EMPLOYMENT AGREEMENT
Exhibit
10.6
THIS
EMPLOYMENT AGREEMENT (this “Agreement”) is made effective the 1st
day
November, 2002 by and between The Avon-Xxxxx Agency, LLC, a Maryland limited
liability company (the “Company”), and Xxxx X. Freestate (the
“Employee”).
WITNESSETH:
That for and in consideration of the sum of One Dollar ($1.00), and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the parties, it is hereby agreed by and between the
parties as follows:
1. Duties.
The
Company hereby employs the Employee as an insurance producer, with such duties
as may be assigned to the Employee by the President of the Company; provided,
however, that such duties shall not include the management of the day-to-day
operations of any portion or aspect of the Company’s business. The Employee
shall devote his full business time, attention and energies to the performance
of his duties hereunder. Except as otherwise expressly agreed to in writing
by
the parties, the Employee’s full business time, attention and energies shall be
focused exclusively on the performance of his duties hereunder, such that,
during the term of this Agreement, the Employee shall not engage in any other
activity for compensation; provided, however, that Employee may serve on the
board of directors of the Centreville National Bank of Maryland.
2. Compensation.
The
Employee shall receive the following compensation:
(a) upon
the
Employee’s execution of this Agreement, a one-time signing bonus of $29,900,
which shall
be
paid up-front but earned pro-rata (i.e.,
Employee will repay that portion of the bonus allocable to the portion
of the
1-year period following the date of this Agreement that he is not employed
by
the Company, if his employment is terminated by the Company pursuant to
Sections 4(b)(i)
through (xii),
inclusive, or by him other than pursuant to Section
4(c));
and
(b) the
commissions set forth and as provided in Schedule A attached
hereto.
3. Term.
The
employment of the Employee shall commence on the date of this Agreement and
shall continue until otherwise terminated in accordance with Section
4.
4. Conditions
of Termination.
(a) This
Agreement may be terminated by the Employee on thirty (30) days’ prior written
notice to the Company for any reason or no reason. This Agreement may be
terminated by the Company without prior notice to the Employee for any reason
or
no reason.
(b) This
Agreement also may be terminated by the Company for any of the following reasons
without prior notice to the Employee:
(i) The
Company or any of its affiliates suffers a material injury to its operations,
financial condition or business reputation as a result of the Employee’s
misconduct, dishonesty or moral turpitude in connection with the performance
of
his duties for the Company;
(ii) The
Employee violates any of the provisions contained in Section
10;
(iii) The
Employee is indicted
for the commission of any
felony, if the indictment has a material adverse impact on the reputation or
standing in the business community of the Company or any of its affiliates;
(iv) The
Employee abuses any drug;
(v) The
Employee abuses alcohol, but only to the extent that such abuse has a material
adverse effect on the Company’s reputation or on the performance of duties and
responsibilities under this Agreement;
(vi) The
Employee loses any of his licenses to sell insurance;
(vii) The
Employee fails to substantially perform his duties under this Agreement, and
such failure is not cured by the Employee within 30 days after receiving written
notice thereof from the Company;
(viii) The
Employee habitually neglects his duties;
(ix) The
Employee materially breaches this Agreement, and such breach is not cured by
the
Employee within 30 days after receiving written notice thereof from the Company;
(x) The
Employee’s coverage
under the Company’s employee dishonesty bond is terminated;
(xi) The
Employee dies;
(xii) The
Employee
is permanently disabled, which is defined as (A) the Employee’s inability,
through physical or mental illness or other cause, to perform the majority
of
regular duties for a period of one hundred eighty (180) days or more; (B) the
Employee’s declaration that he is permanently disabled; (C) a determination by
the Employee’s personal physician that he is permanently disabled; or (D) a
determination by the Company’s physician that the Employee is permanently
disabled; or
(xiii) The
Company determines to discontinue its insurance business.
