Exhibit 10.14

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT, dated as of this 19th day of January, 2005, by
and between Fauquier Bankshares, Inc., a Virginia corporation (the “Company”),
The Fauquier Bank, a Virginia banking corporation (the “Bank”), and Randy K.
Ferrell (the “Executive”).

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

Part I: General Employment Terms

     1. Employment and Duties. The Executive shall be employed by each of the
Company and the Bank as their Chief Executive Officer. The Executive accepts
such employment and agrees to perform the managerial duties and responsibilities
of Chief Executive Officer. The Executive agrees to devote his time and
attention on a full-time basis to the discharge of such duties and
responsibilities of an executive nature as may be assigned him by the Company’s
Board of Directors, provided, that the Executive may accept any elective or
appointed positions or offices with any duly recognized associations or
organizations whose activities or purposes are closely related to the banking
business or service to which would generate good will for the Company and its
subsidiaries and affiliates.

     2. Term. The term of this Agreement (which term, together with any
extension hereunder, is referred to as the “Term”) shall commence on January 15,
2005 (the “Effective Date”) and shall continue through December 31, 2008, unless
terminated or extended as hereinafter provided. This Agreement shall be extended
for successive one-year periods at December 31, 2005 and at each December 31
thereafter during the Term unless either party notifies the other in writing at
least 90 days prior to such December 31 that the Agreement shall not be extended
or further extended as the case may be.

     3. Compensation.

          (a) Base Salary. For the remainder of 2005, the Company shall pay the
Executive an annual base salary not less than $206,000. Such base salary shall
be paid to the Executive in accordance with established payroll practices of the
Company. For 2006 and for each remaining year of the Term, the Compensation
Committee (“Compensation Committee”) of the Board of Directors of the Company
agrees to review the Executive’s base salary and to consider implementing
changes to such base salary as it may deem appropriate; however, such base
salary shall not be reduced at any time during the Term.

          (b) Annual Bonus. The Executive will be eligible to participate in an
annual incentive plan that will establish measurable criteria and incentive
compensation levels payable to the Executive for corporate performance in
relation to defined benchmarks. The Compensation Committee or the Board of
Directors of the Company, as the case may be, will consult with management to
establish the targeted corporate performance levels for the Company on an annual
basis consistent with the Company’s business plan and objectives. Achievement of
the targeted corporate performance levels will normally result in an annual cash
bonus payment equal to 40% of the Executive’s then current annual base salary.
Any bonus payments due hereunder shall be paid to the Executive no later than
75 days after the end of the year.

 

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          (c) Stock Compensation. Subject to the annual approval of the
Compensation Committee or the Board of Directors of the Company, as the case may
be, the Executive will receive during the Term an annual stock award under the
Company’s Omnibus Stock Ownership and Long Term Incentive Plan or any successor
plan (the “Stock Compensation Plan”), with a value up to 90% of his then current
annual base salary. The stock award, which will consist of stock options,
restricted stock grants or other equity compensation grants, or any combination
thereof, will include such vesting and other terms and conditions as required
herein and as otherwise determined in the sole discretion of the Compensation
Committee or the Board of Directors in accordance with the Stock Compensation
Plan, or any successor plan. The valuation of a stock option award will be
determined using the Black-Scholes or similar methodology as determined by the
Compensation Committee or the Board of Directors of the Company.

     4. Benefits and Perquisites.

          (a) During the Term, the Executive shall be eligible to participate in
any plans, programs or forms of compensation or benefits that the Company or its
subsidiaries and affiliates provide to the class of employees that includes the
Executive, on a basis not less favorable than that provided to such class of
employees, including, without limitation, group medical, disability and life
insurance, paid time off, and a retirement plan; provided, however, a reasonable
transition period following any change in control, merger, statutory share
exchange, consolidation, acquisition or transaction involving the Company or any
of its subsidiaries and affiliates shall be permitted in order to make
appropriate adjustments in compliance with this Section 4(a). Unless prior
notice to the contrary is provided, the Executive will be eligible to
participate in the Company’s other incentive programs, dependent on the rules
and goals established for such programs.

          (b) The Executive shall be entitled such paid time off and perquisites
as are provided by the Compensation Committee.

     5. Reimbursement of Expenses. The Company shall reimburse the Executive
promptly, upon presentation of adequate substantiation, including receipts, for
the reasonable travel, entertainment, lodging and other business expenses
incurred by the Executive, including, without limitation, those expenses
incurred by the Executive and his spouse in attending approved trade and
professional association conventions, meetings and other related functions.
However, the Compensation Committee and the Board of Directors of the Company
reserves the right to review these expenses periodically and determine, in its
sole discretion, whether future reimbursement of such expenses to the Executive
will continue without prior approval of the expenses by the Compensation
Committee or the Board of Directors of the Company.

     6. Termination of Employment.

          (a) Death. The Executive’s employment under this Agreement shall
terminate automatically upon the Executive’s death.

