-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EWrRY1j9jzdPrATAEfb5jbqVQfHuFi9trUa4HKQqiYyqmBuo3CdMoWRLSIDmGrgL VVYYdKEVmsej1bNQlXVIiA== 0000950168-96-001437.txt : 19960829 0000950168-96-001437.hdr.sgml : 19960829 ACCESSION NUMBER: 0000950168-96-001437 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALLEY FINANCIAL CORP /VA/ CENTRAL INDEX KEY: 0000921590 STANDARD INDUSTRIAL CLASSIFICATION: 6035 IRS NUMBER: 541702380 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28342 FILM NUMBER: 96608142 BUSINESS ADDRESS: STREET 1: 36 CHURCH AVENUE SW CITY: ROANOKE STATE: VA ZIP: 24011 BUSINESS PHONE: 5403422265 MAIL ADDRESS: STREET 1: 36 CHURCH AVENUE SW CITY: ROANOKE STATE: VA ZIP: 24001 10-Q 1 VALLEY FINANCIAL CORPORATION 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 1996 Commission File Number: 33-77568 VALLEY FINANCIAL CORPORATION VIRGINIA 54-1702380 (State of Incorporation) (I.R.S. Employer Identification Number) 36 Church Avenue, S.W. Roanoke, Virginia 24011 (Address of principal executive offices) (540) 342-2265 (Issuer's telephone number, including area code) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No At August 12, 1996, 964,040 shares of the issuer's common stock, no par value, were outstanding. Transitional small business disclosure format: Yes No X . VALLEY FINANCIAL CORPORATION FORM 10-QSB June 30, 1996 INDEX Part I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Loss 4-5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis or Plan of Operation 10 Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. VALLEY FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30 December 31 1996 1995 ---------------- -------------- Assets Cash and due from banks (note 2) $1,690,101 $1,016,076 Money market investments: Federal funds sold 1,799,000 2,336,000 Interest-bearing deposits 10,395 55,039 Total money market investments 1,809,395 2,391,039 Securities available for sale (note 3) 5,597,736 5,282,614 Loans: Commercial loans 7,136,147 4,234,885 Commercial real estate loans 5,909,911 4,346,540 Residential real estate loans 9,839,896 4,840,781 Loans to individuals 729,154 401,519 Total loans 23,615,108 13,823,725 Less allowance for loan losses (note 4) (235,040) (137,341) Total net loans 23,380,068 13,686,384 Premises and equipment 1,445,526 1,451,754 Organizational costs 221,458 250,344 Other assets 439,799 276,500 Total assets $34,584,083 $24,354,711 Liabilities and Shareholders' Equity Deposits: Non-interest bearing demand deposits 2,819,390 3,213,830 Interest bearing demand deposits 6,160,196 3,712,803 Savings deposits 210,867 143,511 Certificates of deposits > $100,000 3,326,834 1,670,927 Other time deposits 14,125,046 7,375,795 Total deposits 26,642,333 16,116,866 Other liabilities 595,927 173,153 Total liabilities 27,238,260 16,290,019 Preferred stock, no par value. Authorized 10,000,000 shares; none issued and outstanding Common stock, no par value. Authorized 10,000,000 shares; issued and outstanding 964,040 at June 30, 1996 and December 31, 1995 (note 5) 9,089,330 9,089,330 Accumulated deficit (1,689,294) (1,035,064) Unrealized gains (losses) on securities available-for-sale, net of deferred tax expense (benefit) (54,213) 10,426 Total shareholders' equity 7,345,823 8,064,692 Total liabilities and shareholders' equity $34,584,083 $24,354,711
See accompanying notes to consolidated financial statements 3 VALLEY FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF LOSS (Unaudited)
For the Period For the Period January 1, 1996 January 1 1995 Through Through June 30, 1996 June 30, 1995 Interest Income: Interest and fees on loans $799,626 $14,703 Interest on money market investments 42,179 37,055 Interest on securities available for sale 166,329 266,648 Total interest income 1,008,134 318,406 Interest Expense: Interest on certificates of deposit $100,000 73,996 2,333 Interest on other deposits 372,798 11,366 Interest on borrowed funds 252 0 Total interest expense 447,046 13,699 Net interest income 561,088 304,707 Provision for loan losses (note 4) 97,699 15,917 Net interest income after provision for loan losses 463,389 288,790 Noninterest income: Service charges on deposit accounts 25,144 548 Other fee income 10,143 250 Securities gains 887 0 Total noninterest income: 36,174 798 Noninterest Expense: Compensation expense 736,654 320,059 Occupancy and equipment expense, net 131,952 42,429 Data processing expense 36,490 4,310 Marketing and advertising expense 57,487 63,371 Office supply expense 14,273 35,678 Other expense 147,839 60,447 Amortization of organizational expense 29,098 9,629 Total noninterest expense 1,153,793 535,923 Net loss ($654,230) ($246,335) Net loss per share (note 6) ($0.68) ($0.30)
