FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-9101
JEFFERSON BANKSHARES, INC.
Incorporated in the I.R.S. Employer ID No.
State of Virginia 54-1104491
123 East Main Street
Post Office Box 711
Charlottesville, Virginia 22902
Telephone (804) 972-1100
Indicate by a check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
As of July 15, 1997, Registrant had 13,957,180 shares of its
$2.50 par value common stock issued and outstanding.
PART I. FINANCIAL INFORMATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Jefferson Bankshares, Inc. and Subsidiaries
Consolidated Balance Sheets
($ in thousands)
June 30 Dec. 31
1997 1996 1996
<S> <C> <C> <C>
ASSETS
Cash and due from banks............................... $ 91,300 $ 84,568 $ 100,228
Federal funds sold and other money market investments. 17,000 15,000 -
Investment securities:
Available for sale (cost on June 30 of $152,419 in 153,843 193,023 178,073
1997 and $193,386 in 1996 and $176,104 on
December 31, 1996)
Held to maturity (fair value on June 30 372,558 418,678 430,981
of $372,614 in 1997 and $417,171 in 1996
and $432,673 on December 31, 1996)
Total investment securities........................... 526,401 611,701 609,054
Loans................................................. 1,442,989 1,282,949 1,365,949
Less: Unearned income................................. (126) (49) (95)
Allowance for loan losses....................... (15,590) (14,086) (14,656)
Net loans............................................. 1,427,273 1,268,814 1,351,198
Premises and equipment................................ 60,136 50,875 55,774
Other assets.......................................... 46,360 49,812 45,571
Total assets.......................................... $2,168,470 $2,080,770 $2,161,825
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand................................................ $ 324,435 $ 300,252 $ 311,817
Interest-bearing transaction accounts................. 822,014 800,706 824,671
Certificates of deposit $100,000 and over............. 123,208 96,108 110,260
Other time............................................ 606,816 597,602 644,361
Total deposits........................................ 1,876,473 1,794,668 1,891,109
Federal funds purchased and
securities sold under repurchase agreements......... 43,668 16,517 50,066
Other short-term borrowings........................... 20,000 25,000 -
Other liabilities..................................... 16,228 15,356 16,336
Total liabilities..................................... 1,956,369 1,851,541 1,957,511
Shareholders' Equity:
Preferred stock of $10.00 par value. Authorized
1,000,000 shares; issued none..................... - - -
Common stock of $2.50 par value. Authorized 32,000,000
shares; issued and outstanding 13,956,980 shares
June 30, 1997; and 15,144,572 shares June
30,1996; and 13,937,491 shares December 31, 1996.. 34,892 37,861 34,844
Capital surplus....................................... 49,722 48,010 48,720
Retained earnings..................................... 126,560 143,594 119,470
Unrealized gains(losses) on securities
available for sale, net............................ 927 (236) 1,280
Total shareholders' equity ........................... 212,101 229,229 204,314
Total liabilities and shareholders' equity............ $2,168,470 $2,080,770 $2,161,825
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Jefferson Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands except per share data)
Three months ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans .................. $31,796 $27,870 $62,041 $55,257
Income on investment securities:
Available for sale........................... 2,596 3,022 5,293 5,876
Held to maturity............................. 6,084 6,832 12,611 13,768
Other interest income........................ 45 116 107 275
Total interest income........................ 40,521 37,840 80,052 75,176
INTEREST EXPENSE
Interest-bearing transaction accounts........ 5,715 5,479 11,332 10,959
Certificates of deposit $100,000 and over.... 1,504 1,198 2,941 2,404
Other time deposits.......................... 7,494 7,311 15,315 14,990
Short-term borrowings........................ 788 392 1,424 562
Total interest expense....................... 15,501 14,380 31,012 28,915
NET INTEREST INCOME.......................... 25,020 23,460 49,040 46,261
PROVISION FOR LOAN LOSSES.................... 1,050 840 2,040 1,620
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES.............................. 23,970 22,620 47,000 44,641
NON-INTEREST INCOME
Trust income................................. 1,150 1,195 2,336 2,254
Service charges on deposit accounts.......... 2,460 2,521 4,831 4,921
Investment securities gains(losses).......... (4) 2 (4) 3
Mortgage loan sales income................... 129 205 274 365
Other income................................. 2,082 1,016 3,235 2,057
Total non-interest income.................... 5,817 4,939 10,672 9,600
NON-INTEREST EXPENSE
Salaries and employee benefits............... 10,887 10,373 21,659 20,653
Occupancy expense, net....................... 1,282 1,678 2,629 3,045
Equipment expense............................ 1,615 1,567 3,164 3,123
F.D.I.C. assessments......................... 62 30 108 61
Other expense................................ 3,624 3,235 7,166 6,740
Total non-interest expense................... 17,470 16,883 34,726 33,622
INCOME BEFORE INCOME TAXES................... 12,317 10,676 22,946 20,619
Provision for income taxes................... 4,270 3,698 7,950 7,106
NET INCOME................................... $ 8,047 $ 6,978 $14,996 $13,513
NET INCOME PER COMMON SHARE.................. $ .58 $ .46 $ 1.08 $ .89
AVERAGE SHARES OUTSTANDING................... 13,947 15,163 13,945 15,168
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Jefferson Bankshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
($ in thousands)
Six months ended June 30
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 14,996 $ 13,513
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization....................... 3,503 3,714
Accretion and amortization.......................... 1,738 1,856
Provision for loan losses........................... 2,040 1,620
Investment securities (gains)losses, net............ 4 (3)
Gain on sale of premises and equipment.............. (195) (65)
Decrease in interest receivable..................... 1,267 55
Decrease in interest payable........................ (13) (254)
(Increase)decrease in loans held for resale, net.... (104) 726
Other, net.......................................... (3,185) (4,603)
Total adjustments................................... 5,055 3,046
Net cash provided by
operating activities.............................. 20,051 16,559
Cash flows from investing activities:
Proceeds from maturities of investment securities
held to maturity.................................. 60,910 65,497
Proceeds from calls of investment securities
held to maturity.................................. 105 243
Purchases of investment securities held to maturity. (3,975) (31,374)
Proceeds from maturities of securities available
for sale.......................................... 6,300 6,200
Proceeds from sales of securities available
for sale.......................................... 17,026 979
Purchases of securities available for sale.......... - (16,750)
Net increase in loans............................... (78,129) (64,413)
Proceeds from sales of premises and equipment....... 666 695
Proceeds from sales of foreclosed properties........ 202 1,789
Purchases of premises and equipment................. (7,647) (2,511)
Net cash used in investing activities............... (4,542) (39,645)
Cash flows from financing activities:
Net increase(decrease) in deposits.................. (14,636) 1,469
Net increase in short-term borrowings............... 13,602 25,399
Repayment of long-term debt......................... - (15)
Proceeds from issuance of common stock.............. 1,139 461
Payments to acquire common stock.................... (1,024) (1,480)
Dividends paid...................................... (6,518) (6,208)
Net cash provided by financing activities........... (7,437) 19,626
Net increase(decrease) in cash
and cash equivalents.............................. 8,072 (3,460)
Cash and cash equivalents at beginning of period.... 100,228 103,028
Cash and cash equivalents at end of period.......... $108,300 $ 99,568
Supplemental disclosure of cash flow information
Cash payments for:
Interest.......................................... $ 31,025 $ 29,169
Income taxes...................................... 8,147 7,815
Non-cash investing and financing activities:
Loan balances transferred to foreclosed properties $ 87 $ 265
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
Jefferson Bankshares, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
($ in thousands) Six Months Ended
June 30
1997 1996
<S> <C> <C>
Balance, January 1....................................... $204,314 $226,540
Net income............................................... 14,996 13,513
Cash dividends declared.................................. (6,971) (6,666)
Change in unrealized gains (losses) on securities
available for sale................................. (353) (3,139)
Issuance of common stock for:
Dividend Reinvestment Plan......................... 46 -
Employee Stock Purchase Plan....................... 4 -
1985 Long-Term Incentive Stock Plan................ 348 331
Deferred Compensation and Stock Purchase Plan for
Non-Employee Directors.......................... 589 130
Stock options...................................... 152 -
Acquisition of common stock ............................. (1,024) (1,480)
Balance, June 30......................................... $212,101 $229,229
</TABLE>
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
($ in thousands)
Note 1 - General
The consolidated financial statements conform to generally accepted
accounting principles and to general industry practices. The accompanying
consolidated financial statements are unaudited. In the opinion of management,
all adjustments necessary for a fair presentation of the consolidated financial
statements have been included. All such adjustments are of a normal and
recurring nature. The notes included herein should be read in conjunction
with the notes to consolidated financial statements included in the
1996 Annual Report to shareholders of Jefferson Bankshares, Inc. (the
"Corporation").
<TABLE>
Note 2 - Allowance for Loan Losses
A summary of transactions in the consolidated allowance for loan losses
for the six months ended June 30 follows:
1997 1996
<S> <C> <C>
Balance, January 1............................ $ 14,656 $ 13,432
Provision..................................... 2,040 1,620
Recoveries.................................... 490 356
Loan losses................................... (1,596) (1,322)
Balance, June 30.............................. $ 15,590 $ 14,086
</TABLE>
<TABLE>
Note 3 - Income Taxes
Income tax expense for the six months ended June 30 is different than
the amount computed by applying the statutory corporate federal income
tax rate of 35% to income before income taxes. The reasons for this
difference are as follows:
1997 1996
<S> <C> <C>
Tax expense at statutory rate......... $ 8,031 $ 7,217
Increase (reduction) in taxes
resulting from:
Tax exempt interest................... (244) (311)
Other, net............................ 163 200
Provision for income taxes............ $ 7,950 $ 7,106
</TABLE>
Note 4 - Business Combination
On June 9, 1997, the Corporation entered into a definitive merger
agreement with Wachovia Corporation under which the Corporation would be
merged into Wachovia. Under the terms of the agreement, the
Corporation's shareholders would receive a tax-free exchange of 0.625 of
a share of Wachovia Common Stock for each share of the Corporation's
Common Stock. Based upon Wachovia's closing price of $62.125 on June 9,
1997, the last trading day prior to the announcement of the transaction,
the exchange ratio represented a price of $38.83 for each share of the
Corporation's Common Stock. Also in conjunction with the merger, the
Corporation entered into a Stock Option Agreement granting Wachovia an
option to purchase, subject to certain circumstances, up to 2,770,000
shares of the Corporation's Common Stock. The shares subject to the
option represented approximately 19.9 percent of the Corporation's
outstanding shares as of June 10, 1997.
Note 5 - Accounting Rule Change
In February 1997, the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards No. 128, Earnings per Share.
The Statement supersedes APB No. 15 and AICPA Accounting Interpretations
1-102 of Opinion 15. It replaces the presentation of primary earnings
per share (EPS) with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures. Basic EPS
excludes dilution and is computed by dividing net income by the
weighted-average number of common shares outstanding. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common
stock and then shared in the earnings of the entity. This statement is
effective for financial statements issued for periods ending after
December 15, 1997. Although earlier application is not permitted, an
entity is permitted to disclose proforma amounts computed using this
Statement in the notes to financial statements in periods prior to
required adoption. On a proforma basis, if the Corporation had adopted
this Statement at June 30, 1997, basic EPS would have been $.58 for the
three month period ended June 30, 1997 and $1.08 for the six month
period ended June 30, 1997. Diluted EPS would have been $.57 and $1.06
for the respective three and six month periods in 1997.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's discussion and analysis of financial information is
presented to aid the reader in understanding and evaluating the
financial condition and results of operations of the Corporation.
The analysis focuses on the Consolidated Financial Statements and
their accompanying notes. Highlighted in the discussion are material
changes from prior reporting periods and any identifiable trends
affecting the Corporation.
On June 9, 1997, the Corporation entered into a definitive merger
agreement with Wachovia Corporation under which the Corporation would be
merged into Wachovia. Under the terms of the agreement, the
Corporation's shareholders would receive a tax-free exchange of 0.625 of
a share of Wachovia Common Stock for each share of the Corporation Common
Stock. Based upon Wachovia's closing price of $62.125 on June 9, 1997,
the last trading day prior to the announcement of the transaction, the
exchange ratio represented a price of $38.83 for each share of the
Corporation's Common Stock. Also in conjunction with the merger, the
Corporation entered into a Stock Option Agreement granting Wachovia an
option to purchase, subject to certain circumstances, up to 2,770,000
shares of the Corporation's Common Stock. The shares subject to the
option represented approximately 19.9 percent of the Corporation's
outstanding shares as of June 10, 1997.
Financial Condition
Total assets on June 30, 1997 were $2.168 billion compared with
$2.081 billion one year earlier. At December 31, 1996, total assets
were $2.162 billion. Average total assets in the second quarter of 1997
were $2.145 billion compared with the second quarter 1996 average of
$2.051 billion. In the first half, total assets averaged $2.139 billion
in 1997 compared with $2.037 billion in 1996.
Loans, net of unearned income increased 12.5 percent to $1.443
billion on June 30, 1997, from the year earlier total of $1.283 billion.
Compared with the 1996 year-end total of $1.366 billion, the loan
portfolio has increased $77 million in 1997. Approximately $40 million
of that increase occurred in the second quarter, thus reflecting
continued strength in loan demand. Loan growth in the second quarter
was led by indirect instalment lending, mortgage lending, and
construction lending. Average loans, net of unearned income, increased
13 percent in the second quarter of 1997 to $1.424 billion from $1.261
billion in the second quarter of 1996. In the first half of 1997,
loans, net of unearned income, averaged $1.402 billion compared with
$1.243 billion in the same period in 1996.
Investment securities represent the second largest component of
earning assets. Investment securities decreased 14 percent to $526
million on June 30, 1997, from $612 million one year earlier. At year-
end 1996, investment securities totaled $609 million. Investment
securities were reduced in response to loan demand. In the second
quarter of 1997, total investment securities averaged $552 million in
1997, or 13 percent below the second quarter 1996 average of $631
million. Investment securities in the first half of 1997 averaged $571
million compared with $631 million in the first half of 1996.
On June 30, 1997, federal funds sold and money market investments
totaled $17 million compared with $15 million one year earlier. At
year-end 1996, the Corporation did not have any short-term money market
investments. In the second quarter of 1997, these investments averaged
$3 million compared with a second quarter 1996 average of $9 million.
In the first half of 1997, short-term investments averaged $4 million
compared with $11 million in the same period of 1996.
Total deposits on June 30, 1997 were $1.876 billion compared with
the year earlier total of $1.795 billion. At year-end 1996, deposits
totaled $1.891 billion. Non interest-bearing deposits at June 30, 1997,
increased 8 percent to $324 million from $300 million one year earlier.
For the same period, interest-bearing deposits increased 4 percent.
Average total deposits in the second quarter were $1.859 billion in 1997
and $1.772 billion in 1996. In the first half of 1997, total deposits
averaged $1.860 billion compared with $1.766 billion in the first half
of 1996.
Short-term borrowings totaled $64 million on June 30, 1997,
compared with $42 million one year earlier and $50 million at year-end
1996. In the second quarter, short-term borrowings averaged $60 million
in 1997 and $34 million in 1996. In the first half, short-term
borrowings averaged $55 million in 1997 and $26 million in 1996.
