Employment Agreement



 EXHIBIT 10.4 
 EMPLOYMENT AGREEMENT 
 THIS EMPLOYMENT AGREEMENT is made and entered into as of the 27th day
of January, 2004 by and between FIRST NATIONAL CORPORATION, a Virginia corporation, hereinafter called the “Corporation”, and M. SHANE BELL hereinafter called “Employee”, and provides as follows: 
 RECITALS 
 WHEREAS, the
Corporation is a bank holding company engaged in the operation of a bank; and 
 WHEREAS, Employee has been involved in the management of the
business and affairs of the Corporation and, therefore, possesses managerial experience, knowledge, skills and expertise in such type of business; and 
 WHEREAS, the continued employment of Employee by the Corporation is in the best interests of the Corporation and Employee; and 
 WHEREAS, the parties have mutually agreed upon the terms and conditions of Employee’s continued employment by the Corporation as hereinafter set forth; 
 TERMS OF AGREEMENT 
 NOW, THEREFORE, for and in consideration of the
premises and of the mutual promises and undertakings of the parties as hereinafter set forth, the parties covenant and agree as follows: 
 Section 1. Employment. (a) Employee shall be employed as the Senior Vice President, Chief Financial Officer of the Corporation and its wholly owned subsidiary, First Bank. He shall perform such services for the Corporation
and/or one or more Affiliates as may be assigned to Employee by the Corporation from time to time upon the terms and conditions hereinafter set forth. 
 (b) References in this Agreement to services rendered for the Corporation and compensation and benefits payable or provided by the Corporation shall include services rendered for and compensation and benefits payable
or provided by any Affiliate. References in this Agreement to the “Corporation” also shall mean and refer to each Affiliate for which Employee performs services. References in this Agreement to “Affiliate” shall mean any business
entity that, directly or indirectly, through one or more intermediaries, is controlled by the Corporation. 
 (c) The parties recognize that
the Board of Directors of the Corporation shall manage the business affairs of the Corporation and that the relationship between the Corporation and Employee shall be that of an employer and an employee. The Board of Directors shall have the sole
authority to set and establish the hours of operation of the business and to set and establish reasonable work schedules and standards applicable to Employee. 
 Section 2. Term. The term of this Agreement shall at all times be two (2) years, which means that at the end of every day, the term of this Agreement shall be extended for one day. With thirty
(30) days notice, however, either party may notify the other that the term of this Agreement shall no longer be extended and that this Agreement will terminate two (2) years after the effective date of such notice. 
 Section 3. Exclusive Service. Employee shall devote his best efforts and full time to rendering services on behalf of the Corporation in
furtherance of its best interests. Employee shall comply with all policies, standards and regulations of the Corporation now or hereafter promulgated, and shall perform his duties under this Agreement to the best of his abilities and in accordance
with standards of conduct applicable to executive officers of banks. 
 Section 4. Salary. (a) As compensation while employed
hereunder, Employee, during his faithful performance of this Agreement, in whatever capacity rendered, shall receive an annual base salary of $78,000 payable on such terms and in such installments as the parties may from time to time mutually agree
upon. The Board of Directors, in its discretion, may increase Employee’s base salary during the term of this Agreement; provided, however, that Employee’s salary after being increased may not be decreased. 
 (b) The Corporation shall withhold state and federal income taxes, social security taxes and such other payroll deductions as may from time to time be
required by law or agreed upon in writing by Employee and the Corporation. The Corporation shall also withhold and remit to the proper party any amounts agreed to in writing by the Corporation and Employee for participation in any corporate
sponsored benefit plans for which a contribution is required. 
  

