Document:

Exhibit 10.1

 

RAOUF S. GHALI
 EMPLOYMENT AGREEMENT

 

Employment Agreement (this “Agreement”), dated as of August 18, 2016, among Hill International, Inc., a Delaware corporation (the “Company”), and Raouf S. Ghali (“Executive”).

 

WHEREAS, the Company desires to be assured of the association and services of Executive; and

 

WHEREAS, Executive is willing and desires to continue to be employed by the Company, and the Company is willing to continue to employ Executive, upon the terms, covenants and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the mutual terms, covenants and conditions hereinafter set forth, the parties hereto agree as follows:

 

1.                                      Employment.  The Company hereby agrees to continue to employ Executive, and Executive hereby accepts such continued employment, upon the mutual terms, covenants and conditions set forth herein.

 

2.                                      Term.

 

(a)                                 Initial Term of Employment.  The initial term of employment under this Agreement shall be for a period of five (5) years commencing on August 11, 2016 (the “Effective Date”), unless terminated earlier pursuant to Article 5.7 hereof; provided, however, that Executive’s obligations in Article 5 hereof shall continue in effect after such termination as set forth in Article 5.7 hereof.

 

(b)                                 Additional Terms.  The term of employment under this Agreement may be extended upon the mutual consent of Executive and Company.  The initial term of employment provided in Section 2(a) of this Agreement, extended to the extent provided in this Section 2(b), is referred to in this Agreement as the “Employment Term”.

 

3.                                      Compensation; Reimbursement.  For all services rendered by Executive under this Agreement during the Employment Term, the Company shall pay Executive the compensation set forth in Section 3.1 hereof, and shall provide the other benefits and reimbursement of expenses set forth elsewhere in this Article 3.

 

3.1                               Compensation.

 

(a)                                 Base Salary.  The Company shall pay Executive a base salary, payable in equal installments twice monthly on the Company’s regular payroll dates and adjusted annually (the “Base Salary”).  The Base Salary shall be reviewed annually by the Company’s Compensation Committee and Board of Directors (the “Board”).  With respect to compensation and benefit matters generally, to the extent

 

 

consistent with the Company’s governing instruments, the Board may delegate its rights and obligations to the Compensation Committee of the Board (the “Compensation Committee”) and, to the extent of such delegation, all references in this Agreement to the Board shall be deemed to be references to the Compensation Committee.

 

(b)                                 Annual Bonus.

 

(i)                                     The Company shall pay to Executive an annual bonus (the “Bonus”).  For each year, the target amount of the Bonus and the performance criteria on which the Bonus will be based (A) shall be determined by the Board in the manner contemplated by the rules applicable to listed companies of the New York Stock Exchange (or any other exchange on which the Company’s common stock is listed) and (B) shall be communicated to the Executive no later than March 31st of each year to which the Bonus is applicable.  Any Bonus amounts payable under this Agreement shall be paid no later than March 15th of the year following the year with respect to which the Bonus was earned.

 

(ii)                                  For each year, Executive’s Bonus shall be based upon the attainment of the performance criteria, established by the Board.

 

(c)                                  Long-Term Incentive Award.  Executive shall receive an annual long-term incentive award, which may consist of stock options issued by the Company, shares of restricted stock of the Company, as well as other forms of equity-based, equity-linked or other long-term incentive compensation.  The amount and other terms of long-term incentive awards made to Executive shall be determined by the Board and communicated to Executive no later than March 1st of each year to which the award is applicable.

 

3.2                               Benefits.  Executive shall be entitled to all benefits of employment provided to other employees of the Company in comparable positions.  In addition, Executive shall be entitled to four (4) weeks of vacation per annum.

 

3.3                               Expenses.  Executive shall be reimbursed for all reasonable and approved business expenses for first-class air and rail business travel, hotels, meals and all business entertainment incurred by him in connection with the performance of his duties under this Agreement.  Subject to Company policy, the reimbursement of Executive’s business expenses shall be upon monthly presentation to and approval by the Company of valid receipts and other appropriate documentation for such expenses.

 

4.                                      Scope of Duties.

 

4.1                               Title.  During the Employment Term, Executive’s position and title with the Company shall be President and Chief Operating Officer, or such other position and title upon which the Company and Executive may mutually agree.

 

4.2                               Assignment of Duties.  During the Employment Term, Executive shall have such duties as may be assigned to him from time to time by the Company’s Chief Executive Officer commensurate with his experience and responsibilities in the position for which he is employed pursuant to Section 4.1 hereof.  Such duties shall be exercised subject to the control and supervision of the Company’s Chief Executive Officer.

 

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4.3                               Location.  During the Employment Term, Executive shall perform his duties from the Company’s Athens, Greece office or at such other location as shall be determined by the Company and Executive.

 

4.4                               Executive’s Devotion of Time.  During the Employment Term, Executive shall devote his full time, abilities and energy to the faithful performance of the duties assigned to him consistent with Section 4.2 hereof and to the promotion and forwarding of the business affairs of the Company, and not to divert any business opportunities from the Company to himself or to any other person or business entity.  Executive shall promote and develop all business opportunities that come to his attention relating to current or anticipated future business of the Company, in a manner consistent with his reasonable belief as to the best interests of the Company and his duties under this Agreement.

 

5.                                      Executive Covenants.

 

5.1                               Confidential Company Information.  During the Employment Term, the Company has and will continue to provide Executive with access to, and may confide in him, information, business methods and systems, techniques and methods of operation developed at great expense by the Company and which are assets of the Company.  Executive recognizes and acknowledges that: (a) all Confidential Information (defined below) is the property of the Company and is unique, extremely valuable and developed and acquired by great expenditures of time, effort and cost; (b) the misuse, misappropriation or unauthorized disclosure by Executive of the Confidential Information would constitute a breach of trust and would cause serious irreparable injury to the Company; and (c) it is essential to the protection of the Company’s goodwill and to the maintenance of the Company’s competitive position that the Confidential Information be kept secret and that Executive not disclose the Confidential Information to others or use same to his own advantage or to the advantage of others.  Accordingly, Executive shall not, during the Employment Term or thereafter, directly or indirectly, in any manner, utilize or disclose to any person, firm, corporation, association or other entity, or use on his own behalf, any confidential and proprietary information of the Company, including, but not limited to, information relating to strategic plans, sales, costs, client lists, client preferences, client identities, investment strategies, computer programs, profits or the business affairs and financial condition of the Company, or any of its clients, or any of the Company’s business methods, systems, marketing materials, clients or techniques (collectively “Confidential Information”), except for (i) such disclosures where required by law, but only after written notice to the Company detailing the circumstances and legal requirement for the disclosure; or (ii) as authorized during the performance of Executive’s duties for such use or purpose as are reasonably believed by Executive to be in the best interests of the Company.  At any time, upon request, Executive shall deliver to the Company all of its property including, but not limited to, its Confidential Information (whether electronically stored or otherwise) which are in his possession or under his control.  Property to be returned includes, but is not limited to, notebook pages, documents, records, prototypes, client files, drawings, electronically stored data, computer media or any other materials or property in Executive’s possession.

