March 27, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Old Point Financial Corporation. The meeting
will be held on Tuesday, April 28, 1998 at 6:00 p.m. at The
Williamsburg Marriott Hotel, 50 Kingsmill Road, Williamsburg,
Virginia.
You will be asked to vote on the election of directors,
ratification of independent certified public accountants, a
proposal to approve the Old Point 1998 Stock Option Plan, and
a proposal to approve an amendment to the Old Point 1996
Employee Stock Purchase Plan. During the meeting, we will
report to you on the condition and performance of the Company
and the Bank. You also will have an opportunity to question
management on matters that affect the interest of all
stockholders.
We hope to see you on April 28, 1998. Whether you plan to
attend or not, please complete, sign, date and return the
enclosed proxy card as soon as possible in the postage-paid
envelope provided. Your vote is important. We appreciate
your continued loyalty and support.
Cordially,
/s/Robert F. Shuford
Robert F. Shuford
Chairman of the Board and President
Enclosures
<PAGE>
OLD POINT FINANCIAL CORPORATION
1 West Mellen Street
Hampton, Virginia 23663
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 28, 1998
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Old Point Financial
Corporation will be held at The Williamsburg Marriott Hotel, 50
Kingsmill Road, Williamsburg, Virginia, on Tuesday, April 28,
1998, at 6:00 p.m. for the following purposes:
1. To elect 11 directors to serve for the ensuing year, or
until their successors have been elected and qualified;
2. To ratify the appointment of Eggleston Smith P.C., Certified
Public Accountants, as independent accountants and auditors
for 1998;
3. To approve the Old Point Financial Corporation 1998 Stock
Option Plan, as described in the accompanying Proxy
Statement;
4. To approve an amendment to the Old Point Financial
Corporation 1996 Employee Stock Purchase Plan, as described
in the accompanying Proxy Statement; and
5. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on March 17,
1998, will be entitled to notice of and to vote at the Annual
Meeting and any adjournments thereof.
By Order of the Board of Directors
/s/W. Rodney Rosser
W. Rodney Rosser
Senior Vice President & Secretary to the Board
March 27, 1998
Please complete, sign, date and mail the enclosed proxy card
promptly. No postage is required if the return envelope is used
and mailed in the United States. If you attend the meeting, you
may, if you desire, revoke your proxy and vote in person.
<PAGE>
OLD POINT FINANCIAL CORPORATION
1 West Mellen Street
Hampton, Virginia 23663
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 28, 1998
GENERAL
The enclosed proxy is solicited by the Board of Directors of
Old Point Financial Corporation (the "Company") for the 1998
Annual Meeting of Stockholders (the "Annual Meeting") of the
Company to be held Tuesday, April 28, 1998, at the time and place
and for the purposes set forth in the accompanying Notice of the
Annual Meeting. Stockholders may revoke proxies at any time
prior to their exercise by written notice to the Company, by
submitting a proxy bearing a later date, or by attending the
Annual Meeting and requesting to vote in person. The approximate
mailing date of this Proxy Statement and accompanying Proxy is
March 27, 1998.
Voting Rights and Solicitation
Only those stockholders of record at the close of business
on March 17, 1998, are entitled to notice of and to vote at the
Annual Meeting or any adjournments thereof. The number of shares
of common stock of the Company outstanding and entitled to vote
as of the record date was 2,566,172. The Company has no other
class of stock outstanding. A majority of the shares entitled to
vote, represented in person or by proxy, will constitute a quorum
for the transaction of business.
Each share of Company common stock entitles the record
holder thereof to one vote upon each matter to be voted upon at
the Annual Meeting, except that in the election of directors
cumulative voting entitles a stockholder to give one nominee as
many votes as is equal to the number of directors to be elected,
multiplied by the number of shares owned by such stockholder or
to distribute his or her votes on the same principle between two
or more nominees as he or she sees fit. The Board of Directors
will instruct the proxies to use cumulative voting, if necessary,
to elect all or as many of the nominees as possible.
The cost of solicitation of proxies will be borne by the
Company. Solicitation is being made by mail, and if necessary
may be made in person or by telephone, telegram, or special
letter by officers and regular employees of the Company or its
subsidiary, acting without compensation other than regular
compensation.
1
<PAGE>
Principal Shareholders
Mr. Robert F. Shuford and Mrs. Gertrude S. Dixon, both of
whom are directors of the Company and its wholly-owned subsidiary
bank, The Old Point National Bank of Phoebus (the "Bank"), are
the only individuals who beneficially own 5% or more of the
Company's common stock. Their beneficial ownership of the
Company common stock as of March 17, 1998, is shown in the
beneficial ownership table below under "Election of Directors."
The address of Mr. Shuford is the same as the Company's principal
offices, and the address of Mrs. Dixon is P.O. Box 3152,
Hampton, Virginia 23663. In addition, the Bank holds as trustee
of various trust accounts a total of 414,247 shares (or
approximately 16.14%) of Company common stock. The Trust
Department of the Bank possesses sole voting and/or investment
power with respect to 303,533 of these shares, but as to which,
as a matter of state law, it must refrain from voting unless a co-
fiduciary is appointed for the sole purpose of voting such
shares.
