EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT between Jefferson Bankshares, Inc., a Virginia corporation
("Jefferson"), and Xxxxxxx X. Xxxxxx, Xx. (the "Executive"),
WITNESSETH:
WHEREAS, the Board of Directors of Jefferson (the "Board") believes
that, in the event of a threat or occurrence of a bid to acquire or change
control of Jefferson or to effect a business combination, it is in the best
interest of Jefferson and its present and future shareholders that the
business of Jefferson be continued with a minimum of disruption, and that
such objective will be achieved if key management employees of Jefferson
and its subsidiaries are given assurances of employment security so they
will not be distracted by personal uncertainties and risks created during
such period; and
WHEREAS, Jefferson believes the giving of such assurances by
Jefferson will (a) secure the continued services of both its key
operational and management executives in the performance of both their
regular duties and such extra duties as may be required of them during
such period of uncertainty, (b) be able to rely on such executives to
manage the affairs of Jefferson and its subsidiaries during any such
period with less concern for their personal risks, and (c) have the
ability to attract new key executives as needed; and
WHEREAS, the Executive Compensation Committee (the "Committee") of
the Board has recommended, and the Board has approved, entering into
severance agreements with key management executives of Jefferson and its
subsidiaries in order to achieve the foregoing objectives; and
WHEREAS, Executive is a key management executive of Jefferson or
one of its subsidiaries;
NOW, THEREFORE, Jefferson and Executive agree as follows:
1. Change of Control. When used in this Agreement, the term "Change of
Control" means:
(a) The acquisition, other than from Jefferson, by any
individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934 as amended, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) of 20% or more of either
the then outstanding shares of common stock of Jefferson or the
combined voting power of the then outstanding voting securities of
Jefferson entitled to vote generally in the election of directors,
but excluding for this purpose, any such acquisition by Jefferson or
any of its subsidiaries, or any employee benefit plan (or related
trust) of Jefferson or its subsidiaries, 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 common 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 common
stock of Jefferson or the 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; or
(b) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof of "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that
any individual becoming a director subsequent to the date hereof
whose election or nomination for election by Jefferson's shareholders
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, 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 of Regulation 14A promulgated under
the Securities Exchange Act of 1934); or
(c) Approval by the shareholders of Jefferson of a
reorganization, merger or consolidation, in each case, with respect
to which the individuals and entities who were the respective
beneficial owners of the common stock and voting securities of
Jefferson immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or a complete liquidation
or dissolution of Jefferson or of its sale or other disposition of
all or substantially all of the assets of Jefferson.
2. Employment. Jefferson and Executive hereby agree that, if
Executive is in the employ of Jefferson on the date on which a Change
of Control occurs (the "Change of Control Date") Jefferson will
continue to employ Executive and Executive will remain in the employ
of Jefferson, for the period commencing on the Change of Control
Date and ending on the second anniversary of such date (the
"Employment Period"), to exercise such authority and perform such
executive duties as are commensurate with the authority being
exercised and duties being performed by the Executive immediately
prior to the Change of Control Date, which services shall be performed
at the location where the Executive was employed immediately prior
to the Change of Control Date. Employment by a subsidiary of
Jefferson shall be considered employment by Jefferson.
3. Compensation and Benefits. During the Employment Period,
Jefferson (or the subsidiary employing Executive, as the case may
be) will (a) continue to pay the Executive a salary and compensation
related benefits at not less than the level applicable to Executive
on the Change of Control Date, (b) continue bonus plans in effect on
the Change of Control Date and continue to pay the Executive bonuses
in amounts not less than those paid during the 12-month period
preceding the Change of Control Date, and (c) continue employee
benefit programs as to Executive at levels in effect on the Change
of Control Date (but subject to such reductions as may be required to
maintain such plans in compliance with applicable federal law and
regulations applicable to employee benefit programs).
4. Termination of Employment.
(a) If during the Employment Period (i) Executive's
employment is terminated by Jefferson (or a subsidiary of Jefferson),
(ii) there is a material reduction in Executive's compensation or
benefits, or a material change in Executive's status, working
conditions or management responsibilities, or (iii) Executive is
required to change his place of employment, and Executive
voluntarily terminates his or her employment within 60 days of any
such event, or the last in a series of events, then Executive shall
be entitled to receive, subject to the provisions of (c) and (d)
below, a lump sum payment equal to 299% of Executive's "base amount"
as determined under (b) below. Payment shall be subject to and net
of all applicable federal and state withholding taxes and shall be
paid to the Executive within 30 business days after his termination
of employment. If Executive terminates his employment prior to the
Change of Control Date or during the Employment Period, and the
events described in (i), (ii) or (iii) have not occurred, his rights
under this Agreement shall terminate.
