ex1001stkoptionplan.htm


    EXHIBIT 10.1

     

     

     

    SUMMIT FINANCIAL GROUP, INC.

     

     

    2009 OFFICER STOCK OPTION
PLAN

     

     

     

    WITNESSETH this 2009
OFFICER STOCK OPTION PLAN dated as of the 14th day of May, 2009, by
SUMMIT FINANCIAL GROUP, INC. (“Corporation”), a West Virginia corporation:

     

    1.            
PURPOSE OF PLAN. 
The purpose of this 2009 Officer Stock Option Plan (“Plan”) is to further the
success of the Corporation and its subsidiaries by making stock of the
Corporation available for purchase by officers of the Corporation or its
subsidiaries through stock option grants.  The Plan provides an additional
incentive to such officers to continue in the Corporation’s service and give
them a greater interest as stockholders in the success of the Corporation.

     

    2.            
REFERENCE, CONSTRUCTION, AND
DEFINITIONS.  Unless otherwise indicated, all references made in
this Plan shall be to articles, sections and subsections of this Plan.  The
provisions of the Plan are intended to satisfy the requirements of Section 16(b)
of the Securities Exchange Act of 1934, and shall be interpreted in a manner
consistent with the requirements thereof, as now or hereafter construed,
interpreted, and applied by regulations, rulings, and cases.  The Plan is
also designated so that options granted hereunder intended to comply with the
requirements for “performance-based” compensation under Section 162(m) of the
Code may comply with such requirements.  The creation and implementation of
the Plan shall not diminish or prejudice other compensation plans or programs
approved from time to time by the Board.  This Plan shall be construed in
accordance with the laws of the state of West Virginia.  The headings and
subheadings in this Plan have been inserted for convenience of reference only
and are to be ignored in construction of the provision of this Plan.  In
the construction of this Plan, the masculine shall include the feminine and
singular the plural, wherever appropriate.  The following terms shall have
the meanings set forth opposite such terms:

     

    (a)       
“Board” means the Board of Directors of the Corporation.

     

    (b)       
“Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday on
which the Corporation’s Common Stock is available for purchase or sale.

     

    (c)       
“Change of Control” means (a) a report is filed with the Securities and Exchange
Commission (the “SEC”) on Schedule 13D or Schedule 14D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the Exchange Act,
disclosing that any “person”, as such term is used in Section 13(d) and Section
14(d)(2) of the Exchange Act, other than the company or any company employee
benefit plan, is or has become a beneficial owner, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company’s then outstanding securities; (b) the
Company files a report or proxy statement with the SEC pursuant to the Exchange
Act disclosing in response to Item 1 of Form 8-K thereunder or Item 6(e) of
Schedule 14A thereunder that a Change of Control of the Company has or may have
occurred or will or may occur in the future pursuant to any then-existing
contract or transaction; (c) the Company is merged or consolidated with another
corporation and, as a result thereof, securities representing less than fifty
percent (50%) of the combined voting power of the surviving or resulting
corporation’s securities (or of the securities of a parent corporation in case
of a merger in which the surviving or resulting corporation becomes a wholly
owned subsidiary of the parent corporation) are owned in the aggregate by
holders of the Company’s securities immediately prior to such merger or
consolidation; (d) all or substantially all of the assets of the Company are
sold in a single transaction or a series of related transactions to a single
purchaser or a group of affiliated purchasers; or (e) during any period of
twenty-four (24) consecutive months,

     

     

    
      
        
        

      

      
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individuals who were Directors of the Company at the beginning of such period
cease to constitute at least a majority of the Company’s board unless the
election, or nomination for election by the Company’s shareholders, of more than
one-half of any new Directors of the Company was approved by a vote of at least
two-thirds of the Directors of the Company then still in office who were
Directors of the Company at the beginning of such twenty-four (24) month period,
either actually or by prior operation of this clause (e).  A Change of
Control shall not include any transaction described in the definition of Change
of Control in connection with which the Corporation executes a letter of intent
or similar agreement with another company within one year from the effective
date of the Plan.  The date of a Change of Control shall be deemed to be
the date of the earlier of the date of (i) consummation of the transaction
involving the Change of Control, or (ii) the execution of a definitive agreement
by the Corporation involving a transaction deemed to be a Change of Control


     

    (d)       
“Code” means the Internal Revenue Code of 1986, as amended from time to
time.

