Document:

EX-10.1

 

Exhibit 10.1

KEYCORP

AMENDED AND RESTATED

SECOND DIRECTOR DEFERRED COMPENSATION PLAN

     The KeyCorp Second Director Deferred Compensation Plan (the “Plan”), originally established
December 28, 2004 and amended and restated as of January 1, 2005, is hereby again amended and
restated on March 8, 2007 to change the rate of interest of the Interest Bearing Account as of
January 1, 2007. The Plan, as structured, is designed to provide directors with the opportunity to
defer payment of their directors’ fees and vested equity awards in accordance with the provisions
of this Plan. It is the intention of KeyCorp and it is the understanding of the Directors
participating in the Plan, that the Plan constitutes a nonqualified deferred compensation plan
under the provisions of Section 409A of the Code and applicable regulations issued thereunder.

ARTICLE I

DEFINITIONS

     For the purposes hereof, the following words and phrases shall have the meanings indicated.

	 	1.	 	“Account” shall mean the bookkeeping account established in accordance with
Article II hereof.
	 
	 	2.	 	“Beneficiary” shall mean any person designated by a Participant in accordance
with the Plan to receive payment of all or a portion of the remaining balance of the
Participant’s Account in the event of the death of the Participant prior to receipt by
the Participant of the entire amount credited to the Participant’s Account.
	 
	 	3.	 	“Change of Control” shall be deemed to have occurred in accordance with the
requirements of Section 409A of the Code and applicable regulations issued thereunder,
if a change in the ownership or the effective control of the Corporation occurs, or if
there occurs a change in the ownership of a substantial portion of the assets of the
Corporation.
	 
	 	4.	 	“Corporation” shall mean KeyCorp, a bank holding company and its corporate
successors, including the surviving corporation resulting from any merger of KeyCorp
with any other corporation or corporations.
	 
	 	5.	 	“Director” shall mean (i) any member of the Board of Directors of the
Corporation and (ii) any member of the Board of Directors of a Subsidiary.
	 
	 	6.	 	“Election Agreement” shall mean the written election to defer Fees signed in
writing by the Director and in the form provided by the Corporation.
	 
	 	7.	 	“Fees” shall mean the fees earned as a Director.

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	 	8.	 	“Participant” shall mean any Director who has at any time elected to defer
the receipt of Fees in accordance with the Plan.
	 
	 	9.	 	“Plan” shall mean this Second Director Deferred Compensation Plan, together
with all amendments hereto.
	 
	 	10.	 	“Subsidiary” shall mean a corporation organized and existing under the laws
of the United States or of any state or the District of Columbia of which more than
50% percent of the issued and outstanding stock is owned by the Corporation or by a
Subsidiary of the Corporation, and which has been designated by the Board of Directors
or the Chief Executive Officer of the Corporation as a Subsidiary eligible to
participate in the Plan.
	 
	 	11.	 	“Year” shall mean the calendar year.

ARTICLE II

ELECTION TO DEFER

     1. Eligibility. Any Director may elect to defer receipt of all or a specified portion
of his or her Fees for any Year in accordance with Section 2 of this Article.

     2. Election to Defer. A Director who desires to defer the payment of all or a portion
of his or her Fees for any Year must complete and deliver an Election Agreement to the Corporation
no later than the last day of the Year prior to the Year for which the Fees are earned by the
Director; provided, however, that any Director hereafter elected to the Board of Directors of the
Corporation or a Subsidiary who was not a Director on the preceding December 31 may make an
election to defer payment of Fees for the Year in which he or she is elected to the Board of
Directors by delivering the Election Agreement to the Corporation within 30 days of first becoming
eligible to participate in the Plan. A Director who timely delivers the Election Agreement to the
Corporation shall be a Participant in the Plan upon the Corporation’s acceptance of such Election
Agreement.

     3. Amount Deferred; Date of Deferral. A Participant shall designate on the Election
Agreement (a) the amount of his or her Fees that are to be deferred to the Plan for any Year, (b)
the date on which the Participant’s Fees shall be distributed, (c) whether the distribution of
deferred Fees is to be paid in its entirety or whether such Fees shall be paid in installments, and
(d) if in installments, the number of quarterly installments. Deferrals shall be until the earlier
to occur: (i) the date specified by the Participant which may be not later than the date on which
the Participant would attain age 72, or (ii) the date of death of the Participant, at which time
payment of the amount deferred shall be made in accordance with Section 7 or 10 of this Article. A
Participant may select not more than one date in each Election Agreement upon which distribution
shall be made or when installments shall begin; distribution dates shall be the first business day
of a calendar quarter.