          (b) Incapacity. If the Company determines that the Incapacity, as
hereinafter defined, of the Executive has occurred, it may terminate the
Executive’s employment and this Agreement upon 30 days’ written notice provided
that, within 30 days after receipt of such notice, the Executive shall not have
returned to full-time performance of his assigned duties. “Incapacity” shall
mean the failure of the Executive to perform his assigned duties with the
Company on a full-time basis as a result of mental or physical illness or injury
as determined by a physician selected by the Compensation Committee or the Board
of Directors of the Company for the greater of 90

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consecutive calendar days or the longest waiting period under any long term
disability insurance contract or program provided to him as an employee.

          (c) Termination by the Company with or without Cause. The Company may
terminate the Executives employment during the Term, with or without Cause. For
purposes of this Agreement, “Cause” shall mean:

               (i) continual or deliberate neglect by the Executive in the
performance of his material duties and responsibilities as established from time
to time by the Board of Directors of the Company, or the Executive’s willful
failure to follow reasonable instructions or policies of the Company after being
advised in writing of such failure and being given a reasonable opportunity and
period to remedy such failure;

               (ii) conviction of, indictment for (or its procedural
equivalent), entering of a guilty plea or plea of no contest with respect to a
felony, a crime of moral turpitude or any other crime with respect to which
imprisonment is a possible punishment, or the commission of an act of
embezzlement or fraud against the Company or any subsidiary or affiliate
thereof;

               (iii) any breach by the Executive of a material term of this
Agreement, or violation in any material respect of any code or standard of
behavior generally applicable to officers of the Company and its subsidiaries
and affiliates, after being advised in writing of such breach or violation and
being given a reasonable opportunity and period to remedy such breach or
violation;

               (iv) dishonesty of the Executive with respect to the Company or
any subsidiary or affiliate thereof, or breach of a fiduciary duty owed to the
Company or any subsidiary or affiliate thereof; or

               (v) the willful engaging by the Executive in conduct that is
reasonably likely to result, in the good faith judgment of a majority of the
outside members of the Board of Directors of the Company, in material injury to
the Company or any subsidiary or affiliate, monetarily or otherwise.

For purposes hereof, no act, or failure to act, on the Executive’s part shall be
considered “willful” unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his act or omission was in the best
interest of the Company; provided that any act or omission to act on the
Executive’s behalf in reliance upon an opinion of counsel to the Company or
counsel to the Executive shall not be deemed to be willful. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to him a copy of a
certification by a majority of the outside members of the Board of Directors of
the Company finding that, in the good faith opinion of such majority, the
Executive was guilty of conduct which is deemed to be Cause within the meaning
hereof and specifying the particulars thereof in detail, after reasonable notice
to the Executive and an opportunity for him, together with his counsel, to be
heard before such majority.

          (d) Termination by Executive for Good Reason. The Executive may
terminate his employment for Good Reason. For purposes of this Agreement, “Good
Reason” shall mean any of the following not occurring in connection with a
termination of the Executive’s employment for Cause:

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               (i) the continued assignment to the Executive of duties
inconsistent with the Executive’s position, authority, duties or
responsibilities as contemplated by Section 1 hereof or, in the event of a
Change in Control (as hereinafter defined), Section 10(a);

               (ii) any action taken by the Compensation Committee or the Board
of Directors of the Company which results in a substantial reduction in the
status of the Executive, including a diminution in his position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and/or inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;

               (iii) the relocation of the Executive to any other primary place
of employment which might require him to move his residence which, for this
purpose, includes any reassignment to a place of employment located within the
current market area of the Company or any of its subsidiaries or affiliates at
the Effective Date, as such market area is defined for Community Reinvestment
Act purposes, without the Executive’s express written consent to such
relocation; or

               (iv) any failure by the Company, or any successor entity
following a Change in Control, to comply with the provisions of Sections 3 and 4
or Section 10(b) hereof or to honor any other term or provision of this
Agreement, other than an isolated, insubstantial or inadvertent failure not
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive.

     7. Obligations upon Termination.

          (a) Death. If the Executive’s employment is terminated by reason of
death in accordance with Section 6(a) hereof, this Agreement shall terminate
without further obligation to the Executive or his legal representatives under
this Agreement, except that his survivors, designees or estate shall continue to
receive, in addition to all other benefits to which they may be entitled
pursuant to the terms of any plan, program or arrangement of the Company and its
subsidiaries or affiliates, his base salary hereunder for a period of three
months following the month in which his death occurred.

          (b) Incapacity. If the Executive’s employment is terminated by reason
of Incapacity in accordance with Section 6(a) hereof, this Agreement shall
terminate without further obligation to the Executive under this Agreement
except that the Executive shall receive any benefits to which he may be entitled
pursuant to the terms of any plan, program or arrangement of the Company and its
subsidiaries or affiliates.

          (c) Without Cause; Good Reason. Except as set forth in Section 7(e),
if, during the Term, the Company shall terminate the Executive’s employment
without Cause and other than for death or Incapacity or the Executive shall
terminate employment for Good Reason, the Company will pay or provide the
following to the Executive:

               (i) Within 30 days after the termination of employment, the
Company will pay to the Executive in a lump sum the sum of (A) the Executive’s
base salary through the date of termination, (B) the amount, if any, of any
incentive or bonus compensation theretofore earned which has not yet been paid,
(C) the product of the Executive’s annual bonus paid or payable, including by
reason of deferral, for the most recently completed year and a fraction,

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the numerator of which is the number of days in the current year through the
date of termination and the denominator of which is 365, and (D) an amount equal
to two times the average of the Executive’s annual bonuses paid for the last two
calendars years preceding the calendar year of his termination of employment.

