Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS AGREEMENT (the “Agreement”), was originally entered into on June 25, 2003,
by and among JEFFERSON BANCSHARES, INC. (the “Company”), JEFFERSON FEDERAL BANK
(the “Bank”) and ANDERSON L. SMITH (“Executive”) and was subsequently amended on
July 1, 2004. The Agreement is now amended and restated in its entirety as of
December 18, 2008.

WITNESSETH

WHEREAS, the Company and the Bank desire to continue to retain the services of
the Executive as the President and Chief Executive Officer of the Company and
the Bank; and

WHEREAS, the parties to the Agreement desire to amend and restate the Agreement
in its entirety for the purpose of bringing the Agreement into compliance with
Section 409A of the Internal Revenue Code of 1986, as amended (the Code”);

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1. Employment. Executive is employed as the President and Chief Executive
Officer and of the Company and the Bank. Executive shall perform all duties and
shall have all powers which are commonly incident to the offices of President
and Chief Executive Officer and which, consistent with those offices, are
delegated to him by the Chairman of the Board of Directors of the Bank and the
Company.

2. Location and Facilities. Executive will be furnished with the working
facilities and staff customary for executive officers with the title and duties
set forth in Section 1 and as are necessary for him to perform his duties. The
location of such facilities and staff shall be at the principal administrative
offices of the Company and the Bank, or at such other site or sites customary
for such offices.

3. Term.

 

  a. The term of this Agreement shall be (i) the initial term, consisting of the
period commencing on June 25, 2003 (the “Effective Date”) and ending on the
third anniversary of the Effective Date, plus (ii) any and all extensions of the
initial term made pursuant to this Section 3.

 

  b. Commencing on the first year anniversary date of this Agreement, and
continuing on each anniversary thereafter, the disinterested members of the
boards of directors of the Bank and the Company may extend the Agreement an
additional year such that the remaining term of the Agreement shall be
thirty-six (36) months, unless Executive elects not to extend the term of this
Agreement by giving written notice in accordance with Section 19 of this
Agreement. The Board of Directors of the Bank (the “Board”) will review the
Agreement and Executive’s performance annually for purposes of determining
whether to extend the Agreement and the rationale and results thereof shall be
included in the minutes of the Board’s meeting. The Board of Directors of the
Bank shall give notice to Executive as soon as possible after such review as to
whether the Agreement is to be extended.

 

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4. Base Compensation.

 

  a. The Company and the Bank agree to pay the Executive during the term of this
Agreement a base salary at the rate of $210,000 per year, payable in accordance
with customary payroll practices.

 

  b. The Board shall review annually the rate of the Executive’s base salary
based upon factors they deem relevant, and may maintain or increase his salary,
provided that no such action shall reduce the rate of salary below the rate in
effect on the Effective Date.

 

  c. In the absence of action by the Board, the Executive shall continue to
receive salary at the annual rate specified on the Effective Date or, if another
rate has been established under the provisions of this Section 4, the rate last
properly established by action of the Board under the provisions of this
Section 4.

 

  d. The Company and the Bank intend to allocate the compensation expenses
associated with Executive’s performance of services under this Agreement in
accordance with the terms of the Expense Allocation Agreement entered into
between the Bank and the Company.

5. Bonuses. In lieu of any bonus normally provided to permanent full-time
employees of the Bank, the Bank agrees to provide a bonus program to the
Executive which will provide the Executive with the opportunity to earn up to
50% of the Executive’s base salary, on an annual basis, the amount of which
shall be determined by specific performance standards and a formula agreed to by
Executive and the Bank annually. Performance standards shall be measured on a
fiscal year, and no bonus shall be payable if Executive is not employed on
June 30 of the year in question; provided, however, in the event of death of the
Executive, the bonus for the fiscal year of Executive’s death shall be prorated
on a quarterly basis, using the information for the quarter(s) completed prior
to Executive’s death.

6. Benefit Plans. The Executive shall be entitled to participate in such life
insurance, medical, dental, pension, profit-sharing, retirement and stock-based
compensation plans and other programs and arrangements as may be approved from
time to time by the Company and the Bank for the benefit of their employees. In
addition, during the term of this Agreement, the Bank shall provide the
Executive with a supplemental life insurance policy with a death benefit of not
less than $350,000. Notwithstanding the termination of this Agreement for any
reason, other than upon the Executive’s termination for Cause, the Bank further
agrees that the Executive shall receive a supplemental retirement benefit of
$15,083 per year, beginning during the calendar year in which the Executive
attains age 65 and continuing for a total of fifteen (15) years.