Results of Operations
Net income in the second quarter of 1997 increased 15 percent to a
quarterly record of $8.0 million from $7.0 million in the second quarter
of 1996. Net income per share also increased 26 percent in the second
quarter to $.58 in 1997 from $.46 in 1996. The stronger increase in net
income per share resulted from a reduction in shares outstanding through
a tender offer concluded in the fourth quarter of 1996.
In the first half of 1997, net income rose to a record high of
$14.9 million, or 11 percent above $13.5 million in the first half of
1996. Net income per share in the first half of 1997 increased 21
percent to $1.08 from $.89 in the first half of 1996.
Higher net income in the second quarter and first half of 1997 led
to higher profitability ratios. The return on average assets increased
to 1.50 percent in the second quarter of 1997 compared with 1.36 percent
in the second quarter of 1996. In the first half, this ratio was 1.40
percent in 1997 and 1.33 percent in 1996.
The return on average shareholders' equity also improved in the
second quarter and first half of 1997 compared with the same periods in
1996. In the second quarter this ratio advanced to 15.28 percent in
1997 from 12.11 percent in 1996. In the first half the return on
average shareholders' equity increased to 14.34 percent in 1997 from
11.76 percent in 1996. In addition to higher net income, a reduction in
capital from the 1996 tender offer contributed to the increase in the
return on equity in both the second quarter and first half of 1997.
The increase in second quarter 1997 net income was attributable to
a 7 percent increase in net interest income and an 18 percent increase
in non-interest income. Higher first half net income resulted from a 6
percent increase in net interest income and an 11 percent increase in
non-interest income. Non-interest expense also was a factor in second
quarter and first half earnings comparisons between 1997 and 1996, as it
increased only 4 percent in the second quarter and 3 percent in the
first half.
Net interest income increased 7 percent in the second quarter of
1997 on the strength of a 7 percent increase in interest income. The
increase in interest income was attributable to loan growth and to an
increase in the prime lending rate, which occurred near the end of the
first quarter of 1997. Interest expense increased 8 percent in the
second quarter of 1997 as the result of a 6 percent increase in
interest-bearing liabilities and higher rates paid on those balances.
In the first half of 1997, net interest income increased 6 percent
over the amount recorded in the first half of 1996. Interest income
increased 6 percent in the first half of 1997 and interest expense
increased 7 percent. Interest income benefited from a 5 percent increase
in average earning assets and an increase in loans as a proportion of
earning assets. In addition, the yield on average earning assets
increased 12 basis points in the first half of 1997 to 8.18 percent.
Interest expense was 7 percent higher in the first half of 1997,
principally as a result of a 6 percent increase in average
interest-bearing liabilities. The average cost of interest-bearing
liabilities increased only 3 basis points in the first half of 1997 to
3.85 percent.
The factors that affected net interest income in the second quarter
and first half of 1997 led to improvements in the net interest margin
for both periods. In the second quarter, the net interest margin was
5.11 percent in 1997 compared with 5.00 percent in 1996. In the first
half, the net interest margin was 5.02 percent in 1997 and 4.98 percent
in 1996.
In recognition of the increase in loans, an increase in net loan
losses, and industry trends in credit quality measures, the provision
for loan losses was increased in 1997. In the second quarter, the
provision for loan losses was $1.1 million in 1997 compared with $840
thousand in 1996. In the first half, the provision was $2 million in
1997 and $1.6 million in 1996.
On June 30, 1997, the allowance for loan losses was $15.6 million,
or 1.08 percent of loans, net of unearned income. One year earlier, the
allowance was $14.1 million, or 1.10 percent of loans, net of unearned
income. In the second quarter of 1997, net loan losses were $547
thousand, or .15 percent of average loans. In the second quarter of
1996, net loan losses were $532 thousand, or .17 percent of average
loans. After six months net loan losses were $1.1 million in 1997
and $966 thousand in 1996. Those amounts represented .16 percent of
average loans in the first half of 1997 and 1996, respectively.
Non-interest income increased 18 percent in the second quarter and
11 percent in the first half of 1997 over amounts recorded in the
comparable periods in 1996. In the second quarter of 1997, non-interest
income included $594 thousand from the sale of merchant credit card
operations and $257 thousand from the sale of land previously held for
expansion. After taxes, these gains amounted to $553 thousand, or $.04
per share. Income from sales of mortgage loans decreased in the second
quarter and first half of 1997 as the result of a decrease in fixed-rate
mortgage loan originations. Other income rose in both the second
quarter and first half of 1997 as the result of the previously noted
gains and from higher revenues from automated teller machine fees.
Non-interest expense increased 4 percent in the second quarter and
3 percent in the first half of 1997 over amounts recorded in the
comparable 1996 periods. Two non-recurring items recorded in the second
quarter of 1996 affected non-interest expense comparisons with
comparable periods in the second quarter and first half of 1997. A
writedown of certain real estate, in accordance with Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of, raised
occupancy expense $438 thousand in the second quarter of 1996. Also, a
recovery from the sale of a foreclosed property in the second quarter of
1996 lowered other expense $448 thousand. The net effect of these two
non-recurring items was not significant to total non-interest expense,
but affected comparisons with 1997 amounts for occupancy expense and
other expense.
LIQUIDITY
A financial institution's liquidity requirements are measured by
its need to meet deposit withdrawals, fund loans, maintain reserve
requirements, and operate the organization. To meet its liquidity
needs, the Corporation maintains cash reserves and has an adequate flow
of funds from maturing loans, investment securities, and short-term
investments. In addition, the Corporation's bank affiliate has the
ability to borrow from the Federal Reserve and from the Federal Home
Loan Bank. The Corporation considers its sources of liquidity to be
ample to meet its needs.
CAPITAL RESOURCES
On June 30, 1997, shareholders' equity totaled $212 million, or 9.8
percent of total assets. Included in shareholders' equity on June 30,
1997 were unrealized gains, net of the deferred tax effect, of $927
thousand on securities available for sale. In the first half of 1997,
shareholders' equity averaged $209 million, or 9 percent below the first
half 1996 average of $230 million. On June 30, 1997, the book value of
a share of common stock was $15.20 compared with $15.14 a year earlier.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
On April 22, 1997, the Corporation held its annual meeting of shareholders,
at which time shareholders elected 13 directors to serve until the next annual
meeting of shareholders, and approved the selection of KPMG Peat Marwick LLP
as the Corporation's independent auditors for 1997. The number of votes cast
for and the number of votes withheld for each director are set forth below:
For Withhold Authority
John T. Casteen, III 11,650,615 268,387
Hovey S. Dabney 11,650,894 268,108
Lawrence S. Eagleburger 11,659,197 259,805
Hunter Faulconer 11,643,737 275,265
Fred L. Glaize, III 11,666,134 252,868
Henry H. Harrell 11,663,575 255,427
Alex J. Kay, Jr. 11,663,747 255,255
J. A. Kessler, Jr. 11,668,403 250,600
O. Kenton McCartney 11,667,328 251,674
W. A. Rinehart, III 11,645,862 273,140
Gilbert M. Rosenthal 11,653,520 265,482
Alson H. Smith, Jr. 11,658,934 260,068
H. A. Williamson, Jr. 11,663,950 255,052
The number of votes cast for and against KPMG Peat Marwick LLP as independent
auditors for 1997 as well as the number of abstentions in connection with
such vote, are set forth below:
For: 11,807,753 Against: 56,703 Abstain: 54,545
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed on the accompanying Index to Exhibits
immediately following the signature page are filed as part
of, or incorporated by reference into, this report.
(b) Reports on Form 8-K
During the second quarter of 1997, Jefferson Bankshares, Inc.
filed a report on Form 8-K for the pending merger of Jefferson Bankshares,
Inc. into Wachovia Corporation. The merger is expected to close
no later than October 31, 1997.
Pursuant to the requirements of the Securities Exchange Act
of 1934 the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
JEFFERSON BANKSHARES, INC.
August 7, 1997 By: O. Kenton McCartney
President and
Chief Executive Officer
and
By: Allen T. Nelson, Jr.
Senior Vice President,
Chief Financial Officer,
and Treasurer
EXHIBIT INDEX
Exhibit No. Page
3. Articles of Incorporation and Bylaws:
(a) Articles of Incorporation incorporated by
reference to Jefferson Bankshares' Annual
Report on Form 10-K for 1984.
(b) Articles of Amendment to Articles of
Incorporation dated May 7, 1987, incorporated
by reference to Jefferson Bankshares' report
on Form 10-Q for the quarter ended June 30,
1987.
(c) Articles of Amendment to Articles of
Incorporation dated March 23, 1993, incorporated
by reference to Jefferson Bankshares' report
on Form 10-Q for the quarter ended June 30, 1993.
(d) Amended and Restated Bylaws dated January 24, 1995,
incorporated by reference to Jefferson Bankshares'
Annual Report on Form 10-K for 1994.
(e) Amendment dated September 25, 1996 to the Amended
and Restated Bylaws, incorporated by reference to
Jefferson Bankshares' report on Form 10-Q for the
quarter ended September 30, 1996.
4. Instruments defining the rights of security holders
including indentures:
(a) Articles of Incorporation, incorporated by reference
to Jefferson Bankshares' Annual Report on
Form 10-K for 1984.
(b) Articles of Amendment to Articles of
Incorporation dated May 7, 1987, incorporated
by reference to Jefferson Bankshares' report
on Form 10-Q for the quarter ended June 30,
1987.
(c) Articles of Amendment to Articles of
Incorporation dated March 23, 1993,
incorporated by reference to Jefferson
Bankshares' report on Form 10-Q for the
quarter ended June 30, 1993.
10. Material Contracts:
(a) Senior Officers Supplemental Pension Plan,
incorporated by reference to Jefferson
Bankshares' Annual Report on Form 10-K for 1982.
(b) Split Dollar Life Insurance Plan, incorporated
by reference to Jefferson Bankshares' Annual
Report on Form 10-K for 1984.
(c) Incentive Stock Plan, incorporated by reference
to Jefferson Bankshares' report on Form 10-Q for
the quarter ended June 30, 1985.
(d) Amendment dated April 28, 1992 to the Incentive
Stock Plan, incorporated by reference to Exhibit
10(f) to Form S-4 of Jefferson Bankshares, File No.
33-47929.
(e) Amendment dated July 22, 1997 to the Incentive Stock
Plan is filed herewith. 15
(f) 1995 Long Term Incentive Stock Plan, incorporated
by reference to Exhibit 99(a) to Form S-8 of
Jefferson Bankshares, File No. 33-60799.
(g) Amendment dated June 27, 1995 to Long Term Incentive
Stock Plan, incorporated by reference to Jefferson
Bankshares' report on Form 10-Q for the quarter ended
June 30, 1995.
(h) Deferred Compensation and Stock Purchase Plan for
Non-Employee Directors, incorporated by reference
to Exhibit 99(a) to Form S-8 of Jefferson Bankshares,
File No. 33-57461.
(i) First Amendment dated January 28, 1997 to Deferred
Compensation and Stock Purchase Plan for Non-Employee
Directors, incorporated by reference to Jefferson
Bankshares' Annual Report on Form 10-K for 1996.
(j) Executive Continuity Agreement dated April 22, 1997
between Jefferson Bankshares and O. Kenton McCartney
is filed herewith. 16
(k) Executive Continuity Agreement dated April 22, 1997
between Jefferson Bankshares and Robert H. Campbell, Jr.
is filed herewith. 28
(l) Executive Continuity Agreement dated April 22, 1997
between Jefferson Bankshares and Allen T. Nelson, Jr.
is filed herewith. 40
(m) Executive Continuity Agreement dated April 22, 1997
between Jefferson Bankshares and William M. Watson, Jr.
is filed herewith. 52
(n) Amended and Restated Split Dollar Life Insurance
Agreement dated October 29, 1993 between Jefferson
Bankshares and Robert H. Campbell, Jr., incorporated
by reference to Jefferson Bankshares' Annual Report
on Form 10-K for 1993.
(o) Amendment dated February 15, 1995, to the Amended
and Restated Split Dollar Life Insurance Agreement
dated October 29, 1993 between Jefferson Bankshares
and Robert H. Campbell, Jr., incorporated by reference
to Jefferson Bankshares' report on Form 10-Q for the
quarter ended March 31, 1995.
(p) Amended and Restated Split Dollar Life Insurance
Agreement dated October 29, 1993 between Jefferson
Bankshares and O. Kenton McCartney, incorporated by
reference to Jefferson Bankshares' Annual Report on
Form 10-K for 1993.
(q) Amendment dated as of May 19, 1994, to the Amended
and Restated Split Dollar Life Insurance Agreement
dated October 29, 1993 between Jefferson Bankshares
and O. Kenton McCartney, incorporated by reference
to Exhibit 10(p) to Form S-4 of Jefferson Bankshares,
File No. 33-53727.
(r) Amendment dated as of March 12, 1997, to the Amended and
Restated Split Dollar Life Insurance Agreement dated
October 29, 1993 between Jefferson Bankshares and O.
Kenton McCartney is filed herewith. 64
(s) Split Dollar Life Insurance Agreement dated
January 6, 1995 between Jefferson Bankshares, Inc. and
Allen T. Nelson, Jr., incorporated by reference to
Jefferson Bankshares' Annual Report on Form 10-K for 1994.
(t) Amended and Restated Split Dollar Life Insurance
Agreement dated October 29, 1993 between Jefferson
Bankshares and William M. Watson, Jr., incorporated by
reference to Jefferson Bankshares' Annual Report on
Form 10-K for 1995.
(u) Amendment dated as of June 1, 1997, to the Amended
and Restated Split Dollar Life Insurance Agreement
between Jefferson Bankshares and William M. Watson, Jr. 67
is filed herewith.
27. Financial Data Schedule 70
AMENDMENT
TO THE
JEFFERSON BANKSHARES, INC.
INCENTIVE STOCK PLAN
The Jefferson Bankshares, Inc. Incentive Stock Plan (the "Plan"), is
hereby amended as follows:
1. Section 11 of the Plan is amended in its entirety to read as follows:
11. Certain Corporate Events. In the event of the merger,
consolidation, sale of substantially all of the assets,
dissolution or liquidation of the Company, the Committee
may, but shall not be required to, (i) accelerate the
vesting of Grantees' interests in their Book Accounts,
and (ii) specify the time and manner in which Units credited
to Grantees' Book Accounts as of the date of such event will
be distributed, notwithstanding any other provisions
of this Plan and to the contrary. The effectiveness of
such actions, if and to the extent that the Committee
undertakes such actions, shall be conditioned on the
consummation of the merger, consolidation, sale,
dissolution or liquidation of the Company.
This amendment is adopted as of July 22, 1997.
JEFFERSON BANKSHARES, INC.
By: /s/ O. Kenton McCartney
President and
Chief Executive Officer
Exhibit 10(j)
JEFFERSON BANKSHARES, INC.
EXECUTIVE CONTINUITY AGREEMENT
This Executive Continuity Agreement (the "Agreement") is made as of
April 22, 1997, between JEFFERSON BANKSHARES, INC. ("Jefferson") and O. KENTON
McCARTNEY (the "Executive"). The purpose of the Agreement is to encourage the
Executive to continue employment after a Change of Control by providing
reasonable employment security to the Executive and to recognize the prior
service of the Executive in the event of a termination of employment under
defined circumstances after a Change of Control. This Agreement supersedes and
replaces the Executive Severance Agreement dated October 25, 1993 or any similar
agreements between the Executive and Jefferson.
