Exhibit 10.11

VIRGINIA FINANCIAL GROUP, INC.

EXECUTIVE INCENTIVE PLAN

 

1. PURPOSE—The purpose of the Virginia Financial Group, Inc. Executive Incentive
Plan (the “Plan”) is to ensure, through the ability to earn meaningful annual
cash incentives, that the strategies and activities undertaken by the executive
management of Virginia Financial Group, Inc. (the “Company”), its subsidiaries
and its affiliates are focused on increasing the shareholder value of the
Company and aligned with shareholder objectives.

 

2. PLAN YEAR—Each Plan Year begins on January 1 and ends at close of business on
the following December 31.

 

3. ELIGIBILITY—Participation in the Plan is limited to executive management of
the Company and its subsidiaries or affiliates designated for inclusion in the
Plan (“Participating Affiliates”). The inclusion of a subsidiary or affiliate as
a Participating Affiliate shall be made by the Company Board. The participation
of individual executives in the Plan also shall be approved by the Company
Board.

 

4. ADMINISTRATION—The Plan is administered by the Company Board which may, in
its sole discretion, amend, modify, suspend or terminate the Plan and whose
interpretation of the Plan’s terms and provisions, certification of satisfaction
of Performance Goals and decisions regarding earned awards shall be binding and
conclusive. The Company Board may delegate all or any aspect of the operation or
administration of this Plan to the Personnel and Compensation Committee of the
Board (the “Committee”). To the extent the Company Board does not delegate
operation and administration of the Plan to the Committee, any determination by
the Company Board with respect to the Plan will be based on the recommendation
of the Committee.

 

5. AWARDS—Compensation under the Plan is comprised of annual cash incentive
compensation as described below:

 

  a. Prior to the beginning of each Plan Year or no later than 90 days after the
beginning of the Plan Year, Target Awards, determined as a percentage of each
participant’s annual base salary, and all related Performance Goals, the peer
group, Performance Factors, Payout Scales, the Aggregate Performance Threshold
and other aspects of the incentive program for that Plan Year are established
for and communicated to each participant. The Target Awards represent the amount
that will be paid to the participating executive if the predetermined
Performance Goals, as described below, are met.

Actual awards paid are increased or decreased by a Performance Factor in
accordance with the Payout Scale in effect for the Plan Year when performance
exceeds or falls short of the Performance Goals. The maximum award payable under
the Plan is 200% of the Target Award. No awards are paid if overall performance
against the predetermined Performance Goals falls below a threshold level.

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b. Awards are paid, unless otherwise deferred under a prior valid election by
the participant compliant with Section 409A of the Internal Revenue Code, no
later than 2- 1/2 months following the end of the Plan Year. Except as follows,
a participant must be employed on the date award payments are made (or are
credited as deferred compensation rights pursuant to a prior valid election by
the participant).

 

  i. A participant who retires after having attained age 65 or is terminated due
to disability as defined under the Company’s Long Term Disability Plan during a
Plan Year will be entitled to a prorated award based on the Company’s
performance for the entire Plan Year, multiplied by a fraction the numerator of
which is the number of full and partial months the participant is employed
during the Plan Year and the denominator of which is 12.

 

  ii. In the event of a participant’s death during a Plan Year, a prorated award
will be paid to the participant’s beneficiary (or credited as deferred
compensation rights pursuant to a prior valid election by the participant) based
on the Company’s performance through the most recently completed calendar
quarter of the Plan Year, multiplied by a fraction the numerator of which is the
number of full and partial months the participant is employed during the Plan
Year and the denominator of which is 12. The beneficiary will be the beneficiary
designated by the participant under the Company’s Group Term Life Insurance
Plan.

 

  iii. In the event of a participant’s retirement, disability or death after the
end of a Plan Year but prior to the payment date, the applicable earned award
will be paid to the participant or the participant’s beneficiary (or credited as
deferred compensation rights pursuant to a prior valid election by the
participant) based on the Company’s performance for the Plan Year.

 

6. PERFORMANCE MEASUREMENT

 

  a. Performance Goals—The Company Board establishes three to five Performance
Goals annually for a Plan Year. Performance Goals are comprised of targeted
annual performance against key financial and shareholder wealth related measures
and operational safety, soundness and risk management initiatives and results.

