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EXHIBIT 10.16
 

 

 
RABBI TRUST FOR THE
 
DIRECTORS DEFERRAL PLAN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benmark, Inc.
 
1100 Circle 75 Parkway, Suite 320
 
Atlanta, Georgia 30339
 
Telephone:                                (770) 952-1529
 
Facsimile:                                (770) 952-8029
 

 
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RABBI TRUST FOR THE
 
DIRECTORS DEFERRAL PLAN AGREEMENT
 
This Trust Agreement effective as of 4th day of April, 2000 by and between
Summit Financial Group, Inc., a Company having its principal place of business
in Moorefield, West Virginia (hereinafter referred to as the, “Company”), and
the trust department of South Branch Valley National Bank, a banking corporation
with its principal place of business in West Virginia (hereinafter referred to
as the, “Trustee”).
 
WITNESSETH:
 
WHEREAS, the Company has adopted a Directors Deferral Plan (hereinafter referred
to as the, “Benefit Plan”), and such Benefit Plan constitutes a non-qualified
deferred compensation plan.  A copy of the Directors Deferral Plan setting forth
the specific Benefit Plan terms is attached hereto and marked as Exhibit “A”
(hereinafter referred to as the, “Benefit Plan”).
 
WHEREAS, the Company has incurred, or expects to incur, liability under the
terms of the Benefit Plan with respect to the individuals participating in such
Benefit Plan;
 
WHEREAS, the Company wishes to establish a trust (hereinafter referred to as
the, “Trust”) and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company’s creditors in the event of the Company’s
Insolvency, as herein defined, until paid to the Benefit Plan participants, and
their beneficiaries as set forth in the Benefit Plan;
 
WHEREAS, it is the intention of the parties that this Trust shall constitute an
unfunded arrangement and shall not affect the status of the Benefit Plan as an
unfunded plan, maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
for purposes of Title I of the Employee Retirement Income Security Act of 1974,
as amended;
 
WHEREAS, it is the intention of the Company to make contributions to the Trust
to provide itself with a source of funds to assist it in the meeting of the its’
liabilities under the Benefit Plan (hereinafter referred to as the
“Contributions”);
 
 
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NOW, THEREFORE, the parties do hereby establish the Trust and agree that the
Trust shall be comprised, held and disposed of as follows:
 
SECTION I
 
ESTABLISHMENT OF TRUST
 
 
(a)
This trust is hereby established as the Rabbi Trust for the Directors Deferral
Plan.

 
 
(b)
The Company hereby deposits with Trustee in trust, assets which shall become the
principal of the Trust to be held, administered and disposed of by the Trustee
as provided in this Trust Agreement.

 
 
(c)
The Trust hereby established shall be irrevocable, but may be amended as
provided under (and only as provided under) Section XII.

 
 
(d)
The Trust is intended to be a grantor trust, of which the Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.

 
 
(e)
The principal of the Trust, and any earnings thereon shall be held separate and
apart from other funds of the Company and shall be used exclusively for the uses
and purposes of the Benefit Plan participants and general creditors as herein
set forth.  The Benefit Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust.  Any rights created under the Benefit Plan and this Trust Agreement shall
be mere unsecured contractual rights of the Benefit Plan participants and their
beneficiaries against the Company.  Any assets held by the Trust will be subject
to the claims of the Company’s general creditors under federal and state law in
the event of Insolvency, as defined in Section III (a) herein.

 
 
(f)
The Trustee shall be accountable for all property and Contributions received,
but the Trustee shall have no duty to see that the Contributions received are
sufficient to provide for the retirement, disability, or death benefits, nor
shall the Trustee be obligated to enforce or collect any Contribution from the
Company.  Notwithstanding the foregoing, in the event of a Change in Control,
the Trustee

 
 
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                shall have the right to monitor, enforce and/or collect any
Contributions due and owing from the Company or to give notice of any default in
making Contributions to any person.
 
 
SECTION II
 
PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
 
 
(a)
The Company shall deliver to Trustee a schedule (the “Payment Schedule”) that
indicates the amounts payable in respect to each Benefit Plan participant (and
his or her beneficiaries), that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable, the form in
which such .amount is to be paid (as provided for or available under the Benefit
Plan), and the time for commencement of payment of such amounts.  The Company
shall be deemed to be in default if it fails to fulfill its payment obligations
required under the Benefit Plan and shall fail to cure any such failure within
thirty (30) days after receiving written notice of such failure from any
affected Benefit Plan participant or beneficiary.  Upon the Trustee’s receipt of
a written certification of such default from the affected Benefit Plan
participant or beneficiary, the Trustee shall make payments in accordance with
such Payment Schedule and the Trustee shall provide to the Company a copy of
such certification and notice or its commencement of such payments.  The Trustee
shall then continue to make such payments until such time, if any, as it may
receive written instructions to the contrary signed by the affected participant
or beneficiary.

 
 
(b)
The Trustee shall, in accordance with the written instructions of the Company,
in the event of a Change in Control of the Company, or in accordance with the
written instructions of the Benefits Determiner (as defined in Article )(III),
withhold and report any federal, state or local taxes that may be required to be
withheld and reported with respect to the payment of benefits pursuant to the
terms of the Benefit Plan and shall pay amounts withheld to the appropriate
taxing authorities.  In addition, the Trustee shall be authorized to pay any
federal, state or local taxes to any government body that presents a tax
deficiency notice to the Trustee with respect to income or assets of the
Trust.  The Company shall deliver to the Trustee each year a schedule which
specifies the amount of taxes to be withheld, if any, with respect to benefit
payments to be

 
 
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made hereunder.  The Trustee shall be entitled to rely conclusively on the
written instructions of the Company, or in the event of a Change of Control, the
Benefits Determiner, as to all tax reporting and withholding requirements.

