CARDINAL FINANCIAL CORPORATION Executive Deferred Income Plan

 

Cardinal Financial Corporation

Executive Deferred Income Plan

Amended and Restated Effective February 25, 2009

 

TABLE OF CONTENTS

 

ARTICLE I		INTRODUCTION	1
1.1	Name		1
1.2	Purpose		1
1.3	Interpretation		1
ARTICLE II		DEFINITIONS	2
2.1	Generally		2
2.2	Account		2
2.3	Balance		2
2.4	Board of Directors		3
2.5	Change of Control		3
2.6	Code		3
2.7	Committee		3
2.8	Company		3
2.9	Compensation		3
2.10	Contributions		3
2.11	Custodian		4
2.12	Deemed Earnings		4
2.13	Deemed Crediting Options		4
2.14	Deferral Election Form		4
2.15	Designated Beneficiary		4
2.16	Disability		5
2.17	Eligible Employee		5
2.18	Employee		5
2.19	ERISA		5
2.20	Key Employee		5
2.21	Leave of Absence		5
2.22	Matching Contribution		6
2.23	Matching Contribution Account		6
2.24	Participant		6
2.25	Participant Deferral		6
2.26	Participant Deferral Account		6
2.27	Performance Based Compensation		6
2.28	Plan Year		7
2.29	Retirement		7
2.30	Separation from Service		7
2.31	Unforeseeable Emergency		7
2.32	Valuation Date		7
ARTICLE III		ELIGIBILITY & PARTICIPATION	7
3.1	Eligibility Requirements		7

 

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3.2	Participation		8
ARTICLE IV		ELECTIONS, DEFERRALS & MATCHING CONTRIBUITONS	8
4.1	Participant Election to Defer Compensation		8
4.2	Irrevocability, New Participants		9
4.3	Matching Contributions		9
ARTICLE V		ACCOUNTS & ACCOUNT CREDITING	9
5.1	Establishment of a Participant’s Account		9
5.2	Deemed Crediting Options		10
5.3	Allocation of Account Among Deemed Crediting Options		11
5.4	Valuation and Risk of Decrease in Value		11
5.5	Limited Function of Committee		12
ARTICLE VI		VESTING	12
6.1	Vesting of Participant Deferrals		12
6.2	Vesting of Matching Contributions		12
ARTICLE VII		DISTRIBUTIONS	12
7.1	Distributions Generally		12
7.2	Distributions		12
7.3	Timing and Method of Payment Not Specified in Section 7.2		14
7.4	Distributions Resulting from Unforeseeable Emergency		16
7.5	Distributions of Small Accounts		17
ARTICLE VIII		ADMINISTRATION & CLAIMS PROCEDURES	17
8.1	Duties of the Committee		17
8.3	Organization of the Committee		17
8.4	Limitation of Liability		18
8.5	Committee Reliance on Records and Reports		18
8.6	Costs of the Plan		19
8.7	Claims Procedure		19
8.8	Litigation		20
ARTICLE IX		AMENDMENT, TERMINATION & REORGANIZATION	20
9.1	Amendment		20
9.2	Amendment Required By Law		20
9.3	Termination		20
9.4	Consolidation/Merger		21
ARTICLE X		GENERAL PROVISIONS	21
10.1	Applicable Law		21
10.2	Benefits Not Transferable or Assignable		21
10.3	Not an Employment Contract		22
10.4	Notices		22
10.5	Severability		23

 

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10.6	Participant is General Creditor with No Rights to Assets	23
10.7	No Trust Relationship Created	24
10.8	Limitations on Liability of the Company	24
10.9	Plan Establishes Agreement Between Employer and Participant Only	24
10.10	Independence of Benefits	24
10.11	Unclaimed Property	25
10.12	Required Tax Withholding and Reporting	25

 

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ARTICLE I

INTRODUCTION

 

1.1                                Name

 

The name of this Plan is the Cardinal Financial Corporation Executive Deferred Income Plan (the Plan).  The Plan was adopted effective January 1, 2005.  The Plan was amended and restated effective April 21, 2006, and further amended and restated as set forth herein effective October 21, 2008.

