor
any of the Talbot Subsidiaries has any current, contingent or potential
liability with respect to any such plan;
(m) no "reportable event," as such term is defined in Section 4043(c)
of ERISA, has occurred with respect to any plan since the effective date of
ERISA, other than a reportable event for which the 30 days notice
requirement under regulations of the PBGC has been waived;
(n) there are no pending or threatened claims by or disputes with any
participants or beneficiaries of the plans, except plan benefit claims
arising in the normal course of the operations of the plans (other than
terminated plans) and as to which no dispute exists;
(o) Talbot Bancshares has no knowledge of any facts which could give
rise to any claims against any plan or any fiduciary of any plan, except
for plan benefit claims which arise in the normal course of the operations
of the plans (other than terminated plans) and are not disputed;
(p) neither Talbot Bancshares nor any of the Talbot Subsidiaries nor
any fiduciary of any plan has given notice to any fiduciary liability
insurer of any claims or potential claims in connection with any of the
plans;
(q) except as previously disclosed in writing to Shore Bancshares as
plans that cannot be amended or terminated, each of the plans may
effectively be terminated or amended, in any manner and at any time,
without further accrual of liability to its participants, by its sponsoring
or participating employer;
(r) neither Talbot Bancshares nor any of the Talbot Subsidiaries has
provided, nor is required to provide, security to any pension plan or to
any single-employer plan pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA;
(s) there has been no announcement or legally binding commitment by
Talbot Bancshares or any of the Talbot Subsidiaries to create an additional
plan, or to amend a plan except for amendments required by applicable law
which do not materially increase the cost of such plan;
(t) as to any terminated plans, all obligations for plan benefits or
other liabilities have been satisfied in full;
(u) none of the plans contains any provision which would prohibit the
transactions contemplated by this Plan or which, except as previously
disclosed in writing to Shore Bancshares, would give rise to any severance,
termination, or other payments or liabilities, or any forgiveness of
indebtedness, vesting, distribution, increase in benefits, or obligations
to fund benefits as a
-26-
result of the transactions contemplated by this Plan; no payment that is
owed or may become due any director, officer, employee, or agent of Talbot
Bancshares or any of the Talbot Subsidiaries in connection with a plan will
be non-deductible to the payor under Section 280G of the Code, and none of
the Talbot Subsidiaries, Shore Subsidiaries, Talbot Bancshares or Shore
Bancshares will be required to "gross up" or otherwise compensate any
person in connection with a plan because of the imposition of any excise
tax under Section 4999 of the Code; and
(v) no plan is funded by, associated with, or related to a
"voluntary employees' beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
4.13. Related Party Transactions. Except as disclosed on a list
previously provided to Shore Bancshares, neither Talbot Bancshares nor any of
the Talbot Subsidiaries has any contract, extension of credit, business
arrangement, or other relationship of any kind with any of the following
persons: (a) any executive officer or director of Talbot Bancshares or any of
the Talbot Subsidiaries; (b) any stockholder owning five percent or more of the
outstanding Common Stock of Talbot Bancshares; or (c) any "affiliate" (as
defined in the SEC Rule 405) of the foregoing persons or any business in which
any of the foregoing persons is an officer, director, employee, or five percent
or greater equity owner.
4.14. No Conflict with Other Documents. Except as disclosed on a list
previously provided to Shore Bancshares, neither the execution and delivery of
this Plan nor the carrying out of the transactions contemplated hereunder will
result in any violation, termination, or default or acceleration of, or be in
conflict with, any terms of any contract or other instrument to which Talbot
Bancshares or any of the Talbot Subsidiaries is a party, or of any judgment,
decree, or order applicable to Talbot Bancshares or any of the Talbot
Subsidiaries, or result in the creation of any lien, charge, or encumbrance upon
any of their properties or assets, except for any of the foregoing which would
not have a material adverse effect upon the condition (financial or otherwise),
assets, liabilities, business, or operations of Talbot Bancshares and the Talbot
Subsidiaries, taken as a whole.
4.15. Compliance with Laws; Governmental Authorizations. (a) Except
where noncompliance would not have a material and adverse effect upon the
condition (financial or otherwise), assets, liabilities, business, or operations
of Talbot Bancshares and the Talbot Subsidiaries, taken as a whole, (i) Talbot
Bancshares and each of the Talbot Subsidiaries are in compliance with all
statutes, laws, ordinances, rules, regulations, judgments, orders, decrees,
directives, consent agreements, memoranda of understanding, permits,
concessions, grants franchises, licenses, and other governmental authorizations
or approvals applicable to Talbot Bancshares, the Talbot Subsidiaries, or any of
their properties; and (ii) all permits, concessions, grants, franchises,
licenses, and other governmental authorizations and approvals necessary for the
conduct of the business of Talbot Bancshares and the Talbot Subsidiaries as now
conducted have been duly obtained and are in full force and effect, and there
are no proceedings pending or, to Talbot Bancshares' knowledge, threatened which
may result in the revocation, cancellation, suspension, or materially adverse
modification of any thereof. Except as disclosed on a list
-27-
previously provided to Shore Bancshares, neither Talbot Bancshares nor any of
the Talbot Subsidiaries engages in any business or owns any assets that may not
be engaged in or owned by a registered bank holding company, a commercial bank,
or their subsidiaries or affiliates.
(b) Since January 1, 1995 Talbot Bancshares has filed all reports
that it was required to file with the SEC under the Exchange Act, all of which
complied in all material respects with all applicable requirements of the
Exchange Act and the rules and regulations adopted thereunder. As of their
respective dates, each such report, statement, form, or other document,
including without limitation, any financial statements or schedules included
therein, did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, provided, that information as of a later date shall be deemed to
modify information as of an earlier date.
4.16. Authority; Enforceability. The execution, delivery, and
performance of this Plan by Talbot Bancshares have been duly and validly
authorized by its Board of Directors, subject only to requisite approval by the
stockholders of Talbot Bancshares and appropriate governmental regulatory
authorities. This Plan is a valid and binding agreement of Talbot Bancshares,
enforceable against it in accordance with its terms, subject as to enforcement
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
4.17. Insurance. All insurance policies held by Talbot Bancshares and
the Talbot Subsidiaries relating to their operations (except for title insurance
policies), including without limitation all financial institutions bonds, are
set forth on a list previously provided to Shore Bancshares. All such policies
are in full force and effect. Neither Talbot Bancshares nor any of the Talbot
Subsidiaries has received any notice of cancellation with respect to any such
policies and has no reason to expect that it will receive a notice of
cancellation from any of its present insurance carriers; provided, however, that
Talbot Bancshares makes no representation as to the effect of this Plan or the
Merger on its present financial institutions bond or bonds.
4.18. Financial Institutions Bond. Since April 1, 1994, Talbot
Bancshares and the Talbot Subsidiaries have continuously maintained in full
force and effect one or more financial institutions bonds insuring Talbot
Bancshares and the Talbot Subsidiaries against acts of dishonesty by each of
their employees. No claim has been made under any such bond since such date, and
Talbot Bancshares is not aware of any fact or condition now existing which forms
the basis of a claim under any such bond. Talbot Bancshares and the Talbot
Subsidiaries have no reason to expect that their present financial institutions
bond or bonds will not be renewed by their carrier on substantially the same
terms as those now in effect; provided, however, that Talbot Bancshares makes no
representation as to the effect of this Plan or the Merger on its present
financial institutions bond or bonds.
4.19. Brokers; Financial Advisor. All negotiations relating to this
Plan and the transactions contemplated hereunder have been carried on by Talbot
Bancshares directly or through its counsel or financial advisor, and there has
been no intervention of any person as the result of any action of Talbot
Bancshares (and, so far as known to Talbot Bancshares, no
-28-
intervention of any other person) in such manner as to give rise to any valid
claim against any of the parties hereto for a brokerage commission, finder's
fee, or other like payment (other than to its financial advisor, Xxxxxxxxx
Associates Inc. ("Xxxxxxxxx")). A copy of the agreement with Xxxxxxxxx which has
been engaged by Talbot Bancshares as its financial advisor and to deliver an
opinion as to the fairness of the transactions contemplated by this Plan to
Talbot Bancshares has been previously delivered to Shore Bancshares.
4.20. Beneficial Ownership of Shore Bancshares Common Stock. As of the
date hereof, Talbot Bancshares does not beneficially own any shares of Shore
Bancshares Common Stock or have any option, warrant, or right of any kind to
acquire the beneficial ownership of any Shore Bancshares Common Stock.
4.21. Year 2000. Talbot Bancshares has carried out a review to
evaluate the extent to which the business or operations of Talbot Bancshares or
any of the Talbot Subsidiaries will be affected by the Year 2000 Problem. As a
result of such review, Talbot Bancshares has no reason to believe, and does not
believe, that the Year 2000 Problem will have a material adverse effect on the
condition (financial or otherwise), assets, liabilities, business, or operations
of Talbot Bancshares and the Talbot Subsidiaries, taken as a whole. Talbot
Bancshares reasonably believes that the suppliers, vendors, customers or other
material third parties used or served by Talbot Bancshares and the Talbot
Subsidiaries are addressing or will address the Year 2000 Problem in a timely
manner. Talbot Bancshares is in compliance with all applicable requirements of
any Governmental Entity relating to the Year 2000 Problem and has not received
any correspondence from or provided any written information to any Governmental
Entity relating to the Year 2000 Problem.
4.22. Reports. Talbot Bancshares and the Talbot Subsidiaries have
timely filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since January 1, 1995 with (i) the Federal Reserve, (ii) the FDIC and/or
OCC, (iii) any State Regulator, and (iv) and any SRO, and have paid all fees and
assessments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of Talbot Bancshares and the Talbot Subsidiaries, and no Regulatory
Agency has initiated any proceeding or investigation into the business or
operations of Talbot Bancshares or the Talbot Subsidiaries since January 1,
1995. There is no unresolved material violation, criticism, or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations of Talbot Bancshares or the Talbot Subsidiaries.
4.23. Agreements with Regulatory Agencies. Neither Talbot Bancshares
nor the Talbot Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any Company Regulatory Agreement with any Regulatory
Agency or other Governmental Entity that restricts the conduct of its business
or that in any manner relates to its capital adequacy, its credit policies, its
management or its business, nor has Talbot Bancshares or the Talbot Subsidiaries
been advised in writing by any Regulatory Agency or other Governmental Entity
that it is considering issuing or requesting any Company Regulatory Agreement.
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4.24. State Takeover Laws and Control Share Acquisition Act. The Board
of Directors of Talbot Bancshares has approved this Plan, the Talbot Bancshares
Option Agreement and the transactions contemplated hereby prior to the date of
this Plan such that the provisions of Sections 3-602 and 3-702 of the MGCL will
not apply to this Plan, or the Talbot Bancshares Option Agreement or any of the
transactions contemplated hereby or thereby.
5. Covenants of Shore Bancshares. Except as otherwise consented to in
writing by Talbot Bancshares after the date of this Plan, Shore Bancshares
covenants to and agrees with Talbot Bancshares as follows:
5.1. Information. (a) Shore Bancshares shall, upon reasonable notice,
give to Talbot Bancshares and to its officers, accountants, counsel, financial
advisors, and other representatives, reasonable access during Shore Bancshares'
and the Shore Subsidiaries' normal business hours throughout the period prior to
the Effective Date to all of their properties, books, contracts, commitments,
reports of examination (consistent with applicable law), depositor and
stockholder lists, and records. Shore Bancshares and the Shore Subsidiaries
will, at their own expense, furnish Talbot Bancshares during such period with
all such information concerning their affairs as Talbot Bancshares may
reasonably request, including information for use in determining if the
conditions of Section 7.1 through Section 7.9 have been satisfied, necessary to
prepare the regulatory filings or applications to be filed with governmental
regulatory authorities to obtain the approvals referred to in Section 2, and for
use in any other necessary filings to be made with appropriate governmental
regulatory authorities.
(b) Shore Bancshares acknowledges that information received by it
concerning Talbot Bancshares and the Talbot Subsidiaries and their operations is
subject to the Confidentiality Agreement dated February 15, 2000 between Talbot
Bancshares and Shore Bancshares (the "Confidentiality Agreement"). Without
limiting the foregoing, Shore Bancshares will not, and will cause its
representatives not to, use any information obtained pursuant to Section 6.1 for
any purpose unrelated to the consummation of the transactions contemplated by
this Plan. Subject to the requirements of law, Shore Bancshares will keep
confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to Section 6.1 unless such
information (i) was already known to Shore Bancshares, (ii) becomes available to
Shore Bancshares from other sources not known by Shore Bancshares to be bound by
a confidentiality obligation, (iii) is disclosed with prior written approval of
Talbot Bancshares and the Talbot Subsidiaries, or (iv) is or becomes readily
ascertainable from published information or trade sources. In the event that
this Plan is terminated or the transactions contemplated by this Plan shall
otherwise fail to be consummated, Shore Bancshares shall promptly cause all
copies of documents or extracts thereof containing information and data as to
Talbot Bancshares and the Talbot Subsidiaries to be returned. In the event that
this Plan has been terminated or the transactions contemplated hereby shall have
failed to be consummated and Shore Bancshares or any of its agents or
representatives are requested or required (by oral questions, interrogatories,
requests for information, or documents in legal proceedings, subpoena, civil
investigative demand, or other similar process) to disclose any of the materials
delivered or obtained pursuant to the Plan (the "Talbot Documentation"), Shore
Bancshares shall provide Talbot Bancshares with prompt written notice of any
such request or
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requirement so that Talbot Bancshares may seek a protective order or other
appropriate remedy. If, in the absence of a protective order or other remedy,
Shore Bancshares or any of its agents or representatives are compelled to
disclose any of such Talbot Documentation to any tribunal or else stand liable
for contempt or suffer other censure or penalty, Shore Bancshares or its agents
or representatives may, without liability hereunder, disclose to such tribunal
only that portion of the Talbot Documentation which Shore Bancshares' counsel
advises Shore Bancshares is legally required to be disclosed, provided, that
Shore Bancshares shall exercise its best efforts to preserve the confidentiality
of the Talbot Documentation, including, without limitation, by cooperating with
Talbot Bancshares to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Talbot Documentation
by such tribunal.
5.2. Events Preceding Effectiveness. Shore Bancshares and the Shore
Subsidiaries will use commercially reasonable efforts to assure that each of the
events specified in Section 2 which require action on its part shall occur on or
before the Effective Date.
5.3. Meeting of Stockholders of Shore Bancshares. Shore Bancshares
will duly call and convene a meeting of its stockholders to act upon the
transactions contemplated hereby as soon as practicable. Except to the extent
legally required for the discharge by the board of directors of its fiduciary
duties, Shore Bancshares will recommend approval of this Plan and the Merger to
its stockholders, and will use commercially reasonable efforts to obtain a
favorable vote thereon. The calling and holding of such meeting and all notices,
transactions, documents, and information related thereto will be in material
compliance with all applicable laws. Shore Bancshares shall take all such steps
as may be required to cause the transactions contemplated by this Plan and any
other dispositions of Shore Bancshares equity securities (including derivative
securities) or acquisitions of Shore Bancshares equity securities (including
derivative securities) in connection with this Plan by each individual who (i)
is a director or officer of Shore Bancshares or (ii) at the Effective Time, will
become a director or officer of Shore Bancshares, to be exempt under Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), such steps to be taken in accordance with the No-Action Letter dated
January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP.
5.4. Conduct of Business. After the date of this Plan and pending the
Effective Date, (a) Shore Bancshares and the Shore Subsidiaries will conduct
their business only in the ordinary course; (b) Shore Bancshares and the Shore
Subsidiaries shall not effect any change or amendment in their respective
charters or by-laws; (c) except with respect to Shore Bancshares stock options
outstanding on the date of this Plan which are or may become subject to
exercise, Shore Bancshares and the Shore Subsidiaries shall not change their
authorized, issued, or outstanding capital stock; (d) Shore Bancshares shall not
declare cash dividends in respect of its Common Stock (except regular quarterly
cash dividends not in excess of $0.20 per share); (e) except as previously
disclosed in writing to Talbot Bancshares, Shore Bancshares and the Shore
Subsidiaries shall not increase employee compensation or benefit levels (except
for annual increases not in excess of amounts established by its regular past
practices), shall not establish or make any increase in any employment,
compensation, bonus, pension, option, incentive or
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deferred compensation, retirement, death, profit sharing, or similar agreements
or benefits of any of its past, present, or future officers or employees, other
than additional premiums to obtain an extension of directors' and officers'
liability coverage for six years (which Talbot Bancshares is authorized to
obtain), and except as provided in this Plan, shall not modify the existing
employment agreements with any officers or employees; (f) Shore Bancshares and
the Shore Subsidiaries shall not make any change in any of their accounting
policies or practices unless required by generally accepted accounting
principles; and (g) Shore Bancshares and the Shore Subsidiaries shall not incur
any liability for borrowed money except in the ordinary course of their banking
business (i.e., may only incur variable rate loans with terms not greater than
one year) or place upon or permit any lien or encumbrance upon any of their
properties or assets except liens of the type permitted in the exceptions to
Section 3.7. Pending the Effective Date, Shore Bancshares and the Shore
Subsidiaries shall (x) use commercially reasonable efforts to preserve their
business organization and assets and to keep available the services of their
full-time officers and employees, (y) continue in effect the present method of
conducting their business, and (z) advise Talbot Bancshares regarding decisions
or actions in matters (i) other than those in the ordinary course of business,
or (ii) except as previously disclosed in writing to Talbot Bancshares,
involving any capital expenditures in excess of $25,000.
5.5. Reservation of Shares. Shore Bancshares shall have reserved a
sufficient number of shares of its Common Stock for issuance upon exercise of
the option granted pursuant to the Stock Option Agreement attached as Appendix
IV, which is to be executed by Talbot Bancshares and Shore Bancshares, and shall
have taken all other actions necessary to fulfill its obligations thereunder.
5.6. Regulatory Matters; Document Preparation. (a) Shore Bancshares
and the Shore Subsidiaries, with the assistance of Talbot Bancshares, the Talbot
Subsidiaries, and their representatives, will promptly prepare and file with the
appropriate governmental regulatory authorities an application requesting the
regulatory approvals referred to in Sections 2(d), 2(e), 2(f), and 2(g) and will
use commercially reasonable efforts to secure favorable action on such
applications, including without limitation commercially reasonable efforts to
pursue an appeal of a denial of a regulatory approval. Shore Bancshares shall
furnish Talbot Bancshares with copies of all such filings and shall promptly
notify Talbot Bancshares of all communications, oral or written, with the
governmental regulatory authorities concerning such applications.
(b) Shore Bancshares shall furnish Talbot Bancshares with such
information concerning Shore Bancshares and the Shore Subsidiaries as is
necessary in order to cause the Proxy Statement/Prospectus (as defined in
Section 6.6(b)), insofar as it relates to such corporations, to comply with
Section 6.6(b). Shore Bancshares agrees promptly to advise Talbot Bancshares if,
at any time prior to the Shore Bancshares or Talbot Bancshares stockholders'
meetings, any information provided by Shore Bancshares in the Proxy
Statement/Prospectus becomes incorrect or incomplete in any material respect and
to provide Talbot Bancshares with the information needed to correct such
inaccuracy or omission. Shore Bancshares shall furnish Talbot Bancshares with
such supplemental information as may be necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to Shore Bancshares and the Shore
Subsidiaries, to comply with Section 6.6(b) after the mailing thereof to Shore
Bancshares and Talbot
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Bancshares stockholders. The information provided and the representations made
by Shore Bancshares to Talbot Bancshares in connection with the Proxy
Statement/Prospectus, both at the time such information and representations are
provided and made and at the Effective Date, will be true and accurate in all
material respects and will not contain any false or misleading statement with
respect to any material fact or omit to state any material fact required to be
stated therein or necessary in order (i) to make the statements made therein not
false or misleading, or (ii) to correct any statement contained in an earlier
communication with respect to such information or representations which has
become false or misleading. Talbot Bancshares may rely upon all information
provided to it by Shore Bancshares and its representatives in the preparation of
the Proxy Statement/Prospectus and shall not be liable for any untrue statement
of a material fact or any omission to state a material fact in the Proxy
Statement/Prospectus, if such statement is made in reliance upon any information
provided to it by Shore Bancshares or by any of its officers or authorized
representatives.
(c) Shore Bancshares shall promptly furnish Talbot Bancshares with
such information regarding the Shore Bancshares stockholders as Talbot
Bancshares requires to enable it to determine what filings are required under
applicable state securities laws. Shore Bancshares authorizes Talbot Bancshares
to utilize in such filings the information concerning Shore Bancshares and the
Shore Subsidiaries provided to Talbot Bancshares in connection with, or
contained in, the Proxy Statement/Prospectus.
5.7. Consents. Shore Bancshares and the Shore Subsidiaries will use
commercially reasonable efforts to obtain any consents, approvals, or waivers
from third parties required in connection with the transactions contemplated
hereunder.
5.8. Current Information; Advice of Changes. (a) During the period
from the date of this Plan to the Effective Date, Shore Bancshares will cause
one or more of its designated representatives to confer on a monthly or more
frequent basis with representatives of Talbot Bancshares regarding its business,
operations, properties, assets, and condition (financial or otherwise) and
matters relating to the completion of the transactions contemplated herein. As
soon as reasonably available, but in no event more than 45 days after the end of
each calendar quarter (other than the last calendar quarter of each calendar
year) ending after the date of this Plan, Shore Bancshares will deliver to
Talbot Bancshares its quarterly reports on Form 10-Q, as filed with the SEC
under the Exchange Act. As soon as reasonably available, but in no event more
than 90 days after the calendar year, Shore Bancshares will deliver to Talbot
Bancshares its Annual Report on Form 10-K as filed with the SEC under the
Exchange Act.
(b) Between the date of this Plan and the Effective Date, Shore
Bancshares shall promptly advise Talbot Bancshares in writing of any fact which,
if existing or known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Plan or of any fact which, if existing
or known as of the date hereof, would have made any of the representations
contained herein untrue in any material respect.
5.9. No Solicitation of Other Offers. Shore Bancshares agrees that
neither it nor any of the Shore Subsidiaries nor any of their respective
officers, directors, and employees shall, and Shore Bancshares shall direct and
use its best efforts to cause its and the Shore
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Subsidiaries' agents and representatives (including, without limitation, any
investment banker, attorney, or accountant retained by it or any of the Shore
Subsidiaries) not to, directly or indirectly, take any action to solicit or
initiate any inquiries or the making of any offer or proposal (including without
limitation any proposal to stockholders of Shore Bancshares) with respect to a
merger, consolidation, business combination, liquidation, reorganization, sale
or other disposition of any significant portion of assets (except problem assets
shown on a list previously provided to Talbot Bancshares), sale of shares of
capital stock, or similar transactions involving Shore Bancshares or any of the
Shore Subsidiaries (any such inquiry, offer, or proposal, a "Shore Acquisition
Proposal"), or, except in the opinion of outside counsel to Shore Bancshares as
may be legally required to comply with the duties the Board of Directors of
Shore Bancshares under applicable law and upon termination of this Plan under
Section 13(f), engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to a Shore Acquisition Proposal. As of the time hereof, Shore
Bancshares is not engaged in any negotiations or discussions relating to a Shore
Acquisition Proposal. Shore Bancshares shall promptly notify Talbot Bancshares
orally and in writing of, and keep it fully and currently informed on, any Shore
Acquisition Proposal or any inquiries with respect thereto, such written
notification to include the identity of the Person making such inquiry or Shore
Acquisition Proposal and such other information with respect thereto as is
reasonably necessary to apprise Talbot Bancshares of the material terms of such
Shore Acquisition Proposal. Shore Bancshares shall give Talbot Bancshares
contemporaneous written notice upon engaging in discussions or negotiations
with, or providing any information regarding Shore Bancshares or any of the
Shore Subsidiaries to, any such person regarding a Shore Acquisition Proposal.
5.10. Affiliate and Support Agreements. Within 10 days of the date of
this Plan, Shore Bancshares shall deliver or cause to be delivered to Talbot
Bancshares memoranda substantially in the form attached as Appendix VI (the
"Shore Bancshares Affiliates' Memoranda") and agreements substantially in the
form attached as Appendix VIII (the "Shore Bancshares Support Agreements") from
each of its executive officers and directors (and shall use commercially
reasonable efforts to obtain and deliver such memoranda from each stockholder of
Shore Bancshares who may be restricted under the accounting rules applicable to
a pooling-of-interests. Under the terms of the Shore Bancshares Affiliates'
Memoranda, each such officer, director or stockholder shall acknowledge and
agree to abide by all limitations imposed by the accounting rules for the Merger
to be accounted for as a pooling-of-interests. Under the terms of the Shore
Bancshares Support Agreements, each such officer or director shall agree to
support and vote the shares of Common Stock of Shore Bancshares owned or
controlled by him or her to ratify and confirm this Plan and the Merger.
5.11. Pooling-of-Interests. Shore Bancshares shall use its best
efforts not to permit any of the directors, officers, employees, stockholders,
agents, consultants, or other representatives of Shore Bancshares or any of the
Shore Subsidiaries to take any action that would preclude Shore Bancshares from
treating the Merger as a pooling-of-interests for financial reporting purposes.
-34-
5.12. Taxes. Shore Bancshares shall have filed with appropriate
federal, state, county, municipal, or foreign taxing authorities all tax returns
required to be filed (taking any applicable extensions into consideration) on or
before the Effective Date and shall have paid (or shall have made adequate
provision or set up an adequate actual reserve on the financial statements
referred to in Section 3.2 for the payment of) all taxes imposed by any taxing
authority with respect to any such returns, together with any interest,
additions, or penalties related to any such taxes.
5.13. Public Announcements. Between the date of this Plan and the
Effective Date, Shore Bancshares and the Shore Subsidiaries will consult with
Talbot Bancshares before issuing any press release or otherwise making any
public statements with respect to this Plan and the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as counsel may advise is required
by law.
6. Covenants of Talbot Bancshares. Except as otherwise consented to in
writing by Shore Bancshares after the date of this Plan, Talbot Bancshares
covenants to and agrees with Shore Bancshares as follows:
6.1. Information. (a) Talbot Bancshares shall, upon reasonable
notice, give to Shore Bancshares and to its officers, accountants, counsel,
financial advisors, and other representatives, reasonable access during Talbot
Bancshares' and the Talbot Subsidiaries' normal business hours throughout the
period prior to the Effective Date to all of their properties, books, contracts,
commitments, reports of examination (consistent with applicable law), depositor
and stockholder lists, and records. Talbot Bancshares and the Talbot
Subsidiaries will, at their own expense, furnish Shore Bancshares during such
period with all such information concerning their affairs as Shore Bancshares
may reasonably request, including information for use in determining if the
conditions of Section 8.1 through Section 8.9 have been satisfied, necessary to
prepare the regulatory filings or applications to be filed with governmental
regulatory authorities to obtain the approvals referred to in Section 2, and for
use in any other necessary filings to be made with appropriate governmental
regulatory authorities.
(b) Talbot Bancshares acknowledges that information received by it
concerning Shore Bancshares and the Shore Subsidiaries and their operations is
subject to the Confidentiality Agreement. Without limiting the foregoing,
Talbot Bancshares will not, and will cause its representatives not to, use any
information obtained pursuant to Section 5.1 for any purpose unrelated to the
consummation of the transactions contemplated by this Plan. Subject to the
requirements of law, Talbot Bancshares will keep confidential, and will cause
its representatives to keep confidential, all information and documents obtained
pursuant to Section 5.1 unless such information (i) was already known to Talbot
Bancshares, (ii) becomes available to Talbot Bancshares from other sources not
known by Talbot Bancshares to be bound by a confidentiality obligation, (iii) is
disclosed with prior written approval of Shore Bancshares and the Shore
Subsidiaries, or (iv) is or becomes readily ascertainable from published
information or trade sources. In the event that this Plan is terminated or the
transactions contemplated by this Plan shall otherwise fail to be consummated,
Talbot Bancshares shall promptly cause all copies of documents or extracts
thereof containing information and data as to Shore Bancshares and the
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Shore Subsidiaries to be returned. In the event that this Plan has been
terminated or the transactions contemplated hereby shall have failed to be
consummated and Talbot Bancshares or any of its agents or representatives are
requested or required (by oral questions, interrogatories, requests for
information, or documents in legal proceedings, subpoena, civil investigative
demand, or other similar process) to disclose any of the materials delivered or
obtained pursuant to the Plan (the "Shore Documentation"), Talbot Bancshares
shall provide Shore Bancshares with prompt written notice of any such request or
requirement so that Shore Bancshares may seek a protective order or other
appropriate remedy. If, in the absence of a protective order or other remedy,
Talbot Bancshares or any of its agents or representatives are compelled to
disclose any of such Xxxx Documentation to any tribunal or else stand liable for
contempt or suffer other censure or penalty, Talbot Bancshares or its agents or
representatives may, without liability hereunder, disclose to such tribunal only
that portion of the Xxxx Documentation which Talbot Bancshares' counsel advises
Talbot Bancshares is legally required to be disclosed, provided, that Talbot
Bancshares shall exercise its best efforts to preserve the confidentiality of
the Xxxx Documentation, including, without limitation, by cooperating with Shore
Bancshares to obtain an appropriate protective order or other reliable assurance
that confidential treatment will be accorded the Xxxx Documentation by such
tribunal.
