Exhibit
10.1
EMPLOYMENT AGREEMENT
 
THIS EMPLOYMENT AGREEMENT is made and entered into on this 3rd day of January,
2006, by and among SUMMIT FINANCIAL GROUP, INC. (“Summit FGI”), a West Virginia
corporation, and ______________________ (the “Employee”).
 
WHEREAS, Summit FGI offers the terms and conditions of employment hereinafter
set forth and Employee accepts such terms and conditions in consideration of his
employment with the Company; and
 
NOW THEREFORE, in consideration of the promises and the respective covenants and
agreements of the parties herein contained, Summit FGI and Employee contract and
agree as follows:
 
1. Definitions. The following definitions in addition to any terms otherwise
defined herein, shall apply to designated phrases used in this Employment
Agreement.
 
(a) “Change of Control” means (i) a change of ownership of Summit FGI that would
have to be reported to the Securities and Exchange Commission as a change of
control, including but not limited to the acquisition by any “person” and/or
entity as defined by securities regulations and law (other than Summit FGI or
any Summit FGI employee benefit plan), of direct or indirect “beneficial
ownership,” as defined by securities regulations and law, of twenty-five percent
(25%) or more of the combined voting power of Summit FGI’s then outstanding
securities; (ii) the failure during any period of three (3) consecutive years of
individuals who at the beginning of such period constitute the Board of
Directors of Summit FGI for any reason to constitute at least a majority
thereof, unless the election of each director who was not a director at the
beginning of such period has been approved by at least two-thirds (2/3) of the
directors at the beginning of the period; or (iii) the consummation of a
“Business Combination” as defined in Summit FGI’s Articles of Incorporation. In
no event shall corporate restructuring of Summit FGI and/or its affiliates be
construed as a “change in control” absent one or more of the conditions set
forth above.
 
 
 

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(b) “Salary” means the Employee’s average of annual base salary and bonuses for
the two full year periods immediately prior to the date of the consummation of a
Change of Control or for two full year periods immediately preceding the
effective date of termination, whichever is greater.
 
(c) “Good Cause” includes (i) Employee’s continued poor work performance after
written notice of and reasonable opportunity to correct deficiencies;
(ii) Employee’s behavior outside or on the job which affects the ability of
management of Summit FGI or its affiliates or co-workers to perform their jobs
and that is not corrected after reasonable written warning; (iii) Employee’s
failure to devote reasonable time to the job that is not corrected after
reasonable warning; (iv) any other significant deficiency in performance by
Employee that is not corrected after reasonable warning; (v) Employee’s repeated
negligence, malfeasance or misfeasance in the performance of Employee’s duties
that can reasonably be expected to have an adverse impact upon the business and
affairs of Summit FGI or its affiliates, provided, however that if in the
reasonable judgment of the Board of Directors of Summit FGI, the damage incurred
by Summit FGI as a result of Employee’s conduct is capable of being
substantially corrected, Summit FGI will give Employee thirty (30) days’ advance
notice of its intention to terminate for Good Cause under this section and a
reasonable opportunity to cure the cause of the possible termination to the
reasonable satisfaction of Summit FGI; (vi) Employee’s commission of any act
constituting theft, intentional wrongdoing or fraud; (vii) the conviction of the
Employee of a felony criminal offense in either state or federal court; (viii)
any single act by Employee constituting gross negligence or that causes material
harm to the reputation, financial condition or property of Summit FGI or its
affiliates.
 
(d) “Disability” means unable as a result of a physical or mental condition to
perform Employee’s normal duties from day to day in Employee’s usual capacity.
 
(e) “Retirement” means termination of employment by Employee in accordance with
Summit FGI’s ’s retirement plan, including early retirement as approved by the
Board of Directors of Summit FGI .
 
(f) “Good Reason” means a Change of Control in Summit FGI and; (i) a decrease in
the total amount of Employee’s base salary below its level in effect on the date
of consummation of the Change of Control, without Employee’s prior written
consent; or (ii) a material change in Employee’s job duties and responsibilities
without Employee’s prior written consent; or (iii) a geographical relocation of
Employee to an office more than twenty (20) miles from Employee’s location at
the time of the Change of Control without Employee’s prior written consent; or
(iv) failure of Summit FGI to obtain assumption of this Employment Agreement by
its/their successor; or (v) any purported termination of Employee’s employment
which is not effected pursuant to a notice of termination required in Paragraph
15 of this Employment Agreement.
 
 
 

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(g) “Wrongful Termination” means termination of Employee’s employment prior to
the expiration of twenty-four (24) months after consummation of a Change of
Control for any reason other than at Employee’s option, Good Cause or the death,
Disability or Retirement of Employee.
 
