JEFFERSON BANKSHARES, INC.
EXECUTIVE SPLIT DOLLAR LIFE INSURANCE AGREEMENT
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
[As Amended and Restated Effecitve October 29, 1993]
This EXECUTIVE SPLIT DOLLAR LIFE INSURANCE AGREEMENT is made this
day of October 29, 1993, between JEFFERSON BANKSHARES, INC., a Virginia
corporation (the "Company") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., an executive
employed by the Company or one of its subsidiary corporations (the
"Executive"), and supersedes any prior Executive Split Dollar Life
Insurance Agreement between the Company and 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 has selected Executive to receive additional life
insurance protection under the Plan and Executive has elected to receive
such protection.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the
parties agree as follows:
1. Definitions. Where indicated by initial capital letters, the
following terms shall have the following meanings:
(a) Agreement: The Executive Split Dollar Life Insurance
Agreement (including Schedules and attachments) entered into between the
Company and Executive pursuant to the Plan.
(b) Beneficiary: The person or persons designated in writing
by Executive to receive the Executive Death Benefit.
(c) Cause: Cause means, but is not limited to, a determination
by the Company that Executive may have been guilty of criminal
conduct (regardless of whether proven or admitted), gross negligence
or willful misconduct in the performance of Executive's duties or
otherwise, or has engaged in conduct which, if generally known,
would bring discredit to or give rise to adverse publicity to the
Company.
(d) Company Cost: The total premiums paid to the Insurer with
respect to the Policy (including premiums paid on any antecedent
policy), exclusive of ratings, plus, when applicable, Withholding Taxes
advanced by the Company determined under Section 9, less all amounts
received from Executive for the Policy and less the amount of any
outstanding Policy loan.
(e) Disability: The Executive's inability to perform the
duties of his job because of accident or illness, as determined by
the Company. Executive will be deemed disabled, if, by reason of
accident or illness, Executive becomes entitled to benefits under
the Company's long-term disability program. In the event of
Disability this Agreement shall remain in effect as though Executive
continued in active employment by the Company until Executive becomes
entitled to receive retirement benefits under the Company's Pension
Plan.
(f) Executive Death Benefit: The level of life insurance to
which the Executive is entitled pursuant to the Plan.
(g) Executive's Premium: The annual cost of term life insurance
protection on the life of Executive as measured by the PS-58 rate
(or substitute table) published from time to time by the Internal
Revenue Service, prorated for a partial year as appropriate.
(h) Insurer: Any insurance company issuing a life
insurance contract on Executive's life.
(i) Plan: The Jefferson Bankshares, Inc. Executive Split Dollar
Life Insurance Plan.
(j) Policy: One or more life insurance contracts (including
paid up additional insurance) issued on the life of Executive
pursuant to the Plan. The Policy number, face amount, and
Executive Death Benefit are listed on Exhibit A.
(k) Retirement: Termination of employment (except for Cause)
at or after attainment of age 65 or, with the consent of the Company,
age 55 and completion of 15 years of service with the Company or a
subsidiary of the Company.
(l) Roll-Out: Division of the Policy into two separate policies,
one to be retained by the Company and the other to be retained by
Executive.
(m) Roll-Out Date: The later of the first policy
anniversary on which:
(i) The Company can obtain from the Insurer a policy with a
cash surrender value equal to the Company Cost, and
(ii) The Executive can receive a policy with a death benefit
equal to the Executive Death Benefit, with no outlays required
to sustain the Executive Death Benefit based upon the then
current dividend schedule, and with no policy loans.
(n) Termination Date: The date determined by reference to
Section 11(b).
(o) Withholding Taxes: The amount of state and federal income
taxes required by law to be withheld by the Company from Executive
with respect to bonuses paid or imputed to Executive to cover
Executive's Premiums.
2. Application for Insurance. The Company and Executive will apply
to the Insurer for a Policy or one or more Policies with initial coverage
at least equal to the amount of insurance to which the Executive is
entitled under the Plan. The Company and executive agree to take any
action necessary to cause the Insurer to issue the Policy (including
paid-up additional insurance on the Policy). Executive authorizes the
Company to execute for Executive as his attorney-in-fact such documents
as may be necessary to comply with this paragraph. The rights of the
Company and Executive under the Policy shall be subject to the terms of
this Agreement.