6.2. Events Preceding Effectiveness. Talbot Bancshares and the
Talbot Subsidiaries will use commercially reasonable efforts to assure that each
of the events specified in Section 2 which require action on its part shall
occur on or before the Effective Date.
6.3. Meeting of Stockholders of Talbot Bancshares. Talbot Bancshares
will duly call and convene a meeting of its stockholders to act upon the
transactions contemplated hereby as soon as practicable. Except to the extent
legally required for the discharge by the board of directors of its fiduciary
duties, Talbot Bancshares will recommend approval of this Plan and the Merger to
its stockholders, and will use commercially reasonable efforts to obtain a
favorable vote thereon. The calling and holding of such meeting and all notices,
transactions, documents, and information related thereto will be in material
compliance with all applicable laws. Talbot Bancshares shall take all such steps
as may be required to cause the transactions contemplated by this Plan and any
other dispositions of Talbot Bancshares equity securities (including derivative
securities) or acquisitions of Shore Bancshares equity securities (including
derivative securities) in connection with this Plan by each individual who (i)
is a director or officer of Talbot Bancshares or (ii) at the Effective Time,
will become a director or officer of Shore Bancshares, to be exempt under Rule
16b-3 promulgated under the Exchange Act, such steps to be taken in accordance
with the No-Action Letter dated January 12, 1999, issued by the SEC to Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP.
6.4. Conduct of Business. After the date of this Plan and pending
the Effective Date, (a) Talbot Bancshares and the Talbot Subsidiaries will
conduct their business only in the ordinary course; (b) Talbot Bancshares and
the Talbot Subsidiaries shall not effect any change or amendment in their
respective charters or by-laws; (c) except with respect to Talbot Bancshares
stock options outstanding on the date of this Plan which are or may become
subject to exercise, Talbot Bancshares and the Talbot Subsidiaries shall not
change their authorized, issued, or outstanding capital stock; (d) Talbot
Bancshares shall not declare cash dividends in respect of its
-36-
Common Stock (except regular quarterly cash dividends not in excess of $0.50 per
share to be paid to holders of record as of the same date as dividends declared
by Shore Bancshares); (e) except as previously disclosed in writing to Shore
Bancshares, Talbot Bancshares and the Talbot Subsidiaries shall not increase
employee compensation or benefit levels (except for annual increases not in
excess of amounts established by its regular past practices), shall not
establish or make any increase in any employment, compensation, bonus, pension,
option, incentive or deferred compensation, retirement, death, profit sharing,
or similar agreements or benefits of any of its past, present, or future
officers or employees, other than additional premiums to obtain an extension of
directors' and officers' liability coverage for six years (which Shore
Bancshares is authorized to obtain), and except as provided in this Plan, shall
not modify the existing employment agreements with any officers or employees;
(f) Talbot Bancshares and the Talbot Subsidiaries shall not make any change in
any of their accounting policies or practices unless required by generally
accepted accounting principles; and (g) Talbot Bancshares and the Talbot
Subsidiaries shall not incur any liability for borrowed money except in the
ordinary course of their banking business (i.e., may only incur variable rate
loans with terms not greater than one year) or place upon or permit any lien or
encumbrance upon any of their properties or assets except liens of the type
permitted in the exceptions to Section 3.7. Pending the Effective Date, Talbot
Bancshares and the Talbot Subsidiaries shall (x) use commercially reasonable
efforts to preserve their business organization and assets and to keep available
the services of their full-time officers and employees, (y) continue in effect
the present method of conducting their business, and (z) advise Shore Bancshares
regarding decisions or actions in matters (i) other than those in the ordinary
course of business, or (ii) except as previously disclosed in writing to Shore
Bancshares, involving any capital expenditures in excess of $25,000.
6.5. Reservation of Shares. Talbot Bancshares shall have reserved a
sufficient number of shares of its Common Stock for issuance upon exercise of
the option granted pursuant to the Stock Option Agreement attached as Appendix
V, which is to be executed by Shore Bancshares and Talbot Bancshares, and shall
have taken all other actions necessary to fulfill its obligations thereunder.
6.6. Regulatory Matters; Document Preparation. (a) Talbot Bancshares
and the Talbot Subsidiaries will provide the information necessary and, where
necessary, cooperate with Shore Bancshares' efforts to obtain all necessary
regulatory approvals of the transactions contemplated by this Plan.
(b) Talbot Bancshares, with the assistance of Shore Bancshares and
its representatives, will promptly file a Registration Statement with the SEC
which shall include a joint proxy statement for Talbot Bancshares and Shore
Bancshares and a prospectus of Shore Bancshares which shall satisfy all
applicable requirements of applicable state and federal laws, including the
Securities Act, the Exchange Act, and applicable state securities laws and the
rules and regulations thereunder (such joint proxy statement and prospectus,
together with any and all amendments or supplements thereto, the "Proxy
Statement/Prospectus", and the various documents to be filed under the
Securities Act with the SEC to register the Shore Bancshares Common Stock into
which shares of Talbot Bancshares Common Stock will be converted, including the
Proxy Statement/Prospectus, the "Registration Statement"). Talbot Bancshares
-37-
will use commercially reasonable efforts to secure the effectiveness of the
Registration Statement. Talbot Bancshares shall promptly take all such actions
as may be necessary or appropriate in order to comply in all material respects
with all applicable securities laws of any state having jurisdiction over the
transactions contemplated by this Plan and the Merger. Talbot Bancshares shall
furnish Shore Bancshares with copies of all such filings and shall promptly
notify Shore Bancshares of all communications, oral or written, with the SEC
concerning the Registration Statement and the Proxy Statement/Prospectus.
(c) Talbot Bancshares shall furnish such information concerning
Talbot Bancshares and the Talbot Subsidiaries as is necessary in order to cause
the Proxy Statement/Prospectus, insofar as it relates to such corporations, to
comply with Section 6.6(b). Talbot Bancshares agrees promptly to advise Shore
Bancshares if, at any time prior to the Shore Bancshares stockholders' meeting,
any information provided by Talbot Bancshares in the Proxy Statement/Prospectus
becomes incorrect or incomplete in any material respect and to provide Shore
Bancshares with the information needed to correct such inaccuracy or omission.
Talbot Bancshares shall furnish Shore Bancshares with such supplemental
information as may be necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to Talbot Bancshares and the Talbot
Subsidiaries, to comply with Section 6.6(b) after the mailing thereof to Shore
Bancshares stockholders. The information provided and the representations made
by Talbot Bancshares to Shore Bancshares in connection with the Proxy
Statement/Prospectus, both at the time such information and representations are
provided and made and at the Effective Date, will be true and accurate in all
material respects and will not contain any false or misleading statement with
respect to any material fact or omit to state any material fact required to be
stated therein or necessary in order (i) to make the statements made therein not
false or misleading, or (ii) to correct any statement contained in an earlier
communication with respect to such information or representations which has
become false or misleading. Shore Bancshares may rely upon all information
provided to it by Talbot Bancshares and its representatives in the preparation
of the Proxy Statement/Prospectus and shall not be liable for any untrue
statement of a material fact or any omission to state a material fact in the
Proxy Statement/Prospectus, if such statement is made in reliance upon any
information provided to it by Talbot Bancshares or by any of its officers or
authorized representatives.
6.7. Consents. Talbot Bancshares and the Talbot Subsidiaries will
use commercially reasonable efforts to obtain any consents, approvals, or
waivers from third parties required in connection with the transactions
contemplated hereunder.
6.8. Current Information; Advice of Changes. (a) During the period
from the date of this Plan to the Effective Date, Talbot Bancshares will cause
one or more of its designated representatives to confer on a monthly or more
frequent basis with representatives of Shore Bancshares regarding its business,
operations, properties, assets, and condition (financial or otherwise) and
matters relating to the completion of the transactions contemplated herein. As
soon as reasonably available, but in no event more than 45 days after the end of
each calendar quarter (other than the last calendar quarter of each calendar
year) ending after the date of this Plan, Talbot Bancshares will deliver to
Shore Bancshares its quarterly reports on Form 10-Q, as filed with the SEC under
the Exchange Act. As soon as reasonably available, but in no event
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more than 90 days after the calendar year, Talbot Bancshares will deliver to
Shore Bancshares its Annual Report on Form 10-K as filed with the SEC under the
Exchange Act.
(b) Between the date of this Plan and the Effective Date, Talbot
Bancshares shall promptly advise Shore Bancshares in writing of any fact which,
if existing or known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Plan or of any fact which, if existing
or known as of the date hereof, would have made any of the representations
contained herein untrue in any material respect.
6.9. No Solicitation of Other Offers. Talbot Bancshares agrees that
neither it nor any of the Talbot Subsidiaries nor any of their respective
officers, directors, and employees shall, and Talbot Bancshares shall direct and
use its best efforts to cause its and the Talbot Subsidiaries' agents and
representatives (including, without limitation, any investment banker, attorney,
or accountant retained by it or any of the Talbot Subsidiaries) not to, directly
or indirectly, take any action to solicit or initiate any inquiries or the
making of any offer or proposal (including without limitation any proposal to
stockholders of Talbot Bancshares) with respect to a merger, consolidation,
business combination, liquidation, reorganization, sale or other disposition of
any significant portion of assets (except problem assets shown on the list
previously provided to Shore Bancshares, sale of shares of capital stock, or
similar transactions involving Talbot Bancshares or any of the Talbot
Subsidiaries (any such inquiry, offer, or proposal, a "Talbot Acquisition
Proposal"), or, except in the opinion of outside counsel to Talbot Bancshares as
may be legally required to comply with the duties the Board of Directors of
Talbot Bancshares under applicable law and upon termination of this Plan under
Section 13(f), engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to a Talbot Acquisition Proposal. As of the time hereof, Talbot
Bancshares is not engaged in any negotiations or discussions relating to a
Talbot Acquisition Proposal. Talbot Bancshares shall promptly notify Shore
Bancshares orally and in writing of, and keep it fully and currently informed
on, any Talbot Acquisition Proposal or any inquiries with respect thereto, such
written notification to include the identity of the Person making such inquiry
or Talbot Acquisition Proposal and such other information with respect thereto
as is reasonably necessary to apprise Shore Bancshares of the material terms of
such Talbot Acquisition Proposal. Talbot Bancshares shall give Shore Bancshares
contemporaneous written notice upon engaging in discussions or negotiations
with, or providing any information regarding Talbot Bancshares or any of the
Talbot Subsidiaries to, any such person regarding a Talbot Acquisition Proposal.
6.10. Affiliate and Support Agreements. Within 10 days of the date of
this Plan, Talbot Bancshares shall deliver or cause to be delivered to Shore
Bancshares memoranda substantially in the form attached as Appendix VII (the
"Talbot Bancshares Affiliates' Memoranda") and agreements substantially in the
form attached as Appendix IX (the "Talbot Bancshares Support Agreements") from
each of its executive officers and directors (and shall use commercially
reasonable efforts to obtain and deliver such memoranda from each stockholder of
Talbot Bancshares who (a) may be deemed to be an "affiliate" of Talbot
Bancshares, as that term is defined for purposes of the SEC Rules 145 and 405,
or (b) may be restricted under the accounting rules applicable to a pooling-of-
interests). Under the terms of the
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Talbot Bancshares Affiliates' Memoranda, each such officer, director or
stockholder shall acknowledge and agree (i) to abide by all limitations imposed
by the Securities Act and by all rules, regulations, and releases promulgated
thereunder by the SEC with respect to the sale or other disposition of the
shares of the Common Stock of Shore Bancshares to be received by such person
pursuant to the Merger, and (ii) to abide by all limitations imposed by the
accounting rules for the Merger to be accounted for as a pooling-of-interests.
Under the terms of the Talbot Bancshares Support Agreements, each such officer
or director shall agree to support and vote the shares of Common Stock of Talbot
Bancshares owned or controlled by him or her to ratify and confirm this Plan and
the Merger.
6.11. Pooling-of-Interests. Talbot Bancshares shall use its best
efforts not to permit any of the directors, officers, employees, stockholders,
agents, consultants, or other representatives of Talbot Bancshares or any of the
Talbot Subsidiaries to take any action that would preclude Shore Bancshares from
treating the Merger as a pooling-of-interests for financial reporting purposes.
6.12. Taxes. Talbot Bancshares shall have filed with appropriate
federal, state, county, municipal, or foreign taxing authorities all tax returns
required to be filed (taking any applicable extensions into consideration) on or
before the Effective Date and shall have paid (or shall have made adequate
provision or set up an adequate actual reserve on the financial statements
referred to in Section 4.2 for the payment of) all taxes imposed by any taxing
authority with respect to any such returns, together with any interest,
additions, or penalties related to any such taxes.
6.13. Public Announcements. Between the date of this Plan and the
Effective Date, Talbot Bancshares and the Talbot Subsidiaries will consult with
Shore Bancshares before issuing any press release or otherwise making any public
statements with respect to this Plan and the transactions contemplated hereby
and shall not issue any such press release or make any such public statement
prior to such consultation, except as counsel may advise is required by law.
7. Conditions Precedent to Shore Bancshares' Obligations. Unless waived
in writing by Shore Bancshares in its sole discretion, all obligations of Shore
Bancshares hereunder shall be subject to the fulfillment prior to or at the
Effective Date of the following conditions:
7.1. Representations, Warranties, and Covenants. The representations
and warranties of Talbot Bancshares herein contained shall be true in all
material respects as of the date hereof, shall be deemed made again at and as of
the Effective Date except as contemplated herein, and shall be true in all
material respects as so made again; Talbot Bancshares and the Talbot
Subsidiaries shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions required by this Plan to be performed or complied with by them on or
prior to the Effective Date; and Shore Bancshares shall have received from
Talbot Bancshares an officers' certificate to their knowledge, information, and
belief in such detail as Shore Bancshares may reasonably request, dated the
Effective Date and signed by its Chief Executive Officer and its Secretary, to
the foregoing effect.
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7.2. No Adverse Changes. There shall not have been any materially
adverse change in the condition (financial or otherwise), results of operations,
assets, liabilities, or business of Talbot Bancshares and the Talbot
Subsidiaries, taken as a whole, from December 31, 1999 to the Effective Date,
other than any such change attributable to or resulting from (A) any change in
banking or similar laws, rules or regulations of general applicability or
interpretations thereof by courts or governmental authorities, (B) any change in
GAAP or regulatory accounting principles applicable to banks or their holding
companies generally, (C) any change in general economic or business conditions
affecting banks, thrifts or holding companies generally, provided that such
change does not affect Talbot Bancshares to a materially greater extent than
banks, thrifts or holding companies generally, and provided further that such
change does not have a materially adverse effect on (i) the results of
operations or financial condition of Talbot Bancshares, (ii) any action or
omission of Talbot Bancshares or the Talbot Subsidiaries taken in contemplation
of the Merger with the prior written consent of Shore Bancshares, or (iii) the
ability of Talbot Bancshares and the Talbot Subsidiaries to consummate the
transactions contemplated by this Plan. For purposes of this Section 7.2, a
"materially adverse change" shall also include, without limitation, (a) a
reduction of the stockholders' equity of Talbot Bancshares to less than
$36,486,000 (plus such additions to stockholders' equity as a result of the
issuance of any Common Stock after the date of this Plan), (b) a decrease in the
net income of Talbot Bancshares from January 1, 2000 through the Effective Date
to less than the net income for the same period but beginning on January 1,
1999, or (c) an increase in Talbot Bancshares' ratio of non-performing assets to
total assets to above 0.5%, and a "materially adverse change" shall not include
expenses of the transactions under this Plan.
7.3. Events Preceding the Effective Date. Each of the events set
forth in Section 2 shall have occurred and any other required regulatory
approvals shall have been obtained and no more than 10% of the outstanding
shares of Talbot Bancshares shall have voted against the Plan and delivered a
written demand for appraisal of such shares before the vote on the proposal to
adopt the Plan.
7.4. Other Evidence. Talbot Bancshares shall have delivered to Shore
Bancshares such further certificates and documents evidencing due action in
accordance with this Plan, including certified copies of all applicable
proceedings of stockholders and directors of Talbot Bancshares and Talbot Bank
pertaining to the transactions under this Plan, as Shore Bancshares shall
reasonably request.
7.5. No Adverse Proceedings, Events, or Regulatory Requirements. No
action or proceeding against Shore Bancshares or any of the Shore Subsidiaries
or against Talbot Bancshares or any of the Talbot Subsidiaries shall be pending
which seeks to prevent consummation of the transactions contemplated by this
Plan; and no order of any court shall have been entered which prohibits
consummation of the Merger and the transactions contemplated by this Plan. No
approval, consent, waiver, or administrative action shall have included any
condition or requirement that would (i) result in a materially adverse effect on
Shore Bancshares or Talbot Bancshares, or (ii) so materially and adversely
affect the economic or business benefits of the Merger that Shore Bancshares, in
the sole judgment of Shore
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Bancshares, would not have entered into this Plan had such conditions or
requirements been known at the date hereof.
7.6. Consents, Etc. All requisite consents, approvals, waivers,
undertakings, memoranda, agreements, exercises, and terminations by third
parties which Talbot Bancshares and the Talbot Subsidiaries have covenanted to
use commercially reasonable efforts to obtain under Sections 6.7, 6.10, and 6.11
shall have been obtained by Talbot Bancshares or waived by Shore Bancshares
except where the failure to obtain such consent would not, individually or in
the aggregate, result in a materially adverse change.
7.7 Fairness Opinion. Shore Bancshares shall have received a
written opinion from GM&A (or such other recognized investment firm as Shore
Bancshares may select), dated contemporaneously with the date of the Proxy
Statement/Prospectus, to the effect that the exchange ratio is fair to the
stockholders of Shore Bancshares from a financial point of view.
7.8. Opinion of Counsel. Shore Bancshares shall have received
opinions of tax counsel and counsel to Talbot Bancshares, dated the Effective
Date, in forms and substance reasonably satisfactory to Shore Bancshares,
covering the matters set forth in Appendix X and Appendix XII, respectively. In
rendering such tax opinion, tax counsel shall require delivery of and rely upon
certain representation letters delivered by Shore Bancshares, Talbot Bancshares,
and certain stockholders of Talbot Bancshares, which letters shall be in form
and substance satisfactory to tax counsel.
7.9. Pooling-of-Interests Accounting. Shore Bancshares shall have
received a letter from Xxxxxxx & Company stating the accounting treatment of the
transaction if consummated in accordance with this Plan; provided, that such
condition shall be void and of no further force and effect if Shore Bancshares
has not received such letter because of any action or inaction of Shore
Bancshares. In rendering such letter, Xxxxxxx & Company shall require delivery
of and rely upon certain representation letters delivered by Shore Bancshares
and Talbot Bancshares, which letters shall be in form and substance satisfactory
to Xxxxxxx & Company.
8. Conditions Precedent to Talbot Bancshares' Obligations. Unless waived
in writing by Talbot Bancshares in its sole discretion, all obligations of
Talbot Bancshares hereunder shall be subject to the fulfillment prior to or at
the Effective Date of the following conditions:
8.1. Representations, Warranties, and Covenants. The representations
and warranties of Shore Bancshares herein contained shall be true in all
material respects as of the date hereof, shall be deemed made again at and as of
the Effective Date except as contemplated herein, and shall be true in all
material respects as so made again; Shore Bancshares and the Shore Subsidiaries
shall have performed in all material respects all obligations and agreements,
and complied in all material respects with all covenants and conditions required
by this Plan to be performed or complied with by them on or prior to the
Effective Date; and Talbot Bancshares shall have received from Shore Bancshares
an officers' certificate to their knowledge, information, and belief in such
detail as Talbot Bancshares may reasonably request, dated the
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Effective Date and signed by its Chief Executive Officer and its Secretary, to
the foregoing effect.
8.2. No Adverse Changes. There shall not have been any materially
adverse change in the condition (financial or otherwise), results of operations,
assets, liabilities, or business of Shore Bancshares and the Shore Subsidiaries,
taken as a whole, from December 31, 1999 to the Effective Date, other than any
such change attributable to or resulting from (A) any change in banking or
similar laws, rules or regulations of general applicability or interpretations
thereof by courts or governmental authorities, (B) any change in GAAP or
regulatory accounting principles applicable to banks or their holding companies
generally, (C) any change in general economic or business conditions affecting
banks, thrifts or holding companies generally, provided that such change does
not affect Shore Bancshares to a materially greater extent than banks, thrifts
or holding companies generally, and provided further that such change does not
have a materially adverse effect on the results of operations or financial
condition of Shore Bancshares or (D) any action or omission of Shore Bancshares
or the Shore Subsidiaries taken in contemplation of the Merger with the prior
written consent to Talbot Bancshares, or (ii) the ability of Shore Bancshares
and the Shore Subsidiaries to consummate the transactions contemplated by this
Plan. For purposes of this Section 8.2, a "materially adverse change" shall also
include, without limitation, (a) a reduction of the stockholders' equity of
Shore Bancshares to less than $22,773,000 (plus such additions to stockholders'
equity as a result of the issuance of any Common Stock after the date of this
Plan), (b) a decrease in the net income of Shore Bancshares from January 1, 2000
through the Effective Date to less than the net income for the same period but
beginning on January 1, 1999, or (c) an increase in Shore Bancshares' ratio of
non-performing assets to total assets to above 0.5%, and a "materially adverse
change" shall not include expenses of the transactions under this Plan.
8.3. Events Preceding the Effective Date. Each of the events set
forth in Section 2 shall have occurred and any other required regulatory
approvals shall have been obtained and no more than 10% of the outstanding
shares of Shore Bancshares shall have been voted against the Plan.
8.4. Other Evidence. Shore Bancshares shall have delivered to Talbot
Bancshares such further certificates and documents evidencing due action in
accordance with this Plan, including certified copies of all applicable
proceedings of stockholders and directors of Shore Bancshares and Centreville
Bank pertaining to the transactions under this Plan, as Talbot Bancshares shall
reasonably request.
8.5. No Adverse Proceedings, Events, or Regulatory Requirements. No
action or proceeding against Talbot Bancshares or any of the Talbot Subsidiaries
or against Shore Bancshares or any of the Shore Subsidiaries shall be pending
which seeks to prevent consummation of the transactions contemplated by this
Plan; and no order of any court shall have been entered which prohibits
consummation of the Merger and the transactions contemplated by this Plan. No
approval, consent, waiver, or administrative action shall have included any
condition or requirement that would (i) result in a materially adverse effect on
Talbot Bancshares or Shore Bancshares, or (ii) so materially and adversely
affect the economic
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or business benefits of the Merger that Talbot Bancshares, in the sole judgment
of Talbot Bancshares, would not have entered into this Plan had such conditions
or requirements been known at the date hereof.
8.6. Consents, Etc. All requisite consents, approvals, waivers,
undertakings, memoranda, agreements, exercises, and terminations by third
parties which Shore Bancshares and the Shore Subsidiaries have covenanted to use
commercially reasonable efforts to obtain under Sections 5.7, 5.10, and 5.11
shall have been obtained by Shore Bancshares or waived by Talbot Bancshares
except where the failure to obtain such consent would not, individually or in
the aggregate, result in a materially adverse change.
8.7 Fairness Opinion. Talbot Bancshares shall have received a
written opinion from Xxxxxxxxx (or such other recognized investment firm as
Talbot Bancshares may select), dated contemporaneously with the date of the
Proxy Statement/Prospectus, to the effect that the consideration to be received
in the Merger is fair to the stockholders of Talbot Bancshares from a financial
point of view.
8.8. Opinion of Counsel. Talbot Bancshares shall have received
opinions of tax counsel and counsel to Shore Bancshares, dated the Effective
Date, in forms and substance reasonably satisfactory to Talbot Bancshares,
covering the matters set forth in Appendix X and Appendix XI, respectively. In
rendering such tax opinion, tax counsel shall require delivery of and rely upon
certain representation letters delivered by Shore Bancshares, Talbot Bancshares,
and certain stockholders of Talbot Bancshares, which letters shall be in form
and substance satisfactory to tax counsel.
8.9. Pooling-of-Interests Accounting. Talbot Bancshares shall have
received a letter from Xxxxxxx & Company stating the accounting treatment of the
transaction if consummated in accordance with this Plan; provided, that such
condition shall be void and of no further force and effect if Talbot Bancshares
has not received such letter because of any action or inaction of Talbot
Bancshares. In rendering such letter, Xxxxxxx & Company shall require delivery
of and rely upon certain representation letters delivered by Talbot Bancshares
and Shore Bancshares, which letters shall be in form and substance satisfactory
to Xxxxxxx & Company.
9. Terms of the Merger.
9.1. Structure of the Merger. At the Effective Date, subject to the
terms and conditions of this Plan, Talbot Bancshares will merge with and into
Shore Bancshares, the separate corporate existence of Talbot Bancshares shall
cease, and Shore Bancshares shall continue as the successor corporation (the
"Successor Bancshares"). From and after the Effective Date, the Merger shall
have the effects set forth in Md. General Corporation law (S) 3-114.
9.2. Conversion of Stock. (a) On the Effective Date, each share of
the Talbot Bancshares Common Stock outstanding immediately prior to the
Effective Date (other than shares ("Dissenters' Shares") with respect to which
dissenter's rights shall have been perfected in accordance with Md. General
Corporation Law (S)(S) 3-201 et seq.), shall, without any
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action on the part of the holder thereof, be canceled and converted into 2.85
shares of Successor Bancshares Common Stock (rounded to the nearest 0.01 share)
(the "Merger Consideration"). There will be no issued and outstanding shares of
preferred stock of Shore Bancshares on the Effective Date of the Merger.
(b) No certificates for fractional shares of Successor Bancshares
Common Stock shall be issued; in lieu thereof, each holder otherwise entitled to
a fractional interest shall receive an amount in cash based on the market value
of Successor Bancshares Common Stock at the Effective Date (determined in good
faith by the Board of Directors of Successor Bancshares ). Each such holder
shall have no other rights with respect to such fractional interest.
(c) Dissenters' Shares shall be paid for in accordance with Md.
General Corporation Law (S)(S) 3-201 et seq. and thereupon shall be cancelled,
retired and cease to exist.
(d) Notwithstanding any provision of this Plan to the contrary, any
Dissenters' Shares, which as of the Effective Date the holder thereof has not
withdrawn or lost any right to such appraisal shall not be exchanged, or
represent a right to receive shares of Successor Bancshares Common Stock, but
the holder shall only be entitled to such rights as are granted by Md. General
Corporation Law (S)(S) 3-201 et seq. If a stockholder of Talbot Bancshares who
demands appraisal of his or her shares under Md. General Corporation Law (S)(S)
3-201 et seq. shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the Effective Date or the
occurrence of such event, whichever last occurs, that stockholder's shares of
the Talbot Bancshares Common Stock shall be exchanged and represent only the
right to receive shares of Successor Bancshares Common Stock as provided in
Section 9.2(a) pursuant to the procedures in Section 9.3. Notwithstanding any
provision of this Plan to the contrary, Shore Bancshares shall have the right to
terminate this Plan and be released from all obligations hereunder if,
immediately prior to the proposed Effective Date, Talbot Bancshares stockholders
have demanded appraisal rights (which demands theretofore have not been
withdrawn) in such numbers so as to jeopardize the accounting treatment
specified in Section 7.9 and Section 8.9 and Xxxxxxx & Company fails or refuses
to deliver a letter to Shore Bancshares or Talbot Bancshares to the effect that
the Merger qualifies for pooling-of-interests accounting treatment, as provided
in Section 7.9 and Section 8.9.
9.3. Exchange Procedure. (a) After the Effective Date, certificates
representing such shares of Common Stock of Talbot Bancshares shall represent
the right to receive certificates representing shares of Common Stock of
Successor Bancshares determined in accordance with Section 9.2; such Talbot
Bancshares certificates at any time after the Effective Date may be exchanged by
the holders thereof for new certificates for the appropriate number of shares of
Common Stock of Successor Bancshares by forwarding such Talbot Bancshares Common
Stock certificates and the letter of transmittal provided by Successor
Bancshares to the transfer agent for Successor Bancshares Common Stock, and the
payment of cash in lieu of fractions, dividends, and other distributions on said
stock may be withheld until the Talbot Bancshares certificates are surrendered
for exchange to the transfer agent for Successor Bancshares Common Stock; when
such new certificates are issued, the holders thereof shall be entitled to be
paid the amount (without any interest thereon) of all such withheld cash in lieu
of
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fractions, dividends, or other distributions which have theretofore become
payable with respect to such shares of Common Stock of Successor Bancshares.
