Document:

Retirement Agreement with Jean-Claude Kunz

 Exhibit 10.1 

 

 

 HAND-DELIVERED 

Jean-Claude Kunz 

Lausanne, June 15th, 2010 

Early Retirement 
 Dear
Jean-Claude, 
 We refer to our recent discussion regarding the additional terms and conditions relating to the ending of your employment with
Philip Morris International Management SA (the “Company”). We would like to confirm the terms and conditions relating to your early retirement as follows. 
  

	1)	Definitions 

 In this Agreement the
expressions below shall have the following meanings: 
  

	(a)	An “Affiliate” of a company means any person, company, group of companies or other entity, which directly or indirectly owns, is owned by, has common owner(s)
with, or shares ownership interest in that company. 

  

	(b)	The “Tobacco Business” means the manufacturing, sale, marketing and/or distribution of cigarettes or other tobacco products. 

 

	2)	Ending of Employment Agreement 

 As
per your decision reflected in our letter dated June 15, 2010, your employment with the Company will end on August 31, 2010 (the “Early Retirement Date”). 

As agreed with your supervisor, you will be exempt from any further obligation of physical attendance at the office as from July 1, 2010 (the
“Physical Exit Date”) and furthermore you agree to assist the Company, should your help be needed for transition purposes, until August 31, 2010. 

Philip Morris International Management S.A. 

AVENUE DE COUR 107   •   CASE POSTALE 1171  •  1001
LAUSANNE  •  SWITZERLAND  •  TELEPHONE: +41 21 61861 11  •  TELEFAX: +41 21 618 46 18 
  

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	3)	Payments by the Company to the Early Retirement Date 

Your salary will be paid up to and including the Early Retirement Date, together with 

 

	 	(i)	the pro-rated 13th salary for the period from January 1, 2010 to the Early Retirement Date; 

 

	 	(ii)	any outstanding vacation entitlement, as per Company records provided that you have not exceeded your pro-rated vacation entitlement for the year 2010, in which case
the Company will deduct the excess vacation days; and 

  

	 	(iii)	your pro-rated fidelity premium. 

  

	4)	Additional Payments by the Company 

  

	 	a)	In recognition of your contribution to the Company, and subject to your countersignature of this Agreement, you will receive a payment in the total gross amount of CHF
1’054’560.- which also includes your agreement to, and compliance with, the non-competition clause under Section 13. This payment will be paid to you in two installments: the first payment in the amount of CHF 527’280.- will be
paid by August 31, 2010 together with your last salary, and the second payment in the amount of CHF 527’280.- will be paid by August 31, 2011. These amounts will be paid in consideration and satisfactory completion of your non-compete
obligation and subject to the condition that you fully comply with your obligations to the Company under this Agreement. 

  

	 	b)	In addition, and subject to your signature of this Agreement and to your compliance with the terms and conditions of this Agreement, you will receive your pro-rated
2010 incentive Compensation. This IC payment will be made at the end of February 2011 on the basis of the target percentage of an optimal rating at the relevant 2010 IC Company rating and subject to Internal Revenue Code Section 162(m)
maximums. 

  

	 	c)	In the event of your death before the payment to you of any amounts referred to above, the Company will pay your widow (or other designated beneficiary) within two
months from your death, the balance of the amounts unpaid, subject to your having complied in full with the terms of this Agreement at the date of your death. 

 

	5)	Tax, Social security and other payments 

The amounts payable pursuant to Sections 3 and 4 of this Agreement will be subject to income tax and employee AVS/AI/AC deductions, if applicable. It
shall be your responsibility to make these and any other tax payments in respect of these amounts; should you no longer be residing in Switzerland when such payments are made, the Company will make any applicable tax withholdings from such payments.

  

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 Furthermore, any outstanding balance on the Company corporate credit card issued in your name and any other
amounts that you may owe the Company as of the Early Retirement Date will be set-off against the sums payable pursuant to Sections 3 and 4 of this Agreement. 
  

	6)	Pension fund 

 Please contact our
Pension Fund Administration (Phone 058 242 1365) about your acquired rights. 
  

	7)	Tax advice 

 The Company will pay
the fees of KPMG for the preparation of your 2010 and 2011 Swiss tax returns. The fees paid by the Company represent a taxable benefit to you and will be subject to income tax and social security deductions, if applicable. 

 

	8)	Company Car 

You will have the option to buy your present company car at its current net book value of CHF 11’821.50, exercisable before
September 1st, 2010. The current market value being
CHF 35’580.—, the difference between the book and the market value represents a taxable benefit for you and will be subject to income tax and social security deductions, if applicable. The transfer will be effective on the Early Retirement
Date. Insurance of the car will become your responsibility on the Early Retirement Date. The Company does not require reimbursement of the registration tax paid for 2010, but payment for 2011 and beyond shall be your responsibility. Payment for the
car will be deducted from the payment amount which is paid to you on your Early Retirement Date, pursuant to Section 3. No warranties will be given as to the condition of the car, of which you will be deemed to have full knowledge. If you
decide not to exercise your option to buy the Company car, it will be your obligation to return it to the Company on or before the Early Retirement Date and in accordance with the terms of the relevant Company car policy. 

