<SEC-DOCUMENT>0001144204-13-016453.txt : 20130320
<SEC-HEADER>0001144204-13-016453.hdr.sgml : 20130320
<ACCEPTANCE-DATETIME>20130320170937
ACCESSION NUMBER:		0001144204-13-016453
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20130424
FILED AS OF DATE:		20130320
DATE AS OF CHANGE:		20130320
EFFECTIVENESS DATE:		20130320

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:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-22345
		FILM NUMBER:		13705651

	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>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>v338246_def14a.htm
<DESCRIPTION>DEF 14A
<TEXT>
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<P STYLE="margin: 0"></P>

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

<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: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SCHEDULE 14A</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Rule 14a-101)</B></P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SCHEDULE 14A INFORMATION</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Proxy Statement Pursuant to Section
14(a) of the Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Exchange Act of 1934 (Amendment No.
)</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Filed by the Registrant: <FONT STYLE="font-family: Wingdings">&yacute;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Filed by a Party other than the Registrant:
<FONT STYLE="font-family: Wingdings">o</FONT></P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Wingdings">o</FONT> Preliminary Proxy
Statement</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Wingdings">o</FONT> Confidential,
For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Wingdings">&yacute;
</FONT>Definitive Proxy Statement</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Wingdings">&uml;
</FONT>Definitive Additional Materials</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Wingdings">&uml;
</FONT>Soliciting Material Under Rule 14a-12</P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Name of Registrant as Specified in Its
Charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&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">(Name of Person(s) Filing Proxy Statement,
if Other Than the Registrant)</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Payment of Filing Fee (Check the appropriate
box):</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Wingdings">&yacute;
</FONT>No fee required.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Wingdings">&uml;
</FONT>Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in; text-align: left">(1)</TD><TD>Title of each class of securities to which
                                                                                 transaction applies: N/A</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in; text-align: left">(2)</TD><TD>Aggregate number of securities to which transaction
                                                                                 applies: N/A</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in; text-align: left">(3)</TD><TD STYLE="text-align: justify">Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
N/A</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in; text-align: left">(4)</TD><TD>Proposed maximum aggregate value of transaction:
                                                                                 N/A</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in; text-align: left">(5)</TD><TD>Total fee paid: N/A</TD>
</TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.5in; text-indent: 0in"><FONT STYLE="font-family: Wingdings">&uml;
</FONT>Fee paid previously with preliminary materials: N/A</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.5in; text-indent: 0in"><FONT STYLE="font-family: Wingdings">&uml;
</FONT>Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify &#9;the filing for
which the offsetting fee was paid previously. Identify the previous filing by registration &#9;statement number, or the form or
schedule and the date of its filing.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in; text-align: left">(1)</TD><TD>Amount previously paid:</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in; text-align: left">(2)</TD><TD>Form, Schedule or Registration Statement
                                                                                 no.:</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in; text-align: left">(3)</TD><TD>Filing Party:</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in; text-align: left">(4)</TD><TD>Date Filed:</TD>
</TR></TABLE>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: Red"><IMG SRC="logo.jpg" ALT="">&nbsp;</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>410-763-7800/Fax 410-820-4238</B></P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>To the Stockholders of SHORE BANCSHARES, INC.</I></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">Notice is hereby given that the Annual
Meeting of Stockholders of Shore Bancshares, Inc. (the &ldquo;Company&rdquo;) will be held at the Avalon Theatre, 42 East Dover
Street, Easton, Maryland 21601 at 11:00 a.m., local time, on Wednesday, April 24, 2013, for the following purposes:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">1.</TD><TD>To elect the three director nominees named in the attached Proxy
                                                              Statement and form of Proxy to the Board of Directors.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">2.</TD><TD>To ratify the appointment of Stegman &amp; Company as the Company&rsquo;s
                                                              independent registered public accounting firm for fiscal year 2013.</TD></TR></TABLE>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">3.</TD><TD STYLE="text-align: justify">To adopt a non-binding advisory
                                                              resolution approving the compensation of the Company&rsquo;s named
                                                              executive officers.</TD></TR></TABLE>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">4.</TD><TD>To transact any other business that may properly come before
                                                              the Annual Meeting.</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Stockholders of record at the close of
business on March 11, 2013 will be entitled to notice of and to vote at the meeting. This Proxy Statement is accompanied by the
Company&rsquo;s Annual Report to Stockholders for the year ended December 31, 2012.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All stockholders are cordially invited
to attend the meeting in person. Those who cannot attend are urged to sign, date and mail promptly the enclosed proxy in the envelope
provided for that purpose. <B>Whether you own a few or many shares, your proxy is important in fulfilling this requirement. </B>
To assist us with planning the meeting, please mark the appropriate box on your proxy card as to whether you plan to attend the
meeting in person. Returning your proxy does not deprive you of your right to attend the meeting and to vote your shares in person.</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 0pt 4.5in; text-indent: 0.5in">By Order of the Board of Directors,</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5in; text-indent: 0.5in">W. Moorhead Vermilye</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5in; text-indent: 0.5in">Chief Executive Officer</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">March 20, 2013</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Important Notice Regarding the Availability
of Proxy Materials for the Stockholder Meeting </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>to be Held on April 24, 2013:</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The attached Proxy Statement and form
of Proxy, as well as Shore Bancshares, Inc.&rsquo;s Annual Report to Stockholders</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(including its Annual Report on Form
10-K), are available at www.shbi.com under the &ldquo;Documents&rdquo; link.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Information on this website, other than
the Proxy Statement, is not a part of the enclosed Proxy Statement. </B></P>

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

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<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-align: center; color: Red"><IMG SRC="logo.jpg" ALT=""></P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>410-763-7800/Fax 410-820-4238</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-align: center"><B>PROXY STATEMENT</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2013 ANNUAL MEETING OF STOCKHOLDERS</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This Proxy Statement is furnished to the
stockholders of Shore Bancshares, Inc. (the &ldquo;Company&rdquo;) in connection with the solicitation of proxies by the Board
of Directors of the Company to be voted at the 2013 Annual Meeting of Stockholders. The Annual Meeting of Stockholders will be
held on Wednesday, April 24, 2013, at 11:00 a.m., local time, at the Avalon Theatre, 42 East Dover Street, Easton, Maryland 21601,
and at any adjournments thereof. The expense of preparing, printing, and mailing the proxies and solicitation materials will be
borne by the Company. In addition to solicitations by mail, the Company may solicit proxies in person, by telephone or by electronic
means, and may arrange for brokerage houses and other custodians, nominees, and fiduciaries to send proxies and proxy material
to their principals at the expense of the Company. The approximate date on which this Proxy Statement and attached form of Proxy
are being mailed to stockholders is March 20, 2013.</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>PURPOSES OF THE MEETING</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">At the Annual Meeting, stockholders will
be asked to (i) vote on the election of three director nominees named in this Proxy Statement to the Board of Directors (Proposal
1), (ii) ratify the Audit Committee&rsquo;s appointment of Stegman &amp; Company to serve as the Company&rsquo;s independent registered
public accounting firm for fiscal year 2013 (Proposal 2), (iii) adopt a non-binding advisory resolution approving the compensation
of the Company&rsquo;s &ldquo;named executive officers&rdquo; (as defined below in the section entitled &ldquo;EXECUTIVE COMPENSATION&rdquo;),
also known as the &ldquo;Say-on-Pay&rdquo; vote (Proposal 3), and (iv) consider such other business as may properly come before
the Annual Meeting (Proposal 4).</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>RECORD DATE; OUTSTANDING SHARES; VOTING
RIGHTS; QUORUM AND REQUIRED VOTE</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">Holders of record at the close of business
on March 11, 2013 (the &ldquo;Record Date&rdquo;) of outstanding shares of the Company&rsquo;s common stock, par value $.01 per
share (&ldquo;Common Stock&rdquo;), are entitled to notice of and to vote at the meeting. As of the Record Date, the number of
shares of outstanding Common Stock entitled to vote is 8,457,359 shares. Each share is entitled to one vote.</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 presence, in person or by proxy, of
stockholders entitled to cast a majority of all votes entitled to be cast at the Annual Meeting will constitute a quorum. Directors
are elected by a plurality of all votes cast at the Annual Meeting, so the withholding of a vote, an abstention and a broker non-vote
will have no impact on the outcome of the vote on Proposal 1, as described in this Proxy Statement, but all of the foregoing will
be counted for purposes of determining whether a quorum is present for the transaction of business. The ratification of the appointment
of Stegman &amp; Company as the Company&rsquo;s independent registered public accounting firm, as described in Proposal 2, and
the approval of the advisory Say-on-Pay vote, as described in Proposal 3, will be decided by a majority of all votes cast on those
matters. Accordingly, abstentions and broker non-votes with respect to Proposal 2 and Proposal 3 will be counted for purposes
of determining the presence of a quorum but will have no impact on the outcome of the votes on those proposals. Except in cases
of certain extraordinary matters for which the Company&rsquo;s governing instruments or applicable law require a different proportion,
the affirmative vote of a majority of all shares of Common Stock voted at the Annual Meeting is sufficient to approve any motion
that comes before the meeting pursuant to Proposal 4, as described in this Proxy Statement. Accordingly, abstentions and broker
non-votes with respect to any motion that comes before the meeting pursuant to Proposal 4 (other than certain extraordinary matters
as discussed above) will be counted for purposes of determining the presence of a quorum but will have no impact on the outcome
of the vote on such motion.</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>

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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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All properly executed proxies received
pursuant to this solicitation will be voted as directed by the stockholder on the proxy. If no direction is given, the proxy will
be voted <B><U>FOR ALL NOMINEES</U></B> named in Proposal 1, <B><U>FOR</U></B> the ratification of the appointment of Stegman
&amp; Company as the Company&rsquo;s independent registered public accounting firm, as described in Proposal 2, <B><U>FOR</U></B>
the adoption of the resolution approving the compensation of the named executive officers, as described in Proposal 3, and in
the discretion of the proxies as to any other matter that may properly come before the meeting pursuant to Proposal 4.</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">&#9;Please note that if you hold your shares in a stock brokerage
account or if your shares are held by a bank or other nominee (that is, in street name), your broker, bank or other nominee will
not vote your shares of Common Stock (a &ldquo;broker non-vote&rdquo;) unless you provide voting instructions to your broker,
bank or other nominee. You should instruct your broker, bank or other nominee to vote your shares by following the instructions
provided by the broker, bank or nominee when it sends this proxy statement to you. You may not vote shares held in street name
by returning a proxy card directly to the Company or by voting in person at your annual meeting unless you provide a &ldquo;legal
proxy&rdquo;, which you must obtain from your bank, broker or nominee.&#9;</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">A stockholder may revoke the proxy at any
time prior to its use by execution of another proxy bearing a later date, or by written notice delivered to W. Moorhead Vermilye,
Chief Executive Officer of the Company, at the Company&rsquo;s address listed above or at the meeting.</P>

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

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">BENEFICIAL OWNERSHIP 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">The following table sets forth information
as of March 1, 2013 relating to the beneficial ownership of the Common Stock by (i) each person or group known by the Company
to own beneficially more than five (5%) of the outstanding shares of Common Stock; (ii) each of the Company&rsquo;s directors,
director nominees, and named executive officers; and (iii) all directors and executive officers of the Company as a group; and
includes all shares of Common Stock that may be acquired within 60 days of March 1, 2013. The address of each of the persons named
below is the address of the Company except as otherwise indicated.</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>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</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: 55%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Name</B></P></TD>
    <TD STYLE="width: 21%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number of Shares</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Beneficially</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Owned</B></P></TD>
    <TD STYLE="width: 7%; border-bottom: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 17%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Percent of </B><BR>
        <B>Class </B><BR>
        <B>Beneficially</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Owned</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt"><B>Directors, Nominees and Named Executive Officers</B></FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Herbert L. Andrew, III</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">92,682</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">1.1%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Blenda W. Armistead</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">11,513</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">(2)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">David J. Bates</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Lloyd L. Beatty, Jr.</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">35,515</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">(3)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">William W. Duncan, Jr.</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">41,307</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">(4)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">James A. Judge</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">6,409</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">(5)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Susan E. Leaverton</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">25,674</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">(6)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Neil R. LeCompte</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">3,374</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Frank E. Mason, III</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">2,630</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">George S. Rapp</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Christopher F. Spurry</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">18,450</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">(7)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">F. Winfield Trice, Jr.</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">10,872</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">W. Moorhead Vermilye</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">170,558</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">(8)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">2.0%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">John H. Wilson</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">3,033</FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">(9)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">*</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>All Directors, Nominees and Executive</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Officers as a Group</B> <B>(14 Persons)&nbsp;</B></P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">422,017</P></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">5.0%</P></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt"><B>5% Stockholders</B></FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Nicholas F. Brady</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">PO Box 1410</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Easton, MD 21601</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">516,034</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><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">(10)</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">6.1%</P></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt; text-underline-style: double"><B><U>938,051</U></B></FONT></TD>
    <TD STYLE="padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt; text-underline-style: double"><B><U>11.1</U></B></FONT><B><FONT STYLE="font-size: 10pt">%</FONT></B></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 28.05pt"><B>*</B></TD><TD>Amount constitutes less than 1%.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 46.75pt; text-indent: -28.05pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 46.75pt; text-indent: -28.05pt"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 46.75pt; text-indent: -28.05pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 46.75pt; text-indent: -28.05pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 46.75pt; text-indent: -28.05pt">Notes:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 27.75pt">(1)</TD><TD>Includes 86,905 shares held as tenants in common by Herbert
                                                                  L. Andrew, III and Della&nbsp;M.&nbsp;Andrew.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 28.05pt">(2)</TD><TD>Includes 1,305 shares held individually by Bruce C. Armistead;
                                                                  2,532 shares held by Bruce C. Armistead under an Individual
                                                                  Retirement Account arrangement; and 2,545 shares held by Bruce
                                                                  C. Armistead, as custodian for a minor child.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 28.05pt">(3)</TD><TD>Includes 16,000 shares held jointly with Nancy W. Beatty;
                                                                  and 855 shares held individually by Nancy W. Beatty.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 28.05pt">(4)</TD><TD>Includes 1,500 shares held with Diana L. Duncan.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 28.05pt">(5)</TD><TD>Includes 5,740 shares held individually by Margaret B. Judge.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 28.05pt">(6)</TD><TD>Includes 300 shares held by Susan E. Leaverton, as custodian
                                                                  for two minor children; and 3,607 shares held by Keith R. Leaverton
                                                                  under an Individual Retirement Account arrangement.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 28.05pt">(7)</TD><TD>Includes 8,152 shares held jointly with Beverly B. Spurry;
                                                                  300 shares held by Beverly B. Spurry under a SEP arrangement;
                                                                  447 shares held by Beverly B. Spurry under an Individual Retirement
                                                                  Account arrangement; and 300 shares held individually by Beverly
                                                                  B. Spurry.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 28.05pt">(8)</TD><TD>Includes 2,958 shares held individually by Sarah W. Vermilye.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 28.05pt">(9)</TD><TD>Includes 3,033 shares held jointly with Deidre K. Wilson.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18.7pt"></TD><TD STYLE="width: 28.05pt">(10)</TD><TD>Includes 6,000 shares held by a limited liability company
                                                                   of which Nicholas Brady is managing member, 18,806 shares owned
                                                                   by a foundation of which Nicholas Brady and his spouse are
                                                                   trustees, 9,300 shares owned by Nicholas Brady&rsquo;s spouse,
                                                                   and 8,550 shares owned by two trusts of which Nicholas Brady&rsquo;s
                                                                   spouse serves as trustee.</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-align: center"><B>ELECTION OF DIRECTORS (Proposal 1)</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">The number of directors constituting the
Board of Directors is currently set at 12. The Company&rsquo;s Amended and Restated Articles of Incorporation, as supplemented
(the &ldquo;Charter&rdquo;), divides directors into three classes, as nearly equal in number as possible, with respect to the
times for which the directors may hold office. Directors are elected to three-year terms, and one class of directors expires each
year. The terms of directors of Class I expire this year, the terms of directors of Class II expire in 2014, and the terms of
directors of Class III expire in 2015. In all cases, directors are elected until their successors are duly elected and qualify.</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">At this year&rsquo;s Annual Meeting, stockholders
will be asked to vote on the election of the three director nominees named below. Three of the incumbent Class I Directors are
standing for reelection. Mr. Duncan, who currently serves as a Class I Director, is not standing for reelection at the 2013 Annual
Meeting, so the number of directors will be reduced to 11 following the Annual Meeting. Each of the director nominees was nominated
by the Nominating and Corporate Governance Committee of the Company&rsquo;s Board of Directors (the &ldquo;Nominating Committee&rdquo;).
Information about the principal occupations, business experience and qualifications of these nominees is provided below under
the heading &ldquo;QUALIFICATIONS OF DIRECTOR NOMINEES AND CONTINUING DIRECTORS&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">&nbsp;</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">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="width: 40%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Class I Director Nominees</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Terms to expire in 2016)</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 66%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="width: 34%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Age</B></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Frank E. Mason, III</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">50</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Christopher F. Spurry</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">65</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">John H. Wilson</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">67</FONT></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: 30pt"><B>The Board of Directors Recommends that
you vote <U>FOR ALL NOMINEES</U> named above. </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-align: center"><B>CONTINUING DIRECTORS</B></P>