     4. Account. The Corporation shall maintain an Account of the Fees deferred by each
Participant. A Participant shall designate on the Election Agreement whether to have the

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Account
valued on the basis of KeyCorp Common Shares in accordance with Section 5 of this Article or
receive interest in accordance with Section 6 of this Article. The Corporation may, if necessary
or desirable, establish separate Accounts for a Participant to properly account for amounts
deferred under the different alternatives and Years; all such Accounts are collectively referred to
herein as the Account. The Account based on KeyCorp Common Shares shall be known as the “Common
Shares Account”, and the interest bearing account shall be known as the “Interest Bearing Account”;
a Participant may defer a portion of his or her Fees into each type of Account.

     5. Common Shares Account. If a Participant elects to have all or a portion of his or
her Fees deferred into the Common Shares Account, as of the last business day of any quarter, there
shall be added to such Account the number of Common Shares (whole and fractional, rounded to the
nearest one-hundredth of a share) equal to the dollar amount of such Fees payable for such calendar
quarter plus all dividends payable during such quarter on the Common Shares held in the Account on
the first day of such quarter divided by the market value of the Common Shares at the close of
business on the last business day of such quarter.

     6. Interest Bearing Account. If a Participant elects to have all or a portion of his
or her Fees deferred into the Interest Bearing Account, there shall be added to the Account as of
the last business day of each calendar quarter the dollar amount of such Fees payable for such
calendar quarter plus all interest payable on such Interest Bearing Account for such quarter as
follows: A Participant’s account will receive interest on the average daily balance in the
Interest Bearing Account during each month at a rate equal to 120% of the long term federal rate as
published by the Internal Revenue Service for that month, compounded monthly, and divided by 12.

     7. Payment of Account; Period of Deferral. The amount of a Participant’s Account
shall be paid to the Participant in a single payment and/or in a number of substantially equal
consecutive quarterly installments (not to exceed 40), as elected by the Participant in his or her
Election Agreement. Distributions from the Interest Bearing Account shall be in cash.
Distributions from the Common Shares Account shall be in Common Shares. The amount of the Account
remaining after payment of an installment shall continue to be valued in accordance with Section 5
of this Article or bear interest in accordance with Section 6 of this Article. Full payment or the
first quarterly installment, as the case may be, shall be made as soon as administratively possible
after (i) the date specified in Section 3 of this Article, or (ii) the date of the Participant’s
death.

     Any installment payment shall be made pro rata from the Common Shares Account and the Interest
Bearing Account. The election as to the time for and method of payment of the amount of the
Account relating to Fees deferred for a particular Year shall be made on the Election Agreement(s)
and may not thereafter be altered except as provided in Section 10 of this Article.

     In the event that a Participant elects to receive installment payments under this Section 7,

	 	(a)	 	The amount of the distribution from the Common Shares Account shall be valued
based on the fair market value of the Common Shares on the last business day of the
calendar quarter immediately prior to the distribution date;

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	 	(b)	 	The amount of the distribution from the Interest Bearing Account shall be
valued based on the value of such Account on the last business day of the calendar
quarter immediately prior to such distribution date;
	 
	 	(c)	 	The amount of each installment shall be determined by dividing the value of
the Common Shares Account, the Interest Bearing Account, or both, as the case may be,
by the number of installments remaining to be paid to the Participant.

     8. Small Payments. Notwithstanding the foregoing, if the quarterly installment
payment elected under any Election Agreement would result in a quarterly payment of less than $500
in cash or Common Shares, as the case may be, the Participant shall receive an immediate lump sum
payment of the entire amount of the Account to the Participant on the day the installment payments
were to begin.

     9. Death of Participant. In the event of the death of a Participant, the amount of
the Participant’s Account shall be paid to the Beneficiary or Beneficiaries designated in writing
signed by the Participant in the form provided by the Corporation; in the event there is more than
one Beneficiary, such form shall include the proportion to be paid to each Beneficiary and indicate
the disposition of such share if a Beneficiary does not survive the Participant; in the absence of
any such designation, payment from the Account shall be divided equally among all other
Beneficiaries. A Participant’s Beneficiary designation may be changed at any time prior to the
Participant’s death by execution and delivery of a new Beneficiary designation form. The form on
file with the Corporation at the time of the Participant’s death which bears the latest date shall
govern. In the absence of a Beneficiary designation or the failure of any Beneficiary to survive
the Participant, the amount of the Participant’s Account shall be paid to the Participant’s estate
in its entirety ninety days after the appointment of an executor or administrator. In the event of
the death of any Beneficiary after the death of a Participant, the remaining amount of the Account
payable to such Beneficiary shall be paid in its entirety to the estate of such Beneficiary ninety
days after the appointment of an executor or administrator for such estate.