 
 
(c)
The entitlement of a Benefit Plan participant or his or her beneficiaries to
benefits under the Benefit Plan, shall be determined by the Company or such
party (other than the Trustee), shall designated under the Benefit Plan, and any
claim for such benefits shall be considered and reviewed under the procedures
set out in the Benefit Plan.

 
 
(d)
The Company may make payment of benefits directly to Benefit Plan participants
or their beneficiaries if they become so payable under the Benefit Plan to such
participants or beneficiaries.  The Company shall notify the Trustee of its
decision to make payment of benefits directly, prior to the time amounts are
payable to participants or their beneficiaries.  In addition, if the principal
of the Trust, and any earnings thereon, are not sufficient to make payments of
benefits in accordance with the terms of the Benefit Plan, the Company shall
make the balance of each such payment as it falls due.  Trustee shall notify the
Company if and when such principal and earnings are not sufficient to discharge
obligations currently due under the Payment Schedule and shall have no further
obligation hereunder to anyone interested in the Trust.

 
 
(e)
In the event of a Change in Control, Trustee shall rely on the written direction
of the Benefits Determiner who shall confirm the accuracy of the Payment
Schedule or who shall deliver to the Trustee a new Payment Schedule upon which
Trustee may rely.

 
SECTION III
 
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO
 
TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT
 
 
(a)
The Trustee shall cease payment of benefits to the Benefit Plan participants and
their beneficiaries if the Company is Insolvent.  The Company shall be
considered “Insolvent” for purposes of this trust Agreement if (i) The Company
states to it in writing that it is unable to pay its debts as they

 
 
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become due, or (ii) The Company is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.

 
 
(b)
At all times during the continuance of this Trust, as provided in Section I (e)
hereof, the principal and income of the Trust shall be subject to claims of
general creditors of the Company under federal and state law as set forth below.

 
 
(1)
The Board of Directors and the Chief Executive Officer of the Company shall have
the duty to inform the Trustee in writing of the Company’s Insolvency.  If a
person claiming to be a creditor of the Company alleges in writing to the
Trustee that the Company has become Insolvent, the Trustee shall determine
whether the Company is Insolvent and, pending such determination, the Trustee
shall discontinue payment of benefits to the Benefit Plan participants or their
beneficiaries.

 
 
(2)
Unless the Trustee has actual knowledge of the Company’s Insolvency, or has
received notice from the Company or a person claiming to be a creditor alleging
that the Company is Insolvent, the Trustee shall have no duty to inquire whether
the Company is Insolvent.  The Trustee may in all events rely on such evidence
concerning the Company’s solvency as may be furnished to the Trustee and that
provides the Trustee with a reasonable basis for making a determination
concerning the Company’s solvency.  The Trustee shall have no liability for any
payments to the Benefit Plan participants or their beneficiaries after the
occurrence of an Insolvency but prior to its actual knowledge thereof.

 
 
(3)
If at any time the Trustee has determined that the Company is Insolvent, the
Trustee shall discontinue payments to the Benefit Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of the
Company’s general creditors.  Nothing in this Trust Agreement shall in any way
diminish any rights of the Benefit Plan participants or their beneficiaries to
pursue their rights as general creditors.

 
 
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(4)
The Trustee shall resume the payment of benefits to the Benefit Plan
participants or their beneficiaries in accordance with Section II of this
Agreement only after the Trustee has determined that the Company is not (or is
no longer) Insolvent.

 
 
(c)
Provided that there are sufficient assets, if the Trustee discontinues the
payment of benefits from the Trust pursuant to Section III (b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to the
Benefit Plan participants or their beneficiaries under the terms of the Benefit
Plan Agreement for the period of such discontinuance, less the aggregate amount
of any payments made to the Benefit Plan participants or their beneficiaries in
lieu of the payments provided for hereunder during any such period of
discontinuance.

 
SECTION IV
 
PAYMENTS TO COMPANY
 
Except as provided in Sections III or XII hereof, the Company shall have no
right or power to direct the Trustee to return to the Company or to divert to
others any of the Trust assets before all payment of benefits have been made to
the Benefit Plan participants and their beneficiaries pursuant to the terms of
the Benefit Plan.
 
SECTION V
 
THE TRUSTEE’S POWERS
 
 
(a)
All rights associated with assets of the Trust shall be exercised by the Company
or the Trustee, as hereinafter set forth, and shall in no event be exercisable
by or rest with the Benefit Plan participants.  The participant may, however,
direct the fictitious investment of the participant’s deferred compensation
account as set forth in the Benefit Plan Agreement.  The Company shall have the
right at any time, and from time to time in its sole discretion, to substitute
assets of equal fair market value for any asset held by the Trust.  This right
is exercisable by the Company in a non-fiduciary capacity without the approval
or consent of any person in a fiduciary capacity.

 
 

 
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(b)
Subject to the foregoing, the Trustee shall have the following powers and
authority in the administration of the assets of the Trust, in addition to those
vested in it elsewhere in this Trust Agreement or by law:

 
(i)
Subject to investment direction issued by the Company, to invest and reinvest
the assets of the Trust, without distinction between principal and income, in
any kind of property, real, personal or mixed, tangible or intangible, and in
any kind of investment, security or obligation suitable for the investment of
the Trust assets, including federal, state and municipal tax-free obligations
and other tax-free investment vehicles, insurance policies and annuity
contracts, and any common trust fund, group trust, pooled fund, or other
commingled investment fund maintained by the Trustee or any other Company or
entity for trust investment purposes in which the Trust is eligible to invest
and the provisions governing such fund shall be part of the Trust Agreement as
though fully restated herein;

 
 
 
(ii)
To purchase, and maintain as owner, a life insurance policy or policies with
respect to participants; provided; however; that the Trustee shall not be
required to purchase or take any action under a life insurance policy or
policies with respect to participants unless directed to do so by the Company,
which shall designate the face amount of said policy or policies, the terms of
the policy or policies and the insurance company.