See accompanying notes to consolidated financial statements 4 VALLEY FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF LOSS (Unaudited)
For the Period For the Period April 1, 1996 April 1, 1995 Through Through June 30, 1996 June 30, 1995 Interest Income: Interest and fees on loans $472,550 $14,703 Interest on money market investments 16,615 37,055 Interest on securities available for sale 92,930 84,972 Total interest income 582,095 136,730 Interest Expense: Interest on certificates of deposit > $100,000 43,445 2,333 Interest on other deposits 217,638 11,366 Interest on borrowed funds 252 0 Total interest expense 261,335 13,699 Net interest income 320,760 123,031 Provision for loan losses (note 4) 43,674 15,917 Net interest income after provision for loan losses 277,086 107,114 Noninterest income: Service charges on deposit accounts 14,485 548 Other fee income 9,296 250 Securities gains 12 0 Total noninterest income: 23,793 798 Noninterest Expense: Compensation expense 532,010 209,928 Occupancy and equipment expense, net 68,284 34,208 Data processing expense 18,208 4,310 Marketing and advertising expense 30,685 63,371 Office supply expense 6,956 35,678 Other expense 72,408 28,450 Amortization of organizational expense 14,654 9,629 Total noninterest expense 743,205 385,574 Net loss ($442,326) ($277,662) Net income loss per share (note 6) ($0.46) ($0.34)
See accompanying notes to consolidated financial statements 5 VALLEY FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Period For the Period January 1, 1996 January 1, 1995 Through Through June 30, 1996 June 30, 1995 Cash Flows From Operating Activities: Net income (loss) ($654,230) ($246,335) Adjustments to reconcile net loss to net cash used in operating activities: Provision for loan losses 97,699 15,917 Depreciation and amortization of bank premises and equipment 71,015 11,922 Amortization of organizational expenses 28,886 9,629 Amortization/accretion of premiums/discounts, net 12,349 (15,814) Gain on sale of securities (887) 0 Increase in other assets (135,371) (109,603) Increase (decrease) in other liabilities 428,145 (31,978) Net cash used in operating activities (152,394) (366,262) Cash Flows From Investing Activities Net decrease in money market investments 581,644 (5,465,840) Purchases of premises and equipment (64,787) (1,041,252) Purchases of securities available-for-sale (1,975,835) (34,508,988) Proceeds from sales, calls and maturities of securities available-for-sale 1,551,313 31,790,000 Net increase in loans (9,791,383) (2,277,610) Organizational costs 0 (9,518) Net cash used in investing activities (9,699,048) (11,513,208) Cash Flows From Financing Activities Iincrease in time deposits greater than $100,000 1,655,907 400,927 Increase in other time deposits 6,749,251 2,177,420 Net increase in other deposits 2,120,309 2,546,725 Increase (decrease) in advances from related parties 0 (817,000) Proceeds from common stock issued 0 8,154,520 Redemption of common stock 0 (14) Common stock issuance costs 0 (243,414) Net cash provided by financing activities 10,525,467 12,219,164 Net Increase (Decrease) in Cash and Due From Banks 674,025 339,694 Cash and Due From Banks at Beginning of Period 1,016,076 26,970 Cash and Due From Banks at End of Period $1,690,101 $366,664
See accompanying notes to consolidated financial statements 6 VALLEY FINANCIAL CORPORATION Notes to Consolidated Financial Statements June 30, 1996 (Unaudited) Organization and Summary of Significant Accounting Policies (1) General Valley Financial Corporation (the "Company"), a development stage enterprise through May 15, 1995, was incorporated under the laws of the Commonwealth of Virginia on March 15, 1994, primarily to serve as a holding company for Valley Bank, N.A. (the "Bank"), upon formation of the Bank. Prior to the formation of the Company, the Company's organizers (the "Organizers") formed a limited liability company (the "Organizational L.C.") to organize the Company and the Bank and to provide for financing of organizational and other costs. The consolidated financial statements reflect the operations of the Company and the Organizational L.C. since the date of formation of the Organizational L.C. on January 6, 1994. During 1995, all necessary applications and approvals were completed with appropriate regulatory authorities to allow the formation and opening of the Bank. The Bank's main office opened for business on May 15, 1995 and a branch office was opened