20 LEGAL CONTINGENCIES
the course of operations, we may become a party to legal proceedings. There are no pending or threatened legal proceedings to
which the Company or any of its subsidiaries is a party or to which the property of the Company or any of its subsidiaries is
subject that, in the opinion of management, may materially impact the financial condition of the Company, except for the following:
June 24, 2015 New Peoples Bank filed an Amended Complaint in the Circuit Court of Russell County Virginia against Arthur Wayne
Bostic, Michael W. Bostic, Sr. and Jeffrey C. Bostic to enforce guarantees of loans made to Bostic Ford Sales, Inc. and seeking
judgment against the guarantors for $1,427,709.76 with interest and legal fees. On July 24, 2015 Arthur Bostic filed a counterclaim
against New Peoples Bank asserting lender liability theories of recovery. On March 8, 2016 Michael Bostic, Sr. and Jeffrey
Bostic filed similar counterclaims against New Peoples Bank. In January 2018, the parties reached a settlement in the matter
resolving all claims asserted by New Peoples against the guarantors and all claims asserted against New Peoples by the guarantors. A
order dismissing all claims with prejudice was entered on February 7, 2018. This settlement had no material financial impact on
our financial condition or results of operations.
2015, New Peoples Bank filed suit in the Circuit Court for Washington County, Virginia, seeking payment from Ms. Sandra Campbell
due to breach of a promissory note executed in 2013. Ms. Campbell asserted a Counterclaim alleging that the Bank’s requirement
that she provide her personal guaranty on a loan sought by her husband’s company was a violation of the Equal Credit Opportunity
Act. The counterclaim seeks damages in the amount of $825,000. The Bank filed a motion for summary judgment in its favor on its
Complaint and as to Defendant’s Counterclaim in May 2016. A hearing has not yet been held on this motion. If the matter
is not dismissed, the Bank plans a vigorous defense and does not believe that Ms. Campbell’s claims will be successful.
conjunction with the departure of Mr. Kenneth Hart, New Peoples’ former Chief Executive Officer, New Peoples entered into
a separation agreement with him. Mr. Hart originally filed suit alleging various breaches by the Company and the Bank related
to this and earlier agreements between the parties, which action was dismissed in April 2016 for failure to serve. He then refiled
the suit on October 7, 2016, providing him another 12 months to have the Company and the Bank served. On October 3, 2017, the
Company and Bank were served with the current complaint for breach of contract which is substantially the same as his original
suit. Mr. Hart is asking the Court for an award of $1.5 million plus interest alleging a breach by the Company and the Bank of
these various agreements with Mr. Hart. New Peoples filed a “demurrer” to the complaint, asking that the suit be dismissed,
on October 23, 2017. New Peoples believes there is no merit to this suit or these claims which are based on conduct that occurred
in 2010, and that the suit is a reaction to a judgment of over a million dollars awarded in favor of the Bank and against Mr.
Hart in a separate matter. The Court has not yet ruled on this motion to dismiss. Should this suit not be dismissed, New Peoples
intends to defend the matter vigorously to its conclusion and does not believe Mr. Hart’s claims will be successful.
Mullins, is a former President and Chief Executive Officer of New Peoples who departed in December 2014. In 2017 he filed a Complaint
in the Circuit Court of Russell County, Virginia against New Peoples Bank. This is his second lawsuit against the Bank (the first
was dismissed), and he seeks payment of deferred compensation pursuant to a 2009 agreement made with the Board of Directors, in
which he alleges it agreed to payments of $50,000/year for 15 years beginning at age 65. At the time Mullins’ severance
agreement was negotiated, the Bank determined that the accrued value of the deferred compensation at that time was $144,445. Mullins
seeks either the $50,000 annual payments when he reaches age 65 or a lump sum payment of $144,445 with prejudgment interest from
December 2014, along with $20,000 in severance pay and accrued leave. New Peoples filed its “demurrer” to this lawsuit
in January 2018, requesting dismissal. The demurrer argues that the Bank cannot make these payments to Plaintiff in compliance
with federal law, and therefore, Mullins’ case must be dismissed. A hearing has not been set on this motion. If the matter
is not dismissed, New Peoples intends to defend the matter vigorously to its conclusion and does not believe that Mr. Mullin’s
claims will be successful.
November 2017, Keith Carroll filed a complaint against New Peoples Bank in the United States District Court for the Western District
of Virginia alleging violations of the Americans with Disabilities Act (the “ADA”). He has filed essentially the same
lawsuit in multiple Virginia federal court divisions, alleging violations of the ADA against various banks and credit unions.
Mr. Carroll is a blind individual and asserts that he attempted to do business with the Bank through its website, which he claims
was inaccessible to him due to his disability. Mr. Carroll seeks injunctive relief and unspecified monetary damages, to include
costs and attorneys’ fees. The Bank filed a Motion to Dismiss these claims. One of Mr. Carroll’s cases filed in the
Eastern District of Virginia was recently dismissed on numerous grounds, including the ground that websites are not “places
of public accommodation under the ADA,” and that even if they were, no regulations currently exist to govern them as such.
The Bank has requested dismissal of this case for the same reason, among others. A hearing on the Bank’s motion is set for
March 21, 2018. If the matter is not resolved on motions, New Peoples intends to defend the matter vigorously to its conclusion.