3. Amount of Insurance. Executive shall have coverage specified as
the Executive Death Benefit in the Plan. If Executive is not then
insurable at standard rates, the additional premium shall be paid by the
Company.
4. Ownership. The Company and Executive shall jointly own the
Policy, and they shall jointly exercise all ownership rights granted to
the owner by the terms of the Policy except as otherwise provided in this
Agreement. The Company shall keep possession of the Policy, but the
Policy shall be available to Executive during normal business hours for
such purposes as are consistent with the terms of this Agreement.
5. Dividend Option. All dividends declared by the Insurer on the
Policy shall be applied to purchase additional paid up life insurance on
the life of Executive until such option is changed by mutual agreement of
the Company and Executive.
6. Payment of Premiums.
(a) The Company agrees to remit the total amount of each annual
Policy premium on or before the due date of such premium, or within
the grace period provided, if any.
(b) At least thirty (30) days prior to the due date of each
annual Policy premium, the Company shall notify the Executive of the
amount of Executive's Premium to be paid by Executive to the Company
as a premium payment.
(c) The Company will pay not less often than annually the
amounts due under paragraph (b) as a bonus to the Executive, and
Executive will promptly upon demand reimburse the Company for all
Withholding Taxes due with respect to such bonus.
7. Death Benefits.
(a) Upon Executive's death, the Company and Executive's
personal representative will promptly take the appropriate action to
obtain the death benefits provided under the Policy, and
(i) the Company shall be entitled to receive the excess of
the total Policy proceeds over the Executive Death Benefit. The
receipt by the Company of the excess over the Executive Death
Benefit shall constitute satisfaction of Executive's obligation
to the Company under this Agreement; and
(ii) the Beneficiary shall be entitled to receive the
Executive Death Benefit, which shall be paid in accordance with
the terms of the designation and settlement option elected by
Executive.
(b) If at the time the Executive Death Benefit becomes payable
because of Executive's death, there is no effective Beneficiary designation,
the Executive Death Benefit shall be paid in accordance with the terms of the
Policy.
8. Policy Loans.
(a) Executive agrees that the Company, without the further
consent of Executive, has the right to (i) obtain loans secured by
the Policy from the Insurer or from others, and (ii) assign the
Policy as security for the repayment of such loans. The amount of
such loans together with interest thereon shall at no time exceed
the Company Cost with respect to the Policy securing such loan. The
principal amount of the loan and all interest charges with respect
to any Policy loan shall be the sole obligation of and shall be paid
by the Company. Executive authorizes the Company to execute for
Executive as his attorney-in-fact such documents as may be necessary
to comply with this paragraph.
(b) If the Policy is assigned or encumbered in any way,
including a Policy loan, on the date of the Executive's death or the
date of the separation of the Policy into two policies pursuant to
Section 12, the Company shall secure a release or discharge of the
assignment or encumbrance to ensure the prompt payment of death
proceeds under the Policy to the Executive's beneficiary or
beneficiaries or the separation of the Policy, as the case might be.
9. Retirement or Disability.
(a) If Executive becomes Disabled or his Retirement occurs
before his Roll-Out Date, this Agreement and the Policy shall
continue in effect until the occurrence of the Roll-Out Date.
(b) During the period between the date of Executive's
Disability or Retirement and the Roll-Out Date, Executive shall
continue to pay Executive's Premium to the Company and the Company
shall continue to pay the balance of the premiums due on the Policy.
(c) The Company will pay not less often than annually the
amounts due under paragraph (b) as a bonus to the Executive, and
the Executive will upon demand reimburse the Company for all
Executive's Withholding Taxes.
(d) The Company will advise Executive annually of the amount of
Withholding Taxes due with respect to such bonus. Within 60 days
following the date of his Disability or Retirement (to the extent
not already paid), and within 60 days following each succeeding
annual premium due date, Executive shall pay to the Company the
amount of the Executive's Withholding Taxes due the Company for the
Policy year or balance of the Policy year.