(c) This
Agreement may be terminated by the Employee for any of the following reasons
without prior notice to the Company:
(i) Without
the Employee’s prior written consent, the Company takes any action that has a
material adverse effect on the Employee’s ability to perform as an insurance
producer under this Agreement;
(ii) Without
the Employee’s prior written consent, the Company reduces the Employee’s
compensation set forth in Section
2(b);
or
(iii) The
Company materially breaches any of its obligations under this Agreement, and
such breach is not cured by the Company within 30 days after receiving written
notice thereof from the Employee.
(d) The
party
that terminates the Employee’s employment pursuant to Sections 4(b)(i)
through (xii),
inclusive, or Section
4(c)
shall
provide the other party with a final written notice of termination with all
associated facts and details within 30 days after the effective date of such
termination.
5. Payments
Upon Termination.
(a) Upon
the
termination of the Employee’s employment:
(i) the
Employee shall be entitled to receive from the Company all commissions and
payments to which the Employee is entitled as of the effective date of
termination in accordance with Section
2(b) of
this
Agreement and Schedule A attached hereto;
(ii) if
the
Employee’s employment is terminated by the Company other than pursuant to
Section
4(b)(i)
through
(x)
of this
Agreement, inclusive, and the Company gives the Employee less than 30 days’
prior written notice of such termination, then the Employee shall be entitled
to
receive from the Company all commissions to which the Employee would have been
entitled had Employee’s employment continued after the date of termination for
the number of days that shall be equal to the remainder obtained by subtracting
(A) the number of days prior written notice given to the Employee, if any,
from
(B) 30. Such commissions shall be paid in accordance with Section
2(b) of
this
Agreement and Schedule A attached hereto (disregarding the Employee’s employment
status) not later than 60 days after the date of termination; and
2
(iii) if,
within three
(3)
years following the date of this Agreement, (A) the
Company terminates the Employee’s employment other than pursuant to Section
4(b)(i)
through
(xii)
of this
Agreement, inclusive, or (B) the Employee terminates his employment pursuant
to
Section
4(c)
of this
Agreement, then the Company shall
pay
to the Employee the positive remainder, if any, obtained by subtracting (a)
the
amount of any “Deferred Payment” (as defined in that certain Asset
Purchase Agreement of even date herewith by and between X.X. Freestate &
Son, Inc., the Employee, the Company, and Shore Bancshares, Inc.) paid or
payable by the Company, from
(b)
$256,250. Such payment shall be paid to the Employee in cash on the
“Deferred
Payment Due Date” as defined in such Asset Purchase Agreement.
(b) The
payments specified in this Section
5,
if
applicable, shall be considered payment in full for all claims of the Employee
for compensation under this Agreement, and the Employee shall not be entitled
to
any other compensation after the date of termination.
(c) The
Company shall have the right to deduct from the payments due Employee under
this
Agreement any amounts that the Employee owes the Company at the time such
payments are made by the Company.
6. Fringe
Benefits.
The
Company shall provide the same fringe benefits as are provided to other
similarly situated employees of the Company’s affiliate Shore Bancshares,
Inc.
7. Reimbursement
of Expenses.
(a) The
Company recognizes that Employee may incur various expenses, from time to time,
for the Company's benefit and in furtherance of the business. The Company agrees
either to pay directly, advance sums to Employee to be used for and/or to
reimburse Employee for expenses authorized in advance by the
Company.
(b) The
Company shall have the right to establish, change and alter guidelines, from
time to time, with respect to the nature and type of expenses that the Company
will pay hereunder and the limits of payment.
8. Other
Commissions.
The
Employee agrees to remit to the Company any and all commissions, fees and
bonuses which may be made payable to him which he receives as a result of his
referral or sales of insurance while employed by the Company.
9. Property
Rights.
The
Employee agrees that any and all work products he produces, including but not
limited to expirations, renewals, expirations lists, manuals, insurance dailies,
customer lists, commissions or premiums, lists of commissions on premiums,
advertising copy and salesmanship pointers shall be considered the exclusive
property of the Company and shall remain so after termination of this Agreement.
The above enumerations are intended to be illustrations only.
10. Protection
of Business.
