Document:

Exhibit
10.4

 

GEORGE MASON MORTGAGE, LLC

 

Executive Deferred Income Plan

 

 

(A
Plan of Nonqualified Deferred Compensation)

 

Effective
January 1, 2005

 

As amended April 21, 2006

 

 

TABLE OF CONTENTS

 

	
  I.

  	
  Introduction

  	
  3

  
	
   

  	
   

  	
   

  
	
  II.

  	
  Definitions

  	
  3

  
	
   

  	
   

  	
   

  
	
  III.

  	
  Eligibility & Participation

  	
  8

  
	
   

  	
   

  	
   

  
	
  IV.

  	
  Elections, Deferrals & Matching Contributions

  	
  9

  
	
   

  	
   

  	
   

  
	
  V.

  	
  Accounts & Account Crediting

  	
  10

  
	
   

  	
   

  	
   

  
	
  VI.

  	
  Vesting

  	
  12

  
	
   

  	
   

  	
   

  
	
  VII.

  	
  Distributions

  	
  12

  
	
   

  	
   

  	
   

  
	
  VIII.

  	
  Administration & Claims Procedure

  	
  15

  
	
   

  	
   

  	
   

  
	
  IX.

  	
  Amendment, Termination & Reorganization

  	
  18

  
	
   

  	
   

  	
   

  
	
  X.

  	
  General Provisions

  	
  19

  

 

2

 

ARTICLE
I—INTRODUCTION

 

1.1                                                                               Name.

 

The name of this Plan is the George Mason
Mortgage, LLC Executive Deferred Income Plan (the Plan).

 

1.2                                                                               Purpose.

 

The purpose of the Plan is
to offer Participants the opportunity to defer voluntarily current Compensation
for retirement income and other significant future financial needs for
themselves, their families and other dependents, and to provide the Employer,
if appropriate, a vehicle to address limitations on its contributions under any
tax-qualified defined contribution plan. This Plan is intended to be a
nonqualified “top-hat” plan; that is, an unfunded plan of deferred compensation
maintained for a select group of management or highly compensated employees
pursuant to Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA, and an unfunded
plan of deferred compensation under the Code.

 

1.3                                                                               Interpretation.

 

Throughout the Plan, certain words and
phrases have meanings, which are specifically defined for purposes of the Plan.
These words and phrases can be identified in that the first letter of the word
or words in the phrase is capitalized. The definitions of these words and
phrases are set forth in Article II and elsewhere in the Plan document.
Wherever appropriate, pronouns of any gender shall be deemed synonymous, as
shall singular and plural pronouns. Headings of Articles and Sections are for
convenience or reference only, and are not to be considered in the construction
or interpretation of the Plan. The Plan shall be interpreted and administered
to give effect to its purpose in Section 1.3 and to qualify as a nonqualified,
unfunded plan of deferred compensation.

 

ARTICLE
II—DEFINITIONS 

 

2.1                                                                               Generally.

 

Certain words and phrases are defined when
first used in later paragraphs of this Agreement. Unless the context clearly
indicates otherwise, the following words and phrases when used in this
Agreement shall have the following respective meanings:

 

2.2                                                                               Account.

 

“Account” shall mean the interest of a
Participant in the Plan as represented by the hypothetical bookkeeping entries
kept by the Employer for each Participant. Each Participant’s interest may be
divided into one or more separate accounts or sub-accounts, including the
Participant Deferral Account and the Matching Contribution Account, which
reflect not only the Contributions into the Plan, but also gains and losses,
and income and expenses allocated thereto, as well as distributions or any
other withdrawals. The value of these accounts or sub-accounts shall be
determined as of

 

3

 

the Valuation Date. The existence of an
account or bookkeeping entries for a Participant (or his Designated
Beneficiary) does not create, suggest or imply that a Participant, Designated
Beneficiary, or other person claiming through them under this Plan, has a
beneficial interest in any asset of the Employer.

 

2.3                                                                               Balance.

 

“Balance” shall mean the total of
Contributions and Deemed Earnings credited to a Participant’s Account under
Article V, as adjusted for distributions or other withdrawals in accordance
with the terms of this Plan and the standard bookkeeping rules established by
the Employer.

 

2.4                                                                               Board
Committee.

 

“Board Committee” or “Committee” shall mean
the Compensation Committee of the Employer’s Board of Directors, or such other
Committee of the Board as may be delegated with the duty of determining
Participant eligibility under the Plan.

 

2.5                                                                               Board
of Directors.

 

“Board of Directors” or “Board” shall mean
the Board of Directors of the Employer.

 

2.6                                                                               Change
of Control.

 

“Change of Control” shall mean a change in the ownership or effective
control of the Employer, or in the ownership of a substantial portion of the
assets of the Employer, as provided in Treasury

 regulations.

 

2.7                                                                               Code.

 

“Code” shall mean the Internal Revenue Code
of 1986 and the Regulations thereto, as amended from time to time.

 

2.8                                                                               Compensation.

 

“Compensation” shall mean the base or regular
cash salary payable to an Employee by the Employer, as well as incentives or
bonuses payable to an Employee by the Employer, commissions payable to an
Employee by the Employer, including any such amounts which are not includible
in the Participant’s gross income under Sections 125, 401(k), 402(h) or 403(b)
of the Internal Revenue Code of 1986, as amended.

 

2.9                                                                               Contributions.

 

“Contributions” shall mean the total of
Participant Deferrals and Matching Contributions pursuant to Article IV, which
represent each Participant’s credits to his Account.

 

4

 

2.10                                                                        Deemed
Earnings.

 

“Deemed Earnings” shall mean the gains and
losses (realized and unrealized), and income and expenses credited or debited
to Contributions based upon the Deemed Crediting Options in a Participant’s
Account as of any Valuation Date.

 

2.11                                                                        Deemed
Crediting Options.

 

“Deemed Crediting Options” shall mean the
hypothetical options made available to Plan Participants by the Employer for
the purposes of determining the proper crediting of gains and losses, and
income and expenses to each Participant’s Account, subject to procedures and
requirements established by the Committee. 
A Participant may reallocate his Account among such Deemed Crediting
Options periodically at such frequency and upon such terms as the Committee may
determine from time to time.

 

2.12                                                                        Deferral
Election Form.

 

“Deferral Election Form” or
“Annual Deferral Election Form” shall mean that written agreement of a
Participant. The Deferral Election Form shall be in such form or forms as may
be prescribed by the Committee, filed annually with the Employer, according to
procedures and at such times as established by the Committee. Among other
information the Committee may require of the Participant for proper
administration of the Plan, such agreement shall establish the Participant’s
election to defer Compensation for a Plan Year under the Plan; the amount of
the deferral into the Plan for the Plan Year; the Participant’s elections as to
distribution of his Account, and the allocation of his Accounts among the
Deemed Crediting Options provided under the Plan; and the Designated
Beneficiary.

 

2.13                                                                        Designated
Beneficiary.

 

“Designated Beneficiary” or “Beneficiary”
shall mean the person, persons or trust specifically named to be a direct or
contingent recipient of all or a portion of a Participant’s benefits under the
Plan in the event of the Participant’s death prior to the distribution of his
full Account Balance. Such designation of a recipient or recipients may be made
and amended, at the Participant’s discretion, on the Deferral Election Form and
according to procedures established by the Committee. No beneficiary
designation or change of Beneficiary shall become effective until received and
acknowledged by the Employer. In the event a Participant does not have a
beneficiary properly designated, the beneficiary under this Plan shall be the
Participant’s estate.

 

2.14                                                                        Disability.

 

“Disability”
shall mean that a Participant (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve months, or (ii) is, by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than

 

5

 

twelve months,
receiving income replacement benefits for a period of not less than three
months under an accident and health plan covering employees of the
Participant’s employer.

 

2.15                                                                        Effective Date.

 

“Effective Date” of the Plan shall mean
January 1, 2005.

 

2.16                                                                        Eligible
Employee.

 

“Eligible Employee” shall mean a person who
(for any Plan Year or portion thereof) is: (1) an Employee of the Employer; (2)
a member of a select group of management or a highly compensated employee of
the Employer; and (3) selected by the Board Committee to participate in the
Plan.

 

2.17                                                                        Employee.

 

“Employee” shall mean a full time common law
employee of the Employer.

 

2.18                                                                        Employer.

 

“Employer” shall mean
Cardinal Financial Corporation, its designated subsidiaries, and any corporate
successors and assigns, unless otherwise provided herein.

 

2.19                                                                        ERISA.

 

“ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to time.

 

2.20                                                                        Key Employee.

 

“Key Employee” shall mean any
Participant who is (i) one of the top-fifty most highly compensated officers
with annual compensation in excess of $130,000 (as adjusted from time to time
by Treasury regulations); (ii) a five percent owner of the Employer; or (iii) a
one percent owner of the Employer with annual compensation in excess of
$150,000 (as adjusted from time to time by Treasury regulations) of a publicly
traded corporation.

 

2.21                                                                        Leave of Absence.

 

“Leave of Absence” shall mean a period of
time, not to exceed twelve (12) consecutive calendar months during which time a
Participant shall not be an active Employee of the Employer, but shall be
treated for purposes of this Plan as in continuous service with the Employer. A
Leave of Absence may be either paid or unpaid, but must be agreed to in writing
by both the Employer and the Participant. A Leave Of Absence that continues
beyond the twelve (12) consecutive months shall be treated as a Termination of
Service as of the first business day of the thirteenth month for purposes of
the Plan.

