SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Amendment No. 1
to
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 0-24557
CARDINAL FINANCIAL CORPORATION
(Name of Small Business Issuer in its Charter)
Virginia 54-1874630
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
10641 Lee Highway
Fairfax, Virginia 22030
(Address of Principal Executive Offices) (Zip Code)
(703) 934-9200
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $1.00 par value
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes __X__ No _____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. __X__
The issuer's revenues for the fiscal year ended December 31, 1998 were
$1,590,608.
The aggregate market value of the voting stock held by non-affiliates
(as of December 31, 1998) computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of March 25,
1999 was $25,489,750.
The number of shares outstanding of Common Stock, as of March 31, 1999
was 4,239,509.
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TABLE OF CONTENTS
(Amended Items Only)
PART III
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Page
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Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act............................................ 3
Item 10. Executive Compensation....................................................................... 5
Item 11. Security Ownership of Certain Beneficial Owners and Management............................... 7
Item 12. Certain Relationships and Related Transactions............................................... 8
</TABLE>
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Directors
The following information sets forth the names, ages, principal
occupations and business experience for the past five years for all directors of
Cardinal Financial Corporation (the "Company").
Robert M. Barlow, 69, has been a director since 1997.
Mr. Barlow was the founder and principal shareholder of a group of
companies engaged in construction, manufacturing and real estate in
northern Virginia for 38 years. In 1995, he sold those ventures and is
now retired.
Wayne W. Broadwater, 75, has been a director since 1997.
Mr. Broadwater served as President and CEO of Shipmates, Ltd., a chain
of tool and equipment rental and sales companies that he founded in
1972, until its sale in 1997.
Nancy K. Falck, 69, has been a director since 1997.
Ms. Falck has been Secretary of the Company since 1998. She is active
in community affairs and is past President of the Board of Directors of
the Family Respite Center (a day program that helps people with
Alzheimer's disease) and is a Commissioner on the Fairfax Area Council
on Aging.
L. Burwell Gunn, Jr., 54, has been a director since 1997.
Mr. Gunn has been President and Chief Executive Officer of the Company
since 1997. Prior to 1997, he was Executive Vice President and
Commercial Division Head of the Greater Washington Region of Crestar
Bank, where he worked in various positions for 25 years.
Anne B. Hazel, 59, has been a director since 1997.
Ms. Hazel serves as a Director of the Corcoran Museum of Art,
Washington, D.C., the Florida House, Washington, D.C., the Morikani
Museum and Japanese Gardens Foundation, Delray Beach, Florida and the
Concert Hall at Mizner Park, Boca Raton, Florida.
Harvey W. Huntzinger, 72, has been a director since 1997.
Mr. Huntzinger is a founder of National Systems Management Corporation,
a service company organized in 1972, and has been its President and CEO
since 1983.
Jones V. Isaac, 67, has been a director since 1997.
Mr. Isaac is President of Isaac Enterprises, Inc., a service oriented
firm located in Potomac, Maryland. Prior to 1995, Mr. Isaac was the
Administrator of Finance and Administration for the Construction
Specifications Institute, where he had been employed since 1967.
Dale B. Peck, 53, has been a director since 1997.
Mr. Peck is a partner with Beers & Cutler, PLLC, Certified Public
Accountants, in Vienna, Virginia. Prior to joining his present firm,
Mr. Peck founded and operated his own practice.
James D. Russo, 52, has been a director since 1997.
Mr. Russo is the Senior Vice President, Chief Financial Officer and
Treasurer of Shire Laboratories, Inc., a pharmaceutical research and
development company in Rockville, Maryland.
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John H. Rust, Jr., 51, has been Chairman of the Board since 1997.
Mr. Rust is currently of counsel in the law firm of McCandlish and
Lillard in Fairfax, Virginia. Mr. Rust is a member of the Virginia
House of Delegates.
Executive Officers Who Are Not Directors
Edgar M. Andrews, III, 52, has been Executive Vice President of the
Company since 1998 and, subject to regulatory approval, is slated to be
President of Cardinal Bank - Alexandria/Arlington, N.A., a subsidiary of the
Company, when it opens. Prior to 1998, Mr. Andrews was President and Chief
Executive Officer of the Civil War Trust, a 501(c)(3) non-profit organization
that he helped organize in 1992.