<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">The following tables identify each director
of the Company whose term does not expire in 2013. Information about the principal occupations, business experience and qualifications
of these nominees is provided below under the heading &ldquo;QUALIFICATIONS OF DIRECTOR NOMINEES AND CONTINUING DIRECTORS&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">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="width: 40%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Class II Directors</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Terms expire in 2014)</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 66%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="width: 34%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Age</B></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Herbert L. Andrew, III</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">76</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Blenda W. Armistead</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">61</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Neil R. LeCompte</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">72</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">F. Winfield Trice, Jr.</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">58</FONT></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">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="width: 40%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Class III Directors</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Terms expire in 2015)</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 66%; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="width: 34%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Age</B></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="border-top: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">David
    J. Bates</FONT></TD>
    <TD STYLE="border-top: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">66</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Lloyd L. Beatty, Jr. </FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">60</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">James A. Judge</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">54</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">W. Moorhead Vermilye </FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">72</FONT></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-align: center"><B>QUALIFICATIONS OF DIRECTOR NOMINEES
AND CONTINUING DIRECTORS</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition to bringing extensive knowledge
of the communities served by the Company through their involvement with their communities, as business partners and volunteers,
the Nominating Committee believes that all director nominees and continuing directors possess a diverse balance of skills, business
experience and expertise necessary to provide leadership to the Company. The following discussion sets forth the specific experience,
qualifications, other attributes and skills of each director nominee and continuing director that led the Nominating Committee
to determine that such person should serve on the Board of Directors.</P>

<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"><B>Herbert L. Andrew, III </B>is a farmer
who has served as a director of the Company since December 2000 and is currently a member of the Executive, Compensation and Asset
Liability Committees. Mr. Andrew has been a director of The Talbot Bank of Easton, Maryland, a wholly-owned subsidiary of the
Company (&ldquo;Talbot Bank&rdquo;), since 1977. In addition to being a successful business owner and investor, Mr. Andrew was
elected and served as a Councilman for Talbot County, Maryland for 16 years. In nominating Mr. Andrew, the Nominating Committee
considered as important factors his banking experience, his success as a self-employed businessman, and that he is deeply invested
in and provides various community services to Talbot County, which is a key market for the Company. In addition, the Nominating
Committee considered the fact that Mr. Andrew is experienced in financial statement analysis as well as in matters of corporate
governance.</P>

<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"></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"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Blenda W. Armistead </B>is a self-employed
investor. She has served as a director of the Company since January 2002 and is currently the Chair of the Nominating Committee
and also serves on the Planning and Audit Committees. Ms. Armistead has been a director of the Talbot Bank since 1992. Ms. Armistead
served as the County Manager and Finance Officer of Talbot County, Maryland from 1982 to 1999 and has served on the boards of
numerous community-based organizations within Talbot County and the Mid-Shore. In nominating Ms. Armistead, the Nominating Committee
considered as important factors her banking experience, her managerial, governance and financial expertise relating to her career
in local government, and her familiarity with and involvement in one of the Company&rsquo;s key market areas.</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"><B>David J. Bates</B> is a self-employed
investor who has served as a director of the Company since April 2012. Mr. Bates serves on the Planning, Nominating and Asset
Liability Committees. Mr. Bates has a Master&rsquo;s Degree in economics and an MBA in finance and was employed by the World Bank
Group headquartered in Washington, DC for 20 years. During that time he served 10 years as a specialist in project loan finance
at International Finance Corporation, World Bank Group&rsquo;s private sector affiliate. In nominating Mr. Bates, the Nominating
Committee considered Mr. Bates&rsquo; experience in banking and finance as well as his experience in corporate governance matters
gained through service on a number of private corporate and nonprofit boards.</P>

<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"><B>Lloyd L. Beatty, Jr. </B>has served
as a director of the Company since December 2000 and currently serves on the Executive and Planning Committees. Mr. Beatty has
been a director of Talbot Bank since 1992. Mr. Beatty currently serves as the President and Chief Operating Officer of the Company
(the &ldquo;COO&rdquo;), a position he has held since January 1, 2011, and he previously served as Executive Vice President and
COO since August 2007. Prior to that and since October 2004, Mr. Beatty has been employed by the Company in various executive
level operating officer capacities. Prior to joining the Company, Mr. Beatty was the Chief Operating Officer of Darby Overseas
Investments, LP, a global private equity firm, and President of Darby Advisors, Inc., a privately held family investment business,
from 1998 to 2005. Mr. Beatty was also a practicing certified public accountant for 25 years and a principal in the accounting
firm Beatty, Satchell &amp; Company from 1977 to 1998. The Nominating Committee considered as important factors Mr. Beatty&rsquo;s
extensive financial knowledge and operational experience, as well as his familiarity with an important market area in which the
Company competes, his experience with Talbot Bank, whose operations comprise a significant portion of the Company&rsquo;s operations,
and his experience in advising companies on financial and tax matters, merger and acquisition transactions, and insurance operations.</P>

<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"><B>James A. Judge </B>has served as a director
of the Company since April 2009 and is currently the Chair of the Asset Liability Committee and a member of the Audit and Compensation
Committees. Mr. Judge has been a director of CNB, a wholly-owned bank subsidiary of the Company, since 2005. Mr. Judge is a certified
public accountant and partner in Anthony, Judge &amp; Ware, LLC, an accounting and tax services company located in Chestertown,
Maryland. In nominating Mr. Judge, the Nominating Committee considered as important factors Mr. Judge&rsquo;s qualifications as
a certified public accountant, his expertise in the preparation and examination of financial statements, his familiarity with
the banking business, and his experience in owning and operating his own business.</P>

<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"><B>Neil R. LeCompte </B>has served as a
director of the Company since May 1996 and is currently the Chair of the Audit Committee and a member of the Executive and Planning
Committees. Mr. LeCompte has been a director of CNB since 1995. Mr. LeCompte is a certified public accountant and accredited Personal
Financial Specialist in the Accounting Office of Neil R. LeCompte, an accounting and tax services company located in Centreville,
Maryland. Mr. LeCompte also has previous experience as a chief financial officer of a bank in his early career and has been engaged
in the practice of public accounting since 1988. In nominating Mr. LeCompte, the Nominating Committee considered as important
factors Mr. LeCompte&rsquo;s qualifications as a certified public accountant, his experience in the preparation and examination
of financial statements, his familiarity with the banking business, and involvement in one of the Company&rsquo;s key market areas,
and his experience in the financial needs of typical customers of our banks and insurance entities.</P>

<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"></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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Frank E. Mason, III </B>has served as
a director of the Company since April 2011 and is currently a member of the Executive, Audit and Nominating Committees. Mr. Mason
is the President and Chief Executive Officer of JASCO Incorporated, a manufacturer and distributor of analytical instrumentation
for the scientific research community, a position he has held since 2004. JASCO Incorporated, which is a subsidiary of JASCO Corporation
located in Tokyo Japan, operates throughout North and South America. Prior to becoming President and Chief Executive Officer,
Mr. Mason served as JASCO Incorporated&rsquo;s Chief Operations Officer from 1996 to 2004 and as its Sales Director for North
America from 1987 to 1995. Mr. Mason is also a principal and director of The Mason Company, a restaurant, gourmet shop and catering
business located in Easton, Maryland. In nominating Mr. Mason, the Nominating Committee considered as important factors Mr. Mason&rsquo;s
experience in leading a large corporation, his financial and operational knowledge as well as his familiarity with one of the
Company&rsquo;s important market areas.</P>

<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"><B>Christopher F. Spurry </B>has served
as a director of the Company since 2004 and as Chairman of the Board since 2006. He has served as a director of the Talbot Bank
since 1995, and he served as a director of The Felton Bank, a wholly-owned bank subsidiary of the Company that merged into CNB
on January 1, 2011 (&ldquo;Felton Bank&rdquo;), between September 2009 and December 31, 2010. He currently serves as Chair of
both the Compensation Committee and the Executive Committee. Mr. Spurry is the owner and President of Spurry &amp; Associates,
Inc., a manufacturer&rsquo;s representative firm that has represented manufacturing companies in the commercial/institutional
foodservice equipment industry in the Mid-Atlantic region for over 25 years. His firm provides sales, marketing, applications
engineering, and project management services. In 1985, Mr. Spurry founded Charter Distributing, Inc., which he sold in 1996 after
11 profitable years. Over the past 15 years, Mr. Spurry successfully completed seven real estate investment, redevelopment, or
subdivision projects as managing member, investor, or owner. In nominating Mr. Spurry, the Nominating Committee considered as
important factors his executive and business experience, his real estate experience, and his 15-year experience on a bank board,
which the Nominating Committee believes combine to yield valuable insight in the areas of management, communication, best practices,
appreciation of risk, and strategic planning.</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"><B>F. Winfield Trice, Jr. </B>has been
a director of the Company since August 2007 and is currently a member of the Asset Liability Committee. Mr. Trice has served as
a director and President and Chief Executive Officer of CNB since June 2007, and he served as a director of Felton Bank between
September 2009 and December 31, 2010. From 1997 until joining CNB, Mr. Trice served as the Executive Vice President and Senior
Loan Officer at Mercantile Peninsula Bank, and in various lending and administrative positions with Allfirst Financial, Inc. from
1977 until 1997. In nominating Mr. Trice, the Nominating Committee considered as important factors Mr. Trice&rsquo;s extensive
banking experience and responsibility in leading CNB, one of the Company&rsquo;s significant bank subsidiaries.</P>

<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"><B>W. Moorhead Vermilye </B>has been a
director of the Company since December 2000 and is currently a member of the Executive and Asset Liability Committees. Mr. Vermilye
has been a director of Talbot Bank since 1977, and he served as a director of Felton Bank between April 2004 and December 31,
2010. Mr. Vermilye is the Chief Executive Officer of the Company (the &ldquo;CEO&rdquo;), a position he has held since December
2000. From December 2000 until January 2011, Mr. Vermilye also served as President of the Company. From 1988 until July 2006,
Mr. Vermilye served as the President and Chief Executive Officer of Talbot Bank. From 1970 to 1988, Mr. Vermilye was a Principal
in Bartlett, Griffin &amp; Vermilye Insurance Agency located in Easton, Maryland. Mr. Vermilye has served on the boards of numerous
community-based organizations within Talbot County and the Mid-Shore during his career. In nominating Mr. Vermilye, the Nominating
Committee considered as important factors Mr. Vermilye&rsquo;s experience in banking and insurance, his familiarity with and involvement
in one of the Company&rsquo;s key market areas, and his understanding of and experience with the business and financial needs
of the Company&rsquo;s typical customer.</P>

<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"><B>John H. Wilson </B>has served as a director
of the Company since April 2009 and is currently the Chair of the Planning Committee and a member of the Compensation and Nominating
Committees. Mr. Wilson also serves as a director of The Avon-Dixon Agency, LLC, a wholly-owned insurance producer subsidiary of
the Company (&ldquo;Avon-Dixon&rdquo;). Since 2006, Mr. Wilson has served as the President and Chief Executive Officer of Coastal
South of Maryland, Inc., a land development and real estate consulting company. Mr. Wilson is also the owner/operator of the Chesapeake
Bay Beach Club, a private events facility, and managing member of the Tidewater Inn, LLC, a hotel, and he heads up the Urban Land
Institute, Delmarva Committee. In nominating Mr. Wilson, the Nominating Committee considered as important factors Mr. Wilson&rsquo;s
experience in the insurance industry, his experience in real estate development and operating businesses similar to typical customers
of the Company, and his familiarity with and involvement in one of the Company&rsquo;s key market areas.</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"></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>