7. Vacation and Leave.

 

  a. The Executive shall be entitled to vacations and other leave in accordance
with policy for senior executives, or otherwise as approved by the Board, but,
in any event, not less than four (4) weeks vacation annually.

 

  b. In addition to paid vacations and other leave, the Executive shall be
entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment for such additional periods of time and for such
valid and legitimate reasons as the Board may in its discretion determine.
Further, the Board may grant to the Executive a leave or leaves of absence, with
or without pay, at such time or times and upon such terms and conditions as the
Board in its discretion may determine.

 

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8. Expense Payments and Reimbursements. The Executive shall be reimbursed for
all reasonable out-of-pocket business expenses that he shall incur in connection
with his services under this Agreement upon substantiation of such expenses in
accordance with applicable policies of the Company and the Bank. In addition,
Executive shall receive an allowance of $3,600 per year for dues in
professional, social and civic organizations, and miscellaneous expenses,
payable in equal monthly installments.

9. Automobile Allowance. During the term of this Agreement, the Executive shall
be entitled to an annual automobile allowance of $12,000, payable in equal
monthly installments. Executive shall comply with reasonable reporting and
expense limitations on the use of such automobile as may be established by the
Company or the Bank from time to time, and the Company or the Bank shall
annually include on Executive’s Form W-2 any amount of income attributable to
Executive’s personal use of such automobile.

10. Loyalty and Confidentiality; Noncompetition.

 

  a. During the term of this Agreement, Executive: (i) shall devote all his
time, attention, skill, and efforts to the faithful performance of his duties
hereunder; provided, however, that from time to time, Executive may serve on the
boards of directors of, and hold any other offices or positions in, companies or
organizations which will not present any conflict of interest with the Company
and the Bank or any of their subsidiaries or affiliates, unfavorably affect the
performance of Executive’s duties pursuant to this Agreement, or violate any
applicable statute or regulation and (ii) shall not engage in any business or
activity contrary to the business affairs or interests of the Company and the
Bank.

 

  b. Nothing contained in this Agreement shall prevent or limit Executive’s
right to invest in the capital stock or other securities of any business
dissimilar from that of the Company and the Bank, or, solely as a passive,
minority investor, in any business.

 

  c. Executive agrees to maintain the confidentiality of any and all information
concerning the operation or financial status of the Company and the Bank; the
names or addresses of any of its borrowers, depositors and other customers; any
information concerning or obtained from such customers; and any other
information concerning the Company and the Bank to which he may be exposed
during the course of his employment. The Executive further agrees that, unless
required by law or specifically permitted by the Board in writing, he will not
disclose to any person or entity, either during or subsequent to his employment,
any of the above-mentioned information which is not generally known to the
public, nor shall he employ such information in any way other than for the
benefit of the Company and the Bank.

 

  d.

Upon the termination of Executive’s employment hereunder for any reason,
Executive agrees not to compete with the Bank for a period of two (2) years
following such termination in any city, town or county in which the Executive’s
normal business office is located and the Bank has an office or has filed an
application for regulatory approval to establish an office (or within a 60-mile
radius of each of such offices), determined as of the effective date of such
termination, except as agreed to pursuant to a resolution duly adopted by the
Board. Executive agrees that during such period and within said cities, towns
and counties, Executive shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the Bank. The parties
hereto,

 

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recognizing that irreparable injury will result to the Bank, its business and
property in the event of Executive’s breach of his obligations under this
paragraph and agree that in the event of any such breach by Executive, the Bank,
will be entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive, Executive’s partners,
agents, servants, employees and all persons acting for or under the direction of
Executive. Nothing herein will be construed as prohibiting the Bank from
pursuing any other remedies available to the Bank for such breach or threatened
breach, including the recovery of damages from Executive.