 

6

 

2.22                                                                        Matching Contribution.

 

“Matching Contribution” shall mean an amount
credited to a Participant’s Account in accordance with Section 4.4.

 

2.23                                                                        Matching Contribution Account.

 

“Matching Contribution Account” shall mean
that portion of a Participant’s Account established to record Matching
Contributions on behalf of a Participant. 
Matching Contributions shall be deemed to be invested in the Employer
stock, and a Participant shall not be permitted to elect a different Deemed
Crediting Option for such Matching Contributions.

 

2.24                                                                        Participant.

 

“Participant” shall mean an
Eligible Employee who participates in the Plan under Article III; a former
Eligible Employee who has participated in the Plan and continues to be entitled
to a benefit (in the form of an undistributed Account Balance) under the Plan,
and any former Eligible Employee who has participated in the Plan under Article
III and has not yet exceeded any Leave of Absence.

 

2.25                                                                        Participant Deferral.

 

“Participant Deferral” shall mean voluntary
Participant deferral amounts, which could have been received currently but for
the election to defer and are credited to his Account for later distribution,
subject to the terms of the Plan.

 

2.26                                                                        Participant Deferral Account.

 

“Participant Deferral Account” shall mean
that portion of a Participant’s Account established to record Participant
Deferrals on behalf of a Participant.

 

2.27                                                                        Performance Based Compensation.

 

“Performance-based compensation” shall mean
compensation that is (i) variable and contingent on the satisfaction of
pre-established organizational or individual performance criteria; (ii) not
readily ascertainable at the time; and (iii) based on services performed over a
period of at least twelve months.

 

2.28                                                                        Plan
Year.

 

“Plan Year” shall mean the twelve (12)
consecutive month period constituting a calendar year, beginning on January 1
and ending on December 31. However, in any partial year of the Plan that does
not begin on January 1, “Plan Year” shall also mean the remaining partial year
ending on December 31.

 

7

 

2.29                                                                        Qualified Retirement Plan.

 

“Qualified Retirement Plan” shall mean the
401k Plan sponsored by the Employer.

 

2.30                                                                        Retirement.

 

“Retirement” shall mean a Participant’s
actual separation from service from the Employer having attained age sixty-five
(62).

 

2.31                                                                        Separation from Service.

 

“Separation from Service”
shall mean a Participant’s separation from service as an Employee with the
Employer, other than for death, Disability, or Leave of Absence.  A transfer of employment within and among the
Employer and any member of a controlled group, as provided in Code Section 409A
(d)(6), shall not be deemed a Separation from Service.

 

2.32                                                                        Unforeseeable Emergency.

 

“Unforeseeable emergency”
shall mean a severe financial hardship to the Participant, the Participant’s
spouse, or a dependent (as defined in Section 152(a) of the Code) of the
participant, loss of the Participant’s property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant.

 

2.33                                                                        Valuation Date.

 

“Valuation Date” shall mean the close of each
business day, as established and amended from time to time by guidelines and
procedures of the Committee in its sole and exclusive discretion.

 

ARTICLE III—ELIGIBILITY & PARTICIPATION

 

3.1                                                                               Eligibility
Requirements.

 

Only an Eligible Employee selected by the
Board Committee may become a Participant in this Plan. Moreover, a Participant
shall not be permitted to make new Participant Deferrals to the Plan, if he
ceases to be an Eligible Employee because he is no longer a member a select
group of management or highly compensated employees, or otherwise.  The Board Committee shall notify an Eligible
Employee of his eligibility for a Plan Year in such form as it may determine
most appropriate.  Current Participants
remain eligible until notified otherwise.

 

3.2                                                                               Participation.

 

An Eligible Employee shall become a
Participant in the Plan by the completion and timely filing with and subsequent
acceptance by, the Employer of the Deferral Election Form, in such form and
according to the terms and conditions established by the Committee. A
Participant (or any

 

8

 

Designated Beneficiary who becomes entitled)
remains a Participant as to his Account until his Account Balance is fully
distributed under the terms of the Plan.

 

ARTICLE IV—ELECTIONS, DEFERRALS & MATCHING CONTRIBUTIONS

 

4.1                                                                               Participant
Election to Defer Compensation.

 

A.            Prior
to December 31 or an earlier date set by the Committee, a Participant may elect
to defer Compensation for services to be performed in the next following Plan
Year by the execution and timely filing, and Employer’s acceptance of, a
Deferral Election Form in such form and according to such procedures as the
Committee may prescribe from time to time. Each such Deferral Election Form
shall be effective for the Plan Year to which the Deferral Election Form
pertains.

 

B.            Each
Participant may elect annually to have his Compensation for the Plan Year
reduced by a whole percentage that is not less than five percent (5%) ($2,000
minimum), and up to one hundred percent (100%), by timely filing, and the
acceptance by the Employer of, his Deferral Election Form detailing such
deferral. The amount of this Participant Deferral shall be deferred into the
Plan and credited to the Participant’s Account as provided in Article V

 

C.            An
election to defer Performance-Based Compensation may be made at such time and
in such manner as the Committee may specify, but in any event not later than
six months before the end of the period for which it is earned.

 

D.            Under
such Deferral Election Form, a Participant shall indicate the amount of such
Participant Deferral; designate and allocate such Participant Deferral in or
among the elective distribution Account option(s); and, allocate such Accounts
among the various Deemed Crediting Options; provided, however, that Matching
Contributions and earnings thereon must remain in the Employer stock Deemed
Crediting Option.  The Deferral Election
Form shall also permit a Participant to elect annually to receive a
distribution of his entire Account in the event of a Change of Control during
the forthcoming Plan Year. The Deferral Election Form may also request other
information, such as a Participant’s Designated Beneficiary, as may be required
or useful for the administration of the Plan.

 

4.2                                                                             New
Participants and Partial Years.

 

The initial Deferral
Election Form of a new Participant shall be filed with the Employer on a date
established by the Committee, but in any event not later than 30 days following
the date the Participant becomes eligible to participate in the Plan and shall
be effective only with respect to services to be performed subsequent to the
election. Such first Deferral Election Form shall be applicable to a
Participant’s Compensation beginning with the first payroll in the month after
such Form is filed and accepted by the Employer.

 

4.3                                                                               Irrevocable
Elections.

 

An election in a Deferral
Election Form to defer Compensation for a Plan Year, once made by a
Participant, shall be irrevocable.  The
Committee, however, shall reduce or eliminate Participant

 

9

 

Deferrals upon granting a
Participant’s request for a distribution based upon an Unforeseeable Emergency.

 

4.4                                                                               Matching
Contributions.

 

The Employer may, but shall not be required
to, provide a deemed match, in such amounts as it may determine from time to
time, for Participant Deferrals.  Such
Matching Contributions, if any, shall be credited to the Matching Contribution
Account of the Participant’s Account and shall be subject to the vesting
requirements set forth in Section 6.2.

 

ARTICLE V—ACCOUNTS & ACCOUNT CREDITING

 

5.1                                                                               Establishment
of a Participant’s Account.

 

A.            Bookkeeping Account. The Committee
shall cause a deemed bookkeeping Account and appropriate sub-accounts, based
upon the primary elective distribution option(s) to be established and
maintained in the name of each Participant, according to his annual Deferral
Election Form for the Plan Year. This Account shall reflect the amount of
Participant Deferrals, Matching Contributions and Deemed Earnings credited on
behalf of each Participant under this Plan.

 

B.            Bookkeeping Activity. Participant
Deferrals shall be credited to a Participant’s Account on the business day they
would otherwise have been made available as cash to the Participant.  Matching Contributions shall be credited to a
Participant’s Account on the Valuation Date the Employer designates.  Deemed Earnings shall be credited or debited
to each Participant’s Account, as well as any distributions, any other
withdrawals under this Plan, as of a Valuation Date. Accounts shall continue on
each Valuation Date until the Participant’s Account is fully distributed under
the terms of the Plan.

 

5.2                                                                               Deemed
Crediting Options.

 

A.            General.  The Committee shall establish a portfolio
of two or more Deemed Crediting Options, among which a Participant may allocate
amounts credited to his Account, which are subject to Participant direction
under this Plan. The Committee reserves the right, in its sole and exclusive
discretion, to substitute, eliminate and otherwise change this portfolio of
Deemed Crediting Options, as well as the right to establish rules and
procedures for the selection and offering of these Deemed Crediting Options.

 

B.            Employer Stock Deemed
Crediting. One of the Deemed Crediting Options shall be Employer
Stock.  Amounts credited to this option
shall be deemed to be invested in shares of common stock of the Employer.  A Participant’s Account will be credited with
deemed distributions if and when dividends are declared and paid with respect
to Employer common stock, and such deemed dividends will be deemed to have been
reinvested in Employer common stock as of the first business day following the
deemed payment. Fair market value of Employer common stock means, as of any
day, the average of the closing prices of sales of shares of common stock on
all national securities exchanges on which the common stock may

 

10

 

be
listed.  If there have been no sales on
such day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day shall be used. 
If such common stock is not listed on any national exchange, then the
average of the representative bid and asked prices quoted in the National
Association of Securities Dealers, Inc. Automated Quotation System for such
date or the next preceding date that the common stock was traded on such market
shall be used.

