EMPLOYMENT AGREEMENT

(d) (1)  The Employer may terminate Executive’s employment under this Agreement other than for “Cause”, as defined in Section 5(e), at any time upon written notice to Executive, which termination shall be effective immediately.  Executive may resign after written notice to the Employer for “Good Reason”, as hereafter defined. In the event the Executive’s employment terminates pursuant to this Section 5(d)(1), Executive shall receive, at the end of the payroll period that follows the payroll period in which his employment terminates, his Base Salary earned through the date of termination, any bonuses or short-term incentive compensation as described in Section 5(b) above, and accrued but unused paid-time off.  In the event the Executive’s employment terminates pursuant to this Section 5(d)(1), provided he complies with the requirements of Section 5(i) below, Executive shall also receive the following items:

(i) An amount equal to the sum of (i) his current rate of annual Base Salary in effect immediately preceding such termination, and (ii) the average of his last two year’s annual bonus(es) earned (whether paid or unpaid due to restrictions imposed upon the Company under the TARP Capital Purchase Program); provided that such amount shall be paid in a single lump sum cash payment on the date described in Section 5(i) below;

(ii) The Executive may continue participation for both him and his covered dependents (if applicable), in accordance with the terms of the applicable benefits plans, in the Employer’s group health plan pursuant to plan continuation rules under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”).  In accordance with COBRA, assuming the Executive and his covered dependents (if applicable), are covered under the Employer’s group health plan as of his date of termination, the Executive will be entitled to elect COBRA continuation coverage for the legally required COBRA period (the “Continuation Period”) for such persons.  If the Executive timely elects COBRA coverage for group health coverage, he will be obligated to pay the portion of the full COBRA cost of the coverage equal to an active employee’s share of premiums for coverage for the respective plan year and the Employer’s share of such premiums shall be treated as taxable income to Executive.  In addition, if the terms of the applicable plan documents do not allow Employer to continue to provide COBRA coverage to Executive and his covered dependents (if applicable), beyond the expiration of the statutorily-proscribed COBRA period, the Employer shall make monthly cash payments to Executive in an amount equal to the monthly COBRA premium for coverage for Executive for the duration of the period described in Section 8 hereof. Notwithstanding the above, if during the period described in Section 8 hereof the Executive becomes eligible for qualifying health care coverage through a subsequent employer, the Employer’s obligations hereunder with respect to the foregoing benefits provided in this subsection (ii) may be terminated by the Employer.

(2)  Notwithstanding anything in this Agreement to the contrary, if Executive breaches Sections 7 and 8 of this Agreement, Executive will not thereafter be entitled to receive any further compensation or benefits pursuant to Section 5(d)(1) other than the right to participate in COBRA.

    (e) The Employer shall have the right to terminate Executive’s employment under this Agreement at any time for Cause, which termination shall be effective immediately, upon delivery of written notice to the Executive which shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment.  Termination for “Cause” shall mean termination because of the Executive's personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation other than traffic violations or similar offenses or final cease-and-desist order or material breach of any provision of this Agreement.  Cause shall also include termination because of (A) misappropriation or other intentional material damage to the property or business of the Employer by the Executive, (B) the Executive's repeated absences other than for vacation or physical or mental impairment or illness, (C) the Executive's admission or conviction of, or plea of nolo contendere to, any felony or any other crime referenced in Section 19 of the Federal Deposit Insurance Act that, in the reasonable judgment of the Board, adversely affects the Employer’s reputation or the Executive's ability to carry out the Executive's obligations under this Agreement or (D) the Executive's non-compliance with the provisions of Section 2(b) of this Agreement after notice of such non-compliance from the Employers to the Executive and a reasonable opportunity for the Executive to cure such non-compliance.  Notwithstanding the foregoing, the Employer may not terminate the Executive's employment under this Agreement for Cause unless the Employer provide the Executive with (X) written notice in accordance with the By-laws of HRB and BHR of a special meeting of the Board to consider the termination of the Executive's employment under this Agreement for Cause and (Y) the opportunity for the Executive to address such special meeting.  It shall not constitute a breach of this Agreement for the Employer to suspend the Executive’s duties and place the Executive on an unpaid leave during the period prior to the special meeting of the Board.  In the event Executive’s employment under this Agreement is terminated for Cause, Executive shall thereafter have no right to receive compensation or other benefits under this Agreement.

    (f) If Executive is suspended and/or temporarily prohibited from participating in the conduct of the Employer’s affairs by a notice served pursuant to the Federal Deposit Insurance Act, the Employer’s obligations under this Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, the Employer shall (i) pay on the first day of the first month following such dismissal of charges (or as provided elsewhere in this Agreement) the Executive all of the compensation withheld while the obligations under this Agreement were suspended; and (ii) reinstate any such obligations which were suspended.

(2)  For purposes of this Agreement, “Change in Control” shall mean as defined by Treasury Regulation § 1.409A-3(i)(5); provided however that in no event shall the merger of any corporate entities that are wholly-owned by HRB be deemed Change in Control for purposes of this Agreement.

