Exhibit 10.3
CHANGE IN CONTROL
AGREEMENT
(AMENDED AND
RESTATED)
THIS AMENDED AND RESTATED AGREEMENT
is entered into as of the 30th day of December, 2008, by and
between C&F FINANCIAL CORPORATION, a Virginia corporation (the
“Company”), and Thomas Cherry (the
“Executive”).
RECITALS
I. The Executive currently serves as
Executive Vice President & CFO – C&F Financial
Corporation, is a key member of management of the Company and its
affiliates, and his services and knowledge are valuable to the
Company and its affiliates.
II. The Board (as defined below) has
determined that it is in the best interest of the Company and its
shareholders to assure that the Company and its affiliates will
have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change in Control (as
defined below) of the Company. The Board believes it is imperative
to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or
threatened Change in Control and to encourage the Executive’s
full attention and dedication to the Company and its affiliates
currently and in the event of any threatened or pending Change in
Control. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this
Agreement.
III. This Agreement is now being
amended and restated to comply with the requirements of
Section 409A of the Internal Revenue Code (“Code”)
and applicable guidance issued thereunder (“Code
Section 409A”).
NOW, THEREFORE, it is hereby agreed
as follows:
1. CERTAIN DEFINITIONS
.
(a) “Agreement Effective
Date” means the date first set out above.
(b) The “Agreement Term”
means the period commencing on the Agreement Effective Date and
ending on the earlier of (i) the Agreement Regular Termination
Date or (ii) the date this Agreement terminates pursuant to
Section 8. The “Agreement Regular Termination
Date” means the third anniversary of the Agreement Effective
Date, provided, however, that commencing on the first anniversary
of the Agreement Effective Date, and on each subsequent anniversary
(such date and each subsequent anniversary shall be hereinafter
referred to as the “Renewal Date”), unless this
Agreement is previously terminated, the Agreement Regular
Termination Date shall be automatically extended for three years
from the latest Renewal Date, unless at least one month prior to
the latest Renewal Date, the Company shall give notice to the
Executive in accordance with Section 11(c) of this Agreement
that the Agreement Regular Termination Date shall not be so
extended.
(c) “Board” means the
Board of Directors of the Company.
(d) “Cause”
means:
(i) the willful and continued
failure of the Executive to substantially perform his duties with
the Company or one of its affiliates (other than any such failure
resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the
Executive by the Board, pursuant to a vote of a majority of the
Directors of the Company, which specifically identifies the manner
in which the Directors of the Board believe that the Executive has
not substantially performed his duties, or
(ii) the willful engaging by the
Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company.
For purposes of this provision, no
act or failure to act, on the part of the Executive, shall be
considered “willful” unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief
that the Executive’s action or omission was in the best
interest of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board
or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the members of the
Board at a meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive in accordance
with Section 11(c) of this Agreement and the Executive is
given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Executive has engaged in the conduct described in paragraph
(i) or (ii) above, and specifying the particulars thereof
in detail.
(e) The “Change in Control
Date” means the first date during the Agreement Term on which
a Change in Control (as defined in Section 2) occurs. Anything
in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if the Executive’s employment with the
Company is terminated prior to the date on which the Change in
Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment either (i) was
at the request of a third party who has taken steps reasonably
calculated to effect a Change in Control or (ii) otherwise
arose in connection with or anticipation of a Change in Control,
then for all purposes of this Agreement except for the time and
form of payment of the Change in Control Benefits payable under
Section 4(c) the “Change in Control Date” shall
mean the date immediately prior to the date of such termination of
employment.
(f) “Company” means
C&F Financial Corporation, a Virginia corporation.
(g) “Coverage Period”
means the period of time beginning with the Change in Control Date
and ending on the earliest to occur of (i) the
Executive’s death and (ii) the sixty-first day after the
first anniversary of the Change in Control Date.
(h) “Disability” means
the absence of the Executive from his duties with the Company on a
full-time basis for six months as a result of incapacity to serve
as the Chief Financial Officer, including substantially all duties
normally considered a part thereof, due to mental or physical
illness or injury which is determined to be total and permanent by
a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive’s legal representative. If
the Company determines in good faith that the Disability of the
Executive has occurred, it may give to the Executive written notice
in accordance with Section 11(c) of this Agreement of its
intention to terminate the Executive’s employment. In such
event, the Executive’s employment with the Company shall
terminate effective on the 30th day after receipt of such notice by
the Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of his
duties.
