SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<CAPTION>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-
11(c) or Rule 14a-12
</TABLE>
CARDINAL FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
....................................................................
(2) Aggregate number of securities to which transaction applies:
....................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
....................................................................
(4) Proposed maximum aggregate value of transaction:
....................................................................
(5) Total fee paid:
....................................................................
[ ] Fee paid previously with preliminary materials.
....................................................................
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
<PAGE>
(1) Amount previously paid:
....................................................................
(2) Form, Schedule or Registration Statement no.:
....................................................................
(3) Filing Party:
....................................................................
(4) Date Filed:
....................................................................
<PAGE>
CARDINAL FINANCIAL CORPORATION
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
of Cardinal Financial Corporation (the "Company"), which will be held on June
10, 1999 at 7:00 p.m., at the Fair Lakes Hyatt, 12777 Fair Lakes Circle,
Fairfax, Virginia (the "Meeting"). At the Meeting, three directors will be
elected for terms of three years each. Shareholders also will vote on a proposal
to approve the Company's 1999 Stock Option Plan.
Whether or not you plan to attend in person, it is important that your
shares be represented at the Meeting. Please complete, sign, date and return
promptly the form of proxy that is enclosed in the outer addressed pouch of this
mailing. If you decide to attend the meeting and vote in person, or if you wish
to revoke your proxy for any reason prior to the vote at the Meeting, you may do
so, and your proxy will have no further effect.
The Board of Directors and management of the Company appreciate your
continued support and look forward to seeing you at the Meeting.
Sincerely yours,
/s/ L. BURWELL GUNN, JR.
L. Burwell Gunn, Jr.
President and
Chief Executive Officer
Fairfax, Virginia
May 14, 1999
<PAGE>
CARDINAL FINANCIAL CORPORATION
10555 Main Street
Suite 500
Fairfax, Virginia 22030
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on June 10, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Meeting") of the holders of
shares of Common Stock ("Common Stock") of Cardinal Financial Corporation (the
"Company") will be held at the Fair Lakes Hyatt, 12777 Fair Lakes Circle,
Fairfax, Virginia on June 10, 1999 at 7:00 p.m., for the following purposes:
1. To elect three directors for terms of three years each, or until
their successors are elected and qualify;
2. To consider and vote on a proposal to approve the Company's 1999
Stock Option Plan; and
3. To transact such other business as may properly come before the
Meeting.
Holders of shares of Common Stock of record at the close of business on
April 9, 1999, will be entitled to vote at the Meeting.
You are requested to fill in, sign, date and return the enclosed proxy
promptly, regardless of whether you expect to attend the Meeting. A postage-paid
return envelope is enclosed for your convenience.
If you are present at the Meeting, you may vote in person even if you
have already returned your proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Nancy K. Falck
Nancy K. Falck
Secretary
Fairfax, Virginia
May 14, 1999
________________________________________________________________________________
YOU ARE CORDIALLY INVITED TO ATTEND THIS MEETING. IT IS IMPORTANT THAT YOUR
SHARES BE REPRESENTED REGARDLESS OF THE NUMBER THAT YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
________________________________________________________________________________
<PAGE>
CARDINAL FINANCIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
June 10, 1999
GENERAL INFORMATION
This Proxy Statement is furnished to holders of common stock, par value
$1.00 per share ("Common Stock"), of Cardinal Financial Corporation (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company to be used at the Annual Meeting of Shareholders to be
held on June 10, 1999 at 7:00 p.m., at the Fair Lakes Hyatt, 12777 Fair Lakes
Circle, Fairfax, Virginia, and any adjournment thereof (the "Meeting").
At the Meeting, three directors will be elected for terms of three
years each. Shareholders also will vote on a proposal to approve the Company's
1999 Stock Option Plan.
The principal executive offices of the Company are located at 10555
Main Street, Suite 500, Fairfax, Virginia 22030. The approximate date on which
this Proxy Statement and the accompanying proxy card are being mailed to the
Company's shareholders is May 14, 1999.
The Board of Directors has fixed the close of business on April 9, 1999
as the record date (the "Record Date") for the determination of the holders of
shares of Common Stock entitled to receive notice of and to vote at the Meeting.
At the close of business on the Record Date, there were 4,239,509 shares of
Common Stock outstanding held by 253 shareholders of record. Each share of
Common Stock is entitled to one vote on all matters to be acted upon at the
Meeting. In the election of directors, those receiving the greatest number of
votes will be elected even if they do not receive a majority. The proposal to
approve the Company's 1999 Stock Option Plan will be approved if a majority of
the shares voted, in person or by proxy, vote in favor of the proposal.
As of March 31, 1999, directors and executive officers of the Company
and their affiliates, as a group, owned of record and beneficially a total of
526,919 shares of Common Stock, or approximately 12.3% of the shares of Common
Stock outstanding on such date. Directors and executive officers of the Company
have indicated an intention to vote their shares of Common Stock FOR the
election of the nominees set forth on the enclosed proxy and FOR the approval of
the 1999 Stock Option Plan.
