Document:

Exhibit 4.6

 

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

  	
   

  	
   

  
				

 

23EMPLOYMENT AGREEMENT

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

Employment Agreement, dated as of June 5, 2006 (this "Agreement"), by and between Mr. Hugo Castro, a resident of the State of Florida (the "Executive"), and Sun American Bancorp., a Delaware corporation and Sun American Bank, a Florida corporation (collectively, the "Company").

R E C I T A L S:

The Company is a bank holding company and has its primary subsidiary as a Florida state banking corporation and other activities in connection with the foregoing (the "Business").

The Company is desirous of continuing to employ the Executive as its President of its Bank and the Executive desires to be employed by the Bank in such position, upon the terms and provisions, and subject to the conditions, set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.   Employment; Term.  

The Bank shall employ the Executive, and the Executive shall accept employment by the Bank, upon the terms and provisions, and subject to the conditions, of this Agreement.  The term of the Executive's employment hereunder shall commence as of January 1, 2006 and terminate on December 31, 2006 (the "Employment Term"). Unless written notice is given by either party at least 30 days prior to the end of the term, the term of this Agreement will be automatically extended on a year-to-year basis.

2.   Position and Duties.

(a)

The Bank shall employ the Executive, and the Executive shall serve, as the President of Sun American Bank.  The Executive shall be responsible for overseeing and managing the Business as directed by its Chairman and CEO Michael Golden, subject to the ultimate authority of the Board of Directors of the Company.  The Executive shall have such additional responsibilities or duties with respect to the Company and its subsidiaries, and their respective operations, as may be determined and assigned to the Executive by the Board of Directors of the Bank, which responsibilities and duties shall generally be of a nature which may be assigned to the most senior executive of the Bank.  The Executive shall report directly to the Bank Chairman, Michael Golden.

(b)

During the Employment Term, the Bank and its Board of Directors shall cause the Executive to be nominated to be elected as a director to the Bank‘s Board of Directors.

(c)

Nothing in this Agreement shall prohibit the Executive from serving as an officer or director of any entity or business enterprise, or otherwise participating in educational, welfare, social, religious and civic organizations; provided, however, that during the Employment Term, the Executive shall not serve as a director or officer of any entity or business enterprise which engages in a business that competes directly with the Business and Executive shall devote his full time and efforts to his position as the Chief Executive Officer of the Company.

(d)

Nothing in this Agreement shall prohibit the Executive from making any investments in the securities of any entity or business enterprise; provided, however, that during the Employment Term, the Executive shall not make any investments (other than "passive investments" as defined below) in the securities of any entity or business enterprise which engages in a business that competes directly with the Business.  An investment shall be considered a "passive investment" to the extent that such securities (i) are actively traded on a United States national securities exchange, on the NASDAQ National Market System or Small Cap Market System, on the OTC Bulletin Board, or on any foreign securities exchange, and (ii) represent, at the time such investment is made, less than five percent (5%) of the aggregate voting power of such entity or business enterprise.

(e)

The Executive shall perform his duties from his current offices located in Miami, Florida, or at such other location as may be mutually agreed by the Board and the Executive.

3.   Base Salary; Common Stock Bonus; Sale Bonus; Performance Bonus.

(a)

During the Employment Term, the Bank shall pay to the Executive an annual base salary as set forth in the 2006 Addendum, attached hereto and made a part hereof.  The Base Salary shall be payable in equal bi-weekly installments during any year of the Employment Term; provided, however, that such payments shall be subject to withholding for applicable taxes and any other amounts generally withheld from compensation paid to salaried senior executives of the Company.  

4.   Expense Allowance; Business Expenses.

(a)

During the Employment Period the Executive shall receive a car allowance equal to $900 per month (the “Monthly Allowance”).

(b)

In addition to the Expense Allowance, the Bank shall reimburse the Executive for all necessary and reasonable expenses actually incurred or paid by the Executive during the Employment Term in connection with the performance of the Executive's duties and obligations to the Bank in accordance with this Agreement, in accordance with the Bank's policies from time to time in effect. 

