<SEC-DOCUMENT>0001144204-12-016135.txt : 20120320
<SEC-HEADER>0001144204-12-016135.hdr.sgml : 20120320
<ACCEPTANCE-DATETIME>20120320161613
ACCESSION NUMBER:		0001144204-12-016135
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20120315
ITEM INFORMATION:		Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20120320
DATE AS OF CHANGE:		20120320

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SHORE BANCSHARES INC
		CENTRAL INDEX KEY:			0001035092
		STANDARD INDUSTRIAL CLASSIFICATION:	NATIONAL COMMERCIAL BANKS [6021]
		IRS NUMBER:				521974638
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-22345
		FILM NUMBER:		12703615

	BUSINESS ADDRESS:	
		STREET 1:		18 EAST DOVER STREET
		CITY:			EASTON
		STATE:			MD
		ZIP:			21601-3013
		BUSINESS PHONE:		4108221400

	MAIL ADDRESS:	
		STREET 1:		18 EAST DOVER STREET
		CITY:			EASTON
		STATE:			MD
		ZIP:			21601-3013
</SEC-HEADER>
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<TYPE>8-K
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<P STYLE="margin: 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>Washington, D.C.
20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM 8-K</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CURRENT REPORT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PURSUANT TO SECTION 13 OR 15(d) OF THE
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES EXCHANGE ACT OF 1934</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Date of Report (Date of earliest event reported):
March 15, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B><U>SHORE BANCSHARES, INC.</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of registrant as specified in
its charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 25%; padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; text-align: center">Maryland</TD>
    <TD STYLE="width: 1%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 25%; padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; text-align: center">0-22345</TD>
    <TD STYLE="width: 1%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 25%; padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; text-align: center">52-1974638</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">(State or other jurisdiction of</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">(Commission file number)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (IRS Employer</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">incorporation or organization)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Identification No.)</TD>
    </TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><U>18 East Dover Street, Easton, Maryland
21601</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address of principal executive offices)
(Zip Code)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Registrant&rsquo;s telephone number, including
area code: <U>(410) 763-7800</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><U>N/A</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Former Name or Former Address, if Changed
Since Last Report)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0">Check the appropriate box below if the Form 8-K filing
is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Wingdings 2">&pound;</FONT>&#9;Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Wingdings 2">&pound;</FONT>&#9;Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Wingdings 2">&pound;</FONT>&#9;Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR &#9;240.14d-2(b))</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Wingdings 2">&pound;</FONT>&#9;Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR &#9;240.13e-4(c))</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TD STYLE="width: 0in"></TD><TD STYLE="width: 1in; text-align: left"><B>Item 5.02</B></TD><TD STYLE="text-align: justify"><B>Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(e)&#9;<U>Compensatory Arrangements</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 15, 2012, the Compensation Committee
of the Board of Directors of Shore Bancshares, Inc. (the &ldquo;Company&rdquo;) granted nonqualified stock options to Lloyd L.
Beatty, Jr., Susan E. Leaverton and F. Winfield Trice, Jr. under the Company&rsquo;s 2006 Stock and Incentive Compensation Plan
(the &ldquo;Plan&rdquo;) and entered into a Nonqualified Stock Option Agreement with each of them (each, an &ldquo;Option Agreement&rdquo;).
Mr. Beatty serves as a director and the President and Chief Operating Officer of the Company, Ms. Leaverton serves as the Company&rsquo;s
Treasurer and Principal Accounting Officer, and Mr. Trice serves as a director of the Company and as President of CNB, a bank subsidiary
of the Company. Mr. Beatty&rsquo;s option entitles him to purchase 22,590 shares of the common stock of the Company at an exercise
price of $6.64 per share, and the options granted to Ms. Leaverton and Mr. Trice entitle each of them to purchase 13,554 shares
at an exercise price of $6.64 per share. Each option has a 10-year term. Fifty percent of each option vests on March 15, 2014 and
the remaining 50% vests on March 15, 2015, although, subject to the terms of the Plan, the options will immediately vest and become
exercisable in full upon a Change in Control of the Company (as defined in the Plan). In addition, the Compensation Committee may
accelerate the vesting of the options, in whole or in part, at any time and for any reason.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The number of shares subject to the options
and the exercise price thereof are subject to adjustment as provided in the Plan in the event of certain events affecting the outstanding
shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If an optionee retires from employment with
the Company or its subsidiaries in accordance with the Company&rsquo;s retirement plan, then the unexercised portion of his or
her option that has vested will remain exercisable until the earlier of 90 days following the date of retirement or the stated
expiration date of the option. In the event the optionee&rsquo;s employment terminates due to death or disability, the unexercised
portion of his or her option that has vested will remain exercisable until the earlier of one year following the date of death
or disability or the stated expiration date of the option. The unexercised portion of an option (whether vested or not) will terminate,
lapse and be forfeited if the optionee&rsquo;s employment is terminated for &ldquo;Cause&rdquo; (as defined in the Option Agreement).
