Exhibit 10.4
FORM OF
CHANGE IN CONTROL SEVERANCE PLAN
OF
JEFFERSON FEDERAL BANK
1. Plan Purpose. The purpose of the Jefferson Federal Bank Employee
Severance Compensation Plan is to assure for Jefferson Federal Bank (the "Bank")
the services of Eligible Employees of the Bank in the event of a Change in
Control (capitalized terms are defined in section 2 of this Plan) of Jefferson
Bancshares, Inc. (the "Holding Company") or the Bank. The benefits contemplated
by the Plan recognize the value to the Bank of the services and contributions of
Eligible Employees of the Bank and the effect upon the Bank resulting from the
uncertainties of continued employment, reduced employee benefits, management
changes and relocations that may arise in the event of a Change in Control of
the Bank or the Company. The Board of Directors of the Bank believes that it is
in the best interests of the Bank and the Company to provide Eligible Employees
of the Bank and the Company with such benefits in order to defray the costs and
changes in employee status that could follow a Change in Control. The Board of
Directors of the Bank believes that the Plan will also aid the Bank in
attracting and retaining highly qualified individuals who are essential to its
success and the Plan's assurance of fair treatment of the Bank's Eligible
Employees will reduce the distractions and other adverse effects on Eligible
Employees' performance in the event of a Change in Control.
2. Definitions. Whenever used herein, the following terms shall have
the meanings set forth below:
a. "Affiliate" means any corporation, trade or business,
which, at the time of reference, is together with the
Bank, a member of a controlled group of corporations,
a group of trades or businesses (whether or not
incorporated) under common control, or an affiliated
service group, as described in Sections 414(b),
414(c), and 414(m) of the Code, respectively, or any
other organization treated as a single employer with
the Bank under Section 414(o) of the Code; provided,
however, that, where the context so requires, the
term "Affiliate" shall be construed to give full
effect to the provisions of Sections 409(l)(4) and
415(h) of the Code.
b. "Bank" means Jefferson Federal Bank, or any successor
thereto.
c. "Change in Control" means any one of the following
events occurs:
(i) Merger: The Company merges into or
consolidates with another corporation, or
merges another corporation into the Company,
and as a result less than a majority of the
combined voting power of the resulting
corporation immediately after the merger or
consolidation is held by persons who were
stockholders of the Company immediately
before the merger or consolidation;
(ii) Acquisition of Significant Share Ownership: a
report on Schedule 13D or another form or
schedule (other than Schedule 13G) is filed
or is required to be filed under Sections
13(d) or 14(d) of the Securities Exchange Act
of 1934, if the schedule discloses that the
filing person or persons acting in concert
has or have become the beneficial owner of
25% or more of a class of the Company's
voting securities, but this clause (b) shall
not apply to beneficial ownership of Company
voting shares held in a fiduciary capacity by
an entity of which Company directly or
indirectly beneficially owns 50% or more of
its outstanding voting securities;
(iii) Change in Board Composition: during any
period of two consecutive years, individuals
who constitute the Company's Board of
Directors at the beginning of the two-year
period cease for any reason to constitute at
least a majority of the Company.'s Board of
Directors; provided, however, that for
purposes of this clause (iii) each director
who is first elected by the board (or first
nominated by the board for election by
stockholders) by a vote of at least
two-thirds of the directors who were
directors at the beginning of the period
shall be deemed to have been a director at
the beginning of the two-year period; or
(iv) Sale of Assets: Company sells to a third
party all or substantially all of the
Company's assets.
d. "Company" means Jefferson Bancshares, Inc. or any
successor thereto.
e. "Eligible Employee" means any Employee who, as of the
effective date of the Change in Control has or would
have been employed by the Bank for at least one year,
and whose employment, within three months prior to a
Change in Control, or within one year thereafter is
either (i) involuntarily terminated by the Company or
any Affiliate, other than for Just Cause, (ii)
voluntarily terminated by an Eligible Employee
following (A) a relocation of an Eligible Employee's
principal place of employment to a location that is
more than thirty-five (35) miles from its location
immediately prior to the Change in Control, without
his or her consent or (B) a reduction in the base
salary of the Eligible Employee from the amount being
paid as of the date immediately preceding the earlier
of their termination date (but only if it occurs
within three months of the Change in Control) or the
effective date of the Change in Control; or (iii)
voluntarily terminated by an Eligible Employee as a
result of the failure to offer or employ the Eligible
Employee in a "comparable position." For purposes of
this Plan, a "comparable position" shall mean a
position which (A) requires skills and knowledge
similar to those required in the Eligible Employee's
position immediately prior to the Change in Control
and (B) involves a work
schedule that is substantially similar to the work
schedule followed by the Eligible Employee
immediately prior to the Change in Control. A
position shall not fail to be a comparable position
solely as a result of a change following a Change in
Control in the Eligible Employee's (A) title, (B)
supervisory authority or (C) reporting
responsibilities.