A shareholder may abstain or (only with respect to the election of
directors) withhold his vote (collectively, "Abstentions") with respect to each
item submitted for shareholder approval. Abstentions will be counted for
purposes of determining the existence of a quorum. Abstentions will not be
counted as voting in favor of the relevant item.
A broker who holds shares in "street name" has the authority to vote on
certain items when it has not received instructions from the beneficial owner.
Except for certain items for which brokers are prohibited from exercising their
discretion, a broker is entitled to vote on matters put to shareholders without
instructions from the beneficial owner. Where brokers do not have or do not
exercise such discretion, the inability or failure to vote is referred to as a
"broker nonvote." Under the circumstances where the broker is not permitted to,
or does not, exercise its discretion, assuming proper disclosure to the Company
of such inability to vote, broker nonvotes will not be counted for purposes of
determining the existence of a quorum, and also will not be counted as not
voting in favor of the particular matter.
<PAGE>
Shareholders of the Company are requested to complete, date and sign
the accompanying form of proxy and return it promptly to the Company in the
enclosed envelope. If a proxy is properly executed and returned in time for
voting, it will be voted as indicated thereon. If no voting instructions are
given, proxies received by the Company will be voted for approval of the
directors nominated for election and for approval of the proposal to approve the
1999 Stock Option Plan.
Any shareholder who executes a proxy has the power to revoke it at any
time before it is voted by giving written notice of revocation to the Company,
by executing and delivering a substitute proxy to the Company or by attending
the Meeting and voting in person. If a shareholder desires to revoke a proxy by
written notice, such notice should be mailed or delivered, so that it is
received on or prior to the meeting date, to Nancy K. Falck, Secretary, Cardinal
Financial Corporation, 10555 Main Street, Suite 500, Fairfax, Virginia 22030.
The cost of soliciting proxies for the Meeting will be borne by the
Company.
PROPOSAL ONE
ELECTION OF DIRECTORS
Three directors are to be elected to serve for terms of three years
each. The Board of Directors acts as a Nominating Committee for selecting the
nominees for election as directors. The Board of Directors has no reason to
believe that any of the nominees will be unavailable.
Under the Company's Bylaws, notice of a proposed nomination or a
shareholder proposal meeting certain specified requirements must be received by
the Company not less than 60 nor more than 90 days prior to any meeting of
shareholders called for the election of directors, provided in each case that if
fewer than 70 days' notice of the meeting is given to shareholders, such written
notice shall be received not later than the close of the 10th day following the
day on which notice of the meeting was mailed to shareholders. Assuming a date
of June 9, 2000 for the 2000 annual meeting of shareholders, the Company must
receive any notice of nomination or other business no later than April 10, 2000
and no earlier than March 11, 2000.
The Company's Bylaws require that the shareholder's notice set forth as
to each nominee (i) the name, age, business address and residence address of
such nominee, (ii) the principal occupation or employment of such nominee, (iii)
the class and number of shares of the Company that are beneficially owned by
such nominee, and (iv) any other information relating to such nominee that is
required under federal securities laws to be disclosed in solicitations of
proxies for the election of directors, or is otherwise required (including,
without limitation, such nominee's written consent to being named in a proxy
statement as nominee and to serving as a director if elected). The Company's
Bylaws further require that the shareholder's notice set forth as to the
shareholder giving the notice (i) the name and address of such shareholder and
(ii) the class and amount of such shareholder's beneficial ownership of the
Company's capital stock. If the information supplied by the shareholder is
deficient in any material aspect or if the foregoing procedure is not followed,
the chairman of the annual meeting may determine that such shareholder's
nomination should not be brought before the annual meeting and that such nominee
shall not be eligible for election as a director of the Company.
The following information sets forth the names, ages, principal
occupations and business experience for the past five years for all nominees and
incumbent directors.
-2-
<PAGE>
Nominees for Election
for Terms Expiring in 2002
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
and President of Cardinal Bank, N.A., a subsidiary 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.
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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE NOMINEES
SET FORTH ABOVE.
Incumbent Directors Serving
for Terms Expiring in 2000
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.
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.
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.
Incumbent Directors Serving
for Terms Expiring in 2001
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.
-3-
<PAGE>
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 was its President and CEO
until his retirement in 1998.
John H. Rust, Jr., 51, has been Chairman of the Board since 1997.
Mr. Rust is an attorney with the law firm of Wilkes, Artis, Hederick &
Lane in Fairfax, Virginia. He had previously been of counsel in the law
firm of McCandlish and Lillard. Mr. Rust is a member of the Virginia
House of Delegates.
The Board of Directors and Committees
Meetings of the Board of Directors are held regularly each month, and
there is also an organizational meeting following the conclusion of the
Company's annual meeting of shareholders. The Board of Directors held 12
meetings in the year ended December 31, 1998. For the year ended December 31,
1998, none of the Company's directors attended fewer than 75% of the aggregate
of the total number of meetings of the Board of Directors and the total number
of meetings of committees on which the respective directors served.
The Board of Directors has both an Audit Committee and a Compensation
Committee.