Section 1. Definitions. For purposes of this Agreement:
(a) "Affiliate" means any corporation that is directly, or
indirectly through one or more intermediaries, controlled by Jefferson.
(b) "Beneficiary" means the person or entity designated by the
Executive, by a written instrument delivered to Jefferson, to receive any
benefits payable under this Agreement in the event of the Executive's death. If
the Executive fails to designate a Beneficiary, or if no Beneficiary survives
the Executive, such death benefits will be paid to the Executive's estate.
(c) "Board" means the Board of Directors of Jefferson.
(d) "Change of Control" means an event described in (i), (ii),
(iii), or (iv):
(i) The acquisition by a Group of Beneficial Ownership of
20% or more of the Stock of Jefferson, but excluding, for this
purpose, any acquisition by Jefferson or an Affiliate, an employee
benefit plan of Jefferson or an Affiliate, or any corporation with
respect to which, following such acquisition, more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by the individuals and entities who were the beneficial
owners, respectively, of the Stock and voting securities of
Jefferson immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the then outstanding shares of Stock or combined
voting power of the then outstanding voting securities of Jefferson
entitled to vote generally in the election of directors, as the case
may be. "Group" means any individual, entity or group within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Act"), "Beneficial Ownership" has the
meaning in Rule 13d-3 promulgated under the Act, and "Stock" means
the then outstanding shares of common stock of Jefferson.
(ii) Individuals who constitute the Board on the date of this
Agreement (the "Incumbent Board") cease to constitute at least a
majority of the Board, provided that any director whose nomination
was approved by a majority of the Incumbent Board will be considered
a member of the Incumbent Board, excluding any such individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of Jefferson (as such terms are used in Rule 14a-11
promulgated under the Act).
(iii) Approval by the shareholders of Jefferson of a
reorganization, merger or consolidation, in each case, in which the
owners of the Stock of Jefferson do not, following such
reorganization, merger or consolidation, beneficially own, directly
or indirectly, more than 50% of the Stock of the corporation
resulting from such reorganization, merger or consolidation.
(iv) Approval by the shareholders of Jefferson of a complete
liquidation or dissolution of Jefferson, or of the sale or other
disposition of all or substantially all of the assets of Jefferson.
(e) "Change of Control Date" means the date on which a Change of
Control occurs. If a Change of Control occurs on account of a series of
transactions, the Change of Control Date is the date of the last of such
transactions.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Compensation" means the total compensation paid to the
Executive by Jefferson or by any Affiliate of Jefferson which is or will be
reportable as income under the Code on Internal Revenue Service Form W-2 (i)
plus any amount contributed by the Executive pursuant to a salary reduction
agreement and which is not includible in gross income under Code Sections 125 or
402(a)(8) or under any other program that provides for pre-tax salary reductions
or compensation deferrals, and (ii) reduced by any income reportable on Form W-2
that is attributable to the exercise of any stock option. With respect to any
amount which is paid at an earlier date than otherwise due because of the
occurrence of a Change of Control (including through the acceleration of
vesting), that amount shall be included in Compensation at the earlier of (i)
the time or times when the amount would have been paid to the Executive absent a
Change of Control or (ii) the termination of the Executive's employment.
(h) "Employment Period" means the period commencing on the Change of
Control Date and ending on the second anniversary of the later of the Change of
Control Date or the date of closing of the corporate transaction that is the
subject of the shareholder approval in Section 1(d)(iii) or (iv).
(i) "Final Compensation" means the greater of (i) the Executive's
Compensation for the 12 months immediately preceding the termination of the
Executive's employment, or (ii) the Executive's Compensation for the 12 months
immediately preceding the Change of Control.
(j) "Good Reason" will exist with respect to the Executive if,
without the Executive's express written consent, after a Change of Control:
(i) there is a material reduction in the Executive's duties
or authority after a Change of Control;
(ii) there is a material adverse change in the Executive's
overall working environment after a Change of Control;
(iii) there is a reduction in the Executive's rate of base
salary, incentive compensation opportunities, welfare benefits, or
perquisites as in effect at the time of a Change of Control;
(iv) Jefferson changes the principal location in which the
Executive is required to perform services from the location at which
the Executive performed services as of the Change of Control; or
(v) a failure by Jefferson to comply with and satisfy
Section 13(b).
(k) "Pension Plan" means the Jefferson Bankshares, Inc. Pension
Plan, as amended from time to time.
(l) "Retirement Continuance Benefit" means the benefit provided in
Section 4(c).
(m) "Salary Continuance Benefit" means the benefit provided in
Section 4(b).
(n) "Severance Benefit" means the sum of the Salary Continuance
Benefit, the Retirement Continuance Benefit, and the Welfare Continuance
Benefit.
(o) "Severance Period" means the period beginning on the date the
Executive's employment with Jefferson terminates and ending on the date two (2)
years thereafter.
(p) "Welfare Continuance Benefit" means the benefit provided in
Section 4(d).
(q) "Welfare Plan" means any health and dental plan, disability
plan, survivor income plan, life insurance plan or any other welfare benefit
plan, as defined in Section 3(1) of ERISA, currently or hereafter made available
by Jefferson or any Affiliate in which the Executive is eligible to participate.
Section 2. Employment After Change of Control.
If the Executive is employed by Jefferson or an Affiliate on the Change of
Control Date, Jefferson or an Affiliate will continue to employ the Executive
for the Employment Period. During the Employment Period unless the Executive
provides an express written consent otherwise, (A) the Executive will have such
duties and such other powers which are generally consistent with the duties and
powers of the Executive before the Change of Control Date and (B) the
Executive's services will be performed at the location where the Executive was
employed immediately preceding the Change of Control Date.
Section 3. Compensation During Employment Period.
(a) During the Employment Period, the Executive will receive an
annual base salary ("Annual Base Salary"), at least equal to the base salary
paid or payable to the Executive by Jefferson and its Affiliates in respect of
the twelve-month period immediately preceding the Change of Control Date. During
the Employment Period, the Annual Base Salary will be increased at any time and
from time to time as will be substantially consistent with increases in base
salary generally awarded in the ordinary course of business to other peer
executives of Jefferson and its Affiliates. Any increase in Annual Base Salary
will not serve to limit or reduce any other obligation to the Executive under
this Agreement. Annual Base Salary will not be reduced after any such increase.
(b) During the Employment Period, the Executive will be entitled to
participate in all incentive (including, without limitation, stock incentive),
savings, retirement, split dollar life insurance plans, practices, policies and
programs applicable generally to other peer executives of Jefferson and its
Affiliates, but in no event will such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than those
provided by Jefferson and its Affiliates for the Executive under such plans,
practices, policies and program as in effect at any time during the six (6)
months immediately preceding the Change of Control Date, provided that the
Executive's total incentive compensation for each fiscal year during the
Employment Period will be not less than the total incentive compensation paid or
payable to the Executive by Jefferson and its Affiliates in respect of the
fiscal year immediately preceding the Change of Control Date.
(c) During the Employment Period, the Executive and/or the
Executive's family, as the case may be, will be eligible for participation in
and will receive all benefits under welfare benefit plans, practices, policies
and programs provided by Jefferson and its Affiliates (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of
Jefferson and its Affiliates, but in no event will such plans, practices,
policies and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time during the six (6)
months immediately preceding the Change of Control Date.
(d) During the Employment Period, the Executive will be entitled to
fringe benefits in accordance with the most favorable plans, practices, programs
and policies of Jefferson and its Affiliates in effect for the Executive at any
time during the six (6) months immediately preceding the Change of Control Date
or, if more favorable to the Executive, as in effect generally from time to time
after the Change of Control Date with respect to other peer executives of
Jefferson and its Affiliates.
(e) Upon a Change of Control, for purposes of the Jefferson
Executive Incentive Plan ("Executive Incentive Plan") for the fiscal year in
which the Change of Control occurs, Jefferson will be deemed to have achieved
the level of performance as to each performance goal that is the greater of (i)
the actual level of performance, or (ii) the target level of performance. If the
Executive is not employed on the last day of the calendar year in which the
Change of Control occurs, the Executive will receive a pro rata award payable
under the Executive Incentive Plan as determined pursuant to this Section 3(c)
based on the portion of the calendar year during which the Executive was
employed.
Section 4. Benefits Upon Termination of Employment.
(a) Subject to the provisions of section 15, the Executive will be
entitled to a Salary Continuance Benefit, a Retirement Continuance Benefit, and
a Welfare Continuance Benefit if (i) the employment of the Executive with
Jefferson or any Affiliate is terminated for any reason by Jefferson or any
Affiliate within six (6) months prior to a Change of Control or during the
Employment Period, (ii) the Executive terminates his employment with Jefferson
or any Affiliate for Good Reason within the Employment Period, or (iii) the
Executive terminates his employment with Jefferson or any Affiliate within the
thirty (30) day period beginning on the later of the one-year anniversary of the
Change of Control Date or the date of closing of the corporate transaction that
is the subject of the shareholder approval in Section 1(d)(iii) or (iv); which
date of closing will be certified by the Company to the Executive within 30 days
of the closing. Any termination by the Executive will be communicated by Notice
of Termination to Jefferson given in accordance with Section 16(b). For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
indicated the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the date of termination
is other than the date of receipt of such notice, specified the termination date
(which date will be not more than 15 days after the giving of such notice). The
failure by the Executive to set forth in the Notice of Termination any fact or
circumstance will not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(b) The Salary Continuance Benefit will be a lump sum payment equal
to 299% of the Executive's Final Compensation. The Salary Continuance Benefit
will be paid to the Executive within 30 days after the Executive's date of
termination. The Salary Continuance Benefit will be made net of all required
federal and state withholding taxes and similar required withholdings.
(c) The Retirement Continuance Benefit will consist of a Pension
Continuance Benefit, a SERP Continuance Benefit and a Split Dollar Life
Insurance Continuance Benefit.
(i) The Pension Continuance Benefit will be the actuarial
equivalent of the additional amount payable to the Executive under
the Pension Plan and the Jefferson Bankshares, Inc. Excess Benefit
Plan if (A) the Executive's age were deemed to be the Executive's
actual age plus two (2) years (but not in excess of age 65), (B) the
Executive's years of service were the Executive's actual years of
service plus two (2) years, and (C) the Executive's compensation
during the two (2) deemed additional years of service was his Final
Compensation. To determine the actuarial equivalent, the provisions
of the Pension Plan relating to the calculation of lump sum payments
will be used. The Pension Continuance Benefit will be paid to the
Executive in a lump sum within 30 days after the Executive's date of
termination. The Pension Continuance Benefit will be made net of all
required federal and state withholding taxes and similar required
withholdings.
(ii) The SERP Continuance Benefit will be the benefit, if
any, payable under the Jefferson Bankshares, Inc. Senior Officer's
Supplemental Pension Plan calculated if (A) the Executive's age were
deemed to be the Executive's actual age plus two (2) years (but not
in excess of age 65), and (B) the Executive's years of service were
the Executive's actual years of service plus two (2) years. The SERP
Continuance Benefit will be paid at the times and in the forms
otherwise provided in the Jefferson Bankshares, Inc. Senior
Officer's Supplemental Pension Plan for payment of benefits.
(iii) The Split Dollar Life Insurance Continuance Benefit will
be the payment by Jefferson or an Affiliate for two (2) years after
the Executive's termination of all premium payments and other costs
associated with any split dollar life insurance policy, plan or
program to the extent that the premium payments and other costs
would have been paid by Jefferson or an Affiliate if the Executive's
employment had continued for an additional two (2) years. At the end
of the additional two (2) years of payments, the Executive will have
any options with respect to any such policy that would otherwise
have been available at the Executive's termination of employment
absent the Split Dollar Life Insurance Continuance Benefit.
(d) During the Severance Period, the Executive and his dependents
will continue to be covered by all Welfare Plans in which he or his dependents
were participating immediately prior to the date of his termination (the
"Welfare Continuance Benefit"). Any changes to any Welfare Plan during the
Severance Period will be applicable to the Executive and his dependents as if he
continued to be an employee of Jefferson. Jefferson will pay all or a portion of
the cost of the Welfare Continuance Benefit for the Executive and his dependents
under the Welfare Plans on the same basis as applicable, from time to time, to
active employees covered under the Welfare Plans and the Executive will pay any
additional costs. If such participation in any one or more of the Welfare Plans
included in the Welfare Continuance Benefit is not possible under the terms of
the Welfare Plan or any provision of law would create an adverse tax effect for
the Executive or Jefferson due to such participation, Jefferson will provide
substantially identical benefits directly or through an insurance arrangement.
The Welfare Continuance Benefit as to any Welfare Plan will cease if and when
the Executive has obtained coverage under one or more welfare benefit plans of a
subsequent employer that provide for equal or greater benefits to the Executive
and his dependents with respect to the specific type of benefit.
(e) If Jefferson determines that any part of the Severance Benefit
would be subject to the excise tax imposed under Code Section 4999 on "excess
parachute payments," Jefferson will compute the amount that could be paid to the
Executive without the imposition of the excise tax imposed by Code Section 4999
(the "Capped Amount"). The computation required under this subsection will be
made by a tax counsel or nationally recognized accounting firm selected by
mutual consent of Jefferson and the Executive. The fees and expenses of the tax
counsel or the accounting firm will be borne by Jefferson. The calculations
under this subsection will be made in a manner consistent with the requirements
of Code Sections 280G and 4999, as in effect at the time the calculations are
made.
(i) Notwithstanding anything in this Agreement to the
contrary, if the Capped Amount is greater than or equal to 97% of
the Severance Benefit, then the Executive will be paid the Capped
Amount in lieu of the entire Severance Benefit. To achieve such
required reduction in the Severance Benefit to the Capped Amount,
the Executive will determine what portion of the Severance Benefit
will be reduced, eliminated or postponed, the amount of each such
reduction, elimination or postponement, and the period of each such
postponement. To enable the Executive to make such determination,
Jefferson will provide the Executive with such information as is
reasonably necessary for such determination.
(ii) If the Capped Amount is less than 97% of the Severance
Benefit, then Executive will be paid, in addition to the Severance
Benefit, the sum of (x) plus (y) where:
(x) is an amount equal to the excise tax imposed by Code Section
4999 on the Severance Benefit; and
(y) is the amount determined under the following formula:
(x) times ((Tax Rate/(1-Tax Rate)).
For purposes of this subsection, Tax Rate is the sum of (A) the
highest Federal personal income tax rate under Code Section 1
applicable to income of the character of the Severance Benefit; (B)
the highest state and local income tax rates for the state in which
the Participant is a resident applicable to income of the character
of the Severance Benefit; (C) the hospital insurance tax rate under
Code Section 3111(b), and (D) the excise tax rate under Code Section
4999. Such additional amount will be payable to the Executive as
soon as may be practicable after such final determination is made.
(f) The Executive agrees that he will not discuss his employment and
resignation or termination (including the terms of this Agreement) with any
representatives of the media, either directly or indirectly, without the written
consent and approval of Jefferson.
Section 5. Outplacement Services.
