Document:

Exhibit 10.6

 

Execution Version

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 13th day of December , 2018, by and among Delmar Bancorp, a registered bank holding company organized under the laws of Maryland (the “Company”), Virginia Partners Bank, a Virginia chartered commercial bank (the “Bank”), and Lloyd B. Harrison, III (“Executive”).

 

WHEREAS, Executive currently serves as President and Chief Executive Officer of the Bank; and

 

WHEREAS, the Company and the Bank are entering into an Agreement and Plan of Share Exchange, of even date herewith (the “Share Exchange Agreement”), pursuant to which the Company will acquire the Bank, which will continue as a first-tier subsidiary of the Company (the “Share Exchange”);

 

WHEREAS, the Company, the Bank and Executive desire to provide for and set forth the terms and conditions of the continued employment of the Executive as President and Chief Executive Officer of the Company and President and Chief Executive Officer of the Bank following the effective time of the Share Exchange in accordance with the provisions of the Share Exchange Agreement;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.                                      Certain Definitions.  As used in this Agreement, the following terms have the meanings set forth below:

 

1.1                               “Affiliate” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling fifty percent (50%) or more of the outstanding voting interests of such Person, (iii) any officer, director, general partner, managing member, or trustee of, or Person serving in a similar capacity with respect to, such Person, or (iv) any Person who is an officer, director, general partner, member, trustee, or holder of fifty percent (50%) or more of the voting interests of any Person described in clauses (i), (ii), or (iii) of this sentence. For purposes of this definition, the terms “controlling,” “controlled by,” or “under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

1.2                               “Average Bonus” means, as of any date, the amount determined by adding the amount of cash bonus compensation awarded to Executive during the preceding twenty-four (24) months and dividing the sum of such amounts by two (2).

 

 

1.3                               “Bank” has the meaning set forth in the recitals.  If the Bank is merged into any other entity, or transfers substantially all of its business operations or assets to another entity, the term “Bank” shall be deemed to include such successor entity.

 

1.4                               “Bank Entity or Entities” means and includes any of the Bank, the Company, any subsidiary of the Bank, and any subsidiary of the Company, whether now existing or hereafter organized or acquired.

 

1.5                               “Bank Regulatory Agency” means any governmental authority, regulatory agency, ministry, department, statutory corporation, central bank or other body of the United States or of any other country or of any state or other political subdivision of any of them having jurisdiction over the Company or the Bank or any transaction contemplated, undertaken or proposed to be undertaken by the Bank or the Company, including, but not necessarily limited to:

 

(a)                                 the FDIC;

 

(b)                                 the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of Richmond, the Delaware Office of the State Bank Commissioner, or any other federal or state bank regulatory or commissioner’s office;

 

(c)                                  any Person established, organized, owned (in whole or in part) or controlled by any of the foregoing; and

 

(d)                                 any predecessor, successor or assignee of any of the foregoing.

 

1.6                               “Bank Board” means the Board of Directors of the Bank.

 

1.7                               “Bank Information” has the meaning set forth in Section 8.3 hereof.

 

1.8                               “Benefits” means those elements of compensation set forth in Section 5.7 and Section 5.8 hereof.

 

1.9                               “Boards” means the Bank Board and the Company Board, collectively.

 

1.10                        “Cause” has the meaning set forth in Section 7.1 hereof.

 

1.11                        “Code” means the Internal Revenue Code of 1986, as amended.

 

1.12                        “Company Board” means the Board of the Directors of the Company.

 

1.13                        “Compensation Committee” means the Governance and Compensation Committee of the Bank Board or Company Board, or such other or successor committee thereof, or to the extent required by applicable law, regulation and the listing requirements of any exchange on which the Company’s securities are traded (the “Listing Requirements”), the committee of the Company Board with delegated authority to establish or approve executive officer compensation,

 

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and that meets the requirements for independence for such committees established under applicable law, regulation and the Listing Requirements.

 

1.14                        “Competitive Business” means the banking and financial services business, which includes, without limitation, consumer savings, commercial banking, the savings and loan business and mortgage lending, or any other business in which any of the Bank Entities is engaged or has invested significant resources within the prior six (6) month period in preparation for becoming actively engaged.

 

1.15                        “Competitive Products or Services” means, as of any time of determination, those products or services of the type that any of the Bank Entities is providing, or is actively preparing to provide, to its customers, but does not include any products or services that the Bank Entities have ceased to provide.

 

1.16                        “Disability” means a mental or physical condition which, in the good faith opinion of the Company Board, renders Executive, with reasonable accommodation, unable or incompetent to carry out the material job responsibilities which Executive held or the material duties to which Executive was assigned at the time the disability was incurred, which has existed for at least three (3) months and which in the opinion of a physician mutually agreed upon by the Bank and Executive (provided that neither party shall unreasonably withhold such agreement) is expected to be permanent or to last for an indefinite duration or a duration in excess of nine (9) months.

 

1.17                        “Effective Date” means the effective time of the Share Exchange, as determined in accordance with the Share Exchange Agreement.

 

1.18                        “FDIC” means the Federal Deposit Insurance Corporation and “FDIA” means the Federal Deposit Insurance Act, as amended.

 

1.19                        “Good Reason” means, without Executive’s prior consent, (a) a material diminution in Executive’s Salary; (b) a material diminution in Executive’s duties, authorities, or responsibilities; (c) a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Executive is required to report, including a requirement that the Executive report to a corporate officer or employee instead of reporting directly to the Boards prior to the Management Succession Date as provided herein and, after the Management Succession Date, a requirement that the Executive report to a corporate officer or employee other than the Chief Executive Officer of the Company; (d) a material breach of this Agreement by the Company or the Bank; or (e) the Bank requiring Executive to move Executive’s principal location for work to a location that is sixty (60) miles or more from Fredericksburg, Virginia (measured by driving distance).  Notwithstanding the foregoing, Executive’s departure from the position of President and Chief Executive Officer of the Company in connection with the Management Succession Date, and the change in duties, authorities, and responsibilities associated therewith, shall not constitute Good Reason.

 

1.20                        “Management Succession Date” means December 31, 2021, or such earlier date as the Company Board may in its sole discretion determine, upon which Executive shall depart the

 

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position of President and Chief Executive Officer of the Company but continue to serve as President and Chief Executive Officer of the Bank.

 

1.21                        “Person” means any individual or entity.

 

1.22                        “Restricted Period” has the meaning set forth in Section 8.4 hereof.

 

1.23                        “Section 280G” means Section 280G of the Code and the regulations and administrative guidance promulgated thereunder.

 

1.24                        “Section 409A” means Section 409A of the Code and the regulations and administrative guidance promulgated thereunder.

 

1.25                        “Section 4999” means Section 4999 of the Code and the regulations and administrative guidance promulgated thereunder.

 

1.26                        “Term” means the Initial Term and any applicable Renewal Term or Extension Term, each as defined in Section 3.

 

1.27                        “Termination Date” means the date on which the Term expires pursuant to Section 3 or on which the Term is earlier terminated pursuant to Section 6.1, 7.2, 7.3, 7.4, 7.5, or 7.6 as applicable.

 

Other terms are defined throughout this Agreement and have the meanings so given them.

 

2.                                      Employment.  The Company and the Bank agree to employ Executive, and Executive agrees to be employed as President and Chief Executive Officer of the Company and President and Chief Executive Officer of the Bank, subject to the terms and provisions of this Agreement.  From and after the Management Succession Date, Executive shall serve as President and Chief Executive Officer of the Bank and subject to (i) the nomination of Executive by the Bank Board and Company Board for election as a member, respectively, of the Bank Board and Company Board, and (ii) election of Executive as a director of the Bank and Company by the shareholders of the Bank and Company, Executive shall also serve as a member of the Bank Board and the Company Board.  Executive represents and warrants to the Company and Bank that Executive is not subject to any legal obligations or restrictions that would prevent or limit his entering into this Agreement and performing his responsibilities hereunder.

 

3.                                      Term

 

3.1                               Initial Term.                             Executive’s employment hereunder shall commence on the Effective Date and shall continue for a period of three (3) years thereafter, unless sooner terminated in accordance with the provisions of this Agreement (the “Initial Term”).

 

3.2                               Renewal Term.              The Term of this Agreement shall automatically be extended for a period of one (1) year at the conclusion of the Initial Term, and again extended at the

 

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conclusion of each successive one (1) year period thereafter (each such one year period a “Renewal Term”), unless:

 

(a)                                 either party terminates this Agreement as of the end of the Initial Term or any Renewal Term by giving the other party written notice of its or his intent not to renew, transmitted at least sixty (60) days prior to the end of the Initial Term or applicable Renewal Term; or

 

(b)                                 the Agreement is terminated prior to the end of the Initial Term or any Renewal Term, as applicable, in accordance with Section 6 or Section 7 of this Agreement.

 

3.3                               Extension Term.       If at the time of occurrence or consummation of a Change in Control (as defined in Section 9.1) the remaining Term of this Agreement is less than one (1) year, then the Term shall automatically be extended as necessary so that the remaining term shall be equal to one (1) year from the date of occurrence or consummation of the Change in Control (the “Extension Term”). The Extension Term shall not automatically be renewed under Section 3.2.  All provisions of this Agreement shall remain in full force and effect during the Extension Term.

 

4.                                      Duties of Executive.

 

4.1                               Nature and Substance.  (a) Prior to the Management Succession Date: (i) Executive shall have the duties and functions as President and Chief Executive Officer of the Company as are customarily performed by an employee bearing such title, and as may be assigned by the Company Board, which are commensurate with Executive’s education, training and experience; (ii) Executive shall have the duties and functions of President and Chief Executive Officer of the Bank, as are customarily performed by an employee bearing such title, and as may be assigned by the Company Board or the Bank Board, which are commensurate with Executive’s education, training and experience; and (iii) Executive shall report to and be subject to the supervision of the Company Board and the Bank Board.

 

(b)                                 From and after the Management Succession Date: (i) Executive shall have the duties and functions of President and Chief Executive Officer of the Bank, as are customarily performed by an employee bearing such title, and as may be assigned by the Company Board or the Bank Board or the Chief Executive Officer of the Company, and (ii) Executive shall report to and be subject to the supervision of the Chief Executive Officer of the Company.

 

(c)                                  From and after the occurrence or consummation of a Change in Control, Executive shall continue to serve under this Agreement in such executive or officer capacity as may be determined by the then current Boards, which are commensurate with Executive’s education, training and experience, provided that during any Extension Term, at the request of the then current Boards, the Executive shall serve as a consultant, without any additional compensation, except for continued Salary and health insurance equivalent

 

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benefits, as provided in Section 7.8; provided that such consulting services shall not exceed more than twenty percent (20%) of the average level of services Executive performed for the Bank Entities over the prior thirty-six (36) months.

 

4.2                               Performance of Services.  Executive agrees to devote his full business time and attention to the performance of his duties and responsibilities under this Agreement, and shall use his best efforts and discharge his duties to the best of his ability for and on behalf of the Company and Bank and toward their successful operation.  Executive agrees that, without the prior written consent of the Boards, he will not during the Term, directly or indirectly, perform services for or obtain a financial or ownership interest in any other entity (an “Outside Arrangement”) if such Outside Arrangement would interfere with the satisfactory performance of his duties to the Company or Bank, present a conflict of interest with the Company or Bank, breach his duty of loyalty or fiduciary duties to the Company or Bank, or otherwise conflict with the provisions of this Agreement.  Executive shall promptly notify the Boards of any Outside Arrangement, provide the Company and the Bank with any written agreement in connection therewith and respond fully and promptly to any questions that the Boards may ask with respect to any Outside Arrangement.  If the Boards determine that Executive’s participation in an Outside Arrangement would interfere with his satisfactory performance of his duties to the Company or Bank, present a conflict of interest with the Company or Bank, breach his duty of loyalty or fiduciary duties to the Company or Bank, or otherwise conflict with the provisions of this Agreement, Executive shall not undertake, or shall cease, such Outside Arrangement as soon as feasible after the Boards notify him of such determination.  Notwithstanding any provision hereof to the contrary, this Section 4.2 does not restrict Executive’s right to own or manage Executive’s personal passive investments; or to serve as a director, trustee or similar official of non-profit, civic, cultural, religious, professional or philanthropic organizations, so long as such service does not adversely affect the performance of Executive’s services and duties hereunder.

