Document:

cemp-ex1040_304.htm

 

Exhibit 10.40

RETIREMENT AND CONSULTING AGREEMENT

This RETIREMENT AND CONSULTING AGREEMENT (this “Agreement”) is made and dated as of December 9, 2016, by and between Cempra, Inc., a Delaware corporation with its principal executive offices at 6340 Quadrangle Drive, Suite 100, Chapel Hill, NC 27517 (the “Company”), and Prabhavathi Fernandes, Ph.D, a citizen and resident of Orange County, North Carolina residing at 203 Old Franklin Grove Drive, Chapel Hill, NC 27514 (the “Executive”).

WHEREAS, the Executive is employed as President and Chief Executive Officer of the Company pursuant to an Executive Employment Agreement dated as of August 9, 2013, as amended on October 13, 2015 (the “Employment Agreement”); and

WHEREAS, the Executive and the Company’s Board of Directors (the “Board”) have mutually determined that it is an appropriate time for the Executive to retire, for the Executive’s employment to terminate and for the Company to transition to new leadership and therefore wish to set forth the terms of such retirement, termination and transition; and

WHEREAS, the Executive and the Board wish to provide for the Executive’s ongoing assistance to the Company as a consultant during the Consulting Period (as defined below).

NOW, THEREFORE, in order to provide for an orderly transition and in consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the parties hereby agree as follows:

	
1.
	
Retirement, Resignation; Consulting Period; Consulting Fees. 

(a)Effective as of December 9, 2016 (the “Transition Date”), the Executive retired from employment with the Company and all of its affiliates and ceased to serve as President and Chief Executive Officer of the Company and as a member of the Board.  In furtherance thereof, the Executive hereby acknowledges that she has resigned from (i) her position as President and Chief Executive Officer of the Company, (ii) her employment with the Company and its affiliates, (iii) the Board and (iv) any other position that she holds with the Company and any affiliate of the Company, in each case effective as of the Transition Date.  The Executive and the Company each hereby waive any advance notice period which otherwise may have been required in connection with the Executive’s termination of employment.

(b)For the period commencing on the Transition Date and ending on the first anniversary of the Transition Date, subject to monthly extensions by the mutual agreement of the parties (the “Consulting Period”), the Executive shall provide consulting services to the Company for a maximum of twenty (20) hours per week as a non-employee consultant, which services shall consist of assisting the Company with the transition of the Executive’s duties to the Company’s new leadership team, assisting the Company’s executive team, its Board and other senior Company personnel with respect to specific projects and providing assistance with respect to any investigative, administrative or regulatory proceeding (including pending litigation matters involving 

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the Company) as requested from time to time.  The Executive’s consulting services are expected to include travel to and participation in the ECCMID conference in Vienna Austria on April, 2017 (subject to the Company's determination that such participation is not inconsistent with the Company's business objectives) and expenses for such travel and participation shall be reimbursed or paid by the Company in accordance with past practice.

(c)During the Consulting Period, the Company shall pay the Executive a consulting fee of $35,000 per month (such fee, the “Consulting Fee”), payable monthly in arrears.  In addition, each option to acquire shares of the Company previously issued to the Executive shall continue to vest and remain outstanding in accordance with the terms of such option during the Consulting Period as if the Executive were still employed by the Company.  The Company shall reimburse the Executive for all pre-approved reasonable business expenses incurred by the Executive during the Consulting Period in connection with providing the consulting services hereunder. The Executive shall bill the Company monthly for all such expenses (including providing reasonably required documentation of such expenses), which invoices the Company shall pay in accordance with the Company’s expense reimbursement policy.

(d)It is understood by the Parties hereto that the Executive shall at all times during the Consulting Period be an independent contractor with respect to the Company and there shall not be implied any relationship of employer-employee, partnership, joint venture, principal and agent or the like by the agreements contained herein.  The Executive shall not be entitled to participate in any employee benefit plans or other benefits or conditions of employment available to the employees of the Company or its affiliates, except as may be elected by the Executive pursuant to COBRA. 

	
2.
	
Eligibility for Certain Payments and Benefits. The Executive is currently party to the Employment Agreement.  Provided that (i) the Release (as described in Section 3 below) becomes effective, the Parties agree that the termination of the Executive’s employment described in Section 1(a) hereof will be treated as a termination of employment governed by Section 10(d) of the Employment Agreement.   Accordingly, if the Release becomes effective, the Executive will be entitled to the severance payments and benefits described in Section 10(d) of the Employment Agreement (as modified by the provisions of this Agreement) and the other benefits described in Section 4 (the “Severance Benefits”), which shall be paid or provided as is described in Section 4.  

	
3.
	
Release.  Pursuant to the Employment Agreement, in order to receive the Severance Benefits, the Executive is required to execute, following the Transition Date, a release in favor of the Company in the form attached hereto as Exhibit A (the “Release”) within sixty (60) days following the Transition Date and not revoke such a release within seven (7) days from execution.  In the event that the Executive does not timely execute the Release or timely revokes the Release, the Executive will not be entitled to the Severance Benefits and the parties’ agreement with respect to the consulting services and the Consulting Fee will be deemed to be null and void, ab initio.

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4.
	
Accrued Payments and Benefits and Severance Payments and Benefits.  

(a)Accrued Payments and Benefits; Payment in Lieu of Notice.  The Company shall pay and provide the Executive with her accrued base salary (in accordance with the Company’s normal payroll schedule) and benefits through the Transition Date, with such benefits (including any accrued and unused vacation) to be provided in accordance with the terms of the applicable Company plan or arrangement.  The Company will also pay to the Executive, in consideration of the Executive’s waiver of the notice period provided under the Employment Agreement, the amount of $45,000, which amount will be payable as soon as practicable following the Transition Date.   

(b)2016 Annual Bonus.  In lieu of the pro-rated annual bonus due to the Executive pursuant to Section 10(d) of the Employment Agreement upon a termination of employment, the Company will pay to the Executive an annual bonus in respect of 2016 in the amount of $280,260, which amount will be payable as soon as practicable following the Transition Date. 