If the Executive is entitled to a Severance Benefit under Section 4, the
Executive will be entitled to receive complete outplacement services, including
job search and interview skill services, paid by Jefferson up to a total cost of
$20,000. The services will be provided by a nationally recognized outplacement
organization selected by the Executive with the approval of Jefferson (which
approval will not be unreasonably withheld). The services will be provided for
up to two (2) years after the Executive's termination of employment.
Section 6. Death.
If the Executive dies while receiving a Welfare Continuation Benefit, the
Executive's spouse and other dependents will continue to be covered under all
applicable Welfare Plans during the remainder of the Severance Period.
Section 7. No Setoff.
(a) Payment of a Severance Benefit will be in addition to any other
amounts otherwise currently payable to the Executive, including any accrued but
unpaid vacation pay. No payments or benefits payable to or with respect to the
Executive pursuant to this Agreement will be reduced by any amount the Executive
may earn or receive from employment with another employer or from any other
source. In no event will the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and, except as provided
in Section 4(d) with respect to the Welfare Continuation Benefit, such amounts
will not be reduced whether or not the Executive obtains other employment.
(b) Nothing in this Agreement will limit or otherwise affect such
rights as the Executive may have under any contract or agreement with Jefferson
or its Affiliates. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with Jefferson or its Affiliates at or subsequent to
the Executive's termination of employment will be payable in accordance with
such plan, policy, practice or program or contract or agreement except, except
that the Severance Benefit will be reduced (but not below zero) by any payment
made solely as the result of a Change of Control under any employment agreement
or other compensatory agreement between the Executive and Jefferson other than
an agreement that provides for accelerated vesting of any stock-based awards
such as options.
Section 8. No Assignment of Benefit.
No interest of the Executive or any Beneficiary under this Agreement, or
any right to receive any payment or distribution hereunder, will be subject in
any manner to sale, transfer, assignment, pledge, attachment, garnishment, or
other alienation or encumbrance of any kind, nor may such interest or right to
receive a payment or distribution be taken, voluntarily or involuntarily, for
the satisfaction of the obligations or debts of, or other claims against, the
Executive or Beneficiary, including claims for alimony, support, separate
maintenance, and claims in bankruptcy proceedings.
Section 9. Benefits Unfunded.
All rights under this Agreement of the Executive and Beneficiaries will at
all times be entirely unfunded, and no provision will at any time be made with
respect to segregating any assets of Jefferson for payment of any amounts due
hereunder. The Executive and Beneficiaries will have only the rights of general
unsecured creditors of Jefferson.
Section 10. Applicable Law.
This Agreement will be construed and interpreted pursuant to the laws of
the Commonwealth of Virginia, without reference to its conflict of laws rules.
Section 11. No Employment Contract.
Nothing contained in this Agreement will be construed to be an employment
contract between the Executive and Jefferson prior to a Change of Control.
Section 12. Severability.
In the event any provision of this Agreement is held illegal or invalid,
the remaining provisions of this Agreement will not be affected thereby.
Section 13. Successors.
(a) The Agreement will be binding upon and inure to the benefit of
Jefferson, the Executive and their respective heirs, representatives and
successors.
(b) Jefferson will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Jefferson to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that Jefferson would be required to perform it if no such succession had taken
place. As used in this Agreement, "Jefferson" will mean Jefferson as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
Section 14. Litigation Expenses.
(a) Jefferson agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof
unless a court of competent jurisdiction determines that the Executive acted in
bad faith in initiating the contest) by Jefferson, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Code Section 7872(f)(2)(A); provided however, that
the reasonableness of the fees and expenses must be determined by an independent
arbitrator, using standard legal principles, mutually agreed upon by Jefferson
and the Executive in accordance with rules set forth by the American Arbitration
Association.
(b) If there is any dispute between Jefferson and the Executive in
the event of any termination of the Executive's employment by Jefferson or by
the Executive, then, unless and until there is a final, nonappealable judgment
by a court of competent jurisdiction declaring that the Executive is not
entitled to benefits under this Agreement, Jefferson will pay all amounts, and
provide all benefits, to the Executive and/or the Executive's family or other
Beneficiaries, as the case may be, that Jefferson would be required to pay or
provide pursuant to this Agreement. Jefferson will not be required to pay any
disputed amounts pursuant to this paragraph except upon receipt of an
undertaking (which may be unsecured) by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such court not
to be entitled.
Section 15. Confidentiality.
(a) The Executive will hold in a fiduciary capacity for the benefit
of Jefferson all secret or confidential information, knowledge or data relating
to Jefferson or any of its Affiliates and their respective businesses, which
will have been obtained by the Executive during the Executive's employment by
Jefferson or any Affiliate and which will not be or become public knowledge
(other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the Executive's employment
with Jefferson, the Executive will not, without the prior written consent of
Jefferson or except as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than Jefferson and those designated by it.
(b) In the event of a breach or threatened breach of this Section
15, the Executive agrees that Jefferson will be entitled to injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be inadequate and
insufficient. If Jefferson obtains a judicial determination that the Executive
has breached the terms of this Section 15, all rights of the Executive under
this Agreement will terminate. Any termination of the Executive's employment
will have no effect on the continuing operation of this Section 15.
Section 16. Amendment and Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and the writing is signed by the Executive and Jefferson. A waiver of any breach
of or compliance with any provision or condition of this Agreement is not a
waiver of similar or dissimilar provisions or conditions. This Agreement may be
executed in one or more counterparts, all of which will be considered one and
the same agreement.
(b) All notices and other communications hereunder will be in
writing and will be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive to: If to Jefferson to:
O. Kenton McCartney Jefferson Bankshares, Inc.
2021 Spottswood Road 123 E. Main Street
Charlottesville, Virginia 22903 Charlottesville, Virginia 22902
Attention: Corporate Secretary
or to such other address as either party will have furnished to the other in
writing in accordance herewith. Notice and communications will be effective when
actually received by the addressee.
JEFFERSON BANKSHARES, INC.
Date: May 1, 1997 By /s/ Hovey S. Dabney
Date: May 1, 1997 /s/ O. Kenton McCartney
Executive
Exhibit 10(k)
JEFFERSON BANKSHARES, INC.
EXECUTIVE CONTINUITY AGREEMENT
This Executive Continuity Agreement (the "Agreement") is made as of April
22, 1997, between JEFFERSON BANKSHARES, INC. ("Jefferson") and ROBERT H.
CAMPBELL, JR. (the "Executive"). The purpose of the Agreement is to encourage
the Executive to continue employment after a Change of Control by providing
reasonable employment security to the Executive and to recognize the prior
service of the Executive in the event of a termination of employment under
defined circumstances after a Change of Control. This Agreement supersedes and
replaces the Executive Severance Agreement dated October 25, 1993 or any similar
agreements between the Executive and Jefferson.
Section 1. Definitions. For purposes of this Agreement:
(a) "Affiliate" means any corporation that is directly, or
indirectly through one or more intermediaries, controlled by Jefferson.
(b) "Beneficiary" means the person or entity designated by the
Executive, by a written instrument delivered to Jefferson, to receive any
benefits payable under this Agreement in the event of the Executive's death. If
the Executive fails to designate a Beneficiary, or if no Beneficiary survives
the Executive, such death benefits will be paid to the Executive's estate.
(c) "Board" means the Board of Directors of Jefferson.
(d) "Change of Control" means an event described in (i), (ii),
(iii), or (iv):
(i) The acquisition by a Group of Beneficial Ownership of
20% or more of the Stock of Jefferson, but excluding, for this
purpose, any acquisition by Jefferson or an Affiliate, an employee
benefit plan of Jefferson or an Affiliate, or any corporation with
respect to which, following such acquisition, more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by the individuals and entities who were the beneficial
owners, respectively, of the Stock and voting securities of
Jefferson immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the then outstanding shares of Stock or combined
voting power of the then outstanding voting securities of Jefferson
entitled to vote generally in the election of directors, as the case
may be. "Group" means any individual, entity or group within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Act"), "Beneficial Ownership" has the
meaning in Rule 13d-3 promulgated under the Act, and "Stock" means
the then outstanding shares of common stock of Jefferson.
(ii) Individuals who constitute the Board on the date of this
Agreement (the "Incumbent Board") cease to constitute at least a
majority of the Board, provided that any director whose nomination
was approved by a majority of the Incumbent Board will be considered
a member of the Incumbent Board, excluding any such individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of Jefferson (as such terms are used in Rule 14a-11
promulgated under the Act).
(iii) Approval by the shareholders of Jefferson of a
reorganization, merger or consolidation, in each case, in which the
owners of the Stock of Jefferson do not, following such
reorganization, merger or consolidation, beneficially own, directly
or indirectly, more than 50% of the Stock of the corporation
resulting from such reorganization, merger or consolidation.
(iv) Approval by the shareholders of Jefferson of a complete
liquidation or dissolution of Jefferson, or of the sale or other
disposition of all or substantially all of the assets of Jefferson.
(e) "Change of Control Date" means the date on which a Change of
Control occurs. If a Change of Control occurs on account of a series of
transactions, the Change of Control Date is the date of the last of such
transactions.
(f) "Code" means the Internal Revenue Code of 1986, as
amended.
(g) "Compensation" means the total compensation paid to the
Executive by Jefferson or by any Affiliate of Jefferson which is or will be
reportable as income under the Code on Internal Revenue Service Form W-2 (i)
plus any amount contributed by the Executive pursuant to a salary reduction
agreement and which is not includible in gross income under Code Sections 125 or
402(a)(8) or under any other program that provides for pre-tax salary reductions
or compensation deferrals, and (ii) reduced by any income reportable on Form W-2
that is attributable to the exercise of any stock option. With respect to any
amount which is paid at an earlier date than otherwise due because of the
occurrence of a Change of Control (including through the acceleration of
vesting), that amount shall be included in Compensation at the earlier of (i)
the time or times when the amount would have been paid to the Executive absent a
Change of Control or (ii) the termination of the Executive's employment.
(h) "Employment Period" means the period commencing on the Change of
Control Date and ending on the second anniversary of the later of the Change of
Control Date or the date of closing of the corporate transaction that is the
subject of the
shareholder approval in Section 1(d)(iii) or (iv).
(i) "Final Compensation" means the greater of (i) the Executive's
Compensation for the 12 months immediately preceding the termination of the
Executive's employment, or (ii) the Executive's Compensation for the 12 months
immediately preceding
the Change of Control.
(j) "Good Reason" will exist with respect to the Executive if,
without the Executive's express written consent, after a Change of Control:
(i) there is a material reduction in the
Executive's duties or authority after a Change of Control;
(ii) there is a material adverse change in the
Executive's overall working environment after a Change of Control;
(iii) there is a reduction in the Executive's rate of base
salary, incentive compensation opportunities, welfare benefits, or
perquisites as in effect at the time of a Change of Control;
(iv) Jefferson changes the principal location in which the
Executive is required to perform services from the location at which
the Executive performed services as of the Change of Control; or
(v) a failure by Jefferson to comply with and
satisfy Section 13(b).
(k) "Pension Plan" means the Jefferson Bankshares, Inc. Pension
Plan, as amended from time to time.
(l) "Retirement Continuance Benefit" means the benefit provided in
Section 4(c).
(m) "Salary Continuance Benefit" means the benefit provided in
Section 4(b).
(n) "Severance Benefit" means the sum of the Salary Continuance
Benefit, the Retirement Continuance Benefit, and the Welfare Continuance
Benefit.
(o) "Severance Period" means the period beginning on the date the
Executive's employment with Jefferson terminates and ending on the date two (2)
years thereafter.
(p) "Welfare Continuance Benefit" means the benefit provided in
Section 4(d).
(q) "Welfare Plan" means any health and dental plan, disability
plan, survivor income plan, life insurance plan or any other welfare benefit
plan, as defined in Section 3(1) of ERISA, currently or hereafter made available
by Jefferson or any Affiliate in which the Executive is eligible to participate.
Section 2. Employment After Change of Control.
If the Executive is employed by Jefferson or an Affiliate on the Change of
Control Date, Jefferson or an Affiliate will continue to employ the Executive
for the Employment Period. During the Employment Period unless the Executive
provides an express written consent otherwise, (A) the Executive will have such
duties and such other powers which are generally consistent with the duties and
powers of the Executive before the Change of Control Date and (B) the
Executive's services will be performed at the location where the Executive was
employed immediately preceding the Change of Control Date.
Section 3. Compensation During Employment Period.
(a) During the Employment Period, the Executive will receive an
annual base salary ("Annual Base Salary"), at least equal to the base salary
paid or payable to the Executive by Jefferson and its Affiliates in respect of
the twelve-month period immediately preceding the Change of Control Date. During
the Employment Period, the Annual Base Salary will be increased at any time and
from time to time as will be substantially consistent with increases in base
salary generally awarded in the ordinary course of business to other peer
executives of Jefferson and its Affiliates. Any increase in Annual Base Salary
will not serve to limit or reduce any other obligation to the Executive under
this Agreement. Annual Base Salary will not be reduced after any such increase.
(b) During the Employment Period, the Executive will be entitled to
participate in all incentive (including, without limitation, stock incentive),
savings, retirement, split dollar life insurance plans, practices, policies and
programs applicable generally to other peer executives of Jefferson and its
Affiliates, but in no event will such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than those
provided by Jefferson and its Affiliates for the Executive under such plans,
practices, policies and program as in effect at any time during the six (6)
months immediately preceding the Change of Control Date, provided that the
Executive's total incentive compensation for each fiscal year during the
Employment Period will be not less than the total incentive compensation paid or
payable to the Executive by Jefferson and its Affiliates in respect of the
fiscal year immediately preceding the Change of Control Date.
(c) During the Employment Period, the Executive and/or the
Executive's family, as the case may be, will be eligible for participation in
and will receive all benefits under welfare benefit plans, practices, policies
and programs provided by Jefferson and its Affiliates (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of
Jefferson and its Affiliates, but in no event will such plans, practices,
policies and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time during the six (6)
months immediately preceding the Change of Control Date.
(d) During the Employment Period, the Executive will be entitled to
fringe benefits in accordance with the most favorable plans, practices, programs
and policies of Jefferson and its Affiliates in effect for the Executive at any
time during the six
(6)
months immediately preceding the Change of Control Date or, if more favorable to
the Executive, as in effect generally from time to time after the Change of
Control Date with respect to other peer executives of Jefferson and its
Affiliates.
(e) Upon a Change of Control, for purposes of the Jefferson
Executive Incentive Plan ("Executive Incentive Plan") for the fiscal year in
which the Change of Control occurs, Jefferson will be deemed to have achieved
the level of performance as to each performance goal that is the greater of (i)
the actual level of performance, or (ii) the target level of performance. If the
Executive is not employed on the last day of the calendar year in which the
Change of Control occurs, the Executive will receive a pro rata award payable
under the Executive Incentive Plan as determined pursuant to this Section 3(c)
based on the portion of the calendar year during which the Executive was
employed.
Section 4. Benefits Upon Termination of Employment.
(a) Subject to the provisions of section 15, the Executive will be
entitled to a Salary Continuance Benefit, a Retirement Continuance Benefit, and
a Welfare Continuance Benefit if (i) the employment of the Executive with
Jefferson or any Affiliate is terminated for any reason by Jefferson or any
Affiliate within six (6) months prior to a Change of Control or during the
Employment Period or (ii) the Executive terminates his employment with Jefferson
or any Affiliate for Good Reason within the Employment Period. Any termination
by the Executive will be communicated by Notice of Termination to Jefferson
given in accordance with Section 16(b). For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicated the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the date of termination is other than the
date of receipt of such notice, specified the termination date (which date will
be not more than 15 days after the giving of such notice). The failure by the
Executive to set forth in the Notice of Termination any fact or circumstance
will not waive any right of the Executive hereunder or preclude the Executive
from asserting such fact or circumstance in enforcing the Executive's rights
hereunder.
