Document:

Exhibit
      10.1

    
SHORE
      BANCSHARES, INC.

    

    Executive
      Deferred Compensation Plan

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    Effective
      October 1, 2006

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    TABLE
      OF CONTENTS

    

    

    

    
      	
              I.

            	
              Introduction

            	
              3

            
	 	 	 
	
              II.

            	
              Definitions

            	
              3

            
	 	 	 
	
              III.

            	
              Eligibility
                & Participation

            	
              8

            
	 	 	 
	
              IV.

            	
              Elections,
                Deferrals & Contributions

            	
              9

            
	 	 	 
	
              V.

            	
              Accounts
                & Account Crediting

            	
              10

            
	 	 	 
	
              VI.

            	
              Vesting

            	
              12

            
	 	 	 
	
              VII.

            	
              Distributions

            	
              13

            
	 	 	 
	
              VIII.

            	
              Administration
                & Claims Procedure

            	
              16

            
	 	 	 
	
              IX.

            	
              Amendment,
                Termination & Reorganization

            	
              19

            
	 	 	 
	
              X.

            	
              General
                Provisions

            	
              20

            

    

    

    

    

    

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    PREAMBLE

    

    Shore
      Bancshares, Inc. (the Employer) desires to adopt the Executive Deferred
      Compensation Plan (the Plan), effective October 1, 2006, for the benefit of
      its
      selected key executives. The Plan is intended to comply with the requirements
      of
      Section 409A of the Internal Revenue Code, as enacted by the American Jobs
      Creation Act of 2004, in both form and operation.

    

    

    ARTICLE
      I--INTRODUCTION

    

    1.1  Name.

    

    The
      name
      of this Plan is the Shore Bancshares, Inc. Executive Deferred Compensation
      Plan
      (the Plan).

    

    1.2  Purpose.

    

    The
      purpose of the Plan is to offer Participants the opportunity to defer
      voluntarily current Compensation for retirement income and other significant
      future financial needs for themselves, their families and other dependents,
      and
      to provide the Employer, if appropriate, a vehicle for crediting matching,
      discretionary or other amounts for the benefit of Participants. This Plan is
      intended to be a nonqualified “top-hat” plan; that is, an unfunded plan of
      deferred compensation maintained for a select group of management or highly
      compensated employees pursuant to Sections 201(2), 301(a)(3), and 401(a)(1)
      of
      ERISA, and an unfunded plan of deferred compensation under the
      Code.

    

    1.3  Interpretation.

    

    Throughout
      the Plan, certain words and phrases have meanings, which are specifically
      defined for purposes of the Plan. These words and phrases can be identified
      in
      that the first letter of the word or words in the phrase is capitalized. The
      definitions of these words and phrases are set forth in Article II and elsewhere
      in the Plan document. Wherever appropriate, pronouns of any gender shall be
      deemed synonymous, as shall singular and plural pronouns. Headings of Articles
      and Sections are for convenience or reference only, and are not to be considered
      in the construction or interpretation of the Plan. The Plan shall be interpreted
      and administered to give effect to its purpose in Section 1.3 and to qualify
      as
      a nonqualified, unfunded plan of deferred compensation.

    

    

    ARTICLE
      II--DEFINITIONS 

    

    2.1  Generally.

    

    Certain
      words and phrases are defined when first used in later paragraphs of this
      Agreement. Unless the context clearly indicates otherwise, the following words
      and phrases when used in this Agreement shall have the following respective
      meanings:

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    2.2  Account.

    

    “Account”
      shall mean the interest of a Participant in the Plan as represented by the
      hypothetical bookkeeping entries kept by the Employer for each Participant.
      Each
      Participant’s interest may be divided into two separate accounts or
      sub-accounts, the Participant Deferral Account, and the Employer Funded Account,
      which reflect not only the deemed Contributions into the Plan, but also gains
      and losses, and income and expenses allocated thereto, as well as distributions
      or any other withdrawals. The value of these accounts or sub-accounts shall
      be
      determined as of the Valuation Date. The existence of an account or bookkeeping
      entries for a Participant (or his Designated Beneficiary) does not create,
      suggest or imply that a Participant, Designated Beneficiary, or other person
      claiming through them under this Plan, has a beneficial interest in any asset
      of
      the Employer.

    

    2.3  Administrator. 

    

    “Administrator”
      shall mean one or more persons appointed by the Employer to administer the
      terms
      of the Plan, as provided in Article VIII. 

    

    2.4  Balance.

    

    “Balance”
      shall mean the total of Contributions and Deemed Earnings credited to a
      Participant’s Account under Article V, as adjusted for distributions or other
      withdrawals in accordance with the terms of this Plan and the standard
      bookkeeping rules established by the Employer.

    

    2.5  Board
      Committee.

    

    “Board
      Committee” or “Committee” shall mean the Compensation Committee of the
      Employer’s Board of Directors, or such other Committee of the Board as may be
      delegated with the duty of determining Participant eligibility under the
      Plan.

    

    2.6  Board
      of Directors.

    

    “Board
      of
      Directors” or “Board” shall mean the Board of Directors of the
      Employer.

    

    2.7  Change
      of Control.

    

     “Change
      of Control” shall mean a change in the ownership or effective control of the
      Employer,

    or
      in the
      ownership of a substantial portion of the assets of the Employer, as provided
      in
      Treasury

    regulations
      issued pursuant to Code Section 409A.

    

    2.8  Code.

    

    “Code”
      shall mean the Internal Revenue Code of 1986 and the Regulations thereto, as
      amended from time to time.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    2.9  Compensation.

    

    “Compensation”
      shall mean the base or regular cash salary payable to an Employee by the

    Employer,
      as well as incentives or bonuses payable to an Employee by the Employer,

    commissions
      payable to an Employee by the Employer, including any such amounts which are
      not

    includible
      in the Participant’s gross income under Sections 125, 401(k), 402(h) or 403(b)
      of the 

    Internal
      Revenue Code of 1986, as amended.

    

    2.10  Contributions. 

    

    “Contributions”
      shall mean the total of Participant Deferrals, Matching Contributions,
      Discretionary Contributions, and Mandatory Contributions which represent each
      Participant’s credits to his Account. 

    

    2.11  Deemed
      Earnings.

    

    “Deemed
      Earnings” shall mean the gains and losses (realized and unrealized), and income
      and expenses credited or debited to Contributions based upon the Deemed
      Crediting Options in a Participant’s Account as of any Valuation
      Date.

    

    2.12  Deemed
      Crediting Options.

    

    “Deemed
      Crediting Options” shall mean the hypothetical options made available to Plan
      Participants by the Employer for the purposes of determining the proper
      crediting of gains and losses, and income and expenses to each Participant’s
      Account, subject to procedures and requirements established by the Board
      Committee. A Participant may reallocate his Account among such Deemed Crediting
      Options periodically at such frequency and upon such terms as the Board
      Committee may determine from time to time.

    

    2.13  Deferral
      Election Form.

    

    “Deferral
      Election Form” or “Annual Deferral Election Form” shall mean that written
      agreement of a Participant. The Deferral Election Form shall be in such form
      or
      forms as may be prescribed by the Administrator, filed annually with the
      Employer, according to procedures and at such times as established by the
      Administrator. Among other information the Administrator may require of the
      Participant for proper administration of the Plan, such agreement shall
      establish the Participant’s election to defer Compensation for a Plan Year under
      the Plan; the amount of the deferral into the Plan for the Plan Year; the
      Participant’s elections as to distribution of his Account, and the allocation of
      his Accounts among the Deemed Crediting Options provided under the Plan; and
      the
      Designated Beneficiary. 

    

    2.14  Designated
      Beneficiary.

    

    “Designated
      Beneficiary” or "Beneficiary" shall mean the person, persons or trust
      specifically named to be a direct or contingent recipient of all or a portion
      of
      a Participant’s benefits under the Plan in the event of the Participant’s death
      prior to the distribution of his full Account Balance. Such designation of
      a
      recipient or recipients may be made and amended, at the Participant’s
      discretion, on the Deferral Election Form and according to procedures
      established by the Administrator. No beneficiary designation or change of
      Beneficiary shall become effective until received and acknowledged by the
      Employer. In the event a Participant does not have a beneficiary properly
      designated, the beneficiary under this Plan shall be the Participant’s
      estate.

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    2.15  Disability.