(b) The Executive's "base amount" for purposes of this paragraph
shall be his base salary. If Executive has not been employed for a
12-month period, his "base amount" shall be his annualized base
salary at the rate then in effect. Bonuses (including the value of
vested awards under Jefferson Incentive Stock Plan) paid or taxable
to Executive during the 12-month period preceding his termination
of employment pursuant to paragraph (a), shall be included in the
Executive's "base amount" to the extent the Board has specifically
authorized such inclusion. As of the date of the execution of this
Agreement, the Board has not authorized the inclusion of bonuses
in Executive's "base amount."
(c) The amount payable to Executive under (a) shall be reduced
to the extent necessary so that the amounts payable to Executive
under this Agreement, when added to (i) any amounts he becomes
entitled to receive under any other compensation arrangement
maintained by Jefferson (or a subsidiary) which become payable upon
or as a result of the exercise by Executive of rights which are
contingent on a Change of Control, and (ii) the value of rights that
arise or are accelerated as a result of a Change of Control event
described in paragraph (a) (such as, for example, the accelerated
right to exercise stock options, stock appreciation rights, or
redeem stock units), but only to the extent the value of such
payments or rights described in (i) and (ii) would be considered a
"parachute payment" under Internal Revenue Code 280G and
regulations thereunder, do not equal or exceed 300% or the then
permissible percentage of the Executive's "base amount" (as computed
in accordance with Internal Revenue Code provisions and regulations),
whichever is less, for determining whether Executive has received an
excess parachute payment.
(d) If at the time the events as occur described in (a)(i), (ii)
or (iii) entitling Executive to the payment provided for in paragraph
(a) there also exists an employment agreement or other compensatory
arrangement between Executive and Jefferson (or a subsidiary of
Jefferson) pursuant to which Executive becomes entitled to receive,
as a result of a Change of Control, a payment (or series of
payments), the payment provided for in (a) shall be reduced (but
not below zero) by the payment (or present discontinued value of a
series of payments) under such employment agreement or other
compensatory arrangement.
(e) In determining the present discounted value of a series of
payments to be taken into account under this Section 4, the interest
rate shall be equal to 120% of the applicable federal rate determined
under Internal Revenue Code 1274(d), compounded semi-annually, on
the date this Agreement was executed. The applicable federal
short-term, mid-term and long-term rates on the date this Agreement
was executed were 4.39%, 5.93% and 6.91%, respectively.
(f) If Executive becomes entitled to a payment under this
Agreement, Jefferson shall compute the proper amount. In applying
the limitations of Internal Revenue Code 280G, and regulations and
rulings thereunder, Jefferson shall apply the applicable provision
in good faith using the interpretation that is most likely to avoid
the imposition of the excise tax on Executive and ensure the
deductibility of payments by Jefferson.
5. Indemnification. If litigation shall be brought to enforce or
interpret any provision of this Agreement, or if Executive shall have
to institute litigation brought in good faith to enforce any of his
rights under the Agreement, Jefferson shall indemnify Executive for
his reasonable attorney's fees and disbursements incurred in any
such litigation.
6. Confidentiality. Executive recognizes that he has or will have
access to and may participate in the origination of non-public
confidential information and will owe a fiduciary duty with respect to
such information to Jefferson. Confidential information includes, but is
not limited to, trade secrets, supplier information, pricing information,
internal corporate planning, Jefferson secrets, methods of marketing,
methods of branch selection and operation, ideas and plans for development,
historical financial data and forecasts, long range plans and strategies,
and any other data or information of or concerning Jefferson that is not
generally known to the public or in the industry in which Jefferson is
engaged. Executive agrees that from the date of this Agreement and
throughout the Employment Period he will, except as specifically
authorized by Jefferson in writing, maintain in strict confidence and
will not use or disclose, other than disclosure made in the ordinary
course of business or to other employees of Jefferson, any confidential
information belonging to Jefferson. If Executive shall breach the terms
of Section 6, all of his rights under this Agreement shall terminate.
7. Governing Law. This Agreement shall be construed according to
the laws of the Commonwealth of Virginia.
8. Amendment. This Agreement may not be amended except by the
written agreement of the parties hereto.
9. Binding Effect. This Agreement shall be binding on Jefferson,
its successors, and assigns. Should there be a consolidation or merger of
Jefferson with or into another corporation, or a purchase of all or
substantially all of the assets of Jefferson by another entity, the
surviving or acquiring corporation will succeed to the rights and
obligations of Jefferson under this Agreement.
10. Entire Contract. This Agreement constitutes the entire
agreement and supersedes all other prior agreements and understandings,
both written and oral, express or implied with respect to the subject
matter of this Agreement.
11. Term. This Agreement shall be effective from the date of its
execution by Jefferson and for twenty-four (24) months thereafter, and
shall continue in effect from year to year thereafter unless Jefferson
shall notify Executive in writing 30 days in advance of an anniversary of
its execution that the Agreement shall terminate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
dated as of the 20th day of October, 1993.
JEFFERSON BANKSHARES, INC.
By: /s/ XXXXX X. XXXXXX
Executive:
/s/ XXXXXXX X. XXXXXX, XX.
