Filing of Certain Prospectuses and Communications in Connection With Business Combination Transactions (425)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________

FORM 8-K

_________________________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 17, 2019

Summit Financial Group, Inc.

(Exact name of registrant as specified in its charter)



West Virginia	0-16587	55-0672148
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer
incorporation or organization)		Identification No.)



300 North Main Street, Moorefield, West Virginia				26836
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code: (304) 530-1000

Not Applicable

(Former name or address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:



[X]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	SMMF	NASDAQ Capital Market

Indicate by check mark whether the registrant is an emerging growth company as defined by Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 1.01 Entry into a Material Definitive Agreement.

Agreement and Plan of Merger

On September 17, 2019, Summit Financial Group, Inc., a West Virginia corporation (“Summit”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cornerstone Financial Services, Inc., a West Virginia corporation (“Cornerstone”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Cornerstone will merge (the “Merger”) with and into a limited liability company and wholly-owned subsidiary of Summit’s wholly-owned banking subsidiary, Summit Community Bank, Inc., a West Virginia banking corporation (“Summit Community Bank”), formed solely for the purpose of consummating the Merger (“Merger Sub”), with Merger Sub as the surviving entity in the Merger. Immediately following the Merger, Merger Sub will be liquidated (the “Liquidation”) so that Summit Community Bank will own all of the outstanding shares of Cornerstone’s wholly owned banking subsidiary, Cornerstone Bank, Inc., a West Virginia banking corporation (“Cornerstone Bank”). Immediately following the Liquidation, Cornerstone Bank will be merged (the “Bank Merger”) with and into Summit Community Bank, with Summit Community Bank surviving as the surviving bank in the Bank Merger. The Merger Agreement was unanimously approved and adopted by the Board of Directors of each of Summit and Cornerstone.

Subject to the terms and conditions of the Merger Agreement, including the adjustment described below, at the effective time of the Merger (the “Effective Time”), Cornerstone shareholders will have the right to receive cash in the amount of $5,700.00 per share of Cornerstone common stock (the “Cash Consideration”), par value $100.00 per share (“Cornerstone Common Stock”), or 228 shares of Summit common stock, par value $2.50 per share (“Summit Common Stock”), per share of Cornerstone Common Stock (the “Stock Consideration” and together with the Cash Consideration, the “Merger Consideration”) or a combination of Cash Consideration and Stock Consideration, subject to proration to result in approximately 50% Cash Consideration and 50% Stock Consideration. Pursuant to the terms of the Merger Agreement, Cornerstone may make a special cash distribution to its shareholders if a certain shareholders’ equity metric exceeds a defined amount. Conversely, if the shareholders’ equity metric is less than a defined minimum, the aggregate value of the Merger Consideration shall be reduced one dollar for every dollar by which the shareholders’ equity metric is less than the defined minimum.

The Merger Agreement contains customary representations and warranties from both Summit and Cornerstone, each with respect to its and its subsidiaries’ businesses, and each party has agreed to customary covenants, including, among others, Cornerstone’s covenants relating to (1) the conduct of its business during the interim period between the execution of the Merger Agreement and the Effective Time and (2) nonsolicitation of alternative acquisition proposals.

The completion of the Merger is subject to customary conditions, including (1) approval of the Merger Agreement, including the Merger, by the affirmative vote of at least a majority of the shares of Cornerstone Common Stock represented at a meeting in which a quorum is present, (2) authorization for listing on the NASDAQ of the shares of Summit Common Stock to be issued in the Merger, (3) the receipt of required regulatory approvals, including the approval of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the West Virginia Division of Financial Institutions, (4) effectiveness of the registration statement on Form S-4 for the Summit Common Stock to be issued in the Merger, (5) the absence of any order, injunction, writ, decree or other legal restraint preventing the completion of the Merger or making the completion of the Merger illegal, (6) the absence of any burdensome regulatory conditions in connection with the required regulatory approvals, (7) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (8) performance in all material respects by the other party of its obligations under the Merger Agreement, (9) the receipt by the other party of an officers’ certificate certifying satisfaction of conditions, and (10) the receipt by such party of an opinion from its respective counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

With respect to Summit, there are additional conditions to closing including (1) that there shall be less than 5.0% of issued and outstanding Cornerstone Common Stock for which the holders thereof have voted against the approval of the Merger Agreement and the Merger and who has properly perfected his or her dissenter’s rights of appraisal by following the exact procedure required by the West Virginia Business Corporation Act, as amended, and (2) the delivery of certain voting and support agreements from the directors of Cornerstone. With respect to Cornerstone, there are also additional conditions to closing including the delivery of a certain employment agreement.