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

<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">The Company&rsquo;s Board of Directors
has an Executive Committee, an Audit Committee, a Nominating Committee, and a Personnel and Compensation Committee (the &ldquo;Compensation
Committee&rdquo;), each of which is described below. The Board also has a Strategic Planning Committee and an Asset Liability
Committee.</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 Company&rsquo;s Executive Committee
consists of Christopher F. Spurry, <I>Chair</I>, Herbert L. Andrew, III, Lloyd L. Beatty, Jr., Neil R. LeCompte, Frank E. Mason,
III, and W. Moorhead Vermilye. The Executive Committee has the authority to exercise the powers of the Board in the management
of the business and affairs of the Company, subject to any restrictions imposed by law and to subsequent revision or alteration
of any such action by the Board of Directors of the Company. The Executive Committee did not meet in 2012.</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 Company&rsquo;s Audit Committee is
established pursuant to Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the &ldquo;Exchange Act&rdquo;),
and consists of Neil R. LeCompte, <I>Chair</I>, James A. Judge, Blenda W. Armistead and Frank E. Mason, III. The Board has determined
that Mr. LeCompte qualifies as an &ldquo;audit committee financial expert&rdquo; as that term is defined by the Securities and
Exchange Commission (&ldquo;SEC&rdquo;) in Item 407 of Regulation S-K. The Audit Committee assists the Board in monitoring the
integrity of the financial statements, the performance of the Company&rsquo;s internal audit function, and compliance by the Company
with legal and regulatory requirements, and it oversees the qualification, hiring, performance, compensation, and independence
of the Company&rsquo;s independent registered public accounting firm, including whether satisfactory accounting procedures are
being followed. During 2012, the Audit Committee held seven meetings. The Board of Directors has adopted a written charter for
the Audit Committee, a copy of which is available on the Company&rsquo;s website, <U>www.shbi.com</U>, under the &ldquo;Governance
Documents&rdquo; link.</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 Company&rsquo;s Compensation Committee
is responsible for reviewing and recommending director and executive compensation to the full Board, recommending executive promotions
to the full Board, and administering and making grants under the Company&rsquo;s various compensation plans. The Compensation
Committee determines executive compensation pursuant to the principles discussed in the section below entitled &ldquo;Overview
of Compensation Philosophy and Objectives&rdquo; and determines director compensation by periodically reviewing the compensation
practice of peer group institutions. The members of the Compensation Committee are Christopher F. Spurry, <I>Chair</I>, Herbert
L. Andrew, III, James A. Judge and John H. Wilson. The Compensation Committee held two meetings in 2012. The Compensation Committee
has a written charter, a copy of which is available on the Company&rsquo;s website, <U>www.shbi.com,</U> under the &ldquo;Governance
Documents&rdquo; link.</P>

<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">The Company&rsquo;s Nominating Committee
consists of Blenda W. Armistead, <I>Chair</I>, David J. Bates, Frank E. Mason, III and John H. Wilson, and is responsible for
identifying qualified individuals for nomination to the Board of Directors, considering candidates for nomination proposed by
stockholders, recommending director nominees to the Board (see discussion below under the heading &ldquo;Director Recommendations
and Nominations&rdquo; in the section entitled &ldquo;CORPORATE GOVERNANCE MATTERS&rdquo;), recommending directors for each Board
committee, and making recommendations to the Board with respect to corporate governance guidelines. William E. Sylvester, Jr.,
who served as a director from April 25, 2012 until November 6, 2012, served on the committee from May 2012 until August 2012.
During 2012, the Nominating Committee held 10 meetings. The Nominating Committee has adopted a written charter, a copy of which
is available on the Company&rsquo;s website, <U>www.shbi.com,</U> under the &ldquo;Governance Documents&rdquo; link.</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"></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Independence</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 Rule 5605(b)(1) of The NASDAQ
Stock Market Rules (the &ldquo;NASDAQ Rules&rdquo;), a majority of the Company&rsquo;s directors must be &ldquo;independent directors&rdquo;
as that term is defined by NASDAQ Rule 5605(a)(2). The Company&rsquo;s Board of Directors has determined that each of Herbert
L. Andrew, III, Blenda W. Armistead, David J. Bates, James A Judge, Neil R. LeCompte, Frank E. Mason, III, Christopher F. Spurry
and John H. Wilson is an &ldquo;independent director&rdquo;, and these independent directors constitute a majority of the Company&rsquo;s
Board of Directors. Each member of the Compensation Committee and of the Nominating Committee is an &ldquo;independent director&rdquo;
as defined by NASDAQ Rule 5605(a)(2), and each member of the Audit Committee meets the independence standards of NASDAQ Rule 5605(c)(2)(A).
Mr. Sylvester satisfied the independence standards of NASDAQ Rule 5605(a)(2) during his term of service, as did Jerry F. Pierson,
who served as a director until April 25, 2012. In addition to those relationships and transactions described below under the heading,
&ldquo;CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS&rdquo;, the Board considered Mr. Andrew&rsquo;s provision of construction
loan monitoring services to Talbot Bank in determining director independence.</P>

<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"><B>Board Leadership Structure and Risk Oversight Role</B></P>

<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">The position of Chairman of the Board of
Directors and the position of CEO are not held by the same person. The Board&rsquo;s philosophy is and has been to fill the position
of Chairman with an independent director. The foregoing structure is not mandated by any provision of law or of the Company&rsquo;s
Charter or Amended and Restated By-Laws, as amended (the &ldquo;By-Laws&rdquo;), but the Board of Directors believes that this
structure provides the best balance of authority between management and the Board.</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 duties of the Chairman include:
(i) acting as a liaison and channel for communication between the independent directors and the Chief Executive Officer; (ii)
providing leadership to ensure the Board works cohesively and independently and during times of crisis; (iii) advising the
Chief Executive Officer as to the quality, quantity and timeliness of information from executive management to the
independent directors; (iv) being available to consult with the Chief Executive Officer and other directors on corporate
governance practices and policies; (v) coordinating the assessment of Board committee structure, organization and charters
and evaluating the need for change, as well as committee membership; (vi) together with the chairperson of the Nominating
Committee, interviewing all Board candidates and making recommendations concerning such candidates; (vii) coordinating,
developing the agenda and leading executive sessions of the independent directors and communicating the results thereof to
the Chief Executive Officer; (viii) ensuring appropriate segregation of duties between board members and management; (ix)
suggesting agenda items for Board meetings; and (x) together with the Chair of the Compensation Committee, communicating the
Board&rsquo;s evaluation of the performance of the Chief Executive Officer.</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 Board of Directors of the Company is
actively involved in the Company&rsquo;s risk oversight activities through the work of its various committees and through the
work of the boards of directors and committees of the Company&rsquo;s subsidiaries, a number of which have Company directors as
members. In addition to meeting in committee, the independent directors of the Company meet in executive session after each regular
Board meeting to allow for open discussion without the presence of Company management.</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 Nominating Committee, which is also
charged with overseeing corporate governance matters, performs an annual assessment of the effectiveness of the Board and its
committees in carrying out their respective duties.</P>

<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">In addition to the foregoing, the Company
has adopted a Code of Ethics that applies to all of its directors, officers, and employees, including its principal executive
officer, principal financial officer, principal accounting officer, or controller, and persons performing similar functions.</P>

<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"></P>

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    <!-- Field: /Page -->

<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"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Board Meeting Attendance</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">The Board of Directors held eleven meetings
in 2012. During 2012, no director attended fewer than 75% of the aggregate of (1) the total number of meetings of the Board of
Directors (held during the period for which that person served as a director) and (2) the total number of meetings held by all
committees of the Board on which that person served (held during the period served).</P>

<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"><B>Director Recommendations and Nominations</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">The Nominating Committee is responsible
for assembling and maintaining a list of qualified candidates to fill vacancies on the Board, and it periodically reviews this
list and researches the talent, skills, expertise, and general background of these candidates. The Nominating Committee will from
time to time review and consider candidates recommended by stockholders. Stockholder recommendations should be submitted in writing
to: Shore Bancshares, Inc., 18 East Dover Street, Easton, Maryland 21601, Attn: W. David Morse, Secretary; and must specify (i)
the recommending stockholder&rsquo;s contact information, (ii) the class and number of shares of the Company&rsquo;s Common Stock
beneficially owned by the recommending stockholder, (iii) the name, address and credentials of the candidate for nomination, and
(iv) the candidate&rsquo;s consent to be considered as a candidate.</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">Whether recommended by a stockholder or
chosen independently by the Nominating Committee, a candidate will be selected for nomination based on his or her talents and
the needs of the Board. The Nominating Committee does not have a formal policy pursuant to which it considers specific diversity
criteria when selecting nominees, such as education, professional experience, skills, race or gender. Rather, the Nominating Committee&rsquo;s
goal in selecting nominees is to identify persons who have business and other ties to the communities and industries served by
the Company, and who have skills, education and other attributes that will meet the needs of the Board at that time and, generally,
that are complimentary to the skills and attributes possessed by existing directors. When searching for and appointing directors
to fill a particular committee position, the Nominating Committee searches for persons who will meet the independence standards
required for those committees and who possess skills and attributes that will allow the committee to be effective. The Nominating
Committee also strives to select individuals who it believes will work well with the other directors at the highest level of integrity
and effectiveness.</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">A candidate, whether recommended by a Company
stockholder or otherwise, will not be considered for nomination unless he or she is of good character and is willing to devote
adequate time to Board duties. In assessing the qualifications of potential candidates, the Nominating Committee will also consider
the candidate&rsquo;s experience, judgment, and civic and community relationships, and the diversity of backgrounds and experience
among existing directors. Certain Board positions, such as Audit Committee membership, may require other special skills, expertise,
or independence from the Company.</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">It should be noted that a stockholder recommendation
is not a nomination, and there is no guarantee that a candidate recommended by a stockholder will be approved by the Nominating
Committee or nominated by the Board of Directors. A stockholder who desires to nominate a candidate for election may do so only
in accordance with Article II, Section 4 of the Company&rsquo;s By-Laws, which provides that directors may be nominated by stockholders
by written request to the Secretary of the Company received not less than 120 days nor more than 180 days prior to the date fixed
for the meeting. Additional time constraints are applicable in the cases of a change in stockholder meeting date or a special
meeting called for the purpose of electing directors. As provided in the By-Laws, the notice of nomination must specify: (a) the
name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the number of shares of
capital stock of the Company owned by each proposed nominee; (d) the name and residence address of the notifying stockholder;
(e) the number of shares of capital stock of the Company owned by the notifying stockholder; (f) the consent in writing of the
proposed nominee as to the proposed nominee&rsquo;s name being placed in nomination for director; (g) a description of all arrangements
or understandings between such notifying stockholder and each proposed nominee and any other person or persons (including their
names) pursuant to which the nomination(s) are to be made by such notifying stockholder; (h) a representation that such notifying
stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (i) all information
relating to such proposed nominee that would be required to be disclosed by Regulation 14A under the Exchange Act and Rule 14a-11
promulgated thereunder, assuming such provisions would be applicable to the solicitation of proxies for such proposed nominee.</P>

<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">&nbsp;</P>

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    <!-- Field: /Page -->

<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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Stockholder Communications with the Board of Directors</B></P>

<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">Stockholders may communicate with the Company&rsquo;s
Board of Directors by contacting W. David Morse, Secretary, at Shore Bancshares, Inc., 18 East Dover Street, Easton, Maryland
21601 or (410) 763-7800. All communications will be forwarded directly to the Chairman of the Board for consideration.</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 Company believes that the Annual Meeting
is an opportunity for stockholders to communicate directly with directors and, accordingly, expects that all directors will attend
each Annual Meeting. If you would like an opportunity to discuss issues directly with our directors, please consider attending
this year&rsquo;s Annual Meeting. At the 2012 Annual Meeting, all directors (who were serving as such) were in attendance.</P>

<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-align: center"><B>DIRECTOR COMPENSATION</B></P>

<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">Directors of the Company who are not also
employees of the Company or any of its bank subsidiaries (<I>i.e.</I>, Talbot Bank or CNB), referred to as &ldquo;outside directors&rdquo;,
receive fees for attending regular, special and committee meetings of the Board of Directors, as well as annual retainers. Outside
Directors of the Company who also serve on the boards of directors of Talbot Bank and CNB also receive fees for attending meetings
of those boards and their committees, as well as retainers. These fee and other compensatory arrangements are discussed in detail
below.</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 following table provides information
about the compensation paid to or earned by the Company&rsquo;s directors during 2012 who are not named executive officers. Information
regarding compensation paid to or earned by directors who are also named executive officers is presented in the Summary Compensation
Table that appears below in the section entitled &ldquo;EXECUTIVE COMPENSATION&rdquo;.</P>

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

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: bottom; width: 22%; border: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="text-align: center; width: 9%; border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Fees earned or paid in cash</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="vertical-align: bottom; width: 5%; border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center; width: 8%; border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Stock awards </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($) (4)</B></P></TD>
    <TD STYLE="text-align: center; width: 8%; border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Option awards</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($) (4)</B></P></TD>
    <TD STYLE="text-align: center; width: 13%; border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Non-equity </B><BR>
        <B>incentive plan</B><BR>
        <B>compensation ($)</B></P></TD>
    <TD STYLE="text-align: center; width: 13%; border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Change in pension </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>value and nonqualified deferred
        compensation earnings</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="text-align: center; width: 13%; border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>All other compensation</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($) (5)-(7)</B></P></TD>
    <TD STYLE="text-align: center; width: 9%; border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Total</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Andrew</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">28,700</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">6,760</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">35,460</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Ms.
    Armistead</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">31,000</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">102</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">31,102</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Bates</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">7,233</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">7,233</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Judge</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">26,800</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">(2)</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">26,800</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    LeCompte</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">26,700</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">(2)</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">26,700</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Mason</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">16,500</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">16,500</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Pierson (8)</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">15,567</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">(2)</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">1,931</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">17,498</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Spurry</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">32,000</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">102</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">32,102</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Sylvester (9)</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">23,000</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">23,000</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Wilson</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">15,300</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">(3)</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">15,300</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Notes:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 28.05pt">(1)</TD><TD>Includes amounts earned for serving on the Boards of the Company
                                                             and Talbot Bank.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 28.05pt">(2)</TD><TD>Includes amounts earned for serving on the Boards of the Company
                                                             and CNB.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 28.05pt">(3)</TD><TD>Includes amounts earned for serving on the Boards of the Company
                                                             and Avon-Dixon.</TD></TR></TABLE>

