Exhibit 10.4

SUMMIT FINANCIAL GROUP, INC. 2009 OFFICER STOCK OPTION PLAN
FORM OF QUALIFIED STOCK OPTION GRANT AGREEMENT

(Installment Vesting)

 
1.
Grant of Option. Subject to the terms and conditions of this Qualified Stock
Option Grant Agreement (“Agreement”) and the 2009 Officer Stock Option Plan
(“Plan”), dated ____________, 2009, which has been adopted by SUMMIT FINANCIAL
GROUP, INC., a West Virginia corporation (“Corporation”) and which is
incorporated herein by reference, an Option to purchase a total of _____ shares
of $2.50 par value common stock of the Corporation’s Common Stock at a price of
___________________ Dollars and ___ Cents ($______) per share is hereby granted
to _____________________ (“Participant”) as of the date of this Agreement as
affixed below with its execution (“Date of Grant”).

 
2.
Inclusion of Parent, Subsidiary and Successor Corporations.  For purposes of
this Agreement, employment by a parent and or subsidiary of the Corporation
shall be considered employment by the Corporation.  As used in this Section, the
term “Corporation” shall include the parent and all present and future
subsidiaries of the Corporation as defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended or replaced from time to time
(“Code”).  This Agreement shall be binding upon any successor or successors of
the Corporation and reference herein to the Corporation, unless clearly
inapplicable, shall be deemed to include any such successor or successors of the
Corporation.

 
3.
Qualified Stock Option.  This Option is intended to qualify as an option of the
type described in Section 422 of the Code (“Qualified Stock Option”).

 
4.
Installment Exercise.  Subject to any limitations in the Plan and Agreement, the
Qualified Stock Option shall become vested and exercisable prior to the tenth
anniversary of the date of grant (hereinafter the “Expiration Date”) in five (5)
installments for the following percentage of the total number of Common Stock
shares under the Option, on or after the following Date of Vesting indicated, in
cumulative fashion:

 
Number of Shares
Date of Vesting
Date of Termination
% Total Number of Common Stock Shares Under Option
a.
     
b.
     
c.
     
d.
     
e.
     
f.
     
g.
     
h.
     
i.
     
j.
     

Participant agrees to exercise the Option in increments of not less than fifty
(50) shares.
 

 
 

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

 
 
5.
Termination of Option.

 
 
(a)
The Option and all rights granted under this Agreement with respect to the
Option, to the extent not previously exercised, shall terminate and become null
and void on and after the _______anniversary of the Date of Vesting; provided,
however, that the Option may not be exercised at any time on or after the
Expiration Date.

 
 
(b)
Continuous Employment Required.  Except as otherwise provided in this Section, a
Participant must be an employee of the Corporation from the date of grant of a
Qualified Stock Option until the date that is three (3) months prior to the
exercise of the Qualified Stock Option.  If a Participant is terminated due to a
permanent disability, said Participant must be an employee of the Corporation
from the grant of a Qualified Stock Option until one (1) year prior to the
exercise of the Qualified Stock Option.  An employment relationship will be
treated as continuing while the Participant is on military leave, sick leave or
other bona fide leave of absence if the period of leave does not exceed ninety
(90) days, or, if longer, the Participant’s right to re-employment is guaranteed
either by statute or by contract.  Employment shall be defined in accordance
with the provisions of Section 1.421-1(h) of the Income Tax Regulations or any
successor regulations, and if this Option shall be assumed or a new Option
substituted therefore in a transaction to which Code Section 424(a) applies,
employment by such successor corporation shall be considered for all purposes of
this Option to be Employment by the Corporation.

 
 
(c)
Termination.  In the event of termination of the employment of a Participant
prior to the Expiration Date by either the Participant or the Corporation to
whom an Option has been granted under the Plan, other than a termination of
employment by reason of retirement (as defined in subsection (d) of this Section
5), permanent disability (as defined in subsection (e) of this Section 5), or
death, the Participant may exercise such Vested Options until the earlier of (i)
the expiration of the stated term of the Option, or (ii) a period of ninety (90)
days from the date of such termination.

 
 
(d)
Retirement.  If a Participant’s continuous employment with the Corporation
terminates by reason of his or her retirement, pursuant to the definition in the
Plan, from the Corporation at a retirement date authorized by the Committee
prior to the Expiration Date, the retired Participant shall become one hundred
percent (100%) Vested in any installment of the Option not yet one hundred
percent (100%) Vested that Participant has been granted under the Plan as of his
or her date of retirement in accordance with this subsection (d).  A Participant
may exercise such Vested Options until the earlier of (i) the expiration of the
stated term of the Option, or (ii) for a period of ninety (90) days from the
date of such retirement.

