Exhibit
      10.6

    


    EMPLOYMENT
      AGREEMENT

    


    THIS
      EMPLOYMENT AGREEMENT (this “Agreement”) is made effective the 1st
      day
      November, 2002 by and between The Avon-Dixon Agency, LLC, a Maryland limited
      liability company (the “Company”), and Mark M. 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 W.M. 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.

    



    
      	
              ATTEST:

            	 	
              THE
                AVON-DIXON AGENCY, LLC

            	 
	 	 	 	 
	
              /s/
                Terry
                Mead                                                  
                

            	 	
              By:
                /s/ Kevin P.
                LaTulip                                   
                

            	 
	
              Terry
                Mead, Secretary

            	 	
              Kevin
                P. LaTulip, President

            	 
	 	 	 	 
	 	 	 	 
	
              WITNESS:

            	 	 	 
	 	 	 	 
	
              /s/                                                                          
                

            	 	
              /s/
                Mark M.
                Freestate                                        
                

            	 
	 	 	
              Mark
                M. Freestate

            	 


    

    


    
      
         

      

      
        5

        
          

        

      

      
         

      

    


    SCHEDULE
      A

    


    Mark
      M.
      Freestate (the “Employee”) shall earn and be entitled to receive the following
      commissions and payments from The Avon-Dixon 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 W.M. Freestate
      & Son, Inc. (“W.M. 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.