11. Termination and Termination Pay. Subject to Section 12 of this Agreement,
Executive’s employment under this Agreement may be terminated in the following
circumstances:

 

  a. Death. Executive’s employment under this Agreement shall terminate upon his
death during the term of this Agreement, in which event Executive’s estate shall
be entitled to receive the compensation due to the Executive through the last
day of the calendar month in which his death occurred.

 

  b. Retirement. This Agreement shall be terminated upon Executive’s retirement
under the retirement benefit plan or plans in which he participates pursuant to
Section 6 of this Agreement or otherwise.

 

  c. Disability.

 

  i. The Board or Executive may terminate Executive’s employment after having
determined Executive has a Disability. For purposes of this Agreement,
“Disability” means a physical or mental infirmity that impairs Executive’s
ability to substantially perform his duties under this Agreement and that
results in Executive becoming eligible for long-term disability benefits under
any long-term disability plans of the Company and the Bank (or, if there are no
such plans in effect, that impairs Executive’s ability to substantially perform
his duties under this Agreement for a period of one hundred eighty
(180) consecutive days). The Board shall determine whether or not Executive is
and continues to be permanently disabled for purposes of this Agreement in good
faith, based upon competent medical advice and other factors that they
reasonably believe to be relevant. As a condition to any benefits, the Board may
require Executive to submit to such physical or mental evaluations and tests as
it deems reasonably appropriate.

 

  ii.

In the event of such Disability, Executive’s obligation to perform services
under this Agreement will terminate. The Bank will pay Executive, as Disability
pay, an amount equal to seventy-five (75) percent of Executive’s weekly rate of
base salary in effect as of the date of his termination of employment due to
Disability. Disability payments will be made on a monthly basis and will
commence on the first day of the month following the effective date of
Executive’s termination of employment for Disability and end on the earlier of:
(A) the date he returns to full-time employment at the Bank in the same capacity
as he was employed prior to his termination for Disability; (B) his death; or
(C) the remaining term of the Agreement (if the Agreement had not been earlier
terminated by the Executive’s Disability). Such payments shall be reduced by the
amount of any short- or long-term disability benefits payable to the Executive
under any other disability programs sponsored by the Company and the Bank. In
addition, during any

 

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period of Executive’s Disability, Executive and his dependents shall, to the
greatest extent possible, continue to be covered under all benefit plans
(including, without limitation, retirement plans and medical, dental and life
insurance plans) of the Company and the Bank, in which Executive participated
prior to his Disability on the same terms as if Executive were actively employed
by the Company and the Bank.

 

  d. Termination for Cause.

 

  i. The Board may, by written notice to the Executive in the form and manner
specified in this paragraph, immediately terminate his employment at any time,
for “Cause”. The Executive shall have no right to receive compensation or other
benefits for any period after termination for Cause except for vested benefits.
Termination for “Cause” shall mean termination because of, in the good faith
determination of the Board, Executive’s:

 

  (1) Personal dishonesty;

 

  (2) Incompetence;

 

  (3) Willful misconduct;

 

  (4) Breach of fiduciary duty involving personal profit;

 

  (5) Intentional failure to perform duties under this Agreement;

 

  (6) Willful violation of any law, rule or regulation (other than traffic
violations or similar offenses), any felony conviction, any violation of law
involving moral turpitude, or any violation of a final cease-and-desist order;
or

 

  (7) Material breach by Executive of any provision of this Agreement.

 

  ii. Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause by the Company and the Bank unless there shall have been
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of a majority of the entire membership of the Board at a meeting of such
Board called and held for the purpose (after reasonable notice to Executive), of
finding that in the good faith opinion of the Board, Executive was guilty of the
conduct described above and specifying the particulars thereof.

 

  e. Voluntary Termination by Executive. In addition to his other rights to
terminate under this Agreement, Executive may voluntarily terminate employment
during the term of this Agreement upon at least sixty (60) days prior written
notice to the Board, in which case Executive shall receive only his
compensation, vested rights and employee benefits up to the date of his
termination.

 

  f. Without Cause or With Good Reason.

 

  i.

In addition to termination pursuant to Sections 11(a) through 11(e) the Board,
may, by written notice to Executive, immediately terminate his employment at

 

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any time for a reason other than Cause (a termination “Without Cause”) and
Executive may, by written notice to the Board, terminate his employment under
this Agreement for “Good Reason” as defined below (a termination “With Good
Reason”).