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 (c) Except as otherwise expressly set forth hereunder, no compensation shall be paid pursuant to this
Agreement in respect of any month or portion thereof subsequent to any termination of Employee’s employment by the Corporation. 
 Section 5. Corporate Benefit Plans. Employee shall be entitled to participate in or become a participant in any employee benefit plan maintained by the Corporation for which he is or will become eligible on such terms as the
Board of Directors may, in its discretion, establish, modify or otherwise change. 
 Section 6. Bonuses. Employee shall receive
only such bonuses as the Board of Directors, in its discretion, decides to pay to Employee. 
 Section 7. Expense Account. The
Corporation shall reimburse Employee for reasonable and customary business expenses incurred in the conduct of the Corporation’s business. Such expenses will include business meals, out-of-town lodging and travel expenses. Employee agrees to
timely submit records and receipts of reimbursable items and agrees that the Corporation can adopt reasonable rules and policies regarding such reimbursement. The Corporation agrees to make prompt payment to Employee following receipt and
verification of such reports. 
 Section 8. Personal and Sick Leave. Employee shall be entitled to the same personal and sick
leave as the Board of Directors may from time to time designate for all full-time employees of the Corporation. 
 Section 9.
Vacations. Employee shall be entitled vacations in accordance with policies the Board of Directors sets for all full time employees of the Corporation and during which Employee’s compensation hereunder shall continue to be paid.

 Section 10. Termination. (a) Notwithstanding the termination of Employee’s employment pursuant to any provision of
this Agreement, the parties shall be required to carry out any provisions of this Agreement which contemplate performance by them subsequent to such termination. In addition, no termination shall affect any liability or other obligation of either
party which shall have accrued prior to such termination, including, but not limited to, any liability, loss or damage on account of breach. No termination of employment shall terminate the obligation of the Corporation to make payments of any
vested benefits provided hereunder or the obligations of Employee under Sections 11, 12 and 13. 
 (b) Employee’s employment hereunder
may be terminated by Employee upon thirty (30) days written notice to the Corporation or at any time by mutual agreement in writing. 
 (c) This Agreement shall terminate upon death of Employee; provided, however, that in such event the Corporation shall pay to the estate of Employee the compensation including salary and accrued bonus, if any, which otherwise would be
payable to Employee through the end of the month in which his death occurs. 
 (d)(1) The Corporation may terminate Employee’s
employment other than for “Cause”, as defined in Section 10(e), at any time upon written notice to Employee, which termination shall be effective immediately. Employee may resign thirty (30) days after notice to the Corporation
for “Good Reason”, as hereafter defined. 
 (2) If the Corporation terminates the Employee’s employment without Cause or the
Employee resigns for Good Reason, then in either event: 
 (i) The Employee shall be paid for the remainder of the then current term of this
Agreement, at such times as payment was theretofore made, the salary required under Section 4 that the Employee would have been entitled to receive during the remainder of the then current term of this Agreement had such termination not
occurred; and 
 (ii) The Corporation shall maintain in full force and effect for the continued benefit of the Employee for the remainder of
the then current term of this Agreement, all employee welfare benefit plans and programs or arrangements in which the Employee was entitled to participate immediately prior to such termination, provided that continued participation is possible under
the general terms and provisions of such plans and programs. In the event that Employee’s participation in any such plan or program is barred, the Corporation shall arrange to provide the Employee with benefits substantially similar to those
which the Employee was entitled to receive under such plans and program; and 
 (iii) A payment in cash on the date his employment terminates
equal to the amount of any cash bonus paid to him in respect of the fiscal year of the Corporation prior to the fiscal year in which his employment terminates, multiplied by a fraction, the numerator of which is the number of days that elapse before
the date his employment terminates in the fiscal year of the Corporation in which his employment terminates and the denominator of which is three hundred sixty-five (365). 
  

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 Notwithstanding anything in this Agreement to the contrary, if Employee breaches Section 11 or 12,
Employee will not thereafter be entitled to receive any further compensation or benefits pursuant to this Section 10(d). In addition, notwithstanding anything in this Agreement to the contrary, the Corporation shall not be required to make any
payment that is prohibited by the terms of the regulations presently found at 12 C.F.R. part 359 or to the extent that any other governmental approval of the payment required by law is not received. 
 (3) For purposes of this Agreement, “Good Reason” shall mean: 
 (i) The assignment of duties to the Employee by the Corporation which result in the Employee having significantly less authority or responsibility than he has on the date hereof, without his express written consent;