In the event of a termination of employment for any other reason, the unexercised portion of the option that has vested will remain
exercisable until the earlier of 90 days following the date of termination or the stated expiration date of the option. Notwithstanding
the foregoing, if an optionee dies following the termination of his or her employment but prior to exercising the vested portion
of his or her option within the above timeframes, then the period during which that portion of the option may be exercised will
be extended by 12 months, subject in all cases to the stated expiration date of the option.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The optionees are generally prohibited from
assigning or pledging their options except by will or the laws of descent and distribution. If permitted by applicable securities
laws, however, an optionee may assign his or her option to his or her spouse, lineal ascendants, lineal descendants and to trusts
for the benefit of the foregoing persons.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The options are subject in all cases to
the terms and conditions of the Plan and, generally, may not be amended or terminated without the consent of the optionees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The foregoing is only a summary of the material
provisions of the Option Agreement and the Plan and is qualified in its entirety by the terms of the Option Agreement and the Plan.
The form of Option Agreement is filed herewith as Exhibit 10.1, and a copy of the Plan was filed as Appendix A to the Company&rsquo;s
2006 definitive proxy statement filed with the Securities and Exchange Commission on March 24, 2006.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TD STYLE="width: 0in"></TD><TD STYLE="width: 1in; text-align: left"><B>Item 9.01</B></TD><TD STYLE="text-align: justify"><B>Financial Statement and Exhibits.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(d)&#9;<U>Exhibits</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The exhibits filed with this Form 8-K are
listed in the Exhibit Index that immediately follows the signatures hereto, which list is incorporated by reference into this item.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">SHORE BANCSHARES, INC.</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; width: 46%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; width: 5%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; width: 33%">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Dated:&nbsp; March 20, 2012</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">By:</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline">/s/ W. Moorhead Vermilye</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">W. Moorhead Vermilye</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Chief Executive Officer</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">(Principal Executive Officer)</TD>
    </TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="letter-spacing: -0.15pt"><B>EXHIBIT
INDEX</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline">Exhibit</TD>
    <TD STYLE="width: 80%; padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">10.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Form of Nonqualified Stock Option Agreement entered into pursuant to the Shore Bancshares, Inc. 2006 Stock and Incentive Compensation Plan (filed herewith)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -1in">&nbsp;</P>

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<P STYLE="margin: 0; text-align: right"><B>Exhibit 10.1</B></P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NONQUALIFIED STOCK OPTION AGREEMENT</B></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">under the</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SHORE BANCSHARES, INC.</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">2006 STOCK AND INCENTIVE COMPENSATION
PLAN</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">THIS
NONQUALIFIED STOCK OPTION AGREEMENT (this &ldquo;Agreement&rdquo;) is made this 15<SUP>th</SUP> day of March, 2012 (the &ldquo;Grant
Date&rdquo;), by and between Shore Bancshares, Inc., a Maryland corporation (the &ldquo;Company&rdquo;), and _____________________________
(the &ldquo;Participant&rdquo;). </FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">WHEREAS,
the Board of Directors of the Company (the &ldquo;Board&rdquo;) considers it desirable and in the Company&rsquo;s interest that
the Participant be given an opportunity to purchase shares of the common stock of the Company, par value $.01 per share (&ldquo;Shares&rdquo;),
pursuant to the terms and conditions of the Company&rsquo;s 2006 Stock and Incentive Compensation Plan (the &ldquo;Plan&rdquo;),
to provide an incentive for the Participant and to promote the interests of the Company.</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">NOW,
THEREFORE, it is agreed as follows:</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">1.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><U>Definitions</U>. Capitalized terms used but not defined herein shall have the meanings given such terms in the Plan.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">2.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><U>Grant of Option; Certain Terms and Conditions</U>. The Company hereby grants to the Participant an option to purchase
the number of Shares indicated below (the &ldquo;Option Shares&rdquo;) from the Company at an Option Price per Option Share indicated
below, which option shall expire at 5:00 p.m. on the Expiration Date indicated below or as earlier provided in this Agreement and
shall be subject to all of the terms and conditions set forth in this Agreement (the &ldquo;Option&rdquo;). On each anniversary
of the Grant Date, the Option shall become exercisable to purchase, and shall vest with respect to, the number of Option Shares
(rounded down to the nearest whole share) equal to the total number of Option Shares multiplied by the Annual Vesting Rate indicated