The Audit Committee consists of Mr. Isaac, as Chairman, Mrs. Hazel,
Mrs. Falck and Messrs. Peck and Russo. The Audit Committee is responsible for
the selection and recommendation of the independent accounting firm for the
annual audit. It reviews and accepts the reports of the Company's independent
auditors, internal auditor and federal examiners. The Audit Committee met five
times during the year ended December 31, 1998.
The Compensation Committee consists of Mr. Russo, as Chairman, Mrs.
Hazel and Messrs. Isaac and Huntzinger. The Compensation Committee reviews
senior management's performance and compensation and reviews and sets guidelines
for compensation of all employees. The Compensation Committee met three times
during the year ended December 31, 1998.
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. Most recently, 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. Prior to 1992, Mr. Andrews held several senior
management positions with financial institutions in the Company's market area.
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 Cardinal Bank - Manassas/Prince William,
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.
-4-
<PAGE>
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 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 Senior 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.
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 person
under an arrangement whereby the director or executive officer can vest title in
himself at once or at some future time.
-5-
<PAGE>
<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>
_____________________
* 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.
Common Stock
Name and Address Beneficially Owned Percentage of Class
- ---------------- ------------------ -------------------
Laifer Capital Management, Inc. 236,000 5.6%
45 West 45th Street
New York, New York 10036
-6-
<PAGE>
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
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
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 * 1,250 5,247
President and Chief 1997 27,174 25,000 * - 981
Executive Officer
F. Kevin Reynolds 1998(3) 98,640 30,000 * - 545
Executive Vice President
and Senior Lending
Officer
Joseph L. Borrelli 1998(4) 90,670 27,000 * - 3,544
Executive Vice President
and Chief Financial
Officer
Christopher W. Bergstrom 1998(5) 70,189 30,000 * - 3,405
Executive Vice President
</TABLE>
* All benefits that might be considered of a personal nature did not exceed
the lesser of $50,000 or 10% of total annual salary and bonus.
(1) Amounts disclosed for the year ended December 31, 1998 represent grants of
options to Mr. Gunn in his capacity as a director of the Company
(2) Amounts presented represent gross value of payments made by the Bank
pursuant to life insurance agreements between the Company and the named
executive officers. The 1997 amount reflects COBRA payments to Mr. Gunn's
former employer to continue insurance benefits.
(3) Mr. Reynolds' employment with the Company commenced on January 19, 1998.
(4) Mr. Borrelli's employment with the Company commenced on January 1, 1998.
(5) Mr. Bergstrom's employment with the Company commenced on April 6, 1998.
-7-
<PAGE>
Stock Options
The following table sets forth for the year ended December 31, 1998,
the grants of stock options to the named executive officers.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Percent of Total
Number of Options Granted to
Securities Underlying Employees in Fiscal Exercise or Base
Options Granted (1) Year (%)(2) Price ($/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 a total of 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
<TABLE>
<CAPTION>
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 -- -- --
</TABLE>
_____________________
(1) The value of in-the-money options at fiscal year end was calculated by
determining the difference between the closing price of a share of Common
Stock as reported on the Nasdaq SmallCap Market 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 (i)
an option to purchase 1,250 shares of Common Stock at a price of $6.75 per share
and (ii) an option to purchase 750 shares of Common Stock at a price of $6.50
per share. Such options expire on November 23, 2008 and February 19, 2009,
respectively, and are subject to shareholder approval of the Company's 1999
Stock Option Plan.
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.
-8-
<PAGE>
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.
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 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.
-9-
<PAGE>
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.
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.
PROPOSAL TWO
APPROVAL OF THE
CARDINAL FINANCIAL CORPORATION
1999 STOCK OPTION PLAN
Introduction
On March 22, 1999, the Board of Directors of the Company approved the
1999 Stock Option Plan (the "Stock Option Plan"). The Stock Option Plan is
intended to provide a means for selected key employees and directors of the
Company to increase their personal financial interest in the Company, thereby
stimulating the efforts of these employees and directors and strengthening their
desire to remain with the Company. References to the "Company" in this section
will include any subsidiary corporation.
The principal features of the Stock Option Plan are summarized below.
The summary is qualified by reference to the complete text of the Stock Option
Plan, which is attached as Exhibit A to this Proxy Statement.
The proposal to approve the Stock Option Plan will be approved if a
majority of the shares voted, in person or by proxy, vote in favor of the
proposal.
General
The Stock Option Plan will permit the award of shares of Incentive
Stock Options and Non-Qualified Stock Options to directors, eligible officers
and key employees of the Company and its subsidiaries upon such terms as the
Board of Directors may determine, consistent with the terms of the Stock Option
Plan. The Stock Option Plan currently authorizes the issuance of up to 400,000
shares of Common Stock to assist the Company in recruiting and retaining key
management personnel. At March 31, 1999, the market value of the 400,000 shares
that are issuable under the Stock Option Plan was $2,800,000.