               (ii) Commencing within 30 days after the termination of
employment, the Company shall continue to pay to the Executive at regular
payroll intervals Executive’s annual base salary for a period of 24 months from
the date of termination of employment.

               (iii) The Company shall also maintain in full force and effect
for the Executive’s continued benefit, until 24 months from the date of
termination of employment, all health and welfare plan and program coverage for
the Executive, his spouse and dependents then in effect, and provided that the
Executive’s continued participation is possible under the general terms and
provisions of such plans and programs. If the Company reasonably determines that
maintaining any such health and welfare plan and program coverage in full force
and effect until 24 months from the Executive’s date of termination of
employment is not feasible, the Company either shall provide substantially
identical benefits directly or through an insurance arrangement or shall pay the
Executive a lump sum equal to 1.4 times the estimated cost of maintaining such
coverage. If the Executive dies while receiving such health and welfare benefit
continuation, the Executive’s spouse and other dependents will continue to be
provided such benefits during the remainder of the 24-month period. The
Executive, his spouse and his dependents will become eligible for COBRA
continuation coverage as of the date health benefits cease.

               (iv) Vesting in all equity compensation awards granted to the
Executive evidencing the grant of a stock option or other award under the
Company’s Stock Compensation Plan, or any predecessor plan thereto, will
automatically be accelerated and such equity compensation awards shall be
immediately exercisable and fully vested as of the date of termination of
employment. In the case of stock options, stock appreciation rights or similar
awards, the Executive will have at least 90 days after termination of
employment, or such longer period as may be provided for in the separate award
agreement, to exercise his rights thereunder, provided that such extended
exercise period shall not extend beyond the maximum term of such awards
determined without regard to the Executive’s termination of employment.

In addition, the Executive shall receive any benefits to which he may be
entitled pursuant to the terms of any plan, program or arrangement of the
Company and its subsidiaries or affiliates.

          (d) Cause; other than for Good Reason. If the Executive’s employment
shall be terminated for Cause or for other than death, Incapacity or Good
Reason, this Agreement shall terminate without any further obligation of the
Company to the Executive other than to pay to the Executive his annual base
salary through the date of termination and to provide any benefits to which he
may be entitled pursuant to the terms of any plan, program or arrangement of the
Company and its subsidiaries or affiliates. The Executive will still be required
to comply with the non-competition and confidentiality covenants set forth in
Section 7(e).

          (e) Non-Competition. Notwithstanding the foregoing, all such payments
and benefits under Section 7(c) otherwise continuing for periods after the
Executive’s termination of employment shall cease to be paid, and the Company
shall have no further obligation due with respect thereto, in the event the
Executive engages in “Competition” or makes any “Unauthorized

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Disclosure of Confidential Information.” In addition, in exchange for the
payments on termination as provided herein, other provisions of this Agreement
and other valuable consideration hereby acknowledged, the Executive agrees that
he will not engage in competition for a period of 24 months after his employment
ceases for any reason, including the expiration or nonrenewal of this Agreement.
For purposes hereof:

               (i) “Competition” means the Executive’s engaging without the
written consent of the Board of Directors of the Company or a person authorized
thereby, in an activity as an officer, a director, an employee, a partner, a
more than one percent shareholder or other owner, an agent, a consultant, or in
any other individual or representative capacity within the market area of the
Company or any of its subsidiaries or affiliates at the relevant time, as such
market area is defined for Community Reinvestment Act purposes, (unless the
Executive’s duties, responsibilities and activities, including supervisory
activities, for or on behalf of such activity, are not related in any way to
such competitive activity) if it involves:

                    (A) engaging in or entering into the business of banking,
lending or any other business activity in which the Company or any of its
affiliates is actively engaged at the time the Executive’s employment ceases, or

                    (B) soliciting or contacting, either directly or indirectly,
any of the customers or clients of the Company or any of its affiliates for the
purpose of competing with the products or services provided by the Company or
any of its affiliates, or

                    (C) employing or soliciting for employment any employees of
the Company or any of its affiliates for the purpose of competing with the
Company or any of its affiliates.

               (ii) “Unauthorized Disclosure of Confidential Information” means
the use or disclosure of information in violation of Section 8 of this
Agreement.

               (iii) For purposes of this Agreement, “customers” or “clients” of
the Company or any of its subsidiaries or affiliates means individuals or
entities to whom the Company or any of its affiliates has provided products or
services at any time from the Effective Date through the date the Executive’s
employment ceases.

          (f) Remedies. The Executive acknowledges that the restrictions set
forth in paragraph 7(e) of this Agreement are just, reasonable, and necessary to
protect the legitimate business interests of the Company. The Executive further
acknowledges that if he breaches or threatens to breach any provision of
paragraph 7(e), the Company’s remedies at law will be inadequate, and the
Company will be irreparably harmed. Accordingly, the Company shall be entitled
to an injunction, both preliminary and permanent, restraining the Executive from
such breach or threatened breach, such injunctive relief not to preclude the
Company from pursuing all available legal and equitable remedies. In addition to
all other available remedies, if the Executive violates the provisions of
paragraph 7(e), the Executive shall pay all costs and fees, including attorneys’
fees, incurred by the Company in enforcing the provisions of that paragraph. If,
on the other hand, it is finally determined by a court of competent jurisdiction
that a breach or threatened breach did not occur under paragraph 7(e) of this
Agreement, the Company shall reimburse the Executive for reasonable legal fees
incurred to defend that claim.