below.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt"></FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="width: 50%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30%">Number of Option Shares:</TD>
    <TD STYLE="width: 4%; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="width: 26%; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD>Option Price per Share:</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">$6.64</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD>Expiration Date:</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">March 15, 2022</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD>Annual Vesting Rate:</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">0% - 50% - 50%</TD>
    </TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">3.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><U>Acceleration and Termination of Option</U>. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in"><FONT STYLE="letter-spacing: -0.15pt">(a)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT></FONT><U>Acceleration of Vesting</U>.<FONT STYLE="letter-spacing: -0.15pt"> </FONT>S<FONT STYLE="letter-spacing: -0.15pt">ubject
to <I>Article XI</I> of the Plan and the other provisions of this <I>Section 3</I>, the Option shall become immediately exercisable
in full in the event of a Change in Control of the Company. The Committee, in its sole discretion, may at any time accelerate the
exercisability of all or any portion of the Option for any other reason. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in"><FONT STYLE="letter-spacing: -0.15pt">(b)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></FONT><U>Termination of Employment</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1.5in">&nbsp;(i)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;<U>Retirement.
</U>If the Participant&rsquo;s service as an officer or employee of the Company or any of its Subsidiaries (&ldquo;Employment&rdquo;)
is terminated by reason of the Participant&rsquo;s retirement with the approval of the Committee or in accordance with the Company&rsquo;s
or Subsidiary&rsquo;s then current retirement policy (&ldquo;Retirement&rdquo;), then the unexercised portion of the Option may
thereafter be exercised, to the extent it was exercisable on the date of such retirement, until the earlier of 90 days from the
date of such termination of Employment and the Expiration Date (the &ldquo;Option Termination Date&rdquo;).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1.5in">(ii)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;</FONT><U>Death.</U> If the Participant&rsquo;s Employment is terminated by reason of the death of the Participant, then the unexercised
portion of the Option may thereafter be exercised, to the extent it was exercisable by the Participant on the date of the Participant&rsquo;s
death, by the legal representative of the Participant&rsquo;s estate or by any other person who acquires the right to exercise
the Option by reason of such death under the Participant&rsquo;s will or the laws of intestate succession, until the earlier of
12 months from the date of death and the Expiration Date (the &ldquo;Option Termination Date&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1.5in">(iii)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;<U>Disability.
</U>If the Participant&rsquo;s Employment is terminated by reason of the Participant&rsquo;s total and permanent disability within
the meaning of Section 22(e)(3) of the Code (&ldquo;Disability&rdquo;), then the unexercised portion of the Option may thereafter
be exercised, to the extent it was exercisable on the date of such termination, until the earlier of 12 months from the date of
such termination of Employment and the Expiration Date. The Committee shall have sole authority and discretion to determine whether
the Participant&rsquo;s Employment has been terminated by reason of Disability (the &ldquo;Option Termination Date&rdquo;).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1.5in">(iv)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;</FONT><U>Termination
for Cause.</U> If the Participant&rsquo;s Employment is terminated for Cause, as hereinafter defined, the any unexercised portion
of the Option, including any unexercised portion of the Option that is exercisable at the time of such termination, shall immediately
terminate and be of no further force and effect. For purposes of this Agreement, the term &ldquo;Cause&rdquo; shall mean the occurrence
of one or more of the following: (A) an action or failure to act by the Participant constituting fraud, misappropriation or damage
to the property or business of the Company or any Subsidiary; (B) the commission by the Participant of an act of dishonesty, the
Participant&rsquo;s commission of a crime, or any act or omission by the Participant that causes the Company or any Subsidiary
to commit a crime; (C) the Participant&rsquo;s breach of any of his or her obligations under this Agreement, any other agreement
with the Company or a Subsidiary to which he or she is a party, or any of the policies of the Company or a Subsidiary, as determined
by the Board in good faith in its sole discretion; (D) the failure of the Participant to abide by his or her responsibilities
or to perform his duties in a manner satisfactory to the Company or a Subsidiary, as determined by the Board in good faith in
its sole discretion; (E) the failure of the Participant to maintain a smooth and harmonious relationship with the management,
staff, investors, affiliates and/or business relations of the Company and its Subsidiaries, as determined by the Board in good
faith in its sole discretion; or (F) the issuance of any order by the Maryland Commissioner of Financial Regulation, the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, or any other supervisory agency with jurisdiction
over the Company and/or its Subsidiaries that permanently prohibits the Participant&rsquo;s continued Employment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1.5in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(v)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;</FONT><U>Other Termination.</U> If the Participant&rsquo;s Employment is terminated for any reason other than Retirement, death,