2. Term. The initial term of this Employment Agreement shall be for three (3)
years, unless terminated sooner as provided herein. Absent termination by one of
the parties as provided in this Employment Agreement, the term of this
Employment Agreement shall automatically be extended for unlimited additional
one (1) year term(s), in which case such term shall end one (1) year from the
date on which it is last renewed.
 
3. Duties. Employee shall perform and have all of the duties and
responsibilities that may be assigned to him from time to time by the Chief
Executive Officer and/or the Board of Directors of Summit FGI; provided any
material changes to Employee’s duties or obligations have been determined by the
Board of Directors and/or the Chief Executive Officer in their reasonable
discretion to be commensurate with duties and obligations that might be assigned
to other similarly-situated executive officers of the Company. No later than
five (5) days after the Company materially changes Employee’s duties or
obligations, Employee will give the Company written notice if he believes a
breach of this section has occurred and Company shall have a reasonable
opportunity to cure the cause of the possible breach. Failure by Employee to
give the notice required under this section shall constitute a waiver of his
rights to claim a breach of this section arising from the specific duties or
obligations then at issue. If it is determined through arbitration that the
Company has breached this provision, then in consideration of the compensation
and benefits set forth herein, Company and Employee agree that any damages
received by Employee shall be limited to the amount Employee would be entitled
to had he been terminated not for Good Cause under paragraph 6 of this
Agreement.
 
 
 

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Employee’s duties shall include, but not be limited to, ________________
_____________________________. Employee shall devote his best efforts on a
full-time basis to the performance of such duties.
 
4. Compensation and Benefits. During the term of this Employment Agreement,
including any extensions, Summit FGI agrees that Employee’s compensation and
benefits shall be as follows:
 
(a) Base Salary. Employee’s base salary shall be not less than One Hundred Fifty
Thousand Dollars ($150,000.00) per year, paid on a semi-monthly basis. Employee
shall be considered for salary increases on the basis of merit on an annual
basis, with any future increases subject to the sole discretion of Summit FGI.
 
(b) Bonus. In addition to the base salary provided for herein, Employee shall be
eligible for incentive-based bonuses subject to goals and criteria to be
determined by the Board of Directors of Summit FGI.
 
(c) Paid Leave. Employee shall be entitled to all paid leave as provided by
Summit FGI to other similarly-situated officers.
 
(d) Fringe Benefits. Except as specified below, Summit FGI shall afford to
Employee the benefit of all fringe benefits afforded to all other
similarly-situated employees of Summit FGI, including but not limited to
retirement plans, stock ownership or stock option plans, life insurance,
disability, health and accident insurance benefits or any other fringe benefit
plan now existing or hereinafter adopted by Summit FGI, subject to the terms and
conditions thereof.
 
(e) Business Expenses. Summit FGI shall reimburse Employee for reasonable
expenses incurred by Employee in carrying out his duties and responsibilities,
including but not limited to reimbursing civic club organization dues and
reasonable expenses for customer entertainment. All such reimbursement shall be
administered in accordance with the policies and practices established by Summit
FGI from time to time.
 
(f) Automobile. Summit FGI shall provide Employee with the use of an automobile
for the Employee’s business and personal use. Summit FGI shall be responsible
for expenses associated with the vehicle including but not limited to taxes,
gasoline, licenses, maintenance, repair, insurance and reasonable cellular phone
charges. Employee shall be subject to tax for his personal use of the vehicle in
accordance with the Internal Revenue Code and any applicable state law. Upon
approval of the Chief Executive Officer of Summit FGI, appropriate replacement
vehicles shall be provided in the future, but in no event less frequently than
every third model year. If Employee is terminated not for Good Cause, or if
Employee terminates his employment under this Agreement for Good Reason, or
Summit FGI terminates Employee’s employment under this Agreement in a manner
constituting Wrongful Termination, then Employee shall be entitled to retain the
vehicle provided hereunder.
 
5. Termination for Good Cause. Subject to the provisions of Paragraph 7 below,
if Employee terminates his employment with Summit FGI for any reason or Summit
FGI terminates Employee’s employment for Good Cause, Employee shall not be
entitled to any compensation other than that which is earned and payable as of
the effective date of termination of employment.
 
6. Termination Not for Good Cause. Employee’s employment may be terminated by
Summit FGI for any reason permitted under applicable law so long as Employee is
given thirty (30) days advance written notice (or payment in lieu thereof). In
the event of a termination pursuant to this paragraph, Employee shall be
entitled to payment from Summit FGI equal to the base salary compensation set
forth in this Agreement for the remaining term of the Agreement, or severance
pay equal to 100% of his then current annual base salary, whichever is greater.
 
