Exhibit 10.2
Exhibit A
CHANGE IN CONTROL
AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT
(“Agreement”), made and entered into this _ 31st
_ day of _ December _, 2008, by and between Summit Financial
Group, Inc. (the “Company”) and H. Charles Maddy, III
(“Maddy”), amends, restates, supersedes and replaces
that certain Change in Control Agreement made and entered into as
of the 4 th
day of March, 2005;
WHEREAS, Company recognizes that Maddy’s
contribution to the growth, success and continued operation of
Company has been substantial, and
WHEREAS, Company believes it is in the best
interest of Company to grant Maddy a level of security to preserve
key management and to assure fair consideration of any affiliation
opportunities that arise, and
WHEREAS, the parties hereto, in the interests of
clarity and for other reasons stated herein, and for the purpose of
complying with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), wish to
amend and restate this Agreement, provided that all provisions
applicable to compliance under Code Section 409A shall be effective
as of March 4, 2005, and provided further that, notwithstanding any
other provisions of this amended and restated Agreement, this
amendment applies only to amounts that would not otherwise be
payable in 2006, 2007 or 2008 and shall not cause (i) an amount to
be paid in 2006 that would not otherwise be payable in such year,
(ii) an amount to be paid in 2007 that would not otherwise be
payable in such year, and (iii) an amount to be paid in 2008 that
would not otherwise be payable in such year, and to the extent
necessary to qualify under Transition Relief issued under said Code
Section 409A to not be treated as a change in the form and timing
of a payment under section 409A(a)(4) or an acceleration of a
payment under section 409A(a)(3), Maddy, by executing this
Agreement, shall be deemed to have elected the timing and form of
distribution provisions of this amended and restated Agreement, and
to otherwise further revise the Agreement all on or before December
31, 2008.
NOW, THEREFORE, in consideration of the promises
and respective covenants and agreements of the parties herein
contained, Company and Maddy agree as follows:
A.
Definitions . For purposes of this Change in
Control Agreement, the following definitions shall
apply:
(1) “Change
of Control” means with respect to (i) the Company or any
Affiliate for whom Maddy is performing services at the time of the
Change in Control Event; (ii) the Company or any Affiliate that is
liable for the payment to Maddy hereunder (or all corporations
liable for the payment if more than one corporation is liable) but
only if either the compensation payable hereunder is
attributable to the performance of service by Maddy for such
corporation (or corporations) or there is a bona fide business
purpose for such corporation or corporations to be liable for such
payment and, in either case, no significant purpose of
making
such corporation or corporations liable for such payment is the
avoidance of Federal Income tax; or (iii) a corporation that is a
majority shareholder of a corporation identified in paragraph (i)
or (ii) of this section, or any corporation in a chain of
corporations in which each corporation is a majority shareholder of
another corporation in the chain, ending in a corporation
identified in paragraph (i) or (ii) of this section, a Change in
Ownership or Effective Control or a Change in the Ownership of a
Substantial Portion of the Assets of a Corporation as defined in
Section 409A of the Code, and the regulations or guidance issued
thereunder, meeting the requirements of a “Change in Control
Event” thereunder.
(2) “Company”
shall mean Summit Financial Group, Inc.
(3) “Employment
Agreement” shall mean the Amended and Restated Employment
Agreement dated as of _ December 31st ______, 2008, by and
between Summit Financial Group, Inc. and H. Charles Maddy,
III.
(4) “Salary”
means Maddy’s Base Salary as defined in the Employment
Agreement in effect on the date of termination of Maddy’s
employment under this Agreement, or if no Employment Agreement is
in effect, Maddy’s Base Salary on the date of termination of
employment hereunder, corresponding to the definition of Base
Salary in the most recent Employment Agreement.
(5) For
purposes of this Change in Control Agreement, “Good
Cause” shall mean: (i) excessive absenteeism
without approval of Summit not caused by disability; (ii) gross or
willful neglect of duty resulting in substantial harm to Summit
after Maddy has been given written direction and reasonable time to
perform such duties; or (iii) any acts or omissions on the part of
Maddy which when proven constitute fraud or commission of any
criminal act involving the person or property of others or the
public generally.
(6) “Disability”
means a physical or mental condition rendering Maddy substantially
unable to perform the duties of an officer and director of a
banking organization.
(7) “Retirement”
means termination of employment by Maddy in accordance with
Company’s (or its successor’s) retirement plan,
including early retirement as approved by the Board of
Directors.
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A Change of
Control in the Company (as defined above) and:
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a decrease in
Maddy’s overall compensation (including, without limitation,
salary, perquisites, bonuses and other earnings reported on IRS
Form W-2, but excluding a diminution in board fees) below its level
in effect immediately prior to the date of consummation of the
Change of Control, without Maddy’s prior written consent;
or
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a material
reduction in the importance of Maddy’s job responsibilities
or assignment of job responsibilities inconsistent with
Maddy’s responsibility prior to the Change of Control without
Maddy’s prior written consent; or
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a geographical
relocation of Maddy to an office more than 20 miles from
Maddy’s location at the time of the Change of Control or the
imposition of travel requirements inconsistent with those existing
prior to the Change of Control without Maddy’s prior written
consent; or
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Failure of the
Company to obtain assumption of this Change in Control Agreement by
its successor as required by Paragraph M(1) below; or
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Any removal of
Maddy from, or failure to re-elect Maddy to any of Maddy’s
positions with Company immediately prior to a Change of Control
(except in connection with the termination of Maddy’s
employment for Good Cause, death, Disability or Retirement) without
Maddy’s prior consent.