     

    (e)       
“Committee” means the Committee of the Board appointed by the Board to
administer the Plan as constituted from time to time in accordance with Section
4(a); provided, however, that if the Committee shall not be in existence, the
term “Committee” shall mean the Board.

     

    (f)       
“Common Stock” means the common stock ($2.50 par value) of the
Corporation.

     

    (g)       
“Corporation” means Summit Financial Group, Inc., a West Virginia banking
corporation.

     

    (h)       
“Date of Grant” means the date on which an option is granted under the
Plan.

     

    (i)        
“Effective Date” means the date on which the Plan is approved and adopted by the
shareholders of the Corporation.

     

    (j)       
“Fair Market Value” means (i) if the Common Stock is listed on an established
securities exchange, the value per share shall be based on the arithmetic mean
of its closing prices reported on such exchange at the close of business for the
last five (5) most recent Business Days on which the Common Stock traded prior
to the date of grant; provided however, if the Common Stock did not trade for
five (5) Business Days during the continuous thirty (30) day period immediately
prior to the date of grant, then the Fair Market Value shall be the arithmetic
mean of the closing prices reported on such exchange at the close of business
for the Business Days on which the common stock traded during said thirty (30)
day period or if the Common Stock did not trade during said thirty (30) day
period, then the Fair Market Value shall equal the closing price reported on
such exchange at the close of business on the last trading day before the date
of the grant; (ii) if the Common Stock is not listed on any United States
securities exchange but is traded on any formal over-the-counter quotation
system which reports quotations from more than one broker or dealer in the
United States, the value per share shall be based on the simple average of the
closing prices reported on the last five (5) Business Days on which the Common
Stock traded prior to the date of grant provided however, if the Common Stock
did not trade for five (5) Business Days during a continuous thirty (30) day
period immediately prior to the date of grant, then the Fair Market Value shall
be the arithmetic mean of the closing prices reported on such exchange at the
close of business for the Business Days on which the common stock traded during
said thirty (30) day period or if the Common Stock did not trade during said
thirty (30) day period, then the Fair Market Value shall equal the closing price
reported on such exchange at the close of business on the last trading day
before the date of the grant; or (iii) if the Common Stock

     

     

    
      
         

      

      
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is not readily tradable on an established securities exchange, the value per
share shall be based on a reasonable valuation method that conforms to the
requirements of Internal Revenue Code Section 409A.  

     

     

     

     (k)      
“Non Qualified Stock Option” means an Option which is not of the type described
in Section 422(b) or 423(b) of the Code.

     

    (l)        
“Option” means an option to purchase a share or shares of the Corporation’s par
value Common Stock.

     

    (m)      
“Option Agreement” means the written agreement to be entered into by the
Corporation and the Participant, as provided in Section 6 hereof.

     

    (n)       
“Participant” means any officer of the Corporation or its subsidiaries
designated by the Committee and approved by the Board to receive a stock option
grant pursuant to this Plan.

     

    (o)        “Plan” means
this 2009 Officer Stock Option Plan.

     

    (p)       
“Qualified Stock Option” means an Option which is of the type described in
Section 422(b) of the Code.

     

    (q)       
“Retirement” shall mean termination of employment by the Participant (i) at the
age of 65 or more, or (ii) after twenty-five years of service with the
Corporation.

     

    (r)       
“Term” means the period during which a particular Option may be exercised in
accordance with Section 9(b) hereof.

     

    (s)       
“Vest” or “Vesting” means the date, event, or act prior to which an Option, in
whole or in part, is not exercisable, and as a consequence of which the Option,
in whole or in part, becomes exercisable for the first time.