7. Termination Upon Change of Control.
 
(a) Except as hereinafter provided, if Employee terminates his employment with
Summit FGI for Good Reason or Summit FGI terminates Employee’s employment in a
manner constituting Wrongful Termination, Summit FGI hereby agrees to pay
Employee a cash payment equal to Employee’s Salary, on a monthly basis,
multiplied by the number of months between the effective date of termination and
the date that is twenty-four (24) months after the date of consummation of
Change of Control; provided that in no event shall Employee receive a lump sum
payment that is less than 100% of his Salary. Employee shall have the right to
terminate his employment without reason at his option by giving written notice
of termination within six (6) months of a Change of Control. In this case,
Employee will be entitled to receive a lump sum equal to seventy five percent of
his Salary.
 
 
 

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(b) For the year in which Employee terminates his employment with Summit FGI for
Good Reason or Summit FGI terminates Employee’s employment in a manner
constituting Wrongful Termination, Employee will be entitled to receive his
reasonable share of Summit FGI’s cash bonuses and employee benefit plan
contributions, if any, allocated in accordance with existing policies and
procedures and authorized by the Board of Directors of Summit FGI prior to the
Change in Control. The amount of Employee’s cash incentive award shall not be
reduced due to Employee not being actively employed for the full year.
 
(c) If compensation pursuant to Paragraph 7(a) is payable, Employee will
continue to participate, without discrimination, for the number of months
between the date of termination and the date that is twenty-four (24) months
after the date of the consummation of the Change of Control, in benefit plans
(such as retirement, disability and medical insurance) maintained after any
Change of Control for employees, in general, of Summit FGI and/or any successor
organization(s), provided Employee’s continued participation is possible under
the general terms and conditions of such plans. In the event Employee’s
participation in any such plan is barred, Summit FGI shall arrange to provide
Employee with benefits substantially similar to those which Employee would have
been entitled had his participation not been barred. Notwithstanding the
foregoing, if Employee terminates his employment after a Change of Control
without reason at his option, as permitted under Paragraph 7(a), then Employee
shall be entitled to receive the employee benefits contemplated in this
Agreement for a period of six (6) months after the date of termination. However,
in no event will Employee receive from Summit FGI the employee benefits
contemplated by this section if Employee receives comparable benefits from any
other source.
 
 
 

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8. Other Employment. Employee shall not be required to mitigate the amount of
any payment provided for in this Employment Agreement by seeking other
employment. The amount of any payment provided for in this Employment Agreement
shall not be reduced by any compensation earned or benefits provided (except as
set forth in Paragraph 7(c) above) as the result of employment by another
employer after the date of termination.
 
9. Rights of Summit FGI Prior to the Change of Control. This Employment
Agreement shall not affect the right of Summit FGI to terminate Employee, or to
reduce the salary or benefits of Employee, with or without Good Cause, prior to
any Change of Control; provided, however, any termination for any reason other
than at Employee’s option, Good Cause or the death, Disability or Retirement of
Employee that takes place after discussions have commenced that result in a
Change of Control shall be presumed to be a Wrongful Termination, absent clear
and convincing evidence to the contrary.
 
10. Noncompetition and Nonsolicitation. In consideration of the covenants set
forth herein, including but not limited to the compensation set forth in
Paragraphs 4, 6 and 7 above, Employee agrees as follows:
 
(a) For the entire duration of Employee’s employment with Summit FGI and for two
(2) years following the termination of such employment for any reason by either
Employee or Summit FGI (the “Restricted Period”), Employee shall not (i) within
a seventy-five (75) mile radius of Summit FGI and/or its affiliates directly or
indirectly engage in any business or activity of any nature whatsoever that is
competitive with the business of Summit FGI or its affiliates or (ii) sell or
solicit the sale of, any services or products related thereto, directly or
indirectly, to any of Summit FGI’s or its affiliates’ customers or clients
within the State of West Virginia, the Commonwealth of Virginia or any other
states in which Summit FGI and/or its affiliates conducts such business or sells
services in the future. Notwithstanding the foregoing, this noncompetition
covenant shall not apply to the business and activities conducted by Summit
Mortgage, a division of Shenandoah Valley National Bank, unless such business
and activities are conducted in the State of West Virginia, Virginia or any
other state in which other affiliates of Summit FGI also engage in any business
or activity or sell or solicit services in the future.
 