    

    “Disability”
      shall mean that a Participant (i) is unable to engage in any substantial gainful
      activity by reason of any medically determinable physical or mental impairment
      which can be expected to result in death or can be expected to last for a
      continuous period of not less than twelve months, or (ii) is, by reason of
      any
      medically determinable physical or mental impairment which can be expected
      to
      result in death or can be expected to last for a continuous period of not less
      than twelve months, receiving income replacement benefits for a period of not
      less than three months under an accident and health plan covering employees of
      the Participant’s employer, or as provided by Treasury Regulations issued
      pursuant to Code Section 409A.

    

    2.16  Discretionary
      Contribution.

    

    “Discretionary
      Contribution” shall mean an amount, determined in the sole discretion of the
      Committee, to be credited to the Account of a Participant. Participants may
      or
      may not receive any such Discretionary Contribution, and amounts of such
      Contributions may vary among Participants.

    

    2.17  Effective
      Date.

    

    “Effective
      Date” of the Plan shall mean October 1, 2006.

    

    2.18  Eligible
      Employee.

    

    “Eligible
      Employee” shall mean a person who (for any Plan Year or portion thereof) is: (1)
      an Employee of the Employer; (2) a member of a select group of management or
      highly compensated employees of the Employer; and (3) selected by the Board
      Committee to participate in the Plan.

    

    2.19  Employee.

    

    “Employee”
      shall mean a full time common law employee of the Employer.

    

    2.20  Employer.

    

    “Employer”
      shall mean Shore Bancshares, Inc., designated subsidiaries and any corporate
      successors and assigns, unless otherwise provided herein.

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    2.21  ERISA.

    

    “ERISA”
      shall mean the Employee Retirement Income Security Act of 1974, as amended
      from
      time to time.

    

    2.23  Leave
      of Absence.

    

    “Leave
      of
      Absence” shall mean a period of time, not to exceed twelve (12) consecutive
      calendar months during which time a Participant shall not be an active Employee
      of the Employer, but shall be treated for purposes of this Plan as in continuous
      service with the Employer. A Leave of Absence may be either paid or unpaid,
      but
      must be agreed to in writing by both the Employer and the Participant. A Leave
      Of Absence that continues beyond the twelve (12) consecutive months shall be
      treated as a Termination of Service as of the first business day of the
      thirteenth month for purposes of the Plan.

    

    2.24  Mandatory
      Contribution.

    

    “Mandatory
      Contribution” shall mean such amount indicated in Schedule A to be credited to a
      Participant’s Account each Plan Year for which the Participant was an employee
      of the Employer. 

    

    2.25  Matching
      Contribution.

    

    “Matching
      Contribution” shall mean such amount to be credited to a Participant’s Account
      as a match for Participant Deferrals. The amount of any such Matching
      Contribution shall be announced by the Committee prior to each Plan Year and
      shall remain in effect thereafter until modified prior to the beginning of
      a
      Plan Year for which such change shall be effective.

    

    2.26  Participant.

    

    “Participant”
      shall mean an Eligible Employee who participates in the Plan under Article
      III;
      a former Eligible Employee who has participated in the Plan and continues to
      be
      entitled to a benefit (in the form of an undistributed Account Balance) under
      the Plan, and any former Eligible Employee who has participated in the Plan
      under Article III and has not yet exceeded any Leave of Absence.

    

    2.27  Participant
      Deferral.

    

    “Participant
      Deferral” shall mean voluntary Participant deferral amounts, which could have
      been received currently but for the election to defer and are credited to his
      Account for later distribution, subject to the terms of the Plan.

    

    2.28  Performance
      Based Compensation.

    

    “Performance-based
      compensation” shall mean compensation that is (i) variable and contingent on the
      satisfaction of pre-established organizational or individual performance
      criteria; (ii) not readily ascertainable at the time; and (iii) based on
      services performed over a period of at least twelve months, as provided by
      Treasury Regulations issued pursuant to Code Section 409A.

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    2.29  Plan
      Year.

    

    “Plan
      Year” shall mean the twelve (12) consecutive month period constituting a
      calendar year, beginning on January 1 and ending on December 31. However, in
      any
      partial year of the Plan that does not begin on January 1, “Plan Year” shall
      also mean the remaining partial year ending on December 31. For purposes of
      vesting as provided in Section 6.3, Plan Years shall mean years of participation
      in the Plan.

    

    2.30  Separation
      from Service.

    

    “Separation
      from Service” shall mean a Participant’s separation from service as an Employee
      with the Employer, other than for death, Disability, or Leave of Absence. A
      transfer of employment within and among the Employer and any member of a
      controlled group, as provided in Code Section 409A (d)(6), shall not be deemed
      a
      Separation from Service.

    

    2.31  Specified
      Employee.

    

    “Specified
      Employee” shall mean any Participant who is (i) one of the top-fifty most highly
      compensated officers with annual compensation in excess of $130,000 (as adjusted
      from time to time by Treasury regulations); (ii) a five percent owner of the
      Employer; or (iii) a one percent owner of the Employer with annual compensation
      in excess of $150,000 (as adjusted from time to time by Treasury regulations)
      of
      a publicly traded corporation, as provided by Treasury Regulations issued
      pursuant to Code Section 409A.

    

    2.32  Unforeseeable
      Emergency.

    

    “Unforeseeable
      emergency” shall mean a severe financial hardship to the Participant, the
      Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code)
      of the participant, loss of the Participant’s property due to casualty, or other
      similar extraordinary and unforeseeable circumstances arising as a result of
      events beyond the control of the Participant, as provided by Treasury
      Regulations issued pursuant to Code Section 409A.. 

    

    2.33  Valuation
      Date. 

    

    “Valuation
      Date” shall mean the close of each business day, as established and amended from
      time to time by guidelines and procedures of the Administrator in its sole
      and
      exclusive discretion.

    

    

    ARTICLE
      III--ELIGIBILITY & PARTICIPATION

    

    3.1  Eligibility
      Requirements.

    

    Only
      an
      Eligible Employee selected by the Board Committee may become a Participant
      in
      this Plan. Moreover, a Participant shall not be permitted to make new
      Participant Deferrals to the Plan, if he ceases to be an Eligible Employee
      because he is no longer a member a select group of management or highly
      compensated employees, or otherwise. The Board Committee shall notify an
      Eligible Employee of his eligibility for a Plan Year in such form as it may
      determine most appropriate. Current Participants remain eligible until notified
      otherwise.

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    3.2  Participation.

    

    An
      Eligible Employee shall become a Participant in the Plan by the completion
      and
      timely filing with, and subsequent acceptance by, the Employer of the Deferral
      Election Form, according to the terms and conditions established by the
      Administrator. A Participant (or any Designated Beneficiary who becomes
      entitled) remains a Participant until his Account Balance is fully distributed
      under the terms of the Plan.

    

    

    ARTICLE
      IV—ELECTIONS, DEFERRALS & CONTRIBUTIONS

    

    4.1           
      Participant
      Election to Defer Compensation.

    

    
      	A.	
              Prior
                to December 31 or an earlier date set by the Administrator, a Participant
                may elect to defer Compensation for services to be performed in the
                next
                following Plan Year by the execution and timely filing, and Employer’s
                acceptance of, a Deferral Election Form in such form and according
                to such
                procedures as the Administrator may prescribe from time to time.
                Each such
                Deferral Election Form shall be effective for the Plan Year to which
                the
                Deferral Election Form pertains.

            

    

    

    
      	B.	
              Each
                Participant may elect annually to have his Compensation for the Plan
                Year
                reduced by a whole percentage of up to (i) 100% of base salary and
                (ii)
                100% of any annual bonuses by timely filing, and the acceptance by
                the
                Employer of, his Deferral Election Form detailing such deferral.
                The
                amount of this Participant Deferral shall be deferred into the Plan
                and
                credited to the Participant’s Account as provided in Article
                V

            

    

    

    
      	C.	
              An
                election to defer Performance-Based Compensation may be made at such
                time
                and in such manner as the Administrator may specify, but in any event
                not
                later than six months before the end of the period for which it is
                earned.

            

    

    

    
      	D.	
              Under
                such Deferral Election Form, a Participant shall indicate the amount
                of
                such Participant Deferral; designate and allocate such Participant
                Deferral in or among the elective distribution Account option(s);
                and,
                allocate such Accounts among the Deemed Crediting Options. The Deferral
                Election Form may also request other information, such as a Participant’s
                Designated Beneficiary, as may be required or useful for the
                administration of the Plan.