As of the date of this Proxy Statement, options to purchase 169,108
shares have been granted and 230,892 shares remain available for grants and
awards under the Stock Option Plan. The following table sets forth information
relating to the grants of stock options in both 1998 and 1999 to (i) the named
executive officers, (ii) all current executive officers as a group, (iii) all
current directors who are not
-10-
<PAGE>
executive officers as a group, and (iv) all employees, including all current
officers who are not executive officers, as a group.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Options Exercise or Base In-the-Money Options at
Granted(1) Price ($/Share) March 31, 1999 ($)(2)
---------- --------------- ---------------------
<S> <C> <C> <C>
L. Burwell Gunn, Jr. 16,000 6.50 - 7.50 688
F. Kevin Reynolds 3,131 6.38 1,941
Joseph L. Borrelli 2,818 6.38 1,747
Christopher W. Bergstrom 3,131 6.38 1,941
Executive Group 32,508 6.38 - 10.00 10,457
Non-Executive Director Group 18,000 6.50 - 6.75 6,188
Non-Executive Officer Employee Group 98,100 6.38 - 7.00 992
</TABLE>
______________________
(1) Stock options were awarded at or above the closing price of a share of
Common Stock as reported on the Nasdaq SmallCap Market at the date of
award.
(2) The value of in-the-money options was calculated by determining the
difference between the closing price of a share of Common Stock as reported
on the Nasdaq SmallCap Market on March 31, 1999 and the exercise price of
the options.
The Company intends to continue to grant options to purchase shares of
Common Stock under the Stock Option Plan to directors, eligible officers and key
employees. No determination has been made as to which of the persons eligible to
participate in the Stock Option Plan will receive awards under the Stock Option
Plan in the future, and, therefore, the future benefits to be allocated to any
individual or to various groups of participants are not presently determinable.
Administration
The Stock Option Plan is administered by the Board of Directors. The
Board of Directors has the sole discretion, subject to certain limitations, to
interpret the Stock Option Plan; to select Stock Option Plan participants; to
determine the type, size, terms and conditions of awards under the Stock Option
Plan; to authorize the grant of such awards; and to adopt, amend and rescind
rules relating to the Stock Option Plan. All determinations of the Board of
Directors are conclusive. All expenses of administering the Stock Option Plan
will be borne by the Company.
Eligibility
Any director, officer or employee of the Company or its subsidiaries
who, in the judgment of the Board of Directors, has contributed significantly or
can be expected to contribute significantly to the profits or growth of the
Company or a subsidiary is eligible to participate in the Stock Option Plan.
-11-
<PAGE>
Individual Agreements
The Board of Directors has broad authority to fix the terms and
conditions of the individual agreements with participants. All awards granted
under the Stock Option Plan are intended to comply with the applicable
requirements of Rule 16b-3 promulgated under the Exchange Act, which exempts,
grants and awards under qualifying employee benefit plans from certain
"short-swing" profit recovery provisions of the Exchange Act.
Shares Available
Subject to the provisions of the Stock Option Plan providing for
proportional adjustments in the event of various changes in the capitalization
of the Company, no more than 400,000 shares of authorized but unissued Common
Stock may be issued pursuant to the Stock Option Plan. Any shares of Common
Stock subject to an Incentive Stock Option or Non-Qualified Stock Option that
are not issued prior to the expiration of such awards will again be available
for award under the Stock Option Plan.
Incentive Stock Options and Non-Qualified Stock Options ("Options")
The Board of Directors may authorize the grant of either Incentive
Stock Options ("ISOs"), as defined under Section 422 of the Internal Revenue
Code of 1986, as amended, or Non-Qualified Stock Options ("NQSOs"), which are
subject to certain terms and conditions including the following: (1) the option
price per share will be determined by the Board of Directors, but for ISOs will
not, in any event, be less than 100 percent of the fair market value of Common
Stock on the date that the Option is granted; (2) the term of the Option will be
fixed by the Board of Directors, but the maximum period in which an ISO may be
exercised shall not, in any event, exceed ten years from the date that the ISO
is granted; (3) Options will not be transferable other than by will or the laws
of descent and distribution; (4) the purchase price of Common Stock issued upon
exercise of an Option will be paid in full to the Company at the time of the
exercise of the Option in cash, or at the discretion of the Board of Directors,
by surrender to the Company of previously acquired shares of Common Stock, which
will be valued at the fair market value of such shares on the date preceding the
date that the Option is exercised; (5) an Option may expire upon termination of
employment or within a specified period of time after termination of employment
as provided by the Board of Directors; (6) the aggregate fair market value
(determined on the date of grant) of the shares of Common Stock with respect to
which ISOs are exercisable for the first time by any individual during any
calendar year shall not exceed $100,000; and (7) the Board of Directors may
elect to cash out all or part of the portion of any Option to be exercised by a
participant by payment in cash or Common Stock of an amount determined in
accordance with the Stock Option Plan.
Amendment or Termination
The Board of Directors may amend or terminate the Stock Option Plan;
however, no amendment may become effective until shareholder approval is
obtained if the amendment (i) materially increases the aggregate number of
shares that may be issued pursuant to Options, (ii) materially increases the
benefits to participants under the Stock Option Plan, or (iii) materially
changes the requirements as to eligibility for participation in the Stock Option
Plan. No amendment shall, without a participant's consent, adversely affect any
rights of such participant under any Option outstanding at the time that such
amendment is made. No amendment shall be made if it would disqualify the Stock
Option Plan from the exemption provided by Rule 16b-3.
