EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT
(“Agreement”) is made and entered into as of the 13th
day of July, 2009, by and between Hampton Roads Bankshares, Inc., a
Virginia corporation (“Bank”), and John A. B. Davies,
Jr. (“Executive”), and provides as follows:
RECITALS
WHEREAS, the employment of Executive
by the Bank is in the best interests of the parties; and
WHEREAS, the parties have mutually
agreed upon the terms and conditions of Executive’s continued
employment by the Bank as hereinafter set forth; and
WHEREAS, it is the intention of the
parties that this Agreement shall comply with Section 409A of
the Internal Revenue Code of 1986, as amended (the
“Code”) and the Treasury Regulations
thereunder.
TERMS OF
AGREEMENT
NOW, THEREFORE, for and in
consideration of the premises and of the mutual promises and
undertakings of the parties as hereinafter set forth, the parties
covenant and agree as follows:
Section 1. Employment
. Executive shall be
employed as the Chief Executive Officer of the Bank. He shall
perform such services for the Bank and/or one or more Affiliates as
may be assigned to Executive by the Bank. References in this
Agreement to “Affiliate” shall mean any business entity
that, directly or indirectly, through one or more intermediaries,
is controlled by the Bank.
Section 2. Term
. Executive’s
employment with the Bank shall begin on July 14, 2009 and
shall continue for a period of three (3) years, unless
Executive’s employment is terminated by either party in
accordance with the terms of this Agreement (the
“Term”).
Section 3. Exclusive
Service . Executive
shall devote his best efforts and full time to rendering services
on behalf of the Bank in furtherance of its best interests.
Executive shall comply with all policies, standards and regulations
of the Bank now or hereafter promulgated, and shall perform his
duties under this Agreement to the best of his abilities and in
accordance with standards of conduct applicable to officers of
banks.
Section 4.
Compensation . (a) As compensation while employed
hereunder, Executive, during his performance of this Agreement, in
whatever capacity rendered, shall receive an annual base salary of
$500,000 payable on such terms and in such installments as the
parties may from time to time mutually agree upon. The Bank, in its
discretion, may increase Executive’s base salary during the
Term. Executive’s base salary may not be decreased below any
amount to which it is increased (i.e., salary increases are not
subject to revocation) by the Bank.
(b) During Executive’s
employment with the Bank, the Bank shall provide Executive with the
use of a vehicle that may be assigned by the Bank to Executive or,
at the discretion of the Bank may
be selected by the Executive, or provide to the
Executive a vehicle allowance pursuant to the Bank’s
Automobile Policy as such policy may be established and/or amended
from time-to-time by the Bank. All fuel, insurance and maintenance
will be paid for by the Bank and/or reimbursed to the Executive by
the Bank pursuant to the Bank’s Automobile Policy.
(c) The Bank 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 the Bank for all
compensation paid to Executive under this Agreement. The Bank shall
also withhold and remit to the proper party any amounts agreed to
in writing by the Bank and Executive for participation in any
corporate sponsored benefit plans for which a contribution is
required.
(d) Except as otherwise expressly
set forth hereunder, no compensation shall be paid pursuant to this
Agreement in respect of any month or portion thereof subsequent to
the termination of Executive’s employment.
Section 5. Benefit
Plans . Executive
shall be eligible to participate in all cash and non-cash employee
benefit plans maintained by the Bank for its senior executive
officers as may be determined by the Bank’s Board of
Directors.
Section 6. Restricted
Stock . During such
time as (i) Executive serves as Chief Executive Officer of the
Bank and (ii) the Treasury Holding Period (as defined in
Appendix A) shall remain in effect, Executive shall receive
annually restricted stock grants (for shares of Bank’s Common
Stock) equal to the lesser of 25% of his annual base salary then in
effect on the date of the grant, or the maximum the Bank is able to
provide under the applicable restricted stock plan, and each such
annual award of restricted shares shall be subject to vesting as
follows: A(i) one-third (1/3) of such shares shall vest as of
the second anniversary of the date of grant; (ii) one-third
(1/3) of such shares shall vest on the second anniversary of
the date of grant to the extent the Bank attains reasonable
performance standards for the year in which the grant occurred as
established by the Bank Board and (iii) one-third
(1/3) of such shares shall vest upon the Bank’s
attainment of reasonable performance standards for the three year
period, beginning with the year in which the grant occurred,
established by the Bank Board. In addition, any shares that become
vested shall not be transferrable except until the Authorities
permit such transfer except that Executive may transfer a portion
of the restricted stock for the purpose of paying federal, stock,
local, or foreign taxes that are anticipated to apply to the income
recognized due to this vesting.
Section 7. Bonuses
. Subject to
Section 6, Executive shall receive such bonuses as the
Compensation Committee of the Board of Directors of the Bank, in
its discretion, decides to pay to Executive.
Section 8. Personal and
Sick Leave . Executive shall be entitled to the same paid
time off policies as the Bank may from time to time designate for
all full-time senior executive officers of the Bank. For 2009,
Executive shall be entitled to a pro-rated amount of vacation days
based on the date his employment with the Bank began.
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Section 9.
Termination . (a) Notwithstanding the termination of
Executive’s employment pursuant to any provision of this
Agreement, the parties shall be required to carry out any
provisions of this Agreement which contemplate performance by them
subsequent to such termination. In addition, the termination of
Executive’s employment shall not affect any liability or
other obligation of either party which shall have accrued prior to
such termination, including, but not limited to, any liability,
loss or damage on account of breach. No termination of employment
shall terminate the obligation of the Bank to make payments of any
vested benefits provided hereunder or the obligations of Executive
under Sections 10, 11 and 12.
