Document:

hcmempagmt.htm

    
      

      

    

    

     

    Exhibit
10.1

     

    

     

    

     

    

     

    

     

    

     

    

     

    AMENDED
AND RESTATED EMPLOYMENT AGREEMENT

     

    BETWEEN

     

    SUMMIT
FINANCIAL GROUP, INC.

     

    AND

     

    H.
CHARLES MADDY, III

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    
      TABLE OF
CONTENTS

      PAGE

    

    
      
        
          
            	
                    I.

                  	
                    EMPLOYMENT

                  	 
      	
                    2

                  
	
                    II.

                  	
                    DUTIES
      AND RESPONSIBILITIES

                  	 
      	
                    2

                  
	 
      	
                    A.

                  	
                    Chief
      Executive Officer of Summit

                  	
                    2

                  
	 
      	
                    B.

                  	
                    Full
      Time Employment - Best Efforts

                  	
                    2

                  
	
                    III.

                  	
                    TERM;
      EXTENSIONS; SEPARATION FROM SERVICE DEFINED

                  	 
      	
                    2

                  
	 
      	
                    A.

                  	
                    Term
      of Employment, Term of Agreement

                  	
                    2

                  
	 
      	
                    B.

                  	
                    Extension
      of Time of Employment

                  	
                    3

                  
	 
      	
                    C.

                  	
                    Separation
      from Service Defined

                  	
                    3

                  
	
                    IV.

                  	
                    TERMINATION
      OF EMPLOYMENT BY SUMMIT OR MADDY

                  	 
      	
                    4

                  
	 
      	
                    A.

                  	
                    Mutual
      Agreement

                  	
                    4

                  
	 
      	
                    B.

                  	
                    Death

                  	
                    4

                  
	 
      	
                    C.

                  	
                    Disability

                  	
                    4

                  
	 
      	
                    D.

                  	
                    For
      Cause

                  	
                    4

                  
	 
      	
                    E.

                  	
                    Change
      in Control

                  	
                    4

                  
	 
      	
                    F.

                  	
                    Breach
      by Summit

                  	
                    4

                  
	 
      	
                    G.

                  	
                    Insolvency,
      Etc.

                  	
                    5

                  
	
                    V.

                  	
                    COMPENSATION
      AND REIMBURSEMENTS

                  	 
      	
                    5

                  
	 
      	
                    A.

                  	
                    Base
      Salary

                  	
                    5

                  
	 
      	
                    B.

                  	
                    Incentive
      Pay

                  	
                    5

                  
	 
      	
                    C.

                  	
                    Fringe
      Benefits

                  	
                    5

                  
	 
      	
                    D.

                  	
                    Club
      and Organization Membership and Dues

                  	
                    5

                  
	 
      	
                    E.

                  	
                    Business
      Expenses

                  	
                    6

                  
	 
      	
                    F.

                  	
                    Termination
      Payments

                  	
                    6

                  
	
                    VI.

                  	
                    ADDITIONAL
      PAYMENT BY SUMMIT

                  	 
      	
                    8

                  
	 
      	
                    A.

                  	
                    Gross-Up
      Payment

                  	
                    8

                  
	 
      	
                    B.

                  	
                    Determination
      of Gross-Up Payment

                  	
                    8

                  
	
                    VII.

                  	
                    NONCOMPETITION
      AND NONSOLICITATION

                  	 
      	
                    9

                  
	
                    VIII.

                  	
                    CONFIDENTIAL
      INFORMATION

                  	 
      	
                    10

                  
	
                    IX.

                  	
                    ARBITRATION

                  	 
      	
                    11

                  
	
                    X.

                  	
                    MISCELLANEOUS
      PROVISIONS

                  	 
      	
                    12

                  
	 
      	
                    A.

                  	
                    Notices

                  	
                    12

                  
	 
      	
                    B.

                  	
                    Prior
      Agreements

                  	
                    12

                  
	 
      	
                    C.

                  	
                    Amendments

                  	
                    12

                  
	 
      	
                    D.

                  	
                    Governing
      Law

                  	
                    12

                  
	 
      	
                    E.

                  	
                    Headings

                  	
                    12

                  
	 
      	
                    F.

                  	
                    Severability
      of Provisions

                  	
                    12

                  
	 
      	
                    G.

                  	
                    Indemnification

                  	
                    12

                  
	 
      	
                    H.

                  	
                    Authority
      to Execute Documents

                  	
                    13

                  
	 
      	
                    I.

                  	
                    Waiver
      of Breach

                  	
                    13

                  
	 
      	
                    J.

                  	
                    Binding
      Effect and Assignability

                  	
                    13

                  
	 
      	
                    K.

                  	
                    Date
      Payments Deemed Made

                  	
                    13

                  

          

        

      

       

       

      
        

        
          
            
               

            

            
               

              
                

              

            

            
               

            

          

        

        

      

    AMENDED
AND RESTATED EMPLOYMENT AGREEMENT

     

    BETWEEN

     

    SUMMIT
FINANCIAL GROUP, INC.

     

    AND

     

    H.
CHARLES MADDY, III

     

    THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”), made and entered into
this _31st__
day of _December_, 2008,
amends and restates that certain Employment Agreement made and entered into as
of the 4th day of March, 2005, by and between H. Charles Maddy, III (“Maddy”)
and Summit Financial Group, Inc., a West Virginia corporation and bank holding
company (“Summit”).

     

    W I T N E
S S E T H:

     

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

     

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

     

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

     

    WHEREAS,
under Article X Section C this Agreement may be amended by a writing signed by
all the parties hereto, and

     

    WHEREAS,
the parties have agreed to extend the term of this Agreement to March 4, 2012,
and

     

    WHEREAS,
the parties hereto, in the interests of clarity and for other reasons stated
herein, and for the purpose of complying with the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), wish to amend and
restate this Agreement, provided that all provisions applicable
to compliance under Code Section 409A shall be effective as of March 4, 2005,
and provided further that, notwithstanding any other provisions of this amended
and restated Agreement, this amendment applies only to amounts that would not
otherwise be payable in 2006, 2007 or 2008 and shall not cause (i) an amount to
be paid in 2006 that would not otherwise be payable in such year, (ii) an amount
to be paid in 2007 that would not otherwise be payable in such year, and (iii)
an amount to be paid in 2008 that would not otherwise be payable in such year,
and to the extent necessary to qualify under Transition Relief issued under said
Code Section 409A to not be treated as a change in the form and timing of a
payment under section 409A(a)(4) or an acceleration of a payment under section
409A(a)(3), Maddy, by executing this Agreement, shall be deemed to have elected
the timing and form of

     

    
      
         

      

      
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distribution
provisions of this amended and restated Agreement, and to otherwise further
revise the Agreement all on or before December 31, 2008.

     

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

     

    I.           EMPLOYMENT

     

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

     

    II.           DUTIES
AND RESPONSIBILITIES

     

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

     

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

     

    III.           TERM;
EXTENSIONS; SEPARATION FROM SERVICE DEFINED

     

    A.           Term of Employment, Term of
Agreement.  The term of employment of Maddy by Summit shall be
until March 4, 2012, and this Agreement shall remain in force and effect
during such period unless sooner terminated or extended as provided
herein.  The term of this Agreement shall extend until all obligations
under this Agreement have been fully performed by Maddy and Summit.