(b) As soon as possible after the Effective Date, the transfer agent
for Successor Bancshares Common Stock shall send or cause to be sent a notice
and transmittal form to each record holder of a certificate theretofore
evidencing shares of the Talbot Bancshares Common Stock.
(c) All shares of Successor Bancshares Common Stock into which shares
of Talbot Bancshares shall have been converted shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Talbot
Bancshares Common Stock.
9.4. Stock Options. (a) At the Effective Date, all options granted
by Talbot Bancshares which are outstanding under all stock option plans
previously adopted by Talbot Bancshares to purchase shares of Talbot Bancshares
Common Stock, which are outstanding and unexercised immediately prior thereto
(each, an "Outstanding Option"), shall be converted as to each whole share
subject to such Outstanding Option into an option (each, an "Exchange Option")
to purchase a number of shares of Successor Bancshares Common Stock equal to the
number of shares of Talbot Bancshares Common Stock which could have been
purchased under the Outstanding Option adjusted for the Merger Consideration,
with the total for each holder's Exchange Options with the same option price and
expiration date rounded down to the next whole share. Promptly after the
Effective Time Successor Bancshares shall file a registration statement on Form
S-8 or another appropriate form to register the shares of Successor Bancshares
Common Stock to be issued in exchange for the Exchange Options under the
Securities Act.
(b) The per share exercise price of each Exchange Option shall be
equal to the price per share set forth in the Outstanding Option adjusted for
the Merger Consideration, rounded up to the nearest whole cent.
(c) The Exchange Option shall otherwise have the same duration and
other terms as the Outstanding Option.
(d) The adjustments provided herein with respect to any options which
are "incentive stock options" (as defined in Section 422 of the Code) shall be
effected in a manner consistent with Section 424(a) of the Code.
9.5. Charter of the Shore Bancshares. The Charter of Successor
Bancshares in the form attached as Exhibit A to the Articles of Merger set forth
in Appendix II shall be the Charter of the Successor Bancshares until thereafter
amended as provided by law.
9.6. By-Laws of the Successor Bancshares. The By-Laws of Successor
Bancshares as amended and restated in the form set forth in Appendix III shall
be the By-Laws of the Successor Bancshares until thereafter amended as provided
by law.
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10. Boards of Directors and Employment Matters. Upon the Effective Date or
as otherwise indicated:
(a) At Effective Date, the Board of Directors of Successor
Bancshares will be as shown on Appendix XIV.
(b) The members the Boards of Directors having board titles and
the persons serving as executive officers of Successor Bancshares at the
Effective Date are listed on Appendix XIV.
(c) The directors, officers, and employees of Centreville Bank
and Talbot Bank will not change as of the Effective Date.
(d) The President and Chief Executive Officer of Successor
Bancshares named in Appendix XIV shall be offered an employment agreement
by Successor Bancshares and Talbot Bank in the form of Appendix XIII with
terms commencing on the Effective Date. The Executive Vice President of
Successor Bancshares named in Appendix XIV shall be offered an employment
agreement by Successor Bancshares and Centreville Bank in the form of
Appendix XIII with terms commencing on the Effective Date. The President
and Chief Executive Officer of Shore Bancshares and Centreville Bank prior
to the Effective Date will execute an agreement in the form of Appendix XV
pursuant to which he agrees that his current employment agreement will
terminate at the Effective Date and that the change in control provisions
therein will not be activated by the Merger and the transactions
contemplated by this Plan.
(e) It is the intention of Shore Bancshares and Talbot
Bancshares that the employee benefit plans and policies of Shore Bancshares
and Talbot Bancshares will become the employee benefit plans and policies
of Successor Bancshares (unless required to continue the qualification of
the plans); it is the intention of Shore Bancshares and Talbot Bancshares
that the employee benefit plans and policies of Centreville Bank and
Talbot Bank will not change at the Effective Date (unless required to
continue the qualification of the plans); however, Successor Bancshares
will review the employee benefit plans and policies of Shore Bancshares,
Talbot Bancshares, Centreville Bank, and Talbot Bank and in its sole
discretion, may amend, freeze, or terminate such employee benefit plans and
policies, merge them together, or continue to maintain them.
11. Indemnification; Directors' and Officers' Insurance. (a) From and
after the Effective Date, Successor Bancshares will indemnify and hold harmless
each present and former director and officer of Talbot Bancshares or the Talbot
Subsidiaries (the "Indemnified Parties"), against any and all costs or expenses
(including reasonable attorneys' fees), judgments, fines, penalties,
settlements, losses, claims, damages or liabilities incurred in connection with
any and all claims, actions, suits, proceedings or investigations, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters arising out of or in connection with such party's position as, or
actions taken as, a director or officer of Talbot Bancshares or the Talbot
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Subsidiaries (collectively, "Claims"), at or prior to the Effective Date,
whether asserted or claimed prior to, at or after the Effective Date, to the
fullest extent permitted by applicable law (and also advance expenses incurred
to the fullest extent permitted by Maryland law and Successor Bancshares'
Charter and By-Laws); provided, however, that Successor Bancshares' obligation
to provide such indemnification shall not apply to any litigation, proceeding or
investigation required to be disclosed pursuant to Section 4.9 that has not been
previously disclosed in writing by Talbot Bancshares, nor to Claims asserted or
claimed more than six years after the Effective Date. Successor Bancshares shall
not have any obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction shall ultimately determine, and such determination
shall have become final and non-appealable, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law or if such obligation is not covered (without considering retention) by the
liability insurance policies contemplated in Section 11(c).
(b) Any Indemnified Party wishing to claim indemnification under
Section 11(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall within 30 days thereof notify Successor Bancshares thereof,
but the failure to so notify shall not relieve Successor Bancshares of any
liability it may have to such Indemnified Party if such failure does not
materially prejudice Successor Bancshares. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Date) (i) Successor Bancshares shall have the right to assume the
defense thereof and Successor Bancshares shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if Successor Bancshares elects not to assume such defense,
or counsel for the Indemnified Parties advises that there are issues which raise
conflicts of interest between Successor Bancshares and the Indemnified Parties,
the Indemnified Parties may retain counsel satisfactory to them, and Successor
Bancshares shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received, (ii) the
Indemnified Parties will cooperate in the defense of any such matter, and (iii)
Successor Bancshares shall not be liable for any settlement effected without its
prior written consent which shall not be unreasonably withheld.
(c) For a period of six years after the Effective Date, Successor
Bancshares shall cause to be maintained in effect an extension of the current
policies of directors' and officers' liability insurance maintained by Shore
Bancshares and Centreville Bank as contemplated by Section 5.4(e) and Talbot
Bancshares and Talbot Bank as contemplated by Section 6.4(e) (provided that
Successor Bancshares may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous in any material respect to the Indemnified Parties) with respect to
matters arising before the Effective Date.
12. Amendment of this Plan. This Plan may be amended at any time prior to
the Effective Date in response to comments of governmental regulatory
authorities, or otherwise; provided, that any such amendment is in writing and
is approved by the Board of Directors of each of the parties hereto.
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13. Abandonment of this Plan; Effect Thereof. Anything herein to the
contrary notwithstanding, and notwithstanding any stockholder vote or approval,
this Plan may be terminated and abandoned:
(a) by mutual consent of the Boards of Directors of Shore
Bancshares and Talbot Bancshares;
(b) by Talbot Bancshares or Shore Bancshares, if its Board of
Directors so determines, in the event of the failure of the stockholders of
Talbot Bancshares or the stockholders of Shore Bancshares to approve this
Plan at the meetings called to consider such approval, unless in each case
the failure of such occurrence shall be due to the failure of the party
seeking to terminate this Plan to perform or observe its agreement set
forth herein to be performed or observed by such party at or before the
Effective Date;
(c) by Talbot Bancshares or Shore Bancshares, if its Board of
Directors so determines, in the event of a material breach by the other
party hereto of any representation, warranty, covenant, or agreement
contained herein which is not cured or not curable within 60 days after
written notice of such breach is given to the party committing such breach
by the other party;
(d) by Talbot Bancshares or Shore Bancshares by written notice
to the other party hereto if prior to March 1, 2001 (i) any approval,
consent, or waiver of any Governmental Entity required to permit
consummation of the transactions contemplated hereby shall have been
denied, (ii) any approval, consent, or waiver of any Governmental Entity
required to permit consummation of the transactions contemplated hereby
shall include any condition or requirement that would (A) result in a
materially adverse effect on Talbot Bancshares or Shore Bancshares, or (B)
so materially and adversely affect the economic or business benefits of the
Merger that Talbot Bancshares, in the sole judgment of Talbot Bancshares,
or Shore Bancshares, in the sole judgment of Shore Bancshares, would not
have entered into this Plan had such conditions or requirements been known
at the date hereof, (iii) any action or proceeding against Talbot
Bancshares or any of the Talbot Subsidiaries or against Shore Bancshares or
any of the Shore Subsidiaries shall be pending which seeks to prevent
consummation of the transactions contemplated by this Plan;
(e) by Talbot Bancshares or Shore Bancshares, by action of the
Board of Directors of either party and the delivery of written notice by
either party to the other, in the event that (i) the Merger is not
consummated by March 1, 2001, unless the failure to so consummate by such
time is due to the breach of any material representation, warranty,
agreement, or covenant contained in this Plan by the party seeking to
terminate, or (ii) if prior to March 1, 2001, any court shall have entered
an order which prohibits consummation of the Merger and the transactions
contemplated by this Plan; or
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(f) by action of the Board of Directors of Shore Bancshares in
their sole discretion if they determine to negotiate a Shore Acquisition
Proposal under Section 5.9 or by action of the Board of Directors of Talbot
Bancshares in their sole discretion if they determine to negotiate a Talbot
Acquisition Proposal under Section 6.9. If this Plan is terminated by the
Board of Directors of Shore Bancshares in order to accept a Shore
Acquisition Proposal under Section 5.9, Shore Bancshares shall be obligated
to pay Talbot Bancshares, within five business days of such termination, a
fee (the "Termination Fee") in cash in an amount equal to $1.5 million,
plus all reasonable expenses, including, without limitation, legal,
accounting, valuation, printing, and tax expenses, incurred by Talbot
Bancshares in connection with the due diligence investigation of Shore
Bancshares, the negotiation and preparation of this Plan, and the
transactions contemplated herein. Notwithstanding, if the Plan is
terminated under Section 5.9, Shore Bancshares shall not be obligated to
pay such Termination Fee if Talbot Bancshares exercises the Stock Option
Agreement granted by Shore Bancshares. If this Plan is terminated by the
Board of Directors of Talbot Bancshares in order to accept a Talbot
Acquisition Proposal under Section 6.9, Talbot Bancshares shall be
obligated to pay Shore Bancshares, within five business days of such
termination, a fee (the "Termination Fee") in cash in an amount equal to
$1.5 million, plus all reasonable expenses, including, without limitation,
legal, accounting, valuation, printing, and tax expenses, incurred by Shore
Bancshares in connection with the due diligence investigation of Talbot
Bancshares, the negotiation and preparation of this Plan, and the
transactions contemplated herein. Notwithstanding, if the Plan is
terminated under Section 6.9, Talbot Bancshares shall not be obligated to
pay such Termination Fee if Shore Bancshares exercises the Stock Option
Agreement granted by Talbot Bancshares.
Except as provided in Section 17, in the event of the termination of this Plan
by either Talbot Bancshares or Shore Bancshares, as provided above, this Plan
shall thereafter become void, and, except as provided in Section 13(f), there
shall be no liability on the part of any party hereto or their respective
officers or directors, except that any such termination shall be without
prejudice to the rights of any party hereto arising out of the willful breach of
any other party of any covenant or willful misrepresentation contained in this
Plan.
14. Expenses. Whether or not the transactions hereunder are consummated,
each party to the Plan shall pay its own expenses relating hereto, including
fees and disbursements of its counsel, accountants, and financial advisor, one
half of filing fees in respect of regulatory applications or registration
statements required in order to consummate the Merger, and one half of the costs
of printing and mailing the Proxy Statement/Prospectus. The foregoing shall not
be construed as a limitation of damages in the event of breach.
15. Notices. All notices, requests, demands, and other communications
under or connected with this Plan shall be in writing, and (a) if to Shore
Bancshares, shall be addressed to Shore Bancshares, Inc., 000 Xxxxx Xxxxxxxx
Xxxxxx, X.X. Xxx 000, Xxxxxxxxxxx, Xxxxxxxx 00000, attention of Xxxxxx X.
Xxxxxx, President and Chief Executive Officer, with a copy to its
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counsel, Xxxxxx, Feinblatt, Rothman, Hoffberger & Xxxxxxxxx, LLC, The Xxxxxxx
Building, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, attention of
Xxxxxxx X. Xxxxxx, Esquire; or (b) if to Talbot Bancshares, shall be addressed
to Talbot Bancshares, Inc., 00 Xxxx Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxx 00000,
attention of X. Xxxxxxxx Xxxxxxxx, President and Chief Executive Officer, with a
copy to its counsel, Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, 0000 Xxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxx 00000-0000, attention of Xxxxx X. Xxxx, Xx., Esquire. Any
such notices, requests, demands, and other communications shall be mailed,
postage prepaid, first class mail, or delivered personally and shall be
sufficient and effective when delivered to or received at the address as
specified. Each of the parties may change the address at which it is to receive
communications by like written notice to the other.
16. Entire Agreement; Effect. Subject to Sections 5.1(b) and 6.1(b), this
Plan (including the financial statements, lists, schedules, and documents
delivered pursuant hereto, which are made a part hereof) is intended by the
parties to and does constitute the entire agreement of the parties with respect
to the transaction contemplated hereunder. This Plan supersedes any and all
prior understandings, including prior letters of intent, and it may not be
changed, waived, discharged, or terminated orally, but only in writing by a
party against which enforcement of the change, waiver, discharge, or termination
is sought.
17. Representations, Warranties, and Agreements. Except as set forth in
this Section 17, all representations, warranties, and agreements of Talbot
Bancshares and Shore Bancshares made in this Plan, or in any instrument
delivered by Talbot Bancshares or Shore Bancshares pursuant to this Plan, shall
expire at the Effective Date. In the event of the consummation of the
transactions contemplated hereby, the agreements contained in or referred to in
Sections 9, 10, and 11 shall survive the Effective Date. In the event of the
termination of this Plan in accordance with its terms, the agreements contained
in or referred to in Sections 5.1(b), 5.5, 5.9, 6.1(b), 6.5, 6.9 13(f), and 14
or in the Stock Option Agreements and the Support Agreements (which agreements
shall only terminate in accordance with their respective terms) shall survive
such termination. Except to the extent that representations, warranties, and
agreements of Talbot Bancshares and Shore Bancshares made in this Plan, or in
any instrument delivered by Talbot Bancshares or Shore Bancshares pursuant to
this Plan, shall expire at the Effective Date, nothing contained herein shall be
construed to limit the liability of a party to another party for damages caused
by a breach of this Plan.
18. Governing Law. This Plan shall be governed by, and shall be
interpreted in accordance with, the laws of the State of Maryland or, to the
extent applicable, the federal laws of the United States.
19. General. The section headings contained in this Plan are for reference
purposes only and shall not affect in any way the meaning or interpretations of
this Plan. This Plan may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Plan shall inure to the benefit of
and be binding upon the parties hereto and their respective successors but shall
not be assigned to and shall not create any rights in favor of any other party.
Any purported assignment in violation of this Section 19 shall be void.
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IN WITNESS WHEREOF, Talbot Bancshares and Shore Bancshares have caused this
Plan to be duly executed by their respective presidents, and witnessed by their
respective secretaries, thereunto duly authorized as of the date first above
written.
WITNESS TALBOT BANCSHARES, INC.
______________________________ By:___________________________________
X. Xxxxxxxx Xxxxxxxx
Secretary President and Chief Executive Officer
WITNESS SHORE BANCSHARES, INC.
______________________________ By:___________________________________
Xxxxxx X. Xxxxxx
Secretary President and Chief Executive Officer
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APPENDIX I
LIST OF INFORMATION TO BE PROVIDED
PURSUANT TO THE PLAN
A. Information to be Provided by Shore Bancshares to Talbot Bancshares.
Section 3.1(a). List of subsidiaries of Shore Bancshares and their places of
incorporation.
Section 3.1(b). Ownership of Shore Subsidiaries, Joint Ventures, and
Partnerships.
Section 3.1(c). Charters and By-Laws of Shore Bancshares and each of the
Shore Subsidiaries.
Section 3.1(d). List of outstanding options, warrants, rights, restricted
stock, or obligations of any kind entitling the holder
thereof to acquire shares of the Common Stock of Shore
Bancshares or outstanding securities or instruments that are
convertible into shares of the Common Stock of Shore
Bancshares.
Section 3.2. Consolidated Financial Statements of Shore Bancshares and
the Shore Subsidiaries at December 31, 1995, 1996, 1997,
1998, and 1999 and for each of the years then ended, as
reported upon by Xxxxxxx & Company, and at March 31, 1999
and 2000 and for each of the three month periods then ended.
Section 3.3. Tax Returns of Shore Bancshares to Federal, State, County,
Municipal, or Foreign Taxing Authorities for the taxable
years December 31, 1995, 1996, 1997, 1998, and 1999.
Section 3.5. Increase of Salaries or Benefits to Directors, Officers, or
Employees since December 31, 1999.
Section 3.7. List of Liens and Encumbrances on Property, Etc.
Section 3.8. Plans, Contracts, and Agreements.
Section 3.9. Litigation, Etc.
Section 3.10. Environmental Matters.
Section 3.12. Pension and Welfare Matters.
Section 3.13. Related Party Transactions.
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Section 3.14. No Conflicts with Other Documents.
Section 3.15 Non Permitted Business and Assets.
Section 3.17. Insurance Policies, including Financial Institutions Bonds.
Section 3.19. Agreement between Shore Bancshares and GM&A.
Section 3.21. Year 2000.
Section 5.4(e). Increases in Employee Compensation or Benefit Levels.
Section 5.4(z)(ii). Capital Expenditures in Excess of $25,000.
Section 5.9. List of Shore Bancshares' loans classified as substandard,
doubtful, or loss; and real estate owned; Shore Bancshares'
Allowance for Possible Losses.
B. Information to be Provided by Talbot Bancshares to Shore Bancshares.
Section 4.1(a). List of subsidiaries of Talbot Bancshares and their places
of incorporation.
Section 4.1(b). Ownership of Talbot Subsidiaries, Joint Ventures, and
Partnerships.
Section 4.1(c). Charters and By-Laws of Talbot Bancshares and each of the
Talbot Subsidiaries.
Section 4.1(d). List of outstanding options, warrants, rights, restricted
stock, or obligations of any kind entitling the holder
thereof to acquire shares of the Common Stock of Talbot
Bancshares or outstanding securities or instruments that are
convertible into shares of the Common Stock of Talbot
Bancshares.
Section 4.2. Consolidated Financial Statements of Talbot Bancshares and
the Talbot Subsidiaries at December 31, 1995, 1996, 1997,
1998, and 1999 and for each of the years then ended, as
reported upon by Xxxxxxx & Company, and at March 31, 1999
and 2000 and for each of the three month periods then ended.
Section 4.3. Tax Returns of Talbot Bancshares to Federal, State, County,
Municipal, or Foreign Taxing Authorities for the taxable
years December 31, 1995, 1996, 1997, 1998, and 1999.
Section 4.5. Increase of Salaries or Benefits to Directors, Officers, or
Employees since December 31, 1999.
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Section 4.7. List of Liens and Encumbrances on Property, Etc.
Section 4.8. Plans, Contracts, and Agreements.
Section 4.9. Litigation, Etc.
Section 4.10. Environmental Matters.
Section 4.12. Pension and Welfare Matters.
Section 4.13. Related Party Transactions.
Section 4.14. No Conflicts with Other Documents.
Section 4.15 Non Permitted Business and Assets.
Section 4.17. Insurance Policies, including Financial Institutions Bonds.
Section 4.19. Agreement between Talbot Bancshares and Xxxxxxxxx.
Section 4.21. Year 2000.
Section 6.4(e). Increases in Employee Compensation or Benefit Levels.
Section 6.4(z)(ii). Capital Expenditures in Excess of $25,000.
Section 6.9. List of Talbot Bancshares' loans classified as substandard,
doubtful, or loss; and real estate owned; Talbot Bancshares'
Allowance for Possible Losses.
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APPENDIX II
FORM OF ARTICLES OF MERGER
BETWEEN
TALBOT BANCSHARES, INC.
(a Maryland Corporation)
AND
SHORE BANCSHARES, INC.
(a Maryland Corporation)
TALBOT BANCSHARES, INC., a corporation duly organized and existing under
the laws of the State of Maryland ("Talbot Bancshares"), and SHORE BANCSHARES,
INC., a corporation duly organized and existing under the laws of the State of
Maryland ("Shore Bancshares"), do hereby certify that:
FIRST: Talbot Bancshares and Shore Bancshares agree to merge.
SECOND: The name and place of incorporation of each party to these Articles
of Merger are Talbot Bancshares, Inc., a Maryland corporation, and Shore
Bancshares, Inc., a Maryland corporation. Shore Bancshares shall survive the
merger and shall continue under the name "Shore Bancshares, Inc." as a
corporation of the State of Maryland.
THIRD: Talbot Bancshares has its principal office in the State of Maryland
in Talbot County and owns an interest in land in the State of Maryland in
_______ County. Shore Bancshares has its principal office in the State of
Maryland in Queen Anne's County and owns an interest in land in the State of
Maryland in _______ County. Pursuant to these Articles of Merger Shore
Bancshares will change its principal office in the State of Maryland to Talbot
County.
FOURTH: The terms and conditions of the transaction set forth in these
Articles of Merger were advised, authorized, and approved by Talbot Bancshares
or Shore Bancshares, respectively, in the manner and by the vote required by its
Charter and the laws of the State of Maryland. The manner of approval was as
follows:
(a) The Board of Directors of Talbot Bancshares at a meeting
held on ______, 2000 adopted resolutions which declared that the proposed
merger was advisable on substantially the terms and conditions set forth or
referred to in the resolutions and directed that the proposed merger be
submitted for consideration at a special meeting of stockholders of Talbot
Bancshares. Notice which stated that a purpose of the special meeting was
to act on the proposed
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merger was given by Talbot Bancshares as required by law. The proposed
merger was approved by the stockholders of Talbot Bancshares at a special
meeting of stockholders held ______, 2000 by the affirmative vote of a
majority of all the votes entitled to be cast on the matter.
(b) The Board of Directors of Shore Bancshares at a meeting held
on ______, 2000 adopted resolutions which declared that the proposed merger
was advisable on substantially the terms and conditions set forth or
referred to in the resolutions and directed that the proposed merger be
submitted for consideration at a special meeting of stockholders of Shore
Bancshares. Notice which stated that a purpose of the special meeting was
to act on the proposed merger was given by Shore Bancshares as required by
law. The proposed merger was approved by the stockholders of Shore
Bancshares at a special meeting of stockholders held ______, 2000 by the
affirmative vote of a majority of all the votes entitled to be cast on the
matter.
FIFTH: The Charter of Shore Bancshares is to be amended and restated as
part of the merger to read as set forth in Exhibit A hereto.
SIXTH: The total number of shares of capital stock of all classes which
Talbot Bancshares or Shore Bancshares, respectively, has authority to issue, the
number of shares of each class which Talbot Bancshares or Shore Bancshares,
respectively, has authority to issue, and the par value of the shares of each
class which Talbot Bancshares or Shore Bancshares, respectively, has authority
to issue are as follows:
(a) The total number of shares of stock of all classes which
Talbot Bancshares has authority to issue is 25,000,000 shares, all of which
shares are now classified as Common Stock (par value $.01 per share). The
aggregate par value of all the shares of stock of all classes of Talbot
Bancshares is $250,000.00.
(b) The total number of shares of stock of all classes which
Shore Bancshares has authority to issue is 10,000,000 shares, all of which
shares are now classified as Common Stock (par value $.01 per share). The
aggregate par value of all the shares of stock of all classes of Shore
Bancshares is $100,000.00.
SEVENTH: The merger changes the authorized stock of Shore Bancshares as
follows:
(a) As of immediately before the merger the total number of
shares of stock of all classes which Shore Bancshares has authority to
issue is 10,000,000 shares, of which no shares are classified as Preferred
Stock and 10,000,000 shares are classified as Common Stock (par value $.01
per share).
(b) As changed by the merger the total number of shares of stock
of all classes which Shore Bancshares has authority to issue is 35,000,000
shares, of which no shares are classified as Preferred Stock and 35,000,000
shares are classified as Common Stock (par value $.01 per share).
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(c) The aggregate par value of all shares of stock of all
classes of Shore Bancshares is $100,000 before the merger and $350,000 as
changed by the merger.
EIGHTH: The manner and basis of converting or exchanging issued stock of
the merging corporations into different stock of a corporation or other
consideration and the treatment of any issued stock of the merging corporations
not to be converted or exchanged are as follows:
(a) Each issued and outstanding share of Common Stock of Shore
Bancshares on the effective date of the merger shall continue, without
change, to be issued and outstanding share of Common Stock of Shore
Bancshares. There will be no issued and outstanding shares of Preferred
Stock of Shore Bancshares on the effective date of the merger.
(b) Each issued and outstanding share of Common Stock of Talbot
Bancshares on the effective date of the merger, shall upon effectiveness
and without further act, be automatically converted into, and become 2.85
shares of Common Stock of Shore Bancshares. Cash will be paid in lieu of
fractional shares at the rate of $_____ per share. There will be no issued
and outstanding shares of Preferred Stock of Talbot Bancshares on the
effective date of the merger.
(c) After the effective date of the merger, certificates
representing shares of Common Stock of Talbot Bancshares shall represent
the right to receive certificates representing shares of Common Stock of
Shore Bancshares; such Talbot Bancshares certificates at any time after the
effective date of the merger may be exchanged by the holders thereof for
new certificates for the appropriate number of shares of Common Stock of
Shore Bancshares by forwarding such Talbot Bancshares Common Stock
certificates and the letter of transmittal provided by Shore Bancshares to
the transfer agent for Shore Bancshares Common Stock, and the payment of
cash in lieu of fractions, dividends, and other distributions on said stock
may be withheld until the Talbot Bancshares certificates are surrendered
for exchange to the transfer agent for Shore Bancshares Common Stock; and
when such new certificates are issued, the holders thereof shall be
entitled to be paid the amount (without any interest thereon) of all such
withheld cash in lieu of fractions, dividends, or other distributions which
have therefore become payable with respect to such shares of Common Stock
of Shore Bancshares.
NINTH: Other provisions necessary to effect the merger are as follows:
(a) In addition to any other purposes and powers set forth
herein, after the effective time of the merger Shore Bancshares shall have
the all of purposes and powers of both Talbot Bancshares and Shore
Bancshares prior to the effective time of the merger.
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(b) The persons named as directors in Exhibit A hereto shall
become the directors of Shore Bancshares at the effective time of the
merger
(c) The By-Laws of Shore Bancshares is to be amended and
restated as a part of the merger to read as set forth in Appendix III to
the Plan and Agreement to Merge dated as of July 25, 2000 between Talbot
Bancshares and Shore Bancshares.
TENTH: The merger shall become effective at _________ _.m. ET on ________,
2000.
IN WITNESS WHEREOF, TALBOT BANCSHARES, INC. and SHORE BANCSHARES, INC. have
caused this Articles of Merger to be signed in their respective names and on
their respective behalves by their respective presidents and witnessed by their
respective secretaries on ____________, 2000.
WITNESS: TALBOT BANCSHARES, INC.
(a Maryland corporation)
___________________________ By:__________________________________________
X. Xxxxxxxx Xxxxxxxx
Secretary President and Chief Executive Officer
WITNESS: SHORE BANCSHARES, INC.
