EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT, dated as of this 2^nd day of April, 2007, by and between Fauquier Bankshares, Inc., a Virginia corporation (the Company), The Fauquier Bank, a Virginia banking corporation (the Bank), and Gregory D. Frederick (the Executive).

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

Part I: General Employment Terms

1. Employment and Duties. The Executive shall be employed by the Bank as its Chief Operating Officer (the Position) and shall also serve as an officer of the Company. The Executive accepts such employment and agrees to perform the managerial duties and responsibilities of Chief Operating Officer of the Bank. The Executive agrees to devote his time and attention on a full-time basis to the discharge of such duties and responsibilities of an executive nature as may be assigned him by the Companys Chief Executive Officer, provided, that, with the consent of the Companys Chief Executive Officer, the Executive may accept any elective or appointed positions or offices with any duly recognized associations or organizations whose activities or purposes are closely related to the banking business or service for which would generate good will for the Company and its subsidiaries and affiliates.

2. Term. The term of this Agreement (which term, together with any extension hereunder, is referred to as the Term) shall commence on January 1, 2007 (the Effective Date) and shall continue through December 31, 2008, unless terminated or extended as hereinafter provided. This Agreement shall be extended for successive one-year periods at December 31, 2007 and at each December 31 thereafter during the Term unless either party notifies the other in writing at least 90 days prior to such December 31 that the Agreement shall not be extended or further extended as the case may be.

3. Compensation.

(a) Base Salary. The Company shall pay or cause the Bank to pay the Executive an annual base salary not less than $150,000 for 2007. Such base salary shall be paid to the Executive in accordance with established payroll practices of the Company. For each remaining year of the Term, the Compensation Committee (Compensation Committee) of the Board of Directors of the Company agrees to review the Executives base salary and to consider implementing changes to such base salary as it may deem appropriate; however, such base salary shall not be reduced at any time during the Term.

(b) Annual Incentive. The Executive will be eligible to participate in an annual incentive plan that will establish measurable criteria and incentive compensation levels payable to the Executive for corporate performance in relation to defined benchmarks. The Compensation Committee or the Board of Directors of the Company, as the case may be, will consult with management to establish the targeted corporate performance levels for the Company on an annual basis consistent with the Companys business plan and objectives. Achievement of the targeted corporate performance levels will normally result in an annual cash incentive payment equal to 30% of the Executives then current annual base salary. Any annual incentive payments due hereunder shall be paid to the Executive no later than 75 days after the end of the year.

(c) Stock Compensation. Subject to the annual approval of the Compensation Committee or the Board of Directors of the Company, as the case may be, the Executive will receive during the Term an annual stock award under the Companys Omnibus Stock Ownership and Long Term Incentive Plan or any successor plan (the Stock Compensation Plan), with a value up to 90% of his actual annual cash incentive payment earned each year. The stock award, which will consist of stock options, restricted stock grants or other equity compensation grants, or any combination thereof, will include such vesting and other terms and conditions as required herein and as otherwise determined in the sole discretion of the Compensation Committee or the Board of Directors in accordance with the Stock Compensation Plan. The valuation of a stock option award will be determined using the Black-Scholes or similar methodology as determined by the Compensation Committee or the Board of Directors of the Company.

 

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