     

    
      
         

      

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

     

    C.           “Separation from Service”
Defined.  “Separation from Service” means the severance of
Maddy’s employment with Summit, Bank, or any other affiliate for any
reason.  Maddy separates from service with Summit, Bank or any other
affiliate if he dies, retires, separates from service because of Maddy’s
Disability, or otherwise has a termination of employment with Summit, Bank or
any other affiliate.  However, the employment relationship is treated
as continuing intact while Maddy is on military leave, sick leave, or other
bona fide leave of
absence if the period of such leave does not exceed six months, or if longer, so
long as Maddy’s right to reemployment with Summit, Bank or any other affiliate
is provided either by statute or by contract.  If the period of leave
exceeds six months and Maddy’s right to reemployment is not provided either by
statute or by contract, the employment relationship is deemed to terminate on
the first date immediately following such six-month
period.  Notwithstanding the foregoing, where a leave of absence is
due to any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than six months, where such impairment causes Maddy to be unable to
perform the duties of his position of employment or any substantially similar
position of employment, a 29-month period of absence may be substituted for such
six-month period.  In addition, notwithstanding any of the foregoing,
the term “Separation from Service” shall be interpreted under this Agreement in
a manner consistent with the requirements of Code Section 409A including, but
not limited to:

     

    (i) an
examination of the relevant facts and circumstances, as set forth in Code
Section 409A and the regulations and guidance thereunder, in the case of any
performance of services or availability to perform services after a purported
Separation from Service,

     

    (ii) in
any instance in which Maddy is participating or has at any time participated in
any other plan which is, under the aggregation rules of Code Section 409A and
the regulations and guidance issued thereunder, aggregated with this Agreement
and with respect to which amounts deferred hereunder and under such other plan
or plans are treated as deferred under a single plan (hereinafter sometimes
referred to as an “Aggregated Plan” or together as the “Aggregated Plans,”),
then in such instance Maddy shall only be considered to meet the requirements of
a Separation from Service hereunder if Maddy meets (a) the requirements of a
Separation from Service under all such Aggregated Plans and (b) the requirements
of a Separation from Service under this Agreement which would otherwise
apply,

     

    (iii) in
any instance in which Maddy is an employee and an independent contractor of
Summit, Bank or any other affiliate or any combination thereof, Maddy must have
a Separation from Service in all such capacities to meet the requirements of a
Separation from Service hereunder, although, notwithstanding the foregoing, if
Maddy provides services both as an employee and a member of the Board of
Directors of Summit, Bank or any other affiliate or any combination thereof, the
services provided as a director are

     

    
      
         

      

      
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    not taken
into account in determining whether Maddy has had a Separation from Service as
an employee under this Agreement, provided that no plan in which Maddy
participates or has participated in his capacity as a director is an Aggregated
Plan, and

     

    (iv) a
determination of whether a Separation from Service has occurred shall be made in
accordance with Treasury Regulations Section 1.409A-1(h)(4) or any similar or
successor law, regulation or guidance of like import, in the event of an asset
purchase transaction as described therein.

     

    IV.           TERMINATION
OF EMPLOYMENT BY SUMMIT OR MADDY

     

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

     

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

     

    B.           Death.  Automatically
and without action by either party, upon the death of Maddy.

     

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

     

    D.           For
Cause.  By Summit for cause upon giving Maddy thirty
(30) days advance notice of such termination, specifying the cause of
termination. For purposes of this Agreement, “Cause” shall mean:
(i) excessive absenteeism without approval of Summit not caused by
disability; (ii) gross or willful neglect of duty resulting in substantial harm
to Summit after Maddy has been given written direction and reasonable time to
perform such duties; (iii) any acts or omissions on the part of Maddy which
when proven constitute fraud or commission of any criminal act involving the
person or property of others or the public generally; or (iv) Maddy’s
negligence, malfeasance or misfeasance in the performance of Maddy’s duties that
can reasonably be expected to have an adverse impact on the business of Summit
or its affiliates, including but not limited to the reasonable financial
objectives established by the Board of Directors of Summit.

     

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

     

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

     

    
      
         

      

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

     

    V.           COMPENSATION
AND REIMBURSEMENTS

     

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

     

    B.           Incentive
Pay.  In addition to the Base Salary herein provided for, Maddy
shall be entitled to receive incentive compensation from Summit in accordance
with plans adopted by its Board of Directors; provided, however, that any
such plans, if required to be aggregated for Code Section 409A purposes with
this Agreement or any other agreement between Maddy and Summit, Bank, or any
affiliate, shall not cause this Agreement to violate Code Section 409A or the
regulations and guidance issued thereunder.  The Board of Directors
agrees that Mr. Maddy’s bonus opportunities will not be less than the
opportunities currently available to him under the Summit bonus plan in place at
the time of execution of this Agreement or any extension thereof.

     

    C.           Fringe
Benefits.  Summit shall afford to Maddy the benefit of all
fringe benefits afforded to other Summit or bank officers, such as pension, life
insurance, health and accident insurance benefits, vacation and sick leave;
provided, however, that
any such fringe benefits, if required to be aggregated for Code Section 409A
purposes with this Agreement or any other agreement between Maddy and Summit,
Bank, or any affiliate, shall not cause this Agreement to violate Code Section
409A or the regulations and guidance issued thereunder.

     

    D.           Club and Organization
Membership and Dues.  Summit shall maintain the cost of stock
or membership certificate and the cost of the initiation fee for memberships for
a family (general membership) in one or more country clubs in the trade areas of
Summit, which Maddy shall select, plus dues, assessments and other costs of
maintaining such memberships. Summit shall also pay Maddy’s membership fees and
dues in banking, business, civic, professional (including continuing
professional education requirement to maintain his public accountant’s license),
and social organizations in which Maddy is a participating
member.  The benefits provided under this Article V Section D during
Maddy’s taxable year shall not affect the benefits to be provided in any other
taxable year.  The right to benefits under this Article
V

    
      
         

      

      
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Section D
is not subject to liquidation or exchange for another benefit.  In
addition, the right to benefits under this Article V Section D is subject to the
provisions of Article V Section F 8, to the extent applicable.  The
benefits under this Article V Section D shall cease upon Separation from Service
of Maddy.

    E.           Business Expenses.  Summit
shall reimburse Maddy for all reasonable expenses incurred by Maddy in carrying
out his duties and responsibilities, all provided such expense is incurred by
Maddy prior to Separation from Service, including furnishing an automobile of
Maddy’s choice for use by Maddy, with the costs of purchase, maintenance and
operation to be borne by Summit provided that unless otherwise approved by the
Board of Directors, the cost of such automobile shall not exceed $75,000,
adjusted annually for inflation.  The reimbursement of an eligible
expense shall be made by Summit no later than the last day of Maddy’s taxable
year during which the expense was incurred, or if later, the fifteenth day of
the third month after such expense was incurred, and Maddy is required to
request reimbursement and substantiate any such expense no later than ten days
prior to the last date on which Summit is required to provide reimbursement for
such expense hereunder.  The amount of expenses eligible for
reimbursement under this Article V Section E during Maddy’s taxable year shall
not affect the expenses eligible for reimbursement in any other taxable
year.  The right to reimbursement under this Article V Section E is
not subject to liquidation or exchange for another benefit.  In
addition, the right to reimbursement of eligible expenses under this Article V
Section E is subject to the provisions of Article V Section F 8, to the extent
applicable.

     

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

     

    1.          If
terminated and Maddy shall Separate from Service under Article IV,
Section A of this Agreement (mutual agreement), then such amount as the
parties shall agree in writing, subject to Article V Section F 8 to the extent
applicable; provided,
however, that any such written mutual agreement, if required to be aggregated
for Code Section 409A purposes with this Agreement or any other agreement
between Maddy and Summit, Bank, or any affiliate, shall not cause this Agreement
to violate Code Section 409A or the regulations and guidance issued
thereunder.