 

5.2                               Noninterference.  Executive agrees that for a period of twelve (12) months following the end of the Employment Term, for whatever reason, he will not, directly or indirectly, for himself or on behalf of any third party, at any time or in any manner:

 

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(a)                                 request or cause any of the Company’s clients or potential clients to cancel, modify or terminate any existing or continuing or, to Executive’s knowledge, prospective business relationship with the Company;

 

(b)                                 engage in or participate in any effort or act to induce, or in any way cause, any client or, to Executive’s knowledge, prospective client of the Company, to deal with Executive or any other person or entity except in a capacity as representative of the Company, or otherwise take any action which might reasonably be expected to be disadvantageous to the Company;

 

(c)                                  persuade, induce, solicit, influence or attempt to influence any client or, to Executive’s knowledge, prospective client of the Company to cease or refrain from doing business, or to decline to do business, or to change or alter any existing or prospective business relationship, with the Company;

 

(d)                                 accept business from, or perform or provide any services for, any client, or to Executive’s knowledge, prospective client of the Company;

 

(e)                                  contract with or communicate with, in either case in connection with services, any client or, to Executive’s knowledge, prospective client of the Company; or

 

(f)                                   provide any third party with any information concerning any client, or to Executive’s knowledge, prospective client of the Company, including but not limited to, the disclosure of any client name or data, in whatever form, to such third party.

 

5.3                               Non-Compete.  For a period of twelve (12) months following the end of the Employment Term, Executive shall not, directly or indirectly, engage or participate in, or become employed by, or affiliated with, or render advisory or any other services to, any person or business entity or organization, of whatever form, that competes with the Company.  Executive specifically acknowledges that the nature of the Company’s activities is such that competitive activities could be conducted effectively within the territory described above, and that the geographical and temporal limitations, in view of the nature of the Company’s business, is reasonable and necessary to protect its legitimate business interests.

 

5.4                               Injunctive Relief.  Executive acknowledges that his compliance with the covenants in Sections 5.1, 5.2 and 5.3 hereof is necessary to protect the good will, Confidential Information and other proprietary interests of the Company, that such covenants are supported by adequate and sufficient consideration, and that, in the event of any violation or threatened violation by Executive of any such provision, the Company will sustain serious, irreparable and substantial harm to its business, the extent of which will be difficult to determine and impossible to remedy by an action at law for money damages.  Accordingly, Executive agrees that, in the event of such violation or threatened violation by him, the Company shall be entitled to an injunction before trial from any court of competent jurisdiction as a matter of course and upon the posting of not more than a nominal bond, in addition to all such other legal and equitable remedies as may be available to the Company.  Executive further acknowledges that he has carefully considered the nature and extent of the restrictions contained herein and the rights and remedies conferred upon the Company under this Agreement, and hereby acknowledges and agrees that the same are

 

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reasonable, are designed to protect the legitimate business interests of the Company, and do not confer benefits upon the Company disproportionate to the detriment upon him.  In the event that Executive violates any of the covenants in this Agreement and the Company commences legal action for injunctive or other relief, the Company shall have the benefit of the full period of the covenants, computed from the date Executive ceased violation of the covenants, either by order of the court or otherwise.  Executive acknowledges that any claim or cause of action he may have against the Company shall not constitute a defense to the enforcement by the Company of his covenants in Article 5 of this Agreement (e.g., these covenants are independent of any other provision in this Agreement and of any other promise made to Executive).  Executive also acknowledges that his experience and capabilities are such that he can obtain suitable employment otherwise than in violation of the covenants in this Agreement and that the enforcement of these covenants will not prevent the earning of a livelihood nor cause undue hardship.  Without limiting the foregoing, in the event of a breach by Executive of any provision of Section 5.1, 5.2 or 5.3 of this Agreement, the Company’s obligations under this Agreement shall immediately terminate, Executive shall not be entitled to any additional monetary payments or benefits of any kind whatsoever and Executive shall reimburse the Company for all of its reasonable attorneys’ fees and costs associated with any legal or equitable proceedings or litigation seeking to enforce the terms of this Agreement.

 

5.5                               Remedies Cumulative and Concurrent.  The rights and remedies of the Company as provided in this Article 5 shall be cumulative and concurrent and may be pursued separately, successively or together, at the sole discretion of the Company, and may be exercised as often as occasion therefor shall arise.  The failure to exercise any right or remedy shall in no event be construed as a waiver or release thereof.

 

5.6                               Executive’s Authorization.  Executive authorizes the Company to inform any third parties, including future employers, prospective employers and the Company’s clients or prospective clients, of the existence of this Agreement and his obligations under it.

 

5.7                               Change in Control.  Notwithstanding any other provision of this Agreement, in the event that there has occurred a Change in Control as defined in Section 6.1(f) hereof that was effected without being endorsed by a majority of the members of the Board prior to the date of such Change in Control, then all of the provisions of this Article 5 shall thereafter have no further force or effect as against Executive.

 

6.                                      Termination.

 

6.1                               Bases for Termination.

 

(a)                                 Voluntary Termination by Executive.  Executive’s employment hereunder may be terminated by Executive at any time during the Employment Term, provided that the Executive gives the Company no less than thirty (30) days prior written notice of such termination.

 

(b)                                 Termination due to Death or Permanent Incapacity.  This Agreement, and the Employment Term shall automatically terminate on the date on which Executive dies or becomes permanently incapacitated.  “Permanent incapacity” shall mean that (i) Executive is

 

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unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) Executive is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the service provider’s employer.  Executive shall be deemed to have become “permanently incapacitated” on the date that is thirty (30) days after the Company has determined that Executive is permanently incapacitated and so notifies Executive.

 

(c)                                  Termination by Company with Cause.  Executive’s employment may be terminated by the Company “with cause”, effective upon delivery of written notice to Executive given at any time during the Employment Term (without any necessity for prior notice) in the event of any of the following actions by Executive: (i) conviction of any felony or any other crime involving moral turpitude, (ii) fraud against the Company or any of its subsidiaries or affiliates or theft of or maliciously intentional damage to the property of the Company or any of their subsidiaries or affiliates, (iii) willful breach of Executive’s fiduciary duties to the Company, or (iv) breach by Executive of any provision of this Agreement; provided, however, that with respect to clause (iv) above, in order for Executive to be terminated “with cause”, the unacceptable conduct must continue after the Company has given Executive written notice thereof and a reasonable opportunity to correct such conduct.

 

(d)                                 Termination by Company without Cause.  Executive’s employment may be terminated by the Company “without cause”, effective upon delivery of written notice to Executive given at any time during the Employment Term (without any necessity for prior notice) provided that the Company complies with all provisions of this Agreement, including without limitation, obligations related to severance, vesting of options and continuation of benefits as set forth herein.

 

(e)                                  Termination by Executive for Good Reason.  Executive’s employment hereunder may be terminated by Executive for Good Reason (as defined below) at any time during the Employment Term, subject to Section 6.1(e)(iii) hereof.  For purposes of this Agreement, Executive’s voluntary termination of employment for Good Reason (as defined below) will be treated as a termination by the Company “without cause” if such termination of employment occurs under the following conditions:

 

(i)                                     The termination of employment must occur during a period of time not to exceed one (1) year following the initial existence of one or more of the conditions set forth in paragraphs (1) through (5) of this Section 6.1(e)(i) arising without the prior written consent of Executive (the existence of any of which conditions shall constitute “Good Reason”):

 

(1)                                 Any material diminution in Base Salary;

 

(2)                                 Any material diminution in Executive’s authority, duties or responsibilities;

 

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(3)           Any material diminution in the budget over which Executive retains authority;

 

(4)           Any change in the geographic location at which Executive must perform the services under this Agreement without the Executive’s mutual agreement, which change is material to Executive; or

 

(5)           Any other action or inaction that constitutes a material breach by the Company of this Agreement.

