8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  February 12, 2009

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Maryland	0-22345	52-1974638
(State or other jurisdiction of	(Commission file number)	(IRS Employer
incorporation or organization)		Identification No.)

18 East Dover Street, Easton, Maryland 21601

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  (410) 822-1400

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR240.13e-4(c))

ITEM 5.02  Departure of Directors or Certain Officers; Election of Directors;Appointment of Certain Officers; Compensatory Arrangements of CertainOfficers.

(e)           Compensatory Arrangements.

On February 12, 2009, the Compensation Committee of the Board of Directors of Shore Bancshares, Inc. (the “Company”) established the metrics to be applied in 2009 in respect of non-equity incentive compensation award opportunities for certain executive officers under the Company’s Management Incentive Plan (the “MIP”).  The terms of the MIP were previously described in the Company’s Form 8-K filed on April 3, 2007 and Form 8-K filed on August 13, 2007.

Award opportunities were made available to each of the Company’s named executive officers (as defined in Item 402 of the Securities and Exchange Commission’s Regulation S-K).  Each award opportunity is a percentage of the officer’s annual salary and is comprised of two components:  (i) a Company net income component; and (ii) a division/individual performance component.  These Compensation Committee assigns weightings to these components, all as described in the MIP and its Award Percentages and Performance Measure Weightings (Schedule A).  Each component is subject to an upward adjustment (up to 150%) when performance exceeds targeted expectations and to a downward adjustment (down to 0%) when performance falls below targeted expectations, all as described in the Plan and its award leverage schedule (Schedule B).  The Compensation Committee modified the award leverage schedule for 2009 by reducing the minimum performance level that must be achieved for a component to be payable (from 90% of target performance to 85%).

For W. Moorhead Vermilye, President/CEO, the incentive award was set at 75% of annual salary, weighted 50%/50% between the Company net income target and individual performance, respectively.  For Lloyd L. Beatty, COO, the incentive award was set at 40% of annual salary, weighted 30%/70% between the Company net income target and individual performance, respectively.  For Susan E. Leaverton, CFO, the incentive award was set at 40% of annual salary, weighted 20%/80% between the Company net income target and individual performance, respectively.  For William W. Duncan, Jr., President/CEO of The Talbot Bank of Easton, Maryland, the incentive award was set at 50% of annual salary, weighted 20%/80% between the Company net income target and individual performance, respectively.  For F. Winfield Trice, Jr., President/CEO of The Centreville National Bank of Maryland (now CNB), the incentive award was set at 30% of annual salary, weighted 20%/80% between the Company net income target and individual performance, respectively.

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The following table provides information about the amounts that may be paid to the named executive officers for 2009:

2009 GRANTS OF PLAN-BASED AWARDS

	Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
Name	Threshold ($)		Target ($)		Maximum ($)
Mr. Vermilye		112,500		225,000		337,500
Mr. Beatty		52,800		105,600		158,400
Ms. Leaverton		30,400		60,800		91,200
Mr. Duncan		67,500		135,000		202,500
Mr. Trice		31,500		63,000		94,500

A copy of the MIP, which contains the complete terms of the award opportunities for 2009, is attached hereto as Exhibit 10.1 and incorporated herein by reference.

ITEM 9.01.  Financial Statements and Exhibits.

(d)            Exhibits.

10.1            Shore Bancshares, Inc. 2009 Management Incentive Plan (filed herewith)

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SHORE BANCSHARES, INC.
Dated:  March 29, 2010	By:	/s/ W. Moorhead Vermilye
		W. Moorhead Vermilye
		President and CEO

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EXHIBIT INDEX

Exhibit

Number Description

10.1  Shore Bancshares, Inc. 2009 Management Incentive Plan (filed herewith).

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EX-10.1

Exhibit 10.1

Shore Bancshares, Inc.

2009 Management Incentive Plan

ARTICLE I

OBJECTIVE OF THE PLAN

The purpose of this 2009 Management Incentive Plan ("Plan") is to reward executives of Shore Bancshares, Inc. (hereafter, the "Company") for creating value for the Company by maximizing Company, Divisional and / or Individual performance goals.

ARTICLE II

PLAN ADMINISTRATION

The Compensation Committee of the Board shall administer the Plan and have final authority on all matters and or disputes pertaining to this Plan.

The Plan is an annual Plan, is effective January 1, 2009, and shall remain in effect until the Committee deems otherwise.  A new Plan year shall commence on the first business day of the fiscal year.

ARTICLE III

PARTICIPANTS

Participation is limited to those executives recommended by the President & CEO and approved by the Committee each Plan year.

ARTICLE IV

PERFORMANCE OBJECTIVES

Prior to or at the beginning of each fiscal year, the Committee shall establish:

(i) Plan performance objectives for the Company, subsidiary or business unit of the Company based on such criteria as may be recommended by the President & CEO, and

(ii) the award formula or matrix by which all incentive awards under this Plan shall be calculated for Committee review and approval.

The Chairman & CEO shall establish individual performance objectives for each Plan participant and evaluate each participant’s performance against those pre-established individual objectives.