 
 
(iii)
To sell for cash or on credit, to grant options, convert, redeem, exchange for
other securities or other property, or otherwise to dispose of, any security or
other property at any time held except that the Trustee shall have no right or
obligation to take any action with respect to any insurance contract or policy
unless so directed by the Company, or in the event of a Change in Control, by
the Benefits Determiner;

 
 
(iv)
At the direction of the Company, to settle, compromise or submit to arbitration,
any claims, debts or damages, due to or owning to or from the Trust, to commence
or defend suits or legal proceedings and to represent the Trust in all suits or

 

 
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legal proceedings provided, however, the Trustee shall not be expected or
required to undertake any of the foregoing unless there are sufficient assets in
the Trust with which to do so, or the Trustee has received assurances by a party
to this Trust, satisfactory to the Trustee, of the payment or reimbursement of
the expenses connected therewith;

 
 
(v)
To exercise any conversion privilege (other than conversion privileges with
respect to any insurance policy, which shall be exercised only upon direction of
the Company, or in the event of a Change in Control, by the Benefits Determiner)
and/or subscription right available in connection with securities or other
property at any time held, to oppose or to consent to the reorganization,
consolidation, merger or readjustment of the finances of any corporation,
Company or association or to the sale, mortgage, pledge or lease of the property
of any corporation, Company or association any of the securities of which may at
any time be held and to do any act with reference thereto, including the
exercise of options, making of agreement or subscription, which may be deemed
necessary or advisable in connection therewith, and to hold and retain any
securities or other properties so acquired;

 
 
(vi)
To hold cash uninvested for a reasonable period of time under the circumstances
without liability for interest, pending investment thereof or the payment of
expenses or making distributions therewith;

 
 
(vii)
To form corporations and to create trusts to hold title to any securities or
other property, all upon such terms and conditions as may be deemed advisable;

 
 
(viii)
To employ suitable agents and counsel and to pay their reasonable expenses and
compensation;

 
 
(ix)
To register any securities held hereunder in the name of the Trustee or in the
name of a nominee with or without the addition of words indicating that such
securities are held in a fiduciary capacity and to hold any securities in bearer
form and to combine

 

 
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certificates representing such securities with certificates of the same issue
held by the Trustee in other fiduciary or representative capacities, or to
deposit securities in any qualified central depository where such securities may
be held in bulk in the name of the nominee of such depository with securities
deposited by other depositors, or deposit securities issued by the United States
Government, or any agency or instrumentality’s thereof, with a Federal Reserve
Bank;

 
 
(x)
To make, execute and deliver, as trustee, any and all conveyances, contracts,
waivers, releases or other instruments in writing necessary or proper for the
accomplishment of any of the foregoing powers;

 
 
(xi)
To have any and all other powers or authority, under the laws of the state in
which the Trustee’s principal executive offices are located, relevant to
performance in the capacity as the Trustee; and

 
 
(xii)
To settle, compromise or submit to arbitration, any claims, debts or damages,
due or owing to or from the Trust, to commence or defend suits or legal
proceedings and to represent the Trust in all suits or legal proceedings;
provided, however, the Trustee shall not be expected or required to undertake
any of the foregoing unless there are sufficient assets in the Trust with which
to do so, or the Trustee has received assurances by a party to this Trust,
satisfactory to the Trustee, of the payment or reimbursement of the expenses
connected therewith.

 
SECTION VI
 
DISPOSITION OF INCOME
 
During the term of this Trust, all income received by the Trust, net of
distributions, expenses and taxes, shall be accumulated and reinvested.
 
SECTION VII
 
ACCOUNTING BY THE TRUSTEE
 
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee.  Within ninety (90) days

 
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following the close of each calendar year and within sixty (60) days after the
removal or resignation of the Trustee, the Trustee shall deliver to the Company
a written account of its administration of the Trust during such year or during
the period from the close of the last preceding year to the date of such removal
or resignation, setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust at the end of
each year or as of the date of such removal or resignation, as the case may be.
 
SECTION VIII
 
RESPONSIBILITY OF THE TRUSTEE
 
 
(a)
The Trustee shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like goals provided, however, that the Trustee shall incur no
liability to any person for any action taken pursuant to a direction, request or
approval given by the Company which is contemplated by, and in conformity with,
the terms of the Benefit Plan or this Trust and is given in writing by the
Company. In the event of a dispute between the Company and a party, the Trustee
may apply at the expense of the Trust to a court of competent jurisdiction
(located in West Virginia, if possible) to resolve the dispute.

 
 
(b)
If the Trustee undertakes or defends any litigation arising in connection with
this Trust, except where it is finally determined by a court of competent
jurisdiction that the Trustee breached its duties under this Agreement, the
Company agrees to indemnify the Trustee against the Trustee’s costs, expenses
and liabilities (including, without limitation, attorneys’ fees and expenses)
relating thereto and to be primarily liable for such payments.  If the Company
does not pay such costs, expenses and liabilities in a reasonably timely manner,
then the Trustee may obtain payment from the Trust.

 
 
(c)
The Trustee may consult with legal counsel (who may also be counsel for the
Company generally) with respect to any

 
 
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of its duties or obligations hereunder and charge their fees to the Trust if
they are not paid in a timely manner by Company.

 
 
(d)
The Trustee may hire agents, accountants, actuaries, investment advisors,
financial consultants or other professionals to assist it in performing any of
the duties or obligations hereunder.

 
 
(e)
The Trustee shall have, without exclusion, all powers conferred on trustees by
applicable law, unless expressly provided otherwise herein, provided, however,
that if an insurance policy is acquired or held at the direction of the Company
as an asset of the Trust, the Trustee shall have no power to name a beneficiary
of the policy other than the Trust, to assign the policy other than to a
successor trustee, or to loan any person (including the Company) the proceeds of
any borrowing against such policy.

 
 
(f)
Notwithstanding any powers granted to the Trustee pursuant to this Agreement or
to applicable law, the Trustee shall not have any power that could give this
Trust the objective of carrying on a business and dividing the gains therefrom,
within the meaning of section 301.7701-2 of the Procedure and Administrative
Regulations promulgated pursuant to the Internal Revenue Code.