 

	9)	Equity awards 

 You will be
permitted to exercise all vested stock options issued to you by the Company in accordance with the terms of the relevant plan documents and option agreements. If you have any questions in this regard, please contact Laurence Duc in the PMI Global
Processes Department in Lausanne. 
 Subject to your compliance with the terms and conditions of this Agreement, the previous unvested stock
grants and awards made to you will fully vest on your Early Retirement Date. 
 The accelerated vesting will be performed by UBS Financial
Services Inc. (“UBS”) on your Early Retirement Date. The Company will comply with local laws and regulations including wage tax withholding (income and/or social security) and information reporting to the taxing authorities as may be
required; 
  

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 Your wage tax withholding (and any other withholding payroll taxes) will be satisfied by deducting the
number of shares equal in value to the amount of the withholding requirements from your stock award; therefore, the number of shares deposited into your UBS account on the vesting date will be net of the shares used to satisfy applicable withholding
taxes (rounded up to the nearest whole share); 
 You understand and agree that these vestings are being made and the valuations will be
determined in accordance with the terms established at the sole discretion of the Company. 
  

	10)	Health / Accident Insurance 

All your benefits will be kept in force until the Early Retirement Date, with the exception of the accident insurance (LAA coverage only), which will
cover you for an additional thirty (30) days. After that, you may elect to maintain your participation in the current Medical Plan Collective agreement at your own full expense, for as long as, and to the extent that, it is offered to PMI
retirees, or seek alternative private coverage, also at your own full expense. 
  

	11)	Confidentiality 

 You acknowledge
that during your employment you were engaged in a position of trust and confidence and you were privy to Confidential Information (as defined below). You acknowledge that it benefits both the Company and its employees for the Company to protect its
Confidential Information and to obtain the rights to discoveries, inventions, improvements, innovations and other works developed by its employees. You agree that, unless you are required by subpoena or court order, you will not disclose or cause to
be disclosed in any way: 
  

	•	 	 any Confidential Information (as defined below); or 

  

	•	 	 any documents or information obtained by you relating to or arising out of your employment with the Company or the operations of the Company;

  

	•	 	 any information about business or legal strategies; 

  

	•	 	 any information covered by the attorney client privilege or constituting attorney work product; or 

 

	•	 	 the terms of this Agreement. 

You understand that use or disclosure of Confidential Information would violate this Agreement and applicable law, and would cause immediate and
irreparable harm to the Company and its competitive position. You thus acknowledge and agree that the Company is entitled to (and you will be bound by) preliminary and permanent injunctive relief in order to prevent or stop such violations, in
addition to damages, costs, and other relief that may be appropriate. If you are required by subpoena or court order to disclose any Confidential Information, you agree to notify the Company (specifically, the Company representative who has signed
this Agreement, or his successor) as soon as practicable. This Agreement does not prevent you or the Company from responding truthfully to a lawfully-issued subpoena, court order or other lawful request by any regulatory agency or governmental
authority. You must return any Confidential Information in tangible or electronic form in your possession, including any copy by the Early retirement Date at the latest. 
  

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 For purposes of this Agreement, Confidential Information shall mean any information obtained as a result of
your employment by the Company including its current or former employees, current or former customers, or potential customers that belongs to the Company or is private (not publicly known or available), whether or not it is designated that way in
writing. Examples of Confidential Information include, but are not limited to: trade secrets; intellectual property; business strategies; litigation strategies; customers or prospective customers; sales, marketing or advertising; business policies;
government relations; finances; products, services, or pricing; business development matters; organizational structure; research and development; legal strategies; technology (including methods, systems, techniques, procedures, designs,
specifications, formulae, inventions, know-how, hardware and software); data and databases; testing or evaluation procedures; and other information of a similar nature. Confidential Information also includes information you prepared or developed
during your employment with the Company, and other information to which you had access. The information can take any form, including written or electronic, and includes all copies of such Confidential Information. 

You agree that you shall remain bound to the terms and conditions set forth in any confidentiality agreement in place between you and the Company.

 These confidentiality obligations continue to be valid and enforceable after the end of your employment relationship. 

 

	12)	Company Property 

 In addition to
your obligation to return Confidential Information by the Early Retirement Date, at the latest, you will also return to the Company by that date all files, documents, tapes, CDs, and copies thereof, and other items belonging to the Company and its
Affiliates, including credit cards, telephone cards, keys, access and identification cards, company car if you have not exercised your option to buy it, computers, and, if requested, you will certify that this has been done to the best of your
belief. You may, however, keep the mobile telephone provided to you by the Company or its Affiliates, on condition that you pay all future bills and bear all expenses related thereto as of the Early Retirement Date. 

 

	13)	Non-Competition 

 You recognize and
agree that you have access to information relating to the Company and its Affiliates, and their respective businesses, including business plans and strategies, which are highly confidential, and that you have been employed by the Company in a
special position of trust. You also recognize that the Company is undertaking, pursuant to Section 4 of this Agreement, to make substantial payments to you generally, and specifically in respect of your obligations under this Section. In
consideration of the foregoing, you agree that you will not, without the prior written consent of the General Counsel, Philip Morris International Inc., provide any services for a period of one (1) year from the Early Retirement Date, directly
or indirectly, whether as an employee, consultant or otherwise, to any person, company, group of companies or other entity (i) engaged in the Tobacco Business, or (ii) which owns directly or indirectly, either individually or jointly with
other parties and whether through ownership of voting securities or otherwise, more than 25 % of the equity ownership of any person, company, group of companies or other entity engaged in the Tobacco Business, or (iii) one of the purposes
of which is to take positions or actions in opposition to the Tobacco Business. 
  