(a Maryland corporation)
___________________________ By:__________________________________________
Xxxxxx X. Xxxxxx
Secretary President and Chief Executive Officer
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THE UNDERSIGNED, President and Chief Executive Officer of TALBOT
BANCSHARES, INC., a Maryland corporation, who executed on behalf of the
Corporation the foregoing Articles of Merger of which this certificate is made a
part, hereby acknowledges in the name and on behalf of said Corporation the
foregoing Articles of Merger to be the corporate act of said Corporation and
hereby certifies that to the best of his knowledge, information and belief the
matters and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
_____________________________________________
X. Xxxxxxxx Xxxxxxxx
President and Chief Executive Officer
THE UNDERSIGNED, President and Chief Executive Officer of SHORE BANCSHARES,
INC., a Maryland corporation, who executed on behalf of the Corporation the
foregoing Articles of Merger of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the foregoing
Articles of Merger to be the corporate act of said Corporation and hereby
certifies that to the best of his knowledge, information and belief the matters
and facts set forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of perjury.
acknowledges in the name and on behalf of said Corporation the foregoing
Articles of Merger to be the corporate act of said Corporation and hereby
certifies that to the best of his knowledge, information and belief the matters
and facts set forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of perjury.
_____________________________________________
Xxxxxx X. Xxxxxx
President and Chief Executive Officer
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Exhibit A
SHORE BANCSHARES, INC.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
FIRST: SHORE BANCSHARES, INC., a Maryland corporation (hereinafter called
the "Corporation"), having its principal office in Centreville, Maryland, hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
SECOND: The name of the Corporation is:
SHORE BANCSHARES, INC.
THIRD: The purposes for which the Corporation is formed are to engage in
lawful act or activities permitted by a corporation organized under the laws of
the State of Maryland.
FOURTH: The present address of the principal office of the Corporation in
this State is 00 Xxxx Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxx 00000.
FIFTH: The name and address of the resident agent of the Corporation in
this State are X. Xxxxxxxx Xxxxxxxx, c/o 00 Xxxx Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxx
00000. Said resident agent is a citizen of the State of Maryland who resides
there.
SIXTH: (a) The total number of shares of stock of all classes which the
Corporation has authority to issue is 35,000,000 shares of capital stock (par
value $.01 per share), amounting in aggregate par value to $350,000.00. All of
such shares are initially classified as "Common Stock". The Board of Directors
may classify and reclassify any unissued shares of capital stock by setting or
changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of such shares of capital stock. A
majority of the entire Board of Directors, without action by the stockholders,
may amend the Charter to increase or decrease the aggregate number of shares of
stock or the number of shares of stock of any class that the Corporation has
authority to issue.
(b) The following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the Common Stock of the
Corporation:
(1) Each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any class of stock hereafter classified or
reclassified, the exclusive voting power for all purposes shall be vested in
the holders of the Common Stock. Shares of Common Stock shall not have
cumulative voting rights.
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(2) Subject to the provisions of law and any preferences of any class
of stock hereafter classified or reclassified, dividends, including
dividends payable in shares of another class of the Corporation's stock, may
be paid ratably on the Common Stock at such time and in such amounts as the
Board of Directors may deem advisable.
(3) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common
Stock shall be entitled, together with the holders of any other class of
stock hereafter classified or reclassified not having a preference on
distributions in the liquidation, dissolution or winding up of the
Corporation, to share ratably in the net assets of the Corporation
remaining, after payment or provision for payment of the debts and other
liabilities of the Corporation and the amount to which the holders of any
class of stock hereafter classified or reclassified having a preference on
distributions in the liquidation, dissolution or winding up of the
Corporation shall be entitled.
(c) Subject to the foregoing, the power of the Board of Directors to
classify and reclassify any of the shares of capital stock shall include,
without limitation, subject to the provisions of the Charter, authority to
classify or reclassify any unissued shares of such stock into a class or classes
of preferred stock, preference stock, special stock or other stock, and to
divide and classify shares of any class into one or more series of such class,
by determining, fixing, or altering one or more of the following:
(1) The distinctive designation of such class or series and the number
of shares to constitute such class or series; provided that, unless
otherwise prohibited by the terms of such or any other class or series, the
number of shares of any class or series may be decreased by the Board of
Directors in connection with any classification or reclassification of
unissued shares and the number of shares of such class or series may be
increased by the Board of Directors in connection with any such
classification or reclassification, and any shares of any class or series
which have been redeemed, purchased, otherwise acquired or converted into
shares of Common Stock or any other class or series shall become part of the
authorized capital stock and be subject to classification and
reclassification as provided in this sub-paragraph.
(2) Whether or not and, if so, the rates, amounts and times at which,
and the conditions under which, dividends shall be payable on shares of such
class or series, whether any such dividends shall rank senior or junior to
or on a parity with the dividends payable on any other class or series of
stock, and the status of any such dividends as cumulative, cumulative to a
limited extent or non-cumulative and as participating or non-participating.
(3) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights.
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(4) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and conditions
thereof, including provision for adjustment of the conversion or exchange
rate in such events or at such times as the Board of Directors shall
determine.
(5) Whether or not shares of such class or series shall be subject to
redemption and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable and
the amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates; and whether or
not there shall be any sinking fund or purchase account in respect thereof,
and if so, the terms thereof.
(6) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary
depending upon whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates, and
whether such rights shall rank senior or junior to or on a parity with such
rights of any other class or series of stock.
(7) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding, upon the payment of
dividends or making of distributions on, or the acquisition of, or the use
of moneys for purchase or redemption of, any stock of the Corporation, or
upon any other action of the Corporation, including action under this sub-
paragraph, and, if so, the terms and conditions thereof.
(8) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such class
or series, not inconsistent with law and the Charter of the Corporation.
(d) For the purposes hereof and of any articles supplementary to the
Charter providing for the classification or reclassification of any shares of
capital stock or of any other Charter document of the Corporation (unless
otherwise provided in any such articles or document), any class or series of
stock of the Corporation shall be deemed to rank:
(1) prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable on liquidation, dissolution
or winding up, as the case may be, in preference or priority to holders of
such other class or series;
(2) on a parity with another class or series either as to dividends or
upon liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation price per share thereof be different from those
of such others, if the holders of such class or series of stock shall be
entitled to receipt of dividends or amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in proportion to their
respective dividend rates or redemption or
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liquidation prices, without preference or priority over the holders of such
other class or series; and
(3) junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series shall be
subject or subordinate to the rights of the holders of such other class or
series in respect of the receipt of dividends or the amounts distributable
upon liquidation, dissolution or winding up, as the case may be.
SEVENTH: The number of Directors of the Corporation shall be not less than
three (3) nor more than twenty-five (25). The number of Directors may be
increased or decreased in accordance with the Bylaws of the Corporation. The
Directors shall be divided into three classes with respect to the time for which
they shall hold office. Directors of Class I shall hold office for one year or
until the first annual meeting of stockholders following their election;
Directors of Class II shall hold office for two years or until the second annual
meeting of stockholders following their election; and Directors of Class III
shall hold office for three years or until the third annual meeting of
stockholders following their election; and in each case until their successors
are elected and qualify. At each future annual meeting of stockholders, the
successors to the Class of Directors whose term shall expire at that time shall
be elected to hold office for a term of three years, so that the term of office
of one Class of Directors shall expire in each year. The provisions of this
Article Seventh may not be amended or modified unless such amendment or
modification is authorized by the Board of Directors and approved by holders of
80% of the stock of the Corporation entitled to vote on the matter. As of the
date hereof, the Directors of the Corporation are:
(1) [Insert names of directors elected to serve until 2001 from
Schedule to Plan]
(2) [Insert names of directors elected to serve until 2002 from
Schedule to Plan]
(3) [Insert names of directors elected to serve until 2003 from
Schedule to Plan]
EIGHTH: (a) The following provisions are hereby adopted for the purpose
of defining, limiting, and regulating the powers of the Corporation and of the
directors and the stockholders:
(1) The Board of Directors is hereby empowered to authorize the
issuance from time to time of shares of its stock of any class, whether now
or hereafter authorized, or securities convertible into shares of its stock
of any class or classes, whether now or hereafter authorized, for such
consideration as may be deemed advisable by the Board of Directors and
without any action by the stockholders.
(2) No holder of any stock or any other securities of the Corporation,
whether now or hereafter authorized, shall have any preemptive right to
subscribe for or purchase any stock or any other securities of the
Corporation other than such,
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if any, as the Board of Directors, in its sole discretion, may determine and
at such price or prices and upon such other terms as the Board of Directors,
in its sole discretion, may fix; and any stock or other securities which the
Board of Directors may determine to offer for subscription may, as the Board
of Directors in its sole discretion shall determine, be offered to the
holders of any class, series or type of stock or other securities at the
time outstanding to the exclusion of the holders of any or all other
classes, series or types of stock or other securities at the time
outstanding.
(3) The Board of Directors of the Corporation shall, consistent with
applicable law, have power in its sole discretion to determine from time to
time in accordance with sound accounting practice or other reasonable
valuation methods what constitutes annual or other net profits, earnings,
surplus or net assets in excess of capital; to fix and vary from time to
time the amount to be reserved as working capital, or determine that
retained earnings or surplus shall remain in the hands of the Corporation;
to set apart out of any funds of the Corporation such reserve or reserves in
such amount or amounts and for such proper purpose or purposes as it shall
determine and to abolish any such reserve or any part thereof; to redeem or
purchase its stock or to distribute and pay distributions or dividends in
stock, cash or other securities or property, out of surplus or any other
funds or amounts legally available therefor, at such times and to the
stockholders of record on such dates as it may, from time to time,
determine; to determine the amount, purpose, time of creation, increase or
decrease, alteration or cancellation of any reserves or charges and the
propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or
discharged); and to determine the fair value and any matters relating to the
acquisition, holding and disposition of any assets by the Corporation.
(4) Notwithstanding any provision of law requiring the authorization
of any action by a greater proportion than a majority of the total number of
shares of all classes of capital stock or of the total number of shares of
any class of capital stock, such action shall be valid and effective if
authorized by the affirmative vote of the holders of a majority of the total
number of shares of all classes outstanding and entitled to vote thereon,
except as otherwise provided in the Charter.
(5) The Corporation shall indemnify (A) its directors and officers,
whether serving the Corporation or at its request any other entity, to the
full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under
the procedures and to the full extent permitted by law and (B) other
employees and agents to such extent as shall be authorized by the Board of
Directors or the Corporation's By-Laws and be permitted by law. The
foregoing rights of indemnification shall not be exclusive of any other
rights to which those seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
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amend from time to time such by-laws, resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be
permitted by law. No amendment of the Charter of the Corporation or repeal
of any of its provisions shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal.
(6) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its
stockholders for money damages. No amendment of the Charter of the
Corporation or repeal of any of its provisions shall limit or eliminate the
limitation on liability provided to directors and officers hereunder with
respect to any act or omission occurring prior to such amendment or repeal.
(7) For any stockholder proposal to be presented in connection with an
annual or special meeting of stockholders of the Corporation, including any
proposal relating to the nomination of a director to be elected to the Board
of Directors of the Corporation, the stockholders must have given timely
written notice thereof in writing to the Secretary of the Corporation in the
manner and containing the information required by the By-Laws. Stockholder
proposals to be presented in connection with a special meeting of
stockholders, including any proposal relating to the nomination of a
director to be elected to the Board of Directors of the Corporation, will be
presented by the Corporation only to the extent required by Section 2-502 of
the Maryland General Corporation Law and the By-Laws.
(8) Notwithstanding any other provision in the charter or by-laws,
each vacancy on the board of directors resulting from (a) an increase in the
size of the board of directors or (b) the death, resignation or removal of a
director may be filled only by the affirmative vote of a majority of the
remaining directors in office, even if the remaining directors do not
constitute a quorum, provided however, that until September 30, 2005 such
directors shall be elected from the directors of the same financial
institution subsidiary in which the vacating director served. Any director
elected to fill a vacancy shall hold office for the remainder of the full
term of the class of directors in which the vacancy occurred and until a
successor is elected and qualifies.
(9) The Directors of the Corporation shall consider all factors they
deem relevant in evaluating any proposed offer for the Corporation or any of
its stock, any proposed merger or consolidation of the Corporation or
subsidiary of the Corporation with or into another entity, any proposal to
purchase or otherwise acquire all or substantially all the assets of the
Corporation or any subsidiary of the Corporation, and any other business
combination (as such term is defined in the Maryland General Corporation
Law). The Directors shall evaluate whether the proposal is in the best
interests of the Corporation and its subsidiaries by
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considering the best interests of the stockholders and other factors the
Directors determine to be relevant, including the social, legal and economic
effects on employees, customers, depositors, and communities served by the
Corporation and any subsidiary of the Corporation. The Directors shall
evaluate the consideration being offered to the stockholders in relation to
the then current market value of the Corporation and its subsidiaries, the
then current market value of the stock of the Corporation or any subsidiary
in a freely negotiated transaction, and the Directors' judgment as to the
future value of the stock of the Corporation as an independent entity.
(10) Until September 30, 2005, without the approval of at lease two-
thirds of the entire Board of Directors of the Corporation, the Corporation
may not (i) merge or consolidate with, transfer all or substantially all of
its assets to, or engage in a share exchange with another entity, (ii) may
not cause any subsidiary bank of the Corporation to merge or consolidate
with, to transfer of all or substantially all of its assets to, or engage in
a share exchange with another entity, or (iii) sell or otherwise dispose of
any stock of any subsidiary bank.
(11) The Corporation reserves the right from time to time to make any
amendments of the Charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly
set forth in the Charter, of any of its outstanding stock by classification,
reclassification or otherwise and any objecting stockholder whose rights may
or shall be thereby substantially adversely affected shall not be entitled
to demand and receive payment of the fair value of his stock; provided,
however, that any amendment to, repeal of or adoption of any provision
inconsistent with Article SEVENTH or with sub-paragraphs (5), (6) (7), (8),
or (10) of this paragraph (a) of this Article EIGHTH or with this sub-
paragraph (11) of this paragraph (a) of this Article EIGHTH must be
authorized by not less than 80% of the aggregate votes entitled to be cast
thereon (considered for this purpose as a single class), by vote at a
meeting or in writing with or without a meeting.
(b) The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of the Charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the General Laws of the State of Maryland now
or hereafter in force.
NINTH: The duration of the Corporation shall be perpetual.
TENTH: (a) The provisions set forth in these Articles of Amendment and
Restatement are all of the provisions of the Charter of the Corporation in
effect upon acceptance of these Articles of Amendment and Restatement (the
"Articles") for record by the State Department of Assessments and Taxation of
Maryland, and upon such acceptance these Articles shall constitute the entire
Charter of the Corporation and supersede all prior Charter papers.
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(b) The foregoing complete Amendment and Restatement of the Charter of the
Corporation includes amendments to the Charter duly advised by the Board of
Directors and approved by the stockholders of the Corporation in the manner
required for a Charter amendment under the Charter and By-laws of the
Corporation and the laws of the State of Maryland.
(c) The Board of Directors of the Corporation at a meeting held on July
25, 2000, adopted a resolution in which was set forth the foregoing complete
Amendment and Restatement of the Articles of Incorporation, declaring that said
Amendment and Restatement were advisable, and directing that they be submitted
to the stockholders of the Corporation for their consideration.
(d) The stockholders of the Corporation approved the complete Amendment
and Restatement of the Articles of Incorporation as hereinabove set forth at a
meeting of the stockholders held on _______, 2000.
* * * * * * * *
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Consent of Resident Agent
THE UNDERSIGNED, hereby consents to act as resident agent in Maryland for
the entity named in the attached instrument.
_______________________________________
Signature
Printed Name: X. Xxxxxxxx Xxxxxxxx
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APPENDIX III
FORM OF SHORE BANCSHARES, INC.
AMENDED AND RESTATED BY-LAWS
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held on a day duly designated by the Board of Directors in
the month of April in each year, for the purpose of electing directors to
succeed those whose terms shall have expired as of the date of such annual
meeting, and for the transaction of such other corporate business as may come
before the meeting.
SECTION 2. Special Meetings. Special meetings of the stockholders may be
called at any time for any purpose or purposes by the Chairman, the President,
or by a majority of the Board of Directors. Subject to the procedures set forth
in Article II, Section 4 and this Section, special meetings of the stockholders
shall be called by the Secretary upon the request in writing of holders of a
majority of all the shares outstanding and entitled to vote on the business to
be transacted at such meeting. Such request shall state the purpose or purposes
of the meeting and the matters proposed to be acted upon at it. The Secretary
shall provide an estimate of the cost of preparing and mailing and, upon payment
of such cost, the notice of the meeting shall be mailed by the Corporation.
Business transacted at all special meetings of stockholders shall be confined to
the purpose or purposes stated in the notice of the meeting. The Board of
Directors shall have the sole power to fix the date and time of the special
meeting. Nominations of persons for election to the Board of Directors and the
proposal of business to be considered by the stockholders may be made at a
special meeting of stockholders (a) only pursuant to the Corporation's notice of
meeting and, (b) in the case of nominations of persons for election to the Board
of Directors, (i) by or at the direction of the Board of Directors or (ii) by
any stockholder of the Corporation (A) who was a stockholder of record at the
time of giving notice provided for in Article II, Section 4, (B) who is entitled
to vote at the meeting and (C) who complied with the notice procedures set forth
in Article II, Section 4.
SECTION 3. Place of Holding Meetings. All meetings of stockholders shall
be held at the principal office of the Corporation or elsewhere in the United
States as designated by the Board of Directors.
SECTION 4. Notice of Meetings; Waiver of Notice. Written notice of each
meeting of the stockholders shall be mailed, postage pre-paid by the Secretary,
to each stockholder entitled to vote thereat at the stockholder's post office
address, as it appears upon the books of the Corporation, at least ten (10) days
but not more than ninety (90) days before, the meeting. Each such notice shall
state the place, day, and hour at which the meeting is to be held and, in the
case of any special meeting, shall state briefly the purpose or purposes
thereof. Notwithstanding the foregoing provisions, each person who is entitled
to notice waives notice if he or she before or
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after the meeting signs a waiver of the notice which is filed with the records
of stockholders' meetings, or is present at the meeting in person or by proxy.
SECTION 5. Quorum. The presence in person or by proxy of the holders of
record of a majority of the shares of the capital stock of the Corporation
issued and outstanding and entitled to vote thereat shall constitute a quorum at
all meetings of the stockholders, except as otherwise provided by law, by the
Charter or by these By-laws. Whether or not a quorum shall be in attendance at
the time for which the meeting shall have been called, the meeting may be
adjourned from time to time by a majority vote of the stockholders present or
represented to a date not more than 120 days after the original date, without
any notice other than by announcement at the meeting. At any adjourned meeting
at which a quorum shall attend, any business may be deferred and transacted
which might have been transacted if the meeting had been held as originally
called.
SECTION 6. Organization. Meetings of stockholders shall be presided over
by the Chairman of the Board of Directors or, if the Chairman is not present,
the President of the Corporation, or if the President is not present, by a Vice
President, or, if none of said officers is present, by a chairman to be elected
at the meeting. The Secretary of the Corporation, or if the Secretary is not
present, any Assistant Secretary shall act as Secretary of such meetings; in the
absence of the Secretary and any Assistant Secretary, the presiding officer may
appoint a person to act as Secretary of the meeting.
SECTION 7. Voting. Unless the Charter provides otherwise, at all meetings
of stockholders, every stockholder entitled to vote thereat shall have one (1)
vote for each share of stock standing in the stockholder's name on the books of
the Corporation on the date for the determination of stockholders entitled to
vote at such meeting. Such vote may be either in person or by proxy appointed
by an instrument in writing subscribed by such stockholder or the stockholder's
duly authorized attorney, bearing a date not more than eleven (11) months prior
to said meeting, unless said instrument provides for a longer period. Such
proxy shall be dated, but need not be sealed, witnessed or acknowledged. All
elections shall be had and all questions shall be decided by a majority of the
votes cast at a duly constituted meeting, except as otherwise provided by law,
in the Charter or by these By-laws. Notwithstanding, a plurality of all the
votes cast at a meeting at which a quorum is present is sufficient to elect a
director.
SECTION 8. Advance Notice Provisions for Business to be Transacted at
Annual Meeting. No business may be transacted at an annual meeting of
stockholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any stockholder of the Corporation (i) who
is stockholder of record on the date of the giving of the notice provided for in
this Section and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section. A stockholder's notice must be delivered
to or mailed and received by the Secretary at the principal executive offices of
the Corporation not
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less than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than 30 days or delayed by more
than 60 days from the anniversary date of the preceding year's annual meeting,
notice by the stockholder must be so delivered not earlier than the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the tenth day following
the day on which public announcement of the date of such meeting is first made.
A stockholder's notice to the Secretary must be in writing and set forth as to
each matter such stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address of such stockholder as they appear on the Corporation's
books and of the beneficial owner, if any, on whose behalf the proposal is made,
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder and
such beneficial owner, (iv) a description of all arrangements or understandings
between such stockholder and any other person or persons (including their names)
in connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (v) a representation
that such stockholder intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting. No business shall be
conducted at the annual meeting of stockholders except business brought before
the annual meeting in accordance with the procedures set forth in Article II,
Section 4 or in this Section, provided, however, that once business has been
properly brought before the annual meeting in accordance with such procedures,
nothing in Article II, Section 4 nor in this Section shall be deemed to preclude
discussion by any stockholder of any such business. If the chairman of an annual
meeting determines that business was not properly brought before the annual
meeting in accordance with the foregoing procedures, the chairman of the meeting
shall declare to the meeting that the business was not properly brought before
the meeting and such business shall not be transacted. No adjournment or
postponement of a meeting of stockholders shall commence a new period for the
giving of notice of a stockholder proposal hereunder.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers. The property and business of the Corporation
shall be managed by the Board of Directors of the Corporation.
SECTION 2. Number of Directors. The Corporation shall have at least one
director. The Corporation shall have the number of directors provided in the
Charter until changed as herein provided. Two-thirds of the entire Board of
Directors may alter the number of directors set by the Charter to not exceeding
25 nor less than the minimum number then permitted herein, but the action may
not affect the tenure of office of any director.
SECTION 3. Election and Term of Office. The Board of Directors shall be
divided into classes as described in the Charter. Each Director shall hold
office until the expiration of the term for which the Director is elected,
except as otherwise stated in these Bylaws, and thereafter until his or her
successor has been elected and qualifies. If the number of directors is
changed,
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any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible, and
any additional director of any class shall, subject to Article II, Section 5,
hold office for a term that shall coincide with the remaining term of that
class, but in no case shall a decrease in the number of directors shorten the
term of any incumbent director. Election of Directors need not be by written
ballot, unless required by these Bylaws.
SECTION 4. Nomination of Directors. Nomination for election of members of
the Board of Directors may be made by the Board of Directors or by any
stockholder of any outstanding class of capital stock of the Corporation
entitled to vote for the election of Directors and who complies with the notice
provisions in this Section. Notice by a stockholder of intention to make any
nominations shall be made in writing and shall be delivered or mailed to the
Secretary at the principal executive offices of the Corporation (a) in the case
of an annual meeting, not less than 120 days nor more than 180 days prior to the
date of the meeting of stockholders called for the election of Directors which,
for purposes of this provision, shall be deemed to be on the same date as the
annual meeting of stockholders for the preceding year; provided, however, that
in the event that the date of the annual meeting is advanced by more than 30
days or delayed by more than 60 days from the anniversary date of the preceding
year's annual meeting, notice by the stockholder must be so delivered not
earlier than the 180th day prior to such annual meeting and not later than the
close of business on the later of the 120th day prior to such annual meeting or
the tenth day following the day on which public announcement of the date of such
annual meeting is first made; and (b) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the tenth day following the day on which notice of the date
of the special meeting was mailed or public announcement of the date of the
special meeting was made, whichever first occurs. Such notification shall
contain the following information (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the number
of shares of capital stock of the Corporation owned by each proposed nominee;
(d) the name and residence address of the notifying stockholder; (e) the number
of shares of capital stock of the Corporation owned by the notifying
stockholder; (f) the consent in writing of the proposed nominee as to the
proposed nominee's name being placed in nomination for Director; (g) a
description of all arrangements or understandings between such notifying
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
notifying stockholder, (h) a representation that such notifying stockholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in its notice; and (i) all information relating to such proposed nominee
that would be required to be disclosed by Regulation 14A under the Securities
Exchange Act of 1934, as amended, and Rule 14a-11 promulgated thereunder,
assuming such provisions would be applicable to the solicitation of proxies for
such proposed nominee. Nominations not made in accordance herewith shall be
disregarded and, upon the chairman's instructions, the teller shall disregard
all votes cast for each such nominee.
SECTION 5. Vacancies; Removal of Director. A vacancy on the Board of
Directors may be filled only in accordance with the provisions of the Charter.
Any director or the entire Board of Directors may be removed only in accordance
with the provisions of the Charter.
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SECTION 6. Place of Meeting. The Board of Directors may hold their
meetings and have one or more offices, and keep the books of the Corporation,
either within or outside the State of Maryland, at such place or places as they
may from time to time determine by resolution or by written consent of all the
directors. The Board of Directors may hold their meetings by conference
telephone or other similar electronic communications equipment in accordance
with the provisions of Maryland General Corporation Law.
SECTION 7. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by resolution of the Board, provided that notice of every resolution
of the Board fixing or changing the time or place for the holding of regular
meetings of the Board shall be mailed to each director at least three (3) days
before the first meeting held in pursuance thereof. The annual meeting of the
Board of Directors shall be held immediately following the annual stockholders'
meeting at which a Board of Directors is elected. Any business may be
transacted at any regular meeting of the Board.
SECTION 8. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by direction of the Chairman, or the President,
and must be called by the Chairman, the President or the Secretary upon written
request of a majority of the Board of Directors, by mailing the same at least
two (2) days prior to the meeting, or by personal delivery, facsimile
transmission, telegraphing or telephoning the same on the day before the
meeting, to each director; but such notice may be waived by any director. A
special meeting of the Board of Directors shall be held on such date and at any
place as may be designated from time to time by the Board of Directors. Unless
otherwise indicated in the notice thereof, any and all business may be
transacted at any special meeting. At any meeting at which every director shall
be present, even though without notice, any business may be transacted and any
director may in writing waive notice of the time, place and objects of any
special meeting.
SECTION 9. Quorum. A majority of the whole number of directors shall
constitute a quorum for the transaction of business at all meetings of the Board
of Directors, but, if at any meeting less than a quorum shall be present, a
majority of those present may adjourn the meeting from time to time, and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law or by the Corporation's Charter or by these By-
laws.
SECTION 10. Compensation of Directors. Directors may receive a fixed sum
and expenses for attendance at regular and special meetings and committee
meetings, or any combination of the foregoing as may be determined from time to
time by the Board of Directors, and nothing contained herein shall be construed
to preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefore.
SECTION 11. Advisory Directors. The Board of Directors may by resolution
appoint advisory directors to the Board of Directors, who may also serve as
directors emeriti, and shall have such authority and receive such compensation
and reimbursement as the Board of Directors shall provide. Advisory directors
or directors emeriti shall not have the authority to participate by vote in the
transaction of business.
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SECTION 12. Committees. The Board of Directors may appoint from among its
members an Executive Committee, an Audit Committee, a Compensation Committee, a
Nominating Committee, and other committees composed of one or more directors and
delegate to these committees any of the powers of the Board of Directors, except
the power to authorize dividends on stock, elect directors, issue stock other
than as provided in the next sentence, recommend to the stockholders any action
which requires stockholder approval, amend these By-Laws, or approve any merger
or share exchange which does not require stockholder approval. If the Board of
Directors has given general authorization for the issuance of stock providing
for or establishing a method or procedure for determining the maximum number of
shares to be issued, a committee of the Board of Directors, in accordance with
that general authorization or any stock option or other plan or program adopted
by the Board of Directors, may authorize or fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors. Until September 30, 2005
the Audit Committee, the Compensation Committee, and the Nominating Committee
shall be composed of an even number of directors of half of whom are also
directors of The Centreville National Bank of Maryland and half of whom are also
directors of The Talbot Bank.
SECTION 13. Committee Procedure. Each committee may fix rules of
procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the act of a majority of
those present at a meeting at which a quorum is present shall be the act of the
committee. The members of a committee present at any meeting, whether or not
they constitute a quorum, may appoint a director to act in the place of an
absent member. Any action required or permitted to be taken at a meeting of a
committee may be taken without a meeting, if an unanimous written consent which
sets forth the action is signed by each member of the committee and filed with
the minutes of the committee.
SECTION 14. Emergency. In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Corporation by its directors and officers as contemplated by the Charter and
these By-Laws, any two or more available members of the then incumbent Executive
Committee shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Corporation in accordance with the
provisions of Article II, Section 13. In the event of the unavailability, at
such time, of a minimum of two members of the then incumbent Executive
Committee, the available directors shall elect an Executive Committee consisting
of any two members of the Board of Directors, whether or not they be officers of
the Corporation, which two members of the Board of Directors, whether or not
they be officers of the Corporation, which two members shall constitute the
Executive Committee for the full conduct and management of the affairs of the
Corporation in accordance with the foregoing provisions of this Section. This
Section shall be subject to implementation by resolution of the Board of
Directors passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
resolutions shall be suspended until it shall be determined by any interim
Executive Committee acting under this Section that it shall be to the advantage
of the
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Corporation to resume the conduct and management of its affairs and business
under all the other provisions of these By-Laws.