5.   Benefits; Indemnification and D&O Insurance.

(a)

During the Employment Term, the Executive may (subject to applicable eligibility requirements) participate in such insurance and health and medical benefits as are generally made available to the senior executives of the Bank pursuant to such plans as are from time to time maintained by the Bank. The Executive acknowledges that his participation in any benefit plan may require the Executive's co-payment of a periodic premium as a deduction from his salary. The Executive agrees that the Bank may purchase key man life insurance on his life with the Company as the beneficiary.

(b)

During each full year of the Employment Term, the Executive shall be entitled to four (4) weeks of vacation.  The Executive shall take vacation at such time or times as the Executive desires based upon the then current business needs and activities of the Bank.

(c)

During the Employment Term, the Executive shall be entitled to receive such other benefits as may be provided to other senior executives of the Company, including participation in the Company's 401(k) plan and stock option plan.

(d)

During the Employment Term, the Company shall indemnify the Executive and hold the Executive fully harmless from and against all claims, actions, suits, proceedings, liabilities, damages, fines, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) which may be incurred by the Executive in connection with the performance of his duties hereunder, to the fullest extent permitted by applicable law and to the extent no less than provided to any other senior executive officer of the Company. .  During the Employment Term and for a period of three (3) years thereafter, the Company shall maintain in full force and effect (and pay all premiums which may be due in respect thereof) directors and officers liability insurance coverage at whatever amount the Company deems reasonable.

6.   Non-Competition.  Except as otherwise provided in this Agreement, during the Employment Term, the Executive shall not, anywhere within the United States of America, directly or indirectly, alone or in association with any other Person, directly or indirectly, (i) acquire, or own in any manner, any interest in any Person that engages in the Business or that engages in any business, activity or enterprise that competes with any aspect of the Business, or (ii) be interested in (whether as an owner, director, officer, partner, member, lender, shareholder, vendor, consultant, employee, advisor, agent, independent contractor or otherwise), or otherwise participate in the management or operation of, any Person that engages in any business, activity or enterprise that competes with any aspect of the Business. This provision is will stay in effect for a time of three (3) years from the period that the contract officially terminates. 

7.   Protection of Confidential Information.  

(a)

The Executive acknowledges that prior to the date hereof the Executive has had access to, and during the course of the Executive's employment hereunder will have access to, significant Confidential Information (as hereinafter defined).  The Executive shall maintain all Confidential Information in strict confidence 

and shall not disclose any Confidential Information to any other Person, except as necessary in connection with the performance of the Executive's duties and obligations under this Agreement, and (ii) the Executive shall not use any Confidential Information for any purpose whatsoever except in connection with the performance of the Executive's duties and obligations under this Agreement.  

(b)

"Confidential Information" shall mean any and all information pertaining to the Company and the Business, whether such information is in written form or communicated orally, visually or otherwise, that is proprietary, non-public or relates to any trade secret, including, but not limited to, customer data, files, business secrets and business techniques.  Notwithstanding the foregoing, "Confidential Information" shall not include information that (i) is or becomes generally available to, or known by, the public through no fault of the Executive, or (ii) is independently acquired or developed by the Executive without violating any of his obligations under this Agreement.

8.   Termination.

(a)

In the event of the death of the Executive during the Employment Term, the Executive's employment hereunder shall automatically terminate as of the date of death; provided, however, that the Executive's estate or legal representative, as the case may be, shall be entitled to receive, and the Company shall pay the Executive's estate or legal representative, as the case may be, (i) the Base Salary owing to the Executive hereunder through the date of death plus Base Salary for the remaining term of this Agreement. The Executive shall be entitled to no further payment upon such termination.

(b)

In the event of the Executive's Incapacity (as hereinafter defined), the Company may, in its sole discretion, upon written notice to the Executive, terminate the Executive's employment hereunder upon written notice to the Executive; provided, however, that the Executive or the Executive's legal representative, as the case may be, shall be entitled to receive, and the Company shall pay the Executive or the Executive's legal representative, as the case may be, (i) the Base Salary owing to the Executive hereunder through the date the Executive receives written notice from the Company of his termination due to Incapacity plus Base Salary for the remaining term of this Agreement. The Executive shall be entitled to no further payment upon such termination. For purposes of this Agreement, "Incapacity" shall mean the Executive's inability to perform his duties and obligations hereunder on account of illness or other impairment for three (3) consecutive months.  