-12-
<PAGE>
Duration of Plan
No Option may be granted under the Stock Option Plan after November 23,
2008. Options granted before November 23, 2008, shall remain valid in accordance
with their terms.
Tax Status
Under current federal income tax laws, the principal federal tax
consequences to participants and to the Company of the grant and exercise of
ISOs and NQSOs, pursuant to the provisions of the Stock Option Plan, are
summarized below.
Incentive Stock Options. An employee will generally not recognize
income on receipt or exercise of an ISO so long as he or she has been an
employee of the Company or its subsidiaries from the date that the Option was
granted until three months before the date of exercise; however, the amount by
which the fair market value of the Common Stock at the time of exercise exceeds
the option price is a required adjustment for purposes of the alternative
minimum tax applicable to the employee. If the employee holds the Common Stock
received upon exercise of the Option for one year after exercise (and for two
years from the date of grant of the Option), any difference between the amount
realized upon the disposition of the stock and the amount paid for the stock
will be treated as long-term capital gain (or loss, if applicable) to the
employee. If the employee exercises an ISO and satisfies these holding period
requirements, the Company may not deduct any amount in connection with the ISO.
In contrast, if an employee exercises an ISO but does not satisfy the
holding period requirements with respect to the Common Stock acquired on
exercise, the employee generally will recognize ordinary income in the year of
the disposition equal to the excess, if any, of the fair market value of the
Common Stock on the date of exercise over the option price; and any excess of
the amount realized on the disposition over the fair market value on the date of
exercise will be taxed as long- or short-term capital gain (as applicable). If,
however, the fair market value of the Common Stock on the date of disposition is
less than on the date of exercise, the employee will recognize ordinary income
equal only to the difference between the amount realized on disposition and the
option price. In either event, the Company will be entitled to deduct an amount
equal to the amount constituting ordinary income to the employee in the year of
the premature disposition.
Non-Qualified Stock Options. NQSOs granted under the Stock Option Plan
are not taxable to a participant at grant but result in taxation at exercise, at
which time the individual will recognize ordinary income in an amount equal to
the difference between the option exercise price and the fair market value of
the Common Stock on the exercise date. The Company will be entitled to deduct a
corresponding amount as a business expense in the year that the participant
recognizes this income.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE STOCK
OPTION PLAN.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been appointed to perform the audit of the
Company's financial statements for the year ending December 31, 1999. KPMG Peat
Marwick LLP acted as the Company's auditors for the year ended December 31, 1998
and has reported on financial statements during that period. A representative
from KPMG Peat Marwick LLP is expected to be present at the Meeting, will have
the opportunity to make a statement if he desires to do so, and is expected to
be available to respond to appropriate questions.
-13-
<PAGE>
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Shareholders for the year
ended December 31, 1998 has been furnished to shareholders. Additional copies
may be obtained by written request to the Secretary of the Company at the
address indicated below. Such Annual Report is not part of the proxy
solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST OF ANY PERSON WHO, ON THE RECORD
DATE, WAS RECORD OWNER OF COMMON STOCK OR WHO REPRESENTS IN GOOD FAITH THAT HE
OR SHE WAS ON SUCH DATE THE BENEFICIAL OWNER OF SUCH STOCK ENTITLED TO VOTE AT
THE ANNUAL MEETING OF SHAREHOLDERS, CARDINAL WILL FURNISH TO SUCH PERSON,
WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998 AND THE EXHIBITS THERETO REQUIRED TO BE FILED WITH THE
SEC UNDER THE EXCHANGE ACT. ANY SUCH REQUEST SHOULD BE MADE IN WRITING TO NANCY
K. FALCK, SECRETARY, CARDINAL FINANCIAL CORPORATION, 10555 MAIN STREET, SUITE
500, FAIRFAX, VIRGINIA 22030. THE FORM 10-KSB IS NOT PART OF THE PROXY
SOLICITATION MATERIALS.
PROPOSALS FOR 2000 ANNUAL MEETING
Under the regulations of the SEC, any shareholder desiring to make a
proposal to be acted upon at the 2000 annual meeting of shareholders must cause
such proposal to be received, in proper form, at the Company's principal
executive offices at 10555 Main Street, Suite 500, Fairfax, Virginia 22030, no
later than January 14, 2000, in order for the proposal to be considered for
inclusion in the Company's Proxy Statement for that meeting. It is urged that
any such proposals be sent by certified mail, return receipt requested.
The Company's Bylaws also prescribe the procedures that a shareholder
must follow to nominate directors or to bring other business before
shareholders' meetings. For more information on these procedures, see "Election
of Directors."
OTHER MATTERS
The Board of Directors is not aware of any matters to be presented for
action at the meeting other than as set forth herein. However, if any other
matters properly come before the Meeting, or any adjournment thereof, the person
or persons voting the proxies will vote them in accordance with their best
judgment.
By Order of The Board of Directors
/s/ Nancy K. Falck
Nancy K. Falck
Secretary
May 14, 1999
-14-
<PAGE>
Exhibit A
CARDINAL FINANCIAL CORPORATION
1999 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
"Affiliate" means any "subsidiary" or "parent" corporation (within the
meaning of Section 424 of the Code) of the Company.
