Document:

empagree.htm

    EXHIBIT
      10.1

    

    THIRD
      AMENDMENT TO EMPLOYMENT AGREEMENT

     

    THIS
      THIRD AMENDMENT TO EMPLOYMENT AGREEMENT (this
“Agreement”), entered into as of the 14th day of December, 2007, by
      and between
      SUMMIT FINANCIAL GROUP, INC., a West Virginia corporation and bank holding
      company (“Summit”) and H. CHARLES MADDY, III, (“Maddy”).

     

    W
      I T N E
      S S E T H:

     

    WHEREAS,
      on March 4, 2005, Summit and Maddy entered into that certain Employment
      Agreement whereby Summit agreed to employ Maddy and Maddy accepted employment
      as
      the Chief Executive Officer of Summit (the “Employment Agreement”);
      and

     

    WHEREAS,
      the term of the Employment Agreement commenced on March 4, 2005, and extends
      until March 4, 2008; and

     

    WHEREAS,
      the Board of Directors of Summit or a committee designated by the Board of
      Directors of Summit is required by the terms of the Employment Agreement to
      review the Employment Agreement at least annually, and the Board of Directors
      of
      Summit may, with the approval of Maddy, extend the term of the Employment
      Agreement annually for one (1) year periods (so that the actual term of the
      Employment Agreement will always be between two and three years);
      and

     

    WHEREAS,
      on December 6, 2005, the Compensation and Nominating Committee of the Board
      of
      Directors of Summit met to review the Employment Agreement and extended the
      term
      of the Employment Agreement for an additional one (1) year until March 4, 2009;
      and

     

    WHEREAS,
      on December 14, 2006, the Compensation and Nominating Committee of the Board
      of
      Directors of Summit met to review the Employment Agreement and extended the
      term
      of the Employment Agreement for an additional one (1) year until March 4,
      2010;

     

    WHEREAS,
      on December 14, 2007, the Compensation and Nominating Committee of the Board
      of
      Directors of Summit met to review the Employment Agreement and extended the
      term
      of the Employment Agreement for an additional one (1) year until March 4, 2011;
      and

     

    WHEREAS,
      Maddy and Summit desire to enter into this Agreement to evidence the extension
      of the Employment Agreement for an additional one (1) year until March 4,
      2011.

     

    NOW
      THEREFORE, for in consideration of the premises and mutual covenants, agreements
      and undertakings, and for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, the parties covenant and agree
      as
      follows:

     

    1.           Amendment
      to Employment Agreement.  Effective as of the date of this
      Agreement, the term of the Employment Agreement shall be until March 4,
      2011.

     

    2.           Enforceable
      Documents.  Except as modified herein, all terms and conditions of
      the Employment Agreement, as the same may be supplemented, modified, amended
      or
      extended from time to time, are and shall remain in full force and
      effect.

     

    3.           Authority.  The
      undersigned are duly authorized by all required action or agreement to enter
      into this Agreement.

     

    4.           Modifications
      to Agreement.  This Agreement may be amended or modified only by
      an instrument or document in writing signed by the person or entity against
      whom
      enforcement is sought.

     

    5.           Governing
      Law.  This Agreement, and any documents executed in connection
      herewith or as required hereunder, and the rights and obligations of the
      undersigned hereto and thereto, shall be governed by, construed and enforced
      in
      accordance with the laws of the State of West Virginia.

     

    IN
      WITNESS WHEREOF, the parties hereto have duly executed and delivered this
      Agreement as of the date first written above.

     

                        SUMMIT
      FINANCIAL
      GROUP, INC.

    

    

                        By:           /s/
      Oscar M. Bean__________________

     

                        Its:            Chairman
      of the Board of Directors        
    

     

     

                                                                                                                                         
/s/
      H.
      Charles Maddy, III__________________

                         
H.
      Charles Maddy,
      IIIsfgincentivecom.htm

    EXHIBIT
      10.2

    

    

    Summit
      Financial Group, Inc.

    Incentive
      Compensation Plan

    

    December
      14, 2007

    

    Introduction:

    In
      order
      to provide management with incentive to assure that the company operates to
      its
      fullest potential, the Board of Directors of Summit Financial Group,
      Inc.  (the “Company”) has implemented various incentive
      programs.  The Board of Directors of the Company established the
      Incentive Compensation Plan to reward those officers who oversee the various
      facets of the entire company.  The basic specific performance measure
      for the Incentive Compensation Plan is Return on Average Equity
      (ROAE).  This performance measure was chosen because it is widely
      recognized as being a core measure of the Company’s performance and uses our
      shareholder’s equity as a base for measurement.

    

    Incentive
      Compensation Plan Criteria and Method of Calculation:

    At
      the
      end of each year, the Compensation and Nominating Committee will review data
      and
      determine the ROAE level at which officers will become eligible for a
      bonus.  During this review, the Committee will consider, among other
      things, the Company’s peer group data.

    

    After
      determining these levels, the Compensation and Nominating Committee will
      determine the percentage of earnings to allocate to the bonus pool for each
      bonus level.

    

    The
      current ROAE levels at which bonuses will be paid and corresponding percentage
      allocation levels to the bonus pool are as follows:

     

     

    

      
        	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              
	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              	
                *

              

      

    

    Should
      the Company achieve an ROAE of *% to *%, then the allocation to the bonus pool
      will be calculated at *% of net earnings.  An allocation of *% of
      earnings will be made for an ROAE of *% or greater.

    

    The
      Company’s ROAE will be calculated on a quarterly basis.  For bonus
      purposes, “other comprehensive income (loss)” will not be considered when
      calculating average equity.  The bonus pool will be established by
      applying the appropriate percentage to the current earnings on a quarterly
      basis.  The bonus pool will then be divided among plan participants
      using the percentages shown on “Exhibit A”*.

    

    Attached
      to this policy as “Exhibit A”* is the chart which represents sample calculations
      that would be applicable based on the above guidelines.  The sample
      calculation is shown on an annual basis for ease of
      illustration.  However, the Company’s Board of Directors has approved
      the payment of bonuses under the Incentive Compensation Plan on a quarterly
      basis.

    

    Payment:

    The
      Board
      of Directors or Compensation and Nominating Committee shall approve the payments
      under this plan on a quarterly basis.

    

     

    Any
      items
      that qualify as “Extraordinary” under Generally Accepted Accounting Principals
      (GAAP) shall not be considered when calculating bonuses, regardless of whether
      these items have a positive or negative affect.

    

    In
      addition to the bonus pool established based on the ROAE criteria discussed
      above, the Company has also established a discretionary bonus pool under the
      Incentive Compensation Plan.  Bonuses paid from the discretionary pool
      are paid at the sole discretion of the Chief Executive Officer and may be
      awarded to any employee other than the Chief Executive Officer or any other
      Executive Officer.

    

    Any
      conflicts, ambiguities or questions of interpretation will be resolved by the
      Company’s Board of Directors, in its sole discretion.

    

    *
      Confidential, Business Proprietary
      Informationmemoincentive.htm

    

    EXHIBIT
      10.3

    Memorandum

     

    
      	
              To:

            	
              Dave
                Robertson & Ronald Miller

            

    

    From:              
      Charlie Maddy

    
      	
              Date:

            	
              December
                14, 2007

            

    

    
      	
              Re:

            	
              2008
                Incentive Plan – SCB

            

    

    

    

    

    Here
      is
      the 2008 Incentive Bonus Plan for Summit Community Bank.

    

    As
      you
      know, we have established a budget of approximately $* in net income and
      approximately $* in total assets for Summit Community Bank for year ended
      December 31, 2008.  If these targets are met, management will be
      rewarded as follows:

     

    
       

      
        	
                Dave
                  Robertson

              	
                $  *

              
	
                Ronald
                  Miller

              	
                $  *

              
	
                Dawn
                  Frye

              	
                $  *

              
	
                Cyndie
                  Layman

              	
                $  *

              
	
                Discretionary
                  (Dave)

              	
                $  *

              
	
                Discretionary
                  (Ron)

              	
                $  *

              

      

    

    

    

    In
      addition, if the budgeted $* net income is exceeded, we will reserve *% of
      the
      amount over the $* to a pool, which would be divided among key
      managers.  In order to qualify for this additional amount, net income
      for Summit Community Bank would have to be greater than $* after any and all
      bonuses (including the above “budget bonus”) were paid.  The
      calculation would work as follows:

     

     

    

      
        	
                *

              	
                $*

              
	
                *

              	
                  *

              
	
                *

              	
                  *

              
	
                *

              	
                  *%

              
	
                *

              	
                $   *

              
	
                *

              	
                    
                  *

              
	
                *

              	
                $
                    *

              
	
                *

              	
                $   *

              
	 	 

      

    

    
 

    The
      performance pool payment would be divided as follows:

    
 

    
      
        	
                Dave
                  Robertson

              	
                *%

              	
                $
                  *

              
	
                Ronald
                  Miller

              	
                *%

              	
                $
                  *

              
	
                Dawn
                  Frye

              	
                *%

              	
                $
                  *

              
	
                Cyndie
                  Layman

              	
                *%

              	
                $
                  *

              
	
                Discretionary
                  (Dave)

              	
                *%

              	
                $
                  *

              
	
                Discretionary
                  (Ron)

              	
                *%

              	
                $
                  *

              
	
                Reserved

              	
                *%

              	
                $
                  *

              

      

    The
      discretionary amount can be awarded to whatever SCB employee(s) are deserving
      in
      Dave’s or Ron’s discretion.

    

    To
      recap,
      in my example, if the bank were to make $* net in the year 2008 and December’s
      Total Average Assets are at least $*, Dave Robertson’s
      and Ronald Miller’s bonuses would be as follows:

    

    
      	
               

            	
              Budget
                bonus

            	
              $  *

            

    

    
      	
               

            	
              Performance
                bonus

            	
              $  *

            

    

    
      	
               

            	
              Total
                bonus

            	
              $  *

            

    

    

    The
      total
      performance pool total bonus cannot exceed $ *.  Securities gains and
      losses initiated by Summit management will be excluded for bonus calculation
      purposes.  Additionally, derivative market adjustments (that result
      from our recent change in accounting methodology) will also be excluded from
      the
      calculation.

    

    This
      operating plan and budget may be revised if significant structural changes
      occur
      such as the purchase of a new branch, merger, etc.  Summit management
      and board of directors will have sole discretion as to whether these changes
      have occurred in amounts sufficient to make such changes and will advise SCB
      management if these changes are made.

    

    As
      you
      know, the exact date for the Greater Atlantic Financial (GAFC) closing is not
      known.  After this becomes clear, this plan may be
      revised.  Preliminarily however, breaking even on the GAFC branches
      may be a reasonable goal for 2008 so it is nearly as likely that the plan may
      very well stay the same.  We will keep you posted.

    

    Thank
      you
      both for your respective contributions to the success of our
      Company.

    *
      Confidential, Business Proprietary
      Information

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