(c)Continued Payments.  Subject to the effectiveness of the Release, the Company shall continue to pay the Executive’s Base Salary during the eighteen (18) month period following the Transition Date, at the current annual rate of $540,000 payable in accordance with the Company’s payroll schedule (with such payments to commence on the first Company payroll date which occurs on or following the 61st day following the Transition Date (the “Payment Commencement Date”) and with any payments which would otherwise have been payable during such 61 day period being paid on the Payment Commencement Date.  In addition (also subject to the effectiveness of the Release), the Company shall pay to the Executive an amount equal to one and one half times her Target Bonus (as defined in the Employment Agreement) based upon the average percentage of achievement of target objectives for the prior three (3) years, which amount shall be payable in eighteen (18) equal monthly payments (commencing on the Payment Commencement Date and with any payments which would otherwise have been payable during such 61 day period being paid on the Payment Commencement Date).  For the avoidance of doubt, the aggregate gross amount payable pursuant to the preceding sentence is agreed to be $420,390.    In addition, the Company will continue to reimburse the Executive for her international calling plan charges in accordance with past practice, through January, 2017.

(d)COBRA.  Subject to the effectiveness of the Release, the Company shall pay to the Executive an amount equal to the Executive’s applicable COBRA premiums for the eighteen (18) month period immediately following the Termination Date.

(e)Treatment of Equity Awards.  Subject to the effectiveness of the Release, upon the conclusion of the Consulting Period, all of the Executive’s then outstanding and unvested stock options with respect to Company shares shall become fully vested. In addition, if the Consulting Period ends prior to the second anniversary of the Transition Date,  such stock option awards shall remain outstanding and exercisable following the conclusion of the Consulting Period for the period ending on the second anniversary of 

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the Transition Date, notwithstanding the termination of employment and consulting services.

(f)Other Matters. The Executive hereby acknowledges that, in connection with her termination of employment with the Company or any event subsequent to such termination, the Executive shall not be entitled to receive from the Company or an affiliate any severance pay or benefits except as described in Section 4(b)-(e) and that the payments described in Section 4(b)-(e) are in full satisfaction of the Company’s severance obligations to the Executive.  All payments and benefits referenced hereunder, other than the Consulting Fee, shall be subject to required tax withholding.

(g)Change in Control.  Notwithstanding anything in this Agreement to the contrary (but subject to the effectiveness of the Release), in the event that following the Transition Date there occurs a “Change in Control” (as such term is defined in the Cempra, Inc. 2011 Equity Incentive Plan), then (i) upon such Change in Control all of the Executive’s then outstanding and unvested stock options from the Company shall become immediately vested and exercisable and (ii) all unpaid amounts under Section 1(c) shall become immediately due and payable, within ten business days following such Change in Control (provided that the timing of such payments shall not be changed to the extent that such change would result in application of an excise tax pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (along with the Treasury regulations with respect thereto, “Section 409A”), upon the Executive). 

	
5.
	
Mutual Non-Disparagement; Communication.  In consideration of the Company’s execution of this Agreement, the Executive furthers agree that from and after the date hereof, she will not disparage or subvert, or make any statement that could reasonably be viewed as reflecting negatively on the Company, its affiliated corporations or entities, or any of their officers, directors, employees, agents or representatives, and including, but not limited to, any matters relating to the operation or management of the Company, the Executive’s employment and the termination of such employment; provided that the foregoing shall not prohibit truthful testimony that is compelled in any legal proceeding, it being agreed that the Executive will give the Company reasonable prior notice of any compelled testimony.  The Company agrees that it will instruct its officers and directors, from and after the date hereof, not to disparage the Executive, including but not limited to, any matters relating to the operation or management of the Company, the Executive’s employment and termination of the Executive’s employment; provided that the foregoing shall not prohibit truthful testimony that is required in any legal proceeding, it being agreed that the Company will use its reasonable best efforts to give the Executive reasonable prior notice of any compelled testimony.  Without limiting the foregoing, the Executive agrees that, prior to making any public statement to a third party (or any statement which could reasonably be expected to become public) regarding the Company, its affiliated corporations or entities, or any of their officers, directors, employees, agents or representatives, and including, but not limited to, any matters relating to the operation or management of the Company, the Executive’s employment and the termination of such employment, the Executive agrees (1) to notify the Company’s President (the “Company Contact”) of such impending statement and (2) to follow the reasonable direction of the Company Contact in making any such statement.

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6.
	
Permitted Disclosures.  Pursuant to 18 U.S.C. § 1833(b), the Executive understands that she will not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret of the Company that (i) is made (A) in confidence to a Federal, State, or local government official, either directly or indirectly, or to her attorney and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding.  The Executive understands that if she files a lawsuit for retaliation by the Company for reporting a suspected violation of law, she may disclose the trade secret to her attorney and use the trade secret information in the court proceeding if she (y) files any document containing the trade secret under seal, and (z) does not disclose the trade secret, except pursuant to court order.  Nothing in this Agreement, or any other agreement that the Executive has with the Company, is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by such section.  Further, nothing in this Agreement or any other agreement that the Executive has with the Company shall prohibit or restrict her from making any voluntary disclosure of information or documents concerning possible securities law violations to any governmental agency or legislative body, or any self-regulatory organization, in each case, without advance notice to the Company.  

	
7.
	
Entire Agreement.  

(a)This Agreement supersedes the Employment Agreement and the Executive’s Change in Control Severance Agreement with the Company, dated August 9, 2013, except that the provisions of Sections 7(as modified below), 10(g), 10(h), 10(i) of the Employment Agreement shall remain in effect in accordance with their terms and the Executive hereby affirms the effectiveness of such provisions. The Executive’s Confidentiality and Assignment and Inventions Agreement with the Company shall remain in effect in accordance with its terms, as shall the Executive’s option agreements, as modified by Section 4(e) hereof.  Except as specified above, this Agreement represents the entire agreement of the parties regarding the subject matter hereof.  The Executive represents that, in executing this Agreement, the Executive has not relied upon any representation or statement made by the Company or any affiliate of the Company, other than those set forth herein, with regard to the subject matter, basis or effect of this Agreement or otherwise.

