Exhibit
10.1

      
 

    

    
      Shore
Bancshares, Inc.

       

      2009 Management Incentive Plan

      


      


      ARTICLE
I

       

      OBJECTIVE
OF THE PLAN

      


      The
purpose of this 2009 Management Incentive Plan ("Plan") is to reward executives
of Shore Bancshares, Inc. (hereafter, the "Company") for creating value for the
Company by maximizing Company, Divisional and / or Individual performance
goals.

       

      


      ARTICLE
II

       

      PLAN
ADMINISTRATION

      


      The
Compensation Committee of the Board shall administer the Plan and have final
authority on all matters and or disputes pertaining to this Plan.

      


      The Plan
is an annual Plan, is effective January 1, 2009, and shall remain in effect
until the Committee deems otherwise.  A new Plan year shall commence
on the first business day of the fiscal year.

       

      


      ARTICLE
III

       

      PARTICIPANTS

      


      Participation
is limited to those executives recommended by the President & CEO and
approved by the Committee each Plan year.

       

      


      ARTICLE
IV

       

      PERFORMANCE
OBJECTIVES

      


      Prior to
or at the beginning of each fiscal year, the Committee shall
establish:

      


      (i) Plan
performance objectives for the Company, subsidiary or business unit of the
Company based on such criteria as may be recommended by the President & CEO,
and

      


      (ii) the
award formula or matrix by which all incentive awards under this Plan shall be
calculated for Committee review and approval.

      


      The
Chairman & CEO shall establish individual performance objectives for each
Plan participant and evaluate each participant’s performance against those
pre-established individual objectives.

       

      


      ARTICLE
V

       

      AWARD
CALCULATIONS

      


      Each
executive shall be assigned an incentive award target, calculated as a
percentage of base salary at beginning of the plan year, which shall be awarded
if the Company and the executive achieve targeted performance
goals.  Target awards shall be leveraged up when performance exceeds
expectations, or down when performance is below
expectations.  Following are the target awards and weights by
executive position.

      


      
        
           

        

        
           

          
            

          

        

        
           

        

         

      

      Target
awards shall be weighted between 1) Company Net Income and 2) Division /
Individual Goals.  Goals and weightings shall be established and
measured by the Compensation Committee. Company and Division / Individual Goal
weightings and Award Calculations follow:

      


      Schedule A: Award
Percentages and Performance Measure Weightings

       

      
        	
                Position/Title

              	
                Incentive

                Award

                Target

              	 
      	
                Company

                Net
      Income

                Weight

                (1)

              	
                +

                 

              	
                Division/
      Individual

                Performance

                Weight

                (2)

              
	
                President
      & CEO, Shore Bancshares

              	
                75%

              	 
      	
                50%

              	
                +

              	
                50%

              
	
                COO,
      Shore Bancshares

              	
                40%

              	 
      	
                30%

              	
                +

              	
                70%

              
	
                CFO,
      Shore Bancshares

              	
                40%

              	 
      	
                20%

              	
                +

              	
                80%

              
	
                President,
      Talbot Bank

              	
                50%

              	 
      	
                20%

              	
                +

              	
                80%

              
	
                President,
      CNB

              	
                30%

              	 
      	
                20%

              	
                +

              	
                80%

              
	
                President,
      Felton Bank

              	
                20%

              	 
      	
                20%

              	
                +

              	
                80%

              
	
                Senior
      Lender, Talbot

              	
                35%

              	 
      	
                20%

              	
                +

              	
                80%

              
	
                Senior
      Lender, CNB

              	
                20%

              	 
      	
                20%

              	
                +

              	
                80%

              
	
                Secretary
      & CFO, CNB

              	
                20%

              	 
      	
                20%

              	
                +

              	
                80%

              
	
                CEO,
      Insurance Division

              	
                5%

              	 
      	
                20%

              	
                +

              	
                80%

              


      

      


      Schedule
B: Award Leverage Schedule:

      


      
        	
                Percent
      of Company

                Performance

              	
                Percent
      of Company

                Incentive
      Award

              	 
      	
                Percent
      of

                Division
      / Individual

                Goal
      Performance

              	
                Percent
      of

                Division
      / Individual

                Incentive
      Award

              
	
                120%

              	
                150%

              	 
      	
                120%
      or (Exceeded All
      Goals)

              	
                150%

              
	
                110%

              	
                120%

              	 
      	
                110%
      or (Met All and Exceeded
      Some Goals)