 

(ii)           The amount, time, and form of any benefit paid upon the termination of employment for Good Reason pursuant to this Section 6.1(e) must be substantially identical to the amount, time and form of payment of any benefit payable due to an actual termination of employment “without cause.”

 

(iii)          Executive shall provide notice to the Company of the existence of the “Good Reason” condition within ninety (90) days after Executive becomes aware of the initial existence of such “Good Reason” condition, upon notice of which the Company shall have a period of sixty (60) days during which it may remedy such condition.

 

(f)            Termination Following any Change in Control.  Executive’s employment hereunder may be terminated by Executive within two (2) years following any Change in Control (as defined below) of the Company.  For purposes of this Agreement, a “Change in Control” of the Company will be deemed to occur on the earliest to occur of any of the following events:

 

(i)            Change in Ownership:  A change in ownership of the Company occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, excluding the acquisition of additional stock by a person or more than one person acting as a group who is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company.

(ii)           Change in Effective Control:  A change in effective control of the Company occurs on the date that either:

 

(1)           Any one person, or more than one person acting as a group, acquires (or has acquired during the eighteen (18) month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing thirty percent (30%) or more of the total voting power of the stock of the Company;

 

(2)           A majority of the members of the Company’s Board of Directors is replaced during any twenty-four (24) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; provided, that this paragraph (2) will apply to the Company only if no other corporation is a majority shareholder.

 

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(iii)          Change in Ownership of Substantial Assets:  A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

(iv)          Statement of Intended Interpretation:  It is the intent of the parties that the definition of Change in Control under this Agreement be construed consistent with the definition of “Change in Control” as defined in Internal Revenue Code Section 409A (“Code Section 409A”) and the applicable Treasury Regulations, as amended from time to time.

 

6.2          Payment Upon Termination.

 

(a)           Upon termination of Executive’s employment (i) by the Executive voluntarily pursuant to Section 6.1(a) hereof, (ii) by reason of Executive’s permanent incapacity pursuant to Section 6.1(b) hereof, or (iii) by the Company for cause pursuant to Section 6.1(c) hereof, the Company shall pay to Executive, within thirty (30) days after the effective date of such termination, an amount equal to Executive’s then Base Salary accrued as of such date plus any unreimbursed expenses then owed by the Company to Executive.  All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of Code Section 409A.

 

(b)           Upon termination of Executive’s employment by reason of Executive’s death pursuant to Section 6.1(b) hereof, the Company shall pay to Executive, within thirty (30) days after Executive’s death, an amount equal to Executive’s then Base Salary accrued as of such date plus any unreimbursed expenses then owed by the Company to Executive.

 

(c)           Upon termination of Executive’s employment (i) by the Company without cause pursuant to Section 6.1(d) hereof, (ii) by Executive for Good Reason pursuant to Section 6.1(e) hereof or (iii) by Executive following a Change in Control of the Company pursuant to Section 6.1(f), the Company shall make a cash payment to Executive within thirty (30) days after the effective date of such termination in the amount of $2,270,000, plus any unreimbursed expenses then owed by the Company to Executive.  Executive’s receipt of the benefits set forth in this Section 6.2(c) shall be subject to Executive’s timely execution of a customary general release in the form and substance reasonably satisfactory to the Company.

 

(d)           Nothing contained in this Section 6.2 shall affect the terms of any employee stock options, stock grants, or other equity-based compensation that may have been issued by the Company to Executive, which in the event of termination of Executive’s employment with the Company shall continue to be governed by their own terms and conditions; provided, however, that if Executive’s employment is terminated (i) by the Company “without cause pursuant to Section 6.1(d) hereof, (ii) by Executive for Good Reason pursuant to Section

 

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6.1(e) hereof or (iii) by Executive following a Change in Control of the Company pursuant to Section 6.1(f), any and all stock options, stock grants or other stock based compensation granted to Executive shall then immediately vest.

 

(e)           Notwithstanding anything herein to the contrary, to the extent any of the benefits that Executive is entitled to are conditioned upon the timely execution of a release constitute “deferred compensation” under Code Section 409A, such payments shall be made on the thirtieth (30th) day after the effective date of such termination (provided Executive has timely executed the release provided by the Company).

 

6.3          Application of Code Section 409A.

 

(a)           This Agreement shall be interpreted to avoid any penalty sanctions under Code Section 409A.  If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under Code Section 409A, then such benefit or payment will be provided in full (to the extent not paid in part at earlier date) at the earliest time thereafter when such sanctions will not be imposed.  For purposes of Code Section 409A, all payments to be made upon a termination of employment under this Agreement may only be made upon Executive’s “separation from service” (within the meaning of such term under Code Section 409A) with the Company, each payment made under this Agreement will be treated as a separate payment, and the right to a series of installment payments under this Agreement will be treated as a right to a series of separate payments.  In no event will Executive, directly or indirectly, designate the calendar year of payment, except as permitted under Code Section 409A.

 

(b)           Notwithstanding anything herein to the contrary, if, at the time of Executive’s “separation from service” with the Company, the Company has securities which are publicly traded on an established securities market and Executive is a “specified employee” (as such term is defined in Code Section 409A) and it is necessary to postpone the commencement of any payments or benefits otherwise payable under this Agreement as a result of such termination of employment to prevent any accelerated or additional tax under Code Section 409A, then the Company will postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive), until the first payroll date that occurs after the date that is six (6) months following Executive’s “separation of service” with the Company.  If any payments are postponed due to such requirements, such postponed amounts will be paid with interest at the applicable federal rate as provided under Code Section 7872(f)(2)(A) in a lump sum to Executive on the first payroll date that occurs after the date that is six (6) months following Executive’s “separation of service” with the Company.  If Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of Code Section 409A will be paid to the personal representative of Executive’ s estate within sixty (60) days after the date of Executive’s death.  Payments pursuant to Section 6.2 of this Agreement are intended to satisfy the short-term deferral exception under Code Section 409A.

 

(c)           All reimbursements and in-kind benefits provided under this Agreement will be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement will be for expenses incurred during Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii)

 

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the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.

 

(d)           To the extent applicable, all grants, awards, bonuses or other payments made to Executive or for which Executive is eligible under any Company bonus, incentive, deferred compensation plan or program or any other compensation arrangement will be structured to comply with the requirements of Code Section 409A or an exception from such requirements.

 

7.             Arbitration.

 

7.1          Subject to the limitations of this Article 7, if any dispute arises between the parties under or concerning this Agreement or the terms hereof, or regarding the manner in which Executive was treated while employed by the Company, the termination of his employment, or any alleged violation by the Company of Executive’s rights under any common law theory, or any applicable federal, state, or local law, statute, regulation, or ordinance (including without limitation 42 U.S.C. § 1981, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and any other local, state, or federal legislation that pertains to employee rights or discrimination in employment), the parties agree to submit such issue to final and binding arbitration in accordance with the then existing National Rules for the Resolution of Employment Disputes of the American Arbitration Association.  Nothing in this Article 7, however, will preclude the Company from seeking the judicial relief set forth under Article 5 of this Agreement.

 

7.2          The parties agree that the interpretation and enforcement of the arbitration provisions in this Agreement will be governed exclusively by the Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1 et seq., provided that they are enforceable under the FAA, and will otherwise be governed by the law of the Commonwealth of Pennsylvania.