As of March 17, 1998, the persons nominated as directors of
the Company, and the executive officers of the Company and the
Bank, beneficially owned as a group 610,104 shares (approximately
23.3%) of Company common stock outstanding (including shares for
which they hold presently exercisable stock options).
PROPOSAL 1
ELECTION OF DIRECTORS
The eleven persons named below, all of whom currently serve
as directors of the Company, will be nominated to serve as
directors until the 1999 Annual Meeting, or until their
successors have been duly elected and have qualified.
<TABLE>
<CAPTION>
Amount and Nature of
Principal Beneficial Ownership
Director Occupation For As of March 17, 1998
Name and (Age) Since (1) Past Five Years (Percent of Class)(2)(3)
<S> <C> <C> <C>
Dr. Richard F. Clark (65) 1981 Pathologist 62,533
Sentara Hampton General Hospital (2.4%)
Gertrude S. Dixon (84) 1981 Real Estate Management 193,099
and Ownership (7.5%)
Russell Smith Evans Jr. (55) 1993 Assistant Treasurer and 1,650
Corporate Fleet Manager *
Ferguson Enterprises
G. Royden Goodson, III (42) 1994 President 4,362
Warwick Plumbing & Heating Corp. *
Dr. Arthur D. Greene (53) 1994 Surgeon - Partner 3,264
Tidewater Orthopaedic Associates *
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Principal Beneficial Ownership
Director Occupation For As of March 17, 1998
Name and (Age) Since (1) Past Five Years (Percent of Class)(2)(3)
<S> <C> <C> <C>
Stephen D. Harris (56) 1988 Attorney-at-Law - Partner 8,800
Geddy, Harris & Geddy *
John Cabot Ishon (51) 1989 President 12,780
Hampton Stationery *
Eugene M. Jordan (74) 1964 Attorney-at-Law 28,000
Cumming, Hatchett & Jordan, P.C. (1.1%)
John B. Morgan, II (51) 1994 President 2,600
Morgan-Marrow Insurance *
Dr. H. Robert Schappert (59) 1996 Veterinarian - Owner 89,740
Beechmont Veterinary Hospital (3.5%)
Robert F. Shuford (60) 1965 Chairman of the Board, President & CEO 150,530(4)
Old Point Financial Corporation (5.8%)
Chairman of the Board, President & CEO
Old Point National Bank
</TABLE>
- ---------------------------------
*Represents less than 1.0% of the total outstanding shares.
(1) Refers to the year in which the individual first became a
director of the Bank. Dr. Richard F. Clark, Gertrude S.
Dixon, Eugene M. Jordan, and Robert F. Shuford became directors
of the Company upon consummation of the Bank's reorganization on
October 1, 1984. All present directors of the Company are
directors of the Bank.
(2) For purposes of this table, beneficial ownership has been
determined in accordance with the provisions of Rule 13d-3 of the
Securities Exchange Act of 1934 under which, in general, a person
is deemed to be the beneficial owner of a security if he or she
has or shares the power to vote or direct the voting of the
security or the power to dispose of or direct the disposition of
the security, or if he or she has the right to acquire beneficial
ownership of the security within sixty days.
(3) Includes shares held (i) by their close relatives or held
jointly with their spouses, (ii) as custodian or trustee for the
benefit of their children or others, or (iii) as attorney-in-fact
subject to a general power of attorney - Dr. Clark, 200 shares;
Mr. Evans, 650 shares; Dr. Greene, 1,968 shares; Mr. Harris, 400
shares, Mr. Ishon, 3,480 shares; Mr. Jordan, 16,970 shares; Mr.
Morgan, 2,200 shares; Dr. Schappert, 81,370 shares; and Mr.
Shuford, 75,590 shares.
(4) Includes shares that may be acquired within 60 days pursuant
to the exercise of stock options granted under the 1998 Old Point
Stock Option Plan - Mr. Shuford 17,814.
3
<PAGE>
There are two family relationships among the directors and
executive officers. Mr. Jordan is the father-in-law of Mr.
Ishon. Mr. Shuford and Dr. Schappert are married to sisters.
None of the directors serve as a director of any other company
with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934.
Board Committees and Attendance
During 1997, there were fifteen meetings of the Company's
Board of Directors. Each director attended at least 75% of all
meetings of the Board and committees on which he or she served.
The Company's Board has standing Executive, Audit and
Compensation Committees.
The Company's Executive Committee was comprised of Messrs.
Shuford, Jordan, Harris, Dr. Clark and Mrs. Dixon. It serves in
an advisory capacity, reviewing matters and making
recommendations to the Board of Directors. It met four times in
1997.
The Company's Compensation Committee is described below
under "Report on Executive Compensation."
The Bank's Audit Committee is comprised of Messrs. Jordan,
Ishon, Greene, Morgan, Schappert and Harris. The Audit Committee
reviews on a regular basis the work of the internal audit
department. It also reviews and approves the scope and detail of
the continuous audit program which is conducted by the internal
audit staff to protect against improper and unsound practices and
to furnish adequate protection to all assets and records.
Subject to the approval of the Board of Directors, it engages a
firm of certified public accountants to conduct such audit work
as is necessary and receives written reports, supplemented by
such oral reports as it deems necessary, from the audit firm.