(b) The Salary Continuance Benefit will be a lump sum payment equal
to 299% of the Executive's Final Compensation. The Salary Continuance Benefit
will be paid to the Executive within 30 days after the Executive's date of
termination. The Salary Continuance Benefit will be made net of all required
federal and state withholding taxes and similar required withholdings.
(c) The Retirement Continuance Benefit will consist of a Pension
Continuance Benefit, a SERP Continuance Benefit and a Split Dollar Life
Insurance Continuance Benefit.
(i) The Pension Continuance Benefit will be the actuarial
equivalent of the additional amount payable to the Executive under
the Pension Plan and the Jefferson Bankshares, Inc. Excess Benefit
Plan if (A) the Executive's age were deemed to be the Executive's
actual age plus two (2) years (but not in excess of age 65), (B) the
Executive's years of service were the Executive's actual years of
service plus two (2) years, and (C) the Executive's compensation
during the two (2) deemed additional years of service was his Final
Compensation. To determine the actuarial equivalent, the provisions
of the Pension Plan relating to the calculation of lump sum payments
will be used. The Pension Continuance Benefit will be paid to the
Executive in a lump sum within 30 days after the Executive's date of
termination. The Pension Continuance Benefit will be made net of all
required federal and state withholding taxes and similar required
withholdings.
(ii) The SERP Continuance Benefit will be the benefit, if any,
payable under the Jefferson Bankshares, Inc. Senior Officer's
Supplemental Pension Plan calculated if (A) the Executive's age were
deemed to be the Executive's actual age plus two (2) years (but not
in excess of age 65), and (B) the Executive's years of service were
the Executive's actual years of service plus two (2) years. The SERP
Continuance Benefit will be paid at the times and in the forms
otherwise provided in the Jefferson Bankshares, Inc. Senior
Officer's Supplemental Pension Plan for payment of benefits.
(iii) The Split Dollar Life Insurance Continuance Benefit will
be the payment by Jefferson or an Affiliate for two (2) years after
the Executive's termination of all premium payments and other costs
associated with any split dollar life insurance policy, plan or
program to the extent that the premium payments and other costs
would have been paid by Jefferson or an Affiliate if the Executive's
employment had continued for an additional two (2) years. At the end
of the additional two (2) years of payments, the Executive will have
any options with respect to any such policy that would otherwise
have been available at the Executive's termination of employment
absent the Split Dollar Life Insurance Continuance Benefit.
(d) During the Severance Period, the Executive and his dependents
will continue to be covered by all Welfare Plans in which he or his dependents
were participating immediately prior to the date of his termination (the
"Welfare Continuance Benefit"). Any changes to any Welfare Plan during the
Severance Period will be applicable to the Executive and his dependents as if he
continued to be an employee of Jefferson. Jefferson will pay all or a portion of
the cost of the Welfare Continuance Benefit for the Executive and his dependents
under the Welfare Plans on the same basis as applicable, from time to time, to
active employees covered under the Welfare Plans and the Executive will pay any
additional costs. If such participation in any one or more of the Welfare Plans
included in the Welfare Continuance Benefit is not possible under the terms of
the Welfare Plan or any provision of law would create an adverse tax effect for
the Executive or Jefferson due to such participation, Jefferson will provide
substantially identical benefits directly or through an insurance arrangement.
The Welfare Continuance Benefit as to any Welfare Plan will cease if and when
the Executive has obtained coverage under one or more welfare benefit plans of a
subsequent employer that provide for equal or greater benefits to the Executive
and his dependents with respect to the specific type of benefit.
(e) If Jefferson determines that any part of the Severance Benefit
would be subject to the excise tax imposed under Code Section 4999 on "excess
parachute payments," Jefferson will compute the amount that could be paid to the
Executive without the imposition of the excise tax imposed by Code Section 4999
(the "Capped Amount"). The computation required under this subsection will be
made by a tax counsel or nationally recognized accounting firm selected by
mutual consent of Jefferson and the Executive. The fees and expenses of the tax
counsel or the accounting firm will be borne by Jefferson. The calculations
under this subsection will be made in a manner consistent with the requirements
of Code Sections 280G and 4999, as in effect at the time the calculations are
made.
(i) Notwithstanding anything in this Agreement to the
contrary, if the Capped Amount is greater than or equal to 97% of
the Severance Benefit, then the Executive will be paid the Capped
Amount in lieu of the entire Severance Benefit. To achieve such
required reduction in the Severance Benefit to the Capped Amount,
the Executive will determine what portion of the Severance Benefit
will be reduced, eliminated or postponed, the amount of each such
reduction, elimination or postponement, and the period of each such
postponement. To enable the Executive to make such determination,
Jefferson will provide the Executive with such information as is
reasonably necessary for such determination.
(ii) If the Capped Amount is less than 97% of the Severance
Benefit, then Executive will be paid, in addition to the Severance
Benefit, the sum of (x) plus (y) where:
(x) is an amount equal to the excise tax imposed by
Code Section 4999 on the Severance Benefit; and
(y) is the amount determined under the following formula:
(x) times ((Tax Rate/(1-Tax Rate)).
For purposes of this subsection, Tax Rate is the sum of (A) the
highest Federal personal income tax rate under Code
Section 1 applicable to income of the character of the Severance
Benefit; (B) the highest state and local income tax rates for the
state in which the Participant is a resident applicable to income of
the character of the Severance Benefit; (C) the hospital insurance
tax rate under Code Section 3111(b), and (D) the excise tax rate
under Code Section 4999. Such additional amount will be payable to
the Executive as soon as may be practicable after such final
determination is made.
(f) The Executive agrees that he will not discuss his employment and
resignation or termination (including the terms of this Agreement) with any
representatives of the media, either directly or indirectly, without the written
consent
and approval of Jefferson.
Section 5. Outplacement Services.
If the Executive is entitled to a Severance Benefit under Section 4, the
Executive will be entitled to receive complete outplacement services, including
job search and interview skill services, paid by Jefferson up to a total cost of
$20,000. The services will be provided by a nationally recognized outplacement
organization selected by the Executive with the approval of Jefferson (which
approval will not be unreasonably withheld). The services will be provided for
up to two (2) years after the Executive's termination of employment.
Section 6. Death.
If the Executive dies while receiving a Welfare Continuation Benefit, the
Executive's spouse and other dependents will continue to be covered under all
applicable Welfare Plans
during the remainder of the Severance Period.
Section 7. No Setoff.
(a) Payment of a Severance Benefit will be in addition to any other
amounts otherwise currently payable to the Executive, including any accrued but
unpaid vacation pay. No payments or benefits payable to or with respect to the
Executive pursuant to this Agreement will be reduced by any amount the Executive
may earn or receive from employment with another employer or from any other
source. In no event will the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and, except as provided
in Section 4(d) with respect to the Welfare Continuation Benefit, such amounts
will not be reduced whether or not the Executive obtains other employment.
(b) Nothing in this Agreement will limit or otherwise affect such
rights as the Executive may have under any contract or agreement with Jefferson
or its Affiliates. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with Jefferson or its Affiliates at or subsequent to
the Executive's termination of employment will be payable in accordance with
such plan, policy, practice or program or contract or agreement except, except
that the Severance Benefit will be reduced (but not below zero) by any payment
made solely as the result of a Change of Control under any employment agreement
or other compensatory agreement between the Executive and Jefferson other than
an agreement that provides for accelerated vesting of any stock-based awards
such as options.
Section 8. No Assignment of Benefit.
No interest of the Executive or any Beneficiary under this Agreement, or
any right to receive any payment or distribution hereunder, will be subject in
any manner to sale, transfer, assignment, pledge, attachment, garnishment, or
other alienation or encumbrance of any kind, nor may such interest or right to
receive a payment or distribution be taken, voluntarily or involuntarily, for
the satisfaction of the obligations or debts of, or other claims against, the
Executive or Beneficiary, including claims for alimony, support, separate
maintenance, and claims in bankruptcy proceedings.
Section 9. Benefits Unfunded.
All rights under this Agreement of the Executive and Beneficiaries will at
all times be entirely unfunded, and no provision will at any time be made with
respect to segregating any assets of Jefferson for payment of any amounts due
hereunder. The Executive and Beneficiaries will have only the rights of general
unsecured creditors of Jefferson.
Section 10, Applicable Law.
This Agreement will be construed and interpreted pursuant to the laws of
the Commonwealth of Virginia, without reference to its conflict of laws rules.
Section 11. No Employment Contract.
Nothing contained in this Agreement will be construed to be an employment
contract between the Executive and Jefferson prior to a Change of Control.
Section 12. Severability.
In the event any provision of this Agreement is held illegal or invalid,
the remaining provisions of this Agreement will not be affected thereby.
Section 13. Successors.
(a) The Agreement will be binding upon and inure to the benefit of
Jefferson, the Executive and their respective heirs, representatives and
successors.
(b) Jefferson will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Jefferson to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that Jefferson would be required to perform it if no such succession had taken
place. As used in this Agreement, "Jefferson" will mean Jefferson as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
Section 14. Litigation Expenses.
(a) Jefferson agrees to pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof unless a
court of competent jurisdiction determines that the Executive acted in bad faith
in initiating the contest) by Jefferson, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Code Section 7872(f)(2)(A); provided however, that the
reasonableness of the fees and expenses must be determined by an independent
arbitrator, using standard legal principles, mutually agreed upon by Jefferson
and the Executive in accordance with rules set forth by the American Arbitration
Association.
(b) If there is any dispute between Jefferson and the Executive in
the event of any termination of the Executive's employment by Jefferson or by
the Executive, then, unless and until there is a final, nonappealable judgment
by a court of competent jurisdiction declaring that the Executive is not
entitled to benefits under this Agreement, Jefferson will pay all amounts, and
provide all benefits, to the Executive and/or the Executive's family or other
Beneficiaries, as the case may be, that Jefferson would be required to pay or
provide pursuant to this Agreement. Jefferson will not be required to pay any
disputed amounts pursuant to this paragraph except upon receipt of an
undertaking (which may be unsecured) by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such court not
to be entitled.
Section 15. Confidentiality.
(a) The Executive will hold in a fiduciary capacity for the benefit
of Jefferson all secret or confidential information, knowledge or data relating
to Jefferson or any of its Affiliates and their respective businesses, which
will have been obtained by the Executive during the Executive's employment by
Jefferson or any Affiliate and which will not be or become public knowledge
(other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the Executive's employment
with Jefferson, the Executive will not, without the prior written consent of
Jefferson or except as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than Jefferson and those designated by it.
(b) In the event of a breach or threatened breach of this Section
15, the Executive agrees that Jefferson will be entitled to injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be inadequate and
insufficient. If Jefferson obtains a judicial determination that the Executive
has breached the terms of this Section 15, all rights of the Executive under
this Agreement will terminate. Any termination of the Executive's employment
will have no effect on the continuing operation of this Section 15.
Section 16. Amendment and Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and the writing is signed by the Executive and Jefferson. A waiver of any breach
of or compliance with any provision or condition of this Agreement is not a
waiver of similar or dissimilar provisions or conditions. This Agreement may be
executed in one or more counterparts, all of which will be considered one and
the same agreement.
(b) All notices and other communications hereunder will be in
writing and will be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive to: If to Jefferson to:
Robert H. Campbell, Jr. Jefferson Bankshares, Inc.
P.O. Box 711 123 E. Main Street
Charlottesville, Virginia 22902 Charlottesville, Virginia 22902
Attention: Corporate Secretary
or to such other address as either party will have furnished to the other in
writing in accordance herewith. Notice and communications will be effective when
actually received by the addressee.
JEFFERSON BANKSHARES, INC.
Date: May 6, 1997 By /s/ O. Kenton McCartney
Date: May 7, 1997 /s/ Robert H. Campbell, Jr.
Executive
Exhibit 10(l)
JEFFERSON BANKSHARES, INC.
EXECUTIVE CONTINUITY AGREEMENT
This Executive Continuity Agreement (the "Agreement") is made as of April
22, 1997, between JEFFERSON BANKSHARES, INC. ("Jefferson") and ALLEN T. NELSON,
JR., (the "Executive"). The purpose of the Agreement is to encourage the
Executive to continue employment after a Change of Control by providing
reasonable employment security to the Executive and to recognize the prior
service of the Executive in the event of a termination of employment under
defined circumstances after a Change of Control. This Agreement supersedes and
replaces the Executive Severance Agreement dated December 6, 1993 or any similar
agreements between the Executive and Jefferson.
Section 1. Definitions. For purposes of this Agreement:
(a) "Affiliate" means any corporation that is directly, or
indirectly through one or more intermediaries, controlled by Jefferson.
(b) "Beneficiary" means the person or entity designated by the
Executive, by a written instrument delivered to Jefferson, to receive any
benefits payable under this Agreement in the event of the Executive's death. If
the Executive fails to designate a Beneficiary, or if no Beneficiary survives
the Executive, such death benefits will be paid to the Executive's estate.
(c) "Board" means the Board of Directors of Jefferson.
(d) "Change of Control" means an event described in (i), (ii),
(iii), or (iv):
(i) The acquisition by a Group of Beneficial Ownership of
20% or more of the Stock of Jefferson, but excluding, for this
purpose, any acquisition by Jefferson or an Affiliate, an employee
benefit plan of Jefferson or an Affiliate, or any corporation with
respect to which, following such acquisition, more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by the individuals and entities who were the beneficial
owners, respectively, of the Stock and voting securities of
Jefferson immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the then outstanding shares of Stock or combined
voting power of the then outstanding voting securities of Jefferson
entitled to vote generally in the election of directors, as the case
may be. "Group" means any individual, entity or group within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Act"), "Beneficial Ownership" has the
meaning in Rule 13d-3 promulgated under the Act, and "Stock" means
the then outstanding shares of common stock of Jefferson.
(ii) Individuals who constitute the Board on the date of
this Agreement (the "Incumbent Board") cease to constitute at least
a majority of the Board, provided that any director whose nomination
was approved by a majority of the Incumbent Board will be considered
a member of the Incumbent Board, excluding any such individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of Jefferson (as such terms are used in Rule 14a-11
promulgated under the Act).
(iii) Approval by the shareholders of Jefferson of a
reorganization, merger or consolidation, in each case, in which the
owners of the Stock of Jefferson do not, following such
reorganization, merger or consolidation, beneficially own, directly
or indirectly, more than 50% of the Stock of the corporation
resulting from such reorganization, merger or consolidation.
(iv) Approval by the shareholders of Jefferson of a complete
liquidation or dissolution of Jefferson, or of the sale or other
disposition of all or substantially all of the assets of Jefferson.
