EXHIBIT 10.3.1

 

AMENDMENT TO CHANGE IN CONTROL AGREEMENT

 

THIS AMENDMENT is entered into as of the 23rd day of July, 2003, by and between
C&F FINANCIAL CORPORATION, a Virginia corporation (the “Company”), and Thomas
Cherry (the “Executive”).

 

RECITALS

 

I. The Company and the Executive previously entered into a Change in Control
Agreement dated as of April 16, 2002 (the “Agreement”); and

 

II. The Company and the Executive desire to amend the Agreement.

 

NOW, THEREFORE, it is hereby agreed as follows:

 

1. Section 6 of the Agreement is amended to read as follows:

 

6. PAYMENT LIMITATION AND EXCISE TAX GROSS-UP.

 

(a) Additional Payment. Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it shall be
determined that any payment or benefit provided to, or for the benefit of, the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6) (a “Payment”) would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive 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 the Executive shall be
entitled to receive an additional payment (a “Gross-Up Payment”) in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto),
employment taxes and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. Notwithstanding the foregoing provisions of this Section 6(a), if
it shall be determined that the Executive is entitled to a Gross-Up Payment, but
that the Executive, after taking into account the Payments and the Gross-Up
Payment, would not receive a net after-tax benefit of at least $25,000 (taking
into account income taxes, employment taxes and any Excise Tax) as compared to
the net after-tax proceeds to the Executive resulting from an elimination of the
Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount
(the “Limited Payment Amount”) such that the receipt of Payments would not give
rise to any Excise Tax, then the following shall apply:

 

(i) No Gross-Up Payment shall be made to the Executive.

 

(ii) The Payments, in the aggregate, shall be reduced to the Limited Payment
Amount, and in that case, unless the Executive and the Company shall otherwise
agree, the Company shall reduce or eliminate the Payments to the Executive by
first reducing or eliminating those payments or benefits which are not payable
in cash and then by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are to be paid the
farthest in time from the Determination (as hereinafter defined). Any notice
given by the Executive pursuant to the preceding sentence shall take precedence
over the provisions of any other plan, arrangement or agreement governing
Executive’s rights and entitlements to any benefits or compensation.

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(iii) If it is established pursuant to a final determination of a court or an
Internal Revenue Service (the “IRS”) proceeding which has been finally and
conclusively resolved, that Payments which should have been limited to the
Limited Payment Amount have been made to, or provided for the benefit of, the
Executive by the Company, which are in excess of the limitations provided in
Section 6(a) (hereinafter referred to as an “Excess Payment”), such Excess
Payment shall be deemed for all purposes to be a loan to the Executive made on
the date the Executive received the Excess Payment and the Executive shall repay
the Excess Payment to the Company on demand, together with interest on the
Excess Payment at the applicable federal rate (as defined in Section 1274(d) of
the Code) from the date of Executive’s receipt of such Excess Payment until the
date of such repayment.

 

(b) Gross-Up Payment and Limited Payment Amount Determinations. Subject to the
provisions of Section 6(c), all determinations required to be made under this
Section 6, including whether and when a Gross-Up Payment or payment of only the
Limited Payment Amount is required and the amount of such Gross-Up Payment or
Limited Payment Amount and the assumptions to be utilized in arriving at such
determination, shall be made by the Company’s public accounting firm (the
“Accounting Firm”) which shall provide detailed supporting calculations both to
the Company and the Executive within fifteen business days of the receipt of
notice from the Executive in accordance with Section 10(c) of this Agreement
that there has been a Payment, or such earlier time as is requested by the
Company and, with respect to any Limited Payment Amount, a reasonable opinion to
the Executive that he is not required to report any excise tax on his federal
income tax return with respect to the Limited Payment Amount. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Executive shall appoint a
registered public accounting firm under Section 102 of the Sarbanes-Oxley Act to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All determinations regarding the
Gross-Up Payment called for herein shall be based on the maximum applicable
marginal tax rates for each year in which such payments and benefits shall be
paid or provided to, or for the benefit of, the Executive (based upon the rate
in effect for such year at the time of the first payment of the foregoing and,
as appropriate as determined by the Accounting Firm, the taxable wage base for
employment tax purposes). All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 6, shall be paid by the Company to the Executive within ten
business days of the receipt of the Accounting Firm’s determination. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Payments or Gross-Up Payments which will not have
been made by the Company should have been made (an “Underpayment”), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 6(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be paid by the Company to or for the benefit of the Executive
within ten business days of such determination together with interest on such
amount (other than with respect to interest or penalties, if any, included in
the calculation of the Underpayment) at the applicable federal rate from the
date such amount would have been paid to the Executive until the date of
payment.

 

(c) Notices and Advances. The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would or may
require the payment by the Company of a Gross-Up Payment or the payment by the
Executive of an Excise Tax with respect to a Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Executive

 

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is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due) in accordance with Section 10(c) of this Agreement. If the Company
notifies the Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:

 

(i) provide to the Company any information reasonably requested by the Company
relating to such claim,

 

(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,

 

(iii) cooperate with the Company in good faith in order effectively to contest
such claim, and

 

(iv) permit the Company to participate in any proceedings relating to such
claim.

 

Notwithstanding the foregoing, the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and, if a Gross-Up Payment is due, shall indemnify
and hold the Executive harmless, on an after-tax basis, for any Excise Tax,
income tax or employment tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 6(c),
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or to contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine. If the Company
directs the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax, income tax or employment tax (including interest or penalties
with respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

 

(d) Refund Payment and Advance Forgiveness. If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 6(c), the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company’s complying with the requirements of
Section 6(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 6(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

 

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(e) Banking Payment Limitation. Notwithstanding anything contained in this
Agreement or any other agreement or plan to the contrary, the payments and
benefits provided to, or for the benefit of, the Executive under this Agreement
or under any other plan or agreement shall be reduced (but not below zero) to
the extent necessary so that no payment to be made, or benefit to be provided,
to the Executive or for his benefit under this Agreement or any other plan or
agreement shall be in violation of the golden parachute and indemnification
payment limitations and prohibitions of 12 CFR Section 359.

 

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.

 

C&F FINANCIAL CORPORATION By:  

/s/    J.P.Causey, Jr.

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Name:   J.P. Causey, Jr.

Its Chairman, Comp. Comm.

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/s/    Thomas F. Cherry        

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    Executive

 

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