EMPLOYMENT AGREEMENT
Exhibit
10.1
THIS
EMPLOYMENT AGREEMENT is made
and
entered into on this 3rd day of January, 2006, by and among SUMMIT FINANCIAL
GROUP, INC. (“Summit FGI”), a West Virginia corporation, and
______________________ (the “Employee”).
WHEREAS,
Summit FGI offers the terms and conditions of employment hereinafter set forth
and Employee accepts such terms and conditions in consideration of his
employment with the Company; and
NOW
THEREFORE, in consideration of the promises and the respective covenants and
agreements of the parties herein contained, Summit FGI and Employee contract
and
agree as follows:
1. Definitions.
The
following definitions in addition to any terms otherwise defined herein, shall
apply to designated phrases used in this Employment Agreement.
(a) “Change
of Control” means (i) a change of ownership of Summit FGI that would have to be
reported to the Securities and Exchange Commission as a change of control,
including but not limited to the acquisition by any “person” and/or entity as
defined by securities regulations and law (other than Summit FGI or any Summit
FGI employee benefit plan), of direct or indirect “beneficial ownership,” as
defined by securities regulations and law, of twenty-five percent (25%) or
more
of the combined voting power of Summit FGI’s then outstanding securities; (ii)
the failure during any period of three (3) consecutive years of individuals
who
at the beginning of such period constitute the Board of Directors of Summit
FGI
for any reason to constitute at least a majority thereof, unless the election
of
each director who was not a director at the beginning of such period has been
approved by at least two-thirds (2/3) of the directors at the beginning of
the
period; or (iii) the consummation of a “Business Combination” as defined in
Summit FGI’s Articles of Incorporation. In no event shall corporate
restructuring of Summit FGI and/or its affiliates be construed as a “change in
control” absent one or more of the conditions set forth above.
(b) “Salary”
means the Employee’s average of annual base salary and bonuses for the two full
year periods immediately
prior to
the date of the consummation of a Change of Control or for two full year periods
immediately preceding the effective date of termination, whichever is
greater.
(c) “Good
Cause” includes (i) Employee’s continued poor work performance after written
notice of and reasonable opportunity to correct deficiencies;
(ii) Employee’s behavior outside or on the job which affects the ability of
management of Summit FGI or its affiliates or co-workers to perform their jobs
and that is not corrected after reasonable written warning; (iii) Employee’s
failure to devote reasonable time to the job that is not corrected after
reasonable warning; (iv) any other significant deficiency in performance by
Employee that is not corrected after reasonable warning; (v) Employee’s repeated
negligence, malfeasance or misfeasance in the performance of Employee’s duties
that can reasonably be expected to have an adverse impact upon the business
and
affairs of Summit FGI or its affiliates,
provided, however that if in the reasonable judgment of the Board of Directors
of Summit FGI, the damage incurred by Summit FGI as a result of Employee’s
conduct is capable of being substantially corrected, Summit FGI will give
Employee thirty (30) days’ advance notice of its intention to terminate for Good
Cause under this section and a reasonable opportunity to cure the cause of
the
possible termination to the reasonable satisfaction of Summit FGI;
(vi)
Employee’s commission of any act constituting theft, intentional wrongdoing or
fraud; (vii) the conviction of the Employee of a felony criminal offense in
either state or federal court; (viii) any single act by Employee constituting
gross negligence or that causes material harm to the reputation, financial
condition or property of Summit FGI or its affiliates.
(d) “Disability”
means unable as a result of a physical or mental condition to perform Employee’s
normal duties
from day
to day in Employee’s usual capacity.
(e) “Retirement”
means termination
of employment by Employee in accordance with Summit FGI’s ’s retirement
plan,
including early retirement as approved by the Board of Directors of Summit
FGI
.
