Change of Control Severance Agreement, dated as of May 23, 2024, by and between The Old Point National Bank of Phoebus and Cathy W. Liles

THIS CHANGE OF CONTROL SEVERANCE AGREEMENT (the “Agreement”), effective this 23rd day of May, 2024, by and between The Old Point National Bank of Phoebus (the “Bank”) and Cathy W. Liles (“Employee”).

WHEREAS, Employee is a valuable employee of the Bank;

WHEREAS, the Bank wishes to encourage Employee to continue Employee’s career and services with the Bank and to remain with the Bank during any potential change of control of the Bank; and

WHEREAS, the Bank and Employee have agreed to enter into this Agreement to set forth the terms on which Employee may be entitled to severance pay from the Bank following a Change of Control (as defined below).

NOW, THEREFORE, it is hereby agreed by and between the parties hereto as follows:

 (b)          “Change of Control” shall mean the date any one of the following events occurs after the effective date of this Agreement:

(i)       any one person, or more than one person acting as a group, acquires ownership of stock of Old Point Financial Corporation (“Old Point”) 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 Old Point. However, if any one person or group, is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of Old Point, the acquisition of additional stock by the same person or group is not considered to cause a Change of Control. An increase in the percentage of stock owned by any one person or group, as a result of a transaction in which Old Point acquires its stock in exchange for property will be treated as an acquisition of stock. This applies only when there is a transfer of stock of Old Point (or issuance of stock of Old Point) and stock in Old Point remains outstanding after the transaction.

(ii)      any one person, or more than one person acting as a group, acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition by such person or group) ownership of stock of Old Point possessing thirty percent (30%) or more of the total voting power of the stock of Old Point.

(iii)      a majority of members of Old Point’s Board of Directors is replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the members of Old Point’s Board of Directors prior to the date of the appointment or election.

(iv)     any one person, or more than one person acting as a group, acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition by such person or group) assets from Old Point that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of Old Point immediately prior to such acquisition or acquisitions.  For this purpose, “gross fair market value” shall mean the value of the assets of Old Point, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. A transfer of assets by Old Point shall not be treated as a Change of Control if the assets are transferred to: (A) a shareholder of Old Point (immediately before the asset transfer) in exchange for or with respect to its stock; (B) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by Old Point; (C) a person, or more than one person acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of Old Point; or (D) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a person described in Section 1(b)(iv)(C) above.  A person’s status is determined immediately after the transfer of the assets.  For example, a transfer to a corporation in which Old Point has no ownership interest before the transaction, but which is a majority-owned subsidiary of Old Point after the transaction is not treated as a Change of Control.

For purposes of Section 1(b)(ii) and (iii) above, if any one person or more than one person acting as a group is considered to effectively control Old Point (within the meaning of Section 1(b)(ii) or (iii) above), the acquisition of additional control of Old Point by the same person or group is not considered to cause a Change of Control.  For purposes of this Section 1, “more than one person acting as a group” shall include the owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or assets, or similar business transaction with Old Point. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock or assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. Persons will not be considered to be acting as a group solely because they (I) purchase or own stock of the same corporation at the same time, or as a result of the same public offering, or (II) purchase assets of the same corporation at the same time.  The above definition of Change of Control is intended to and shall be interpreted and applied in a manner as to comply with the requirements of Code Section 409A.

(c)            “Good Reason” shall mean within twenty-four (24) months after a Change of Control:

Employee is required to provide written notice to the Bank of the existence of a condition described in Section 1(c) above within a sixty (60) day period of the initial existence of the condition, and the Bank shall have thirty (30) days after notice to remedy the condition without liability.  If not remedied by the Bank, Employee shall have thirty (30) days after the end of such remedy period to terminate employment for Good Reason.

Notwithstanding the above, “Good Reason” shall not include any resignation by Employee where Cause for Employee’s termination by the Bank exists.

(d)           “Incapacity” shall mean Employee is suffering a physical or mental impairment that renders the Employee, as determined by the Bank, unable to perform the essential functions of the Employee’s position.    Such a determination shall only be made after (1) Employee has exhausted all leave rights to which [he or she] is entitled under the Bank’s policies and this Agreement and (2) a determination is made by the Bank that no reasonable accommodation exists to allow Employee to continue to perform the essential functions of the position following the principles established under the Americans with Disabilities Act (“ADA”).