(b) Executive’s employment
hereunder may be terminated by Executive upon thirty (30) days
written notice to the Bank or at any time by mutual agreement in
writing. In such event, Executive shall only be entitled to
Executive’s salary through Executive’s last day of
employment.
(c) This Agreement shall terminate
upon death of Executive; provided, however, that in such event the
Bank shall pay to the estate of Executive the compensation
including salary and accrued bonus, if any, which otherwise would
be payable to Executive through the end of the month in which his
death occurs in accordance with Bank’s normal payroll
schedule.
(d) (1) The Bank may terminate
Executive’s employment other than for “Cause,” as
defined below, or the Executive may terminate his employment for
“Good Reason,” as defined below, at any time upon
thirty (30) days written notice to the Bank or Executive, as
applicable, in each case other than in connection with a Change of
Control (which shall be controlled by Section 9(i).
(2) If the Executive’s
employment terminates pursuant to Section 9(d)(1), Executive
shall be entitled to receive an amount equal to his base salary in
effect at the time of the termination that he would have received
for the remainder of the Term of this Agreement. Such amount will
be paid in accordance with the Bank’s normal payroll
schedule. Executive acknowledges, however, that if he receives the
compensation outlined in this Section 9(d)(2) that he is not
entitled to the Change in Control payment set forth in
Section 9(i) or the consulting fees set forth in
Section 9(j) below.
(3) Notwithstanding anything in this
Agreement to the contrary, if Executive breaches Section 10,
11 or 12, Executive will not thereafter be entitled to receive any
further compensation or benefits pursuant to this
Agreement.
(4) For purposes of this Agreement,
“Good Reason” shall mean: (i) the assignment of
duties to the Executive by the Bank which result in the Executive
having significantly less authority or responsibility than he has
on the date hereof, without his consent, except in connection with
the termination of Executive’s employment;
(ii) requiring the Executive to maintain his principal office
outside of Norfolk, Virginia Beach or Chesapeake, Virginia unless
the Bank moves its principal executive offices to a place to which
the Executive is required to move; (iii) the Bank’s
failure to comply with any material term of this Agreement;
provided, however, that the Executive shall not be deemed to have
Good Reason pursuant to this Section 9(d)(4)(iii)
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unless the Executive gives the Bank written
notice that the specified conduct or event has occurred and the
Bank fails to cure such conduct or event within thirty
(30) days of receipt of such notice.
(e) The Bank shall have the right to
terminate Executive’s employment under this Agreement at any
time for Cause, which termination shall be effective immediately.
Termination for “Cause” shall include termination for
Executive’s: (i) personal dishonesty; (ii)incompetence;
(iii) insubordination; (iv) misconduct; (v) breach
of a fiduciary duty involving personal profit;
(vi) intentional failure to perform stated duties;
(vii) willful violation, in connection with his acts or
omissions in his role as Chief Executive Officer of the Bank, of
any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order;
(viii) conviction of a felony or of a misdemeanor involving
moral turpitude; (ix) misappropriation of the Bank’s
assets (determined on a reasonable basis) or those of its
Affiliates; or (x) material breach of any other provision of
this Agreement. The Bank shall not be deemed to have Cause under
sections 9(e)(ii), (iii), (iv), or (vi), unless the Bank gives the
Executive written notice that the specified conduct had occurred
and the Executive fails to cure such conduct within thirty
(30) days of receipt of such notice. In the event
Executive’s employment under this Agreement is terminated for
Cause, Executive shall thereafter have no right to receive
compensation or other benefits under this Agreement.
(f) The Bank may terminate
Executive’s employment under this Agreement, after having
established the Executive’s disability by giving to Executive
written notice of its intention to terminate his employment for
disability and his employment with the Bank shall terminate
effective on the 90th day after receipt of such notice if within 90
days after such receipt Executive shall fail to return to the
full-time performance of the essential functions of his position
(and if Executive’s disability has been established pursuant
to the definition of “disability” set forth below). For
purposes of this Agreement, “disability” means either
(i) disability which after the expiration of more than 13
consecutive weeks after its commencement is determined to be total
and permanent by a physician selected and paid for by the Bank or
its insurers, and acceptable to Executive or his legal
representative, which approval shall not be unreasonably withheld
or (ii) disability as defined in the policy of disability
insurance maintained by the Bank or its Affiliates for the benefit
of Executive, whichever shall be more favorable to Executive.
Notwithstanding any other provision of this Agreement, the Bank
shall comply with all requirements of the Americans with
Disabilities Act, 42 U.S.C. § 12101 et. seq
.
(g) If Executive is suspended and/or
temporarily prohibited from participating in the conduct of the
Bank’s affairs by a notice served pursuant to the Federal
Deposit Insurance Act, the Bank’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, the Bank may (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 which were suspended with any such payment made by
March 15 following the calendar year in which such charges are
dismissed.
(h) If Executive is removed and/or
permanently prohibited from participating in the conduct of the
Bank’s affairs by an order issued under the Federal Deposit
Insurance Act or the Code of Virginia, all obligations of the Bank
under this Agreement shall terminate as of the effective date of
the order, but vested rights of the parties shall not be
affected.
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(i) If Executive’s employment is
terminated without Cause within one year after a &l