 
 

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(b) Without limitation of the foregoing, during the Restricted Period, Employee
shall not serve as a proprietor, partner, officer, director, stockholder,
employee, sales representative or consultant for any organization, company or
business entity of any type that engages in any business or activity of any
nature whatsoever described in Paragraph 10(a) above, provided however that this
provision will not prohibit Employee from (i) owning bonds, non-voting preferred
stock or up to five percent (5%) of the outstanding common stock of any such
entity if such common stock is publicly traded, or (ii) accepting a position
with a nationally- recognized professional services firm, provided that in such
capacity, Employee does not render services, directly or indirectly, to any
client or customer of such firm that engages in any business or activity
described in Paragraph 10(a), above.
 
(c) Employee acknowledges and agrees that in the event of the breach or
threatened breach of this provision, the harm and damages that will be suffered
by Summit FGI are not susceptible of calculation or determination with a
reasonable degree of certainty, and cannot be fully remedied by an award of
money damages or other remedy at law. Employee further acknowledges and agrees
that considering Employee’s relevant background, education and experience,
Employee will be able to earn a livelihood without violating the foregoing
restrictions. In addition to any and all other rights and remedies available to
Summit FGI in the event of any threatened, actual or continuing breach of this
covenant not to compete, Employee consents to and acknowledges Summit FGI’s
right and option to seek and obtain in any court of competent jurisdiction a
preliminary and/or permanent injunction in respect of any threatened, actual or
continuing breach of the covenant not to compete set forth herein.
 
(d) In the event that this provision shall be deemed by any court or body of
competent jurisdiction to be unenforceable in whole or in part by reason of its
extending for too long a period of time, or too great a geographical area or
over too great a range of activities, or overly broad in any other respect or
for any other reason, then and in such event this Employment Agreement shall be
deemed modified and interpreted to extend over only such maximum period of time,
geographical area or range of activities, or otherwise, so as to render these
provisions valid and enforceable, and as so modified, these provisions shall be
enforceable and enforced.
 
 
 

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(e) This Paragraph 10 shall not apply in any respect to Employee, unless
Employee agrees otherwise in writing, in the event of the consummation of a
Change in Control or in the event of Employee’s termination by Summit FGI for
other than Good Cause.
 
11. Confidential Information.
 
(a) Employee agrees not to use, publish or otherwise disclose (except as
Employee’s duties may require), either during or at any time subsequent to
his/her employment, any secret, proprietary or confidential information or data
of Summit FGI or any information or data of others that Summit FGI or its
affiliates is obligated to maintain in confidence. Employee understands that the
use, publication or other disclosure of such information may violate privacy
rights, as well as expose Summit FGI or its affiliates to financial loss,
competitive disadvantage and/or embarrassment. Employee also understands that it
is Employee’s duty to take adequate care to ensure that such secret, proprietary
or confidential information is not used, published or otherwise disclosed by
others. Notwithstanding the foregoing, nothing herein shall prevent Employee
from utilizing the knowledge and experience he has acquired in the banking
industry.
 
(b) Employee also agrees that upon any termination of his/her employment to
deliver to Summit FGI promptly all items that belong to Summit FGI or that by
their nature are for the use of employees of Summit FGI only, including, without
limitation, all written and other materials that are of a secret, proprietary or
confidential nature relating to the business of Summit FGI and/or Summit FGI’s
affiliates. All business developed and produced by Employee while in the employ
of Summit FGI is the exclusive property of Summit FGI unless specifically
excluded in this Agreement. Employee shall not, during the term of this
Agreement or any time thereafter, intentionally interfere with any business or
contractual relationship of Summit FGI.
 
(c) For purposes of this Employment Agreement, the terms “secret” or
confidential” are used in the ordinary sense and do not refer to official
security classifications of the United States Government. Without limitation,
examples of materials, information and data that are considered to be of a
secret or confidential nature are for purposes of this Employment Agreement
include but are not limited to drawings, manuals, customer lists, notebooks,
reports, models, inventions, formulas, incentive plans, processes, machines,
compositions, computer programs, accounting methods, business plans and
information systems including such materials, information and data that are in
machine-readable form.
 
 
 

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12. No Prior Obligation: Other than this Employment Agreement, Employee
represents that there are no agreements, covenants or arrangements, whether
written or oral, in effect which would prevent him from rendering service to
Summit FGI during the term of this employment and he has not made and will not
make any commitments, become associated, either directly or indirectly, in any
manner, as partner, officer, director, stockholder, advisor, employee or in any
other capacity in any business or organization, unless such activity complies
with Summit FGI’s Code of Ethics. Employee expressly agrees to indemnify and
hold harmless Company, its affiliates, and Company’s and its affiliates’ and
directors, officers and employees from any and all liability resulting from or
arising under the breach of this representation and warranty. This indemnify is
in addition to and not in substitution of rights Company may have against
Employee at common law or otherwise.
 