        (h) Notwithstanding the provisions relating to the timing of payments described in this Section 5 above, if the Executive is a “specified employee” under Section 409A of the Internal Revenue Code of 1986 and any regulations thereunder (the “Code”) on the date of his termination of employment, payment of amounts due under Section 5(d)(1) shall be made as described in Section 27 of this Agreement.

      (i)  In addition, within 60 days of termination of the Executive’s employment, and as a condition to the Employer’s obligation to pay any severance under this Section 5, the Executive shall execute, and not timely revoke during any revocation period provided pursuant to such release, a release and waiver of claims reasonably satisfactory to the Employer.  In most instances, payment will be made, or in the case of installment payments, will begin as soon as practicable after such release is effective. If the 60-day period spans two calendar years, such severance payment will be made as soon as possible in the subsequent taxable year, provided however that any portion of an insurance premium due to be paid by the Employer during such 60-day period under Section 5 shall be paid by the Employer on the due date whether or not the release and waiver has been signed.

             (j) If tax counsel appointed by the Employer (the “Tax Counsel”) determines that any or the aggregate value (as determined pursuant to Section 280G of the Code) of all payments, distributions, accelerations of vesting, awards and provisions of benefits by the Employer to or for the benefit of Executive (whether paid or payable, distributed or distributable, accelerated, awarded or provided pursuant to the terms of this Agreement or otherwise) (a “Payment”) would constitute an “excess parachute payment” within the meaning of Section 280G of the Code and be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), such Payment shall be reduced to the least extent necessary so that no portion of the Payment shall be subject to the Excise Tax, but only if, by reason of such reduction, the net after-tax benefit received by the Executive as a result of such reduction will exceed the net after-tax benefit that would have been received by the Executive if no such reduction were made.  The Payment shall be reduced,  if applicable, by the Employer in the following order of priority: (A) reduction of any cash severance payments otherwise payable to the Executive that are exempt from Section 409A of the Code; (B) reduction of any other cash payments or benefits otherwise payable to the Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code; (C) reduction of any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code, in each case beginning with payments that would otherwise be made last in time; and (D) reduction of any other payments or benefits otherwise payable to the Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting and payments with respect to any equity award that are exempt from Section 409A of the Code.  If, however, such Payment is not reduced as described above, then such Payment shall be paid in full to the Executive and the Executive shall be responsible for payment of any Excise Taxes relating to the Payment.

 

8. Restrictive covenants.

10. Regulatory Compliance.  Notwithstanding anything to the contrary herein, any compensation or other benefits paid to the Executive shall be limited to the extent required by any federal or state regulatory agency having authority over HRB or BHR, including any limitations or prohibitions on payments under Section 5 of this Agreement.  The Executive agrees that compliance by HRB or BHR with such regulatory restrictions, even to the extent that compensation or other benefits paid to the Executive are limited, shall not be a breach of this Agreement by the Company or the Employer.

11. Entire Agreement; Amendment.  This Agreement contains the entire agreement between the Employer and the Executive with respect to the subject matter of this Agreement, and this Agreement may not be amended, waived, changed, modified or discharged except by an instrument in writing executed by the Employer and the Executive.

12. Assignability.  The services of the Executive under this Agreement are personal in nature, and the Employer may not assign this Agreement nor the rights or obligations of the Employer under this Agreement, whether by operation of law or otherwise, without the Executive’s prior written consent.  This Agreement shall be binding upon, and inure to the benefit of, the Employer and its permitted successors and assigns under this Agreement.  The Executive may not assign this Agreement, but the Executive’s benefits under this Agreement shall inure to the benefit of the Executive’s heirs, executors, administrators and legal representatives to the extent this Agreement expressly provides.

13. Notice.  Any notice that may be given under this Agreement shall be in writing and be deemed given when hand delivered and acknowledged or, if mailed, one day after mailing by registered or certified mail, return receipt requested, or if delivered by an overnight delivery service, one day after the notice is delivered to such service, to any party to this Agreement at its respective address stated above, or at such other address as any party may by similar notice designate.

14. Specific Performance.  The parties agree that irreparable damage would occur in the event that any of the provisions of Sections 7 and 8 of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  The parties accordingly agree that each of the parties to this Agreement shall be entitled to an injunction or injunctions to prevent breaches of Sections 7 and 8 of this Agreement and to enforce specifically the terms and provisions of Sections 7 and 8 of this Agreement, and that such injunctive relief shall be in addition to any other remedy to which any party is entitled at law or in equity. The existence of any claim or cause of action of the Executive against the Employer, whether predicated on this Agreement or not, shall not constitute a defense to the enforcement by the Employer of the restrictions, covenants and agreements contained in this Agreement.  Furthermore, in addition to any other remedies, the Executive agrees that any violation of the provisions in Sections 7 and 8 will result in the immediate forfeiture of any remaining payment that otherwise is or may become due under Section 5, if applicable.  The Executive further agrees that should he breach any of the provisions contained in Sections 7 and 8 of this Agreement, the Executive shall repay to the Employer any amounts previously received by the Executive pursuant to Section 5 that are attributable to that portion of the payments paid for the period during which the Executive was in breach of any of the provisions.  The Employer and the Executive agree that all remedies available to the Employer or the Executive, as applicable, shall be cumulative.