Disability or Cause, then any unexercised portion of the Option may thereafter be exercised, to the extent it was exercisable
on the date of such termination, until the earlier of 90 days from the date of termination of Employment and the Expiration Date
(the &ldquo;Option Termination Date&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1.5in"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; letter-spacing: -0.15pt"></FONT>(vi)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;</FONT><U>Transfer, Leave of Absence.</U> For purposes of this Agreement, the following events shall not be deemed a termination
of Employment:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1.75in"><FONT STYLE="letter-spacing: -0.15pt">(A)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></FONT>a transfer of the Participant to the Employment of the Company from any of its Subsidiaries or from the Company to
any of its Subsidiaries, or from one Subsidiary to another; or</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1.75in"><FONT STYLE="letter-spacing: -0.15pt">(B)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;
</FONT></FONT>an approved leave of absence for military service or sickness, or for any other purpose approved by the Company,
if the Participant&rsquo;s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant
to which the leave of absence was granted or if the Committee otherwise so provides in writing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">(c)<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><U>Death Following Termination of Employment</U>. Notwithstanding anything to the contrary contained in this Agreement,
if the Participant dies at any time after the termination of his or her Employment and prior to the Option Termination Date, then
the Option Termination Date shall be extended, and the unexercised portion of the Option that was vested as of the date Employment
was terminated, if any, may be exercised by the legal representative of the Participant&rsquo;s estate or by any other person who
acquires the right to exercise the Option by reason of such death under the Participant&rsquo;s will or the laws of intestate succession,
until the earlier of the first anniversary of the date of such death and the Expiration Date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">4.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><U>Rights of Stockholder</U>. The Participant shall have the rights of a stockholder of the Company only as to Option Shares
acquired upon the exercise of the Option and not as to Option Shares that are subject to any unexercised portion of the Option.
Option Shares issued upon the exercise of the Option shall be free of all restrictions under the Plan, except as otherwise provided
in the Plan or applicable law and regulation.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">5.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><U>Adjustments</U>. The number of Option Shares subject to this Option and the related Option Price are subject to adjustment
in the event of certain events affecting the outstanding Shares of the Company&rsquo;s common stock, all as specified in <I>Section
4.4 </I>of the Plan. </FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">6.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><U>Exercise</U>. </FONT>Except as otherwise provided in the Plan and <I>Sections</I> <I>3</I> and <I>8 </I>of this Agreement,
the Option shall be exercisable during the Participant&rsquo;s lifetime only by the Participant or by his or her guardian or legal
representative. The <FONT STYLE="letter-spacing: -0.15pt">Option may be exercised in whole or in part by delivery of a written
notice to the Company, in substantially the form attached hereto as <U>Exhibit A</U>, signed by the Participant or other person
entitled to exercise the Option which specifies the number of Option Shares with respect to which the Option is being exercised
and the date of the proposed exercise. Such notice shall be delivered to the Company&rsquo;s Director of Human Resources at the
Company&rsquo;s main office no less than three (3) business days in advance of the date of the proposed exercise. The Participant
(or other person entitled to exercise the Option) may withdraw such notice at any time prior to the close of business on the proposed
date of exercise, in which case such notice shall be returned. </FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">7.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT><U>Manner
and Timing of Payment Upon Exercise</U>. Payment of the aggregate Option Price and </FONT>any withholding taxes for the
portion of the Option being exercised shall be made in full concurrently with the exercise (a) by cash or certified
check payable to the Company, (b) if the Company is not then prohibited from purchasing or acquiring Shares, with Mature
Shares (as defined below), delivered in lieu of cash and valued at their Fair Market Value (as defined in the Plan) on the
date of exercise, (c) by such other method permitted by the Plan or as the Board or the Committee may approve, to the extent
permitted by applicable law, or (d) any combination of the foregoing. For purposes of this Agreement, &ldquo;Mature
Shares&rdquo; are Shares that have been purchased by the Participant on the open market, or that have been beneficially owned
by the Participant for a period of at least six (6) months and are not then subject to restriction under any Company
plan.</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">8.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><U>Limitation upon Transfer</U>. Except as otherwise provided in the Plan and this <I>Section</I>, the Option may not be
assigned, pledged or hypothecated except by will or by the laws of descent and distribution, and shall not be subject to execution,
attachment or similar process. The Option shall immediately lapse and become null and void upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option in violation of this <I>Section</I> and the Plan, or upon the levy or any