During 1997, the Audit Committee held four meetings. The members
of the Bank's Audit Committee also serve as the Audit Committee
for the Company.
The Board has no separate nominating committee. The
Executive Committee reviews any recommendations obtained and
gives their recommendations to the Board. The entire Board
reviews, on an as needed basis, the qualifications of candidates
for membership to the Board. Following appropriate review, the
Board ascertains the willingness of selected individuals to serve
and extends invitations to serve as a Board member.
Directors' Compensation
Directors of the Company and Bank receive $300 for each
meeting of the Company and Bank Boards of Directors they attend.
The Directors of the Bank receive $150 for each committee meeting
they attend. The Directors of the Company receive $150 for
attending the Strategic Planning Committee meetings, but are not
remunerated for Executive Committee meetings. In addition, non-
officer directors of the Bank are paid a retainer fee of $3,000
annually. Company directors have been elected as directors of
the Bank, but there is no assurance that this practice will
continue.
Directors who are employees of the Company and Bank are
compensated for attendance at Bank Board meetings but do not
receive any fees for attendance at committee meetings.
4
<PAGE>
Indebtedness and Other Transactions
Some of the Company's directors, executive officers, and
members of their immediate families, and corporations,
partnerships and other entities of which such persons are
officers, directors, partners, trustees, executors or
beneficiaries, are customers of the Bank. All loans and
commitments to lend included in such transactions were made in
the ordinary course of business, upon substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
persons and did not involve more than normal risk of
collectibility or present other unfavorable features. It is the
policy of the Bank to provide loans to officers who are not
executive officers and to employees at more favorable rates than
those prevailing at the time for comparable transactions with
other persons. These loans do not involve more than the normal
risk of collectibility or present other unfavorable features.
The law firm of Cumming, Hatchett and Jordan, P.C. serves
as legal counsel to the Bank. Mr. Eugene M. Jordan is a member
of the firm. During 1997, the firm received from the Bank a
retainer and fees totaling $85,576. Morgan Marrow Company of
which John B. Morgan, II is President, provided insurance for
which the Bank paid $98,785 during 1997. Hampton Stationery, of
which John Cabot Ishon is the owner, Geddy, Harris & Geddy, of
which Stephen D. Harris is a partner, and Warwick Plumbing &
Heating Corp. of which G. Royden Goodson, III is President
provided products and services to the Bank during 1997.
EXECUTIVE COMPENSATION
Cash Compensation
The following table presents a three-year summary of all
compensation paid or accrued by the Company and the Bank to the
Company's Chief Executive Officer and each executive officer
whose salary and bonus for 1997 exceeded $100,000.
5
<PAGE>
EXECUTIVE COMPENSATION
Cash Compensation
The following table presents a three-year summary of all
compensation paid or accrued by the Company and the Bank to the
Company's Chief Executive Officer and each executive officer
whose salary and bonus for 1997 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
Name
and
Principal
Position Year Salary(1) Bonus(2) All Other Compensation(3)(4)
<S> <C> <C> <C> <C>
Robert F. Shuford 1997 $148,500 $26,000 $16,092
Chairman, President 1996 $147,900 $10,000 $10,857
& CEO 1995 $147,900 0 $56,655
W. Rodney Rosser 1997 $ 86,100 $14,400 $ 8,499
EVP & Trust Officer 1996 $ 85,500 $ 8,000 $ 6,136
& Secretary 1995 $ 80,000 $ 7,500 $ 5,008
</TABLE>
- ----------------------------------
(1) Salary includes directors' fees as follows: Mr. Shuford -
1997 of $4,500, 1996 of $3,900, and 1995 of $3,900.
(2) Bonus consideration for Mr. Shuford is paid in January of
each year following the year in which earned so that end
results could be evaluated by the Compensation Committee.
Bonus consideration for Mr. Rosser is paid in the year in
which earned.
(3) Mr. Shuford has received other compensation as follows:
1997 1996 1995
Profit Sharing $ 4,342 $ 4,395 $ 3,233
Cash Profit Sharing 4,088 0 0
401(k) Matching Plan 4,320 4,320 4,320
Split Dollar Life Insurance * 0 24,750
Sale of ISO ** 0 0 22,750
Group Term Insurance 3,342 2,142 1,602
------- ------ ------
$16,092 $10,857 $56,655
* The Split Dollar policy was awarded to Mr. Shuford in
1995. When this occurs the gain must be treated as compensation
to the employee.
6
<PAGE>
** When an incentive stock option (ISO) share is sold prior
to a one year vesting period, the gain on the sale is treated as
compensation to the employee.
(4) Mr. Rosser has received other compensation as follows:
1997 1996 1995
Profit Sharing $2,532 $2,564 $1,796
Cash Profit Sharing 2,385 0
401(k) Matching Plan 2,520 2,510 2,400
Group Term Insurance 1,062 1,062 812
------- ------ -------
$8,499 $6,136 $5,008
<TABLE>
<CAPTION>
OPTION EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option Exercises in Last
Fiscal Year and December 31, 1997 Option Value
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
12/31/97 (#) 12/31/97 ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) (1) Unexercisable Unexercisable (1)
<S> <C> <C> <C> <C>
Robert F. Shuford 0 0 16,500/5,294 $47,438/$11,771
W. Rodney Rosser 0 0 4,400/2,470 $11,262/$617
</TABLE>
- ----------------------------------
(1) Market value of underlying securities at exercise or year-
end, minus the exercise or base price.