ARTICLE III
OFFICERS
SECTION 1. Election, Tenure, and Compensation. The officers of the
Corporation shall be a President, one or more Vice-Presidents (if so elected by
the Board of Directors), a Secretary, and a Treasurer, and such other officers
as the Board of Directors from time to time may consider necessary for the
proper conduct of the business of the Corporation. It may also have, and until
September 30, 2005 shall have, a Chairman of the Board. The Board of Directors
shall designate who shall serve as chief executive officer, who shall have
general supervision of the business and affairs of the Corporation, and may
designate a chief operating officer, who shall have supervision of the
operations of the Corporation. In the absence of any designation the Chairman
of the Board, if there be one, shall serve as chief executive officer and the
President shall serve as chief operating officer. In the absence of the
Chairman of the Board, or if there be none, the President shall be the chief
executive officer. The officers shall be elected annually by the Board of
Directors at its first meeting following the annual meeting of the stockholders.
The Chairman shall be a director and the other officers may, but need not be,
directors. Any two or more of the above officers, except those of President and
Vice President, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity if such
instrument is required by law or by these By-laws to be executed, acknowledged
or verified by any two or more officers. The compensation or salary paid all
officers of the Corporation shall be fixed by resolutions adopted by the Board
of Directors.
Except where otherwise expressly provided in a contract duly authorized by
the Board of Directors, all officers and agents of the Corporation shall be
subject to removal at any time by the affirmative vote of a majority of the
whole Board of Directors, and all officers, agents, and employees, other than
officers appointed by the Board of Directors, shall hold office at the
discretion of the Board of Directors or of the officers appointing them.
SECTION 2. Powers and Duties of the Chairman. The Chairman, if one be
elected, shall preside at all meetings of the stockholders and of the Board of
Directors. Until September 30, 2005 the Chairman of the Board shall be a
director that is also a non-employee director of The Centreville National Bank
of Maryland. The Chairman shall be ex-officio a member of all the standing
committees. The Chairman shall do and perform such other duties as may, from
time to time, be assigned to the Chairman by the Board of Directors.
SECTION 3. Powers and Duties of the President. The President shall be the
chief executive officer of the Corporation and shall have general charge and
control of all its business affairs and properties. The President may sign and
execute all authorized bonds, contracts or other obligations in the name of the
Corporation. The President shall have the general powers and duties of
supervision and management usually vested in the office of President of a
corporation. The President shall do and perform such other duties as may, from
time to time, be
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assigned to the President by the Board of Directors. Until September 30, 2005,
the President shall be the President of The Talbot Bank unless the entire Board
of Directors by two-thirds vote determines otherwise.
SECTION 4. Powers and Duties of the Vice President. The Board of
Directors may elect one or more Vice Presidents. Any Vice President (unless
otherwise provided by resolution of the Board of Directors) may sign and execute
all authorized bonds, contracts, or other obligations in the name of the
Corporation. Each Vice President shall have such other powers and shall perform
such other duties as may be assigned to the Vice President by the Board of
Directors or by the Chairman or the President. In case of the absence or
disability of the President, the duties of that office shall be performed by any
Vice President, and the taking of any action by such Vice President in place of
the President shall be conclusive evidence of the absence or disability of the
President. Until September 30, 2005, the Corporation shall also have an
Executive Vice President, who shall also serve as the Chief Operating Officer,
who shall be the President of The Centreville National Bank of Maryland unless
the entire Board of Directors by two-thirds vote determines otherwise.
SECTION 5. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors and all other notices
required by law or by these By-laws, and in case of the Secretary's absence or
refusal or neglect to do so, any such notice may be given by any person
thereunto directed by the Chairman or the President, or by the directors or
stockholders upon whose written requisition the meeting is called as provided in
these By-laws. The Secretary shall record all the proceedings of the meetings
of the stockholders and of the directors in books provided for that purpose, and
shall perform such other duties as may be assigned to him by the directors, the
Chairman, or the President. The Secretary shall have custody of the seal of the
Corporation and shall affix the same to all instruments requiring it, when
authorized by the Board of Directors, the Chairman, or the President, and attest
the same. In general, the Secretary shall perform all the duties generally
incident to the office of Secretary, subject to the control of the Board of
Directors, the Chairman, and the President.
SECTION 6. Treasurer. The Treasurer shall have custody of all the funds
and securities of the Corporation, and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. The Treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depository or depositories as may be designated by the
Board of Directors.
The Treasurer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements. The
Treasurer shall render to the Chairman, the President and the Board of
Directors, whenever any of them so requests, an account of all transactions as
Treasurer and of the financial condition of the Corporation.
The Treasurer shall give the Corporation a bond, if required by the Board
of Directors, in a sum, and with one or more sureties, satisfactory to the Board
of Directors, for the faithful performance of the duties of the office and for
the restoration to the Corporation in case of the Treasurer's death,
resignation, retirement or removal from office of all books, papers, vouchers,
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moneys, and other properties of whatever kind in the Treasurer's possession or
under the Treasurer's control belonging to the Corporation.
The Treasurer shall perform all the duties generally incident to the office
of the Treasurer, subject to the control of the Board of Directors, the
Chairman, and the President.
SECTION 7. Assistant Secretary. The Board of Directors may appoint an
Assistant Secretary or more than one Assistant Secretary. Each Assistant
Secretary shall (except as otherwise provided by resolution of the Board of
Directors) have power to perform all duties of the Secretary in the absence or
disability of the Secretary and shall have such other powers and shall perform
such other duties as may be assigned by the Board of Directors, the Chairman, or
the President. In case of the absence or disability of the Secretary, the
duties of the office shall be performed by any Assistant Secretary, and the
taking of any action by any such Assistant Secretary in place of the Secretary
shall be conclusive evidence of the absence or disability of the Secretary.
SECTION 8. Assistant Treasurer. The Board of Directors may appoint an
Assistant Treasurer or more than one Assistant Treasurer. Each Assistant
Treasurer shall (except as otherwise provided by resolution of the Board of
Directors) have power to perform all duties of the Treasurer in the absence or
disability of the Treasurer and shall have such other powers and shall perform
such other duties as may be assigned by the Board of Directors, the Chairman or
the President. In case of the absence or disability of the Treasurer, the
duties of the office shall be performed by any Assistant Treasurer, and the
taking of any action by any such Assistant Treasurer in place of the Treasurer
shall be conclusive evidence of the absence or disability of the Treasurer.
ARTICLE IV
CAPITAL STOCK
SECTION 1. Issue of Certificates of Stock. The certificates for shares of
the stock of the Corporation shall be of such form not inconsistent with the
Charter, or its amendments, as shall be approved by the Board of Directors. All
certificates shall be signed by the Chairman, the President or by any Vice-
President and counter-signed by the Secretary, an Assistant Secretary, Treasurer
or Assistant Treasurer, and sealed with the seal of the Corporation. All
certificates for each class of stock shall be consecutively numbered. The name
of the person owning the shares issued and the address of the holder, shall be
entered in the Corporation's books. All certificates surrendered to the
Corporation for transfer shall be canceled and no new certificates representing
the same number of shares shall be issued until the former certificate or
certificates for the same number of shares shall have been so surrendered, and
canceled, unless a certificate of stock be lost or destroyed, in which event
another may be issued in its stead upon proof of such loss or destruction and
the giving of a satisfactory bond of indemnity not exceeding an amount double
the value of the stock. Both such proof and such bond shall be in a form
approved by the general counsel of the Corporation and by the Transfer Agent of
the Corporation and by the Registrar of the stock.
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SECTION 2. Transfer of Shares. Shares of the capital stock of the
Corporation shall be transferred on the books of the Corporation only by the
holder thereof in person or by the holder's attorney upon surrender and
cancellation of certificates for a like number of shares as hereinbefore
provided.
SECTION 3. Registered Stockholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share in the name of any other person, whether or
not it shall have express or other notice thereof, save as expressly provided by
the Laws of Maryland.
SECTION 4. Closing Transfer Books. The Board of Directors may fix the
period, not exceeding twenty (20) days, during which time the books of the
Corporation shall be closed against transfers of stock, or, in lieu thereof, the
directors may fix a date not less than ten (10) days nor more than sixty (60)
days preceding the date of any meeting of stockholders or any dividend payment
date or any date for the allotment of rights, as a record date for the
determination of the stockholders entitled to notice of and to vote at such
meeting or to receive such dividends or rights as the case may be; and only
stockholders of record on such date shall be entitled to notice of and to vote
at such meeting or to receive such dividends or rights as the case may be.
SECTION 5. Lost Stock Certificates. The Board of Directors may determine
the conditions for issuing a new stock certificate in place of one which is
alleged to have been lost, stolen, or destroyed, or the Board of Directors may
delegate such power to any officer or officers of the Corporation. In their
discretion, the Board of Directors or such officer or officers may require the
owner of the certificate to give bond, with sufficient surety, to indemnify the
Corporation against any loss or claim arising as a result of the issuance of a
new certificate. In their discretion, the Board of Directors or such officer or
officers may refuse to issue such new certificate save upon the order of some
court having jurisdiction in the premises.
SECTION 6. Exemption from Control Share Acquisition Statute. The
provisions of Sections 3-701 to 3-709 of the Maryland General Corporation Law
shall not apply to any share of the capital stock of the Corporation. Such
shares of capital stock are exempted from such Sections to the fullest extent
permitted by Maryland law.
ARTICLE V
BANK ACCOUNTS AND LOANS
SECTION 1. Bank Accounts. Such officers or agents of the Corporation as
from time to time shall be designated by the Board of Directors shall have
authority to deposit any funds of the Corporation in such banks or trust
companies as shall from time to time be designated by the Board of Directors and
such officers or agents as from time to time authorized by the Board of
Directors may withdraw any or all of the funds of the Corporation so deposited
in any bank or trust or trust company, upon checks, drafts or other instruments
or orders for the payment of money, drawn against the account or in the name or
behalf of this Corporation, and made or
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signed by such officers or agents; and each bank or trust company with which
funds of the Corporation are so deposited is authorized to accept, honor, cash
and pay, without limit as to amount, all checks, drafts or other instruments or
orders for the payment of money, when drawn, made or signed by officers or
agents so designated by the Board of Directors until written notice of the
revocation of the authority of such officers or agents by the Board of Directors
shall have been received by such bank or trust company. There shall from time to
time be certified to the banks or trust companies in which funds of the
Corporation are deposited, the signature of the officers or agents of the
Corporation so authorized to draw against the same. In the event that the Board
of Directors shall fail to designate the persons by whom checks, drafts and
other instruments or orders for the payment of money shall be signed, as
hereinabove provided in this Section, all of such checks, drafts and other
instruments or orders for the payment of money shall be signed by the Chairman,
the President or a Vice President and counter-signed by the Secretary or
Treasurer or an Assistant Secretary or an Assistant Treasurer of the
Corporation.
SECTION 2. Loans. Such officers or agents of the Corporation as from time
to time shall be designated by the Board of Directors shall have authority to
effect loans, advances or other forms of credit at any time or times for the
Corporation from such banks, trust companies, institutions, corporations, firms
or persons as the Board of Directors shall from time to time designate, and as
security for the repayment of such loans, advances, or other forms of credit to
assign, transfer, endorse, and deliver, either originally or in addition or
substitution, any or all stock, bonds, rights, and interests of any kind in or
to stocks or bonds, certificates of such rights or interests, deposits,
accounts, documents covering merchandise, bills and accounts receivable and
other commercial paper and evidences or debt at any time held by the
Corporation; and for such loans, advances, or other forms of credit to make,
execute and deliver one or more notes, acceptances or written obligations of the
Corporation on such terms, and with such provisions as to the security or sale
or disposition thereof as such officers or agents shall deem proper; and also to
sell to, or discount or rediscount with, such banks, trust companies,
institutions, corporations, firms or persons any and all commercial paper, bills
receivable, acceptances and other instruments and evidences of debt at any time
held by the Corporation, and to that end to endorse, transfer and deliver the
same. There shall from time to time be certified to each bank, trust company,
institution, corporation, firm or person so designated the signature of the
officers or agents so authorized; and each bank, trust company, institution,
corporation, firm or person is authorized to rely upon such certification until
written notice of the revocation by the Board of Directors of the authority of
such officers or agents shall be delivered to such bank, trust company,
institution, corporation, firm or person.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall begin on
the first day of January of each year.
SECTION 2. Notices. Whenever, under the provisions of these By-laws,
notice is required to be given to any director, officer or stockholder, unless
otherwise provided in these By-laws, such notice shall be deemed given if in
writing, and personally delivered, or sent by
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telefax, or telegram, or by mail, by depositing the same in a post office or
letter box, in a postpaid sealed wrapper, addressed to each stockholder, officer
or director, as the case may be, at such address as appears on the books of the
Corporation, or in default of any other address, to such director, officer or
stockholder, at the general post office in the Town of Centreville, Maryland,
and such notice shall be deemed to be given at the time the same is so
personally delivered, telefaxed, telegraphed or so mailed. Any stockholder,
director or officer may waive any notice required to be given under these By-
laws.
SECTION 3. Voting Upon Stocks. Unless otherwise ordered by the Board of
Directors, the President and the Vice President, or any of them, shall have full
power and authority on behalf of the Corporation to attend and to vote and to
grant proxies to be used at any meetings of stockholders of any corporation in
which the Corporation may hold stock. The Board of Directors, however, may by
resolution appoint some other person to vote such shares, in which case such
person shall be entitled to vote such shares upon the production of a certified
copy of such resolution. Until September 30, 2005, any such person voting stock
of a banking institution registered in the name of the Corporation in the
election or removal of directors of such institution must cast votes in favor of
the election or against removal of directors of such institution, unless
otherwise directed by the affirmative vote of not less than two-thirds of the
entire Board of Directors.
ARTICLE VII
AMENDMENT OF BY-LAWS
In accordance with the Charter, these By-Laws may be repealed, altered,
amended or rescinded and new by-laws may be adopted (a) by the stockholders of
the Corporation (considered for this purpose as one class) by the affirmative
vote of not less than a majority of all the votes entitled to be cast by the
outstanding shares of capital stock of the Corporation generally in the election
of directors which are cast on the matter at any meeting of the stockholders
called for that purpose (provided that notice of such proposal is included in
the notice of such meeting) or (b) by the Board of Directors by the affirmative
vote of not less than two-thirds of the Board of Directors at a meeting held in
accordance with the provisions of these By-Laws.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. Definitions. As used in this Article VIII, any word or words
that are defined in Section 2-418 of the Corporations and Associations Article
of the Annotated Code of Maryland (the "Indemnification Section"), as amended
from time to time, shall have the same meaning as provided in the
Indemnification Section.
SECTION 2. Indemnification of Directors and Officers. The Corporation
shall indemnify and advance expenses to a director or officer of the Corporation
in connection with a proceeding to the fullest extent permitted by and in
accordance with the Indemnification Section. Notwithstanding the foregoing, the
Corporation shall be required to indemnify a director or
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officer in connection with a proceeding commenced by such director or officer
against the Corporation or its directors or officers only if the proceeding was
authorized by the Board of Directors.
SECTION 3. Indemnification of Other Agents and Employees. With respect to
an employee or agent, other than a director or officer of the Corporation, the
Corporation may, as determined by and in the discretion of the Board of
Directors of the Corporation, indemnify and advance expenses to such employees
or agents in connection with a proceeding to the extent permitted by and in
accordance with the Indemnification Section.
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APPENDIX IV
FORM OF SHORE BANCSHARES
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Option Agreement") dated as of July 26,
2000, between SHORE BANCSHARES, INC. ("Shore Bancshares"), a Maryland
corporation, and TALBOT BANCSHARES, INC. ("Talbot Bancshares"), a Maryland
corporation, recites and provides:
A. The Board of Directors of Shore Bancshares and Talbot Bancshares have
approved a Plan and Agreement to Merge dated July 25, 2000 (the "Plan")
providing for the merger (the "Merger") of Shore Bancshares and Talbot
Bancshares.
B. As a condition to and as consideration for Talbot Bancshares' entry
into the Plan and to induce such entry, Shore Bancshares has agreed to grant to
Talbot Bancshares the option set forth herein to purchase authorized but
unissued shares of Shore Bancshares Common Stock.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms defined in the Plan and used herein
shall have the same meanings as in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Shore Bancshares hereby grants to Talbot Bancshares an option (the "Option") to
purchase up to 380,912 shares of Shore Bancshares Common Stock at an exercise
price of $14.62 per share payable in cash as provided in Section 4; provided,
however, that in the event Shore Bancshares issues or agrees to issue any shares
of Shore Bancshares Common Stock (other than as permitted under the Plan) at a
price less than $14.62 per share (as adjusted pursuant to Section 6), the
exercise price shall be such lesser price.
3. Exercise of Option. (a) Unless Talbot Bancshares shall have breached
in any material respect any covenant or representation contained in the Plan and
such breach has not been cured, Talbot Bancshares may exercise the Option, in
whole or part, at any time or from time to time if a Purchase Event (as defined
below) shall have occurred and be continuing; provided, that to the extent the
Option shall not have been exercised, it shall terminate and be of no further
force and effect upon the earliest to occur of (i) the Effective Date of the
Merger, or (ii) the termination of the Plan in accordance with the provisions
thereof prior to the occurrence of a Purchase Event (other than as a result of a
willful breach by Shore Bancshares of any Specified Covenant or as a result of
failure of Shore Bancshares' stockholders to approve the Plan by the vote
required under applicable law or under Shore Bancshares' Charter), or (iii) 12
months after termination of the Plan due to a willful breach by Shore Bancshares
of any Specified Covenant or failure of Shore Bancshares' stockholders to
approve the Plan by the vote required under applicable law or under Shore
Bancshares' Charter; provided, however, that any
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purchase of shares upon exercise of the Option shall be subject to compliance
with applicable law, including, without limitation, the Bank Holding Company Act
of 1956, as amended. Any exercise of the Option shall be subject to compliance
with applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Shore Bancshares or The Centreville National Bank of
Maryland ("Centreville Bank"), without having received Talbot Bancshares'
prior written consent, shall have entered into an agreement with any person
(x) to merge or consolidate, or enter into any similar transaction, except
as contemplated in the Plan, (y) to purchase, lease, or otherwise acquire
all or substantially all of the assets of Shore Bancshares or Centreville
Bank, or (z) to purchase or otherwise acquire (including by way of merger,
consolidation, share exchange, or any similar transaction) securities
representing 15% or more of the voting power of Shore Bancshares or
Centreville Bank;
(ii) any person (other than Shore Bancshares or Centreville
Bank in a fiduciary capacity, or Talbot Bancshares or Talbot Bank in a
fiduciary capacity) shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 15% or more of the outstanding shares of
Shore Bancshares Common Stock after the date hereof (the term "beneficial
ownership" for purposes of this Option Agreement having the meaning
assigned thereto in Section 13(d) of the Securities Exchange Act of 1934
(the "Exchange Act") and the regulations promulgated thereunder);
(iii) any person shall have made a bona fide proposal to Shore
Bancshares by public announcement or written communication that is or
becomes the subject of public disclosure to acquire Shore Bancshares or
Centreville Bank by merger, consolidation, purchase of all or substantially
all of its assets, or any other similar transaction, and following such
bona fide proposal the stockholders of Shore Bancshares vote not to adopt
the Plan; or
(iv) Shore Bancshares shall have willfully breached any
Specified Covenant following a bona fide proposal to Shore Bancshares or
Centreville Bank to acquire Shore Bancshares or Centreville Bank by merger,
consolidation, purchase of all or substantially all of its assets, or any
other similar transaction, which breach would entitle Talbot Bancshares to
terminate the Plan (without regard to the cure periods provided for
therein) and such breach shall not have been cured prior to the Notice Date
(as defined below).
If more than one of the transactions giving rise to a Purchase Event under this
Section 3(b) is undertaken or effected, then all such transactions shall give
rise only to one Purchase Event, which Purchase Event shall be deemed continuing
for all purposes hereunder until all such transactions are abandoned. As used
in this Option Agreement, "person" shall have the meanings specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
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(c) In the event Talbot Bancshares wishes to exercise the Option, it
shall send to Shore Bancshares a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise, and (ii) a place and date not earlier
than three business days nor later than 60 business days after the Notice Date
for the closing of such purchase ("Closing Date"); provided, that if prior
notification to or approval of any federal or state regulatory agency is
required in connection with such purchase, Talbot Bancshares shall promptly file
the required notice or application for approval and shall expeditiously process
the same and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which any required notification
period has expired or been terminated or such approval has been obtained and any
requisite waiting period shall have passed.
(d) As used herein, "Specified Covenant" means any covenant made by
Shore Bancshares and contained in Section 5 of the Plan.
4. Payment and Delivery of Certificates. (a) At the closing referred to
in Section 3, Talbot Bancshares shall pay to Shore Bancshares the aggregate
purchase price for the shares of Shore Bancshares Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Shore Bancshares.
(b) At such closing, simultaneously with the delivery of funds as
provided in subsection (a), Shore Bancshares shall deliver to Talbot Bancshares
a certificate or certificates representing the number of shares of Shore
Bancshares Common Stock purchased by Talbot Bancshares, and Talbot Bancshares
shall deliver to Shore Bancshares a letter agreeing that Talbot Bancshares will
not offer to sell or otherwise dispose of such shares in violation of applicable
law or the provisions of this Option Agreement.
(c) Certificates for Shore Bancshares Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN PROVISIONS OF A STOCK OPTION AGREEMENT BETWEEN THE REGISTERED
HOLDER HEREOF AND SHORE BANCSHARES, INC. ("SHORE BANCSHARES") AND TO RESALE
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF SHORE BANCSHARES.
A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY SHORE BANCSHARES OF A WRITTEN REQUEST."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Talbot Bancshares
shall have delivered to Shore Bancshares a copy of a letter from the staff of
the Securities and Exchange Commission, or an opinion of counsel, in form and
substance satisfactory to Shore Bancshares, to the effect that
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such legend is not required for purposes of the Securities Act of 1933, as
amended (the "Securities Act").
5. Representations. Shore Bancshares represents, warrants, and covenants
to Talbot Bancshares as follows:
(a) Shore Bancshares shall at all times maintain sufficient
authorized but unissued shares of Shore Bancshares Common Stock so that the
Option may be exercised without authorization of additional shares of Shore
Bancshares Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part,
of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid, and nonassessable.
6. Adjustment Upon Changes in Capitalization. In the event of any change
in Shore Bancshares Common Stock by reason of stock dividends, split-ups,
consolidation, recapitalizations, combinations, exchanges of shares, or the
like, the type and number of shares subject to the Option, and the purchase
price per share, as the case may be, shall be adjusted appropriately. In the
event that any additional shares of Shore Bancshares Common Stock are issued or
otherwise become outstanding after the date of this Option Agreement (other than
pursuant to this Option Agreement), the number of shares of Shore Bancshares
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of Shore Bancshares Common
Stock then issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 6 shall be
deemed to authorize Shore Bancshares to breach any provision of the Plan.
7. Registration Rights. If requested by Talbot Bancshares, Shore
Bancshares shall as expeditiously as possible file a registration statement on a
form of general use under the Securities Act if necessary in order to permit the
sale or other disposition of the shares of Shore Bancshares Common Stock that
have been acquired upon exercise of the Option in accordance with the intended
method of sale or other disposition requested by Talbot Bancshares. Talbot
Bancshares shall provide all information reasonably requested by Shore
Bancshares for inclusion in any registration statement to be filed hereunder.
Shore Bancshares will use its best efforts to cause such registration statement
first to become effective and then to remain effective for such period not in
excess of 270 days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sales or other
dispositions. Only one registration may be effected under this Section 7 at
Shore Bancshares' expense, and which shall not include underwriting commissions
and the fees and disbursements of Talbot Bancshares' counsel attributable to the
registration of such Shore Bancshares Common Stock. The filing of any
registration statement hereunder may be delayed for such period of time as may
reasonably be required to facilitate any public distribution by Shore Bancshares
of Shore Bancshares Common Stock. If requested by Talbot Bancshares, in
connection with any such registration, Shore Bancshares will become a party to
any underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities, and other agreements customarily included in such underwriting
agreements. Upon receiving any request from Talbot Bancshares or assignee
thereof under this Xxxxxxx 0, Xxxxx
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Xxxxxxxxxx agrees to send a copy thereof to Talbot Bancshares and to any
assignee thereof known to Shore Bancshares, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies.
8. Repurchase of Option at the Election of Talbot Bancshares. (a) At the
request of Talbot Bancshares at any time commencing (i) upon the first
occurrence of a Repurchase Event (as defined below) and ending 18 months
immediately thereafter Shore Bancshares (or any successor entity thereof) shall
repurchase from Talbot Bancshares (I) the Option and (II) all shares of Shore
Bancshares Common Stock purchased by Talbot Bancshares pursuant hereto with
respect to which Talbot Bancshares then has beneficial ownership. The date on
which Talbot Bancshares exercises its rights under this Section 8 is referred to
as the "Section 8 Request Date." Such repurchase shall be at an aggregate price
(the "Section 8 Repurchase Consideration") equal to:
(A) the aggregate Purchase Price paid by Talbot Bancshares for any
shares of Shore Bancshares Common Stock acquired pursuant to the Option
with respect to which Talbot Bancshares then has beneficial ownership;
plus
(B) the excess, if any, of (x) the Applicable Price (as defined
below) as of the Section 8 Request Date for a share of Shore Bancshares
Common Stock over (y) the Purchase Price (subject to adjustment pursuant
to Section 6), multiplied by the number of shares of Shore Bancshares
Common Stock with respect to which the Option has not been exercised;
plus
(C) the excess, if any, of the Applicable Price as of the Section 8
Request Date over the Purchase Price paid (or, in the case of shares of
Shore Bancshares Common Stock with respect to which the Option has been
exercised but the Effective Date has not occurred, payable (subject to
adjustment pursuant to Section 6)) by Talbot Bancshares for each share of
Shore Bancshares Common Stock with respect to which the Option has been
exercised and with respect to which Talbot Bancshares then has beneficial
ownership, multiplied by the number of such shares; plus
(D) the amount of the documented reasonable out-of-pocket expenses
incurred by Talbot Bancshares in connection with the Plan and this Option
Agreement and the transactions contemplated thereby and hereby, including
reasonable accounting, investment banking and legal fees.
(b) If Talbot Bancshares exercises its rights under this Section 8, Shore
Bancshares shall, within 10 business days after the Section 8 Request Date, pay
the Section 8 Repurchase Consideration to Talbot Bancshares in immediately
available funds, and Talbot Bancshares shall surrender to Shore Bancshares the
Option and the certificates evidencing the shares of Shore Bancshares Common
Stock purchased hereunder with respect to which Talbot Bancshares then has
beneficial ownership and Talbot Bancshares shall warrant that it has sole record
and beneficial ownership of such shares and that the same are then free and
clear of all liens, claims, charges and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
approval of the Board of Governors of the Federal Reserve System
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(the "Federal Reserve") or other regulatory authority is required in connection
with the payment of all or any portion of the Section 8 Repurchase
Consideration, Shore Bancshares shall deliver from time to time that portion of
the Section 8 Repurchase Consideration that it is not then so prohibited from
paying and shall promptly provide the required notice or application for
approval and shall expeditiously process the same (and Talbot Bancshares shall
cooperate with Shore Bancshares in the filing of any such notice or application
and the obtaining of any such approval), and the period of time that otherwise
would run pursuant to the preceding sentence for the payment of the portion of
the Section 8 Repurchase Consideration requiring such notification or approval
shall run instead from the date on which, as the case may be, (i) any required
notification period has expired or been terminated or (ii) such approval has
been obtained and, in either event, any requisite waiting period shall have
passed. If the Federal Reserve or any other regulatory authority disapproves of
any part of Shore Bancshares proposed repurchase pursuant to this Section 8,
Shore Bancshares shall promptly give notice of such fact to Talbot Bancshares
and redeliver to Talbot Bancshares the shares issued upon exercise of the
Option, it is then prohibited from repurchasing, and Talbot Bancshares shall
have the right to exercise the Option as to the number of shares issued upon
exercise of the Option for which the Option was exercisable at the Section 8
Request Date less the number of shares as to which payment has been made
pursuant to Section 8(a)(B); provided that if the Option shall have terminated
prior to the date of such notice or shall be scheduled to terminate at any time
before the expiration of a period ending on the thirtieth business day after
such date, Talbot Bancshares shall nonetheless have the right so to exercise the
Option or exercise its rights under Section 3 until the expiration of such
period of 30 business days. Notwithstanding anything herein to the contrary,
Shore Bancshares shall not be obligated to repurchase the Option or any shares
of Shore Bancshares Common Stock pursuant to this Section 8 on more than one
occasion.