 

5.3                                                                               Allocation
Of Account Among Deemed Crediting Options.

 

A.            Each
Participant shall elect the manner in which his Account is divided among the
Deemed Crediting Options by giving allocation instructions in a Deferral
Election Form supplied by and filed with the Committee, or by such other
procedure, including electronic communications, as the Committee may prescribe.
A Participant’s election shall specify the percentage of his Account (in any
whole percentage) to be deemed to be invested in any Deemed Crediting Option;
provided, however, that a Participant Matching Contribution Account must be
fully allocated to the Employer Stock Deemed Crediting Option.  Such election shall remain in effect until a
new election is made.

 

B.            Amounts
credited to a Participant’s Account shall be deemed to be invested in
accordance with the most recent effective Deemed Crediting Option election. As
of the effective date of any new Deemed Crediting Option election, all or a
portion of the Participant’s Account shall be reallocated among the designated
Deemed Crediting Options and according to the percentages specified in the new
instructions, until and unless subsequent instructions shall be filed and
become effective. If the Committee receives a Deemed Crediting Option election,
which is unclear, incomplete or improper, the Deemed Crediting Option election
then in effect shall remain in effect until the subsequent instruction is
clarified, completed or otherwise made acceptable to the Committee.

 

5.4                                                                               Valuation
and Risk of Decrease in Value.

 

The Participant’s Account will be valued on
the Valuation Date at fair market value. On such date, Deemed Earnings will be
allocated to each Participant’s Account. Each Participant and Designated
Beneficiary assumes the risk in connection with any decrease in the fair market
value of his Account.

 

5.5                                                                               Limited
Function of Committee.

 

By deferring compensation pursuant to the
Plan, each Participant hereby agrees that the Employer and Committee are in no
way responsible for or guarantor of the investment results of the Participant’s
Account. The Committee shall have no duty to review, or to advise the
Participant on, the investment of the Participant’s Account; and in fact, shall
not review or advise the Participant thereon. Furthermore, the Committee shall
have no power to direct the investment of the Participant’s Account other than
promptly to carry out the Participant’s deemed investment instructions when properly
completed and transmitted to the Committee and accepted according to its rules
and procedures.

 

11

 

ARTICLE
VI—VESTING

 

6.1                                                                              Vesting
of Participant Deferrals.

 

A Participant shall be fully vested at all
times in Participant Deferrals, as well as Deemed Earnings upon Participant
Deferrals, credited to his Participant Deferral Account.

 

6.2                                                                               Vesting
of Matching Contributions.

 

A Participant shall vest in Matching
Contributions, as well as Deemed Earnings upon Matching Contributions, credited
to his Matching Contribution Account in accordance with the schedule below.

 

	
  Year of Matching Contribution: 

  	
   

  	
  0

  	
  %

  
	
  The first year after the Matching
  Contribution 

  	
   

  	
  0

  	
  %

  
	
  The second year after the Matching
  Contribution 

  	
   

  	
  0

  	
  %

  
	
  The third year after the Matching
  Contribution 

  	
   

  	
  0

  	
  %

  
	
  The fourth year after the Matching
  Contribution

  	
   

  	
  100

  	
  %

  

 

Notwithstanding the above, a Participant
shall become fully vested in his Matching Contribution Account upon death,
Disability, Change of Control or Retirement. 
Upon Separation from Service, a Participant shall be entitled to the
vested portion of his Matching Contribution Account, and any non-vested portion
shall be forfeited.

 

ARTICLE VII—DISTRIBUTIONS

 

7.1                                                                               Distributions
Generally.

 

A Participant’s
Account shall be distributed only in accordance with the provisions of this
Article VII. All distributions from Accounts under the Plan shall be made in
cash in American currency. Distributions from the Plan shall be made in cash;
provided, however, that to the extent that all or a portion of a Participant’s
Account is deemed to be invested in common stock of Cardinal Financial
Corporation (“Common Stock”), such amounts shall be paid in shares of Common
Stock in an amount equal to the number of whole shares of Common Stock credited
to the Participant’s Account as of the date of distribution.  Any fractional share shall be paid in
cash.  

 

7.2                                                                               Automatic
Distributions.

 

A.            Participant’s Death. If the Participant
dies while employed by the Employer, his Account shall be valued as of the
Valuation Date next following his date of death and shall be distributed in
lump sum to his Designated Beneficiary as soon as administratively feasible.

 

B.            Participant’s Disability. If a
Participant becomes disabled while employed by the Employer, his Account shall
be valued as of the Valuation Date next following his date of Disability and
shall be distributed in lump sum to him as soon as administratively feasible.

 

C.            Separation from Service. If a Participant
incurs a Separation from Service, his vested Account shall be valued as of the
Valuation Date next following his official date of separation and shall be
distributed in lump sum to him as soon as administratively feasible; provided,
however, that the Account of a Key Employee shall not be distributed until six
months following Separation from Service.

 

12

 

7.3                                                                               Elective
Distributions.

 

A Participant shall become
entitled to receive a distribution from his Account at such time or times and
by such method of payment as elected and specified in the Participant’s
applicable annual Deferral Election Form, and/or as may be mandated by the
provisions of this Article VII based upon the following distribution options:

 

A.            Retirement Distribution. Upon a
Participant’s Retirement from the Employer, his Account shall be distributed
according to the method of payment elected in his applicable Deferral Election
Form.  If the Participant dies while
receiving Retirement installment payments, his Designated Beneficiary shall
continue to receive the remaining installments. 
If subsequently, the Designated Beneficiary dies, any remaining
installments will be paid to the Designated Beneficiaries estate.

 

B.            In-Service Distributions. If a Participant elects in
his annual Deferral Election Form, he can receive a distribution from his
Account, as soon as three (3) years after the end of the deferral Plan Year,
all of his annual deferral amount, plus amounts credited/debited based on the
performance of the Participant’s elected Deemed Crediting Options. The election
is made on an annual basis, applies only to the Participant’s current Plan Year
contributions, is irrevocable and is payable according to the method of payment
elected in the Participant’s applicable annual Deferral Election Form. If the
Participant dies while receiving In-Service installment payments, his
Designated Beneficiary shall continue to receive the remaining installments. If
subsequently, the Designated Beneficiary dies; any remaining installments will
be paid to the Designated Beneficiary’s estate.

 

C.            Change of Control Distribution. If a
Participant shall so elect in his annual Deferral Election Form, a
Participant’s elective distribution election(s) shall be overridden and his
entire Account shall be distributed to him as set forth in Section 7.4 C if a
Change of Control should occur during the Plan Year.

 

7.4                                                                               Timing
and Method of Payment for Elective Distributions.

 

A.            Retirement Distribution. At the
election of a Participant in the applicable Deferral Election Form, a
Participant may receive a Retirement distribution in a lump sum or in payments
of up to ten (10) annual installments (10 years) with the first installment to
begin within ten (10) days of the first business day on or after January 1 in
the calendar year following the Participant’s date of Retirement and to be paid
thereafter within ten (10) days of the first business day on or after January 1
of each calendar year until the Account has been fully distributed; provided,
however, that a Participant who is a Key Employee shall not begin to receive
payment earlier than six months following his retirement.

 

B.            In-Service Distributions.  At the election of a Participant in the
applicable Deferral Election Form, an In-Service distribution may be selected
for payment as soon as three (3) years after the end of the deferral Plan
Year.  Distribution will be either in the
form of a lump-sum, occurring no later than thirty (30) days following the
distribution date elected on the Deferral

 

13

 

Election Form,
or in annual installment payments beginning with the first business day on or
after the commencement date as selected by the Participant in the annual
Deferral Election Form and for a duration as selected by the Participant in the
annual Deferral Election Form and to be paid thereafter within ten (10) days of
the anniversary of the distribution date of each calendar year until the
In-Service Distribution amount has been fully distributed.  A Participant’s Account shall be valued as of
such distribution date elected on the Deferral Election Form.

 

C.            Change of Control Distribution. If
so elected by the Participant in his Annual Distribution Election Form, a
distribution of all of a Participant’s Account shall be made to him in a lump
sum within thirty (30) days of the effective date of a Change of Control,
overriding any prior Participant election(s) for distribution. Notwithstanding
the foregoing provision, no distribution shall be made to any Participant until
the earliest date and upon such conditions as may be set forth under Treasury
regulations issued pursuant to Code Section 409A (e). A Participant’s Account
shall be valued as of such effective date of the Change of Control.  If no such election was made by the
Participant in his Annual Distribution Election Form, his distribution
election(s) will not be overridden.

 

D.            Installment Payments. In any
distribution in which a Participant has elected or will receive distribution in
periodic installments, the amount of each periodic installment shall be
determined by applying a formula to the Account in which the numerator is the
number one and the denominator is the number of remaining installments to be
paid. For example, if a Participant elects ten (10) annual installments for a
Retirement distribution, the first payment will be 1/10 of the Account, the
second will be 1/9, the third will be 1/8; the fourth will be 1/7 and so on
until the Account is entirely distributed.