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 Your obligations in the preceding paragraph shall apply worldwide, including without limitation with respect
to Japan Tobacco Inc., Imperial Tobacco Group plc, British American Tobacco p.l.c., China Tobacco Corporation, and their Affiliates. 
 You
further agree for a period of one (1) year from the Early Retirement Date not to acquire a financial interest or shares in an enterprise engaged in the Tobacco Business or to enter into a partnership with such an enterprise. However, the
acquisition of 5% or less of shares in a publicly held corporation will not be deemed a violation of this covenant not to compete. 
 In case of
any violation of this covenant not to compete you agree that the Company will retain, and you will forfeit your right to, the amount of CHF 1’054’560.— provided for in consideration for the non competition obligation, or if already
paid, you will return such amount to the Company. Moreover, in case of such a violation, a contractual penalty of CHF 100’000.— shall be due by you to the Company. In addition, the Company reserves the right to seek further damages and/or
specific performance of this covenant not to compete. 
  

	14)	Future Cooperation 

 You agree
that, consistent with applicable law and to the extent the Company or any of its Affiliates so requests, you will cooperate reasonably and truthfully in connection with any matter, including any legal or business dispute, concerning which you were
involved or had knowledge while employed by the Company and its Affiliates, including, but not limited to, any inquiry, proceeding, hearing, or investigation by or before any administrative, executive, judicial or legislative body or agency, or
within the Company and its Affiliates. You agree to make yourself available if and when reasonably required by the Company, its Affiliates or relevant counsel, taking into account your schedule. The Company will reimburse you for all reasonable
travel and other out-of-pocket expenses incurred by you in connection with your compliance with this obligation. 
 You agree that, to the
extent consistent with applicable law, you will not aid, assist, or participate in any legal action or proceeding filed by third parties against the Company, its Affiliates, or against any of its and their current or former officers, directors,
employees, employee benefit plans or pension funds. 
 Nothing in this section shall prohibit you from responding truthfully to a
lawfully-issued subpoena, court order, or other lawful request by any regulatory agency or governmental authority. 
  

	15)	Affiliate Directorships 

 You agree
to resign as a Director or Manager of all Affiliates of the Company of which you are a director or a manager on or before the Early Retirement Date, by signing the resignation letter(s) that the Company shall submit to you. 

 

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	16)	Agreement and Release 

 By
countersigning this Agreement and in consideration of the payments to be made by the Company to you or for your benefit: 
  

	 	(i)	you hereby confirm that you accept and agree to all of the terms and conditions set forth in this Agreement; 

 

	 	(ii)	you hereby acknowledge and agree that all overtime work you might have performed, if any, has been compensated in full; 

 

	 	(iii)	you hereby agree that this Agreement sets out all the terms and conditions relating to the ending of your employment with the Company, and supersedes all discussions
and understandings, if any, oral or written; 

  

	 	(iv)	if any provision of this Agreement is held by a court of competent jurisdiction to be overbroad, unreasonable or unenforceable, such provision shall be given effect by
the court to the maximum extent possible by narrowing or not enforcing that aspect of the provision found overbroad, unreasonable or unenforceable, without affecting the validity or enforceability of the remainder of this Agreement; and

  

	 	(v)	you also acknowledge that this Agreement provides consideration to you which you are not entitled to receive under usual Company policy or under any other agreement. In
exchange for receiving this additional consideration, you agree, on behalf of yourself, your heirs, personal representatives, executors, administrators, successors and assigns, to forever release and discharge the Company, its Affiliates, and its
and their respective successors, predecessors, divisions, assigns, assets, employee benefit plans or funds, pension funds, and any of its or their respective past, present and/or future representatives, shareholders, directors, officers,
fiduciaries, agents, trustees, administrators, and employees (collectively referred to as the “Releasees”), from any and all claims, demands, damages, remedies, contracts (express or implied) and causes of action of any kind or nature
whatsoever, whether known or unknown, which you had, now have or in the future may or could have against the Releasees, or any of them, by reason of any matter, act, omission or event that occurred, or is alleged to have occurred, up to the date of
this Agreement, including, but not limited to, any and all claims in connection with your employment with the Company (or with any other Releasee) and/or the end of said employment. 

You represent that you have not, and agree that, to the extent permitted by law, you will not, bring or cause to be brought any charges,
claims, demands, or actions in any forum against the Company or any other Releasee arising from any matter, act, omission or event that occurred or is alleged to have occurred, up to the date of this Agreement, including, but not limited to, any
charge or claim in connection with your employment and/or the end of said employment, except for any claim related to settlement of any outstanding expenses pursuant to the Company’s Expense Account Policy and the payments to be made pursuant
to Sections 3 and 4 above. 
 This waiver and release includes all claims of any kind which you now have, had, or may hereafter
claim to have had against the Company and its Affiliates, and their current and former officers, 
  

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directors, employees, employee benefit plans or pension funds, by reason of any matter, act, omission, or event that has occurred or is alleged to have occurred up to the date of this Agreement,
except for claims that cannot be waived or released under Swiss law. 
  