 

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 Company, 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

 

A.                                    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 1.2 and to qualify as a nonqualified, unfunded plan of deferred compensation.

 

B.                                      Any benefit, payment or other right provided by the Plan shall be provided or made in a manner, and at such time, in such form and subject to such election procedures (if any), as complies with the applicable requirements of Code section 409A to avoid a plan failure described in Code section 409A(a)(1), including without limitation, deferring payment until the occurrence of a specified payment event described in Code section 409A(a)(2).  Notwithstanding any other provision hereof or document pertaining hereto, the Plan shall be construed, interpreted and administered to meet the applicable requirements of Code section 409A and Treasury Regulations thereunder to avoid a plan failure described in Code section 409A(a)(1).

 

 

C.                                      It is specifically intended that all elections, consents and modifications thereto under the Plan will comply with the requirements of Code section 409A (including any transition or grandfather rules thereunder).  The Company is authorized to adopt rules or regulations deemed necessary or appropriate in connection therewith to anticipate and/or comply the requirements of Code section 409A (including any transition or grandfather rules thereunder) and to declare any election, consent or modification thereto void if non-compliant with Code section 409A.

 

D.                                     Pursuant to Section 3.02 of Internal Revenue Notice 2006-79 and Section 3.01(B)(1).02 of Internal Revenue Notice 2007-86 (collectively, the “Transition Relief”), the Company shall permit Participants to modify their existing deferral elections under the Plan to reflect new deferral elections regarding the time and form of payment of benefits under the Plan to the extent permitted by, and in accordance with, the Transition Relief and Section 7.4 G of the Plan.

 

ARTICLE II

DEFINITIONS

 

2.1                                Generally

 

Certain words and phrases are defined when first used in later paragraphs of this Plan.  Unless the context clearly indicates otherwise, the following words and phrases when used in this Plan 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 Company 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 the applicable 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 Company.

 

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 Company.

 

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2.4                                Board of Directors

 

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

 

2.5                                Change of Control

 

“Change of Control” shall mean (i) the date that any one person, or more than one person, acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Company; or (ii) the date that any one person, or more than one person, acting as a group, acquires assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all the assets of the Company immediately before such acquisition.  This definition shall be interpreted in a manner that is consistent with Treasury Regulation section 1.409A-3(i)(5).

 

2.6                                Code

 

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

 

2.7                                Committee

 

“Committee” shall mean the Compensation Committee of the Company’s Board of Directors, or such other committee to whom the Board or Compensation Committee delegates the duty of determining Participant eligibility or other administrative duties under the Plan.

 

2.8                                Company

 

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

 

2.9                                Compensation

 

“Compensation” shall mean the base or regular cash salary payable to an Employee by the Company, as well as incentives or bonuses payable to an Employee by the Company, and commissions payable to an Employee by the Company, including any such amounts which are not includible in the Participant’s gross income under Sections 125, 40 1(k), 402(h) or 403(b) of the Internal Revenue Code of 1986, as amended.

 

2.10                         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.

 

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2.11                         Custodian

 

“Custodian” shall mean the Committee’s choice of financial institution or designated person or persons that have charge or custody of the assets and records of the plan and responsibility for the overall recordkeeping for the plan participants.

 

2.12                         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.

 

2.13                         Deemed Crediting Options

 

“Deemed Crediting Options” shall mean the hypothetical options made available to Plan Participants by the Company 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.

 

2.14                         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 Company, 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; the allocation of his Accounts among the Deemed Crediting Options provided under the Plan; and the Designated Beneficiary.  “Deferral Election Form” shall also include a form on which special elections are made pursuant to the Transition Relief under Code Section 409A during 2008.

 

2.15                         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 Committee.  In the event a Participant does not have a beneficiary properly designated, the beneficiary under this Plan shall be the Participant’s estate.

 

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2.16                         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 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 Company.

