Exhibit 10.2



 








Exhibit 10.2




CHANGE IN CONTROL AGREEMENT




          THIS CHANGE IN CONTROL AGREEMENT, made and entered into this 4th day of March, 2005, by and
between Summit Financial Group, Inc. (the “Company”) and H. Charles Maddy, III (“Maddy”);



          WHEREAS, Company recognizes that Maddy’s contribution to the growth, success and continued
operation of Company has been substantial, and



          WHEREAS, Company believes it is in the best interest of Company to grant Maddy a level of
security to preserve key management and to assure fair consideration of any affiliation
opportunities that arise.



          NOW, THEREFORE, in consideration of the promises and respective covenants and agreements of
the parties herein contained, Company and Maddy agree as follows:




	A.  	Definitions. For purposes of this Change in Control Agreement, the
following definitions shall apply:






	 	(1)  	“Change of Control” means






	 	(a)  	a change of ownership of the Company 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, of direct or indirect “beneficial
ownership” as defined, of twenty-five percent (25%) or more of the combined
voting power of the Company’s then outstanding securities; or
	 
	 	(b)  	the failure during any period of three (3) consecutive years of
individuals who at the beginning of such period constitute the Board 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 in advance by directors representing at least two-thirds (2/3) of the
directors at the beginning of the period; or
	 
	 	(c)  	the consummation of a “Business Combination” as defined in the
company’s Articles of Incorporation.






	 	(2)  	“Company” shall mean Summit Financial Group, Inc.




 









 






	 	(3)  	“Employment Agreement” shall mean the Employment Agreement dated as of
March 4, 2005, by and between Summit Financial Group, Inc. and H. Charles Maddy,
III.
	 
	 	(4)  	“Salary” means Maddy’s Base Salary as defined in the Employment
Agreement in effect on the date of termination of Maddy’s employment under this
Agreement, or if no Employment Agreement is in effect, Maddy’s Base Salary on the
date of termination of employment hereunder, corresponding to the definition of
Base Salary in the most recent Employment Agreement.
	 
	 	(5)  	For purposes of this Change in Control Agreement, “Good Cause” shall
mean: (i) excessive absenteeism without approval of Summit not caused by
disability; (ii) gross or willful neglect of duty resulting in substantial harm to
Summit after Maddy has been given written direction and reasonable time to perform
such duties; or (iii) any acts or omissions on the part of Maddy which when proven
constitute fraud or commission of any criminal act involving the person or property
of others or the public generally.
	 
	 	(6)  	“Disability” means a physical or mental condition rendering Maddy
substantially unable to perform the duties of an officer and director of a banking
organization.
	 
	 	(7)  	“Retirement” means termination of employment by Maddy in accordance
with Company’s (or its successor’s) retirement plan, including early retirement as
approved by the Board of Directors.
	 
	 	(8)  	“Good Reason” means






	 	(a)  	A Change of Control in the Company (as defined above) and:






	 	(i)  	a decrease in Maddy’s overall compensation
(including, without limitation, salary, perquisites, bonuses and other
earnings reported on IRS Form W-2, but excluding a diminution in board
fees) below its level in effect immediately prior to the date of
consummation of the Change of Control, without Maddy’s prior written
consent; or
	 
	 	(ii)  	a material reduction in the importance of
Maddy’s job responsibilities or assignment of job responsibilities
inconsistent with Maddy’s responsibility prior to the Change of Control
without Maddy’s prior written consent; or
	 
	 	(iii)  	a geographical relocation of Maddy to an
office more than 20 miles from Maddy’s location at the time of the
Change of Control or the imposition of travel requirements inconsistent
with those




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	 	   	existing prior to the Change of Control without Maddy’s prior written
consent; or






	 	(b)  	Failure of the Company to obtain assumption of this Change in
Control Agreement by its successor as required by Paragraph M(1) below; or
	 
	 	(c)  	Any removal of Maddy from, or failure to re-elect Maddy to any
of Maddy’s positions with Company immediately prior to a Change of Control
(except in connection with the termination of Maddy’s employment for Good
Cause, death, Disability or Retirement) without Maddy’s prior consent.






	 	(8)  	“Wrongful Termination” means termination of Maddy’s employment by the
Company or its affiliates for any reason other than at Maddy’s option, Good Cause
or the death, Disability or Retirement of Maddy prior to the expiration of twelve
(12) months after consummation of the Change of Control.






	 	B.  	Retention of Maddy After Change of Control. In order to facilitate
management continuity and to promote an orderly transition of ownership, Company and
Maddy agree that after a Change of Control, Maddy shall be employed by the acquiring
company for a period of one (1) year (the “Transition Period”), commencing upon the
date of consummation of the transaction resulting in a Change of Control. During the
Transition Period, Maddy may terminate his employment for Good Reason, and the Company
may terminate the employment of Maddy for Good Cause. If Company terminates Maddy in a
manner constituting Wrongful Termination, or Maddy terminates for Good Reason, Maddy
shall be entitled to receive the compensation set forth in paragraph E below.
	 
	 	   	If the Employment Agreement is still in effect, Maddy shall be employed pursuant to
the terms of Article II and Article V, A-E of the Employment Agreement. All other
terms of Maddy’s employment, including without limitation his right to receive
termination payments and the term of his employment, will be controlled by this
Agreement.
	 
	 	C.  	Compensation of Maddy for Death or Disability During the Transition
Period. In the event of the Death or Disability of Maddy during the Transition
Period, Maddy shall be entitled to three times the greater of (a) Maddy’s Salary in
effect immediately prior to the date of consummation of a Change of Control or (b)
Maddy’s Salary in effect on the date of termination of Maddy’s employment under this
Agreement.




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	 	D.  	Compensation of Maddy Upon Expiration of the Transition Period. Within
a period of thirty (30) days after expiration of the Transition Period, Maddy shall be
entitled to be paid an amount equal to three (3) times the greater of (a) Maddy’s
Salary in effect immediately prior to the date of consummation of a Change of Control
or (b) Maddy’s Salary in effect on the date of expiration of the Transition Period.
	 
	 	E.  	Compensation of Maddy Upon Termination for Good Reason or Wrongful
Termination during the Transition Period. Except as hereinafter provided, if Maddy
terminates his employment with the Company for Good Reason or the Company terminates
Maddy’s employment in a manner constituting Wrongful Termination, the Company agrees as
follows:






	 	(1)  	The Company shall pay Maddy a cash payment equal to three (3) times the
greater of (a) Maddy’s Salary in effect immediately prior to the date of
consummation of a Change of Control or (b) Maddy’s Salary in effect on the date of
termination of Maddy’s employment under this Agreement.
	 
	 	(2)  	Maddy will be entitled to receive his reasonable share of the Company’s
cash bonuses, if any, allocated in accordance with existing principles and
authorized by the Board of Directors. The amount of Maddy’s cash incentive award
shall not be reduced due to Maddy not being actively employed for the full year.
	 
	 	(3)  	Maddy will continue to participate, without discrimination, for the
number of months between the Date of Termination and the date that is thirty-six
(36) 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 Maddy, in general, of the Company, or any successor
organization, provided Maddy’s continued participation is possible under the
general terms and conditions of such plans. In the event Maddy’s participation in
any such plan is barred, the Company shall arrange to provide Maddy with benefits
substantially similar to those which Maddy would have been entitled had his
participation not been barred. However, in no event will Maddy receive from the
Company the employee benefits contemplated by this subparagraph if Maddy receives
comparable benefits from any other source.
	 
	 	(4)  	Paragraph F of this Agreement and Section VII of the Employment
Agreement shall not apply.






	 	F.  	Termination at Maddy’s Option. During the Transition Period, Maddy may
terminate his employment without reason at his option by giving written notice of
termination within six (6) months of consummation of any Change of Control;




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	 	   	provided that notice shall be given at least thirty (30) days prior to the effective
time for termination. In such event, Maddy shall be entitled to receive a lump sum
payment equal to 75% of the greater of (a) Maddy’s Salary in effect immediately
prior to the date of consummation of a Change of Control or (b) Maddy’s Salary in
effect on the date of termination of Maddy’s employment under this Agreement.
	 