 

5.                                      Compensation and Benefits.  As full compensation for all services rendered pursuant to this Agreement and the covenants contained herein, the Company and the Bank shall pay, allocating the costs pursuant to Bank Regulatory Agency requirements, to Executive the following:

 

5.1                               Salary.  Commencing with the Effective Date, Executive shall be paid a base salary (“Salary”) of Two Hundred Seventy-Five Thousand Dollars ($275,000) on an annualized basis.  Executive’s salary shall be automatically increased by ten percent (10%) of Executive’s then current Salary effective on each of January 1, 2020, and January 1, 2021.  Executive’s Salary may be further increased annually in the discretion of the Bank Board based upon the recommendation of the Compensation Committee (or other approval procedure required by applicable law, regulation or Listing Requirement), but may not be decreased below the then current level without Executive’s consent.  Executive shall not be entitled to any separate compensation for service as a member of the Bank Board or the Company Board, or any committee thereof.  The Bank shall pay Executive’s Salary in equal installments in accordance with the Bank’s regular payroll periods as may be set by the Bank from time to time, but no less frequently than monthly.

 

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5.2.                            Bonus.  Executive shall be entitled to receive incentive bonus payments as approved by the Company Board, in its sole discretion, based upon the recommendation of the Compensation Committee (or other approval procedure required by applicable law regulation or Listing Requirement).

 

5.3                               Withholding.  Payments of Salary, bonus or other amounts payable to Executive hereunder shall be subject to the customary withholding of income and other employment taxes as is required with respect to compensation paid by an employer to an employee, and such other amounts as may be authorized by Executive.

 

5.4                               Vacation and Leave.  Executive shall be entitled to five (5) weeks of vacation on a calendar year basis (vacation in partial calendar years shall be provided on a pro rata basis), as well as such other leave as may be provided for under the current and future leave and vacation policies of the Company and the Bank for Executive Officers.

 

5.5                               Office Space.  The Bank will provide customary office space and office support to Executive.

 

5.6                               Car.  During the Term, the Bank will provide Executive with the use of a new (as of the commencement of the Term) Bank-owned automobile of a make and model suitable to Executive’s position, reasonably acceptable to Executive and having a retail value of not more than Fifty Thousand Dollars ($50,000).  The Bank shall provide insurance for, and shall be responsible for maintenance of and all operating costs of, the automobile.  If the Term is terminated without Cause prior to its natural expiration pursuant to Section 7.3, Section 7.5, or a Change in Control occurs as defined in Section 9 hereof, the Bank agrees to transfer the automobile to Executive for a nominal consideration of Ten Dollars ($10.00).

 

5.7                               Non-Life Insurance.  The Company and the Bank will provide Executive with group health, disability and other insurance as the Bank may determine appropriate for all Executive Officers of the Bank.

 

5.8                               Life Insurance.

 

5.8.1                     The Company or Bank shall obtain, and during the Term of this Agreement maintain, a term life insurance policy (the “Policy”) on Executive in the amount of One Million Dollars ($1,000,000), the particular product and carrier to be chosen by the Bank in its discretion.  Executive shall have the right to designate the beneficiary of the Policy.  The Company or the Bank will pay, during the Term of this Agreement, the premiums for the Policy, at standard rates.  In the event Executive is rated and the premium exceeds the standard rate for an individual of similar age, Executive shall be responsible for paying the excess, which shall be deducted from his Salary.  Should the premium exceed the standard rate, Executive, in his sole discretion, may elect in writing to decrease the amount of insurance to a sum where the premium is equivalent to that of the standard rate on a One Million Dollar ($1,000,000) Policy.

 

5.8.2                     The Company or the Bank may, at its cost and for its benefit, obtain and maintain “key-man” life insurance and/or Bank-owned life insurance on Executive in such amount as

 

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determined by the Board from time to time.  Executive agrees to cooperate fully and to take all actions reasonably required by the Bank in connection with the purchase and maintenance of such insurance.

 

5.9                               Expenses.  The Bank shall, promptly upon presentation of proper expense reports therefor, pay or reimburse Executive, in accordance with the policies and procedures established from time to time by the Bank for its officers, for all reasonable and customary travel (other than personal use of an automobile) and other out-of-pocket expenses incurred by Executive in the performance of his duties and responsibilities under this Agreement and promoting the business of the Company and/or the Bank, including the cost of attending business related seminars, meetings and conventions, and membership fees and dues and other business related expenses at Fawn Lake Country Club and Farmington Country Club.

 

5.10                        Retirement Plans.  Executive shall be entitled to participate in any and all qualified pension or other retirement plans of the Company or the Bank which may be applicable to personnel of the Bank.

 

5.11                        Other Benefits.  While this Agreement is in effect, Executive shall continue to be entitled to all other benefits that the Company or the Bank provides from time to time to its senior executives and such other benefits as the Boards may from time to time approve for Executive.  As a result of his existing employment with the Company and the Bank, Executive is fully vested as to his contributions under any pension or other retirement plan as of the beginning date of this Agreement. As to any other contributions, Executive shall be vested in accordance with the provisions of the pension or other retirement plan.  The terms hereof apply only to any pension or other retirement plan, and does not apply to any stock plans or equity compensation as provided for in Section 5.12 below.

 

5.12                        Equity Compensation.  Executive shall be eligible to receive awards of equity based compensation, under any existing or future equity compensation plan adopted by the Company, as the Company Board, or the Compensation Committee thereof, may determine in its discretion from time to time.  Such award shall vest in full upon the occurrence of a Change in Control.

 

5.13.                     Contract Review.  The Bank shall reimburse or directly pay the legal and tax advisor fees actually and reasonably incurred by Executive in connection with the pre-execution negotiation and review of this Agreement, up to a maximum amount of Seven Thousand Five Hundred Dollars ($7,500), provided that any such payment shall be made on or before March 15 of the calendar year immediately following the Effective Date.

 

6.                                      Conditions Subsequent to Continued Operation and Effect of Agreement.

 

6.1                               Continued Approval by Bank Regulatory Agencies.  This Agreement and all of its terms and conditions, and the continued operation and effect of this Agreement and the Company’s and the Bank’s continuing obligations hereunder, shall at all times be subject to the continuing approval of any and all Bank Regulatory Agencies whose approval is a necessary prerequisite to the continued operation of the Bank.  Should any term or condition of this Agreement, upon review by any Bank Regulatory Agency, be found to violate or not be in compliance with any then-

 

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applicable statute or any rule, regulation, order, agreement or understanding promulgated by any Bank Regulatory Agency, or should any term or condition required to be included herein by any such Bank Regulatory Agency be absent, this Agreement may be terminated by the Company or the Bank if the parties hereto cannot in good faith agree upon such additions, deletions or modifications as may be deemed necessary or appropriate to bring this Agreement into compliance.  Each of the Company and the Bank shall use its good faith reasonable efforts to defend and uphold the terms of this Agreement with each appropriate Bank Regulatory Agency.  If, notwithstanding such efforts, a modification of this Agreement is required, the Company and the Bank will use good faith reasonable efforts to honor the spirit and intent of the Agreement within said regulatory restrictions and regulatory policy.  A termination by the Company or the Bank pursuant to this Section 6.1 shall be deemed to be a termination by Executive pursuant to Section 7.6(a), except that no notice shall be required and, Executive shall not be bound by the terms of Section 8.4 and Section 8.5 and said provisions thereof shall not apply to Executive.

 

7.                                      Termination of Employment.  The Term or Extension Term of this Agreement may be terminated as provided below in this Section 7.

 

7.1                               Definition of Cause.  For purposes of this Agreement, “Cause” means:

 

(a)                                 any act of theft, fraud, or breach of fiduciary duty involving personal gain by Executive with respect to the Company or the Bank Entities or the services to be rendered by him under this Agreement;

 

(b)                                 any Bank Regulatory Agency action or proceeding against Executive as a result of his negligence, fraud, malfeasance or misconduct which results in any Bank Regulatory Agency action described in Section 7.10.1(a);

 

(c)                                  Executive’s conviction or plea of nolo contendere at the trial court level, of a felony, or any crime of moral turpitude, or involving dishonesty, deception or breach of trust;

 

(d)                                 any of the following conduct on the part of Executive that Executive has not corrected or cured, or commenced curative action with respect to, within thirty (30) days after having received written notice from the Bank Board detailing and describing such conduct (provided, however, that the Company or the Bank Board shall not be required to provide Executive with notice and opportunity to cure more than one (1) time in any twelve (12) month period):

 

(i)            habitual absenteeism, or the failure by or the inability of Executive to devote full time attention and energy to the performance of Executive’s duties pursuant to this Agreement (other than by reason of his death or Disability);

 

(ii)           intentional failure by Executive to carry out the explicit lawful and reasonable directions, instructions, policies, rules, regulations or decisions of the Boards which are consistent with his position; or

 

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(iii)          willful or intentional misconduct on the part of Executive that is injurious to the financial condition or business reputation of the Company or the Bank Entities;

 

(e)                                  the use of drugs, alcohol or other substances by Executive to an extent which materially interferes with or prevents Executive from performing his duties under this Agreement; or

 

(f)                                   termination under the circumstances described in the fourth sentence of Section 7.6(a).

 

7.2                               Termination by the Company or the Bank for Cause.  After the occurrence of any of the conditions specified in Section 7.1, the Company or the Bank shall have the right to terminate the Term for Cause, effective immediately on delivery of written notice to Executive.

 

7.3                               Termination by the Company or the Bank without Cause.  The Company or the Bank shall have the right to terminate the Term at any time on sixty (60) days notice without Cause, for any or no reason.  In the event that the Bank gives Executive notice of termination pursuant to this Section 7.3, Executive, subject to the Company’s or the Bank’s right to require Executive to refrain from engaging in business on their behalf, or directing any of their employees or agents, shall be obligated to continue performance under this Agreement until the date of termination, and to devote his good faith energies to transitioning his duties to his successor, during which period Executive would continue to be paid and receive benefits as provided in this Agreement. For purposes of clarity, a notice of nonrenewal under Section 3.2(a) shall not constitute termination without Cause under this Section 7.3.

 

7.4                               Termination for Death or Disability.  The Term shall automatically terminate upon the death of Executive or upon the determination of either Board that Executive is suffering from a Disability, as defined in Section 1.16.

 

7.5                               Termination by Executive for Good Reason.  Executive shall have the right to terminate the Term for Good Reason, if (a) Executive reasonably determines in good faith that a Good Reason condition has occurred; (b) Executive notifies the Boards in writing of the occurrence of the Good Reason condition within sixty (60) days of the condition first occurring; (c) Executive cooperates in good faith with the Boards’ efforts, for a period not less than thirty (30) days following such notice (the “Cure Period”), to remedy the condition; (d) notwithstanding such efforts, the Good Reason condition continues to exist; and (e) Executive terminates his employment within sixty (60) days after the end of the Cure Period.