Christopher W. Bergstrom, 39, has been Executive Vice President and
Commercial Lending Officer of the Company since 1998 and, subject to regulatory
approval, is slated to be President of the Manassas/Prince William Bank, N.A., a
subsidiary of the Company, when it opens. Prior to 1998, Mr. Bergstrom was
employed with Crestar Bank, where he served in a variety of retail and
commercial functions.
Joseph L. Borrelli, 51, has been Executive Vice President and Chief
Financial Officer of the Company since 1998. Prior to 1998, Mr. Borrelli served
as the Regional Finance Manager for the greater Washington Region for Crestar
Bank.
Carl E. Dodson, 44, has been Senior Vice President and Chief Credit
Officer of the Company since 1998. From 1997 to 1998, Mr. Dodson was Chief
Financial Officer of C.C. Pace Resources, Inc., an engineering company in
Fairfax, Virginia. Prior to 1997, he was the senior commercial lending officer
of Palmer National Bank ("Palmer") in Washington, D.C. and, following Palmer's
sale to George Mason Bank ("George Mason") in 1996, Senior Vice President of
Credit Administration of George Mason.
Thomas C. Kane, 37, has been President of Cardinal Wealth Services,
Inc., a wholly-owned subsidiary of the Company that offers full service
investment management products, since December 1998. Prior to that time, Mr.
Kane was Senior Vice President and Division Manager, Retail Securities &
Personal Trust & Investment Management Sales for Crestar Bank in its Greater
Washington Region.
F. Kevin Reynolds, 39, has been Executive Vice President and Senior
Lending Officer of the Company and President of Cardinal Bank, a subsidiary of
the Company, since 1998. Prior to 1998, Mr. Reynolds was the senior lending
officer responsible for all facets of the commercial lending business of George
Mason and helped create George Mason's commercial lending group.
Eleanor D. Schmidt, 38, has been Vice President and Retail Banking Head
of the Company since 1998. Prior to 1998, Ms. Schmidt was employed with
NationsBank, where she managed multiple branches in the Fairfax area serving a
large and diverse deposit and loan base.
Greg D. Wheeless, 37, has been Executive Vice President of the Company
since 1998 and, subject to regulatory approval, is slated to be President of
Cardinal Bank - Dulles, N.A., a subsidiary of the Company, when it opens. Prior
to 1998, Mr. Wheeless was employed with Crestar Bank, which he joined in 1989 as
Vice President, Commercial Lender, and where he served most recently as Senior
Vice President and Northern Virginia Middle Market Manager.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
any persons who own more than 10% of Common Stock, to file with the Securities
and Exchange Commission ("SEC") reports of ownership and changes in ownership of
common stock. Officers and directors are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms that they file. Based solely
on review of the copies of such reports furnished to the Company or written
representation that no other reports were required, the Company believes that,
during fiscal year 1998, all filing requirements applicable to its officers and
directors were complied with.
Item 10. Executive Compensation
Executive Compensation
The following table shows, for the fiscal years ended December 31, 1998
and 1997, the cash compensation paid by the Company and its subsidiaries, as
well as certain other compensation paid or accrued for those years, to each of
the named executive officers in all capacities in which they served:
Summary Compensation Table
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Annual Compensation Long Term Compensation
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Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($) Options (#)(1) Compensation ($)(2)
------------------ ---- ---------- --------- ---------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
L. Burwell Gunn, Jr. 1998 150,000 50,000 * 15,250 5,247
Chairman, President and Chief 1997 27,174 25,000 * - 981
Executive Officer
F. Kevin Reynolds 1998(3) 98,640 30,000 * 3,131 545
Executive Vice President and
Senior Lending Officer
Joseph L. Borrelli 1998(4) 90,670 27,000 * 2,818 3,544
Executive Vice President and
Chief Financial Officer
Christopher W. Bergstrom 1998(5) 70,189 30,000 * 3,131 3,405
Executive Vice President
</TABLE>
______________________
* All benefits that might be considered of a personal nature did not exceed
the lesser of $50,000 or 10% of total annual salary and bonus.