            

    

    

    4.2
        New
      Participants and Partial Years.

    

    The
      initial Deferral Election Form of a new Participant shall be filed with the
      Employer on a date established by the Administrator, but in any event not later
      than 30 days following the date the Participant becomes eligible to participate
      in the Plan and shall be effective only with respect to services to be performed
      and income earned subsequent to the election. Such first Deferral Election
      Form
      shall be applicable to a Participant’s Compensation beginning with the first
      payroll in the month after such Form is filed and accepted by the
      Employer.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    4.3  Irrevocable
      Elections.

    

    An
      election in a Deferral Election Form to defer Compensation for a Plan Year,
      once
      made by a Participant, shall be irrevocable. The Administrator, however, shall
      reduce or eliminate Participant Deferrals upon granting a Participant’s request
      for a distribution based upon an Unforeseeable Emergency.

    

    4.4              
      Matching
      Contribution.

    

    Prior
      to
      the beginning of a Plan Year, the Administrator shall announce the amount,
      if
      any, that the Employer will credit to a Participant’s Account as a match for
      Participant Deferrals. Such deemed matching amounts shall be credited to the
      Participant’s Employer Funded Account of his Account.

    

    4.5               Discretionary
      Contribution.

    

    In
      its
      discretion, the Employer may credit an amount to the Account of a Participant
      as
      of the end of a Plan Year. Such deemed discretionary amount, if any, may vary
      among Participants, shall be in addition to any Matching Contribution or
      Mandatory Contribution, and shall be credited to the Participant’s Employer
      Funded Account of his Account.

     

    4.6              
      Mandatory
      Contribution.

    

    Certain
      Participants shall be entitled to a mandatory contribution each Plan Year. 
The Employer will credit an amount to the Account of each such Participant
      on the last day of each Plan Year for which the Participant was an employee
      of
      the Employer. Such deemed mandatory contribution shall be credited to the
      Participant’s Employer Funded Account of his Account. The Participants who shall
      be entitled to receive mandatory contributions and the amounts of such
      contributions are detailed in Schedule A hereto. 

    

    For
      any
      partial Plan Year, or year in which a Participant has a Separation from Service,
      a pro-rata reduction in the Mandatory Contribution will be made at the
      discretion of the Board Committee.

    

    ARTICLE
      V--ACCOUNTS & ACCOUNT CREDITING

    

    5.1  Establishment
      of a Participant’s Account.

    

    
      	A.	
              Bookkeeping
                Account. The
                Administrator shall cause a deemed bookkeeping Account and appropriate
                sub-accounts, based upon the primary elective distribution option(s)
                to be
                established and maintained in the name of each Participant, according
                to
                his annual Deferral Election Form for the Plan Year. This Account
                shall
                reflect the amount of Participant Deferrals, Matching Contributions,
                Discretionary Contributions, and Mandatory Contributions, as well
                as
                Deemed Earnings credited on behalf of each Participant under this
                Plan.

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
 

    
      	B.	
              Bookkeeping
                Activity. Participant
                Deferrals shall be credited to a Participant’s Account on the business day
                they would otherwise have been made available as cash to the Participant.
                Matching Contributions, Discretionary Contributions, and
                Mandatory Contributions shall
                be credited to a Participant’s Account on the Valuation Date the Employer
                designates. Deemed Earnings shall be credited or debited to each
                Participant’s Account, as well as any distributions or any other
                withdrawals under this Plan, as of a Valuation Date. Accounts shall
                continue to be valued on each Valuation Date until the Participant’s
                Account is fully distributed under the terms of the
                Plan.

            

    

    

    5.2  Deemed
      Crediting Options.

    

    
      	A.  	
              General.
                The
                Board Committee shall establish a portfolio of one or more Deemed
                Crediting Options, among which a Participant may allocate amounts
                credited
                to his Account, which are subject to Participant direction under
                this
                Plan. The Board Committee reserves the right, in its sole and exclusive
                discretion, to substitute, eliminate and otherwise change this portfolio
                of Deemed Crediting Options, as well as the right to establish rules
                and
                procedures for the selection and offering of these Deemed Crediting
                Options.

            

    

    

    
      	B.  	
              Deemed
                Crediting Options. The
                initial Deemed Crediting Options under the Plan shall include the
                following:

            

    

     

    S&P
      500 Index      

    S&P
      400 MidCap Index     

    Lehman
      Bond Index      

    Money
      Market 

    Employer
      Stock

    

    The
      performance of such Deemed Crediting Options selected by the Participant shall
      determine the amount of gain or loss to be credited to such Participant’s
      account.

    

    C.
      Employer Stock Option.
      Amounts
      credited to this Option shall be deemed to be invested in shares of common
      stock
      of the Employer. A Participant’s Account will be credited with deemed
      distributions if and when dividends are declared and paid with respect to
      Employer common stock, and such deemed dividends will be deemed to have been
      reinvested in Employer common stock as of the first business day following
      the
      deemed payment. Fair market value of Employer common stock means, as of any
      day,
      the average of the closing prices of sales of shares of common stock on all
      national securities exchanges on which the common stock may be listed. If there
      have been no sales on such day, the average of the highest bid and lowest asked
      prices on all such exchanges at the end of such day shall be used. If such
      common stock is not listed on any national exchange, then the average of the
      representative bid and asked prices quoted in the National Association of
      Securities Dealers, Inc. Automated Quotation System for such date or the next
      preceding date that the common stock was traded on such market shall be used.
      If
      Employer common stock is not traded on a public market, then the Board Committee
      shall determine the value of Employer common stock by reasonable application
      of
      a reasonable valuation method, as provided by Treasury Regulations issued
      pursuant to Code Section 409A.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    5.3  Allocation
      Of Account Among Deemed Crediting Options.

    

    
      	A.	
              Each
                Participant shall elect the manner in which his Account is divided
                among
                the Deemed Crediting Options by giving allocation instructions in
                a
                Deferral Election Form supplied by and filed with the Administrator,
                or by
                such other procedure, including electronic communications, as the
                Administrator may prescribe. A Participant’s election shall specify the
                percentage of his Account (in any whole percentage) to be deemed
                to be
                invested in any Deemed Crediting Option. Such election shall remain
                in
                effect until a new election is made.

            

    

    

    
      	B.	
              Amounts
                credited to a Participant’s Account shall be deemed to be invested in
                accordance with the most recent effective Deemed Crediting Option
                election. As of the effective date of any new Deemed Crediting Option
                election, all or a portion of the Participant’s Account shall be
                reallocated among the designated Deemed Crediting Options and according
                to
                the percentages specified in the new instructions, until and unless
                subsequent instructions shall be filed and become effective. If the
                Administrator receives a Deemed Crediting Option election, which
                is
                unclear, incomplete or improper, the Deemed Crediting Option election
                then
                in effect shall remain in effect.

            

    

    

    5.4  Valuation
      and Risk of Decrease in Value.

    

    The
      Participant’s Account will be valued on the Valuation Date at fair market value.
      On such date, Deemed Earnings will be allocated to each Participant’s Account.
      Each Participant and Designated Beneficiary assumes the risk in connection
      with
      any decrease in the fair market value of his Account.

    

    5.5  Limited
      Function of Administrator.

    

    By
      deferring compensation pursuant to the Plan, each Participant hereby agrees
      that
      the Employer and Administrator are in no way responsible for or guarantor of
      the
      investment results of the Participant’s Account. The Administrator shall have no
      duty to review, or to advise the Participant on, the investment of the
      Participant’s Account; and in fact, shall not review or advise the Participant
      thereon. Furthermore, the Administrator shall have no power to direct the
      investment of the Participant’s Account other than promptly to carry out the
      Participant’s deemed investment instructions when properly completed and
      transmitted to the Administrator and accepted according to its rules and
      procedures. 

     

    ARTICLE
      VI--VESTING

    

    6.1   Vesting
      of Participant Deferrals.

    

    A
      Participant shall be fully vested at all times in Participant Deferrals, as
      well
      as Deemed Earnings upon Participant Deferrals, credited to his Participant
      Deferral Account.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
 

    6.2               
      Employer
      Funded Account.

    

    A
      Participant shall vest (become non-forfeitable) with respect to Mandatory
      Contributions, Matching Contributions, and Discretionary Contributions (Employer
      Funded Account) upon death, Change of Control, and as follows:

    

    
      	
              Years
                in Plan

            	
              Vesting
                Percent

            
	
              1

            	
              0%

            
	
              2

            	
              25%

            
	
              3

            	
              50%

            
	
              4

            	
              75%

            
	
              5

            	
              100%

            

    

    

    6.3               Forfeitures.

    

    If
      a
      Participant separates from service for any reason other than death, Disability,
      Change of Control, or Retirement at or after age 65, any non-vested portion
      of
      his Employer Funded Account shall be forfeited.