(c) For purposes of this Option Agreement, the "Applicable Price," as of
any date, means the highest of (i) the highest price per share at which a Tender
Offer has been made for shares of Shore Bancshares Common Stock after the date
hereof and on or prior to such date, (ii) the price per share to be paid by any
third party for shares of Shore Bancshares Common Stock or the consideration per
share to be received by holders of Shore Bancshares Common Stock, in each case
pursuant to an agreement for a merger or other business combination transaction
with Shore Bancshares entered into on or prior to such date or (iii) the highest
bid price per share of Shore Bancshares Common Stock as quoted on the National
Association of Securities Dealers Automated Quotations System or, if the shares
of Shore Bancshares Common Stock are not quoted thereon, the principal trading
market on which such shares are traded as reported by a recognized source during
the 60 business days preceding such date. If the consideration to be offered,
paid or received pursuant to either of the foregoing clauses (i) or (ii) shall
be other than in cash, the value of such consideration shall be determined in
good faith by an independent nationally recognized investment banking firm
selected by Talbot Bancshares and reasonably acceptable to Shore Bancshares,
which determination shall be conclusive for all purposes of this Option
Agreement.
(d) As used herein, a "Repurchase Event" means the occurrence of any of the
Purchase Events specified in Section 3(b).
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9. Severability. If any term, provision, covenant, or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, and covenants, and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired, or invalidated. If for any
reason such court or regulatory agency determines that the Option will not
permit the holder to acquire the full number of shares of Shore Bancshares
Common Stock provided in Section 2 (as adjusted pursuant to Section 6), it is
the express intention of Shore Bancshares to allow the holder to acquire such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
10. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants, and counsel.
(b) Entire Agreement. Except as otherwise expressly provided herein,
this Option Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred and be
continuing Talbot Bancshares may assign in whole or in part its rights and
obligations hereunder; provided, however, that to the extent required by
applicable regulatory authorities, Talbot Bancshares may not assign its rights
under the Option except in (i) a widely dispersed public distribution, (ii) a
private placement in which no one party acquires the right to purchase in excess
of 2% of the voting shares of Shore Bancshares, (iii) an assignment to a single
party (e.g., a broker or investment banker) for the purpose of conducting a
widely dispersed public distribution on Talbot Bancshares' behalf, or (iv) any
other manner approved by applicable regulatory authorities.
(d) Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the address provided for in or pursuant to Section 15 of the Plan.
(e) Counterparts. This Option Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
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(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
SHORE BANCSHARES, INC.
By:__________________________________________
Xxxxxx X. Xxxxxx
President and Chief Executive Officer
TALBOT BANCSHARES, INC.
By:__________________________________________
X. Xxxxxxxx Xxxxxxxx
President and Chief Executive Officer
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APPENDIX V
FORM OF TALBOT BANCSHARES STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Option Agreement") dated as of July 26,
2000, between TALBOT BANCSHARES, INC. ("Talbot Bancshares"), a Maryland
corporation, and SHORE BANCSHARES, INC. ("Shore Bancshares"), a Maryland
corporation, recites and provides:
A. The Board of Directors of Talbot Bancshares and Shore Bancshares have
approved a Plan and Agreement to Merge dated July 25, 2000 (the "Plan")
providing for the merger (the "Merger") of Talbot Bancshares and Shore
Bancshares.
B. As a condition to and as consideration for Shore Bancshares' entry into
the Plan and to induce such entry, Talbot Bancshares has agreed to grant to
Shore Bancshares the option set forth herein to purchase authorized but unissued
shares of Talbot Bancshares Common Stock.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms defined in the Plan and used herein
shall have the same meanings as in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Talbot Bancshares hereby grants to Shore Bancshares an option (the "Option") to
purchase up to 237,780 shares of Talbot Bancshares Common Stock at an exercise
price of $45.00 per share payable in cash as provided in Section 4; provided,
however, that in the event Talbot Bancshares issues or agrees to issue any
shares of Talbot Bancshares Common Stock (other than as permitted under the
Plan) at a price less than $45.00 per share (as adjusted pursuant to Section 6),
the exercise price shall be such lesser price.
3. Exercise of Option. (a) Unless Shore Bancshares shall have breached
in any material respect any covenant or representation contained in the Plan and
such breach has not been cured, Shore Bancshares may exercise the Option, in
whole or part, at any time or from time to time if a Purchase Event (as defined
below) shall have occurred and be continuing; provided, that to the extent the
Option shall not have been exercised, it shall terminate and be of no further
force and effect upon the earliest to occur of (i) the Effective Date of the
Merger, or (ii) the termination of the Plan in accordance with the provisions
thereof prior to the occurrence of a Purchase Event (other than as a result of a
willful breach by Talbot Bancshares of any Specified Covenant or as a result of
failure of Talbot Bancshares' stockholders to approve the Plan by the vote
required under applicable law or under Talbot Bancshares' Charter), or (iii) 12
months after termination of the Plan due to a willful breach by Talbot
Bancshares of any Specified Covenant or failure of Talbot Bancshares'
stockholders to approve the Plan by the vote required under applicable law or
under Talbot Bancshares' Charter; provided, however, that any purchase of shares
upon exercise of the Option shall be subject to compliance with applicable law,
including, without limitation, the Bank Holding Company Act of 1956, as amended.
Any exercise of the Option shall be subject to compliance with applicable
provisions of law.
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(b) As used herein, a "Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Talbot Bancshares or The Talbot Bank of Easton, Maryland
("Talbot Bank"), without having received Shore Bancshares' prior written
consent, shall have entered into an agreement with any person (x) to merge
or consolidate, or enter into any similar transaction, except as
contemplated in the Plan, (y) to purchase, lease, or otherwise acquire all
or substantially all of the assets of Talbot Bancshares or Talbot Bank, or
(z) to purchase or otherwise acquire (including by way of merger,
consolidation, share exchange, or any similar transaction) securities
representing 15% or more of the voting power of Talbot Bancshares or Talbot
Bank;
(ii) any person (other than Talbot Bancshares or Talbot Bank in
a fiduciary capacity, or Shore Bancshares or Centreville Bank in a
fiduciary capacity) shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 15% or more of the outstanding shares of
Talbot Bancshares Common Stock after the date hereof (the term "beneficial
ownership" for purposes of this Option Agreement having the meaning
assigned thereto in Section 13(d) of the Securities Exchange Act of 1934
(the "Exchange Act") and the regulations promulgated thereunder);
(iii) any person shall have made a bona fide proposal to Talbot
Bancshares by public announcement or written communication that is or
becomes the subject of public disclosure to acquire Talbot Bancshares or
Talbot Bank by merger, consolidation, purchase of all or substantially all
of its assets, or any other similar transaction, and following such bona
fide proposal the stockholders of Talbot Bancshares vote not to adopt the
Plan; or
(iv) Talbot Bancshares shall have willfully breached any
Specified Covenant following a bona fide proposal to Talbot Bancshares or
Talbot Bank to acquire Talbot Bancshares or Talbot Bank by merger,
consolidation, purchase of all or substantially all of its assets, or any
other similar transaction, which breach would entitle Shore Bancshares to
terminate the Plan (without regard to the cure periods provided for
therein) and such breach shall not have been cured prior to the Notice Date
(as defined below).
If more than one of the transactions giving rise to a Purchase Event under this
Section 3(b) is undertaken or effected, then all such transactions shall give
rise only to one Purchase Event, which Purchase Event shall be deemed continuing
for all purposes hereunder until all such transactions are abandoned. As used
in this Option Agreement, "person" shall have the meanings specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event Shore Bancshares wishes to exercise the Option, it
shall send to Talbot Bancshares a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise, and (ii) a place and date not earlier
than three business days nor later than 60 business days after the
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Notice Date for the closing of such purchase ("Closing Date"); provided, that if
prior notification to or approval of any federal or state regulatory agency is
required in connection with such purchase, Shore Bancshares shall promptly file
the required notice or application for approval and shall expeditiously process
the same and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which any required notification
period has expired or been terminated or such approval has been obtained and any
requisite waiting period shall have passed.
(d) As used herein, "Specified Covenant" means any covenant made by
Talbot Bancshares and contained in Section 5 of the Plan.
4. Payment and Delivery of Certificates. (a) At the closing referred to
in Section 3, Shore Bancshares shall pay to Talbot Bancshares the aggregate
purchase price for the shares of Talbot Bancshares Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Talbot Bancshares.
(b) At such closing, simultaneously with the delivery of funds as
provided in subsection (a), Talbot Bancshares shall deliver to Shore Bancshares
a certificate or certificates representing the number of shares of Talbot
Bancshares Common Stock purchased by Shore Bancshares, and Shore Bancshares
shall deliver to Talbot Bancshares a letter agreeing that Shore Bancshares will
not offer to sell or otherwise dispose of such shares in violation of applicable
law or the provisions of this Option Agreement.
(c) Certificates for Talbot Bancshares Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN PROVISIONS OF A STOCK OPTION AGREEMENT BETWEEN THE REGISTERED
HOLDER HEREOF AND TALBOT BANCSHARES, INC. ("TALBOT BANCSHARES") AND TO
RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF TALBOT
BANCSHARES. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY TALBOT BANCSHARES OF A WRITTEN REQUEST."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Shore Bancshares
shall have delivered to Talbot Bancshares a copy of a letter from the staff of
the Securities and Exchange Commission, or an opinion of counsel, in form and
substance satisfactory to Talbot Bancshares, to the effect that such legend is
not required for purposes of the Securities Act of 1933, as amended (the
"Securities Act").
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5. Representations. Talbot Bancshares represents, warrants, and covenants
to Shore Bancshares as follows:
(a) Talbot Bancshares shall at all times maintain sufficient
authorized but unissued shares of Talbot Bancshares Common Stock so that the
Option may be exercised without authorization of additional shares of Talbot
Bancshares Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part,
of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid, and nonassessable.
6. Adjustment Upon Changes in Capitalization. In the event of any change
in Talbot Bancshares Common Stock by reason of stock dividends, split-ups,
consolidation, recapitalizations, combinations, exchanges of shares, or the
like, the type and number of shares subject to the Option, and the purchase
price per share, as the case may be, shall be adjusted appropriately. In the
event that any additional shares of Talbot Bancshares Common Stock are issued or
otherwise become outstanding after the date of this Option Agreement (other than
pursuant to this Option Agreement), the number of shares of Talbot Bancshares
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of Talbot Bancshares Common
Stock then issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 6 shall be
deemed to authorize Talbot Bancshares to breach any provision of the Plan.
7. Registration Rights. If requested by Shore Bancshares, Talbot
Bancshares shall as expeditiously as possible file a registration statement on a
form of general use under the Securities Act if necessary in order to permit the
sale or other disposition of the shares of Talbot Bancshares Common Stock that
have been acquired upon exercise of the Option in accordance with the intended
method of sale or other disposition requested by Shore Bancshares. Shore
Bancshares shall provide all information reasonably requested by Talbot
Bancshares for inclusion in any registration statement to be filed hereunder.
Talbot Bancshares will use its best efforts to cause such registration statement
first to become effective and then to remain effective for such period not in
excess of 270 days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sales or other
dispositions. Only one registration may be effected under this Section 7 at
Talbot Bancshares' expense, and which shall not include underwriting commissions
and the fees and disbursements of Shore Bancshares' counsel attributable to the
registration of such Talbot Bancshares Common Stock. The filing of any
registration statement hereunder may be delayed for such period of time as may
reasonably be required to facilitate any public distribution by Talbot
Bancshares of Talbot Bancshares Common Stock. If requested by Shore Bancshares,
in connection with any such registration, Talbot Bancshares will become a party
to any underwriting agreement relating to the sale of such shares, but only to
the extent of obligating itself in respect of representations, warranties,
indemnities, and other agreements customarily included in such underwriting
agreements. Upon receiving any request from Shore Bancshares or assignee
thereof under this Section 7, Talbot Bancshares agrees to send a copy thereof to
Shore Bancshares and to any assignee thereof known
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to Talbot Bancshares, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies.
8. Repurchase of Option at the Election of Shore Bancshares. (a) At the
request of Shore Bancshares at any time commencing (i) upon the first occurrence
of a Repurchase Event (as defined below) and ending 18 months immediately
thereafter Talbot Bancshares (or any successor entity thereof) shall repurchase
from Shore Bancshares (I) the Option and (II) all shares of Talbot Bancshares
Common Stock purchased by Shore Bancshares pursuant hereto with respect to which
Shore Bancshares then has beneficial ownership. The date on which Shore
Bancshares exercises its rights under this Section 8 is referred to as the
"Section 8 Request Date." Such repurchase shall be at an aggregate price (the
"Section 8 Repurchase Consideration") equal to:
(A) the aggregate Purchase Price paid by Shore Bancshares for any
shares of Talbot Bancshares Common Stock acquired pursuant to the Option
with respect to which Shore Bancshares then has beneficial ownership;
plus
(B) the excess, if any, of (x) the Applicable Price (as defined
below) as of the Section 8 Request Date for a share of Talbot Bancshares
Common Stock over (y) the Purchase Price (subject to adjustment pursuant
to Section 6), multiplied by the number of shares of Talbot Bancshares
Common Stock with respect to which the Option has not been exercised;
plus
(C) the excess, if any, of the Applicable Price as of the Section 8
Request Date over the Purchase Price paid (or, in the case of shares of
Shore Bancshares Common Stock with respect to which the Option has been
exercised but the Effective Date has not occurred, payable (subject to
adjustment pursuant to Section 6)) by Shore Bancshares for each share of
Talbot Bancshares Common Stock with respect to which the Option has been
exercised and with respect to which Shore Bancshares then has beneficial
ownership, multiplied by the number of such shares; plus
(D) the amount of the documented reasonable out-of-pocket expenses
incurred by Shore Bancshares in connection with the Plan and this Option
Agreement and the transactions contemplated thereby and hereby, including
reasonable accounting, investment banking and legal fees.
(b) If Shore Bancshares exercises its rights under this Section 8, Talbot
Bancshares shall, within 10 business days after the Section 8 Request Date, pay
the Section 8 Repurchase Consideration to Shore Bancshares in immediately
available funds, and Shore Bancshares shall surrender to Talbot Bancshares the
Option and the certificates evidencing the shares of Talbot Bancshares Common
Stock purchased hereunder with respect to which Shore Bancshares then has
beneficial ownership and Shore Bancshares shall warrant that it has sole record
and beneficial ownership of such shares and that the same are then free and
clear of all liens, claims, charges and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve") or other regulatory authority is required in connection with the
payment
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of all or any portion of the Section 8 Repurchase Consideration, Talbot
Bancshares shall deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from paying and shall
promptly provide the required notice or application for approval and shall
expeditiously process the same (and Shore Bancshares shall cooperate with Talbot
Bancshares in the filing of any such notice or application and the obtaining of
any such approval), and the period of time that otherwise would run pursuant to
the preceding sentence for the payment of the portion of the Section 8
Repurchase Consideration requiring such notification or approval shall run
instead from the date on which, as the case may be, (i) any required
notification period has expired or been terminated or (ii) such approval has
been obtained and, in either event, any requisite waiting period shall have
passed. If the Federal Reserve or any other regulatory authority disapproves of
any part of Talbot Bancshares proposed repurchase pursuant to this Section 8,
Talbot Bancshares shall promptly give notice of such fact to Shore Bancshares
and redeliver to Shore Bancshares the shares issued upon exercise of the Option
it is then prohibited from repurchasing, and Shore Bancshares shall have the
right to exercise the Option as to the number of shares issued upon exercise of
the Option for which the Option was exercisable at the Section 8 Request Date
less the number of shares as to which payment has been made pursuant to Section
8(a)(B); provided that if the Option shall have terminated prior to the date of
such notice or shall be scheduled to terminate at any time before the expiration
of a period ending on the thirtieth business day after such date, Shore
Bancshares shall nonetheless have the right so to exercise the Option or
exercise its rights under Section 3 until the expiration of such period of 30
business days. Notwithstanding anything herein to the contrary, Talbot
Bancshares shall not be obligated to repurchase the Option or any shares of
Talbot Bancshares Common Stock pursuant to this Section 8 on more than one
occasion.
(c) For purposes of this Option Agreement, the "Applicable Price," as of
any date, means the highest of (i) the highest price per share at which a Tender
Offer has been made for shares of Talbot Bancshares Common Stock after the date
hereof and on or prior to such date, (ii) the price per share to be paid by any
third party for shares of Talbot Bancshares Common Stock or the consideration
per share to be received by holders of Talbot Bancshares Common Stock, in each
case pursuant to an agreement for a merger or other business combination
transaction with Talbot Bancshares entered into on or prior to such date or
(iii) the highest bid price per share of Talbot Bancshares Common Stock as
quoted on the National Association of Securities Dealers Automated Quotations
System or, if the shares of Talbot Bancshares Common Stock are not quoted
thereon, the principal trading market on which such shares are traded as
reported by a recognized source during the 60 business days preceding such date.
If the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Shore Bancshares and reasonably
acceptable to Talbot Bancshares, which determination shall be conclusive for all
purposes of this Option Agreement.
(d) As used herein, a "Repurchase Event" means the occurrence of any of the
Purchase Events specified in Section 3(b).
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9. Severability. If any term, provision, covenant, or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, and covenants, and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired, or invalidated. If for any
reason such court or regulatory agency determines that the Option will not
permit the holder to acquire the full number of shares of Talbot Bancshares
Common Stock provided in Section 2 (as adjusted pursuant to Section 6), it is
the express intention of Talbot Bancshares to allow the holder to acquire such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
10. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants, and counsel.
(b) Entire Agreement. Except as otherwise expressly provided herein,
this Option Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred and be
continuing Shore Bancshares may assign in whole or in part its rights and
obligations hereunder; provided, however, that to the extent required by
applicable regulatory authorities, Shore Bancshares may not assign its rights
under the Option except in (i) a widely dispersed public distribution, (ii) a
private placement in which no one party acquires the right to purchase in excess
of 2% of the voting shares of Talbot Bancshares, (iii) an assignment to a single
party (e.g., a broker or investment banker) for the purpose of conducting a
widely dispersed public distribution on Shore Bancshares' behalf, or (iv) any
other manner approved by applicable regulatory authorities.
(d) Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the address provided for in or pursuant to Section 15 of the Plan.
(e) Counterparts. This Option Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
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(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
TALBOT BANCSHARES, INC.
By:_________________________________________
X. Xxxxxxxx Xxxxxxxx
President and Chief Executive Officer
SHORE BANCSHARES, INC.
By:_________________________________________
Xxxxxx X. Xxxxxx
President and Chief Executive Officer
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APPENDIX VI
MEMORANDUM TO SHORE BANCSHARES PERSONS
DEEMED TO BE AFFILIATED PERSONS
July 25, 2000
This memorandum summarizes certain technical requirements of the federal
securities laws and of the accounting rules relating to treatment as a pooling-
of-interests which will apply following completion of the combination of TALBOT
BANCSHARES, INC. ("Talbot Bancshares") by SHORE BANCSHARES, INC. ("Shore
Bancshares") by effecting the merger of Talbot Bancshares with an into Shore
Bancshares (the "Merger").
Pursuant to the Plan and Agreement to Merge dated as of July 25, 2000 (the
"Plan"), shares of the Common Stock of Shore Bancshares will be issued to the
stockholders of Talbot Bancshares for each issued and outstanding share of
Common Stock of Talbot Bancshares. Shore Bancshares will file a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act")
with the Securities and Exchange Commission (the "SEC") to register shares of
its Common Stock to be issued in connection with the Merger.
Under Section 5.10 of the Plan, Shore Bancshares has agreed to deliver to
Talbot Bancshares written letter agreements (the "Shore Bancshares Support
Agreements") from each of the officers and directors of Shore Bancshares (and
has agreed to use its best efforts to obtain and deliver an Shore Bancshares
Support Agreement from each stockholder of Shore Bancshares who may be deemed to
be an "affiliate" under the rules of the SEC). Under Section 5.11 of the Plan,
Shore Bancshares has agreed to use its best efforts not to permit any of the
directors, officers, employees, stockholders, agents, consultants or other
representatives of Shore Bancshares, The Centreville National Bank of Maryland,
or any of Shore Bancshares' other subsidiaries to take any action that would
preclude Shore Bancshares from treating the Merger as a "pooling-of-interests"
for financial reporting purposes. The purpose of this memorandum is to more
fully describe the sale restrictions imposed by the accounting rules relating to
the treatment of the Merger as a pooling-of-interests.
Restrictions Imposed by Accounting Rules Regarding Treatment as a Pooling-of-
Interests.
In order for the Merger to be treated as a pooling-of-interests for
accounting purposes, affiliates of Talbot Bancshares and affiliates of Shore
Bancshares are required to observe certain restrictions on disposition of their
shares of the Common Stock of Talbot Bancshares and of the Common Stock of Shore
Bancshares. Specifically, such affiliates must agree not to sell, pledge,
transfer or otherwise dispose of any shares of the Common Stock of Talbot
Bancshares or of the Common Stock of Shore Bancshares during the 30-day period
prior to the effective date of the Merger and until after such time as results
covering at least 30 days of operations of Shore Bancshares after the effective
date of the Merger have been published by Shore Bancshares in the form of a
quarterly earnings report, an effective registration statement filed with the
SEC, a
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report to the SEC on Forms 10-K, 10-Q or 8-K, or any other public
issuance which includes such combined results or operations.
To signify your consent to these restrictions a copy of an Undertaking and
Agreement is attached hereto and is to be executed by you (and where any such
shares are owned jointly, by the joint owner or owners) and returned to Shore
Bancshares, Inc., 000 Xxxxx Xxxxxxxx Xxxxxx, X.X. Xxx 000, Xxxxxxxxxxx, Xxxxxxxx
00000, attention of Xxxxxx X. Xxxxxx, President and Chief Executive Officer.
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UNDERTAKING AND AGREEMENT
The undersigned has received a copy of a memorandum dated July 25, 2000
concerning the provisions of certain accounting rules which relate to the Common
Stock of SHORE BANCSHARES, INC. ("Shore Bancshares") in connection with the
Merger of Talbot Bancshares into Shore Bancshares. The undersigned hereby
undertakes and agrees to comply fully with the restrictions on sales of shares
of the Common Stock as outlined in the paragraph entitled "Restrictions Imposed
by Accounting Rules Regarding Treatment as a Pooling-of-Interests."
IN WITNESS WHEREOF, I have hereunto signed my name as of July __, 2000.
________________________, as joint owner
________________________, as joint owner
________________________, as joint owner
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APPENDIX VII
MEMORANDUM TO TALBOT BANCSHARES PERSONS
DEEMED TO BE AFFILIATED PERSONS
July 25, 2000
This memorandum summarizes certain technical requirements of the federal
securities laws and of the accounting rules relating to treatment as a pooling-
of-interests which will apply following completion of the combination of TALBOT
BANCSHARES, INC. ("Talbot Bancshares") by SHORE BANCSHARES, INC. ("Shore
Bancshares") by effecting the merger of Talbot Bancshares with and into Shore
Bancshares (the "Merger").
Pursuant to the Plan and Agreement to Merge dated as of July 25, 2000 (the
"Plan"), shares of the Common Stock of Shore Bancshares will be issued to the
stockholders of Talbot Bancshares for each issued and outstanding share of
Common Stock of Talbot Bancshares. Shore Bancshares will file a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act")
with the Securities and Exchange Commission (the "SEC") to register shares of
its Common Stock to be issued in connection with the Merger.
Under Section 6.10 of the Plan, Talbot Bancshares has agreed to deliver to
Shore Bancshares written letter agreements (the "Talbot Bancshares Support
Agreements") from each of the officers and directors of Talbot Bancshares (and
has agreed to use its best efforts to obtain and deliver an Talbot Bancshares
Support Agreement from each stockholder of Talbot Bancshares who may be deemed
to be an "affiliate" under the rules of the SEC). Under the terms of the Shore
Bancshares Support Agreements, each such officer, director or stockholder is to
acknowledge and agree to abide by all limitations imposed by the Securities Act
and by all rules, regulations and releases promulgated thereunder by the SEC
with respect to the sale or other disposition of the shares of the Common Stock
of Shore Bancshares to be received by such person pursuant to the Plan. Under
Section 6.11 of the Plan, Talbot Bancshares has agreed to use its best efforts
not to permit any of the directors, officers, employees, stockholders, agents,
consultants or other representatives of Talbot Bancshares, The Talbot Bank, or
any of Talbot Bancshares' other subsidiaries to take any action that would
preclude Shore Bancshares from treating the Merger as a "pooling-of-interests"
for financial reporting purposes. The purpose of this memorandum is to more
fully describe the sale restrictions imposed by the Securities Act and by all
rules, regulations and releases promulgated thereunder and the accounting rules
relating to the treatment of the Merger as a pooling-of-interests.
Resale Restrictions Imposed by Subparagraph (d) of SEC Rule 145.
For the one-year period following the effective date of the Merger, a
person who is an affiliate of Talbot Bancshares at the time of the Merger may
dispose of his shares of the Common Stock of Shore Bancshares only pursuant to
SEC Rule 145. The limitations are as follows:
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1. Such sale must be effected (a) in transactions directly
with a market maker or (b) in unsolicited brokerage transactions
(i.e., neither you nor the broker handling the sale of your
shares may solicit a purchaser for the shares being sold). As
there are usually market makers for the Common Stock of Shore
Bancshares, this requirement should not impair your ability to
find a purchaser. In each case it is quite important to let your
broker know that the sale is to be made under SEC Rule 145;
otherwise, compliance with the restrictions will not be assured.
2. The rule also restricts the number of shares which may
be sold during any three-month period. The rule would permit up
to 1% of the outstanding shares of the Common Stock of Shore
Bancshares to be sold by each affiliate during any three-month
period.
3. The rule requires current public information on Shore
Bancshares to be available at the time of your sales. Shore
Bancshares is required by law to file with the SEC reports which
are designed to present on a current basis the affairs of Shore
Bancshares. The filing of these reports will satisfy the current
public information requirements. Since it is possible, however,
that a required filing may be late, at the time of any sale you
should check with the Secretary of Shore Bancshares to ascertain
whether public information on Shore Bancshares is then available.
After the one-year period has run, so long as (a) you are not an affiliate
of Shore Bancshares (that is, not a major stockholder, director, or principal
officer of Shore Bancshares) at the time of the sale, (b) Shore Bancshares
continues to be required to file certain periodic reports with the SEC, and (c)
all such reports required to be filed in the 12 months prior to your sale have
been filed, there will be no restriction on the sale of the shares of the Common
Stock of Shore Bancshares. Prior to a contemplated sale you should check with
the Secretary of Shore Bancshares to determine if requirements (b) and (c) have
been met. In the unlikely event that the three requirements set forth above are
not met at the time of your sale, the procedures for sales consummated before
the end of the one-year period would still apply.
After two years from the Effective Date of the Merger, so long as you are
not, at the time of sale, and have not been during the preceding three months,
an affiliate of Shore Bancshares, you may sell your shares of the Common Stock
of Shore Bancshares with no restrictions.
Restrictions Imposed by Accounting Rules Regarding Treatment as a Pooling-of-
Interests.
In order for the Merger to be treated as a pooling-of-interests for
accounting purposes, affiliates of Shore Bancshares and affiliates of Talbot
Bancshares are required to observe certain restrictions on disposition of their
shares of the Common Stock of Shore Bancshares and of the Common Stock of Talbot
Bancshares. Specifically, such affiliates must agree not to sell, pledge,
transfer or otherwise dispose of any shares of the Common Stock of Shore
Bancshares of the Common Stock of Talbot Bancshares during the 30-day period
prior to the effective date of the Merger and until after such time as results
covering at least 30 days of operations of Shore Bancshares after the effective
date of the Merger have been published by Shore Bancshares in
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the form of a quarterly earnings report, an effective registration statement
filed with the SEC, a report to the SEC on Forms 10-K, 10-Q or 8-K, or any other
public issuance which includes such combined results or operations.
To signify your consent to these restrictions a copy of an Undertaking and
Agreement is attached hereto and is to be executed by you (and where any such
shares are owned jointly, by the joint owner or owners) and returned to TALBOT
BANCSHARES, INC., 00 Xxxx Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxx 00000, attention of X.
Xxxxxxxx Xxxxxxxx, President and Chief Executive Officer.