(i) “Good Reason” means
any good faith determination made by the Executive (which
determination shall be conclusive) that any of the following has
occurred:
(i) the occurrence, on or after the
Agreement Effective Date and during the Coverage Period, of any of
the following:
(A) the assignment to the Executive
of any duties inconsistent in any material adverse respect with the
Executive’s position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities
immediately prior to the Change in Control, or any other action by
the Company or its affiliates which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken
in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive in accordance with
Section 11(c) of this Agreement;
(B) a reduction by the Company or
its affiliates in the Executive’s rate of annual base salary,
benefits (including, without limitation, incentive or bonus pay
arrangements, stock plan
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benefit arrangements, and retirement
and welfare plan coverage) and perquisites as in effect immediately
prior to the Change in Control or as the same may be increased from
time to time thereafter, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive in accordance with Section 11(c) of
this Agreement;
(C) the Company’s requiring
the Executive to be based at any office or location more than 35
miles from the facility where the Executive is located at the time
of the Change in Control or the Company’ s requiring the
Executive to travel on Company business to a substantially greater
extent than required immediately prior to the Change in Control
Date (but determined without regard to travel necessitated by
reason of any anticipated Change in Control);
(D) any purported termination by the
Company or its affiliates of the Executive’s employment
otherwise than as expressly permitted by this Agreement;
(E) any failure by the Company or
its affiliates to comply with and satisfy Section 10(c) of
this Agreement by obtaining satisfactory agreement from any
successor to assume and perform this Agreement; or
(F) so long as no Cause for
Executive’s termination by the Company exists (or would exist
assuming the Board made a determination of Cause), a voluntary
cessation by the Executive of his employment for any reason during
any Window Period.
(ii) any event or condition
described in paragraph (i) of this Section 1(i) which
occurs on or after the Agreement Effective Date, but prior to a
Change in Control, but was at the request of a third party who
effectuates the Change in Control, notwithstanding that it occurred
prior to the Change in Control, but such event or condition shall
not be considered to actually have occurred until the Change in
Control Date.
(j) “Covered
Termination” means a termination of Executive’s
employment during the Coverage Period (i) by the Company for
any reason other than Cause or the Executive’s Disability or
death, or (ii) by the Executive for Good Reason.
(k) “Noncovered
Termination” means a cessation of Executive’s
employment which is not a Covered Termination.
(l) “Window Period”
means any of (i) the 60-day period commencing on the Change in
Control Date, (ii) the 60-day period commencing on the first
anniversary of the Change in Control Date, and (iii) the
60-day period commencing on the second anniversary of the Change in
Control Date.
2. CHANGE IN CONTROL
.
A “Change in Control”
means a change in the ownership of the Company, a change in the
effective control of the Company, or a change in the ownership of a
substantial portion of the assets of the Company, consistent with
and interpreted in accordance with Code Section 409A and
regulations issued thereunder, and specifically defined as
follows:
(a) General Rules . In order
to constitute a Change in Control as to the Executive, the Change
in Control shall relate to:
(i) The corporation for whom the
Executive is performing services at the time of the Change in
Control; or
(ii) The corporation that is liable
for the payment of the deferred compensation (or all corporations
liable for the payment if more than one corporation is liable) but
only if either the deferred compensation is attributable to the
performance of service by the Executive 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
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(iii) A corporation that is a
majority shareholder of a corporation identified in either
paragraph (i) or (ii), 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 either paragraph (i) or
(ii) above.
(b) Change In Ownership . A
change in the ownership of a corporation shall occur on the date
that any one person, or more than one person acting as a group,
acquires ownership of stock of the corporation that, together with
stock held by such person or group, constitutes more than 50% of
the total fair market value or total voting power of the stock of
such corporation. However, if any person, or more than one person
acting as a group, is considered to own more than 50% of the total
fair market value or total voting power of the stock of a
corporation, then the acquisition of additional stock by the same
person or persons shall not be considered to cause a change in the
ownership of the corporation (or to cause a change in the effective
control of the corporation).
(c) Change In Effective
Control . Notwithstanding the fact that a corporation has not
undergone a change in ownership as described above, a change in the
effective control of a corporation shall occur only on the date
that either:
(i) Any one person or more than one
person acting as a group acquires (or has acquired during the
twelve month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the
corporation possessing 30% or more of the total voting power of the
stock of such corporation; or
(ii) A majority of members of the
corporation’s Board of Directors is replaced during any
12-month period by Directors whose appointment or election is not
endorsed by a majority of the members of the corporation’s
Board of Directors prior to the date of the appointment or
election, provided that for purposes of this paragraph (ii), the
term “corporation” refers solely to the relevant
corporation identified above, for which no other corporation is a
majority shareholder.