(a)         Without Cause or for Good Reason. If Employee’s employment is involuntarily terminated without Cause (and other than due to Employee’s death or Incapacity) within two (2) years after a Change of Control shall have occurred or if Employee resigns for Good Reason within two (2) years after a Change of Control shall have occurred, then the Bank shall pay to Employee (subject to any applicable payroll or other taxes required to be withheld), (i) (A) any unpaid base salary for time worked through the date of termination payable in a lump sum as soon as administratively feasible following termination, but not later than thirty (30) days thereafter; (B) any annual incentive compensation earned during the calendar year preceding the calendar year of termination, but not yet paid as of the date of termination, payable on the earlier of the thirtieth (30^th) day after the date of termination, or when otherwise due; and (C) any benefits or awards vested, due and owing pursuant to the terms of any other plans, policies or programs, payable when otherwise due (hereinafter subsections (a)(i)(A) – (C) collectively are referred to as the “Accrued Obligations”) and (ii) subject to Employee’s signing, delivering and not revoking the Release attached as Exhibit A, which Release must be signed, delivered and not revoked within the time period set forth therein, the following:

(A)     An amount equal to 1.00 times Employee’s base salary as in effect at the time of termination, payable over a period of twelve (12) months in accordance with the regular pay periods of the Bank (but not less frequently than monthly and in equal installments) beginning on the first payroll following the date of termination of employment, provided, however, that all payments otherwise due during the first sixty (60) days following termination of employment shall be accumulated and, if the Release requirements have been met, paid on the sixtieth (60^th) day following termination of employment.

(B)       An amount equal to 1.00 times the average annual bonus payable for the five years preceding the calendar year in which the termination occurs (or the average for the number of years the Agreement has been in effect if less than five (5) years.)  If the Agreement was in effect and no bonus was paid for a calendar year, then the amount to be used for that year in computing the average shall be zero.  The bonus amount shall be payable over a period of twelve (12) months in accordance with the regular pay periods of the Bank (but not less frequently than monthly and in equal installments), payable in the same manner and at the same time as the payments in Section 2(a)(A).

(C)      An amount equal to the product of twelve (12) times the monthly rate of the Bank’s subsidy for coverage in its medical, dental and vision plans for active employees (including any applicable coverage for spouses and dependents) in effect on the date of termination, payable in a lump sum on the sixtieth (60^th) day following termination of employment.

(b)          It is the intention of the parties that no payment be made or benefit provided to Employee pursuant to this Agreement that would constitute an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code and any regulations thereunder (“Code Section 280G”), thereby resulting in a loss of an income tax deduction by the Bank or Old Point or the imposition of an excise tax on Employee under Section 4999 of the Internal Revenue Code. If the independent accountants serving as auditors for the Bank on the date of a Change of Control (or any other accounting firm designated by the Bank) determine that some or all of the payments or benefits scheduled under this Agreement, as well as any other payments or benefits to Employee, would be nondeductible by the Bank or Old Point under Code Section 280G, then the payments and benefits scheduled under this Agreement and all other agreements between Employee and the Bank will be reduced to one dollar less than the maximum amount which may be paid without causing any such payment or benefit to be nondeductible. The determination made as to the reduction of benefits or payments required hereunder by the independent accountants shall be binding on the parties. Any reduction of benefits or payments required to be made under this Section 2(b) shall be taken in the following order: first from cash compensation and then from payments or benefits not payable in cash, in each case in reverse order beginning with payments or benefits which are to be paid farthest in time from the date of determination.

(c)            Other Terminations. If Employee’s employment is terminated for Cause or due to Employee’s death or Incapacity or if Employee voluntarily terminates his employment other than for Good Reason, within two (2) years after a Change of Control shall have occurred, this Agreement shall terminate without any further obligation of the Bank to Employee other than the payment to Employee of any unpaid base salary for the time worked through the date of termination as soon as administratively feasible after termination but not later than thirty (30) days thereafter and the payment of any benefits vested, due and owing pursuant to the terms of any plans, policies or programs, payable when otherwise due.

(a)             Non-Competition. Notwithstanding the foregoing, all such payments and benefits otherwise due under Section 2(a) shall cease to be paid, and the Bank shall have no further obligation due with respect thereto, in the event Employee engages in any conduct prohibited in this Section 3.  In exchange for this Agreement and other valuable consideration, Employee agrees that Employee will not engage in Competition for a period of twelve (12) months after Employee’s employment with the Bank ceases for any reason, regardless of whether any benefits are due under Section 2(a).  For purposes hereof, “Competition” means Employee’s performing duties that are the same as or substantially similar to those duties performed by Employee for the Bank during the last twelve (12) months of Employee’s employment, as an officer, a director, an employee, a partner or in any other capacity, within twenty-five (25) miles of the headquarters of the Bank (or any Virginia headquarters of any successor) or any branch office of the Bank (or any successor (as to its Virginia branches only) where Employee performed services for the Bank as they are located as of the date Employee’s employment ceases, if those duties are performed for a bank or other financial institution that provides products or services that are the same as or substantially similar to, and competitive with, any of the products or services provided by the Bank at the time Employee’s employment ceases.