(f) “Good
Reason” means a Change of Control in Summit FGI and; (i) a decrease in the
total amount of Employee’s base salary below its level in effect on the date of
consummation of the Change of Control, without Employee’s prior written consent;
or (ii) a material change in Employee’s job duties and responsibilities without
Employee’s prior written consent; or (iii) a geographical relocation of Employee
to an office more than twenty (20) miles from Employee’s location at the time of
the Change of Control without Employee’s prior written consent; or (iv) failure
of Summit FGI to obtain assumption of this Employment
Agreement by its/their successor; or (v) any purported termination of Employee’s
employment which is not effected pursuant to a notice of termination required
in
Paragraph 15 of this Employment Agreement.
(g) “Wrongful
Termination” means termination of Employee’s employment prior to the expiration
of twenty-four (24) months after consummation of a Change of Control for any
reason other than at Employee’s option, Good Cause or the death, Disability or
Retirement of Employee.
2. Term.
The
initial term of this Employment Agreement shall be for three (3) years, unless
terminated sooner as provided herein. Absent termination by one of the parties
as provided in this Employment Agreement, the term of this Employment Agreement
shall automatically be extended for unlimited additional one (1) year term(s),
in which case such term shall end one (1) year from the date on which it is
last
renewed.
3. Duties.
Employee
shall perform and have all of the duties and responsibilities that may be
assigned to him from time to time by the Chief Executive Officer and/or the
Board of Directors of Summit FGI; provided any material changes to Employee’s
duties or obligations have been determined by the Board of Directors and/or
the
Chief Executive Officer in their reasonable discretion to be commensurate with
duties and obligations that might be assigned to other similarly-situated
executive officers of the Company. No later than five (5) days after the Company
materially changes Employee’s duties or obligations, Employee will give the
Company written notice if he believes a breach of this section has occurred
and
Company shall have a reasonable opportunity to cure the cause of the possible
breach. Failure by Employee to give the notice required under this section
shall
constitute a waiver of his rights to claim a breach of this section arising
from
the specific duties or obligations then at issue. If it is determined through
arbitration that the Company has breached this provision, then in consideration
of the compensation and benefits set forth herein, Company and Employee agree
that any damages received by Employee shall be limited to the amount Employee
would be entitled to had he been terminated not for Good Cause under paragraph
6
of this Agreement.
Employee’s
duties shall include, but not be limited to, ________________
_____________________________. Employee shall devote his best efforts on a
full-time basis to the performance of such duties.
4. Compensation
and Benefits.
During
the term of this Employment Agreement, including any extensions, Summit FGI
agrees that Employee’s compensation and benefits shall be as
follows:
(a) Base
Salary.
Employee’s base salary shall be not less than One Hundred Fifty Thousand Dollars
($150,000.00) per year, paid on a semi-monthly basis. Employee shall be
considered for salary increases on the basis of merit on an annual basis, with
any future increases subject to the sole discretion of Summit FGI.
(b) Bonus.
In
addition to the base salary provided for herein, Employee shall be eligible
for
incentive-based bonuses subject
to goals
and criteria to be determined by the Board of Directors of Summit
FGI.
(c) Paid
Leave.
Employee shall
be
entitled to all paid leave as provided by Summit FGI to other similarly-situated
officers.
(d) Fringe
Benefits.
Except
as specified below, Summit FGI shall afford to Employee the benefit of all
fringe benefits afforded to all other similarly-situated employees of Summit
FGI, including but not limited to retirement plans, stock ownership or stock
option plans, life insurance, disability, health and accident insurance benefits
or any other fringe benefit plan now existing or hereinafter adopted by Summit
FGI, subject to the terms and conditions thereof.
(e) Business
Expenses.
Summit
FGI shall reimburse Employee for reasonable expenses incurred by Employee in
carrying out his duties and responsibilities, including but not limited to
reimbursing civic club organization dues and reasonable expenses for customer
entertainment. All such reimbursement shall be administered in accordance with
the policies and practices established by Summit FGI from time to
time.
(f) Automobile.