(e) Executive may irrevocably elect to have the Company advance
Executive's Withholding Taxes, in which case the Company shall be
entitled to receive from Executive on the Roll-Out Date, and
Executive agrees to pay Company, an amount equal to the Executive's
Withholding Taxes advanced by the Company, plus simple interest at
an annual rate of 6% on the Withholding Taxes, directly by cash
payment, or as a deduction from the cash values of Executive's
Policy. The election permitted under this paragraph shall be made
in a writing filed by Executive with the Company within 60 days
after the date of Executive's Retirement or Disability, or as to
succeeding Policy years, within 60 days after the Policy premium due
date.
10. Termination of Employment.
(a) If Executive's termination of employment occurs before his
Roll-Out Date for reasons other than death, Retirement, Disability
or termination by the Company for Cause, this Agreement and
Executive's entire interest in his share of the Policy shall
terminate and be forfeited as of the date of his termination of
employment unless Executive timely makes the election hereinafter
provided in subparagraph (b). If Executive makes such election,
Sections 12(a) and (b) shall apply.
(b) This Agreement and the Policy will continue in effect until
the Policy anniversary next following the date of his termination
of employment if Executive elects in writing to continue the Policy
in effect and pays to the Company within 30 days of his termination
date in a lump sum the amount of Executive's Premium for the balance
of the Policy year.
(c) If Executive makes the election as provided in subparagraph
(b), the Company shall continue to pay the balance of the premiums
due, if any, on the Policy with respect to the balance of the Policy
year.
(d) If Executive's death occurs before the 30-day election
period has expired and Executive has not made the election as
provided in subparagraph (b), Executive will be deemed to have died
while still an employee and his rights under this Agreement and the
Policy will be governed by Section 7.
11. Amendment and Termination of Agreement.
(a) This Agreement may not be amended, altered, or modified
except in writing and signed by the Company and the Executive.
(b) This Agreement shall terminate upon the first to occur of
any of the following events, each of which is a "Termination Date":
(i) the Roll-Out Date;
(ii) in the case of an Executive whose employment terminates
for reasons other than death, Disability, Retirement or termination
of employment for Cause, who has not made the election permitted
under Section 10(b), the date of his termination of employment
(unless Committee determines that Executive shall be treated as an
active employee after a termination of employment);
(iii) in the case of an Executive whose employment terminates
for reasons other than death, Disability, Retirement or termination
of employment for Cause, who has made the election permitted under
Section 10(b), the Policy anniversary next following the date of
Executive's termination of employment;
(iv) cessation of the Company's business or the bankruptcy,
receivership or dissolution of the Company, unless the Company's
business is continued by a successor corporation or business entity;
(v) termination of the Agreement as of a Policy anniversary
date by Executive during employment upon written notice to the
Company; or
(vi) termination of Executive's employment by the Company
for Cause.
12. Disposition of the Policy.
(a) If the Termination Date is the Roll-Out Date, Executive
shall retain exclusive ownership of the portion of the Policy
remaining after the interests of the Company and Executive in the
Policy have been separated. The Company shall have the unqualified
right to receive from the cash surrender value of the Policy an
amount in cash equal to the Company Cost or, alternatively, a policy
from the Insurer that has a cash surrender value equal to the
Company Cost, at the election of the Company.
(b) Except as provided in Sections 10(a) and 12(c), if the
Termination Date is not the Roll-Out Date, Executive and the
Company shall each retain exclusive ownership of the portion of the
Policy remaining after the interests of the Company and Executive in
the Policy have been separated in the following manner:
(i) Executive shall, subject to the other provisions of
this Section 12(b), retain an insurance policy with a death benefit
equal to the then Executive Death Benefit together with the
attendant cash surrender value; and
(ii) the Company shall have the unqualified right to receive
an insurance policy having a death benefit equal to the difference
between the Executive Death Benefit and the death benefit provided
by the Policy together with the remaining cash surrender value of
the Policy.