     

       
2.           If
terminated under Article IV, Section B (death), of this Agreement,
then Summit shall pay Maddy’s beneficiary (to be designated in a form attached
to this Agreement), or in the absence of a designated beneficiary, Maddy’s
estate, in a lump sum, on the first day of the second month following date of
death, an amount equal to three (3) times the Base Salary in effect for the year
in which death occurs.  Summit further agrees to provide health
benefits to the extent permitted under Summit’s health benefit plans to Maddy’s
spouse and dependent children for a period of one (1) year following
Maddy’s death.  Notwithstanding any other provisions of this
Agreement, (i) in-kind health benefits provided under this Article V Section F 2
during any taxable year of Maddy, his spouse or dependent children shall not
affect the in-kind health benefits to be provided under this Article V Section F
2 in any other taxable year; (ii) if the provision of health benefits under this
Article V Section F 2 is to be done by means of reimbursement, the reimbursement
of an eligible health benefit expense under this Article V Section F 2 must be
made on or before the last day of the spouse’s or dependent children’s taxable
year following the taxable year in which the expense was incurred, and (iii) no
rights to

     

    
      
         

      

      
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reimbursement
or in-kind health benefits under this Article V Section F 2 shall be subject to
liquidation or exchange for any other benefit.

     

    3.           If
terminated and Maddy shall Separate from Service under Article IV, Section C
(Disability), of this Agreement, then Summit shall pay Maddy in a lump sum on
the date of Separation from Service, subject to Article V Section F 8 to the
extent applicable, an amount equal to three (3) times the Base Salary in effect
for the year in which Separation from Service occurs.

     

    4.           If
terminated and Maddy shall Separate from Service under Article IV,
Section D(iv) (for cause), then Summit shall pay Maddy in a lump sum on the
date of Separation from Service, subject to Article V Section F 8 to the extent
applicable, an amount equal to the Base Salary in effect for the year in which
termination occurs without offset for compensation already paid prior to the
effective date of termination.

     

    5.           If
terminated under Article IV, Section D(i) - (iii) (for cause), or any
combination of D(i), (ii), or (iii) or if voluntarily terminated by Maddy
and there is no material breach by Summit, Summit shall pay Maddy’s Base Salary
in effect for the year in which termination occurs, only for such period of his
active full-time employment to the date of the termination.  Such
payment shall be made to Maddy within the taxable year in which such Base Salary
is earned, or if later no later than 2 1⁄2 months after the date of Maddy’s
termination under this subparagraph.

     

    6.           If
terminated and Maddy shall Separate from Service pursuant to Article IV,
Section F (material breach by Summit), then Summit shall pay Maddy in a
lump sum on the date of Separation from Service, subject to Article V Section F
8 to the extent applicable, an amount equal to two (2) times his Base
Salary in effect for the year in which termination occurs without offset for
compensation already paid prior to the effective date of
termination.

     

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

     

    8.           Six-Month
Delay.  Notwithstanding any other provisions of this Article V Section
F, or any other provision of this Agreement, or any provision of the Change in
Control Agreement attached hereto as Exhibit A, if Maddy is a Specified
Employee (within the meaning of Code Section 409A) on Maddy’s date of Separation
from Service, then if any payment of deferred compensation (within the meaning
of Code Section 409A) is to be made upon or based upon Maddy’s Separation from
Service other than by death, under any provision of this Agreement or of said
Change in Control Agreement, and such payment of deferred compensation is to be
made within six months after Maddy’s date of Separation from Service, other than
by death, then such payment shall instead be made on the date which is six
months after such Separation from Service of Maddy (other than by death,)
provided further, however, that in the case of any payment of deferred
compensation which is to be made in installments, with the first such
installment to be paid on or within six months after the date of Separation from
Service other than by death, then in such event all such installments which
would have otherwise been paid within the date which is six months after such
Separation from Service of Maddy (other

     

    
      
         

      

      
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than by
death) shall be delayed, aggregated, and paid, notwithstanding any other
provision of this Agreement or any other provision of said Change in Control
Agreement, on the date which is six months after such Separation from Service of
Maddy (other than by death), with the remaining installments to continue
thereafter until fully paid hereunder or under said Change in Control Agreement,
as the case may be.  Notwithstanding any of the foregoing, or any
other provision of this Agreement or of said Change in Control Agreement, no
payment of deferred compensation upon or based upon Separation from Service may
be made under this Agreement or under said Change in Control Agreement before
the date that is six months after the date of Separation from Service or, if
earlier, the date of death, if Maddy is a Specified Employee on Maddy’s date of
Separation from Service.  This Article V Section F 8 shall only
apply to delay the payment of deferred compensation to Specified Employees as
required by Code Section 409A and the regulations and guidance issued
thereunder.

     

     

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

     

    VI.           ADDITIONAL
PAYMENT BY SUMMIT

     

    A.           Gross-Up
Payment.  Notwithstanding anything in this Agreement to the
contrary, in the event it shall be determined that any payment or distribution
by Summit and any of its subsidiaries and affiliates to or for the benefit of
Maddy (whether paid or payable or distributed or distributable pursuant to this
Agreement, the Executive Salary Continuation Agreement between Summit and Maddy,
the Change in Control Agreement between Summit and Maddy, or any other
agreement, contract, plan or arrangement, but determined without regard to any
additional payments required under this Article VI) (any such payments and
distributions collectively referred to as “Payments”), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, or any similar tax that may hereinafter be imposed or any interest and
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”), then Summit shall pay to Maddy an additional payment (the
“Gross-Up Payment”) equal to one hundred percent (100%) of the Excise Tax and
one hundred percent (100%) of the amount of any federal, state and local income
taxes and Excise Tax imposed on the Gross-Up Payment, all provided that any and
all such Gross-Up Payment or Payments shall be paid to Maddy thirty (30) days
after Maddy remits the taxes with respect to which such Gross-Up Payment is
made, all subject to the provisions of Article V Section F 8 to the extent
applicable.

     

    B.           Determination of Gross-Up
Payment.  All determinations required to be made under this
Article VI, including whether a Gross-Up Payment is required and the amount
of such Gross-Up Payment, shall be made by the firm of independent accountants
selected by Summit to audit its financial statements (the “Accounting Firm”)
which shall provide either

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
before or
no later than twenty (20) days after Maddy remits any such taxes, detailed
supporting calculations both to Summit and Maddy.  In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting a “change in control,” Maddy shall appoint another
nationally recognized accounting firm to make, either before or no later than
twenty (20) days after Maddy remits any such taxes, the determinations required
hereunder (which accounting firm shall then be referred to as the “Accounting
Firm” hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by Summit.

     

    VII.           NONCOMPETITION
AND NONSOLICITATION.

     

    In
consideration of the covenants set forth herein, including but not limited to
the payments set forth in Article V Section F and the Change in Control
Agreement attached as Exhibit A, Maddy agrees as follows:

     

    A.           For
a period of two (2) years after Maddy’s employment with Summit is terminated for
any reason other than for cause under Article IV Section D, or insolvency
of Summit not attributable to Maddy, or material breach by Summit, Maddy shall
not, directly or indirectly, engage in the business of banking in the entire
State of West Virginia, in any county or location in which Summit has operating
offices at the time of termination, in the following designated locations in
Virginia (see Exhibit to Article VII Section A attached, which is
incorporated herein by reference; this Exhibit was molded to include the
counties where municipalities are located) or in any location identified by
Summit in its three-year strategic plan as a location for future expansion to be
adopted by the Board and reviewed and updated at regular intervals.