              	
                120%

              
	
                100%

              	
                100%

              	 
      	
                100%
      or (Met Most
      Goals)

              	
                100%

              
	
                85%

              	
                50%

              	 
      	
                85%
      or (Met Some
      Goals)

              	
                50%

              
	
                Less
      than 85%

              	
                0%

              	 
      	
                Less
      than 85% or (Did Not Meet
      Goals)

              	
                0%

              


      

       

      Award
Calculation Formula:

       

      The
calculation example below assumes an executive has a base salary of $150,000
with a target award opportunity of 25% and goal weights of 60% on Company Net
Income, and 40%
on Division / Individual goals.  In addition, the example assumes Net
Income results are 110% of target performance and Division / Individual goals
are met.  Please refer to Schedule B above when determining
appropriate leverage percentages.

       

      (Base
Salary) x ((Company Award x Leverage %) + (Division / Individual Award x
Leverage %))

      


      
        	   	
                Example:

              	
                ($150,000)
      x ((25% x 60%) + (25% x 40%)) =

              


      

       

      
        ($150,000)
x ((15%) + (10%)) =

      

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

         

      

      
        ($150,000)
x ((15% x 1.20) + (10% x 1.00)) =

      

       

      
        ($150,000)
x ((18%) + (10%)) =

      

       

      
        ($150,000)
x (28%) = $42,000 Total Annual Incentive
Award

      

      


       

      
        ARTICLE
VI

      

       

      ADMINISTRATIVE
MATTERS

      


      The
Committee reserves the right to withhold awards provided that the Committee
gives written explanation to participants within a reasonable period of time
following their decision to withhold.

      


      Incentive
awards shall be paid as soon as practicable following the end of the fiscal
year, however in no event shall awards be paid later than March 15th of the
subsequent fiscal year.

      


      In the
event of death, permanent disability, retirement or involuntary termination
without cause, unpaid awards shall be calculated on a pro-rated basis by taking
the number of full months, including the month in which the terminating event
occurred, and dividing those months by twelve.  Prorated awards will
be payable at the same time that normal award distributions occur.

      


      Except in
the case of death, disability or retirement, a participant shall forfeit his
right to receive any Plan award in the event of voluntary or involuntary
termination for cause during the Plan year.

      


      Interpolation
shall be used to calculate incentive awards when Company and Division /
Individual performance falls between levels detailed in Schedules
B.

       

      


      ARTICLE
VII

       

      NO
ENTITLEMENT TO BONUS

      


      Plan
participants are entitled to a distribution under this Plan only upon the
approval of the award by the Committee and no participant shall be entitled to
an award under the Plan unless the award is subject to the attainment of
performance objectives defined under the Plan.

       

      


      ARTICLE
VIII

       

      TERMINATION
OF PLAN

      


      The
Committee reserves the right to amend or terminate the Plan at any time within
thirty days written notice to Plan participants.  In the event of a
Plan termination, participants shall continue to be eligible for incentive
awards, if earned, for the current Plan year.  Incentive awards shall
be calculated as of the date of the Plan termination and payable as soon as
practicable after the end of the Plan year.

       

      


      ARTICLE
IX

       

      PARTICIPANT'S
RIGHT OF ASSIGNABILITY

      


      Participant
awards shall not be subject to assignment, pledge or other disposition, nor
shall such amounts be subject to garnishment, attachment, transfer by operation
of law, or any legal process.

      


      Nothing
contained in this Plan shall confer upon participants any right to continued
employment, nor interfere with the right of the Company to terminate a
participant’s employment from the Company.  Participation in the Plan
does not confer rights to participation in other company programs, including
annual or long-term incentive plans, non-qualified retirement or deferred
compensation plans or other perquisite programs.

      


      
        
           

        

        
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      ARTICLE
X

       

      GOVERNING
LAW

      


      The laws
of the State of Maryland shall govern the validity, construction, performance
and effect of the Plan.

      


      


      IN
WITNESS WHEREOF, the parties have executed this Plan on the date written
below.

      


      


      
        	
                /s/
      W. Moorhead Vermilye

              	 	
                2/12/2009

              
	
                President
      & CEO

              	 	
                Date

              
	 
      	 	 
      
	 
      	 	 
      
	
                /s/
      Christopher F. Spurry

              	 	
                2/12/2009

              
	
                Chairman,
      Compensation Committee

              	 	
                Date

              


      

       

      
        
           

        

        
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