"Agreement" means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of an Option granted to such Participant.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, and any amendments
thereto.
"Committee" means the Executive Compensation Committee of the Board.
"Common Stock" means the common stock of the Company.
"Company" means Cardinal Financial Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and as in effect on the date of this Agreement.
"Fair Market Value" means, on any given date, the closing price of a
share of Common Stock as reported on the NASDAQ market on which the Common Stock
trades ("NASDAQ") on such date, or if the Common Stock was not traded on the
NASDAQ on such day, then on the next preceding day that the Common Stock was
traded on such market, all as reported by such source as the Board may select.
"Option" means a stock option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price set forth in
an Agreement.
"Participant" means an employee of the Company or an Affiliate,
including an employee who is a member of the Board, or an individual who
provides services to the Company or an Affiliate, who satisfies the requirements
of Article IV and is selected by the Board to receive an Option.
"Plan" means the Cardinal Financial Corporation 1999 Stock Option Plan.
"Ten Percent Shareholder" means any individual owning more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of an Affiliate. An individual shall be considered to own any voting
stock owned (directly or indirectly) by or for his brothers, sisters, spouse,
ancestors or lineal descendants and shall be considered to own proportionately
any voting stock owned (directly or indirectly) by or for a corporation,
partnership, estate or trust of which such individual is a shareholder, partner
or beneficiary.
A-1
<PAGE>
ARTICLE II
PURPOSES
The Plan is intended to assist the Company and its Affiliates in
recruiting and retaining individuals with ability and initiative by enabling
such persons to participate in the future success of the Company and its
Affiliates and to associate their interests with those of the Company and its
shareholders. The Plan is intended to permit the grant of both Options
qualifying under Section 422 of the Code ("incentive stock options") and Options
not so qualifying. No Option that is intended to be an incentive stock option
shall be invalid for failure to qualify as an incentive stock option. The
proceeds received by the Company from the sale of Common Stock pursuant to this
Plan shall be used for general corporate purposes.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Board. The Board shall have
authority to grant Options upon such terms (not inconsistent with the provisions
of this Plan) as the Board may consider appropriate. Such terms may include
conditions (in addition to those contained in this Plan) on the exercisability
of all or any part of an Option. Notwithstanding any such conditions, the Board
may, in its discretion, accelerate the time at which any Option may be
exercised. In addition, the Board shall have complete authority to interpret all
provisions of this Plan; to prescribe the form of Agreements; to adopt, amend,
and rescind rules and regulations pertaining to the administration of the Plan;
and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of any specific power
to the Board shall not be construed as limiting any power or authority of the
Board. Any decision made, or action taken, by the Board or in connection with
the administration of this Plan shall be final and conclusive. Neither the Board
nor any member of the Committee shall be liable for any act done in good faith
with respect to this Plan or any Agreement. All expenses of administering this
Plan shall be borne by the Company.
The Board, in its discretion, may delegate to one or more officers of
the Company or the Committee, all or part of the Board's authority and duties
with respect to grants and awards to individuals who are not subject to the
reporting and other provisions of Section 16 of the Exchange Act. The Board may
revoke or amend the terms of a delegation at any time but such action shall not
invalidate any prior actions of the Board's delegate or delegates that were
consistent with the terms of the Plan.
ARTICLE IV
ELIGIBILITY
Any employee of the Company or an Affiliate (including a corporation
that becomes an Affiliate after the adoption of this Plan) or a person who
provides services to the Company or an Affiliate (including a corporation that
becomes an Affiliate after the adoption of this Plan) is eligible to participate
in this Plan if the Board, in its sole discretion, determines that such person
has contributed significantly or can be expected to contribute significantly to
the profits or growth of the Company or an Affiliate. Directors of the Company
or an Affiliate may be selected to participate in this Plan.
A-2
<PAGE>
ARTICLE V
STOCK SUBJECT TO PLAN
5.01. Shares Issued. Upon the exercise of any Option the Company may deliver
to the Participant (or the Participant's broker if the Participant so directs),
shares of Common Stock from its authorized but unissued Common Stock.
5.02. Aggregate Limit. The maximum aggregate number of shares of Common Stock
that may be issued under this Plan pursuant to the exercise Options is Four
Hundred Thousand (400,000) shares. The maximum aggregate number of shares that
may be issued under this Plan shall be subject to adjustment as provided in
Article VII.
5.03. Reallocation of Shares. If an Option is terminated, in whole or in part,
for any reason other than its exercise, the number of shares of Common Stock
allocated to the Option or portion thereof may be reallocated to other Options
to be granted under this Plan.
ARTICLE VI
OPTIONS
6.01. Award. In accordance with the provisions of Article IV, the Board will
designate each individual to whom an Option is to be granted and will specify
the number of shares of Common Stock covered by such awards.
6.02. Option Price. The price per share for Common Stock purchased on the
exercise of an Option shall be determined by the Board on the date of grant. The
price per share for Common Stock purchased on the exercise of any Option that is
an incentive stock option granted to an individual who is a Ten Percent
Shareholder on the date such option is granted, shall not be less than one
hundred ten percent (110%) of the Fair Market Value on the date the Option is
granted.