f. "Employee" means any person who has been employed by
the Company or any Affiliate for at least 120 days,
on a full-time salaried basis, immediately prior to
the Change in Control, excluding any person who is
covered by an employment contract, change in control
or severance agreement with the Company or any
Affiliate.
g. "Just Cause," with respect to termination of
employment, means an act or acts of personal
dishonesty, incompetence, willful misconduct, breach
of fiduciary duty involving personal profit, failure
to perform stated duties, willful violation of any
law, rule, or regulation (other than traffic
violations or similar offenses) or final
cease-and-desist order. In determining incompetence,
acts or omissions shall be measured against standards
generally prevailing in the banking industry, as
determined by the Board of Directors of the Bank or
the Company in its sole discretion.
h. "Year of Service" means each consecutive 12 month
period, beginning with an employee's date of hire and
running without a termination of employment in which
an employee is credited with at least one hour of
service in each of the 12 calendar months in such
period. The taking of an leave of absence shall not
eliminate a period of time from being a Year of
Service if such period of time otherwise qualifies as
such. Further if a particular 12 month period of time
would not otherwise qualify under the Plan as a Year
of Service because one hour of service is not
credited during each month of such period due to the
taking of a leave of absence, then such period of
time shall be deemed to be a Year of Service for all
other sections of this Plan. For purposes of
determining a severance benefit under this Plan,
partial years will be rounded up to the nearest whole
Year of Service.
3. Severance Benefit to Eligible Employees.
a. Each Eligible Employee shall be entitled to receive a
severance benefit equal to one (1) month's base pay
for each Year of Service with the Bank or the
Company. Notwithstanding the foregoing, an Eligible
Employee shall be entitled to a minimum severance
benefit equal to one (1) month base pay and a maximum
severance benefit equal to twelve (12) month's base
pay. For purposes of this Plan, "base pay" shall mean
1/12th of an Eligible Employee's monthly average cash
compensation during the
twelve (12) months preceding the Eligible Employee's
termination of employment.
b. All severance payments shall be made in a single lump
sum payment, without discount, payable within 10 days
of termination of employment.
c. Notwithstanding the provisions of paragraph (a)
above, if a severance benefit payment to an Eligible
Employee who is a "Disqualified Individual" shall be
in an amount which includes an "Excess Parachute
Payment," when taken together with any other payments
or benefits that are paid or provided to the Eligible
Employee, the payment to that Eligible Employee shall
be reduced to the maximum amount which does not
include an Excess Parachute Payment. The terms
"Disqualified Individual" and "Excess Parachute
Payment" shall have the same meanings as defined in
Section 280G of the Internal Revenue Code of 1986, as
amended, or any successor provision thereto.
d. The Eligible Employee shall not be required to
mitigate damages on the amount of their severance
benefits by seeking other employment or otherwise,
nor shall the amount of such severance benefit be
reduced by any compensation earned by the Eligible
Employee as a result of employment after termination
of employment hereunder.
4. Written Acknowledgment. As a condition to receiving any
payments pursuant to paragraph 3 of this Plan, the Eligible Employee shall
deliver to the Company or any applicable Affiliate on the date of his or her
employment termination a written Acknowledgment signed by the Eligible Employee
stating (i) that the severance payment to be made to the Eligible Employee
pursuant to paragraph 3 above is in full and complete satisfaction of all
liabilities and obligations of the Company and its Affiliates, directors,
officers, employees and agents, except for any tax-qualified plan benefits that
may be due and owing and except for any liabilities or obligations that may be
required by law, and (ii) that the Company or any Affiliate shall not have any
other liabilities or obligation to the Eligible Employee relating to the
Eligible Employee's employment by the Company or any Affiliate.
5. Legal Fees and Expenses. All reasonable legal fees and other
expenses paid or incurred by a party hereto pursuant to any dispute or question
of interpretation relating to this Plan shall be paid or reimbursed by the
prevailing party in any legal judgment, arbitration or settlement.
6. Required Provisions.
a. The Company or any of its Affiliates may terminate an
employee's employment at any time, but any termination
by the Company or any of its Affiliates, other than
termination for Just Cause, shall not prejudice
employee's right to compensation under this Plan.