 

7.6                               Termination by Executive Without Good Reason.  (a) Executive shall have the right to terminate the Term at any time without Good Reason on sixty (60) days written notice.  After receiving notice of termination, the Company or the Bank may require Executive to devote his good faith energies to transitioning his duties to his successor and to otherwise helping to minimize the adverse impact of his resignation.  If Executive unreasonably fails or refuses to fully and materially cooperate with such transition, the Company or the Bank may terminate Executive upon ten (10) days advance written notice specifying in reasonable detail the actions or omission of the

 

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Executive constituting such failure or refusal.  If Executive has not corrected or cured such failure or refusal, or commenced curative action, within ten (10) days after having received written notice, termination hereunder shall be deemed to be a termination for Cause.  The Bank and the Company may, in the exercise of their sole discretion, elect to relieve Executive of all duties during the period following giving of notice by Executive under this section and the effective date of Executive’s termination of employment (the “Executive Resignation Period”), however, in such event, Executive shall continue to be paid and receive all benefits as provided for in this Agreement during the Executive Resignation Period.

 

(b)                                 Notwithstanding anything to the contrary in this Agreement, Executive shall have the right, in his sole discretion, to terminate the Term at any time within one (1) year following the Management Succession Date on thirty (30) days written notice.

 

7.7                               Pre-Termination Salary and Expenses.  Without regard to the reason for, or the timing of, the termination of the Agreement or upon expiration of the Term:  (a) the Bank shall pay Executive any unpaid Salary due for the period prior to the Termination Date in accordance with Bank’s regular payroll periods; and (b) following submission of proper expense reports by Executive, the Bank shall promptly reimburse Executive for all expenses incurred prior to the Termination Date and subject to reimbursement pursuant to Section 5.9 hereof.

 

7.8                               Severance if Termination by the Company or the Bank without Cause; by Executive For Good Reason; or by Executive following Management Succession Date.

 

(a)                                 If the Extension Term is terminated prior to its expiration date by the Company or the Bank without Cause, by the Executive for Good Reason, or pursuant to Section 6.1, the Bank shall, for the remainder of such Extension Term continue to pay Executive his Salary at the rate being paid as of the Termination Date, and to provide health insurance equivalent to the health insurance existing as of the Termination Date, but the Executive shall not be entitled to any other severance.

 

(b)                                 If the Term (excluding any Extension Term) is terminated prior to its expiration date by the Company or the Bank without Cause, by the Executive for Good Reason, or pursuant to Section 6.1, the Bank shall for the longer of (i) twelve (12) months or (ii) the remainder of the Term, continue to pay Executive his Salary at the rate being paid as of the Termination Date, and to provide health insurance equivalent to the health insurance existing as of the Termination Date.  Executive shall also be entitled to receive, over the course of the same period during which he is paid Salary pursuant to the preceding sentence, an amount equal to one (1) times the Average Bonus if the payment period is twelve (12) months.

 

(c)                                  If the Term is terminated prior to its expiration date by the Executive within one (1) year following the Management Succession Date, as described in Section 7.6(b), the Bank shall for the remainder of the one-year period following the Management Succession Date, continue to pay Executive his

 

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Salary at the rate being paid as of the Termination Date, and to provide health insurance equivalent to the health insurance existing as of the Termination Date.

 

(d)                                 If the Company or the Bank is unable, under the terms of its insurance policy, to provide post termination health benefits to Executive, it or they shall reimburse Executive for the cost of comparable health benefits obtained by Executive.

 

(e)                                  Any payments due Executive pursuant to this Section 7.8 shall be paid to Executive in installments on the same schedule as Executive was paid immediately prior to the Termination Date.  In the event Executive breaches any provision of Sections 8.4 or 8.5 of this Agreement, Executive’s entitlement to any payments payable pursuant to this Section 7.8, if and to the extent not yet paid, shall terminate.  Notwithstanding anything to the contrary in this Section 7.8, any payment pursuant to this Section shall be subject to any delay in payment required by Section 10.2 hereof.

 

7.9                               Release.  Notwithstanding anything to the contrary contained herein, Executive’s entitlement to receive any payments pursuant to Section 7.8 or 9.2 is subject to Executive’s execution and delivery to the Company and the Bank of a General Release and Waiver in the form attached to this Agreement as Exhibit A (the “Release”), no later than twenty-one (21) days (or forty-five (45) days if there is a group termination) after the Termination Date.  Notwithstanding anything to the contrary contained herein, if the twenty-one (21) (or forty-five (45)) day period in which Executive may deliver the Release begins in one (1) calendar year and ends in the following calendar year, the date on which payments will commence under Section 7.8 shall be the first payroll date of such following calendar year or, if later, the date on which the enforceable Release is delivered to the Company and the Bank.

 

7.10                        Certain Regulatory Events.  Notwithstanding anything to the contrary contained herein:

 

(a)                                 If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank Entities’ affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of the FDIA, all obligations of the Bank and/or Company under this Agreement shall terminate as of the effective date of the order.

 

(b)                                 If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations of the Bank and the Company under this Agreement shall terminate as of the date of default.

 

(c)                                  If a notice served under Sections 8(e)(3) or 8(g)(1) of the FDIA suspends and/or temporarily prohibits Executive from participating in the conduct of the Bank’s affairs, the Company’s and the Bank’s obligations under this Agreement shall be suspended as of the date of such service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, the Company and the Bank shall promptly

 

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(i) pay Executive all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations that were suspended.

 

(d)                                 If the Company or the Bank is prohibited from making a payment hereunder, or agreeing to make a payment hereunder, under Part 359 of the regulations of the FDIC, then the Company and the Bank shall not be obligated to make such payment, and Executive shall have no right to receive such payment.  If the Company or the Bank is prohibited from making a payment hereunder without the prior consent or approval of the FDIC or other Bank Regulatory Agency, then the Company and the Bank shall not be obligated to make such payment, and Executive shall have no right to receive such payment, unless such consent or approval is received.  In such event, Executive may terminate this Agreement immediately and without notice and the Executive shall not be bound by the terms of Section 8.4 and Section 8.5 and said provisions thereof shall not apply to Executive.

 

(e)                                  The occurrence of any of the events described in paragraph (a) of this Section 7.10 may be considered by the Bank in connection with a termination for Cause.

 

7.11                        Resignation as Director and Other Offices.             Unless otherwise agreed, upon any termination of this Agreement or Executive’s services hereunder, Executive shall immediately submit his written resignation as a member of the Boards and all committees thereof, and from all other offices which he may hold at any of the Bank Entities.

 

8.                                      Confidentiality; Non-Competition; Non-Interference.

 

8.1                               Confidential Information.  Executive, during employment, will have, and has had, access to and become familiar with various confidential and proprietary information of the Bank Entities and/or relating to the business of the Bank Entities (“Confidential Information”), including, but not limited to: business plans; operating results; financial statements and financial information; contracts; mailing lists; purchasing information; customer data (including lists, names and requirements); feasibility studies; personnel related information (including compensation, compensation plans, and staffing plans); internal working documents and communications; and other materials related to the businesses or activities of the Bank Entities which is made available only to employees with a need to know or which is not made available to the public.  Failure to mark any Confidential Information as confidential, proprietary or protected information shall not affect its status as part of the Confidential Information subject to the terms of this Agreement.  Notwithstanding the foregoing, “Confidential Information” shall not include (1) information that is or becomes public without a breach of the Agreement, (2) information that became available to the Executive on a non-confidential basis from a source not bound, to the Executive’s knowledge, by a fiduciary duty of confidentiality or a non-disclosure agreement that covers the relevant information, (3) information that the Executive knows (and can demonstrate that he knows) before commencing employment with the Bank, (4) information independently developed by the Executive without the use of information otherwise classified as Confidential Information subject to the Agreement, and (5) information required to be disclosed by law after notice so that the Bank can contest the required disclosure or seek some other protection.

 

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8.2                               Nondisclosure.  Executive hereby covenants and agrees that he shall not, directly or indirectly, disclose or use, or authorize any Person to disclose or use, any Confidential Information (whether or not any of the Confidential Information is novel or known by any other Person); provided however, that this restriction shall not apply to the use or disclosure of Confidential Information (i) to any governmental entity to the extent required by law, or (ii) which is or becomes publicly known and available through no wrongful act of Executive or any Affiliate of Executive. Notwithstanding the foregoing, Executive, the Company and the Bank acknowledge and agree that nothing contained in this Section 8.2 shall be interpreted, construed, asserted or enforced by the Company or Bank to prohibit Executive from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation.  Further, nothing contained in this Agreement, or any Release and Waiver delivered in accordance with this Agreement, shall be interpreted, construed, asserted or enforced by Company or Bank to prohibit or disqualify Executive form being awarded, receiving and/or enjoying the benefit of, any award, reward, emolument or payment, or other relief of any kind whatsoever, from any agency, which is provided based upon Executive’s providing information to any such agency as a whistleblower under applicable law or regulation

 

8.3                               Documents.  All files, papers, records, documents, compilations, summaries, lists, reports, notes, databases, tapes, sketches, drawings, memoranda, and similar items, whether prepared by Executive, or otherwise provided to or coming into the possession of Executive, that contain any proprietary Confidential Information about or pertaining or relating to the Bank Entities (the “Bank Information”) shall remain the exclusive property of the Bank Entities so long as the same contain Confidential Information. Promptly after a request by the Company or the Bank or the Termination Date, Executive shall take reasonable efforts to (i) return to the Company or the Bank all Bank Information in any tangible form (whether originals, copies or reproductions) and all computer disks or other media containing or embodying any Bank Information and (ii) purge and destroy all Bank Information in any intangible form (including computerized, digital or other electronic format) as may be requested in writing by either of the Boards, and Executive shall not retain in any form any such Bank Information or any summary, compilation, synopsis or abstract of any Bank Information.

 

8.4                               Non-Competition.  Executive hereby acknowledges and agrees that, during the course of employment, Executive has become, and will become, familiar with and involved in all aspects of the business and operations of the Bank Entities.  Executive hereby covenants and agrees that during the Term and for one (1) year after the Termination Date (the “Restricted Period”), Executive shall not, without the prior approval of a majority of the Company Board (Executive not participating), directly or indirectly, in any capacity (whether as a proprietor, owner, agent, officer, director, shareholder, organizer, partner, principal, manager, member, employee, contractor, consultant or otherwise) own, manage or control or participate in the ownership, management or control, or perform services that are the same as or substantially to those services provided by Executive to the Company or the Bank within twelve (12) months prior to the cessation of Executive’s employment by the Company or the Bank to, any Competitive Business or to any Person that is attempting to form or acquire a Competitive Business if such Competitive

 

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Business operates, or is planning to operate, any office, branch or other facility (in any case, a “Branch”) that is (or is proposed to be) located within a fifty (50) mile radius of the Bank’s headquarters or within a twenty-five (25) mile radius of any Branch office of the Bank Entities that is in existence immediately prior to the date of termination of Executive’s employment.  Notwithstanding any provision hereof to the contrary, this Section 8.4 does not restrict Executive’s right to (i) own or acquire securities of any entity that files periodic reports with the Securities and Exchange Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); provided that his total ownership constitutes less than two percent (2%) of the outstanding securities of such entity; (ii) to own, or during the Restricted Period to maintain ownership of (but not to acquire ownership of), passive investments in securities of any entity that does not file periodic reports with the Securities and Exchange Commission under Section 13 or 15(d) of the Exchange Act; provided that his total ownership constitutes less than five percent (5%) of the outstanding securities of such company or (iii) to serve as a director of Westminster American Insurance Company.

 

8.5                               Non-Interference.  Executive hereby covenants and agrees that during the Restricted Period, he will not, directly or indirectly, for himself or any other Person (whether as a proprietor, owner, agent, officer, director, shareholder, organizer, partner, principal, member, manager, employee, contractor, consultant or any other capacity):

 

(a)                                 solicit or divert from any Bank Entity or transact business with any “Customer” of any Bank Entity with whom Executive had “Material Contact” during the last twelve (12) months of Executive’s employment or about whom Executive obtained Confidential Information while acting within the scope of his employment during the last twelve (12) moths of employment, if the purpose of such solicitation, diversion or transaction is to provide Competitive Products or Services. “Material Contact” means that Executive personally communicated with the Customer, either orally or in writing, for the purpose of providing, offering to provide or assisting in providing products or services of the Bank Entity.  “Customer” means any person or entity with whom the Bank Entity had a depository or other contractual relationship, pursuant to which the Bank provided products or services within twenty-four (24) months prior to the cessation of Executive’s employment; or

 

(b)                                 hire any person employed by any Bank Entity within six (6) months prior to the Termination Date or solicit for hire or induce any person to terminate their employment with a Bank Entity, if the purpose is to compete with a Bank Entity.