 

  ii. Subject to Section 12 of this Agreement, in the event of termination under
this Section 11(f), Executive shall be entitled to receive a payment equal to
the base salary (determined by reference to the Executive’s base salary on the
termination date) and bonuses (determined by reference to the Executive’s
average bonus over the three (3) years preceding his termination date or such
lesser period as he was employed by the Bank) that would otherwise have been
payable over the remaining term of the Agreement. Such amount shall be paid in
one lump sum within ten (10) calendar days of such termination. Also, in such
event, Executive shall, for the remaining term of the Agreement, receive the
benefits he would have received during the remaining term of the Agreement under
any retirement programs (whether tax-qualified or non-qualified) in which
Executive participated prior to his termination (with the amount of the benefits
determined by reference to the benefits received by the Executive or accrued on
his behalf under such programs during the twelve (12) months preceding his
termination) and continue to participate in any benefit plans of the Company and
the Bank that provide health (including medical and dental), life, or similar
coverage upon terms no less favorable than the most favorable terms provided to
senior executives of the Company and the Bank during such period. In the event
that the Company and the Bank are unable to provide such coverage by reason of
Executive no longer being an employee, the Company and the Bank shall provide
Executive with comparable coverage on an individual policy basis.

 

  iii. For purposes of this Agreement “Good Reason” shall mean the occurrence of
any of the following events without the Executive’s consent:

 

  (1) A material diminution in Executive’s Base Salary;

 

  (2) A material diminution of the Executive’s authority, duties, or
responsibilities (including reporting requirements); or

 

  (3) A change in the geographic location at which the Executive must perform
services for the Bank outside of the area consisting of a twenty-five (25) mile
radius from the current main office and any branch of the Bank;

provided, that within sixty (60) days after the initial existence of such event,
the Bank shall be given notice and an opportunity, not less than thirty
(30) days, to effectuate a cure for such asserted “Good Reason” by Executive.
Executive’s resignation hereunder for Good Reason shall not occur later than six
(6) months following the initial date on which the event Executive claims
constitutes Good Reason occurred.

 

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12. Termination in Connection with a Change in Control.

 

  a. For purposes of this Agreement, a “Change in Control” shall be deemed to
occur on the earliest of:

 

  (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 (ii) shall not apply to beneficial ownership
of Company voting shares held in a fiduciary capacity by an entity of which the
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.

 

  b.

Termination. If within the period ending two years after a Change in Control,
(i) the Company and the Bank shall terminate the Executive’s employment Without
Cause, or (ii) Executive voluntarily terminates his employment With Good Reason,
the Company and the Bank shall, within ten calendar days of the termination of
Executive’s employment, make a lump-sum cash payment to him equal to 2.99 times
the Executive’s average Annual Compensation over the five (5) most recently
completed calendar years ending with the year immediately preceding the
effective date of the Change in Control (or such lesser number of completed
calendar years as the Executive has been employed by the Company and the Bank).
In determining Executive’s average Annual Compensation, Annual Compensation
shall include base salary and any other taxable income, including but not
limited to amounts related to the granting, vesting or exercise of restricted
stock or stock option awards, commissions, bonuses (whether paid or accrued for
the applicable period), as well as, retirement benefits, director or committee
fees and fringe benefits paid or to be paid to Executive or paid for Executive’s
benefit during any such year, profit sharing, employee stock ownership plan and
other retirement contributions or benefits, including to any tax-qualified plan
or arrangement (whether or not taxable) made or accrued on behalf of Executive
of such year. The cash payment made under this Section 12(b) shall be made in
lieu of any payment also required under

 

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Section 11(f) of this Agreement because of a termination in such period.
Executive’s rights under Section 11(f) are not otherwise affected by this
Section 12. Also, in such event, the Executive shall, for a thirty-six
(36) month period following his termination of employment, receive the benefits
he would have received over such period under any retirement programs (whether
tax-qualified or nonqualified) in which the Executive participated prior to his
termination (with the amount of the benefits determined by reference to the
benefits received by the Executive or accrued on his behalf under such programs
during the twelve (12) months preceding the Change in Control) and continue to
participate in any benefit plans of the Company and the Bank that provide health
(including medical and dental), life, or similar coverage upon terms no less
favorable than the most favorable terms provided to senior executives during
such period. In the event that the Company and the Bank are unable to provide
such coverage by reason of the Executive no longer being an employee, the
Company and the Bank shall provide the Executive with comparable coverage on an
individual policy.