(b)           Non-Piracy. In exchange for the benefits promised in this Agreement and other valuable consideration, Employee agrees that for a period of twelve (12) months after Employee’s employment ceases for any reason, Employee will not, directly or indirectly, solicit, divert from the Bank or Old Point, or do business with any “Customer” of the Bank with whom Employee had “Material Contact” during the last twelve (12) months of Employee’s employment or about whom Employee obtained non-public information while acting within the scope of his employment during the last twelve (12) months of employment, if the purpose of such solicitation, diversion or transaction is to provide products or services that are the same as or substantially similar to those offered by the Bank at the time Employee’s employment ceases.  “Material Contact” means that Employee personally communicated with the Customer, either orally or in writing, for the purpose of providing, offering to provide or assisting in providing products or services of the Bank. “Customer” means any person or entity with whom the Bank had a depository or other contractual relationship, pursuant to which the Bank provided products or services during the last twelve (12) months of Employee’s employment.

(c)            Non-Solicitation. In exchange for the benefits promised in this Agreement and other valuable consideration, Employee agrees that for a period of twelve (12) months after employment ceases, for any reason, Employee will not, directly or indirectly, hire or solicit for hire or induce any person to terminate his employment with the Bank, if the purpose is to compete with the Bank.

(d)           Confidentiality. As an employee of the Bank, Employee will have access to and may participate in the origination of non-public, proprietary and confidential information relating to the Bank and/or its affiliates, and Employee acknowledges a fiduciary duty owed to the Bank and its affiliates not to disclose impermissibly any such information. Confidential information may include, but is not limited to, trade secrets, customer lists and information, internal corporate planning, methods of marketing and operation, and other data or information of or concerning the Bank or its customers that is not generally known to the public or generally in the banking industry. Employee agrees that during employment and for a period of five (5) years following the cessation of employment, Employee will not use or disclose to any third party any such confidential information, either directly or indirectly, except as may be authorized in writing specifically by the Bank; provided, however that to the extent the information covered by this Section 3(d) is otherwise protected by the law, such as “trade secrets,” as defined by the Virginia Uniform Trade Secrets Act, or customer information protected by banking privacy laws, that information shall not be disclosed or used for however long the legal protections applicable to such information remain in effect.

Notwithstanding the foregoing, nothing in this Agreement is intended to prohibit Employee from performing any duty or obligation that shall arise as a matter of law or limit Employee’s right to communicate with a government agency, as provided for, protected under or warranted by applicable law.  Specifically, Employee shall continue to be under a duty to truthfully respond to any legal and valid subpoena or other legal process.  In the event Employee is requested to disclose confidential information by subpoena or other legal process or lawful exercise of authority, Employee shall promptly provide the Bank with notice of the same and cooperate with the Bank in the Bank's effort, at its sole expense, to avoid disclosure.

Federal law provides certain protections to individuals who disclose a trade secret to their attorney, a court, or a government official in certain, confidential circumstances.  Specifically, federal law provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret under either of the following conditions:

 

Federal law also provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

 

(e)            Remedies. Employee acknowledges that the covenants set forth in Section 3 of this Agreement are just, reasonable, and necessary to protect the legitimate business interests of the Bank.  Employee further acknowledges that if Employee breaches or threatens to breach any provision of Section 3, the Bank’s remedies at law will be inadequate, and the Bank will be irreparably harmed. Accordingly, the Bank shall be entitled to an injunction, both preliminary and permanent, restraining Employee from such breach or threatened breach, such injunctive relief not to preclude the Bank from pursuing all available legal and equitable remedies. The parties further agree that in any legal action under Section 3, the prevailing party shall be entitled to an award of their costs and attorney’s fees incurred in enforcing or defending their rights under Section 3.

 

4.         Documents. All documents, records, tapes and other media of any kind or description relating to the business of the Bank or any of its affiliates (the “Documents”), whether or not prepared by Employee, shall be the sole and exclusive property of the Bank. The Documents (and any copies) shall be returned to the Bank upon Employee’s termination of employment for any reason or at such earlier time or times as the Board of Directors of the Bank or its designee may specify.