 

(c)                                  Exception.  A general solicitation through a public medium specifically directed toward any Customer or other person shall constitute a breach of Section 8.5.

 

8.6                               Injunction.  In the event of any breach or threatened or attempted breach of any provision of this Section 8 by Executive, the Company and the Bank shall, in addition to and not to the exclusion of any other rights and remedies at law or in equity, be entitled to seek and receive

 

15

 

from any court of competent jurisdiction (i) full temporary and permanent injunctive relief enjoining and restraining Executive and each and every other Person concerned therein from the continuation of such violative acts and (ii) a decree for specific performance of the applicable provisions of this Agreement, without being required to furnish any bond or other security.

 

8.7                               Exceptions.  Notwithstanding anything to the contrary contained herein, the provisions of Section 8.4 and 8.5 shall not apply in the event:

 

(a)                                 The Agreement is not renewed by the Company and the Bank at the end of an Initial Term or Renewal Term, and if Executive has not previously received a Change Payment under Section 9.2.1;

 

(b)                                 The Company and Bank terminate this Agreement pursuant to Section 6.1;

 

(c)                                  The Bank is in default (as defined in Section 3(x)(1) of FDIA) and the Agreement is terminated as provided for in Section 7.10.1(b); or

 

(d)                                 The Bank is prohibited from making a payment hereunder as provided in Section 7.10.1(d) and this Agreement is terminated by Executive.

 

8.8                               Reasonableness.  Executive has carefully read and considered the provisions of this Section 8 and, having done so, agrees that the restrictions and agreements set forth in this Section 8 are fair and reasonable and are reasonably required for the protection of the interests of the Bank Entities.  Executive, the Company, and the Bank acknowledge and agree that an amount equal to one (1) year of Salary (at the then current rate) of the amount has been promised to Executive as severance subject to Section 7.8, and an amount equal to one (1) year of Salary (at the then current rate) of the amount payable to Executive following a Change in Control has been promised in consideration of Executive’s agreement to be bound by Section 8.4 and Section 8.5 for a one (1) year period following termination of the Agreement under the circumstances provided herein. Executive further agrees that the restrictions set forth in this Agreement will not impair or unreasonably restrain his ability to earn a livelihood.

 

9.                                      Change in Control.

 

9.1                               Definition.  “Change in Control” means and shall be deemed to have occurred if:

 

(a)                                 there shall be consummated (i) any consolidation, merger, share exchange, or similar transaction relating to the Bank or Company, pursuant to which shares of the Bank’s or Company’s capital stock are converted into cash, securities of another entity and/or other property, other than a transaction in which the holders of the Company’s voting stock immediately before such transaction shall, upon consummation of such transaction, own at least fifty percent (50%) of the voting power of the surviving entity, or (ii) any sale of all or substantially all of the consolidated assets of the Bank or Company, other than a transfer of assets to a related Person which is not treated as a change

 

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in control event under §1.409A-3(i)(5)(vii)(B) of the U.S. Treasury Regulations;

 

(b)                                 any person, entity or group (each within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than Kenneth R. Lehman, members of his immediate family (within the meaning of 12 CFR §225.41(b)(3)) and/or any Affiliates thereof, shall become the beneficial owner (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of securities of the Company  representing more than fifty percent (50%) of the voting power of all outstanding securities of the Company entitled to vote generally in the election of directors of the Company (including, without limitation, any securities of the Company that any such Person has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, which shall be deemed beneficially owned by such Person); or

 

(c)                                  over a twelve (12) month period, a majority of the members of the Company Board are replaced by directors whose appointment or election was not endorsed by a majority of the members of the Company Board in office prior to such appointment or election.

 

(d)                                 Notwithstanding the foregoing, if the event purportedly constituting a Change in Control under Section 9.1(a), Section 9.1(b), or Section 9.1(c) does not also constitute a “change in ownership” of the Bank or Company, a “change in effective control” of the Bank or Company or a “change in the ownership of a substantial portion of the assets” of the Bank or Company within the meaning of Section 409A, then such event shall not constitute a “Change in Control” hereunder.  For avoidance of any doubt, consummation of the transactions contemplated by the Share Exchange Agreement will not constitute a Change in Control.

 

9.2                               Change in Control Payment.

 

9.2.1                     Change Payment.  If there is a Change in Control, Executive shall be paid in thirty-six (36) equal monthly cash payments (the “Change Payment”) by the Bank an aggregate amount equal to the sum of (i) three (3) times Executive’s Salary as of the date of the Change in Control, and, (ii) one (1) times the Average Bonus as of the date of the Change in Control. In addition, the Bank shall provide Executive with Benefits (or reimburse Executive for the cost of comparable benefits if the Bank is unable to provide such Benefits under applicable insurance policies) for the period during which the Change Payment is made.  The Change Payment payable to Executive under this Section 9.2.1 shall be in addition to and shall not be offset by any sums payable to Executive under Sections 5 or 7.8 or payable to Executive pursuant to a new contract, agreement or arrangement entered into between Executive and any successor entity or successor controlling shareholder, except as may be expressly agreed to by Executive in any such new contract agreement or arrangement.

 

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9.2.2                     Limitations.  Notwithstanding anything to the contrary in this Section 9.2, any payment pursuant to this Section shall be subject to (i) any delay in payment required by Section 10.2 hereof and (ii) any reduction required pursuant to Section 10.1.2 hereof, as applicable.

 

10.                               Compliance with Certain Restrictions.

 

10.1                        Section 280G.

 

10.1.1              For purposes of this Agreement, the following terms are defined as follows:

 

(a)                                 “Additional 280G Payments” means any distributions in the nature of compensation by any Bank Entity to or for the benefit of Executive (including, but not limited to, the value of acceleration in vesting in restricted stock, options or any other stock-based compensation, and amounts paid to Executive pursuant to any other agreement between Executive and Company or Bank, or pursuant to any benefit plan in which Executive participates), whether or not paid or payable or distributed or distributable pursuant to this Agreement, which is required to be taken into consideration in applying Section 280G(b)(2)(A) of the Code;

 

(b)                                 “Parachute Payment” is defined as set forth in Section 280G(b)(2) of the Code; and

 

(c)                                  “Total Change in Control Payments” means the total amount of the Change Payment together with all Additional 280G Payments that are required to be paid because of a Change in Control.

 

10.1.2              (a)  Notwithstanding anything in this Agreement to the contrary, other than the provisions of Section 10.1.3, if the Determining Firm (as hereinafter defined) determines that any portion of the Total Change in Control Payments would otherwise constitute a Parachute Payment, whether or not paid or payable or distributed or distributable pursuant to the terms of this Agreement, would cause any portion of the Total Change in Control Payment to be subject to the excise tax imposed by Code Section 4999 or would be nondeductible by the Company or Bank pursuant to Code Section 280G, then the Total Change in Control Payments will be reduced, beginning with the Change Payment, to an amount which will not cause any portion of the Total Change in Control Payments to constitute an excess parachute payment, as defined in Section 280G(b)(1) of the Code (the “Reduced Change in Control Payments”).

 

(b)  All calculations and determinations required to be made under this Section 10.1, will be made by a reputable law or accounting firm experienced in making such calculations and determinations (the “Determining Firm”) selected by the Company and reasonably acceptable to Executive.  All fees and expenses of the Determining Firm will be obligations solely of the Company and the Bank.  The determination of the Determining Firm will be binding upon Executive, the Company and the Bank.  If the Total Change in Control Payments are to be paid in other than a lump sum, such reduction shall be applied in inverse order to the time at which the payments are scheduled to be made (e.g., the last scheduled payment will be the first such payment

 

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to be reduced).  The Company and the Bank shall have no obligation to pay, or reimburse Executive for payment of, any tax or penalty which may be imposed or to which he may become subject as a result of the payment of any amounts under this Agreement.

 

10.1.3              Notwithstanding anything in this Agreement to the contrary, in the event that Executive’s employment is terminated during the Initial Term or any Extension Term by the Company and/or the Bank without Cause, then the provisions of Section 10.1.2 shall not apply, and the Executive will receive the Total Change in Control Payments unless the (a) after-tax amount that would be retained by the Executive (after taking into account all federal, state, and local income taxes payable by the Executive and the amount of any excise taxes payable by the Executive under Section 4999 that would be payable by the Executive if the Executive were to receive the Total Change in Control Payments has a lesser aggregate value than (b) the after-tax amount that would be retained by the Executive (after taking into account all federal, state, and local income taxes payable by the Executive) if the Executive were to receive the Reduced Change in Control Payments, in which case the Executive shall be entitled only to the Reduced Change in Control Payments.

 

10.2                        Section 409A.

 

10.2.1              It is the intention of the parties hereto that this Agreement and the payments provided for hereunder shall not be subject to, or shall be in accordance with, Section 409A, and thus, to the extent possible, avoid the imposition of any tax and interest on Executive pursuant to Section 409A(a)(1)(B) of the Code, and this Agreement shall be interpreted and construed consistent with this intent. Executive acknowledges and agrees that he shall be solely responsible for the payment of any tax or penalty which may be imposed or to which he may become subject as a result of the payment of any amounts under this Agreement.

 

10.2.2              Notwithstanding any provision of this Agreement to the contrary, if Executive is a “specified employee” at the time of his “separation from service”, any payment of “nonqualified deferred compensation” (in each case as determined pursuant to Section 409A) that is otherwise to be paid to Executive within six (6) months following  his separation from service, then to the extent that such payment would otherwise be subject to interest and additional tax under Section 409A(a)(1)(B) of the Code, such payment shall be delayed and shall be paid on the first business day of the seventh calendar month following Executive’s separation from service, or, if earlier, upon Executive’s death.  Any deferral of payments pursuant to the foregoing sentence shall have no effect on any payments that are scheduled to be paid more than six (6) months after the date of separation from service.  If an amount is to be paid under this Agreement in two (2) or more installments, each installment shall be treated as a separate payment for purposes of Section 409A.

 

10.2.3              The parties hereto agree that they shall take such actions as may be necessary and permissible under applicable law, regulation and guidance to amend or revise this Agreement in order to ensure that Section 409A(a)(1)(B) does not impose additional tax and interest on Executive on payments made pursuant to this Agreement.

 

11.                               Assignability.  Executive shall have no right to assign this Agreement or any of his rights or obligations hereunder to another party or parties.  The Company and the Bank may assign

 

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this Agreement to any Person that acquires the Company or the Bank or a substantial portion of the operating assets of the Company or the Bank.  Upon any such assignment by the Company or the Bank, references in this Agreement to the Company or the Bank, as applicable, shall automatically be deemed to refer to such assignee instead of, or in addition to, the Company or the Bank, as appropriate in the context.  For the avoidance of doubt, assignment by the Company or the Bank shall not release the Company or the Bank of its obligations to Executive hereunder unless specifically agreed in writing by Executive.

 

12.                               Governing Law; Venue.  This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland applicable to contracts executed and to be performed therein, without giving effect to the choice of law rules thereof.  Any action to enforce any provision of this Agreement may be brought only in the Circuit Court of Wicomico County, Maryland or in the United States District Court for the District of Maryland, Baltimore Division.  Accordingly, each party (a) agrees to submit to the jurisdiction of such courts and to accept service of process at its address for notices and in the manner provided in Section 13 for the giving of notices in any such action or proceeding brought in any such court and (b) irrevocably waives any objection to the laying of venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient or inappropriate forum.