 

E.              Failure to Designate a Method of Payment. In
any situation in which the Committee is unable to determine the method of
payment because of incomplete, unclear, or uncertain instructions in a
Participant’s Deferral Election Form, the Participant will be deemed to have
elected a lump sum distribution.

 

F.              Subsequent
Elections.  A Participant who has
made an In-Service distribution or a Retirement distribution election may make
one or more subsequent elections to postpone the distribution date or to change
the form of payment to another form permitted by the Plan.  Such Subsequent Election shall be made in
writing is such form as is acceptable to the Committee and (i) is made at least
twelve months prior to the original distribution date; (ii) provides for an
effective date at least twelve months following the Subsequent Election; and
(iii) postpones the commencement of payment for a period of not less than five
years from the previous distribution date.

 

7.5                                                                               Distributions
Resulting from Unforeseeable Emergency.

 

A Participant may request that all or a
portion of his Account be distributed at any time prior to separation from
service from the Employer by submitting a written request to the Committee,
provided that the Participant has incurred an Unforeseeable Emergency, and the
distribution is necessary to alleviate such Unforeseeable Emergency.

 

14

 

Such distribution shall be limited to an
amount that does not exceed the amount necessary to satisfy such emergency,
plus amounts necessary to pay taxes reasonably anticipated as a result of the
distribution, after taking into account the extent to which such hardship is or
may be relieved through reimbursement or compensation by insurance or otherwise
or by liquidation of the Participant’s assets (to the extent the liquidation of
such assets would not itself cause severe financial hardship).  Such distribution shall be made as soon as
administratively practicable. The Balance not distributed from the
Participant’s Account shall remain in the Plan.

 

7.6                                                                               Distributions
of Small Accounts.

 

If at any time the value of the Participant’s
Account is less than $5,000 (or such other greater or lesser amount as may be
specified as “minimal” under Treasury regulations), the Committee, in its sole
and exclusive discretion, may make a distribution in lump sum of the value of
the entire Account. If the value of a Participant’s Account is zero upon the
Valuation Date of any distribution, the Participant shall be deemed to have
received a distribution of such Account and his participation in the Plan
terminates.

 

ARTICLE VIII—ADMINISTRATION & CLAIMS PROCEDURE

 

8.1                                                                               Duties
of the Employer.

 

The Employer shall have overall
responsibility for the establishment, amendment, termination, administration,
and operation of the Plan. The Employer shall discharge this responsibility by
the appointment and removal (with or without cause) of the members of the
Committee, to which is delegated overall responsibility for administering,
managing and operating the Plan.

 

8.2                                                                               The
Committee.

 

The Committee shall consist
of one or more members who shall be appointed by, and may be removed by, the
Employer, and one of whom (who must be an officer of the Employer) shall be
designated by the Employer as Chairman of the Committee. In the absence of such
appointment, the Employer shall serve as the Committee. The Committee shall
consist of officers or other Employees of the Employer, or any other persons
who shall serve at the request of the Employer. Any member of the Committee may
resign by delivering a written resignation to the Employer and to the
Committee, and this resignation shall become effective upon the date specified
therein. The members of the Committee shall serve at the will of the Employer,
and the Employer may from time to time remove any Committee member with or
without cause and appoint their successors. In the event of a vacancy in
membership, the remaining members shall constitute the Committee with full
order to act.

 

8.3                                                                               Committee’s
Powers and Duties to Enforce Plan.

 

The Committee shall be the “Administrator”
and “Named Fiduciary” only to the extent required by ERISA for top-hat plans
and shall have the complete control and authority to enforce the Plan on behalf
of any and all persons having or claiming any interest in the Plan in
accordance with its

 

15

 

terms. The Committee, in its sole and
absolute discretion, shall interpret the Plan and shall determine all questions
arising in the administration and application of the Plan. Any such
interpretation by the Committee shall be final, conclusive and binding on all
persons.

 

8.4                                                                               Organization
of the Committee.

 

The Committee shall act by a majority of its
members at the time in office. Committee action may be taken either by a vote
at a meeting or by written consent without a meeting. The Committee may
authorize any one or more of its members to execute any document or documents
on behalf of the Committee. The Committee shall notify the Employer, in writing,
of such authorization and the name or names of its member or members so
designated in such cases. The Employer thereafter shall accept and rely on any
documents executed by said member of the Committee or members as representing
action by the Committee until the Committee shall file with the Employer a
written revocation of such designation. 
The Committee may adopt such by-laws and regulations, as it deems
desirable for the proper conduct of the Plan and to change or amend these
by-laws and regulations from time to time. With the permission of the Employer,
the Committee may employ and appropriately compensate accountants, legal
counsel, benefit specialists, actuaries, plan administrators and record keepers
and any other persons as it deems necessary or desirable in connection with the
administration and maintenance of the Plan. Such professionals and advisors
shall not be considered members of the Committee for any purpose.

 

8.5                                                                               Limitation
of Liability.

 

A.            No member of the Board of Directors,
the Employer and no officer or Employee of the Employer shall be liable to any
Employee, Participant, Designated Beneficiary or any other person for any
action taken or act of omission in connection with the administration or
operation of this Plan unless attributable to his own fraud or willful
misconduct. Nor shall the Employer be liable to any Employee, Participant,
Designated Beneficiary or any other person for any such action taken or act of
omission unless attributable to fraud, gross negligence or willful misconduct
on the part of a Director, officer or Employee of the Employer.  Moreover, each Participant, Designated
Beneficiary, and any other person claiming a right to payment under the Plan
shall only be entitled to look to the Employer for payment, and shall not have
the right, claim or demand against the Committee (or any member thereof), any
Director, Officer or Employee of the Employer.

 

B.            To the fullest extent permitted by the
law and subject to the Employer’s Certificate of Incorporation and By-laws, the
Employer shall indemnify the Committee, each of its members, and the Employer’s
officers and Directors (and any Employee involved in carrying out the functions
of the Employer under the Plan) for part or all expenses, costs, or liabilities
arising out of the performance of duties required by the terms of the Plan
agreement, except for those expenses, costs, or liabilities arising out of a
member’s fraud, willful misconduct or gross negligence.

 

16

 

8.6                                                                               Committee
Reliance on Records and Reports.

 

The Committee shall be entitled to rely upon
certificates, reports, and opinions provided by an accountant, tax or pension
advisor, actuary or legal counsel employed by the Employer or Committee. The
Committee shall keep a record of all its proceedings and acts, and shall keep
all such books of account, records, and other data as may be necessary for the
proper administration of the Plan. The regularly kept records of the Committee
and the Employer shall be conclusive evidence of the service of a Participant,
Compensation, age, marital status, status as an Employee, and all other matters
contained therein and relevant to this Plan. The Committee, in any of its
dealings with Participants hereunder, may conclusively rely on any Deferral
Election Form, written statement, representation, or documents made or provided
by such Participants.

 

8.7                                                                               Costs
of the Plan.

 

All the costs and expenses for maintaining
the administration and operation of the Plan shall be borne by the Employer
unless the Employer shall give notice (that Plan Participants bear this
expense, in whole or in part) to: (a) Eligible Participants at the time they
become a Participant by completion and filing of a Deferral Election Form; or
(b) to existing Participants during annual re-enrollment.  Such notice shall detail the administrative
expense to be assessed a Plan Participant, how that expense will be assessed
and allocated to the Participant Accounts, and any other important information
concerning the imposition of this administrative expense. This administration
charge, if any, shall operate as a reduction to the bookkeeping Account of a
Participant or his designated Beneficiary, and in the absence of specification
otherwise shall reduce the Account, and be charged annually during the month of
January.

 

8.8                                                                               Claims
Procedure.

 

A.            Claim. Benefits shall be paid in
accordance with the terms of this Plan. A Participant, Designated Beneficiary
or any person who believes that he is being denied a benefit to which he is
entitled under the Plan (hereinafter referred to as a “Claimant”) may file a
written request for such benefit with the Employer, setting forth his claim.
The request must be addressed to the Committee care of Secretary of the
Employer at its then principal place of business.

 

B.            Claim Decision. Upon the receipt of a
claim, the Committee shall advise the Claimant that a reply will be forthcoming
within ninety (90) days and shall, in fact, deliver such reply within such
period. However, the Committee may extend the reply period for an additional
ninety (90) days for reasonable cause. Any claim not granted or denied within
such time period shall be deemed to have been denied.  If the claim is denied in whole or in part,
the Committee shall adopt a written opinion, using language calculated to be
understood by the Claimant, setting forth:

 

(1)         The specific reason
or reasons for such denial;

 

(2)         The specific
reference to pertinent provisions of this Agreement on which such denial is
based;

 

(3)         A description of any
additional material or information necessary for the Claimant to perfect his
claim and an explanation why such material or such information is necessary;

 

17

 

(4)         Appropriate information as to the steps to
be taken if the Claimant wishes to submit the claim for review; and

 

(5)         The time limits for requesting a review under
Subsection C and for review under Subsection D hereof.

 

C.            Request for Review. Within sixty (60)
days after the receipt by the Claimant of the written opinion described above,
the Claimant may request in writing that the Secretary of the Employer review
the determination of the Committee. Such request must be addressed to the
Secretary of the Employer, at its then principal place of business. The
Claimant or his duly authorized representative may, but need not, review the
pertinent documents and submit issues and comments in writing for consideration
by the Employer. If the Claimant does not request a review of the Committee’s
determination by the Secretary of the Employer within such sixty (60) day
period, he shall be barred and estopped from challenging the Committee’s
determination.