    

    

    ARTICLE
      VII--DISTRIBUTIONS

    

    7.1  Distributions
      Generally.

    

    A
      Participant’s Account shall be distributed only in accordance with the
      provisions of this Article

    VII.
      All
      distributions from Accounts under the Plan shall be made in cash in American
      currency.

    

    7.2  Automatic
      Distributions.

    

    
      	A.	
              Participant’s
                Death. If
                the Participant dies while employed by the Employer in the capacity,
                his
                Account shall be valued as of the Valuation Date next following his
                date
                of death and shall be distributed in lump sum to his Designated
                Beneficiary. 

            

    

    

    
      	B.	
              Participant’s
                Disability. If
                a Participant becomes disabled while employed by the Employer, his
                Account
                shall be valued as of the Valuation Date next following his date
                of
                Disability and shall be distributed in lump sum to
                him.

            

    

    

    
      	C.	
              Separation
                from Service. If
                a Participant incurs a Separation from Service, his vested Account
                shall
                be valued as of the Valuation Date next following his official date
                of
                separation and shall be distributed to him in a lump sum or in
                installments, as the Participant may have
                elected.

            

    

    

    
      	D.	
              Change
                of Control Distribution. If
                a Change of Control should occur during the Plan Year, a
                Participant’s elective distribution election(s) shall be overridden and
                his entire Account shall valued as of the Valuation Date next following
                the Change of Control event and be distributed to him in a lump
                sum.

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
 

    
      	E.	
              Time
                of Payment. Payment,
                or the commencement of payments, under the Plan shall be made within
                sixty
                (60) days following the Valuation Date following the event of
                distribution; provided, however, that the Account of a Key Employee
                shall
                not be distributed or payments commenced until six months following
                Separation from Service or the Change of Control event. Notwithstanding
                the foregoing provision, no distribution shall be made to any Participant
                until the earliest date and upon such conditions as may be set forth
                under
                Treasury regulations issued pursuant to Code Section 409A
                (e).

            

    

    

    7.3  Elective
      Distributions.

    

    A
      Participant shall become entitled to receive a distribution from his Account
      at
      such time or times and by such method of payment as elected and specified in
      the
      Participant’s applicable annual Deferral Election Form, and/or as may be
      mandated by the provisions of this Article VII based upon the following
      distribution options: 

    

    
      	A.	
              In-Service
                Distributions. If
                a Participant elects in his annual Deferral Election Form, he can
                receive
                a distribution from the Participant Deferral Account of his Account,
                as
                soon as three (3) years after the end of the deferral Plan Year,
                all of
                his annual deferral amount, plus amounts credited/debited based on
                the
                performance of the Participant’s Deemed Crediting Options. The election is
                made on an annual basis, applies only to the Participant’s current Plan
                Year deferrals, is irrevocable and is payable according to the method
                of
                payment elected in the Participant’s applicable annual Deferral Election
                Form. If the Participant dies while receiving In-Service installment
                payments, his Designated Beneficiary shall be paid the balance of
                the
                Account in a lump sum. 

            

    

     

    
      	B.  	
              Timing
                and Method
                of Payment for In-Service Distributions.
                At
                the election of a Participant in the applicable Deferral Election
                Form, an
                In-Service Distribution will be either in the form of a lump-sum,
                occurring no later than sixty (60) days following the distribution
                date
                elected on the Deferral Election Form, or in annual installment payments
                beginning with the first business day on or after the commencement
                date as
                selected by the Participant in the annual Deferral Election Form
                and for a
                duration as selected by the Participant in the annual Deferral Election
                Form and to be paid thereafter within ten (10) days of the anniversary
                of
                the Valuation Date next preceding the distribution date of each calendar
                year until the In-Service Distribution amount has been fully
                distributed.

            

    

    

    7.4  Form
      of Payment 

    

    
      	A.  	
              Installment
                Payments. In
                any distribution in which a Participant has elected or will receive
                distribution in annual installments of up to ten (10) years, the
                amount of
                each annual installment shall be determined by applying a formula
                to the
                Account in which the numerator is the number one and the denominator
                is
                the number of remaining installments to be paid. For example, if
                a
                Participant elects ten (10) annual installments for a distribution,
                the
                first payment will be 1/10 of the Account, the second will be 1/9,
                the
                third will be 1/8; the fourth will be 1/7 and so on until the Account
                is
                entirely distributed. 

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      	B.  	
              Failure
                to Designate a Method of Payment. In
                any situation in which the Administrator is unable to determine the
                method
                of payment because of incomplete, unclear, or uncertain instructions
                in a
                Participant’s Deferral Election Form, the Participant will be deemed to
                have elected a lump sum
                distribution.

            

    

    

    
      	C.  	
              Subsequent
                Elections. A
                Participant who has made an In-Service distribution or a Separation
                from
                Service distribution election may make one or more subsequent elections
                to
                postpone the distribution date or to change the form of payment to
                another
                form permitted by the Plan. Such Subsequent Election shall be made
                in
                writing in such form as is acceptable to the Administrator and (i)
                is made
                at least twelve months prior to the original distribution date; (ii)
                provides for an effective date at least twelve months following the
                Subsequent Election; and (iii) postpones the commencement of payment
                for a
                period of not less than five years from the previous distribution
                date.

            

    

    

    7.5  Distributions
      Resulting from Unforeseeable Emergency.

    

    A
      Participant may request that all or a portion of his Account be distributed
      at
      any time prior to 

    Separation
      from Service from the Employer by submitting a written request to the
      Administrator,

    provided
      that the Participant has incurred an Unforeseeable Emergency, and the
      distribution is

    necessary
      to alleviate such Unforeseeable Emergency. 

    

    Such
      distribution shall be limited to an amount that does not exceed the amount
      necessary to

    satisfy
      such emergency, plus amounts necessary to pay taxes reasonably anticipated
      as a
      result of

    the
      distribution, after taking into account the extent to which such hardship is
      or
      may be relieved 

    through
      reimbursement or compensation by insurance or otherwise or by liquidation of
      the

    Participant’s
      assets (to the extent the liquidation of such assets would not itself cause
      severe 

    financial
      hardship). 

    

    Such
      distribution shall be made within thirty (30) days after the Valuation. Date
      immediately following the determination that such Unforeseeable Emergency
      exists, or as soon as administratively practicable. The balance not distributed
      from the Participant’s Account shall remain in the Plan.

    

    7.6             
      Distribution
      of Small Accounts.

    

    If
      at any
      time the value of the Participant’s Account is less than $10,000 (or such other
      greater or lesser amount as may be specified as “minimal” under Treasury
      regulations), the Administrator, in its sole and exclusive discretion, may
      make
      a distribution in lump sum of the value of the entire Account. If the value
      of a
      Participant’s Account is zero upon the Valuation Date of any distribution, the
      Participant shall be deemed to have received a distribution of such Account
      and
      his participation in the Plan terminates.

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

    ARTICLE
      VIII--ADMINISTRATION & CLAIMS PROCEDURE

    

    
      	8.1  	
              Duties
                of the Employer.

            

    

    

    The
      Employer shall have overall responsibility for the establishment, amendment,
      termination, administration, and operation of the Plan. The Employer shall
      discharge this responsibility by the appointment and removal (with or without
      cause) of the members of the Administrator, to which is delegated overall
      responsibility for administering, managing and operating the Plan.

    

    
      	8.2  	
              The
                Administrator.

            

    

    

    The
      Administrator shall consist of one or more members who shall be appointed by,
      and may be removed by, the Employer, and one of whom (who must be an officer
      of
      the Employer) shall be designated by the Employer as Chairman. In the absence
      of
      such appointment, the Employer shall serve as the Administrator. The
      Administrator shall consist of officers or other Employees of the Employer,
      or
      any other persons who shall serve at the request of the Employer. Any member
      of
      the Administrator may resign by delivering a written resignation to the Employer
      and to the Administrator, and this resignation shall become effective upon
      the
      date specified therein. The members of the Administrator shall serve at the
      will
      of the Employer, and the Employer may from time to time remove any Administrator
      member with or without cause and appoint their successors. In the event of
      a
      vacancy in membership, the remaining members shall constitute the Administrator
      with full order to act.

    

    8.3  Administrator’s
      Powers and Duties to Enforce Plan.

    

    The
      Administrator shall be the “Administrator” and “Named Fiduciary” only to the
      extent required by ERISA for top-hat plans and shall have the complete control
      and authority to enforce the Plan on behalf of any and all persons having or
      claiming any interest in the Plan in accordance with its terms. The
      Administrator, in its sole and absolute discretion, shall interpret the Plan
      and
      shall determine all questions arising in the administration and application
      of
      the Plan. Any such interpretation by the Administrator shall be final,
      conclusive and binding on all persons.

    

    8.4  Organization
      of the Administrator.

    

    The
      Administrator shall act by a majority of its members at the time in office.
      Administrator action may be taken either by a vote at a meeting or by written
      consent without a meeting. The Administrator may authorize any one or more
      of
      its members to execute any document or documents on behalf of the Administrator.
      The Administrator shall notify the Employer, in writing, of such authorization
      and the name or names of its member or members so designated in such cases.
      The
      Employer thereafter shall accept and rely on any documents executed by said
      member of the Administrator or members as representing action by the
      Administrator until the Administrator shall file with the Employer a written
      revocation of such designation. The Administrator may adopt such by-laws and
      regulations, as it deems desirable for the proper conduct of the Plan and to
      change or amend these by-laws and regulations from time to time. With the
      permission of the Employer, the Administrator may employ and appropriately
      compensate accountants, legal counsel, benefit specialists, actuaries, plan
      administrators and record keepers and any other persons as it deems necessary
      or
      desirable in connection with the administration and maintenance of the Plan.
      Such professionals and advisors shall not be considered members of the
      Administrator for any purpose.

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    8.5  Limitation
      of Liability.

    

    
      	A.	
              No
                member of the Board of Directors, the Employer and no officer or
                Employee
                of the Employer shall be liable to any Employee, Participant, Designated
                Beneficiary or any other person for any action taken or act of omission
                in
                connection with the administration or operation of this Plan unless
                attributable to his own fraud or willful misconduct. Nor shall the
                Employer be liable to any Employee, Participant, Designated Beneficiary
                or
                any other person for any such action taken or act of omission unless
                attributable to fraud, gross negligence or willful misconduct on
                the part
                of a Director, officer or Employee of the Employer. Moreover, each
                Participant, Designated Beneficiary, and any other person claiming
                a right
                to payment under the Plan shall only be entitled to look to the Employer
                for payment, and shall not have the right, claim or demand against
                the
                Administrator (or any member thereof), any Director, Officer or Employee
                of the Employer.

            

    

    

    
      	B.	
              To
                the fullest extent permitted by the law and subject to the Employer’s
                Certificate of Incorporation and By-laws, the Employer shall indemnify
                the
                Administrator, each of its members, and the Employer’s officers and
                Directors (and any Employee involved in carrying out the functions
                of the
                Employer under the Plan) for part or all expenses, costs, or liabilities
                arising out of the performance of duties required by the terms of
                the Plan
                agreement, except for those expenses, costs, or liabilities arising
                out of
                a member’s fraud, willful misconduct or gross
                negligence.

            

    

    

    8.6  Administrator
      Reliance on Records and Reports.

    

    The
      Administrator shall be entitled to rely upon certificates, reports, and opinions
      provided by an accountant, tax or pension advisor, actuary or legal counsel
      employed by the Employer or Administrator. The Administrator shall keep a record
      of all its proceedings and acts, and shall keep all such books of account,
      records, and other data as may be necessary for the proper administration of
      the
      Plan. The regularly kept records of the Administrator and the Employer shall
      be
      conclusive evidence of the service of a Participant, Compensation, age, marital
      status, status as an Employee, and all other matters contained therein and
      relevant to this Plan. The Administrator, in any of its dealings with
      Participants hereunder, may conclusively rely on any Deferral Election Form,
      written statement, representation, or documents made or provided by such
      Participants.

    

    8.7  Costs
      of the Plan.

    

    All
      the
      costs and expenses for maintaining the administration and operation of the
      Plan
      shall be borne by the Employer unless the Employer shall give notice (that
      Plan
      Participants bear this expense, in whole or in part) to: (a) Eligible
      Participants at the time they become a Participant by completion and filing
      of a
      Deferral Election Form; or (b) to existing Participants during annual
      re-enrollment. Such notice shall detail the administrative expense to be
      assessed a Plan Participant, how that expense will be assessed and allocated
      to
      the Participant Accounts, and any other important information concerning the
      imposition of this administrative expense. This administration charge, if any,
      shall operate as a reduction to the bookkeeping Account of a Participant or
      his
      designated Beneficiary, and in the absence of specification otherwise shall
      reduce the Account, and be charged annually during the month of
      January.

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    8.8  Claims
      Procedure.

    

    
      	A.	
              Claim.
                Benefits
                shall be paid in accordance with the terms of this Plan. A Participant,
                Designated Beneficiary or any person who believes that he is being
                denied
                a benefit to which he is entitled under the Plan (hereinafter referred
                to
                as a “Claimant”) may file a written request for such benefit with the
                Employer, setting forth his claim. The request must be addressed
                to the
                Administrator care of Secretary of the Employer at its then principal
                place of business. 

            

    

    

    
      	B.	
              Claim
                Decision. Upon
                the receipt of a claim, the Administrator shall advise the Claimant
                that a
                reply will be forthcoming within ninety (90) days and shall, in fact,
                deliver such reply within such period. However, the Administrator
                may
                extend the reply period for an additional ninety (90) days for reasonable
                cause. Any claim not granted or denied within such time period shall
                be
                deemed to have been denied. If the claim is denied in whole or in
                part,
                the Administrator shall adopt a written opinion, using language calculated
                to be understood by the Claimant, setting
                forth:

            

    

    

    
      	(1)  	
              The
                specific reason or reasons for such
                denial;

            

    

    

    
      	(2)  	
              The
                specific reference to pertinent provisions of this Agreement on which
                such
                denial is based;

            

    

    

    
      	(3)  	
              A
                description of any additional material or information necessary for
                the
                Claimant to perfect his claim and an explanation why such material
                or such
                information is necessary;

            

    

    

    
      	 	
               (4)

            	
              Appropriate
                information as to the steps to be taken if the Claimant wishes to
                submit
                the claim for review; and

            

    

    

    
      	 	
               (5)

            	
              The
                time limits for requesting a review under Subsection C and for review
                under Subsection D hereof.

            

    

     

    
      	C.	
              Request
                for Review. Within
                sixty (60) days after the receipt by the Claimant of the written
                opinion
                described above, the Claimant may request in writing that the Secretary
                of
                the Employer review the determination of the Administrator. Such
                request
                must be addressed to the Secretary of the Employer, at its then principal
                place of business. The Claimant or his duly authorized representative
                may,
                but need not, review the pertinent documents and submit issues and
                comments in writing for consideration by the Employer. If the Claimant
                does not request a review of the Administrator’s determination by the
                Secretary of the Employer within such sixty (60) day period, he shall
                be
                barred and estopped from challenging the Administrator’s
                determination.

            

    

    

    
      	D.	
              Review
                of Decision. Within
                sixty (60) days after the Secretary’s receipt of a request for review, he
                will review the Administrator’s determination. After considering all
                materials presented by the Claimant, the Secretary will render a
                written
                opinion, written in a manner calculated to be understood by the Claimant,
                setting forth the specific reasons for the decision and containing
                specific references to the pertinent provisions of this Agreement
                on which
                the decision is based. If special circumstances require that the
                sixty
                (60) day time period be extended, the Secretary will so notify the
                Claimant and will render the decision as soon as possible, but no
                later
                than one hundred twenty (120) days after receipt of the request for
                review. Any claim not granted or denied within such time period shall
                be
                deemed to have been denied.

            

    

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

       

    

    
      	8.9  	
              Litigation.

            

    

    

    It
      shall
      only be necessary to join the Employer as a party in any action or judicial
      proceeding affecting the Plan. No Participant or Designated Beneficiary or
      any
      other person claiming under the Plan shall be entitled to service of process
      or
      notice of such action or proceeding, except as may be expressly required by
      law.
      Any final judgment in such action or proceeding shall be binding on all
      Participants, Designated Beneficiaries or persons claiming under the
      Plan.