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     8. Confidentiality. The Executive recognizes that as an employee of the
Company and the Bank he will have access to and may participate in the
origination of non-public, proprietary and confidential information and that he
owes a fiduciary duty to the Company and its subsidiaries and affiliates.
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 the
Company and its subsidiaries and affiliates or any of their customers that is
not generally known to the public. The Executive agrees that he will never use
or disclose to any third party any such confidential information, either
directly or indirectly, except as may be authorized in writing specifically by
the Company or required by law.

Part II: Change in Control

     9. Change in Control and Changes in Employment Terms and Conditions.
Notwithstanding any other term or provision of this Agreement, in the event of a
Change in Control (as defined in Section 14), this Part II shall become
effective and govern the terms and conditions of the Executive’s employment.

          (a) Continued Employment. If a Change in Control occurs during the
Term, and the Executive is employed by the Company on the Change in Control
Date, the Company will continue to employ the Executive in accordance with the
terms and conditions of this Agreement for the period beginning on the Change in
Control Date (as defined in Section 14) and ending on the third anniversary of
such date (the “Change in Control Employment Period”).

          (b) Vesting of Equity Compensation Awards. Upon a Change in Control,
all equity compensation awards granted to the Executive under the Stock
Compensation Plan, or any predecessor thereto, prior to the Change in Control
Date, shall become immediately vested and exercisable with respect to all or any
portion of the shares covered thereby and not previously forfeited or lapsed
regardless of whether such awards are otherwise vested and exercisable. The
Company shall reimburse the Executive for any federal income tax liability
incurred by the Executive in connection with the exercise of such awards which
would not have otherwise been incurred by the Executive in the absence of such
awards becoming immediately available upon a Change in Control, such
reimbursement to be submitted to the Executive within ten days of written
notification to the Company by the Executive of the exact amount of such
additional tax liability.

          (c) Cancellation and Cash Payment for Stock Options, Stock
Appreciation Rights and Similar Equity Compensation Awards. At any time
subsequent to seven days after the public announcement of a Change in Control,
any or all stock options, stock appreciation rights and similar equity
compensation awards granted to the Executive under the Stock Compensation Plan
held by the Executive for more than six months (“Cancelable Awards”) may, upon
the written approval of a majority of disinterested, non-employee members of the
Board of Directors of the Company, be cancelled by the Company in exchange for
the payment to the Executive of cash in an amount equal to the aggregate spread
between the average exercise price of the Cancelable Awards and the higher of:
(i) the average of the closing prices of the Company’s shares as reported in the
daily newspaper for the 30 business days immediately preceding the public
announcement of the Change in Control, or (ii) the highest price per share
actually paid in connection with the Change in Control of the Company.

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     10. Terms of Employment following a Change in Control.

          (a) Position and Duties. During the Change in Control Employment
Period, (i) the Executive’s position, authority, duties and responsibilities
will be at least commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 90-day period
immediately preceding the Change in Control Date, and (ii) the Executive’s
services will be performed at the location where the Executive was employed
immediately preceding the Change in Control Date or any office that is the
headquarters of the Company and is less than 10 miles from such location; it
being understood and agreed that this subsection (ii) shall supercede the
provisions of Section 6(c)(iii) dealing with the relocation of the Executive
following a Change in Control.

          (b) Compensation and Benefits following a Change in Control.

               (i) Annual Base Salary. During the Change in Control Employment
Period, the Executive will receive an annual base salary (the “Annual Base
Salary”) at least equal to the highest base salary paid or payable to the
Executive by the Company and its affiliated companies during the 12-month period
immediately preceding the Change in Control Date. During the Change in Control
Employment Period, the Annual Base Salary will be reviewed at least annually and
will be increased each year after such Change in Control by an amount which at
least equals, on a percentage basis, the percentage increase, if any, in the
cost of living as set forth in the Consumer Price Index for the area in which
the principal office of the Company is located (1967=100) published by the
Bureau of Labor Statistics of the United States Department of Labor over the
preceding year, unless the failure to so increase the Executive’s Annual Base
Salary is waived in writing by the Executive. Any increase in the Annual Base
Salary will not serve to limit or reduce any other obligation to the Executive
under this Agreement. The Annual Base Salary will not be reduced after any such
increase, and the term Annual Base Salary as used in this Agreement will refer
to the Annual Base Salary as so increased. The term “affiliated companies”
includes any company controlled by, controlling or under common control with the
Company.

               (ii) Annual Bonus. During the Change in Control Employment
Period, the Executive will be entitled to participate in an annual incentive
plan generally applicable to other peer executives of the Company and its
affiliated companies, but in no event will such incentive plan provide the
Executive with a less favorable opportunity to earn an annual bonus that is
similarly structured to the annual incentive plan as in effect at any time
during the 12-month period immediately preceding the Change in Control Date.