 

5.         Severability. If any provision of this Agreement, or part thereof, is determined to be unenforceable for any reason whatsoever, it shall be severable from the remainder of this Agreement and shall not invalidate or affect the other provisions of this Agreement, which shall remain in full force and effect and shall be enforceable according to their terms. No covenant shall be dependent upon any other covenant or provision herein, each of which stands independently.

6.         Governing Law/Venue. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia. The parties further agree that venue in the event of any dispute shall be exclusively in the Circuit Court of the City of Hampton, Virginia, or the Norfolk federal court, at the sole option of the Bank, and Employee agrees not to object to venue.

 

7.         Notices. All written notices required by this Agreement shall be deemed given when delivered personally or sent by registered or certified mail, return receipt requested, to the parties at their addresses set forth on the signature page of this Agreement.  Each party may, from time to time, designate a different address to which notices should be sent.

 

8.         Amendment. This Agreement may not be varied, altered, modified or in any way amended except by an instrument in writing executed by the parties hereto or their legal representatives.

 

9.         Binding Effect. This Agreement shall be binding upon Employee and on the Bank, its successors and assigns, effective on the date first above written subject to the approval by the Boards of Directors of the Bank. The Bank will require any successor to all or substantially all of the business and/or assets of the Bank to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place.  This Agreement shall be freely assignable by the Bank.

 

10.       No Construction Against Any Party. This Agreement is the product of informed negotiations between Employee and the Bank. 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. Employee and the Bank agree that neither party was in a superior bargaining position regarding the substantive terms of this Agreement.

 

11.       Code Section 409A Compliance.

 

(a)            The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended, and applicable guidance thereunder (“Code Section 409A”) or comply with an exemption from the application of Code Section 409A and, accordingly, all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A.

 

(b)            Neither Employee nor the Bank shall take any action to accelerate or delay the payment of any monies and/or provision of any benefits in any matter which would not be in compliance with Code Section 409A.

(c)           A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the form or timing of payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” (within the meaning of Code Section 409A) and, for purposes of any such provision of this Agreement under which (and to the extent) deferred compensation subject to Code Section 409A is paid, references to a “termination” or “termination of employment” or like references shall mean separation from service. A “separation from service” shall not occur under Code Section 409A unless such Employee has completely severed Employee’s relationship with the Bank or Employee has permanently decreased Employee’s services to twenty percent (20%) or less of the average level of bona fide services over the immediately preceding thirty-six (36) month period (or the full period if Employee has been providing services for less than thirty-six (36) months). A leave of absence shall only trigger a termination of employment that constitutes a separation from service at the time required under Code Section 409A. If Employee is deemed on the date of separation from service with the Bank to be a “specified employee,” within the meaning of that term under Code Section 409A(a)(2)(B) and using the identification methodology selected by the Bank from time to time, or if none, the default methodology, then with regard to any payment or benefit that is required to be delayed in compliance with Code Section 409A(a)(2)(B) (after taking into account any exclusions applicable to such payment under Section 409A), such payment or benefit shall not be made or provided prior to the earlier of (i) the expiration of the six-month period measured from the date of Employee’s separation from service or (ii) the date of Employee’s death. In the case of benefits required to be delayed under Code Section 409A, however, Employee may pay the cost of benefit coverage, and thereby obtain benefits, during such six-month delay period and then be reimbursed by the Bank thereafter when delayed payments are made pursuant to the next sentence. On the first day of the seventh month following the date of Employee’s separation from service or, if earlier, on the date of Employee’s death, all payments delayed pursuant to this Section 11(c) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Employee in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. If any cash payment is delayed under this Section 11(c), then interest shall be paid on the amount delayed calculated at the prime rate reported in The Wall Street Journal for the date of Employee’s termination to the date of payment.

(d)           With regard to any provision herein that provides for reimbursement of expenses or in-kind benefits subject to Code Section 409A, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect. All reimbursements shall be reimbursed in accordance with the Bank’s reimbursement policies but in no event later than the calendar year following the calendar year in which the related expense is incurred.

(e)            If under this Agreement, an amount is to be paid in two or more installments, for purposes of Code Section 409A, each installment shall be treated as a separate payment. In the event any payment payable upon termination of employment would be exempt from Code Section 409A under Treas. Reg. § 1.409A-1(b)(9)(iii) but for the amount of such payment, the determination of the payments to Employee that are exempt under such provision shall be made by applying the exemption to payments based on chronological order beginning with the payments paid closest in time on or after such termination of employment.

(f)            When, if ever, a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within ten (10) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Bank.

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