Employee Benefit Plans
Pension Plan. The Company has a noncontributory defined
benefit pension plan which covers substantially all full-time
employees who have completed one year of service. A participant's
monthly retirement benefit (if he or she has 25 years of Credited
Service at his Normal Retirement Date) is 20% of his final average
pay plus 15% of final average pay in excess of the participant's
Social Security Covered Pay. The Social Security Covered Pay is
the average pay of the calendar year prior to the year the
participant attains his Social Security Retirement Age. If the
participant has less than 25 years of service at his Normal
Retirement Date, the participant's monthly retirement benefit will
be actuarially reduced by 1/25 for each year of credited service
less than 25 years. Cash benefits under the plan generally
commence on retirement, death or other termination of employment
and are payable in various forms at the election of the
participant.
7
<PAGE>
Thrift Plan. The Company has a contributory 401(k) profit-
sharing and thrift plan. Employees are eligible to participate if
they complete 1,000 hours of service for a plan year and are at
least 21 years old. Participants may elect to defer between 1% to
15% of their base compensation as defined in the plan, which will
be contributed to the plan. The Bank will contribute 50 cents for
each dollar deferred by an employee on the first 6% of the
employee's compensation. Participants may also elect to make
additional deferrals subject to certain limitations, which are not
matched by the Bank.
Distributions to participants are made at death, retirement
or other termination of employment in a lump sum payment, unless a
participant or his beneficiary elects to receive payments in
installments. The plan permits certain in-service withdrawals.
All employee contributions are fully vested and the Bank's
contributions become fully vested when a participant reaches age
65, becomes totally and permanently disabled or dies. If a
participant leaves the Bank before the occurrence of one of these
events, the Bank's contributions will become 10% vested per year
for the first four years of service and 20% vested per year for
the next three years of service, becoming 100% vested after seven
years of service.
Employee Stock Purchase Plan. The Company has one employee
stock purchase plan - the 1996 Employee Stock Purchase Plan (the
A1996 Plan"). The 1996 Plan provides eligible employees with a
simple and convenient method of investing in Company stock at a 5%
discount. The 1996 Plan provides the Company with additional
capital funds, and its aim is to increase employee interest and
productivity through ownership of Company common stock. Regular
employees may voluntarily participate in the 1996 Plan. They may
elect to contribute from 2% to 15% of their base pay to the 1996
Plan by payroll deduction for the purchase of Company common
stock. The 1996 Plan's fiscal year is the twelve month period
beginning July 1st and ending the next June 30th. The term of the
1996 Plan is for five consecutive fiscal years ending on June 30th
from its inception date of July 1st, 1996.
In effect, the 1996 Plan grants eligible employees, who
voluntarily participate, an option to purchase Company common
stock at an exercise price for a 1996 Plan year equal to 95% of
the lesser of (1) the Fair Market Value of the common stock on the
1st day of the 1996 Plan year (July 1st), or (2) the Fair Market
Value of the common stock on the last day of the 1996 Plan year
(June 30th).
The 1996 Plan was designed to qualify as an Employee Stock
Purchase Plan under Section 423 of the Internal Revenue Code, as
amended (the "Code"). Under the Code, participants normally do
not realize any income at the date of grant, or the date of
exercise and purchase of shares under the 1996 Plan. Recognition
of income is normally postponed until disposition of the shares.
1989 Stock Option Plan. The Company has one stock option
plan - the 1989 Stock Option Plan (the "1989 Plan"). The 1989
Plan provides for the award of nonqualified stock options and
incentive stock options to employees of the Company and the Bank
selected by the Board of Directors to participate in the 1989
Plan. The Board of Directors makes awards under the 1989 Plan and
establishes the terms and conditions of each award in the option
agreement entered into with each optionee. The price of shares of
stock to be issued upon the exercise of options will be at least
100% of the fair market value on the date of award. Options may
not be granted more than ten years after the adoption of the 1989
Plan by the Board and are exercisable only during the term
specified in the option agreement, which in the case of incentive
stock options shall not exceed ten years. The options are not
transferable other than by will or the laws of descent and
distribution.
8
<PAGE>
The Company reserved 84,534 shares of Company common stock
for grants under the 1989 Plan. As of December 31, 1997, one
hundred percent (100%) of the options available for grant had been
issued. Therefore, the Board is proposing to adopt a 1998 Stock
Option Plan in order to provide for the issuance of additional
options to key employees and non-employee directors as further
detailed below under "Proposal to Adopt 1998 Stock Option Plan."
Other Benefit Plans. Life, medical, dental, and disability
insurance is provided to all officers and employees of the
Company and Bank.
Report on Executive Compensation
Compensation for executive officers is administered by the
Compensation Committee (the "Committee"). The Committee is
comprised of four non-employee directors, Messrs. Goodson
(Chairman), Clark, Evans, and Morgan. It met two times in 1997.
All decisions of the Committee are recommended to the entire Board
of Directors, which makes the final decision.