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

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"><BR></TD><TD STYLE="width: 28.05pt">(4)</TD><TD>The amounts reflect the aggregate grant date fair value of stock and option awards
                                        computed in accordance with FASB ASC Topic 718, &ldquo;Accounting for Stock Compensation&rdquo;
                                        (&ldquo;ASC 718&rdquo;). See Note 13 to the consolidated audited financial statements
                                        contained in the Company&rsquo;s Annual Report on Form 10-K for the year ended December
                                        31, 2012 regarding assumptions underlying valuation of equity awards. There were no outstanding
                                        awards at December 31, 2012.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 28.05pt">(5)</TD><TD>For Messrs. Andrew and Spurry and Ms. Armistead, amounts include
                                                             premiums of $10, $102, and $102, respectively, paid by Talbot Bank
                                                             for life insurance coverage.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 28.05pt">(6)</TD><TD>The amounts shown for Mr. Pierson include imputed income of $1,931
                                                             related to the economic value of split dollar life insurance benefit
                                                             payable under the CNB Director Endorsement Agreement.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 28.05pt">(7)</TD><TD>For Mr. Andrew, the amount includes $6,750 for inspection fees
                                                             paid in conjunction with his monitoring of Talbot Bank construction
                                                             loans.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 28.05pt">(8)</TD><TD>Mr. Pierson served on the Board of the Company through April
                                                             25, 2012 but continued his service on the board of CNB.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 28.05pt">(9)</TD><TD>Mr. Sylvester served on the Board of the Company and the board
                                                             CNB through November 6, 2012.</TD></TR></TABLE>

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During 2012, outside directors of the Company
received $300 for attending each meeting of the Board and $300 for attending each meeting of a Board committee on which those
directors served. Board and committee chairpersons (Messrs. Spurry, Judge and LeCompte and Ms. Armistead) received $500 for attending
Board or committee meetings of which they were the chairpersons. In addition, the Chairman of the Board (Mr. Spurry) received
a $10,000 annual retainer and each other director received a $5,000 annual retainer.</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">All directors of the Company and of its
subsidiaries are eligible to participate in the Shore Bancshares, Inc. 2006 Stock and Incentive Compensation Plan (the &ldquo;2006
Equity Plan&rdquo;), which is discussed below under the heading &ldquo;Overview of Compensation Philosophy and Objectives&rdquo;
in the &ldquo;EXECUTIVE COMPENSATION&rdquo; section.</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"><B>Talbot Bank Board Compensation</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">During 2012, outside directors of the Company
who served as directors of Talbot Bank (Messrs. Andrew and Spurry and Ms. Armistead) also received an annual retainer of $5,000
per year for serving on the board of directors of Talbot Bank, plus $200 per meeting attended. Talbot Bank paid these fees. Directors
are compensated once for attending joint meetings of the Company&rsquo;s Board and the board of directors of Talbot Bank.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>CNB Board Compensation</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">During 2012, outside directors of the Company
who served as directors of CNB (Messrs, Judge, LeCompte, Pierson, and Sylvester) also received an annual retainer of $10,000,
plus $100 for each meeting attended. These fees were paid by CNB. Directors are compensated once for attending joint meetings
of the Company&rsquo;s Board and the board of directors of CNB.</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">In 1997, CNB entered into a Director Indexed
Fee Continuation Plan Agreement (a &ldquo;Director Fee Agreement&rdquo;) with Mr. Pierson that calls for the payment of certain
benefits on and after retirement from the Board. The benefits are funded by a life insurance policy on the life of Mr. Pierson,
which is owned solely by CNB. Each year during Mr. Pierson&rsquo;s service to the Board, CNB deposits to or withdraws from a retirement
account an amount equal to the difference between the annual after-tax earnings or loss, respectively, generated by the insurance
policy and the &ldquo;Cost of Funds&rdquo; (as defined in the Director Fee Agreement) for that year. Upon normal retirement after
age 65, Mr. Pierson is entitled to receive (i) the balance of his retirement account paid in 15 annual installments commencing
30 days after retirement, and (ii) each year after retirement until death, the difference between the after-tax income generated
by the policy for that year and the &ldquo;Cost of Funds&rdquo; for that year. If Mr. Pierson elects early retirement after reaching
age 55 but before age 65, then he will be entitled to receive (x) the balance of his retirement account as of the date of retirement
paid in 15 annual installments commencing at age 65, and (y) each year after early retirement until death, the difference between
the after-tax income generated by the policy for that year and the Cost of Funds for that year. If Mr. Pierson should retire prior
to reaching age 55, then no benefits will be paid. If Mr. Pierson should die prior to receiving the entire amount of his retirement
account, then his designated beneficiaries will receive the unpaid amount as a lump sum payment. If Mr. Pierson&rsquo;s service
is terminated following a &ldquo;Change of Control&rdquo;, then he will be automatically vested in the promised normal retirement
benefits and entitled to receive them starting at age 65. At December 31, 2012, the retirement account balance for Mr. Pierson
was $272,757.</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"></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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the Director Fee Agreement,
CNB and Mr. Pierson entered into a Life Insurance Endorsement Method Split-Dollar Plan Agreement in 1997 (a &ldquo;Director Endorsement
Agreement&rdquo;) pursuant to which CNB agreed to endorse to the beneficiaries named by Mr. Pierson 80% of the net-at-risk insurance
portion of the death benefits payable to CNB under the insurance policy discussed above on the life of that director. The net-at-risk
portion of the proceeds is defined as the total proceeds paid at death less the then cash value of the policy. The benefit payable
under the Director Endorsement Agreements as of December 31, 2012 to the beneficiaries of Mr. Pierson was approximately $790,737.</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"><B>Avon-Dixon Agency Board Compensation</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">During 2012, Mr. Wilson served as a director
of Avon-Dixon and received an additional $1,000 for attending all meetings of its board of directors. These fees were paid by
Avon-Dixon.</P>

<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-align: center"><B>AUDIT COMMITTEE REPORT</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Audit Committee has (i) reviewed and
discussed the Company&rsquo;s consolidated audited financial statements for fiscal year ended December 31, 2012 with Company management;
(ii) discussed with Stegman &amp; Company, the Company&rsquo;s independent registered public accounting firm, all matters required
to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, <I>Professional Standards</I>, Vol. 1, AU &sect;
380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and (iii) received the written disclosures and
the letter from Stegman &amp; Company required by applicable requirements of the Public Company Accounting Oversight Board regarding
Stegman &amp; Company&rsquo;s communications with the Audit Committee concerning independence, and discussed with Stegman &amp;
Company its independence. Based on the foregoing review and discussions, the Audit Committee recommended to the Board of Directors
that the Company&rsquo;s consolidated audited financial statements for the year ended December 31, 2012 be included in the Company&rsquo;s
Annual Report on Form 10-K for the year ended December 31, 2012.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">AUDIT COMMITTEE</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 20%"><TR STYLE="vertical-align: top">
<TD NOWRAP STYLE="width: 10%; text-align: right">By:</TD>
    <TD STYLE="width: 10%">&nbsp;</TD><TD NOWRAP STYLE="width: 80%">Neil R. LeCompte, <I>Chair</I></TD>
</TR>     <TR STYLE="vertical-align: top">
<TD NOWRAP STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD><TD NOWRAP>Blenda W. Armistead</TD></TR>
<TR STYLE="vertical-align: top">
<TD NOWRAP STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD><TD NOWRAP>James A. Judge</TD></TR>
<TR STYLE="vertical-align: top">
<TD NOWRAP STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD><TD NOWRAP>Frank E. Mason, III</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0in; text-indent: 0in"></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></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>EXECUTIVE OFFICERS</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Information about the Company&rsquo;s current
executive officers is provided below.</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">W. Moorhead Vermilye, 72, has served as
the CEO since December 2000. In addition, from December 1, 2000 until January 1, 2011 Mr. Vermilye also served as the President
of the Company. Between 1997 and December 2000, Mr. Vermilye served as President of Talbot Bancshares, Inc., which merged with
the Company in 2000. Mr. Vermilye served as President of Talbot Bank from 1988 to July 2006 and as Chief Executive Officer of
Talbot Bank from 1993 to July 2006. Mr. Vermilye currently serves as a director of the Company and of Talbot Bank.</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">Lloyd L. Beatty, Jr., 60, was named President
and COO effective January 1, 2011. Mr. Beatty served as the Executive Vice President and COO from August 2007 until December 31,
2010 and previously as Vice President and COO since July 2006 and as Vice President of the Company since October 2004. Until January
1, 2006, Mr. Beatty primarily assisted management of the Company with certain strategic initiatives, and he worked on a part-time
basis until October 2005. Starting January 1, 2006, Mr. Beatty&rsquo;s duties were expanded to include management authority with
respect to certain aspects of the Company&rsquo;s strategic initiatives and to provide corporate oversight of the Company&rsquo;s
non-traditional products and services and the Company&rsquo;s information technology (IT) system. Since August 2006, Mr. Beatty
has been responsible for overall operations of the Company. Mr. Beatty currently serves as a director of the Company and of Talbot
Bank.</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>

<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; text-indent: 0.5in">Susan E. Leaverton, 49, served as Treasurer
and Principal Accounting Officer (the &ldquo;PAO&rdquo;) of the Company between December 2000 and February 20, 2013, and as Vice
President of Finance of Talbot Bank since 1994. Between April 2004 and December 31, 2010, she also served as the Principal Accounting
Officer of Felton Bank. Between 1997 and December 2000, Ms. Leaverton served as Secretary/Treasurer of Talbot Bancshares, Inc.</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">George S. Rapp, 60, is the current Vice
President and Chief Financial Officer of the Company (&ldquo;CFO&rdquo;), positions he has held since February 20, 2013. Prior
to joining the Company, from 2010 to 2012, Mr. Rapp served as the Chief Financial Officer and one of the four executive founders
of World Currency USA in Marlton, NJ, a provider of foreign currency exchange services to financial institutions, where he was
responsible for the financial operations, including raising capital to fund the start-up operation. Between 2005 and 2010, he
served as the Chief Financial Officer of Harleysville National Corporation, a regional banking corporation in Harleysville, PA,
where he managed all financial functions including controller, treasury and shareholder relations. Between 1980 and 2005, Mr.
Rapp held a variety of roles with various financial institutions, including as Chief Financial Officer, Senior Vice President
&amp; Chief Accounting Officer, Chief Operations Officer and Controller.</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">Information about certain significant executive
officers of the Company&rsquo;s subsidiaries is provided below.</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">William W. Duncan, Jr., 66, has served
as a director of the Company since July 2006. Mr. Duncan retired as a director of Talbot Bank and from his position as President
and Chief Executive Officer of Talbot Bank on December 31, 2012, both positions held since July 2006. From 2004 until his appointment
with Talbot Bank, Mr. Duncan served as the Chairman of Mercantile Eastern Shore Bank, located in Chestertown, Maryland. From 1982
to 2004, Mr. Duncan was President and Chief Executive Officer of St. Michaels Bank, located in St. Michaels, Maryland. Mr. Duncan
currently serves as a director of the Company.</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">F. Winfield Trice, Jr., 58, has served
as the President and Chief Executive Officer of CNB since June 2007. Prior to June 2007, Mr. Trice was employed by Mercantile
Peninsula Bank as the Executive Vice President and Senior Lending Officer. Mr. Trice currently serves as a director of the Company
and CNB.</P>

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

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

<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">The following table sets forth for the
last three fiscal years the total remuneration for services in all capacities awarded to, earned by, or paid to the Company&rsquo;s
CEO, the person serving as the PAO as of December 31, 2012, and the three most highly compensated executive officers and other
significant executive officers of the Company and its subsidiaries other than the CEO and the PAO who were serving as executive
officers as of December 31, 2012 and whose total compensation (excluding changes in pension value and non-qualified deferred compensation
earnings) exceeded $100,000 during 2012 (the CEO, the PAO and such other officers are referred to as the &ldquo;named executive
officers&rdquo;). Mr. Rapp did not earn any remuneration from the Company or its subsidiaries during 2012, 2011 or 2010.</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>

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    <!-- Field: /Page -->

<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">&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">&nbsp;</P>