September 11, 1995. Accordingly, the Company is no longer considered to be in the development stage. The Company's fiscal year end is December 31. The consolidated financial statements of the Company conform to generally accepted accounting principles and to general banking industry practices. The interim period financial statements are unaudited; however, in the opinion of management, all adjustments of a normal recurring nature which are necessary for a fair presentation of the financial statements herein have been included. The financial statements herein should be read in conjunction with the Company's 1995 Annual Report on Form 10-KSB. (2) Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks. 7 (3) Securities The carrying values and approximate market values of investment securities at June 30, 1996, are shown in the table below. As of June 30, 1996, investments with an amortized cost of $200,000 were pledged as collateral for public deposits.
Amortized Unrealized Unrealized Approximate Securities held to maturity: Costs Gains Losses Fair Values - - ------------------------------------------ --------------- ------------- ------------- ----------------- U.S. Treasury 0 0 0 0 U.S. Government agencies 0 0 0 0 Total securities held to maturity 0 0 0 0 Securities available for sale: - - -------------------------------------------- U.S. Treasury $1,906,082 0 ($3,953) $1,902,129 U.S. Government agencies $2,746,763 0 ($67,104) $2,679,659 States and political subdivisions $566,032 0 ($11,084) $554,948 Equity securities $461,000 0 0 $461,000 Total securities available for sale $5,679,877 0 ($82,141) $5,597,736 - - -------------------------------------------- --------------- -------------- --------------- ----------------- Total securities $5,679,877 0 ($82,141) $5,597,736 - - -------------------------------------------- --------------- -------------- --------------- -----------------
(4) Allowance for Loan Losses Changes in the allowance for loan losses are as follows: Balance at January 1, 1996 $137,341 Provision for loan losses 97,699 Recoveries 0 Charged off loans 0 Balance at June 30, 1996 $235,040 (5) Common Stock Offering The Company commenced a public offering of its Common Stock in July 1994, which offering terminated on July 14, 1995. The offering sold 964,040 shares of Common Stock at $10 per share, representing total gross proceeds to the Company of $9,640,400, reduced by $551,070 of direct stock issuance costs associated with the offering, resulting in net proceeds of $9,089,330. 8 (6) Net Loss Per Share Net loss per share is based upon the weighted average number of common shares outstanding during the period. 9 Item 2. Management's Discussion and Analysis or Plan of Operation. General. The Company was incorporated as a Virginia stock corporation on March 15, 1994, primarily to own and control all of the capital stock of the Bank. Prior to the formation of the Company, the Organizers formed the Organizational L.C. to organize the Company and the Bank, and to provide for financing of organizational and other costs. Any financial information for the period ended June 30, 1995, contained herein, reflects the operations of the Company and the Organizational L.C. for a portion of the development period since the date of formation of the Organizational L.C. on January 6, 1994. The Organizers received final approval of their application to charter the Bank from the OCC on May 15, 1995, and final approval of their application for deposit insurance from the FDIC on May 15, 1995. The Bank opened for business on May 15, 1995, at its main office in the City of Roanoke, and opened its branch office on September 11, 1995, in the County of Roanoke. In July 1995, the Company completed its initial public offering of 964,040 shares of its common stock, no par value, at a price of $10.00 per share. The Offering resulted in gross proceeds to the Company of $9,640,400, reduced by $551,070 of direct stock issuance costs associated with the Offering, for net proceeds of $9,089,330. Of the net proceeds of the Offering, $7,900,000 has been invested in the Bank as equity capital and the remainder retained at the parent company for working capital needs and future financial flexibility. Total assets at June 30, 1996 were $34,584,083, up from $24,354,711 at December 31, 1995, reflecting growth in the Bank's deposits and earning assets. The principal components of the Company's assets at the end of the period were $1,690,101 in cash and due from banks, $1,809,395 in money market investments, $5,597,736 in securities available-for-sale, $23,615,108 