 (ii) The removal of the Employee from or any failure to re-elect him to the position of Senior Vice President and Chief Financial Officer
of the Corporation and First Bank; 
 (iii) Requiring the Employee to maintain his principal office anywhere outside of the Virginia Counties
of Frederick, Warren and Shenandoah, or cities located therein; 
 (iv) The failure of the Corporation to provide the Employee with
substantially the same fringe benefits that are provided to him at the inception of this Agreement; 
 (v) The Corporation’s failure to
comply with any material term of this Agreement; or 
 (vi) The failure of the Corporation to obtain the assumption of and agreement to
perform this Agreement by any successor as contemplated in Section 14 hereof. 
 (e) The Corporation shall have the right to terminate
Employee’s employment under this Agreement at any time for Cause, which termination shall be effective immediately. Termination for “Cause” shall include termination for Employee’s failure, neglect or refusal to perform his
duties and responsibilities without the same being corrected after ten days prior written notice or termination because of his personal dishonesty, incompetence, willful misconduct, breach of a fiduciary duty involving personal profit, willful
violation of any law, rule or regulation (other than traffic violations or similar offenses) conviction of a felony or of a misdemeanor involving moral turpitude, misappropriation of the Corporation’s assets (determined on a reasonable basis)
or those of its Affiliates, or material breach of any other provision of this Agreement. Termination for Cause also shall include termination as a result of the Employee’s failure to correct a material deficiency in the performance of his
duties within 60 days after a written notice from the Board of Directors or such other reasonable period of time specified by the Board of Directors if such deficiency cannot be cured within 60 days. Any notice given under this subsection shall
state that it is a notice pursuant to Section 10(e) of this Agreement and shall set forth the Board’s complaints in detail sufficient to allow Employee to understand and correct them. In the event Employee’s employment under this
Agreement is terminated for Cause, Employee shall thereafter have no right to receive compensation or other benefits under this Agreement. 
 (f) The Corporation may terminate Employee’s employment under this Agreement, after having established the Employee’s disability by giving to Employee written notice of its intention to terminate his employment for disability and
his employment with the Corporation shall terminate effective on the 90th day after receipt of such notice if within 90 days after such receipt Employee shall fail to return to the full-time performance of the essential functions of his position
(and if Employee’s disability has been established pursuant to the definition of “disability” set forth below). For purposes of this Agreement, “disability” means either (i) disability which after the expiration of more
than 13 consecutive weeks after its commencement is determined to be total and permanent by a physician selected and paid for by the Corporation or its insurers, and acceptable to Employee or his legal representative, which consent shall not be
unreasonably withheld or (ii) disability as defined in the policy of disability insurance maintained by the Corporation or its Affiliates for the benefit of Employee, whichever shall be more favorable to Employee. Notwithstanding any other
provision of this Agreement, the Corporation shall comply with all requirements of the Americans with Disabilities Act, 42 U.S.C. § 12101 et. seq. 
 (g) If Employee is suspended and/or temporarily prohibited from participating in the conduct of the Corporation’s affairs by a notice served pursuant to the Federal Deposit Insurance Act, the Corporation’s
obligations under this Employment Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Corporation may in its discretion (i) pay Employee all or part of
the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended. 
 (h) If Employee is removed and/or permanently prohibited from participating in the conduct of the Corporation’s affairs by an order issued under the Federal Deposit Insurance Act or the Code of Virginia, all
obligations of the Corporation under this Employment Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected. 
  