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UNDERTAKING AND AGREEMENT
The undersigned has received a copy of a memorandum dated July 25, 2000
concerning the provisions of the federal securities laws and certain accounting
rules which relate to the Common Stock of TALBOT BANCSHARES, INC. ("Talbot
Bancshares") and to resales of shares of the Common Stock of Shore Bancshares to
be received by the undersigned in connection with the merger of Talbot
Bancshares with and into Shore Bancshares. The undersigned hereby undertakes to
comply fully with the provisions of the federal securities laws as outlined in
the memorandum and hereby agrees to the additional restrictions on sales of the
Common Stock of Talbot Bancshares and resale of shares of the Common Stock of
Shore Bancshares outlined in the paragraph entitled "Restrictions Imposed by
Accounting Rules Regarding Treatment as a Pooling-of-Interests."
IN WITNESS WHEREOF, I have hereunto signed my name as of July __, 2000.
________________________, as joint owner
________________________, as joint owner
________________________, as joint owner
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APPENDIX VIII
FORM OF SHORE BANCSHARES SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") dated as of July 25, 2000,
between TALBOT BANCSHARES, INC., a Maryland corporation ("Talbot Bancshares"),
and each of the individuals listed on Schedule A attached hereto (collectively,
the "Shore Bancshares Stockholders").
W I T N E S S E T H:
WHEREAS, the Shore Bancshares Stockholders (i) collectively possess
the sole or joint right to vote, or direct the voting of, an aggregate of
___________ shares of common stock, par value $___ per share (the "Shares"), of
Shore Bancshares, Inc., a Maryland corporation ("Shore Bancshares"), which
constitute approximately _____ % of the outstanding capital stock of Shore
Bancshares, and (ii) individually possess the right to vote, or to direct the
voting of, the number of Shares set forth opposite such Shore Bancshares
Stockholder's name on Schedule A hereto; and
WHEREAS, the Shore Bancshares Stockholders (i) collectively possess
the sole or joint power to dispose of, or to direct the disposition of, an
aggregate of ___________ Shares, which constitute approximately _____ % of the
outstanding capital stock of Shore Bancshares, and (ii) individually possess the
power to dispose of, or direct the disposition of, the number of Shares set
forth opposite such Shore Bancshares Stockholder's name on Schedule A hereto;
and
WHEREAS, Talbot Bancshares has entered into a Plan and Agreement to
Merge with Shore Bancshares, dated as of July 25, 2000 (the "Plan"), pursuant to
which Talbot Bancshares would merge with and into Shore Bancshares (the
"Merger"), with shares of the Common Stock of Shore Bancshares to be issued to
the stockholders of Talbot Bancshares; and
WHEREAS, pursuant to Section 5.10 of the Plan, Shore Bancshares has
covenanted to obtain agreements from each of its executive officers and
directors in which the executive officers and directors of Shore Bancshares (in
their capacity as Shore Bancshares Stockholders) and would agree to support the
Merger; and the Shore Bancshares Stockholders have in accordance with such
covenant agreed to support the Merger.
NOW, THEREFORE, to induce Talbot Bancshares to enter into the Plan and
in consideration of the mutual covenants and agreements set forth herein and in
the Plan and the mutual benefits to be derived herefrom and therefrom, the
parties agree as follows:
1. Representations of the Shore Bancshares Stockholders. Each of the
Shore Bancshares Stockholders, severally, and not jointly, represents that:
(a)(1) such Shore Bancshares Stockholder possesses the sole or
joint right to vote, or direct the voting of, all of the Shares set forth
on Schedule A opposite the Shore Bancshares Stockholder's name, (2) such
number of Shares constitutes
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all of the Shares with respect to which the Shore Bancshares Stockholder
possesses the sole or joint right to vote, or direct the voting of, as the
case may be, and (3) except as to Shares held only under a power of
attorney or as guardian or custodian, such Shore Bancshares Stockholder has
good and merchantable title to all of the Shares indicated on said list
opposite the Shore Bancshares Stockholder's name, free of all restrictions
and encumbrances of every kind and character, except as indicated on
Schedule A.
(b)(1) such Shore Bancshares Stockholder possesses the sole or
joint power to dispose of, or direct the disposition of, the Shares set
forth on Schedule A opposite the Shore Bancshares Stockholder's name, (2)
such number of Shares constitutes all of the Shares with respect to which
the Shore Bancshares Stockholder possesses or will possess the sole or
joint power to dispose of or direct the disposition of, and (3) except as
to Shares held only under a power of attorney, such Shore Bancshares
Stockholder has good and merchantable title to all of the Shares indicated
on said list opposite the Shore Bancshares Stockholder's name free of all
restrictions and encumbrances of any kind or character except as indicated
on Schedule A.
(c) such Shore Bancshares Stockholder does not own, of record or
beneficially, any Shares that are not reflected on Schedule A. For the
purposes of this Agreement, beneficial ownership has the meaning set forth
in Rule 13d-3 of the Securities Exchange Act of 1934, as amended.
(d) such Shore Bancshares Stockholder has full right, power, and
authority to enter into, deliver and perform this Agreement; this Agreement
has been duly executed and delivered by such Shore Bancshares Stockholder;
and this Agreement constitutes the legal, valid, and binding obligation of
the Shore Bancshares Stockholder, and is enforceable in accordance with its
terms.
2. Covenants of the Shore Bancshares Stockholders. Each of the Shore
Bancshares Stockholders, severally and not jointly, covenants as follows:
(a) Restrictions on Transfer. With respect to Shares listed on
Schedule A, during the term of this Agreement, such Shore Bancshares
Stockholder shall not voluntarily pledge, hypothecate, grant a security
interest in, sell, transfer, or otherwise dispose of or encumber any of
such Shares and will not enter into any agreement, arrangement, or
understanding (other than a proxy for the purpose of voting his or her
Shares in accordance with Subparagraph 2(c) hereof) which would, during
that term (i) restrict, (ii) establish a right of first refusal to, or
(iii) otherwise relate to the transfer or voting of such Shares; provided,
however, this restriction shall not apply to a transfer of any of the
Shares by the Shore Bancshares Stockholder to his or her spouse, children,
or grandchildren, subject to the conditions that any transferee, recipient,
or custodian of any such transferee or recipient must execute an agreement
substantially in the form of this Agreement
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in a form satisfactory to Talbot Bancshares, and Schedule A hereto may be
revised by Talbot Bancshares to reflect such transfer.
(b) Other Restrictions. During the term of this Agreement, such
Shore Bancshares Stockholder, as a Shore Bancshares Stockholder, shall not,
directly or indirectly, solicit, initiate, or encourage inquiries or
proposals from, or participate in any discussions or negotiations with, or
provide any information to, any individual, corporation, partnership, or
other person, entity, or group (other than Talbot Bancshares, any of its
subsidiaries, and their respective officers, employees, representatives,
and agents) concerning any sale of assets, sale of shares of capital stock,
merger, consolidation, share exchange, or similar transactions involving
Shore Bancshares. Such Shore Bancshares Stockholder shall promptly advise
Talbot Bancshares of, and communicate to Talbot Bancshares the terms of,
any such inquiry or proposal addressed either to such Shore Bancshares
Stockholder or to Shore Bancshares that such Shore Bancshares Stockholder
receives or of which such Shore Bancshares Stockholder has knowledge.
(c) Merger. With respect to the Shares listed on Schedule A
pursuant to Subparagraph 1(a) hereof, each of the Shore Bancshares
Stockholders shall vote such Shares to ratify and confirm the Plan and the
Merger and the transactions contemplated thereby. Each of the Shore
Bancshares Stockholders, as a Shore Bancshares Stockholder, further agrees
to use all commercially reasonable efforts to cause the Merger to be
effected.
(d) Additional Shares. The provisions of subparagraphs (a) and
(c) above shall apply to all Shares currently owned and hereafter acquired,
of record or beneficially, by each of the Shore Bancshares Stockholders.
3. Termination. This Agreement shall terminate upon the termination of the
Plan.
4. Governing Law. This Agreement shall in all respects be governed by and
construed under the laws of Maryland, all rights and remedies being governed by
such laws.
5. Benefit of Agreement. This Agreement shall be binding upon and inure to
the benefit of, and shall be enforceable by, the parties hereto and their
respective personal representatives, successors, and assigns, except that
neither party may transfer or assign any of its respective rights or obligations
hereunder without the prior written consent of the other party or, if by Talbot
Bancshares, in accordance with the Plan.
6. Counterparts. For convenience of the parties hereto, this Agreement may
be executed in several counterparts, each of which shall be deemed an original,
all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, Talbot Bancshares and the Shore Bancshares
Stockholders have caused this Agreement to be duly executed as of the day and
year first above written.
TALBOT BANCSHARES, INC.
By:_____________________________________
X. Xxxxxxxx Xxxxxxxx
President and Chief Executive Officer
SHORE BANCSHARES STOCKHOLDERS:
________________________________________
________________________________________
________________________________________
________________________________________
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SCHEDULE A
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Name Number of Shares Number of Shares Number of Shares As Number of Shares As Encumbrance
As to which As to which to which Holder Has to Which Holder Has
Holder has Sole Holder has Joint Direct or Indirect Sole or Shared Power
Power to Vote Power to Vote Control of Power to to Dispose or Direct
Vote Disposition
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* Pending confirmation on __________.
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APPENDIX IX
FORM OF TALBOT BANCSHARES SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") dated as of July 25, 2000,
between SHORE BANCSHARES, INC., a Maryland corporation ("Shore Bancshares"), and
each of the individuals listed on Schedule A attached hereto (collectively, the
"Talbot Bancshares Stockholders").
W I T N E S S E T H:
WHEREAS, the Talbot Bancshares Stockholders (i) collectively possess
the sole or joint right to vote, or direct the voting of, an aggregate of
___________ shares of common stock, par value $___ per share (the "Shares"), of
Talbot Bancshares, Inc., a Maryland corporation ("Talbot Bancshares"), which
constitute approximately _____ % of the outstanding capital stock of Talbot
Bancshares, and (ii) individually possess the right to vote, or to direct the
voting of, the number of Shares set forth opposite such Talbot Bancshares
Stockholder's name on Schedule A hereto; and
WHEREAS, the Talbot Bancshares Stockholders (i) collectively possess
the sole or joint power to dispose of, or to direct the disposition of, an
aggregate of ___________ Shares, which constitute approximately _____ % of the
outstanding capital stock of Talbot Bancshares, and (ii) individually possess
the power to dispose of, or direct the disposition of, the number of Shares set
forth opposite such Talbot Bancshares Stockholder's name on Schedule A hereto;
and
WHEREAS, Shore Bancshares has entered into a Plan and Agreement to
Merge with Talbot Bancshares, dated as of July 25, 2000 (the "Plan"), pursuant
to which Talbot Bancshares would merge with and into Shore Bancshares (the
"Merger"), with shares of the Common Stock of Shore Bancshares to be issued to
the stockholders of Talbot Bancshares; and
WHEREAS, pursuant to Section 6.10 of the Plan, Talbot Bancshares has
covenanted to obtain agreements from each of its executive officers and
directors in which the executive officers and directors of Talbot Bancshares (in
their capacity as Talbot Bancshares Stockholders) and would agree to support the
Merger; and the Talbot Bancshares Stockholders have in accordance with such
covenant agreed to support the Merger.
NOW, THEREFORE, to induce Shore Bancshares to enter into the Plan and
in consideration of the mutual covenants and agreements set forth herein and in
the Plan and the mutual benefits to be derived herefrom and therefrom, the
parties agree as follows:
1. Representations of the Talbot Bancshares Stockholders. Each of
the Talbot Bancshares Stockholders, severally, and not jointly, represents that:
(a)(1) such Talbot Bancshares Stockholder possesses the sole or
joint right to vote, or direct the voting of, all of the Shares set forth
on Schedule A opposite the Talbot Bancshares Stockholder's name, (2) such
number of Shares
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constitutes all of the Shares with respect to which the Talbot Bancshares
Stockholder possesses the sole or joint right to vote, or direct the voting
of, as the case may be, and (3) except as to Shares held only under a power
of attorney or as guardian or custodian, such Talbot Bancshares Stockholder
has good and merchantable title to all of the Shares indicated on said list
opposite the Talbot Bancshares Stockholder's name, free of all restrictions
and encumbrances of every kind and character, except as indicated on
Schedule A.
(b)(1) such Talbot Bancshares Stockholder possesses the sole or
joint power to dispose of, or direct the disposition of, the Shares set
forth on Schedule A opposite the Talbot Bancshares Stockholder's name, (2)
such number of Shares constitutes all of the Shares with respect to which
the Talbot Bancshares Stockholder possesses or will possess the sole or
joint power to dispose of or direct the disposition of, and (3) except as
to Shares held only under a power of attorney, such Talbot Bancshares
Stockholder has good and merchantable title to all of the Shares indicated
on said list opposite the Talbot Bancshares Stockholder's name free of all
restrictions and encumbrances of any kind or character except as indicated
on Schedule A.
(c) such Talbot Bancshares Stockholder does not own, of record
or beneficially, any Shares that are not reflected on Schedule A. For the
purposes of this Agreement, beneficial ownership has the meaning set forth
in Rule 13d-3 of the Securities Exchange Act of 1934, as amended.
(d) such Talbot Bancshares Stockholder has full right, power,
and authority to enter into, deliver and perform this Agreement; this
Agreement has been duly executed and delivered by such Talbot Bancshares
Stockholder; and this Agreement constitutes the legal, valid, and binding
obligation of the Talbot Bancshares Stockholder, and is enforceable in
accordance with its terms.
2. Covenants of the Talbot Bancshares Stockholders. Each of the Talbot
Bancshares Stockholders, severally and not jointly, covenants as follows:
(a) Restrictions on Transfer. With respect to Shares listed on
Schedule A, during the term of this Agreement, such Talbot Bancshares
Stockholder shall not voluntarily pledge, hypothecate, grant a security
interest in, sell, transfer, or otherwise dispose of or encumber any of
such Shares and will not enter into any agreement, arrangement, or
understanding (other than a proxy for the purpose of voting his or her
Shares in accordance with Subparagraph 2(c) hereof) which would, during
that term (i) restrict, (ii) establish a right of first refusal to, or
(iii) otherwise relate to the transfer or voting of such Shares; provided,
however, this restriction shall not apply to a transfer of any of the
Shares by the Talbot Bancshares Stockholder to his or her spouse, children,
or grandchildren, subject to the conditions that any transferee, recipient,
or custodian of any such transferee or recipient must execute an agreement
substantially in the form of this Agreement
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in a form satisfactory to Shore Bancshares, and Schedule A hereto may be
revised by Shore Bancshares to reflect such transfer.
(b) Other Restrictions. During the term of this Agreement, such
Talbot Bancshares Stockholder, as a Talbot Bancshares Stockholder, shall
not, directly or indirectly, solicit, initiate, or encourage inquiries or
proposals from, or participate in any discussions or negotiations with, or
provide any information to, any individual, corporation, partnership, or
other person, entity, or group (other than Shore Bancshares, any of its
subsidiaries, and their respective officers, employees, representatives,
and agents) concerning any sale of assets, sale of shares of capital stock,
merger, consolidation, share exchange, or similar transactions involving
Talbot Bancshares. Such Talbot Bancshares Stockholder shall promptly
advise Shore Bancshares of, and communicate to Shore Bancshares the terms
of, any such inquiry or proposal addressed either to such Talbot Bancshares
Stockholder or to Talbot Bancshares that such Talbot Bancshares Stockholder
receives or of which such Talbot Bancshares Stockholder has knowledge.
(c) Merger. With respect to the Shares listed on Schedule A
pursuant to Subparagraph 1(a) hereof, each of the Talbot Bancshares
Stockholders shall vote such Shares to ratify and confirm the Plan and the
Merger and the transactions contemplated thereby. Each of the Talbot
Bancshares Stockholders, as a Talbot Bancshares Stockholder, further agrees
to use all commercially reasonable efforts to cause the Merger to be
effected.
(d) Additional Shares. The provisions of subparagraphs (a) and
(c) above shall apply to all Shares currently owned and hereafter acquired,
of record or beneficially, by each of the Talbot Bancshares Stockholders.
3. Termination. This Agreement shall terminate upon the termination of the
Plan.
4. Governing Law. This Agreement shall in all respects be governed by and
construed under the laws of Maryland, all rights and remedies being governed by
such laws.
5. Benefit of Agreement. This Agreement shall be binding upon and inure to
the benefit of, and shall be enforceable by, the parties hereto and their
respective personal representatives, successors, and assigns, except that
neither party may transfer or assign any of its respective rights or obligations
hereunder without the prior written consent of the other party or, if by Shore
Bancshares, in accordance with the Plan.
6. Counterparts. For convenience of the parties hereto, this Agreement may
be executed in several counterparts, each of which shall be deemed an original,
all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, Shore Bancshares and the Talbot Bancshares
Stockholders have caused this Agreement to be duly executed as of the day and
year first above written.
SHORE BANCSHARES, INC.
By:____________________________________
Xxxxxx X. Xxxxxx
President and Chief Executive Officer
TALBOT BANCSHARES STOCKHOLDERS:
_______________________________________
_______________________________________
_______________________________________
_______________________________________
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SCHEDULE A
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Name Number of Shares Number of Shares Number of Shares As Number of Shares As Encumbrance
As to which As to which to which Holder Has to Which Holder Has
Holder has Sole Holder has Joint Direct or Indirect Sole or Shared Power
Power to Vote Power to Vote Control of Power to to Dispose or Direct
Vote Disposition
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* Pending confirmation on __________.
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APPENDIX X
FORM OF OPINION OF TAX COUNSEL
(1) The transfer of all of the assets of Talbot Bancshares to Shore
Bancshares, and the assumption by Shore Bancshares of the liabilities of Talbot
Bancshares pursuant to the terms of the Plan, will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Code. Shore Bancshares and
Talbot Bancshares will each be a "party to the reorganization" within the
meaning of Section 368(b) of the Code.
(2) A holder of Talbot Bancshares Common Stock who receives solely
shares of Shore Bancshares Common Stock in exchange for his Talbot Bancshares
Common Stock (including fractional shares of Shore Bancshares Common Stock
deemed issued as described below) will not recognize any gain or loss upon the
exchange.
(3) A holder of Talbot Bancshares Common Stock who receives cash in
lieu of a fractional share of Shore Bancshares Common Stock will be treated as
if he received a fractional share of Shore Bancshares Common Stock pursuant to
the Merger and Shore Bancshares then redeemed such fractional share for the cash
received. Such a holder will recognize capital gain or loss on the constructive
redemption of the fractional share in an amount equal to the difference between
the cash received and the adjusted basis of the fractional share.
(4) The basis of the Shore Bancshares Common Stock received by a
Talbot Bancshares stockholder (including fractional shares of Shore Bancshares
Common Stock deemed issued as described above) will be the same as the basis of
the Talbot Bancshares Common Stock surrendered in exchange therefor.
(5) The holding period of the Shore Bancshares Common Stock received
by the Talbot Bancshares stockholders will include the period during which the
Talbot Bancshares Common Stock surrendered in exchange therefor was held,
provided that the Talbot Bancshares Common Stock is held as a capital asset in
the hands of the Talbot Bancshares stockholders on the date of the exchange.
(6) No gain or loss will be recognized by Talbot Bancshares upon the
transfer of all of its assets to Shore Bancshares in exchange for shares of the
Common Stock of Shore Bancshares and the assumption by Shore Bancshares of the
liabilities of Talbot Bancshares.
(7) No gain or loss will be recognized by Shore Bancshares upon the
receipt by Shore Bancshares of all of the assets of Talbot Bancshares in
exchange for shares of the Common Stock of Shore Bancshares and the assumption
by Shore Bancshares of the liabilities of Talbot Bancshares.
(8) The basis of each asset of Talbot Bancshares in the hands of
Shore Bancshares will be the same as the basis of such asset in the hands of
Talbot Bancshares
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immediately prior to the Merger; the holding period of each such asset in the
hands of Shore Bancshares will include the periods during which such asset was
held by Talbot Bancshares.
(9) The accumulated earnings and profits of Talbot Bancshares on the
Effective Date will become the accumulated earnings and profits of Shore
Bancshares and will be available for subsequent distributions of dividends
within the meaning of Section 316 of the Code.
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APPENDIX XI
FORM OF OPINION OF COUNSEL TO SHORE BANCSHARES
(a) Shore Bancshares has been duly organized and is validly existing
as a corporation under the laws of the State of Maryland, and Centreville Bank
has been duly organized and is validly existing as a national banking
association under the laws of the United States.
(b) The execution and delivery of the Plan and the Stock Option
Agreement by Shore Bancshares and the consummation by Shore Bancshares of the
transactions provided for therein have been duly authorized by all requisite
corporate and stockholder action on the part of Shore Bancshares. Shore
Bancshares has the corporate power and corporate authority to execute and
deliver the Plan and the Stock Option Agreement and to consummate the
transactions contemplated thereby.
(c) The Plan and the Stock Option Agreement have been executed and
delivered by Shore Bancshares and are valid and binding obligations of Shore
Bancshares, enforceable against Shore Bancshares in accordance with their terms,
except to the extent that enforcement thereof may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization, receivership, conservatorship or other
similar laws now or hereinafter in effect relating to or affecting the
enforcement of creditors' rights generally or the rights of creditors of insured
depository institutions or their holding companies and (ii) general principles
of equity, regardless of whether such enforceability is considered in a
proceeding at law or in equity.
(d) The execution and delivery and performance by Shore Bancshares of
the Plan and the Stock Option Agreement do not violate the Charter or By-Laws of
Shore Bancshares.
(e) No consent or approval of, or other action by or filing with, any
court or administrative or governmental body which has not been obtained, taken
or made is required under the Subject Laws (as defined below), or any court
order or judgment specifically applicable to Shore Bancshares and actually known
to such counsel, for Shore Bancshares to execute and deliver the Plan and the
Stock Option Agreement and to consummate the transactions provided for therein.
Such counsel need express no opinion, however, as to any such consent, approval,
action or filing which may be required as the result of Talbot Bancshares'
involvement in the transactions contemplated by the Plan and the Stock Option
Agreement because of such entities' legal or regulatory status or because of
other facts specifically pertaining to Talbot Bancshares.
(f) Assuming due authorization of the Merger by Talbot Bancshares and
the Talbot Bancshares stockholders, upon the filing of an Articles of Merger
with the Maryland State Department of Assessments and Taxation in accordance
with the Plan, the Merger will be effective in accordance with the laws of the
State of Maryland.
(g) The Proxy Statement/Prospectus, insofar as it constituted a proxy
statement for the special meeting (the "Special Meeting") of Shore Bancshares'
stockholders held on
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_____________, 2000, as of the date thereof, complied as to form in all material
respects to the requirements of the Exchange Act, and the rules and regulations
promulgated thereunder, except that such counsel need express no opinion as to
(i) the financial statements, schedules and other financial, statistical and
tabular data included in or incorporated into the Proxy Statement/Prospectus,
(ii) any document incorporated by reference into the Proxy Statement/Prospectus,
(iii) the exhibits to any document incorporated by reference into the Proxy
Statement/Prospectus, (iv) the description of the analyses performed by the
investment banker in rendering its fairness opinion, or (v) information relating
to Talbot Bancshares or the Talbot Subsidiaries which was included in the Proxy
Statement/Prospectus. Such counsel need not assume any responsibility for the
accuracy, completeness of fairness of the statements contained in the Proxy
Statement/Prospectus or any documents incorporated by reference therein except
as set forth in the paragraph immediately following this one.
In connection with the Merger, such counsel shall state that it
participated in conferences with certain officers and other representatives of
Shore Bancshares and Centreville Bank at which the contents of the Proxy
Statement/Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, fairness or completeness of the statements contained in the Proxy
Statement/Prospectus and made no independent check or verification of the
existence or absence of any matter set forth therein, on the basis of the
foregoing, such counsel shall state that no facts have come to its attention
that leads it to believe that the Proxy Statement/Prospectus as of the date it
was mailed to Shore Bancshares' stockholders and on the date of the Special
Meeting contemplated thereby, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that such counsel need not express any belief
with respect to (i) the financial statements, schedules and other financial,
statistical and tabular data included in or incorporated into the Proxy
Statement/Prospectus, (ii) the exhibits thereto and the exhibits to any document
incorporated by reference into the Proxy Statement/Prospectus, (iii) the
documents incorporated by reference therein, (iv) the description of the
analyses performed by the investment banker in rendering its fairness opinion,
or (v) any information relating to Talbot Bancshares or the Talbot Subsidiaries
contained therein. In rendering such statement, such counsel may state that it
has served only as special counsel to Shore Bancshares and Centreville Bank,
that such representation of such entities has been limited to acting as their
special counsel with respect to the Merger and on certain other unrelated
matters on which such counsel has been consulted by the management of Shore
Bancshares or Centreville Bank, and that such counsel has relied solely upon the
examination and inquiries stated therein.
In rendering such opinion, such counsel may, without independent
verification, assume: (i) the genuineness of all signatures and the authenticity
of all documents submitted to such counsel as originals, the conformity to
original documents of all documents submitted to such counsel as certified,
conformed or reproduction copies, and the authenticity of such originals of such
latter documents; (ii) the execution of such documents, acknowledgment as
indicated thereon and receipt of the consideration recited therein by Talbot
Bancshares, (iii) that Talbot Bancshares has the full power, authority and legal
right under its charter and other governing
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documents and applicable laws, as the case may be, to execute and to perform its
obligations under all documents executed by it in connection with the
transactions contemplated by the Plan and the Stock Option Agreement; (iv) that
the foregoing documents, in the forms submitted to such counsel for review, have
not been altered or amended in any respect material to such counsel's opinion as
stated herein; (v) that there are no other agreements or understandings among
the parties that would modify the terms of the proposed transactions or the
respective rights or obligations of the parties thereunder; (vi) the accuracy of
the representations and warranties of Shore Bancshares and Centreville Bank as
set forth in the Plan; (vii) the accuracy of all certifications made available
to such counsel from public officials and officers of Shore Bancshares and
Centreville Bank on which such counsel is relying in rendering the opinions set
forth above; and (viii) the validity of all laws and regulations applicable to
the transactions contemplated by the Plan and the Stock Option Agreement.
Furthermore, to the extent not inconsistent with the other assumptions,
qualifications and limitations set forth in such counsel's opinion, such
counsel's opinion shall be governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the American Bar Association
Section of Business Law (1991). As a consequence, such opinion shall be subject
to a number of qualifications, exceptions, definitions, limitations on coverage
and other limitations, all as more particularly described in the Accord, and
such counsel's opinion should be read in conjunction therewith. The term
"actual knowledge" when used in such counsel's opinion shall have the meaning
set forth in the Accord. For purposes of the opinion in (e) above, Subject Laws
shall mean the Maryland General Corporation Law, the Financial Institutions
Article of the Annotated Code of Maryland, The Securities Act and the Exchange
Act, and the rules and regulations promulgated thereunder.
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APPENDIX XII
FORM OF OPINION OF COUNSEL TO TALBOT BANCSHARES
(a) Talbot Bancshares has been duly organized and is validly existing
as a corporation under the laws of the State of Maryland, and Talbot Bank has
been duly organized and is validly existing as a commercial bank under the laws
of the State of Maryland.
(b) The execution and delivery of the Plan and the Stock Option
Agreement by Talbot Bancshares and the consummation by Talbot Bancshares of the
transactions provided for therein have been duly authorized by all requisite
corporate and stockholder action on the part of Talbot Bancshares. Talbot
Bancshares has the corporate power and corporate authority to execute and
deliver the Plan and the Stock Option Agreement and to consummate the
transactions contemplated thereby.
(c) The Plan and the Stock Option Agreement have been executed and
delivered by Talbot Bancshares and are valid and binding obligations of Talbot
Bancshares, enforceable against Talbot Bancshares in accordance with their
terms, except to the extent that enforcement thereof may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization, receivership,
conservatorship or other similar laws now or hereinafter in effect relating to
or affecting the enforcement of creditors' rights generally or the rights of
creditors of insured depository institutions or their holding companies and (ii)
general principles of equity, regardless of whether such enforceability is
considered in a proceeding at law or in equity.
(d) The execution and delivery and performance by Talbot Bancshares
of the Plan and the Stock Option Agreement do not violate the Charter or By-Laws
of Talbot Bancshares.
(e) No consent or approval of, or other action by or filing with, any
court or administrative or governmental body which has not been obtained, taken
or made is required under the Subject Laws (as defined below), or any court
order or judgment specifically applicable to Talbot Bancshares and actually
known to such counsel, for Talbot Bancshares to execute and deliver the Plan and
the Stock Option Agreement and to consummate the transactions provided for
therein. Such counsel need express no opinion, however, as to any such consent,
approval, action or filing which may be required as the result of Shore
Bancshares' involvement in the transactions contemplated by the Plan and the
Stock Option Agreement because of such entities' legal or regulatory status or
because of other facts specifically pertaining to Shore Bancshares.
