EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT between Jefferson Bankshares, Inc., a Virginia corporation
("Jefferson"), and Allen T. Nelson, Jr. (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
in amount 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
200% 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's 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 compensations 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 Section 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 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 Section 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 4.55%, 6.01% and 7.16%, 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 Section 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 6th day of December, 1993.
JEFFERSON BANKSHARES, INC.
By /s/ Hovey S. Dabney
Executive:
/s/ Allen T. Nelson, Jr.