     

    3.            
STOCK SUBJECT TO
PLAN.  Subject to the provisions of Sections 6, 7, 8 and 9, there
shall be reserved for issuance or transfer upon the exercise of Options to be
granted from time to time under the Plan an aggregate of three hundred and fifty
thousand (350,000) shares of Common Stock, which shares may be in whole or in
part, as the Board shall from time to time determine, authorized and unissued
shares of Common Stock, or issued shares of Common Stock which shall have been
reacquired by the Corporation.  If any Option granted under the Plan shall
expire, terminate, or be canceled for any reason without having been exercised
in full, the unpurchased shares subject thereto shall again be available for the
purpose of the Plan.  The maximum aggregate number of shares that can be
issued under the Plan through a Qualified Stock Option is one hundred thousand
(100,000). 

     

    4.            
ADMINISTRATION.

     

    (a)       
The Plan shall be administered by the Committee.  Actions by the Committee
for purposes of this Plan shall be by not less than a majority of its
members.  Any decision or determination reduced to writing and signed by
all Committee members shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held.  The Committee shall
report all action taken by it to the Board.

     

    (b)       
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee or
any person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under

     

    
      
         

      

      
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the Plan. All decisions, determinations, and interpretations of the Committee
shall be final and binding on all Participants under this Plan.

     

    (c)       
The Board may authorize the Committee to administer the Plan.  In the event
the Board elects to administer the Plan, the Board shall have the power and
authority otherwise delegated to the Committee in the Plan documents and all
acts performed by the Committee under the Plan shall be performed by the
Board.

     

    (d)       
The Committee shall have authority in its discretion, but subject to the express
provisions of the Plan:

     

    (1)      
to determine Participants to whom Option may be granted;

     

    (2)      
to determine the time or times when Option may be granted;

     

    (3)      
to determine the purchase price of the Common Stock covered by each Option grant
(notwithstanding anything in this Plan to the contrary, no Options shall be
granted with a option price of less than Fair Market Value);

     

    (4)      
to determine the number of shares of Common Stock to be subject to each
Option;

     

    (5)      
to determine when an Option can be exercised and whether in whole or in
installments as the result of a Vesting schedule triggered by the passage of
time or the attainment of performance goals set by the Committee and approved by
the Board;

     

    (6)      
to prescribe, amend, or rescind rules and regulations relating to the
Plan;

     

    (7)      
to determine any other terms and provisions and any related amendments to the
individual Option Agreements, which need not be identical for each Participant,
including such terms and provisions and amendments as shall be required in the
judgment of the Committee to conform to any change in any law or regulation
applicable thereto, and with particular regard to any changes in or effect of
the Code and the regulations thereunder; and

     

    (8)      
to make all other determinations deemed necessary or advisable for the
administration of the Plan.

     

    5.             PARTICIPATION.  Options
may be granted to officers employed by the Corporation or its
subsidiaries.  In determining the officers to whom Options may be granted
and the number of shares to be covered by each grant, the Committee may take
into account the nature of the services rendered by the respective officers,
their present and potential contributions to the Corporation’s success, and such
other factors as the Committee in its discretion shall deem relevant.  Non
Qualified Stock Options may be granted to officers who currently hold Corporate
stock or who hold or have held Options under this Plan.  Qualified Stock
Options may be granted to key employees of the Corporation or its
subsidiaries.  The term employees for purposes of participating in a
Qualified Stock Option is defined pursuant to Code Section 3401(c) and the
regulations issued thereunder and excludes independent contractors and directors
of the Corporation in their capacity as such.  The term “ key employees”
means employees of Summit or its subsidiaries who hold the office of vice
president or higher.

     

    
      
         

      

      
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    6.            
OPTION GRANTS AND
LIMITS.

     

    (a)          
Nothing contained in this Plan or in any resolution adopted or to be adopted by
the Board shall constitute the granting of any Option hereunder.  The
granting of an Option pursuant to the Plan shall take place only when a written
Option Agreement shall have been duly executed and delivered by or on behalf of
the Corporation and the officer (or his or her duly authorized attorney-in-fact)
in whom such Option is to be granted.