in loans and $1,445,526 in premises and equipment. Total liabilities at June 30, 1996 were $27,238,260, up from $16,290,019 at December 31, 1995, with the increase almost entirely represented by $10,525,467 growth in deposits. Total shareholders' equity at June 30, 1996 was $7,345,823, consisting of $9,089,330 in net proceeds from the Company's initial public offering, reduced by the accumulated deficit of $1,689,294 and $54,213 of unrealized losses on securities available-for-sale, net of the related deferred tax benefit. At December 31, 1995, total shareholder's equity was $8,064,692. The Company had a net loss of $654,230 for the six months ended June 30, 1996, compared with a net loss of $246,335 for the comparable period in 1995. The loss results from higher noninterest expenses in virtually all categories as the Bank in 1996 maintained properties, staffed two offices and sustained a provision for an Allowance for Loan and Lease Losses. For the six months ended June 30, 1995, these expenses were either nonexistent or at much-reduced levels as the Bank did not open for business until May 15, 1995. Also, the Company enjoyed interest income of $181,676 in the period ended June 30, 1995, a significant portion of which represented interest on escrowed stock subscription funds which the Company could not record as income until the conditions to the breaking of escrow on the stock subscription proceeds were satisfied and the Company took possession of those funds on January 27, 1995. Included in compensation expense for the first six months and the second quarter of 1996 is the present value of future severance payments the Company is obligated to make to Guy W. Byrd, Jr., who resigned as President and Chief Executive Officer of the Company and the Bank on June 20, 1996. As previously mentioned, the Bank opened for business on May 15, 1995. Accordingly, 10 comparison of operations for the first six months of 1996 with the first six months of 1995, which included a significant preopening period, is not considered meaningful. The following discussion is intended to focus on the results for 1996 as well as discussing future factors of significance to the Company. Net interest income was $561,088 for the six months ended June 30, 1996 and is attributable to interest income from securities, loans and money market investments exceeding the cost associated with interest paid on deposits. The Company benefitted from the investment income derived from these sources while interest expense increased at a slower rate as deposits were taken by the Bank. A provision for loan losses of $97,699 was provided in recognition of management's estimate of risks inherent with lending activities. The allowance for loan losses was $235,040 as of June 30, 1996 and represents approximately 1% of total loans outstanding. The Bank did not have any nonperforming assets as of June 30, 1996; nor did it have any loans past due more than thirty days. Due to the Bank's limited operating history, management's estimates on which the loan loss provision is premised are based primarily on industry practices, peer group comparisons, knowledge of the individual credits within the loan portfolio and consideration of local economic factors. Although these factors are subjective, management believes the allowance is adequate as of June 30, 1996 and will periodically evaluate the reasonableness of future provisions considering the specific nature of the portfolio, historical operating trends as available and other economic and industry factors. Noninterest income consists of service charges and fees on accounts and other miscellaneous income. Future levels of noninterest income are expected to increase as a direct result of business growth and expansion. Noninterest expense of $1,153,793 is the most significant factor contributing to the net loss of $654,230 for the six months ended June 30, 1996. As previously mentioned, and with the exception of severance expense associated with the resignation of the former President of the Company, increases in virtually all categories are attributable to the opening of the Bank and include hiring staff, acquiring and maintaining properties and equipment and other normal expenses associated with the operations of the Company. While expenses are expected to increase in future years, it is anticipated that there will be a correlation to business growth and expansion as opposed to the significant outlays involved with the opening of a new business. The Company's financial position at June 30, 1996 reflects liquidity