 
 
(e)
Permanent Disability.  If a Participant’s continuous employment terminates prior
to the Expiration Date by reason of a permanent disability, as defined in Code
Section 22(e)(3) of the Code, as amended from time to time, and as determined by
the Committee in its discretion based upon such documentation and information as
the Committee may require the Participant to submit for purposes of establishing
permanent disability pursuant to this subsection (e) of Section 5, then such
Option of the Participant may be exercised with respect to the number of shares
covered by the Participant’s Option that were Vested immediately prior to the
date of such permanent disability as determined by the Committee.  A Participant
who is determined to be permanently disabled pursuant to this subsection (e) of
Section 5 may exercise such Vested Options until the earlier of (i) the
expiration of the stated term of the Option, or (ii) one (1) year after a
Participant’s continuous employment with the Corporation is terminated by reason
of a permanent disability as established pursuant to this subsection (e) of
Section 5.

 
 
(f)
Death.  If a Participant’s continuous employment with the Corporation terminates
by reason of his or her death prior to the Expiration Date, then to the extent
that the Participant would have been entitled to exercise the Option immediately
prior to his or her death, such Option of the deceased Participant may be
exercised during the period the Option would have been exercisable if the
deceased Participant had not died and had remained in employment, by the person
or persons

 

 
 

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

 

 
(including his or her estate) to whom his or her rights under such Option shall
have passed by will or by laws of descent and distribution.  Notwithstanding the
previous sentence, a Participant must be an employee of the Corporation (i) at
the time of the Participant’s death or (ii) within three (3) months of the
Participant’s death to entitle the person or persons (including his or her
estate) to whom his or her rights under such Option shall have passed by will or
by laws of descent and distribution to exercise said Option.

 
6.
Exercise of Option.  Subject to Section 5 of this Agreement, Participant may
exercise the Option with respect to all or any part of the number of shares then
exercisable under this Agreement by giving the Committee written notice of
intent to exercise, of the number of shares to be purchased, the exercise date,
and making full payment of the Option price, all in accordance with Sections 8
and 9 of the Plan.

 
7.
Adjustment of and Changes in Stock of the Corporation.  Pursuant to Section 11
of the Plan, in the event of a reorganization, recapitalization, change of
shares, stock split, spin-off, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of capital stock of the Corporation,
the Committee shall make such adjustment as it deems appropriate in the number
and kind of shares of stock subject to the Option or in the Option price.  All
provided, however, that any such adjustments shall be accomplished so that such
Qualified Stock Option shall continue to be an incentive stock option within the
meaning of Code Section 422.  However, in no event shall this Section 7 be
construed to permit a modification (including a replacement) of an Option if
such modification either:  (i) would result in accelerated recognition of income
or imposition of additional tax under Code Section 409A; or (ii) would cause the
Option subject to the modification (or cause a replacement Option) to be subject
to Code Section 409A; and provided, further, that such adjustment shall be made
in accordance with Code Section 424(h).

 
8.
Change of Control.  Pursuant to Sections 11(b) and 12 of the Plan, in the event
of a Change of Control, the Participant shall become one hundred percent (100%)
Vested as of the date of such Change of Control in all Options granted hereunder
and all such Options shall become exercisable regardless of the number of years
that have passed since the Date of Grant and regardless of any vesting
provisions in this Agreement to the contrary.  All provided that the Participant
must be an employee on the date the Change of Control is deemed to have occurred
in order to have the vesting of outstanding Options
accelerated.  Notwithstanding any provision in this Section to the contrary, no
extension to the Term of an Option shall be extended beyond the original Term of
said Option.

 
9.
No Rights of Stockholders.  Neither Participant nor any personal representative
of Participant shall be, or shall have any of the rights and privileges of, a
stockholder of the Corporation with respect to any shares of stock purchasable
or issuable upon the exercise of the Option, in whole or in part, prior to the
date of exercise of the Option.

 
10.
Employment Not Affected.  Nothing contained in the Plan or this Option shall be
construed or deemed by any person under any circumstances to bind the
Corporation to continue the employment of the Participant for the period within
which this Option may be exercised.

 
11.
Nontransferability of Option.  Except as provided in Section 5 of this
Agreement, no rights granted under this Agreement or any Option hereunder may be
transferred in any manner as this Option is personal and may be exercised only
by Participant while he or she is an employee of the Corporation.  In the event
of (i) any attempt by Participant to alienate, assign, pledge, hypothecate, or
otherwise dispose of the Option, except as provided in this Agreement, or (ii)
the levy of any attachment, execution, or similar process upon the rights or
interests conferred by this Agreement, the Corporation may terminate the Option
by notice to Participant and upon such notice the Option shall become null and
void.  The terms of this Option shall be binding upon the executors,
administrators, heirs, successors, and assigns of Participant.