	17)	Non-binding Offer 

 This offer of
Early Retirement is non-binding and made without prejudice. It will be null and void if not accepted by August 2, 2010. Such acceptance shall be evidenced by initialing each page and signing this Agreement. 

 

	18.	Governing law and Jurisdiction 

Any issues relating to or arising out of this Agreement shall be governed exclusively by the laws of Switzerland without regard to its conflict of law
provisions and shall be subject to the exclusive jurisdiction of the competent courts of the Canton de Vaud, Switzerland. However, each party is hereby expressly authorized and entitled to initiate judicial action seeking preliminary or permanent
injunctive relief with respect to the obligations set forth under confidentiality and non-compete provisions of this Agreement, before any other court of competent jurisdiction. 

					
		  		  	Yours faithfully,
			
		  		  	 PHILIP MORRIS INTERNATIONAL

MANAGEMENT S.A.

			
	 /s/ Daniele Regorda
	  		  	 /s/ Andre Calantzopoulos

	Daniele Regorda	  		  	Andre Calantzopoulos
	Senior Vice President Human Resources	  		  	Chief Operating Officer

 I agree to the
above terms: 

			
	
		
	Name:	 	/s/ Jean-Claude Kunz
		 	Jean-Claude Kunz
	
	Date: July 10, 2010

  

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 BY HAND 

Jean-Claude Kunz 

Lausanne, June 15, 2010 

Dear Jean-Claude, 
 This is to confirm that we
have taken good note of your decision to retire from Philip Morris International Management SA (“the Company”). Thus, we accept that your employment agreement will end on August 31,2010. 

 

					
		 		 	Yours faithfully,
			
		 		 	 PHILIP MORRIS INTERNATIONAL

MANAGEMENT SA

			
	 /s/ Daniele Regorda
	 		 	 /s/ Andre Calantzopoulos

	Daniele Regorda	 		 	Andre Calantzopoulos
	Senior Vice President Human Resources	 		 	Chief Operating Officer

 Received:

  

			
	 Name:
	 	 /s/ Jean-Claude Kunz

		 	Jean-Claude Kunz
	
	Date: July 5, 2010

 Philip Morris
International Management S.A. 
 AVENUE DE RHODANIE 50   •   1007 LAUSANNE   
•   SWITZERLAND    •   TELEPHONE: +41 58 242 00 00    •   TELEFAX: +41 58 242 01 01 

www.philipmorrisinternational.comExhibit 10.1

 Exhibit 10.1 

UNITED STATES OF AMERICA 

BEFORE THE 
 BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 
 WASHINGTON, D.C. 

STATE CORPORATION COMMISSION 

BUREAU OF FINANCIAL INSTITUTIONS 

RICHMOND, VIRGINIA 
  

			
	 Written Agreement by and among
  
	  	
	  
 NEW PEOPLES BANKSHARES, INC.

Honaker, Virginia
  

NEW PEOPLES BANK, INC.
 Honaker,
Virginia
  
 FEDERAL RESERVE BANK

OF RICHMOND
 Richmond, Virginia

 
 and
  

STATE CORPORATION COMMISSION
 BUREAU OF FINANCIAL
INSTITUTIONS
 Richmond, Virginia
	  	  
 Docket No. 10-148-WA/RB-BHC

                      
10-148-WA/RB-SM

 WHEREAS, in recognition of their common goal to maintain the financial soundness of New
Peoples Bankshares, Inc., Honaker, Virginia (“NPBI”), a registered bank holding company, and its subsidiary bank, New Peoples Bank, Inc., Honaker, Virginia (the “Bank”), a state-chartered bank that is a member of the Federal
Reserve System, NPBI, the Bank, the Federal Reserve Bank of Richmond (the “Reserve Bank”), and the State Corporation Commission Bureau of Financial Institutions (the “Bureau”) have mutually agreed to enter into this Written
Agreement (the “Agreement”); and 

 WHEREAS, on July 27, 2010, NPBI’s and the Bank’s boards of directors, at duly
constituted meetings, adopted resolutions authorizing and directing Michael G. McGlothlin, to consent to this Agreement on behalf of NPBI and the Bank, and consenting to compliance with each and every applicable provision of this Agreement by NPBI,
the Bank, and their institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12 U.S.C. §§ 1813(u) and 
1818(b)(3)). 

NOW, THEREFORE, NPBI, the Bank, the Reserve Bank, and the Bureau agree as follows: 

Source of Strength 
 1.
The board of directors of NPBI shall take appropriate steps to fully utilize NPBI’s financial and managerial resources, pursuant to section 225.4(a) of Regulation Y of the Board of Governors of the Federal Reserve System (the “Board of
Governors”) (12 C.F.R. § 225.4(a)), to serve as a source of strength to the Bank, including, but not limited to, taking steps to ensure that the Bank complies with this Agreement and any other supervisory action taken by the Bank’s
federal or state regulators. 
 Board Oversight 

2. Within 60 days of this Agreement, the Bank’s board of directors shall submit to the Reserve Bank and the Bureau a written plan to
strengthen board oversight of the management and operations of the Bank. The plan shall, at a minimum, address, consider, and include: 

(a) The actions that the board of directors will take to improve the Bank’s condition and maintain effective control over, and
supervision of, the Bank’s major operations and activities, including but not limited to, credit risk management, processes to mitigate risks associated with credit concentrations, capital, earnings, funds management, and audit; 

 

 2 

 (b) the responsibility of the board of directors to monitor management’s adherence to
approved policies and procedures, and applicable laws and regulations; 
 (c) a description of the information and reports that
will be regularly reviewed by the board of directors in its oversight of the operations and management of the Bank, including information on the Bank’s adversely classified assets, watch list, concentrations of credits, allowance for loan and
lease losses (“ALLL”), capital, liquidity, earnings, and response to audit and examination findings; and 
 (d) the
maintenance of adequate and complete minutes of all board and committee meetings, approval of such minutes, and their retention for supervisory review. 

