EMPLOYMENT TERMINATION AGREEMENT
THIS EMPLOYMENT TERMINATION AGREEMENT , is entered into this 7 th day of December, 2006, (this “ Termination Agreement ”) by and between The Centreville National Bank of Maryland (the “ Bank ”) and Shore Bancshares, Inc. (“ SHBI ”, and with the Bank, collectively, the “ Companies ”) and Daniel T. Cannon (the “ Employee ”).
WHEREAS , the Companies and Employee entered into a “Form of Employment Agreement”, dated November 30, 2000 (the “ Employment Agreement ”); and
WHEREAS , Employee has announced his intention to retire on or before the expiration of the current term of the Employment Agreement, i.e. November 30, 2010; and
WHEREAS , the Companies and Employee agree that it would be in their mutual best interests to terminate the employment relationship in a manner which provides for an orderly transition period recognizing that Employee, with more than 37 years of service, has been an integral part of the Bank; and
WHEREAS , the parties hereto desire by writing to set forth their agreement to terminate the employment relationship upon the terms and conditions hereinafter provided.
NOW, THEREFORE , in consideration of the mutual promises and covenants set forth herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Resignation - Employee hereby resigns/retires effective January 1, 2007, as the Executive Vice President of SHBI, as a Director of SHBI, and as the President and Chief Executive Officer of the Bank. Employee will retain his position as a Director of the Bank and assist in the transition, as hereinafter provided, to ensure that his successor(s) are positioned to best serve the Companies. The parties acknowledge that such resignation/retirement is intended to constitute a “separation from service” within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and any related regulations or other guidance promulgated with respect to Section 409A of the Code (and any successor section or regulations).
2. Transition Services - Commencing on the execution day of this Termination Agreement, the parties will begin a transition period wherein a mutually agreed upon public announcement will be made regarding Employee’s resignation; provided, however, that the foregoing sentence shall not restrict the content or timing of any disclosure required by law. It is the intention of the parties to ensure that customer and employee relationships are transitioned smoothly to Employee’s successor(s).
Employee will provide up to a total of twenty (20) hours per month of administrative and/or operational support, for a period of five (5) months following the date of his resignation, as and if requested by Companies. Thereafter, and continuing until December
31, 2008, Employee will provide up to a total of ten (10) hours per month of administrative and/or operational support, as and if requested by Companies. Employee has purchased a home in Delaware. Accordingly, unless impractical, Employees support services may be provided via telephone, e-mail and/or in person, as Employee may elect.
3. Employee Severance Benefits - Employee will receive severance benefits, as follows:
a. Employee will receive his current salary and all employee benefits attributable to the positions held by him through December 31, 2006.
b. Accounting from January 1, 2007 and ending on December 31, 2008, the Companies agree to pay Employee his current annual salary of $205,000, payable not less frequently than twice monthly, through the Bank’s normal payroll processing procedures, with all appropriate statutory withholding, including FICA (matched by Bank), to be reported as wages.
c. Beginning January 1, 2007:
d. Employee is 100% vested in, and shall be entitled to receive, all current benefits and balances in the Companies 401(k) Plan and Profit Sharing Plan.
e. Notwithstanding any provision of this Agreement to the contrary, if the Employee is deemed to be a “key employee” (as defined in Section 416(i) of the Code (applied in accordance with Section 416 regulations and disregarding Section 416(i)(5) of the Code)) at any time during the 12-month period ending on December 31, 2006, no distribution of any severance benefits under Section 3(c) or any other benefit contemplated by this Agreement that constitutes non-qualified deferred compensation within the meaning of Section 409A of the Code may be made to t