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="10" STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt"><B>SUMMARY
    COMPENSATION TABLE</B></FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom; width: 19%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Name and principal position</B></P></TD>
    <TD STYLE="vertical-align: bottom; width: 6%; border-bottom: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt"><B>Year</B></FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 11%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Salary </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="vertical-align: bottom; width: 8%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Bonus</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)(1)</B></P></TD>
    <TD STYLE="vertical-align: top; width: 9%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Stock awards ($)(2)</B></P></TD>
    <TD STYLE="vertical-align: top; width: 9%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Option awards ($)(2)</B></P></TD>
    <TD STYLE="vertical-align: bottom; width: 10%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Non-equity incentive plan compen-sation</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)(1)</B></P></TD>
    <TD STYLE="vertical-align: bottom; width: 11%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Change in pension value and
        non-qualified deferred compen-</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>sation earnings</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="vertical-align: bottom; width: 10%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>All other compen-sation</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($) (3)&ndash;(7)</B></P></TD>
    <TD STYLE="vertical-align: bottom; width: 7%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Total</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">W. Moorhead Vermilye, CEO</FONT></TD>
    <TD STYLE="padding: 0; text-indent: 0"><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">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">2011</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">324,000</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">324,000</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">41,733</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">42,781</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">365,733</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">366,781</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><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">2010</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">324,000</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">25,000</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">60,678</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">409,678</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Lloyd L. Beatty, President </FONT><BR>
    <FONT STYLE="font-size: 10pt">and COO</FONT></TD>
    <TD STYLE="padding: 0; text-indent: 0"><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">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">2011</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">300,000</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">300,000</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">77,710</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">20,769</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: right">20,930</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">398,479</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">320,930</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><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">2010</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">294,000</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">50,000</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">22,508</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">366,508</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Susan E. Leaverton,</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Treasurer and PAO</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><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">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">2011</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">156,600</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">156,600</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">15,000</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">46,626</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">6,283</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">6,589</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">224,509</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">163,189</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><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">2010</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">156,600</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">30,000</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">9,026</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">195,626</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">William W. Duncan, Jr., President/CEO of Talbot Bank</FONT></TD>
    <TD STYLE="padding: 0; text-indent: 0"><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">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">2011</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">284,100</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">284,100</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">97,322</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">20,866</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">67,882</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">304,966</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">449,304</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><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">2010</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><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: right">284,100</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">143,316</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">80,211</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">507,627</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">F. Winfield Trice, Jr.</FONT><BR>
    <FONT STYLE="font-size: 10pt">/CEO of CNB</FONT></TD>
    <TD STYLE="padding: 0; text-indent: 0"><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">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">2011</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">222,300</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">222,300</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">30,000</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">46,626</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">13,750</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">14,764</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">312,676</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">237,064</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">2010</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">222,300</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">20,000</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">64,800</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">15,414</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">322,514</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 37.4pt; text-align: justify; text-indent: -25.25pt">Notes:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 12.15pt"></TD><TD STYLE="width: 25.25pt">(1)</TD><TD>Amounts reflect discretionary cash bonuses awarded to the
                                                                   named executive officers. Incentive awards paid under the MIP
                                                                   are reported in the column entitled &ldquo;Non-Equity Incentive
                                                                   Plan Compensation&rdquo;.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 12.15pt"></TD><TD STYLE="width: 25.25pt">(2)</TD><TD>Amounts reflect the aggregate grant date fair value of
                                                                   stock options and restricted stock awards granted in each fiscal
                                                                   year computed in accordance with ASC 718. See Note 13 to the
                                                                   consolidated audited financial statements contained in the
                                                                   Company&rsquo;s Annual Report on Form 10-K for the year ended
                                                                   December 31, 2012 regarding assumptions underlying valuation
                                                                   of equity awards.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 12.15pt"></TD><TD STYLE="width: 25.25pt">(3)</TD><TD>For Mr. Vermilye, the 2012 amount includes a $20,000 contribution
                                                                   under the Company Deferred Compensation Plan, a $9,800 matching
                                                                   contribution under the 401(k) plan, $5,303 for use of an automobile
                                                                   and $6,630 for club dues. The 2011 amount includes a $20,000
                                                                   contribution under the Company Deferred Compensation Plan,
                                                                   a $9,800 matching contribution under the 401(k) plan, $5,086
                                                                   for use of an automobile and $7,895 for club dues. The 2010
                                                                   amount includes a $40,000 contribution under the Company Deferred
                                                                   Compensation Plan, a $9,800 matching contribution under the
                                                                   401(k) plan, $5,348 for use of an automobile and $5,530 for
                                                                   club dues.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 12.15pt"></TD><TD STYLE="width: 25.25pt">(4)</TD><TD>For Mr. Beatty, the 2012 amount includes a $9,800 matching
                                                                   contribution under the 401(k) plan, $48 in dividends on restricted
                                                                   stock awards, $5,219 for use of an automobile and $5,702 for
                                                                   club dues. The 2011 amount includes a $9,800 matching contribution
                                                                   under the 401(k) plan, $814 in dividends on restricted stock
                                                                   awards, $4,760 for use of an automobile and $5,556 for club
                                                                   dues. The 2010 amount includes a $9,800 matching contribution
                                                                   under the 401(k) plan $2,590 in dividends on restricted stock
                                                                   awards, $4,686 for use of an automobile and $5,432 for club
                                                                   dues.</TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 12.15pt"></TD><TD STYLE="width: 25.25pt">(5)</TD><TD>For Ms. Leaverton, the 2012 amount includes a $6,264 matching
                                                                   contribution under the 401(k) plan and $19 in dividends on
                                                                   restricted stock awards. The 2011 amount includes a $6,264
                                                                   matching contribution under the 401(k) plan and $325 in dividends
                                                                   on restricted stock awards. The 2010 amount includes a $7,928
                                                                   matching contribution under the 401(k) plan and $1,098 in dividends
                                                                   on restricted stock awards.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 12.15pt"></TD><TD STYLE="width: 25.25pt">(6)</TD><TD>For Mr. Duncan, the 2012 amount includes a $6,145 matching
                                                                   contribution under the 401(k) plan, $252 in dividends on restricted
                                                                   stock awards, $1,200 opt out payment in lieu of health insurance
                                                                   coverage provided by the Company, $5,070 for use of an automobile
                                                                   and $8,199 for club dues. The 2011 amount includes a $44,924
                                                                   contribution under the Company Deferred Compensation Plan,
                                                                   a $6,141 matching contribution under the 401(k) plan, $1,817
                                                                   in dividends on restricted stock awards, $1,201 opt out payment
                                                                   in lieu of health insurance coverage provided by the Company,
                                                                   $4,699 for use of an automobile and $9,100 for club dues. The
                                                                   2010 amount includes a $54,198 contribution under the Company
                                                                   Deferred Compensation Plan, a $6,107 matching contribution
                                                                   under the 401(k) plan, $ 4,716 in dividends on restricted stock
                                                                   awards, $1,001 opt out payment in lieu of health insurance
                                                                   coverage provided by the Company, $5,305 for use of an automobile
                                                                   and $8,884 for club dues.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 12.15pt"></TD><TD STYLE="width: 25.25pt">(7)</TD><TD>For Mr. Trice, the 2012 amount includes an $8,892 matching
                                                                   contribution under the 401(k) plan, $32 in dividends on restricted
                                                                   stock awards and $4,826 for use of an automobile. The 2011
                                                                   amount includes a $9,692 matching contribution under the 401(k)
                                                                   plan, $543 in dividends on restricted stock awards and $4,529
                                                                   for use of an automobile. The 2010 amount includes a $9,800
                                                                   matching contribution under the 401(k) plan, $1,831 in dividends
                                                                   on restricted stock awards and $3,783 for use of an automobile.</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"><B>Overview of Compensation Philosophy and Objectives</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">The primary objective of the Compensation
Committee&rsquo;s approach is to provide competitive levels of compensation so that the Company may attract, retain and reward
outstanding executive officers. In a highly competitive community banking marketplace, excellent leadership is essential. The
Company&rsquo;s executive officers are expected to manage the business of the Company and its subsidiaries in a manner that promotes
growth and profitability for the benefit of stockholders, while exceeding the requirements and service expectations of the Company&rsquo;s
customers. To that end, the Committee believes that:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Key executives
                                                                                                             should have compensation
                                                                                                             opportunities at
                                                                                                             levels that are competitive
                                                                                                             with peer institutions;</TD></TR></TABLE>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Total compensation
                                                                                                             should include &ldquo;at
                                                                                                             risk&rdquo; components
                                                                                                             that are linked to
                                                                                                             annual and long-term
                                                                                                             performance results;
                                                                                                             and</TD></TR></TABLE>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Stock-based compensation
                                                                                                             should form a key
                                                                                                             component of total
                                                                                                             compensation as a
                                                                                                             means of linking
                                                                                                             senior management
                                                                                                             to the long-term
                                                                                                             performance of the
                                                                                                             Company and aligning
                                                                                                             their interests with
                                                                                                             those of stockholders.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&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 Company&rsquo;s success depends on
the ability of its key executives to meet and exceed operational and financial goals defined in the Company&rsquo;s business plan.
Consequently, the Compensation Committee applies the following principles when structuring compensation arrangements for key executives:</P>

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

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<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">1.</TD><TD><U>Benchmarking</U> &ndash; In order to determine competitiveness
                                                                in the marketplace, the Committee relies on an analysis of peer
                                                                institutions, comparable in asset size and corporate structure,
                                                                prepared by the Compensation Consulting Practice of Lockton Companies,
                                                                LLC (&ldquo;Lockton&rdquo;), an independent compensation advisor
                                                                retained by the Compensation Committee. The members of this peer
                                                                group include:</TD></TR></TABLE>

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

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

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="width: 70%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 47%; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">ACNB Corporation</FONT></TD>
    <TD STYLE="width: 53%; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Eagle Bancorp, Inc.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Alliance Financial Corporation</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Financial Institutions, Inc.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">American National Bankshares, Inc.</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">First South Bancorp, Inc.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Ameriserv Financial, Inc.</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Franklin Financial Services Corporation</FONT></TD></TR>
</TABLE>

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

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

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

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

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="width: 70%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; width: 47%"><FONT STYLE="font-size: 10pt">Berkshire Bancorp, Inc.</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; width: 53%"><FONT STYLE="font-size: 10pt">Middleburg Financial Corp</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Bridge Bancorp, Inc.</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">National Bankshares, Inc.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Bryn Mawr Bank Corporation</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Newbridge Bancorp</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">C &amp; F Financial Corporation</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Old Point Financial Corporation</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Center Bancorp, Inc.</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Penns Woods Bancorp, Inc.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Capital Bank Corp</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Republic First Bancorp</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Citizens &amp; Northern Corp</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Severn Bancorp, Inc.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">CNB Financial Corporation</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Vist Financial</FONT></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 0pt 0.5in">The Committee believes that total direct compensation
should be established at a level that is competitive with the Company&rsquo;s defined peer group. In addition, the Committee believes
that it is essential to offer competitive supplemental benefit arrangements and perquisites, in certain instances to round out
the executive compensation package and ensure that the package has the proper retention value.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">2.</TD><TD><U>Allocation of Elements of Compensation</U> &ndash; The
                                                                Committee believes that the weighting of compensation elements
                                                                should vary within the management group to reflect the role of
                                                                each executive and his or her ability to influence short- and
                                                                long-term performance. In general, the Committee believes that
                                                                fixed base salary should approximate 50% of the targeted total
                                                                compensation opportunity for senior management, with the balance
                                                                split between short-term (cash) and long-term incentives (such
                                                                as stock options and time- and performance-based stock awards),
                                                                as the circumstances dictate. Finally, while not a significant
                                                                component of the executive compensation package, fringe benefits,
                                                                including supplemental retirement benefits, for several executives
                                                                are important to enhance the retention value of the executive
                                                                compensation package. These fringe benefits may include car allowances,
                                                                country club dues and supplemental insurance and retirement benefits.</TD></TR></TABLE>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">3.</TD><TD><U>Impact of 2012 Say on Pay Vote</U> - At the 2012 annual
                                                                meeting of stockholders, the Company&rsquo;s stockholders overwhelmingly
                                                                adopted a non-binding resolution approving the compensation paid
                                                                to our executive officers, as disclosed in the definitive proxy
                                                                statement for that meeting pursuant to Item 402 of the SEC&rsquo;s
                                                                Regulation S-K. The measure was approved by approximately 90.8%
                                                                of all votes cast. The Compensation Committee and the Board consider
                                                                this vote to be an endorsement of our compensation philosophy
                                                                and practices, including our balance between cash and equity compensation.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 37.4pt">Based upon that stockholder vote, the Compensation
Committee believed that significant modifications to our executive compensation program were not necessary for 2012 and, as such,
it remained relatively unchanged from our 2011 program. Both the Committee and the Board intend to periodically re-evaluate our
executive compensation philosophy and practices in light of the Company&rsquo;s performance, needs and developments, including
the outcome of future non-binding advisory votes by the Company&rsquo;s stockholders.</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"><B>Employment Arrangements</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: 45.8pt">Of the named executive officers, only
Messrs. Vermilye and Beatty are parties to employment agreements, the material terms of which are discussed below. The terms of
employment for all of the named executive officers provide for salary, the possibility for additional compensation each year through
the Company&rsquo;s bonus and profit sharing plans, matching 401(k) contributions, to the extent such plans permit participation,
and the other elements of compensation described below, as well as coverage under the Company&rsquo;s group term life insurance
program that is generally available to all employees.</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 employment agreements (the &ldquo;Employment
Agreements&rdquo;) for Messrs. Vermilye and Beatty provide that they will serve as the Company&rsquo;s CEO and President, respectively
and entitle them to receive annual base salaries of $324,000 and $300,000, respectively, subject to periodic review and adjustment.
In addition, each officer is entitled to: (i) participate in the Company&rsquo;s bonus plans; (ii) receive employee benefits of
the type offered by the Company and its affiliates to similarly-situated officers, including vacation, sick leave and disability
leave; (iii) receive fringe benefits of the type customarily made available by the Company to its officers; and (iv) be reimbursed
for employment-related expenses.</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"></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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each of the Employment Agreements has a
two-year term, which will automatically renew for successive 12-month terms unless a party notifies the other party at least 120
days prior to the end of the then-current term of its or his decision not to renew the Employment Agreement. The term of an officer&rsquo;s
employment under his Employment Agreement may be terminated at any time and for any reason by either the Company or the officer
(upon 30 days&rsquo; prior written notice), and it will automatically terminate upon the officer&rsquo;s death.</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">Generally, the Company&rsquo;s obligations
to each officer under his Agreement will be suspended if any regulatory agency with jurisdiction over the Company temporarily
prohibits the officer&rsquo;s continued employment. If such regulator&rsquo;s charges are later dismissed, then the Company must
reinstate the officer and pay him all compensation that was withheld during the suspension.</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">Upon the termination of his employment,
each of the officers is entitled to receive all unpaid base salary that has accrued through the date of termination, all bonus
awards (pro rated through the last day of the month in which termination occurs) that he would have received had he remained employed
when bonuses are next declared or paid, and reimbursement of all unreimbursed expenses, all of which must be paid no later than
March 15th of the year following the year in which the termination occurs. In addition, all unexercised or unvested equity awards,
or portions thereof, held by the officer as of the date of termination shall vest or terminate and be exercisable in accordance
with their terms.</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 officer&rsquo;s employment is terminated
without &ldquo;Cause&rdquo; prior to the expiration of the term of his Employment Agreement, then, except in the case of termination
following a &ldquo;Change in Control&rdquo; of the Company, the officer will additionally be entitled to receive severance (&ldquo;Severance&rdquo;)
in the form of continued base salary (at the then-current level) for a period of 24 months following the date of termination (the
&ldquo;Severance Period&rdquo;). Each of the Employment Agreements provides that the first Severance payment will be made on the
first regular payroll date that occurs on or after the 60th day following the termination of employment, provided that the officer
has executed and delivered a release of claims and the statutory period during which he may revoke that release has expired on
or before that 60th day.</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">In lieu of Severance, each of the Employment
Agreements provides for the payment of a Change in Control benefit (the &ldquo;CiC Benefit&rdquo;) should the Company terminate
an officer&rsquo;s employment without Cause within 12 months of a Change in Control of the Company. In this case, the officer
will be entitled to receive an amount equal to the difference between (i) the product of 2.99 times the officer&rsquo;s &ldquo;base
amount&rdquo; as defined in Section 280G(b)(2) of the Internal Revenue Code (the &ldquo;Code&rdquo;) and (ii) the sum of any other
parachute payments as defined under Section 280G(b)(2) of the Code that the officer receives on account of the Change in Control.
The CiC Benefit will be paid in one lump sum on the 60th day following termination of employment, provided that the officer has
executed and delivered a release of claims and the statutory period during which he may revoke that release has expired on or
before that 60th day.</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">Notwithstanding the payment terms discussed
above, any payment obligation that arises on account of a termination of employment while the officer is a &ldquo;specified employee&rdquo;
as defined under Section 409A of the Code will be subject to a post-termination waiting period to the extent that the payment
constitutes &ldquo;deferred compensation&rdquo; under applicable Treasury regulations. Mr. Vermilye&rsquo;s Employment Agreement
provides that such amounts will be paid within 15 days after the later of (i) the date that is six months after termination and
(ii) the date that is 18 months after the date of his Employment Agreement. Mr. Beatty&rsquo;s Employment Agreement provides that
such amounts will be paid within 15 days after the six-month period that follows his termination date. If either officer dies
during the waiting period, then payment will be made in a lump sum within 15 days after the appointment of a personal representative
or executor of his estate.</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"></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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If an officer is indebted to the Company
at the time his employment is terminated, then, subject to certain restrictions, the Employment Agreement allows the Company to
apply any post-termination amounts due to the officer toward repayment of such debt.</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 Employment Agreements define the term
&ldquo;Cause&rdquo; as: (i) the officer&rsquo;s &ldquo;Disability&rdquo; (as defined in the Employment Agreement); (ii) fraud,
misappropriation or damage to the property or business of the Company by the officer; (iii) the commission of an act by the officer
that constitutes dishonesty or a crime, or that causes the Company to commit a crime; (iv) the officer&rsquo;s breach of the non-competition
or non-solicitation provisions of the Employment Agreement; (v) the unauthorized use, misappropriation or disclosure by the officer
of the Company&rsquo;s confidential information or any confidential information of another person to whom the officer owes an
obligation of nondisclosure; (vi) the officer&rsquo;s breach of any of his other obligations under the Employment Agreement or
any of the policies of the Company; (vii) the failure of the officer to abide by his responsibilities or to satisfactorily perform
his duties; (viii) the officer&rsquo;s failure to maintain a smooth and harmonious relationship with the Company&rsquo;s management,
staff, investors, affiliates or business relations; or (ix) 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 permanently prohibiting the officer&rsquo;s continued service.</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 term &ldquo;Change in Control&rdquo;
is defined as the occurrence of any of the following events: (i) a person, or group of persons acting together, acquires ownership
of securities of the Company that, together with such person&rsquo;s or group&rsquo;s other securities, constitutes more than
50% of the total fair market value or total voting power of the Company&rsquo;s securities; (ii) any person, or group of persons
acting together, acquires (or has acquired during the preceding 12-month period) ownership of securities of the Company possessing
35% or more of the total voting power of the Company&rsquo;s securities, (iii) a majority of the Company&rsquo;s Board of Directors
is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members
of the Company&rsquo;s Board prior to the date of the appointment or election; or (iv) any person, or group of persons acting
together, acquires (or has acquired during the preceding 12-month period) assets from the Company that have a total gross fair
market value equal of at least 40% of the total gross fair market value of all of the Company&rsquo;s assets.</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">Both Employment Agreements contain non-competition
and non-solicitation provisions. Specifically, during the term of an officer&rsquo;s employment and thereafter until the longer
of (i) his Severance Period and (ii) the date that is 12 months after the date of the Employment Agreement, but in no case longer
than 24 months following the termination of employment, neither officer may, directly or indirectly, (a) compete with the Company
or any of its affiliates in any county of any jurisdiction in which the Company or any of its affiliates maintains a branch or
other office, or in any county of any jurisdiction that is contiguous to any such county, (b) solicit any existing Business Relation
(as defined in the Employment Agreements) of the Company or any of its affiliates, wherever located, to purchase, sell or otherwise
provide competing products and services, (c) accept employment with or act as an independent contractor to any such Business Relation
if the employment or service will require the officer to render services that are similar to those provided by the Company or
any of its affiliates, (d) employ, engage, or solicit for employment or engagement any person who was an employee or independent
contractor of the Company or any of its affiliates during the 24 months preceding the officer&rsquo;s termination of employment,
or (e) encourage any person to reduce such person&rsquo;s business, employment or service with the Company or any affiliate. In
addition to the foregoing, the Employment Agreements contain other customary business protection provisions, including an agreement
to maintain the confidentiality of the Company&rsquo;s business information, an agreement to return Company property following
termination, and a 12-month non-disparagement agreement.</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">Except for disputes relating to the enforcement
of the non-competition, non-solicitation and other business protection provisions of the Employment Agreements, the parties have
agreed that all disputes arising under the Employment Agreements will be settled by binding arbitration.</P>