(e) "Change of Control Date" means the date on which a Change of
Control occurs. If a Change of Control occurs on account of a series of
transactions, the Change of Control Date is the date of the last of such
transactions.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Compensation" means the total compensation paid to the
Executive by Jefferson or by any Affiliate of Jefferson which is or will be
reportable as income under the Code on Internal Revenue Service Form W-2 (i)
plus any amount contributed by the Executive pursuant to a salary reduction
agreement and which is not includible in gross income under Code Sections 125 or
402(a)(8) or under any other program that provides for pre-tax salary reductions
or compensation deferrals, and (ii) reduced by any income reportable on Form W-2
that is attributable to the exercise of any stock option. With respect to any
amount which is paid at an earlier date than otherwise due because of the
occurrence of a Change of Control (including through the acceleration of
vesting), that amount shall be included in Compensation at the earlier of (i)
the time or times when the amount would have been paid to the Executive absent a
Change of Control or (ii) the termination of the Executive's employment.
(h) "Employment Period" means the period commencing on the Change of
Control Date and ending on the second anniversary of the later of the Change of
Control Date or the date of closing of the corporate transaction that is the
subject of the shareholder approval in Section 1(d)(iii) or (iv).
(i) "Final Compensation" means the greater of (i) the Executive's
Compensation for the 12 months immediately preceding the termination of the
Executive's employment, or (ii) the Executive's Compensation for the 12 months
immediately preceding the Change of Control.
(j) "Good Reason" will exist with respect to the Executive if,
without the Executive's express written consent, after a Change of Control:
(i) there is a material reduction in the Executive's duties
or authority after a Change of Control;
(ii) there is a material adverse change in the Executive's
overall working environment after a Change of Control;
(iii) there is a reduction in the Executive's rate of base
salary, incentive compensation opportunities, welfare benefits, or
perquisites as in effect at the time of a Change of Control;
(iv) Jefferson changes the principal location in which the
Executive is required to perform services from the location at which
the Executive performed services as of the Change of Control; or
(v) a failure by Jefferson to comply with and satisfy
Section 13(b).
(k) "Pension Plan" means the Jefferson Bankshares, Inc. Pension
Plan, as amended from time to time.
(l) "Retirement Continuance Benefit" means the benefit provided in
Section 4(c).
(m) "Salary Continuance Benefit" means the benefit provided in
Section 4(b).
(n) "Severance Benefit" means the sum of the Salary Continuance
Benefit, the Retirement Continuance Benefit, and the Welfare Continuance
Benefit.
(o) "Severance Period" means the period beginning on the date the
Executive's employment with Jefferson terminates and ending on the date two (2)
years thereafter.
(p) "Welfare Continuance Benefit" means the benefit provided in
Section 4(d).
(q) "Welfare Plan" means any health and dental plan, disability
plan, survivor income plan, life insurance plan or any other welfare benefit
plan, as defined in Section 3(1) of ERISA, currently or hereafter made available
by Jefferson or any Affiliate in which the Executive is eligible to participate.
Section 2. Employment After Change of Control.
If the Executive is employed by Jefferson or an Affiliate on the Change of
Control Date, Jefferson or an Affiliate will continue to employ the Executive
for the Employment Period. During the Employment Period unless the Executive
provides an express written consent otherwise, (A) the Executive will have such
duties and such other powers which are generally consistent with the duties and
powers of the Executive before the Change of Control Date and (B) the
Executive's services will be performed at the location where the Executive was
employed immediately preceding the Change of Control Date.
Section 3. Compensation During Employment Period.
(a) During the Employment Period, the Executive will receive an
annual base salary ("Annual Base Salary"), at least equal to the base salary
paid or payable to the Executive by Jefferson and its Affiliates in respect of
the twelve-month period immediately preceding the Change of Control Date. During
the Employment Period, the Annual Base Salary will be increased at any time and
from time to time as will be substantially consistent with increases in base
salary generally awarded in the ordinary course of business to other peer
executives of Jefferson and its Affiliates. Any increase in Annual Base Salary
will not serve to limit or reduce any other obligation to the Executive under
this Agreement. Annual Base Salary will not be reduced after any such increase.
(b) During the Employment Period, the Executive will be entitled to
participate in all incentive (including, without limitation, stock incentive),
savings, retirement, split dollar life insurance plans, practices, policies and
programs applicable generally to other peer executives of Jefferson and its
Affiliates, but in no event will such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than those
provided by Jefferson and its Affiliates for the Executive under such plans,
practices, policies and program as in effect at any time during the six (6)
months immediately preceding the Change of Control Date, provided that the
Executive's total incentive compensation for each fiscal year during the
Employment Period will be not less than the total incentive compensation paid or
payable to the Executive by Jefferson and its Affiliates in respect of the
fiscal year immediately preceding the Change of Control Date.
(c) During the Employment Period, the Executive and/or the
Executive's family, as the case may be, will be eligible for participation in
and will receive all benefits under welfare benefit plans, practices, policies
and programs provided by Jefferson and its Affiliates (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of
Jefferson and its Affiliates, but in no event will such plans, practices,
policies and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time during the six (6)
months immediately preceding the Change of Control Date.
(d) During the Employment Period, the Executive will be entitled to
fringe benefits in accordance with the most favorable plans, practices, programs
and policies of Jefferson and its Affiliates in effect for the Executive at any
time during the six (6) months immediately preceding the Change of Control Date
or, if more favorable to the Executive, as in effect generally from time to time
after the Change of Control Date with respect to other peer executives of
Jefferson and its Affiliates.
(e) Upon a Change of Control, for purposes of the Jefferson
Executive Incentive Plan ("Executive Incentive Plan") for the fiscal year in
which the Change of Control occurs, Jefferson will be deemed to have achieved
the level of performance as to each performance goal that is the greater of (i)
the actual level of performance, or (ii) the target level of performance. If the
Executive is not employed on the last day of the calendar year in which the
Change of Control occurs, the Executive will receive a pro rata award payable
under the Executive Incentive Plan as determined pursuant to this Section 3(c)
based on the portion of the calendar year during which the Executive was
employed.
Section 4. Benefits Upon Termination of Employment.
(a) Subject to the provisions of section 15, the Executive will be
entitled to a Salary Continuance Benefit, a Retirement Continuance Benefit, and
a Welfare Continuance Benefit if (i) the employment of the Executive with
Jefferson or any Affiliate is terminated for any reason by Jefferson or any
Affiliate within six (6) months prior to a Change of Control or during the
Employment Period, (ii) the Executive terminates his employment with Jefferson
or any Affiliate for Good Reason within the Employment Period, or (iii) the
Executive terminates his employment with Jefferson or any Affiliate within the
thirty (30) day period beginning on the later of the one-year anniversary of the
Change of Control Date or the date of closing of the corporate transaction that
is the subject of the shareholder approval in Section 1(d)(iii) or (iv); which
date of closing will be certified by the Company to the Executive within 30 days
of the closing. Any termination by the Executive will be communicated by Notice
of Termination to Jefferson given in accordance with Section 16(b). For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
indicated the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the date of termination
is other than the date of receipt of such notice, specified the termination date
(which date will be not more than 15 days after the giving of such notice). The
failure by the Executive to set forth in the Notice of Termination any fact or
circumstance will not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(b) The Salary Continuance Benefit will be a lump sum payment equal
to 200% of the Executive's Final Compensation. The Salary Continuance Benefit
will be paid to the Executive within 30 days after the Executive's date of
termination. The Salary Continuance Benefit will be made net of all required
federal and state withholding taxes and similar required withholdings.
(c) The Retirement Continuance Benefit will consist of a
Pension Continuance Benefit, a SERP Continuance Benefit and a Split Dollar
Life Insurance Continuance Benefit.
(i) The Pension Continuance Benefit will be the actuarial
equivalent of the additional amount payable to the Executive under
the Pension Plan and the Jefferson Bankshares, Inc. Excess Benefit
Plan if (A) the Executive's age were deemed to be the Executive's
actual age plus two (2) years (but not in excess of age 65), (B) the
Executive's years of service were the Executive's actual years of
service plus two (2) years, and (C) the Executive's compensation
during the two (2) deemed additional years of service was his Final
Compensation. To determine the actuarial equivalent, the provisions
of the Pension Plan relating to the calculation of lump sum payments
will be used. The Pension Continuance Benefit will be paid to the
Executive in a lump sum within 30 days after the Executive's date of
termination. The Pension Continuance Benefit will be made net of all
required federal and state withholding taxes and similar required
withholdings.
(ii) The SERP Continuance Benefit will be the benefit, if
any, payable under the Jefferson Bankshares, Inc. Senior Officer's
Supplemental Pension Plan calculated if (A) the Executive's age were
deemed to be the Executive's actual age plus two (2) years (but not
in excess of age 65), and (B) the Executive's years of service were
the Executive's actual years of service plus two (2) years. The SERP
Continuance Benefit will be paid at the times and in the forms
otherwise provided in the Jefferson Bankshares, Inc. Senior
Officer's Supplemental Pension Plan for payment of benefits.
(iii) The Split Dollar Life Insurance Continuance Benefit
will be the payment by Jefferson or an Affiliate for two (2) years
after the Executive's termination of all premium payments and other
costs associated with any split dollar life insurance policy, plan
or program to the extent that the premium payments and other costs
would have been paid by Jefferson or an Affiliate if the Executive's
employment had continued for an additional two (2) years. At the end
of the additional two (2) years of payments, the Executive will have
any options with respect to any such policy that would otherwise
have been available at the Executive's termination of employment
absent the Split Dollar Life Insurance Continuance Benefit.
(d) During the Severance Period, the Executive and his dependents
will continue to be covered by all Welfare Plans in which he or his dependents
were participating immediately prior to the date of his termination (the
"Welfare Continuance Benefit"). Any changes to any Welfare Plan during the
Severance Period will be applicable to the Executive and his dependents as if he
continued to be an employee of Jefferson. Jefferson will pay all or a portion of
the cost of the Welfare Continuance Benefit for the Executive and his dependents
under the Welfare Plans on the same basis as applicable, from time to time, to
active employees covered under the Welfare Plans and the Executive will pay any
additional costs. If such participation in any one or more of the Welfare Plans
included in the Welfare Continuance Benefit is not possible under the terms of
the Welfare Plan or any provision of law would create an adverse tax effect for
the Executive or Jefferson due to such participation, Jefferson will provide
substantially identical benefits directly or through an insurance arrangement.
The Welfare Continuance Benefit as to any Welfare Plan will cease if and when
the Executive has obtained coverage under one or more welfare benefit plans of a
subsequent employer that provide for equal or greater benefits to the Executive
and his dependents with respect to the specific type of benefit.
(e) If Jefferson determines that any part of the Severance Benefit
would be subject to the excise tax imposed under Code Section 4999 on "excess
parachute payments," Jefferson will compute the amount that could be paid to the
Executive without the imposition of the excise tax imposed by Code Section 4999
(the "Capped Amount"). The computation required under this subsection will be
made by a tax counsel or nationally recognized accounting firm selected by
mutual consent of Jefferson and the Executive. The fees and expenses of the tax
counsel or the accounting firm will be borne by Jefferson. The calculations
under this subsection will be made in a manner consistent with the requirements
of Code Sections 280G and 4999, as in effect at the time the calculations are
made.
(i) Notwithstanding anything in this Agreement to the
contrary, if the Capped Amount is greater than or equal to 97% of
the Severance Benefit, then the Executive will be paid the Capped
Amount in lieu of the entire Severance Benefit. To achieve such
required reduction in the Severance Benefit to the Capped Amount,
the Executive will determine what portion of the Severance Benefit
will be reduced, eliminated or postponed, the amount of each such
reduction, elimination or postponement, and the period of each such
postponement. To enable the Executive to make such determination,
Jefferson will provide the Executive with such information as is
reasonably necessary for such determination.
(ii) If the Capped Amount is less than 97% of the Severance
Benefit, then Executive will be paid, in addition to the Severance
Benefit, the sum of (x) plus (y) where:
(x) is an amount equal to the excise tax imposed by Code Section
4999 on the Severance Benefit; and
(y) is the amount determined under the following formula:
(x) times ((Tax Rate/(1-Tax Rate)).
For purposes of this subsection, Tax Rate is the sum of (A) the
highest Federal personal income tax rate under Code Section 1
applicable to income of the character of the Severance Benefit; (B)
the highest state and local income tax rates for the state in which
the Participant is a resident applicable to income of the character
of the Severance Benefit; (C) the hospital insurance tax rate under
Code Section 3111(b), and (D) the excise tax rate under Code Section
4999. Such additional amount will be payable to the Executive as
soon as may be practicable after such final determination is made.
(f) The Executive agrees that he will not discuss his employment and
resignation or termination (including the terms of this Agreement) with any
representatives of the media, either directly or indirectly, without the written
consent and approval of Jefferson.
Section 5. Outplacement Services.
If the Executive is entitled to a Severance Benefit under Section 4, the
Executive will be entitled to receive complete outplacement services, including
job search and interview skill services, paid by Jefferson up to a total cost of
$20,000. The services will be provided by a nationally recognized outplacement
organization selected by the Executive with the approval of Jefferson (which
approval will not be unreasonably withheld). The services will be provided for
up to two (2) years after the Executive's termination of employment.
Section 6. Death.
If the Executive dies while receiving a Welfare Continuation Benefit, the
Executive's spouse and other dependents will continue to be covered under all
applicable Welfare Plans during the remainder of the Severance Period.
Section 7. No Setoff.
(a) Payment of a Severance Benefit will be in addition to any other
amounts otherwise currently payable to the Executive, including any accrued but
unpaid vacation pay. No payments or benefits payable to or with respect to the
Executive pursuant to this Agreement will be reduced by any amount the Executive
may earn or receive from employment with another employer or from any other
source. In no event will the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and, except as provided
in Section 4(d) with respect to the Welfare Continuation Benefit, such amounts
will not be reduced whether or not the Executive obtains other employment.
(b) Nothing in this Agreement will limit or otherwise affect such
rights as the Executive may have under any contract or agreement with Jefferson
or its Affiliates. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with Jefferson or its Affiliates at or subsequent to
the Executive's termination of employment will be payable in accordance with
such plan, policy, practice or program or contract or agreement except, except
that the Severance Benefit will be reduced (but not below zero) by any payment
made solely as the result of a Change of Control under any employment agreement
or other compensatory agreement between the Executive and Jefferson other than
an agreement that provides for accelerated vesting of any stock-based awards
such as options.
Section 8. No Assignment of Benefit.
No interest of the Executive or any Beneficiary under this Agreement, or
any right to receive any payment or distribution hereunder, will be subject in
any manner to sale, transfer, assignment, pledge, attachment, garnishment, or
other alienation or encumbrance of any kind, nor may such interest or right to
receive a payment or distribution be taken, voluntarily or involuntarily, for
the satisfaction of the obligations or debts of, or other claims against, the
Executive or Beneficiary, including claims for alimony, support, separate
maintenance, and claims in bankruptcy proceedings.
Section 9. Benefits Unfunded.
All rights under this Agreement of the Executive and Beneficiaries will at
all times be entirely unfunded, and no provision will at any time be made with
respect to segregating any assets of Jefferson for payment of any amounts due
hereunder. The Executive and Beneficiaries will have only the rights of general
unsecured creditors of Jefferson.
Section 10. Applicable Law.
This Agreement will be construed and interpreted pursuant to the laws of
the Commonwealth of Virginia, without reference to its conflict of laws rules.
Section 11. No Employment Contract.
Nothing contained in this Agreement will be construed to be an employment
contract between the Executive and Jefferson prior to a Change of Control.
Section 12. Severability.