6.03. Maximum Option Period. The maximum period in which an Option may be
exercised shall be determined by the Board on the date of grant, except that no
Option that is an incentive stock option shall be exercisable after the
expiration of ten years from the date such Option was granted. In the case of an
incentive stock option that is granted to a Participant who is a Ten Percent
Shareholder on the date of grant, such Option shall not be exercisable after the
expiration of five years from the date of grant. The terms of any Option that is
an incentive stock option may provide that it is exercisable for a period less
than such maximum period.
6.04. Nontransferability. Except as provided in Section 6.05, each Option
granted under this Plan shall be nontransferable except by will or by the laws
of descent and distribution. In the event of any such transfer, the Option must
be transferred to the same person or persons or entity or entities. During the
lifetime of the Participant to whom the Option is granted, the Option may be
exercised only by the Participant. No right or interest of a Participant in any
Option shall be liable for, or subject to, any lien, obligation, or liability of
such Participant.
6.05. Transferable Options. Section 6.04 to the contrary notwithstanding, if
the Agreement provides, an Option that is not an incentive stock option may be
transferred by a Participant to the Participant's children, grandchildren,
spouse, one or more trusts for the benefit of such family members or a
partnership in which such family members are the only partners; provided,
however, that Participant may not receive any consideration for the transfer. In
addition to transfers described in the preceding sentence
A-3
<PAGE>
the Board may grant Options that are not incentive stock options that are
transferable on other terms and conditions as may be permitted under Securities
Exchange Commission Rule 16b-3 as in effect from time to time. The holder of an
Option transferred pursuant to this section shall be bound by the same terms and
conditions that governed the Option during the period that it was held by the
Participant. In the event of any such transfer, the Option must be transferred
to the same person or persons or entity or entities.
6.06. Employee Status. For purposes of determining the applicability of
Section 422 of the Code (relating to incentive stock options), or in the event
that the terms of any Option provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Board may decide to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other reasons shall not be
deemed interruptions of continuous employment.
6.07. Exercise. Subject to the provisions of this Plan and the applicable
Agreement, an Option may be exercised in whole at any time or in part from time
to time at such times and in compliance with such requirements as the Board
shall determine; provided, however, that incentive stock options (granted under
the Plan and all plans of the Company and its Affiliates) may not be first
exercisable in a calendar year for stock having a Fair Market Value (determined
as of the date an Option is granted) exceeding $100,000. An Option granted under
this Plan may be exercised with respect to any number of whole shares less than
the full number for which the Option could be exercised. A partial exercise of
an Option shall not affect the right to exercise the Option from time to time in
accordance with this Plan and the applicable Agreement with respect to the
remaining shares subject to the Option.
6.08. Payment. Useless otherwise provided by the Agreement, payment of the
Option price shall be made in cash or a cash equivalent acceptable to the Board.
If the Agreement provides, payment of all or part of the Option price may be
made by surrendering shares of Common Stock to the Company. If Common Stock is
used to pay all or part of the Option price, the sum of the cash and cash
equivalent and the Fair Market Value (determined as of the day preceding the
date of exercise) of the shares surrendered must not be less than the Option
price of the shares for which the Option is being exercised.
6.09. Installment Payment. If the Agreement provides, and if the Participant
is employed by the Company on the date the Option is exercised, payment of all
or part of the Option price may be made in installments. In that event the
Company shall lend the Participant an amount equal to not more than ninety
percent (90%) of the Option price of the shares acquired by the exercise of the
Option. This amount shall be evidenced by the Participant's promissory note and
shall be payable in not more than five equal annual installments, unless the
amount of the loan exceeds the maximum loan value for the shares purchased,
which value shall be established from time to time by regulations of the Board
of Governors of the Federal Reserve System. In that event, the note shall be
payable in equal quarterly installments over a period of time not to exceed five
years. The Board, however, may vary such terms and make such other provisions
concerning the unpaid balance of such purchase price in the case of hardship,
subsequent termination of employment, absence on military or government service,
or subsequent death of the Participant as in its discretion are necessary or
advisable in order to protect the Company, promote the purposes of the Plan and
comply with regulations of the Board of Governors of the Federal Reserve System
relating to securities credit transactions.
The Participant shall pay interest on the unpaid balance at the minimum
rate necessary to avoid imputed interest or original issue discount under the
Code. All shares acquired with cash borrowed from the Company shall be pledged
to the Company as security for the repayment thereof. In the discretion of the
Board, shares of stock may be released from such pledge proportionately as
payments on the note (together with interest) are made, provided the release of
such shares complies with the regulations of the Federal Reserve System relating
to securities credit transactions then applicable. While shares are so pledged,
and so long as there has been no default in the installment payments, such
shares shall remain
A-4
<PAGE>
registered in the name of the Participant, and he shall have the right to vote
such shares and to receive all dividends thereon.
6.10. Shareholder Rights. No Participant shall have any rights as a
shareholder with respect to shares subject to his Option until the date of
exercise of such Option.