     10. Acceleration.

	 	(a)	 	Notwithstanding any other provision of the Plan to the contrary, upon the
occurrence of a Change of Control, a Participant shall be entitled to receive from the
Corporation the payment of his or her Account in the manner selected as follows:
within 30 days following the date that a person first becomes eligible to become a
Participant, the Participant shall be entitled to make a Change of Control Election
which will be applicable in the event of a Change of Control (the “Change of Control
Election”). The Change of Control Election will provide the following distribution
options to a Participant in the event of a Change of Control:

	 	(i)	 	upon the occurrence of a Change of Control, the
entire amount of the Participant’s Account will be immediately paid
in full to the Participant regardless of whether the Participant
continues as a Director after the Change of Control;
	 
	 	(ii)	 	upon and after the occurrence of a Change of
Control, the entire amount of the Participant’s Account will be
immediately paid in full to the Participant, but only if either (a)
the Participant is not

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	 	 	 	a Director as of immediately after the Change
of Control, or (b) the Participant ceases to be a Director within two
Years after the Change of Control; or
	 
	 	(iii)	 	upon the occurrence of a Change of Control, the
payment elections specified in the Participant’s Election Agreement
shall govern irrespective of the Change of Control.

	 	(b)	 	The Corporation may accelerate the making of payment of the amount of a
Participant’s Account to a Participant in the event of an “unforeseeable emergency” of
the Participant. For purposes of this Section 10(b), the term “unforeseeable
emergency” shall mean a severe financial hardship to the Participant resulting from a
sudden and unexpected illness or accident of the Participant, the Participant’s spouse,
or the Participant’s dependent (as defined in Section 152(a) of the Code), the loss of
the Participant’s property due to casualty, or such other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of the
Participant. The determination of an “unforeseeable emergency” and the ability of the
Corporation to accelerate the Participant’s Supplemental Retirement Benefit shall be
determined in accordance with the requirements of Section 409A of the Code and
applicable regulations issued thereunder.

     11. Change of Control. Notwithstanding any other provision of the Plan to the
contrary, in the event of a Change of Control, no amendment or modification of this Plan may be
made at any time on or after such Change of Control (1) to reduce or modify a Participant’s
Pre-Change of Control Account Balance, (2) to reduce or modify the Interest Bearing Account’s rate
of earnings on or method of crediting such earnings to a Participant’s Pre-Change of Control
Account Balance, (3) to reduce or modify the Common Shares Account’s method of calculating all
earnings, gains, and/or losses on a Participant’s Pre-Change of Control Account Balance, or (4) to
reduce or modify the Participant’s deferrals to be credited to a Participant’s Plan Account for the
applicable deferral period. For purposes of this Section 11, the term “Pre-Change of Control
Account Balance” shall mean, with regard to any Plan Participant, the aggregate amount of such
Participant’s prior deferrals with all earnings, gains, and losses thereon which are credited to
the Participant’s Plan Account through the close of the calendar Year in which such Change of
Control occurs.

     12. Common Stock Conversion. In the event of a Change of Control in which the Common
Shares of the Corporation are converted into or exchanged for securities, cash and/or other
property as a result of any capital reorganization or reclassification of the capital stock of the
Corporation, or as a result of the consolidation or merger of the Corporation with or into another
corporation or entity, or the sale of all or substantially all of its assets to another corporation
or entity, the Corporation shall cause the Common Shares Account to reflect the securities, cash
and other property to be received in such reorganization, reclassification, consolidation, merger
or sale on the balance in the Common Shares Account and, from and after such reorganization,
reclassification, consolidation, merger or sale, the Common Shares Account shall reflect all
dividends, interest, earnings and losses attributable to such securities, cash, and other property
(with any cash earning interest at the rate applicable to the Interest Bearing Account).

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     13. Amendment in the Event of a Change of Control. On or after a Change of Control,
the provisions of Article I and Article II may not be amended or modified as such provisions apply
to Participants’ Pre-Change of Control Account Balances.

     14. Statement. Each Participant shall receive a statement of his or her Account not
less than annually.

     15. Valuation of the Account. Each Account shall be valued as of the last day of each
calendar quarter until payment of a Participant’s Fees in full. If a Participant has elected to
have his or her Fees deferred into the Common Shares Account, the Corporation shall ascertain the
number of shares in the Account (whole and fractional, rounded to the nearest one-hundredth of a
share) after taking into account earnings to the Account under this Article and distributions from
the Account under this Article, based on the fair market value of the Common Shares on the last
business day of such calendar quarter. Automatically and without further action by the
Corporation, in the event of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination, exchange of shares, or a similar corporate change,
appropriate adjustments in the number and kind of shares held in a Participant’s Account shall be
made by the Corporation to reflect such change. If a Participant has elected to have his or her
Fees deferred into the Interest Bearing Account, the Corporation shall ascertain the value of such
Interest Bearing Account by adding to the value of the Account at the beginning of such calendar
quarter the dollar amount of the Fees deferred into the
Account for such quarter, plus the value of any interest paid on the Account in accordance with
this Article, less any distributions made from the Account in accordance with this Article.