               (iii) Incentive, Savings and Retirement Plans. During the Change
in Control Employment Period, the Executive will be entitled to participate in
all incentive (including stock incentive), savings and retirement, health and
welfare plans, policies and programs applicable generally to other peer
executives of the Company and its affiliated companies, but in no event will
such plans, policies and programs provide the Executive with incentive
opportunities, savings opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than those provided by the Company
and its affiliated companies for the Executive under such plans, policies and
programs as in effect at any time during the 12-month period immediately
preceding the Change in Control Date.

               (iv) Health and Welfare Benefit Plans. During the Change in
Control Employment Period, the Executive and/or the Executive’s family, as the
case may be, will be

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eligible for participation in and will receive all benefits under health and
welfare benefit plans, policies and programs provided by the Company and its
affiliated companies to the extent applicable generally to other peer executives
of the Company and its affiliated companies, but in no event will such plans,
policies and programs provide the Executive with benefits that are less
favorable, in the aggregate, than the most favorable of such plans, policies and
programs in effect at any time during the 12-month period immediately preceding
the Change in Control Date.

               (v) Fringe Benefits. During the Change in Control Employment
Period, the Executive will be entitled to fringe benefits in accordance with the
comparable plans, policies and programs of the Company and its affiliated
companies in effect for the Executive at any time during the 12-month period
immediately preceding the Change in Control Date or, if more favorable to the
Executive, as in effect generally from time to time after the Change in Control
Date with respect to other peer executives of the Company and its affiliated
companies.

               (vi) Vacation. During the Change in Control Employment Period,
the Executive will be entitled to paid vacation in accordance with the
comparable plans, policies and programs of the Company and its affiliated
companies in effect for the Executive at any time during the 12-month period
immediately preceding the Change in Control Date or, if more favorable to the
Executive, as in effect generally from time to time after the Change in Control
Date with respect to other peer executives of the Company and its affiliated
companies.

     11. Termination of Employment following a Change in Control.

          (a) Death or Incapacity. The Executive’s employment will terminate
automatically upon the Executive’s death or Incapacity during the Change in
Control Employment Period.

          (b) Cause. The Company may terminate the Executive’s employment during
the Change in Control Employment Period for Cause (as defined in Section 6(b)).

          (c) Good Reason. The Executive’s employment may be terminated during
the Change in Control Employment Period by the Executive for Good Reason (as
defined in Section 6(c)), provided, however, that Good Reason for this purpose
shall also include the Executive’s voluntary resignation in his discretion at
any time during the 90 day period beginning on the Change in Control Date or at
any time during the 90 day period beginning on the first anniversary of the
Change in Control Date.

          (d) Notice of Termination. Any termination during the Change in
Control Employment Period by the Company or by the Executive for Good Reason
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination(s) in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of employment under the provision so
indicated.

          (e) Date of Termination. “Date of Termination” means the date
specified in the Notice of Termination, which shall be not less than 30 nor more
than 90 days after such Notice of Termination is given; provided, that if within
30 days after any Notice of Termination is given in connection with a
termination by the Company for Cause or by the Executive for Good Reason, the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning

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the termination, then pending the resolution of any such dispute the Executive
shall continue to be paid the same base salary as and when due and payable, and
shall be provided with the same or substantially comparable fringe benefits that
he was paid and provided immediately prior to the delivery of the Notice of
Termination. If a termination by the Company for Cause is challenged by the
Executive and the termination is ultimately determined to be justified, then all
sums paid by the Company to the Executive pursuant to this Section 11(e), plus
the cost to the Company of providing the Executive such fringe benefits from the
date of such termination to the date of the resolution of such dispute, shall be
promptly repaid by the Executive with interest at the rate charged from time to
time by The Fauquier Bank, to its most substantial customers for unsecured
parties of credit. Should it ultimately be determined that a termination by the
Company for Cause above was not justified, or that a termination by the
Executive was for Good Reason, then the Executive shall be entitled to retain
all sums paid to him pending the resolution of such dispute and he shall be
entitled to receive in addition the payments and other benefits provided for
herein, and the Date of Termination shall be the date on which the dispute is
finally settled, either by mutual written agreement of the parties, or by a
final judgment.

     12. Obligations upon Termination following a Change in Control.

          (a) Death. If the Executive dies during the Change in Control
Employment Period, this Agreement will terminate without any further obligation
on the part of the Company under this Agreement, other than for (i) payment of
the Accrued Obligations and three months of the Executive’s Annual Base Salary
(which shall be paid to the Executive’s beneficiary designated in writing or his
estate, as applicable, in a lump sum cash payment within 30 days of the date of
death); (ii) the timely payment or provision of the Welfare Continuance Benefit
(as defined in Section 12(c)) to the Executive’s spouse and other dependents for
36 months following the date of death; and (iii) any other benefits to which the
Executive may be entitled pursuant to the terms of any plan, program or
arrangement of the Company and its affiliated companies.

          (b) Incapacity. If the Executive’s employment is terminated because of
the Executive’s Incapacity during the Change in Control Employment Period, this
Agreement will terminate without any further obligation on the part of the
Company under this Agreement, other than for (i) payment of the Accrued
Obligations and three months of the Executive’s Annual Base Salary (which shall
be paid to the Executive in a lump sum cash payment within 30 days of the Date
of Termination); (ii) the timely payment or provision of the Welfare Continuance
Benefit in Section 12(c)) for 36 months following the Date of Termination; and
(iii) any other benefits to which the Executive may be entitled pursuant to the
terms of any plan, program or arrangement of the Company and its affiliated
companies.