 
 
(g)
The Trustee shall be entitled to conclusively rely upon written notice,
direction, instruction, certificate or other communication believed by it to be
genuine and to be signed by the proper person or persons.

 
 
(h)
Nothing contained in this Trust Agreement shall require the Trustee to risk or
expend its own funds in the performance of its duties hereunder.  In the
acceptance and performance of its duties hereunder, the Trustee acts solely as
trustee of the Trust and not in its individual capacity, and all persons, other
than the Company, having any claim against the Trustee related to this Trust
Agreement or the actions or agreements of the Trustee contemplated hereby shall
look solely to the Trustee for the payment or satisfaction thereof, except to
the extent that the Trustee has engaged in willful misconduct or gross
negligence, or the Trustee has willfully breached its obligation under this
Trust Agreement.

 
 
(i)
The Trustee shall not be responsible for determining whether a Change in Control
(as hereinafter defined) has

 

 
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occurred.  The Company will notify the Trustee of the occurrence of a Change in
Control, and the Trustee shall be entitled to rely conclusively upon such
notification for all purposes of a Change in Control hereunder without any
liability or further duty with respect thereto.

 
(j)
Any amendment or amendments that are or may be made to the Benefit Plan shall
not increase the Trustee’s duties hereunder without the express written consent
of the Trustee.

 
SECTION IX
 
COMPENSATION AND EXPENSES OF TRUSTEE
 
The Company shall pay all administrative and the Trustee’s fees and
expenses.  If not paid by the Company, the fees and expenses shall be paid from
the Trust.
 
SECTION X
 
RESIGNATION AND REMOVAL OF TRUSTEE
 
 
(a)
The Trustee may resign at any time by written notice to the Company, which shall
be effective thirty (30) days after receipt of such notice unless the Company
and the Trustee agree otherwise, whether or not a successor has been appointed
and qualifies.  The Trustee shall pay or deliver property to the successor
trustee or the Company (in further trust, pending the appointment of a
successor) as the case may be, at the end of such period.

 
 
(b)
The Trustee may be removed by the Company on sixty (60) days notice to the
Trustee or upon shorter notice accepted by the Trustee.  A successor trustee may
be removed by Company on ninety (90) days notice to such successor trustee or
upon shorter notice accepted by the successor trustee.

 
 
(c)(1)
If, at the time of a Change in Control (as defined herein) the then acting
trustee is an individual or entity not independent of the Company, the Board of
Directors of the Company as in existence immediately prior to the Change in
Control, shall designate an independent third party with corporate trustee
powers to act as successor trustee and upon such appointment, the trustee acting
prior to such Change in Control shall resign. The successor trustee appointed by
the Board of Directors may not be removed by the Company for two (2) years
following the date of such Change in Control.

 
 
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(2)
If, at the time of a Change in Control (as defined herein), the Trustee is,
other than serving as Trustee hereunder, an independent party with respect to
the Company, the Trustee may not be removed by Company for the two (2) years
following the date of such a Change in Control. Such Trustee also may not be
removed by the Company in anticipation of a Change in Control.

 

 
(d)
If the Trustee resigns at any time following a Change in Control, or if the
Trustee is removed by the Company at any time following the expiration of the
two (2) year period (as described in Subpart (c) above) following a Change in
Control, the President of the Company, as in existence immediately prior to a
Change in Control, or in the event such person is deceased, the Benefits
Determiner, shall select a successor trustee in accordance with the provisions
of XI (a) hereof and such selection shall be made on or before the effective
date of the Trustee’s resignation or removal. In all other instances of
resignation or removal, the Company shall select a successor trustee in
accordance with the provisions of XI (a) hereof, with such selection being made
on or before the effective date of the Trustee’s resignation or removal.

 
 
(e)
Upon resignation or removal of the Trustee and appointment of a successor
trustee, all assets shall subsequently be promptly transferred to the successor
trustee, in accordance with subsection (a) hereof.

 
 
(f)
If the Trustee resigns or is removed under paragraph (a), (b), or (d) of this
Section X, a successor shall be appointed in accordance with Section XI hereof,
with such selection being made on or before the effective date of resignation or
removal. If no such appointment has been made, the Company or the Trustee (as
applicable) may apply to a court of competent jurisdiction for appointment of a
successor or for instructions. Should the Trustee be required to apply to a
court of competent jurisdiction for such purpose, all expenses of the Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.

 
SECTION XI
 
APPOINTMENT OF SUCCESSOR
 
 
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(a)
If the Trustee resigns or is removed pursuant to the provisions of Section X
hereof, the Company may appoint any third party, such as a Company trust
department or other party that may be granted corporate trustee powers under
state law, to serve as successor trustee hereunder. The appointment of a
successor trustee shall be effective when accepted in writing by the new
trustee. The new trustee shall have all of the rights and powers of the former
trustee, including ownership rights in the Trust assets. The former trustee
shall execute any instrument necessary or reasonably requested by the successor
trustee to evidence the transfer.

 
 
(b)
The successor trustee need not examine the records and acts of any prior Trustee
and may retain or dispose of existing Trust assets, subject to Sections VII and
VIII hereof. The successor trustee shall not be responsible for and the Company
shall indemnify and defend the successor trustee from any claim or liability
resulting from any action or inaction of any prior trustee from any other past
event, or any condition existing at the time it becomes successor trustee.

 
SECTION XII
 
AMENDMENT OR TERMINATION
 
 
(a)
This Trust Agreement may be amended by a written instrument executed by the
Trustee and the Company. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Benefit Plan or shall make the Trust revocable.