and capital levels currently adequate to fund anticipated future business expansion. Capital ratios are well in excess of required regulatory minimums for a well-capitalized institution. The proceeds from the initial public stock offering have been invested in securities, loans, premises and equipment and used to fund expenses associated with the operations of the Company. All investment securities at June 30, 1996 were classified as available for sale. This classification in management's opinion is appropriate as it affords maximum flexibility in managing liquidity and funding the Bank's future business growth, although changes in interest rates result in unrealized gains or losses on available-for-sale securities being reflected directly as a component of shareholders' equity. 11 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. The Company held its 1996 Annual Meeting of Shareholders on April 24, 1996, at which meeting five Class B directors were re-elected to new three year terms. The following table indicates the total votes in favor of, and withheld from voting on, the re-election of each Class B director, and provides certain information with respect to those directors whose term of office continued past the 1996 Annual Meeting of Shareholders:
DIRECTOR NAME TERM OF AFFIRMATIVE VOTES OFFICE VOTES WITHHELD Class B Directors Abney S. Boxley, III 1996 - 1999 735,721 100 W. Jackson Burrows 1996 - 1999 735,721 100 William D. Elliot 1996 - 1999 735,521 300 Barbara B. Lemon 1996 - 1999 735,721 100 Ward W. Stevens, M.D. 1996 - 1999 735,721 100 Directors Continuing in Office After 1996 Annual Meeting Class C Directors Guy W. Byrd, Jr. 1994 - 1997 (resigned 6/20/96) Lawrence H. Hamlar 1994 - 1997 A. Wayne Lewis 1994 - 1997 George W. Logan 1994 - 1997 Maury L. Strauss 1994 - 1997 Class A Directors Eddie F. Hearp 1995 - 1998 Anna L. Lawson 1995 - 1998 John W. Starr, M.D. 1995 - 1998 Michael E. Warner 1995 - 1998
12 Subsequent to the 1996 Annual Meeting of Shareholders, Guy W. Byrd, Jr. resigned as a Class C director and was replaced in office by Ellis L. Gutshall. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) The Company filed the following exhibits for the quarter ended June 30, 1996: 10.11. Severance Agreement dated June 20, 1996 between the Company and Guy W. Byrd, Jr. 27. Financial Data Schedule (b) The Company filed two reports on Form 8-K relating to the quarter ended June 30, 1996. The first, dated June 20, 1996, reported the resignation of Guy W. Byrd, Jr. as President, Chief Executive Officer and a director of the Company and the Bank. It also reported the naming of Ellis L. Gutshall as President, Chief Executive Officer and a director of the Company and the Bank, and of A. Wayne Lewis as Executive Vice President of the Company and the Bank. The second report on Form 8-K, dated July 19, 1996, reported the details of the Company's severance obligation to Guy W, Byrd, Jr. pursuant to his employment agreement with the Company. 13 SIGNATURES 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. VALLEY FINANCIAL CORPORATION August 13, 1996 /S/ Ellis L. Gutshall Date Ellis L. Gutshall, President and Chief Executive Officer August 13, 1996 /S/ A. Wayne Lewis Date A. Wayne Lewis, Executive Vice President and Chief Financial Officer 14 EX-10 2 EXHIBIT 10.11 Exhibit 10.11 Severance Agreement This Agreement is made and entered into as of the 20th day of June, 1996, by and between Guy W. Byrd, Jr. ("Byrd") and Valley Financial Corporation ("VFC"), a Virginia bank holding company. Whereas, pursuant to an Employment Agreement dated as of April 8, 1994, as amended ("Employment Agreement"), Byrd was employed as President and Chief Executive Officer of VFC and its wholly owned subsidiary, Valley Bank, N.A. ("VBNA"), respectively, and was a member of the Board of Directors of VFC and VBNA, respectively. VFC and VBNA are hereinafter jointly referred to as "Valley". Whereas, on June 20, 1996, Byrd resigned as President and Chief Executive Officer of Valley and from the Boards of Directors of Valley and pursuant to agreement reached with VFC such resignation was treated as a termination of Byrd's employment not for "Cause" as defined in the Employment Agreement and pursuant to Section IV C (i) thereof; Whereas, in connection with the termination of Byrd's employment certain additional agreements between Byrd and VFC were reached in respect to his severance as an employee of Valley; Whereas, the parties desire to memorialize these additional agreements pursuant hereto. NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises herein set forth and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows: 1. Byrd confirms his resignation as an officer, employee and director of VFC and VBNA, respectively, effective June 20, 1996, and Byrd and VFC confirm their agreement that such resignation shall be treated as a termination of Byrd's employment not for Cause pursuant to Section IV C (i) of the Employment Agreement. 