Summit
FGI shall provide Employee with the use of an automobile for the Employee’s
business and personal use. Summit FGI shall be responsible for expenses
associated with the vehicle including but not limited to taxes, gasoline,
licenses, maintenance, repair, insurance
and
reasonable cellular phone charges. Employee shall be subject to tax for his
personal use of the vehicle in accordance with the Internal Revenue Code and
any
applicable state law. Upon approval of the Chief Executive Officer of Summit
FGI, appropriate replacement vehicles shall be provided in the future, but
in no
event less frequently than every third model year. If Employee is terminated
not
for Good Cause, or if Employee terminates his employment under this Agreement
for Good Reason, or Summit FGI terminates Employee’s employment under this
Agreement in a manner constituting Wrongful Termination, then Employee shall
be
entitled to retain the vehicle provided hereunder.
5. Termination
for Good Cause.
Subject
to the provisions of Paragraph 7 below, if Employee terminates his employment
with Summit FGI for any reason or Summit FGI terminates Employee’s employment
for Good Cause, Employee shall not be entitled to any compensation other than
that which is earned and payable as of the effective date of termination of
employment.
6. Termination
Not for Good Cause.
Employee’s employment may be terminated by Summit FGI for any reason permitted
under applicable law so long as Employee is given thirty (30) days advance
written notice (or payment in lieu thereof). In the event of a termination
pursuant to this paragraph, Employee shall be entitled to payment from Summit
FGI equal to the base salary compensation set forth in this Agreement for the
remaining term of the Agreement, or severance pay equal to 100% of his then
current annual base salary, whichever is greater.
7. Termination
Upon Change of Control.
(a) Except
as
hereinafter provided, if Employee terminates his employment with Summit FGI
for
Good Reason or Summit FGI terminates Employee’s employment in a manner
constituting Wrongful Termination, Summit FGI hereby agrees to pay Employee
a
cash payment equal to Employee’s Salary, on a monthly basis, multiplied by the
number of months between the effective date of termination and the date that
is
twenty-four (24) months after the date of consummation of Change of Control;
provided that in no event shall Employee receive a lump sum payment that is
less
than 100% of his Salary. Employee shall have the right to terminate his
employment without reason at his option by giving written notice of termination
within six (6) months of a Change of Control. In this case, Employee
will be
entitled to receive a lump sum equal to seventy five percent of his
Salary.
(b) For
the
year in which Employee terminates his employment with Summit FGI for Good Reason
or Summit FGI terminates Employee’s employment in a manner constituting Wrongful
Termination, Employee will be entitled to receive his reasonable share of Summit
FGI’s cash
bonuses
and employee benefit plan contributions, if any, allocated in accordance with
existing policies and procedures and authorized by the Board of Directors of
Summit FGI prior to the Change in Control. The amount of Employee’s cash
incentive award shall not be reduced due to Employee not being actively employed
for the full year.
(c) If
compensation pursuant to Paragraph 7(a) is payable, Employee will continue
to
participate, without discrimination, for the number of months between the date
of termination and the date that is twenty-four (24) months after the date
of
the consummation of the Change of Control, in benefit plans (such as retirement,
disability and medical insurance) maintained after any Change of Control for
employees, in general, of Summit FGI and/or any successor organization(s),
provided Employee’s continued participation is possible under the general terms
and conditions of such plans. In the event Employee’s participation in any such
plan is barred, Summit FGI shall arrange to provide
Employee
with benefits substantially similar to those which Employee would have been
entitled had his participation not been barred. Notwithstanding the foregoing,
if Employee terminates his employment after a Change of Control without reason
at his option, as permitted under Paragraph 7(a), then Employee shall be
entitled to receive the employee benefits contemplated in this Agreement for
a
period of six (6) months after the date of termination. However, in no event
will Employee receive from Summit FGI the employee benefits contemplated by
this
section if Employee receives comparable benefits from any other
source.
8. Other
Employment.