(b)Notwithstanding the foregoing, Section 7 (a)(i) of the Employment Agreement is hereby modified to read as follows:

Within the Restricted Territory (as defined in subsection (b) below), engage in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise) that develops, manufactures, markets, licenses or sells any pharmaceutical antibiotic products that either (1) involve macrolides or fusidic acid or (2) compete with the products being sold or developed by the Company (provided that in order to be covered by clause (2), such products must have been sold or developed by the Company either during the Executive’s employment with the Company or during the Consulting Period) (collectively, the "Competitive Products") in any management or executive role in 

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which Executive would perform duties that are the same or substantially similar to those duties actually performed by Executive for the Company prior to the termination of Executive's employment or in any position where Executive or such business or enterprise would benefit from Executive's use or disclosure of the Company's Proprietary Information as defined in the Confidentiality and Assignment of Inventions Agreement;

	
8.
	
Section 409A.  The Company and the Executive each hereby affirm that it is their mutual view that the provision of payments and benefits described or referenced herein are exempt from or in compliance with the requirements of Section 409A and that each party’s tax reporting shall be completed in a manner consistent with such view.  The Company and the Executive each agree that upon the Transition Date, the Executive experienced a “separation from service” for purposes of Section 409A.

	
9.
	
Return of Company Property and Information.   Within five calendar (5) days following the Transition Date or at such later date as may be agreed to by the Company, Executive shall return to the Company all materials containing Company Information (as defined below), and any copies, duplicates, reproductions or excerpts thereof, including, but not limited to, documents and memoranda, and all other property belonging to the Company which in each case is in the Executive’s possession or control.  The term Company Information as used in this Agreement means (a) confidential information including, without limitation, information received from third parties under confidential conditions; and (b) other technical, business or financial information which the Company regards as confidential and the use or disclosure of which might reasonably be considered to be contrary to the interests of the Company.   The Company will provide the Executive with such documents and other Company information as the Company deems reasonably necessary to permit the Executive to perform the consulting services described in Section 1(b).  The Executive shall be permitted to retain her existing computer, printer and docking station.

	
10.
	
Cooperation.  The Executive agrees that, from and after the Transition Date, upon reasonable notice and without the necessity of the Company’s obtaining a subpoena or court order, the Executive shall provide reasonable cooperation in connection with any suit, action or proceeding (or any appeal from any suit, action or proceeding), and any investigation and/or defense of any claims asserted against the Company or any of its affiliates, that relates to events as to which the Executive may have relevant information (including but not limited to furnishing relevant information and materials to the Company or its designee and/or providing testimony at depositions and at trial), provided that the Company shall reimburse the Executive for expenses reasonably incurred in connection with any such cooperation following the Consulting Period, and further provided that any such cooperation shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with the Executive’s business or personal affairs.  To the extent that the Executive provides services to the Company under this Section 10 following the Consulting Period, the Company will pay to the Executive a per diem for such services of $350 per hour.

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11.
	
Time and Disclosures.  Executive acknowledges that she has been given at least twenty-one (21) days to consider whether to execute this Agreement and the Release.

	
12.
	
Executive Acknowledgement.  The Executive acknowledges that:

(a)The Executive has carefully read all provisions of this Agreement and the Release and fully understands what those provisions mean.

(b)The Executive has been advised by the Company of her right to review this Agreement with her legal counsel and other advisors prior to executing it.

(c)The Executive is entering into this Agreement of the Executive’s own free will and choice, without being pressured, forced or coerced into signing in exchange for good and valuable consideration on the part of the Company.  The Executive is in good health and of sound mind, and there is no reason why the Executive would be unable to make a knowing and voluntary decision to agree to this Agreement.

(d)The Executive understands and agrees that if any provision of this Agreement shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not affect, impair, or invalidate the remainder of the Agreement, but shall be confined in its operation to the provision of this Agreement directly involved in the controversy in which such judgment shall have been rendered and the remainder of the Agreement shall remain valid and enforceable in accordance with its terms.

	
13.
	
No Admission of Wrongdoing.  Nothing herein is to be deemed to constitute an admission of wrongdoing by the Executive, the Company or any of its affiliates.

	
14.
	
Miscellaneous.

(a)This Agreement is governed by and will be construed and interpreted in accordance with the laws of the State of North Carolina, without reference to its conflict of laws principles.

(b)Any dispute arising out of, or relating to, this Agreement or the breach thereof, or regarding the interpretation thereof (except for any disputes arising out of or related to the Executive’s Confidentiality and Assignment of Inventions Agreement, the provisions of Section 7 of the Employment Agreement or the provisions of Section 5 hereof), shall be finally settled by binding arbitration conducted in Raleigh, North Carolina and administered by the American Arbitration Association (“AAA”) pursuant to its then-current Employment Arbitration Rules and Mediation Procedures (available at www.adr.org). The arbitration shall be conducted by a single experienced arbitrator or retired judge, to be chosen via the AAA’s selection procedures. The arbitrator’s award shall be final and binding. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator may award monetary damages and, in the arbitrator’s discretion, attorneys’ fees and/or costs to the prevailing party if allowed by statute. The arbitrator may not award punitive damages or any other type of exemplary damages unless such damages are specifically authorized by statute. 

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Any filing fees and the fees and costs of the arbitrator shall be paid equally by the Company and Executive. Each party shall pay the fees of its or her attorneys, the expenses of its or her witnesses, and any other expenses that party incurs in connection with the arbitration. For the purpose of any judicial proceeding to enforce such award or incidental to such arbitration or to compel arbitration and for purposes of the Executive’s Confidentiality and Assignment of Inventions Agreement, the provisions of Section 7 of the Employment Agreement and the provisions of Section 5 hereof, the parties hereby submit to the sole and exclusive jurisdiction of the state or federal courts sitting in Orange County, North Carolina, and agree that service of process in such arbitration or court proceedings shall be satisfactorily made upon it or her if sent by registered mail addressed to it or her at the address referred to in Section 14(g) of this Agreement.