(1) With the exception of a grant of an option to Mr. Gunn, in his capacity as
a director, to purchase 1,250 shares of Common Stock, amounts disclosed for
the year ended December 31, 1998 represent grants of options to the named
executive officers as of January 1, 1999 and relate to such officers'
compensation for the 1998 fiscal year.
(2) Amounts presented represent gross value of payments made by the Bank year
pursuant to life insurance agreements between the Company and the named
executive officers. The 1997 amount reflects COBRA payments to Mr. Gunn's
former employer to continue insurance benefits.
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(3) Mr. Reynolds' employment with the Company commenced on January 19, 1998.
(4) Mr. Borrelli's employment with the Company commenced on January 1, 1998.
(5) Mr. Bergstrom's employment with the Company commenced on April 6, 1998.
Stock Options
The following table sets forth for the year ended December 31, 1998,
the grants of stock options to the named executive officers.
Option Grants In Last Fiscal Year
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Percent of Total
Number of Securities Options Granted to
Underlying Options Employees in Fiscal Exercise or Base
Granted (#)(1) Year (%)(2) Price ($/Share) Expiration Date
-------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
L. Burwell Gunn, Jr. 1,250 62.5% 6.75 November 23, 2008
</TABLE>
___________________________
(1) Stock options were awarded at or above the fair market value of the shares
of Common Stock at the date of award.
(2) Options to purchase 2,000 shares of Common Stock were granted to employees
during the year ended December 31, 1998. The options presented in the table
were granted to Mr. Gunn in his capacity as a director of the Company.
The following table sets forth the amount and value of stock options
held by the named executive officers as of December 31, 1998.
Fiscal Year End Option Values
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Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Fiscal Year End (#) at Fiscal Year End ($)(1)
------------------- -------------------------
Name Exercisable (2) Unexercisable Exercisable Unexercisable
- ---- --------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
L. Burwell Gunn, Jr. 1,250 -- -- --
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___________________________
(1) The value of in-the-money options at fiscal year end was calculated by
determining the difference between the fair market value of the Common
Stock underlying the options on December 31, 1998 and the exercise price of
the options.
(2) Subject to shareholder approval of the Company's 1999 Stock Option Plan.
Directors' Fees
Directors of the Company do not receive any cash compensation. In lieu
of cash fees for service in 1998, each director of the Company was granted on
November 23, 1998 an option to purchase 1,250 shares of Common Stock at a price
of $6.75 per share. Such options expire on November 23, 2008.
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Compensation and Other Employment Arrangements
On September 30, 1997, Mr. Gunn entered into an employment contract to
serve as President and Chief Executive Officer of the Company and to perform
such services and duties as each entity's Board of Directors may designate.
Under the contract, Mr. Gunn is entitled to an annual base salary of $150,000.
Any increases in base salary are at the discretion of the Boards of Directors.
In addition, Mr. Gunn earned a bonus in 1997 of $25,000 in connection with the
completion of various aspects of the organization of the Company and Cardinal
Bank, and may be entitled to up to an additional $50,000 in connection with the
first year of operations of the Company and Cardinal Bank, and up to $50,000 per
year for future performance.
The contract is for a term of three years and may be extended for at
least two additional years. Mr. Gunn serves at the pleasure of the Company's
Board of Directors. If, during the term of the contract, Mr. Gunn's employment
is terminated without cause, Mr. Gunn will be entitled to a severance payment
equal to his annual base salary at that time. The contract also provides for
certain non-competition covenants for a period of one year following Mr. Gunn's
termination.
During each year under his three-year employment contract, Mr. Gunn
will be granted an option to purchase 7,048 shares of Common Stock at $7.50 per
share, or such number of shares as may be determined by the Board of Directors
in its discretion. The grant of any option for any particular year, however,
shall be conditioned on the Company's financial performance's exceeding certain
amounts budgeted for that year.
Each of F. Kevin Reynolds, Joseph L. Borrelli, and Christopher W.
Bergstrom, have also entered into employment agreements with the Company. Mr.
