Exhibit 10.26-1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT, (“Agreement”), made this 16th day of, July, 2003, by
and between THE BANK OF HAMPTON ROADS, INC., a banking association organized
under the laws of the Commonwealth of Virginia (the “Bank” or “Employer”), and
DONALD W. FULTON, JR. (the “Executive”).

 

W I T N E S S E T H :

 

WHEREAS, the Executive currently is rendering valuable services to the Employer
and it is the desire of the Employer to have the benefit of the Executive’s
continued loyalty, service and counsel; and

 

WHEREAS, the Executive wishes to continue in the employ of the Employer;

 

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

 

1. EMPLOYMENT: The Employer agrees to continue to employ the Executive to
perform services for the Employer and the Executive agrees to continue to serve
the Employer upon the terms and conditions herein provided. The Executive agrees
to perform such managerial duties and responsibilities as shall be assigned to
him by the Board of Directors of the Employer, which duties and responsibilities
shall be substantially those functions of the Executive on the date of this
Agreement and the commencement date hereof. The Executive shall devote his time
and attention on a full-time basis to the discharge of the duties undertaken by
him hereunder.

 

2. TERMS AND COMPENSATION:

 

(a) Term of Employment. The term of employment hereunder shall commence as of
the date of this agreement and shall continue to the first to occur of (i)
except as otherwise provided in Section 3 hereof, the end of the sixtieth
consecutive month, following the commencement date aforesaid (ii) the
Executive’s death, or (iii) except as provided in Paragraph (d) of this Section
2, the Executive’s disability. In the event the Executive is not informed, in
writing, prior to the last day of the forty-eighth consecutive month following
the commencement date of employment as aforesaid that this Agreement will not be
renewed, this Agreement will automatically renew itself for an additional period
of sixty months from the anniversary date established by the commencement of
employment as aforesaid.

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(b) Compensation. During the term of employment hereunder, the Executive shall
receive for his services a base salary and incentive or bonus compensation in
amounts determined by the Board of Directors or an appropriate committee of the
Employer in accordance with the salary administration program of the Employer as
the same may from time to time be in effect, but in no event shall such base
salary be less than the Executive’s base salary at the date hereof.

 

(c) Benefits. The Executive shall be eligible for participation in any
additional plans, programs or forms of compensation or benefits that the
Employer’s Board of Directors might hereinafter provide to the class of
employees that includes the Executive.

 

(d) Disability. In the event of the physical or mental disability of the
Executive by reason of which the Executive is unable to perform the duties of
his employment hereunder, the Employer shall continue to pay or provide to the
Executive the compensation and benefits provided under Paragraphs (b) and (c) of
this Section 2 for the first six months of such disability. If, however, the
disability continues beyond such six-month period, the Employer may, at its
election, terminate the Executive’s employment under this Agreement, in which
case the Executive shall receive any disability benefits payable under the
Employer’s plans in effect at that time.

 

(e) Death. In the event that the Executive’s death should occur during the term
of this Agreement, this Agreement shall terminate and the Executive or his
estate or beneficiaries, as the case may be, shall be entitled only to any and
all retirement or death benefits payable under the Employer’s plans in effect at
that time and no further compensation will be paid under this Agreement.

 

3. TERMINATION:

 

(a) Termination by the Employer. Nothing herein contained shall prevent the
Employer from terminating the services of the Executive at any time prior to the
expiration of this Agreement.

 

(1) If such termination is effective prior to the time “a change in control” (as
defined in part (b) of this Paragraph (3) occurs with respect to the Bank, and
prior to the time the Employer enters into negotiations which result in such
change of control, then unless the termination is “for good cause “ as
hereinafter defined, the Employer shall pay the Executive a termination
allowance in 12 equal monthly payments commencing on the last day of the month
in which the date of actual termination occurs, the total amount of which will
equal the base salary plus director’s fees, if any, but not including any
bonuses paid to the Executive by the Bank in the 12 months next preceding the
Notice of Termination. Except as provided in this Paragraph 3(a)(1), upon the
termination herein described, the compensation and benefits of the Executive
will cease as of the Date of Termination as defined in Paragraph 3(d).

 

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(2) Termination of employment “for good cause” means a dismissal of the
Executive because of (i) the material failure of the Executive, after written
notice, for reasons other than disability, to render services to the Employer as
provided herein, (ii) the Executive’s gross or willful neglect of duty, or (iii)
illegal or intentional acts by the Executive demonstrating bad faith toward the
Employer. If the Employer shall terminate the Executive’s employment for good
cause, the Executive shall be entitled only to receive his basic salary in
respect of services performed through the Date of Termination.

 

(b) Termination by the Executive. The Executive shall be entitled to terminate
his employment for good reason, in which event the Employer shall be obligated
to pay the Executive and furnish him the benefits provided in Section 4 hereof.
By way of illustration and not limitation, the following circumstances shall
constitute “good reason” and shall be deemed to be a breach of this Agreement by
the Employer:

 

(i) the Executive is assigned any duties or responsibilities that are
inconsistent with his positions, duties, responsibilities and status with the
Employer in effect at the date of this Agreement; or

 

(ii) a change in control occurs with respect to the Bank.