Corporate Governance and Management Review 

3. (a) Within 30 days of this Agreement, the board of directors of the Bank shall retain an independent consultant acceptable to the
Reserve Bank and the Bureau to assess the effectiveness of the Bank’s corporate governance, board and management structure (the “Review”), to assess staffing needs, and to prepare a written report of findings and recommendations (the
“Report”). The Review shall, at a minimum, address, consider, and include: 
  

	 	(i)	the qualifications and performance of each of the Bank’s senior executive officers to determine whether the individual possesses the ability, experience, and other
qualifications to competently perform present and anticipated duties, including their ability to: adhere to applicable laws and regulations and the Bank’s 

 

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 established policies and procedures; restore and maintain the Bank to a safe and sound
condition; and comply with the requirements of this Agreement; 
  

	 	(ii)	the identification of present and future management and staffing needs for each area of the Bank, particularly in the areas of credit risk management, lending and
credit administration, loan review, and problem asset workout; and 

  

	 	(iii)	an assessment of the current structure, qualifications, and composition of the board of directors and their committees, and a determination of the structure and
composition needed to adequately supervise the affairs of the Bank. 

 (b) Within 10 days of the Reserve
Bank’s and the Bureau’s approval of the Bank’s independent consultant selection, the Bank shall submit an engagement letter to the Reserve Bank and the Bureau for approval. The engagement letter shall require the independent
consultant to submit the Report within 30 days of regulatory approval of the engagement letter and to provide a copy of the Report to the Reserve Bank and the Bureau at the same time that it is provided to the Bank’s board of directors.

 4. Within 30 days of receipt of the Report the Bank’s board of directors shall submit a written management plan to the
Reserve Bank and the Bureau that fully addresses the findings and recommendations in the independent consultant’s Report and describes the specific actions that the board of directors proposes to take in order to strengthen the Bank’s
management and corporate governance, and to hire, as necessary, additional or replacement directors, officers or staff to properly oversee, manage and operate the Bank. 
  

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 Credit Risk Management 

5. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan to strengthen
credit risk management practices. The plan shall, at a minimum, address, consider, and include: 
 (a) The responsibility of the
board of directors to establish appropriate risk tolerance guidelines and risk limits; 
 (b) periodic review and revision of
risk exposure limits to address changes in market conditions; 
 (c) timely and accurate identification and quantification of
credit risk within the loan portfolio; 
 (d) strategies to minimize credit losses and reduce the level of problem assets;

 (e) enhanced stress testing of loan portfolio segments; and 

(f) enhanced watch list reporting. 

Concentrations of Credit 

6. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan to strengthen the
Bank’s management of commercial real estate (“CRE”) concentrations, including steps to reduce the risk of concentrations. The plan shall, at a minimum, include: 

(a) Procedures to identify, limit, and manage concentrations of credit that are consistent with the Interagency Guidance on
Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, dated December 12, 2006 (SR 07-1); 

(b) a schedule for reducing and the means by which the Bank will reduce the level of CRE concentrations, and timeframes for achieving the
reduced levels; and 
  

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 (c) enhanced monitoring and reporting of CRE concentrations to management and the board of
directors. 
 Lending and Credit Administration 

7. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written lending and credit
administration program that shall, at a minimum, address, consider, and include: 
 (a) Documented analysis of the
borrower’s and guarantor’s repayment sources, credit worthiness, global cash flow, leverage, liquidity, and overall debt services ability; 

(b) types of financial and collateral information that must be obtained and the timing and frequency for receipt of such information;

 (c) standards for renewing, extending, or modifying existing loans; 

(d) ongoing assessment, inspection, and reporting of real estate development project status; 

(e) appropriate controls on loan draws, including, but not limited to, a description of the documents necessary to support the draw;

 (f) monitoring and reporting of exceptions to loan policies and procedures; 

(g) policies and procedures to minimize financial and document exceptions; 

(h) standards for the management of collateral including accurate and timely 

valuation of collateral; and 

(i) procedures for monitoring loan participations. 