          (c) Termination without Cause or for Good Reason. The Executive will
be entitled to the following benefits if, during the Change in Control
Employment Period, the Company terminates his employment without Cause or the
Executive terminates his employment with the Company or any affiliated company
for Good Reason.

               (i) Accrued Obligations. The Accrued Obligations are the sum of:
(A) the Executive’s Annual Base Salary through the Date of Termination at the
rate in effect just prior to the time a Notice of Termination is given; (B) the
amount, if any, of any incentive or bonus compensation theretofore earned which
has not yet been paid; (C) the product of the Annual Bonus paid or payable,
including by reason of deferral, for the most recently completed year and a
fraction, the numerator of which is the number of days in the current year
through the Date of Termination and the denominator of which is 365; and (D) any
benefits or awards

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(including both the cash and stock components) which pursuant to the terms of
any plans, policies or programs have been earned or become payable, but which
have not yet been paid to the Executive (but not including amounts that
previously had been deferred at the Executive’s request, which amounts will be
paid in accordance with the Executive’s existing directions). The Accrued
Obligations will be paid to the Executive in a lump sum cash payment within ten
days after the Date of Termination;

               (ii) Salary Continuance Benefit. The Salary Continuance Benefit
is an amount equal to 2.99 times the Executive’s Highest Annual Compensation.
For purposes of this Agreement, “Highest Annual Compensation” means the highest
annual compensation consisting only of base salary and cash bonuses paid to the
Executive by the Company and its affiliated companies for any six months ending
with the Executive’s termination. The Salary Continuance Benefit will be paid to
the Executive in a lump sum cash payment not later than the 45th day following
the Date of Termination, provided that, at the option of the Executive, the
amount required to be paid hereby shall be paid in equal monthly installments
over the six months succeeding the Date of Termination, payable on the first day
of each such month;

               (iii) Continuance of Health and Welfare Benefits. For 36 months
following the Date of Termination (the “Welfare Continuance Benefit Period”),
the Executive, his spouse and his dependents will continue to be covered under
all health and welfare plans and programs (“Welfare Plans”) in which the
Executive, his spouse or his dependents were participating immediately prior to
the Date of Termination (the “Welfare Continuance Benefit”). The Company will
pay all or a portion of the cost of the Welfare Continuance Benefit for the
Executive, his spouse and his dependents under the Welfare Plans on the same
basis as applicable, from time to time, to active employees covered under the
Welfare Plans and the Executive will pay any additional costs. If participation
in any one or more of the Welfare Plans included in the Welfare Continuance
Benefit is not possible under the terms of the Welfare Plan or any provision of
law would create an adverse tax effect for the Executive or the Company due to
such participation, the Company either shall provide substantially identical
benefits directly or through an insurance arrangement or shall pay the Executive
a lump sum equal to 1.4 times the estimated cost of maintaining such coverage.
If the Executive dies while receiving a Welfare Continuation Benefit, the
Executive’s spouse and other dependents will continue to be covered under all
applicable Welfare Plans during the remainder of the applicable Welfare
Continuance Benefit Period. The Executive, his spouse and his dependents will
become eligible for COBRA continuation coverage as of the date the Welfare
Continuance Benefit ceases for health benefits.

               (iv) Continuance of Retirement Benefits. For 36 months following
the Date of Termination, the Executive will continue to be covered and accrue
benefits under all employee retirement benefit plans and programs (“Retirement
Plans”) in which the Executive was participating immediately prior to the Date
of Termination based on the rate of accrual immediately prior to the Date of
Termination (the “Retirement Continuance Benefit”). If participation in any
Retirement Plan included in the Retirement Continuance Benefit is not possible
under the terms of the Retirement Plan or any provision of law would create an
adverse tax effect for the Company due to such participation, the Company will
annually pay in cash to the Executive at the end of each year in the 36-month
period following the Date of Termination the value of the Retirement Continuance
Benefit accrual which is not provided through the Retirement Plans.

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               (v) Acceleration of Vesting of Equity Compensation Awards and
Exercisability thereof. Except as may be otherwise agreed to by the Executive,
all equity compensation awards granted to the Executive under the Stock
Compensation Plan, or any predecessor thereto, at or after the Change in Control
Date, shall become immediately vested and exercisable with respect to all or any
portion of the shares covered thereby and not previously forfeited or lapsed
regardless of whether such awards are otherwise vested and exercisable. In
additional, the Executive will have at least 90 days after Termination of
Employment to exercise all stock options, stock appreciation rights and similar
awards, or such longer period as may be provided for in the separate stock
option agreement, to exercise such awards, provided that such extended exercise
period shall not extend beyond the maximum term of such awards determined
without regard to the Executive’s Termination of Employment.