Employee
shall not be required to mitigate the amount of any payment provided for in
this
Employment Agreement by seeking other employment. The amount of any payment
provided for in this Employment Agreement shall not be reduced by any
compensation earned or benefits provided (except as set forth in Paragraph
7(c)
above) as the result of employment by another employer after the date of
termination.
9. Rights
of Summit FGI Prior to the Change of Control.
This
Employment Agreement shall not affect the right of Summit FGI to terminate
Employee, or to reduce the salary or benefits of Employee, with or without
Good
Cause, prior to any Change of Control; provided, however, any termination for
any reason other than at Employee’s option, Good Cause or the death, Disability
or Retirement of Employee that takes place after discussions have commenced
that
result in a Change of Control shall be presumed to be a Wrongful Termination,
absent clear and convincing evidence to the contrary.
10. Noncompetition
and Nonsolicitation.
In
consideration of the covenants set forth herein, including but not limited
to
the compensation set forth in Paragraphs 4, 6 and 7 above, Employee agrees
as
follows:
(a) For
the
entire duration of Employee’s employment with Summit FGI and for two (2) years
following the termination of such employment for any reason by either Employee
or Summit FGI (the “Restricted Period”), Employee shall not (i) within a
seventy-five (75) mile radius of Summit FGI and/or its affiliates directly
or
indirectly engage in any business or activity of any nature whatsoever that
is
competitive with the business of Summit FGI or its affiliates or (ii) sell
or
solicit the sale of, any services or products related thereto, directly or
indirectly, to any of Summit FGI’s or its affiliates’ customers or clients
within the State of West Virginia, the Commonwealth of Virginia or any other
states in which Summit FGI and/or its affiliates conducts
such
business or sells services in the future. Notwithstanding the foregoing, this
noncompetition covenant shall not apply to the business and activities conducted
by Summit Mortgage, a division of Shenandoah Valley National Bank, unless such
business and activities are conducted in the State of West Virginia, Virginia
or
any other state in which other affiliates of Summit FGI also engage in any
business or activity or sell or solicit services in the future.
(b) Without
limitation of the foregoing, during the Restricted Period, Employee shall not
serve as a proprietor,
partner, officer, director, stockholder, employee, sales representative or
consultant for any organization, company or business entity of any type that
engages in any business or activity of any nature whatsoever described in
Paragraph 10(a) above, provided however that this provision will not prohibit
Employee from (i) owning bonds, non-voting preferred stock or up to five percent
(5%) of the outstanding common stock of any such entity if such common stock
is
publicly traded, or (ii) accepting a position with a nationally- recognized
professional services firm, provided that in such capacity, Employee does not
render services, directly or indirectly, to any client or customer of such
firm
that engages in any business or activity described in Paragraph 10(a),
above.
(c) Employee
acknowledges and agrees that in the event of the breach or threatened breach
of
this provision, the harm and damages that will be suffered by Summit FGI are
not
susceptible of calculation or determination with a reasonable degree of
certainty, and cannot be fully remedied by an award of money damages or other
remedy at law. Employee further acknowledges and agrees that considering
Employee’s relevant background, education and experience, Employee will be able
to earn a livelihood without violating the foregoing restrictions. In addition
to any and all other rights and remedies available to Summit FGI in the event
of
any threatened, actual or continuing breach of this covenant not to compete,
Employee consents to and acknowledges Summit FGI’s right and option to seek and
obtain in any court of competent jurisdiction a preliminary and/or permanent
injunction in respect of any threatened, actual or continuing breach of the
covenant not to compete set forth herein.
(d) In
the
event that this provision shall be deemed by any court or body of competent
jurisdiction to be unenforceable in whole or in part by reason of its extending
for too long a period of time, or too great a geographical area or over too
great a range of activities, or overly broad in any other respect or for any
other reason, then and in such event this Employment Agreement shall be deemed
modified and interpreted to extend over only such maximum period of time,
geographical area or range of activities, or otherwise, so as to render these
provisions valid and enforceable, and as so modified, these provisions shall
be
enforceable and enforced.