 
 
(b)
The Trust shall not terminate until Benefit Plan participants and their
beneficiaries are no longer entitled to any benefits pursuant to the terms of
the Benefit Plan. Upon termination of the Trust, any assets remaining in the
trust shall be returned to the Company. Notwithstanding the foregoing, if at any
time prior to the termination of the Trust pursuant to the provisions set forth
herein, the Trust has distributed its entire corpus, the trust shall terminate
unless within sixty (60) days of notification to the Company by trustee that all
assets of the Trust have been distributed, the Company makes additional
contributions to the Trust for purposes of paying the benefits set forth herein.

 
 
(c)
Upon written approval of the Benefit Plan participants or beneficiaries entitled
to payment of benefits pursuant to the

 

 
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terms of the Benefit Plan, the Company may terminate this Trust prior to the
time all benefit payments under the Benefit Plan have been made. All assets in
the Trust at termination shall, after payment of all amounts due to the Trustee
and all fees, taxes, expenses chargeable to the Trust, be distributed returned
to the Company.

 
 
(d)
Section(s) I (one), II (two), VI (six), X (ten) and XII (twelve) of this trust
Agreement may not be amended by the Company (i) in anticipation of or (ii) for
two (2) years following a Change of Control, as defined herein.

 
SECTION XIII
 
MISCELLANEOUS
 
 
(a)
Any provision of this Trust Agreement prohibited by law shall be ineffective to
the extent of any such prohibition, without invalidating the remaining
provisions hereof.

 
 
(b)
Benefits payable to the Benefit Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.

 
 
(c)
This Trust Agreement shall be governed by and constructed in accordance with the
laws of the State of West Virginia. Nothing in this Trust Agreement shall be
construed to subject the Trust to the Employee Retirement Security Act of 1974,
as amended.

 
 
(d)
For purposes of this Trust, Change in Control shall mean and include the
following with respect to (i) the Company or any successor thereto:

 
 
(1)
a change in control of a nature that would be required to be reported in
response to Item 1(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (hereinafter the “Exchange Act”); or

 
 
(2)
a change in control of the Company within the meaning of 12 C.F.R. §225.41 of
Regulation Y of the Federal Reserve Board; or

 
 
(3)
at such time as:

 
 
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(i)
any “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
Twenty Five Percent (25%) or more of the combined voting

 
 
power of the Company’s outstanding securities ordinarily having the right to
vote at the elections of directors, except for any stock purchased by the
Company’s Employee Stock Ownership Plan and/or the trust under such plan; or

 
 
(ii)
individuals who constitute the board of directors of the Company on the date
hereof (hereinafter the “Incumbent Board”) cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board, or whose
nomination for election by the Company’s nominating committee which is comprised
solely of members of the Incumbent Board, shall be, for purposes of this clause
(ii), considered as though he were a member of the Incumbent Board; or

 
 
(iii)
merger, consolidation, or sale of all substantially all the assets of the
Company occurs; or

 
 
(iv)
a proxy statement is issued soliciting proxies from the stockholders of the
Company by someone other than the current management of the Company, seeking
stockholder approval of a plan of reorganization, merger, or consolidation of
the Company with one or more corporations as a result of which the outstanding
shares of the class of the Company’s securities are exchanged for or converted
into cash or property or not issued by the Company.

 
 
(e)
The Company shall be required to notify the Trustee of a Change in Control or
imminent Change in Control (for these purposes, a Change in Control shall be
imminent if it shall occur within sixty (60) days from the date of said notice).
The Trustee shall not be charged with actual knowledge of a Change in Control
until it has received

 
 
 
17

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notice, in writing, of such Change in Control or imminent Change in Control.

 
 
(f)
Every direction or notice authorized hereunder shall be deemed delivered to the
Company or the Trustee as the case may be:

 
(i)
on the date it is personally delivered to the Company or the Trustee at its
respective principal executive offices, or

 
 
(ii)
three (3) business days after it is sent by registered or certified mail,
postage prepaid, addressed to the Company, the Trustee or the benefits
determiner at such principal executive offices.

 
 
(g)
The Trustee shall be fully protected in relying upon a certification of an
authorized representative of the Company with respect to any instruction,
direction or approval of the Company required or permitted hereunder, and
protected also in relying upon the certification until a subsequent
certification is filed with the Trustee. The Trustee shall be fully protected in
acting upon any instrument, certificate, or paper believed by it to be genuine
and to be signed or presented by the proper person or persons, and the Trustee
shall be under no duty to make any investigation or inquiry as to any statement
contained in any such writing, but may accept the same as conclusive evidence of
the trust and accuracy contained therein.

 
 
(h)
The Company has appointed Benmark, Inc. as the “Benefits Determiner” to
determine the manner and amount of payments to be made to the participant and/or
the beneficiary under the Agreement. The Company may remove the Benefits
Determiner at any time by giving at least thirty (30) days prior written notice
to the Benefits Determiner. In the event that the Benefits Determiner fails to
act or resigns, a successor benefits determiner shall be:

 
 
(i)
selected by the Company, if no Change in Control has occurred at the Company,
or,

 
 
(ii)
selected jointly by the participant (or beneficiary, if the participant is
deceased) and the Trustee, if a Change in Control has occurred at the Company.

 
 
(i)
Communications under this Agreement shall be in writing and shall be sent to the
following addresses:

 
 
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Trustee:   Russ Ratliff, Trust Officer
 
The Trust Department of South Branch Valley Bank
310 North Main Street
Moorefield, West Virginia 26836
 
Company:  Summit Financial Group, Inc.
 
                       310 North Main Street
                              Moorefield, West Virginia 26836
 
Benefits Determiner:
Benmark, Inc.

 
1100 Circle 75 Parkway, Suite 320
Atlanta, Georgia 30339
 
 
(j)
This Trust Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which shall together
constitute only one agreement.

 
SECTION XIV
 
EFFECTIVE DATE
 
The effective date of this Trust Agreement shall be the 4th day of April, 2000.
 
IN WITNESS WHEREOF, this instrument has been executed as of the day and year
first above written.
 
ATTEST:                                                                                    SUMMIT
FINANCIAL GROUP, INC.
 