    

    

    ARTICLE
      IX--AMENDMENT, TERMINATION & REORGANIZATION

    

    9.1  Amendment.

    

    The
      Employer by action of its Board of Directors, or duly authorized Administrator
      thereof, in accordance with its by-laws, reserves the right to amend the Plan,
      by resolution of the Employer, to the extent permitted under the Code and ERISA.
      However, no amendment to the Plan shall be effective to the extent that it
      has
      the effect of decreasing a Participant’s (or Designated Beneficiary’s) accrued
      benefit prior to the date of the amendment. 

    

    9.2  Amendment
      Required By Law.

    

    Notwithstanding
      Section 9.1, the Plan may be amended at any time, if in the opinion of the
      Employer, such amendment is necessary to ensure the Plan is treated as a
      nonqualified plan of deferred compensation under the Code and ERISA, or to
      bring
      it into conformance with Treasury or SEC regulations or requirements for such
      plans. This includes the right to amend this Plan, so that any Trust, if
      applicable, created in conjunction with this Plan, will be treated as a grantor
      Trust under Sections 671 through 679 of the Code, and to otherwise conform
      the
      Plan provisions and such Trust, if applicable, to the requirements of any
      applicable law.

    

    9.3  Termination.

    

    The
      Employer intends to continue the Plan indefinitely. However, the Employer by
      action of its Board of Directors or a duly authorized committee thereof, in
      accordance with its by-laws, reserves the right to terminate the Plan at any
      time. However, no such termination shall deprive any participant or Designated
      Beneficiary of a right accrued under the Plan prior to the date of
      termination.

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    9.4  Consolidation/Merger.

    

    The
      Employer shall not enter into any consolidation or merger without the guarantee
      and assurance of the successor or surviving company or companies to the
      obligations contained under the Plan. Should such consolidation or merger occur,
      the term “Employer” as defined and used in this Agreement shall refer to the
      successor or surviving company. 

    

    

    ARTICLE
      X--GENERAL PROVISIONS

    

    10.1  Applicable
      Law.

    

    Except
      insofar as the law has been superseded by Federal law, Maryland law shall govern
      the construction, validity and administration of this Plan as created by this
      Agreement. The parties to this Agreement intend that this Plan shall be a
      nonqualified unfunded plan of deferred compensation without plan assets and
      any
      ambiguities in its construction shall be resolved in favor of an interpretation
      which will effect this intention.

    

    10.2  Benefits
      Not Transferable or Assignable.

    

    
      	A.	
              Benefits
                under the Plan shall not be subject to anticipation, alienation,
                sale,
                transfer, assignment, pledge, encumbrance or charge and any attempt
                to
                anticipate, alienate, sell, transfer, assign, pledge, encumber or
                charge
                such benefits shall be void, nor shall any such benefits be in any
                way
                liable for or subject to the debts, contracts, liabilities, engagements
                or
                torts of any person entitled to them. However, a Participant may
                name a
                recipient for any benefits payable or which would become payable
                to a
                Participant upon his death. This Section shall also apply to the
                creation,
                assignment or recognition of a right to any benefit payable with
                respect
                to a Participant pursuant to a domestic relations order, including
                a
                qualified domestic relations order under Section 414(p) of the Code.
                In
                addition, the following actions shall not be treated or construed
                as an
                assignment or alienation: (a) Plan Contribution or distribution tax
                withholding; (b) recovery of distribution overpayments to a Participant
                or
                Designated Beneficiary; (c) direct deposit of a distribution to a
                Participant’s or Designated Beneficiary’s banking institution account; or
                (d) transfer of Participant rights from one Plan to another Plan,
                if
                applicable.

            

    

    

    
      	B.	
              The
                Employer may bring an action for a declaratory judgment if a
                Participant’s, Designated Beneficiary’s or any Beneficiary’s benefits
                hereunder are attached by an order from any court. The Employer may
                seek
                such declaratory judgment in any court of competent jurisdiction
                to:

            

    

    

    
      	(1)
                	
              determine
                the proper recipient or recipients of the benefits to be paid under
                the
                Plan;

            

    

    

    
      	(2) 
               	
              protect
                the operation and consequences of the Plan for the Employer and all
                Participants; and

            

    

    

    
      	(3) 
               	
              request
                any other equitable relief the Employer in its sole and exclusive
                judgment
                may feel appropriate. 

            

    

    

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    Benefits
      which may become payable during the pendency of such an action shall, at the
      sole discretion of the Employer, either be:

    

    (1) paid
      into
      the court as they become payable or

    

    (2)
      held in
      the Participant’s or Designated Beneficiary’s Account subject to the court’s
      final distribution order.

    

    
      	10.3  	
              Not
                an Employment
                Contract.

            

    

    

    The
      Plan
      is not and shall not be deemed to constitute a contract between the Employer
      and
      any Employee, or to be a consideration for, or an inducement to, or a condition
      of, the employment of any Employee. Nothing contained in the Plan shall give
      or
      be deemed to give an Employee the right to remain in the employment of the
      Employer or to interfere with the right to be retained in the employ of the
      Employer, any legal or equitable right against the Employer, or to interfere
      with the right of the Employer to discharge any Employee at any time. It is
      expressly understood by the parties hereto that this Agreement relates to the
      payment of deferred compensation for the Employee’s services, generally payable
      after separation from employment with the Employer, and is not intended to
      be an
      employment contract.

    

    
      	10.4  	
              Notices.

            

    

    

    
      	A. 
               	
              Any
                notices required or permitted hereunder shall be in writing and shall
                be
                deemed to be sufficiently given at the time when delivered personally
                or
                when mailed by certified or registered first class mail, postage
                prepaid,
                addressed to either party hereto as
                follows:

            

    

    

    If
      to the
      Employer:

    

    Shore
      Bancshares

    18
      East
      Dover Street

    Easton,
      MD 21601

    

    If
      to the
      Participant:

    

    At
      his
      last known address, as indicated by the records of the Employer.

    

    or
      to
      such changed address as such parties may have fixed by notice. However, any
      notice of change of address shall be effective only upon receipt.

    

    
      	
            	B.	
              Any
                communication, benefit payment, statement of notice addressed to
                a
                Participant or Designated Beneficiary at the last post office address
                as
                shown on the Employer’s records shall be binding on the Participant or
                Designated Beneficiary for all purposes of the Plan. The Employer
                shall
                not be obligated to search for any Participant or Designated Beneficiary
                beyond sending a registered letter to such last known
                address.

            

    

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    
 

    
      	10.5  	
              Severability.

            

    

    

    The
      Plan
      as contained in the provisions of this Agreement constitutes the entire
      Agreement between the parties. If any provision or provisions of the Plan shall
      for any reason be invalid or unenforceable, the remaining provisions of the
      Plan
      shall be carried into effect, unless the effect thereof would be to materially
      alter or defeat the purposes of the Plan. All terms of the plan and all
      discretion granted hereunder shall be uniformly and consistently applied to
      all
      the Employees, Participants and Designated Beneficiaries.

    

    
      	10.6  	
              Participant
                is General Creditor with No Rights to
                Assets.

            

    

    

    
      	A.	
              The
                payments to the Participant or his Designated Beneficiary or any
                other
                beneficiary hereunder shall be made from assets which shall continue,
                for
                all purposes, to be a part of the general, unrestricted assets of
                the
                Employer, no person shall have any interest in any such assets b
                y virtue
                of the provisions of this Agreement. The Employer’s obligation hereunder
                shall be an unfunded and unsecured promise to pay money in the future.
                To
                the extent that any person acquires a right to receive payments from
                the
                Employer under the provisions hereof, such right shall be no greater
                than
                the right of any unsecured general creditor of the Employer; no such
                person shall have nor require any legal or equitable right, or claim
                in or
                to any property or assets of the Employer. The Employer shall not
                be
                obligated under any circumstances to fund obligations under this
                Agreement.

            

    

    

    
      	B.	
              The
                Employer at its sole discretion and exclusive option, may acquire
                and/or
                set-aside assets or funds, in a trust or otherwise, to support its
                financial obligations under this Plan. No such trust established
                for this
                purpose shall be established in or transferred to a location that
                would
                cause it to be deemed to be an “offshore trust” for purposes of Code
                Section 409A (b)(1). No such acquisition or set-aside shall impair
                or
                derogate from the Employer’s direct obligation to a Participant or
                Designated Beneficiary under this Plan. However, no Participant or
                Designated Beneficiary shall be entitled to receive duplicate payments
                of
                any Accounts provided under the Plan because of the existence of
                such
                assets or funds.