Loan Review 
 8. Within
60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written program for the ongoing review and grading of the Bank’s loan 

 

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portfolio by a qualified independent party or by qualified staff that is independent of the Bank’s lending function. The program shall, at a minimum, address, consider, and include:

 (a) The scope and frequency of the loan review; 

(b) standards and criteria for assessing the credit quality of the loans; 

(c) application of loan grading standards and criteria to the loan portfolio; and 

(d) quarterly written reports to the board of directors that identify the status of those loans that are adversely graded and the
prospects for full collection or strengthening of the quality of any such loans. 
 Asset Improvement 

9. The Bank shall not, directly or indirectly, extend, renew, or restructure any credit to or for the benefit of any borrower, including
any related interest of the borrower, whose loans or other extensions of credit are criticized in the report of examination of the Bank conducted by the Reserve Bank that commenced on September 14, 2009 (the “Report of Examination”)
or in any subsequent report of examination, without the prior approval of a majority of the board of directors or a designated committee thereof. The board of directors or its committee shall document in writing the reasons for the extension of
credit, renewal, or restructuring, specifically certifying that: (i) the Bank’s risk management policies and practices for loan workout activity are acceptable; (ii) the extension of credit is necessary to improve and protect the
Bank’s interest in the ultimate collection of the credit already granted and maximize its potential for collection; (iii) the extension of credit reflects prudent underwriting based on reasonable repayment terms and is adequately secured;
and all necessary loan documentation has been properly and accurately prepared and filed; (iv) the Bank has performed a comprehensive credit analysis indicating that the borrower has the willingness and ability to repay the debt as

  

 7 

 
supported by an adequate workout plan, as necessary; and (v) the board of directors or its designated committee reasonably believes that the extension of credit will not impair the
Bank’s interest in obtaining repayment of the already outstanding credit and that the extension of credit or renewal will be repaid according to its terms. The written certification shall be made a part of the minutes of the meetings of the
board of directors or its committee, as appropriate, and a copy of the signed certification, together with the credit analysis and related information that was used in the determination, shall be retained by the Bank in the borrower’s credit
file for subsequent supervisory review. For purposes of this Agreement, the term “related interest” is defined as set forth in section 2 15.2(n) of Regulation O of the Board of Governors of the Federal Reserve System (the “Board of
Governors”) (12 C.F.R. § 215.2(n)). 
 10. (a) Within 60 days of this Agreement, the Bank shall submit to the
Reserve Bank and the Bureau an acceptable written plan designed to improve the Bank’s position through repayment, amortization, liquidation, additional collateral, or other means on each loan or other asset in excess of $1,000,000, including
OREO, that: (i) is past due as to principal or interest more than 90 days as of the date of this Agreement; (ii) is on the Bank’s problem loan list; or (iii) was adversely classified in the Report of Examination. In developing
the plan for each loan, the Bank shall, at a minimum, review, analyze, and document the financial position of the borrower, including source of repayment, repayment ability, and alternative repayment sources, as well as the value and accessibility
of any pledged or assigned collateral, and any possible actions to improve the Bank’s collateral position. 
 (b) Within 30
days of the date that any additional loan or other asset in excess of $1,000,000, including OREO: (i) becomes past due as to principal or interest for more than 90 days; (ii) is on the Bank’s problem loan list; or (iii) is
adversely classified in any subsequent report of examination of the Bank, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan to improve the Bank’s position on such loan or asset. 

 

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 (c) Within 30 days after the end of each calendar quarter thereafter, the Bank shall submit
a written progress report to the Reserve Bank and the Bureau to update each asset improvement plan, which shall include, at a minimum, the carrying value of the loan or other asset and changes in the nature and value of supporting collateral, along
with a copy of the Bank’s current problem loan list, a list of all loan renewals and extensions without full collection of interest in the last quarter, and past due/non-accrual report. The board of directors shall review the progress reports
before submission to the Reserve Bank and the Bureau and shall document the review in the minutes of the board of directors’ meetings. 

Allowance for Loan and Lease Losses 

11. (a) Within 10 days of this Agreement, the Bank shall eliminate from its books, by charge-off or collection, all assets or
portions of assets classified “loss” in the Report of Examination that have not been previously collected in full or charged off. Thereafter the Bank shall, within 30 days from the receipt of any federal or state report of examination,
charge off all assets classified “loss” unless otherwise approved in writing by the Reserve Bank and the Bureau. 

(b) Within 60 days of this Agreement, the Bank shall review and revise its ALLL methodology consistent with relevant supervisory
guidance, including the Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations regarding the ALLL set forth in
the Report of Examination, and submit a description of the revised methodology to the Reserve Bank and the Bureau. The revised ALLL methodology shall be 

 

 9 

 
designed to maintain an adequate ALLL and shall address, consider, and include, at a minimum, the reliability of the Bank’s loan grading system, the volume of criticized loans,
concentrations of credit, the current level of past due and nonperforming loans, past loan loss experience, evaluation of probable losses in the Bank’s loan portfolio, including adversely classified loans, and the impact of market conditions on
loan and collateral valuations and collectibility. 
 (c) Within 60 days of this Agreement, the Bank shall submit to the Reserve
Bank and the Bureau an acceptable written program for the maintenance of an adequate ALLL. The program shall include policies and procedures to ensure adherence to the revised ALLL methodology and provide for periodic reviews and updates to the ALLL
methodology, as appropriate. The program shall also provide for a review of the ALLL by the board of directors on at least a quarterly calendar basis. Any deficiency found in the ALLL shall be remedied in the quarter it is discovered, prior to the
filing of the Consolidated Reports of Condition and Income, by additional provisions. The board of directors shall maintain written documentation of its review, including the factors considered and conclusions reached by the Bank in determining the
adequacy of the ALLL. During the term of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau, within 30 days after the end of each calendar quarter, a written report regarding the board of directors’ quarterly review of the
ALLL and a description of any changes to the methodology used in determining the amount of ALLL for that quarter. 
 Capital Plan