 

D.            Review of Decision. Within sixty (60)
days after the Secretary’s receipt of a request for review, he will review the
Committee’s determination. After considering all materials presented by the
Claimant, the Secretary will render a written opinion, written in a manner
calculated to be understood by the Claimant, setting forth the specific reasons
for the decision and containing specific references to the pertinent provisions
of this Agreement on which the decision is based. If special circumstances
require that the sixty (60) day time period be extended, the Secretary will so
notify the Claimant and will render the decision as soon as possible, but no
later than one hundred twenty (120) days after receipt of the request for
review. Any claim not granted or denied within such time period shall be deemed
to have been denied.

 

8.9                                                                               Litigation.

 

It shall only be necessary to join the
Employer as a party in any action or judicial proceeding affecting the Plan. No
Participant or Designated Beneficiary or any other person claiming under the
Plan shall be entitled to service of process or notice of such action or
proceeding, except as may be expressly required by law. Any final judgment in
such action or proceeding shall be binding on all Participants, Designated
Beneficiaries or persons claiming under the Plan.

 

ARTICLE IX—AMENDMENT, TERMINATION & REORGANIZATION

 

9.1                                                                               Amendment.

 

The Employer by action of its Board of
Directors, or duly authorized Committee thereof, in accordance with its
by-laws, reserves the right to amend the Plan, by resolution of the Employer,
to the extent permitted under the Code and ERISA. However, no amendment to the
Plan shall be effective to the extent that it has the effect of decreasing a
Participant’s (or Designated Beneficiary’s) accrued benefit prior to the date
of the amendment.

 

18

 

9.2                                                                               Amendment
Required By Law.

 

Notwithstanding Section 9.1, the Plan may be
amended at any time, if in the opinion of the Employer, such amendment is
necessary to ensure the Plan is treated as a nonqualified plan of deferred
compensation under the Code and ERISA, or to bring it into conformance with
Treasury or SEC regulations or requirements for such plans. This includes the
right to amend this Plan, so that any Trust, if applicable, created in
conjunction with this Plan, will be treated as a grantor Trust under Sections
671 through 679 of the Code, and to otherwise conform the Plan provisions and
such Trust, if applicable, to the requirements of any applicable law.

 

9.3                                                                               Termination.

 

The Employer intends to continue the Plan
indefinitely. However, the Employer by action of its Board of Directors or a
duly authorized Committee thereof, in accordance with its by-laws, reserves the
right to terminate the Plan at any time. However, no such termination shall
deprive any participant or Designated Beneficiary of a right accrued under the
Plan prior to the date of termination.

 

9.4                                                                               Consolidation/Merger.

 

The Employer shall not enter into any
consolidation or merger without the guarantee and assurance of the successor or
surviving company or companies to the obligations contained under the Plan.
Should such consolidation or merger occur, the term “Employer” as defined and
used in this Agreement shall refer to the successor or surviving company.

 

ARTICLE X—GENERAL PROVISIONS

 

10.1                                                                        Applicable
Law.

 

Except insofar
as the law has been superseded by Federal law, Virginia law shall govern the
construction, validity and administration of this Plan as created by this
Agreement. The parties to this Agreement intend that this Plan shall be a
nonqualified unfunded plan of deferred compensation without plan assets and any
ambiguities in its construction shall be resolved in favor of an interpretation
which will effect this intention.

 

10.2                                                                        Benefits
Not Transferable or Assignable.

 

A.            Benefits under the Plan shall not be
subject to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge such benefits shall be void, nor shall any
such benefits be in any way liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person entitled to them. However, a
Participant may name a recipient for any benefits payable or which would become
payable to a Participant upon his death. This Section shall also apply to the
creation, assignment or recognition of a right to any benefit payable with
respect to a Participant pursuant to a domestic relations order, including a
qualified domestic relations order under Section 414(p) of the Code. In addition,
the following actions

 

19

 

shall not be
treated or construed as an assignment or alienation: (a) Plan Contribution or
distribution tax withholding; (b) recovery of distribution overpayments to a
Participant or Designated Beneficiary; (c) direct deposit of a distribution to
a Participant’s or Designated Beneficiary’s banking institution account; or (d)
transfer of Participant rights from one Plan to another Plan, if applicable.

 

B.            The Employer may bring an action for a
declaratory judgment if a Participant’s, Designated Beneficiary’s or any
Beneficiary’s benefits hereunder are attached by an order from any court. The
Employer may seek such declaratory judgment in any court of competent
jurisdiction to:

 

(1)         determine the proper
recipient or recipients of the benefits to be paid under the Plan;

 

(2)         protect the operation
and consequences of the Plan for the Employer and all Participants; and

 

(3)         request any other
equitable relief the Employer in its sole and exclusive judgment may feel
appropriate.

 

Benefits which
may become payable during the pendency of such an action shall, at the sole
discretion of the Employer, either be:

 

(1)         paid into the court as they become payable
or

 

(2)
held in the Participant’s or Designated Beneficiary’s Account subject to the
court’s final distribution order.

 

10.3                                                                        Not
an Employment Contract.

 

The Plan is not and shall not be deemed to
constitute a contract between the Employer and any Employee, or to be a
consideration for, or an inducement to, or a condition of, the employment of
any Employee. Nothing contained in the Plan shall give or be deemed to give an
Employee the right to remain in the employment of the Employer or to interfere
with the right to be retained in the employ of the Employer, any legal or
equitable right against the Employer, or to interfere with the right of the
Employer to discharge any Employee at any time. It is expressly understood by
the parties hereto that this Agreement relates to the payment of deferred
compensation for the Employee’s services, generally payable after separation
from employment with the Employer, and is not intended to be an employment
contract.

 

10.4                                                                        Notices.

 

A.            Any notices
required or permitted hereunder shall be in writing and shall be deemed to be
sufficiently given at the time when delivered personally or when mailed by
certified or registered first class mail, postage prepaid, addressed to either
party hereto as follows:

 

If to the
Employer:

 

20

 

Cardinal
Financial Corporation

8270
Greensboro Drive

Suite 500

McLean,
Virginia 22102

 

If to the
Participant:

 

At his last
known address, as indicated by the records of the Employer.

 

or to such changed address
as such parties may have fixed by notice. However, any notice of change of
address shall be effective only upon receipt.

 

B.            Any
communication, benefit payment, statement of notice addressed to a Participant
or Designated Beneficiary at the last post office address as shown on the Employer’s
records shall be binding on the Participant or Designated Beneficiary for all
purposes of the Plan. The Employer shall not be obligated to search for any
Participant or Designated Beneficiary beyond sending a registered letter to
such last known address.

 

10.5                                                                        Severability.

 

The Plan as contained in the provisions of
this Agreement constitutes the entire Agreement between the parties. If any
provision or provisions of the Plan shall for any reason be invalid or
unenforceable, the remaining provisions of the Plan shall be carried into
effect, unless the effect thereof would be to materially alter or defeat the
purposes of the Plan. All terms of the plan and all discretion granted
hereunder shall be uniformly and consistently applied to all the Employees,
Participants and Designated Beneficiaries.

 

10.6                                                                        Participant
is General Creditor with No Rights to Assets.

 

A.            The
payments to the Participant or his Designated Beneficiary or any other
beneficiary hereunder shall be made from assets which shall continue, for all
purposes, to be a part of the general, unrestricted assets of the Employer, no
person shall have any interest in any such assets by virtue of the provisions
of this Agreement. The Employer’s obligation hereunder shall be an unfunded and
unsecured promise to pay money in the future. To the extent that any person
acquires a right to receive payments from the Employer under the provisions
hereof, such right shall be no greater than the right of any unsecured general
creditor of the Employer; no such person shall have nor require any legal or
equitable right, or claim in or to any property or assets of the Employer. The
Employer shall not be obligated under any circumstances to fund obligations
under this Agreement.

 

B.            The Employer at its sole discretion and
exclusive option, may acquire and/or set-aside assets or funds, in a trust or
otherwise, to support its financial obligations under this Plan. No such trust
established for this purpose shall be established in or transferred to a
location that would cause it to be deemed to be an “offshore trust” for
purposes of Code Section 409A (b)(1).  No
such acquisition or set-aside shall impair or derogate from the Employer’s
direct obligation to a Participant or Designated

 

21

 

Beneficiary
under this Plan. However, no Participant or Designated Beneficiary shall be
entitled to receive duplicate payments of any Accounts provided under the Plan
because of the existence of such assets or funds.

 

C.            In
the event that, in its discretion, the Employer purchases an asset(s) or
insurance policy or policies insuring the life of the Participant to allow the
Employer to recover the cost of providing benefits, in whole or in part
hereunder, neither the Participant, Designated Beneficiary nor any other
beneficiary shall have any rights whatsoever therein in such assets or in the
proceeds therefrom. The Employer shall be the sole owner and beneficiary of any
such assets or insurance policy and shall possess and may exercise all
incidents of ownership therein. No such asset or policy, policies or other
property shall be held in any trust for the Participant or any other person nor
as collateral security for any obligation of the Employer hereunder. Nor shall
any Participant’s participation in the acquisition of such assets or policy or
policies be a representation to the Participant, Designated Beneficiary or any
other beneficiary of any beneficial interest or ownership in such assets,
policy or policies. A Participant may be required to submit to medical
examinations, supply such information and to execute such documents as may be
required by an insurance carrier or carriers (to whom the Employer may apply
from time to time) as a precondition to participate in the Plan.