(c)

The Company shall have the right to terminate the Executive's employment under this Agreement at any time for Cause (as hereinafter defined) upon written notice to the Executive.  In the event the Executive's employment hereunder is terminated by the Company for Cause, or the Executive voluntarily terminates his employment with the Company prior to the end of the Employment Term upon ninety (90) days prior written notice from the Executive to the Company, the Executive shall be entitled to receive, and the Company shall pay the Executive, (i) the Base Salary owing to the Executive hereunder through the date of termination; (ii) any accrued but unpaid Performance Bonus and Sale Bonus, and (iii) any business expenses which were properly reimbursable to the Executive pursuant to Section 4 hereof through the date of termination.  The Executive shall be entitled to no further 

payment upon such termination.  The Executive acknowledges and agrees that each of the factors which comprise the definition of "Cause" constitutes, on an individual basis, adequate and sufficient grounds for termination of the Executive's employment with the Company.  If the Executive voluntarily terminates his employment hereunder, it shall not be deemed a breach of this Agreement by the Executive or a violation of the Executive's duties or obligations hereunder.

(d)

For purposes of this Agreement, "Cause" shall mean:  The term “cause” when utilized herein with respect to the termination of Executive shall include (i) the material breach by Executive of any of the material terms or provisions of this Agreement (provided, however, that if such breach is curable, only after 10 days’ notice in reasonable detail, if not cured), (ii) the willful misconduct of Executive in connection with the performance of his material duties hereunder, or the willful refusal by Executive to perform all or any portion of his material duties and responsibilities required pursuant to this Agreement or (iii) fraud, criminal conduct, material dishonesty or breach of trust or embezzlement by Executive.

(e)

The Company shall have the right to terminate the Executive's employment hereunder without Cause at any time upon thirty (30) days prior written notice to the Executive.  If the Company terminates the Executive's employment hereunder without Cause, the Executive shall be entitled to receive, and the Company shall pay the Executive, in accordance with the Company's regular payroll policy, (i) Base Salary owing to the Executive through date of termination plus Base Salary for the remaining term of this Agreement. The Executive shall be entitled to terminate his employment with the Company for Good Reason (as hereinafter defined) upon notice to the Company of his intent to so terminate within thirty (30) days after he has actual knowledge of the event giving rise to the notice and the Company fails to cure the condition specified in the Executive's notice to the Company required to be provided by this Section 11(f) within thirty (30) days following such notice.  If the Executive terminates his employment pursuant to this Section 11(f), such termination shall be deemed to be a termination by the Company without Cause, with the same effect and affording to the Executive the same rights and benefits as otherwise provided in this Agreement upon a termination of the Executive's employment by the Company without Cause as provided in Section 11(e) hereof.

(f)

For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following events:

(i)

the Executive is not retained as President of the Company even if the Executive is allowed to continue in the employ of the Company; or

(ii)

the Company materially reduces the Executive's duties and responsibilities hereunder; or

(iii)

the Executive is removed from his position as a member of the Board of Directors of the Company for any reason other than in connection with the Executive's termination for Cause; or

(iv)

the Company fails to perform or observe any of its material obligations to the Executive under this Agreement including, 

without limitation, by failing to provide or cause the provision of, any compensation or benefits to the Executive that it is obligated to provide hereunder; or

9.   Miscellaneous.

(a)

Notices.  All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows:  (i) if personally delivered, on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, four (4) business days after being mailed, (iii) if delivered by overnight courier (with all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing), or (iv) if delivered by facsimile transmission, on the business day of such delivery if sent by 5:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding business day (as evidenced by the printed confirmation of delivery generated by the sending party's facsimile machine).  If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 12(a)), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender).  All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable:  

If to the Company, to:

Sun American Bancorp.

Attn: Michael Golden

1200 N. Federal Highway.

Suite 111

Boca Raton, FL 33432

with a copy to: 

Blank, Rome, LLP

Attn: Bruce C. Rosetto, Esq. 