     16. Plan Transfers.  Participants may elect to transfer vested equity awards (other
than stock option awards) granted under the KeyCorp Directors’ Deferred Share Plan to the Plan,
provided, the Participant’s election to transfer such vested award is made in accordance with the
requirements of the grant agreement under which the award was issued and in accordance with the
subsequent deferral election requirements of Section 409A of the Code. Transferred awards shall be
fully vested under the Plan and shall be subject to the distribution requirements contained within
the Participant’s transfer election form provided, however, that such Plan transfers must be
deferred under the Plan for a minimum of five (5) years from the date of the transfer regardless of
the Participant’s termination, retirement, or the distribution instructions contained in the
Participant’s transfer election form. Transferred awards shall be subject to full investment
diversification if cash based, and transferred awards shall be invested in the in the Plan’s Common
Stock Account if equity based. Awards invested in the Plan’s Common Stock Account will not be
subject to investment direction or diversification. Transferred awards shall be separately
maintained under the Plan.

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ARTICLE III

ADMINISTRATION

     The Corporation shall be responsible for the general administration of the Plan and for
carrying out the provisions hereof. The Corporation shall have all such powers as may be necessary
to carry out its duties under the Plan, including the power to determine all questions relating to
eligibility for and the amount in an Account, all questions pertaining to claims for benefits and
procedures for claim review, and the power to resolve all other questions arising under the Plan,
including any questions of construction. The Corporation may take such further action as the
Corporation shall deem advisable in the administration of the Plan. The actions taken and the
decisions made by the Corporation hereunder shall be final and binding upon all interested parties.

ARTICLE IV

AMENDMENT AND TERMINATION

     The Corporation reserves the right to amend or terminate the Plan at any time by action of its
Board of Directors, the Compensation and Organization Committee or any other duly authorized
Committee of the Board of Directors; provided, however, that no such action shall adversely affect
any Participant or Beneficiary with respect to the amount credited to a Deferred Compensation
Account and further provided that any such action shall be subject to the limitations set forth in
Article II, Sections 11 and 13, hereof. No amendment or termination of the Plan shall result in an
acceleration of Plan benefits in violation of Section 409A of the Code.

ARTICLE V

MISCELLANEOUS

     1. No Present Interest. Subject to any federal statute to the contrary, no right or
benefit under the Plan and no right or interest in each Participant’s Plan Account shall be subject
to anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to
anticipate, alienate, sell, assign, pledge, encumber, or charge any right or benefit under the
Plan, or Participant’s Plan Account shall be void. No right, interest, or benefit under the Plan
or Participant’s Plan Account shall be liable for or subject to the debts, contracts, liabilities,
or torts of the Participant or Beneficiary. If the Participant or Beneficiary becomes bankrupt or
attempts to alienate, sell, assign, pledge, encumber, or charge any right under the Plan or
Participant’s Plan Account, such attempt shall be void and unenforceable.

     2. Plan Noncontractual. Nothing herein contained shall be construed as a commitment
to or agreement with any Director of the Corporation or a Subsidiary to continue such person’s
directorship with the Corporation or Subsidiary, and nothing herein contained shall be construed as
a commitment or agreement on the part of the Corporation or any Subsidiary to continue the
directorship or the rate of director compensation of any such person for any period.

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All Directors
shall remain subject to removal to the same extent as if the Plan had never been put into effect.

     3. Interest of Director. The obligation of the Corporation under the Plan to make
payment of amounts reflected on an Account merely constitutes the unsecured promise of only the
Corporation to make payments from its general assets as provided herein. Further, no Participant
or Beneficiary shall have any claim whatsoever against any Subsidiary for amounts reflected on an
Account. At its discretion, the Corporation may establish one or more trusts, with such trustees
as the Corporation may approve, for the purpose of providing for the payment of benefits owed under
the Plan. Although such a trust may be irrevocable, in the event of insolvency or bankruptcy of
the Corporation, such assets will be subject to the claims of the Corporation’s general creditors.
To the extent any benefits provided under the Plan are paid from any such trust, the Corporation
shall have no further obligation to pay them. If not paid from the trust, such benefits shall
remain the obligation of the Corporation.

     4. Claims of Other Persons. The provisions of the Plan shall in no event be construed
as giving any person, firm, or corporation any legal or equitable rights against the Corporation or
any Subsidiary, or the officers, employees, or directors of the Corporation or any Subsidiary,
except any such rights as are specifically provided for in the Plan or are hereafter created in
accordance with the terms and provisions of the Plan.

     5. Delegation of Authority. Any action to be taken by the Corporation’s Board of
Directors under this Plan may be taken by such Board’s Compensation and Organization Committee,
Executive Committee or any other duly authorized Committee of the Board of Directors.

     6. Severability. The invalidity and unenforceability of any particular provision of
the Plan shall not affect any other provision hereof, and the Plan shall be construed in all
respects as if such invalid or unenforceable provisions were omitted herefrom.

     7. Governing Law. The provisions of the Plan shall be governed and construed in
accordance with the laws of the State of Ohio.