attachment or similar process upon the Option. Notwithstanding the foregoing, to the extent permitted under Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, the Participant may transfer this Option to his or her spouse, lineal ascendants, lineal descendants,
or to trusts for their benefit, provided that the Option may not again be transferred other than to the Participant or to an individual
or trust to whom the Participant could have transferred this Option pursuant to this <I>Section 8</I>. Once transferred, this Option
shall be exercisable by the transferee subject to the same terms and conditions as would have applied to this Option in the hands
of the Participant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">9.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT></FONT><U>Plan; Applicable Law</U>. The Participant acknowledges, by executing this Agreement, that (a) this Agreement is
subject in all respects to the provisions of the Plan, as amended from time to time, the terms of which are incorporated herein
by reference and made a part hereof, and (b) a copy of the Plan was provided to the Participant on the date hereof. This Agreement
shall be governed by and construed in accordance with the laws of the State of Maryland, excluding its provisions relating to conflicts
of laws, except to the extent that federal law shall be deemed to apply.</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">10.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT></FONT><U>Amendments and Termination</U>. The Plan and this Agreement may be amended or terminated as provided in <I>Article
XIII</I> of the Plan.</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">11.<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><U>Nonqualified Stock Option</U>. The Option is not intended to qualify as an incentive stock option under Section 422 of
the Code. </FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed under seal, intending this to be a sealed instrument, as
of the date first above written.</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">ATTEST:</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">SHORE BANCSHARES, INC.:</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; width: 34%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; width: 18%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; width: 31%">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">______________________________</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_____________________________(SEAL)</FONT></TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Name: W.
Moorhead Vermilye</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Title: &nbsp;&nbsp;Chief Executive Officer</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">WITNESS:</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">PARTICIPANT:</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">______________________________</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">________________________________(SEAL)</TD>
    </TR>
</TABLE>


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<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="letter-spacing: -0.15pt">[SAMPLE
NOTICE OF EXERCISE]</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">Date:_____________________</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">Director
of Human Resources</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">Shore
Bancshares, Inc.</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">18
East Dover Street</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">Easton,
MD 21601</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">To
the Director of Human Resources:</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">I
hereby exercise my option to purchase ______________ shares (&ldquo;Option Shares&rdquo;) of common stock, par value $.01 per share
(&ldquo;Common Stock&rdquo;), of Shore Bancshares, Inc. (the &ldquo;Company&rdquo;) in accordance with the terms set forth in the
Nonqualified Stock Option Agreement under the Company&rsquo;s 2006 Stock and Incentive Compensation Plan. </FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="letter-spacing: -0.15pt">In
full payment for such exercise, please find enclosed:</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Wingdings; letter-spacing: -0.2pt">&uml;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">cash in the
amount of $____________</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Wingdings; letter-spacing: -0.2pt">&uml;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">certified check
in the amount of $____________</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Wingdings; letter-spacing: -0.2pt">&uml;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">Shares of Common
Stock of the having a Fair Market Value of &nbsp;$__________</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.75in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Wingdings 2">&#163;</FONT></TD><TD STYLE="text-align: justify">Cashless exercise pursuant to the Plan with respect
to _______ shares subject to the option</TD>
</TR></TABLE>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Wingdings; letter-spacing: -0.2pt">&uml;</FONT>
<FONT STYLE="letter-spacing: -0.15pt">I authorize the Company/direct the Company to withhold a number of Option Shares equal to
any withholding obligation applicable to me.</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="letter-spacing: -0.15pt"></FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 19%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 13%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 30%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">Very truly yours,</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">___________________________________</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">___________________________________</TD>
    </TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Print Name</TD>
    </TR>
</TABLE>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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