6.11. Disposition of Stock. A Participant shall notify the Company of any sale
or other disposition of Common Stock acquired pursuant to an Option that was an
incentive stock option if such sale or disposition occurs (i) within two years
of the grant of an Option or (ii) within one year of the issuance of the Common
Stock to the Participant. Such notice shall be in writing and directed to the
Secretary of the Company.
ARTICLE VII
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options may be granted under
this Plan, and the terms of outstanding Options shall be adjusted as the Board
shall determine to be equitably required in the event that (a) the Company (i)
effects one or more stock dividends, stock split-ups, subdivisions or
consolidations of shares or (ii) engages in a transaction to which Section 424
of the Code applies or (b) there occurs any other event which, in the judgment
of the Board necessitates such action. Any determination made under this Article
VII by the Board shall be final and conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
maximum number of shares as to which Options may be granted, or the terms of
outstanding Options.
ARTICLE VIII
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be issued and no
certificates for shares of Common Stock shall be delivered, except in compliance
with all applicable federal and state laws and regulations (including, without
limitation, withholding tax requirements), any listing agreement to which the
Company is a party, and the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company shall have the right to rely on an
opinion of its counsel as to such compliance. Any share certificate issued to
evidence Common Stock or for which an Option is exercised may bear such legends
and statements as the Board may deem advisable to assure compliance with federal
and state laws and regulations. No Option shall be exercisable, no Common Stock
shall be issued, no certificate for shares shall be delivered, and no payment
shall be made under this Plan until the Company has obtained such consent or
approval as the Board may deem advisable from regulatory bodies having
jurisdiction over such matters.
A-5
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
9.01. Effect on Employment and Service. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any individual any right to continue in the employ or
service of the Company or an Affiliate or in any way affect any right and power
of the Company or an Affiliate to terminate the employment or service of any
individual at any time with or without assigning a reason therefor.
9.02. Unfunded Plan. The Plan, insofar as it provides for grants, shall be
unfunded, and the Company shall not be required to segregate any assets that may
at any time be represented by grants under this Plan. Any liability of the
Company to any person with respect to any grant under this Plan shall be based
solely upon any contractual obligations that may be created pursuant to this
Plan. No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
9.03. Rules of Construction. Headings are given to the articles and sections
of this Plan solely as a convenience to facilitate reference. The reference to
any statute, regulation, or other provision of law shall be construed to refer
to any amendment to or successor of such provision of law.
ARTICLE X
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval is
obtained if (i) the amendment increases the aggregate number of shares of Common
Stock that may be issued under the Plan, (ii) the amendment changes the class of
individuals eligible to become Participants or (iii) the amendment materially
increases the benefits that may be provided under the Plan. No amendment shall,
without a Participant's consent, adversely affect any rights of such Participant
under any Option outstanding at the time such amendment is made.
ARTICLE XI
DURATION OF PLAN
No Option may be granted under this Plan after November 23, 2008.
Options granted before that date shall remain valid in accordance with their
terms.
ARTICLE XII
EFFECTIVE DATE OF PLAN
No Option shall be effective or exercisable unless this Plan is
approved by a majority of the votes entitled to be cast by the Company's
shareholders, voting either in person or by proxy, at a duly held shareholders'
meeting within twelve months of such adoption.
A-6
<PAGE>
Cardinal Financial Corporation
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Anne B. Hazel and Dale B. Peck, jointly
and severally, proxies, with full power to act alone, and with full power of
substitution, to represent the undersigned and to vote, as designated on the
reverse side and upon any and all other matters that may properly be brought
before such meeting, all shares of Common Stock that the undersigned would be
entitled to vote at the Annual Meeting of Shareholders of Cardinal Financial
Corporation, a Virginia corporation (the "Corporation"), to be held at the Fair
Lakes Hyatt, 12777 Fair Lakes Circle, Fairfax, Virginia, on Thursday, June 10,
1999 at 7:00 p.m., local time, or any adjournments thereof, for the following
purposes:
(Continued and to be dated and signed on other side)
<PAGE>
Please mark your
| X | votes as in this
example
<TABLE>
<CAPTION>
<S><C>
FOR WITHHOLD
nominees listed at right AUTHORITY
(except as written on the to vote for all
line below) nominees listed at right
1. To elect as directors ___ ___ Nominees: Nancy K. Falck
the three persons | | | | L. Burwell Gunn, Jr.
listed as nominees |___| |___| Jones. V. Isaac
for terms of three
years each expiring at the 2002 annual meeting of shareholders.
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual
nominee listed at right, write that nominee's name on the space
provided below.)
___________________________________________________________________
FOR AGAINST ABSTAIN
2. To approve the Corporation's 1999 ___ ___ ___
Stock Option Plan. | | | | | |
|___| |___| |___|
3. In their discretion, the proxies are authorized to vote upon any
other business that may properly come before the meeting, or any
adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR ITEM
2.
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY.
<TABLE>
<CAPTION>
<S><C>
Signature___________________Signature___________________Printed Name___________________Dated_________, 1999
NOTE: (If signing as Attorney, Administrator, Executor, Guardian or Trustee, please add your title as such.)
</TABLE>