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 (i)(1) If Employee’s employment is terminated without Cause or if he resigns for Good Reason within
one year after a Change of Control shall have occurred, then on or before Employee’s last day of employment with the Corporation, the Corporation shall pay to Employee as compensation for services rendered to the Corporation and its Affiliates
a cash amount (subject to any applicable payroll or other taxes required to be withheld) equal to the excess, if any, of 299% of Employee’s “annualized includable compensation for the base period”, as defined in Section 280G of
the Internal Revenue Code of 1986 (the “Code”), over the total amount payable to Employee under Section 10(d) provided that, at the option of Employee, the cash amount required to be paid hereby shall be paid by the Corporation in
equal monthly installments over the thirty-six (36) months succeeding the date of termination, payable on the first day of each such month. 
 (2) For purposes of this Agreement, a Change of Control occurs if, after the date of this Agreement, (i) any person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the
owner or beneficial owner of Corporation securities having 50% or more of the combined voting power of the then outstanding Corporation securities that may be cast for the election of the Corporation’s directors other than a result of an
issuance of securities initiated by the Corporation, or open market purchases approved by the Board of Directors, as long as the majority of the Board of Directors approving the purchases is a majority at the time the purchases are made; or
(ii) as the direct or indirect result of, or in connection with, a tender or exchange offer, a merger or other business combination, a sale of assets, a contested election of directors, or any combination of these events, the persons who were
directors of the Corporation before such events cease to constitute a majority of the Corporation’s Board, or any successor’s board, within two years of the last of such transactions. For purposes of this Agreement, a Change of Control
occurs on the date on which an event described in (i) or (ii) occurs. If a Change of Control occurs on account of a series of transactions or events, the Change of Control occurs on the date of the last of such transactions or events.

 (3) 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 Code and any regulations thereunder, thereby resulting in a loss of an income tax deduction by the Corporation or the imposition of an excise tax on
Employee under Section 4999 of the Code. If the independent accountants serving as auditors for the Corporation on the date of a Change of Control (or any other accounting firm designated by the Corporation) determine that some or all of the
payments or benefits scheduled under this Agreement, as well as any other payments or benefits on a Change of Control, would be nondeductible by the Company under Section 280G of the Code, then the payments scheduled under this Agreement 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. Employee shall have the right to designate within a reasonable period, which payments or benefits will be reduced; provided, however, that if no direction is received from Employee, the Corporation shall
implement the reductions in its discretion. 
 Section 11. Confidentiality/Nondisclosure. Employee covenants and agrees that any
and all information concerning the customers, businesses and services of the Corporation of which he has knowledge or access as a result of his association with the Corporation in any capacity, shall be deemed confidential in nature and shall not,
without the proper written consent of the Corporation, be directly or indirectly used, disseminated, disclosed or published by Employee to third parties other than in connection with the usual conduct of the business of the Corporation. Such
information shall expressly include, but shall not be limited to, information concerning the Corporation’s trade secrets, business operations, business records, customer lists or other customer information. Upon termination of employment
Employee shall deliver to the Corporation all originals and copies of documents, forms, records or other information, in whatever form it may exist, concerning the Corporation or its business, customers, products or services. In construing this
provision it is agreed that it shall be interpreted broadly so as to provide the Corporation with the maximum protection. This Section 11 shall not be applicable to any information which, through no misconduct or negligence of Employee, has
previously been disclosed to the public by anyone other than Employee. 
 Section 12. Covenant Not to Compete. During the term of
this Agreement and throughout any further period that he is an officer or employee of the Corporation, and for a period of twelve (12) months from and after the date that Employee is (for any reason) no longer employed by the Corporation or for
a period of twelve (12) months from the date of entry by a court of competent jurisdiction of a final judgment enforcing this covenant in the event of a breach by Employee, whichever is later, Employee covenants and agrees that he will not,
directly or indirectly, either as a principal, agent, employee, employer, stockholder, co-partner or in any other individual or representative capacity whatsoever: (i) engage in a Competitive Business anywhere within a ten (10) mile
straight-line radius of any office operated by the Corporation on the date Employee’s employment terminates; or (ii) solicit, or assist any other person or business entity in soliciting, any depositors or other customers of the Corporation
to make deposits in or to become customers of any other financial institution conducting a Competitive Business; or (iii) induce any individuals to terminate their employment with the Corporation or its Affiliates. As used in this Agreement,
the term “Competitive Business” means all banking and financial products and services that are substantially similar to those offered by the Corporation on the date that Employee’s employment terminates. 
 Section 13. Injunctive Relief, Damages, Etc. Employee agrees that given the nature of the positions held by Employee with the Corporation,
that each and every one of the covenants and restrictions set forth in Sections 11 and 12 above are reasonable 