Reynolds' agreement, which is dated as of February 12, 1999, provides for his
service as Executive Vice President of the Company and President and Chief
Executive Officer of Cardinal Bank, N.A. Mr. Borrelli's agreement, which is
dated as of February 17, 1999, provides for his service as Executive Vice
President and Chief Financial Officer of the Company. Mr. Bergstrom's agreement,
which is dated as of December 17, 1998, provides for his service as Executive
Vice President of the Company and President and Chief Executive Officer of
Manassas/Prince William Bank.
Each of the agreements for Messrs. Reynolds, Borrelli and Bergstrom
provide for annual base salaries of $100,000 and includes annual increases at
the discretion of the Board of Directors and cash bonuses up to 30% of the
salary based on the attainment of certain performance objectives by the
individual. The agreements also include stock option grants up to 20% of salary
based on the attainment of such objectives. Such grants are awarded with an
option exercise price equal to the fair market value of shares of Common Stock
at the date of grant, and the options vest and become exercisable in equal
installments over a three-year period from the date of grant. Each of these
agreements is for a term that expires in 2001 and may be renewed for an
additional two-year period.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Management
The following table sets forth information as of March 31, 1999
regarding the number of shares of Common Stock beneficially owned by all
directors, by all executive officers named in the summary compensation table
below and by all directors and executive officers as a group. Beneficial
ownership includes shares, if any, held in the name of the spouse, minor
children or other relatives of the director or executive officer living in such
person's home, as well as shares, if any, held in the name of another
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person under an arrangement whereby the director or executive officer can vest
title in himself at once or at some future time.
<TABLE>
<CAPTION>
Common Stock Percentage
Name Beneficially Owned (1) of Class (%)
---- ---------------------- ------------
<S> <C> <C>
Robert M. Barlow 79,500 1.9
Christopher W. Bergstrom 17,603 *
Joseph L. Borrelli 13,859 *
Wayne W. Broadwater 29,000 *
Nancy K. Falck 61,336 1.4
L. Burwell Gunn, Jr. 35,770 *
Anne B. Hazel 15,334 *
Harvey W. Huntzinger 88,500 2.1
Jones V. Isaac 45,400 1.1
Dale B. Peck 28,667 *
F. Kevin Reynolds 18,250 *
James D. Russo 55,600 1.3
John H. Rust, Jr. 38,100 *
All present executive officers and
directors as a group (18 persons) 526,919 12.3
</TABLE>
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* Percentage of ownership is less than one percent of the outstanding shares
of Common Stock.
(1) Includes beneficial ownership of shares issuable upon the exercise of stock
options exercisable within 60 days of March 31, 1999, subject to
shareholder approval of the Company's 1999 Stock Option Plan.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as of March 31, 1999,
regarding the number of shares of Common Stock beneficially owned by all persons
who own five percent or more of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Common Stock
Name and Address Beneficially Owned Percentage of Class
- ---------------- ------------------ -------------------
<S> <C> <C>
Laifer Capital Management, Inc. 236,000 5.6%
45 West 45th Street
New York, New York 10036
</TABLE>
Item 12. Certain Relationships and Related Transactions
Transactions with Management
Some of the directors and officers of the Company are at present, as in
the past, customers of the Company and, the Company has had, and expects to have
in the future, banking transactions in the ordinary course of its business with
directors, officers, principal shareholders and their associates, on
substantially the same terms, including interest rates and collateral on loans,
as those prevailing at the same time for comparable transactions with others.
These transactions do not involve more than the normal risk of collectibility or
present other unfavorable features. The aggregate outstanding balance of
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loans to directors, executive officers and their associates, as a group, at
December 31, 1998 totaled $965,778, or 2.8% of the Company's equity capital at
that date.
Any future transactions between the Company and its officers and
directors, as well as transactions with any person who acquires five percent or
more of the Company's voting stock will be on substantially the same terms,
including interest rates and security for loans, as those prevailing at the time
for comparable transactions with others.
There are no legal proceedings to which any director, officer,
principal shareholder or associate is a party that would be material and adverse
to the Company.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
CARDINAL FINANCIAL CORPORATION
Date: April 30, 1999 By: /s/ L. Burwell Gunn, Jr.
-------------------------------------
President and Chief Executive Officer