In an environment characterized by change, regulatory
oversight and increased competition, total executive compensation
is designed to attract and retain qualified personnel by providing
competitive levels of compensation as compared to similarly sized
financial institutions. Executive compensation consists of the
several elements specified in the Summary Compensation Table under
"Executive Compensation;" namely, base salary and annual and long-
term incentive compensation.
In making its recommendation to the Board, the Committee
obtains from market and economic research companies information
pertaining to salary levels at other comparable financial
institutions. Annual compensation is determined by evaluating
several factors. The primary factor considered in evaluating the
level of executive compensation is the progress the Company made
during the year in achieving performance goals. The performance
goals evaluated include, but are not limited to, return on average
assets, return on average equity, net income, asset quality, and
deposit and loan growth. Secondary factors considered by the
Committee include comparing the Company's performance with other
local institutions and comparable executive compensation packages.
Lastly, the Committee gives some consideration to the expected
future contributions of the executive, general economic
conditions, the executive's length of service and standing within
the local banking communities, and other factors. Bonuses are
awarded based on evaluation of the foregoing factors relating to
the Company's financial performance. Decisions regarding
compensation, however, are mostly subjective in nature, and no
specific formulas are used to calculate an executive's
compensation.
The asset growth, loan growth and earnings increase resulted
in an overall positive financial performance of the Company and
the Bank in fiscal year 1997.
The committee recommended to the Board a bonus be granted to
Mr. Shuford in the amount of $26,000 and to Mr. Rosser of $14,400.
9
<PAGE>
The foregoing report was furnished to the Committee, and
approved by the directors of the Company.
G. Royden Goodson, III, Chairman
Dr. Richard F. Clark
Russell S. Evans, Jr.
John B. Morgan, II
10
<PAGE>
FIVE YEAR STOCK PERFORMANCE
Management provides below a line graph which compares the
Company's shareholder return with the return of the National
Association of Securities Dealers Automated Quotation National
Market System ("NASDAQ") Composite Index, a market-weighted
average of all over-the-counter stocks traded on NASDAQ, and with
the NASDAQ Bank Index, an index of non-holding company banking
institutions traded on NASDAQ. Management believes this is a
reasonable comparison of shareholder return performance, although
the Company's common stock is traded more thinly and was not on
the over-the-counter market in 1997, and therefore is not as
freely tradable or as subject to day to day market fluctuations.
This performance graph was created by comparing the percentage
change in stock prices for the Company and both indices on a year
to year basis, factoring in dividend payments, and looking only
at the closing price of the stock as of December 31 of each year
surveyed. This graph may be affected by unusually high or low
prices at December 31, 1992 or by temporary swings in stock price
at December 31 of any given year. Accordingly, this is not
necessarily the best measure of the Company's performance.
1992 1993 1994 1995 1996 1997
OPFC 100 142 152 157 175 181
NASDAQ BANK INDEX 100 129 131 189 239 391
NASDAQ COMPOSITE 100 115 111 155 191 232
The index reflects the total return on the stock that is
shown, including price appreciation, all stock splits and stock
dividends, and reinvestment of cash dividends at time of payment,
relative to the value of the stock at the beginning of the time
period. Thus a move from 100 to 150 on the index scale indicates
a 50% increase in the value of the investment. The NASDAQ Bank
Index contains all non-holding company banking institutions
traded on the NASDAQ exchange. In addition to traditional banks
this includes thrifts but does not include other non-regulated
finance companies. The NASDAQ Composite is a market value-
weighted average of all over-the-counter stocks quoted on their
listing service.
11
<PAGE>
PROPOSAL 2
RATIFICATION OF SELECTION OF ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of
Directors has appointed Eggleston Smith P.C., certified public
accountants, as the Company's and Bank's independent auditors for
1998, subject to ratification by stockholders at the Annual
Meeting. Eggleston Smith P.C. rendered audit services to the
Company and Bank during 1997. These services consisted primarily
of the examination and audit of the institution's financial
statements, tax reporting assistance, and other audit and
accounting matters.
Representatives of Eggleston Smith P.C. are expected to be
present at the Annual Meeting and are expected to be available to
respond to your questions.
The Board of Directors recommends that the stockholders vote
FOR ratification of Eggleston Smith P.C., as the Company's
independent auditors for 1998.
PROPOSAL 3
APPROVAL OF THE 1998 STOCK OPTION PLAN
General
The Company's 1998 Stock Option Plan (the "Option Plan") was
adopted by the Board of Directors on March 10, 1998, to become
effective on May 1, 1998, subject to the approval by the holders
of a majority of the Company's Common Stock represented at the
Annual Meeting. The Option Plan makes available up to 125,000
shares of Common Stock for awards to key employees and non-
employee directors of the Company and its subsidiaries in the
form of stock options, all as more fully described below.
The following description of the Option Plan summarizes the
principal features of the Option Plan and is qualified in its
entirety by reference to the Option Plan, a copy of which is
available upon written request to the Secretary of the Company.
Purpose
The purpose of the Option Plan is to promote the success of
the Company and its subsidiaries by providing incentives to key
employees and non-employee directors that will promote the
identification of their personal interest with the long-term
financial success of the Company and with growth in shareholder
value. The Plan is designed to provide flexibility to the
Company in its ability to motivate, attract, and retain the
services of key employees and non-employee directors upon whose
judgment, interest, and special effort the successful conduct of
its operation is largely dependent.