 

13.                               Notices.  All notices, requests, demands and other communications required to be given or permitted to be given under this Agreement shall be in writing and shall be conclusively deemed to have been given as follows: (a) when hand delivered to the other party; (b) when received by facsimile at the facsimile number set forth below with a copy transmitted by e-mail to the e-mail address set forth below, provided, however, that any notice given by facsimile and e-mail  shall not be effective unless either (i) a duplicate copy of such facsimile and e-mail  notice is promptly given by depositing the same in a United States post office first-class postage prepaid and addressed to the applicable party as set forth below or (ii) the receiving party delivers a written confirmation of receipt for such notice either by facsimile or e-mail or by any other method permitted under this Section; or (c) when deposited in a United States post office with first-class certified mail, return receipt requested, postage prepaid and addressed to the applicable party as set forth below; or (d) when deposited with a national overnight delivery service, postage prepaid, addressed to the applicable party as set forth below with next-business-day delivery guaranteed; provided that the sending party receives a confirmation of delivery from the delivery service provider. Any notice given by facsimile shall be deemed received on the date on which notice is received except that if such notice is received after 5:00 p.m. (recipient’s time) or on a non-business day, notice shall be deemed given the next business day).  Any notice sent by United States mail shall be deemed given three (3) business days after the same has been deposited in the United States mail.  Any notice given by national overnight delivery service shall be deemed given on the first business day following deposit with such delivery service.  For purposes of this Agreement, the term “business day” shall mean any day other than a Saturday, Sunday or day that is a legal holiday in Wicomico County, Maryland.  The address of a party set forth below may be changed by that party by written notice to the other from time to time pursuant to this section.

 

	
To:
    	
Executive
    
	
 
    	
Lloyd   B. Harrison, III
    

 

20

 

	
 
    	
Virginia   Partners Bank
    
	
 
    	
410   William Street
    
	
 
    	
Fredericksburg   VA 22401
    
	
 
    	
Email:   LHarrison@vapartnersbank.com
    
	
 
    	
 
    
	
To:
    	
Delmar   Bancorp
    
	
 
    	
Attention:   Jeffrey Turner, Chairman of the Board
    
	
 
    	
2245   Northwood Drive
    
	
 
    	
Salisbury,   Maryland 21801
    
	
 
    	
Fax   No: 410-742-9588
    
	
 
    	
Email:   jturner@bankofdelmarva.com
    
	
 
    	
 
    
	
To:
    	
Virginia   Partners Bank
    
	
 
    	
Attention:   John Janney, Chairman of the Board
    
	
 
    	
410   William Street
    
	
 
    	
Fredericksburg,   VA 22401
    
	
 
    	
Email:   JJanney@vapartnersbank.com
    

 

14.                               Entire Agreement.  This Agreement contains all of the agreements and understandings between the parties hereto with respect to the employment of Executive by the Bank, and supersedes all prior agreements, arrangements and understandings related to the subject matter hereof.  No oral agreements or written correspondence shall be held to affect the provisions hereof.  No representation, promise, inducement or statement of intention has been made by either party that is not set forth in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise, inducement or statement of intention not so set forth.

 

15.                               Headings.  The Section headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

 

16.                               Severability; Judicial Modification.  Should any part of this Agreement for any reason be declared or held illegal, invalid or unenforceable, such determination shall not affect the legality, validity or enforceability of any remaining portion or provision of this Agreement, which remaining portions and provisions shall remain in force and effect as if this Agreement has been executed with the illegal, invalid or unenforceable portion thereof eliminated.  If any court of competent jurisdiction should determine that the duration, geographical area or scope of any provision or restriction set forth in Section 8 of this Agreement exceeds the maximum duration, geographic area or scope that is reasonable and enforceable under applicable law, the parties agree that, to the extent then allowed under governing law, said provision shall automatically be modified and shall be deemed to extend only over the maximum duration, geographical area and/or scope as to which such provision or restriction said court determines to be valid and enforceable under applicable law, which determination the parties direct the court to make, and the parties agree to be bound by such modified provision or restriction.

 

17.                               Amendment; Waiver.  Neither this Agreement nor any provision hereof may be amended, modified, changed, waived, discharged or terminated except by an instrument in writing signed by the party against which enforcement of the amendment, modification, change, waiver,

 

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discharge or termination is sought.  The failure of either party at any time or times to require performance of any provision hereof shall not in any manner affect the right at a later time to enforce the same.  No waiver by either party of the breach of any term, provision or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term, provision or covenant contained in this Agreement.

 

18.                               Gender and Number.  As used in this Agreement, the masculine, feminine and neuter gender, and the singular or plural number, shall each be deemed to include the other or others whenever the context so indicates.

 

19.                               Binding Effect.  This Agreement is and shall be binding upon, and inures to the benefit of, the Bank, its successors and assigns, and Executive and his heirs, executors, administrators, and personal and legal representatives.

 

[Signatures on following page]

 

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first written above.

 

 

	
 
    	
DELMAR   BANCORP
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jeffrey Turner
    
	
 
    	
 
    	
Jeffrey   Turner
    
	
 
    	
 
    	
Chairman   of the Board
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
VIRGINIA   PARTNERS BANK
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Janney
    
	
 
    	
 
    	
John   Janney
    
	
 
    	
 
    	
Chairman   of the Board
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Lloyd B.   Harrison, III
    
	
 
    	
Lloyd B. Harrison, III
    

 

[signature page to Harrison Employment Agreement]

 

 

Exhibit A

 

Form of

General Release and Waiver of All Claims

 

Lloyd B. Harrison, III (“you”) executes this General Release And Waiver of All Claims (the “Release”) as a condition of receiving certain payments and other benefits in accordance with the terms of Section 7.8 or Section 9.2 of your Employment Agreement dated            , 2018.  All capitalized terms used but not otherwise defined herein shall have the same meaning as in your Employment Agreement.

 

1.  RELEASE.

 

You hereby release and forever discharge Delmar Bancorp, Virginia Partners Bank and each and every one of their former or current subsidiaries, parents, directors, officers, employees, agents, successors, predecessors, assigns and attorneys (the “Released Parties”) from any and all charges, claims, damages, injury and actions, in law or equity, which you or your heirs, successors, executors, or other representatives ever had, now have, or may in the future have by reason of any act, omission, matter, cause or thing through the date of your execution of this Release. You understand that this Release is a general release of all claims you may have against the Released Parties based on any act, omission, matter, case or thing through the date of your execution of this Release.  Notwithstanding the foregoing, excluded from the operation of this release are (i) any right(s) of indemnification which you may have for any liabilities arising from your actions within the course and scope of your employment with any Bank Entities; (ii) any payments or sums payable by Bank to Executive pursuant to the terms of the Employment Agreement, whether accruing prior to or subsequent to the execution of this Release; and (iii) any claims which cannot be waived by law.

 

2.  WAIVER.

 

You realize there are many laws and regulations governing the employment relationship.  These include, but are not limited to, Title VII of the Civil Rights Acts of 1964 and 1991; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act of 1990, the Americans with Disabilities Act; the National Labor Relations Act; 42 U.S.C. § 1981; the Family and Medical Leave Act; the Civil Rights Act of 1991; the Employee Retirement Income Security Act of 1974 (other than any accrued benefit(s) to which you have a non-forfeitable right under any pension benefit plan); and any other state, local and federal employment, human rights and civil rights laws; and any amendments to any of the foregoing. You also understand there may be other statutes and laws of contract and tort that also relate to your employment.  By signing this Release, you waive and release any rights you may have against the Released Parties under these and any other laws based on any act, omission, matter, cause or thing through the date of your execution of this Release.  You also agree not to initiate, join, or voluntarily participate in any action or suit in any court or to accept any damages or other relief from any such proceeding

 

Ex. A-1

 

brought by anyone else based on any act, omission, matter, cause or thing through the date of your execution of this Release.

 

3.  INTERPRETATION

 

Notwithstanding anything contained in Section 1 or Section 2 of this Release, nothing contained in this Release, shall be interpreted, construed, asserted or enforced by Company or Bank to prohibit or disqualify you from being awarded, receiving and/or enjoying the benefit of, any award, reward, emolument or payment, or other relief of any kind whatsoever, from any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, which is provided to you based upon you having provided information to any such agency as a whistleblower under applicable law or regulation.  Provided further that nothing herein precludes you from filing a charge of discrimination with the Equal Employment Opportunity Commission, or any similar state or local government agency; provided, however, that you shall not be entitled to recover any monetary damages or to obtain non-monetary relief if the EEOC or other agency were to pursue any claims relating to your employment.

 

4.  NOTICE PERIOD.

 

This document is important.  We advise you to review it carefully and consult an attorney before signing it, as well as any other professional whose advice you value, such as an accountant or financial advisor.  If you agree to the terms of this Release, sign in the space indicated below for your signature.  You will have twenty-one (21) calendar days from the date you receive this document to consider whether to sign this Release (or forty-five (45) days in the event of a group termination).  If you choose to sign the Release before the end of that twenty-one (21) (or forty-five (45)) day period, you certify that you did so voluntarily for your own benefit and not because of any coercion.

 

5.  RETURN OF PROPERTY.

 

You certify that you have fully complied with Section 8.3 of your Employment Agreement.

 

6.  REVOCATION.

 

You should also understand that even after you have signed this Release, you still have seven (7) days to revoke it.  To revoke your acceptance of this Release, the Chairman of the Company’s Board of Directors (or in the event that you are the Chairman of the Company’s Board of Directors, the Chairman of the Compensation Committee or comparable committee of the Board of Directors) must receive written notice before the end of the seven (7)-day period.  In the event you revoke or do not accept this Release, you will not be entitled to any of the payments or benefits that you would have been entitled to under your Employment Agreement by virtue of executing this Release.  If you do not revoke this Release within seven (7) days after you sign it, it will be final, binding, and irrevocable.

 

Ex. A-2

 

IN WITNESS WHEREOF, the Parties have knowingly and voluntarily executed this Release, as of the day and year set forth below opposite your signature.

 

 

	
 
    	
 
    	
 
    
	
Lloyd B. Harrison, III
    	
 
    	
Date
    

 

Ex. A-3Exhibit 10.11

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made by and between The Bank of Delmarva (“Employer”) and Betsy Eicher (“Executive”) and is effective as of this 24th day of March, 2019 (the “Effective Date”).

 

WHEREAS, Employer wishes to continue the employment of Executive as a key executive of Employer and it is the desire of Employer to have the benefit of Executive’s continued loyalty and service; and

 

WHEREAS, Executive wishes to remain in the employ of Employer on the terms and subject to the conditions set forth herein.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein the parties agree as follows:

 

1.                                      Employment and Duties.

 

(a)                                 Executive shall be employed as Senior Vice President and Chief Financial Officer of Employer (the “Position”) on the terms and subject to the conditions of this Agreement.  Executive accepts such employment and agrees to perform the duties and responsibilities of the Position, as may be assigned to Executive by the Chief Executive Officer or Board of Directors of Employer.

 

(b)                                 Executive shall devote Executive’s best efforts and full time to rendering services on behalf of Employer in furtherance of its best interests.  Executive shall comply with all policies, standards and regulations of Employer now or hereafter promulgated, and shall perform all duties under this Agreement to the best of Executive’s abilities and in accordance with the ethics and standards of conduct applicable to employees in the banking industry.