 

7.3          The parties agree and understand that one of the objectives of this arbitration agreement is to resolve disputes expeditiously, as well as fairly, and to those ends it is the obligation of both parties to raise any disputes subject to arbitration hereunder in an expeditious manner.  Accordingly, the parties agree that, as to any dispute that can be brought hereunder, a demand for arbitration must be postmarked or delivered in person to the other party no later than six (6) months after the date the demanding party knows or should have known of the event or events giving rise to the claim.  Failure to demand arbitration on a claim within these time limits is intended to, and will to the furthest extent permitted by law, be a waiver and release with respect to such claims.  If, and only if, the waiver and release of claims referenced in the immediately preceding sentence is found by a court of competent jurisdiction to be unenforceable as against Executive or the Company under this Agreement, then the parties will nevertheless submit such claims to arbitration pursuant to this Article within the time permitted by law.

 

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7.4          The Company will pay the arbitrator’s fees.

 

7.5          Unless otherwise agreed by the parties, arbitration will take place in Philadelphia, Pennsylvania.

 

7.6          In rendering an award, the arbitrator will determine the rights and obligations of the parties according to federal law and the substantive law of the Commonwealth of Pennsylvania without regard to any principles governing conflicts of laws and the arbitrator’s decision will be governed by state and federal substantive law, including state and federal discrimination laws referenced in Section 7.1 hereof, as though the matter were before a court of law.

 

7.7          Any arbitration award will be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award.  The decision of the arbitrator will be made within thirty (30) days following the close of the hearing.  The parties agree that the award will be enforceable exclusively by any state or federal court of competent jurisdiction within Philadelphia, Pennsylvania.

 

7.8          It is understood and agreed by the parties that their agreement herein concerning arbitration does not contain, and cannot be relied upon by Executive to contain, any promises or representations concerning the duration of the employment relationship, or the circumstances under or procedures by which the employment relationship may be modified or terminated.

 

7.9          If any part of this arbitration procedure is in conflict with any mandatory requirement or applicable law, the law will govern, and that part of this arbitration procedure will be reformed and construed to the maximum extent possible in conformance with the applicable law.  The arbitration procedure will remain otherwise unaffected and enforceable.

 

8.             Miscellaneous.

 

8.1          Transfer and Assignment; Successors.  This Agreement is personal as to Executive and shall not be assigned or transferred by Executive. This Agreement shall be binding upon and inure to the benefit of all of the parties hereto and their respective permitted heirs, personal representatives, successors and assigns.

 

8.2          Severability.  Nothing contained herein shall be construed to require the commission of any act contrary to law and, as to the Company, any rule applicable to listed companies of the New York Stock Exchange (or any other exchange on which the Company’s common stock is listed).  Should there be any conflict between any provisions hereof and any present or future statute, law, ordinance, rule (including, with respect to the Company and without limitation, any rule applicable to listed companies of the New York Stock Exchange (or any other exchange on which the Company’s common stock is listed)), regulation or other pronouncement having the force of law, the latter shall prevail, but the provision of this Agreement affected thereby shall be curtailed and limited only to the extent necessary to bring it within the requirements of the law, and the remaining provisions of this Agreement shall remain in full force and effect.

 

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8.3          Governing Law.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Pennsylvania.

 

8.4          Counterparts.  This Agreement may be executed in several counterparts and all documents so executed shall constitute one agreement, binding on all of the parties hereto, notwithstanding that all of the parties did not sign the original or the same counterparts.

 

8.5          Entire Agreement.  This Agreement constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements, arrangements and understandings with respect thereto.  No representation, promise, inducement, statement or intention has been made by any party hereto that is not embodied herein, and no party shall be bound by or liable for any alleged representation, promise, inducement, or statement not so set forth herein.

 

8.6          Modification.  This Agreement may be modified, amended, superseded or cancelled, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by all of the parties hereto.

 

8.7          Attorneys’ Fees and Costs.  In the event of any dispute arising out of the subject matter of this Agreement, the prevailing party shall recover, in addition to any other damages assessed, its reasonable attorneys’ fees, legal expenses and court costs incurred in litigating, arbitrating or otherwise attempting to enforce this Agreement or resolve such dispute.  In construing this Agreement, no party hereto shall have any term or provision construed against such party solely by reason of such party having drafted or written such term or provision.

 

8.8          Waiver.  The waiver by either of the parties, express or implied, of any right under this Agreement or any failure to perform under this Agreement by the other party, shall not constitute or be deemed as a waiver of any other right under this Agreement or of any other failure to perform under this Agreement by the other party, whether of a similar or dissimilar nature.

 

8.9          Cumulative Remedies.  Each and all of the several rights and remedies provided in this Agreement, or by law or in equity, shall be cumulative, and no one of them shall be exclusive of any other right or remedy, and the exercise of any one of such rights or remedies shall not be deemed a waiver of, or an election to exercise, any other such right or remedy.

 

8.10        Headings.  The section and other headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning and interpretation of this Agreement.

 

8.11        Notices.  Any notice under this Agreement must be in writing and may be: (i) telecopied, (ii) sent by overnight courier, (iii) hand-delivered, or (iv) sent by United States mail, to the party to be notified at the following address:

 

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If to the Company, to:

 

Hill International, Inc.

One Commerce Square

2005 Market Street, 17th Floor

Philadelphia, Pennsylvania 19103

Attention:  Catherine H. Emma, Senior Vice President and Chief Administrative Officer

 

With a copy to:

 

Hill International, Inc.

One Commerce Square

2005 Market Street, 17th Floor

Philadelphia, Pennsylvania 19103

Attention:  William H. Dengler, Jr., Esq., Senior Vice President and General Counsel

 

If to Executive, to:

 

Raouf S. Ghali

Lord Byron 4

Pallini 15334

Athens, Greece

 

Each notice delivered in accordance with this Section 8.11 shall be deemed to be effective as of the date such notice was sent.  Each party may change its address for notice by giving notice thereof in the manner provided above.

 

8.12        Survival.  Any provision of this Agreement which imposes an obligation after termination or expiration of this Agreement shall survive the termination or expiration of this Agreement and be binding on Executive and the Company.

 

IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to be executed under seal as of the date first written above.

 

	
Attested to by:
    	
HILL   INTERNATIONAL, INC
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/ William H.   Dengler, Jr.
    	
 
    	
By: 
    	
/s/ Catherine H. Emma,   PHR
    
	
William H.   Dengler, Jr.
    	
 
    	
 
    	
Catherine H. Emma, PHR,
    
	
Secretary
    	
 
    	
Senior Vice President   and Chief Administrative Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Raouf S. Ghali
    
	
 
    	
RAOUF S. GHALI
    

 

13EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is dated as of August 18, 2016 by and between Fauquier Bankshares, Inc. a Virginia corporation (the "Company"), and Timothy Michael York and to which The Fauquier Bank, a wholly-owned banking subsidiary of the Company (the "Bank"), is made a party.

The parties, intending to be legally bound, agree as follow:

1. Employment.  You will be employed as Executive Vice President and Chief Operating Officer of the Company and the Bank on the terms and subject to the conditions of this Agreement.  You will have the duties and responsibilities that are commensurate with your position and shall also render such other managerial services as may be reasonably assigned to you by the Company or its designee, consistent with your position.  You accept such employment and agree to devote the necessary time and attention on a full-time basis to the discharge of such duties and responsibilities to the best of your abilities.  You agree to comply with all policies, standards and codes of conduct of the Company now or hereafter adopted.

References in this Agreement to services rendered for the Company and compensation and benefits payable or provided by the Company shall include services rendered for, and compensation and benefits payable or provided by, any Affiliate (as defined below) of the Company.  Unless the context otherwise requires, references in this Agreement to the "Company" also shall mean and refer to any business entity, including the Bank, that, directly or indirectly through one or more intermediaries, is controlled by the Company (each, an "Affiliate").

