SEPARATION
        AGREEMENT

       

      Agreement
        made this 10th day of March, 2008 (hereinafter referred to as the “Agreement”),
        by and between Leslie Christon (hereinafter referred to as “Christon”), and
        Shells Seafood Restaurants, Inc. (hereinafter referred to as “Shells” or the
“Company”).

       

      W
        I T
        N E S S E T H :

       

      WHEREAS,
        Christon has been the Chief Executive Officer of the Company; and

       

      WHEREAS,
        the Company and Christon now desire to end the employment relationship and
        the
        parties wish to resolve amicably all outstanding issues, rights and obligations
        by and between them and to embody those understandings in this
        Agreement.

       

      NOW,
        THEREFORE, in consideration of the premises and of the representations, promises
        and obligations herein contained, the parties hereto agree as
        follows:

       

      1.  The
        parties agree that Christon’s employment with the Company terminated on February
        29, 2008 (the “Termination Date”) and that Christon has resigned as a director
        and officer of the Company and its subsidiaries, to the extent she held such
        positions. The Company agrees to continue to pay Christon an amount equal
        to her
        salary at the current rate, on the Company’s regular pay days, for a period of
        six months following the Termination Date, or until Christon commences
        employment with another entity or person, whichever occurs earlier. The Company
        will also pay Christon for any accrued but unused vacation to which Christon
        was
        entitled as of the Termination Date. The parties agree that the amended and
        restated employment agreement between Christon and the Company, dated as
        of July
        1, 2007, is terminated and no longer of any force or effect, provided, however
        that Sections 5(a), 5(b), 7, 8, 9, 15, 16, 17 and 18 shall survive the
        termination and continue in effect. Other than as set forth herein, the Company
        has no further obligations to Christon with respect to any other amounts
        allegedly due to Christon, including, but not limited to, salary, bonuses,
        vacations, leave and other benefits.

       

      2.  Christon
        agrees that she has been granted options to purchase (i) 297,374 shares of
        common stock of Shells on July 7, 2003, with an exercise price of $0.62 per
        share, all of which are vested and may be exercised within 90 days from the
        Termination Date, (ii) 450,000 shares of common stock of Shells on March
        21,
        2005, with an exercise price of $1.10 per share, 300,000 of which are vested
        and
        may be exercised within 90 days from the Termination Date; (iii) 450,000
        shares
        of common stock of Shells on June 13, 2005, with an exercise price of $0.76
        per
        share, 300,000 of which are vested and may be exercised within 90 days from
        the
        Termination Date; and (iv) 1,061,535 shares of common stock of Shells on
        November 14, 2005, with an exercise price of $0.85 per share, 707,690 of
        which
        are vested and may be exercised within 90 days from the Termination Date.
        All of
        Christon’s unvested options shall terminate as of the Termination Date. In
        accordance with the terms of the Shells stock option plan and the Stock Option
        Agreement, dated November 14, 2005, Christon is required to exercise her
        vested
        options no later than 90 days following the Termination Date. To the extent
        that
        Christon does not exercise the vested options within 90 days of the Termination
        Date, those options will thereupon terminate. Any exercise by Christon of
        any
        stock options may not be treated for tax purposes or otherwise as an exercise
        of
        an incentive stock option.

       

      3.  Christon
        understands that, as of the Termination Date, she will no longer be an employee
        of the Company, and that she will no longer be entitled to participate in
        any
        employee benefit or incentive plan maintained by the Company, including any
        medical, life or other insurance plan (except as allowed under the Consolidated
        Omnibus Budget Reconciliation Act (“COBRA”) with respect to continuation medical
        coverage). Notwithstanding the foregoing, the Company agrees that, to the
        extent
        that Christon elects continuation coverage under COBRA, the Company will
        pay on
        behalf of Christon the cost of the premiums for the six-month period following
        the Termination Date, or until Christon commences employment with another
        entity
        or person, whichever occurs earlier.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      4.  Christon
        represents that as of the Termination Date, she will have returned all property
        of the Company, including but not limited to, any computers, telephones,
        documents, books, records (whether in electronic format or hard copy), reports,
        files, correspondence, notebooks, manuals, notes, specifications, mailing
        lists,
        credit cards and data in her possession or control.

       