 12. Within 60 days of this Agreement, NPBI and the Bank shall submit to the Reserve Bank and the Bureau an acceptable
joint written plan to maintain sufficient capital at NPBI on a 
  

 10 

 
consolidated basis, and the Bank as a separate legal entity on a stand-alone basis. The plan shall, at a minimum, address, consider, and include: 

(a) NPBI’s current and future capital requirements, including compliance with the Capital Adequacy Guidelines for Bank Holding
Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D); 

(b) the Bank’s current and future capital requirements, including compliance with the Capital Adequacy Guidelines for State Member
Banks: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B); 

(c) the adequacy of the Bank’s capital, taking into account the volume of classified assets, concentrations of credit, the adequacy
of the ALLL, current and projected asset growth, projected retained earnings, and anticipated and contingency funding needs; 

(d) the source and timing of additional funds to fulfill NPBI’s and the Bank’s future capital requirements; and 

(e) the requirements of section 225.4(a) of Regulation Y of the Board of Governors (12 C.F.R. § 225.4(a)) that NPBI serve as a
source of strength to the Bank. 
 13. NPBI and the Bank shall notify the Reserve Bank and the Bureau, in writing, no more than
30 days after the end of any calendar quarter in which any of NPBI’s consolidated capital ratios or the Bank’s capital ratios (total risk-based, Tier 1 risk-based, or leverage) fall below the approved capital plan’s minimum ratios.
Together with the notification, the NPBI and the Bank shall submit an acceptable written plan that details the steps NPBI or the Bank, as appropriate, will take to increase NPBI’s or the Bank’s capital ratios to or above the approved
capital plan’s minimums. 
  

 11 

 Strategic Plan and Budget 

14. (a) Within 90 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau a strategic plan to improve the
Bank’s earnings and a budget for 2010. The written plan and budget shall include, but not be limited to: 
 (i)
Identification of the major areas where, and means by which, the board of directors will seek to improve the Bank’s operating performance; 

(ii) a realistic and comprehensive budget for calendar year 2010, including income statement and balance sheet projections; and

 (iii) a description of the operating assumptions that form the basis for, and adequately support, major projected income,
expense, and balance sheet components. 
 (b) A strategic plan and budget for each calendar year subsequent to 2010 shall be
submitted to the Reserve Bank and the Bureau at least 30 days prior to the beginning of that calendar year. 
 Liquidity and Funds Management

 15. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan
designed to improve management of the Bank’s liquidity position and funds management practices. The plan shall, at a minimum, address, consider, and include: 

(a) Measures to enhance the monitoring, measurement, and reporting of the Bank’s liquidity to the board of directors; and

  

 12 

 (b) specific liquidity targets and parameters and the maintenance of sufficient liquidity to
meet contractual obligations and unanticipated demands. 
 16. Within 60 days of this Agreement, the Bank shall submit to the
Reserve Bank and the Bureau an acceptable revised written contingency funding plan that, at a minimum, identifies available sources of liquidity and includes adverse scenario planning. 

Dividends and Distributions 

17. (a) The Bank shall not declare or pay any dividends without the prior written approval of the Reserve Bank, the Director of the
Division of Banking Supervision and Regulation of the Board of Governors (the “Director”), and the Bureau. 
 (b) NPBI
shall not declare or pay any dividends without the prior written approval of the Reserve Bank, the Director, and the Bureau. 

(c) NPBI shall not take any other form of payment representing a reduction in capital from the Bank without the prior written approval of
the Reserve Bank and the Bureau. 
 (d) NPBI and its nonbank subsidiaries shall not make any distributions of interest,
principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank, the Director, and the Bureau. 

(e) All requests for prior approval shall be received at least 30 days prior to the proposed dividend declaration date, proposed
distribution on subordinated debentures, and required notice of deferral on trust preferred securities. All requests shall contain, at a minimum, current and projected information, as appropriate, on the parent’s capital, earnings, and cash
flow; the Bank’s capital, asset quality, earnings and ALLL needs; and identification of the sources of funds for the proposed payment or distribution. For requests to declare or pay dividends, NPBI and the Bank, as appropriate, must also
demonstrate that the requested 
  

 13 

 
declaration or payment of dividends is consistent with the Board of Governors’ Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated
November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323), and Section 6.1-56 of the Code of Virginia. 
 BSA/AML
Compliance 
 18. Within 90 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable
written plan to enhance the Bank’s anti-money laundering (“AML ”) internal controls, training, and independent testing and to ensure the Bank’s compliance with all applicable federal laws, rules, and regulations relating to AML,
including the Bank Secrecy Act (“BSA”) (31 U.S.C. § 5311 et seq.); the rules and regulations issued thereunder by the U.S. Department of the Treasury (31 C.F.R. Part 103); and the AML requirements of Regulation H of the Board of
Governors (12 C.F.R. § 208.63). 
 Debt and Stock Redemption 

19. (a) NPBI, and its nonbank subsidiaries, shall not, directly or indirectly, incur, increase, or guarantee any debt without the
prior written approval of the Reserve Bank and the Bureau. All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt
repayment, and an analysis of the cash flow resources available to meet such debt repayment. 
 (b) NPBI shall not, directly or
indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank and the Bureau. 
 Compliance
with Laws and Regulations 
 20. (a) In appointing any new director or senior executive officer, or changing the
responsibilities of any senior executive officer so that the officer would assume a different senior 
  

 14 

 
executive officer position, the Bank shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12
C.F.R. §§ 225.71 etseq.). 
 (b) The Bank shall comply with the restrictions on indemnification and severance
payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359). 