 
__/s/  Scott C.
Jennings   ________                                                                           
By:___/s/  Robert S. Tissue_______________
 
_________________________                                                                                      
Vice President & CFO   _____________
                 (Title)
 
ATTEST:                                                                                    TRUSTEE
 

 
_/s/  Lori A.
Whetzel__________                                                                               
By:__/s/  Russell F. Ratliff Jr. ____________
            (Trustee)
 

 
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EXHIBIT “A”
 
THE SUMMIT FINANCIAL GROUP, INC.
 
DIRECTORS DEFERRAL PLAN
 
By a vote of the Summit Financial Group, Inc.’s Board of Directors, (hereinafter
referred to as the, “Company”) on the 25th day of April, 2000, the Company has
established The Summit Financial Group, Inc.’s Company Directors Deferral Plan
(hereinafter referred to as the, “Benefit Plan”) to allow eligible Directors the
opportunity to participate in the Plan and defer all or a portion of their fees
in accordance therewith;
 
It is the intent of the Company that this Benefit Plan be considered an unfunded
arrangement maintained primarily to provide supplemental retirement benefits,
and to be considered a non-qualified benefit plan for purposes of the Employee
Retirement Security Act of 1974, as amended (“ERISA”).
 
I.           DIRECTOR’S SERVICES
 
So long as the Director shall continue to be a director of the Company the
Director shall devote best efforts to the performance of duties as a member of
the Board of Directors and of any of its committees to which the Director is
appointed.
 
II.           FEES
 
The fees covered under this Benefit Plan shall be any and all amounts paid to
the Director for services as a Director, including but not limited to annual
fees, meeting fees, and committee fees.  The fees covered under this Benefit
Plan shall be credited to the Director in the manner and on the terms and
conditions specified in Paragraph IV subject to the election requirement of
Paragraph M.
 
III.           ELECTION OF DEFERRED COMPENSATION AND INVESTMENTS
 
The Director shall at the same time as entering into this Benefit Plan file a
written statement with the Company notifying them as to the percent (%) or
dollar amount of fees as defined in Paragraph II that is to be deferred.  The
election to defer fees may only be made for fees not yet earned as of the date
of said election. Signed written statements filed under this section, unless
modified or revoked in writing, shall be valid for all succeeding years.  In
addition, the Director may file with the Company quarterly investment elections
setting forth the percentage that should hypothetically be invested in each
particular investment vehicle. (A copy of said investment election form is
attached hereto, marked as Exhibit “A-1” and fully incorporated herein by
reference).  Said amounts shall not actually be invested in said investments,
and said investment elections are merely for the purpose of calculating interest
and returns on the Deferred Compensation Account as set forth in Paragraph V. 
The Company shall not be under any duty to advise a participant or beneficiary
with respect to any said hypothetical investment. Said investment elections must
be received by the Company on or before the 25th day of the month prior to the
end of the quarter.
 

 
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IV.           RABBI TRUST AND CREDITS TO DEFERRED COMPENSATION ACCOUNT
 
The Company shall establish a Rabbi Trust for the Benefit Plan. The Company
shall pay all deferral amounts to the Rabbi Trust. The Trustee shall establish a
bookkeeping account for the Director (hereinafter called the, “Directors
Deferred Compensation Account”) which shall be credited on the dates such fees,
as defined in Paragraph II, would otherwise have been paid with the percentage
or dollar amount that the Director has notified the Company in writing, pursuant
to Paragraph III, that the Director elected to have deferred.
 
V.
INTEREST AND RETURNS ON THE DEFERRED COMPENSATION ACCOUNT

 
Once each calendar quarter, the Directors Deferred Compensation Account shall be
credited with an amount that is in addition to the fees credited under Paragraph
W. Such amount shall be determined by multiplying the balance of the Directors
Deferred Compensation Account by a rate of interest equal to the total return
for such quarter of the investments chosen by the Director pursuant to Paragraph
III. Such amount shall be credited as long as there is a balance in the
Directors Deferred Compensation Account and shall be credited on the last day of
each calendar quarter.
 
VI.
NATURE OF THE DEFERRED COMPENSATION ACCOUNT

 
The Directors Deferred Compensation Account shall be utilized solely as a device
for the measurement and determination of the amount of deferred compensation to
be paid to the Director at the times hereinafter specified. On the contrary, it
is understood that all amounts credited to the Directors Deferred Compensation
Account shall be for the sole purpose of bookkeeping and that the Director shall
have no ownership rights of any nature with respect thereto.  The Director’s
rights are limited to the rights to receive payments as hereinafter provided and
the Director’s position with respect thereto is that of a general unsecured
creditor of the Company.
 
VII.   PAYMENT OF DIRECTOR’S DEFERRED COMPENSATION
 
Subject to Subparagraphs VII (A) and (B) hereinbelow, the amounts in the
Directors Deferred Compensation Account shall be paid, at the election of the
Director, in a lump sum, or five (5), ten (10), fifteen (15), or twenty (20)
equal annual installments, plus or minus each year the annual interest gained or
market value lost during the year.  The Director shall make said election no
later than one (1) year prior to receiving the first payment. In the event the
Director fails to make said election, then the Director shall receive the
payments in ten (10) equal annual installments.  The amount payable would be the
balance of the Director’s Deferred Compensation Account as defined in Section
IV, including all interest and returns credited pursuant to Paragraph V.  The
payments set forth herein shall commence thirty (30) days after the end of the
calendar quarter following the Director’s retirement.
 
(A)      The end of the Director’s term of office other than retirement:
 Subject to Subparagraph VII (B) hereinbelow, if the Director’s term of office
ends due to resignation, removal, or failure to be elected to the Board prior to
retirement, then the Director shall receive the account balance’ in a lump sum
within thirty (30) days after the end of the calendar quarter following the
Director’s end of term of office.