ARTICLE VI

COMPLIANCE WITH

SECTION 409A CODE

     The Plan is intended to provide for the deferral of compensation in accordance with the
provisions of Section 409A of the Code and regulations and published guidance issued pursuant
thereto. Accordingly, the Plan shall be construed in a manner consistent with those provisions and
may at any time be amended in the manner and to the extent determined necessary or desirable by the
Corporation to reflect or otherwise facilitate compliance with such provisions with respect to
amounts deferred on and after January 1, 2005. Notwithstanding any provision of the Plan to the
contrary, no otherwise permissible election, deferral, accrual, or distribution shall be made or
given effect under the Plan that would result in early taxation or assessment of penalties or
interest of any amount under Section 409A of the Code.

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	 	 	KEYCORP  
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas E. Helfrich	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:
	 	Executive Vice President	 	 

9<PAGE>

                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

     This Agreement is made as of the 30th day of September, 2003, by and
between PENDLETON COUNTY BANK, a West Virginia corporation (the "Bank"), WILLIAM
A. LOVING ("Employee"), and joined in by Allegheny Bancshares, Inc.
("Allegheny"), parent of "Bank"..

                                    RECITALS

     The Bank desires to employ Employee, and Employee desires to provide
services to the Bank, upon the terms and conditions hereinafter set forth.

                                   WITNESSETH:

     NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:

1)   Employment

     a)   The Bank hereby employs Employee and Employee hereby accepts such
          employment. During the term of Employee's employment under this
          Agreement (the "Employment Term"), Employee shall serve as the Chief
          Executive Officer of the Bank, and shall perform such duties as are
          reasonably requested from time to time by the Board of Directors of
          the Bank.

     b)   Employee represents to the Bank that he is not subject, or a party, to
          any employment agreement, non-competition covenant, non-disclosure
          agreement or any other agreement, covenant, understanding or
          restriction of any nature which would prohibit Employee from executing
          this Agreement and performing fully his duties and responsibilities
          hereunder, or which would in any manner, directly or indirectly, limit
          or affect the duties and responsibilities which may now or in the
          future be assigned to Employee by the Bank.

2)   Performance. Employee shall devote his entire business efforts to the
     performance of his duties hereunder; provided, however, that Employee may
     engage in any of the following activities so long as they do not interfere
     with the performance of his duties hereunder: (i) serve on such civic,
     charitable or trade association boards or committees; and (ii) manage his
     personal investments.

3)   Term. The Employment Term shall begin on the date hereof and shall continue
     until September 30, 2006 ("Anniversary Date") and shall automatically renew
     for additional three (3) year periods, unless terminated prior thereto in
     accordance with Sections 5 or 6 of this agreement or either party gives
     notice, at least 90 days prior to the Anniversary Date, of their intent not
     to renew this agreement.

Page 1 of 10

<PAGE>

4)   Compensation for Employment

     a)   The basic annual rate of compensation of Employee for his employment
          services during the Employment term shall be One Hundred Twenty-Five
          Thousand and no/100 Dollars ($125,000.00) (such amount, as adjusted in
          accordance with this Section 4(a), is referred to herein as the
          "Salary"), which the Bank shall pay to Employee in equal installments
          in accordance with the normal payroll policies of the Bank. The Salary
          may be adjusted upward on an annual basis as the Board of Directors
          may approve, in its sole discretion, but the Salary shall not be
          decreased.

     b)   During the Employment Term, the Bank shall reimburse Employee for
          reasonable expenses incurred in connection with the performance of his
          services hereunder and the Bank shall provide Employee with fringe
          benefits that are substantially equivalent, but not limited to the
          fringe benefits specified in "Exhibit A" hereto (the "Fringe
          Benefits").

5)   Termination Without Compensation

     a)   Total Disability. If employee becomes totally disabled (as defined
          below), the Bank may terminate the Employment Term by notice to the
          Employee, and as of the termination date, defined as the date Employee
          is eligible for Long Term Disability coverages under bank's plan, the
          Bank shall have no further liability or obligation to Employee
          hereunder except as follow: Employee shall receive: (i) any unpaid
          Salary, Fringe Benefits and bonuses that have accrued through the date
          of termination; and (ii) whatever benefits that he may be entitled to
          receive under any then existing disability benefit plans of the Bank,
          including any such plans included in the Fringe Benefits. For the
          purposes hereof, Employee shall be deemed to be "totally disabled" if
          Employee is considered totally disabled under any group disability
          plan maintained by the Bank and in effect at that time, or in the
          absence of any such plan, under applicable Social Security
          regulations. In the event of any dispute under this Section 5(a),
          Employee shall submit to a physical examination by a licensed
          physician mutually satisfactory to the Bank and Employee, the cost of
          such examination to be paid by the Bank, and the determination of such
          physician shall be conclusive.