     

    For a
period of one (1) year after Maddy’s employment with Summit is terminated
for cause as set forth in Article IV Section D(iv), Maddy shall not,
directly or indirectly, engage in the business of banking in the entire State of
West Virginia, in any county or location in which Summit has operating offices
at the time of termination, in the following designated locations in Virginia
(see Exhibit to Article VII Section A attached, which is incorporated
herein by reference; this Exhibit was molded to include the counties where
municipalities are located), or in any location identified by Summit in its
three-year strategic plan as a location for future expansion to be adopted by
the Board and reviewed and updated at regular intervals.

     

    For
purposes of this Article VII Section A, being engaged in the business of
banking shall mean Maddy’s engaging in any business or activity of any nature
that is competitive with the business of Summit or its affiliates in the
specified geographic area or Maddy’s solicitation of business from clients with
a primary or principal office in the specified geographic area.

     

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

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
associating
or becoming an affiliate of Maddy in any business which is in competition with
any business or activity engaged in by the Summit or its
affiliates.

     

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

     

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

     

    D.           In
the event that this provision shall be deemed by any Court or body of competent
jurisdiction to be unenforceable in whole or in part by reason of its extending
for too long a period of time, or too great a geographical area or over too
great a range of activities, or is overly broad in any other respect or for any
other reason, then in such event this Employment Agreement shall be deemed
modified and interpreted to extend over only such maximum period of time,
geographical area, or range of activity or otherwise, so as to render these
provisions valid and enforceable, and as so modified, these shall be enforceable
and enforced.

     

    VIII.                     CONFIDENTIAL
INFORMATION.

     

    Maddy
shall not, during the term of this Agreement or at any time thereafter, directly
or indirectly, publish or disclose to any person or entity any confidential
information (other than a Summit employee entitled to know such confidential
information) concerning the assets, customer/client lists, business or affairs
of Summit, and its affiliates, including but not limited to any trade secrets,
financial data, employee or customer/client information or organizational
structure.  Notwithstanding the foregoing, nothing herein shall
prevent Maddy from utilizing the knowledge and experience he has acquired in the
banking industry including without limitation his knowledge of and experience
with producer bonus plans.

     

    All
files, records, documents, information, letters, notes, media lists, notebook
and similar items relating to the business of Summit shall remain the exclusive
property of Summit.  Upon the expiration or earlier termination of
this Agreement, or when requested by Summit, Maddy shall immediately deliver to
Summit all such files, computer data files, records, documents, information and
other items in the possession of or under the control of Maddy.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    All
business produced by Maddy while in the employ of Summit is the exclusive
property of Summit unless specifically excluded elsewhere in this
Agreement.  Maddy shall not, during the term of this Agreement or any
time thereafter, intentionally interfere with any business or contractual
relationship of Summit.

     

    IX.           ARBITRATION.

     

    Any
dispute between the parties arising out of or with respect to this Agreement or
any of its provisions or Maddy’s employment with Summit, whether sounding in
tort or contract, shall be resolved by the sole and exclusive remedy of binding
arbitration. Maddy hereby waives his right to a jury trial and his right to
receive noneconomic damages.  Arbitration shall be conducted in
Moorefield, West Virginia, in accordance with the rules of the American
Arbitration Association (“AAA”).  The parties agree each to select one
arbitrator from an AAA employment panel.  Within ten days after
selection of the second arbitrator, the two arbitrators shall promptly select a
third arbitrator.  The arbitration shall be conducted in accordance
with the West Virginia Rules of Evidence and all discovery issues shall be
decided by the arbitrators.  The panel of arbitrators shall supply a
written opinion and analysis of the matter submitted for arbitration along with
the decision.  The arbitration decision shall be final and subject to
enforcement in the local circuit court.

     

    In any
arbitration proceeding between the parties, the losing party shall pay to the
prevailing party all reasonable expenses and costs including attorneys’ fees
incurred by the prevailing party during the arbitration proceeding, provided, that in the event
Maddy becomes entitled to reimbursement under this Article IX, the following
provisions shall apply:  (i) reimbursement provided under this Article
IX during any taxable year of Maddy shall not affect reimbursement to be
provided under this Article IX in any other taxable year; (ii) reimbursement
under this Article IX shall be made thirty (30) days after Maddy requests
reimbursement hereunder, provided that in no event
shall any payment under this Article IX be made after the last day of Maddy’s
taxable year following the taxable year in which the expense was incurred, (iii)
no rights to reimbursement under this Article IX shall be subject to liquidation
or exchange for any other benefit, and (iv) reimbursement provided under this
Article IX shall be subject to the provisions of Article V Section F 8 herein,
to the extent applicable.  A party shall be considered a prevailing
party if:   

     

    (i)           it
initiated the arbitration and substantially obtained the relief it sought,
either through a judgment or the losing party’s voluntary action before
arbitration (after it is scheduled) or judgment;

     

    (ii)           the
other party withdraws its action without substantially obtaining the relief it
sought, or

     

    (iii)           it
did not initiate the arbitration and judgment is entered for either party, but
without substantially granting the relief sought.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    X.           MISCELLANEOUS
PROVISIONS

     

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

     

    
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              Summit
      Financial Group, Inc.

            	 
      	
              300
      North Main Street

            
	 
      	 
      	 
      	 
      	
              Moorefield,
      West Virginia 26836

            
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              H.
      Charles Maddy, III

            	 
      	
              P.
      O. Box 979

            
	 
      	 
      	 
      	 
      	
              Old
      Fields, West Virginia 26845

            

    

     

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

     

     

    C.           Amendments.  Any
amendments to this Agreement must be in writing and signed by all parties hereto
except that extensions of the term of this Agreement under Article III may
be evidenced by Board of Directors or Nominating and Compensation Committee
minutes, all provided that (i) no amendment to this Agreement shall be effective
if it would, if effective, cause this Agreement to violate Code Section 409A and
the regulations and guidance thereunder or cause any amount of compensation or
payment hereunder to be subject to a penalty tax under Code Section 409A and the
regulations and guidance issued thereunder, which amount of compensation or
payment would not have been subject to a penalty tax under Code Section 409A and
the regulations and guidance thereunder in the absence of such amendment and
(ii) the provisions of this Article X Section C are irrevocable.

     

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

     

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

     

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

     

     

    G.           Indemnification.  To
the fullest extent permitted under applicable West Virginia law and federal
banking law, Summit agrees that it will indemnify and hold harmless Maddy from
and against all costs and expenses, including without limitation, all court
costs and attorneys’ fees, incurred by him during his lifetime in defending any
and all claims, demands, proceedings, suits or actions, actually instituted or
threatened, by third parties, involving this Agreement, its validity or
enforceability or with respect to any payments to be made pursuant

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    thereto;
provided, that in the
event Maddy becomes entitled to reimbursement under this Article X Section G,
the following provisions shall apply:  (i) reimbursement provided
under this Article X Section G during any taxable year of Maddy shall not affect
reimbursement to be provided under this Article X Section G in any other taxable
year; (ii) reimbursement under this Article X Section G shall be made thirty
(30) days after Maddy requests reimbursement hereunder, provided that in no event
shall any payment under this Article X Section G be made after the last day of
Maddy’s taxable year following the taxable year in which the expense was
incurred, (iii) no rights to reimbursement under this Article X Section G shall
be subject to liquidation or exchange for any other benefit, and (iv)
reimbursement provided under this Article X Section G shall be subject to the
provisions of Article V Section F 8 herein, to the extent
applicable.