(f) Assuming due authorization of the Merger by Shore Bancshares and
the Shore Bancshares stockholders, upon the filing of an Articles of Merger with
the Maryland State Department of Assessments and Taxation in accordance with the
Plan, the Merger will be effective in accordance with the laws of the State of
Maryland.
(g) The Proxy Statement/Prospectus, insofar as it constituted a proxy
statement for the special meeting (the "Special Meeting") of Talbot Bancshares'
stockholders held on
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_____________, 2000, as of the date thereof, complied as to form in all material
respects to the requirements of the Exchange Act, and the rules and regulations
promulgated thereunder, except that such counsel need express no opinion as to
(i) the financial statements, schedules and other financial, statistical and
tabular data included in or incorporated into the Proxy Statement/Prospectus,
(ii) any document incorporated by reference into the Proxy Statement/Prospectus,
(iii) the exhibits to any document incorporated by reference into the Proxy
Statement/Prospectus, (iv) the description of the analyses performed by the
investment banker in rendering its fairness opinion, or (v) information relating
to Shore Bancshares or the Shore Subsidiaries which was included in the Proxy
Statement/Prospectus. Such counsel need not assume any responsibility for the
accuracy, completeness of fairness of the statements contained in the Proxy
Statement/Prospectus or any documents incorporated by reference therein except
as set forth in the paragraph immediately following this one.
In connection with the Merger, such counsel shall state that it
participated in conferences with certain officers and other representatives of
Talbot Bancshares and Talbot Bank at which the contents of the Proxy
Statement/Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, fairness or completeness of the statements contained in the Proxy
Statement/Prospectus and made no independent check or verification of the
existence or absence of any matter set forth therein, on the basis of the
foregoing, such counsel shall state that no facts have come to its attention
that leads it to believe that the Proxy Statement/Prospectus as of the date it
was mailed to Talbot Bancshares' stockholders and on the date of the Special
Meeting contemplated thereby, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that such counsel need not express any belief
with respect to (i) the financial statements, schedules and other financial,
statistical and tabular data included in or incorporated into the Proxy
Statement/Prospectus, (ii) the exhibits thereto and the exhibits to any document
incorporated by reference into the Proxy Statement/Prospectus, (iii) the
documents incorporated by reference therein, (iv) the description of the
analyses performed by the investment banker in rendering its fairness opinion,
or (v) any information relating to Shore Bancshares or the Shore Subsidiaries
contained therein. In rendering such statement, such counsel may state that it
has served only as special counsel to Talbot Bancshares and Talbot Bank, that
such representation of such entities has been limited to acting as their special
counsel with respect to the Merger and on certain other unrelated matters on
which such counsel has been consulted by the management of Talbot Bancshares or
Talbot Bank, and that such counsel has relied solely upon the examination and
inquiries stated therein.
In rendering such opinion, such counsel may, without independent
verification, assume: (i) the genuineness of all signatures and the authenticity
of all documents submitted to such counsel as originals, the conformity to
original documents of all documents submitted to such counsel as certified,
conformed or reproduction copies, and the authenticity of such originals of such
latter documents; (ii) the execution of such documents, acknowledgment as
indicated thereon and receipt of the consideration recited therein by Shore
Bancshares, (iii) that Shore Bancshares has the full power, authority and legal
right under its charter and other governing documents and applicable laws, as
the case may be, to execute and to perform its obligations
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under all documents executed by it in connection with the transactions
contemplated by the Plan and the Stock Option Agreement; (iv) that the foregoing
documents, in the forms submitted to such counsel for review, have not been
altered or amended in any respect material to such counsel's opinion as stated
herein; (v) that there are no other agreements or understandings among the
parties that would modify the terms of the proposed transactions or the
respective rights or obligations of the parties thereunder; (vi) the accuracy of
the representations and warranties of Talbot Bancshares and Talbot Bank as set
forth in the Plan; (vii) the accuracy of all certifications made available to
such counsel from public officials and officers of Talbot Bancshares and Talbot
Bank on which such counsel is relying in rendering the opinions set forth above;
and (viii) the validity of all laws and regulations applicable to the
transactions contemplated by the Plan and the Stock Option Agreement.
Furthermore, to the extent not inconsistent with the other assumptions,
qualifications and limitations set forth in such counsel's opinion, such
counsel's opinion shall be governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the American Bar Association
Section of Business Law (1991). As a consequence, such opinion shall be subject
to a number of qualifications, exceptions, definitions, limitations on coverage
and other limitations, all as more particularly described in the Accord, and
such counsel's opinion should be read in conjunction therewith. The term
"actual knowledge" when used in such counsel's opinion shall have the meaning
set forth in the Accord. For purposes of the opinion in (e) above, Subject Laws
shall mean the Maryland General Corporation Law, the Financial Institutions
Article of the Annotated Code of Maryland, The Securities Act and the Exchange
Act, and the rules and regulations promulgated thereunder.
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APPENDIX XIII
FORM OF EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into this as of __________, 2000, (this
"Agreement") by and between [a][The Centreville National Bank of Maryland]
[b][The Talbot Bank of Easton, Maryland] (the "Bank") and Shore Bancshares, Inc.
("Shore Bancshares", and with the Bank, collectively, the "Companies") and
[a][Xxxxxx X. Xxxxxx] [b][X. Xxxxxxxx Xxxxxxxx] (the "Employee").
WHEREAS, Talbot Bancshares, Inc. has merged into Shore Bancshares (the
"Merger"); and
[a][WHEREAS, the Employee has been employed by the Companies as President
and Chief Executive Officer; and
WHEREAS, the Employee has agreed (a) to a termination of the Employment
Agreement dated January 1, 1999 between the Companies and the Employee and (b)
that the Merger shall not be deemed to be a change in control thereunder; and]
[b][WHEREAS, the Employee has been employed by the Bank and, prior to the
Merger, by Talbot Bancshares, Inc. as President and Chief Executive Officer;
and]
WHEREAS, the parties hereto desire by writing to set forth the continued
employment relationship of the Companies and the Employee;
NOW THEREFORE, it is AGREED as follows:
1. The Employee is employed as the [a][Executive Vice President of Shore
Bancshares and the President and Chief Executive Officer of the Bank]
[b][President and Chief Executive Officer of the Companies]. The Employee shall
render administrative and management services to the Companies such as are
customarily performed by persons situated in similar executive capacity. The
Employee shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Companies. The Employee's other duties
shall be such as the Boards of Directors of the Companies(the "Boards") may from
time to time reasonably direct, including normal duties of an officer of the
Companies.
2. The Companies agree to pay the Employee during the term of this
Agreement a salary at the rate of [a][$127,500] [b][$170,000] per annum, in cash
not less frequently than twice monthly or at some other reasonable frequency as
other employees of the Companies are paid. Such rate of salary, or increased
rate of salary, if any, as the case may be, shall be reviewed by the Boards, or
by a committee designated by the Boards, no less often than annually and may be
increased; which increases may not be unreasonably denied; but not decreased, in
such amounts as the Boards in their discretion may decide.
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3. The Employee shall be eligible to participate in an equitable manner
with all other key management in discretionary bonuses authorized and declared
by the Boards to its key management and other employees. No other compensation
provided for in this Agreement shall be deemed a substitute for the Employee's
right to participate in such discretionary bonuses when and as declared by the
Boards.
4. (a) The Employee shall be entitled to participate in any plan of the
Companies relating to pension, profit sharing, or other retirement benefits and
medical coverage or reimbursement plans the Companies may adopt for the benefit
of its employees. The Companies may also at their discretion enter into other
agreements with the Employee to provide supplemental retirement benefits,
additional death benefits, or the like.
(b) The Employee shall be eligible to participate in any fringe
benefits which may be or become applicable to the Companies' executive employees
including participation in any stock option or incentive plans adopted by the
Boards, a country club membership, the use of a luxury class automobile, a
reasonable expense account, and any other benefits which are commensurate with
the responsibilities and functions to be performed by the Employee under this
Agreement. The Companies shall reimburse the Employee for all out of pocket
expenses which the Employee shall incur in connection with his services for the
Companies.
5. The initial term of employment under this Agreement shall be for 60
months commencing on the date of this Agreement. Upon the expiration of the 60
month initial term of employment, the term of employment shall automatically be
extended for another 60 month period and then for successive 12 month periods
without further action by the parties, unless either party shall have served
notice upon the other 90 days prior to the commencement of any period, of its
intention that this Agreement shall terminate at the end of the then current
term of employment.
6. (a) The Employee shall devote his full time and best efforts to the
performance of his employment under this Agreement. During the term of this
Agreement, the Employee shall not, at any time or place, either directly or
indirectly, engage in any business or activity in competition with the business
affairs or interest of the Companies.
(b) During the term of this Agreement and, in the event of
termination prior to expiration of such term, except as otherwise provided in
the next sentence, the Employee will not be a director, officer, or employee of,
or consultant to, any federal or state financial institution operating in Queen
Anne's, Kent, Caroline, Talbot, and Xxxx Arundel Counties in the State of
Maryland, and Kent County, Delaware, other than the Companies or their
subsidiaries or affiliates. Such non compete covenant shall terminate and be of
no further force and effect upon the earliest to occur of (i) the expiration
date of this Agreement or (ii) termination of the Employee's employment under
Subsections 9(c), 9(f), or 9(g).
(c) Nothing contained in this Section 6 shall be deemed to prevent or
limit the right of the Employee to invest in the capital stock or other
securities of any business dissimilar from that of the Companies or, solely as a
passive and minority investor in any business.
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7. The Employee shall perform his duties under this Agreement in
accordance with such reasonable standards expected of employees with comparable
positions in comparable organizations and as may be established from time to
time by the Boards.
8. At such reasonable times as the Boards shall in their discretion
permit, the Employee shall be entitled, without loss of pay, to absent himself
voluntarily from the performance of his employment under this Agreement, all
such voluntary absences to count as vacation time; provided that:
(a) The Employee shall be entitled to an annual vacation in
accordance with the policies as periodically established by the Boards for
senior management officials of the Companies, which shall in no event be less
than three weeks.
(b) The Employee shall not be entitled to receive any additional
compensation from the Companies on account of his failure to take a vacation;
nor shall he be entitled to accumulate unused vacation from one fiscal year to
the next except to the extent authorized by the Boards for senior management
officials of the Companies.
(c) In addition to the aforesaid paid vacations, the Employee shall
be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment with the Companies for such additional periods of
time and for such valid and legitimate reasons as the Boards in their discretion
may determine.
(d) In addition, the Employee shall be entitled to an annual sick
leave as established by the Boards for senior management officials of the
Companies. In the event any sick leave shall not have been used during any
year, such leave shall accrue to subsequent years only to the extent authorized
by the Boards. Upon termination of his employment, the Employee shall not be
entitled to receive any additional compensation from the Companies for unused
sick leave.
9. The Employee's employment under this Agreement shall be terminated upon
the following occurrences:
(a) The death of the Employee during the term of this Agreement, in
which event the Employee's estate shall be entitled to receive the compensation
due the Employee through the last day of the calendar month in which the
Employee's death shall have occurred (including any bonus under Section 3, pro
rated through the last day of such calendar month, to which the Employee would
have been eligible to receive had he been alive when bonuses were next
declared), and any vested rights and benefits of the Employee pursuant to any
plan of the Companies, whether or not written.
(b) The Boards may terminate the Employee's employment at any time,
but any termination by the Boards other than termination for Cause (defined
below), shall not prejudice the Employee's right to compensation or other
benefits under this, or other, agreements. The Employee shall have no right to
receive compensation or other benefits, except at the discretion of the Boards
or as may be required by other agreements, after termination for Cause.
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Termination for "Cause" shall mean termination for gross negligence or gross
neglect or the commission of a felony or gross misdemeanor involving moral
turpitude, fraud, dishonesty or willful violation of any law that results in any
adverse effect on either of the Companies, or for intentional failure to perform
stated duties.
(c) In the event the Employee's employment under this Agreement is
terminated by the Boards without Cause, the Companies shall be obligated to
continue to pay the Employee his salary up to the date of termination of the
current term of this Agreement. In no event shall the Employee's compensation
be continued for a period of less than 24 months upon any termination without
Cause.
(d) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Companies' business by an order issued by
the [a][Office of the Comptroller of the Currency] [b][Maryland Commissioner of
Financial Regulation], the Federal Deposit Insurance Corporation, the Board of
Governors of the Federal Reserve System, or other appropriate supervisory
agency, obligations under this Agreement shall terminate, as of the effective
date of the order, but vested rights of the parties shall not be affected.
(e) The voluntary termination by the Employee during the term of this
Agreement with the delivery of no less than 90 days written notice to the
Boards, in which case the Employee shall be entitled to receive only his
compensation, vested rights, and all employee benefits up the date of his
termination, unless otherwise provided by law.
(f) Notwithstanding any provision herein to the contrary (except
Subsection 9(h)), if the Employee's employment under this Agreement is
terminated by the Companies, without the Employee's consent and for a reason
other than Cause, in connection with or within 12 months after any Change in
Control (defined below) of the Companies, or if the Employee voluntarily
terminates employment for any reason during the 30 day period beginning with
said Change in Control, the Employee shall be paid an amount equal to the
difference between (i) the product of 2.99 times the Employee's "base amount" as
defined in Section 280G(b)(3) of the Internal Revenue Code, as amended (the
"Code") and regulations promulgated thereunder, and (ii) the sum of any other
parachute payments (as defined under Section 280G(b)(2) of the Code) that the
Employee receives on account of the Change in Control. Said sum shall be paid
to the Employee in one lump sum within 10 days of the termination. This
Subsection 9(f)is not applicable in the event of a termination of the Employee's
employment due to the Employee's death or voluntary termination (other than
voluntary termination pursuant to Subsection 9(g)).
The term "Change in Control" shall mean any one of the following events:
(i) the acquisition of ownership, holding or power to vote more than 25% of the
Companies' voting stock, (ii) the acquisition of the ability to control the
election of a majority of the Companies' directors, (iii) the acquisition of a
controlling influence over the management or policies of the Companies by any
person or by persons acting as a "group" within the meaning of Section 13(d) of
the Securities Exchange Act of 1934), (iv) the acquisition of control of the
Companies within the meaning of 12 C.F.R. Part 5.50 or its applicable equivalent
(except in the case of (i), (ii), (iii), or (iv) of this paragraph, the
Companies' mere formation of a holding company shall not itself constitute a
Change in Control), or (v) during any period of two consecutive years,
individuals
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(the "Continuing Directors") who at the beginning of such period constitute the
Boards of the Companies (the "Existing Board") cease for any reason to
constitute at least two-thirds thereof, provided that any individual whose
election as a member of the Existing Board was approved by a vote of at least
two-thirds of the Continuing Directors then in office shall be considered a
Continuing Director. For purposes of this paragraph only, the term "person"
refers to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein.
(g) Notwithstanding any other provision of this Agreement to the
contrary (except this Subsection 9(g)), the Employee may voluntarily terminate
the Employee's employment within 12 months following a Change in Control of the
Companies, and the Employee shall thereupon be entitled to receive the payment
described in Subsection 9(f) of this Agreement, upon the occurrence of any of
the following events, or within 90 days thereafter, which have not been
consented to in advance by the Employee in writing: (i) the requirement that
the Employee perform the Employee's principal executive functions more than 35
miles from the Employee's primary office as of the date of the Change in
Control; (ii) a reduction in the Employee's base compensation as in effect on
the date of the Change in Control or as the same may be increased from time to
time; (iii) the failure by the Companies to continue to provide the Employee
with the compensation and benefits provided for under this Agreement, as the
same may be changed by mutual agreement from time to time, or with benefits
substantially similar to those provided to the Employee under any employee
benefit plan in which the Employee is a participant at the time of the Change in
Control, or the taking of any action which would materially reduce any of such
benefits or deprive the Employee of any material fringe benefit enjoyed by the
Employee at the time of the Change in Control; (iv) the assignment to the
Employee of duties and responsibilities materially different from those normally
associated with the Employee's position as referenced at Section 1; (v) a
failure to elect or reelect the Employee to the Boards of the Companies (if the
Employee is serving on the Boards at the time of the Change in Control); or (vi)
a material diminution or reduction in the Employee's responsibilities or
authority (including reporting responsibilities) in connection with the
Employee's employment with the Companies.
(h) Any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to, and conditioned upon their compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
(i) Within 5 business days before or after a Change in Control, as
defined in Subsection 9(f), which was not approved in advance by resolution of
at least two-thirds of the Continuing Directors of the Companies, the Companies
shall (i) deposit, or cause to be deposited, in a grantor trust (the "Trust")
meeting the requirements of Revenue Procedure 92-64 and having an independent
trustee, an amount equal to 2.99 times the Employee's base amount as defined in
Subsection 9(f), and (ii) provide the trustee of the Trust with a written
direction to hold said amount and any investment return thereon in a segregated
account for the benefit of the Employee, and to follow the procedures set forth
in the next paragraph as to the payment of such amounts from the Trust.
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During the 12 consecutive month period following the date on which the
Companies make the deposit referred to in the preceding paragraph, the Employee
may provide the trustee with a written notice requesting that the trustee pay to
the Employee an amount designated in the notice as being payable pursuant to
Subsection 9(f) or 9(g). Within 3 business days after receiving said notice,
the trustee of the Trust shall send a copy of the notice to the Companies via
overnight and registered mail return receipt requested. On the 10th business
day after mailing said notice to the Companies, the trustee of the Trust shall
pay the Employee the amount designated therein in immediately available funds,
unless prior thereto the Companies provide the trustee with a written notice
directing the trustee to withhold such payment. In the latter event, the
trustee shall submit the dispute to non-appealable binding arbitration for a
determination of the amount payable to the Employee pursuant to Subsections 9(f)
or 9(g) hereof. The party responsible for the payment of the costs of such
arbitration (including any legal fees and expenses incurred by the Employee)
shall be determined by the arbitrator. The trustee shall choose the arbitrator
to settle the dispute, and such arbitrator shall be bound by the rules of the
American Arbitration Association in making his or her determination. The
parties and the trustee shall be bound by the results of the arbitration, and
within 3 business days of the determination by the arbitrator, the trustee shall
pay from the Trust the amounts required to be paid to the Employee and/or the
Companies, and in no event shall the trustee be liable to either party for
making the payments as determined by the arbitrator.
Upon the earlier of (i) any payment from the Trust to the Employee, or (ii)
the date 12 months after the date on which the Companies make the deposit
referred to in the first paragraph of this Subsection 9(i), the trustee of the
Trust shall pay to the Companies the entire balance remaining in the Trust. The
Employee shall thereafter have no further rights under this Section 9, no
further rights in the Trust pursuant to this Agreement, and no further rights or
claims against the Companies pursuant to this Agreement.
10. (a) The suspension of the Employee from office and/or temporary
prohibition from participation in the conduct of the affairs of the Companies
pursuant to notice served by the appropriate regulatory agency, unless stayed by
appropriate proceedings, shall suspend, as of the date of such service, all
obligations of the Companies under the terms of this Agreement.
(b) In the event the charges specified in a notice served as provided
in Section 10(a) shall be dismissed, the Companies shall (i) pay the Employee
any compensation withheld from the Employee pursuant to the suspension of the
Companies' obligations as required in Section 10(a) and (ii) reinstate the
obligations suspended as required in Section 10(a).
11. If the Employee shall become disabled or incapacitated, as determined
by the Employee's physician, to the extent that he is unable to perform the
duties provided in Section 1, he shall nevertheless continue to receive the
following percentages of his compensation, inclusive of any benefits which may
be payable to the Employee under the provisions of any disability insurance in
effect for the Employee, under Section 2 for the following periods of
disability: 100% for the first 6 months, 75% for the next 12 months, and 50%
thereafter for the remainder of the initial term, or any renewal thereof, of
this Agreement. Upon returning to active full-time employment, the Employee's
full compensation as set forth in this Agreement
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shall be reinstated. In the event that the Employee returns to active employment
on other than a full-time basis, then his compensation as set forth in Section 2
may be reduced in proportion to the time spent in said employment. If he is
again unable to perform the duties provided in Section 1 due to illness or other
incapacity, benefits under this Section 11 shall (a) begin again at 100% for the
first 6 months if he has been engaged in active full-time employment for more
than 12 months immediately prior to such later absence or inability or (b)
resume where benefits left off if he has been engaged in active full-time
employment for 12 months or less immediately prior to such later absence or
inability.
Notwithstanding any provision of this Section to the contrary, the
Companies may, after 2 years of the Employee's continuing disability (or
immediately if notified by the Employee's physician that, in his opinion, the
Employee will not be able to return to active service/duty within a two year
period), hire or appoint a successor, and if a successor is so hired or
appointed, the Employee is not obligated to return, and is entitled to receive:
(a) the balance of the disability compensation for the remainder of the current
term, as above set forth; [a][(b) the benefits promised in the Executive
Supplemental Retirement Plan upon attaining Normal Retirement Age, as if he had
been continuously employed by the Bank until his Normal Retirement Age; (c) the
Employee shall be 100% vested in the benefits promised in the Life Insurance
Endorsement Method Split Dollar Agreement and, therefore, upon the death of the
Employee, the Employee's beneficiary(ies) (designated in accordance with the
Agreement) shall receive the death benefit provided therein as if the Employee
had died while employed by the Companies (see Subparagraph VI(A) in the Life
Insurance Method Split Dollar Agreement); and (d)] [b][(b) the benefits promised
in any Executive Supplemental Retirement Plan upon attaining Normal Retirement
Age, as if he had been continuously employed by the Bank until his Normal
Retirement Age; and (c)] all other benefits to which the Employee is entitled
under any other of the Companies' plans or agreements then in effect.
12. (a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Companies which shall acquire, directly
or indirectly, by merger, consolidation, purchase, or otherwise, all or
substantially all of the assets of the Companies.
(b) Since the Companies are contracting for the unique and personal
skills of the Employee, the Employee shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Companies.
13. In the event a dispute arises over benefits or other provisions under
this Agreement (other than a dispute to be resolved under Section 9(i)), then
the parties hereto agree to submit the dispute to non-appealable binding
arbitration. The Board of arbitrators shall consist of three members, with one
member selected by the Employee, one member selected by the Companies, and the
third member selected by the first two members. The party responsible for the
payment of the costs of such arbitration (including any legal fees and expenses
incurred by the Employee) shall be determined by the Board. The Board shall be
bound by the rules of the American Arbitration Association in making their
determination. The parties hereto agree
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that they and their heirs, personal representatives, successors, and assigns
shall be bound by the decision of such Board with respect to any controversy
properly submitted to it for determination.
Where a dispute arises as to the Companies' discharge of the Employee for
Cause, such dispute shall likewise be submitted to arbitration as above
described and the parties hereto agree to be bound by the decision hereunder.
14. No amendments or additions to this Agreement shall be valid unless in
writing and signed by both parties, except as herein otherwise provided.
15. This Agreement shall be governed in all respects whether as to
validity, construction, capacity, performance or otherwise, by the laws of the
State of Maryland, except to the extent that Federal law shall be deemed to
apply.
16. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity
and enforceability of the other provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
____________, 2000.
[a][THE CENTREVILLE NATIONAL
BANK OF MARYLAND] [b][THE
ATTEST: TALBOT BANK OF EASTON,
MARYLAND]
__________________________________
Secretary ______________________________________
Chairman
SHORE BANCSHARES, INC
ATTEST: ______________________________________
Chairman
___________________________________
Secretary
WITNESS: ______________________________________
[a][Xxxxxx X. Xxxxxx] [b][X. Xxxxxxxx
____________________________________ Xxxxxxxx], Employee
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APPENDIX XIV
SUCCESSOR BANCSHARES
BOARD AND EXECUTIVE OFFICER ASSIGNMENTS AT
THE EFFECTIVE DATE
Designated Directors of Shore Bancshares:
Name Class Designated by
---- ----- -------------
Xxxxx X. Xxxxx 2001 Talbot Bancshares
Xxxxxx X. Xxxxxx 2001 Shore Bancshares
Xxxxxxx X. Xxxxxxxxx 2001 Talbot Bancshares
Xxxxx X. Xxxxx 2002 Shore Bancshares
Xxxxxx X. Xxx 2002 Talbot Bancshares
Xxxx X. XxXxxxxx 2002 Shore Bancshares
Xxxxxxx X. Xxxxxx, III 2002 Talbot Bancshares
Xxxx X. Xxxxxx 2003 Shore Bancshares
Xxxxx X. Xxxxxx, Xx. 2003 Talbot Bancshares
B. Xxxxx Xxxxxxx, Xx. 2003 Shore Bancshares
X. Xxxxxxxx Xxxxxxxx 2003 Talbot Bancshares
Designated titles (director titles and executive officer titles) of Shore
Bancshares:
Name Title
---- -----
Director Titles:
To Be Determined Chairman of the Board
Executive Officer Titles:
X. Xxxxxxxx Xxxxxxxx President and Chief Executive Officer
Xxxxxx X. Xxxxxx Executive Vice President and Chief
Operating Officer
Xxxxx X. Xxxxxxxxx Treasurer
Xxxxx X. Xxxxxxxxxx Secretary
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APPENDIX XV
FORM OF TERMINATION AND RELEASE OF EMPLOYMENT AGREEMENT
THIS TERMINATION AND RELEASE OF EMPLOYMENT AGREEMENT (this "Agreement") is
entered into as of July 25, 2000, by and among The Centreville National Bank of
Maryland (the "Centreville Bank"), Shore Bancshares, Inc. ("Shore Bancshares"),
TALBOT BANCSHARES, INC. ("Talbot Bancshares"), and XXXXXX X. XXXXXX (the
"Employee").
WHEREAS, Talbot Bancshares has agreed to merge with and into Shore
Bancshares under a Plan and Agreement to Merge dated as of July 25, 2000 (the
"Plan"); and
WHEREAS, the Employee has been employed as President and Chief Executive
Officer of Shore Bancshares and Centreville Bank under an Employment Agreement
dated January 1, 1999 (the "Employment Agreement"); and
WHEREAS, the Employment Agreement provides the Employee with certain rights
in respect to his employment, including rights upon a "change in control" of
Shore Bancshares and Centreville Bank; and
WHEREAS, Centreville Bank and Shore Bancshares wish to employ the Employee
after the consummation of the transaction contemplated by the Plan (the
"Merger") as Executive Vice-President of Shore Bancshares and the President and
Chief Executive Officer of Centreville Bank, but only if the Employee agrees to
terminate the Employment Agreement, to release all of his rights thereunder,
including rights that may arise as a result of the Merger under provisions of
the Employment Agreement relating to a "change in control," and to enter into an
employment agreement (the "New Employment Agreement") in substantially the form
attached hereto as Exhibit A; and
WHEREAS, the Employee has agreed to enter into this Agreement and, thereby,
to terminate the Employment Agreement and release all of his rights thereunder,
including rights that may arise upon a change of control, subject to the
condition that the Merger occurs and that Centreville Bank and Shore Bancshares
execute and deliver to him for signature the New Employment Agreement in
substantially the form attached hereto.
NOW THEREFORE, it is AGREED as follows:
1. The parties agree that effective upon the Merger, and subject to the
condition that at the time of the Merger each of Centreville Bank and Shore
Bancshares execute and deliver to the Employee for signature the New Employment
Agreement in substantially the form attached hereto as Exhibit A, the Employment
Agreement shall terminate and be of no further force or effect, and Centreville
Bank, Shore Bancshares and Talbot Bancshares are and shall be released and
forever discharged from any and all obligations and liabilities under the
Employment Agreement, including but not limited to, any obligations and
liabilities relating to any "change in
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control" (as defined in Section 9(f) of the Employment Agreement) occurring with
respect to Centreville Bank and Talbot Bancshares as the result of the Merger.
2. This Agreement shall be binding upon the Executive, his heirs,
successors and assigns, and shall inure to the benefit of and be binding upon
any corporate or other successor of Centreville Bank, Shore Bancshares and
Talbot Bancshares, which shall acquire, directly or indirectly, by merger,
consolidation, purchase, or otherwise, all or substantially all of the assets of
Centreville Bank, Shore Bancshares and Talbot Bancshares.
3. This Agreement shall be governed in all respects whether as to
validity, construction, capacity, performance or otherwise, by the laws of the
State of Maryland, except to the extent that Federal law shall be deemed to
apply. No amendments or additions to this Agreement shall be binding unless in
writing and signed by both parties.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of July 25,
2000.
ATTEST: THE CENTREVILLE NATIONAL BANK OF
MARYLAND
__________________________________
Secretary ______________________________________
Chairman
ATTEST: SHORE BANCSHARES, INC
___________________________________ ______________________________________
Secretary Chairman
ATTEST: TALBOT BANCSHARES, INC
___________________________________ ______________________________________
Secretary Chairman
WITNESS:
____________________________________ ______________________________________
Xxxxxx X. Xxxxxx, Employee
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