            

    

    

    
      	C.	
              In
                the event that, in its discretion, the Employer purchases an asset(s)
                or
                insurance policy or policies insuring the life of the Participant
                to allow
                the Employer to recover the cost of providing benefits, in whole
                or in
                part hereunder, neither the Participant, Designated Beneficiary nor
                any
                other beneficiary shall have any rights whatsoever therein in such
                assets
                or in the proceeds therefrom. The Employer shall be the sole owner
                and
                beneficiary of any such assets or insurance policy and shall possess
                and
                may exercise all incidents of ownership therein. No such asset or
                policy,
                policies or other property shall be held in any trust for the Participant
                or any other person nor as collateral security for any obligation
                of the
                Employer hereunder. Nor shall any Participant’s participation in the
                acquisition of such assets or policy or policies be a representation
                to
                the Participant, Designated Beneficiary or any other beneficiary
                of any
                beneficial interest or ownership in such assets, policy or policies.
                A
                Participant may be required to submit to medical examinations, supply
                such
                information and to execute such documents as may be required by an
                insurance carrier or carriers (to whom the Employer may apply from
                time to
                time) as a precondition to participate in the
                Plan.

            

    

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    
 

    
      	10.7  	
              No
                Trust Relationship
                Created.

            

    

    

    Nothing
      contained in this Agreement shall be deemed to create a trust of any kind or
      create any fiduciary relationship between the Employer and the Participant,
      Designated Beneficiary, other beneficiaries of the Participant, or any other
      person claiming through the Participant. Funds allocated hereunder shall
      continue for all purposes to be part of the general assets and funds of the
      Employer and no person other than the Employer shall, by virtue of the
      provisions of this Plan, have any beneficial interest in such assets and funds.
      The creation of a grantor Trust (so called “Rabbi Trust”) under the Code (owned
      by and for the benefit of the Employer) to hold such assets or funds for the
      administrative convenience of the Employer shall not give nor be a
      representation to a Participant, Designated Beneficiary, or any other person,
      of
      a property or beneficial ownership interest in such Trust assets or funds even
      though the incidental advantages or benefits of the Trust to Plan Participants
      may be communicated to them.

    

    
      	10.8  	
              Limitations
                on Liability of the
                Employer.

            

    

    

    Neither
      the establishment of the Plan nor any modification hereof nor the creation
      of
      any Account under the Plan nor the payment of any benefits under the Plan shall
      be construed as giving to any Participant or any other person any legal or
      equitable right against the Employer or any Director, officer or Employee
      thereof except as provided by law or by any Plan provision.

     

    
      	10.9  	
              Agreement
                Between Employer and Participant
                Only.

            

    

    

    This
      Agreement is solely between the Employer and Participant. The Participant,
      Designated Beneficiary, estate or any other person claiming through the
      Participant, shall only have recourse against the Employer for enforcement
      of
      this Agreement. This Agreement shall be binding upon and inure to the benefit
      of
      the Employer and its successors and assigns, and the Participant, successors,
      heirs, executors, administrators and beneficiaries.

    

    
      	10.10	
              Independence
                of Benefits.

            

    

    

    The
      benefits payable under this Agreement are for services already rendered and
      shall be independent of, and in addition to, any other benefits or compensation,
      whether by salary, bonus, fees or otherwise, payable to the Participant under
      any compensation and/or benefit arrangements or plans, incentive cash
      compensations and stock plans and other retirement or welfare benefit plans,
      that now exist or may hereafter exist from time to time.

    

    
      	10.11	
              Unclaimed
                Property.

            

    

    

    Except
      as
      may be required by law, the Employer may take any of the following actions
      if it
      gives notice to a Participant or Designated Beneficiary of an entitlement to
      benefits under the Plan, and the Participant or Designated Beneficiary fails
      to
      claim such benefit or fails to provide their location to the Employer within
      three (3) calendar years of such notice:

    

    
      	(1)	
              Direct
                distribution of such benefits, in such proportions as the Employer
                may
                determine, to one or more or all, of a Participant’s next of kin, if their
                location is known to the Employer;

            

    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    
      	(2)	
              Deem
                this benefit to be forfeiture and paid to the Employer if the location
                of
                a Participant’s next of kin is not known. However, the Employer shall pay
                the benefit, unadjusted for gains or losses from the date of such
                forfeiture, to a Participant or Designated Beneficiary who subsequently
                makes proper claim to the benefit. 

            

    

    

    The
      Employer shall not be liable to any person for payment pursuant to applicable
      state unclaimed property laws.

    

    
      	10.12  	
              Required
                Tax Withholding and
                Reporting.

            

    

    

    The
      Employer shall withhold and report Federal, state and local income and payroll
      tax amounts on all Contributions to and distributions and withdrawals from
      a
      Participant’s Account as may be required by law from time to time.

    

    SHORE
      BANCSHARES, INC.

    

    

    BY:
      /s/
      W.
      Moorhead Vermilye   

    

    Title:
      President
      and Chief Executive Officer  

    

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    
 

    Schedule
      A

    

    Mandatory
      Contributions:

    

    Mr.
      Duncan

    

    Annual
      contribution of 21% of cash compensation over the IRS Section 415 limit, plus
      the following:

    

    
      	
              Plan
                Year 1

            	
              $28,914

            
	
              Plan
                Year 2

            	
              $30,649

            
	
              Plan
                Year 3

            	
              $32,488

            
	
              Plan
                Year 4

            	
              $34,437

            
	
              Plan
                Year 5

            	
              $36,503

            

    

    

    Mr.
      Vermilye

    

    Annual
      contribution of $20,000.

    

    2006
      Discretionary Contributions:

    

    Mr.
      Vermilye

    

    $60,000
      in 2006.

    

    Mr.
      Beatty

    

    $40,000
      in 2006.

    

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
          Shore
            Bancshares Inc. Executive Deferred Compensation Plan

          Deferral
            Election Form

          Short
            Plan Year October 1, 2006 to December 31,
            2006

        

      

    

    
 

    
      
        	
                 

                Section
                  1 Employee

                Information

              	
                 

                 

                _________________________________________     
                   _______________________________

                Name
                                                                                                           
                   Social Security Number

                 

              
	
                 

                Section
                  2 Enrollment Election

              	
                 

                oElection
                  to Participate.  I
                  hereby elect to defer 4th
                  Quarter 2006 compensation to the Shore Bancshares Inc.
                  Executive

                    Deferred
                  Compensation Plan (the “Plan”). I understand that any election I make
                  regarding the amount I wish to defer

                   
                  is irrevocable
                  during the Plan year and cannot be changed until the next Plan
                  year.

                 

                   
Indicate
                  below how much you would like to defer for both base salary and
                  bonus
                  earnings:

                 

                   
I
                  elect to defer ______% (choose from 1% to 100% in
                  whole percentages only)
                  per pay period or $_________ (fixed 

                   
                  dollar amount) of my base
                  salary
                  for the quarter. 

                 

                   
I
                  elect to defer ______% (choose from 1% to 100% in
                  whole percentages only)
                  per pay period or $_________ (fixed 

                   
                  dollar amount) of my bonus
                  per annum. (Note:
                  For 2006, amount deferred cannot exceed 25% of the total annual
                  

                   
                  bonus.) 

                 

                 

                oElection
                  Not to Participate. I
                  elect not
                  to
                  defer 2006 compensation to the Plan. 

                 

              
	
                 

                Section
                  3 Distribution

                Election

              	
                 

                The
                  Plan offers automatic distributions in the event of Death, Disability,
                  Change of Control, or Separation from Service. In addition, you
                  may elect
                  In-Service Distributions. You must elect the timing and type of
                  payment
                  you want to receive for each In-Service Distribution. 

                 

                Note:
                  In-Service Distributions are available only
                  for Deferrals and related deemed earnings, not
                  for Employer Contributions.

                 

                Note:
                  See Section 7.2E of the Plan relating to Time of
                  Payment

                 

                I
                  wish to make the following irrevocable
                  In-Service Distribution election for 2006 deferrals and any related
                  deemed
                  earnings. 