     

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

     

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

     

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

     

    K.           Date Payments Deemed
Made.  In accordance with Code Section 409A and to the extent
permitted by said Code Section 409A and the regulations and guidance issued
thereunder, any payment to or on behalf of Maddy under this Agreement shall be
treated as having been made on a date specified in this Agreement if it is made
on a later date within Maddy’s same taxable year as
the designated date, or, if later, if made no later than the fifteenth day of
the third month after such designated date provided
that, in any event, Maddy is not permitted, directly or indirectly, to designate
the taxable year of any payment.

     

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

     

    SUMMIT
FINANCIAL GROUP, INC.

    

    By:  /s/ Oscar M.
Bean______   _________

    

    Its:  Chairman_______________________

    

    _/s/ H. Charles Maddy,
III______________

    H.
CHARLES MADDY, III

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    Exhibit
to Article VII Section A of Amended and Restated Employment Agreement by
and between

    Summit
Financial Group, Inc. and H. Charles Maddy, III, dated _December 31__,
2008

    Designated
Virginia Locations

    
      	 
      	 
      	 
      
	 
      	 
      	
              Ashburn

            
	 
      	 
      	 
      
	 
      	 
      	
              Charlottesville

            
	 
      	 
      	 
      
	 
      	 
      	
              Fredericksburg

            
	 
      	 
      	 
      
	 
      	 
      	
              Leesburg

            
	 
      	 
      	 
      
	 
      	 
      	
              Purcellville

            
	 
      	 
      	 
      
	 
      	 
      	
              Warrenton

            

    

    

    
      	
              *  

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

            

    

    

    
 

    
 

    14hcmchgcntrlagmt.htm

     

    
      

      

    

    
 

    Exhibit
10.2

     

    Exhibit A

     

    CHANGE
IN CONTROL AGREEMENT

     

    THIS
CHANGE IN CONTROL AGREEMENT (“Agreement”), made and entered into this _31st_ day of _December_, 2008, by
and between Summit Financial Group, Inc. (the “Company”) and H. Charles Maddy,
III (“Maddy”), amends, restates, supersedes and replaces that certain Change in
Control Agreement made and entered into as of the 4th day of
March, 2005;

     

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

     

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

     

    WHEREAS,
the parties hereto, in the interests of clarity and for other reasons stated
herein, and for the purpose of complying with the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), wish to amend and
restate this Agreement, provided that all provisions applicable
to compliance under Code Section 409A shall be effective as of March 4, 2005,
and provided further that, notwithstanding any other provisions of this amended
and restated Agreement, this amendment applies only to amounts that would not
otherwise be payable in 2006, 2007 or 2008 and shall not cause (i) an amount to
be paid in 2006 that would not otherwise be payable in such year, (ii) an amount
to be paid in 2007 that would not otherwise be payable in such year, and (iii)
an amount to be paid in 2008 that would not otherwise be payable in such year,
and to the extent necessary to qualify under Transition Relief issued under said
Code Section 409A to not be treated as a change in the form and timing of a
payment under section 409A(a)(4) or an acceleration of a payment under section
409A(a)(3), Maddy, by executing this Agreement, shall be deemed to have elected
the timing and form of distribution provisions of this amended and restated
Agreement, and to otherwise further revise the Agreement all on or before
December 31, 2008.

     

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

     

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

     

    (1)           “Change
of Control” means with respect to (i) the Company or any Affiliate for whom
Maddy is performing services at the time of the Change in Control Event; (ii)
the Company or any Affiliate that is liable for the payment to Maddy hereunder
(or all corporations liable for the payment if more than one corporation is
liable) but only if either the  compensation payable hereunder is
attributable to the performance of service by Maddy for such corporation (or
corporations) or there is a bona fide business purpose for such corporation or
corporations to be liable for such payment and, in either case, no significant
purpose of making

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    
such
corporation or corporations liable for such payment is the avoidance of Federal
Income tax; or (iii) a corporation that is a majority shareholder of a
corporation identified in paragraph (i) or (ii) of this section, or any
corporation in a chain of corporations in which each corporation is a majority
shareholder of another corporation in the chain, ending in a corporation
identified in paragraph (i) or (ii) of this section, a Change in Ownership or
Effective Control or a Change in the Ownership of a Substantial Portion of the
Assets of a Corporation as defined in Section 409A of the Code, and the
regulations or guidance issued thereunder, meeting the requirements of a “Change
in Control Event” thereunder.

     

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

     

    (3)           “Employment
Agreement” shall mean the Amended and Restated Employment Agreement dated as of
_December
31st______, 2008, by and between Summit Financial Group, Inc. and H.
Charles Maddy, III.

     

    (4)           “Salary”
means Maddy’s Base Salary as defined in the Employment Agreement in effect on
the date of termination of Maddy’s employment under this Agreement, or if no
Employment Agreement is in effect, Maddy’s Base Salary on the date of
termination of employment hereunder, corresponding to the definition of Base
Salary in the most recent Employment Agreement.

     

    (5)           For
purposes of this Change in Control Agreement, “Good Cause” shall
mean:  (i) excessive absenteeism without approval of Summit not caused
by disability; (ii) gross or willful neglect of duty resulting in substantial
harm to Summit after Maddy has been given written direction and reasonable time
to perform such duties; or (iii) any acts or omissions on the part of Maddy
which when proven constitute fraud or commission of any criminal act involving
the person or property of others or the public generally.

     

    (6)           “Disability”
means a physical or mental condition rendering Maddy substantially unable to
perform the duties of an officer and director of a banking
organization.

     

    (7)           “Retirement”
means termination of employment by Maddy in accordance with Company’s (or its
successor’s) retirement plan, including early retirement as approved by the
Board of Directors.

     

    (8)           “Good
Reason” means

     

    
      	
               
      

            	
              (a)

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

            

    

     

    
      	
               
      

            	
              (i)

            	
              a
      decrease in Maddy’s overall compensation (including, without limitation,
      salary, perquisites, bonuses and other earnings reported on IRS Form W-2,
      but excluding a diminution in board fees) below its level in effect
      immediately prior to the date of consummation of the Change of Control,
      without Maddy’s prior written consent;
or

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (ii)

            	
              a
      material reduction in the importance of Maddy’s job responsibilities or
      assignment of job responsibilities inconsistent with Maddy’s
      responsibility prior to the Change of Control without Maddy’s prior
      written consent; or

            

    

     

    
      	
               
      

            	
              (iii)

            	
              a
      geographical relocation of Maddy to an office more than 20 miles from
      Maddy’s location at the time of the Change of Control or the imposition of
      travel requirements inconsistent with those existing prior to the Change
      of Control without Maddy’s prior written consent;
  or

            

    

     

    
      	
               
      

            	
              (b)

            	
              Failure
      of the Company to obtain assumption of this Change in Control Agreement by
      its successor as required by Paragraph M(1) below;
  or

            

    

     

    
      	
               
      

            	
              (c)

            	
              Any
      removal of Maddy from, or failure to re-elect Maddy to any of Maddy’s
      positions with Company immediately prior to a Change of Control (except in
      connection with the termination of Maddy’s employment for Good Cause,
      death, Disability or Retirement) without Maddy’s prior
      consent.