(e) This
Paragraph 10 shall not apply in any respect to Employee, unless Employee agrees
otherwise in writing,
in the
event of the consummation of a Change in Control or in the event of Employee’s
termination by Summit FGI for other than Good Cause.
11. Confidential
Information.
(a) Employee
agrees not to use, publish or otherwise disclose (except as Employee’s duties
may require), either during or at any time subsequent to his/her employment,
any
secret, proprietary or confidential information or data of Summit FGI or any
information or data of others that Summit FGI or its affiliates is obligated
to
maintain in confidence. Employee understands that the use, publication or other
disclosure of such information may violate privacy rights, as well as expose
Summit FGI or its affiliates to financial loss, competitive disadvantage and/or
embarrassment. Employee also understands that it is Employee’s duty to take
adequate care to ensure that such secret, proprietary or confidential
information is not used, published or otherwise disclosed by others.
Notwithstanding the foregoing, nothing herein shall prevent Employee from
utilizing the knowledge and experience he has acquired in the banking
industry.
(b) Employee
also agrees that upon any termination of his/her employment to deliver to Summit
FGI promptly
all
items that belong to Summit FGI or that by their nature are for the use of
employees of Summit FGI only, including, without limitation, all written and
other materials that are of a secret, proprietary or confidential nature
relating to the business of Summit FGI and/or Summit FGI’s affiliates. All
business developed and produced by Employee while in the employ of Summit FGI
is
the exclusive property of Summit FGI unless specifically excluded in this
Agreement. Employee shall not, during the term of this Agreement or any time
thereafter, intentionally interfere with any business or contractual
relationship of Summit FGI.
(c) For
purposes of this Employment Agreement, the terms “secret” or confidential” are
used in the ordinary sense and do not refer to official security classifications
of the United States Government. Without limitation, examples of materials,
information and data that are considered to be of a secret or confidential
nature are for purposes of this Employment Agreement include but are not limited
to drawings, manuals, customer lists, notebooks, reports, models, inventions,
formulas, incentive plans, processes, machines, compositions, computer programs,
accounting methods, business plans and information systems including such
materials, information and data that are in machine-readable form.
12. No
Prior Obligation:
Other
than this Employment Agreement, Employee represents that there are no
agreements, covenants or arrangements, whether written or oral, in effect which
would prevent him from rendering service to Summit FGI during the term of this
employment and he has not made and will not make any commitments, become
associated, either directly or indirectly, in any manner, as partner, officer,
director, stockholder, advisor, employee or in any other capacity in any
business or organization, unless such activity complies with Summit FGI’s Code
of Ethics. Employee expressly agrees to indemnify and hold harmless Company,
its
affiliates, and Company’s and its affiliates’ and directors, officers and
employees from any and all liability resulting from or arising under the breach
of this representation and warranty. This indemnify is in addition to and not
in
substitution of rights Company may have against Employee at common law or
otherwise.
13. Successors;
Binding Agreement; Exclusive Remedy.
(a) Summit
FGI will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business stock
and/or assets of Summit FGI, by agreement in form and substance satisfactory
to
Employee, to expressly assume and agree to perform this Employment Agreement.
(b) This
Employment Agreement and all rights of Employee hereunder shall inure to the
benefit of and be enforceable by Employee’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If Employee should die while any amounts would still be payable to
him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Employment
Agreement to Employee’s devisee, legatee, or other designee or, if there be no
such designee, to Employee’s estate.
(c) This
Employment Agreement shall represent the exclusive and only remedy of Employee
in the event a termination occurs after a Change in Control. Summit FGI and
Employee agree that it is impossible
to
determine with any reasonable accuracy the amount of prospective damages to
either party should Employee be terminated or terminate his employment during
the term of this Employment Agreement. Summit FGI and Employee agree that the
payment provided herein is reasonable and not a penalty, based upon the facts
and circumstances of the parties at the time of entering this Employment
Agreement, and with due regard to future expectations.