Administration
The Option Plan will be administered by a committee of not
less than three nor more than seven non-employee directors
appointed in accordance with the Option Plan (the "Committee"),
except for awards under the Option Plan to non-employee directors
which will be administered by the full Board of Directors. All
members of the Committee will be "non-employee directors" as
defined in Rule 16b-3 under the Securities Exchange Act of 1934
(the "Exchange Act"). The Committee will have the power to
determine the key employees to whom awards under the Option Plan
shall be made. The Board of Directors will have the power to
determine the non-employee directors to whom awards shall be
made.
12
<PAGE>
Each Option (as defined below under "Options") under the
Option Plan will be made pursuant to a written agreement between
the Company and the recipient of the Option (the "Agreement").
In administering the Option Plan, the Committee (or the Board in
the case of Options to directors) will have the express power,
subject to the provisions of the Option Plan, to determine the
terms and conditions upon which Options may be made and
exercised, to determine terms and provisions of each Agreement,
to construe and interpret the Option Plan and the Agreements, to
accelerate the exercisability of any Option, to establish, amend
or waive rules or regulations for the Option Plan's
administration, and to make all other determinations and take all
other actions necessary or advisable for the administration of
the Option Plan.
The Board will be indemnified by the Company against the
reasonable expenses incurred by them, including attorney's fees,
in the defense of any action, suit or proceeding, or any appeal
therein to which they may be a party by reasons of any action
taken or failure to act under the Option Plan.
Subject to the terms, conditions and limitations of the Option
Plan, outstanding Options may be modified, extended or renewed.
The Board or Committee may also modify any outstanding Agreement,
provided that no modification may adversely affect the rights or
obligations of the recipient without the consent of the
recipient.
The Board may terminate, amend or modify the Option Plan from
time to time in any respect without stockholder approval, unless
the particular amendment or modification requires stockholder
approval under the Internal Revenue Code of 1986, as amended (the
"Code"), the rules and regulations under Section 16 of the
Exchange Act, the rules and regulations of the exchange or system
on which the Common Stock is listed or reported or pursuant to
any other applicable laws, rules or regulations.
The Option Plan will expire on March 9, 2008, unless sooner
terminated by the Board.
Eligibility
Employees of the Company and its subsidiaries who are deemed
to be key employees ("Key Employees") by the Committee are
eligible for Options under the Option Plan. Key Employees
include officers or other employees of the Company and its
subsidiaries who, in the opinion of the Committee, can contribute
significantly to the growth and profitability of, or perform
services of major importance to, the Company and its
subsidiaries. Directors who are not also officers or employees
of the Company or its subsidiaries are not Key Employees, but are
eligible for awards under the Plan as described under "Grants to
Non-Employee Directors". The number of employees who initially
may be eligible for Options under the Option Plan is
approximately 24 (including those persons named in the cash
compensation table), and the nature and extent of their
participation, the benefits or amounts to be received by each of
them and any consideration to be received by the Company for
granting or awarding such benefits will be determined by the
Committee. Unless specified below in the description of the
particular Options available under the Option Plan or in the
Option Plan itself, the prices, expiration dates, consideration
to be received by the Company, and other terms of each Agreement
shall be determined by the Committee.
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Certain Terms of Options
Options granted under the Option Plan generally may not be
assigned, transferred, pledged or otherwise encumbered by a
participant, other than by will or the laws of descent and
distribution. Options may be exercised during the recipient's
lifetime only by the recipient or, in the case of death or
disability, by the recipient's legal representative.
Options
The Option Plan authorizes the grant of incentive stock
options within the meaning of Section 422 of the Code ("ISOs")
and non-qualified stock options ("NQSOs") (collectively,
"Options"). The Option terms applicable to such Options will be
determined by the Committee, but an Option generally will not be
exercisable until at least six months after its grant (except in
cases of death or disability) or after ten years from its grant.
All Options granted as ISOs shall comply with all applicable
provisions of the Code and all other applicable rules and
regulations governing ISOs. All other Option terms will be
determined by the Committee in its sole discretion.
Grants to Non-Employee Directors
Each non-employee director serving on the Board of the Company
and its subsidiaries is eligible to receive non-qualified stock
option grants during the term of the Plan. The Company and the
Bank currently have 10 non-employee directors.
The exercise price of option grants will be 100% of fair
market value of the shares on the grant date. Unless otherwise
provided in the governing Agreement, such options will not be
exercisable for 6 months from the grant date.
Shares Subject to the Option Plan
Up to 125,000 shares of Common Stock may be issued under the
Option Plan. Except as set forth below, shares of Common Stock
issued in connection with the exercise of, or as other payment
for, an Option will be charged against the total number of shares
issuable under the Option Plan. If any Option granted (for which
no material benefits of ownership have been received, including
dividends) terminates, expires or lapses for any reason other
than as a result of being exercised, or if shares issued (for
which no material benefits of ownership have been received,
including dividends) pursuant to an Option are forfeited, Common
Stock subject to such Option will be available for further
Options to participants.