<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"></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"><B>&nbsp;</B></P>

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

<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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For 2012, the Compensation Committee determined
that salaries would not be increased above the amounts paid for 2011.</P>

<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"><B>Annual Bonus</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">The Company&rsquo;s primary bonus program,
the Management Incentive Plan (the &ldquo;MIP&rdquo;), was developed to provide additional cash compensation to key management
personnel when corporate and individual performance meet or exceed specific predetermined goals. Incentive award targets are assigned
to each executive based on the executive&rsquo;s position and responsibilities and identified comparative compensation targets
and mix outlined in our executive compensation philosophy. Based on the Company&rsquo;s projected income for 2012, the Compensation
Committee did not establish performance metrics for, or grant award opportunities under, the MIP in 2012. The Compensation Committee
did, however, determine to pay discretionary cash bonuses to Ms. Leaverton and Mr. Trice in recognition of their efforts during
the year.</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"><B>Equity Compensation</B></P>

<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">During 2012, the Company maintained two
equity compensation plans: (i) the 2006 Equity Plan; and (ii) the Shore Bancshares, Inc.<I> </I>1998 Stock Option Plan (&ldquo;1998
Option Plan&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: 0.5in">The 2006 Equity Plan reserves 600,000 shares
of Common Stock, subject to adjustment for stock splits and other similar reclassification events, plus up to 31,972 shares that
were subject to outstanding awards under the 1998 Stock Option Plan as of April 26, 2006 that thereafter terminate, lapse or are
forfeited, for issuance pursuant to awards. Through December 31, 2012, both nonqualified stock options and restricted stock have
been granted under the 2006 Equity Plan. During 2012, the Company granted nonqualified stock options to purchase a total of 49,698
shares of Common Stock to the named executive officers under the 2006 Equity Plan. Under the terms of outstanding awards, all
unvested stock options will lapse and be forfeited upon the termination of the optionee&rsquo;s employment with the Company.</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 following table provides information
with respect to outstanding equity awards held by the named executive officers at December 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</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 COLSPAN="7" STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt"><B>OUTSTANDING
    EQUITY AWARDS AT FISCAL YEAR-END</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="4" STYLE="border-right: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt"><B>Option
    Awards</B></FONT></TD>
    <TD COLSPAN="2" STYLE="padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt"><B>Stock Awards</B></FONT></TD></TR>
<TR>
    <TD STYLE="text-align: left; width: 14%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0; vertical-align: top"><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">&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">&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"><B>Name</B></P></TD>
    <TD STYLE="text-align: center; width: 14%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number of </B><BR>
        <B>securities</B><BR>
        <B>underlying</B><BR>
        <B>unexercised </B><BR>
        <B>options</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(#)</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>exercisable</B></P></TD>
    <TD STYLE="text-align: center; width: 14%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number of </B><BR>
        <B>securities </B><BR>
        <B>underlying</B><BR>
        <B>unexercised</B><BR>
        <B>options</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(#)</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>unexercisable</B></P></TD>
    <TD STYLE="text-align: center; width: 12%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Option</B><BR>
        <B>exercise price</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="text-align: center; width: 18%; border-bottom: windowtext 1pt solid; padding: 0; border-right: windowtext 1pt solid; text-indent: 0; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Option </B><BR>
        <B>expiration date</B></P></TD>
    <TD STYLE="text-align: center; width: 14%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number of </B><BR>
        <B>shares or units </B><BR>
        <B>that have not </B><BR>
        <B>vested </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(#)</B></P></TD>
    <TD STYLE="text-align: center; width: 14%; border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0; vertical-align: bottom"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Market value </B><BR>
        <B>of shares or </B><BR>
        <B>units of stock </B><BR>
        <B>that have not </B><BR>
        <B>vested</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Vermilye</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Mr. Beatty</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">22,590 (1)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">6.64</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">March
    15, 2022</FONT></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">1,140 (2)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">1,865 (3)</P></TD>
    <TD STYLE="padding: 0; text-indent: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">6,145</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">10,052</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Ms. Leaverton</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">13,554 (1)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">6.64</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">March
    15, 2022</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">1,119 (3)</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">6,031</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Mr. Duncan</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Mr. Trice</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">13,554
    (1)</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">6.64</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">March
    15, 2022</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">1,865
    (3)</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding: 0; text-align: right; text-indent: 0"><FONT STYLE="font-size: 10pt">10,052</FONT></TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 9.35pt"></TD><TD STYLE="width: 18pt">(1)</TD><TD>Unless forfeited, 50% will vest on March 15, 2014 and 50% will
                                                               vest March 15, 2015.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 9.35pt"></TD><TD STYLE="width: 18pt">(2)</TD><TD>Unless forfeited, this amount will vest January 30, 2013.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 9.35pt"></TD><TD STYLE="width: 18pt">(3)</TD><TD>Unless forfeited, this amount will vest January 29, 2013.</TD></TR></TABLE>

<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; text-indent: 0.5in"></P>

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<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; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth the number
of restricted shares of Common Stock acquired by the named executive officers pursuant to stock awards that vested during 2012
and the value realized upon vesting of stock awards. During 2012, none of the named executive officers exercised any stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</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 COLSPAN="5" STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>OPTION
    EXERCISES AND STOCK VESTED</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD ROWSPAN="2" STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><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"><B>&nbsp;</B></P>
        <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"><B>Name</B></P></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Option
    Awards</B></FONT></TD>
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Stock
    Awards</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number of Shares Acquired on
        Exercise</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(#)</B></P></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Value Realized on Exercise</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Number
    of Shares Acquired on Vesting (#)</B></FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Value Realized on Vesting </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr. Vermilye</FONT></TD>
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="width: 20%; border-right: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr. Beatty</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">4,825</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">26,849</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Ms. Leaverton</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">1,946</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">10,859</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr. Duncan</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">25,218</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">183,657</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Trice</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">3,245</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">18,108</FONT></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"><B>Deferred Compensation</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">The following table provides information
regarding 2012 contributions, earnings, and other financial information in respect of the Company&rsquo;s deferred compensation
plans:</P>

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="7" STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>NONQUALIFIED
    DEFERRED COMPENSATION</B></FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom; width: 13%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="vertical-align: top; width: 10%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Plan (1)</B></P></TD>
    <TD STYLE="vertical-align: bottom; width: 19%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Executive
    </B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>contributions</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>in last FY</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>($)</B></FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 15%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Registrant
    </B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>contributions</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>in last FY</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>($)</B></FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 14%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Aggregate</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>earnings(loss)</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>in last FY </B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>($)</B></FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 15%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Aggregate</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>withdrawals/</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>distributions</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>($)</B></FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 14%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Aggregate
    </B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>balance at </B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>last FYE</B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>($)</B></FONT></TD></TR>
<TR>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr. Vermilye</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">TSDCP</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CDCP</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">20,000</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">28,313</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">30,418</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">256,254</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">251,074</P></TD></TR>
<TR>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr. Beatty</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">CDCP</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">5,945</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">44,620</FONT></TD></TR>
<TR>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Ms. Leaverton</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD></TR>
<TR>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr. Duncan</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">CDCP</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">89,215</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">964,422</FONT></TD></TR>
<TR>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Trice</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">(1) &ldquo;TSDCP&rdquo; stands for the Talbot Deferred
Compensation Plan and &ldquo;CDCP&rdquo; stands for the Company Deferred Compensation Plan.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Shore Bancshares, Inc. Executive Deferred Compensation Plan
(Company Deferred Compensation Plan)</I></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">Under the Company Deferred Compensation
Plan, amounts deferred at the election of the employee are credited to an account maintained on behalf of the participant and
are deemed to be invested in certain investment options established from time to time by the Compensation Committee. Mandatory,
matching and discretionary contributions will be credited to an Employer Funded Account (as defined in the plan) established by
the Company and will be deemed to be invested in the manner specified in the participant&rsquo;s election form for that Plan Year
in respect of his or her voluntary deferrals. An employee&rsquo;s account is credited with the gain or loss generated on the investments
in which the funds in those account are deemed to be invested. Mandatory contributions will be reduced on a pro-rata basis in
the event a participant has a Separation from Service</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(generally defined as a termination of employment other than
because of death, Disability (as defined in the plan) or the taking of leave of absence).</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">A participant is fully vested at all times
in employee deferrals (and earnings thereon). Starting in the second year of participation, a participant vests in his or her
Employer Funded Account at the rate of 25% each year. If, however, (i) the participant reaches age 70 while employed, (ii) the
participant&rsquo;s service with the Company terminates because of death or Disability, or because of retirement at or after age
70, or (iii) the Company experiences a Change in Control (as defined in the plan), then in each such case the participant&rsquo;s
interest in his or her Employer Funded Account will be automatically 100% vested regardless of years in the plan. If the participant
separates from service for any other reason, then any non-vested portion of his or her Employer Funded Account will be forfeited.</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"></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 Company Deferred Compensation Plan
contemplates automatic distributions upon the occurrence of certain events and elective distributions.</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 a participant dies or experiences a
Disability while employed by the Company or if the Company experiences a Change in Control, then the vested portions of a participant&rsquo;s
accounts will be distributed in a lump sum payment to the participant or, in the case of death, to his or her designated beneficiaries.
If a participant experiences a Separation from Service, then the vested portions of a participant&rsquo;s accounts will be distributed
in a lump sum or in installments, as specified in the most recent election form. Certain restrictions on the commencement of automatic
distributions apply to Key Employees (as defined in the plan).</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">A participant may elect in his or her annual
election form to receive elective distributions, or &ldquo;In-Service Distributions&rdquo;, of his or her employee deferrals (and
earnings thereon) for a given Plan Year as soon as three years after the end of that Plan Year. At the time of the election, the
participant must also elect whether to receive the elective distribution in a lump sum or in installments over a period of up
to 10 years. If a participant fails to make a payment method election, then the distribution will be made in one lump sum. A participant
may change his or her election to postpone a distribution or change the form of payment, but such change must be made at least
12 months prior to the original distribution date, cannot be effective until at least 12 months following the subsequent election,
and must postpone the commencement of the payment for a period of at least five years from the original distribution 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">The Company Deferred Compensation Plan
also permits certain limited distributions upon the occurrence of an Unforeseen Emergency (as defined in the plan) and a lump
sum distribution, at the administrator&rsquo;s sole discretion, in the event the participant&rsquo;s accounts have a value of
less than $10,000.</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"><I>Talbot Bank Supplemental Deferred Compensation Plan (Talbot
Deferred Compensation Plan)</I></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">Talbot Bank elected to suspend contributions
to the Talbot Deferred Compensation Plan for all plan years beginning on and after January 1, 2007. As noted above, this plan
called for annual employer contributions of $20,000 to an account established for the benefit of Mr. Vermilye. Mr. Vermilye is
immediately vested in the deferred amounts and is entitled to direct the manner in which these amounts are deemed to be invested
in the investment options offered from time to time by Talbot Bank. His account is credited or debited with the deemed earnings
or losses on the investments. Subject to any waiting period required by law, upon termination of employment, Mr. Vermilye is entitled
to a lump sum cash payment equal to the amount in his account. If Mr. Vermilye dies before terminating his employment, his designated
beneficiaries are entitled to receive a lump sum cash payment equal to the amount in his account. The plan automatically terminates
in the event of a change of control where the successor does not specifically assume the plan.</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">For information about amounts that could
be payable to the named executive officers under these deferred compensation plans upon a termination of employment, see the section
below entitled &ldquo;Benefits Upon Termination of Employment&rdquo;.</P>