(c)This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and assigns.

(d)This Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive. The Company may assign its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its business or assets, but no such assignment shall release the Company of any of its obligations hereunder.

(e)This Agreement cannot be amended orally, or by any course of conduct or dealing, but only by a written agreement signed by the parties hereto.

(f)The failure of either party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and such terms, conditions and provisions shall remain in full force and effect. No waiver of any term or condition of this Agreement on the part of either party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such party.

(g)All notices, requests, consents and other communications, required or permitted to be given hereunder, shall be in writing and shall be delivered personally or by an overnight courier service or sent by registered or certified mail, postage prepaid, return receipt requested, to the parties at the addresses set forth on the first page of this Agreement, and shall be deemed given when so delivered personally or by overnight courier, or, if mailed, five days after the date of deposit in the United States mail. Either party may designate another address, for receipt of notices hereunder by giving notice to the other party in accordance with this paragraph (g).

(h)As used in this Agreement, “affiliate” of a specified Person shall mean and include any Person controlling, controlled by or under common control with the specified Person.

(i)The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

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(j)This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument.

(k)Executive acknowledges that she has been advised by the Company to seek the advice of independent legal counsel prior to entering into this Agreement. The Company agrees to reimburse Executive up to $7,500 for the services of such counsel.

THE EXECUTIVE IS ADVISED TO READ THIS DOCUMENT AND THE RELEASE CAREFULLY.   THIS DOCUMENT AND THE RELEASE ARE LEGAL DOCUMENTS.  THEY INCLUDE AN AGREEMENT BY THE EXECUTIVE TO GIVE UP ALL KNOWN AND UNKNOWN CLAIMS AGAINST  THE COMPANY, ITS SUCCESSORS, SUBSIDIARIES AND AFFILIATES (AND THE OTHER RELEASED PARTIES DESCRIBED IN THE RELEASE).  

SIGNATURE PAGE FOLLOWS

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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the date first above written.

 

	
CEMPRA, INC.

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
/s/ Sherrill Neff
	
 
	
12/11/2016

	
 
	
 
	
Name: P. Sherrill Neff
	
 
	
Date

	
 
	
 
	
Title: Authorized Member, Board of Directors
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
Prabhavathi Fernandes, Ph.D
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
/s/ Prabavathi Fernandes
	
 
	
12/12/2016

	
 
	
 
	
 
	
 
	
Date

 

 

 

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EXHIBIT A

RELEASE OF CLAIMS

This General Release of Claims (the "General Release") is being executed by Prabhavathi Fernandes, Ph.D (the "Executive"), for and in consideration of certain amounts payable under the Retirement and Consulting Agreement, dated December 9, 2016 (the “Retirement Agreement”).  The Executive agrees as follows:

The Executive, on behalf of herself and her agents, heirs, executors, administrators, successors and assigns, hereby releases and forever discharges the Company, and any and all of the affiliates, stockholders, officers, directors, employees, agents, counsel, and successors and assigns of the Company, from any and all rights, complaints, claims, charges, demands, damages, lawsuits, actions, sums of money, suits, debts, covenants, contracts, agreements, promises, obligations, damages, demands, liabilities and causes of action of every kind whatsoever, in law or in equity, whether known or unknown, suspected or unsuspected (each a “Claim,” collectively, “Claims”)  which (i) she has or may have against any one or more of them by reason of any event, matter, cause or thing which has occurred prior to the date this General Release is executed by the Executive including, but not limited to:  (A) any Claims arising under any federal, local or state statute or regulation, including, without limitation, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Americans With Disabilities Act of 1990, 42 U.S.C., § 12101 et seq., the Equal Pay Act of 1963, 29 U.S.C. § 206(d), the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq.,, the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §2101 et seq., the Retaliatory Employment Discrimination Act, the North Carolina Persons with Disabilities Act, and the North Carolina Equal Employment Practices Act, each as amended and including each of their respective implementing regulations, (B) all common law Claims  including, but not limited to, actions in tort and defamation, (C) any Claim (including a claim for retaliation) under any common law theory or any federal, state or local statute or ordinance not expressly referenced above, and (D) any Claims relating in any way to her employment with the Company; (ii) arise out of or relate to the termination of the Executive’s employment; (iii) arise out of or relate to any non-vested ownership interest in the Company, contractual or otherwise, including but not limited to claims to stock or stock options (except as otherwise set forth in the Retirement Agreement); or (iv) arise under or relate to any policy, agreement, understanding or promise, written or oral, formal or informal, between the Company and the Executive; provided, however, that nothing herein is intended to be construed as releasing the Company from: (w) any Claims that the Executive may have that cannot be waived under applicable law, (x) any obligation set forth in the Retirement Agreement, (y) any rights or potential claims for indemnification as otherwise available to the Executive as an officer, director, agent or in any other capacity or (z) any claims for earned and accrued benefits under employee benefit plans.

The Executive acknowledges and agrees that the Company has fully satisfied any and all obligations whatsoever owed to her arising out of her employment with the Company and that, except as set forth in the Retirement Agreement, no further payments or benefits are owed to her by the Company.  

 

 

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The Executive acknowledges that this is a General Release, and she agrees and understands that she is specifically releasing all claims under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq, as amended by the Older Workers Benefit Protection Act.  The Executive acknowledges that she has read and understands the foregoing General Release and executes it voluntarily and without coercion and that, in exchange for signing and not timely revoking her consent to this General Release, she will receive payments and benefits which she would not otherwise be entitled to receive.  She further acknowledges that she is being advised herein in writing to consult with an attorney of her choosing prior to executing this General Release, and that she has had more than twenty-one (21) calendar days within which to consider this General Release.  The Executive understands that she has seven (7) calendar days following her execution of this General Release to revoke it in writing, and that this General Release is not effective or enforceable until  the eighth (8th) calendar day after the day that the Executive executes this General Release .  For such revocation to be effective, notice must be received at the principal office of the Company, no later than 11:59 p.m. on the seventh (7th) calendar day after the date on which the Executive has signed this General Release.  The Executive expressly agrees that, in the event she revokes this General Release, the Company shall not be obligated to pay her any amounts the payment of which is expressly conditioned under the Retirement Agreement on the effectiveness of this General Release. 