In
order that the Company shall continue to receive the benefit of the goodwill
and
relationships with customers which it enjoys, the Employee agrees, in
consideration of $100, that:
(a) For
a
period of three (3) years after the Employee ceases to be employed by the
Company, the Employee will not directly or indirectly, within the Delmarva
Peninsula, whether alone or as an employee, officer, director, stockholder,
member, or partner of any other entity, or as a trustee, fiduciary, or other
representative of any other such activity, solicit, sell, serve, divert or
receive insurance producer business to or from any party which was a customer
or
an actively solicited prospective customer of the Company as of the date of
termination or during the period of eighteen (18) months prior to said
termination date; provided, however, that this Section
10(a)
shall
not apply if Employee’s employment is terminated as provided in Section
4(b)(xiii)
because
the Company has determined to discontinue its insurance business, but only
if
such discontinuance is not the result of the sale or other transfer of the
Company’s insurance business to another person or entity.
3
(b) For
a
period of three (3) years after the Employee ceases to be employed by the
Company, the Employee will not, directly or indirectly, engage in the insurance
producer business in the Delmarva Peninsula; provided, however, that this
Section
10(b)
shall
not apply if Employee’s employment is terminated as provided in Section
4(b)(xiii)
because
the Company has determined to discontinue its insurance business, but only
if
such discontinuance is not the result of the sale or other transfer of the
Company’s insurance business to another person or entity.
(c) During
and after the Employee’s employment with the Company, the Employee shall not
disclose or divulge to third parties, any confidential information concerning
the Company, its business, or its customers. All information regarding the
Company, and its business, including but not limited to information regarding
the Company's former, current or prospective customers, employees and markets,
methods of doing business, systems, procedures and financial performance and
condition shall be presumed to be confidential information of the company for
purposes of this Agreement except to the extent that any such information is
otherwise in the public domain and became part of the public domain other than
by means of a breach of a confidentiality obligation. All tangible embodiments
of confidential information, whether typed, written, stored electronically
or
otherwise, shall at all times remain the property of the Company. Upon the
cessation of employment with the Company, the Employee shall promptly return
to
the Company all copies of such tangible embodiments of confidential
information.
(d) It
is
recognized that damages in the event of a breach of this Section
10
by the
Employee would be difficult, if not impossible, to ascertain, and it is
therefore agreed that the Company, in addition to and without limiting any
other
remedy or right it may have, shall have the right to an injunction or other
equitable relief in any court in the State of Maryland of competent
jurisdiction, enjoining any such breach, and the Employee hereby waives any
and
all defenses he may have on the ground of lack of jurisdiction or competence
of
a court in the State of Maryland to grant such an injunction or other equitable
relief. The existence of this right shall not preclude any other rights and
remedies at law or in equity which the Company may have.
(e) The
covenants contained in each of the above subsections of this Section
10
and
within the subsections themselves are intended to be separate and divisible
covenants and if, for any reason, any one or more thereof shall be held to
be
invalid or unenforceable, in whole or in part, it is agreed that the same shall
not be held to affect the validity of any other such covenant contained in
this
Agreement. The benefits of this Section
10
shall
inure to the benefit of, and each reference to Company shall be deemed to
include any affiliate, subsidiary or parent of the Company.
11. Set
Off.
The
Company may set off against any of the amounts due the Employee by the Company
hereunder, any amounts which are due from the Employee to the Company and for
bad debts of customers for which the Employee is responsible (as evidenced
by
the coding of such customers or otherwise assigned to the Employee) in excess
of
$3,500.00 in any calendar year (exclusive of any late charges or commission
due
to the Company or the Employee). The Company shall provide the Employee with
a
period of one (1) year following the year that the bad debt is written off
by
the Company to collect the bad debt prior to exercising its night of setoff
relating to such bad debt under this Section
11.
To the
extent that the Company exercises its right of setoff pursuant to this
Section
11,
and
provided that the Employee complies in all respects with all applicable federal
and state laws and regulations governing the collection of debts, including
the
federal Fair Debt Collection Practices Act, the Company shall assign to the
Employee its rights with respect to the subject bad debts.
12. Miscellaneous
Provisions:
(a) Applicable
Law.
