EXHIBIT
10.1
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:
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i.
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Employee shall not be eligible to
make additional salary deferrals in the Companies’ 401(k)
Plan. Any matching funds due for the year ended December 31, 2006
will, however, be paid.
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ii.
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Employee shall not be eligible to
participate in additional discretionary contributions made to the
Companies’ Profit Sharing Plan. Any contributions made for
the year ended December 31, 2006 will be paid on behalf of Employee
as if he were still employed
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iii.
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Except for Cobra coverage available
at Employee’s expense, employer paid health insurance
benefits shall cease.
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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
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