2. Term.  The term of this Agreement shall be deemed to have commenced on June 29, 2016 and, subject to Section 5, shall continue until December 31, 2018; provided that on December 31, 2017 and on each December 31st thereafter (each such December 31st is referred to as the "Renewal Date"), this Agreement will be automatically extended for an additional calendar year so as to terminate two years from such Renewal Date.  This Agreement will not, however, be extended if the Company gives you written notice ("Nonrenewal Notice") of such non-renewal before the Renewal Date (the initial and any extended term of this Agreement is referred to as the "Employment Period").  Notwithstanding anything in this Agreement to the contrary, this Agreement will automatically terminate on the first day of the month immediately following the month in which you turn sixty-five (65).  The last day of the Employment Period is sometimes referred to in this Agreement as the "Expiration Date."

3. Compensation.

(a) Base Salary.  During the Employment Period, you will receive for your services an annual base salary (the "Base Salary") in an amount to be determined by the Company in accordance with its salary administration program as it may from time to time be in effect.  The Base Salary will be reviewed annually and may be adjusted upward or downward in the sole discretion of the Compensation Committee or the Board of Directors of the Company, except that any downward adjustment in your Base Salary may be made only in connection with a general reduction in Base Salary that affects all similarly situated senior officers of the Company in substantially the same proportions.  The initial Base Salary will be $225,000.  In no event will the Base Salary be less than $225,000.

(b) Short-Term and Long-Term Incentives.  During the Employment Period, you may participate in such short-term and/or long-term cash and/or equity incentive plan(s) in such manner and subject to such terms and conditions as the Compensation Committee or the Board of Directors of the Company in its sole discretion may determine.  Based on your June start date, you will be eligible to participate in the 2016 Management Incentive Plan on a pro rata basis equal to 50%.  An annual bonus, if any, will be paid within two and a half months after the end of the applicable year.  To be eligible to receive any bonus, you must be employed by the Company on the date such bonus is paid, unless you have retired in accordance with the Company's retirement policy after the date on which you were deemed to have earned any bonus under the applicable bonus or incentive plan.

(c) Supplemental Executive Retirement Benefit.  As soon as reasonably practicable, the Company will enter into a supplemental executive retirement plan with you to provide for certain supplemental nonqualified cash benefits in accordance with the terms included in the Company's offer letter, dated June 17, 2016.

4. Benefits; Business Expenses.

(a) Benefit Programs.  You will eligible to participate in any plans, programs, or forms of compensation or benefits that the Company or its Affiliates provide to the class of employees that includes you, on a basis not less favorable than that provided to such class of employees, including without limitation, group medical, disability and life insurance, vacation and sick leave, and retirement.  It is understood that the Board of Directors of the Company may, in its sole discretion, establish, modify or terminate such plans, programs or benefits.

(b) Business Expenses.  The Company will pay on your behalf (or promptly reimburse you for) reasonable expenses incurred by you at the request of, or on behalf of, the Company in the performance of your duties pursuant to this Agreement and in accordance with the Company's policies.

(c) Paid Time-Off.  You will be entitled to paid time-off in accordance with the Company's paid time-off policies as in effect from time to time.  Under the Company's current policy, you will be entitled to twenty-eight (28) days of paid time-off annually, including vacation, sick leave and personal leave.

(d) Relocation Expenses.  The Company will pay directly to a moving company of our mutual choice, after soliciting three estimates, moving expenses incurred relating to your relocation to the Warrenton, Virginia area.  In addition, the Company will pay directly to the closing attorney or other third party agent handling the disbursement of funds in connection with the sale of your personal residence an amount equal to the real estate agent's commission, not to exceed $25,000, plus a separate amount of up to $5,000 to reimburse you for travel related expenses prior to your move.  If you terminate your employment without Good Reason or the Company terminates your employment for Cause, in either case prior June 29, 2019, you will be required to reimburse the Company for the Real Estate Commissions on a prorated basis, determined by the product of the Real Estate Commissions and a fraction, the numerator of which is the number of whole months between the date of termination and June 29, 2019 and the denominator of which is thirty-six (36).

5. Termination and Termination Benefits.  The Employment Period and your employment may be terminated by either the Company or you at any time or for any reason.  Upon termination of your employment during the Employment Period, you shall be entitled to the compensation and benefits described in this Section 5 and shall have no further rights to any compensation or other benefits from the Company or any of its Affiliates, provided that Section 6 shall govern the compensation and other benefits payable to you in connection with the termination of your employment following a Change in Control (as defined in Section 6(b)) of the Company.

(a) Termination as a Consequence of Death or Incapacity.  If you die while employed by the Company, the Company will pay your beneficiary designated in writing (provided such writing is executed and dated by you and delivered to the Company in a form acceptable to the Company prior to your death) and surviving you or, if none, your estate your Base Salary through the end of the third full calendar month following the month in which your death occurs.

If the Company determines that the Incapacity, as defined below, of you has occurred, it may terminate your employment and this Agreement upon thirty (30) days' written notice, provided that, within thirty (30) days after receipt of such notice you shall not have returned to full-time performance of your assigned duties.  Incapacity shall mean either: (i) your failure to perform your assigned duties and responsibilities 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; or (ii) incapacity or disability as defined in the disability insurance policy maintained by the Company for your benefit, whichever definition is more favorable to you.  You will not be entitled to any additional benefits under this Agreement as a result of a termination due to your Incapacity.

(b) Termination for Cause.  Your employment may be terminated by the Company for Cause (as defined below).  If your employment is terminated by the Company for Cause, you will be entitled to receive:

(i) Any accrued but unpaid Base Salary which shall be paid on the payroll date immediately following the date of termination in accordance with the Company's customary payroll procedures;

(ii) Reimbursement for unreimbursed expenses properly incurred by you, which shall be subject to and paid in accordance with the Company's expense reimbursement policy; and

(iii) Such employee benefits (including equity compensation), if any, to which you may be entitled under the Company's employee benefit plans and programs as of the date of termination (items (i) through (iii) are referred to collectively as the "Accrued Amounts").

(c) Definition of Cause.  For purposes of this Agreement, Cause shall mean:

(i) Your failure to perform any of the material duties and responsibilities required by your position (other than by reason of Incapacity), or your failure to follow reasonable instructions or policies of the Company;

(ii) Your conviction of or entering of a guilty plea or plea of no contest with respect to a felony, a crime of moral turpitude or any other crime with respect to which imprisonment is a possible punishment, or your misappropriation or embezzlement of funds or property of the Company or its Affiliates;

(iii) Your fraud or dishonesty with respect to the Company or its Affiliates;

(iv) Your breach of fiduciary duties owed by you to the Company or its Affiliates;

(v) Your breach of a material term of this Agreement or violation in any material respect of any code or standard of behavior generally applicable to employees of the Company; or

(vi) Your engaging in conduct that, if it became known by any regulatory or governmental agency or the public, is reasonably likely to result, or has resulted, in material injury to the Company or its Affiliates, reputational, financial or otherwise.