 
12.
Limitations on Disposition of Qualified Stock Option Shares.  It is understood
and intended that this Option shall qualify as a Qualified Stock Option, an
option of the type described in Section 422 of the Code.  The Participant
understands that to obtain the benefits of a Qualified Stock Option, no sale or
other

 

 
 

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

 

 
disposition may be made of any shares acquired upon exercise of the Option
within one year after the day of the transfer of such shares to him or her, nor
within two years after the grant of the Option, subject to the exceptions
described in Sections 7(h) and 10(d) of the Plan.  If the Participant intends to
dispose, or does dispose (whether by sale, exchange, gift, transfer or
otherwise), of any such shares within said periods, he or she will notify the
Corporation in writing within ten days after such disposition.

 
13.
Amendment of Option. The Option may be amended by the Board or the Committee at
any time (i) if the Board or the Committee determines, in its sole discretion,
that amendment shall deem necessary or advisable, or to conform to any change in
any law or regulation applicable thereto; or (ii) other than in the
circumstances described in clause (i), with the consent of Participant.  All
provided that (i) no such amendment or modification shall be effective if it
would cause this Agreement to violate Code Sections 409A and/or 422 and the
regulations and guidance thereunder and consequently cause this Agreement to be
subject to 409A or cause any Qualified Stock Option granted hereunder to be
treated as a Non Qualified Stock Option.

 
14.
Notice. Any notice to the Corporation provided for in this instrument shall be
addressed to it in care of its President at its principal office in West
Virginia, and any notice to the Participant shall be addressed to the
Participant at the current address shown on the payroll records of the
Corporation.  Any notice shall be deemed to be duly given if and when properly
addressed and posed by registered or certified mail, postage prepaid.

 
15.
Incorporation of Plan by Reference.  The Option is granted pursuant to the terms
of the Plan, the terms of which are incorporated herein by reference, and the
Option shall in all respects be interpreted in accordance with the Plan.  The
Committee shall interpret and construe the Plan and this instrument, and its
interpretations and determinations shall be conclusive and binding on the
parties to this Agreement and any other person claiming an interest under the
Agreement, with respect to any issue arising under it or the Plan.  Unless
otherwise expressly stated herein, in the event of any inconsistency between the
terms and conditions of the Plan and this Agreement, the terms of the Plan shall
control.  Any defined term used in this Agreement is, unless specifically
defined otherwise, given the meaning as defined in the Plan.

 
16.
Construction.  If any provision of this Agreement is held to be illegal or void,
such illegality or invalidity shall not affect the remaining provisions of the
Agreement, but shall be fully severable, and the Agreement shall be construed
and enforced as if the illegal or invalid provisions had never been
inserted.  For all purposes of the Agreement, where the context permits, the
singular shall include the plural, and the plural shall include the
singular.  All decisions of the Board or the Committee upon questions regarding
the Agreement shall be conclusive and binding on all persons.  The headings of
the paragraphs of this Agreement have been included for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms of provisions hereof.

 
17.
Governing Law.  The validity, construction, interpretation, and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the State of West Virginia, except to the extent preempted by federal
law, which shall to that extent govern.

 
IN WITNESS WHEREOF, the Corporation has caused its duly authorized officers to
execute and attest this Qualified Stock Option Grant Agreement, and to apply the
corporate seal hereto, and Participant has placed his or her signature,
effective as of the Date of Grant.
 

 
 

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

 

CORPORATION:
                                SUMMIT FINANCIAL GROUP, INC.

                                By: _____________________________________
                                Oscar Bean
                                Its:           Chairman of the Board

                                Attest: ___________________________________

                                Title: ____________________________________

 

 
Participant acknowledges receipt of a copy of the Plan, a copy of which is
attached, and represents that he or she is familiar with the terms and
provisions of the Plan.  Participant hereby accepts this Option subject to all
the terms and provisions of the Plan.  Participant hereby agrees to accept as
binding, conclusive, and final all decisions and interpretations of the
Committee, and, where applicable, the Board, upon any questions arising under
the Plan.
 
Dated:                      __________________________

PARTICIPANT:
                                __________________________________

                                Sworn and subscribed before me this _____ day of
_________________, 20___.

                                __________________________________
                                Notary Public

 

                                My Commission
expires:  __________________________.