Employee shall not
have the right to receive compensation for any period
after termination for Just Cause as defined in
Section 2(g) of this Plan.
b. If an Employee is suspended and/or temporarily
prohibited from participating in the conduct of the
Bank's affairs by a notice served under Section
8(e)(3) or 8(g)(1) of the Federal Deposit Insurance
Act, 12 U.S.C. (S)1818(e)(3) or (g)(1), the Bank's
obligations under this Plan shall be suspended as of
the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay the
Employee all or part of the compensation withheld
while their contract obligations were suspended and
(ii) reinstate (in whole or in part) any of the
obligations which were suspended.
c. If an employee is removed and/or permanently
prohibited from participating in the conduct of the
Bank's affairs by an order issued under Section
8(e)(4) or 8(g)(1) of the Federal Deposit Insurance
Act, 12 U.S.C. (S)1818(e)(4) or (g)(1), all
obligations of the Bank under this contract shall
terminate as of the effective date of the order, but
vested rights of the contracting parties shall not be
affected.
d. If the Bank is in default as defined in Section
3(x)(1) of the Federal Deposit Insurance Act, 12
U.S.C. (S)1813(x)(1), all obligations of the Bank
under this Plan shall terminate as of the date of
default, but this paragraph shall not affect any
vested rights of the contracting parties.
e. Any payments made to an Eligible Employee pursuant to
this Plan, or otherwise, are subject to and
conditioned upon their compliance with 12 U.S.C.
(S)1828(k) and any regulations promulgated
thereunder.
7. Administrative Provisions.
a. The administrator of the Plan shall be under the
supervision of the Board of Directors of the Bank or
a committee appointed by the Board of Directors of
the Bank (the "Board"). It shall be a principal duty
of the Board to see that the Plan is carried out in
accordance with its terms, for the exclusive benefit
of persons entitled to participate in the Plan
without discrimination among them. The Board will
have full power to administer the Plan in all of its
details subject, however, to the requirements of
ERISA. For this purpose, the Board's powers will
include, but will not be limited to, the following
authority, in addition to all other powers provided
by this Plan: (i) to make and enforce such rules and
regulations as it deems necessary or proper for the
efficient administration of the Plan; (ii) to
interpret the Plan, its interpretation thereof in
good faith to be final and conclusive on all persons
claiming benefits under the Plan; (iii) to decide all
questions concerning the Plan and the eligibility of
any person to
participate in the Plan; (iv) to compute the amount
of severance benefits payable to any Eligible
Employee or other person in accordance with the
provisions of the Plan, and to determine the person
or persons to whom such benefits will be paid; (v) to
authorize severance benefits; (vi) to appoint such
agents, counsel, accountants, consultants and
actuaries as may be required to assist in
administering the Plan; and (vii) to allocate and
delegate its responsibilities under the Plan and to
designate other persons to carry out any of its
responsibilities under the Plan, any such allocation,
delegation or designation to be by written instrument
and in accordance with Section 405 of ERISA, if
applicable.
b. The Board will be a "named fiduciary" for purposes of
Section 402(a)(1) of ERISA with authority to control
and manage the operation and administration of the
Plan, and will be responsible for complying with all
of the reporting and disclosure requirements of Part
1 of Subtitle B of Title I of ERISA.
8. Claims and Review Procedures.
a. If any person believes he is being denied any rights
or benefits under the Plan, such person may file a
claim in writing with the Board. If any such claim is
wholly or partially denied, the Board will notify
such person of its decision in writing. Such
notification will be written in a manner calculated
to be understood by such person and will contain (i)
specific reasons for the denial, (ii) specific
reference to pertinent Plan provisions, (iii) a
description of any additional material or information
necessary for such person to perfect such claim and
an explanation of why such material or information is
necessary and (iv) information as to the steps to be
taken if the person wishes to submit a request for
review. Such notification will be given within 90
days after the claim is received by the Board (or
within 180 days, if special circumstances require an
extension of time for processing the claim, and if
written notice of such extension and circumstances is
given to such person within the initial 90 day
period). If such notification is not given within
such period, the claim will be considered denied as
of the last day of such period and such person may
request a review of his claim.
b. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if
applicable, within 60 days after the date on which
such denial is considered to have occurred) such
person (or his duly authorized representative) may
(i) file a written request with the Board for a
review of his denied claim and of pertinent documents
and (ii) submit written issues and comments to the
Board. The Board will notify such person of its
decision in writing. Such notification will be
written in a manner calculated to be understood by
such person and will contain
specific reasons for the decision as well as specific
references to pertinent Plan provisions. The decision
on review will be made within 60 days after the
request for review is received by the Board (or
within 120 days, if special circumstances require an
extension of time for processing the requests such as
an election by the Board to hold a hearing, and if
written notice of such extension and circumstances is
given to such person within the initial 60 day
period). If the decision on review is not made within
such period, the claim will be considered denied.
9. Governing Law. This plan shall be governed by the laws of
the State of Tennessee.
10. Termination or Amendment. This plan may be amended or
terminated at any time, in the full discretion of the Board of Directors of the
Bank, prior to the Change in Control. This plan may not be terminated or amended
at the time of or after the occurrence of the Change in Control.
Having been duly adopted by the Board of Directors of the Bank,
this Plan is executed by a duly authorized officer of the Bank on this _____ day
of ______________________, 2003.
ATTEST: JEFFERSON FEDERAL BANK
________________________________ By:_________________________________________
For the Entire Board of Directors