1200 Federal Highway

Suite 417

Boca Raton, Florida 33432

If to the Executive, to:

Hugo Castro

3400 Coral Way

Miami, Florida 33145

or to such other address as any party may specify by notice given to the other party in accordance with this Section 12(a).  

(b)

Amendment.  This Agreement may not be modified, amended, altered or supplemented, except by a written agreement executed by each of the parties hereto.  

(c)

Entire Agreement.  This Agreement contains the entire understanding and agreement of the parties relating to the subject matter hereof and supersedes all prior and/or contemporaneous understandings and agreements of any kind and nature (whether written or oral) among the parties with respect to such subject matter, all of which are merged herein. 

(d)

Waiver.  Any waiver by a party hereto of any breach of or failure to comply with any provision or condition of this Agreement by any other party hereto shall not be construed as, or constitute, a continuing waiver of such provision or condition, or a waiver of any other breach of, or failure to comply with, any other provision or condition of this Agreement, any such waiver to be limited to the specific matter and instance for which it is given.  No waiver of any such breach or failure or of any provision or condition of this Agreement shall be effective unless in a written instrument signed by the party granting the waiver and delivered to the other party hereto in the manner provided for hereunder in Section 12(a).  No failure or delay by any party to enforce or exercise its rights hereunder shall be deemed a waiver hereof, nor shall any single or partial exercise of any such right or any abandonment or discontinuance of steps to enforce such rights, preclude any other or further exercise thereof or the exercise of any other right.

10.   Governing Law; Jurisdiction.

(a)

This Agreement shall be governed by and construed in accordance with the laws of the State of Florida applicable to agreements made and to be performed in that state, without regard to any of its principles of conflicts of laws or other laws that would result in the application of the laws of another jurisdiction.  

(b)

Each of the parties unconditionally and irrevocably consents to the exclusive jurisdiction of the courts of the State of Florida located in Palm Beach County and the federal district court for the Southern District of Florida located in Palm Beach County with respect to any suit, action or proceeding arising out of or relating to this Agreement, and each of the parties hereby unconditionally and irrevocably waives any objection to venue in any such court or to assert that any such court is an inconvenient forum, and agrees that service of any summons, complaint, notice or other process relating to such suit, action or other proceeding may be effected in the manner provided in Section 13(a) hereof.  Each of the parties hereby unconditionally and irrevocably waives the right to a trial by jury in any such action, suit or other proceeding. 

11.   Binding Effect, No Assignment, etc.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, estate, successors and permitted assigns.  Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party, and any attempt to do so shall be void and of no force and effect, except (i) assignments and transfers by operation of law and (ii) that the Company may assign any or all of its respective rights, interests and 

obligations hereunder to any purchaser of a majority of the issued and outstanding capital stock of the Company or a substantial part of the assets of the Company.  

12.   Third Parties.  Nothing herein is intended or shall be construed to confer upon or give to any Person, other than the parties hereto (or persons set forth in Section 14), any rights, privileges or remedies under or by reason of this Agreement.

13.   Headings.  The section headings contained in this Agreement are inserted for reference purposes only and shall not affect in any way the meaning, construction or interpretation of this Agreement.  Any reference to the masculine, feminine, or neuter gender shall be a reference to such other gender as is appropriate.  References to the singular shall include the plural and vice versa.

14.   Counterparts.  This Agreement may be executed in two (2) or more counterparts (including by facsimile signature, which shall constitute a legal and valid signature), and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, and all of which, when taken together, shall constitute one and the same document.  This Agreement shall become effective when one or more counterparts, taken together, shall have been executed and delivered by all of the parties.  

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.

			
	 	SUN AMERICAN BANK 

	 	 	 
	 	 	 
	 	By: 

	/s/ HUGO CASTRO  

	 	 	Name: Hugo Castro

	 	 	Title: President

	 	 	 
	 	SUN AMERICAN BANK. 

	 	 	 
	 	 	 
	 	By:

	/s/ MICHAEL GOLDEN

	 	 	Name: Michael Golden

	 	 	Title: Chairman & CEO

	 	 	 
	 	 	 

2006 Addendum

		
	Base salary for 2006

	$ 195,000

	 	 
	Bonus compensation

	to be determined by the Chairman

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