<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"><B>Benefits Upon Termination of Employment</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">The following table shows the estimated
present value of benefits (as of December 31, 2012) that could be payable to the named executive officers under employment agreements
and deferred compensation plans upon a termination of employment. Information is provided only for those named executive officers
who are eligible to receive such benefits.</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"></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>

<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: 15%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><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"><B>Name</B></P></TD>
    <TD STYLE="width: 35%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Reason for Termination</B></P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; width: 25%"><FONT STYLE="font-size: 10pt"><B>Payment
    Under </B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>Employment Agreement </B></FONT><BR>
    <FONT STYLE="font-size: 10pt"><B>($)</B></FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; width: 25%"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Payment Under Deferred </B><BR>
        <B>Compensation Plans</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD ROWSPAN="4" STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Vermilye</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Death</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">507,328</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Change in control</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">1,164,745</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">507,328</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Involuntary termination without cause</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;648,000</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">507,328</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Termination
    for any other reason</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">507,328</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD ROWSPAN="5" STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Beatty</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Death or disability</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">44,620</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Change in control</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">1,029,110</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">44,620</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Involuntary termination without cause</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">600,000</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;44,620</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Termination for any other reason before
    age 70</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">-</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">44,620</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Termination
    for any other reason after age 70</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;-</P></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">44,620</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Mr.
    Duncan</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><FONT STYLE="font-size: 10pt">Termination
    for any reason</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"><FONT STYLE="font-size: 10pt">964,422</FONT></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"><B>401(k) Profit Sharing Plan</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">All employee contributions to the 401(k)
Profit Sharing Plan are immediately vested. Discretionary and matching contributions by the Company vest incrementally over a
six-year period. Discretionary, pre-tax and matching contributions may be withdrawn while a participant is employed by the Company
if the participant has reached age 59&frac12; in circumstances of financial hardship or in certain other circumstances pursuant
to plan restrictions.</P>

<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"><B>Compensation for 2013</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">The annual salary rates for the named executive
officers (other than Mr. Duncan, who retired on December 31, 2012) for 2013 are as follows:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 90%">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: left"></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center"></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"></FONT><FONT STYLE="font-size: 10pt">Base Salary</FONT></TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Increase</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0; border-bottom: Black 1pt solid; text-align: left">Name</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; border-bottom: Black 1pt solid; text-align: center">Title</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; border-bottom: Black 1pt solid; text-align: center">2012</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; border-bottom: Black 1pt solid; text-align: center">2013</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; border-bottom: Black 1pt solid; text-align: center">Amount</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; border-bottom: Black 1pt solid; text-align: center">Percentage</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="width: 16%; font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: left">W. Moorhead Vermilye</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 16%; font: 10pt Times New Roman, Times, Serif; text-align: center">CEO</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 16%; font: 10pt Times New Roman, Times, Serif; text-align: center">324,000</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 16%; font: 10pt Times New Roman, Times, Serif; text-align: center">324,000</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 16%; font: 10pt Times New Roman, Times, Serif; text-align: center">0</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 15%; font: 10pt Times New Roman, Times, Serif; text-align: center">0.0%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: left">Lloyd L. Beatty, Jr.</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">COO</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">300,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">345,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">45,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">15.0%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: left">Susan E. Leaverton</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">PAO of Talbot Bank</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">156,600</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">156,600</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">0.0%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: left">George S. Rapp</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">CFO</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">-</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">225,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">N/A</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">N/A</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: left">F. Winfield Trice, Jr.</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">CEO CNB</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">222,300</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">235,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">12,700</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">5.7%</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">In addition to the salary disclosed above,
the terms of Mr. Rapp&rsquo;s offer of employment contemplate: (i) participation in the Company&rsquo;s MIP and an opportunity
thereunder for plan year 2013 to receive up to 35% of his annual salary based on the achievement of to-be-determined performance
criteria (with a guaranteed minimum incentive award of $20,000); (ii) a grant of $25,000 in shares of restricted stock under the
Company&rsquo;s 2006 Equity Plan, which will vest over a three-year period (50% in year two and 50% in year three); and (iii)
four weeks of vacation, $20,000 in relocation expense reimbursement and other employee benefits customarily made available to
the Company&rsquo;s senior executives.</P>

<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"><B>Impact of Recent Legislation on Executive Compensation</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">On July 21, 2010, the Dodd-Frank Wall Street
Reform and Consumer Protection Act (the &ldquo;Dodd-Frank Act&rdquo;) was signed into law and imposed several new requirements
on public companies. Other than the requirements relating to stockholder advisory votes, the implementation of these new requirements
is dependent on rulemaking efforts by the SEC and other regulatory agencies that are not yet final. The Company does expect that
these new requirements will impact its executive compensation policies and practices, but those impacts cannot be predicted at
this time.</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"></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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Dodd-Frank Act created two new stockholder
advisory vote requirements that are currently applicable to the Company. First, every public company is required to seek an advisory
stockholder vote on executive compensation, as disclosed in the proxy statement. The vote must be held no less frequently than
once every three years.&nbsp; Stockholders determine the frequency of this &ldquo;Say on Pay&rdquo; vote, and public companies
must seek a stockholder vote on the frequency at least once every six years.&nbsp; Second, for every meeting at which stockholders
will be asked to approve a change in control or similar transaction, the proxy statement must disclose all &ldquo;golden parachute&rdquo;
arrangements between the public company and/or the acquiring company and any named executive officer that relate to that transaction,
and the public company must seek an advisory stockholder vote on those arrangements.&nbsp; Both of these advisory votes are non-binding
on the public company, so they will not overrule a decision of the company or its board of directors. Moreover, Dodd-Frank specifically
provides that an advisory vote does not create or imply any change to a board of director&rsquo;s fiduciary duties.</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">In June 2012, pursuant to Section 952 of
the Dodd-Frank Act, the SEC issued regulations that require national securities exchanges and associations to prohibit the listing
of the equity securities of most companies that do not comply with four new requirements relating to compensation committees.&nbsp;
First, each public company must have a compensation committee that is made up entirely of independent directors as defined by
each of the exchanges and associations, which definitions must take into account relevant factors, such as how and why the committee
member is paid by the company and whether the committee member is affiliated with the company and its subsidiaries.&nbsp; Second,
the compensation committee, before retaining a compensation consultant, including legal counsel, must consider various factors
that could affect the consultant&rsquo;s independence.&nbsp; These factors will include other services provided to the company
by the consultant, the amount of fees paid to the consultant for compensation work (as a percentage of total revenues of the company),
the committee&rsquo;s policies and procedures that are designed to prevent conflicts of interest, any business or personal relationship
of the consultant with a member of the compensation committee, and whether the consultant owns any stock of the company.&nbsp;
Third, the compensation committee must be solely responsible for the hiring, payment, oversight and firing of compensation consultants.&nbsp;
Fourth, proxy statements with respect to annual meetings of stockholders occurring after July 21, 2011 must disclose whether the
compensation committee retained a compensation consultant and whether the consultant&rsquo;s work raised any conflict of interest
and, if so, the nature of that conflict and how it was or is being addressed. On January 11, 2013, the SEC approved final rules
by NASDAQ to implement these requirements. NASDAQ listed companies, like the Company, must comply the requirements relating to
compensation committee responsibilities and authority on or before July 1, 2013 and with the other requirements on or before the
earlier of their first annual meeting occurring after January 15, 2014 or October 31, 2014. However, smaller reporting companies
are exempt from the heightened independence requirements and the requirement that the Company establish a formal compensation
committee charter that outlines the specific responsibilities and authority of the compensation committee so long as the board
of directors adopts a resolution which sets forth such responsibilities and authority.</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">Section 953 of the Dodd-Frank Act requires
the SEC to amend the proxy rules to require new disclosures by publicly-traded companies about executive compensation.&nbsp; First,
the proxy statement for any annual meeting of stockholders must disclose the relationship between executive compensation and the
financial performance of the company.&nbsp; Second, these proxy statements also must disclose the median of the annual total compensation
of all employees of the company other than the chief executive officer, the annual total compensation of the company&rsquo;s chief
executive officer and the ratio of these two amounts. The SEC has not yet issued rules to implement Section 953.</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">Under Section 954 of the Dodd-Frank Act,
the national securities exchanges must adopt rules that prohibit the listing of any security of a company that does not adopt
a policy with respect to the &ldquo;claw-back&rdquo; of executive compensation. The policy must provide for disclosure of the
company&rsquo;s policy on incentive-based compensation that is based on financial information required to be reported under the
securities laws.&nbsp; In the event of an accounting restatement due to the company&rsquo;s material noncompliance with any financial
reporting requirement, the policy must require the company to recover any excess compensation above that which would have been
paid, after giving effect to the restatement, from any current or former executive officer who received incentive-based compensation
(including stock options) during the three-year period preceding the restatement date. The SEC and the national securities exchanges
have not yet adopted rules to implement Section 954.</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"></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">Finally, Section 956 of the Dodd-Frank
Act requires the SEC and the federal banking regulators to jointly promulgate regulations requiring each &ldquo;covered financial
institution&rdquo; with assets of $1 billion or more to disclose to its federal regulator the structure of its incentive-based
compensation arrangements and prohibiting a covered financial institution from entering into any incentive-based compensation
arrangement that encourages (as determined by the federal regulators) the institution to take inappropriate risk.&nbsp; A &ldquo;covered
financial institution&rdquo; includes a depository institution, a depository institution holding company, a registered broker
or dealer, a credit union, an investment adviser, FannieMae, FreddieMac, and any other financial institution designated by the
federal regulators. Proposed rules were published in May 2011, but final rules have not yet been adopted.</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"><B>Role of Compensation Consultants</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">In 2012, the Compensation Committee directly
engaged Lockton to assist the Compensation Committee with the maintenance and administration of the Company&rsquo;s comprehensive
executive compensation strategy including the provision of peer data used in benchmarking director and executive compensation
as discussed above. The Company paid fees totaling $11,250 to Lockton during 2012.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE</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">Section 16(a) of the Exchange Act requires
the Company&rsquo;s directors and executive officers and persons who own more than 10% of the outstanding shares of Common Stock
to file reports with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;) disclosing their ownership of Common Stock
at the time they become subject to Section 16(a) and changes in such ownership that occur during the year. Based solely on a review
of copies of such reports furnished to the Company, or on written representations that no reports were required, the Company believes
that all directors, executive officers and holders of more than 10% of the Common Stock complied in a timely manner with the filing
requirements applicable to them with respect to transactions during the year ended December 31, 2012, except that one Statement
of Changes in Beneficial Ownership on Form 4 (relating to two sales of Common Stock on two consecutive days) was filed late by
William E. Sylvester, Jr.</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>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</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"><I>Related Party Transactions since January 1, 2011</I></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">During the past two years Talbot Bank and
CNB have had banking transactions in the ordinary course of their businesses with their directors and officers and with the associates
of such persons on substantially the same terms, including interest rates, collateral, and repayment terms on loans, as those
prevailing at the time for comparable transactions with persons not related to the Company and its subsidiaries. Extensions of
credit by Talbot Bank and CNB to these persons have not and do not currently involve more than the normal risk of collectability
or present other unfavorable features.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Review, Approval and Ratification of Related Party Transactions</I></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">NASDAQ Rule 5630 requires the Company to
conduct an appropriate review of all related party transactions for potential conflict of interest situations on an ongoing basis
and further requires all such transactions to be approved by the Company&rsquo;s Audit Committee or another &ldquo;independent
body&rdquo; of the Board of Directors. The term &ldquo;related party transaction&rdquo; is generally defined as any transaction
(or series of related transactions) in which the Company is a participant and the amount involved exceeds $120,000, and in which
any director, director nominee, or executive officer of the Company, any holder of more than 5% of the outstanding voting securities
of the Company, or any immediate family member of the foregoing persons will have a direct or indirect interest. For smaller reporting
companies, the dollar threshold is the greater of $120,000 and 1.0% of the company&rsquo;s average consolidated assets for the
last two fiscal years. The term includes most financial transactions and arrangements, such as loans, guarantees and sales of
property, and remuneration for services rendered (as an employee, consultant or otherwise) to the Company.</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"></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 Company and its subsidiaries have adopted
policies and procedures to ensure compliance with the foregoing requirements.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RATIFICATION OF THE APPOINTMENT OF STEGMAN
&amp; COMPANY AS THE COMPANY&rsquo;S</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INDEPENDENT REGISTERED ACCOUNTING FIRM
FOR FISCAL YEAR 2013 (Proposal 2</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">Stockholders will also be asked to ratify
the Audit Committee&rsquo;s appointment of Stegman &amp; Company to audit the books and accounts of the Company for the fiscal
year ended December 31, 2013. Stegman &amp; Company served as the Company&rsquo;s independent registered public accounting firm
in 2012. Stegman &amp; Company has advised the Company that neither the accounting firm nor any of its members or associates has
any direct financial interest in or any connection with the Company other than as independent auditors. A representative of Stegman
&amp; Company is expected to be present at the Annual Meeting, will have an opportunity to make a statement if he or she desires
to do so, and will be available to respond to appropriate questions.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because your vote is advisory, it will
not be binding upon the Audit Committee, overrule any decision made by the Audit Committee, or create or imply any additional
fiduciary duty by the Audit Committee. The Audit Committee may, however, take into account the outcome of the vote when considering
future auditor appointments.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>The Board of Directors recommends that
stockholders vote <U>FOR</U> the ratification of the appointment of Stegman &amp; Company as the Company&rsquo;s independent registered
public accounting firm for fiscal year 2013.</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-align: center"><B>AUDIT FEES AND SERVICES</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table shows the fees paid
or accrued by the Company for the audit and other services provided by Stegman &amp; Company during fiscal years 2012 and 2011:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 68%; font-size: 10pt; text-align: left; text-indent: -5.8pt; padding-left: 5.8pt">Audit Fees</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">169,432</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">172,269</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-indent: -5.8pt; padding-left: 5.8pt">Audit-Related Fees</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">9,793</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,670</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -5.8pt; padding-left: 5.8pt">Tax Fees</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">15,440</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">13,500</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; text-indent: -5.8pt; padding-left: 5.8pt">All Other Fees</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 2.5pt; padding-left: 5.4pt">Total</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: right">194,665</TD><TD STYLE="padding-bottom: 2.5pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: right">196,439</TD><TD STYLE="padding-bottom: 2.5pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</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">Audit Fees incurred in fiscal years 2012
and 2011 include charges for the examination of the consolidated financial statements of the Company, quarterly reviews of financial
statements, and the attestation of management&rsquo;s report on internal control over financial reporting. Audit-Related Fees
incurred in fiscal year 2012 and 2011 include charges related to the audit of the 401(k) and profit sharing plan. Tax Fees incurred
in fiscal years 2012 and 2011 include charges primarily related to tax return preparation. The Audit Committee has reviewed summaries
of the services provided and the related fees and has determined that the provision of non-audit services is compatible with maintaining
the independence of Stegman &amp; Company.</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 Audit Committee&rsquo;s policy is to
pre-approve all audit and permitted non-audit services, except that <I>de minimis</I> non-audit services, as defined in Section
10A(i)(1) of the Exchange Act, may be approved prior to the completion of the independent auditor&rsquo;s audit. All of the 2012
and 2011 services described above were pre-approved by the Audit Committee.</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; text-indent: 0.5in"></P>