The Merger Agreement provides certain termination rights for both Summit and Cornerstone, including, among others, by mutual consent of the parties, by either party upon the failure to obtain the requisite regulatory approvals or by Summit if a requisite regulatory approval contains a burdensome condition on it, by either party if the Merger is not consummated by March 31, 2020, by either party if the other materially breaches a representation or warranty, by either party for Cornerstone not obtaining the required shareholder vote, and by either party upon the occurrence of a material adverse effect on the other party.

Cornerstone may also elect to terminate the Merger Agreement (but only within two calendar days after the fifth calendar day immediately prior to the Effective Time) if both (1) the ratio, the numerator of which is the average of the daily volume weighted average price per share of Summit Common Stock over the 20 consecutive trading days ending on the trading day immediately prior to the fifth calendar day immediately prior to the Effective Time and the denominator of which is the average of the daily volume weighted average price per share of Summit Common Stock over the 20 consecutive trading days ending on the trading day immediately preceding the date of the Merger Agreement, is less than 0.85 and (2) the difference between (a) the number obtained by dividing (i) the average closing value of the NASDAQ Bank Index (IBIX), with certain exclusions, over the 20 consecutive trading days ending on the trading day immediately prior to the fifth calendar day immediately prior to the Effective Time by (ii) the average closing value of the NASDAQ Bank Index (IBIX), with certain exclusions, over the 20 consecutive trading days ending on the trading day immediately preceding the date of the Merger Agreement and (b) the ratio described in clause (1) above, is greater than 0.15. If Cornerstone elects to terminate under the provision described above, Summit shall have the option to increase the per share stock consideration pursuant to a certain formula described in the Merger Agreement.

The Merger Agreement provides that Cornerstone will pay a fee of $1,282,500 to Summit if (1) Summit terminates the Merger Agreement because (a) the Cornerstone board of directors changes its recommendation to its shareholders or fails to include the agreed board recommendation in the proxy statement/prospectus to be filed by Summit, (b) Cornerstone enters into an acquisition agreement that does not violate the nonsolicitation covenants, or (c) Cornerstone intentionally or materially breaches its covenant to hold the Cornerstone shareholder meeting to vote on the Merger Agreement and Merger or the nonsolicitation covenant, or (2) Cornerstone terminates the Merger Agreement because it enters into an acquisition agreement that does not violate the nonsolicitation covenants.

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. Unless otherwise provided in the Merger Agreement, the representations, warranties and covenants of each party set forth in the Merger Agreement have been made only for purposes of, and were and are solely for the benefit of the parties to, the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made or at any other time, and investors should not rely on them as statements of fact. In addition, such representations and warranties (1) will not survive consummation of the Merger, unless otherwise specified therein, and (2) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding Summit or Cornerstone, their respective affiliates or their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding Summit, Cornerstone, their respective affiliates or their respective businesses, the Merger Agreement and the Merger that will be contained in, or incorporated by reference into, the registration statement on Form S-4 that will include a proxy statement of Cornerstone and a prospectus of Summit, as well as in the Forms 10-K, Forms 10-Q, Forms 8-K and other filings that Summit makes with the Securities and Exchange Commission (“SEC”).

Item 8.01 Other Events.

Director Support Agreements

Simultaneous with the execution of the Merger Agreement, Summit entered into support agreements with each of the directors of Cornerstone. The director support agreements provide generally that the executing party will not solicit the former employees or customers of Cornerstone or any of its subsidiaries, or compete within a 25 mile radius of any location of Cornerstone, any Cornerstone subsidiary, Summit or Summit subsidiary, for a period of 18 months following the effective date of the merger, subject to certain exceptions. A form of the director support agreement is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Director Voting Agreement

Simultaneous with the execution of the Merger Agreement, Summit entered into a voting agreement with each of the directors of Cornerstone in their capacities as shareholders (each a “Shareholder”). The director voting agreement generally provides that each Shareholder will vote his or her shares in favor of the Merger Agreement and the Merger. The director voting agreement further

provides that each Shareholder will vote against approval of any alternative acquisition proposals or any other proposal made in opposition to or in competition with the Merger Agreement and the Merger. A form of the director voting agreement is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

Press Release

Summit and Cornerstone issued a press release and Summit provided an investor presentation to interested parties concerning the acquisition of Cornerstone. A copy of the press release and investor presentation are attached hereto as Exhibits 99.3 and 99.4 and are being furnished to the SEC and shall not be deemed “filed” for any purpose.