ARTICLE V

AWARD CALCULATIONS

Each executive shall be assigned an incentive award target, calculated as a percentage of base salary at beginning of the plan year, which shall be awarded if the Company and the executive achieve targeted performance goals.  Target awards shall be leveraged up when performance exceeds expectations, or down when performance is below expectations.  Following are the target awards and weights by executive position.

Target awards shall be weighted between 1) Company Net Income and 2) Division / Individual Goals.  Goals and weightings shall be established and measured by the Compensation Committee. Company and Division / Individual Goal weightings and Award Calculations follow:

Schedule A: Award Percentages and Performance Measure Weightings

Position/Title	Incentive Award Target	Company Net Income Weight (1)	+	Division/ Individual Performance Weight (2)
President & CEO, Shore Bancshares	75%	50%	+	50%
COO, Shore Bancshares	40%	30%	+	70%
CFO, Shore Bancshares	40%	20%	+	80%
President, Talbot Bank	50%	20%	+	80%
President, CNB	30%	20%	+	80%
President, Felton Bank	20%	20%	+	80%
Senior Lender, Talbot	35%	20%	+	80%
Senior Lender, CNB	20%	20%	+	80%
Secretary & CFO, CNB	20%	20%	+	80%
CEO, Insurance Division	5%	20%	+	80%

Schedule B: Award Leverage Schedule:

Percent of Company Performance	Percent of Company Incentive Award	Percent of Division / Individual Goal Performance	Percent of Division / Individual Incentive Award
120%	150%	120% or (Exceeded All Goals)	150%
110%	120%	110% or (Met All and Exceeded Some Goals)	120%
100%	100%	100% or (Met Most Goals)	100%
85%	50%	85% or (Met Some Goals)	50%
Less than 85%	0%	Less than 85% or (Did Not Meet Goals)	0%

Award Calculation Formula:

The calculation example below assumes an executive has a base salary of $150,000 with a target award opportunity of 25% and goal weights of 60% on Company Net Income, and 40% on Division / Individual goals.  In addition, the example assumes Net Income results are 110% of target performance and Division / Individual goals are met.  Please refer to Schedule B above when determining appropriate leverage percentages.

(Base Salary) x ((Company Award x Leverage %) + (Division / Individual Award x Leverage %))

Example: ($150,000) x ((25% x 60%) + (25% x 40%)) =

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

2

($150,000) x ((15% x 1.20) + (10% x 1.00)) =

($150,000) x ((18%) + (10%)) =

($150,000) x (28%) = $42,000 Total Annual Incentive Award

ARTICLE VI

ADMINISTRATIVE MATTERS

The Committee reserves the right to withhold awards provided that the Committee gives written explanation to participants within a reasonable period of time following their decision to withhold.

Incentive awards shall be paid as soon as practicable following the end of the fiscal year, however in no event shall awards be paid later than March 15th of the subsequent fiscal year.

In the event of death, permanent disability, retirement or involuntary termination without cause, unpaid awards shall be calculated on a pro-rated basis by taking the number of full months, including the month in which the terminating event occurred, and dividing those months by twelve.  Prorated awards will be payable at the same time that normal award distributions occur.

Except in the case of death, disability or retirement, a participant shall forfeit his right to receive any Plan award in the event of voluntary or involuntary termination for cause during the Plan year.

Interpolation shall be used to calculate incentive awards when Company and Division / Individual performance falls between levels detailed in Schedules B.

ARTICLE VII

NO ENTITLEMENT TO BONUS

Plan participants are entitled to a distribution under this Plan only upon the approval of the award by the Committee and no participant shall be entitled to an award under the Plan unless the award is subject to the attainment of performance objectives defined under the Plan.

ARTICLE VIII

TERMINATION OF PLAN

The Committee reserves the right to amend or terminate the Plan at any time within thirty days written notice to Plan participants.  In the event of a Plan termination, participants shall continue to be eligible for incentive awards, if earned, for the current Plan year.  Incentive awards shall be calculated as of the date of the Plan termination and payable as soon as practicable after the end of the Plan year.

ARTICLE IX

PARTICIPANT'S RIGHT OF ASSIGNABILITY

Participant awards shall not be subject to assignment, pledge or other disposition, nor shall such amounts be subject to garnishment, attachment, transfer by operation of law, or any legal process.

Nothing contained in this Plan shall confer upon participants any right to continued employment, nor interfere with the right of the Company to terminate a participant’s employment from the Company.  Participation in the Plan does not confer rights to participation in other company programs, including annual or long-term incentive plans, non-qualified retirement or deferred compensation plans or other perquisite programs.

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ARTICLE X

GOVERNING LAW

The laws of the State of Maryland shall govern the validity, construction, performance and effect of the Plan.

IN WITNESS WHEREOF, the parties have executed this Plan on the date written below.

/s/ W. Moorhead Vermilye	2/12/2009
President & CEO	Date
/s/ Christopher F. Spurry	2/12/2009
Chairman, Compensation Committee	Date

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