 
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(B)      The end of the Director’s term of office or the Director’s termination
of the Plan within three (3) years of the Director’s participation in the Plan:
 Notwithstanding the provisions set forth in Paragraph VII hereinabove, if the
Director’s office ends due to resignation, removal, or failure to be re-elected
to the Board, prior to retirement, or the Director terminates the Plan within
the first three (3) years of the Director’s participation in the Plan, then the
Directors account balance1 shall be paid in two (2) equal installments on the
first and last day of the calendar year following the year in which the Director
would have participated in the Plan for three (3) full years.

 
VIII.
DEATH OF DIRECTOR PRIOR TO TERMINATION OF SERVICE OR COMMENCEMENT OF PAYMENTS

 
In the event of the death of the Director prior to termination of service or
commencement of payments, the Director’s account balance shall be paid in a lump
sum within thirty (30) days after the end of the calendar quarter following the
Director’s death and shall be made to a beneficiary or beneficiaries designated
by the Director in writing and delivered to the Company.  In the event no
designation is made, the Director’s account balance shall be paid in a lump sum
to the Director’s estate.  The lump sum payment to be made under this Paragraph
shall be the Director’s account balance1 as determined at the quarterly
evaluation following the Director’s death.
 
  IX.
DIRECTOR’S DEATH

 
In the event of the death of the Director after commencement of payments, but
prior to receiving all payments due under this Benefit Plan, the Directors’s
account balance shall be paid in a lump sum within thirty (30) days after the
end of the calendar quarter following the Director’s death and shall be made to
a beneficiary or beneficiaries designated by the Director in writing and
delivered to the Company.  In the event no designation is made, the Director’s
account balance shall be paid in a lump sum to the Director’s estate.  The lump
sum payment to be made under this Paragraph shall be the Director’s account
balance1 as determined at the quarterly evaluation following the Director’s
death.
 
  X.
FUNDING

 
The Company’s obligation under this Benefit Plan shall be an unfunded and
unsecured promise to pay.  The Company shall not be obligated under any
circumstances to fund its obligations, the Company may, however, at its sole and
exclusive option, elect to fund this Benefit Plan in whole or in part.
 

                                                                
 
1 Deferrals plus credited interest and returns
 

 
22

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Should the Company elect to fund this Benefit Plan informally, in whole or in
part, the manner of such informal funding, and the continuance or discontinuance
of such informal funding shall be the sole and exclusive decision of the
Company.
 
Should the Company determine to informally fund this Benefit Plan, in whole or
in part, through the medium of life insurance or annuities, or both, the Company
shall be the owner and beneficiary of the policy.  The Company reserves the
absolute right to terminate such life insurance or annuities, as well as any
other funding at any time, either in whole or in part.
 
Any such life insurance or annuity policy purchased by the Company shall not in
any way be considered to be security for the performance of the obligations for
this Benefit Plan. It shall be, and remain, a general, unpledged, unrestricted
asset of the Company and the Director shall have no interest in such policy
whatsoever.
 
  XI.
EFFECT ON OTHER COMPANY BENEFIT PLANS

 
Nothing contained in this Benefit Plan shall affect the right of the Director to
participate in or be covered by any qualified or non-qualified pension, profit
sharing, group bonus or their supplemental compensation or fringe benefit plans
constituting a part of the Company’s existing or future compensation structure.
 
XII.
ASSIGNMENT OR PLEDGE

 
The Directors Deferred Compensation Account and any payment payable at any time
to this Benefit Plan shall not be assignable or subject to pledge or
hypothecation nor shall said payments be subject to seizure for the payment of
any debts, judgments, alimony or separate maintenance, or be transferable by
operation of law in the event of bankruptcy, insolvency or otherwise except to
the extent as provided by law.
 
  XIII.
CONTINUATION AS DIRECTOR

 
Neither this Benefit Plan nor the payments of any benefits thereunder shall be
construed as giving to the Director any right to be retained as a member of the
Board of Directors of the Company.
 
  XIV.
NAMED FIDUCIARY

 
The Named Fiduciary for this Benefit Plan for purposes of claim procedures under
this Benefit Plan is Russ Ratliff, or any other successor Trust Officer at South
Branch Valley Bank.  The business address and telephone number of the Named
Fiduciary under this Benefit Plan is as follows:
 
 

 
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Name
Russ Ratliff, Trust Officer
Bank
South Branch Valley National Bank
Main Street
310 North Main Street
City, State
Moorefield, West Virginia
Phone Number
(304) 538-2353

 

 
The Named Fiduciary under this Benefit Plan may be changed at any time with the
written consent of the Director.
 
XV.
CLAIMS PROCEDURE AND ARBITRATION

 
In the event that benefits under this Benefit Plan are not paid to the Director
(or to his beneficiary in the case of the Director’s death) and such claimants
feel they are entitled to receive such benefits, then a written claim must be
made to the Plan Fiduciary and Administrator named above within sixty (60) days
from the date payments are refused.  The Plan Fiduciary and Administrator and
the Company shall review the written claim and if the claim is denied, in whole
or in part, they shall provide in writing within ninety (90) days of receipt of
such claim provisions of this Benefit Plan upon which the denial is based and
any additional material or information necessary to perfect the claim.  Such
written notice shall further indicate the additional steps to be taken by
claimants if a further review of the claim denial is desired.  A claim shall be
deemed denied if the Plan Fiduciary and Administrator fails to take any action
within the aforesaid ninety-day period.
 
If claimants desire a second review, they shall notify the Plan Fiduciary and
Administrator in writing within sixty (60) days of the first claim denial.
Claimants may review this Benefit Plan or any other documents relating thereto
and submit any written issues and comments they may feel appropriate.  In its
sole discretion the Plan Fiduciary and Administrator shall then review the
second claim and provide a written decision within sixty (60) days of receipt of
such claim.  This decision shall likewise state the specific reasons for the
decision and shall include reference to specific provisions of this Benefit Plan
upon which the decision is based.
 