          (d) Cause; other than for Good Reason. If the Executive’s employment
is terminated for Cause during the Change in Control Employment Period, this
Agreement will terminate without further obligation to the Executive other than
the payment to the Executive of the Annual Base Salary through the Date of
Termination, plus the amount of any compensation previously deferred by the
Executive, and any other benefits to which the Executive may be entitled
pursuant to the terms of any plan, program or arrangement of the Company and its
affiliated companies. If the Executive terminates employment during the Change
in Control Employment Period, excluding a termination either due to death or
Incapacity or for Good Reason (or Good Reason is alleged but ultimately
determined pursuant to Section 11(e) to be not justifiable), this Agreement will
terminate without further obligation to the Executive other than for the Accrued
Obligations (which will be paid in a lump sum in cash within 30 days of the Date
of Termination or later determination that alleged Good Reason is not
justifiable) and any other benefits to which the Executive may be entitled
pursuant to the terms of any plan, program or arrangement of the Company and its
affiliated companies.

          (e) Possible Reduction in Payments and Benefits.

               (i) Excess Parachute Payments. Notwithstanding the foregoing, in
the event that the payments and benefits provided to the Executive, or for the
Executive’s benefit, under this Agreement or under any other plan or agreement
which become payable or are taken into account as “parachute payments” within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), as a result of a Change in Control or the Executive’s termination
of employment relating thereto (the “Total Parachute Payments”) would result in
the Executive’s being entitled to “excess parachute payments” as defined in
Section 280G of the Code, the payments and benefits provided to the Executive,
or for the Executive’s benefit, under this Agreement shall be reduced (but not
below zero) to the extent necessary so that no payment to be made, or benefit to
be provided, to the Executive or for the Executive’s benefit under this
Agreement or any other plan or agreement would result in “excess parachute
payments” as defined in Section 280G of the Code and there would consequently be
no loss of an income tax deduction by the Company or the imposition of an excise
tax on the Executive under Section 4999 of the Code, provided, however that such
reduction shall not apply unless the Executive’s Net After-tax Benefit if such
reduction were made shall exceed the Executive’s Net After-tax Benefit if such
reduction were not made by at least $25,000. In connection with the foregoing:

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                    (A) “Net After-tax Benefit” shall mean the sum of (1) the
Total Parachute Payments which the Executive receives or is then entitled to
receive, less (2) the amount of federal, state and local income and employment
taxes payable by the Executive with respect to the Total Parachute Payments,
less (3) the amount of excise taxes imposed with respect to the Total Parachute
Payments by Section 4999 of the Code.

                    (B) All determinations regarding such reduction shall be
made by the registered public accounting firm under Section 102 of the
Sarbanes-Oxley Act serving as auditors for the Company on the date of a Change
in Control (or any other registered public accounting firm designated by the
Company) and shall be based on the maximum applicable marginal tax rates for
each year in which such payments and benefits shall be paid or provided to the
Executive or for the Executive’s benefit (based upon the rate in effect for such
year at the time of the first payment of the foregoing and, as appropriate as
determined by such tax counsel, the taxable wage base for employment tax
purposes). The determination made as to the reduction of benefits or payments
required hereunder by such registered public accounting firm shall be binding on
the parties, absent a determination by the Internal Revenue Service which is
agreed to by both the Company and the Executive or a final decision by a court
of competent jurisdiction over the tax issue in which case such determination or
decision shall control.

                    (C) The Executive shall have the right to designate within a
reasonable period, which payments or benefits will be reduced; provided,
however, that if no direction is received from the Executive, the Company shall
implement the reductions in its discretion.

               (ii) Banking Payment Limitation. Notwithstanding anything
contained in this Agreement or any other agreement or plan to the contrary, the
payments and benefits provided to, or for the benefit of, the Executive under
this Agreement or under any other plan or agreement shall be reduced (but not
below zero) to the extent necessary so that no payment to be made, or benefit to
be provided, to the Executive or for his benefit under this Agreement or any
other plan or agreement shall be in violation of the golden parachute and
indemnification payment limitations and prohibitions of 12 CFR Section 359.

     13. Company Obligations; Non-competition.

          (a) The Company’s obligation to pay the Executive the compensation and
benefits and to make the arrangements provided in this Part II of this Agreement
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against him or
anyone else. Except as expressly provided in Section 11(e), each and every
payment made hereunder by the Company pursuant to Part II of this Agreement
shall be final and the Company will not seek to recover all or any part of such
payment from the Executive or from whosoever may be entitled thereto, for any
reason whatsoever.

          (c) The Executive will not be required to comply with the
non-competition covenant in Section 7(e) if his employment is terminated during
the Change in Control Employment Period without Cause or he terminates for Good
Reason.

     14. Change in Control Definitions. For purposes of this Agreement, the
following terms have the following meanings.

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     (a) Change in Control. A “Change in Control” shall mean the occurrence of
ether of the following after the Effective Date of this Agreement:

               (i) any person, including a “group” as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (but excluding any group
of which the Executive is a member), becomes the owner or beneficial owner of
securities of the Company or the Bank having 20% or more of the combined voting
power of the then outstanding Company or Bank securities that may be cast for
the election of the Company or Bank directors other than a result of an issuance
of securities initiated by the Company or Bank, as long as the majority of the
Board of Directors approving the purchases is a majority at the time the
purchases are made, or

               (ii) as the direct or indirect result of, or in connection with,
a tender or exchange offer, a merger or other business combination, a sale of
assets, contested election, or any combination of these events, the persons who
were directors of the Company or Bank before such events cease to constitute a
majority of the Company’s or Bank’s Board, or any successor’s board, within two
years of the last of such transactions

          (b) Change in Control Date. The “Change in Control Date” is the date
on which an event constituting a Change in Control occurs. If a Change in
Control occurs on account of a series of transactions, the Control Change Date
is the date of the last of such transactions.

