Unassociated Document


     

    Shore
      Bancshares, Inc.

    2007
      Management Incentive Plan

     

    ARTICLE
      I

    OBJECTIVE
      OF THE PLAN

    


    The
      purpose of this 2007 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 and is effective January 1, 2007 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 year-end base salary, 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 if 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%

            	 	
              80%

            	
              +

            	
              20%

            
	
              COO,
                Shore Bancshares

            	
              40%

            	 	
              80%

            	
              +

            	
              20%

            
	
              CFO,
                Shore Bancshares

            	
              40%

            	 	
              40%

            	
              +

            	
              60%

            
	
              President,
                Talbot Bank

            	
              50%

            	 	
              30%

            	
              +

            	
              70%

            
	
              President,
                CNB

            	
              25%

            	 	
              30%

            	
              +

            	
              70%

            
	
              President,
                Felton Bank

            	
              20%

            	 	
              30%

            	
              +

            	
              70%

            
	
              Senior
                Lender, Talbot

            	
              35%

            	 	
              20%

            	
              +

            	
              80%

            
	
              Senior
                Lender, CNB

            	
              20%

            	 	
              20%

            	
              +

            	
              80%

            
	
              Secretary,
                Shore Bancshares

            	
              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%

            
	
              90%

            	
              50%

            	 	
              90%
                or (Met
                Some Goals)

            	
              50%

            
	
              Less
                than 90%

            	
              0%

            	 	
              Less
                than 90% 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%)) =

            


    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

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

     

    ($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.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    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.

    


    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

              	 	
                March
                  28, 2007

              
	
                President
                  & CEO

              	 	
                Date

              
	 	 	 
	 	 	 
	
                /s/
                  Christopher F. Spurry

              	 	
                March
                  28, 2007

              
	
                Chairman,
                  Compensation Committee

              	 	
                Date

              


      



    
      
        
        

      

      
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