In order to reflect such events as stock dividends, stock
splits, recapitalizations, mergers, consolidations or
reorganizations by the Company, the Committee (or the Board) may,
in their respective sole discretion, adjust the number of shares
subject to each outstanding Option, the exercise price and the
aggregate number of shares from which grants or awards may be
made.
The closing bid price per share of the Company's Common Stock
on February 28, 1998 was $27.50.
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Change in Control
In order to maintain all the participants' rights in the
event of a Change in Control of the Company (as that term is
defined in the Incentive Plan), the Committee or the Board, as
constituted before such Change in Control, may take in its sole
discretion any one or more of the following actions either at the
time an Option is made or any time thereafter: (i) provide for the
acceleration of any time periods relating to the exercise or
realization of any such Option so that such Option may be
exercised or realized in full on or before a date initially fixed
by the Committee; (ii) provide for the purchase or settlement of
any such Option by the Company, upon the participant's request,
for an amount of cash equal to the amount which could have been
obtained upon the exercise of such Option or realization of such
participant's rights had such Option been currently exercisable or
payable; (iii) make such adjustment to any such Option then
outstanding as the Committee deems appropriate to reflect such
Change in Control; or (iv) cause any such Option then outstanding
to be assumed, or new rights substituted therefor, by the
acquiring or surviving corporation in such Change in Control.
Certain Federal Income Tax Consequences
Incentive Stock Options. An optionee will not recognize
income on the grant of an ISO, and an optionee generally will not
recognize income on the exercise of an ISO, except as described
in the following paragraph. Under these circumstances, no
deduction will be allowable to the employer corporation in
connection with either the grant of such Options or the issuance
of shares upon exercise thereof.
However, if the exercise of an ISO occurs more than three
months after the optionee ceased to be an employee for reasons
other than death or disability (or more than one year thereafter
if the optionee ceased to be an employee by reason of permanent
and total disability), the exercise will not be treated as the
exercise of an ISO, and the optionee will be taxed in the same
manner as on the exercise of a NQSO, as described below. For the
Option to qualify as an ISO upon the optionee's death, the
optionee must have been employed at the Company for at least
three months before his or her death.
To the extent the aggregate fair market value (determined at
the time the Options are granted) of shares subject to an ISO
that become exercisable for the first time by any optionee in any
calendar year exceeds $100,000, the Options will be treated as
Options which are not ISOs, and the optionee will be taxed upon
exercise of those excess Options in the same manner as on the
exercise of NQSO, as described below.
Gain or loss from the sale or exchange of shares acquired upon
exercise of an ISO generally will be treated as capital gain or
loss. If, however, shares acquired pursuant to the exercise of
an ISO are disposed of within two years after the Option was
granted or within one year after the shares were transferred
pursuant to the exercise of the Option, the optionee generally
will recognize ordinary income at the time of the disposition
equal to the excess over the exercise price of the lesser of the
amount realized or the fair market value of the shares at the
time of exercise (or, in certain circumstances, at the time such
shares became either transferable or not subject to a substantial
risk of forfeiture). If, however, such disposition is not a sale
or exchange with respect to which a loss (if sustained) would be
recognized, the ordinary income is the excess of the fair market
value of the shares at the time of exercise (or, in certain
circumstances, at the time they became either transferable or not
subject to substantial risk of forfeiture) over the exercise
price. Gain recognized on the disposition in excess of the
ordinary income resulting therefrom will be capital gain and any
loss recognized on the disposition will be capital loss. If an
optionee recognizes ordinary income as a result of a disposition
as described in this paragraph, the employer corporation will be
entitled to a deduction of the same amount.
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<PAGE>
The exercise of an ISO may result in a tax to the optionee
under the alternative minimum tax because as a general rule the
excess of the fair market value of stock received on the exercise
of an ISO over the exercise price is defined as an item of "tax
preference" for purposes of determining alternative minimum
taxable income.
Non-qualified Options. A participant will not recognize
income on the grant of a NQSO, but generally will recognize
income upon the exercise of a NQSO. The amount of income
recognized upon the exercise of a NQSO will be measured by the
excess, if any, of the fair market value of the shares at the
time of exercise over the exercise price, provided that the
shares issued are either transferable or not subject to a
substantial risk of forfeiture.
If shares received on the exercise of a NQSO are
nontransferable and subject to a substantial risk of forfeiture
then, unless the optionee elects to recognize income at the time
of receipt of such shares, the optionee will not recognize
ordinary income until the shares become either transferable or
not subject to a substantial risk of forfeiture. For these
purposes, shares will be treated as nontransferable and subject
to a substantial risk of forfeiture for as long as the sale of
the shares at a profit could subject the optionee to suit under
Section 16(b) of the Exchange Act. In the circumstances
described in this paragraph, the amount of income recognized is
measured with respect to the fair market value of the shares at
the time the income is recognized. Under recent changes to the
rules under Section 16(b), in most cases an officer or director
subject to those rules who has held a NQSO for at least six
months prior to its exercise will recognize income and therefore
be taxed immediately upon exercise of the NQSO.
In the case of ordinary income recognized by an optionee as
described above in connection with the exercise of a NQSO, the
employer corporation will be entitled to a deduction in the
amount of ordinary income so recognized by the optionee.