Part III: Miscellaneous

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

     16. Severability. If any provision of this Agreement, or part thereof, is
determined to be invalid or 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 their terms. No covenant shall
be dependent upon any other covenant or provision herein, each of which stands
independently.

     17. Modification. The parties expressly agree that should a court find any
provision of this Agreement, or part thereof, to be unenforceable or
unreasonable, the court may modify the provision, or part thereof, in a manner
which renders that provision reasonable, enforceable, and in conformity with the
public policy of Virginia.

     18. Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia.

     19. Notices. All written notices required by this Agreement shall be deemed
given when delivered personally or sent by registered or certified mail, return
receipt requested, to the parties at their addresses set forth below:

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  If to the Executive:   Randy K. Ferrell

      7138 Norwich Ct.

      Warrenton, VA 20187
 
       

  If to the Bank:   The Fauquier Bank

      10 Courthouse Square

      P. 0. Drawer 561
Warrenton, Virginia 22186
 
       

  If to the Company:   Fauquier Bankshares, Inc.

      10 Courthouse Square

      P. 0. Drawer 561
Warrenton, Virginia 22186

Each party may, from time to time, designate a different address to which
notices should be sent by providing the same in writing to the other parties .

     20. Amendment. 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.

     21. Binding Effect; No Mitigation; Notice and Demand Not Required.

     (a) This Agreement shall be binding upon the Executive and on the Company,
its successors and assigns effective on the date first above written subject to
the approval by the Compensation Committee or the Board of Directors of the
Company. The Company will require any successor to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.

     (b) The Executive shall not be required to mitigate the amount of any
payment or benefit the Company becomes obligated to make or provide to the
Executive in connection with this Agreement, by seeking other employment or
otherwise.

     (c) All amounts payable by the Company under this Agreement shall be paid
without notice or demand except as expressly provided herein .

     22. No Construction against Any Party. This Agreement is the product of
informed negotiations between the Executive and the Company. 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. The Executive and the Company agree that
neither party was in a superior bargaining position regarding the substantive
terms of this Agreement.

     23. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the matters addressed herein and it supersedes all
other prior agreements and understandings, both written and oral, express or
implied, with respect to the subject matter of this Agreement.

     24. Arbitration. Any dispute, controversy or claim arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
arbitrators, conducted before a panel of

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three in Richmond, Virginia in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction. Unless otherwise provided
in the rules of the American Arbitration Association, the arbitrators shall, in
their award, allocate between the parties the costs of arbitration, which shall
include reasonable attorneys’ fees and expenses of the parties, as well as the
arbitrator’s fees and expenses, in such proportions as the arbitrators deem
just.

     25. Litigation. Notwithstanding the requirements of Section 24 hereof, if
litigation shall be brought to challenge, enforce or interpret any provision
contained in this Agreement, and such litigation does not end with judgment in
favor of the Company, the Company hereby agrees to indemnify the Executive for
his reasonable attorney’s fees and disbursements incurred in such litigation,
and hereby agrees to pay post-judgment interest on any money judgment obtained
by the Executive calculated at the rate charged from time to time by The
Fauquier Bank, to its most substantial customers for unsecured lines of credit
from the date that payment(s) to him should have been made under the judgment to
date of payment.

     25. Nonqualified Deferred Compensation Plan Omnibus Provision. The parties
to this Agreement recognize and acknowledge that compensation, benefits or other
remuneration provided or available to the Executive pursuant to or in connection
with this Agreement may be considered to be provided under a nonqualified
deferred compensation plan subject to Section 409A of the Code. The parties
hereby agree that any such compensation, benefit or other remuneration that is
subject to the provisions of Section 409A of the Code shall be paid in a manner,
and at such time and in such form, as complies with the applicable requirements
of Section 409A of the Code to avoid a plan failure described in
Section 409A(a)(1) of the Code, including without limitation, deferring payment
until the occurrence of a specified payment event described in
Section 409A(a)(2) of the Code, that, notwithstanding any other provision
thereof or document pertaining to any such compensation, benefit or other
remuneration subject to the provisions of Section 409A of the Code, each
provision of any plan, program or arrangement (including without limitation this
Agreement) relating to the provision of such compensation, benefit or other
remuneration to or with respect to the Executive, shall be so construed and
interpreted, and that the Executive hereby consents to the amendment of any such
plan, program or arrangement as may be determined by the Company to be necessary
or appropriate to evidence or further evidence required compliance with
Section 409A of the Code.

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

                  Fauquier Bankshares, Inc.              

  By   /s/ C. Hunton Tiffany    

           

  Its   Chairman    

           
 
                The Fauquier Bank    
 
           

  By   /s/ C. Hunton Tiffany    

           

  Its   Chairman    

           
 
                /s/ Randy K. Ferrell                   Randy K. Ferrell    

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