  

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in scope, length of time and geographic area and are necessary for the protection of the significant investment of the Corporation in developing, maintaining
and expanding its business. Accordingly, the parties hereto agree that in the event of any breach by Employee of any of the provisions of Sections 11 or 12 that monetary damages alone will not adequately compensate the Corporation for its losses
and, therefore, that it may seek any and all legal or equitable relief available to it, specifically including, but not limited to, injunctive relief and Employee shall be liable for all damages, including actual and consequential damages, costs and
expenses, including legal costs and actual attorneys’ fees, incurred by the Corporation as a result of taking action to enforce, or recover for any breach of, Section 11 or Section 12. The covenants contained in Sections 11 and 12
shall be construed and interpreted in any judicial proceeding to permit their enforcement to the maximum extent permitted by law. Should a court of competent jurisdiction determine that any provision of the covenants and restrictions set forth in
Section 12 above is unenforceable as being overbroad as to time, area or scope, the court may strike the offending provision or reform such provision to substitute such other terms as are reasonable to protect the Corporation’s legitimate
business interests. 
 Section 14. Binding Effect/Assignability. This Employment Agreement shall be binding upon and inure to the
benefit of the Corporation and Employee and their respective heirs, legal representatives, executors, administrators, successors and assigns, but neither this Agreement, nor any of the rights hereunder, shall be assignable by Employee or any
beneficiary or beneficiaries designated by Employee. The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business, stock or assets of the
Corporation, by agreement in form and substance reasonably satisfactory to the Employee, to expressly assume and agree to perform this Agreement in its entirety. Failure of the Corporation to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and shall entitle the Employee to the compensation described in Sections 10(d) and 10(i). As used in this Agreement, “Corporation” shall mean First National Corporation, a Virginia
corporation, and any successor to its respective business, stock or assets as aforesaid which executes and delivers the agreement provided for in this Section 14 or which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law. 
 Section 15. Governing Law. This Employment Agreement shall be subject to and construed in accordance with
the laws of Virginia. 
 Section 16. Invalid Provisions. The invalidity or unenforceability of any particular provision of this
Employment Agreement shall not affect the validity or enforceability of any other provisions hereof, and this Employment Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. 
 Section 17. Notices. Any and all notices, designations, consents, offers, acceptance or any other communications provided for herein shall be
given in writing and shall be deemed properly delivered if delivered in person or by registered or certified mail, return receipt requested, addressed in the case of the Corporation to its registered office or in the case of Employee to his last
known address. 
 Section 18. Entire Agreement.  
 (a) This Employment Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes any and all other agreements, either oral or in writing, among the parties
hereto with respect to the subject matter hereof. 
 (b) This Employment Agreement may be executed in one or more counterparts, each of which
shall be considered an original copy of this Agreement, but all of which together shall evidence only one agreement. 
 Section 19.
Amendment and Waiver. This Employment Agreement may not be amended except by an instrument in writing signed by or on behalf of each of the parties hereto. No waiver of any provision of this Employment Agreement shall be valid unless in
writing and signed by the person or party to be charged. 
 Section 20. Case and Gender. Wherever required by the context of this
Employment Agreement, the singular or plural case and the masculine, feminine and neuter genders shall be interchangeable. 
 Section 21. Captions. The captions used in this Employment Agreement are intended for descriptive and reference purposes only and are not intended to affect the meaning of any Section hereunder. 
  

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 IN WITNESS WHEREOF, the Corporation has caused this Employment Agreement to be signed by its duly
authorized officer and Employee has hereunto set his hand and seal on the day and year first above written. 
 FIRST
NATIONAL CORPORATION 
  

					
	By:	 	 /s/ Harry S. Smith
	 	
	Title:	 	President	 	
		
	ATTEST:	 	
		
	  
	 	
		
	EMPLOYEE	 	
		
	 /s/ M. Shane Bell
	 	(SEAL)
	M. Shane Bell	 	
		
	ATTEST:	 	
		
	  
	 	

  

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