Use of Shares to Exercise Options. Special rules govern the
tax treatment of the use of stock to pay the exercise price of an
ISO or NQSO.
General. The rules governing the tax treatment of Options
that may be granted under the Option Plan are quite technical, so
that the above description of tax consequences is necessarily
general in nature and does not purport to be complete. Moreover,
statutory provisions are, of course, subject to change, as are
their interpretations, and their application may vary in
individual circumstances.
Finally, the tax consequences under applicable state laws may
not be the same as under the federal income tax laws.
Effective Date
If approved by the stockholders, the Option Plan will be
treated as effective as of May 1, 1998.
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Vote Required
The affirmative vote of the holders of a majority of the
Common Stock represented in person or by proxy at the Annual
Meeting, assuming a quorum is present, is required to ratify and
approve the Option Plan.
The Board of Directors recommends that the stockholders vote
FOR adoption of the proposed Option Plan.
PROPOSAL 4
APPROVAL OF AMENDMENT TO
1996 EMPLOYEE STOCK PURCHASE PLAN
The Board approved the Company,s 1996 Employee Stock
Purchase Plan on May 14, 1996 (the "Purchase Plan"), and
shareholders approved the Purchase Plan at the Annual Meeting on
April 22, 1997. On June 27, 1997, the Board of Directors
approved an amendment to the Purchase Plan that eliminated the
requirement that plan participants be at least 19 years of age.
This change was made pursuant to the requirements of Section 423
of the Code.
The Board proposes that Subparagraph 2.1(a) of the Purchase
Plan shall be amended upon shareholder approval to read:
2.1(a) Each Eligible Employee who has completed a 6 month
Period of Service as of the Offering Commencement Date for an
Offering and who is an Eligible Employee on such Offering
Commencement Date shall be eligible to participate in the
Offering.
The Board of Directors recommends that the stockholders vote
FOR adoption of the proposed amendment to the 1996 Employee Stock
Purchase Plan.
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1999 ANNUAL MEETING OF STOCKHOLDERS
In accordance with the By-Laws of the Company as currently in
effect, the 1999 Annual Meeting of Stockholders will be held on
April 27, 1999.
The Board of Directors need not include an otherwise
appropriate shareholder proposal in its proxy statement or form of
proxy for that meeting unless the proposal is received by the
Holding Company at its main office on or before December 1, 1998.
ANNUAL FINANCIAL DISCLOSURE STATEMENT
A copy of the Company's Annual Report on Form 10-K (including
exhibits) as filed with the Securities and Exchange Commission for
the year ended December 31, 1997, will be furnished without charge
to shareholders upon written request directed to:
Louis G. Morris
Executive Vice President
The Old Point National Bank of Phoebus
1 West Mellen Street
Hampton, Virginia 23663
(757) 728-1297
OTHER MATTERS
Management knows of no other business to be brought before
the Annual Meeting. Should any other business properly be
presented for action at the meeting, the shares represented by
the enclosed proxy shall be voted by the persons named therein in
accordance with their best judgment and in the best interests of
the Holding Company.
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OLD POINT FINANCIAL CORPORATION
P.O. BOX 3392 HAMPTON, VIRGINIA 23663
PROXY CARD FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Richard S. von Schilling and
Seymour F. Sanders as Proxies, each with full power to appoint
his substitute and hereby authorizes them to represent and to
vote, as designated below, all the shares of voting common stock,
$5.00 par value, of Old Point Financial Corporation held of
record by the undersigned on March 17, 1998 at the Annual Meeting
of Shareholders, to be held on April 28, 1998, and any and all
adjournments thereof.
This proxy, will be voted in the manner directed by the
undersigned. If no direction is made, this proxy will be voted
FOR Items 1, 2, 3 and 4.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD IN THE ENCLOSED
POSTAGE PAID ENVELOPE AS SOON AS POSSIBLE.
Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both should
sign. When signing in a representative capacity,
please provide full title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS
- -----------------------------------------------
- -----------------------------------------------
X PLEASE MARK VOTES AS IN THIS EXAMPLE
OLD POINT FINANCIAL CORPORATION
Mark box at right if you plan to attend the Annual Meeting.
Mark box at right if an address change or comment has been
Noted on the reverse side of this card.
RECORD DATE SHARES:
Please be sure to sign and date this proxy.
Date_______
__________________ ________________
Shareholder sign here Co-owner sign here
DETACH CARD
For All With-
Nominee's hold Except
1. Election of Directors
Richard F. Clark, Gertrude S. Dixon,
Russell S. Evans,Jr., G. Royden Goodson, III,
Arthur D.Greene, Stephen D. Harris,
John Cabot Ishon, Eugene M. Jordan,
John B. Morgan, II, H. Robert Schappert,
Robert F. Shuford
(Instructions: To withhold authority to vote for any nominee,
mark the "For All Except" box and strike a line through the
nominee's name in the list above.)
For Against Abstain
2. Ratification of the appointment of
Eggleston Smith, P.C., Certified Public Accountants,
as independent auditors for 1998.
3. Ratification and approval of the adoption of
the 1998 Old Point Stock Option Plan.
4. Ratification and approval of an amendment
to the 1996 Employee Stock Purchase Plan.
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting and at any
adjournment(s) thereof.