     

    (b)          
During the Participant’s lifetime, any Option granted under this Plan shall be
exercisable only by the Participant or any legally appointed guardian or legal
representative of the Participant, subject to the limitations of Code Section
422, and the Option shall not be transferable except, in case of the death of
the Participant, by will or the laws of descent and distribution, nor shall the
Option be subject to attachment, execution, or other similar process.  In
the event of (i) any attempt by the Participant to alienate, assign, pledge,
hypothecate, or otherwise dispose of the Option, except as provided in this
Plan, or (ii) the levy of any attachment, execution, or similar process upon the
rights or interests conferred by the Option, the Corporation may terminate the
Option by notice to the Participant and upon such notice the Option shall become
null and void.

     

    (c)          
Each Option Agreement shall include a Vesting schedule describing the date,
event, or act upon which an Option shall Vest, in whole or in part, with respect
to all or a specified portion of the shares covered by such Option.  This
condition shall not impose upon the Corporation any obligation to retain the
Participant in its employ for any period.

     

    (d)          
Each Option granted pursuant to the Plan shall be evidenced by an Option
Agreement between the Corporation and the Participant, in such form as the
Committee shall from time to time approve, nonetheless each Option Agreement
shall comply with and be subject to all of the terms and conditions in Sections
6, 7, 8, 9 and 10. 

     

    (e)          
Options shall include Non Qualified Stock Options and Qualified Stock Options
and each Option Agreement shall specifically state the number of shares of
Common Stock to which the Option relates and what type of Option is being
granted whether a Non Qualified Stock Option or Qualified Stock Option.

     

    7.            
QUALIFIED STOCK
OPTIONS. 
Notwithstanding any provision of this Plan to the contrary the following
requirements must be met for the issuance and exercise of a Qualified Stock
Option: 

     

    (a)            Stockholder Approval:  No
Qualified Stock Options will be granted under this Plan unless stockholder
approval of the Plan is secured within twelve (12) months prior to the adoption
of the Plan or within the twelve (12) months following the adoption of the Plan.


     

    (b)           Key
Employees:  A Qualified Stock Option shall only be granted to a key
employee of the Corporation or its subsidiaries.  The term employees for
purposes of participating in a Qualified Stock Option is defined pursuant to
Code Section 3401(c) and the regulations issued thereunder and excludes
independent contractors and directors of the Corporation in their capacity as
such.  The term key employees means employees of Summit or its subsidiaries
who hold the office of vice president or higher.

     

    (c)           Employment
Requirement:  A Participant must be an employee of the corporation
or its subsidiaries from the grant of a Qualified Stock Option until three (3)
months prior to the exercise of the Qualified Stock Option.  If a
Participant is terminated due to a permanent and total disability, said
Participant must be an employee of the Corporation or its subsidiaries 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


     

    
      
         

      

      
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continuing intact 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.

     

    (d)           Ten Year Granting
Limit:  Any Qualified Stock Option granted under this Plan must be
granted within ten (10) years of the earlier of (i) the date the Plan is adopted
or (ii) the date the Plan is approved by the stockholders.

     

    (e)            Exercise Time
Limit:  Any Qualified Stock Option granted under this Plan must be
exercised prior to the expiration of (i) ten (10) years from the date the option
is granted or (ii) five (5) years from the date the option is granted to an
employee who owns at least ten percent (10%) of the Corporation. 


     

    (f)            10% Ownership
Limit:  Any Participant at the time a Qualified Stock Option is
granted cannot own
stock having more than ten percent (10%) of the total combined voting power of
all classes of stock of the Corporation or any subsidiary.  This ten
percent (10%) stock ownership limit above does not apply if, at the time the
Qualified Stock Option is granted:

     

    (1)        the Qualified Stock Option
price is at least one
hundred and ten percent (110%) of the stock's Fair Market Value on the date of
grant; and ,

     

    (2)        the Qualified Stock Option,
by its terms, is not exercisable more than five years after the date granted.


