Exhibit 10.6.1
December 30, 2008
Mr. Frank H. Grace, III
14200 Park Meadow Drive
Suite 200 South
Chantilly, VA 20151
Re: Amendment to Amended and Restated Employment Agreement dated March 1, 2007
(the “Employment Agreement”) with Alliance Bank
Dear Frank:
     By now, you may be aware that in 2004 in reaction to the Enron debacle,
Congress adopted sweeping new rules governing all forms of deferred compensation
provided by employers to their employees. These new rules — Section 409A of the
Internal Revenue Code — have been evolving for several years and are complex,
and the deadline for compliance is December 31, 2008. They have significant
implications for many types of deferred compensation and benefit plans and
programs, as well as employment agreements.
     We believe that some of the payments provided under your Employment
Agreement are subject to Section 409A. As such, we recommend that your
Employment Agreement be amended to avoid potentially adverse tax consequences to
you. (If Section 409A is not complied with, you may be subject to accelerated
income tax on a portion of your unpaid benefits under the Agreement plus a 20%
additional penalty and interest charge.) The proposed amendments are set forth
on Schedule A. We ask that you please countersign this letter on or before
December 31, 2008 (and return a signed copy to us for our files) to reflect our
mutual agreement that your Employment Agreement shall be, and is by virtue of
this letter, amended as set forth in Schedule A.
     If you do not execute and return the amendment to us, we will assume that
you have determined that the proposed changes are not necessary to comply with
Section 409A. (None of Alliance Bank or its respective affiliates or
representatives is liable for any adverse tax consequences resulting from any
failure to comply with Section 409A.)
     Please feel free to call me if you have any questions.

            Sincerely,

Alliance Bank Corporation
      By:   /s/ Thomas A. Young, Jr.       Its:   President and Chief Executive
Officer             

Seen and Agreed:
I have received the attached letter and agree to the changes to my Employment
Agreement that are described therein.

         
Date: December 30, 2008     
  /s/ Frank H. Grace, III    
 
       
 
  Frank H. Grace, III    

 

--------------------------------------------------------------------------------

 

SCHEDULE A
409A Amendments
(All capitalized terms have the meaning set forth in the Employment Agreement
unless otherwise defined herein.)

1.   Section 4(a) shall be amended by adding the following to the end:       The
annual base salary shall be paid in accordance with the Bank’s normal payroll
practices, but not less frequently than monthly.   2.   Section 6 shall be
amended by adding the following to the end:       Any bonus due to Employee
shall be paid to Employee no later than 2-1/2 months after the end of the Bank’s
taxable year or the calendar year, whichever is later, in which such bonus is no
longer subject to a substantial risk of forfeiture (as determined in accordance
with Internal Revenue Code (the “Code”) Section 409A and applicable guidance
issued thereunder (“Code Section 409A”)).   3.   Section 9(c) shall be amended
by adding the following to the end:       Such amounts shall be paid within
60 days of Employee’s death.   4.   Section 9(i)(1) shall be amended by
replacing it in its entirety with the following:       (i)(1) If Employee’s
employment is terminated without Cause within one year after a Change of Control
shall have occurred or if he resigns for Good Reason within one year after a
Change of Control shall have occurred, then on or before Employee’s last day of
employment with the Bank, the Bank shall pay to Employee as compensation for
services rendered to the Bank and its Affiliates an amount (subject to any
applicable payroll or other taxes required to be withheld) equal to the excess,
if any, of 150% of Employee’s “annualized includable compensation for the base
period”, as defined in Section 280G of the Code, over the total amount payable
to Employee under Section 9(d); provided that such amount shall be paid by the
Bank in equal installments over the twenty-four months succeeding the date of
termination. Payments of the above installments shall be made at the times
Employee’s base salary payments would have been made in accordance with
Section 4(a).   5.   A new Section 22 shall be added to the end of the
Employment Agreement as follows:       Section 22. Code Section 409A Compliance.

     (a) The intent of the parties is that payments and benefits under this
Agreement comply with 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) Neither Employee nor the Bank shall take any action to accelerate or
delay the payment of any monies and/or provision of any benefits in any matter
which would not be in compliance with Code Section 409A.
     (c) 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 that are subject to Code Section 409A and
that are paid 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. If Employee is deemed on the date
of separation from service with the Bank 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 the Bank from time to time, or if none,
the default methodology, then with regard to any payment or benefit that is
required to be delayed in compliance with Code Section 409A(a)(2)(B), such
payment or benefit shall not be made or provided prior to the earlier of (i) the
expiration of the six-month period measured from the date of Employee’s
separation from service or (ii) the date of Employee’s death. In the case of
benefits, however, Employee may pay the cost of benefit coverage, and thereby
obtain benefits, during such six month delay period and then be reimbursed by
the Bank thereafter when delayed payments are made pursuant to the next
sentence. On the first day of the seventh month following the date of Employee’s
separation from service or, if earlier, on the date of Employee’s death, all
payments delayed pursuant to this Section 22 (whether they would have otherwise
been payable in a single sum or in installments in the absence of such delay)
shall be paid or reimbursed to Employee in a lump sum, and any remaining
payments and benefits due under this Agreement shall be paid or provided in
accordance with the normal payment dates specified for them herein.
     (d) With regard to any provision herein that provides for reimbursement of
expenses or in-kind benefits that are 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 the Bank’s reimbursement policies but in no event later than the calendar
year following the calendar year in which the related expense is incurred.

 

--------------------------------------------------------------------------------

 

     (e) 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.
     (f) 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 the Bank.
     (g) Notwithstanding any of the provisions of this Agreement, the Bank shall
not be liable to Employee 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 409.