            

    

     

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

     

    (10)           “Separation
from Service” means the severance of Maddy’s employment with the Company or any
Affiliate for whom Maddy is performing services at the time of the Change in
Control Event for any reason.  Maddy separates from service with the
Company or any Affiliate if he dies, retires, separates from service because of
Maddy’s Disability, or otherwise has a termination of employment with the
Company or any Affiliate.  However, the employment relationship is
treated as continuing intact while Maddy is on military leave, sick leave, or
other bona fide leave
of absence if the period of such leave does not exceed six months, or if longer,
so long as Maddy’s right to reemployment with the Company or any Affiliate is
provided either by statute or by contract.  If the period of leave
exceeds six months and Maddy’s right to reemployment is not provided either by
statute or by contract, the employment relationship is deemed to terminate on
the first date immediately following such six-month
period.  Notwithstanding the foregoing, where a leave of absence is
due to any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than six months, where such impairment causes Maddy to be unable to
perform the duties of his position of employment or any substantially similar
position of employment, a 29-month period of absence may be substituted for such
six-month period.  In addition, notwithstanding any of the foregoing,
the term “Separation from Service” shall be interpreted under this Agreement in
a manner consistent with the requirements of Code Section 409A including, but
not limited to:

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	
                 

            	
              
(i)
      an examination of the relevant facts and circumstances, as set forth in
      Code Section 409A and the regulations and guidance thereunder, in the case
      of any performance of services or availability to perform services
      after a purported
      Separation from Service,

            

    

     

    (ii) in
any instance in which Maddy is participating or has at any time participated in
any other plan which is, under the aggregation rules of Code Section 409A and
the regulations and guidance issued thereunder, aggregated with this Agreement
and with respect to which amounts deferred hereunder and under such other plan
or plans are treated as deferred under a single plan (hereinafter sometimes
referred to as an “Aggregated Plan” or together as the “Aggregated Plans,”),
then in such instance Maddy shall only be considered to meet the requirements of
a Separation from Service hereunder if Maddy meets (a) the requirements of a
Separation from Service under all such Aggregated Plans and (b) the requirements
of a Separation from Service under this Agreement which would otherwise
apply,

     

    (iii) in
any instance in which Maddy is an employee and an independent contractor of the
Company or any Affiliate or any combination thereof, Maddy must have a
Separation from Service in all such capacities to meet the requirements of a
Separation from Service hereunder, although, notwithstanding the foregoing, if
Maddy provides services both as an employee and a member of the Board of
Directors of the Company or any Affiliate or any combination thereof, the
services provided as a director are not taken into account in determining
whether Maddy has had a Separation from Service as an employee under this
Agreement, provided that no plan in which Maddy participates or has participated
in his capacity as a director is an Aggregated Plan, and

     

    (iv) a
determination of whether a Separation from Service has occurred shall be made in
accordance with Treasury Regulations Section 1.409A-1(h)(4) or any similar or
successor law, regulation or guidance of like import, in the event of an asset
purchase transaction as described therein.

     

    B.           Retention of Maddy After
Change of Control.  In order to facilitate management
continuity and to promote an orderly transition of ownership, Company and Maddy
agree that after a Change of Control, Maddy shall be employed by the acquiring
company for a period of one (1) year (the “Transition Period”), commencing upon
the date of consummation of the transaction resulting in a Change of
Control.  During the Transition Period, Maddy may terminate his
employment for Good Reason, and the Company may terminate the employment of
Maddy for Good Cause.  If Company terminates Maddy in a manner
constituting Wrongful Termination, or Maddy terminates for Good Reason, Maddy
shall be entitled to receive the compensation set forth in paragraph E
below.

     

    If the
Employment Agreement is still in effect, Maddy shall be employed pursuant to the
terms of Article II and Article V, A-E of the Employment Agreement; provided, that any additional
provisions of Maddy’s Employment Agreement which by their terms specifically
apply to this Change in Control Agreement shall also apply to Maddy’s employment
hereunder and, if the Employment Agreement is no longer in effect, such
provisions shall be deemed to survive and shall be incorporated by reference
into this Change in Control Agreement.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
All other
terms of Maddy’s employment, including without limitation his right to receive
termination payments and the term of his employment, will be controlled by this
Agreement.

     

    C.           Compensation of Maddy Upon
Separation from Service Due to Death or Disability During the Transition
Period.  In the event of the Separation from Service of Maddy
due to Death or Disability during the Transition Period, Maddy shall be entitled
to three times the greater of (a) Maddy’s Salary in effect immediately prior to
the date of consummation of a Change of Control or (b) Maddy’s Salary in effect
on the date of Separation from Service.  Such payment shall be made in
a lump sum on the date of Separation from Service under this Agreement, subject
to the provisions of Paragraph N herein to the extent applicable.

     

    D.           Compensation of Maddy Upon
Separation from Service Due to Expiration of the Transition
Period.  Upon Separation from Service due to the expiration of
the Transition Period, Maddy shall be entitled to be paid an amount equal to
three (3) times the greater of (a) Maddy’s Salary in effect immediately prior to
the date of consummation of a Change of Control or (b) Maddy’s Salary in effect
on the date of Separation from Service.  Such payment shall be made in
a lump sum on the date of Separation from Service under this Agreement, subject
to the provisions of Paragraph N herein to the extent applicable.

     

    E.           Compensation of Maddy Upon
Separation from Service Due to Good Reason or Wrongful Termination during the
Transition Period.  Except as hereinafter provided, if Maddy
terminates his employment with the Company during the Transition Period for Good
Reason, resulting in Maddy’s Separation from Service, or the Company terminates
Maddy’s employment during the Transition Period in a manner constituting
Wrongful Termination, resulting in Maddy’s Separation from Service, the Company
agrees as follows:

     

    (1)           The
Company shall pay Maddy a cash payment equal to three (3) times the greater of
(a) Maddy’s Salary in effect immediately prior to the date of consummation of a
Change of Control or (b) Maddy’s Salary in effect on the date of Separation from
Service.  Such payment shall be made in a lump sum on the date of
Separation from Service under this Agreement, subject to the provisions of
Paragraph N herein to the extent applicable.

     

    (2)           Maddy
will be entitled to receive his reasonable share of the Company’s cash bonuses,
if any, allocated in accordance with existing principles and authorized by the
Board of Directors.  The amount of Maddy’s cash incentive award shall
not be reduced due to Maddy not being actively employed for the full
year.  Said cash bonuses, if any, will be paid to Maddy in a lump sum
on the date of Separation from Service, taking into account the provisions of
Paragraph M herein relating to when payments are deemed to be made, and subject
to the provisions of Paragraph N herein to the extent applicable.

     

    (3)           Maddy
will continue to participate, without discrimination, for the number of months
between the date of Separation from Service and the date that is thirty-six (36)
months after the date of the consummation of the Change of Control in benefit
plans (such as retirement, disability and medical insurance) maintained after
any Change of Control for Maddy, in general, of the Company, or any successor
organization, provided Maddy’s continued participation is possible under the
general terms and conditions of such plans.  In the event Maddy’s
participation
in any such plan is barred, the Company shall arrange to provide Maddy with

     

     

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

     

     

    benefits
substantially similar to those to which Maddy would have been entitled had his
participation not been barred.  However, in no event will Maddy
receive from the Company the employee benefits contemplated by this subparagraph
if Maddy receives comparable benefits from any other source.  With
respect to any benefits Maddy receives under this Paragraph E(3), the following
provisions will apply:  (i) in-kind benefits provided under this
Paragraph E(3) during any taxable year of Maddy shall not affect the in-kind
benefits to be provided under this Paragraph E(3) in any other taxable year;
(ii) if the provision of benefits under this Paragraph E(3) is to be done by
means of reimbursement, the reimbursement of an eligible benefit expense under
this Paragraph E(3) must be made on or before the last day of Maddy’s taxable
year following the taxable year in which the expense was incurred, (iii) no
rights to reimbursement or in-kind benefits under this Paragraph E(3) shall be
subject to liquidation or exchange for any other benefit, and (iv) benefits
provided under this Paragraph E(3) shall be subject to the provisions of
Paragraph N herein to the extent applicable.