     

    (g)           Aggregate $100,000
Limit:  A stock option will not be treated as a Qualified Stock
Option if the aggregate Fair Market Value as of the date of grant of the stock
options exceed one hundred thousand dollars ($100,000) when first
exercisable.  Any Option grant which exceeds this aggregate limit will be
considered a Non Qualified Stock Option.  

     

    (h)           Stock Holding
Period:  Upon the transfer of stock to the Participant pursuant to
the exercise of a Qualified Stock Option, the Participant shall not make a
disposition of the share of stock so transferred before the later of the
expiration of:

     

    (1)        the two (2) year period
from the date of grant of the Qualified Stock Option under which the stock was
transferred; or 

     

    (2)        the one (1) year period
from the date of transfer of the share of stock to the Participant. 


     

    If a Participant
does not comply with the above stock holding period any such disposition will be
considered a disqualifying disposition pursuant to Code Section 422 and 421 and
the regulations issued thereunder.   

     

    The limitation in
this Section 7(h) shall not be applicable if during the required holding period
an insolvent Participant transfers stock acquired through the exercise of a
Qualified Stock Option (i) to a trustee, receiver or other fiduciary, or (ii)
for the benefit of creditors, in a bankruptcy or insolvency proceeding, subject
to the limitations of Code Section 422.  

     

    (i)            Tandem Qualified Stock
Options / Non Qualified Stock Options:  No tandem Qualified Stock
Options / Non Qualified Stock Options will be issued under this Plan.  A
tandem Qualified Stock Option / Non Qualified Stock Option would occur if both
options were to be granted at the same time and where the exercise of one option
affects the right to exercise the other option.

     

    
      
         

      

      
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    8.            
OPTION PRICES.  The
Option price to be paid by the Participants to the Corporation for each share
purchased upon the exercise of the Option shall be not less than the Fair Market
Value of the share on the date the Option is granted.  In no event may an
Option be granted under the Plan if the Option price per share is less than the
par value of a share.

     

    9.            
EXERCISE OF
OPTIONS.

     

    (a)          
A Participant may exercise any Option granted under this Plan with respect to
all or any part of the number of shares then exercisable under the terms of the
written Option Agreement by giving the Committee written notice of intent to
exercise.  The notice of exercise shall specify the number of shares to be
purchased under the Option and the date of exercise.

     

    (b)         
Each Option granted under the Plan shall be exercisable only during a Term
established by the Committee as set forth in the applicable Option
Agreement.  

     

    (c)          
Full payment of the option price for the shares purchased shall be made by the
Participant on or before the exercise date specified in the notice of
exercise.  Payment of the purchase price of any shares with respect to
which the Option is being exercised shall be (i) cash, (ii) certified check to
the order of the Corporation, or (iii) shares of Common Stock of the Corporation
valued at the Fair Market Value on such Business Day as the Option or portion
thereof is exercised.

     

    (d)         
The Corporation shall not be required to deliver certificates for such shares
until full payment of the Option price has been made.  On or as soon as is
practicable after the exercise date specified in the Participant’s notice and
upon full payment of the Option price, the Corporation shall cause to be
delivered to the Participant a certificate or certificates for the shares then
being purchased (out of previously unissued Common Stock or reacquired Common
Stock, as the Corporation may elect).  The exercise of the Option and the
resulting obligation of the Corporation to deliver Common Stock shall, however,
be subject to the condition that the listing, registration, or qualification of
the Option or the shares upon any securities exchange or under any state or
federal law, or the consent, or approval of any governmental regulatory body
shall have been effected or obtained free of any conditions not acceptable to
the Committee.

     

    (e)          
If the Participant fails to pay for any of the shares specified in such notice
or fails to accept delivery of the shares, his or her right to purchase such
shares may be terminated by the Corporation.  The date specified in the
Participant’s notice as the date of exercise shall be deemed the date of
exercise of the Option, provided that payment in full for the shares to be
purchased upon such exercise shall have been received by such date.