13. Successors; Binding Agreement; Exclusive Remedy.
 
(a) Summit FGI will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business stock and/or assets of Summit FGI, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform this
Employment Agreement.
 
(b) This Employment Agreement and all rights of Employee hereunder shall inure
to the benefit of and be enforceable by Employee’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. If Employee should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Employment Agreement to Employee’s devisee, legatee, or other designee or, if
there be no such designee, to Employee’s estate.
 
(c) This Employment Agreement shall represent the exclusive and only remedy of
Employee in the event a termination occurs after a Change in Control. Summit FGI
and Employee agree that it is impossible to determine with any reasonable
accuracy the amount of prospective damages to either party should Employee be
terminated or terminate his employment during the term of this Employment
Agreement. Summit FGI and Employee agree that the payment provided herein is
reasonable and not a penalty, based upon the facts and circumstances of the
parties at the time of entering this Employment Agreement, and with due regard
to future expectations.
 
 
 

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14. Arbitration. Except for any dispute arising out of the obligations set forth
in Paragraph 10 of this Employment Agreement, any dispute between the parties
arising out of or with respect to this Employment Agreement or any of its
provisions or Employee’s employment with Summit FGI shall be resolved by the
sole and exclusive remedy of binding arbitration. Unless otherwise agreed by the
parties, the arbitration shall be conducted in Moorefield, West Virginia under
the auspices of, and in accordance with the rules of the American Arbitration
Association. Any decision issued by an arbitrator in accordance with this
provision shall be final and binding on the parties thereto and not subject to
appeal or civil litigation.
 
15. Notice. For the purposes of this Employment Agreement, notices, demands and
other communications provided for in the Employment Agreement shall be in
writing and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by the United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
 
 If to Employee: _________________
                     _________________
                     _________________
 

 
If to Summit FGI: Summit Financial Group, Inc.
 
Attn:  H. Charles Maddy, III, President & CEO
P. O. Box 179
Moorefield, WV  26836
 
or such other address as any party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
 
 
 

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16. Indemnification. To the fullest extent permitted under West Virginia law and
federal banking law, Summit FGI agrees that it will indemnify and hold Employee
harmless from and against all costs and expenses, including without limitation,
all court costs and attorney’s fees, incurred by Employee in defending any and
all claims, demands, proceedings, suits or actions actually instituted or
threatened by third parties involving this Agreement, its validity or
enforceability or with respect to payments to be made pursuant thereto.
 
17. Additional Payment by Summit FGI.
 
a. Gross-Up Payment. Notwithstanding anything in this Agreement to the contrary,
in the event it shall be determined that any payment or distribution by Summit
FGI and any of its subsidiaries and affiliates to or for the benefit of Employee
(whether paid or payable or distributed or distributable pursuant to this
Agreement, the Supplemental Retirement Agreement between Summit FGI and
Employee, or any other agreement, contract, plan or arrangement, but determined
without regard to any additional payments required under this Paragraph 17) (any
such payments and distributions collectively referred to as “Payments”), would
be subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended, or any similar tax that may hereinafter be imposed or
any interest and penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then Summit FGI shall pay to Employee an
additional payment (the “Gross-Up Payment”) equal to one hundred percent (100%)
of the Excise Tax and one hundred percent (100%) of the amount of any federal,
state and local income taxes and Excise Tax imposed on the Gross-Up Payment.
 
b. Determination of Gross-Up Payment. All determinations required to be made
under this paragraph 17 including whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment, shall be made by the firm of independent
accountants selected by Summit FGI to audit its financial statements (the
“Accounting Firm”) which shall provide detailed supporting calculations both to
Summit FGI and Employee in good faith within a reasonable time period. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting a “change in control,” Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
“Accounting Firm” hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by Summit FGI. Any Gross-Up Payment, as determined pursuant to
this Paragraph 17, shall be paid to Employee within 30 days of the receipt of
the Accounting Firm’s determination.
 
 
 

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18. Miscellaneous. No provisions of this Employment Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Employee and authorized officers of Summit FGI. No waiver
by either party hereto at any time of any breach by the other hereto of, or
compliance with, any condition or provisions of this Employment Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or any prior or subsequent time.
 
19. Validity. The invalidity or unenforceability of any provision or provisions
of this Employment Agreement shall not affect the validity or enforceability of
any other provisions of this Employment Agreement, which shall remain in full
force and effect.
 
IN WITNESS WHEREOF, the parties have caused this Employment Agreement to be
signed as of the day and year first above written.
 
SUMMIT FINANCIAL GROUP, INC.
 
By:                                                          
 
Its: