Document:

Exhibit 10.1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

BETWEEN

SUMMIT FINANCIAL GROUP, INC.

AND

H. CHARLES MADDY, III

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	PAGE
	I. EMPLOYMENT
	 	 	1	 
	 
	 	 	 	 
	II. DUTIES AND RESPONSIBILITIES
	 	 	2	 
	A. Chairman and Chief Executive Officer of Summit
	 	 	2	 
	B. Full Time
Employment - Best Efforts
	 	 	2	 
	 
	 	 	 	 
	III. TERM; EXTENSIONS
	 	 	2	 
	 
	 	 	 	 
	IV. TERMINATION OF EMPLOYMENT BY SUMMIT OR MADDY
	 	 	3	 
	A. Mutual Agreement
	 	 	3	 
	B. Death
	 	 	3	 
	C. Disability
	 	 	3	 
	D. For Cause
	 	 	3	 
	E. Change in Control
	 	 	4	 
	F. Breach by Summit
	 	 	4	 
	G. Insolvency, Etc.
	 	 	4	 
	 
	 	 	 	 
	V. COMPENSATION AND REIMBURSEMENTS
	 	 	4	 
	A. Base Salary
	 	 	4	 
	B. Incentive Pay
	 	 	5	 
	C. Fringe Benefits
	 	 	5	 
	D. Club and Organization Membership and Dues
	 	 	5	 
	E. Business Expenses
	 	 	5	 
	F. Termination Payments
	 	 	5	 
	 
	 	 	 	 
	VI. ADDITIONAL PAYMENT BY SUMMIT
	 	 	7	 
	A. Gross-Up Payment
	 	 	7	 
	B. Determination of Gross-Up Payment
	 	 	7	 
	 
	 	 	 	 
	VII. NONCOMPETITION AND NONSOLICITATION
	 	 	7	 
	 
	 	 	 	 
	VIII. CONFIDENTIAL INFORMATION
	 	 	9	 
	 
	 	 	 	 
	IX. ARBITRATION
	 	 	10	 
	 
	 	 	 	 
	X. MISCELLANEOUS PROVISIONS
	 	 	11	 
	A. Notices
	 	 	11	 
	B. Prior Agreements
	 	 	11	 
	C. Amendments
	 	 	11	 
	D. Governing Law
	 	 	11	 
	E. Headings
	 	 	11	 
	F. Severability of Provisions
	 	 	12	 
	G. Indemnification
	 	 	12	 
	H. Authority to Execute Documents
	 	 	12	 
	I. Waiver of Breach
	 	 	12	 
	J. Binding Effect and Assignability
	 	 	12	 

 i

 

 

EMPLOYMENT AGREEMENT

BETWEEN

SUMMIT FINANCIAL GROUP, INC.

AND

H. CHARLES MADDY, III

          THIS EMPLOYMENT AGREEMENT (“Agreement”), made and entered into this 4th day of March, 2005, by
and between H. Charles Maddy, III (“Maddy”) and Summit Financial Group, Inc., a West Virginia
corporation and bank holding company (“Summit”).

W I T N E S S E T H:

          WHEREAS, Maddy is Chief Executive Officer and a Director of Summit and Chairman and a Director
of Summit Community Bank, Inc., a state banking association (“Bank”), and

          WHEREAS, the Board of Directors of Summit believe that it is in the best interests of Summit
and its subsidiaries to enter into this Agreement with Maddy to ensure continuity of leadership and
to ensure that Summit and its subsidiaries will have the benefit of his services as an employee of
Summit and any of its affiliated companies for a reasonable period of time in the future, and

          WHEREAS, Maddy is willing to provide the herein described services to Summit and its
affiliates.

          NOW, THEREFORE, for and in consideration of the premises, their mutual promises, and the other
good and valuable consideration herein specified, the receipt of which is hereby acknowledged by
the parties hereto, the parties agree as follows:

     1. EMPLOYMENT

          Summit employs Maddy and Maddy accepts employment as Chief Executive Officer of Summit. All
employment shall be in accordance with and subject to the terms and conditions of this Agreement
and is sometimes herein referred to as the “Employment.”

 

 

     2. DUTIES AND RESPONSIBILITIES

          (a) Chief Executive Officer of Summit. Maddy, as Chief Executive Officer of Summit,
shall report to and shall be responsible only to the Board of Directors of Summit, and he shall
have direction and control of the duties and responsibilities of all other Summit officers and
employees, regardless of the title or position of any such other officer or employee, except that
Summit’s Internal Auditor shall report to and shall be responsible only to the Board of Directors.
As Chief Executive Officer, Maddy will perform all the duties and shall have all the
responsibilities normally imposed upon and held by the Chief Executive Officer of a bank holding
company. Maddy shall have the duty and responsibility of carrying out and executing the business
policies of Summit as established from time to time by the Board of Directors, and he shall have
such other specific duties and responsibilities relating to Summit and its affiliates as may be
assigned to him from time to time by the Board of Directors.

          (b) Full
Time Employment - Best Efforts. Maddy shall devote full time and his best
efforts at all times to the performance of his duties for Summit and its subsidiaries. He shall
not be employed by, nor shall he devote any of his time and efforts to the furtherance of interests
of any other person, firm or corporation except Summit, Summit’s subsidiaries and such other
entities as may be approved by the Board of Directors of Summit. Nothing herein shall preclude
Maddy’s current level of activity with respect to Mountain Lion Land Development LLC and the
management by Maddy of his personal investment portfolio. It is contemplated that Maddy shall
serve in banking, business, civic and social activities that will consume some part of his time and
efforts, and such activities are encouraged and expected by Summit as part of Maddy’s position with
Summit and as part of the banking, business, civic and social communities of the State of West
Virginia and Virginia, and nationally. The provisions of this Agreement are not intended to
restrict such activities by Maddy so long as such activities do not interfere with his duties and
responsibilities as defined in this Agreement.

     3. TERM; EXTENSIONS

          The term of employment of Maddy by Summit shall be until March 4, 2008, and this Agreement
shall remain in force and effect during such period unless sooner terminated or extended as
provided herein.

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          The Board of Directors or a committee designated by the Board of Directors of Summit shall
review this Agreement at least annually, and may, with the approval of Maddy, extend the term of
this Agreement annually for additional one (1) year periods (so that the actual term of this
Agreement will always be between two and three years.).

          The term of this Agreement shall extend until all obligations under this Agreement have been
fully performed by Maddy and Summit.

     4. TERMINATION OF EMPLOYMENT BY SUMMIT OR MADDY

          The employment of Maddy may be terminated by any one of the following prior to the expiration
of its normal term, provided that unless otherwise agreed to by the parties, all employment by both
Summit and Bank shall be terminated simultaneously and termination of employment by either Summit
or Bank shall automatically terminate employment with the other in which case Maddy shall be
entitled to the benefits due and payable upon termination set forth elsewhere herein:

          (a) Mutual Agreement. By mutual agreement of the parties upon such terms and
conditions as they may agree.

          (b) Death. By Summit upon the death of Maddy.

          (c) Disability. By Summit upon the legal disability of Maddy, which shall mean that
Maddy shall be unable to perform his duties by reason of any mental or physical disability which is
expected to last at least six (6) months or result in death, as certified by Maddy’s physician and
as approved by Summit.

          (d) For Cause. By Summit for cause upon giving Maddy thirty (30) days advance notice
of such termination, specifying the cause of termination. For purposes of this Agreement, “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; (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; or (iv) Maddy’s negligence,

3

 

malfeasance or misfeasance in the performance of Maddy’s duties that can reasonably be
expected to have an adverse impact on the business of Summit or its affiliates, including but not
limited to the reasonable financial objectives established by the Board of Directors of Summit.

          (e) Change of Control. By Maddy or Summit as set forth in the Change in Control
Agreement upon a Change of Control as defined in the Change in Control Agreement attached hereto as
Exhibit A.

          (f) Breach by Summit. By Maddy in the event of a material breach by Summit of any of
the terms or conditions of this Agreement, in which case the noncompetition and nonsolicitation
provisions set forth in Section VII of this Agreement shall not apply.

          (g) Insolvency, Etc. By Maddy, in the event of the business failure, insolvency,
bankruptcy, or assignment for the benefit of creditors of or by Summit or Bank not attributable to
Maddy, in which case the noncompetition and nonsolicitation provisions set forth in Section VII of
this Agreement shall not apply.

     V. COMPENSATION AND REIMBURSEMENTS

          A. Base Salary. Summit shall pay Maddy for his service to both Summit and Bank, a
base salary at an annual rate not less than $350,000, payable in equal semi-monthly installments
(the “Base Salary”). Maddy’s performance shall be evaluated by the Nominating and Compensation
Committee of Summit at least once each twelve month period, and such evaluation shall be the basis
of determining whether the compensation payable to Maddy shall be increased in the judgment of such
committee directors. Upon review and extension of the Agreement as provided in Section III, above,
the Base Salary shall be adjusted to reflect any increase in compensation above the initial base
salary in effect for that year. All references to Base Salary in this Agreement and the Change in
Control Agreement shall include subsequent increases. No decreases in the Base Salary shall be
permitted during the term. In addition, for service as a member of the Boards of Directors of
Summit or any of Summit’s subsidiaries or affiliates, or their respective committees, Maddy shall
receive such sums as may be paid to members and officers of such boards for their services.

4

 

          B. Incentive Pay. In addition to the Base Salary herein provided for, Maddy shall be
entitled to receive incentive compensation from Summit in accordance with plans adopted by its
Board of Directors. The Board of Directors agrees that Mr. Maddy’s bonus opportunities will not be
less than the opportunities currently available to him under the Summit bonus plan in place at the
time of execution of this Agreement or any extension thereof.

          C. Fringe Benefits. Summit shall afford to Maddy the benefit of all fringe benefits
afforded to other Summit or bank officers, such as pension, life insurance, health and accident
insurance benefits, vacation and sick leave.

          D. Club and Organization Membership and Dues. Summit shall maintain the cost of stock
or membership certificate and the cost of the initiation fee for memberships for a family (general
membership) in one or more country clubs in the trade areas of Summit, which Maddy shall select,
plus dues, assessments and other costs of maintaining such memberships. Summit shall also pay
Maddy’s membership fees and dues in banking, business, civic, professional (including continuing
professional education requirement to maintain his public accountant’s license), and social
organizations in which Maddy is a participating member.

          E. Business Expenses. Summit shall reimburse Maddy for all reasonable expenses
incurred by Maddy in carrying out his duties and responsibilities, including furnishing an
automobile of Maddy’s choice for use by Maddy, with the costs of purchase, maintenance and
operation to be borne by Summit provided that unless otherwise approved by the Board of Directors,
the cost of such automobile shall not exceed $75,000, adjusted annually for inflation.

          F. Termination Payments. In the event of termination of Maddy’s employment prior to
expiration of the term of this Agreement, Maddy or his family shall be compensated as follows:

               1. If terminated under Article IV, Section A of this Agreement (mutual agreement), then such
amount as the parties shall agree.

               2. If terminated under Article IV, Sections B (death) or C (disability), of this Agreement,
then Summit shall pay Maddy (or his family or estate) in a lump sum an amount equal to three (3)
times the Base Salary in effect for the year in which termination occurs. If

5

 

terminated because of Maddy’s death, Summit further agrees to provide health benefits to the
extent permitted under Summit’s health benefit plans to Maddy’s spouse and dependent children for a
period of one (1) year.

               3. If terminated under Article IV, Section D(iv) (for cause), then Summit shall pay Maddy in a
lump sum an amount equal to the Base Salary in effect for the year in which termination occurs
without offset for compensation already paid prior to the effective date of termination.

               4. If
terminated under Article IV, Section D(i) - (iii) (for cause), or any combination of
D(i), (ii), or (iii) or if voluntarily terminated by Maddy and there is no material breach by
Summit, Summit shall pay Maddy’s Base Salary in effect for the year in which termination occurs,
only for such period of his active full-time employment to the date of the termination.

               5. If terminated pursuant to Article IV, Section F (material breach by Summit), then Summit
shall pay Maddy in a lump sum an amount equal to two (2) times his Base Salary in effect for the
year in which termination occurs without offset for compensation already paid prior to the
effective date of termination.

               6. If terminated pursuant to the provisions of the Change in Control Agreement attached hereto
as Exhibit A, Maddy shall be entitled to the compensation set forth therein.

               7. The payments provided for in the event of Maddy’s termination are in the nature of
additional compensation and liquidated damages and upon termination, Maddy shall have no obligation
to mitigate damages incurred by him in connection with such termination and he shall be absolutely
entitled to receive said payments. Upon termination, Summit shall not be liable to Maddy for any
further payments for other damages or compensation, except liabilities to Maddy incurred prior to
termination under Article V, Section C, E and F, if any, of this Agreement.

6

 

     VI. ADDITIONAL PAYMENT BY SUMMIT

          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 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 Summit
and Maddy, the Change in Control Agreement between Summit and Maddy, or any other agreement,
contract, plan or arrangement, but determined without regard to any additional payments required
under this Article VI) (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 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.

          B. Determination of Gross-Up Payment. All determinations required to be made under
this Article VI, 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 to audit its
financial statements (the “Accounting Firm”) which shall provide detailed supporting calculations
both to Summit 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 Summit. Any Gross-Up Payment, as determined pursuant to this Article VI, shall be paid to Maddy
within 30 days of the receipt of the Accounting Firm’s determination.

     VII. NONCOMPETITION AND NONSOLICITATION. In consideration of the covenants set forth herein,
including but not limited to the payments set forth in Section V(F) and the Change in Control
Agreement attached as Exhibit A, Maddy agrees as follows:

7

 

          A. For a period of two (2) years after Maddy’s employment with Summit is terminated for any
reason other than for cause under Paragraph IV(D), or insolvency of Summit not attributable to
Maddy, or material breach by Summit, 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 Paragraph VII(A) attached, which is incorporated herein by reference
This Exhibit was molded to include the counties where 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.

          For a period of one (1) year after Maddy’s employment with Summit is terminated for cause as
set forth in Paragraph IV(D)(iv), 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, the following designated locations in Virginia (See
Exhibit to Paragraph VII(A) attached, which is incorporated herein by reference This Exhibit was
molded to include the counties where 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.

          For purposes of this Paragraph VII(A), 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.

          B. During Maddy’s employment by Summit and for two (2) years after Maddy’s employment with
Summit is terminated for any reason other than for cause under Paragraph IV(D)(iv), insolvency of
Summit not attributable to Maddy, or material breach by Summit, Maddy shall not, on his own behalf
or on behalf of any other person, corporation or entity, either directly or indirectly, solicit,
induce, recruit or cause another person in the employ of the Summit or its affiliates to terminate
his or her employment for the purpose of joining, associating or becoming an affiliate of Maddy in
any business which is in competition with any business or activity engaged in by the Summit or its
affiliates.

8

 

          For a period of one (1) year after Maddy’s employment is terminated for cause as set forth in
Paragraph D(iv), Maddy shall not on his own behalf or on behalf of any other person, corporation or
entity, either directly or indirectly, solicit, induce, recruit or cause another person in the
employ of Summit or its affiliates to terminate his or her employment for the purpose of joining,
associating, or becoming affiliated with Maddy in any business that is in competition with any
business or activity engaged in by Summit or its affiliates.

          C. Maddy further recognizes and acknowledges that in the event of the termination of Maddy’s
employment with Summit for any reason other than for cause under Paragraph IV(D), or material
breach by Summit, (1) a breach of the obligations and conditions set forth herein will irreparably
harm and damage Summit; (2) an award of money damages may not be adequate to remedy such harm; and
(3) considering Maddy’s relevant background, education and experience, Maddy believes that he will
be able to earn a livelihood without violating the foregoing restrictions. Consequently, Maddy
agrees that, in the event that Maddy breaches any of the covenants set forth in this Section VII,
Summit and/or its affiliates shall be entitled to both a preliminary and permanent injunction in
order to prevent the continuation of such harm and to recover money damages, insofar as they can be
determined, including, without limitation, all costs and attorneys’ fees incurred by Summit in
enforcing the provisions of this Section VII.

          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 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.

     VIII. CONFIDENTIAL INFORMATION. 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 Summit employee entitled to know such confidential
information) concerning the assets, customer/client lists, business or affairs of Summit, and its
affiliates, including but not limited to any trade secrets, financial data, employee or
customer/client

9

 

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 his knowledge of and experience with producer bonus plans.

          All files, records, documents, information, letters, notes, media lists, notebook and similar
items relating to the business of Summit shall remain the exclusive property of Summit. Upon the
expiration or earlier termination of this Agreement, or when requested by Summit, Maddy shall
immediately deliver to Summit 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 Summit is the exclusive property of
Summit 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.

     IX. 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 Summit, whether sounding in tort or
contract, shall be resolved by the sole and exclusive remedy of 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 promptly
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:

10

 

          (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.

     X. MISCELLANEOUS PROVISIONS

          A. Notices. Whenever notices are given pursuant to this Agreement, or with relation
to any matter arising hereunder, such notices shall be given to such parties at the address set
opposite their name below, and shall be given in writing, by registered mail, return receipt
requested:

	 	 	 	 	 
	

	 	Summit Financial Group, Inc.
	 	300 North Main Street
	

	 	 	 	Moorefield, West Virginia 26836
	 
	 	 	 	 
	

	 	H. Charles Maddy,
	 	III P. O. Box 979
	

	 	 	 	Old Fields, West Virginia 26845

          B. Prior Agreements. This Agreement represents the entire agreement between the
parties, and all prior representations, promises or statements are merged with and into this
document.

          C. Amendments. Any amendments to this Agreement must be in writing and signed by all
parties hereto except that extensions of the term of this Agreement under Article III may be
evidenced by Board of Directors or Nominating and Compensation Committee minutes.

          D. Governing Law. The laws of West Virginia shall govern the interpretation and
enforcement of this Agreement.

          E. Headings. The headings used in this Agreement are used solely for the convenience
of the parties and are not to be used in construing or interpreting the Agreement.

11

 

          F. Severability of Provisions. The effect of a determination by a court of competent
jurisdiction that one or more of the contract clauses is or are found to be unenforceable, illegal,
contrary to public policy, or otherwise unenforceable, then this Agreement shall remain in full
force and effect except for such clauses.

          G. 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 attorneys’ 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.

          H. Authority to Execute Documents. The undersigned representative of Summit certifies
and represents that he is authorized to enter into its binding agreement with Maddy.

          I. Waiver of Breach. A waiver of a breach of any provision of the Agreement by any
party shall not be construed as a waiver of subsequent breaches of that provision. No requirement
of this Agreement may be waived except in writing by the party adversely affected.

          J. Binding Effect and Assignability. This Agreement shall inure to the benefit of,
and shall be binding upon, the parties hereto and their respective successors, assigns, heirs and
legal representatives, including any entity with which Summit or Bank may merge or consolidate or
to which either of them may transfer all or substantially all of their assets. Insofar as Maddy is
concerned, this Agreement, being personal, cannot be assigned as to performance or for any other
purpose.

12

 

          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

13

 

Exhibit to Paragraph VII(A) of Employment 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.

 

 

Exhibit A

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

2

 

	 	   	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.

3

 

	 	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;

4

 

	 	   	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

5

 

	 	   	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

6

 

	 	   	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

7

 

	 	   	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

8

 

	 	   	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:	 	 
	

	 	 	 	 
	 
	 	 	 	 
	

	 	Its:	 	 
	

	 	 	 	 
	 
	 	 	 	 
	 	 	
H. CHARLES MADDY, III

9

 

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.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

2

 

	 	   	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.

3

 

	 	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;

4

 

	 	   	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

5

 

	 	   	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

6

 

	 	   	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

7

 

	 	   	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

8

 

	 	   	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

9

 

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.

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