15. Successor Liability.  The Employer shall require any subsequent successor, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Employer to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform it if no such succession had taken place.

16. Mitigation.  The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits payable after the termination of this Agreement, except that the Employer shall not be required to provide the Executive and the Executive’s eligible dependents with medical insurance coverage as long as the Executive and the Executive’s eligible dependents are receiving comparable medical insurance coverage from another employer.

17. Waiver of Breach.  The failure at any time to enforce or exercise any right under any of the provisions of this Agreement or to require at any time performance by the other parties of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement or any part of this Agreement, or the right of any party hereafter to enforce or exercise its rights under each and every provision in accordance with the terms of this Agreement.

18. No Attachment.  Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect; provided, however, that nothing in this Section 20 shall preclude the assumption of such rights by executors, administrators or other legal representatives of the Executive or the Executive’s estate and their assigning any rights under this Agreement to the person or persons entitled hereto.

19. Severability.  The invalidity or unenforceability of any term, phrase, clause, paragraph, section, restriction, covenant, agreement or other provision of this Agreement shall in no way affect the validity or enforceability of any other provision, or any part of this Agreement, but this Agreement shall be construed as if such invalid or unenforceable term, phrase, clause, paragraph, section, restriction, covenant, agreement or other provision had never been contained in this Agreement unless the deletion of such term, phrase, clause, paragraph, section, restriction, covenant, agreement or other provision would result in such a material change as to cause the covenants and agreements contained in this Agreement to be unreasonable or would materially and adversely frustrate the objectives of the parties as expressed in this Agreement.

20. Survival of Benefits.  Any provision of this Agreement that provides a benefit to the Executive and that by the express terms of this Agreement does not terminate upon the expiration of his employment hereunder shall survive the expiration of the term of his employment and shall remain binding upon the Employer until such time as such benefits are paid in full to the Executive or the Executive’s estate.

21. Construction.  This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Virginia, to the extent not inconsistent with and governed by federal law, without giving effect to principles of conflict of laws.  All headings in this Agreement have  been inserted solely for convenience of reference only, are not to be considered a part of this Agreement and shall not affect the interpretation of any of the provisions of this Agreement.

22. Jury Waiver.  The Employer and the Executive agree that in any litigation action or proceeding arising out of or relating to this Agreement or the Executive’s employment with the Employer, trial shall be in a court of competent jurisdiction without a jury.  The Employer and the Executive irrevocably waive any right each may have to a jury trial and a copy of this Agreement may be introduced as written evidence of the waiver of the right to trial by jury.  The Employer has not made and the Executive has not relied on, any oral representation regarding the enforceability of this provision.  The Employer and the Executive have read and understand the effect of this jury waiver provision.

23. Venue.  The Employer and the Executive hereby expressly consent to be subject to the jurisdiction of the Commonwealth of Virginia to determine any disputes regarding this Agreement and further agree that the exclusive venue for any such dispute shall be in Virginia Beach, Virginia.  Employer and Executive agree to accept the jurisdiction of any such court and each waives any claim and warrants that he or it will not argue or contend that any such court does not have jurisdiction, is not an appropriate forum or venue or that such a forum is inconvenient.

24. Full Capacity.  The persons signing this Agreement represent that they have full authority and representative capacity to execute this Agreement in the capacities indicated below and to perform all obligations under this Agreement.

25. Compliance with Internal Revenue Code Section 409A.  All payments that may be made and benefits that may be provided pursuant to this Agreement are intended to qualify for an exclusion from Section 409A of the Code and any related regulations or other pronouncements thereunder and, to the extent not excluded, to meet the requirements of Section 409A of the Code.  Any payments made under Section 5 of this Agreement which are paid on or before the last day of the applicable period for the short-term deferral exclusion under Treasury Regulation § 1.409A-1(b)(4) are intended to be excluded under such short-term deferral exclusion.  Any remaining payments under Section 5 are intended to qualify for the exclusion for separation pay plans under Treasury Regulation § 1.409A-1(b)(9). Each payment made under Section 5 shall be treated as a “separate payment”, as defined in Treasury Regulation § 1.409A-2(b)(2), for purposes of Code Section 409A.  Further, notwithstanding anything to the contrary, all severance payments payable under the provisions of Section 5 shall be paid to the Executive no later than the last day of the second calendar year following the calendar year in which occurs the date of Executive’s termination of employment. None of the payments under this Agreement are intended to result in the inclusion in Executive’s federal gross income on account of a failure under Section 409A(a)(1) of the Code.  The parties intend to administer and interpret this Agreement to carry out such intentions.  However, the Employer does not represent, warrant or guarantee that any payments that may be made pursuant to this Agreement will not result in inclusion in the Executive’s gross income, or any penalty, pursuant to Section 409A(a)(1) of the Code or any similar state statute or regulation.  Notwithstanding any other provision of this Agreement, to the extent that the right to any payment (including the provision of benefits) hereunder provides for the “deferral of compensation” within the meaning of Section 409A(d)(1) of the Code, the payment shall be paid (or provided) in accordance with the following: