Document:

exhibit1030.htm

    Exhibit
10.30

     

    AMENDMENT
NO. 3

    TO

    CREDIT
AGREEMENT

     

    AMENDMENT
NO. 3, dated as of March 26, 2009 (this “Amendment No. 3”),
made by and among COLOR EDGE LLC (f/k/a MCEI, LLC), a Delaware limited liability
company (“MCEI”), COLOR EDGE
VISUAL LLC (f/k/a MCEV, LLC), a Delaware limited liability company (“MCEV”), and CRUSH
CREATIVE LLC (f/k/a MCRU, LLC), a Delaware limited liability company (“MCRU”; each of MCEI, MCEV,
and MCRU, referred to as a “Borrower” and,
collectively, as the “Borrowers”), the
Corporate Guarantors signatory hereto, and AMALGAMATED BANK, a New York banking
corporation (the “Lender”).

     

     

    This Amendment No. 3 amends that
certain Credit Agreement, dated as of March 1, 2005, as amended by Amendment No.
1 thereto, dated as of August 8, 2005, and Amendment No. 2 thereto, dated as of
February 27, 2008  (as amended, supplemented or otherwise modified
prior to the date hereof, the “Existing Credit
Agreement”) among the Borrowers, MERISEL,
INC., a Delaware corporation (“Merisel”), MERISEL
AMERICAS, INC., a Delaware corporation (“Merisel Americas”)
and certain other affiliates of the Borrowers as guarantors (“Subsidiary
Guarantors”; each of Merisel, Merisel Americas and the Subsidiary
Guarantors, a “Corporate Guarantor”
and, collectively, the “Corporate
Guarantors”) and Lender.

     

     

    WITNESSETH:

     

     

    WHEREAS, capitalized terms not
otherwise defined herein shall have the same meanings as specified in the
Existing Credit Agreement;

     

     

    WHEREAS, the Loan Parties have
requested that Lender agree to amend the Existing Credit Agreement as more
specifically set forth herein; and

     

     

    WHEREAS, the Lender has
indicated its willingness to agree to such amendment of the Existing Credit
Agreement on the terms and subject to the satisfaction of the conditions set
forth herein.

     

     

    NOW, THEREFORE, in
consideration of the premises and of the mutual covenants and agreements
contained herein, the parties hereto hereby agree as follows:

     

    ARTICLE
1

    AMENDING
PROVISIONS

     

    Section
1.1 Amendment. As of the
Third Amendment Effective Date (as defined in Section 4.1 hereof):

     

    (a) The first
sentence of the definition of “Borrowing Base” in
Section 1.1 of the Existing Credit Agreement is hereby amended by deleting it in
its entirety and inserting, in lieu thereof:   ““Borrowing Base”, at
any time, 80% of the then Eligible Accounts”.

     

    (b) The
definition of “Leverage Ratio” in
Section 1.1 of the Existing Credit Agreement is hereby amended by deleting it in
its entirety and inserting, in lieu thereof, the following:

     

    ““Leverage
Ratio”:  at any time, the ratio of (a) Consolidated
Indebtedness of Merisel and the other Loan Parties as of such time to
(b) Adjusted Consolidated EBITDA of Merisel and the other Loan Parties for
the Test Period ended at or most recently prior to such time.”

     

    (c) The
definition of “Revolving Credit Commitment
Period” in Section 1.1 of the Existing Credit Agreement is hereby
amended, effective as of April 15, 2009, by deleting it in its entirety and
inserting, in lieu thereof, the following:

     

    ““Revolving Credit Commitment
Period”: the period from and including April 15, 2009 to the Revolving
Credit Termination Date or such earlier date on which the Revolving Credit
Commitments shall terminate as provided herein.”

     

    (d) The
definition of “Revolving Credit Termination
Date” in Section 1.1 of the Existing Credit Agreement is hereby amended
by deleting it in its entirety and inserting, in lieu thereof, the
following:

     

    ““Revolving Credit Termination
Date”: means April 13, 2010; provided that the
Revolving Credit Termination Date may be extended for one or more 364-day
periods at the sole discretion of the Lender as set forth in this
paragraph.  So long as no Default or Event of Default has occurred and is
continuing, if Borrower requests, by written notice to the Lender, given no
earlier than 120 days prior to the then current Revolving Credit
Termination Date, but in any event, no later than 90 days prior to the then
current Revolving Credit Termination Date, that such Revolving Credit
Termination Date be extended for a period of 364 days, the Lender may, in its
sole discretion, agree to such request by providing written notice to that
effect to Borrower no later than 30 days prior to the then current
Revolving Credit Termination Date, in which case, such Revolving Credit
Termination Date shall be deemed so extended from the then current Revolving
Credit Termination Date and the last day of such 364 day period shall become the
Revolving Credit Termination Date.  For the avoidance of doubt, if the
Lender has not provided such written notice to Borrower agreeing to any
such extension, no such extension shall occur.  The Borrower
shall be deemed to have represented and warranted on and as of the date of any
such extension of the Revolving Credit Termination Date, that no Default or
Event of Default has occurred and is continuing.”

     

    (e) The
following definitions are added to Section 1.1 of the Existing Credit Agreement
in alphabetical order:

     

     

    ““Adjusted Consolidated
EBITDA”:  for any period with respect to Merisel and its
Subsidiaries, Consolidated EBITDA; provided, that for
periods beginning on and after January 1, 2008 and ending on or before
December 31, 2008, such Consolidated EBITDA shall be adjusted to add back
certain legal fees as set forth on Schedule 1 attached
to Amendment No. 3.”

     

     

     ““Amendment No. 3”
means that certain Amendment No. 3 to Credit Agreement by and among the
Borrowers, Corporate Guarantors and Lender dated as of March 26,
2009.”

     

    (f) Clause
(a) of Section 5.1 of the Existing Credit Agreement is hereby amended by
deleting it in its entirety and inserting, in lieu thereof, the following: “Each
Term Loan shall bear interest at a rate per annum equal to the Base
Rate.”

     

    (g) Clause
(b) of Section 5.1 of the Existing Credit Agreement is hereby amended by
deleting it in its entirety and inserting, in lieu thereof, the following: “Each
Revolving Credit Loan shall bear interest at a rate per annum equal to the Base
Rate plus 1%.”

     

    (h) Clause
(a) of Section 8.1 of the Existing Credit Agreement is hereby amended by
deleting it in its entirety and inserting, in lieu thereof, the
following:

     

    ““as soon
as available, but in any event within 180 days after the end of each fiscal year
of each Borrower, a copy of the consolidated and consolidating balance sheet of
Merisel and its Subsidiaries as at the end of such year and the related
consolidated (and with respect to statement of income, consolidating),
statements of income and retained earnings and of cash flows for such year,
setting forth in each case in comparative form the figures for the previous
year, reported on without a “going concern” or like qualification or exception,
or qualification arising out of the scope of the audit, by BDO Seidman or other
independent certified public accountants acceptable to the Lender;”

     

    (i) Clause
(b) of Section 8.1 of the Existing Credit Agreement is hereby amended by
deleting it in its entirety and inserting, in lieu thereof, the
following:

     

    ““as soon
as available, but in any event not later than 60 days after the end of each of
the first three quarterly periods of each fiscal year of each Borrower, the
unaudited consolidated and consolidating balance sheet of Merisel and its
Subsidiaries as at the end of such quarter and the related unaudited
consolidated (and with respect to statement of income, consolidating) statements
of income and retained earnings and of cash flows of Merisel and its
Subsidiaries for such quarter and the portion of the fiscal year through the end
of such quarter, setting forth in each case in comparative form the figures for
the previous year, certified by a Responsible Officer as being fairly stated in
all material respects (subject to normal year end audit adjustments) and
reviewed pursuant to procedures agreed upon with the Lender by BDO Seidman or
other independent certified public accountants acceptable to the
Lender;”

     

    (j) Clause
(c) of Section 8.1 of the Existing Credit Agreement is hereby amended by
deleting it in its entirety, together with all references to such clause
throughout the Loan Documents.

     

    (k) Exhibit H
to the Existing Credit Agreement, referred to in the definition of “Borrowing Base
Certificate” in Section 1.1 of the Existing Credit Agreement, is hereby
amended by deleting the percentage “85%” in Section 1 thereof in its entirety
and inserting, in lieu thereof, “80%”.

     

    ARTICLE
2

    LIMITED
WAIVER

     

    Section
2.1                                Waiver.  Subject
to the satisfaction of the conditions in Article 4 below, Lender hereby grants a
one-time waiver of all Defaults and Events of Default with respect to the
non-compliance with Section 9.1(a) of the Existing Credit Agreement resulting
solely from the failure of Merisel and its Subsidiaries to maintain a Leverage
Ratio of no greater than 3.0:1 for the fiscal year ended December 31, 2008;
provided, that
such waiver shall not be construed a permanent waiver of Section 9.1(a) of the
Existing Credit Agreement, as amended by this Amendment No. 3.

     

    ARTICLE
3

    COVENANTS
AND LIMITATIONS

     

    Section
3.1 Certain Covenants and
Limitations.  In consideration of the execution and delivery of
this Amendment No. 3 by the Lender, Borrowers hereby agree to pay all costs and
expenses of Lender, including the fees associated with the accounts receivable
audit review, and of its counsel, Nixon Peabody LLP, incurred in connection
herewith or otherwise due and owing as of the date hereof pursuant to Section
11.5 of the Credit Agreement.

     

    ARTICLE
4

    CONDITIONS

     

    Section
4.1 Conditions Precedent to the
Effectiveness of this Amendment No. 3.  This Amendment No. 3
shall become effective as of the date hereof (the “Third Amendment Effective Date”)
provided that each of the following conditions precedent shall have been
satisfied on or before such date:

     

    (a) Amendment.  Lender
has received counterparts of this Amendment No. 3 executed and delivered by an
authorized officer of each of the Loan Parties and the Lender.

     

    (b) Borrowing Base
Certificate.  The Lender shall have received a Borrowing Base
Certificate showing the Borrowing Base as of December 31, 2008, satisfactory in
form and substance to the Lender, executed by the Chief Financial Officer of
Merisel Americas, Inc., the sole shareholder of each Borrower.

     

    (c) Representations and
Warranties.  The representations and warranties contained in
Section 4.1 of this Amendment No. 3 shall be true and correct in all material
respects on and as of the Third Amendment Effective Date, as though made on and
as of such date (except for any such representation and warranty that by its
terms refers to a specific date other than the date first above written, in
which case it shall be true and correct in all material respects as of such
earlier date); and each Loan Party hereby restates each of the representations
and warranties set forth in the Existing Credit Agreement, as amended by this
Amendment No. 3 (including without limitation the Schedules delivered therein),
and represents and warrants to Lender that such representations and warranties
as so amended are true and correct on and as of the date hereof in all material
respects and with the same effect as if made on the date hereof (except for any
such representation and warranty that by its terms refers to a specific date
other than the date first above written, in which case it shall be true and
correct in all material respects as of such earlier date).  Each Loan
Party further hereby agrees that all representations and warranties made herein
shall be deemed to be part of the Existing Credit Agreement for all
purposes.

     

    (d) No Default or Event of
Default.  No Default or Event of Default that has not been
waived by Lender in writing shall have occurred and be continuing or shall occur
after giving effect to this Amendment No. 3.

     

    ARTICLE
5

    MISCELLANEOUS

     

    Section
5.1 Reference to and Effect on
the Loan Documents.  As of the Third Amendment Effective Date,
any reference in any Loan Document to the Existing Credit Agreement shall be to
the Existing Credit Agreement, as amended by this Amendment No.
3.   The execution, delivery and effectiveness of this Amendment
No. 3 shall not operate as a waiver of any right, power or remedy of the Lender
under any of the Loan Documents, nor, except as specifically set forth in
Section 2.1, constitute a waiver of any provision of any of the Loan
Documents.

     

    Section
5.2 Integration.  This
Amendment No. 3 represents the agreement of the Borrowers and the Lender with
respect to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Lender relative to subject matter hereof
not expressly set forth or referred to herein.

     

    Section
5.3 No Third Party
Beneficiaries.  This Amendment No. 3 shall be binding upon and
inure to the benefit of the Loan Parties and the Lender and their respective
successors and assigns.  No Person other than the parties hereto shall
have any rights hereunder or be entitled to rely on this Amendment No. 3, and
all third-party beneficiary rights are hereby expressly disclaimed.

     

    Section
5.4 Execution in
Counterparts. This Amendment No. 3 may be executed by one or more of the
parties to this Amendment No. 3 on any number of separate counterparts
(including by facsimile transmission of signature pages hereto), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

     

    Section
5.5 Governing
Law.  THIS AMENDMENT NO. 3 AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     

     

    [signature
pages follow]

     

    
      
        
          12449142.5

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.

     

     

    
      	
               
      

            	
              BORROWERS:

            

    

     

     

    
      	
               
      

            	
              CRUSH
      CREATIVE LLC

            

    

     

     

    
      	
               
      

            	
              f/k/a
      MCRU, LLC

            

    

     

     

    
      	
               
      

            	
              By:
      MERISEL AMERICAS, INC., as Sole
Member

            

    

     

    
      	
               
      

            	
              By: /s/ Jon H.
      Peterson

            

    

    
      	
               
      

            	
              Name:
      Jon H. Peterson

            

    

    
      	
               
      

            	
              Title:   Chief
      Financial Officer

            

    

    

     

    
      	
               
      

            	
              COLOR
      EDGE LLC

            

    

     

     

    
      	
               
      

            	
              f/k/a
      MCEI, LLC

            

    

     

     

    
      	
               
      

            	
              By:
      MERISEL AMERICAS, INC., as Sole
Member

            

    

     

    
      	
               
      

            	
              By: /s/ Jon H.
      Peterson

            

    

    
      	
               
      

            	
              Name:
      Jon H. Peterson

            

    

    
      	
               
      

            	
              Title:   Chief
      Financial Officer

            

    

    

     

    
      	
               
      

            	
              COLOR
      EDGE VISUAL LLC

            

    

     

     

    
      	
               
      

            	
              f/k/a
      MCEV, LLC

            

    

     

     

    
      	
               
      

            	
              By:
      MERISEL AMERICAS, INC., as Sole
Member

            

    

     

    
      	
               
      

            	
              By: /s/ Jon H.
      Peterson

            

    

    
      	
               
      

            	
              Name:
      Jon H. Peterson

            

    

    
      	
               
      

            	
              Title:   Chief
      Financial Officer

            

    

     

    

     

     

    
      	
               
      

            	
              CORPORATE
      GUARANTORS:

            

    

     

    
      	
               
      

            	
              MERISEL,
      INC.

            

    

    

    
      	
               
      

            	
              By: /s/ Jon H.
      Peterson

            

    

    Name: Jon
H. Peterson

    Title:   Chief
Financial Officer

    

    
      	
               
      

            	
              MERISEL
      AMERICAS, INC.

            

    

    

    
      	
               
      

            	
              By:
      /s/ Jon H.
      Peterson

            

    

    
      	
               
      

            	
              Name:
      Jon H. Peterson

            

    

    
      	
               
      

            	
              Title:   Chief
      Financial Officer

            

    

    

    
      	
               
      

            	
              COMP 24 LLC (f/k/a MC24,
      LLC)

            

    

    
      	
               
      

            	
              FUEL
      DIGITAL, LLC

            

    

    
      	
               
      

            	
              DENNIS
      CURTIN STUDIOS, LLC

            

    

    
      	
               
      

            	
              MADP,
      LLC

            

    

     

     

    
      	
               
      

            	
              By:
      MERISEL AMERICAS, INC., as Sole Member of each of the above-named
      entities

            

    

     

    
      	
               
      

            	
              By: /s/ Jon H.
      Peterson

            

    

    
      	
               
      

            	
              Name:
      Jon H. Peterson

            

    

    
      	
               
      

            	
              Title:   Chief
      Financial Officer

            

    

     

    
      	
               
      

            	
              ADVERTISING
      PROPS, INC.

            

    

     

     

    
      	
               
      

            	
              By:
      MADP LLC, as Sole Shareholder

            

    

     

    
      	
               
      

            	
              By:
      /s/ Jon H.
      Peterson

            

    

    
      	
               
      

            	
              Name:
      Jon H. Peterson

            

    

    
      	
               
      

            	
              Title:   Manager

            

    

    
      
        
          Signature
page to Amendment No. 3

           

        

         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              LENDER:

            

    

     

     

    
      	
               
      

            	
              AMALGAMATED
      BANK

            

    

     

    
      	
               
      

            	
              By:

            	
              /s/ Louis
      DeLuca

            	 

    

    
      	
               
      

            	
              Name:
      Louis DeLuca

            

    

    
      	
               
      

            	
              Title:   Executive
      Vice President

            

    

     

    

     

     

    

     

    
      
        
          Signature
page to Amendment No. 3

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
1

    

    Adjustments
to EBITDA

    

    
      	
              1.

            	
              The
      March 31, 2008 Consolidated EBITDA figure shall be adjusted upward by
      $834,000.

            

    

    

    
      	
              2.

            	
              The
      June 30, 2008 Consolidated EBITDA figure shall be adjusted upward by
      $1,106,000.

            

    

    

    
      	
              3.

            	
              The
      September 30, 2008 Consolidated EBITDA figure shall be adjusted upward by
      $309,000.

            

    

    

    
      	
              4.

            	
              The
      December 31, 2008 Consolidated EBITDA figure shall be adjusted upward by
      $115,000.exawpsubpromnote033009.htm

    
 

    
      

      

    

     

    
 

    EXHIBIT
10.1

    

    

    this
note does not represent a deposit and is not insured by the federal deposit
insurance corporation or any other governmental agency.  this
note represents an unsecured
obligation of summit financial group,
inc.

    

    this
note has not been registered under the securities act of 1933, as amended (the “act”), or
registered or qualified under the securities laws of any state, and the holder
hereof cannot make any sale, assignment or other transfer of any such note
except pursuant to an offering of such note duly registered under the act and
registered or qualified under any applicable state securities laws, or under
such other circumstances as in the opinion of counsel for or satisfactory to the
company shall not, at the time, require registration under the act and/or
registration or qualification under any state securities laws.

    

    

    $5,000,000                                                                                                                                                                                         March 30, 2009

    

    SUMMIT
FINANCIAL GROUP, INC.

    10%
Subordinated Promissory Note Due March 31, 2019

    

    FOR VALUE RECEIVED, the undersigned,
SUMMIT FINANCIAL GROUP, INC., a West Virginia corporation (the “Company”),
hereby promises to pay to the order of ALLEGHENY WOOD PRODUCTS, INC. or
registered assigns (the “Holder”), the principal sum of FIVE MILLION DOLLARS
($5,000,000) on March 31, 2019 and to pay interest on the unpaid balance thereof
at the rate of 10% per annum, as provided for herein.

    

    Section
1.              Definitions.

    

    Section
1.1.           As used
herein, the term “Business Day” shall mean any day other than a Saturday, a
Sunday or other day on which commercial banks in Moorefield, West Virginia are
authorized by law to close.

    

    Section
1.2.           Interest
Payment Date shall have the meaning provided in Section 3.

    

    Section
1.3.           As used
herein, the term “Junior Securities” means (i) shares of Common Stock of the
Company, (ii) shares of any other class or classes of capital stock of the
Company, (iii) any other non-debt securities of the Company (whether or not such
other securities are convertible into Junior Securities of the Company), or (iv)
debt securities of the Company (other than this Note) as to which, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such debt securities are not Senior
Indebtedness with respect to, or do not rank  pari passu with, this
Note.

    

    Section
1.4.           As used
herein, the term “Note” shall mean this Note.

    

    Section
1.5.           Note
Register shall have the meaning provided in Section 9.1.

    

    Section
1.6.           Notice of
Redemption shall have the meaning provided in Section 6.2.

    

    Section
1.7.           As used
herein, “Redemption Date” shall mean the date specified in the Notice of
Redemption on which the company shall return all or a portion of the
Notes.

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    Section
1.8.           Redemption
Price shall have the meaning provided in Section 6.1.

    

    Section
1.9.           As used
herein, “Senior Indebtedness” shall mean shall mean any obligation of the
Company to its general creditors and the principal (and premium, if any) and
interest on the following whether now outstanding or subsequently incurred,
assumed or created, including (i) indebtedness of the Company for money borrowed
or purchased, similar obligations arising from off-balance sheet guarantees and
direct credit substitutes, and obligations associated with derivative products
such as interest and foreign exchange rate contracts, commodity contracts, and
similar arrangements and (ii) any deferrals, renewals, extensions and
refundings of any such Senior Indebtedness; other than (i) any indebtedness or
obligation as to which, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such obligation
(A) is not Senior Indebtedness with respect to the Note or (B) ranks pari passu with this Note,
and (ii) indebtedness evidenced by this Note.

    

    Section
1.10          As used herein,
the “Special Record Date” shall mean the date fixed by the Company to determine
holders of record of this Note which date shall not be more than 15 days nor
less than 10 days prior to the date of the proposed payment of defaulted
interest pursuant to Section 3.

    

    Section
2.              Principal.  The
principal amount of this Note shall be due and payable on March 31,
2019.  Payment of the principal shall be made by check mailed to the
address of the Holder of this Note as it appears in the Note Register to be
maintained by the Company.

    

    Section
3.              Interest.  Interest
on this Note shall begin to accrue on the date hereof and shall be due and
payable monthly in arrears on the first day of each month during the term hereof
(each an “Interest Payment Date”), commencing May 1, 2009 (or the next Business
Day following such date, in the event such date is not a Business
Day).  Interest will accrue based on the actual number of days that
principal is outstanding over a year of 360 days.  Payments of
interest will be made on the Interest Payment Dates to the person in whose name
this Note is registered at the close of business on the Regular Record Date
which shall be the 15th day of each month next preceding such Interest Payment
Date.

    

    Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid (i) to the person in whose name
this Note is registered at the close of business on a Special Record Date for
the proposed payment of such defaulted interest (to be fixed as described
below), notice whereof shall be sent to the Holder of this Note by first-class,
postage prepaid mail at his address as it appears in the Note Register not less
than 10 days prior to such Special Record Date or (ii) in any other lawful
manner.  Subject to the foregoing provision, each Note delivered upon
registration of transfer of, or in exchange for or in lieu of, any other Note
shall carry the rights to accrue interest and to accrued, but unpaid, interest
which were carried by such other Note.  Payment of  interest
is to be made by check mailed to the address of the person entitled thereto as
it appears in the Note Register to be maintained by the Company.

    

    Section
4.              Subordination/Ranking.

    

    Section
4.1.           (a) All
payments of principal and interest pursuant to this Note shall be subordinated,
in the manner and to the extent provided in this Note, to the prior payment in
full of all “Senior Indebtedness.”  The Company covenants and agrees
that, anything herein to the contrary notwithstanding, the indebtedness
evidenced by this Note is subordinate and junior in right of payment to all
Senior Indebtedness to the extent provided herein, and the Holder of this Note,
by such Holder’s acceptance hereof, likewise covenants and agrees to the
subordination herein provided and shall be bound by the provisions
hereof.  Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of these subordination provisions irrespective of
any amendment, modification or waiver of any term of the Senior Indebtedness or
extension or renewal of the Senior Indebtedness.

    
      
         

      

      
        2 

        
          

        

      

      
         

      

    

    

    (b)           In
the event that the Company shall default in the payment of any principal of (or
premium, if any), or interest on, any Senior Indebtedness when the same become
due and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, upon written notice of such
default to the Company by the holder(s) of Senior Indebtedness or any trustee
therefor, unless and until such default shall have been cured or waived or shall
have ceased to exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made on
account of the principal of (or premium, if any), or interest on, this Note, or
in respect of any redemption, repayment, retirement, purchase or other
acquisition of this Note.

    

    (c)           In
the event of

    

    
      	
               
      

            	
              (i)

            	
              any
      insolvency, bankruptcy, receivership, liquidation, reorganization,
      readjustment, composition or other similar proceeding relating to the
      Company, its creditors or its
property,

            

    

    

    
      	
               
      

            	
              (ii)

            	
              any
      proceeding for the liquidation, dissolution or other winding up of the
      Company, voluntary or involuntary, whether or not involving insolvency or
      bankruptcy proceedings,

            

    

    

    
      	
               
      

            	
              (iii)

            	
              any
      assignment by the Company for the benefit of creditors,
  or

            

    

    

    
      	
               
      

            	
              (iv)

            	
              any
      other marshaling of the assets of the
Company,

            

    

    

    all
Senior Indebtedness (including any interest thereon, whether accruing before or
after the commencement of any such proceedings) shall first be paid in full
before any payment or distribution, whether in cash, securities or other
property, shall be made to any Holder of this Note on account of the principal
of, or interest on, this Note.  Any payment or distribution, whether
in cash, securities or other property which would otherwise (but for these
subordination provisions) be payable or deliverable in respect of this Note
shall be paid or delivered directly to the holders of Senior Indebtedness in
accordance with the priorities then existing among such holders until all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceedings) shall have been paid in full.  In the event of
any such proceeding, after payment in full of all sums owing with respect to
Senior Indebtedness, the Holder of this Note, together with the holders of any
obligations of the Company ranking on a parity with this Note, shall be entitled
to be paid from the remaining assets of the Company the amounts at the time due
and owing on account of unpaid principal of (and premium, if any, and interest
on, this Note and such other obligations before any payment or other
distribution, whether in cash, property or otherwise, shall be made on account
of any capital stock or any obligations of the Company ranking junior to this
Note and such other obligations.

    

    (d)           In
the event that, notwithstanding the foregoing, any payment or distribution of
any character or any security, whether in cash, securities or other property
shall be received by any Holder of this Note in contravention of any of the
terms hereof, such payment or distribution or security shall be received in
trust for the benefit of, and shall be paid over or delivered and transferred
to, the holders of the Senior Indebtedness at the time outstanding in accordance
with the priorities then existing among such holders for application to the
payment of all Senior Indebtedness remaining unpaid, to the extent necessary to
pay all such Senior Indebtedness in full.  In the event of the failure
of any such Holder to endorse or assign any such payment, distribution or
security, each holder of Senior Indebtedness is hereby irrevocably authorized to
endorse or assign the same.

    

    (e)           Nothing
contained herein shall impair, as between the Company and the Holder of this
Note, the obligation of the Company to pay such Holder the principal of, (and
premium, if any) and

    
      
         

      

      
        3 

        
          

        

      

      
         

      

    

    interest
on, this Note or prevent such Holder from exercising all rights, powers and
remedies otherwise permitted by applicable law or hereunder upon a default or
Event of Default (as defined in Section 8 hereof) hereunder, all subject to the
rights of the holders of the Senior Indebtedness to receive cash, securities or
other property otherwise payable or deliverable to the Holders of this
Note.

    

    Section
4.2.           Senior
Indebtedness shall not be deemed to have been paid in full unless the holders
thereof shall have received cash, securities or other property equal to the
amount of such Senior Indebtedness then outstanding.  Upon the payment
in full of all Senior Indebtedness, the Holder of this Note together with all
other subordinated debt of the Company ranking on a parity therewith shall be
subrogated to all rights of any holders of Senior Indebtedness to receive any
further payments or distributions applicable to the Senior Indebtedness until
the indebtedness evidenced by this Note shall have been paid in full, and such
payments or distributions received by the Holder thereof, by reason of such
subrogation, of cash, securities or other property which otherwise would be paid
or distributed to the holders of Senior Indebtedness, shall, as between the
Company and its creditors other than the holders of Senior Indebtedness, on the
one hand, and such Holders on the other hand, be deemed to be a payment by the
Company on account of Senior Indebtedness and not on account of this
Note.  No present or future holder of any Senior Indebtedness shall be
prejudiced in the right to enforce subordination of the indebtedness evidenced
by this Note by any act or failure to act on the part of the
Company.

    

    Section
4.3.           The
provisions of this Note shall not impair any rights, remedies or powers of any
secured creditor of the Company in respect of any security
interest.  The securing of any obligations of the Company otherwise
ranking on a parity with this Note or ranking junior to such Note shall not be
deemed to prevent such obligations from constituting, respectively, obligations
ranking on a parity with such Note or ranking junior to such Note.

    

    Section
4.4.           No
modification or amendment of the subordination provisions of Section 4 hereof in
a manner adverse to the holders of Senior Indebtedness may be made without the
consent of all holders of Senior Indebtedness.

    

    Section
4.5.           This Note
shall rank pari passu
with the Company’s Variable Rate Subordinated Debt Security Due October 15,
2015.  This Note shall rank senior to (i) the Company’s Floating Rate
Junior Subordinated Debt Securities due 2032, (ii) the Company’s Junior Debt
Securities Due 2034 and (iii) the Company’s Floating Rate Junior
Subordinated Notes due 2036.

    

    Section
5.              Certain
Covenants.

    

    Section
5.1.           Company May Consolidate,
Etc. Only on Certain Terms.  The Company shall not consolidate
or merge into any other person or convey, transfer or lease its properties and
assets substantially as an entirety to any person, and the Company shall not
permit any person to consolidate with or merge into the Company, unless, in case
the Company shall consolidate with or merge into another person or convey,
transfer or lease its properties and assets substantially as an entirety to any
person, the person formed by such consolidation or into which the Company is
merged or the person which acquires by conveyance or transfer, or which leases,
the properties and assets of the Company substantially as an entirety shall be a
corporation, partnership or trust, shall be organized and validly existing under
the laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, in form satisfactory to the Company, the
due and punctual payment of the principal of (and premium, if any), and interest
on, all of the Notes and the performance or observance of every covenant of the
Notes on the part of the Company to be performed or observed.

    

    Section
5.2.           So long as
any principal remains outstanding hereunder, the Company will not, without the
prior written consent of the Holder, which consent will not be unreasonably
withheld, enter into any transactions involving the acquisition of a bank or
bank or bank holding company.

    
      
         

      

      
        4 

        
          

        

      

      
         

      

    

    

    Section
6.              Optional
Redemption.

    

    Section
6.1.           This Note
(or any successor Note) may be redeemed at the election of the Company, as a
whole or from time to time in part, on any Interest Payment Date on or after
April 1, 2014 at the then outstanding principal amount of the Note (the
“Redemption Price”).  The Redemption Price will be delivered to the
Holder, together with accrued, but unpaid, interest to the Redemption
Date.

    

    Section
6.2.           Notice of
Redemption shall be in writing and sent by first-class mail, postage prepaid,
not less than 30 nor more than 60 days prior to the Redemption Date, to the
Holder at such Holder’s address appearing in the Note Register.

    

    All Notices of Redemption shall
state:

    

    (a)           the
Redemption Date,

    

    (b)           the
Redemption Price,

    

    
      	
               
      

            	
              (c)

            	
              in
      the case of partial redemption of the Note, the principal amount to be
      redeemed,

            

    

    

    
      	
               
      

            	
              (d)

            	
              that
      on the Redemption Date the Redemption Price will become due and payable
      upon such Note to be redeemed and that interest thereon will cease to
      accrue on and after said date, and

            

    

    

    
      	
               
      

            	
              (e)

            	
              the
      place or places where any such Note is to be surrendered for payment of
      the Redemption Price.

            

    

    

    Any immaterial defect in said notice
shall not affect the validity of the proceedings for the redemption of any other
Note or portion thereof.  Any notice that is mailed in the manner
herein provided shall be conclusively presumed to have been given whether or not
the Holder receives said notice.

    

    Section
6.3.           Prior to
any Redemption Date, the Company shall segregate and hold in trust an amount of
money sufficient to pay the Redemption Price of, and accrued, but unpaid,
interest on, any Note which is to be redeemed on that date.

    

    Notice of redemption having been given
as aforesaid, any Note so to be redeemed shall, on the Redemption Date, become
due and payable at the Redemption Price therein specified, and from and after
such date (unless the Company shall default in the payment of the Redemption
Price and accrued interest) such Note shall cease to bear
interest.  Upon surrender of any such Note for redemption in
accordance with said notice, such Note shall be paid by the Company at the
Redemption Price, together with accrued interest to the Redemption Date; provided, however, that
installments of interest payable on an Interest Payment Date occurring prior to
or on the Redemption Date shall be payable to the Holders of such Note
registered as such at the close of business on the relevant Regular Record
Date.

    

    If any Note called for redemption shall
not be so paid upon surrender thereof for redemption, the principal (and
premium, if any) shall, until paid, bear interest from the Redemption Date at
the rate borne by the Note.

    

    Section
6.4.           Any Note
which is to be redeemed only in part shall be surrendered at the principal
office of the Company (with, if the Company so requires, due endorsement by, or
a written instrument of transfer in form satisfactory to the Company duly
executed by, the Holder thereof or his

    
      
         

      

      
        5 

        
          

        

      

      
         

      

    

    attorney
duly authorized in writing), and the Company shall execute and deliver to the
Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Note so surrendered.

    

    Section
7.              Affirmative
Covenants.

    

    Section
7.1.           The
Company will use its best efforts to preserve and keep in full force and effect
its corporate existence and maintain all rights, licenses and permits necessary
to the proper conduct of its business.

    

    Section
7.2.           The
Company will at all times keep proper books of record and account in which full,
true and correct entries will be made of all of its dealings, businesses and
affairs in accordance with sound accounting practices.

    

    Section
7.3.           The
Company will not (1) declare or pay any dividend or make any other distribution
on any Junior Securities of the Company, except dividends or distributions
payable in Junior Securities of the Company, or (2) make any special or
extraordinary payments to any of the Company’s shareholders, employees, or
directors or their affiliates, or (3) purchase, redeem or otherwise acquire or
retire for value any Junior Securities of the Company, except Junior Securities
acquired upon conversion thereof into other Junior Securities of the Company, or
(4) permit a subsidiary of the Company to purchase, redeem or otherwise acquire
or retire for value any Junior Securities of the Company or make any special or
extraordinary payments to any of the Company’s shareholders, employees or
directors or their affiliates, if, at the time such dividend, distribution,
purchase, redemption, other acquisition or payment is effected, a default in the
payment of any interest upon any Note when it becomes due and payable or a
default in the payment of the principal of (or premium, if any, on) any Note at
its maturity shall have occurred and be continuing.

    

    Section
7.4            In
the event that the Company issues additional subordinated debt in the future,
the Company commits that this Note will rank pari passu with all such
future subordinated debt issuances.

    

    Section
8.              Default
Provisions.  Upon the occurrence of any one or more of the
following events (herein called “Events of Default”), whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law, pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body:

    

    (a)           the
entry of a decree or an order for relief in respect of the Company by a court
having jurisdiction in the premises in an involuntary case under the federal
bankruptcy law, as now or hereafter constituted, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days,
or

    

    (b)           the
commencement by the Company of a voluntary case under the federal bankruptcy
laws, as now or hereafter constituted, or the consent by the Company to the
entry of a decree or order for relief in an involuntary case under such law,
or

    

    (c)           the
appointment of a receiver for Summit Community Bank, the Company’s wholly-owned
subsidiary,

     

    then the
Holder of this Note, at any time thereafter that such Event of Default is
continuing, by notice in writing mailed or delivered to the Company, declare the
unpaid principal of all this Note and all interest then accrued, but unpaid, on
such Note immediately due and payable, and such principal and interest
shall

    
      
         

      

      
        6 

        
          

        

      

      
         

      

    

    thereupon
become and be immediately due and payable, without presentation, demand,
protest, notice of protest or other notice of dishonor, all of which are hereby
expressly waived by the Company.

    

    In case any one or more defaults under
this Note shall occur and be continuing, the Holder of this Note may, to the
extent permitted by law, proceed to protect and enforce the rights of such
Holder either by suit in equity and/or by action at law, whether for the
specific performance of any covenant or agreement contained in this Note or in
the aid of the exercise of any power granted in this Note, or proceed to obtain
a judgment or any other relief whatsoever appropriate to the action or
proceeding, or proceed to enforce any other legal or equitable right of the
Holder of this Note.

    

    Section
9.              Registration, Registration
of Transfer and Exchange.

    

    Section
9.1            The
Company shall cause to be kept at the principal office of the Company a register
(the register maintained in such office being herein sometimes collectively
referred to as the “Note Register”) in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of this Note and of transfers of this Note, subject to applicable state and
federal securities laws.  Upon surrender for registration of transfer
of the Note at the principal office of the Company, the Company shall execute
and deliver, in the name of the designated transferee or transferees, one or
more new Notes in minimum denominations of $1,000 and integral multiples of
$1,000.

    

    At the option of the Holder, this Note
may be exchanged for other Notes of any authorized denominations and of a like
aggregate principal amount, upon surrender of this Note for such
exchange.  Whenever the Note is so surrendered for exchange, the
Company shall execute and deliver the Note which the Holder making the exchange
is entitled to receive.

    

    All Notes issued upon any registration
of transfer or exchange shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits as the Notes
surrendered upon such registration of transfer or exchange.  Every
Note presented or surrendered for registration of transfer or exchange shall (if
so required by the Company) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company duly executed, by the
Holder thereof or his attorney duly authorized in writing.  No service
charge shall be made for any registration of transfer or exchange of Notes, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Notes.

    

    The Company shall not be required (i)
to issue, register the transfer of or exchange any Note during a period
beginning at the opening of business 15 days before the day of the mailing of a
Notice of Redemption of Notes selected for redemption under Section 6.1 and
ending at the close of business on the day of such mailing, or (ii) to register
the transfer of or exchange of any Note so selected for redemption in whole or
in part, except the unredeemed portion of any Note being redeemed in
part.

    

    Section
9.2.           If any
mutilated Note is surrendered to the Company, the Company shall execute and
deliver in exchange therefor a new Note of like tenor and principal amount and
bearing a number not contemporaneously outstanding.  If there shall be
delivered to the Company (i) evidence to its satisfaction of the destruction,
loss or theft of any Note and (ii) such security or indemnity as may be required
by it to save the Company and any agent harmless, then, in the absence of notice
to the Company that such Note has been acquired by a bona fide purchaser, the
Company shall execute and deliver, in lieu of any such destroyed, lost or stolen
Note, a new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.  In case any such mutilated, destroyed,
lost or stolen Note has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Note, pay such
Note.

    
      
         

      

      
        7 

        
          

        

      

      
         

      

    

    

    Upon the issuance of any new Note under
this Section, the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses connected therewith.

    

    Every new Note issued pursuant to this
Section in lieu of any destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Note shall be at any time enforceable by
anyone.

    

    The provisions of this Section are
exclusive and shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes.

    

    Section
9.3.           If an
Event of Default shall have occurred and be continuing, a Holder shall have a
right to do either or both of the following for a purpose reasonably related to
such Holder’s interest as a Holder:  (a) inspect and copy the Note
Register during usual business hours upon five (5) business days’ prior written
demand upon the Company; or (b) obtain from the Company, upon written demand and
upon the tender of a reasonable charge therefor (the amount of which charge
shall be stated to the Holder by the Company upon request), a copy of the Note
Register as of the most recent date for which it has been compiled or as of a
date specified by the Holder subsequent to the date of demand.  The
Note Register shall be made available on or before the later of five (5)
business days after the demand is received or the date specified therein as the
date as of which the Note Register is to be compiled.

    

    Section
10.            Governing
Law.

    

    This Note shall be governed by and for
all purposes shall be construed in accordance with the laws of the State of West
Virginia, without regard to its choice of law principles.

    

    

                                                 SUMMIT FINANCIAL GROUP,
INC.

    

    

    
      	
               
      

            	
              By:

            	
              /s/  Robert
      S. Tissue

            	 

    

    
      	
               
      

            	
              Print
      Name:

            	
              Robert S.
      Tissue

            	 

    

    
      	
               
      

            	
              Title:

            	
              Senior Vice President,
      Chief Financial Officer

            

    

    

    Witness:

    

    

    _/s/ Teresa D. Ely___________

    Corporate
Secretary

     

    
 

    
      
         

      

      
        8

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