 

2.17                         Eligible Employee

 

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

 

2.18                         Employee

 

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

 

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 a Participant who, as of December 31 of a given year, meets the requirements of Code section 416(i)(1)(A)(i), (ii), or (iii) applied in accordance with the regulations thereunder and disregarding Code section 416(i)(5).  A Participant who meets the criteria set forth in the preceding sentence will be considered a Key Employee for purposes of the Plan for the 12-month period commencing on the next following April 1.  In general, a Participant will meet these criteria if he or she 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 Company; or (iii) a one percent owner of the Company with annual compensation in excess of $150,000 (as adjusted from time to time by Treasury Regulations).

 

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 Company, but shall be treated for purposes of this Plan as in continuous service with the Company.  A Leave of

 

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Absence may be either paid or unpaid, but must be agreed to in writing by both the Company and the Participant.  A Leave of Absence that continues beyond the twelve (12) consecutive months shall be treated as a Separation from Service as of the first business day of the thirteenth month for purposes of the Plan.  Notwithstanding the foregoing, for a Leave of Absence that exceeds six (6) months, if the Participant is not guaranteed a right to reemployment by statute or contract, the Leave of Absence shall be treated as a Separation from Service on the first date immediately following the six (6)-month period.

 

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 Company 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 (i) is variable and contingent on the satisfaction of written, pre-established organizational or individual performance criteria, where the outcome of such criteria is substantially uncertain at the time the criteria are established; (ii) is based on services performed over a period of at least twelve months; and (iii) 

 

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otherwise constitutes performance-based compensation within the meaning of Treasury Regulations under Code Section 409A.

 

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.

 

2.29                         Retirement

 

“Retirement” shall mean a Participant’s actual Separation from Service from the Company after having attained age sixty-two (62).

 

2.30                         Separation from Service

 

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

 

2.31                         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.

 

2.32                         Valuation Date

 

“Valuation Date” shall mean each business day, or such other date(s) 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 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 Committee shall notify an

 

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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 Committee of the Deferral Election Form, in such form and according to the terms and conditions established by the Committee.  A Participant (or any Designated Beneficiary who becomes entitled to a benefit under the Plan) 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 the Committee’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 earned during 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 Committee 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 of service for which it is earned.

 

D.                                     On each such Deferral Election Form, a Participant shall indicate the amount of his or her 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 Company stock Deemed Crediting Option.  Each Deferral Election Form shall also permit a Participant to elect to receive a distribution of the portion of his or her Account attributable to Participant Deferrals elected on that Deferral Election Form in the event of a Change of Control.  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.

 

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4.2                                Irrevocability, New Participants

 

Any Election Form delivered by a Participant shall be irrevocable with respect to any Compensation or Performance Based Compensation covered by the elections set forth therein after the last date for making an effective election for such Compensation or Performance Based Compensation in accordance with Code section 409A, or after any earlier date prescribed by the Committee.  The Committee, however, may reduce or eliminate Participant Deferrals upon granting a Participant’s request for a distribution based upon an Unforeseeable Emergency.

 

The initial Deferral Election Form of a new Participant shall be filed with the Company 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 compensation for services to be performed subsequent to the initial election through the end of that calendar year.  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 Company.

 

4.3                                Matching Contributions

 

The Company 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.  Such Matching Contributions shall not exceed the greater of 50% of the Participant’s deferral or $50,000 per Participant per year. Such Matching Contributions shall be credited on the Valuation Date(s) determined by the Company in its sole discretion.

 

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. 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 Company.

 

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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(s) the Company designates, in its sole discretion.  Deemed Earnings shall be credited or debited to each Participant’s Account, as well as any distributions and any other withdrawals under this Plan, as of each Valuation Date.  Accounts shall continue to be credited and debited with earnings and losses on each Valuation Date through the first to occur of (i) the last day of the payroll period in which Participant Separates from Service or (ii) such earlier date as established by the Committee with respect to amounts subject to a distribution on a Change of Control.  Notwithstanding the foregoing, the portion of an Account allocated to the Company Stock Deemed Crediting Option shall continue to be credited and debited with earnings and losses on each Valuation Date until such portion 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 Deeme