If on the Termination Date the cash surrender value of the insurance
policy to be issued to the Company pursuant to (ii) is less than the
Company Cost, Executive shall elect in writing to (x) pay the Company in
cash an amount equal to the difference between the cash surrender value
of the Company's insurance policy and the Company Cost; (y) accept an
insurance policy with a reduced death benefit that has a cash surrender
value reduced and allocated to the Company to the extent of the difference
described in (i); or (z) surrender to the Company his ownership rights to
the Policy, but retaining the right to receive from the Company cash in
an amount equal to any excess cash surrender value over the Company Cost.
Executive's election shall be made and filed with, and any cash required by
Executive's election paid to, the Company on or before the Termination Date.
Executive authorizes the Company to execute for Executive as his attorney-in-
fact such documents as may be necessary to implement the provisions of
this subparagraph. If Executive fails to make an election by the
Termination Date, Executive shall be deemed to have elected to surrender
the Policy as provided in clause (z). An example of the application of
Section 12(b) is attached as Exhibit B.
(c) If Executive's employment is terminated for Cause (as
determined by the Committee), Executive agrees that his rights under
this Agreement and the Policy (and the rights of Executive's
Beneficiary) shall terminate and be forfeited. Executive further
agrees to execute such documents as may be necessary to evidence
Executive's waiver and transfer of Executive's rights in the Policy
to the Company. Executive authorizes the Company to execute the
Executive as his attorney-in-fact such documents as may be necessary
to comply with this paragraph.
13. Termination of the Plan. Notwithstanding anything contained in
this Agreement to the contrary, a termination of the Plan will not
adversely affect the rights of Executive under this Agreement and,
unless otherwise agreed by Executive and the Company, this Agreement
will continue as though the Plan were still in effect.
14. Company's Rights to Set-Off Under the Policy. If, upon
termination of employment, Executive is indebted to the Company or a
subsidiary of the Company for any reason (other than for a personal or
commercial loan from the Company or a subsidiary of the Company), the
Company shall have the right to recover such indebtedness from the cash
value of the Policy in addition to any other amounts to which the Company
may be entitled pursuant to this Agreement.
15. Miscellaneous.
(a) This Agreement shall not affect any rights the Executive
may otherwise have under the pension, profit sharing or other
employee benefit plan (except group term life insurance) established
by the Company.
(b) This Agreement shall be binding on and inure to the
benefit of both the Company, its successors and assigns, and the
Executive, his Beneficiary, assigns and his personal representative.
The Agreement shall be interpreted in accordance with the laws of
the Commonwealth of Virginia.
(c) Except as permitted by law or pursuant to Section 15(f) or
by the Company's written consent, any benefits to which the
Executive or Executive's Beneficiary may become entitled under this
Agreement shall not be subject to anticipation, alienation, sale,
transfer, assignment, or pledge. The Company shall not be liable
for, or subject to, the debts, contracts, liabilities, or torts of
any person entitled benefit under this Agreement.
(d) This Agreement shall not confer upon the Executive any
legal or equitable right against the Company except as expressly
provided in this Agreement, the Plan and the Policy.
(e) Neither this Agreement, the Plan nor the Policy shall
constitute an inducement or consideration for the employment of the
Executive and shall not give the Executive any right to be retained
in the employ of the Company. The Company hereby retains the right
to discharge the Executive at any time, with or without Cause.
(f) The Executive's interest under this Agreement, the Plan and
the Policy, may be assigned by the Executive upon written notice to
the Company.
(g) If a provision of this Agreement is not valid or
enforceable, that fact in no way affects the validity or
enforceability of any other provision.
(h) Whenever any words are used in this Agreement in the
masculine gender, they shall be construed as though they were also
used in the feminine gender in all cases where they would so apply,
and wherever any words are used herein in the singular form they
shall be construed as though they were also used in the plural form
in all cases where they would so apply. Headings used in this
Agreement are inserted for convenience or reference, are not part of
this Agreement and are not to be considered in the construction of
this Agreement.