 

10.7                                                                        No
Trust Relationship Created.

 

Nothing contained in this Agreement shall be
deemed to create a trust of any kind or create any fiduciary relationship
between the Employer and the Participant, Designated Beneficiary, other
beneficiaries of the Participant, or any other person claiming through the
Participant. Funds allocated hereunder shall continue for all purposes to be
part of the general assets and funds of the Employer and no person other than
the Employer shall, by virtue of the provisions of this Plan, have any
beneficial interest in such assets and funds. 
The creation of a grantor Trust (so called “Rabbi Trust”) under the Code
(owned by and for the benefit of the Employer) to hold such assets or funds for
the administrative convenience of the Employer shall not give nor be a
representation to a Participant, Designated Beneficiary, or any other person,
of a property or beneficial ownership interest in such Trust assets or funds
even though the incidental advantages or benefits of the Trust to Plan Participants
may be communicated to them.

 

10.8                                                                        Limitations
on Liability of the Employer.

 

Neither the establishment of the Plan nor any
modification hereof nor the creation of any Account under the Plan nor the
payment of any benefits under the Plan shall be construed as giving to any
Participant or any other person any legal or equitable right against the
Employer or any Director, officer or Employee thereof except as provided by law
or by any Plan provision.

 

10.9                                                                        Agreement
Between Employer and Participant Only.

 

This Agreement is solely between the Employer
and Participant. The Participant, Designated Beneficiary, estate or any other
person claiming through the Participant, shall only have recourse against the
Employer for enforcement of this Agreement. This Agreement shall be binding
upon and inure to the benefit of the Employer and its successors and assigns,
and the Participant, successors, heirs, executors, administrators and
beneficiaries.

 

22

 

10.10                                                                 Independence
of Benefits.

 

The benefits payable under this Agreement are
for services already rendered and shall be independent of, and in addition to,
any other benefits or compensation, whether by salary, bonus, fees or
otherwise, payable to the Participant under any compensation and/or benefit
arrangements or plans, incentive cash compensations and stock plans and other
retirement or welfare benefit plans, that now exist or may hereafter exist from
time to time.

 

10.11                                                                 Unclaimed
Property.

 

Except as may be required by law, the
Employer may take any of the following actions if it gives notice to a
Participant or Designated Beneficiary of an entitlement to benefits under the
Plan, and the Participant or Designated Beneficiary fails to claim such benefit
or fails to provide their location to the Employer within three (3) calendar
years of such notice:

 

(1)         Direct
distribution of such benefits, in such proportions as the Employer may
determine, to one or more or all, of a Participant’s next of kin, if their location
is known to the Employer;

 

(2)         Deem
this benefit to be a forfeiture and paid to the Employer if the location of a
Participant’s next of kin is not known. 
However, the Employer shall pay the benefit, unadjusted for gains or
losses from the date of such forfeiture, to a Participant or Designated
Beneficiary who subsequently makes proper claim to the benefit.

 

The Employer shall not be liable to any
person for payment pursuant to applicable state unclaimed property laws.

 

10.12                                                                 Required
Tax Withholding and Reporting.

 

The Employer shall withhold and report
Federal, state and local income and payroll tax amounts on all Contributions to
and distributions and withdrawals from a Participant’s Account as may be
required by law from time to time.

 

 

	
  CARDINAL FINANCIAL CORPORATION

  
	
   

  
	
   

  
	
  BY

  	
   

  	
   

  
	
   

  	
   

  
	
  Title

  	
   

  	
   

  
				

 

23Exhibit 10.31

 

SYNOPSYS, INC.

2005 NON-EMPLOYEE DIRECTORS EQUITY INCENTIVE PLAN

 

Adopted by the Board of Directors on March 1, 2005, amended by the
Board on March 3, 2006 and approved by the Stockholders on May 23,
2005 and April 25, 2006

 

I. PURPOSE
OF THE PLAN

 

This 2005 Non-Employee
Directors Equity Incentive Plan (the “Plan”) is intended to promote the
interests of Synopsys, Inc., a Delaware corporation (the “Corporation”),
by providing the non-employee members of the Board of Directors with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation.

 

II. DEFINITIONS

 

For purposes of the Plan,
the following definitions shall be in effect:

 

ANNUAL
MEETING: the first meeting of the Corporation’s stockholders held each calendar
year at which directors of the Corporation are selected.

 

AWARD:
an option granted pursuant to Section VI.A(1), Section VI.A(2)(i) or
Section VI.A(3) or common stock issued as Restricted Stock pursuant
to Section VI.A(2)(ii).

 

BOARD:
the Corporation’s Board of Directors.

 

CODE:
the Internal Revenue Code of 1986, as amended.

 

COMMON
STOCK: shares of the Corporation’s common stock.

 

CHANGE
IN CONTROL: a change in ownership or control of the Corporation effected
through either of the following transactions:

 

(1)                                              any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation’s outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation’s stockholders; or

 

1

 

(2)                                              there
is a change in the composition of the Board over a period of twenty-four (24)
consecutive months or less such that a majority of the Board members ceases, by
reason of one or more contested elections for Board membership, to be comprised
of individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the
Board members described in clause (A) who were still in office at the time
such election or nomination was approved by the Board.

 

CORPORATE
TRANSACTION: any of the following stockholder-approved

 

transactions to which the
Corporation is a party:

 

(1)                                              a
merger or consolidation in which the Corporation is not the surviving entity,

 

(2)                                              the
sale, transfer or other disposition of all or substantially all of the assets
of the Corporation but only if such sale, transfer or other disposition occurs
in connection with the complete liquidation or dissolution of the Corporation,
or

 

(3)                                              any
merger in which the Corporation is the surviving entity but becomes a more than
fifty percent (50%) owned subsidiary of another corporation.

 

EFFECTIVE
DATE: March 1, 2005, the date on which the Plan was adopted by the Board.

 

ELIGIBLE
DIRECTOR:  a person designated as an
Eligible Director pursuant to Section V.A.

 

FAIR
MARKET VALUE: the Fair Market Value per share of Common Stock determined in
accordance with the following provisions:

 

(1)                                              If
the Common Stock is not at the time listed or admitted to trading on any
national securities exchange but is traded on the Nasdaq National Market, the
Fair Market Value shall be the closing selling price per share on the date in
question, as such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there is no
reported closing selling price for the Common Stock on the date in question,
then the closing selling price on the last preceding date for which such
quotation exists shall be determinative of Fair Market Value.

 

(2)                                              If
the Common Stock is at the time listed or admitted to trading on any national
securities exchange, then the Fair Market Value shall be the closing selling
price per share on the date in question on the exchange serving as the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported sale
of Common Stock on such exchange on the date in question, then the 

 

2

 

Fair Market Value shall
be the closing selling price on the exchange on the last preceding date for
which such quotation exists.

 

1934
ACT: the Securities Exchange Act of 1934, as amended.

 

OPTIONEE:
any person to whom an option is granted under the Plan.

 

PERMANENT
DISABILITY OR PERMANENTLY DISABLED: the inability of

 

the Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment expected to result in death or to be of
continuous duration of twelve (12) months or more.

 

RESTRICTED
STOCK:  shares of Common Stock as
described in Section VI.A(2)(ii).

 

III. ADMINISTRATION
OF THE PLAN

 

Except as otherwise
provided herein, the terms and conditions of each Award (including the timing
and pricing of option grants) shall be determined by the express terms and
conditions of the Plan. To the extent not inconsistent with the foregoing, the
Board shall have the power to construe and interpret the Plan and Awards
granted under it, and to establish, amend, and revoke rules and
regulations for the administration of the Plan. The Board, in the exercise of
this power, may (i) correct any defect, omission or inconsistency in the
Plan or in any Stock Option Agreement or Restricted Stock Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective, (ii) to amend the Plan or an Award as provided in Section VIII,
or (iii) to exercise such powers and to perform such acts as the Board
deems necessary or expedient to promote the best interests of the Corporation. Notwithstanding
the foregoing, the Board shall not have the power to approve a program whereby
outstanding Awards are surrendered in exchange for Awards with a lower exercise
price, without first obtaining stockholder approval of such program other than
changes to outstanding awards pursuant to Section IV.C.

 

IV. STOCK
SUBJECT TO THE PLAN

 

A.                       Shares of
the Corporation’s Common Stock shall be available for issuance under the Plan
and shall be drawn from either the Corporation’s authorized but unissued shares
of Common Stock or from reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market. The number of shares of
Common Stock reserved for issuance over the term of the Plan shall initially be
fixed at 750,000 shares.

 

B.                         Should
one or more outstanding options under this Plan expire or terminate for any
reason prior to exercise in full, then the shares subject to the portion of
each option not so exercised shall be available for issuance under the Plan. Unvested
shares of Restricted Stock that revert to the Corporation shall also be
available for reissuance under the Plan. In addition, should the exercise price
of an outstanding option under the Plan be paid with shares of Common 

 

3

 

Stock that were not
acquired from the Corporation, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised, and not by the net number of shares
of Common Stock actually issued to the holder of such option.