In the event any provision of this Agreement is held illegal or invalid,
the remaining provisions of this Agreement will not be affected thereby.
Section 13. Successors.
(a) The Agreement will be binding upon and inure to the benefit of
Jefferson, the Executive and their respective heirs, representatives and
successors. (b) Jefferson will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Jefferson to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that Jefferson would be required to perform it if no such succession had taken
place. As used in this Agreement, "Jefferson" will mean Jefferson as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
Section 14. Litigation Expenses.
(a) Jefferson agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof
unless a court of competent jurisdiction determines that the Executive acted in
bad faith in initiating the contest) by Jefferson, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Code Section 7872(f)(2)(A); provided however, that
the reasonableness of the fees and expenses must be determined by an independent
arbitrator, using standard legal principles, mutually agreed upon by Jefferson
and the Executive in accordance with rules set forth by the American Arbitration
Association.
(b) If there is any dispute between Jefferson and the Executive in
the event of any termination of the Executive's employment by Jefferson or by
the Executive, then, unless and until there is a final, nonappealable judgment
by a court of competent jurisdiction declaring that the Executive is not
entitled to benefits under this Agreement, Jefferson will pay all amounts, and
provide all benefits, to the Executive and/or the Executive's family or other
Beneficiaries, as the case may be, that Jefferson would be required to pay or
provide pursuant to this Agreement. Jefferson will not be required to pay any
disputed amounts pursuant to this paragraph except upon receipt of an
undertaking (which may be unsecured) by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such court not
to be entitled.
Section 15. Confidentiality.
(a) The Executive will hold in a fiduciary capacity for the benefit
of Jefferson all secret or confidential information, knowledge or data relating
to Jefferson or any of its Affiliates and their respective businesses, which
will have been obtained by the Executive during the Executive's employment by
Jefferson or any Affiliate and which will not be or become public knowledge
(other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the Executive's employment
with Jefferson, the Executive will not, without the prior written consent of
Jefferson or except as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than Jefferson and those designated by it.
(b) In the event of a breach or threatened breach of this Section
15, the Executive agrees that Jefferson will be entitled to injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be inadequate and
insufficient. If Jefferson obtains a judicial determination that the Executive
has breached the terms of this Section 15, all rights of the Executive under
this Agreement will terminate. Any termination of the Executive's employment
will have no effect on the continuing operation of this Section 15.
Section 16. Amendment and Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and the writing is signed by the Executive and Jefferson. A waiver of any breach
of or compliance with any provision or condition of this Agreement is not a
waiver of similar or dissimilar provisions or conditions. This Agreement may be
executed in one or more counterparts, all of which will be considered one and
the same agreement.
(b) All notices and other communications hereunder will be in
writing and will be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive to: If to Jefferson to:
Allen T. Nelson, Jr. Jefferson Bankshares, Inc.
3368 Camden Court 123 E. Main Street
Keswick, Virginia 22947 Charlottesville, Virginia 22902
Attention: Corporate Secretary
or to such other address as either party will have furnished to the other in
writing in accordance herewith. Notice and communications will be effective when
actually received by the addressee.
JEFFERSON BANKSHARES, INC.
Date: May 6, 1997 By /s/ O. Kenton McCartney
Date: May 8, 1997 /s/ Allen T. Nelson, Jr.
Executive
Exhibit 10(m)
JEFFERSON BANKSHARES, INC.
EXECUTIVE CONTINUITY AGREEMENT
This Executive Continuity Agreement (the "Agreement") is made as of April
22, 1997, between JEFFERSON BANKSHARES, INC. ("Jefferson") and WILLIAM M.
WATSON, JR. (the "Executive"). The purpose of the Agreement is to encourage the
Executive to continue employment after a Change of Control by providing
reasonable employment security to the Executive and to recognize the prior
service of the Executive in the event of a termination of employment under
defined circumstances after a Change of Control. This Agreement supersedes and
replaces the Executive Severance Agreement dated October 25, 1993 or any similar
agreements between the Executive and Jefferson.
Section 1. Definitions. For purposes of this Agreement:
(a) "Affiliate" means any corporation that is directly, or
indirectly through one or more intermediaries, controlled by Jefferson.
(b) "Beneficiary" means the person or entity designated by the
Executive, by a written instrument delivered to Jefferson, to receive any
benefits payable under this Agreement in the event of the Executive's death. If
the Executive fails to designate a Beneficiary, or if no Beneficiary survives
the Executive, such death benefits will be paid to the Executive's estate.
(c) "Board" means the Board of Directors of Jefferson.
(d) "Change of Control" means an event described in (i), (ii),
(iii), or (iv):
(i) The acquisition by a Group of Beneficial Ownership of
20% or more of the Stock of Jefferson, but excluding, for this
purpose, any acquisition by Jefferson or an Affiliate, an employee
benefit plan of Jefferson or an Affiliate, or any corporation with
respect to which, following such acquisition, more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by the individuals and entities who were the beneficial
owners, respectively, of the Stock and voting securities of
Jefferson immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the then outstanding shares of Stock or combined
voting power of the then outstanding voting securities of Jefferson
entitled to vote generally in the election of directors, as the case
may be. "Group" means any individual, entity or group within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Act"), "Beneficial Ownership" has the
meaning in Rule 13d-3 promulgated under the Act, and "Stock" means
the then outstanding shares of common stock of Jefferson.
(ii) Individuals who constitute the Board on the date of this
Agreement (the "Incumbent Board") cease to constitute at least a
majority of the Board, provided that any director whose nomination
was approved by a majority of the Incumbent Board will be considered
a member of the Incumbent Board, excluding any such individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of Jefferson (as such terms are used in Rule 14a-11
promulgated under the Act).
(iii) Approval by the shareholders of Jefferson of a
reorganization, merger or consolidation, in each case, in which the
owners of the Stock of Jefferson do not, following such
reorganization, merger or consolidation, beneficially own, directly
or indirectly, more than 50% of the Stock of the corporation
resulting from such reorganization, merger or consolidation.
(iv) Approval by the shareholders of Jefferson of a complete
liquidation or dissolution of Jefferson, or of the sale or other
disposition of all or substantially all of the assets of Jefferson.
(e) "Change of Control Date" means the date on which a Change of
Control occurs. If a Change of Control occurs on account of a series of
transactions, the Change of Control Date is the date of the last of such
transactions.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Compensation" means the total compensation paid to the
Executive by Jefferson or by any Affiliate of Jefferson which is or will be
reportable as income under the Code on Internal Revenue Service Form W-2 (i)
plus any amount contributed by the Executive pursuant to a salary reduction
agreement and which is not includible in gross income under Code Sections 125 or
402(a)(8) or under any other program that provides for pre-tax salary reductions
or compensation deferrals, and (ii) reduced by any income reportable on Form W-2
that is attributable
to the exercise of any stock option. With respect to any amount which is paid
at an earlier date than otherwise due because of the occurrence of a Change of
Control (including through the acceleration of vesting), that amount shall be
included in Compensation at the earlier of (i) the time or times when the amount
would have been paid to the Executive absent a Change of Control or (ii) the
termination of the Executive's employment.
(h) "Employment Period" means the period commencing on the Change of
Control Date and ending on the second anniversary of the later of the Change of
Control Date or the date of closing of the corporate transaction that is the
subject of the shareholder approval in Section 1(d)(iii) or (iv).
(i) "Final Compensation" means the greater of (i) the Executive's
Compensation for the 12 months immediately preceding the termination of the
Executive's employment, or (ii) the Executive's Compensation for the 12 months
immediately preceding the Change of Control.
(j) "Good Reason" will exist with respect to the Executive if,
without the Executive's express written consent, after a Change of Control:
(i) there is a material reduction in the Executive's duties
or authority after a Change of Control;
(ii) there is a material adverse change in the Executive's
overall working environment after a Change of Control;
(iii) there is a reduction in the Executive's rate of base
salary, incentive compensation opportunities, welfare benefits, or
perquisites as in effect at the time of a Change of Control;
(iv) Jefferson changes the principal location in which the
Executive is required to perform services from the location at which
the Executive performed services as of the Change of Control; or
(v) a failure by Jefferson to comply with and satisfy
Section 13(b).
(k) "Pension Plan" means the Jefferson
Bankshares, Inc. Pension Plan, as amended from time to time.
(l) "Retirement Continuance Benefit" means the benefit provided in
Section 4(c).
(m) "Salary Continuance Benefit" means the benefit provided in
Section 4(b).
(n) "Severance Benefit" means the sum of the Salary Continuance
Benefit, the Retirement Continuance Benefit, and the Welfare Continuance
Benefit.
(o) "Severance Period" means the period beginning on the date the
Executive's employment with Jefferson terminates and ending on the date two (2)
years thereafter.
(p) "Welfare Continuance Benefit" means the benefit provided in
Section 4(d).
(q) "Welfare Plan" means any health and dental plan, disability
plan, survivor income plan, life insurance plan or any other welfare benefit
plan, as defined in Section 3(1) of ERISA, currently or hereafter made available
by Jefferson or any Affiliate in which the Executive is eligible to participate.
Section 2. Employment After Change of Control.
If the Executive is employed by Jefferson or an Affiliate on the
Change of Control Date, Jefferson or an Affiliate will continue to employ the
Executive for the Employment Period. During the Employment Period unless the
Executive provides an express written consent otherwise, (A) the Executive will
have such duties and such other powers which are generally consistent with the
duties and powers of the Executive before the Change of Control Date and (B) the
Executive's services will be performed at the location where the Executive was
employed immediately preceding the Change of Control Date.
Section 3. Compensation During Employment Period.
(a) During the Employment Period, the Executive will receive an
annual base salary ("Annual Base Salary"), at least equal to the base salary
paid or payable to the Executive by Jefferson and its Affiliates in respect of
the twelve-month period immediately preceding the Change of Control Date. During
the Employment Period, the Annual Base Salary will be increased at any time and
from time to time as will be substantially consistent with increases in base
salary generally awarded in the ordinary course of business to other peer
executives of Jefferson and its Affiliates. Any increase in Annual Base Salary
will not serve to limit or reduce any other obligation to the Executive under
this Agreement. Annual Base Salary will not be reduced after any such increase.
(b) During the Employment Period, the Executive will be entitled to
participate in all incentive (including, without limitation, stock incentive),
savings, retirement, split dollar life insurance plans, practices, policies and
programs applicable generally to other peer executives of Jefferson and its
Affiliates, but in no event will such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than those
provided by Jefferson and its Affiliates for the Executive under such plans,
practices, olicies and program as in effect at any time during the six (6)
months immediately preceding the Change of Control Date, provided that the
Executive's total incentive compensation for each fiscal year during the
Employment Period will be not less than the total incentive compensation paid or
payable to the Executive by Jefferson and its Affiliates in respect of the
fiscal year immediately preceding the Change of Control Date.
(c) During the Employment Period, the Executive and/or the
Executive's family, as the case may be, will be eligible for participation in
and will receive all benefits under welfare benefit plans, practices, policies
and programs provided by Jefferson and its Affiliates (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of
Jefferson and its Affiliates, but in no event will such plans, practices,
policies and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time during the six (6)
months immediately preceding the Change of Control Date.
(d) During the Employment Period, the Executive will be entitled to
fringe benefits in accordance with the most favorable plans, practices, programs
and policies of Jefferson and its Affiliates in effect for the Executive at any
time during the six (6) months immediately preceding the Change of Control Date
or, if more favorable to the Executive, as in effect generally from time to time
after the Change of Control Date with respect to other peer executives of
Jefferson and its Affiliates.
(e) Upon a Change of Control, for purposes of the Jefferson
Executive Incentive Plan ("Executive Incentive Plan") for the fiscal year in
which the Change of Control occurs, Jefferson will be deemed to have achieved
the level of performance as to each performance goal that is the greater of (i)
the actual level of performance, or (ii) the target level of performance. If the
Executive is not employed on the last day of the calendar year in which the
Change of Control occurs, the Executive will receive a pro rata award payable
under the Executive Incentive Plan as determined pursuant to this Section 3(c)
based on the portion of the calendar year during which the Executive was
employed.
Section 4. Benefits Upon Termination of Employment.
(a) Subject to the provisions of section 15, the Executive will be
entitled to a Salary Continuance Benefit, a Retirement Continuance Benefit, and
a Welfare Continuance Benefit if (i) the employment of the Executive with
Jefferson or any Affiliate is terminated for any reason by Jefferson or any
Affiliate within six (6) months prior to a Change of Control or during the
Employment Period, (ii) the Executive terminates his employment with Jefferson
or any Affiliate for Good Reason within the Employment Period, or (iii) the
Executive terminates his employment with Jefferson or any Affiliate within the
thirty (30) day period beginning on the later of the one-year anniversary of the
Change of Control Date or the date of closing of the corporate transaction that
is the subject of the shareholder approval in Section 1(d)(iii) or (iv); which
date of closing will be certified by the Company to the Executive within 30 days
of the closing. Any termination by the Executive will be communicated by Notice
of Termination to Jefferson given in accordance with Section 16(b). For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
indicated the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the date of termination
is other than the date of receipt of such notice, specified the termination date
(which date will be not more than 15 days after the giving of such notice). The
failure by the Executive to set forth in the Notice of Termination any fact or
circumstance will not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(b) The Salary Continuance Benefit will be a lump sum payment equal
to 299% of the Executive's Final Compensation. The Salary Continuance Benefit
will be paid to the Executive within 30 days after the Executive's date of
termination. The Salary Continuance Benefit will be made net of all required
federal and state withholding taxes and similar required withholdings.
(c) The Retirement Continuance Benefit will consist of a Pension
Continuance Benefit, a SERP Continuance Benefit and a Split Dollar Life
Insurance Continuance Benefit.
(i) The Pension Continuance Benefit will be the actuarial
equivalent of the additional amount payable to the Executive under
the Pension Plan and the Jefferson Bankshares, Inc. Excess Benefit
Plan if (A) the Executive's age were deemed to be the Executive's
actual age plus two (2) years (but not in excess of age 65), (B) the
Executive's years of service were the Executive's actual years of
service plus two (2) years, and (C) the Executive's compensation
during the two (2) deemed additional years of service was his Final
Compensation. To determine the actuarial equivalent, the provisions
of the Pension Plan relating to the calculation of lump sum payments
will be used. The Pension Continuance Benefit will be paid to the
Executive in a lump sum within 30 days after the Executive's date of
termination. The Pension Continuance Benefit will be made net of all
required federal and state withholding taxes and similar required
withholdings.
(ii) The SERP Continuance Benefit will be the benefit, if
any, payable under the Jefferson Bankshares, Inc. Senior Officer's
Supplemental Pension Plan calculated if (A) the Executive's age were
deemed to be the Executive's actual age plus two (2) years (but not
in excess of age 65), and (B) the Executive's years of service were
the Executive's actual years of service plus two (2) years. The SERP
Continuance Benefit will be paid at the times and in the forms
otherwise provided in the Jefferson Bankshares, Inc. Senior
Officer's Supplemental Pension Plan for payment of benefits.
(iii) The Split Dollar Life Insurance Continuance Benefit will
be the payment by Jefferson or an Affiliate for two (2) years after
the Executive's termination of all premium payments and other costs
associated with any split dollar life insurance policy, plan or
program to the extent that the premium payments and other costs
would have been paid by Jefferson or an Affiliate if the Executive's
employment had continued for an additional two (2) years. At the end
of the additional two (2) years of payments, the Executive will have
any options with respect to any such policy that would otherwise
have been available at the Executive's termination of employment
absent the Split Dollar Life Insurance Continuance Benefit.