     

    (f)           The
holder of an Option shall not have any of the rights of a stockholder with
respect to the shares subject to the Option until such shares shall be issued or
transferred to him or her upon the exercise of his or her Option.

     

    10.          
TERMINATION, DISABILITY, OR
DEATH OF OPTION HOLDER.  The ability to exercise Options under this
Plan shall be conditioned as follows:

     

    (a)          
Exercise During and
After Employment.  Unless otherwise provided in the terms of an
Option, an Option may be exercised by the Participant while he or she is an
employee if it is vested and if he or she has maintained since the date of the
grant of the Option continuous status as an employee.  

     


                   
In the event of termination of the employment of a Participant by either the
Participant or the Corporation to whom an Option has been granted under the
Plan, other than a 

     

    
      
         

      

      
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termination by reason of Retirement, permanent disability, or death (all as more
fully described below), the Participant may (unless otherwise provided in his or
her Option Agreement) exercise such Vested Options until the shorter of (i) the
expiration of the stated term of the Option; (ii) in the case of Non Qualified
Stock Options for a period of one (1) year from his or her termination date; or
(iii) in the case of Qualified Stock Options for a period of ninety (90) days
from the date of such termination.  

     

    (b)          
Exercise Upon
Retirement.  Unless otherwise provided in the terms of an Option, if
a Participant’s continuous employment shall terminate by reason of his or her
Retirement, at a retirement date authorized by the Committee, from the
Corporation or its subsidiaries, a retired Participant shall be come one hundred
percent (100%) Vested in any Option he or she has been granted under the Plan as
of that date.  A Participant may exercise such Vested Options until the
shorter of (i) the expiration of the stated term of the Option; (ii) in the case
of Non Qualified Stock Options for a period of one (1) year from his or her
retirement date; or (iii) in the case of Qualified Stock Options for a period of
ninety (90) days from the date of such retirement. 

     

    (c)          
Exercise Upon
Permanent Disability.  Unless otherwise provided in the terms of an
Option, if a Participant’s continuous employment shall terminate by reason of a
permanent disability (as determined by the Participant establishing to the
Committee his or her disability as defined in Code Section 22(e)(3) of the Code,
as amended from time to time), then such Option of the disabled Participant may
be exercised with respect to the number of shares covered by the Participant’s
Option that were Vested immediately prior to that disability.  Such Option
of the permanently disabled Participant may be exercised during the period the
Option would have been exercisable if the permanently disabled Participant had
not been permanently disabled and had remained in employment. 
Notwithstanding the previous sentence, a Qualified Stock Option must be
exercised within one (1) year after a Participant’s continuous employment is
terminated by reason of a permanent disability, after the expiration of said one
(1) year any unexercised Qualified Stock Options will become null and
void.  Notwithstanding any provision in this subsection to the contrary, no
extension to the Term of an Option shall be extended beyond the original Term of
said Option.

     

    (d)          
Exercise Upon
Death.  Unless otherwise provided in the terms of an Option, if a
Participant’s continuous employment shall terminate by reason of his or her
death, 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 or its subsidiaries (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 Qualified Stock Option shall have passed by will or by
laws of descent and distribution to exercise said Qualified Stock Option. 
The stock holding requirement as provided in Section 7(h) is not applicable upon
the death of a Participant. 

     

    11.           ADJUSTMENTS.

     

    (a)          
In the event that the outstanding shares of Common Stock are hereafter increased
or decreased or changed into or exchanged for a different number or kind of
shares or other securities of the Corporation or of another corporation, by
reason of a recapitalization, reclassification, stock split-up, combination of
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payable in capital stock, appropriate adjustment shall be made by the Committee
in the number and kind of shares for which Options may be granted under the
Plan.  In addition, the Committee shall make appropriate adjustment in the
number and kind of shares as to which outstanding Options, or portions thereof
then unexercised, shall be exercisable, to the end that the proportionate
interest of the holder of the Option shall, to the extent practicable, be
maintained as before the occurrence of such event.  Such adjustment in
outstanding Options shall be made without change in the total price applicable
to the unexercised portion of the Option but with a corresponding adjustment in
the Option price per share.  All provided however, that all such
adjustments made in respect of each Qualified Stock Option 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 Subsection 11(a) 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, with respect to Incentive Stock Options, such adjustment shall be
made in accordance with Code Section 424(h).