 

  c. The provisions of Sections 12 and Sections 14 through 25, including the
defined terms used is such sections, shall continue in effect until the later of
the expiration of this Agreement or two years following a Change in Control.

13. Indemnification and Liability Insurance.

 

  a. Indemnification. The Company and the Bank agree to indemnify Executive (and
his heirs, executors, and administrators), and to advance expenses related
thereto, to the fullest extent permitted under applicable law and regulations
against any and all expenses and liabilities reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his having been a director or executive of the
Company, the Bank or any of their subsidiaries (whether or not he continues to
be a director or executive at the time of incurring any such expenses or
liabilities) such expenses and liabilities to include, but not be limited to,
judgments, court costs, and attorneys’ fees and the cost of reasonable
settlements, such settlements to be approved by the Board, if such action is
brought against Executive in his capacity as an executive or director of the
Company and the Bank or any of their subsidiaries. Indemnification for expense
shall not extend to matters for which the Executive has been terminated for
Cause. Nothing contained herein shall be deemed to provide indemnification
prohibited by applicable law or regulation. Notwithstanding anything herein to
the contrary, the obligations of this Section 13 shall survive the term of this
Agreement by a period of six (6) years.

 

  b. Insurance. During the period in which indemnification of Executive is
required under this Section, the Company and the Bank shall provide the
Executive (and his heirs, executors, and administrators) with coverage under a
directors’ and Executives’ liability policy at the expense of the Company and
the Bank, at least equivalent to such coverage provided to directors and senior
Executives of the Company and the Bank.

14. Reimbursement of Executive’s Expenses to Enforce this Agreement. The Company
and the Bank shall reimburse the Executive for all out-of-pocket expenses,
including, without limitation, reasonable attorneys’ fees, incurred by the
Executive in connection with successful enforcement by the Executive of the
obligations of the Company and the Bank to the Executive under this Agreement.
Successful enforcement shall mean the grant of an award of money or the
requirement that the Company and the Bank take some action specified by this
Agreement (i) as a result of court order; or (ii) otherwise by the Company and
the Bank following an initial failure of the Company and the Bank to pay such
money or take such action promptly after written demand therefor from the
Executive stating the reason that such money or action was due under this
Agreement at or prior to the time of such demand.

 

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15. Limitation of Benefits under Certain Circumstances. If the payments and
benefits pursuant to Section 12 of this Agreement, either alone or together with
other payments and benefits which the Executive has the right to receive from
the Company and the Bank, would constitute a “parachute payment” under
Section 280G of the Code, the payments and benefits pursuant to Section 12 shall
be reduced or revised, in the manner determined by the Executive, by the amount,
if any, which is the minimum necessary to result in no portion of the payments
and benefits under Section 12 being non-deductible to the Company and the Bank
pursuant to Section 280G of the Code and subject to the excise tax imposed under
Section 4999 of the Code. The determination of any reduction in the payments and
benefits to be made pursuant to Section 12 shall be based upon the opinion of
the Company and the Bank’s independent public accountants and paid for by the
Company and the Bank. In the event that the Company, the Bank and/or the
Executive do not agree with the opinion of such counsel, (i) the Company and the
Bank shall pay to the Executive the maximum amount of payments and benefits
pursuant to Section 12, as selected by the Executive, which opinion indicates
there is a high probability of such payments and benefits being non-deductible
to the Company and the Bank and subject to the imposition of the excise tax
imposed under Section 4999 of the Code and (ii) the Company and the Bank may
request, and the Executive shall have the right to demand that they request, a
ruling from the IRS as to whether the disputed payments and benefits pursuant to
Section 12 have such consequences. Any such request for a ruling from the IRS
shall be promptly prepared and filed by the Company and the Bank, but in no
event later than thirty (30) days from the date of the opinion of counsel
referred to above, and shall be subject to the Executive’s approval prior to
filing, which shall not be unreasonably withheld. The Company, the Bank and the
Executive agree to be bound by any ruling received from the IRS and to make
appropriate payments to each other to reflect any such rulings, together with
interest at the applicable federal rate provided for in Section 7872(f)(2) of
the Code. Nothing contained herein shall result in a reduction of any payments
or benefits to which the Executive may be entitled upon termination of
employment other than pursuant to Section 12 hereof, or a reduction in the
payments and benefits specified in Section 12 below zero.