      5.  Christon,
        for herself and for the executors and administrators of her estate, her heirs,
        successors and assigns, hereby releases and forever discharges the Company
        and
        its officers, directors, employees and shareholders and the respective
        executors, administrators, heirs, successors and assigns of the foregoing,
        from
        any and all claims, actions, causes of action, suits, sums of money, debts,
        dues, accounts, reckonings, bonds, bills, covenants, contracts, controversies,
        agreements, promises, demands or damages of any nature whatsoever or by reason
        of any matter, cause or thing regardless of whether known or unknown at present,
        which against the Company or any of its officers, directors, employees or
        shareholders Christon ever had, now has or hereafter can, shall or may have
        for,
        upon, or by reason of, any matter, cause or thing whatsoever from the beginning
        of the world to the date hereof including, but not limited to, any matter
        relating to or arising out of the employment of Christon or termination thereof
        under any contract, tort, federal, state or local fair employment practices
        or
        civil rights law including, but not limited to, Title VII of the Civil Rights
        Act of 1964, as amended, the Americans with Disabilities Act, the Age
        Discrimination in Employment Act, the Older Workers Benefits Protection Act,
        the
        federal Family and Medical Leave Act, the Florida Civil Rights Act, or any
        claim
        for physical or emotional distress or injuries, or any other duty or obligation
        of any kind or description, including any implied covenant of good faith
        and
        fair dealing, implied contract of permanent employment or the tortious or
        willful discharge of employment. The parties also agree that this Agreement
        does
        not either affect the rights and responsibilities of the Equal Employment
        Opportunity Commission to enforce the Age Discrimination in Employment Act,
        or
        justify interfering with the protected right of an employee to file a charge
        or
        participate in an investigation or proceeding conducted by the Equal Employment
        Opportunity Commission under the Age Discrimination in Employment Act. In
        the
        event the Equal Employment Opportunity Commission commences a proceeding
        against
        the Company in which Christon is a named party, Christon agrees to waive
        and
        forego any monetary claims which may be alleged by the Equal Employment
        Opportunity Commission to be owed to Christon. The parties also agree that
        nothing in the provisions of this paragraph 5 is intended to limit their
        rights
        under and concerning enforcement of this Agreement. Christon agrees that
        she
        will not seek reinstatement and/or future employment with the Company or
        any
        present or future affiliated entity.

       

      6.  Christon
        agrees to keep confidential the terms of this Agreement and not to disclose
        any
        term of this Agreement to any other person or entity, except for Christon’s
        family, accountants and attorneys. In the event that Christon is required
        by law
        to disclose any term of this Agreement, Christon agrees to give the Company
        ten
        days’ written notice prior to any such disclosure, or such shorter time period
        as mandated by law or is otherwise practicable. 

       

      
        
          
          

        

        
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      7.  Christon
        shall not make any statements, either directly or through other persons or
        entities, which are disparaging to the Company or any of its affiliates,
        management, officers, directors, services, products, operations, prospects
        or
        other matters relating to the Company’s businesses. The Company, through its
        officers and directors, shall not make any statements, either directly or
        through other persons or entities, which are disparaging to Christon.


       

      8.  The
        Company has advised Christon to consult with an attorney prior to executing
        this
        Agreement. By executing this Agreement, Christon acknowledges that (a) she
        has
        been provided an opportunity to consult with an attorney or other advisor
        of her
        choice regarding the terms of this Agreement, (b) this is a final offer and
        Christon has been given twenty-one (21) days in which to consider whether
        she
        wishes to enter into this Agreement, (c) Christon has elected to enter this
        Agreement knowingly and voluntarily and (d) if she does so within fewer than
        twenty-one (21) days from receipt of the final document she has knowingly
        and
        voluntarily waived the remaining time. The Company reserves the right to
        change
        or revoke this Agreement prior to Christon’s execution hereof. This Agreement
        shall be fully effective and binding upon all parties hereto immediately
        upon
        execution of this Agreement except as to rights or claims arising under the
        ADEA, in which case Christon has seven (7) days following execution of this
        Agreement to change her mind (the “Revocation Period”). 

       

      9.  Any
        notice to be given hereunder shall be in writing and shall be deemed given
        when
        mailed by certified mail, return receipt requested, addressed as
        follows:

       

      
        	
              	To Christon at: 	 	 
	 	 	 	 
	 	With a copy to: 	 	 
	 	 	
              	 
	 	To the Company at: 	Shells Seafood Restaurants,
                Inc.
                
                16313
                  N. Dale Mabry Highway, Suite 100

                Tampa,
                  Florida 33618

              
	 	 	 	 
	 	 	Attention: President
	 	 	 	 
	 	With a copy to:	Sheldon G. Nussbaum
                Fulbright
                  & Jaworski L.L.P.

                666
                  Fifth Avenue, 31st Floor

                New
                  York, New York 10103

              


      

       

      or
        at
        such other address as may be indicated in writing by any party to the other
        parties in the manner provided herein for giving notice.

       

      10.  In
        the
        event that any one or more of the provisions of this Agreement is held to
        be
        invalid, illegal or unenforceable, the validity, legality and enforceability
        of
        the remaining provisions will not in any way be affected or impaired thereby.
        This Agreement will survive the termination of any arrangements contained
        herein
        and is binding on and will inure to the benefit of each of the parties and
        their
        respective affiliates, heirs, executors, administrators, successors and
        assigns.

       

      11.  This
        Agreement shall be governed by the substantive laws of the State of Florida,
        without giving effect to any principles of conflicts of law.

       

      12.  Each
        of
        the parties agrees to do and perform or cause to be done and performed all
        further acts and shall execute and deliver all other documents necessary
        on its
        part to carry out the intent and accomplish the purposes of this Agreement
        and
        the transaction contemplated hereby.

       

      13.  This
        Agreement sets forth the entire agreement between the parties hereto concerning
        the subject matter hereof and may not be changed without the written consent
        of
        each of the parties.

       

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      IN
        WITNESS WHEREOF, the parties have each executed this Agreement as of the
        date
        first written above.

       

      
        	
                 

                 

                 

                 

                 

              	
                SHELLS
                  SEAFOOD RESTAURANTS, INC.

                 

                 

                By:
                  /s/  Warren R
                  Nelson                                         

                Name:  
                  Warren R Nelson

                Title:     
                  President / CFO

                 

                 

                /s/
                  Leslie
                  Christon                                                    
                  

                Leslie
                  Christon