You shall not be deemed to have been terminated for Cause unless and until the Company delivers to you a copy of a resolution duly adopted by the affirmative vote of a majority of the directors who qualify as "independent" directors of the Company under the applicable stock exchange listing requirements (the "Independent Directors"), after reasonable written notice is provided to you and you are given an opportunity, together with counsel, to be heard before the Independent Directors, finding that you are guilty of the conduct described in any of clauses (i) – (vi) above.  Except for a failure, breach or refusal which, by its nature, cannot reasonably be expected to be cured, you shall have ten (10) days from the delivery of written notice by the Company within which to cure any acts constituting Cause; provided, however, that if a majority of the Independent Directors reasonably expects irreparable injury from a delay of ten (10) days, the Company may give you notice of such shorter period within which to cure as the Independent Directors determine is reasonable under the circumstances, which may include the termination of your employment without notice and with immediate effect.

(d) Termination by You Other Than for Good Reason.  You may terminate your employment hereunder without Good Reason (as defined below) by written notice to the Company effective thirty (30) days after receipt of such notice by the Company or at any time by mutual agreement in writing.  If you terminate your employment without Good Reason, you will be entitled to receive the Accrued Amounts as provided in Section 5(b).  It shall not constitute a breach of this Agreement for the Company to suspend your duties and to place you on paid leave during the notice period.

(e) Termination by the Company Without Cause.  Your employment may be terminated by the Company without Cause at any time upon written notice to you, which termination will be effective immediately or on such later date as specified in the written notice.  In the event your employment is terminated without Cause, you shall receive the Accrued Amounts and, provided you sign a release and waiver of claims in favor of the Company and its Affiliates and their respective officers and directors in a form provided by the Company (the "Release") and it becomes effective, you shall receive the following benefits:

(i) Any earned but unpaid incentive bonus with respect to any completed calendar year immediately preceding the date of termination, which shall be paid on the applicable payment date;

(ii) The product of the annual cash bonus paid or payable, including by reason of deferral, for the most recently completed year and a fraction, the numerator of which is the number of days in the current year through the date of termination and the denominator of which is 365, which shall be paid within thirty (30) days of the termination date;

(iii) The Company shall continue to pay your Base Salary in effect on the date of termination for a period of twenty-four (24) months, such payments to be made on the same periodic dates as salary payments would have been made to you had your employment not been terminated, subject to compliance with Section 11(g) of this Agreement regarding the requirements of Section 409A of the Internal Revenue Code of 1986 (the "Code"); and

(iv) If you timely and properly elect continuation coverage under the Consolidated Omnibus Reconciliation Act of 1985 ("COBRA"), the Company will reimburse you for the difference between the monthly COBRA premium amount paid by you for your and your eligible dependents' group health insurance coverage and the monthly premium amount paid by similarly situated active employees.  Such reimbursement will be paid to you by the tenth day of the month immediately following the month in which you timely remit the COBRA premium payment.  You shall be eligible to receive such reimbursement until the earliest of: (A) eighteen (18) months following the date of termination, (B) the date you are no longer eligible to receive COBRA continuation coverage; or (C) the date on which you become eligible to receive substantially similar coverage from another employer.  Notwithstanding the foregoing, if the Company's payments under this Section 5(e)(iv) would violate the nondiscrimination rules applicable to non-grandfathered plans or would result in the imposition of penalties under the Patient Protection and Affordable Care Act of 2010 and the related regulations and guidance promulgated thereunder (the "PPACA"), the parties agree to reform this Section 5(e)(iv) in a manner as is necessary to comply with the PPACA.

(f) Termination by You for Good Reason.  You may voluntarily terminate your employment under this Agreement at any time for Good Reason and be entitled to receive the compensation and other benefits set forth in Section 5(e) relating to a termination without Cause, provided you sign a Release and it becomes effective.  You must provide written notice to the Company of the existence of the event or condition constituting such Good Reason within ninety (90) days of the initial occurrence of the event or condition alleged to constitute Good Reason.  Upon delivery of such notice by you, the Company shall have a period of thirty (30) days during which it may remedy in good faith the event or condition constituting Good Reason, and your employment shall continue in effect during such time so long as the Company is making diligent efforts to cure.  In the event the Company shall remedy in good faith the event or condition constituting Good Reason, then such notice of termination shall be null and void, and the Company shall not be required to pay the amount due to you under this Section 5(f).

For purposes of this Agreement, Good Reason shall mean:

(i) The assignment to you, without your written consent, of duties inconsistent with your position, authority, duties or responsibilities as contemplated by Section 1 hereof;

(ii) Any action taken by the Company that results in a substantial reduction in your status, including a diminution in your position, authority, duties or responsibilities;

(iii) Requiring you to maintain your primary office outside of the Market Area (as defined in Section 7(d)), unless either the Company or the Bank moves its principal executive offices to the place to which you are required to move your primary office;

(iv) The failure of the Company to comply with any material term of this Agreement; or

(v) The failure of the Company to nominate you for election to the Board of Directors of the Company and to use its best efforts to have you re-elected.

Notwithstanding the above, Good Reason shall not include your removal as an officer of any Affiliate of the Company (including the Bank) in order that you might concentrate your efforts on the Company or any resignation by you where Cause for your termination by the Company exists.

(g) Resignation of All Other Positions.  Effective upon the termination of your employment for any reason, you shall be deemed to have resigned from all positions that you hold as an officer or member of the Board of Directors (or a committee thereof) of the Company or any of its Affiliates.

(h) Regulatory Requirement.  The Company shall not be required to make payment of, or provide any benefit under, this Section 5 to the extent such payment or benefit is prohibited by the regulations presently found at 12 C.F.R. Part 359 or to the extent that any other governmental approval for the payment or benefit that is required by law is not received.

6. Change in Control Termination.

(a) Change in Control Payments and Benefits.  Notwithstanding any other provision in this Agreement, if your employment is terminated by you for Good Reason or by the Company on account of its failure to renew the Agreement in accordance with Section 2 or without Cause (other than on account of your death or Incapacity), in each case within thirty-six (36) months following a Change in Control, you shall be entitled to receive the following payments and benefits, provided you sign a Release and it becomes effective:

(i) The sum of: (1) the Accrued Amounts; (2) the amount, if any, of any earned but unpaid incentive or bonus compensation with respect to any completed calendar year immediately preceding the date of termination; (3) the product of the annual cash bonus paid or payable, including by reason of deferral, for the most recently completed year and a fraction, the numerator of which is the number of days in the current year through the date of termination and the denominator of which is 365; and (4) 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 been paid to you.  These amounts will be paid to you in a lump sum cash payment within ten (10) days after the effective date of the Release;

(ii) An amount equal to 2.99 times your Final Compensation.  For purposes of this Agreement, Final Compensation means the Base Salary in effect at the date of termination, plus the highest annual cash bonus paid or payable for the two most recently completed years.  This severance benefit will be paid to you in a lump sum cash payment within thirty (30) days after the effective date of the Release; and

(iii) If you timely elect COBRA coverage, your current benefits under group health and dental plans will continue in accordance with Section 5(e)(iv).  its portion of such health and dental premiums.

(b) For purposes of this Agreement, Change in Control means the occurrence of any of the following:

(i) The acquisition by any Person (as defined below) of beneficial ownership of 25% or more of the then outstanding shares of common stock of the Company, provided that an acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege) shall not constitute a Change in Control;

(ii) Individuals who constitute the Board of Directors of the Company on the effective date of this Agreement (the "Incumbent Board") cease to constitute a majority of the Board of Directors, provided that any director whose nomination was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board will be considered a member of the Incumbent Board, but excluding any such individual whose assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company;

(iii) Consummation by the Company of a reorganization, merger, share exchange or consolidation (a "Reorganization"), provided that the consummation of a Reorganization will not constitute a Change in Control if, upon consummation of the Reorganization, each of the following conditions is satisfied:

		(1)	More than 50% of the then outstanding shares of common stock of the corporation resulting from the Reorganization is beneficially owned by all or substantially all of the former shareholders of the Company in substantially the same proportions as their ownership existed in the Company immediately prior to the Reorganization; and

		(2)	At least a majority of the members of the board of directors of the corporation resulting from the Reorganization were members of the Incumbent Board at the time of the execution of the initial agreement providing for the Reorganization; or

(iii) The complete liquidation or dissolution of the Company, or the sale or other disposition of all or substantially all of the assets of the Company.