It is the intent of the Company Board that, whenever possible, Performance Goal
achievement is measured in terms of the Company’s performance ranking against
peer organizations. This reduces the possibility that awards will be paid for
performance that meets internally developed goals but which ignores the
competitive environment. The peer group of organizations for the Plan Year is
determined by the Company Board annually when the Performance Goals are
established. If a peer group member ceases to exist during a Plan Year, no
replacement member shall be selected for that Plan Year unless done so within
the first 90 days of the Plan Year.

 

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In those instances where degrees of performance against goals cannot be measured
on a sliding scale and performance is limited to the accomplishment or lack of
accomplishment, then performance is determined on a “Pass/Fail” basis. Awards
for performance against such goals may not exceed 100% of the target award for
that component of the total Target Award.

 

  b. Performance Scorecards—A performance scorecard which includes the
Performance Goals and Target Award for the Plan Year is developed for and given
to each participant no later than April 30 of the Plan Year. All participants
share the same Performance Goals but have different Target Awards based on their
positions and competitive practice.

In developing the scorecard, the Company Board establishes the weighting of each
Performance Goal as a percentage of the total Target Award. Each Performance
Goal is multiplied by its weighting percentage to determine the Target Award
component for that Performance Goal.

Within the first 2- 1/2 months after the Plan Year, the Company Board determines
the extent, if any, to which the Performance Goals were met for the Plan Year
and certifies such satisfaction of the Performance Goals in the Company’s
records.

After results against a Performance Goal have been determined, its weighting
percentage is multiplied by a Payout Factor derived from the Payout Scale. This
determines the Performance Factor for that Performance Goal. The Performance
Factor is multiplied by the Target Award for that Performance Goal to determine
the percentage of the Target Award attributable to that Performance Goal to be
paid (subject to meeting the Aggregate Performance Factor Threshold below).

In order for any award to be paid for a Plan Year, the sum of the individually
determined percentages of the total Target Award earned for the Plan Year on the
scorecard, must be at least equal to the threshold level established in the
Payout Scale (the “Aggregate Performance Threshold”).

 

7. NO PROMISE OR CONTRACT—The earning and payment of compensation under the Plan
for one Plan Year does not constitute the promise of future payment or continued
participation in the Plan. Neither does it confer upon any participant the right
to continue as an employee of the Company or a Participating Affiliate.

 

8.

AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION OF THE PLAN—The Company Board
may amend, modify, suspend or terminate the Plan for any purpose permitted or
required by law except that the Plan may not be amended to change any material
or substantive feature more than once during any 12 month period except as may
be necessitated by changes in the regulations and statutes under which the Plan
is

 

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required to operate. However, the incentive program for any Plan Year may not be
terminated or suspended after the end of the Plan Year. The Company Board will
seek shareholder approval of any amendment to the Plan if such approval is
determined to be required or advisable by the regulations of the Securities and
Exchange Commission, the Internal Revenue Service, the rules of any stock
exchange on which the Company’s stock is listed or other applicable law.

 

9. EFFECTIVE DATE—The Plan is effective as of January 1, 2007; provided however,
that with respect to the 2007 Plan Year only, the provisions of the Plan
requiring action within the first 90 days or by April 30 of the Plan Year will
not apply.

The previously approved Payout Scales for the 2007 Plan Year is attached to this
document as Exhibit A and the previously approved Performance Goals and
Weightings for the 2007 Plan Year is attached to this document as Exhibit B.

Approved by the Board of Directors of

Virginia Financial Group, Inc.

on July 17, 2007, with approval

of the 2007 incentive program

goals and measures by the

Board of Directors on May 14, 2007

 

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Exhibit A

2007 Executive Incentive Plan Payout Scales

Peer Ranking Payout Scale

 

Performance

Goal Peer

Ranking

  

Performance

Factor

1

   200%

2

   180%

3

   160%

4

   140%

5

   120%

6

   100%

7

   80%

8

   60%

9

   40%

10

   20%

<10

   0%

Pass/ Fail Payout Scale

 

Performance

Goal

  

Performance

Factor

Pass    100% Fail    0%

Aggregate Performance Threshold

20%

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Exhibit B

2007 Performance Goals and Weightings

 

Measurement

  

Type of Measure

  

Targeted Performance

  

Weighting

Earnings Per Share Growth    Peer Ranking    6th    35% Balance Sheet Growth   
Peer Ranking    6th    35% Regulatory Exams    Pass/Fail    Pass    10% Credit
Quality    Peer Ranking    6th    10% Stock Price Growth    Peer Ranking    6th
   10%

 

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