FIDELITY BANKSHARES, INC.
AMENDED AND RESTATED EXECUTIVE AGREEMENT
WHEREAS, Brian
C. Mahoney ("Executive") and Fidelity Bankshares, Inc. (the
"Company") originally entered into an
Executive Agreement dated March 27, 2003,
which is now being amended and restated effective as of the date set forth
below, in order to comply with
Section 409A of the Internal Revenue Code of
1986, as amended ("Executive Agreement") to guarantee and ensure that the
Executive shall receive the full value of the
benefits to which he is entitled
under various benefit plans sponsored by
the Company or by Fidelity Federal Bank
& Trust (the "Bank") in which the
Executive is a participant; and
WHEREAS,
tax law provisions
relating to "golden
parachute payments" could
have the effect of reducing the benefits
otherwise promised to Executive under
the various benefit plans sponsored by the Bank as a result
of a Change in
Control of the Company or the Bank, either as the result of
cut-backs in the
benefit due to restrictions imposed by the Bank's regulators or the imposition
of an excise tax on the deemed "excess
parachute payment"; and
WHEREAS,
the Board believes
that this Executive
Agreement is in the
best
interests of the Company and its
shareholders
and will provide the benefits
intended to be provided to Executive in the event of a change
in control of the
Company or the Bank, without any reduction because of tax code "penalties" or
excise taxes relating to a change in
control; and
WHEREAS,
the Company and the Executive also desire to enter into this
Executive Agreement for the purpose of providing further incentive to the
Executive to achieve successful results in the
management and operations of the
Company.
NOW, THEREFORE,
in consideration of
the mutual covenants herein contained,
and upon the other terms and conditions
hereinafter provided, the parties hereto
hereby agree as follows:
1. In the event
of a Change in Control (as defined herein) of the Bank or
the Company, the Executive shall be entitled to receive, pursuant to this
Executive Agreement, an amount payable by the Company, in addition to any
compensation or benefits otherwise paid by
the Bank or the Company, which shall
equal the difference, if any, between (i) the amount that would
be paid by the
Bank under the terms of the various benefit plans without regard to any
reduction that may be required or imposed by
any regulatory
authority having
jurisdiction over the Bank, and (ii) the amount
that is actually paid to or for
the benefit of the Executive by the Bank
under the terms of the various benefit
plans.
2. In addition,
in each calendar year that Executive is entitled to receive
payments or benefits under the provisions of a benefit plan and
this Executive
Agreement, the independent accountants of the Company shall determine if an
excess parachute payment (as defined in Section
4999 of the Internal
Revenue
Code of 1986, as amended (the "Code"))
exists. Such
determination shall be made
after taking any reductions permitted pursuant to Section 280G of the
Code and
the regulations thereunder. Any amount determined to be an excess
parachute
payment after taking into account such
reductions shall be hereafter referred to
as the "Initial Excess Parachute Payment".
As soon as practicable after a Change
<PAGE>
in Control, the Initial Excess Parachute Payment shall be determined.
At the
time at which the Executive would be entitled to a payment
under the provisions
of a benefit plan and this Executive Agreement or, if the Executive is a
Specified Employee (as defined in Proposed Treasury Regulations Section
1.409A-1(i)) and the payment is due to the
Executive's Separation
from Service
(as defined in Proposed Treasury Regulations Section 1.409A-1(h)), the date
which is six (6) months after the date of the Executive's Separation from
Service (but only if such delay is required
by Code Section 409A),
the Company
shall pay Executive, subject to applicable withholding requirements under
applicable state or federal law an amount
equal to:
(i)
twenty percent (20%) of the Initial Excess Parachute
Payment (or such other amount equal to the tax
imposed under Section 4999 of the Code), and
(ii)
such additional amount (tax allowance) as may be
necessary to compensate Executive for the payment by
Executive of state and federal income and excise
taxes on the payment provided under Clause (i) and on
any payments under this Clause (ii). In computing
such tax allowance, the payment to be made under
Clause (i) shall be multiplied by the "gross up
percentage" ("GUP"). The GUP shall be determined as
follows:
Tax Rate
GUP = ----------