 

For purposes of this Agreement, the term “a change in control” shall mean (a)
any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934) who is, or who has entered into a definite agreement with
the Bank to become, the beneficial owner, directly or indirectly, of securities
of the Bank representing more than 50% of the combined voting power of the then
outstanding securities of the Bank; or (b) a change in the composition of a
majority of the Board of Directors of the Bank within twelve months after any
person (as defined above) is or becomes the beneficial owner, directly or
indirectly, of securities of the Bank representing 25% of the combined voting
power of the then outstanding securities of the Bank. The right herein conferred
upon the Executive to terminate his employment for good reason may be exercised
by the Executive at any time during the terms of this Agreement at his sole
discretion, and any failure by the Executive to exercise this right after he has
“good reason” to do so shall not be deemed a waiver of the right.

 

In the event the Executive terminates his employment without “good reason” then
he shall be entitled to no termination allowance and no severance allowance and
no further compensation after the “Date of Termination” as defined in part (d)
of this Paragraph 3.

 

(c) Notice of Termination. Any termination of the Executive’s employment by the
Employer or by

 

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the Executive shall be communicated by a 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 provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination.

 

(d) Date of Termination. “Date of Termination” shall mean (i) if the Agreement
is terminated by the Executive, the date on which the Notice of Termination is
delivered, (ii) if the Agreement is terminated by the Employer because of the
Executive’s disability, thirty days after the Notice of Termination is given, or
(iii) if the Executive’s employment is terminated by the Employer for any other
reason, the date on which a Notice of Termination is given, unless within thirty
days thereafter the Executive notifies the Employer that a dispute exists
concerning the termination, in which case the Date of Termination shall be the
date on which the dispute is finally determined, whether by mutual written
agreement of the parties or by a final judgement, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected).

 

4. Compensation Upon Termination. Except as provided in Paragraph 3(a)(1) above,
if, without good cause, the Employer terminates the services of the Executive
prior to the expiration of this Agreement or if the Executive terminates his
employment for good reason, then:

 

(a) Accrued But Unpaid Compensation. The Employer shall pay the Executive’s full
base salary through the Date of Actual Termination at the rate then in effect
and the amount, if any, of awards theretofore made which have not yet been paid.

 

(b) Severance Allowance. The Employer shall pay the Executive a severance
allowance in 60 equal monthly payments commencing on the last day of the month
in which the date of actual termination occurs, the total amount of which will
equal and will not exceed the present value of three times the base amount minus
$1.00 plus the present value of any other payments in the nature of compensation
within the meaning of Section 280G(b)(2)(A)(ii) of the Internal Revenue Code of
1954, as amended (Code).

 

For purposes of this Paragraph 4(b), the following definitions shall apply:

 

(i) Base Amount - The term “base amount” means the Executive’s average
annualized includible compensation for the base period.

 

(ii) Annualized Includible Compensation for the Base Period - The term
“annualized includible compensation for the base period” means the average
annual compensation paid by the Bank, which was includible in the gross income
of the executive for federal income tax purposes for taxable years in the base
period.

 

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(iii) Base Period - The term “base period” means the period consisting of the
most recent five taxable years ending before the date on which termination
occurs, except for termination as a result of the operation of Paragraph
3(b)(ii) above in which case the date of termination shall be deemed to be the
date a change in control occurs with respect to the Bank.

 

(iv) Present Value - Present value shall be determined in accordance with
Section 1274(b)(2) of the Code.

 

(c) Employee Benefits. The Employer shall maintain in full force and effect, for
the Executive’s continued benefit until the earlier of the third anniversary of
the Date of Termination or the date the Executive becomes a participant in
similar plans, programs or arrangements provided by a subsequent employer, all
life, accident, medical and dental insurance benefit plans and programs or
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination, provided that the Executive’s continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that the Executive’s participation in any such plan
or program is barred, the Employer shall arrange to provide the Executive with
benefits substantially similar to those which the Executive is entitled to
receive under such plans and programs. At the end of the period of coverage, the
Executive shall have the option to have assigned to him at no cost and with no
apportionment of prepaid premiums, any assignable insurance policy owned by the
Employer, or any one of them, and relating specifically to the Executive.

 

(d) No Duty to Mitigate. The Executive shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 4
be reduced by any compensation earned by the Executive as the result of
employment by another employer after the Date of Termination, or otherwise.

 

5. MISCELLANEOUS:

 

(a) Waiver. A waiver by any party of any of the terms and conditions of this
Agreement in any instance shall not be deemed or construed to be a waiver of
such terms and conditions for the future, or of any subsequent breach thereof.

 

(b) Severability. If any provision of this Agreement, as applied to any
circumstances, shall be adjudged by a court to be void and unenforceable, the
same shall in no way affect any other provision of this Agreement or the
applicability of such provision to any other circumstances.

 

(c) Amendment. This Agreement may not be varied, altered, modified, changed, or
in any way amended except by an instrument in writing, executed by the parties
hereto or their legal representatives.

 

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(d) Nonassignability. Neither the Executive nor his estate shall have any right
to commute, sell, assign, transfer or otherwise convey the right to receive any
payments hereunder, which payments and the right thereto are expressly declared
to be nonassignable and nontransferable.

 

(e) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Executive (and his personal representative), the Bank and any
successor organization or organizations which shall succeed to substantially all
of the business and property of the Bank, whether by means of merger,
consolidation, acquisition of all or substantially all of the assets of the Bank
or otherwise, including by operation of law.

 

(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the Commonwealth of Virginia, whether statutory or
decisional, applicable to agreements made and entirely to be performed within
such state and such provisions of federal law as may be applicable.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

 

The Bank of Hampton Roads, Inc.

By:

 

/s/ Emil A. Viola

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Emil A. Viola, Chairman of the Board

   

/s/ Donald W. Fulton, Jr.

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Donald W. Fulton, Jr., Executive

 

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