 

2.                                      Term.  The Term (as defined below) of this Agreement is effective as of the Effective Date and will continue through the earlier of one year from the Effective Date (the “Initial Term”) or (ii) the date this Agreement otherwise terminates pursuant to Section 6 or Section 16 below; provided, however, that, at the end of the Initial Term, if this Agreement has not been previously terminated pursuant to Section 6 or Section 16 below, this Agreement shall be automatically extended for a one-year term (a “Renewal Term”), commencing at the end of the Initial Term, unless either party gives written notice of non-renewal no later than sixty (60) days prior to the end of the Initial Term.  This Agreement shall continue to be further extended for an additional one-year term at the end of each Renewal Term, unless either party gives written notice of non-renewal no later than sixty (60) days prior to the end of the applicable Renewal Term.  During the Initial Term or any Renewal Term, this Agreement may be terminated at any time pursuant to Section 6 or Section 16 below.  The Term of this Agreement, including all Renewal Terms, if any, is referred to herein as the “Term.”

 

 

3.                                      Compensation.

 

(a)                                 Base Salary.  During the Term, Employer shall cause Executive to be paid an annual base salary of not less than One Hundred Thirty Thousand Dollars ($130,000.00), paid in equal installments to Executive in accordance with Employer’s established payroll practices (but no less frequently than monthly).  Employer’s Board of Directors or its designee, in its discretion, may increase Executive’s base salary during the Term.  Employer shall withhold state and federal income taxes, social security taxes and such other payroll deductions as may from time to time be required by law or agreed upon in writing by Executive and Employer.  Employer shall also withhold and remit to the proper party any amounts agreed to in writing by Employer and Executive for participation in any corporate sponsored benefit plans for which a contribution is required.

 

(b)                                 Executive shall devote Executive’s best efforts and full time to rendering services on behalf of Employer in furtherance of its best interests.  Executive shall comply with all policies, standards and regulations of Employer now or hereafter promulgated, and shall perform all duties under this Agreement to the best of Executive’s abilities and in accordance with the ethics and standards of conduct applicable to employees in the banking industry.

 

(c)                                  Equity Awards.  Executive may be eligible to receive equity awards from Employer, in such manner and subject to such terms and conditions as the Board of Directors or its designee, in its sole discretion, may determine, if at all.

 

(d)                                 Clawback.  Executive agrees that any incentive compensation that Executive receives from Employer or a related entity shall be subject to repayment (i.e., clawback) to Employer or such related entity to the extent required under any repayment or clawback policy adopted by the Board of Directors in the future.

 

4.                                      Benefits.

 

(a)                                 Corporate Benefit Plans.  Executive shall be entitled to participate in or become a participant in any employee benefit plan maintained by Employer for which Executive is or will become eligible on such terms as the Board of Directors or its designee may, in its discretion, establish, modify or otherwise change.

 

(b)                                 Personal Time Off.  Executive shall be entitled to four (4) weeks (or twenty (20) business days) of paid time off (“PTO”) each year (or such greater annual number of days allowed under Employer’s PTO policy) which shall be taken in accordance with Employer’s PTO Policy.

 

5.                                      Reimbursement of Expenses.  Executive shall be reimbursed upon Executive’s incurring reasonable and customary business expenses in connection with the performance of Executive’s duties, subject to presentation of adequate substantiation, including receipts, for the reasonable business travel, entertainment, lodging, and other business expenses incurred by Executive.  In no event will such reimbursements be made later than the last day of the calendar month following the calendar month in which Executive submits the request for payment of the

 

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reimbursable expense, which shall be submitted no later than sixty (60) days after the expense is incurred.

 

6.                                      Termination of Employment.

 

(a)                                 Death or Incapacity.  Executive’s employment under this Agreement shall terminate automatically upon Executive’s death.  Executive’s spouse, if the spouse survives Executive, or, if not, Executive’s estate shall receive (i) any unpaid base salary which otherwise would be payable to Executive through the date of termination payable in a lump sum as soon as administratively feasible following termination, but not later than thirty (30) days thereafter; (ii) any annual bonus compensation earned and awarded pursuant to Section 3(b)(i) above, but not yet paid as of the date of termination, payable on the earlier of (A) the thirtieth (30th) day after the date of termination, or (B) when otherwise due; (iii) any benefits vested, due and owing pursuant to the terms of any other plans, policies or programs, payable when otherwise due (hereinafter subsections (i) — (iii) collectively are referred to as the “Accrued Obligations”). Executive’s spouse, if the spouse survives Executive, or, if not, Executive’s estate shall also receive an amount equal to Executive’s base salary from the date of Executive’s death through the end of the month in which Executive’s death occurs, payable in a lump sum as soon as administratively feasible following Executive’s death, but not later than thirty (30) days thereafter.  If Employer determines that Incapacity (as defined below) of Executive has occurred, it may terminate Executive’s employment and this Agreement upon ninety (90) days’ written notice, provided that, within ninety (90) days after receipt of such notice, Executive shall not have returned to full-time performance of Executive’s assigned duties.  In the event of a termination due to “Incapacity,” Employer shall pay the Accrued Obligations to Executive.  For purposes of this Agreement, “Incapacity” shall occur if (i) Executive is unable to perform the material functions of Executive’s position for thirteen (13) consecutive weeks and is then deemed to be permanently unable to continue in the Position by a physician selected by Employer or its insurer, and acceptable to Executive or Executive’s legal representative, which consent shall not be unreasonably withheld, or (ii) Executive is deemed disabled as defined in the policy of disability insurance maintained by Employer for the benefit of Executive (and others if a group policy).  Notwithstanding any other provision in this Agreement, Employer shall comply with all requirements of the Americans with Disabilities Act.  Further, if Executive’s employment is terminated due to death or “Incapacity,” then no payments (other than the Accrued Obligations and spousal death benefit described above) shall be owed or paid, including those under Section 7(a) or Section 9(a).

 

(b)                                 Termination by Employer With or Without Cause.  Employer may terminate Executive’s employment at any time during the Term of this Agreement, with or without notice (unless otherwise required herein) and with or without Cause.  For purposes of this Agreement, “Cause” shall mean:

 

(i)                                     Executive’s willful misconduct in connection with the performance of Executive’s duties;

 

(ii)                                  Executive’s misappropriation or embezzlement of funds or material property of Employer or any affiliate;

 

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(iii)                               Executive’s fraud or dishonesty with respect to Employer or any affiliate;

 

(iv)                              Executive’s failure to perform any of the material duties and responsibilities required by the Position (other than by reason of Incapacity), or Executive’s failure to follow reasonable instructions or policies of Employer, in either case after being advised in writing of such failure and being given a reasonable opportunity and period (as determined by Employer in its reasonable business judgment) to remedy such failure (if such breach or violation is capable of being remedied), which period shall be not less than thirty (30) days;

 

(v)                                 Executive’s conviction of, indictment for (or the procedural equivalent), or entering of a guilty plea or plea of no contest with respect to any felony or any misdemeanor involving moral turpitude;

 

(vi)                              Executive’s breach of a material term of this Agreement, or violation in any material respect of any policy, code or standard of behavior or ethics generally applicable to officers of Employer, after being advised in writing of such breach or violation and being given a reasonable opportunity and period (as determined by Employer in its reasonable business judgment) to remedy such breach or violation (if such breach or violation is capable of being remedied), which period shall be not less than thirty (30) days;

 

(vii)                           Executive’s willful violation of any final cease and desist order;

 

(viii)                        Executive’s breach of any fiduciary duty owed to Employer or its affiliates; or

 

(ix)                              Executive’s engaging in conduct that, if it became known by any regulatory or governmental agency or the public, would be or is reasonably likely to result, in the good faith judgment of Employer, in material injury to Employer, monetarily or otherwise.

 

(c)                                  Termination by Executive for Good Reason.  Executive may terminate employment for Good Reason.  For purposes of this Agreement, “Good Reason” shall mean:

 

(i)                                     The assignment of duties to Executive by Employer which result in Executive having materially less authority or responsibility than Executive has on the Effective Date, without Executive’s express written consent;

 

(ii)                                  Requiring Executive to maintain Executive’s principal office at a location that is sixty (60) miles or more from Salsibury, MD (measured by driving distance from the current headquarters), unless Employer moves its principal executive offices to the place to which Executive is required to move; or

 

(iii)                               A material reduction in the Executive’s base salary; or

 

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(iv)                              Any action or inaction by the Employer that constitutes a material breach of this Agreement.

 

Executive is required to provide written notice to Employer detailing the existence of a condition described above in this Section 6(c) within a sixty (60) day period after the initial existence of the condition, and Employer shall have thirty (30) days after notice to remedy the condition without liability.  In addition to the foregoing requirements, to trigger payment under this Section 6(c), Executive must also terminate employment within one hundred twenty (120) days after the initial occurrence of the event constituting “Good Reason” and Employer must have been allowed the full opportunity to cure, as set forth above.

 

Notwithstanding the above, “Good Reason” shall not include any resignation by Executive where Cause for Executive’s termination by Employer exists under Section 6(b), or there is an isolated, insubstantial or inadvertent action by Employer (provided that such action is remedied by Employer after written notice by Executive), and shall not include any action by Employer taken before the Effective Date of this Agreement.

 

(d)                                 Other.  Executive’s employment hereunder may be terminated voluntarily by Executive without Good Reason upon ninety (90) days’ prior written notice to Employer or at any time by mutual agreement in writing.  In the event of such voluntary termination notice by Executive without Good Reason, Employer may terminate Executive’s employment prior to the expiration of the notice period without incurring any liability under Section 7, and, under this Section 6(d).  Employer shall be required only to pay Executive’s base salary through the termination date (with such payment to be made in accordance with Employer’s established payroll practices), plus any Accrued Obligations (as defined Section 6(a)).

 

7.                                      Obligations Upon Termination.

 

(a)                                 Without Cause or for Good Reason.  If either Employer terminates Executive’s employment without Cause or Executive terminates Executive’s employment for Good Reason during the Term, Executive shall be entitled to receive, subject to any applicable delay set forth in Section 19 below:

 

(i)                                     The Accrued Obligations (as defined in Section 6(a)); and

 

(ii)                                  Subject to Executive’s signing, delivering and not revoking the Release attached as Exhibit A, which Release must be signed, delivered and not revoked within the period set forth in the Release:

 

(A)  A payment in a monthly amount equal to one-twelfth (1/12) of Executive’s annual base salary in effect immediately preceding such termination for twelve (12) months, payable in accordance with Employer’s established payroll practices (but no less frequently than monthly), provided that the amounts Executive would otherwise have received during the sixty (60) days after Executive’s termination had the payments begun immediately after Executive’s

 

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termination of employment shall be paid in a lump sum on the sixtieth (60th) day after Executive’s termination of employment; and

 

(B)  For twelve (12) months after the date of termination, Executive shall receive coverage under all employee health insurance programs or plans (medical, dental and vision) (“Health Care Plans”) in which Executive and/or Executive’s spouse and any of Executive’s dependents were entitled to participate immediately prior to such termination, with Employer paying the employer portion of the premium therefor (the “Termination Health Care Continuance Benefit”), provided that the continued participation of Executive and/or Executive’s spouse and any of Executive’s dependents  is possible under the general terms and provisions of the Health Care Plans. If Employer cannot maintain such coverage for Executive or Executive’s spouse or dependents under the terms and provisions of the Health Care Plans (or where such continuation would adversely affect the tax status of the Health Care Plans pursuant to which the coverage is provided), Employer shall provide the Termination Health Care Continuance Benefit by either providing substantially identical benefits directly or through an insurance arrangement or by paying Executive the estimated cost of the expected premium for twelve (12) months after the date of termination with such payments to be made in accordance with Employer’s established payroll practices (but no less frequently than monthly) for employees generally for the period during which such cash payments are to be provided.  To the extent allowed by applicable law, the 12-month Termination Health Care Continuance Benefit period shall run concurrently with the period for which Executive and/or Executive’s spouse and any of Executive’s dependents would be eligible for continuation coverage under the Consolidated Omnibus Reconciliation Act of 1985 (the “COBRA Period”).