     

    (4)           Paragraph
F of this Agreement and Section VII of the Employment Agreement shall not
apply.

     

    F.           Separation from Service at
Maddy’s Option.  Maddy may Separate from Service within six (6)
months after consummation of any Change of Control without reason at his
option by giving at least thirty (30) days’ written notice of his intention to
terminate his employment.  In such event, Maddy shall be entitled to
receive a payment equal to 75% of the greater of (a) Maddy’s Salary in effect
immediately prior to the date of consummation of a Change of Control or
(b) Maddy’s Salary in effect on the date of Separation from
Service.  Such payment shall be made in a lump sum on the date of
Separation from Service under this Agreement, subject to the provisions of
Paragraph N herein to the extent applicable.

     

    G.           Noncompetition and
Nonsolicitation.  In consideration of the covenants set forth
herein, including but not limited to the payment set forth in paragraphs C, D
and E hereof, Maddy agrees as follows:

     

    (1)           For
a period of three (3) years after expiration of the Transition Period, provided
Maddy’s employment under this Agreement is not sooner terminated, Maddy shall
not, directly or indirectly engage in the business of banking, in the entire
State of West Virginia, in any county or location in which Summit has operating
offices at the time of termination, in the following designated locations in
Virginia (See Exhibit to Paragraphs G(1) and (2) attached, which is incorporated
herein by reference.  This Exhibit was molded to included the counties
where the municipalities are located.), or in any location identified by Summit
in its three-year strategic plan as a location for future expansion to be
adopted by the Board and reviewed and updated at regular intervals.

     

    (2)           For
a period of one (1) year after Maddy’s employment with Summit is terminated for
any reason other than Maddy’s Disability, Retirement, Good Reason or termination
at Maddy’s option as provided in Paragraph F hereof, Maddy shall not, directly
or indirectly, engage in the business of banking in the entire State of West
Virginia, in any county or location in which Summit has operating offices at the
time of termination, in the following designated locations in Virginia (See
Exhibit to Paragraphs G(1) and (2)) attached, which is incorporated
herein by reference.  This Exhibit was molded to included the counties
where the 

     

     

     

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

     

     

    municipalities
are located.), or in any location identified by Summit in its three-year
strategic plan as a location for future expansion to be adopted by the Board and
reviewed and updated at regular intervals.

     

    (3)           For
purposes of Paragraphs G(1) - (2), being engaged in the business of banking
shall mean Maddy’s engaging in any business or activity of any nature that is
competitive with the business of Summit or its affiliates in the specified
geographic area or Maddy’s solicitation of business from clients with a primary
or principal office in the specified geographic area.

     

    (4)           In
the event that this provision shall be deemed by any Court or body of competent
jurisdiction to be unenforceable in whole or in part by reason of its extending
for too long a period of time, or too great a geographical area or over too
great a range of activities, or is overly broad in any other respect or for any
other reason, then in such event this Agreement shall be deemed modified and
interpreted to extend over only such maximum period of time, geographical area,
or range of activity or otherwise, so as to render these provisions valid and
enforceable, and as so modified, these shall be enforceable and
enforced.

     

    H.           Other
Employment.  Maddy shall not be required to mitigate the amount
of any payment provided for in this Change in Control Agreement by seeking other
employment.  The amount of any payment provided for in this Change in
Control Agreement shall not be reduced by any compensation earned or benefits
provided (except as set forth in Paragraph E(3) above) as the result of
employment by another employer after the date of Separation from
Service.

     

    I.           Rights of Company Prior to
the Change of Control.  This Change in Control Agreement shall
not affect the right of the Company or Maddy to terminate the foregoing
Employment Agreement or the employment of Maddy in accordance therewith;
provided, however, that any termination or reduction in salary or benefits that
takes place after discussions have commenced that result in a Change of Control
shall be presumed (without clear and convincing evidence to the contrary) to be
Good Reason and a violation of this Change in Control Agreement entitling Maddy
to the benefits hereof, provided Maddy Separates from Service either before or
during the Transition Period, and any such termination by Company resulting in
Maddy’s Separation from Service either before or during the Transition Period
shall be deemed to be a Wrongful Termination, and all references in this Change
in Control Agreement to Salary shall be deemed to mean the Salary, as defined
herein, based on the earnings Maddy would have had prior to any reduction
thereof.

     

    J.           Confidentiality.  Maddy
shall not, during the term of this Agreement or at any time thereafter, directly
or indirectly, publish or disclose to any person or entity any confidential
information (other than a Company employee entitled to know such confidential
information) concerning the assets, customer/client lists, business or affairs
of Company, and its affiliates, including but not limited to any trade secrets,
financial data, employee or customer/client information or organizational
structure.  Notwithstanding the foregoing, nothing herein shall
prevent Maddy from utilizing the knowledge and experience he has acquired in the
banking industry including without limitation the knowledge of producer bonus
plans.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    All
files, records, documents, information, letters, notes, media lists, notebook
and similar items relating to the business of Company shall remain the exclusive
property of Company.  Upon the expiration or earlier termination of
this Agreement, or when requested by Company, Maddy shall immediately deliver to
Company all such files, computer data files, records, documents, information and
other items in the possession of or under the control of Maddy.

     

    All
business produced by Maddy while in the employ of the Company or any Affiliate
thereof is the exclusive property of Company unless specifically excluded
elsewhere in this Agreement.  Maddy shall not, during the term of this
Agreement or any time thereafter, intentionally interfere with any business or
contractual relationship of the Company.

     

    K.           Gross-Up
Payment.  Notwithstanding anything in this Agreement to the
contrary, in the event it shall be determined that any payment or distribution
by Company and any of its subsidiaries and affiliates to or for the benefit of
Maddy (whether paid or payable or distributed or distributable pursuant to this
Agreement, the Executive Salary Continuation Agreement between Company and
Maddy, the Employment Agreement between Company and Maddy, or any other
agreement, contract, plan or arrangement, but determined without regard to any
additional payments required under this Paragraph K) (any such payments and
distributions collectively referred to as “Payments”), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, or any similar tax that may hereinafter be imposed or any interest and
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”), then Company shall pay to Maddy an additional payment (the
“Gross-Up Payment”) equal to one hundred percent (100%) of the Excise Tax and
one hundred percent (100%) of the amount of any federal, state and local income
taxes and Excise Tax imposed on the Gross-Up Payment, all provided that any and
all such Gross-Up Payment or Payments shall be paid to Maddy thirty (30) days
after Maddy remits the taxes with respect to which such Gross-Up Payment is made
and all subject to the provisions of Paragraph N herein to the extent
applicable.

     

    All
determinations required to be made under this Paragraph K, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by the firm of independent accountants selected by Company to audit its
financial statements (the “Accounting Firm”) which shall provide either before
or no later than twenty (20) days after Maddy remits any such taxes, detailed
supporting calculations both to Company and Maddy.  In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting a “change in control,” Maddy shall appoint another
nationally recognized accounting firm to make, either before or no later than
twenty (20) days after Maddy remits any such taxes, the determinations required
hereunder (which accounting firm shall then be referred to as the “Accounting
Firm” hereunder).  All fees and expenses of the Accounting Firm shall
be borne solely by Company.

     

    L.           Arbitration.  Any
dispute between the parties arising out of or with respect to this Agreement or
any of its provisions or Maddy’s employment with Company, whether sounding in
tort or contract, shall be resolved by the sole and exclusive remedy of binding
arbitration.  Maddy hereby waives his right to a jury trial and his
right to receive noneconomic damages.  Arbitration shall be conducted
in Moorefield, West Virginia, in accordance with the rules

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
of the
American Arbitration Association (“AAA”).  The parties agree each to
select one arbitrator from an AAA employment panel.  Within ten days
after selection of the second arbitrator, the two arbitrators shall select a
third arbitrator.  The arbitration shall be conducted in accordance
with the West Virginia Rules of Evidence and all discovery issues shall be
decided by the arbitrators.  The panel of arbitrators shall supply a
written opinion and analysis of the matter submitted for arbitration along with
the decision.  The arbitration decision shall be final and subject to
enforcement in the local circuit court.

     

    In any
arbitration proceeding between the parties, the losing party shall pay to the
prevailing party all reasonable expenses and costs including attorneys’ fees
incurred by the prevailing party during the arbitration proceeding, provided, that in the event
Maddy becomes entitled to reimbursement under this Paragraph L, the following
provisions shall apply:  (i) reimbursement provided under this
Paragraph L during any taxable year of Maddy shall not affect reimbursement to
be provided under this Paragraph L in any other taxable year; (ii) reimbursement
under this Paragraph L shall be made thirty (30) days after Maddy requests
reimbursement hereunder, provided that in no event
shall any payment under this Paragraph L be made after the last day of Maddy’s
taxable year following the taxable year in which the expense was incurred, (iii)
no rights to reimbursement under this Paragraph L shall be subject to
liquidation or exchange for any other benefit, and (iv) reimbursement provided
under this Paragraph L shall be subject to the provisions of Paragraph N herein,
to the extent applicable.  A party shall be considered a prevailing
party if:

     

    
      	
               
      

            	
              (i)

            	
              it
      initiated the arbitration and substantially obtained the relief it sought,
      either through a judgment or the losing party’s voluntary action before
      arbitration (after it is scheduled) or
judgment;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              the
      other party withdraws its action without substantially obtaining the
      relief it sought, or

            

    

     

    
      	
               
      

            	
              (iii)

            	
              it
      did not initiate the arbitration and judgment is entered for either party,
      but without substantially granting the relief
  sought.

            

    

     

    M.           Date Payments Deemed
Made.

     

    In
accordance with Code Section 409A and to the extent permitted by said Code
Section 409A and the regulations and guidance issued thereunder, any payment to
or on behalf of Maddy under this Agreement shall be treated as having been made
on a date specified in this Agreement if it is made on a later date within
Maddy’s same taxable year as
the designated date, or, if later, if made no later than the fifteenth day of
the third month after such designated date provided
that, in any event, Maddy is not permitted, directly or indirectly, to designate
the taxable year of any payment.

     

    N.           Six-Month Delay in
Payments.

     

    Notwithstanding
any other provisions of this Agreement, if Maddy is a Specified Employee (within
the meaning of Code Section 409A) on Maddy’s date of Separation from Service,
then if any payment of deferred compensation (within the meaning of Code Section
409A) is to be made upon or based upon Maddy’s Separation from Service other
than by death,

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
under any
provision of this Agreement, and such payment of deferred compensation is to be
made within six months after Maddy’s date of Separation from Service, other than
by death, then such payment shall instead be made on the date which is six
months after such Separation from Service of Maddy (other than by death,)
provided further, however, that in the case of any payment of deferred
compensation which is to be made in installments, with the first such
installment to be paid on or within six months after the date of Separation from
Service other than by death, then in such event all such installments which
would have otherwise been paid within the date which is six months after such
Separation from Service of Maddy (other than by death) shall be delayed,
aggregated, and paid, notwithstanding any other provision of this Agreement, on
the date which is six months after such Separation from Service of Maddy (other
than by death), with the remaining installments to continue thereafter until
fully paid hereunder.  Notwithstanding any of the foregoing, or any
other provision of this Agreement, no payment of deferred compensation upon or
based upon Separation from Service may be made under this Agreement before the
date that is six months after the date of Separation from Service or, if
earlier, the date of death, if Maddy is a Specified Employee on Maddy’s date of
Separation from Service.  This Paragraph N shall only apply to
delay the payment of deferred compensation to Specified Employees as required by
Code Section 409A and the regulations and guidance issued
thereunder.

     

    O.           Successors; Binding
Agreement.

     

    (1)           The
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance satisfactory to
Maddy, to expressly assume and agree to perform this Change in Control
Agreement.  Failure of the Company to obtain such agreement prior to
the effectiveness of any such succession shall be a breach of this Change in
Control Agreement and shall entitle Maddy to compensation from the Company in
the same amount and on the same terms as he would be entitled to hereunder if he
terminated his employment for Good Reason hereunder, provided that Maddy incurs
a Separation from Service within the Transition Period.

     

    (2)           This
Change in Control Agreement and all rights of Maddy hereunder shall inure to the
benefit of and be enforceable by Maddy’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees.  If Maddy should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Maddy’s devisee, legatee, or other designee or, if there be no such
designee, to Maddy’s estate.

     

    P.           Indemnification.  To
the fullest extent permitted under West Virginia law and federal banking law,
the Company agrees that it will indemnify and hold harmless Maddy from and
against all costs and expenses, including without limitation, all court costs
and attorney’s fees, incurred by him during his lifetime in defending any and
all claims, demands, proceedings, suits or actions, actually instituted or
threatened, by third parties, involving this Agreement, its validity or
enforceability or with respect to any payments to be made pursuant thereto;
provided, that in the
event Maddy becomes entitled to reimbursement under this Paragraph P, the
following provisions shall apply:  (i) reimbursement provided under
this

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    
Paragraph
P during any taxable year of Maddy shall not affect reimbursement to be provided
under this Paragraph P in any other taxable year; (ii) reimbursement under this
Paragraph P shall be made thirty (30) days after Maddy requests reimbursement
hereunder, provided
that in no event shall any payment under this Paragraph P be made after the last
day of Maddy’s taxable year following the taxable year in which the expense was
incurred, (iii) no rights to reimbursement under this Paragraph P shall be
subject to liquidation or exchange for any other benefit, and (iv) reimbursement
provided under this Paragraph P shall be subject to the provisions of Paragraph
N herein, to the extent applicable.

     

    Q.           Survival of Change in
Control Agreement.  This Change in Control Agreement shall
survive the expiration of the Employment Agreement.

     

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

     

    SUMMIT
FINANCIAL GROUP, INC.

    

    By:           /s/ Oscar M.
Bean  ______________

    

    Its:           Chairman______________________

    

    

    

    /s/ H. Charles Maddy,
III________________

    H.
CHARLES MADDY, III

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    
      	
               
      

            	
               

            

    

     

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

    

    By and
Between Summit Financial Group, Inc. and H. Charles Maddy, III, dated December 31_,
2008.

    

    Designated
Virginia Locations

    
      	 
      	 
      	 
      
	 
      	 
      	
              Ashburn

            
	 
      	 
      	 
      
	 
      	 
      	
              Charlottesville

            
	 
      	 
      	 
      
	 
      	 
      	
              Fredericksburg

            
	 
      	 
      	 
      
	 
      	 
      	
              Leesburg

            
	 
      	 
      	 
      
	 
      	 
      	
              Purcellville

            
	 
      	 
      	 
      
	 
      	 
      	
              Warrenton

            

    

    

    
      	
              *  

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

            

    

     

     

     

    12

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