IN WITNESS WHEREOF, the Executive has executed this General Release, on the date set forth below.

ACCEPTED AND AGREED TO:

Prabhavathi Fernandes, Ph.D

 

	
	
/s/ Prabhavathi Fernandes

 

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2= 2 "697154-BOSSR01A - MSW"Exhibit

Exhibit 10.28

CHANGE OF CONTROL WAIVER

This Waiver is being executed in connection with the proposed merger (the "Merger") between Union First Market Bankshares Corporation ("Union") and StellarOne Corporation( "StellarOne").

The undersigned employee of StellarOne, intending to be legally bound, hereby agrees that, if and when consummated, neither the Merger nor the subsequent merger of StellarOne Bank with and into Union First Market Bank shall be deemed to constitute a "Change of Control" for purposes of the undersigned's Change of Control Agreement, dated as of June 23, 2011 (the "Change of Control Agreement"), with StellarOne. Accordingly, the undersigned will not be entitled  to receive, and hereby waives any and all right to receive, any severance related payments and benefits to which the undersigned would otherwise have been entitled to receive under the Change of Control Agreement as a result of the Merger, provided that all the required conditions to the payment of such severance benefits thereunder were satisfied.

Union will assume and honor the Change of Control Agreement at the effective date of the Merger, as amended by this Waiver. Union and the undersigned employee of StellarOne specifically agree that, for purposes of interpreting and construing the Change of Control Agreement from and after the effective date of the Merger, references to "StellarOne Corporation" and "StellarOne Bank" shall mean "Union First Market Bankshares Corporation" and "Union First Market Bank," respectively.

Except as set forth in this Change of Control Waiver, the Change of Control Agreement shall otherwise remain in full force and effect.  This Change of Control Waiver shall be null, void and of no further force or effect in the event the Merger is not consummated. This waiver relates solely to the acquisition of StellarOne by Union and does not affect any other event that would qualify as a "Change of Control" of StellarOne.

Dated:  August 14, 2013

UNION FIRST MARKET BANKSHARES CORPORATION

     /s/ David G. Bilko                       /s/ G. William Beale
______________________________________        ______________________________________
David G. Bilko                        G. William Beale
Chief Executive Officer

CHANGE OF CONTROL AGREEMENT

THIS CHANGE OF CONTROL  AGREEMENT,  dated as of this 23rd day of June, 2011, by and between StellarOne  Corporation, a Virginia corporation (the "Company"), and David G. Bilko (the "Executive").

WHEREAS, the Executive is a key executive of the Company; and

WHEREAS,  the Company considers the availability of the Executive's services to be important to the management and conduct of the Company's business and desire to provide the Executive with reasonable employment security in the event of a change in control of the Company and certain rights in the event of the Executive's termination of employment after a change in control of the Company.

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

1.     Employment. The Executive is employed by StellarOne Bank (the "Employer") as its Chief
Audit Officer (the "Position").

2.          Term.  The term of this Agreement is effective as of the Effective Date, and will continue through December 31, 2012, unless terminated or extended as hereinafter provided.  Except as provided in Section 3(a)(i), this Agreement shall be extended for successive one-year periods following the original term unless either party notifies the other in writing at least ninety (90) days prior to the end of the original term, or the end of any additional one-year renewal term, that the Agreement shall not be extended beyond its current term. The term of this Agreement, including any renewal term, is referred to as the "Term."

3.     Change of Control and Severance Benefits.

(a)     In the event a Change of Control as hereinafter defined occurs during the Term, the following provisions shall apply:

(i)         The Term provided in Section 2 hereof shall continue for twenty-four (24) months after the Change of Control or the balance of the Term, whichever is greater.

(ii)        If, during the Term and after the occurrence of a Change of Control, the Executive's employment is terminated without Cause by the Company or the Employer for reasons other than the Executive's Incapacity (as defined in Section 4(e)), or the Executive resigns from employment with the Company and all of its subsidiaries for Good Reason within one hundred eighty (180) days after the occurrence of the Good Reason, except as set forth in Section 3(b) below, the Executive shall receive as "Severance Benefits" the following payments or benefits following the Executive's cessation of employment:

(A)       Accrued Obligations - the "Accrued Obligations" are the sum of:   (1) the Executive's annual base salary through the date of termination; (2) the amount, if any, of any incentive or bonus compensation theretofore earned which has not yet been paid; and (3) any benefits or awards (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 payment of cash or stock, as applicable, as soon as administratively feasible after the date of termination; provided, however, that if payment of any such Accrued Obligation                        

at such time would result in a prohibited acceleration  under  Section  409A  of the Internal Revenue Code of 1986, as amended (the "Code"),  such Accrued Obligation  shall be paid at the time the Accrued  Obligation  would have been paid under  the applicable  plan, policy, program or arrangement relating to such Accrued Obligation had the Executive remained employed with the Company or the Employer;

(B)        Salary  Continuance   Benefit  -  the  "Salary   Continuance   Benefit"  is  the payment  of  the  Executive's  base  salary  then  in  effect  (but  in  no  event  less  than  the Executive's  base salary in effect at the Change of Control) for the Continuation  Period (as defined  below).   The Salary Continuance  Benefit will be paid to the Executive  at regular paydays (but not less frequently than monthly) during the Continuation Period; and

(C)        Health Care Continuance Benefit - the "Health Care Continuance Benefit" is the opportunity  to be covered  for  the Continuation  Period  (as  defined  below)  under any health care (medical,  dental and vision) plan or plans ("Health  Care Plans"),  other than a flexible  spending  account,  provided  to  the  Executive  and  the  Executive's  spouse  and dependents  at  the date  of  termination,  with  the  Company  paying  on  a  monthly  or more frequent basis the normal Company paid contribution therefore for similarly  situated active employees  and  with  such  coverage  being  available  on  the  same  basis  as  available  to similarly active employees during such continuation period, provided that the Executive's continued participation is possible under the general terms and provisions of such plans. The following rules shall also apply:

(1)         If the Company reasonably determines  that it cannot maintain such coverage for the Executive or the Executive's  spouse or dependents under the terms and  provisions  of  such  plans  and  programs  (or  that  such  continuation   would adversely  affect  the  tax  status  of  the  plan  pursuant  to  which  the  coverage  is provided), the Company shall either provide substantially  identical benefits directly or through an insurance arrangement or shall pay the Executive cash equal to the estimated cost of the expected Company contribution  therefore for the Continuation Period with such payments to be made in accordance with the established payroll practices of the Company (not less frequently than monthly) for employees generally for the period during which such cash payments are to be provided.

(2)        The Health Care Continuance  Benefit  as to any Health  Care Plan will cease if and when the Executive has obtained health care coverage under one or more  welfare  benefit  plans  of  a subsequent  employer  that  provides  for  equal  or greater  benefits to the Executive  and the Executive's spouse and dependents  with respect to the specific type of benefit.

(3)        If  the Executive  dies  while  receiving  a Health  Care  Continuance Benefit, the Executive's spouse and dependents will continue to receive the Health Care Continuance Benefit during the remainder of the Continuation Period.

(4)         The  Executive  and  the  Executive's spouse  and  dependents  will become eligible for COBRA continuation coverage as of the date the Health Care Continuance Benefit ceases for all health and dental benefits.

For purposes hereof, the "Continuation  Period" shall mean 12 months.

(b)     Excess Parachute Payment Limitation on Severance Benefits.   Notwithstanding  the foregoing  provisions of Section 3(a), the aggregate value of all Severance Benefits provided for under this Agreement, when added to the value of all other payments or benefits payable to or with respect to the Executive (even though not paid or provided pursuant to this Agreement) which constitute "parachute payments" under Section 280G of the Code shall be reduced to the extent necessary so that none of such benefits and payments (whether or not paid or provided pursuant to this Agreement) constitute "excess parachute payments" on which an excise tax is imposed pursuant to Section 4999 of the Code.  The order of reduction shall be first all cash payments on a pro rata basis, then any equity compensation or accelerated vesting on a pro rata basis, and lastly medical, dental and vision coverage.

shall mean:
(c)     Change of Control Defined. For purposes of this Agreement, a "Change of Control"

(i)         the acquisition after the Effective Date by any individual, entity or group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act') of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act), of securities of the Company representing 20% or more of the combined voting power of the then outstanding securities; provided, however, that the following acquisitions shall not constitute a Change of Control:

(A)       acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege);

(B)    any acquisition by the Company;

(C)        any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or

(D)       any acquisition pursuant to a reorganization, merger or consolidation by any corporation owned or proposed to be owned, directly or indirectly, by shareholders of the Company if the shareholders' ownership of securities of the corporation resulting from such transaction constitutes a majority of the ownership of securities of the resulting entity and at least a majority of the members of the board of directors of the corporation resulting from such transaction were members of the Incumbent Board as defined in this Agreement at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or

(ii)        where individuals who, as of the Effective Date, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board of Directors; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the shareholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-ll of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than a member of the Board of Directors; or

(iii)     the Company consummates after the Effective Date:

(A)       a merger, statutory share exchange, or consolidation of the Company with any other corporation, except as provided in subparagraph (i)(D) of this section, or

(B)        the sale or other disposition of all or substantially all of the assets of the
Company.

(d)    Cause. For purposes of this Agreement, "Cause" shall include but not be limited to:

(i)        the Executive's willful misconduct in connection with the performance of the Executive's duties which the Company believes does or may result in material harm to the Company or any of its subsidiaries;

(ii)            the  Executive's  misappropriation or  embezzlement of  funds  or  property of  the
Company or any of its subsidiaries;

      (iii)         the Executive's  fraud or dishonesty with respect to the Company or any of its subsidiaries;

(iv)       the Executive's failure to perform any of the duties and responsibilities required by the Position (other than by reason of Incapacity as defined in Section 4(e)) or the Executive's willful failure to follow reasonable instructions or policies of the Employer or the Company, in either case after being advised in writing of such failure and being given a reasonable opportunity and period (as determined by the Employer or the Company) to remedy such failure;

(v)        the  Executive's  conviction of,  indictment for  (or  its  procedural equivalent), or entering of a guilty plea or plea of no contest with respect to any felony or any other crime involving moral turpitude or any other crime with respect to which imprisonment is a possible punishment;

(vi)       the Executive's  breach 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 Employer or the Company, after being advised in writing of such breach or violation and being given a reasonable opportunity and period (as determined by the Employer or the Company) to remedy such breach or violation;

(vii)     the Executive's breach of fiduciary duties owed to the Company or any of its subsidiaries; or

(viii)    the  Executive's  willful engaging in  conduct  that, if  it  became  known  by  any regulatory or governmental agency or the public, is reasonably likely to result, in the good faith judgment of the Company, in material injury to the Company or any of its subsidiaries, monetarily or otherwise.