 

C.                         Should
any change be made to the Common Stock issuable under the Plan by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation’s receipt of consideration, then appropriate
adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of
securities for which Awards are to be subsequently made to each newly-elected
or continuing non-employee Board member under the Plan, and (iii) the
number and/or class of securities and price per share in effect under each
Award outstanding under the Plan. The adjustments to the outstanding Awards
shall be made by the Board in a manner which shall preclude the enlargement or
dilution of rights and benefits under such Awards and shall be final, binding
and conclusive.

 

V. ELIGIBILITY

 

A.                       Eligible
Directors. The individuals eligible to receive Awards pursuant to the
provisions of this Plan shall be limited to (i) those individuals who are
first elected or appointed as non-employee Board members after the Effective
Date, whether through appointment by the Board or election by the Corporation’s
stockholders, and (ii) those individuals who are re-elected as
non-employee Board members at one or more Annual Meetings held after the
Effective Date whether or not such individual is serving as a non-employee
director on the Effective Date. Each non-employee Board member eligible to
participate in the Plan pursuant to the foregoing criteria is hereby designated
an Eligible Director.

 

B.                         Limitation.
Except for the grants to be made pursuant to this Plan, non-employee Board
members shall not be eligible to receive any stock options, stock appreciation
rights, direct stock issuances or other stock awards under this Plan or any
other stock plan of the Corporation or any parent or subsidiary.

 

VI. TERMS
AND CONDITIONS OF AUTOMATIC AWARDS

 

A.        Award
Amounts and Dates. Awards shall be granted in the amounts and on the dates
specified below:

 

(1)                      Initial
Awards. Each individual who first becomes an Eligible Director after the
Effective Date, whether through election by the Corporation’s stockholders or
appointment by the Board, shall automatically be granted, at the time of such
initial election or appointment, a non-statutory option to purchase thirty
thousand (30,000) shares of Common Stock. The terms and conditions of any such
option shall be as set forth in Section VI.B.

 

4

 

(2)                      Annual
Awards. On the date of each Annual Meeting during the term of this Plan, each
Eligible Director who is re-elected to the Board at that Annual Meeting shall
automatically be granted, on the date of such Annual Meeting (the “Award Annual
Meeting”), an annual Award (an “Annual Award”) in the form described below,
with a value equal to the Annual Award Value, as defined below. There shall be
no limit on the number of Annual Awards any one Eligible Director may receive
over his or her period of continued Board service during the term of this Plan.
On or before the December 31st of the calendar year immediately
preceding the calendar year in which the Award Annual Meeting occurs, the Board
shall determine if the Annual Award shall be in the form of a stock option in
the form described in Section VI.A(2)(i) below or in the form of
Restricted Stock described in Section VI.A(2)(ii) below. In the event
that no such determination is made by such December 31st, the
last election made by the Board as to the type of Award to receive shall
continue with respect to the Annual Awards issuable at the Award Annual
Meeting.

 

(i) 
If the Annual Award is in the form of a stock option, the Annual Award shall be
a non-statutory option to purchase a number of shares of Common Stock (an “Annual
Option Grant”) equal to the number of shares which will result in the Annual
Option Grant having a value as determined under the generally accepted
accounting principles employed by the Corporation for the purposes of preparing
its financial statements equal to the Annual Award Value. The Annual Option
Grant shall have the terms and conditions set forth in Section VI.B.

 

(ii) 
If the Annual Award is in the form of Restricted Stock, the Annual Award shall
be a grant of a number of unvested shares of Common Stock with a Fair Market
Value equal to the Annual Award Value with any fractional share being eliminated.
The terms and conditions of an Annual Award in the form of restricted stock
shall be as set forth in Section VI.C. Notwithstanding the foregoing, the
Board shall have the authority to provide that an Award in the form of
Restricted Stock shall instead be in the form of a commitment to issue shares
of Common Stock on the dates the Restricted Stock would have vested and
otherwise with substantially the same provisions as set forth in this Plan for
Awards of Restricted Stock. (Such a commitment is commonly referred to as an
award of “Restricted Stock Units.”)  If
the Board has determined that Awards of Restricted Stock Units shall be made in
lieu of Awards of Restricted Stock, references in this Plan to Restricted Stock
shall be deemed references to Restricted Stock Units.

 

(3)                      Interim
Awards. In the case of an Eligible Director who is appointed to the Board on a
date (the “Interim Appointment Date”) that is neither (x) the date of an Annual
Meeting nor (y) a date that is more than eleven (11) months since the most
recent Annual Meeting that preceded the Interim Appointment Date, such Eligible
Director shall automatically be granted, at the time of such appointment, an
Award (an “Interim Award”) in the form of a non-statutory option to purchase a
number of shares of Common Stock (an “Interim Option Grant”) equal to the
number of shares which will result in the Interim Option Grant having a value
as determined under the generally accepted accounting principles employed by
the Corporation for the purposes of preparing its financial statements equal to
the Interim Award 

 

5

 

Value, as defined below. The
Interim Option Grant shall have the terms and conditions set forth in Section VI.B

 

(4)                      Definitions.
The following definitions shall apply for the purposes of this Section VI:

 

(i) 
For the purposes of this Section VI.A, “Annual Award Value” shall mean a
dollar amount equal to the annual cash retainer for service as a Director in
effect at the time of the Award Annual Meeting for the period from the Award
Annual Meeting until the first Annual Meeting following the Award Annual
Meeting.

 

(ii) 
“Interim Award Value” shall mean a dollar amount equal to the product of (i) the
Annual Award Value the Eligible Director would have received had the Eligible
Director been appointed to the Board at the time of the most recent Annual
Meeting that preceded the Interim Appointment Date multiplied by (ii) a
fraction the numerator of which is twelve (12) minus the lesser of (x) the number
of whole months from the most recent Annual Meeting that preceded the Interim
Appointment Date until the Interim Appointment Date with any fraction of a
month being rounded up to the next whole month or (y) twelve (12) and the
denominator of which is twelve (12).

 

B.     Terms and
Conditions of Options. Any options granted pursuant to Section VI.A(1), Section VI.A(2)(i) or
Section VI.A(3) shall have the following terms and conditions:

 

(1)                      Exercise
Price. The exercise price per share of Common Stock subject to such option
shall be equal to one hundred percent (100%) of the Fair Market Value per share
of Common Stock on the grant date.

 

(2)                      Payment.
Upon the exercise of the option in whole or in part, the exercise price for the
portion being exercised shall become immediately due and shall be payable in
one of the alternative forms specified below, or in a combination of such
alternative forms, to the extent permitted by law and permitted in the form of
Stock Option Agreement issued in connection with the option:

 

(i)                    full
payment in cash or check made payable to the Corporation’s order; or

 

(ii)                 full
payment in shares of Common Stock valued at Fair Market Value on the Exercise
Date (as such term is defined below); or

 

(iii)              full
payment through a broker-dealer sale and remittance procedure pursuant to which
the non-employee Board member (x) shall provide irrevocable written
instructions to a brokerage firm acceptable to the Corporation to effect the
immediate sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares and (y) shall 

 

6

 

concurrently provide
written directives to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale
transaction; or

 

(iv)             a
“net exercise” arrangement pursuant to which the Corporation will reduce the
number of shares of Common Stock issued upon exercise of the option by the
largest whole number of shares with a Fair Market Value that does not exceed
the aggregate exercise price; provided, however, that the Corporation shall
accept a cash payment from the Eligible Director to the extent of any remaining
balance of the aggregate exercise price not satisfied by such holding back of
whole shares; provided further, however, that shares of Common Stock will no
longer be outstanding under the option and will not be exercisable thereafter
to the extent that (x) shares are used to pay the exercise price pursuant to
the “net exercise” of the option and (y) shares are directly or indirectly
delivered to the Eligible Director as a result of such exercise of the option.

 

For purposes of this Section VI.B(2),
the Exercise Date shall be the date on which written notice of the option
exercise is delivered to the Corporation. Except to the extent the sale and
remittance procedure specified above is utilized in connection with the exercise
of the option, payment of the exercise price for the purchased shares must
accompany the exercise notice.

 

(3)                      Exercisability/Vesting.
Each stock option granted pursuant to this Plan shall be exercisable only if
the option becomes vested in accordance with the terms of this Plan. Once a
portion of an option becomes vested, such portion shall remain exercisable
until either such portion is exercised or the option is terminated in
accordance with the provisions of this Plan. In no event, however, shall any
additional option shares vest after the Optionee’s cessation of Board service. Except
as otherwise provided in this Plan, options granted pursuant to this Plan shall
vest as follows:

 

(i)                                                 The
initial automatic grant for thirty thousand (30,000) shares made to each
Eligible Director shall vest in a series of four (4) successive equal
installments as such individual continues in Board service through the date
immediately preceding each of the first four (4) Annual Meetings following
the grant date of that option.

 

(ii)                                              Each
Annual Option Grant and any Interim Option Grant made to an Eligible Director
shall vest in thirty-six (36) successive equal installments for each month the
Optionee continues in Board service from the grant date of that option through the
third (3rd) anniversary of the grant date of the option.