	 	G.  	Noncompetition and Nonsolicitation. In consideration of the covenants
set forth herein, including but not limited to the payment set forth in paragraphs C, D
and E hereof, Maddy agrees as follows:






	 	(1)  	For a period of three (3) years after expiration of the Transition
Period, provided Maddy’s employment under this Agreement is not sooner terminated,
Maddy shall not, directly or indirectly engage in the business of banking, in the
entire State of West Virginia, in any county or location in which Summit has
operating offices at the time of termination , in the following designated
locations in Virginia (See Exhibit to Paragraphs G(1) and (2) attached, which is
incorporated herein by reference This Exhibit was molded to included the counties
where the municipalities are located.), or in any location identified by Summit in
its three-year strategic plan as a location for future expansion to be adopted by
the Board and reviewed and updated at regular intervals.
	 
	 	(2)  	For a period of one (1) year after Maddy’s employment with Summit is
terminated for any reason other than Maddy’s Disability, Retirement, Good Reason or
termination at Maddy’s option as provided in paragraph E hereof, Maddy shall not,
directly or indirectly, engage in the business of banking in the entire State of
West Virginia, in any county or location in which Summit has operating offices at
the time of termination, , in the following designated locations in Virginia (See
Exhibit to Paragraphs G (1) and (2)) attached, which is incorporated herein by
reference This Exhibit was molded to included the counties where the municipalities
are located.), or in any location identified by Summit in its three-year strategic
plan as a location for future expansion to be adopted by the Board and reviewed and
updated at regular intervals.
	 
	 	(3)  	For purposes of Paragraphs G(1) - (2), being engaged in the business of
banking shall mean Maddy’s engaging in any business or activity of any nature that
is competitive with the business of Summit or its affiliates in the specified
geographic area or Maddy’s solicitation of business from clients with a primary or
principal office in the specified geographic area.
	 
	 	(4)  	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




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	 	   	extending for too long a period of time, or too great a geographical area or over
too great a range of activities, or is overly broad in any other respect or for
any other reason, then 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 activity or otherwise, so as to render these
provisions valid and enforceable, and as so modified, these shall be enforceable
and enforced.






	 	H.  	Other Employment. Maddy shall not be required to mitigate the amount
of any payment provided for in this Change in Control Agreement by seeking other
employment. The amount of any payment provided for in this Change in Control Agreement
shall not be reduced by any compensation earned or benefits provided (except as set
forth in Paragraph E(3) above) as the result of employment by another employer after
the Date of Termination.
	 
	 	I.  	Rights of Company Prior to the Change of Control. This Change in
Control Agreement shall not affect the right of the Company or Maddy to terminate the
foregoing Employment Agreement or the employment of Maddy in accordance thereof;
provided, however, that any termination or reduction in salary or benefits that takes
place after discussions have commenced that result in a Change of Control shall be
presumed (without clear and convincing evidence to the contrary) to be Good Reason and
a violation of this Change in Control Agreement entitling Maddy to the benefits hereof,
so that any termination by Company shall be deemed to be a Wrongful Termination, and
all references in this Change in Control Agreement to Salary shall be deemed to mean
the Salary, as defined herein, based on the earnings Maddy would have had prior to any
reduction thereof.
	 
	 	J.  	Confidentiality. Maddy shall not, during the term of this Agreement or
at any time thereafter, directly or indirectly, publish or disclose to any person or
entity any confidential information (other than a Company employee entitled to know
such confidential information) concerning the assets, customer/client lists, business
or affairs of Company, and its affiliates, including but not limited to any trade
secrets, financial data, employee or customer/client information or organizational
structure. Notwithstanding the foregoing, nothing herein shall prevent Maddy from
utilizing the knowledge and experience he has acquired in the banking industry
including without limitation the knowledge of producer bonus plans.
	 
	 	   	All files, records, documents, information, letters, notes, media lists, notebook
and similar items relating to the business of Company shall remain the exclusive
property of Company. Upon the expiration or earlier termination of this Agreement,
or when requested by Company, Maddy shall immediately deliver to




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	 	   	Company all such files, computer data files, records, documents, information and
other items in the possession of or under the control of Maddy.
	 
	 	   	All business produced by Maddy while in the employ of is the exclusive property of
Company unless specifically excluded elsewhere in this Agreement. Maddy shall not,
during the term of this Agreement or any time thereafter, intentionally interfere
with any business or contractual relationship of Summit.
	 