                 

                 

                Elective
                  Distributions 

                 

                In-Service
                  Distribution
                  -
                  I elect to receive an In-Service Distribution, commencing on: (no
                  sooner
                  than three (3) years after the close of the 2006 Plan Year):

                 

                Date:
                  _________________________ In the form of (choose one): 

                 

                o 
 Lump-Sum
                  Payment               
                   o
Annual
                  Installments over ______ (up to 10) years 

                 

                 

              
	
                 

                Section
                  4 Signature

              	
                 

                 

                _________________________________                            
                  ____________     

                Employee's
                  Signature                                                                   
                  Date

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Shore
              Bancshares Inc. Executive Deferred Compensation Plan

            Deemed
              Crediting Option Election Form

          

        

      

    

     

    

      
        	
                 

                Section
                  1 Employee

                Information

              	
                 

                 

                _________________________________________    
                  _______________________________

                Name                                                                                          
                  Social
                  Security Number

              
	
                 

                Section
                  2 Enrollment Election

              	
                 

                I
                  elect as a Deemed Crediting Option(s) the following, which will
                  determine
                  my rate of return as discussed in 

                Article
                  V of the Plan. 

                 

                Note:
                  Selected Deemed Crediting Options must have at least a 5% allocation
                  of
                  your Account. 

                 

                Note:
                  This election applies to your entire Account, including Deferrals,
                  Mandatory Contributions, and any Matching 

                or
                  Discretionary Contributions.

                 

                Note:
                  This election will remain valid until a subsequent election is
                  made by
                  you, on forms provided by Shore

                Bancshares,
                  Inc.

                 

                 

                Deemed
                  Crediting Option
                  Options                                  
                  Participant
                  Allocation

                 

                S&P
                  500
                  Index                                                                                
                  _______
                  %

                 

                S&P
                  400 MidCap
                  Index                                                                 
                  _______
                  %

                 

                Lehman
                  Bond
                  Index                                                                       
                  _______
                  %

                 

                Money
                  Market                                                                                
                  _______
                  %

                 

                Shore
                  Bancshares Inc.
                  Stock                                                        
                  _______ %

                 

                TOTAL
                  (must
                  equal
                  100%)                                                           
                  _______
                  %

                 

                 

                I
                  understand that Shore Bancshares, Inc. shall determine, in its
                  sole
                  discretion, whether, and if so,

                to
                  what extent, the amount that I defer under the Plan shall be invested
                  in
                  the options I have selected.

                 

              
	
                 

                Section
                  3 Signature

              	
                 

                 

                 

                _____________________________________                        
                  ____________     

                Employee's
                  Signature                                                                       
                    Date

              

      

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
          Shore
            Bancshares Inc. Executive Deferred Compensation Plan

          Beneficiary
            Designation Form

        

      

    

    
 

    
      
        
          	
                   

                  Section
                    1 Employee

                  Information

                	
                   

                   

                  _________________________________________    
                    _______________________________

                  Name                                                                                          
                    Social
                    Security Number

                   

                
	
                   

                  Section
                    2 

                  Designation 

                   

                	 

                  Use
                    this Form to designate the person or persons who are to receive
                    benefits
                    payable by the Plan upon your death. 

                  Please
                    note these other important
                    points:

                

        

      

    

     

    
      	· 
                	
              You
                may designate one or more persons or one or more trusts as your
                beneficiary.

            

       

      	·  
               	
              If
                you fail to designate a beneficiary or all your beneficiaries predecease
                you, the Plan will pay benefits to your
                estate.

            

       

      	· 
                	
              If
                we cannot after reasonable effort locate your beneficiary(ies), the
                Plan
                may pay benefits to your estate.

            

       

      	·  
               	
              If
                you designate a spouse as your beneficiary and then become divorced
                or
                legally separated from the spouse, your beneficiary designation
                will remain in effect until you modify it
                on
                forms the Employer will provide upon your
                request.

            

       

      	· 
                	
              If
                you designate multiple primary or contingent beneficiaries, indicate
                the
                share payable to each.

            

       

      	·  
               	
              The
                benefit received under this Plan is subject to income
                taxation.

            

      

      Primary
        Beneficiary(ies) : 

       

      
        	
                Name

              	
                SSN
                  / ID #

              	
                Address

              	
                Relationship

              	
                Share

              
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

      

      

      Contingent
        Beneficiary(ies) : 

      
         

        
          	
                  Name

                	
                  SSN
                    / ID #

                	
                  Address

                	
                  Relationship

                	
                  Share

                
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

        

        
          	    
	             
                  
	
                   

                  Section
                    3 Signature

                	
                   

                   

                   

                  _____________________________________                        
                    ____________     

                  Employee's
                    Signature                                                                       
                      DateExhibit
      10.1

    

    September
      19, 2006

    

    Triangle
      USA Petroleum Corporation

    Suite
      1110, 521- 3rd
      Avenue
      S.W.

    Calgary,
      Alberta T2P 3T3

    

    

    Attention:
      Mr. Ron Hietala

    

    
      	Re:	
              Letter
                Exploration Participation Agreement dated September 12,
                2006

              Arkansas,
                USA

            

    

     

    
      
        

      

    The
      following shall evidence the agreement reached between Kerogen Resources Inc.
      (herein referred to as the “Kerogen”) and Triangle USA Corporation (herein
      referred to as “Triangle”) with respect to the following:

    

    Triangle
      commits to participate for a 50% Working Interest in the joint exploration
      and
      development of the prospects contained herein:

    

    Commitment:

    

    Triangle
      shall have the right to acquire 50% of Kerogen’s land position, approximately
      17,000 acres, upon execution of this agreement. In addition, Triangle will
      participate in two 3-D seismic programs, on a 50/50 basis, in order to evaluate
      these lands. Triangle agrees to carry a portion of Kerogen’s working interest in
      the land and seismic programs, as described below. Triangle agrees to pay a
      promoted cost for land and seismic up to $9,609,039 after which the costs shall
      be shared 50/50.

    

    Upon
      completion of the seismic interpretation, Kerogen and Triangle shall jointly
      participate in two net test wells per area on or before December 31, 2007.
      Triangle agrees to carry a portion of Kerogen’s working interest in the test
      wells as described below. Triangle agrees to pay a promoted cost for the test
      wells up to $3,266,340 after which the costs shall be shared 50/50.

    

    All
      of
      the land, seismic and test well costs are subject to the Carried Interest
      described below.

    

    Carried
      Interest:

    

    In
      addition to Triangle’s 50% share of the costs, Triangle will carry a
      proportional share of Kerogen’s costs for the land, seismic, drilling and
      completing of the commitment wells, up to the total capital commitment listed
      below, being equal to 16.6666% for a total commitment of 66.6666%. Any costs
      incurred above the capital commitment listed below shall be shared
      50/50.

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    Total
      Capital Commitment:

    

    
      	
              Prospect

            	
              Land
                and Seismic Costs

            	
              Commitment
                Well Costs

            	
              Total
                Cost

            
	
              Arkansas
                Area 1

            	
              $4,076,259

            	
              $3,266,340

            	
              $7,342,599

            
	
              Arkansas
                Area 2

            	
              $5,532,780

            	
              $3,266,340

            	
              $8,799,120

            
	
              Total

            	
              $9,609,039

            	
              $6,532,680

            	
              $16,141,719

            

    

     

    Interest
      Earned:

    

    By
      paying
      its proportionate share of the land and seismic costs, as well as participating
      in the test wells, Triangle will earn an undivided 50% of Kerogen’s interest in
      each prospect. Upon earning, Kerogen will assign 50% of its interest in all
      the
      leases contained within each prospect.

    

    Area
      of
      Mutual Interest:

    

    Kerogen
      and Triangle hereby establish an area of mutual interest (“AMI”) for each
      prospect for a term of three years. If at any time during the term of the AMI
      either party acquires an interest within the AMI, such acquiring party shall
      make available 50% of such acquired interest to the other party.

    

    Failure
      to Drill Commitment Wells:

    

    If
      Kerogen fails to commence the drilling of any commitment well on or before
      December 31, 2007 the prospect will no longer be subject to this agreement.
      Kerogen will tender assignment of 50% interest in the leases for no additional
      cost and Triangle will have full right of ownership as if all commitment wells
      had been drilled. 

    

    Additional
      Terms:

    

    All
      other
      terms are to be agreed between the parties using Kerogen’s standard Joint
      Operating Agreements.

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Yours
      truly,

    

    KEROGEN
      RESOURCES INC.

     

    

    “Thomas
      G. Harris”

    
      
        

      

    

    Thomas
      G.
      Harris    

    President

    

    

    ACCEPTED
      AND AGREED TO THIS 19th
      DAY OF SEPTEMBER, 2006  

    

    

    

    “Ron
      Hietala”

    
      
Ron
      Hietala

    President

    Triangle
      USA Petroleum Corporation 

     

     

    
      
         

      

      
        3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}]]