(d) During the Severance Period, the Executive and his dependents
will continue to be covered by all Welfare Plans in which he or his dependents
were participating immediately prior to the date of his termination (the
"Welfare Continuance Benefit"). Any changes to any Welfare Plan during the
Severance Period will be applicable to the Executive and his dependents as if he
continued to be an employee of Jefferson. Jefferson will pay all or a portion of
the cost of the Welfare Continuance Benefit for the Executive and his dependents
under the Welfare Plans on the same basis as applicable, from time to time, to
active employees covered under the Welfare Plans and the Executive will pay any
additional costs. If such participation in any one or more of the Welfare Plans
included in the Welfare Continuance Benefit is not possible under the terms of
the Welfare Plan or any provision of law would create an adverse tax effect for
the Executive or Jefferson due to such participation, Jefferson will provide
substantially identical benefits directly or through an insurance arrangement.
The Welfare Continuance Benefit as to any Welfare Plan will cease if and when
the Executive has obtained coverage under one or more welfare benefit plans of a
subsequent employer that provide for equal or greater benefits to the Executive
and his dependents with respect to the specific type of benefit.
(e) If Jefferson determines that any part of the Severance Benefit
would be subject to the excise tax imposed under Code Section 4999 on "excess
parachute payments," Jefferson will compute the amount that could be paid to the
Executive without the imposition of the excise tax imposed by Code Section 4999
(the "Capped Amount"). The computation required under this subsection will be
made by a tax counsel or nationally recognized accounting firm selected by
mutual consent of Jefferson and the Executive. The fees and expenses of the tax
counsel or the accounting firm will be borne by Jefferson. The calculations
under this subsection will be made in a manner consistent with the requirements
of Code Sections 280G and 4999, as in effect at the time the calculations are
made.
(i) Notwithstanding anything in this Agreement to the
contrary, if the Capped Amount is greater than or equal to 97% of
the Severance Benefit, then the Executive will be paid the Capped
Amount in lieu of the entire Severance Benefit. To achieve such
required reduction in the Severance Benefit to the Capped Amount,
the Executive will determine what portion of the Severance Benefit
will be reduced, eliminated or postponed, the amount of each such
reduction, elimination or postponement, and the period of each such
postponement. To enable the Executive to make such determination,
Jefferson will provide the Executive with such information as is
reasonably necessary for such determination.
(ii) If the Capped Amount is less than 97% of the Severance
Benefit, then Executive will be paid, in addition to the Severance
Benefit, the sum of (x) plus (y) where:
(x) is an amount equal to the excise tax imposed by Code Section
4999 on the Severance Benefit; and
(y) is the amount determined under the following formula:
(x) times ((Tax Rate/(1-Tax Rate)).
For purposes of this subsection, Tax Rate is the sum of (A) the
highest Federal personal income tax rate under Code Section 1
applicable to income of the character of the Severance Benefit; (B)
the highest state and local income tax rates for the state in which
the Participant is a resident applicable to income of the character
of the Severance Benefit; (C) the hospital insurance tax rate under
Code Section 3111(b), and (D) the excise tax rate under Code Section
4999. Such additional amount will be payable to the Executive as
soon as may be practicable after such final determination is made.
(f) The Executive agrees that he will not discuss his employment and
resignation or termination (including the terms of this Agreement) with any
representatives of the media, either directly or indirectly, without the written
consent and approval of Jefferson.
Section 5. Outplacement Services.
If the Executive is entitled to a Severance Benefit under Section 4, the
Executive will be entitled to receive complete outplacement services, including
job search and interview skill services, paid by Jefferson up to a total cost of
$20,000. The services will be provided by a nationally recognized outplacement
organization selected by the Executive with the approval of Jefferson (which
approval will not be unreasonably withheld). The services will be provided for
up to two (2) years after the Executive's termination of employment.
Section 6. Death.
If the Executive dies while receiving a Welfare Continuation Benefit,
the Executive's spouse and other dependents will continue to be covered under
all applicable Welfare Plans during the remainder of the Severance Period.
Section 7. No Setoff.
(a) Payment of a Severance Benefit will be in addition to any other
amounts otherwise currently payable to the Executive, including any accrued but
unpaid vacation pay. No payments or benefits payable to or with respect to the
Executive pursuant to this Agreement will be reduced by any amount the Executive
may earn or receive from employment with another employer or from any other
source. In no event will the Executive be obligated to seek other employment or
take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section 4(d)
with respect to the Welfare Continuation Benefit, such amounts will not be
reduced whether or not the Executive obtains other employment.
(b) Nothing in this Agreement will limit or otherwise affect such
rights as the Executive may have under any contract or agreement with Jefferson
or its Affiliates. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with Jefferson or its Affiliates at or subsequent to
the Executive's termination of employment will be payable in accordance with
such plan, policy, practice or program or contract or agreement except, except
that the Severance Benefit will be reduced (but not below zero) by any payment
made solely as the result of a Change of Control under any employment agreement
or other compensatory agreement between the Executive and Jefferson other than
an agreement that provides for accelerated vesting of any stock-based awards
such as options.
Section 8. No Assignment of Benefit.
No interest of the Executive or any Beneficiary under this Agreement, or
any right to receive any payment or distribution hereunder, will be subject in
any manner to sale, transfer, assignment, pledge, attachment, garnishment, or
other alienation or encumbrance of any kind, nor may such interest or right to
receive a payment or distribution be taken, voluntarily or involuntarily, for
the satisfaction of the obligations or debts of, or other claims against, the
Executive or Beneficiary, including claims for alimony, support, separate
maintenance, and claims in bankruptcy proceedings.
Section 9. Benefits Unfunded.
All rights under this Agreement of the Executive and Beneficiaries will at
all times be entirely unfunded, and no provision will at any time be made with
respect to segregating any assets of Jefferson for payment of any amounts due
hereunder. The Executive and Beneficiaries will have only the rights of general
unsecured creditors of Jefferson.
Section 10. Applicable Law.
This Agreement will be construed and interpreted pursuant to the laws of
the Commonwealth of Virginia, without reference to its conflict of laws rules.
Section 11. No Employment Contract.
Nothing contained in this Agreement will be construed to be an employment
contract between the Executive and Jefferson prior to a Change of Control.
Section 12. Severability.
In the event any provision of this Agreement is held illegal or invalid,
the remaining provisions of this Agreement will not be affected thereby.
Section 13. Successors.
(a) The Agreement will be binding upon and inure to the benefit of
Jefferson, the Executive and their respective heirs, representatives and
successors.
(b) Jefferson will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Jefferson to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that Jefferson would be required to perform it if no such succession had taken
place. As used in this Agreement, "Jefferson" will mean Jefferson as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
Section 14. Litigation Expenses.
(a) Jefferson agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof
unless a court of competent jurisdiction determines that the Executive acted in
bad faith in initiating the contest) by Jefferson, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Code Section 7872(f)(2)(A); provided however, that
the reasonableness of the fees and expenses must be determined by an independent
arbitrator, using standard legal principles, mutually agreed upon by Jefferson
and the Executive in accordance with rules set forth by the American Arbitration
Association.
(b) If there is any dispute between Jefferson and the Executive in
the event of any termination of the Executive's employment by Jefferson or by
the Executive, then, unless and until there is a final, nonappealable judgment
by a court of competent jurisdiction declaring that the Executive is not
entitled to benefits under this Agreement, Jefferson will pay all amounts, and
provide all benefits, to the Executive and/or the Executive's family or other
Beneficiaries, as the case may be, that Jefferson would be required to pay or
provide pursuant to this Agreement. Jefferson will not be required to pay any
disputed amounts pursuant to this paragraph except upon receipt of an
undertaking (which may be unsecured) by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such court not
to be entitled.
Section 15. Confidentiality.
(a) The Executive will hold in a fiduciary capacity for the benefit
of Jefferson all secret or confidential information, knowledge or data relating
to Jefferson or any of its Affiliates and their respective businesses, which
will have been obtained by the Executive during the Executive's employment by
Jefferson or any Affiliate and which will not be or become public knowledge
(other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the Executive's employment
with Jefferson, the Executive will not, without the prior written consent of
Jefferson or except as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than Jefferson and those designated by it.
(b) In the event of a breach or threatened breach of this Section
15, the Executive agrees that Jefferson will be entitled to injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be inadequate and
insufficient. If Jefferson obtains a judicial determination that the Executive
has breached the terms of this Section 15, all rights of the Executive under
this Agreement will terminate. Any termination of the Executive's employment
will have no effect on the continuing operation of this Section 15.
Section 16. Amendment and Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and the writing is signed by the Executive and Jefferson. A waiver of any breach
of or compliance with any provision or condition of this Agreement is not a
waiver of similar or dissimilar provisions or conditions. This Agreement may be
executed in one or more counterparts, all of which will be considered one and
the same agreement.
(b) All notices and other communications hereunder will be in
writing and will be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive to: If to Jefferson to:
William M. Watson, Jr. Jefferson Bankshares, Inc.
105 Falcon Drive 123 E. Main Street
Charlottesville, Virginia 22901 Charlottesville, Virginia 22902
Attention: Corporate Secretary
or to such other address as either party will have furnished to the other in
writing in accordance herewith. Notice and communications will be effective when
actually received by the addressee.
JEFFERSON BANKSHARES, INC.
Date: May 6, 1997 By /s/ O. Kenton McCartney
Date: May 6, 1997 /s/ William M. Watson, Jr.
Executive
JEFFERSON BANKSHARES, INC.
AMENDMENT TO THE AMENDED AND RESTATED
EXECUTIVE SPLIT DOLLAR LIFE INSURANCE AGREEMENT
This AMENDMENT TO THE AMENDED AND RESTATED EXECUTIVE SPLIT DOLLAR LIFE
INSURANCE AGREEMENT is made as of March 3, 1997, between JEFFERSON BANKSHARES,
INC., a Virginia corporation (the "Company") and O. KENTON MCCARTNEY, an
executive employed by the Company or one of its subsidiary corporations (the
"Executive").
A. The Company has adopted a Split Dollar Life Insurance Plan (the
"Plan") to provide certain executive employees with additional life insurance
protection under split dollar life insurance policies.
B. The Company and Executive have entered into an Amended and Restated
Split Dollar Life Insurance Agreement dated as of October 29, 1993, as amended
(the "Split Dollar Agreement"), pursuant to which Executive has received Four
Hundred Fifty-Seven Thousand Dollars ($457,000) of life insurance protection
under the Plan.
C. The Company has selected Executive to receive an additional
Two Hundred Eighty-Five Thousand Dollars ($285,000) of life insurance
protection under the Plan and Executive has elected to receive such
additional protection
Now, therefore, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Exhibit A to the Split Dollar Agreement is hereby replaced,
in its entirety, by Exhibit A attached hereto.
2. Except as set forth in this Amendment, the Split Dollar Agreement
will remain unchanged and unaltered and will continue in full force and effect.
In consideration of the foregoing, the Company and Executive have
executed and sealed this Agreement as of the day and year first written above.
(SEAL) JEFFERSON BANKSHARES, INC.
By: /s/ William M. Watson, Jr.
Title:General Counsel and Secretary
/s/ O. Kenton McCartney (SEAL)
Exhibit A
Specification of Certain Terms of the Policy
Policy Number: 6,913,222
Face Amount: $242,000
Executive Death Benefit: $220,000
Policy Number: 7,710,332
Face Amount: $95,000
Executive Death Benefit: $81,000
Policy Number: 6,913,414
Face Amount: $110,000
Executive Death Benefit: $92,000
Policy Number: 7,712,531
Face Amount: $80,000
Executive Death Benefit: $64,000
Policy Number: 9,649,870
Face Amount: $335,000
Executive Death Benefit: $285,000
JEFFERSON BANKSHARES, INC.
AMENDMENT TO THE AMENDED AND RESTATED
EXECUTIVE SPLIT DOLLAR LIFE INSURANCE AGREEMENT
This AMENDMENT TO THE AMENDED AND RESTATED EXECUTIVE SPLIT DOLLAR LIFE
INSURANCE AGREEMENT is made as of the 1st day of June, 1997, between JEFFERSON
BANKSHARES, INC., a Virginia corporation (the "Company") and WILLIAM M. WATSON,
JR., an executive employed by the Company or one of its subsidiary corporations
(the "Executive").
A. The Company has adopted a Split Dollar Life Insurance Plan (the
"Plan") to provide certain executive employees with additional life insurance
protection under split dollar life insurance policies.
B. The Company and Executive have entered into an Amended and Restated
Split Dollar Life Insurance Agreement dated as of October 29, 1993 (the "Split
Sollar Agreement"), pursuant to which Executive has received One Hundred
Eighty-Four Thousand Dollars ($184,000) of life insurance protection under the
Plan.
C. The Company has selected Executive to receive an additional
Fifty-Five Thousand Dollars ($55,000) of life insurance protection under
the Plan and Executive has elected to receive such additional
protection
Now, therefore, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Exhibit A to the Split Dollar Agreement is hereby replaced,
in its entirety, by Exhibit A attached hereto.
2. Except as set forth in this Amendment, the Split Dollar Agreement
will remain unchanged and unaltered and will continue in full force and effect.
In consideration of the foregoing, the Company and Executive have
executed and sealed this Agreement as of the day and year first written above.
(SEAL) JEFFERSON BANKSHARES, INC.
By: /s/ O. Kenton McCartney
Title: President and
Chief Executive Officer
/s/ William M. Watson, Jr. (SEAL)
Exhibit A
Specification of Certain Terms of the Policy
Policy Number: 7558862
Face Amount: $270,000
Executive Death Benefit $239,000
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 91300
<INT-BEARING-DEPOSITS> 1552038
<FED-FUNDS-SOLD> 17000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 153843
<INVESTMENTS-CARRYING> 372558
<INVESTMENTS-MARKET> 372614
<LOANS> 1442863
<ALLOWANCE> 15590
<TOTAL-ASSETS> 2168470
<DEPOSITS> 1876473
<SHORT-TERM> 63668
<LIABILITIES-OTHER> 16228
<LONG-TERM> 0
0
0
<COMMON> 34892
<OTHER-SE> 177209
<TOTAL-LIABILITIES-AND-EQUITY> 2168470
<INTEREST-LOAN> 62041
<INTEREST-INVEST> 17904
<INTEREST-OTHER> 107
<INTEREST-TOTAL> 80052
<INTEREST-DEPOSIT> 29588
<INTEREST-EXPENSE> 31012
<INTEREST-INCOME-NET> 49040
<LOAN-LOSSES> 2040
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 34726
<INCOME-PRETAX> 22946
<INCOME-PRE-EXTRAORDINARY> 7950
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14996
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.02
<LOANS-NON> 3527
<LOANS-PAST> 2482
<LOANS-TROUBLED> 245
<LOANS-PROBLEM> 3363
<ALLOWANCE-OPEN> 14656
<CHARGE-OFFS> 1596
<RECOVERIES> 490
<ALLOWANCE-CLOSE> 15590
<ALLOWANCE-DOMESTIC> 13629
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1961
</TABLE>