	 	K.  	Gross-Up Payment. Notwithstanding anything in this Agreement to the
contrary, in the event it shall be determined that any payment or distribution by
Company and any of its subsidiaries and affiliates to or for the benefit of Maddy
(whether paid or payable or distributed or distributable pursuant to this Agreement,
the Supplemental Retirement Agreement between Company and Maddy, the Employment
Agreement between Company and Maddy, or any other agreement, contract, plan or
arrangement, but determined without regard to any additional payments required under
this Paragraph J) (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 Company shall pay to Maddy 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.
	 
	 	   	All determinations required to be made under this Paragraph J, 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 Company to audit its financial
statements (the “Accounting Firm”) which shall provide detailed supporting
calculations both to Company and Maddy 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,” Maddy 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 Company. Any Gross-Up Payment, as determined pursuant to this
Paragraph J, shall be paid to Maddy within 30 days of the receipt of the Accounting
Firm’s determination.
	 
	 	L.  	Arbitration. Any dispute between the parties arising out of or with
respect to this Agreement or any of its provisions or Maddy’s employment with Company,
whether sounding in tort or contract, shall be resolved by the sole and exclusive
remedy of




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	 	   	binding arbitration. Maddy hereby waives his right to a jury trial and his right to
receive noneconomic damages. Arbitration shall be conducted in Moorefield, West
Virginia, in accordance with the rules of the American Arbitration Association
(“AAA”). The parties agree each to select one arbitrator from an AAA employment
panel. Within ten days after selection of the second arbitrator, the two
arbitrators shall select a third arbitrator. The arbitration shall be conducted in
accordance with the West Virginia Rules of Evidence and all discovery issues shall
be decided by the arbitrator. The panel of arbitrators shall supply a written
opinion and analysis of the matter submitted for arbitration along with the
decision. The arbitration decision shall be final and subject to enforcement in the
local circuit court.
	 	   	In any arbitration proceeding between the parties, the losing party shall pay to
the prevailing party all reasonable expenses and costs including attorneys’ fees
incurred by the prevailing party. A party shall be considered a prevailing party
if:






	 	(i)  	it initiated the arbitration and substantially obtained the
relief it sought, either through a judgment or the losing party’s voluntary
action before arbitration (after it is scheduled) or judgment;
	 
	 	(ii)  	the other party withdraws its action without substantially
obtaining the relief it sought, or
	 
	 	(iii)  	it did not initiate the arbitration and judgment is entered
for either party, but without substantially granting the relief sought.






	 	M.  	Successors; Binding Agreement.






	 	(1)  	The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to Maddy, to expressly assume and agree to perform this Change in
Control Agreement. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of the this Change in
Control Agreement and shall entitle Maddy to compensation from the Company in the
same amount and on the same terms as he would be entitled to hereunder if he
terminated his employment for Good Reason hereunder.
	 
	 	(2)  	This Change in Control Agreement and all rights of Maddy hereunder
shall inure to the benefit of and be enforceable by Maddy’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. If Maddy 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




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	 	   	Amended and Restated Agreement to Maddy’s devisee, legatee, or other designee or,
if there be no such designee, to Maddy’s estate.






	 	N.  	Indemnification. To the fullest extent permitted under West Virginia
law and federal banking law, Summit agrees that it will indemnify and hold harmless
Maddy from and against all costs and expenses, including without limitation, all court
costs and attorney’s fees, incurred by him 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 any
payments to be made pursuant thereto.
	 
	 	O.  	Survival of Change in Control Agreement. This Change in Control
Agreement shall survive the expiration of the Employment Agreement.





          IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day first
written above:



	 	 	 	 	 
	 	 	SUMMIT FINANCIAL GROUP, INC.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Oscar M. Bean
	

	 	 	 	 
	 
	 	 	 	 
	

	 	Its:
	 	Chairman of the Board
	 
	 	 	 	 
	 	 	   /s/ H. Charles Maddy, III
	 	 	 
	 	 	H. CHARLES MADDY, III






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Exhibit to Paragraphs G(1) and (2) of Change in Control Agreement




By and Between Summit Financial Group, Inc. and H. Charles Maddy, III, dated March 4, 2005




Designated Virginia Locations




	 	 	 
	

	 	Ashburn
	 
	 	 
	

	 	Charlottesville
	 
	 	 
	

	 	Fredericksburg
	 
	 	 
	

	 	Leesburg
	 
	 	 
	

	 	Purcellville
	 
	 	 
	

	 	Warrenton







	*  	The designation of the municipality expressly includes the county in
which the municipality is located.