     

    (b)          
In the event of a Change of Control, any Option under the Plan shall terminate
as of a date to be fixed by the Committee, provided that not less than ninety
(90) days’ written notice of the date so fixed shall be given to each
Participant, and each such Participant shall have the right during such period
to exercise any of his or her Options as to all or any part of the shares
covered thereby including shares as to which such Options would not otherwise be
exercisable by reason of any insufficient lapse of time.  Notwithstanding
any provision in this Plan to the contrary, no extension of the Term of an
Option shall be granted under any circumstances under this Plan; consequently if
the prohibition on Term extensions and the expiration date of the original Term
of an Option would cause the above required ninety (90) day written notice
period to be violated, said notice period will be shortened appropriately to
ensure that the original Term of any Option is not extended.  

     

    (c)          
Adjustment and determinations under this Section 11 shall be made by the
Committee, whose decisions as to what adjustments or determinations shall be
made, and the extent thereof, shall be final, binding, and conclusive.

     

    12.          
CHANGE OF CONTROL.
 Notwithstanding any other Plan provisions or grant term, in the event of a
Change of Control, all Options granted hereunder shall become Vested and
exercisable regardless of the number of years that have passed since the Date of
Grant and regardless of any vesting provisions in the Option Agreements. 
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.

     

    13.          
AMENDMENT AND
TERMINATION.  Unless the Plan shall theretofore have been terminated
as hereinafter provided, no Option shall be granted thereunder after the tenth
(10th) anniversary of the Effective Date.  All other Plan provisions shall
remain in effect with respect to Options granted prior to the tenth (10th)
anniversary of the Effective Date.  The Board may terminate the Plan or
make such modifications or amendments thereof as it shall deem advisable, or to
conform to any change in any law or regulation applicable thereto, including
without limitation (a) increasing the maximum number of shares to which Options
may be granted under the Plan, subject to shareholder approval and the
limitations applicable to issuance of Qualified Stock Options or Non Qualified
Stock Options; (b) changing the class of employees eligible to be granted Non
Qualified Stock Options, subject to shareholder approval and the
limitations

     

    
      
         

      

      
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applicable to issuance of Qualified Stock Options or Non Qualified Stock
Options; (c) increasing the periods during which Non Qualified Stock Options may
be granted, subject to the limitations applicable to issuance of Qualified Stock
Options or Non Qualified Stock Options; or (d) providing for the administration
of the Plan in a manner which may avoid, without the consent of the Participant
to whom any Option shall theretofore have been granted, adversely affecting the
rights of such Participant under such grant.  All provided that (i) no such
amendment or modification shall be effective if it would cause this Plan to
violate Code Sections 409A and 422 and the regulations and guidance thereunder
and consequently cause this Plan to be subject to 409A or cause any Qualified
Stock Option issued hereunder to be treated as a Non Qualified Stock
Option.

     

    14.          
RESTRICTIONS ON ISSUING
SHARES.  The transfer of a share of Common Stock upon the exercise
of each Option shall be subject to the condition that if at any time the
Corporation shall determine in its discretion that the satisfaction of
withholding tax or other withholding liabilities, or that the listing,
registration or qualification of any shares otherwise deliverable upon any
securities exchange or under any state or federal law, or that the consent or
approval of such regulatory body, is necessary or desirable as a condition, of,
or in connection with, such transfer of shares pursuant thereto, then in any
such event, such transfer shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained under conditions acceptable to the Corporation.

     

    15.          
USE OF PROCEEDS. 
The proceeds received from the sale of Common Stock pursuant to the exercise of
Options granted under the Plan shall be added to the Corporation’s general funds
and used for general corporate purposes.