 

(iii)                                           Should
the Optionee die or become Permanently Disabled while serving as a Board
member, then any option grant issued under the Plan held by the Optionee at the
time of his or her death or Permanent Disability may subsequently be exercised
for any or all of the option shares in which the Optionee is vested at that
time plus an additional number of option shares equal to the number of option
shares (if any) in which the Optionee would have vested had he or she continued
in Board service until the next Annual Meeting.

 

7

 

(4)                      Option Term.
Each option grant under the Plan shall have a maximum term of seven (7) years
measured from the automatic grant date.

 

(5)                      Effect of
Termination of Board Service.

 

(i)                    Should
the Optionee cease to serve as a Board member for any reason (other than death
or Permanent Disability) while holding one or more option grants issued under
the Plan, then such individual shall have a six (6)-month period following the
date of such cessation of Board service in which to exercise each such option
for any or all of the option shares in which the Optionee is vested at the time
of his or her cessation of Board service. Each such option shall immediately
terminate and cease to be outstanding, at the time of such cessation of Board
service, with respect to any option shares in which the Optionee is not
otherwise at that time vested.

 

(ii)                 Should
the Optionee die on or before the date that is six (6) months after
cessation of Board service, then any option grant issued under the Plan held by
the Optionee at the time of death may subsequently be exercised, for any or all
of the option shares in which the Optionee is vested at the time of his or her
cessation of Board service (less any option shares subsequently purchased by
the Optionee prior to death), by the personal representative of the Optionee’s
estate or by the person or persons to whom the option is transferred pursuant
to the Optionee’s will or in accordance with the laws of descent and
distribution. The right to exercise each such option shall lapse upon the
expiration of the twelve (12)-month period measured from the date of the
Optionee’s death.

 

(iii)              Should the Optionee become Permanently
Disabled while serving as a Board member, then the Optionee shall have the
right to exercise the option for any or all of the option shares in which the
Optionee is vested at the time of his or her cessation of Board service at any
time prior to the expiration of the twelve (12)-month period measured from the
date of the Optionee’s Permanent Disability.

 

(iv)             In
no event shall any option grant under this Plan remain exercisable after the
expiration date of the maximum seven (7) year option term. Upon the
expiration of the applicable post-service exercise period under subparagraphs (i) through
(iii) above or (if earlier) upon the expiration of the maximum seven (7)-year
option term, the grant shall terminate and cease to be outstanding for any option
shares in which the Optionee was vested at the time of his or her cessation of
Board service but for which such option was not otherwise exercised.

 

(6)                      Stockholder
Rights. The holder of an option grant issued under the Plan shall have none of
the rights of a stockholder with respect to any shares subject to such option
until such individual shall have exercised the option and paid the exercise
price for the purchased shares.

 

(7)                      Remaining
Terms. The remaining terms and conditions of each option grant issued under the
Plan shall be as set forth in a written stock option agreement (the “Stock
Option 

 

8

 

Agreement”) in a form
adopted from time to time by the Board; provided, however, that the terms of any
Stock Option Agreement shall be consistent with the provisions of this Plan.

 

C. Terms
and Conditions of Restricted Stock. Any Restricted Stock granted pursuant to
the provisions of Section VI.A(2)(ii) shall have the following terms
and conditions:

 

(1)                      Payment. To
the fullest extent permitted by law, the payment for the restricted shares
shall be in the form of past services rendered to or future services to be
rendered to the Corporation. In the event additional consideration is required
to be paid in order that the restricted shares shall be deemed fully paid and
nonassessable, the Board shall determine the amount and character of such
additional consideration.

 

(2)                      Vesting. Each
Annual Award granted to an Eligible Director in the form of Restricted Stock
shall vest, and the Corporation’s repurchase right shall lapse, in thirty-six
(36) successive equal installments for each month the Eligible Director
continues in Board service from the grant date of that Annual Award through the
third (3rd) anniversary of the grant date of such Annual Award. Should
the Eligible Director die or become Permanently Disabled while serving as a
Board member, then any Restricted Stock issued under the Plan held by the
Eligible Director at the time of his or her death or Permanent Disability shall
be deemed vested for a number of shares equal to the number calculated in the
preceding sentence as of the date of death or Permanent Disability plus an
additional number of shares equal to the number of shares (if any) in which the
Eligible Director would have vested had he or she continued in Board service
until the next Annual Meeting.

 

(3)                      Effect of
Termination of Board Service. Should an Eligible Director cease to serve as a
Board member while holding unvested Restricted Stock, the unvested stock shall
immediately be forfeited and revert back to the Corporation. No notice or other
action shall be required of the Corporation to effectuate such reversion.

 

(4)                      Remaining
Terms. The remaining terms and conditions of each grant of Restricted Stock
under the Plan shall be as set forth in a written restricted stock agreement
(the “Restricted Stock Agreement”) in a form adopted from time to time by the
Board; provided, however, that the terms of any Restricted Stock Agreement
shall be consistent with the provisions of this Plan.

 

VII. SPECIAL
VESTING ACCELERATION EVENTS

 

A.                       In the
event of any Corporate Transaction, the Board may provide that some or all of
the outstanding stock options and some or all of the Corporation’s outstanding
reacquisition rights shall be assumed by the successor corporation or its
parent corporation. In the event of any Corporate Transaction, each outstanding
stock option and each outstanding share of Restricted Stock shall become
immediately vested, immediately prior to the Corporate Transaction unless (i) in
the case of an option, such option is assumed by the successor corporation or
its parent corporation or (ii) in the case of Restricted Stock, the
Corporation’s reacquisition rights are 

 

9

 

assumed by the successor
corporation or its parent corporation. In the event an option outstanding
immediately prior to the Corporate Transaction is not assumed by the successor
corporation or its parent corporation, the outstanding option shall terminate
and cease to be outstanding immediately following the Corporate Transaction to
the extent that such option is not exercised as of the effective date of the
Corporate Transaction.

 

B.                         In
connection with any Change in Control of the Corporation, each outstanding,
unvested option granted under the Plan and each share of unvested Restricted
Stock issued under the Plan shall automatically vest in full immediately prior
to the specified effective date for the Change in Control.

 

VIII. AMENDMENT
OF THE PLAN AND AWARDS

 

The Board has complete
and exclusive power and authority to amend or modify the Plan (or any component
thereof) in any or all respects whatsoever; provided, however, that no such
amendment or modification shall adversely affect rights and obligations with
respect to Awards at the time outstanding under the Plan, unless the affected
Eligible Directors consent to such amendment. In addition, the Board may not,
without the approval of the Corporation’s stockholders, amend the Plan in such
a manner that would violate the listing requirements applicable to the
Corporation with respect to any securities exchange or quotation system on
which the Corporation lists the Corporation’s securities.

 

IX. EFFECTIVE
DATE AND TERM OF PLAN

 

A.                       The Plan
became effective immediately upon adoption by the Board on the Effective Date,
and one or more automatic option grants may be made under the Plan at any time
on or after such Effective Date. However, no options granted under the Plan
shall become exercisable in whole or in part prior to approval of the Plan by
the Corporation’s stockholders at the 2005 Annual Meeting. If such approval is
not obtained, then all options previously granted under the Plan shall
terminate and cease to be outstanding, and no further option grants shall be
made under the Plan.

 

B.                         The Plan
shall terminate upon the earlier of (i) the day immediately prior to the
date of the Annual Meeting of stockholders that occurs in 2010 or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued or canceled pursuant to the exercise of Awards. If the date of
termination is determined under clause (i) above, then all option grants
and issuances of Restricted Stock outstanding on such date shall thereafter
continue to have force and effect in accordance with the provisions of the
applicable Stock Option Agreements and Restricted Stock Agreements..

 

X. USE
OF PROCEEDS

 

Any cash proceeds
received by the Corporation from the sale of shares pursuant to option grants
or share issuances under the Plan shall be used for general corporate purposes.

 

10

 

XI. REGULATORY
APPROVALS

 

A.                       The
implementation of the Plan, the granting of any Awards and the issuance of Common
Stock upon the exercise of an Award shall be subject to the Corporation’s
compliance in all respects with the requirements of applicable law and the rules of
any securities exchange or quotation system on which the Corporation lists the
Corporation’s securities.

 

B.                         No shares
of Common Stock or other assets shall be issued or delivered under this Plan
unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of
Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange or quotation system on which the Common Stock is
then listed or quoted for trading.

 

XII. NO
IMPAIRMENT OF RIGHTS

 

Neither the action of the
Corporation in establishing the Plan nor any provision of the Plan shall be
construed or interpreted so as to affect adversely or otherwise impair the
right of the Corporation or the stockholders to remove any individual from the
Board at any time in accordance with the provisions of applicable law.

 

XIII. MISCELLANEOUS
PROVISIONS

 

A.                       Awards may
not be assigned, encumbered or otherwise transferred by any holder of the Award
except by will or the laws of descent and distribution or as provided in the
associated Stock Option Agreement or Restricted Stock Agreement.

 

B.                         The
provisions of the Plan shall inure to the benefit of, and be binding upon, the
Corporation and its successors or assigns, whether by Corporate Transaction or
otherwise, and the Optionees, the legal representatives of their respective
estates, their respective heirs or legatees and their permitted assignees.

 

C.                         The
existence of outstanding Awards shall in no way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.

 

11

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