It is
the intention of the parties hereto that all questions with respect to the
construction of this Agreement and rights and liabilities of the parties
hereunder shall be determined in accordance with the laws of the State of
Maryland.
4
(b) Entire
Agreement.
This
Agreement embodies and constitutes the entire understanding among the parties
with respect to the transactions contemplated herein, and all prior or
contemporaneous agreements, understanding, representations and statements,
oral
or written, are merged into this Agreement.
(c) Modification.
Neither
this Agreement nor any provision hereof may be waived, modified, amended,
discharged, or terminated except by an instrument in writing signed by the
party
against which the enforcement of such waiver, modification, amendment, discharge
or termination is sought, and then only to the extent set forth in such
instrument.
(d) Headings.
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
(e) Binding
Effect.
The
Agreement shall be binding upon and shall insure to the benefit of the parties
hereto and their successors and assigns. This Agreement may be assigned by
the
Company to an affiliate of the Company, or to any third party in connection
with
any sale of the Company’s business or other extraordinary transaction. This
Agreement may not be assigned by the Employee.
(f) Severability.
In case
any one or more of the provisions contained in this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
(g) Gender.
Whenever herein the singular number is used, the same shall include the plural
and the masculine gender shall include the feminine and neuter
genders.
(h) Notices.
All
notices and communications hereunder shall be in writing and shall be deemed
given when sent postage prepaid by registered or certified mail, return receipt
requested, and, if intended for the Company, shall be addressed to it, to the
attention of its President, at the principal office of the Company, and if
intended for Employee, shall be addressed to the Employee at the Employee’s
address as shown in the Company's records.
(i) Counterparts.
This
Agreement may be executed simultaneously in one or more counterparts, each
one
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) Waiver.
Failure
to Insist upon strict compliance with any of terms, covenants or conditions
hereof shall not be deemed a waiver of such terms, covenants or conditions,
nor
shall any waiver or relinquishment or any night or power hereunder at any one
instance or instances be deemed a waiver or relinquishment of such right or
power at any other time or times.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and year first above written.
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ATTEST:
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THE
AVON-XXXXX AGENCY, LLC
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|
/s/
Xxxxx
Xxxx
|
By:
/s/ Xxxxx X.
XxXxxxx
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||
|
Xxxxx
Xxxx, Secretary
|
Xxxxx
X. XxXxxxx, President
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WITNESS:
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|||
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/s/
|
/s/
Xxxx X.
Freestate
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Xxxx
X. Freestate
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5
SCHEDULE
A
Xxxx
X.
Freestate (the “Employee”) shall earn and be entitled to receive the following
commissions and payments from The Avon-Xxxxx Agency, LLC (the “Company”)
pursuant to Section 2(b) of the Employment Agreement to which this Schedule
A is
attached (the “Employment Agreement”):
(A) 32%
of
the commissions received by the Company (i) on or after the date of the
Employment Agreement, and (ii) on or before the date the Employee ceases to
be
employed by the Company, on the commercial insurance business of X.X. Freestate
& Son, Inc. (“X.X. Freestate”) that existed as of the date of the Employment
Agreement;
(B) 50%
of
commissions received by the Company (i) on or after the date of the Employment
Agreement, and (ii) on or before the date the Employee ceases to be employed
by
the Company, on the life insurance business placed by the Employee after the
date of the Employment Agreement;
(C) 32%
of
commissions received by the Company (i) on or after the date of the Employment
Agreement, and (ii) on or before the date the Employee ceases to be employed
by
the Company, on the commercial insurance business placed by the Employee after
the date of the Employment Agreement;
(D) 50%
of
the first-year commissions received by the Company (i) on or after the date
of
the Employment Agreement, and (ii) on or before the date the Employee ceases
to
be employed by the Company, on personal lines insurance business placed by
the
Employee after the date of the Employment Agreement; and
(E) 20%
of
all first-year commissions received by the Company (i) on or after the date
of
the Employment Agreement, and (ii) on or before the date the Employee ceases
to
be employed by the Company, on all insurance business that results directly
from
a referral of such insurance business by Employee to another employee of the
Company, but only to the extent the Employee holds a valid license that permits
him to receive such referral fees.