(i) All notices provided for or permitted to be given under any
of the provisions of this Agreement will be in writing and will be
deemed to have been duly given or served and delivered personally or
by overnight courier, telecopied or deposited in the U.S. Mail by
Registered or Certified Mail, return receipt requested, postage
prepaid and addressed as follows:
If to the Company:
Jefferson Bankshares, Inc.
P. O. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
If to the Executive:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or to such other person or address as may be given in writing by either
party to the other in accordance with this paragraph.
In consideration of the foregoing, the Company and the Executive
have executed this Agreement in duplicate as of the day and year first
written above.
JEFFERSON BANKSHARES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Exhibit A
Specification of Certain Terms of the Policy
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Policy Number: 7558862
Face Amount: $270,000
Executive Death Benefit: $184,000
Exhibit B
Page 1
Example of the Application of Section 12(b)
Section 12(b) provides that in the event the Policy is separated
on a date other than the Roll-Out Date, Executive and the Company will
each receive a policy that contains a portion of the death benefits and
cash values in the Policy. Because separation of the Policy is
occurring before the Roll-Out Date, Executive and the Company cannot
each receive the benefits that they would receive if the separation were
to occur at the Roll-Out Date. Section 12(b) provides a mechanism for
determining the amounts that Executive and the Company will receive.
Examples of the application of Section 12(b) are set forth below:
1. Assume (i) that Executive is a male, age 45 with no ratings; (ii)
the Policy was issued in 1989; (iii) that the policy year is from
November 1 through October 31; (iv) that the face amount of the
Policy at the date of issue was $115,000; (v) that the Executive
Death Benefit is $100,000; (vi) that Executive voluntarily leaves
employment with the Company on January 1, 1994 (i.e., during
policy year 5) and makes the necessary election and payments
required by Section 10 to continue the Policy until October 31,
1994 (i.e., the end of the then current policy year); (vii) that
the dividend rate for the Policy has remained unchanged from the
date of issuance; and (viii) that on October 31, 1994, the Company
Cost is $11,303, the total death benefit of the Policy is $122,357
(of which $115,000 is the face amount of the original Policy and
$7,357 is the amount of paid-up additions), the cash surrender
value of the Policy is $6,789 (of which $4,636 is allocated to the
original Policy and $2,153 of which is allocated to the paid-up
additions).
Based on the foregoing facts, the Policy would be divided into a
policy for the Executive and the Company as of October 31, 1994.
Pursuant to Section 12(b)(i), Executive will receive a policy with
a death benefit of $100,000 together with attendant cash values of
approximately $4,031 (i.e., the amount of the guaranteed cash
surrender value that a whole life policy in the amount of $100,000
would have at the end of the fifth policy year). Pursuant to
Section 12(b)(ii), the Company will receive a policy with a death
benefit of $22,357 (i.e., the difference between the Executive
Death Benefit ($100,000) and the total death benefit of the Policy
on October 31, 1994 ($122,357)) and with guaranteed cash surrender
values in the amount of $2,758 (i.e., the difference between the
total cash value of the Policy on October 31, 1994 and the amount
of cash allocated to Executive).
The amount of cash in the Company's policy is $8,545 less than the
Company Cost (i.e., $11,303-$2,758). Pursuant to Section 12(b),
Executive is required, on or before the Termination Date to (i)
pay this difference to the Company, (ii) accept an insurance
Exhibit B
Page 2
policy with a reduced death benefit and shift the reduction in the
death benefit and attendant cash values to the Company, or (iii)
surrender Executive's policy to the Company and receive from the
Company cash in the amount equal to the excess, if any, of any
cash surrender value over the Company Cost.
If Executive elects to pay the difference to the Company,
Executive may pay this difference in a number of ways including,
for example, Executive's own cash or a loan against the policy.
If Executive does not make the necessary election and, if
Executive has elected to pay cash to the Company, make the
necessary payment on or before the Termination Date, Executive
will be deemed to have elected to surrender Executive's policy to
the Company and receive cash in excess of the Company Cost.