Compliance with the Agreement 

21. (a) Within 10 days of this Agreement, the boards of directors NPBI and the Bank shall appoint a joint committee (the
“Compliance Committee”) to monitor and coordinate the compliance with the provisions of this Agreement. The Compliance Committee shall include a majority of outside directors who are not executive officers of NPBI or the Bank or principal
shareholders of NPBI, as defined in sections 215.2(e)(1) and 215.2(m)(1) of Regulation O of the Board of Governors (12 C.F.R. § 215.2(e)(1) and 215.2(m)(1)). At a minimum, the Compliance Committee shall meet at least monthly, keep detailed
minutes of each meeting, and report its findings to the boards of directors of the NPBI and the Bank. 
 (b) Within 30 days
after the end of each calendar quarter following the date of this Agreement, NPBI and the Bank shall submit to the Reserve Bank and the Bureau written progress reports detailing the form and manner of all actions taken to secure compliance with this
Agreement and the results thereof. 
 Approval and Implementation of Plans, Program, and Engagement Letter 

22. (a) The written plans, program, and an engagement letter required by paragraphs 3(b), 5, 6, 7, 8, 10(a), 10(b), 11(c), 12, 13,
15, 16, and 18 of this Agreement shall be submitted to the Reserve Bank and the Bureau for review and approval. Acceptable plans, program, and engagement letter shall be submitted within the time periods set forth in the Agreement. An independent
consultant acceptable to the Reserve Bank and the Bureau shall be retained in the time period set forth in paragraph 3(a). 
  

 15 

 (b) Within 10 days of approval by the Reserve Bank and the Bureau, the Bank shall adopt the
approved plans, program, and engagement letter. Upon adoption, the Bank shall promptly implement the approved plans, program, and engagement letter and thereafter fully comply with them. 

(c) During the term of this Agreement, the approved plans, program, and engagement letter shall not be amended or rescinded without the
prior written approval of the Reserve Bank and the Bureau. 
 Communications 

23. All communications regarding this Agreement shall be sent to: 

 

	 	(a)	Eugene W. Johnson, Jr. 

	 	    	Vice President 

	 	    	Federal Reserve Bank of Richmond 

	 	    	P.O. Box 27622 

	 	    	Richmond, Virginia 23261-7622 

  

	 	(b)	John M. Crockett 

	 	    	Deputy Commissioner 

	 	    	State Corporation Commission Bureau of Financial Institutions 

	 	    	P.O. Box 640 

	 	    	Richmond, Virginia 23218 

  

	 	(c)	Michael G. McGlothlin 

	 	    	Chairman of the Board 

	 	    	New Peoples Bankshares, Inc. 

	 	    	New Peoples Bank, Inc. 

	 	    	67 Commerce Street 

	 	    	Honaker, Virginia 24260 

  

 16 

	 	(d)	Jonathan D. Mullins 

	 	    	President and Chief Executive Officer 

	 	    	New Peoples Bankshares, Inc. 

	 	    	New Peoples Bank, Inc. 

	 	    	67 Commerce Street 

	 	    	Honaker, Virginia 24260 

 Miscellaneous 

 24. Notwithstanding any provision of this Agreement, the Reserve Bank and the Bureau may, in their sole discretion, grant
written extensions of time to NPBI and the Bank to comply with any provision of this Agreement. 
 25. The provisions of this
Agreement shall be binding upon NPBI and the Bank and their institution-affiliated parties, in their capacities as such, and their successors and assigns. 

26. Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing
by the Reserve Bank and the Bureau. 
 27. The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board
of Governors, the Reserve Bank, the Bureau, or any other federal or state agency from taking any other action affecting NPBI and the Bank or any of their current or former institution-affiliated parties and their successors and assigns. 

 

 17 

 28. Pursuant to section 50 of the FDI Act (12 US.C. § 183laa), this Agreement is
enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818). 
 IN WITNESS
WHEREOF, the parties have caused this Agreement to be executed as of the
29th day of July, 2010. 

 

									
	NEW PEOPLES BANKSHARES, INC.	 		 	FEDERAL RESERVE BANK OF RICHMOND
					
	By:	 	 /s/ Michael G. McGlothlin
	 		 	By:	 	 /s/ Eugene W. Johnson, Jr.

		 	Michael G. McGlothlin	 		 		 	Eugene W. Johnson, Jr.
		 	Chairman of the Board	 		 		 	Vice President

  

									
	 NEW PEOPLES BANK, INC.
	 		 	 STATE CORPORATION COMMISSION

BUREAU OF FINANCIAL

INSTITUTIONS

					
	By:	 	 /s/ Michael G. McGlothlin
	 		 	By:	 	 /s/ John M. Crockett

		 	Michael G. McGlothlin	 		 		 	John M. Crockett
		 	Chairman of the Board	 		 		 	Deputy Commissioner

  

 18

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