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(9) “Wrongful
Termination” means termination of Maddy’s employment by
the Company or its affiliates for any reason other than at
Maddy’s option, Good Cause or the death, Disability or
Retirement of Maddy prior to the expiration of twelve (12) months
after consummation of the Change of Control.
(10) “Separation
from Service” means the severance of Maddy’s employment
with the Company or any Affiliate for whom Maddy is performing
services at the time of the Change in Control Event for any
reason. Maddy separates from service with the Company or
any Affiliate if he dies, retires, separates from service because
of Maddy’s Disability, or otherwise has a termination of
employment with the Company or any Affiliate. However,
the employment relationship is treated as continuing intact while
Maddy is on military leave, sick leave, or other bona fide
leave of absence if the period of such leave does not exceed six
months, or if longer, so long as Maddy’s right to
reemployment with the Company or any Affiliate is provided either
by statute or by contract. If the period of leave
exceeds six months and Maddy’s right to reemployment is not
provided either by statute or by contract, the employment
relationship is deemed to terminate on the first date immediately
following such six-month period. Notwithstanding the
foregoing, where a leave of absence is due to any medically
determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period
of not less than six months, where such impairment causes Maddy to
be unable to perform the duties of his position of employment or
any substantially similar position of employment, a 29-month period
of absence may be substituted for such six-month
period. In addition, notwithstanding any of the
foregoing, the term “Separation from Service” shall be
interpreted under this Agreement in a manner consistent with the
requirements of Code Section 409A including, but not limited
to:
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(i) an examination of the relevant
facts and circumstances, as set forth in Code Section 409A and the
regulations and guidance thereunder, in the case of any performance
of services or availability to perform services
after a purported Separation from Service,
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(ii) in
any instance in which Maddy is participating or has at any time
participated in any other plan which is, under the aggregation
rules of Code Section 409A and the regulations and guidance issued
thereunder, aggregated with this Agreement and with respect to
which amounts deferred hereunder and under such other plan or plans
are treated as deferred under a single plan (hereinafter sometimes
referred to as an “Aggregated Plan” or together as the
“Aggregated Plans,”), then in such instance Maddy shall
only be considered to meet the requirements of a Separation from
Service hereunder if Maddy meets (a) the requirements of a
Separation from Service under all such Aggregated Plans and (b) the
requirements of a Separation from Service under this Agreement
which would otherwise apply,
(iii) in any
instance in which Maddy is an employee and an independent
contractor of the Company or any Affiliate or any combination
thereof, Maddy must have a Separation from Service in all such
capacities to meet the requirements of a Separation from Service
hereunder, although, notwithstanding the foregoing, if Maddy
provides services both as an employee and a member of the Board of
Directors of the Company or any Affiliate or any combination
thereof, the services provided as a director are not taken into
account in determining whether Maddy has had a Separation from
Service as an employee under this Agreement, provided that no plan
in which Maddy participates or has participated in his capacity as
a director is an Aggregated Plan, and
(iv) a
determination of whether a Separation from Service has occurred
shall be made in accordance with Treasury Regulations Section
1.409A-1(h)(4) or any similar or successor law, regulation or
guidance of like import, in the event of an asset purchase
transaction as described therein.
B.
Retention of Maddy After Change of Control . In
order to facilitate management continuity and to promote an orderly
transition of ownership, Company and Maddy agree that after a
Change of Control, Maddy shall be employed by the acquiring company
for a period of one (1) year (the “Transition Period”),
commencing upon the date of consummation of the transaction
resulting in a Change of Control. During the Transition
Period, Maddy may terminate his employment for Good Reason, and the
Company may terminate the employment of Maddy for Good
Cause. If Company terminates Maddy in a manner
constituting Wrongful Termination, or Maddy terminates for Good
Reason, Maddy shall be entitled to receive the compensation set
forth in paragraph E below.
If the Employment Agreement is still in effect,
Maddy shall be employed pursuant to the terms of Article II and
Article V, A-E of the Employment Agreement; provided, that
any additional provisions of Maddy’s Employment Agreement
which by their terms specifically apply to this Change in Control
Agreement shall also apply to Maddy’s employment hereunder
and, if the Employment Agreement is no longer in effect, such
provisions shall be deemed to survive and shall be incorporated by
reference into this Change in Control Agreement.
All other terms of Maddy’s employment, including without
limitation his right to receive termination payments and the term
of his employment, will be controlled by this Agreement.
C.
Compensation of Maddy Upon Separation from Service Due to Death
or Disability During the Transition Period . In the
event of the Separation from Service of Maddy due to Death or
Disability during the Transition Period, Maddy shall be entitled to
three times the greater of (a) Maddy’s Salary in effect
immediately prior to the date of consummation of a Change of
Control or (b) Maddy’s Salary in effect on the date of
Separation from Service. Such payment shall be made in a
lump sum on the date of Separation from Service under this
Agreement, subject to the provisions of Paragraph N herein to the
extent applicable.
D.
Compensation of Maddy Upon Separation from Service Due to
Expiration of the Transition Period . Upon
Separation from Service due to the expiration of the Transition
Period, Maddy shall be entitled to be paid an amount equal to three
(3) times the greater of (a) Maddy’s Salary in effect
immediately prior to the date of consummation of a Change of
Control or (b) Maddy’s Salary in effect on the date of
Separation from Service. Such payment shall be made in a
lump sum on the date of Separation from Service under this
Agreement, subject to the provisions of Paragraph N herein to the
extent applicable.
E.
Compensation of Maddy Upon Separation from Service Due to Good
Reason or Wrongful Termination during the Transition Period
. Except as hereinafter provided, if Maddy terminates
his employment with the Company during the Transition Period for
Good Reason, resulting in Maddy’s Separation from Service, or
the Company terminates Maddy’s e
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