2. VFC shall pay Byrd the compensation provided for in Section IV C (i) of the Employment Agreement in thirty-one (31) equal monthly installments of $10,958.33 each on the last day of each month commencing with the last day of July, 1996, and continuing on the last day of each succeeding month with a final installment on January 31, 1999. These monthly installments shall be reduced by the loan payments provided in paragraph 4. of this Agreement. 3. Byrd may participate in VFC's health insurance plan until the earlier of the date Byrd is reemployed or the end of the 90 day period commencing on June 21, 1996, on the same terms and conditions as if Byrd were an employee of VFC during that period. Byrd's participation in the health insurance plan shall automatically end as of the last day of such ninety day period or on the day when Byrd is reemployed, whichever first occurs. This paragraph does not constitute a waiver by Byrd of his rights under COBRA with respect to health insurance. 4. Byrd acknowledges that he owes VFC the principal sum of $97,088.82, plus accrued interest from April 1, 1996, in connection with the financing by VFC ("Life Insurance Loan") of certain premiums on two life insurance policies with aggregate face amounts of approximately $800,000, as to which Byrd is the owner. Byrd agrees that, within 30 days from the date of this Agreement, he will repay to VFC the sum of at least 2 $50,000 to be applied to the principal balance of the Life Insurance Loan. VFC agrees to finance the remaining principal balance of the Life Insurance Loan not to exceed the amount of $47,088.82, plus accrued interest from April 1, 1996, over a period of thirty-one (31) months coinciding with the period specified in section 2 hereof during which VFC shall pay Byrd compensation. The unpaid principal balance shall accrue interest at a variable rate equal to the average quarterly federal funds rate as published by the Federal Reserve Bank of Richmond (which variable rate shall be automatically adjusted quarterly on the first day of each calendar quarter in accordance with the average federal funds rate for the immediately preceding quarter) through the date of repayment in full. Byrd irrevocably and unconditionally authorizes repayments of the Life Insurance Loan, principal and interest, to be deducted by VFC from the amounts paid to him under Section 2 hereof automatically before remittance thereof to him. Byrd agrees to sign a promissory note to VFC's order on the standard form of VBNA and containing terms not inconsistent herewith to evidence the Life Insurance Loan, including collateral assignments of the underlying policies to secure the Life Insurance Loan. 5. VFC, represents and Byrd acknowledges, that the Option Exercise Criteria as defined in Section V. of the Employment Agreement have not been met to date with respect to the option referred to in Section V A(i). Byrd agrees that he is not entitled to and shall not under any circumstances at any time become entitled to exercise the options granted under Section V of the Employment Agreement and Byrd hereby waives any right to claim them at any future time. 6. VFC agrees: (a) to pay Byrd the balance of his salary at the rate in effect on 3 June 20, 1996, the date of termination of his employment, for June no later than July 1, 1996. This amount shall include salary for the period from June 20, 1996 to June 30, 1996; (b) to pay Byrd an additional $5,000 on July 1, 1996 to cover unsubmitted expense reimbursements, the cost of a physical examination, parking, unused vacation and other incidental expenses; and (c) to waive the rights and benefits of Byrd's covenant not to compete as set forth in Section XII B. of the Employment Agreement. 7. The obligations and agreements of Valley set forth in the preceding paragraphs of this Agreement are expressly conditioned on Byrd's continuing compliance with the following: (a) Byrd shall not violate his confidentiality obligations under Section XII of the Employment Agreement and shall not and shall not permit, allow, cause, facilitate, and/or encourage, directly or indirectly, through others the disclosure to any person or entity any facts or opinions concerning or make any public statements about or otherwise reveal to any person or entity the circumstances surrounding the termination of his employment with Valley, his resignation as a director of Valley or any aspect of the management or administration of Valley, or of its policies and procedures, governance, personnel, financial condition or any other aspect of its business, operations or affairs except to the extent disclosed by Valley in its public announcements, releases or filings. Byrd shall inform the members of his immediate family of the obligations imposed by this paragraph and understands that any disclosure by them or others contrary to the requirements of this paragraph shall cause Byrd to be in violation of this paragraph 7(a) as fully as if Byrd himself had made the disclosure. 4 (b) The obligations set forth in Section 7(a) shall not apply to disclosures required by law or to the extent approved in writing in advance by Valley. (c) The obligations set forth in Section 7(a) shall be in addition to and not in substitution of the obligations of Byrd respecting confidentiality set forth in Section XII of the Employment Agreement. 8. Valley agrees that it shall not and shall not permit, allow, cause, facilitate and/or encourage, directly or indirectly, through others the disclosure to any person or entity any facts or opinions concerning or make any public statements about the circumstances surrounding the termination of Byrd's employment with Valley or his resignation as a director of Valley except (a) to the extent disclosed by Valley in its public announcements, releases or filings; (b) to banking or other regulatory authorities; (c) to securities exchanges and similar agencies with respect to VFC's securities; (d) as requested by Byrd; (e) as required by law; (f) to officers and directors of Valley in the course of their responsibilities. Valley agrees that any disclosure contrary to this paragraph 8 by the directors and officers of Valley or members of their immediate family shall constitute a breach of this Agreement. 9. Each party shall pay its own legal fees and related and other expenses incurred in connection with the enforcement of this Agreement, whether or not such party prevails. 10. Except as provided in this Agreement and except for continuing obligations under Section IV (C)(i) and Sections XII A., C. and D. of the Employment Agreement each party hereby unconditionally releases and discharges the other and, in the case of Valley, VFC's and VBNA's respective directors, officers, agents, employees and representatives from all claims, demands, causes of action, suits, losses, damages and expenses, known or 5 unknown, matured or unmatured, absolute or contingent, of every kind, nature or description, whether in tort, contract or otherwise, whether at law or in equity, arising out of, incurred in connection with, or resulting from, the Employment Agreement, the termination of Byrd's employment with VFC and/or VBNA, and/or the resignation of Byrd from the Boards of Directtors of VFC or VBNA. 11. The parties agree that this Severance Agreement constitutes the complete, final and entire agreement as to the matters contemplated hereby or provided for herein and may not be amended or modified except in a writing signed by the parties. This Severance Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, personal representatives, successors and assigns. 12. This Severance Agreement shall be governed by the laws of the Commonwealth of Virginia. The parties agree that any lawsuit between them shall be brought only in a federal or state court located in the City of Roanoke, Virginia and the parties waive any objection to and expressly consent to jurisdiction and venue in such courts. IN WITNESS WHEREOF, the parties have executed this Severance Agreement as of the date and year first written above. /S/ Guy W. Byrd, Jr. Guy W. Byrd, Jr. Valley Financial Corporation Attest: By: /S/ A. Wayne Lewis /S/ Ellis L. Gutshall Executive Vice President/Secretary Title: President and CEO 6 Valley Bank, N.A. Attest: By: /S/ A. Wayne Lewis /S/ Ellis L. Gutshall Executive Vice President/Secretary Title: President and CEO 7 EX-27 3 EXHIBIT 27
9 6-MOS DEC-31-1996 JUN-30-1996 1,690,101 23,822,943 1,799,000 0 5,597,736 0 0 23,615,108 235,040 34,584,083 26,642,333 0 595,927 0 0 0 9,089,330 0 34,584,083 799,626 208,508 0 1,008,134 446,794 447,046 561,088 97,699 887 147,839 (654,230) (654,230) 0 0 (654,230) .68 .68 4.43 0 0 0 0 137,341 0 0 235,040 235,040 0 0
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