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<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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ADVISORY VOTE ON EXECUTIVE COMPENSATION
(Proposal 3)</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">The Company is providing its stockholders
with the opportunity to approve or disapprove the compensation of its named executive officers for 2012, as discussed in this
Proxy Statement pursuant to Item 402 of the SEC&rsquo;s Regulation S-K (commonly referred to as the &ldquo;Say-on-Pay&rdquo; vote).
Although this advisory vote is required by the Dodd-Frank Act, the Board of Directors nevertheless believes that it is appropriate
to seek the views of stockholders on the design and effectiveness of the Company&rsquo;s executive compensation program.</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 Company&rsquo;s goal for its executive
compensation program is to attract, motivate and retain a talented team of executives who will provide leadership for the Company&rsquo;s
success in dynamic and competitive markets. The section of this Proxy Statement entitled &ldquo;EXECUTIVE COMPENSATION&rdquo;
contains the information required by Item 402 of Regulation S-K and discusses in detail the Company&rsquo;s executive compensation
program, the decisions made by the Compensation Committee during 2012, and the compensation that was earned by, awarded to or
paid to the Company&rsquo;s named executive officers.</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 Board of Directors and its Compensation
Committee believe that the Company&rsquo;s compensation policies and procedures are reasonable in comparison both to the Company&rsquo;s
peer group and to the Company&rsquo;s performance during 2012. The Board of Directors and its Compensation Committee also believe
that the Company&rsquo;s compensation program strongly aligns executive officers with the interests of stockholders in the long-term
value of the Company as well as the components that drive long-term value.</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">At the annual meeting, stockholders will
be asked to adopt the following non-binding advisory resolution:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1in; text-align: justify; text-indent: 0.5in">RESOLVED, that the
compensation paid to the named executive officers of Shore Bancshares, Inc., as disclosed in its definitive proxy statement for
the 2013 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including in the section entitled &ldquo;EXECUTIVE
COMPENSATION&rdquo;, is hereby approved.</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">Because this advisory vote relates to,
and may impact, the Company&rsquo;s executive compensation policies and practices, the Company&rsquo;s named executive officers
have an interest in the outcome of this vote. However, it should be noted that your vote is advisory, so it will not be binding
on the Board of Directors or its Compensation Committee, overrule any decision made by the Board or its Compensation Committee,
or create or imply any additional fiduciary duty by the Board or its Compensation Committee. The Board and its Compensation Committee
may, however, take into account the outcome of the vote when considering future executive compensation arrangements.</P>

<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"><B>The Board of Directors unanimously recommends
that stockholders vote <U>FOR</U> approval of the compensation of the Company&rsquo;s named executive officers, as disclosed in
this Proxy Statement pursuant to Item 402 of Regulation S-K. </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-align: center"><B>FINANCIAL STATEMENTS</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A copy of the Company&rsquo;s Annual Report
on Form 10-K for the year ended December 31, 2012, which contains audited financial statements for the year ended December 31,
2012, accompanies this Proxy Statement. <B>This Form 10-K may also be obtained without charge by visiting the Company&rsquo;s
website (<U>www.shbi.com</U>) or upon written request to W. David Morse, Secretary, Shore Bancshares, Inc., 18 East Dover Street,
Easton, Maryland 21601.</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"></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-align: center"><B>DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS</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">Any stockholder desiring to present a proposal
pursuant to Rule 14a-8 of the Exchange Act to be included in the definitive proxy statement and voted on by the stockholders at
the 2014 Annual Meeting of Stockholders must submit a written proposal, including all supporting information, to the Company at
its principal executive offices no later than November 20, 2013 (120 days before the date of mailing based on this year&rsquo;s
Proxy Statement date), and must meet all other requirements for inclusion in the proxy statement. As provided in the By-Laws,
if a stockholder intends to present a proposal for business to be considered at the 2014 Annual Meeting of Stockholders but does
not seek inclusion of the proposal in the Company&rsquo;s proxy statement for that meeting, then such proposal, including all
supporting information, must be delivered to and received by the Company&rsquo;s Secretary at the Company&rsquo;s principal executive
offices no earlier than January 23, 2014 and no later than February 23, 2014 (not more than 90 days nor less than 60 days before
the first anniversary of the prior year&rsquo;s annual meeting). Additional time constraints are applicable where the date of
the Annual Meeting is changed. Proposals received by the Company outside of these timelines will be considered untimely. If a
stockholder proposal is not timely received, then the proxies will be authorized to exercise discretionary authority with respect
to the proposal.</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>OTHER BUSINESS</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: 37.4pt">As of the date of this Proxy Statement,
management does not know of any other matters that will be brought before the meeting requiring action of the stockholders. However,
if any other matters requiring the vote of the stockholders properly come before the meeting, it is the intention of the persons
named in the enclosed form of proxy to vote the proxies in accordance with the discretion of management. The persons designated
as proxies will also have the right to approve any and all adjournments of the meeting 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">By Order of the Board of Directors,</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">W. Moorhead Vermilye</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">March 20, 2013</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"></P>

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    <!-- Field: /Page -->

<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-align: center"><B>APPENDIX A</B></P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>410-763-7800/Fax 410-820-4238</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROXY SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS</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-align: justify">The undersigned stockholder of Shore Bancshares,
Inc. (the &ldquo;Company&rdquo;) hereby appoints W. Moorhead Vermilye and Neil R. LeCompte, or either of them, the lawful attorneys
and proxies of the undersigned, with full power of substitution, and hereby authorizes them to represent and to vote, as designated
below, all shares of common stock of the Company held by the undersigned as of March 11, 2013 at the Annual Meeting of Stockholders
called to convene on Wednesday, April 24, 2013, and any adjournment or postponement thereof, for the purposes identified on this
proxy and with discretionary authority as to any other matters that may properly come before the Annual Meeting, including substitute
nominees if any of the named nominees for director should be unavailable to serve for election in accordance with and as described
in the Notice of Annual Meeting of Stockholders and Proxy Statement.</P>

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="border-top: Black 1pt solid; border-right: Black 1pt solid; border-left: Black 1pt solid; font-weight: bold; text-align: justify"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-indent: -9pt"><B>The
                                                                                                                                                             Board
                                                                                                                                                             of
                                                                                                                                                             Directors
                                                                                                                                                             recommends
                                                                                                                                                             a
                                                                                                                                                             vote
                                                                                                                                                             &ldquo;FOR
                                                                                                                                                             ALL
                                                                                                                                                             NOMINEES&rdquo;
                                                                                                                                                             in
                                                                                                                                                             Proposal
                                                                                                                                                             1.</B></P>


</TD>
    <TD STYLE="border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" ROWSPAN="4" STYLE="border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 9pt">4.
    In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting and
    any adjournments or postponements thereof.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="4" STYLE="border-right: windowtext 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 9pt">1.</FONT></TD>
    <TD COLSPAN="4" STYLE="border-right: windowtext 1pt solid; font-weight: bold; text-align: justify"><P STYLE="margin: 0pt 0">Elect
                                                                                                       the three (3) director
                                                                                                       nominees named below to
                                                                                                       serve on the Board of Directors
                                                                                                       until 2016 and until their
                                                                                                       successor are duly elected
                                                                                                       and qualify.</P>


</TD>
    <TD STYLE="border-right: windowtext 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid; font-weight: bold"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid; font-weight: bold"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold"><FONT STYLE="font-size: 9pt">Class I (term expires 2016)</FONT></TD>
    <TD STYLE="font-family: Wingdings 2"><FONT STYLE="font-size: 9pt">&pound;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">FOR ALL NOMINEES</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">01</FONT></TD>
    <TD>Frank E. Mason, III&#9;</TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">02&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD>Christopher F. Spurry&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD STYLE="font-family: Wingdings 2"><FONT STYLE="font-size: 9pt">&pound;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">WITHHOLD AUTHORITY FOR ALL</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">03</FONT></TD>
    <TD>John H. Wilson</TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">NOMINEES</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD></TD>
    <TD></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD></TD>
    <TD></TD>
    <TD STYLE="font-family: Wingdings 2"><FONT STYLE="font-size: 9pt">&pound;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">FOR ALL EXCEPT</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">(see instruction below)</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="border-right: windowtext 1pt solid; border-left: windowtext 1pt solid; font-weight: bold"><P STYLE="margin: 0pt 0">INSTRUCTION:
                                                                                                                     To withhold
                                                                                                                     authority
                                                                                                                     to vote for
                                                                                                                     any individual
                                                                                                                     nominee,
                                                                                                                     mark &ldquo;FOR
                                                                                                                     ALL EXCEPT&rdquo;
                                                                                                                     and strike
                                                                                                                     a line through
                                                                                                                     that nominee&rsquo;s
                                                                                                                     name in the
                                                                                                                     list above.</P>


</TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="border-right: windowtext 1pt solid; border-left: windowtext 1pt solid; font-weight: bold"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The
                                                                                                                     Board of
                                                                                                                     Directors
                                                                                                                     recommends
                                                                                                                     a vote &ldquo;FOR&rdquo;
                                                                                                                     in Proposal
                                                                                                                     2.</B></P></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: Black 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" ROWSPAN="2" STYLE="border-right: windowtext 1pt solid; font-weight: bold"><FONT STYLE="font-size: 9pt">I/WE
    ACKNOWLEDGE RECEIPT OF NOTICE OF THE 2013 ANNUAL MEETING OF STOCKHOLDERS</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid; font-weight: bold"><FONT STYLE="font-size: 9pt">2.</FONT></TD>
    <TD COLSPAN="4" STYLE="border-right: windowtext 1pt solid; font-weight: bold"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Ratify
                                                                                  the appointment of Stegman &amp; Company as
                                                                                  the Company&rsquo;s independent registered public
                                                                                  accounting firm for 2013.</B></P>


<FONT STYLE="font-size: 9pt"></FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">FOR <FONT STYLE="font-family: Wingdings">&uml;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AGAINST
    <FONT STYLE="font-family: Wingdings">&uml;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ABSTAIN
    <FONT STYLE="font-family: Wingdings">&uml;</FONT></FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">Date: _______________________, 2013</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid; width: 3%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 20%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 6%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; width: 30%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; width: 3%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; width: 30%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; width: 3%"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">Signature</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">Signature</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="5" STYLE="border-right: windowtext 1pt solid; border-left: windowtext 1pt solid; font-weight: bold"><FONT STYLE="font-size: 9pt">The
    Board of Directors recommends a vote &ldquo;FOR&rdquo; in Proposal 3.</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD ROWSPAN="3" STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">NOTE: Please sign exactly as name
    appears hereon. Joint holders should each sign. When signing as attorney, executor, administrator, trustee or guardian, please
    indicate the capacity in which you are signing. If a corporation or other entity, please sign in full corporate or entity
    name by authorized person.</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid; font-weight: bold; text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">3.</FONT></TD>
    <TD COLSPAN="4" STYLE="border-right: windowtext 1pt solid; font-weight: bold; text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">Adopt
    a non-binding advisory resolution approving the compensation of the named executive officers.</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid; text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="text-align: left; vertical-align: top; border-right: Black 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT><BR>
    <FONT STYLE="font-size: 9pt">FOR <FONT STYLE="font-family: Wingdings">&uml;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AGAINST
    <FONT STYLE="font-family: Wingdings">&uml;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ABSTAIN
    <FONT STYLE="font-family: Wingdings">&uml;</FONT>&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-left: windowtext 1pt solid; text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="border-right: windowtext 1pt solid; text-align: left; vertical-align: top"></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt"><B>If you plan to attend the meeting, please
    designate the number that will attend </B><FONT STYLE="font-family: Wingdings 2">&pound;</FONT></FONT></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></TD></TR>
</TABLE>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this proxy is properly executed, then
all shares represented hereby will be voted in accordance with the instructions appearing on the proxy. In the absence of specific
instructions, proxies will be voted &ldquo;<B><U>FOR ALL NOMINEES</U></B>&rdquo; with respect to Proposal 1, &ldquo;<B><U>FOR</U></B>&rdquo;
the ratification of appointment of Stegman &amp; Company with respect to Proposal 2, &ldquo;<B><U>FOR</U></B>&rdquo; the adoption
of the resolution approving the compensation of the named executive officers with respect to Proposal 3, and in the discretion
of the proxy holders as to any other matter that may properly come before the meeting as described in Proposal 4.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Important Notice Regarding the Availability
of Proxy Materials </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Stockholder Meeting to be Held
on April 24, 2013:</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>This form of Proxy, the related Proxy
Statement, and Shore Bancshares, Inc.&rsquo;s Annual Report to Stockholders (including its Annual Report on Form 10-K) are available
at www.shbi.com&#9;</B></P>



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

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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