(e)     Good Reason. For purposes of this Agreement, "Good Reason" shall mean:

(i)         the continued assignment to the Executive of duties materially inconsistent with the Executive's position, authority, duties or responsibilities in all material respects with the most significant of those held, exercised and assigned at any time during the ninety (90) day period immediately preceding the Change of Control;

(ii)        any action taken by the Employer or the Company which results in a substantial reduction in the status of the Executive, including a significant diminution in the Executive's position, authority, duties or responsibilities;

(iii)      the relocation of the Executive to any other primary place of employment which might require the Executive to move the Executive's residence which, for this purpose, includes any reassignment to a place of employment other than the location where the Executive was employed immediately preceding the Change of Control or any office that is the headquarters of the Company
or the Employer and is less than thirty-five (35) miles from such location, without the Executive's express written consent to such relocation; provided, however, this subsection (iii) shall not apply in connection with the relocation ofthe Executive if the Company decides to relocate its headquarters;

(iv)       any material reduction in the Executive's annual base salary in effect at the time of the 

Change of Control or any uncompensated exclusion of the Executive from participation (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) in any plans, programs or forms of compensation or benefits that the Company or its subsidiaries provide to the class of employees that includes the Executive, on a basis not less favorable than that provided to such class of employees, provided however, a reasonable transition period following any merger, statutory share exchange, consolidation or acquisition or transaction involving the Company or any of its subsidiaries shall be permitted in order to make appropriate adjustments in compliance with this obligation; or

(v)        any failure by the Company, or any successor entity following a Change of Control, to comply with the provisions of Section 11 hereof or to honor any other term or provision of this Agreement.

Notwithstanding the above, "Good Reason" shall not include the removal of the Executive as an officer of any subsidiary of the Company (including the Employer if the Employer is not the Company) in order that the Executive might concentrate the Executive's efforts on the Company, any resignation by the Executive where Cause for the Executive's termination by the Company exists, or an isolated, insubstantial and/or inadvertent action not taken in bad faith by the Employer or the Company and which is remedied by the Employer or the Company within a reasonable time after receipt of notice thereof given by the Executive, and the Executive's termination shall be considered for "Good Reason" only if the Executive provides written notice to the Company of the Good Reason no later than sixty (60) days after the event claimed to be Good Reason (which notice shall include the specifics of the event or events) the Company fails to cure the claimed Good Reason within thirty (30) days after receipt of such notice.

4.         Employment at Will and Other Termination of or Resignation from Employment.

(a)       At Will Employment.   The Executive and the Company acknowledge that the employment of the Executive by the Company is "at will," and the Executive's employment may be terminated by the Company, the Employer or the Executive at any time.

(b)        Termination for Cause. If the Executive's employment shall be terminated by the Company for Cause (whether before or after a Change of Control), this Agreement shall terminate without further obligation to the Executive other than the Executive's Accrued Obligations (as described in Section
3(a)(ii)(A)), if any.

(c)        Resignation Other Than for Good Reason. If the Executive resigns or voluntarily leaves the employment of the Company for other than for Good Reason (whether before or after a Change of Control),  this  Agreement  shall  terminate  without  further  obligation  to  the  Executive  other  than  the Executive's Accrued Obligations (as described in Section 3(a)(ii)(A)), if any.

(d)        Death. The Executive's employment under this Agreement shall cease automatically upon the Executive's death (whether before or after a Change of Control) and this Agreement shall terminate without further obligation to the Executive other than the Executive's Accrued Obligations (as described in Section 3(a)(ii)(A)), if any; provided, however, that in the event the Executive dies while employed during the Term and on or after a Change of Control, the following benefits shall be provided:

		
	(i)
	Salary Death Benefit - the "Salary Death Benefit" is a payment of an amount equal

to three (3) months of the Executive's base salary in a lump sum cash payment within thirty (30) days of the date of death.   The Salary Death Benefit shall be paid to the Executive's beneficiary designated in writing (provided such writing is executed and dated by the Executive and delivered to the Company in a form acceptable to the Company prior to the Executive's death) and surviving the Executive or, if none, the Executive's  estate, as applicable; and

(ii)        Health  Care  Continuance  Death  Benefit  -  the  "Health  Care  Continuance  Death Benefit" is the opportunity for the Executive's  spouse and dependents to receive the Health Care Continuance Benefit 

described in Section 3(a)(ii)(C) above (determined  as though the Executive has terminated employment  thereunder immediately prior to the Executive's death) for the Continuation Period.    The  Executive's spouse  and dependents  will  become  eligible  for  COBRA  continuation coverage for health and dental benefits at the end of such Continuation Period.

(e)         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 thirty (30) days'  written notice provided  that, within thirty (30) days after receipt of such notice,  the Executive shall  not have returned  to full-time  performance  of the Executive's assigned  duties.   In the event of the termination of the Executive's employment due to the Executive's Incapacity, this Agreement shall terminate without further obligation to the Executive other than the Executive's Accrued Obligations  (as described in Section  3(a)(ii)(A)),  if any; provided,  however,  that in the event the Executive's Incapacity  occurs  while employed during the Term and on or after a Change of Control the Company shall pay or cause the Employer to pay a "Salary Incapacity Benefit" in the amount of three (3) months of the Executive's base salary.  The Salary  Incapacity  Benefit  shall  be paid  to the Executive  at regular  paydays  (but  not less frequently  than monthly) during the three (3) month period immediately following the Executive's termination on account of Incapacity.  "Incapacity" shall mean the failure of the Executive to perform the Executive's 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 Company for ninety (90) consecutive calendar days.

5.          Confidentiality.

(a)         The Executive  recognizes  that as an employee of the Company  the Executive will have access to and may participate in the origination of non-public, proprietary and confidential information and that the Executive owes a fiduciary duty to the Company.  Confidential  information may include, but is not  limited  to,  trade  secrets,  customer  lists  and  information,  internal  corporate  planning,  methods  of marketing and operations, and other data or information of or concerning the Company and its subsidiaries or their customers or any of their clients and not generally known to the public or in the banking industry. The Executive agrees never to reveal any such confidential information, either directly or indirectly, to any third party except as may be authorized in writing specifically by the Company.

(b)        Notwithstanding  the foregoing, nothing in this Agreement is intended to prohibit the Executive  from  performing  any  duty  or  obligation  that shall  arise  as a matter  of  law.    Specifically,  the Executive shall continue  to be under a duty to truthfully respond to any legal and valid subpoena or other legal process.   This Agreement  is not intended in any way to proscribe  the Executive's right and ability to provide information to any federal, state or local agency in response or adherence  to the lawful exercise of such  agency's  authority.   In  the event  the Executive  is requested  to disclose  confidential  information  by subpoena  or other legal  process or lawful exercise of authority,  the Executive  shall  promptly  provide the Company with notice of the same and either receive approval from the Company to make the disclosure or cooperate with the Company in the Company's effort, at its sole expense, to avoid disclosure.