(iv) For purposes of this Agreement, "Person" means any individual, entity or group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, and "beneficial ownership" has the meaning given the term in Rule 13d-3 under the Exchange Act.

(c) Potential Limitation of Payments and Benefits.

(i) Subject to subsection (ii) below, in the event that the aggregate value of the payments and benefits to which you may be entitled under this Agreement or any other agreement, plan, program or arrangement in connection with a Change in Control (the "Change in Control Termination Benefits") would subject you the excise tax imposed under Section 4999 of the Code (the "Excise Tax"), then the Change in Control Termination Benefits shall be reduced in a manner determined by the Company (by the minimum possible amount) that is consistent with the requirements of Section 409A of the Code until no amount or benefit payable to you will be subject to the Excise Tax.

(ii) Notwithstanding the foregoing, no reduction in the Change in Control Termination Benefits shall be made if your Net After-Tax Benefit (as defined below) assuming such reduction was not made exceeds by $25,000 or more your Net After-Tax Benefit assuming such reduction was made.

(iii) "Net After-Tax Benefit" shall mean the amount of the Change in Control Termination Benefits which you receive or are then entitled to receive, less the amount of all applicable taxes payable by you with respect to the Change in Control Termination Benefits, including any Excise Tax.

(iv) All calculations and determinations under this Section 6(c) shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the "Tax Advisor") whose determinations shall be conclusive and binding on the Company and you for all purposes.  The Tax Advisor may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code.  The Company shall bear all costs of the Tax Advisor.

7. Covenants.

(a) Noncompetition.  You agree that during the Employment Period and for a two-year period following the expiration of this Agreement (subject to Section 7(c) below) or, if sooner, the termination of your employment for any reason, including resignation or retirement, during the Employment Period (the "Noncompete Period"), you will not directly or indirectly, as a principal, agent, employee, employer, investor, director, consultant, co-partner or in any other individual or representative capacity whatsoever, engage in a business that provides Competitive Services anywhere in the Market Area (as such terms are defined below) in any competitive capacity holding a similar office or engaging in similar activities to those which you held or performed on behalf of the Company and any of its Affiliates during the Employment Period.  Notwithstanding the foregoing, you may purchase or otherwise acquire up to (but not more than) 1% of any class of securities of any business enterprise (but without otherwise participating in the activities of such enterprise) that engages in a Competitive Business in the Market Area and whose securities are listed on any national or regional securities exchange or have been registered under Section 12 of the Securities Exchange Act of 1934, as amended.

(b) Nonsolicitation.  You further agree that during the Employment Period and for a two-year period following the expiration of this Agreement or, if sooner, the termination of your employment for any reason, including resignation or retirement, during the Employment Period, you will not directly or indirectly: (i) solicit, or assist any other person in soliciting, any Customers (as defined below) to make deposits in, borrow money from, or otherwise become customers of any other business entity conducting a Competitive Business in the Market Area; (ii) induce any Customers to terminate their relationship with the Company or its Affiliates; or (iii) contact, solicit or assist in the solicitation of any employee to terminate his or her employment with the Company or its Affiliates.

(c) Expiration of the Agreement.  If the Company elects not to extend this Agreement by giving you a Nonrenewal Notice in accordance with Section 2 and your employment is subsequently terminated after the expiration of the then current term, you will not be subject to the noncompetition provisions of Section 7(a) unless the Company makes a timely election to continue to make Base Salary payments to you at the level in effect at the date of termination of your employment for the remaining balance of the Noncompete Period.  The Company must notify you in writing of its election to enforce the noncompetition provisions of Section 7(a) within seven (7) business days following the termination of your employment.  The Company may not revoke its election to enforce the noncompetition covenant.

(d) Definitions.  As used in this Agreement, the term "Competitive Services" means providing financial products and services, which includes offering one or more of the following services and products: depository accounts, consumer and commercial lending, residential and commercial mortgage lending, cash management services, trust and estate administration, asset management, and any other business in which the Company or any of its Affiliates are engaged and in which you are significantly engaged at the time of termination of your employment; the term "Customer" means any individual or entity to whom or to which the Company or an Affiliate provided Competitive Services within two (2) years of the date on which your employment terminates; the term "Market Area" means (i) Fauquier County and Prince William County and any separately incorporated municipality located within either Fauquier County or Prince William County, and (ii) the area within a 15-mile radius of any full-service banking office established by the Company at the time of termination of your employment; the term "Person" means any person, partnership, corporation, company, group or other entity; and the term "Confidential Information" shall include, but not be limited to, all financial and personnel data, computer software and all data base technologies, capital plans, customer lists and requirements, market studies, know-how, processes, trade secrets, and any other information concerning the non-public business and affairs of the Company.

(e) Confidentiality.  During the Employment Period and thereafter, and except as required by any court, supervisory authority or administrative agency or as may be otherwise required by applicable law, you shall not, without the written consent of a person duly authorized by the Company, disclose to any person (other than your personal attorney, or an employee of the Company or an Affiliate, or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by you of your duties as an employee of the Company) or utilize in conducting a business any Confidential Information obtained by you while in the employ of the Company, unless such information has become a matter of public knowledge at the time of such disclosure.

(f) Acknowledgment.  The covenants contained in this Section 7 shall be construed and interpreted in any proceeding to permit their enforcement to the maximum extent permitted by law.  You agree that the restrictions imposed herein are necessary for the reasonable and proper protection of the Company and its Affiliates, and that each and every one of the restrictions is reasonable in respect to length of time, geographic area and scope of prohibited activities, and that the restrictions are neither overly restrictive on your post-employment activity nor overly burdensome for you to abide by.  You covenant that you will not make any contention contrary to any of the foregoing representations in the future and agree that you will be estopped to deny or contradict the truth or accuracy of these representations.  If, however, the time, geographic and/or scope of activity restrictions set forth in Section 7 are found by an arbitrator or court to exceed the standards deemed enforceable, the arbitrator or court, as applicable, is empowered and directed to modify the restriction(s) to the extent necessary to make them enforceable.  Notwithstanding anything to the contrary herein, nothing in this Agreement shall be construed to prohibit any activity that cannot reasonably be construed to further in any meaningful way any actual or potential competition against the Company or an Affiliate.

(g) Enforcement.  You acknowledge that damages at law would not be a measurable or adequate remedy for breach of the covenants contained in this Section 7 and, accordingly, you agree to submit to the equitable jurisdiction of any court of competent jurisdiction in connection with any action to enjoin you from violating any such covenants.  If the Company is successful in whole or in part in any legal, equitable, or arbitration action against you in connection with the enforcement of the covenants included in this Section 7, the Company shall be entitled to payment of all costs, including reasonable attorney's fees, from you.  If, on the other hand, it is finally determined by a court of competent jurisdiction that a breach or threatened breach did not occur under Section 7 of this Agreement, the Company shall reimburse you for reasonable legal fees incurred to defend the claim.  In the event legal action is commenced with respect to the provisions of this Section 7 and you have not strictly observed the restrictions set forth in this Section 7, then the restricted periods described in Paragraphs (a) and (b) shall begin to run anew from the date of any Final Determination of such legal action.  "Final Determination" shall mean the expiration of time to file any possible appeal from a final judgment in such legal action or, if an appeal be taken, the final determination of the final appellate proceeding.  All the provisions of this Section 7 will survive termination and expiration of this Agreement.

