Exhibit 10.1

AMENDED COMPENSATION ARRANGEMENT FOR WILLIAM W. DUNCAN, JR.

The Talbot Bank of Easton, Maryland (the “Bank”) and William W. Duncan, Jr., the
Bank’s President and Chief Executive Officer, are not party to a written
employment agreement. Mr. Duncan’s employment arrangement provides for an annual
salary of $245,000, subject to annual adjustment. Mr. Duncan is also entitled to
participate in the bonus program, profit sharing and 401(k) plan, and group term
life insurance program of Shore Bancshares, Inc. (the “Company”), to the extent
the provisions and rules of those plans and programs permit such participation.
In addition, provided that Mr. Duncan remains employed by the Bank, the Company
agreed to make five annual awards of restricted stock to Mr. Duncan under the
Company’s 2006 Stock and Incentive Compensation Plan (the “Equity Plan”). The
number of shares of restricted stock underlying each award will be determined by
dividing $36,076 by the Fair Market Value (as defined in the Equity Plan) of a
share of Company common stock on the date of that award. Each award of
restricted stock will vest ratably over the lesser of five years or the number
of years remaining until Mr. Duncan reaches age 65.