6.     Severability.     If  any  provision  of  this  Agreement,  or  part  thereof,  is  determined  to  be 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.

7.         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.

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

9.         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 on the signature page of this Agreement. Each party may, from time to time, designate a different address to which notices should be sent.

10.       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.

11.       Binding Effect.  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 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.   If the Executive dies before receiving all payments due under this Agreement, unless expressly otherwise provided hereunder or in a separate plan, program, arrangement or agreement, any remaining payments due after the Executive's death shall be made to the Executive's beneficiary designated in writing (provided such writing is executed and dated by the Executive and delivered to the Company in a form acceptable to the Company prior to the Executive's death) and surviving the Executive or, if none, to the Executive's estate.

12.       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.

13.      Nonqualified Deferred Compensation Omnibus Provision.    Notwithstanding any other provision of this Agreement, it is intended that any payment or benefit which is provided pursuant to or in connection with this Agreement which is considered to be deferred compensation subject to Section 409A of the Code shall be provided and paid in a manner, and at such time, including without limitation payment and provision of benefits only in connection with the occurrence of a permissible payment event contained in Section 409A (e.g. death, disability, separation from service from the Company and its affiliates as defined for purposes of Section 409A of the Code), and in such form, as complies with the applicable requirements of  Section  409A  of   the  Code  to  avoid  the  unfavorable  tax  consequences  provided  therein  for non-compliance. The following rules shall apply:

(a)       Notwithstanding  any  other provision of  this Agreement, the  Company's Compensation Committee or Board of Directors is authorized to amend this Agreement, to amend or void any election made by the Executive under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by it to be necessary or appropriate to

comply, or to evidence or further evidence required compliance, with Section 409A of the Code (including any transition or grandfather rules thereunder).

(b)        For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code. 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.

(c)        If the Executive is a key employee (as defined in Section 416(i) of the Code without regard to paragraph (5)  thereof) and any of  the Company's  stock is  publicly traded on an established securities market or otherwise, then payment of any amount or provision of any benefit under this Agreement which is considered deferred compensation subject to Section 409A of the Code shall be deferred for six (6) months as required by Section 409A(a)(2)(B)(i) of the Code (the "409A Deferral Period").  In the event such payments are otherwise due to be made in installments or periodically during the 409A Deferral Period, the payments which would otherwise have been made in the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral 

Period ends, and the balance of the payments shall be made as otherwise scheduled.  In the event benefits are required to be deferred, any such benefit may be provided during the 409A Deferral Period at the Executive's expense, with the Executive having a right to reimbursement from the Company once the 409A Deferral Period ends, and the balance of the benefits shall be provided as otherwise scheduled.

(d)        For purposes of this Agreement, termination of employment and date of termination or cessation of employment will be read to mean a "separation from service" within the meaning of Section
409A of the Code where it is reasonably anticipated that no further services would be performed after such
date or that the level of bona fide services Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to less than 50% of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period.

(e)        With regard to any provision herein that provides for reimbursement of expenses subject to Code Section 409A, except as permitted by Code Section 409A, (a) the right to reimbursement is not subject to liquidation or exchange for another benefit, and (b) the amount of expenses eligible for reimbursement provided during any taxable year shall not affect the expenses eligible for reimbursement in any other taxable year.   All reimbursements shall be reimbursed in accordance with the Company's reimbursement policies but in no event later than the calendar year following the calendar year in which the related expense is incurred.

(f)        Notwithstanding any of the provisions of this Agreement, the Company shall not be liable to the Executive if any payment or benefit which is to be provided pursuant to this Agreement and which is considered deferred compensation subject to Section 409A of the Code otherwise fails to comply with, or be exempt from, the requirements of Section 409A of the Code.

14.       Capital Purchase Program Limitations.  The Executive understands that the Company has participated in the Capital Purchase Program (the "CPP")  implemented under the Emergency Economic Stabilization Act of 2008, as amended (the "EESA") and that the Company is required to comply with the requirements of Section 111(b) of the EESA, as amended from time to time, and the CPP with respect to the compensation of certain current and future employees of the Company (as determined for purposes of the EESA and the guidance and regulations issued by the Treasury Department with respect to the CPP (the "CPP Requirements")), in accordance with the CPP Requirements.  Notwithstanding any other provision of this Agreement or any other agreement to the contrary, the Executive acknowledges and understands that this Agreement and such other agreements shall be administered, interpreted and construed and, if and where applicable, benefits provided hereunder or thereunder shall be limited, deferred, forfeited and/or subject to repayment to the Company in accordance with the CPP Requirements and Section 111(b) of the EESA, as

amended from time to time, to the extent legally applicable with respect to the Employee, as determined by the Committee in its discretion, including without limitation the clawback, the bonus prohibition and the parachute prohibitions thereof.

15.       Entire Agreement.  Except as provided in the next sentence, 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 including, without limitation, agreements, if any, in effect immediately prior to the Effective Date. It is specifically agreed and acknowledged that exercisability of stock options and vesting of restricted stock, benefits or other rights on account of there being a "change of control" (as defined in any applicable plan or agreement providing for rights upon the occurrence of a change of control) in plans or agreements  other  than  those  designated  as  severance,  separation,  change  of  control  or  employment agreements shall not be superseded by this Agreement and shall operate in accordance with their terms. It is further specifically agreed and acknowledged that, except as provided herein, the Executive shall not be entitled to severance payments or benefits under any severance or similar plan, program, arrangement or agreement of or with the Employer or the Company for any cessation of employment occurring while this Agreement is in effect.

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

STELLARONE CORPORATION

By:     /s/O.R. Ed Barham                
Its     Pres/CEO            

Address:

590 Peter Jefferson Parkway, Suite 250
Charlottesville, VA 22911

By:     /s/David G. Bilko                
Chief Audit Officer

Address:

590 Peter Jefferson Parkway, Suite 250
Charlottesville, VA 22911

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