(h) Change in Control.  Notwithstanding anything to the contrary contained in this Agreement, in the event of a Change in Control, the restrictions imposed by paragraphs (a) and (b) of this Section 7 will apply to you after you cease to be employed by the Company or its successor only if your employment is terminated without Cause or for Good Reason, thereby entitling you to the severance benefits described in Section 6(a).

(i) Notice.  During the twenty-four (24) month period following the date of termination, you shall provide the Company with at least ten days written notice before the starting date of any employment, identifying the prospective employer and its affiliated companies and the job description, including a description of the proposed geographic market area associated with the new position.  You shall notify in writing any new employer of the existence of the restrictive covenants set forth in Section 7 of this Agreement.

8. Dispute Resolution.

(a) If a dispute arises out of or relates to this Agreement, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation before resorting to arbitration in accordance with Section 8(b) hereof.  The parties agree to use The McCammon Group, Ltd. and to convene the mediation in Warrenton, Virginia.  The fees for the mediation will be borne equally by the parties.

(b) Except as provided in Section 8(c) below and to the extent any dispute is not resolved through mediation as provided in Section 8(a), any dispute, controversy or claim arising out of or related to this Agreement, or any breach thereof, shall be submitted to and decided by binding arbitration to be held in Warrenton, Virginia.  The arbitration shall be administered and conducted by The McCammon Group according to its standard arbitration rules governing at the time one of the parties initiates a claim.  The fees for the arbitration services shall be borne equally by the parties, unless otherwise agreed.  The law of the Commonwealth of Virginia shall govern.  Either party may initiate arbitration pursuant to this Agreement by delivering a copy of this Agreement to The McCammon Group with a request that arbitration be initiated.  Such requests shall the claim (including relief sought) giving rise to the arbitration.  The decision of the arbitrator(s) shall be final, conclusive and binding on the parties to the arbitration.  Judgment may be entered on the arbitrator's decision in any court having jurisdiction.  The party against whom the arbitrator(s) shall render an award shall pay the other party's reasonable attorneys' fees and other reasonable costs and expenses in connection with the enforcement of its rights under this Agreement (including the enforcement of any arbitration award in court), unless and to the extent the arbitrator(s) shall determine that under the circumstances recovery by the prevailing party of all or a part of any such fees and costs and expenses would be unjust.

(c) The parties may apply to any court of competent jurisdiction for a temporary restraining order, preliminary injunction, or other interim or conservatory relief, as necessary, without breach of this arbitration agreement and without abridgment of the powers of the arbitrator(s).

9. Non-disparagment.  You will not at any time during or after the Employment Period make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company or its business, or any of its directors, employees, customers, and other associated third parties.  This Section 9 does not, in any way, restrict or impede you from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by law, regulation or order.  You shall promptly provide written notice of any such order to the Company.  The Company will cause its officers and directors to refrain from making, publishing or communicating, at any time during or after the Employment Period, to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning you.

10. Stock Ownership Requirements.  During the Employment Period, you will be expected to maintain ownership of Company common stock in accordance with the guidelines established by the Board of Directors from time to time.  You will be required to meet this ownership requirement within five years after the commencement of your employment.

11. Miscellaneous.

(a) Severability.  If any clause or provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, then the remainder of this Agreement shall not be affected thereby, and in lieu of each clause or provision of this Agreement which is illegal, invalid or unenforceable, there shall be added, as part of this Agreement, a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and as may be legal, valid and enforceable.

(b) Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without regard to its conflicts of law principles.

(c) Entire Agreement; Amendments.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, between the parties.  This Agreement may be amended only by an agreement signed by the parties hereto.

(d) Waiver.  The rights and remedies of the parties to this Agreement are cumulative and not alternative.  Neither the failure nor any delay by either party in exercising, in whole or in part, any right, power, or privilege under this Agreement will operate as a waiver of such right, power, or privilege.

(e) Binding Effect; Survival; No Mitigation.  This Agreement is binding upon and shall inure to the benefit of the parties and their respective successors, heirs and assigns, provided that no part of this Agreement is assignable by you.  The Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) 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.  Except as otherwise expressly provided herein, upon the termination or expiration of this Agreement the respective rights and obligations of the parties hereto shall survive such termination or expiration to the extent necessary to carry out the intentions of the parties set forth in this Agreement, including but not by way of limitation the restrictive covenants applicable to you set forth in Section 7 hereof.  You shall not be required to mitigate the amount of any payment or benefit the Company becomes obligated to make or provide to you in connection with this Agreement, by seeking other employment or otherwise.

(f) No Construction Against Any Party.  This Agreement is the product of informed negotiations between parties.  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 parties agree neither party was in a superior bargaining position regarding the substantive terms of this Agreement.

(g) Section 409A Compliance.  This Agreement is intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and administered in accordance with Section 409A.  Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption.  Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible.  For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment.  Any payments to be made under this Agreement upon a termination of employment shall only be made upon a "separation from service" under Section 409A.  Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of non-compliance with Section 409A.

Notwithstanding any other provision of this Agreement, if any payment or benefit provided to you in connection with your termination of employment is determined to constitute "nonqualified deferred compensation" within the meaning of Section 409A and you are determined to be a "specified employee" as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the date of termination (the "Specified Employee Payment Date").  The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to you in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.

(h) Clawback.  You agree that any incentive based compensation or award that you receive, or have received, from the Company or any Affiliate under this Agreement or otherwise, will be subject to clawback by the Company as may be required by applicable law or stock exchange listing requirement and on such basis as the Board of Directors of the Company determines, but in no event with a look-back period of more than three years, unless required by applicable law or stock exchange listing requirement.

(i) Documents.  All documents, records, tapes and other media of any kind or description relating to the business of the Company or its Affiliates (the "Documents"), whether or not prepared by you, shall be the sole and exclusive property of the Company.  The Documents, and any copies, shall be returned to the Company upon your termination of employment for any reason or at such earlier time as the Board of Directors of the Company or its designees may specify.

(j) Notices.  Notices and all other communications required to be delivered under this Agreement shall be in writing and shall delivered personally or sent by mail or overnight carrier addressed, in the case of the Company, to both the Chairman of the Board of the Company and the head of the Company's human resources function at the Company's principal corporate offices and, in your case, to you at your address as shown in the records of the Company.  Either party may designate another address in writing (or by such other method approved by the Company) from time to time.

(k) Acknowledgement of Full Understanding.  YOU ACKNOWLEDGE AND AGREE: (i) THAT YOU HAVE FULLY READ, UNDERSTAND AND ARE VOLUNTARILY ENTERING INTO THIS AGREEMENT; AND (ii) THAT, YOU HAVE HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF YOUR CHOICE BEFORE SIGNING THIS AGREEMENT.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written.

FAUQUIER BANKSHARES, INC.

By:          /s/ John B. Adams, Jr.

John B. Adams, Jr.

Chairman of the Board

THE FAUQUIER BANK

By:          /s/ John B. Adams, Jr.

John B. Adams, Jr.

Chairman of the Board

 

 

/s/ Timothy Michael York

Timothy Michael York

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