14. Arbitration.
Except
for any dispute arising out of the obligations set forth in Paragraph 10 of
this
Employment Agreement, any dispute between the parties arising out of or with
respect to this Employment Agreement or any of its provisions or Employee’s
employment with Summit FGI shall be resolved by the sole and exclusive remedy
of
binding arbitration. Unless otherwise agreed by the parties, the arbitration
shall be conducted in Moorefield, West Xxxxxxxx under the auspices of, and
in
accordance with the rules of the American Arbitration Association. Any decision
issued by an arbitrator in accordance with this provision shall be final and
binding on the parties thereto and not subject to appeal or civil
litigation.
15. Notice.
For the
purposes of this Employment Agreement, notices, demands and other communications
provided for in the Employment Agreement shall be in writing and shall be deemed
to have been duly given when delivered or (unless otherwise specified) mailed
by
the United States registered mail, return receipt requested, postage prepaid,
addressed as follows:
If
to Employee: _________________
_________________
_________________
If
to
Summit FGI: Summit
Financial Group, Inc.
Attn:
H. Xxxxxxx Xxxxx, III, President & CEO
P.
O. Xxx
000
Xxxxxxxxxx,
XX 00000
or
such
other address as any party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
16. Indemnification.
To the
fullest extent permitted under West Virginia law and federal banking law, Summit
FGI agrees that it will indemnify and hold Employee harmless from and against
all costs and expenses, including without limitation, all court costs and
attorney’s fees, incurred by Employee in defending any and all claims, demands,
proceedings, suits or actions actually instituted or threatened by third parties
involving this Agreement, its validity or enforceability or with respect to
payments to be made pursuant thereto.
17. Additional
Payment by Summit FGI.
x. Xxxxx-Up
Payment.
Notwithstanding anything in this Agreement to the contrary, in the event it
shall be determined that any payment or distribution by Summit FGI and any
of
its subsidiaries and affiliates to or for the benefit of Employee (whether
paid
or payable or distributed or distributable pursuant to this Agreement, the
Supplemental Retirement Agreement between Summit FGI and Employee, or any other
agreement, contract, plan or arrangement, but determined without regard to
any
additional payments required under this Paragraph 17) (any such payments and
distributions collectively referred to as “Payments”), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, or any similar tax that may hereinafter be imposed or any interest
and
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”), then Summit FGI shall pay to Employee an additional payment (the
“Gross-Up Payment”) equal to one hundred percent (100%) of the Excise Tax and
one hundred percent (100%) of the amount of any federal, state and local income
taxes and Excise Tax imposed on the Gross-Up Payment.
b. Determination
of Gross-Up Payment.
All
determinations required to be made under this paragraph 17 including whether
a
Gross-Up Payment is required
and the
amount of such Gross-Up Payment, shall be made by the firm of independent
accountants selected by Summit FGI to audit its financial statements (the
“Accounting Firm”) which shall provide detailed supporting calculations both to
Summit FGI and Employee in good faith within a reasonable time period. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting a “change in control,” Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
“Accounting Firm” hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by Summit FGI. Any Gross-Up Payment, as determined pursuant
to
this Paragraph 17, shall be paid to Employee within 30 days of the receipt
of
the Accounting Firm’s determination.
18. Miscellaneous.
No
provisions of this Employment Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed
by
Employee and authorized officers of Summit FGI. No waiver by either party hereto
at any time of any breach by the other hereto of, or compliance with, any
condition or provisions of this Employment Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or any prior or subsequent time.
19. Validity.
The
invalidity or unenforceability of any provision or provisions of this Employment
Agreement shall not affect the validity or enforceability of any other
provisions of this Employment Agreement, which shall remain in full force and
effect.
IN
WITNESS WHEREOF, the parties have caused this Employment Agreement to be signed
as of the day and year first above written.
SUMMIT
FINANCIAL GROUP, INC.
By:
Its:
