AGREEMENT AND PLAN OF REORGANIZATION

                                                                                                                                                                    Exhibit 2.1                                                            

AGREEMENT AND PLAN OF REORGANIZATION , dated as of April 27, 2007 (this “Agreement”), by and among KELLY INSURANCE AGENCY, INC. (“Kelly Insurance”) and KELLY PROPERTY AND CASUALTY INC. (“Kelly P & C”) and SUMMIT FINANCIAL GROUP, INC. (“Summit”).

A.   Kelly Insurance . Kelly Insurance is a Virginia corporation, having its principal place of business in Leesburg, Virginia.

B.   Kelly P & C . Kelly P & C is a Virginia corporation, having its principal place of business in Leesburg, Virginia.

C.   Summit . Summit is a West Virginia corporation, having its principal place of business in Moorefield, West Virginia.

D.   Intentions of the Parties . It is the intention of the parties to this Agreement that the business combination contemplated hereby be treated as a “reorganization” under Section 368 of the Internal Revenue Code of 1986 (the “ Code ”).

E.   Board Action . The respective Boards of Directors of each of Summit and Kelly Insurance have determined that it is in the best interests of their respective companies and their stockholders to consummate the strategic business combination transaction provided for herein.

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

ARTICLE I   

1.01    Certain Definitions. The following terms are used in this Agreement with the meanings set forth below:

“Acquisition Proposal” means any tender or exchange offer, proposal for a merger, consolidation or other business combination involving Kelly Insurance or Kelly P & C or any proposal or offer to acquire in any manner a substantial equity interest in, or a substantial portion of the assets or deposits of, Kelly Insurance or Kelly P & C, other than the transactions contemplated by this Agreement.

“Agreement” means this Agreement, as amended or modified from time to time in accordance with Section 9.02.

“Average Closing Price” shall mean the average closing prices of a share of Summit Common Stock on the NASDAQ Reporting System during the period of five (5) consecutive full trading days prior to the Closing.

“Code” means the Internal Revenue Code of 1986, as amended.

“Compensation and Benefit Plans” has the meaning set forth in Section 5.03(l).

“Consultants” has the meaning set forth in Section 5.03(l).

“Costs” has the meaning set forth in Section 6.08(a).

“Determination Date” has the meaning set forth in Section 8.01(f).

“Directors” has the meaning set forth in Section 5.03(l).

“Disclosure Schedule” has the meaning set forth in Section 5.01.

“DOL” means the United States Department of Labor.

“Effective Date” has the meaning set forth in Section 2.02.

“Effective Time” means the effective time of the Merger, as provided for in Section 2.02.

“Employees” has the meaning set forth in Section 5.03(l).

“Environmental Laws” means all applicable local, state and federal environmental, health and safety laws and regulations, including, without limitation, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Clean Water Act, the Federal Clean Air Act, and the Occupational Safety and Health Act, each as amended, regulations promulgated thereunder, and state counterparts.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate” has the meaning set forth in Section 5.03(l).

“Governmental Authority” means any court, administrative agency or commission or other federal, state or local governmental authority or instrumentality.

“IRS” has the meaning set forth in Section 5.03(l).

“Indemnified Party” has the meaning set forth in Section 6.08(a).

“Insurance Amount” has the meaning set forth in Section 6.08(b).

“Kelly Insurance” has the meaning set forth in the preamble to this Agreement.

“Kelly Insurance Affiliate” has the meaning set forth in Section 7.07(a).

“Kelly Insurance Agency Incorporated Common Stock” means the common stock, par value $10.00 per share, of Kelly Insurance Agency Incorporated.

“Kelly Insurance Board” means the Board of Directors of Kelly Insurance.

“Kelly Insurance By-Laws” means the By-laws of Kelly Insurance.

“Kelly Insurance Certificate” means the Certificate of Incorporation of Kelly Insurance, as amended.

“Kelly Insurance Meeting” has the meaning set forth in Section 6.02.

“Kelly P & C” has the meaning set forth in the preamble of this Agreement .

“Kelly P & C Meeting” has the meaning set forth in Section 6.02.

“Kelly P & C Stock” means the common stock, no par value per share of Kelly Property & Casualty Insurance Corp.

“Lien” means any charge, mortgage, pledge, security interest, restriction, claim, lien, or encumbrance.

“Material Adverse Effect” means, with respect to Summit or Kelly Insurance, any effect that (i) is material and adverse to the financial position, results of operations or business of Summit and its Subsidiaries taken as a whole or Kelly Insurance taken as a whole, respectively, or (ii) would materially impair the ability of either Summit or Kelly Insurance to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the Merger and the other transactions contemplated by this Agreement; provided, however, that Material Adverse Effect shall not be deemed to include the impact of (a) changes in banking insurance and/or similar laws of general applicability or interpretations thereof by courts or governmental authorities, (b) changes in generally accepted accounting principles or regulatory accounting requirements applicable to banks and their holding companies generally, (c)  any modifications or changes to valuation policies and practices in connection with the Merger or restructuring charges taken in connection with the Merger, in each case in accordance with generally accepted accounting principles, or (d) actions and omissions of Summit or Kelly Insurance taken with the prior written consent of the other in contemplation of the transactions contemplated hereby.

“Merger has the meaning set forth in Section 2.01(b).

“Merger Consideration” has the meaning set forth in Section 4.01(a).

“NASDAQ” means The NASDAQ Stock Market, Inc.’s National Market System.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Person” means any individual, bank, corporation, limited liability company, partnership, association, joint-stock company, business trust or unincorporated organization.

“Previously Disclosed” by a party shall mean information set forth in its Disclosure Schedule or in Summit’s SEC Documents.

“Regulatory Authorities” has the meaning set forth in Section 5.03(l).

“Representative” has the meaning set forth in Section 4.02(b).

“Secretary of State” means the Secretary of State of the State of West Virginia.

“Subsidiary” and   “ Significant Subsidiary” have the meanings ascribed to them in Rule 1-02 Section 210.1-(2)(w) of Regulation S-X of the SEC.

“Summit” has the meaning set forth in the preamble to this Agreement.

“Summit Board” means the Board of Directors of Summit.

“Summit Common Stock” means the common stock, par value $2.50 per share, of Summit.

“Summit Ratio” has the meaning set forth in Section 8.01(f).

“Tax” and “ Taxes” means all federal, state, local or foreign taxes, charges, fees, levies or other assessments, however denominated, including, without limitation, all net income, gross income, gains, gross receipts, sales, use, ad valorem , goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property, environmental, unemployment or other taxes, custom duties, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority whether arising before, on or after the Effective Date.

“Tax Returns” means any return, amended return or other report (including elections, declarations, disclosures, schedules, estimates and information returns) required to be filed with respect to any Tax.

“Treasury Stock” shall mean shares of Kelly Insurance Common Stock or Kelly P & C Common Stock held by Kelly Insurance or Kelly P & C in each case other than in a fiduciary capacity or as a result of debts previously contracted in good faith.

“WVCA” means the West Virginia Corporation Act.

2.01    The Merger. 

(a)   At the Effective Time, Kelly Insurance and Kelly P & C shall each merge with and into Summit Insurance Services, LLC (“Agency”) (the “Merger”). The separate existence of Kelly Insurance Kelly P & C shall cease and Agency shall survive and continue to exist as a subsidiary of Summit. Summit may at any time prior to the Effective Time, change the method of effecting the combination with Kelly Insurance and Kelly P & C (including without limitation the provisions of this Article II) if and to the extent it deems such changes necessary, appropriate or desirable; provided, however that no such change shall (i) alter or change the amount or kind of Merger Consideration, or the relative proportions of each and Summit Common Stock included therein, (ii) adversely affect the tax treatment of Kelly Insurance’s or Kelly P & C’s stockholders as a result of receiving the Merger Consideration or (iii) materially impede or delay consummation of the transactions contemplated by this Agreement, and provided further, that Summit shall provide Kelly Insurance and Kelly P & C with prior written notice of such change and the reasons therefore.

(b)   Subject to the satisfaction or waiver of the conditions set forth in Article VII, the Merger shall become effective upon the filing in the office of the Secretary of State of a Certificate of Merger in accordance with Section 31D-11-1103 of the WVCA or such later date and time as may be set forth in such Articles of Merger. The Merger shall have the effects prescribed in the WVCA.

2.02   Effective Date and Effective Time . Subject to the satisfaction or waiver of the conditions set forth in Article VIII, the parties shall cause the effective date of the Merger (the “ Merger Effective Date ”) to occur on the Effective Date of such later date to which the parties may agree in writing.

ARTICLE III   

3.01    Merger Consideration. Subject to the provisions of this Agreement, at the Effective Time, automatically by virtue of the Merger and without any action on the part of any Person:

(a)    Stock Consideration . Each holder of a share of Kelly Insurance Common Stock and Kelly P & C Common Stock (other than Kelly Insurance or Kelly P & C or Summit and its subsidiaries and Dissenters’ Shares, except for shares held by them in a fiduciary capacity) shall receive in respect thereof, subject to any adjustment pursuant to section 3.04, below, the number of shares of Summit Common Stock equal to:(i) for Kelly Insurance shareholders, the number of shares of Kelly Insurance Common Stock held by them divided by the total number of shares of Kelly Insurance Common Stock outstanding multiplied by t the quotient of Six Million Dollars ($6,000,000) divided by the Average Closing Price; and (ii) for Kelly P & C shareholders, the number of shares of Kelly P & C Common Stock held by them divided by the total number of shares of Kelly P & C Common Stock outstanding multiplied by the quotient of Two Hundred Thousand Dollars ($200,000) divided by the Average Closing Price. The Stock Consideration shall be paid no later than five (5) days after the determination of any Purchase Price Adjustment described in Section 3.04 below.

(b)    Outstanding Summit Stock . Each share of Summit Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and unaffected by the Merger.

(c)    Treasury Shares . Each share of Kelly Insurance Common Stock and Kelly P & C held as Treasury Stock immediately prior to the Effective Time shall be canceled and retired at the Effective Time and no consideration shall be issued in exchange therefore.

3.02    Rights as Stockholders; Stock Transfers. At the Effective Time, holders of Kelly Insurance Common Stock and Kelly P & C Common Stock shall cease to be, and shall have no rights as, stockholders of Kelly Insurance or Kelly P & C, other than to receive the Merger Consideration and any dividend or other distribution with respect to such Kelly Insurance Common Stock and Kelly P & C Common Stock with a record date occurring prior to the Effective Time, and the consideration provided under this Article IV. After the Effective Time, there shall be no transfers on the stock transfer books of Kelly Insurance Common Stock or Kelly P & C Common Stock.

3.03    Fractional Shares. Notwithstanding any other provision hereof, no fractional shares of Summit Common Stock and no certificates or scrip therefore, or other evidence of ownership thereof, will be issued in the Merger; instead, Summit shall pay to each holder of Kelly Insurance Common Stock or Kelly P & C Common Stock who would otherwise be entitled to a fractional share of Summit Common Stock (after taking into account all Old Certificates registered in the name of such holder) an amount in cash (without interest) determined by multiplying such fraction by the closing price of Summit Common Stock as reported by NASDAQ reporting system (as reported in the Wall Street Journal ) on the Effective Date.

3.04    Adjustment of Purchase Price . (a)Within fifteen (15) days after the Closing Date, a representative of Kelly Insurance and Kelly P & C (the “Seller Representative”) shall cause to be prepared and delivered to Summit a draft statement of the working capital of Kelly Insurance and Kelly P & C as of the Closing Date (“Working Capital Statement”). The working capital set forth on the Working Capital Statement shall be determined by subtracting current liabilities from current assets as of the Closing Date as calculated in accordance with the internal format and accounting policies and practices used by Kelly Insurance and Kelly P & C, consistent with past practice, in connection with the regular monthly financial statements prepared by the Company’s management for distribution to the Board of Directors.

(b)   If the working capital shown on the Working Capital Statement (the “Working Capital”), of (i) Kelly Insurance is greater than $100,000 (the “Kelly Insurance Working Capital Requirement”) and (ii) Kelly P&C is greater than $35,000 (the Kelly P&C Working Capital Requirement”) the Stock Consideration shall be increased by one dollar for every dollar by which the Working Capital exceeds the Kelly Insurance Working Capital Requirement or the Kelly P&C Working Capital (the “Purchase Price Increase”).   To the extent the Final Working Capital of the Company is less than the Working Capital Requirement, the Stock Consideration shall be reduced by one dollar for every dollar by which the Working Capital Requirement exceeds the Working Capital (the “Purchase Price Reduction”). Whichever shall be applicable of the Purchase Price Increase and the Purchase Price Reduction is referred to herein as the “Purchase Price Adjustment”. The Purchase Price Adjustment, if any, shall be paid in stock, within five Business Days of the delivery of the Working Capital Statement.

                                                                               ARTICLE IV   

4.01    Forebearances of Kelly Insurance and Kelly P & C. From the date hereof until the Effective Time, except as expressly contemplated by this Agreement or Previously Disclosed, without the prior written consent of Summit, Kelly Insurance and Kelly P & C will not:

(a)    Ordinary Course . Conduct the business of Kelly Insurance and Kelly P & C other than in the ordinary and usual course or fail to use reasonable efforts to preserve intact their business organizations and assets and maintain their rights, franchises and existing relations with customers, suppliers, employees and business associates, or take any action reasonably likely to have an adverse affect upon Kelly Insurance’s or Kelly P & C’s ability to perform any of its material obligations under this Agreement.

(b)    Capital Stock . Other than pursuant to Rights Previously Disclosed and outstanding on the date hereof, (i) issue, sell or otherwise permit to become outstanding, or authorize the creation of, any additional shares of Kelly Insurance Common Stock or Kelly P & C Common Stock or any Rights, (ii) enter into any agreement with respect to the foregoing, or (iii) permit any additional shares of Kelly Insurance Common Stock or Kelly P & C Common Stock to become subject to new grants of employee or director stock options, other Rights or similar stock-based employee rights.

(c)    Dividends, Etc . (a) Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of Kelly Insurance Common Stock or Kelly P & C Common Stock or (b) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its capital stock.

(d)    Compensation; Employment Agreements; Etc . Enter into or amend or renew any employment, consulting, severance or similar agreements or arrangements with any director, officer or employee of Kelly Insurance or Kelly P & C, or grant any salary or wage increase or increase any employee benefit (including incentive or bonus payments), except (i) for normal individual payments of incentives and bonuses to employees in the ordinary course of business consistent with past practice, , (ii) for normal individual increases in compensation to employees in the ordinary course of business consistent with past practice, (iii) for other changes that are required by applicable law, (iv) to satisfy Previously Disclosed contractual obligations existing as of the date hereof, or (v) for grants of awards to newly hired employees consistent with past practice. Notwithstanding the foregoing any issuance of shares by Kelly Insurance to certain employees in the form of a stock bonus shall not be deemed a violation of this section.

(e)    Benefit Plans . Enter into, establish, adopt or amend (except (i) as may be required by applicable law or (ii) to satisfy Previously Disclosed contractual obligations existing as of the date hereof) any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any director, officer or employee of Kelly Insurance, Kelly P & C, or take any action to accelerate the vesting or exercisability of stock options, restricted stock or other compensation or benefits payable thereunder.

(f)    Dispositions . Except as Previously Disclosed, sell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties except in the ordinary course of business and in a transaction that is not material to it and its Subsidiaries taken as a whole.

(g)    Acquisitions . Except as Previously Disclosed, acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice) all or any portion of, the assets, business, deposits or properties of any other entity.

(h)    Governing Documents . Amend the Kelly Insurance Certificate, Kelly Insurance By-laws or the Kelly P & C Certificate or Kelly P & C Bylaws.

(i)    Accounting Methods . Implement or adopt any change in its accounting principles, practices or methods, other than as may be required by generally accepted accounting principles.

(j)    Contracts . Except in the ordinary course of business consistent with past practice, enter into or terminate any material contract (as defined in Section 6.03(k)) or amend or modify in any material respect any of its existing material contracts.

(k)    Claims . Except in the ordinary course of business consistent with past practice, settle any claim, action or proceeding, except for any claim, action or proceeding which does not involve precedent for other material claims, actions or proceedings and which involve solely money damages in an amount, individually or in the aggregate for all such settlements, that is not material to Kelly Insurance, taken as a whole.

(l)    Adverse Actions . (a) Take any action while knowing that such action would, or is reasonably likely to, prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368 of the Code; or (b) knowingly take any action that is intended or is reasonably likely to result in (i) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time, (ii) any of the conditions to the Merger set forth in Article VIII not being satisfied or (iii) a material violation of any provision of this Agreement except, in each case, as may be required by applicable law or regulation.

(m)    Indebtedness . Incur any indebtedness for borrowed money other than in the ordinary course of business.

(n)    Commitments . Agree or commit to do any of the foregoing.

5.01    Disclosure Schedules. On or prior to the date hereof, Summit has delivered to Kelly Insurance and Kelly P & C a schedule and Kelly Insurance and Kelly P & C have delivered to Summit a schedule (respectively, its “ Disclosure Schedule ”) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Section 5.03 or 5.04 or to one or more of its covenants contained in Article V; provided, that (a) no such item is required to be set forth in a Disclosure Schedule as an exception to a representation or warranty if its absence could not be reasonably likely to result in the related representation or warranty being deemed untrue or incorrect under the standard established by Section 5.02, and (b) the mere inclusion of an item in a Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by a party that such item represents a material exception or fact, event or circumstance or that such item is reasonably likely to result in a Material Adverse Effect on the party making the representation. All of Kelly Insurance’s and Kelly P & C’s representations, warranties and covenants contained in this Agreement are qualified by reference to the Disclosure Schedule and none thereof shall be deemed to be untrue or breached as a result of effects arising solely from actions taken in compliance with a written request of Summit.

5.02    Standard. No representation or warranty of Kelly Insurance or Summit contained in Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no party hereto shall be deemed to have breached a representation or warranty, as a consequence of the existence of any fact, event or circumstance unless such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in Section 5.03 or 5.04 has had or is reasonably likely to have a Material Adverse Effect. For purposes of this Agreement, “knowledge” shall mean (i) with respect to Summit, actual knowledge of H. Charles Maddy, III and Robert S. Tissue, and (ii) with respect to Kelly Insurance and Kelly P & C, actual knowledge of E. Joseph Kelly, Wayne Wilmot, Kenneth Randall Sink, and Marji Grubic.

5.03    Representations and Warranties of Kelly Insurance and Kelly P & C. Subject to Sections 5.01 and 5.02 and except as Previously Disclosed, Kelly Insurance and Kelly P & C hereby represent and warrant to Summit:

(a)    Organization and Standing . Kelly Insurance and Kelly P & C are each a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. Kelly Insurance and Kelly P & C are each duly qualified to do business and is in good standing in the states of the United States and any foreign jurisdictions where its ownership or leasing of property or assets or the conduct of its business requires it to be so qualified.

(b)    Capitalization . As of the date hereof, the authorized capital stock of Kelly Insurance consists of 5000 shares of Kelly Insurance Common Stock, of which as of March 31,2007, 1000 shares were outstanding. As of the date hereof, the authorized capital stock of Kelly P & C consists of (i) 5,000 shares of Kelly P & C Common Stock, of which as of March 31, 2007, 300 shares were outstanding.. As of March 31, 2007, Kelly Insurance has no shares of Kelly Insurance Common Stock which are issuable and reserved for issuance upon the exercise of Kelly Insurance Stock Options. The outstanding shares of Kelly Insurance Common Stock and Kelly P & C Common Stock have been duly authorized and are validly issued and outstanding, fully paid and nonassessable, and subject to no preemptive rights (and were not issued in violation of any preemptive rights.

(c)    Corporate Power . Each of Kelly Insurance and Kelly P & C has the corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and Kelly Insurance and Kelly P & C each have the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.

(d)    Corporate Authority . Subject to receipt of the requisite approval of this Agreement (including the agreement of merger set forth herein) by the holders of a majority of the outstanding shares of Kelly Insurance Common Stock and Kelly P & C Common Stock entitled to vote thereon (which is the only vote of Kelly Insurance stockholders or Kelly P & C stockholders required thereon), the execution and delivery of this Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of Kelly Insurance and the Kelly Insurance Board and Kelly P & C and the Kelly P & C Board. Assuming due authorization, execution and delivery by Summit, this Agreement is a valid and legally binding obligation of Kelly Insurance and Kelly P & C, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

(e)    Consents and Approvals; No Defaults .

(i)    No consents or approvals of, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by Kelly Insurance or Kelly P & C in connection with the execution, delivery or performance by Kelly Insurance or Kelly P & C of this Agreement or to consummate the Merger except for (A) filings of appl