 

(C)  An additional amount, payable in one lump sum, less all applicable withholdings, on the sixtieth (60th) day following Executive’s termination of employment, equal to one (1) times the highest annual bonus compensation earned by Executive for the three (3) immediately preceding complete fiscal years or such fewer number of complete fiscal years as Executive may have been employed by Employer.  For the avoidance of any doubt, if Employer makes a determination to award no annual bonus compensation to Executive for the three (3) immediately preceding complete fiscal years or such fewer number of complete fiscal years as Executive may have been employed by Employer, then no amount is payable under this Section 7(a)(ii)(C).

 

Notwithstanding the foregoing, and in addition to Employer’s remedies set forth in Section 8(e), all such payments and benefits under Section 7(a) otherwise to be made after Executive’s termination of employment shall cease to be paid, and Employer shall have no further obligation with respect thereto, in the event Executive, without the consent of Employer, breaches or engages in any activity prohibited in Section 8 or any of its sub-parts.

 

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(b)                                 For Cause; Other Than for Good Reason.  If Executive’s employment is terminated for Cause or if Executive voluntarily terminates Executive’s employment other than for Good Reason, this Agreement shall terminate without any further obligation of Employer to Executive other than the payment to Executive of the Accrued Obligations.

 

8.                                      Covenants of Executive.

 

(a)                               Confidentiality.  As an employee of Employer, Executive will have access to and may participate in the origination of non-public, proprietary and confidential information relating to Employer and/or its affiliates and Executive acknowledges a fiduciary duty owed to Employer and its affiliates not to disclose any such information.  Confidential information may include, but is not limited to, trade secrets, customer lists and information, internal corporate planning, methods of marketing and operation, and other data or information of or concerning Employer and its affiliates or their customers that is not generally known to the public or generally in the banking industry.  Executive agrees that for a period of five (5) years following the cessation of employment, Executive will not use or disclose to any third party any such confidential information, either directly or indirectly, except as may be authorized in writing specifically by Employer; provided, however that to the extent the information covered by this Section 8 is otherwise protected by the law, such as “trade secrets,” as defined by the Virginia Uniform Trade Secrets Act, or customer information protected by banking privacy laws, that information shall not be disclosed or used for however long the legal protections applicable to such information remain in effect.

 

Nothing in this Agreement restricts or prohibits Executive or Executive’s counsel from initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before a self-regulatory authority or a governmental, law enforcement or other regulatory authority, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Department of Justice, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Congress, and any Office of Inspector General (collectively, the “Regulators”), from participating in any reporting of, investigation into, or proceeding regarding suspected violations of law, or from making other disclosures that are protected under or from receiving an award for information provided under the whistleblower provisions of state or federal law or regulation.  Executive does not need the prior authorization of Employer to engage in such communications with the Regulators, respond to such inquiries from the Regulators, provide confidential information or documents containing confidential information to the Regulators, or make any such reports or disclosures to the Regulators.  Executive is not required to notify Employer that Executive has engaged in such communications with the Regulators.  Executive recognizes and agrees that, in connection with any such activity outlined above, Executive must inform the Regulators that the information Executive is providing is confidential.

 

Federal law provides certain protections to individuals who disclose a trade secret to their attorney, a court, or a government official in certain, confidential circumstances.  Specifically, federal law provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret under either of the following conditions:

 

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·                  Where the disclosure is made (a) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (b) solely for the purpose of reporting or investigating a suspected violation of law; or

 

·                  Where the disclosure is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

Federal law also provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (a) files any document containing the trade secret under seal; and (b) does not disclose the trade secret, except pursuant to court order.

 

(b)                                 Omitted.

 

(c)                                  Non-Piracy.  In consideration for Employer’s entering into this Agreement and in exchange for the benefits promised herein, and other valuable consideration, Executive agrees that for a period of twelve (12) months after Executive’s employment ceases for any reason, Executive will not, directly or indirectly, solicit, divert from Employer or transact business with any “Customer” of Employer with whom Executive had “Material Contact” during the last twelve (12) months of Executive’s employment or about whom Executive obtained information not known generally to the public while acting within the scope of Executive’s employment during the last twelve (12) months of employment, if the purpose of such solicitation, diversion or transaction is to provide products or services that are the same as or substantially similar to, and competitive with, those offered by Employer at the time Executive’s employment ceases. “Material Contact” means that Executive personally communicated with the Customer, either orally or in writing, for the purpose of providing, offering to provide or assisting in providing products or services of Employer during the last twelve (12) months of Executive’s employment.  “Customer” means any person or entity with whom Employer had a depository or other contractual relationship, pursuant to which Employer provided products or services during the last twelve (12) months of Executive’s employment.

 

(d)                                 Non-Solicitation.  In consideration for Employer’s entering into this Agreement and in exchange for the benefits promised herein, and other valuable consideration, Executive agrees that for a period of twelve (12) months after Executive’s employment ceases for any reason, Executive will not, directly or indirectly, hire any person employed by Employer during the last six (6) months of Executive’s employment, or solicit for hire or induce any such person to terminate employment with Employer, if the purpose is to compete with Employer.

 

(e)                                  Remedies.  Executive acknowledges that the covenants set forth in Section 8 of this Agreement are just, reasonable, and necessary to protect the legitimate business interests of Employer.  Executive further acknowledges that if Executive breaches or threatens to breach any provision of Section 8, all payments otherwise due under Section 7(a)(ii) and 9(a) shall immediately cease, but Employer’s remedies at law will be inadequate, and Employer will be irreparably harmed.  Accordingly, Employer shall be entitled to an injunction, both preliminary and permanent, restraining Executive from such breach or threatened breach, such injunctive relief

 

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not to preclude Employer from pursuing all available legal and equitable remedies, and being entitled to all reasonable attorney’s fees and costs incurred in connection with the breach, threatened breach, or any challenge to the enforceability of Section 8.

 

9.                                Termination After Change of Control.

 

(a)                                 Without Cause or for Good Reason.  If Executive’s employment is involuntarily terminated without Cause within one (1) year after a Change of Control (as defined below) shall have occurred or if Executive resigns for Good Reason within one (1) year after a Change of Control shall have occurred, Executive shall be entitled to receive, subject to any applicable delay set forth in Section 19 below:

 

(i)                                     The Accrued Obligations (as defined in Section 6(a));

 

(ii)                                  Subject to Executive’s signing, delivering and not revoking the Release attached as Exhibit A, which Release must be signed, delivered and not revoked within the period set forth in the Release:

 

(A)  A payment equal to one-and-a-half (1 1/2) times Executive’s annual base salary in effect immediately preceding such termination payable in one lump sum, less all applicable withholdings, on the sixtieth (60th) day after Executive’s termination of employment; and

 

(B)  For eighteen (18) months after the date of termination, Executive shall receive coverage under all Health Care Plans in which Executive and/or Executive’s spouse and any of Executive’s dependents were entitled to participate immediately prior to such termination, with Employer paying the employer portion of the premium therefor (the “Change in Control Health Care Continuance Benefit”), provided that the continued participation of Executive and/or Executive’s spouse and any of Executive’s dependents is possible under the general terms and provisions of the Health Care Plans. If Employer cannot maintain such coverage for Executive or Executive’s spouse or dependents under the terms and provisions of the Health Care Plans (or where such continuation would adversely affect the tax status of the Health Care Plans pursuant to which the coverage is provided), Employer shall provide the Change in Control Health Care Continuance Benefit by either providing substantially identical benefits directly or through an insurance arrangement or by paying Executive the estimated cost of the expected premium for eighteen (18) months after the date of termination with such payments to be made in accordance with Employer’s established payroll practices (but no less frequently than monthly) for employees generally for the period during which such cash payments are to be provided, less all applicable withholdings.  To the extent allowed by applicable law, the 18-month Change in Control Health Care Continuance Benefit period shall run concurrently with the period for which Executive and/or Executive’s spouse and any of Executive’s dependents would be eligible for continuation coverage under the COBRA Period.

 

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(C)  An additional amount, payable in one lump sum, less all applicable withholdings, on the sixtieth (60th) day following Executive’s termination of employment, equal to one (1) times the highest annual bonus compensation earned by Executive for the three (3) immediately preceding complete fiscal years or such fewer number of complete fiscal years as Executive may have been employed by Employer.  For the avoidance of any doubt, if Employer makes a determination to award no annual bonus compensation to Executive for the three (3) immediately preceding complete fiscal years or such fewer number of complete fiscal years as Executive may have been employed by Employer, then no amount is payable under this Section 9(a)(ii)(C).

 

Notwithstanding the foregoing, and in addition to Employer’s remedies set forth in Section 8(e), all such payments and benefits under Section 9(a) otherwise to be made after Executive’s termination of employment shall cease to be paid, and Employer shall have no further obligation with respect thereto, in the event Executive, without the consent of Employer, engages in any activity prohibited by Section 8.

 

(b)                                 Modified Cutback of Compensation Deemed to be Contingent on a Change of Control.  If any benefits or payments are to be made under the terms of this Agreement or any other agreement between Executive and Employer following a transaction that constitutes a change in the ownership or effective control of Employer or in the ownership of a substantial portion of the assets of Employer such that the provisions of Section 280G of the Internal Revenue Code of 1986, as amended, and any regulations thereunder (“Code Section 280G”) or Section 4999 of the Internal Revenue Code and any regulations thereunder could potentially apply to such compensation, then the following provisions shall be applicable:

 

(i)                                     In the event the independent accountants serving as auditors for Employer on the date of a change of control within the meaning of Code Section 280G (or any other accounting firm designated by Employer) determine that some or all of the payments or benefits scheduled under this Agreement, as well as any other payments or benefits on such change of control, would be nondeductible by Employer under Code Section 280G, then the payments scheduled under this Agreement and all other agreements between Executive and Employer will be reduced to one dollar less than the maximum amount which may be paid without causing any such payment or benefit to be nondeductible.  Any reduction of benefits or payments required to be made under this Section 9(b)(i) shall be taken in the following order: first from cash compensation and then from payments or benefits not payable in cash, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the date of determination.

 

(ii)                                  Notwithstanding the foregoing Section 9(b)(i), in the event the independent accountants serving as auditors for Employer on the date of a change of control within the meaning of Code Section 280G (or any other accounting firm designated by Employer) determine that the net economic benefit to Executive after payment of all income and excise taxes is greater without giving effect to Section 9(b)(i) than Executive’s

 

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net economic benefit after a reduction by reason of the application of Section 9(b)(i), then Section 9(b)(i) shall be a nullity and without any force or effect.  Any decisions regarding the requirement or implementation of the reductions to compensation described in Section 9(b)(i) shall be made by the independent accountants serving as auditors for Employer on the date of a change of control within the meaning of Code Section 280G (or any other accounting firm designated by Employer), shall be made at Employer’s expense and shall be binding on the parties.

 

(d)                                 Superseding Provisions.  The benefits and payments set forth in Section 9(a) that may be due in connection with a Change of Control shall supersede all payments, entitlements and benefits of Executive otherwise payable under Section 7(a).  The benefits and payments due under Section 9(a) replace those in Section 7(a), and are not cumulative thereof.

 

(e)                                  For Cause; Other Than for Good Reason.  If Executive’s employment is terminated for Cause or if Executive voluntarily terminates Executive’s employment other than for Good Reason, within two (2) years after a Change of Control, this Agreement shall terminate without any further obligation of Employer to Executive other than the payment to Executive of the Accrued Obligations.

 

10.                               Change of Control Defined.  For purposes of this Agreement, a “Change of Control” occurs if Employer merges with another depository institution, whether or not Employer is the surviving entity.

 

11.                               Documents.  All documents, records, tapes and other media of any kind or description relating to the business of Employer or any of its affiliates or subsidiaries (the “Documents”), whether or not prepared by Executive, shall be the sole and exclusive property of Employer.  The Documents (and any copies) shall be returned to Employer upon Executive’s termination of employment for any reason or at such earlier time or times as the Board of Directors of Employer or its designee may specify.