     b)   Death. If Employee dies, this Employment Agreement shall terminate on
          the date of death, and thereafter the Bank shall not have any further
          liability or obligation to Employee, his executors, administrators,
          heirs, assigns or any other person claiming under or through him,
          except that Employee's estate shall receive any unpaid Salary, Fringe
          Benefits and bonuses that have accrued through the date of
          termination.

     c)   Cause. The Bank may terminate the Employment Term for "cause" by
          giving Employee notice of the termination date (which may be
          immediate), and as of the termination date, the Bank shall not have
          any further liability or obligation to Employee, except that Employee
          shall receive any unpaid Salary and fringe Benefits that have accrued
          through the date of termination. For purposes of this

Page 2 of 10

<PAGE>

          Agreement, "cause" shall mean: (i) the failure of Employee to observe
          or perform (other than by reason of illness, injury or incapacity) any
          of the material terms or provisions of this Agreement; (ii) the
          failure of Employee to comply fully with the lawful directives of the
          Board of Directors of the Bank (the "Board"); (iii) willful
          misconduct; (iv) material neglect of the business of the Bank; (v)
          conviction of a felony or other crime involving moral turpitude; (vi)
          misappropriation of funds; or (vii) habitual insobriety or drug
          addiction. In the case of a termination for "cause," the notice of
          termination shall specify the basis for the Bank's determination of
          "cause". Any act or failure to act based upon authority given pursuant
          to a resolution duly adopted by the Board or based upon the advice of
          counsel for the Bank shall be conclusively presumed to be done, or
          omitted to be done, by the Executive in good faith and in the best
          interests of the Bank. It is also expressly understood that the
          Executive's attention to matters not directly related to the business
          of the Bank shall not provide a basis for termination for Cause.
          Notwithstanding the foregoing, the Executive shall not be deemed to
          have been terminated for Cause unless and until there shall have been
          delivered to him a copy of a resolution duly adopted by the
          affirmative vote of a majority of the Board at a meeting of the Board
          called and held for such purposes (after reasonable notice to the
          Executive and an opportunity for him, together with his counsel, to be
          heard before the Board), finding that in the good faith opinion of the
          board the Executive was guilty of the conduct set forth above and
          specifying the particulars thereof in detail.

     d)   Resignation. Employee shall have the right to terminate the Employment
          Term at any time by giving the Bank 90 days notice of the termination
          date. Under such circumstances, the Bank shall not have any further
          liability or obligation to Employee, except that Employee shall
          receive any unpaid Salary and Fringe Benefits that have accrued
          through the date of termination.

6)   Termination With Compensation. The Bank shall have the right to terminate
     the Employment term without cause at any time by giving Employee 60 days
     notice of the termination date. Under such circumstances, the Bank shall
     continue to pay to Employee based upon the Salary at time of notice of
     termination earned in the prior year and provide to Employee the Fringe
     Benefits which it is permitted by law to provide through the earlier of:
     (i) the end of the Employment Term; or (ii) twelve (12) months after such
     date of termination. Such period is referred to herein as the "Pay-Out
     Period" and the Salary and the Fringe Benefits to be provided under this
     Section 6 are referred to herein as the "Termination Compensation". As of
     the termination date, the Bank shall not have any further liability or
     obligation to Employee other than to continue providing the Termination
     Compensation for the period specified in this Section 6. Employee shall not
     be entitled to any Termination Compensation unless Employee executes and
     delivers to the Bank after a notice of termination a release in a form
     satisfactory to the Bank in its reasonable discretion by which Employee
     releases the Bank from any obligations and liabilities of any type
     whatsoever, except for the Bank's obligations with respect to the
     Termination Compensation. The parties hereto acknowledge that the
     Termination Compensation to be provided under this Section 6 is to be
     provided in consideration for the above-specified release.

Page 3 of 10

<PAGE>

7)   Agreement Not to Compete.

     a)   During the period (the "Restricted Period") beginning on the
          expiration of the term of this Agreement or the termination of
          Employee's employment hereunder and in doing on the second anniversary
          of the date of such termination of employment hereunder, employee
          shall not, directly or indirectly, own, manage, operate, join,
          control, finance or participate in the ownership, management,
          operation, control or financing of, or be connected as a partner,
          principal, member, manager, agent, representative, consultant or
          otherwise with or use or permit his name to be used in connection
          with, any business or enterprise engaged directly or indirectly in
          competition with the business ("Business") conducted by the Bank at
          any time during such period within the Counties of Pendleton, Grant,
          Hardy, and Pocahontas, West Virginia, and any other County the Bank
          may have an office of operation, regardless of state ("Restricted
          Area"). It is recognized by Employee and the Bank that the Business is
          and is expected to continue to be conducted throughout the Restricted
          Area and that more narrow geographical limitations of any nature on
          this non-competition covenant (and the non-solicitation covenant set
          forth in Section 7(b) are therefore not appropriate. The foregoing
          restriction shall not be construed to prohibit the ownership by
          Employee as a passive investment of not more than one percent of any
          class of securities of any corporation which is engaged in any of the
          foregoing businesses having a class of securities registered pursuant
          to the Securities Exchange Act of 1934.