If claimants continue to dispute the benefit denial based upon completed
performance of this Benefit Plan or the meaning and effect of the terms and
conditions thereof, then claimants may submit the dispute to a Board of
Arbitration for final arbitration.  Said Board shall consist of one member
selected by the claimant, one member selected by the Company, one member
selected by the first two members.  The Board shall operate under any generally
recognized set of arbitration rules.  The parties hereto agree that they and
their heirs, personal representatives, successors and assigns shall be bound by
the decision of such Board with respect to any controversy properly submitted to
it for determination.
 

 
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XVI.       MISCELLANEOUS
 
A.           Amendment or Revocation:
 
It is understood that, during the lifetime of the Participant, this Benefit Plan
may be amended or revoked at any time or times, in whole or in part, by the
mutual written consent of the Participant, the Company, and the Trustee.
 
B.           Gender:
 
Whenever in this Benefit Plan words are used in the masculine or neuter gender,
they shall be read and construed as in the masculine, feminine or neuter gender,
whenever they should so apply.
 
C.           Effect on Other Company Benefit Plans:
 
Nothing contained in this Benefit Plan shall affect the right of the Participant
to participate in or be covered by any qualified or non-qualified pension,
profit-sharing, group, bonus or other supplemental compensation or fringe
benefit plan constituting a part of the Company’s existing or future
compensation structure.
 
D.           Headings:
 
Headings and subheadings in this Benefit Plan are inserted for reference and
convenience only and shall not be deemed a part of this Benefit Plan.
 
E.           Partial Invalidity:
 
If any term, provision, covenant, or condition of this Benefit Plan is
determined by an arbitrator or a court, as the case may be, to be invalid, void,
or unenforceable, such determination shall not render any other term, provision,
covenant, or condition invalid, void, or unenforceable, and this Benefit Plan
shall remain in full force and effect notwithstanding such partial invalidity.
 
SUMMIT FINANCIAL GROUP, INC.
 
By:_______________        
      Chairman of the Board

 
25

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EXHIBIT “A-1”
 
SUMMIT FINANCIAL GROUP, INC.
DEFERRAL AND DISTRIBUTION ELECTION FORM
 

--------------------------------------------------------------------------------

PERSONAL DATA
 

--------------------------------------------------------------------------------

 Last Name                                                     First
Name                           M.I.                                   Social
Security Number
 
 

--------------------------------------------------------------------------------

 Permanent Mailing Address
 

Hire Date
     
Birth Date
Single                   Married

 
 

--------------------------------------------------------------------------------

 
DEFERRAL ELECTION
 

A.                        I elect to defer ____% or $______ of my Director’s
fees earned after the date below to the Plan.
 
B.                       I do not wish to participate in the Plan.
 

--------------------------------------------------------------------------------

 
CREDITING OPTIONS
 

All funds are to be allocated among the following Crediting Options. Said
options are hypothetical and not actual, and are used merely for purposes of
calculating interest and returns on the Deferred Compensation Account pursuant
to paragraph V of the Directors Deferral Plan.
 

 

   
FUND
            TYPE
%
Option 1
Fidelity VIP Fund II Contrafund
Capital Appreciation
%
Option 2
Fidelity VIP Fund Growth Port.
Long-Term Growth
%
Option 3
Fidelity VIP Fund III Growth Opportunities
Capital Appreciation
%
Option 4
NSAT Total Return Fund
Growth & Income/tocks & Bonds
%
Option 5
Dreyfus Stock Index Fund
Specialty
%
Option 6
American Century Income & Growth
Growth & Income
%
Option 7
Janus Global Technology Portfolio
Specialty
%
Option 8
Fidelity VIP High Income
High Current Income
%
Option 9
American Century VP
International Stock
%
Option 10
Salomon Brothers Asset Management
Balanced Fund
%
Option 11
Nationwide Separate Account Trust (NSAT)
Government Bond
%
Option 12
NSAT Money Market
Money Market
%
Option 13
Nationwide Fixed Account
Fixed Interest

NOTE:  Total of percentages MUST equal 100%

 
26

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REMEMBER
 
1.On a quarterly basis, you may change the contribution percentage to these
Crediting Options for future contributions.

 
2.On a quarterly basis, you may also reallocate the distribution of your
existing funds between these Crediting Options.

 
3.The deadline for receipt of the above changes by Corporate Compensation is 10
calendar days before a quarter end.

--------------------------------------------------------------------------------

 
DISTRIBUTION ELECTION - TIMING AND FORM
 
Distribute the amounts deferred or credited to my account after the date of this
deferral election as follows:
 
Upon retirement, I want the payments to last for the following number of years:
 
 
 Lump sum         5 years         10 years         15 years         20 years

--------------------------------------------------------------------------------

 
BENEFICIARY DESIGNATION
 
The following beneficiary shall receive any payments from this account in the
event of my death:
 
Beneficiary:  __________________________________                                                                                                Soc.
Sec. #: ____ - ____
Primary
 
Beneficiary:  __________________________________                                                                                                Soc.
Sec. #: ____ - ____
Contingent
 

--------------------------------------------------------------------------------

 
AUTHORIZATION & ACKNOWLEDGMENT
 
I authorize the Company to effect the elections specified on this Deferral and
Payment Election Form. I have read the instructions attached to this Form, and I
understand that my Deferral Election to this Plan is irrevocable for the entire
Plan Year. I also understand that my Payment Election will remain in effect
until I submit a change according to the provisions of the Plan.
 
I acknowledge that I have received sufficient information on the Investment
Crediting Options to make an informed election and that I have had answered to
my satisfaction those questions that I may have had. I further understand that
each of these choices involves differing levels of risk and that neither Summit
Financial Group, Inc., nor any of its employees, is providing any assurances of
returns or of preservation of principle.
 

 

 
__________________________                                                                           ________________________________
Date                                                                                              
Participant Signature
 

 
You must sign the Deferral and Payment Election Form. The Company will not
effect your elections without your authorization. Your elections on this form
will remain in effect until you make a change according to the provisions of the
Plan.
 
 
 
27 

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