 

12.                               Suspension or Temporary Prohibition of Services; Permanent Prohibition of Services.  If Executive is suspended and/or temporarily prohibited from participating in the conduct of Employer’s affairs by a notice served pursuant to the Federal Deposit Insurance Act, Employer’s obligations under this Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, Employer may in its discretion (a) pay Executive all or part of the compensation withheld while its contract obligations were suspended, and (b) reinstate (in whole or in part) any of its obligations which were suspended.  If Executive is removed and/or permanently prohibited from participating in the conduct of Employer’s affairs by an order issued under the Federal Deposit Insurance Act or the Code of Virginia, all obligations of Employer under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected.

 

13.                               Severability/Breach Not Excuse Performance.  If any provision of this Agreement, or part thereof, is determined to be unenforceable for any reason whatsoever, it shall be severable from the remainder of this Agreement and shall not invalidate or affect the other provisions of this Agreement, which shall remain in full force and effect and shall be enforceable according to

 

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their terms.  No covenant shall be dependent upon any other covenant or provision herein, each of which stands independently.  No breach of this Agreement by Employer shall excuse Executive’s obligations under Section 8.

 

14.                               Governing Law/Venue.  This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland.  The parties further agree that venue in the event of a dispute shall be exclusively in the Circuit Court of Wicomico County, or in the United States District Court for the District of Maryland, at the sole option of Employer, and Executive agrees not to object to venue.

 

15.                               Notices.  All written notices required by this Agreement shall be deemed given when delivered personally or sent by overnight or registered or certified mail, return receipt requested, to the parties at the following addresses (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

 

To Employer:                                                                     Chief Executive Officer

The Bank of Delmarva

2245 Northwood Drive

Salisbury, MD  21801

 

To Executive:                                                                    At Executive’s home address as shown on the records of Employer.

 

16.                               Amendment and Termination of Agreement.  This Agreement may not be varied, altered, modified or in any way amended except by an instrument in writing executed by the parties hereto or their legal representatives.  Except as specifically set forth herein, including pursuant to the provisions of Section 6 above, this Agreement may not be terminated except by an instrument in writing executed by the parties hereto or their legal representatives, provided, however, and notwithstanding anything in this Agreement to the contrary, Employer or its successor has the unilateral right to terminate this Agreement and pay out the full value of all benefits hereunder in one lump sum payment in connection with a Change of Control pursuant to, and in compliance with, Treasury Regulation § 1.409A-3(j)(4)(ix)(B).

 

17.                               Binding Effect.  This Agreement shall be binding upon Executive and on Employer, its successors and assigns on the Effective Date, subject to the approval by the Board of Directors of Employer.  Employer will require any successor to all or substantially all of the business, stock or assets of Employer to assume expressly and agree to perform this Agreement in the same manner and to the same extent that Employer would be required to perform it if no such succession had taken place.  This Agreement shall be freely assignable by Employer.

 

18.                               No Construction Against Any Party.  This Agreement is the product of informed negotiations between Executive and Employer.  If any part of this Agreement is deemed to be unclear or ambiguous, it shall be construed as if it were drafted jointly by all parties.  Executive and Employer agree that neither party was in a superior bargaining position regarding the substantive terms of this Agreement.

 

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19.                               Code Section 409A Compliance.

 

(a)                                 The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended, and any regulations thereunder (“Code Section 409A”) or comply with an exemption from the application of Code Section 409A and, accordingly, all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A.

 

(b)                                 A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the form or timing of payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” (within the meaning of Code Section 409A) and, for purposes of any such provision of this Agreement under which (and to the extent) deferred compensation subject to Code Section 409A is paid, references to a “termination” or “termination of employment” or like references shall mean separation from service. A “separation from service” shall not occur under Code Section 409A unless such Executive has completely severed Executive’s relationship with Employer or Executive has permanently decreased Executive’s services to twenty percent (20%) or less of the average level of bona fide services over the immediately preceding thirty-six (36) month period (or the full period if Executive has been providing services for less than thirty-six (36) months). A leave of absence shall only trigger a termination of employment that constitutes a separation from service at the time required under Code Section 409A.  If Executive is deemed on the date of separation from service with Employer to be a “specified employee”, within the meaning of that term under Code Section 409A(a)(2)(B) and using the identification methodology selected by Employer from time to time, or if none, the default methodology, then with regard to any payment or benefit that is required to be delayed for six (6) months in compliance with Code Section 409A(a)(2)(B), such payment or benefit shall be paid with interest on the earlier of (i) the first day of the seventh (7th) month measured from the date of Executive’s separation from service or (ii) the date of Executive’s death.  The amount of interest to be paid shall be based on the prime rate of interest in effect on the first day of the month following the Executive’s separation from service as reported in the Wall Street Journal.  In the case of benefits required to be delayed under Code Section 409A, however, Executive may pay the cost of benefit coverage, and thereby obtain benefits, during such six (6) month delay period and then be reimbursed by Employer thereafter on the first day of the seventh (7th) month following the date of Executive’s separation from service or, if earlier, on the date of Executive’s death.

 

(c)                                  With regard to any provision herein that provides for reimbursement of expenses or in-kind benefits subject to Code Section 409A, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect. All reimbursements shall be reimbursed in accordance with Employer’s reimbursement policies but in no event later than the calendar year following the calendar year in which the related expense is incurred.

 

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(d)                                 If under this Agreement, an amount is to be paid in two or more installments, for purposes of Code Section 409A, each installment shall be treated as a separate payment.

 

(e)                                  When, if ever, a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within ten (10) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of Employer.  In the event any payment payable upon termination of employment would be exempt from Code Section 409A under Treasury Regulation § 1.409A-1(b)(9)(iii) but for the amount of such payment, the determination of the payments to Executive that are exempt under such provision shall be made by applying the exemption to payments based on chronological order beginning with the payments paid closest in time on or after such termination of employment.

 

(f)                                   Notwithstanding any other provision of this Agreement, Executive shall be solely liable, and Employer shall not be liable in any way to Executive if any payment or benefit which is to be provided pursuant to this Agreement and which is considered deferred compensation subject to Code Section 409A otherwise fails to comply with, or be exempt from, the requirements of Code Section 409A.

 

20.                               Regulatory Limitation.  Notwithstanding any other provision of this Agreement, neither Employer nor any subsidiary shall be obligated to make, and Executive shall have no right to receive, any payment, benefit or amount under this Agreement that would violate any law, regulation or regulatory order applicable to Employer or the subsidiary at the time such payment is due, including without limitation, any regulation or order of the Federal Deposit Insurance Corporation or the Board of Governors of the Federal Reserve System.  Executive agrees that compliance by Employer with such regulatory restrictions, even to the extent that compensation or other benefits paid to Executive are limited, shall not be a breach of this Agreement by Employer.

 

21.                               Waiver of Breach.  The failure at any time to enforce or exercise any right under any of the provisions of this Agreement or to require at any time performance by the other parties of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement or any part of this Agreement, or the right of any party hereafter to enforce or exercise its rights under each and every provision in accordance with the terms of this Agreement.

 

22.                               No Attachment.  Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect; provided, however, that nothing in this Section 22 shall preclude the assumption of such rights by executors, administrators or other legal representatives of Executive or Executive’s estate and their assigning any rights under this Agreement to the person or persons entitled hereto.

 

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23.                               Full Capacity.  The persons signing this Agreement represent that they have full authority and representative capacity to execute this Agreement in the capacities indicated below and to perform all obligations under this Agreement.

 

24.                               Representation and Warranty of Executive.  Executive represents and warrants to Employer that Executive is not under any obligation, contractual or otherwise, to any other firm or corporation, which would prevent Executive from entering into the employ of Employer under this Agreement or prevent Executive from performing the terms of this Agreement.

 

25.                               Entire Agreement.  Except as otherwise provided herein, this Agreement constitutes the entire agreement of the parties with respect to the matters addressed herein and, upon the Effective Date, it supersedes all other prior agreements and understandings, both written and oral, express or implied, with respect to the subject matter of this Agreement.

 

26.                               Survivability.  The provisions of Section 8 shall survive the termination, expiration or non-renewal of this Agreement.

 

27.                               Counterparts/Facsimile.  This Agreement may be executed in counterparts (including by facsimile), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

28.                               Case and Gender.  Wherever required by the context of this Agreement, the singular or plural case and the masculine, feminine and neuter genders shall be interchangeable.

 

29.                               Title.  The titles and sub-headings of each Section and Sub-Section in this Agreement are for convenience only and should not be considered part of this Agreement to aid in interpretation or construction.

 

[Signature Block on Next Page]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the dates below.

 

 

	
Date: March 24, 2019
    	
/s/ Betsy Eicher
    
	
 
    	
Betsy Eicher
    
	
 
    	
 
    
	
 
    	
 
    
	
Date: March 24, 2019
    	
The Bank of Delmarva
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ John W. Breda
    
	
 
    	
 
    	
John W. Breda, President & CEO
    

 

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EXHIBIT A

 

RELEASE

 

In consideration of the benefits promised in the Employment Agreement to which this Release is attached as Exhibit A (and further defined below), Betsy Eicher (“Executive”), hereby irrevocably and unconditionally releases, acquits, and forever discharges The Bank of Delmarva, and each of its agents, directors, members, shareholders, affiliated entities, officers, employees, former employees, attorneys, and all persons acting by, through, under or in concert with any of them (collectively “Releasees”) from any and all charges, complaints, claims, liabilities, grievances, obligations, promises, agreements, controversies, damages, policies, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to, any rights arising out of alleged violations or breaches of any contracts, express or implied, or any tort, or any legal restrictions on Releasees’ right to terminate employees, or any federal, state or other governmental statute, regulation, law or ordinance, including without limitation  (1) Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991; (2) the Americans with Disabilities Act; (3) 42 U.S.C. § 1981; (4) the federal Age Discrimination in Employment Act (age discrimination); (5) the Older Workers Benefit Protection Act; (6) the Equal Pay Act; (7) the Family and Medical Leave Act; and (8) the Employee Retirement Income Security Act (“Claim” or “Claims”), which Executive now has, owns or holds, or claims to have, own or hold, or which Executive at any time heretofore had owned or held, or claimed to have owned or held, against each or any of the Releasees at any time up to and including the date of the execution of this Release.

 

Executive hereby acknowledges and agrees that the execution of this Release and the cessation of Executive’s employment and all actions taken in connection therewith are in compliance with the federal Age Discrimination in Employment Act and the Older Workers Benefit Protection Act and that the releases set forth above shall be applicable, without limitation, to any claims brought under these Acts.  Executive further acknowledges and agrees that:

 

a.                                      The Release given by Executive is given solely in exchange for the benefits set forth in the Employment Agreement dated as of March    , 2019 between The Bank of Delmarva and Executive (the “Employment Agreement”) to which this Release was initially attached and such consideration is in addition to anything of value which Executive was entitled to receive prior to entering into this Release;

 

b.                                      By entering into this Release, Executive does not waive rights or claims that may arise after the date this Release is executed;

 

c.                                       Executive has been advised to consult an attorney prior to entering into this Release, and this provision of the Release satisfies the requirements of the Older Workers Benefit Protection Act that Executive be so advised in writing;

 

d.                                      Executive has been offered twenty-one (21) days [or forty-five (45) days if applicable] from receipt of this Release within which to consider whether to sign this Release; and

 

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e.                                       For a period of seven (7) days following Executive’s execution of this Release, Executive may revoke this Release by delivering the revocation to the Chief Executive Officer of The Bank of Delmarva, and it shall not become effective or enforceable until such seven (7) day period has expired.

 

This Release shall be binding upon the heirs and personal representatives of Executive and shall inure to the benefit of the successors and assigns of The Bank of Delmarva.

 

	
 
    	
 
    	
 
    
	
Date
    	
 
    	
Betsy Eicher
    

 

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