EXHIBIT
        10.1

      


      FORM
        OF EMPLOYMENT AGREEMENT WITH THOMAS EVANS

      


      EMPLOYMENT
        AGREEMENT

       

      THIS
        AGREEMENT
        is
        entered into this as of November 3, 2005 (this “Agreement”)
        by and
        between The Felton Bank (the “Bank”)
        and
        Shore Bancshares, Inc. “Shore
        Bancshares”,
        with
        the Bank, collectively, the “Companies”)
        and
        Thomas Evans (the “Employee”).

       

      WHEREAS,
        Bank
        is a
        subsidiary of Shore Bancshares; and

       

      WHEREAS,
        the
        Employee has been employed by the Bank as President and Chief Executive Officer;
        and

       

      WHEREAS,
        the
        parties hereto desire by writing 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 President and Chief Executive Officer of The
        Felton
        Bank. 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 $105,000.00 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.

       

      3.  The
        Employee shall be eligible 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.

       

       (b) The
        Employee shall be eligible to participate in any fringe benefits which may
        be or
        become applicable to the Companies’ officers including participation in any
        stock option or incentive plans adopted by the Boards, 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.

       

      5.  The
        initial term of employment under this Agreement shall be for 29 months
        commencing on the date of this Agreement and ending on March 31, 2008. Upon
        the
        expiration of the this initial term of employment, the term of employment
        shall
        automatically be extended for another 12 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 other than the Companies or their subsidiaries
        or affiliates, operating within 50 miles of any of the Companies. Such
        non-compete covenant shall terminate and be of no further force and effect
        upon
        the earliest to occur of (i) one year after the expiration date of this
        Agreement or (ii) one year after termination of the Employee’s employment under
        Subsection 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.

       

      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 not
        accrue
        to subsequent years unless 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:

       

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

         

      

      (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 as provided for
        under this Agreement. The Employee shall have no right to receive compensation
        or other benefits, except at the discretion of the Boards after termination
        for
        Cause. 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 pay the Employee the payment
        of one-year salary based on the current year salary at the time of termination.
        Said sum shall be paid in one lump sum within 15 days of the
        termination.

       

      (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 Delaware
        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 to the date of his termination, unless otherwise
        provided by law.

       

      (f) Notwithstanding
        any other provision of this Agreement to the contrary (except Subsection
        9(h)),
        if the Employee’s employment under this Agreement is terminated by the
        Companies, without Employee’s consent and for reason other than Cause, in
        connection with or within 12 months after any Change in Control (defined
        in
        Subsection 9(g) 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 Employee’s death or voluntary termination (other than
        voluntary termination pursuant to Subsection 9(g)). 

       

      (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 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. 

       

      
        
           

        

        
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      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
        Companies by any person or by person acting as a “group”
        within
        the meaning of Section 12(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) if this paragraph, the Companies’ mere formation of a holding company shall
        not itself constitute a Change in Control), or (v)
        during
        the period of two consecutive years, individuals (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.

       

      (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) As
        a
        condition of receiving any payments under paragraph 9(c), 9(f) or 9(g), Employee
        shall be required to sign a release and covenant not to sue.

       

      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 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.

       

      
        
           

        

        
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      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,
        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 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.  This
        Agreement supercedes all prior agreements with respect to your employment
        with
        the Companies.

       

      15.  No
        amendments or additions to this Agreement shall be valid unless in writing
        and
        signed by both parties, except as herein otherwise provided.

       

      16.  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.

       

      17.  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.

       

      
        
           

        

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

       

      
        	 	 	 
	ATTEST:	THE
                FELTON BANK
	 
 
                
                  

                

              	
                 

                 

                
                  

                

                W. Edwin Kee, Jr.,
                  Chairman

              


      

       

      
        	 	 	 
	ATTEST:	SHORE
                BANCSHARES, INC.
	 
 
                
                  

                

              	
                 

                 

                
                  

                

                W. Moorhead Vermilye,
                  Chairman

              


         

      

      
        	 	 	 
	WITNESS:	 
	 
 
                
                  

                

              	
                 

                 

                
                  

                

                Thomas Evans

              


         

      

      
        
           

        

        
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