If Executive elects to pay the difference to the Company from
Executive's own cash, Executive and the Company will have received
the following:
Death Cash
Benefit Value Cash
Executive $100,000 $4,031 ($8,545)
Company $ 22,357 $2,758 $8,545
Following the separation, Executive would have to continue to make
the required premium payments on the policy retained by Executive.
If Executive elects to accept a policy with a reduced death
benefit and shift the reduction in the death benefit and attendant
cash values to the Company or elects (or is deemed to have
elected) to surrender Executive's policy to the Company and
receive from the Company cash in an amount equal to the excess, if
any, of the cash surrender value over the Company Cost, Executive
and the Company will have received the following:
Death Cash
Benefit Value Cash
Executive $ 0 $ 0 $0
Company $122,357 $6,789 $0
2. Assume the same facts in the first example except (i) that the
Executive voluntarily leaves employment with the Company on
January 1, 1998 (i.e., during policy year 9) and makes the
necessary election and payments required by Section 10 to continue
Exhibit B
Page 3
the Policy until October 31, 1998 (i.e., the end of the then
current policy year); and (ii) that on October 31, 1998, the
Company Cost is $19,124, the total death benefit of the Policy is
$140,200 (of which $115,000 is the face amount of the original
Policy and $25,200 is the amount of paid-up additions), the cash
surrender value of the Policy is $22,042 (of which $13,458 is
allocated to the original Policy and $8,584 of which is allocated
to the paid-up additions).
Based on the foregoing facts, the Policy would be divided into a
policy for the Executive and the Company as of October 31, 1998.
Pursuant to Section 12(b)(i), Executive will receive a policy with
a death benefit of $100,000 together with attendant cash values of
approximately $11,703 (i.e., the amount of the guaranteed cash
surrender value that a whole life policy in the amount of $100,000
would have at the end of the ninth policy year). Pursuant to
Section 12(b)(ii), the Company will receive a policy with a death
benefit of $40,200 (i.e., the difference between the Executive
Death Benefit ($100,000) and the total death benefit of the Policy
on October 31, 1998 ($140,200)) and with guaranteed cash surrender
values in the amount of $10,339 (i.e., the difference between the
total cash value of the Policy on October 31, 1998 and the amount
of cash allocated to Executive).
The amount of cash in the Company's policy is $8,785 less than the
Company Cost (i.e., $19,124-10,339). Pursuant to Section 12(b),
Executive is required, on or before the Termination Date to (i)
pay this difference to the Company, (ii) accept an insurance
policy with a reduced death benefit and shift the reduction in the
death benefit and attendant cash values to the Company, or (iii)
surrender Executive's policy to the Company and receive from the
Company cash in the amount equal to the excess, if any, of any
cash surrender value over the Company Cost.
If Executive elects to pay the difference to the Company,
Executive may pay this difference in a number of ways including,
for example, Executive's own cash or a loan against the policy.
If Executive does not make the necessary election and, if
Executive has elected to pay cash to the Company, make the
necessary payment on or before the Termination Date, Executive
will be deemed to have elected to surrender Executive's policy to
the Company and receive cash in excess of the Company Cost.
Exhibit B
Page 4
If Executive elects to pay the difference to the Company from
Executive's own cash, Executive and the Company will have received
the following:
Death Cash
Benefit Value Cash
Executive $100,000 $11,703 ($8,785)
Company $ 40,200 $10,339 $8,785
Following the separation, Executive would have to continue to make
the required premium payments on the policy retained by Executive.
If Executive elects to accept a policy with a reduced death
benefit and shift the reduction in the death benefit and attendant
cash values to the Company, Executive and the Company will have
received the following:
Death Cash
Benefit Value Cash
Executive $ 25,000 $ 2,918 $0
Company $115,200 $19,124 $0
Following the separation, Executive would have to continue to make
the required premium payments on the policy retained by Executive.
If Executive elects (or is deemed to have elected) to surrender
Executive's policy to the Company and receive from the Company
cash in an amount equal to the excess, if any, of the cash
surrender value over the Company Cost, Executive and the Company
will have received the following:
Death Cash
Benefit Value Cash
Executive $ 0 $ 0 $2,918
Company $140,200 $22,042 ($2,918)