     b)   During the Restricted Period, Employee shall not, either directly or
          indirectly, (i) call on or solicit any person who or which has been a
          customer of the Bank with respect to the activities prohibited by
          Section 7 (a); or (ii) solicit the employment of any person who is
          employed by the Bank during such period on a full or part-time basis.

     c)   Employee acknowledges that the restrictions contained in this Section
          7 are reasonable and necessary to protect the legitimate interests of
          the Bank, and that any violation will result in irreparable injury to
          the Bank.

     d)   The Bank shall be entitled to preliminary and permanent injunctive
          relief, without the necessity of proving actual damages, as well as an
          equitable accounting of all earnings, profits and other benefits
          arising from any violation of this Section 7 should ever be
          adjudicated to exceed the time, geographic, product or service, or
          other limitations permitted by applicable law in any jurisdiction,
          then such provisions shall be deemed reformed in such jurisdiction to
          the maximum time, geographic, product or service, or other limitations
          permitted by applicable law.

8)   Confidential Information.

     a)   Employee has had and will have possession of or access to confidential
          information relating to the business of the Bank, including writings,
          processes, reports, manuals, financial information, business plans,
          customer lists, the identity of or other facts relating to prospective
          customers, arrangements with customers, computer programs, or other
          material embodying trade secrets,

Page 4 of 10

<PAGE>

          customer or product information or technical or business information
          of the bank. All such information, other than any information that is
          in the public domain through no act or omission of Employee or which
          he is authorized to disclose, is referred to collectively as the "Bank
          Information". During and after the Employment Term, Employee shall
          not: (i) use or exploit in any manner the Bank information for himself
          or any person, partnership, association, corporation or other entity
          other than the Bank; (ii) remove any Bank information, or any
          reproduction thereof, from the possession or control of the bank; or
          (iii) treat Bank information otherwise than in a confidential manner.

     b)   All Bank information developed, created or maintained by Employee,
          alone or with others while employed by the Bank, and all Bank
          information maintained by Employee thereafter, shall remain at all
          times the exclusive property of the Bank. Employee shall return to the
          Bank all Bank information, and reproductions thereof, whether prepared
          by him or others, that are in his possession immediately upon request
          and in any event upon the completion of his employment by the Bank.

9)   Remedies. Employee expressly acknowledges that the remedy of law for any
     breach of Sections 7 and 8 will be inadequate and that upon any such breach
     or threatened breach, the Bank shall be entitled as a matter of right to
     injunctive relief in any court of competent jurisdiction, in equity or
     otherwise, and to enforce the specific performance of Employee's
     obligations under these provisions without the necessity of proving actual
     damage to the Bank or the inadequacy of a legal remedy. The rights
     conferred upon the Bank by the preceding sentence shall not be exclusive
     of, but shall be in addition to, any other rights or remedies which the
     Bank may have at law, in equity or otherwise.

10)  General.

     a)   Governing Law. The terms of this Agreement shall be governed by the
          laws of the State of West Virginia (exclusive of its provisions
          regarding conflicts of laws).

     b)   Bank. For purposes of Sections 7, 8, 9 and 10, the term "Bank" shall
          be deemed to include any incorporated or unincorporated entities that
          are controlled by, or under common control with, directly or
          indirectly, the Bank through ownership, agreement or otherwise.

     c)   Binding Effect. All of the terms and provisions of this Agreement
          shall be binding upon and inure to the benefit and be enforceable by
          the respective heirs, representatives, successors (including any
          successor as a result of a merger or similar reorganization) and
          assigns of the parties hereto, except that the duties and
          responsibilities of Employee hereunder are of a personal nature and
          shall not be assignable in whole or in part by Employee.

     d)   Notices. All notices that are required or permitted hereunder shall be
          in writing and shall be sufficient if personally delivered or sent by
          mail, facsimile message or federal express or other national,
          recognized overnight delivery service. Any notices shall be deemed
          given upon the earlier of the date when received, or the

Page 5 of 10

<PAGE>

          third day after the date when sent by registered or certified mail or
          the day after the date when sent by Federal express or other national,
          recognized overnight delivery service to, the address or fax number is
          changed by notice to the other party hereto, given in accordance with
          the foregoing notice procedures:

               If to the Bank:

               Pendleton County Bank
               PO Box 487
               Franklin, WV 26807
               Attn: Chairman of the Board

               With a copy to:

               Charles Dunbar
               Jackson Kelly Associates, LLC
               P.O. Box 553
               Charleston, WV 25322
               Fax: (304) 340-1080

               If to Employee:

               William A. Loving
               P.O. Box 238
               Franklin, WV 26807

               With a copy to:
               _____________________________
               _____________________________
               _____________________________
               Fax: ________________________
               Attn: _______________________

     e)   Entire Agreement; Modification. This Agreement and the Executive
          Severance Agreement of even date herewith, constitutes the entire
          agreement of the parties hereto with respect to the subject matter
          hereof and may not be modified or amended in any way except in writing
          by the parties hereto. In the event that terms in this Agreement
          conflict with the Executive Severance Agreement, the term(s) shall be
          interrupted most favorable to Employee.

     f)   Duration. Notwithstanding the termination of the Employment Term and
          of Employee's employment by the Bank, this Agreement shall continue to
          bind the parties for so long as any obligations remain under the terms
          of this Agreement.

     g)   Waiver. No waiver of any breach of this Agreement shall be construed
          to be a waiver as to succeeding breaches.

Page 6 of 10

<PAGE>

     h)   Severability. If any provision of this Agreement or application
          thereof to anyone under any circumstances is adjucated to be invalid
          or unenforceable in any jurisdiction, such invalidity or
          unenforceability shall not affect any other provisions or applications
          of this Agreement which can be given effect without the invalid or
          unenforceable provision or application and shall not invalidate or
          render unenforceable such provision in any other jurisdiction.

     i)   Joinder. Allegheny Bancshares, Inc. joins into this agreement as
          evidence and consent and agrees to employ employee as it's Executive
          Vice President and CEO without additional pay and on the terms and
          conditions herein.

          IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto duly executed this Agreement as of the day and year first written
above.

                                        Pendleton County Bank,
                                        a West Virginia Corporation

                                        By
                                           -------------------------------------
                                           President

                                        By
                                           -------------------------------------
                                           Chairman of the Board

                                        Allegheny Bancshares, Inc.

                                        By:
                                            ------------------------------------
                                            President

                                        By:
                                            ------------------------------------
                                            Chairman of the Board

                                        By:
                                            ------------------------------------
                                            Executive  William A. Loving, Jr.,
                                            CLBB

Page 7 of 10

<PAGE>

                                   "EXHIBIT A"

                                 FRINGE BENEFITS

A)   Term Life, Disability, and Health insurance, including family coverage in
     amounts in accordance with Bank's policies.

B)   Paid holidays in accordance with the Bank's policies.

C)   Paid vacation in accordance with Bank's policies..

D)   Participation, when eligible, in Bank's 401K or other retirement plans.

E)   Participation in any Bonus Plan, if any, adopted by the Bank in accordance
     with its terms and conditions.

F)   Bank will provide automobile for employee's use. Employee will be taxed,
     according to IRS rules and regulations, according to economic benefit
     provided.

Page 8 of 10

<PAGE>

                                  MODIFICATION

                              EMPLOYMENT AGREEMENT

                          EXECUTIVE SEVERANCE AGREEMENT

          William A. Loving (Employee), and Pendleton Community Bank (Bank) and
Allegheny Bancshares, Inc. hereby agree to modify that certain Employment
Agreement between the parties dated September 30, 2003 ("Employment Agreement")
and that certain Executive Severance Agreement between the parties also dated
September 30, 2003 ("Executive Severance Agreement") as hereinafter set forth.

          1. Section 6 of the Employment Agreement is amended by adding the
following paragraph at the end:

               Notwithstanding the above, if at the time of the Employee's
          termination from employment the Employee is a "specified employee" as
          defined under Section 409A of the Internal Code and regulations
          thereunder, any cash "Termination Compensation" due Employee during
          the first six months following the date of his termination shall be
          accumulated and paid in a lump sum on the first day of the seventh
          month following the termination of his employment. Except for these
          cash payments, all other Termination Compensation shall be made in
          accordance with the provisions of this Agreement.

          2. Paragraph 5(C)(b) of the Executive Severance Agreement 5(C) is
amended by adding the following at its end:

          Notwithstanding the payment date set forth in the preamble to
          Paragraph 5(C), if Executive at the time of his termination is a
          "specified employee" as defined under Section 409A of the Internal
          Revenue Code and regulations thereunder, the cash severance benefit
          shall be deferred and paid as of the first day of the seventh month
          following Executive's termination.

Page 9 of 10

<PAGE>

          3. Except as hereinabove amended the Employment Agreement and the
Executive Severance Agreement shall remain in full force and effect.

          In Witness Whereof, Employee, Bank and Allegheny Bancshares, Inc. has
caused this Modification to be executed as of the 28th day of December, 2006.

                                        PENDLETON COMMUNITY BANK

                                        By:
                                            ------------------------------------
                                        Its:
                                             -----------------------------------

                                        ALLEGHENY BANCSHARES, INC.

                                        By:
                                            ------------------------------------
                                        Its:
                                             -----------------------------------

                                        ----------------------------------------
                                        WILLIAM A. LOVING, JR.

Page 10 of 10

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