(d) Change In Ownership of
Assets . A change in the ownership of a substantial portion of
the assets of a corporation shall occur on the date that any one
person, or more than one person acting as a group, acquires (or has
acquired during the twelve-month period ending on the date of the
most recent acquisition by such person or persons) assets from the
corporation that have a total gross fair market value equal to or
more than 40% of the total gross fair market value of all of the
assets of the corporation immediately prior to such acquisition or
acquisitions. For this purpose, “gross fair market
value” shall mean the value of the assets of the corporation,
or the value of the assets being disposed of, determined without
regard to any liabilities associated with such assets.
A transfer of assets by a
corporation shall not be treated as a change in the ownership of
such assets if the assets are transferred to:
(i) A shareholder of the corporation
(immediately before the asset transfer) in exchange for or with
respect to its stock; or
(ii) An entity, 50% or more of the
total value or voting power of which is owned, directly or
indirectly, by the corporation; or
(iii) A person, or more than one
person acting as a group, that owns, directly or indirectly, 50% or
more of the total value or voting power of all the outstanding
stock of the corporation; or
(iv) An entity, at least 50% of the
total value or voting power of which is owned, directly or
indirectly, by a person who is a “related person” under
applicable Treasury Regulations.
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There shall be no Change in Control
when there is a transfer to an entity that is controlled by the
shareholders of the transferring corporation immediately after the
transfer.
3. OBLIGATIONS OF THE
EXECUTIVE TO REMAIN EMPLOYED .
The Executive agrees that in the
event any person or group attempts a Change in Control, he shall
not voluntarily leave the employ of the Company without Good Reason
(i) until such attempted Change in Control terminates or
(ii) if a Change in Control shall occur, until the Change in
Control Date. For purposes of the foregoing clause (i), Good Reason
shall be determined as if a Change in Control had occurred when
such attempted Change in Control became known to the
Board.
4. OBLIGATIONS UPON THE
EXECUTIVE’S TERMINATION .
(a) Notice of Termination .
Any termination of the Executive’s employment by the Company
or by the Executive, other than by reason of death, during the
Coverage Period shall be communicated by Notice of Termination to
the other party hereto given. Any termination of the
Executive’s employment by the Company or by the Executive,
other than by reason of death, prior to or after the Coverage
Period shall be communicated by such method or methods as the
Company may designate from time to time for its “at
will” employees. For purposes hereof:
(i) “Notice of
Termination” means a written notice given in accordance with
Section 11(c) of this Agreement which (A) states whether
such termination is for Cause, Good Reason or Disability,
(B) indicates the specific termination provision in this
Agreement relied upon, if any, (C) to the extent applicable,
sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s
employment under the provision so indicated, and (D) if the
Date of Termination is other than the date of receipt of such
notice, specifies the termination date. The failure by the
Executive or the Company to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of Good
Reason, Cause or Disability shall not waive any right of the
Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive’s or the
Company’s rights hereunder.
(ii) “Date of
Termination” means (A) if the Executive’s
employment is terminated by reason of Disability, the Disability
Effective Date, (B) if the Executive’s employment is
terminated by the Company for any reason other than Disability, the
date of the Executive’s receipt of the Notice of Termination
or any later date specified therein, as the case may be, and
(C) if the Executive’s employment is terminated by the
Executive for any reason, the date of the Company’s receipt
of the Notice of Termination or any later date specified therein,
as the case may be.
(b) Obligations of the Company in
a Covered Termination . If the Executive’s employment
shall cease by reason of a Covered Termination, then the following
shall be paid or provided (the payments and benefits described in
(i), (ii) and (iii) below may hereinafter sometimes be
referred to as the “Change in Control Benefit” or
“Change in Control Benefits”):
(i) the Company shall pay or cause
to be paid in cash to the Executive a lump sum within 30 days after
the Date of Termination and with the lump sum payment totaling an
amount equal to the sum of two (2) times the Executive’s
(1) highest aggregate annual base salary from the Company and
its affiliated companies in effect at any time during the 24 month
period ending on the Change in Control Date and (2) highest
annual bonus (including any deferrals thereof) from the Company and
its affiliated companies payable for the Company’s three
fiscal years immediately preceding the fiscal year which includes
the Change in Control Date;
(ii) for two years after the
Executive’s Date of Termination, the Company shall continue
or cause to be continued benefits to the Executive and/or the
Executive’s family at least equal to those under the Welfare
Benefit Plans. (Nothing in an Agreement shall limit the
Executive’s right to additional retiree or other welfare
benefits provided under the applicable benefit plan subject to
any
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and all limitations in such plan.)
If the Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such
other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for any retiree benefits
pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until two
years after the Date of Termination and to have retired on the last
day of such period. For purposes hereof, the term “Welfare
Benefit Plan” means the welfare benefit plans, practices,
policies