Additional Information About the Merger and Where to Find It

The information in this Current Report on Form 8-K and the exhibits incorporated herein by reference does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with the proposed Merger, Summit will file with the SEC a Registration Statement on Form S-4 with respect to the offering of Summit common stock as the Merger Consideration under the Securities Act, which will include a proxy statement of Cornerstone seeking approval of the Merger by Cornerstone’s shareholders and a prospectus of Summit. Cornerstone will deliver the proxy statement/prospectus to its shareholders. In addition, Summit may file other relevant documents concerning the proposed Merger with the SEC. Investors and security holders are urged to read the registration statement and proxy statement/prospectus and other relevant documents when they become available because they will contain important information about the proposed Merger.

Investors and security holders may obtain free copies of these documents through the website maintained by the SEC at http://www.sec.gov. Security holders of Summit and Cornerstone may also obtain free copies of these documents by directing a request to Ms. Teresa Ely, Summit’s Director of Shareholder Relations, by telephone at (304) 530-0526 or by email at tely@summitfgi.com or by accessing these documents at Summit’s website: www.summitfgi.com. The information on Summit’s website is not, and shall not be deemed to be, a part of this Report or the exhibits incorporated herein or incorporated into other filings made with the SEC.

Participants in the Solicitation

Summit, Cornerstone and their respective directors, executive officers and certain other members of management and employees may be deemed “participants” in the solicitation of proxies from Cornerstone’s shareholders in connection with the Merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the Cornerstone shareholders in connection with the Merger will be set forth in the proxy statement/prospectus when it is filed with the SEC.

You can find information about the executive officers and directors of Summit in its Annual Report on Form 10-K for the year ended December 31, 2018 and in its definitive proxy statement filed with the SEC on April 16, 2019. Information about the directors and executive officers of Cornerstone may be obtained by reading the proxy statement/prospectus regarding the Merger when it becomes available. You can obtain free copies of these documents from Summit or Cornerstone using the contact information above.

Forward-Looking Statements

This Current Report on Form 8-K, the press release and the investor presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about: (i) the benefits of a merger between Cornerstone and Summit, including future financial and operating results, cost savings enhancements to revenue and accretion to reported earnings that may be realized from the merger; (ii) Summit’s and Cornerstone’s plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts; and (iii) other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “projects,” or words of similar meaning generally intended to identify forward-looking statements. These forward-looking statements are based upon the current beliefs and expectations of the respective managements of Summit and Cornerstone and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Cornerstone and Summit. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements because of possible uncertainties.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the businesses of Summit and Cornerstone may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; (2) the expected growth opportunities or cost savings from the merger may not be fully realized or may take longer to realize than expected; (3) deposit attrition, operating costs, customer losses and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected; (4) the regulatory approvals required for the merger may not be obtained on the proposed terms or on the anticipated schedule; (5) the shareholders of Cornerstone may fail to approve the merger; (6) legislative or regulatory changes, including changes in accounting standards, may adversely affect the businesses in which Summit and Cornerstone are engaged; (7) changes in the interest rate environment may adversely affect net interest income; (8) results may be adversely affected by continued diversification of assets and adverse changes to credit quality; (9) competition from other financial services companies in Summit’s and Cornerstone’s markets could adversely affect operations; and (10) the economy could experience a slowdown that could adversely affect credit quality and loan originations. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Summit’s reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available on the SEC’s Internet site (http://www.sec.gov).

Summit and Cornerstone caution that the foregoing list of factors is not exclusive. All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to Summit or Cornerstone or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Summit and Cornerstone do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.



Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated as of September 17, 2019, by and between Summit Financial Group, Inc. and Cornerstone Financial Services, Inc. (Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Summit Financial Group, Inc. agrees to furnish by supplement to the SEC a copy of any omitted schedule upon request).
99.1		Form of Director Support Agreement, dated as of September 17, 2019, by and between Summit Financial Group, Inc. and each of the directors of Cornerstone Financial Services, Inc. (included as Exhibit B to Exhibit 2.1 hereto).
99.2		Form of Director Voting Agreement, dated as of September 17, 2019, by and among Summit Financial Group, Inc. and certain shareholders of Cornerstone Financial Services, Inc. (included as Exhibit C to Exhibit 2.1 hereto).
99.3		Press Release, dated September 17, 2019, issued by Summit Financial Group, Inc.
99.4		Investor Presentation, dated September 17, 2019, issued by Summit Financial Group, Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.