     

    16.          
INDEMNIFICATION OF
COMMITTEE.  In addition to such other rights of indemnification as
they may have as members of the Board or as members of the Committee, the
members of the Committee shall be indemnified by the Corporation against all
costs and expenses reasonably incurred by them in connection with any action,
suit, or proceeding to which they or any of them may a be party by reason of any
action taken or failure to act under or in connection with the Plan, or any
Option and against all amounts paid by them in settlement thereof (provided such
settlement is approved by legal counsel selected by the Corporation) or paid by
them in satisfaction of a judgment in any such action, suit, or proceeding,
except a judgment based upon a finding of bad faith.  Upon the institution
of any such action, suit, or proceeding, a Committee member shall notify the
Corporation in writing, giving an opportunity, at its own expense, to handle and
defend the same before such Committee member undertakes to handle it on his or
her own behalf.

     

    17.          
EFFECTIVENESS OF THE
PLAN.  The Plan shall become effective as of the Effective
Date.  

     

    18.          
MISCELLANEOUS.

     

    (a)          
Employment Not
Affected.  Neither the granting of an Option nor its exercise shall
be construed as granting to the Participant any right with respect to
continuance of his or her employment with the Corporation or its
subsidiaries.  Except as may otherwise be limited by a written agreement
between the Corporation or its subsidiaries and the Participant, the right of
the Corporation or its subsidiaries to terminate at will the Participant’s
employment with it at any time (whether by dismissal, discharge, retirement, or
otherwise) is specifically reserved by the Corporation or its subsidiaries as
the employer or on behalf of the employer (whichever the case may be) and
acknowledged by the Participant.

     

    (b)          
Binding on
Successors and Assigns.  This Plan shall be binding on the
Corporation, its successors and assigns.

     


    (c)          
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


     

    
      
         

      

      
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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.

     

    (d)          
Construction.  If any provision
of the Plan or any Option Agreement is held to be illegal or void, such
illegality or invalidity shall not affect the remaining provisions of the Plan
or Option Agreement, but shall be fully severable, and the Plan or Option
Agreement shall be construed and enforced as if said illegal or invalid
provisions had never been inserted herein.  For all purposes of the Plan,
where the context permits, the singular shall include the plural, and the plural
shall include the singular.  Headings of Articles and Sections herein are
inserted only for convenience of reference and are not to be considered in the
construction of the Plan.  The laws of the State of West Virginia shall
govern, control and determine all questions of law arising with respect to the
Plan and the interpretation and validity of its respective
provisions.

     

    19.           
INTERPRETATION.

     

    (a)         
The terms of this Plan concerning the issue of Qualified Stock Options are
subject to all present and future regulations and rulings of the Secretary of
the Treasury or his or her delegate relating to the qualification of incentive
stock options under Code Section 422.  If any provision of the Plan
applicable to Qualified Stock Options conflicts with any such regulation or
ruling, then that provision of the Plan shall be void and of no effect and such
regulation or ruling shall be deemed to be a part of this Plan as if originally
a part hereof.

     

    (b)         
The terms of this Plan concerning the issue of Non-qualified Stock Options are
subject to all present and future regulations and rulings of the Secretary of
the Treasury or his or her delegate relating thereto, including without
limitation, the provisions of § 409A of the Code.  If any provision of
the Plan applicable to Non-qualified Stock Options conflicts with any such
regulation or ruling, then that provision of the Plan shall be void and of no
effect and such regulation or ruling shall be deemed to be a part of this Plan
as if originally a part hereof.

     

     

     

                                            SUMMIT FINANCIAL GROUP, INC.

     

     

     

                                             By: /s/ H. Charles Maddy, III

                                                  H. Charles
Maddy, III

                                                     
President

     

     

     

     

     

    Attest:  /s/ Teresa Ely

           Teresa
Ely

    Title:     Assistant Secretary

     

     

    
      
         

      

      
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