16. Injunctive Relief. If there is a breach or threatened breach of Section 10
of this Agreement, the parties agree that there is no adequate remedy at law for
such breach, and that the Company and the Bank shall be entitled to injunctive
relief restraining the Executive from such breach or threatened breach, but such
relief shall not be the exclusive remedy hereunder for such breach. The parties
hereto likewise agree that the Executive, without limitation, shall be entitled
to injunctive relief to enforce the obligations of the Company and the Bank
under this Agreement.

17. Successors and Assigns.

 

  a. This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Company and the Bank which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company and the Bank.

 

  b. Since the Company and the Bank are contracting for the unique and personal
skills of Executive, Executive shall be precluded from assigning or delegating
his rights or duties hereunder without first obtaining the written consent of
the Company and the Bank.

18. No Mitigation. Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to Executive in any subsequent employment.

 

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19. Notices. All notices, requests, demands and other communications in
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed to the Company and/or the Bank at their principal business
offices and to Executive at his home address as maintained in the records of the
Company and the Bank.

20. No Plan Created by this Agreement. Executive, the Company and the Bank
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act or any other law or regulation, and each party expressly waives any
right to assert the contrary. Any assertion in any judicial or administrative
filing, hearing, or process that such a plan was so created by this Agreement
shall be deemed a material breach of this Agreement by the party making such an
assertion.

21. Amendments. No amendments or additions to this Agreement shall be binding
unless made in writing and signed by all of the parties, except as herein
otherwise specifically provided.

22. Applicable Law. Except to the extent preempted by Federal law, the laws of
the State of Tennessee shall govern this Agreement in all respects, whether as
to its validity, construction, capacity, performance or otherwise.

23. Severability. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.

24. Headings. Headings contained herein are for convenience of reference only.

25. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, other than written agreements with respect to specific plans, programs
or arrangements described in Sections 5 and 6. The parties agree that this
Agreement supercedes and replaces in its entirety the Agreement between the
Executive, the Bank and the Company dated June 25, 2003.

26. Required Provisions. In the event any of the provisions of this Section 26
are in conflict with the terms of this Agreement, this Section 26 shall prevail.

 

  a. The Bank may terminate Executive’s employment at any time, but any
termination by the Bank, other than Termination for Cause, shall not prejudice
Executive’s right to compensation or other benefits under this Agreement.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 7 hereinabove.

 

  b.

If Executive is suspended from office 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.
§1818(e)(3) or (g)(1); the Bank’s obligations under this contract 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

 

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its discretion: (i) pay Executive 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 Executive 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. §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. §1813(x)(1) all obligations of the Bank under
this contract shall terminate as of the date of default, but this paragraph
shall not affect any vested rights of the contracting parties.

 

  e. All obligations of the Bank under this contract shall be terminated, except
to the extent determined that continuation of the contract is necessary for the
continued operation of the institution: (i) by the Director of the OTS (or his
designee), the FDIC or the Resolution Trust Corporation, at the time the FDIC
enters into an agreement to provide assistance to or on behalf of the Bank under
the authority contained in Section 13(c) of the Federal Deposit Insurance Act,
12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his designee) at the
time the Director (or his designee) approves a supervisory merger to resolve
problems related to the operations of the Bank or when the Bank is determined by
the Director to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such action.

 

  f. Any payments made to Executive pursuant to this Agreement, or otherwise,
are subject to and conditioned upon compliance with 12 U.S.C. §1828(k) and 12
C.F.R. Section 545.121 and any rules and regulations promulgated thereunder.

27. Section 409A of the Code.

 

  a. This Agreement is intended to comply with the requirements of Section 409A
of the Code, and specifically, with the “short-term deferral exception” under
Treasury Regulation Section 1.409A-1(b)(4) and the “separation pay exception”
under Treasury Regulation Section 1.409A-1(b)(9)(iii), and shall in all respects
be administered in accordance with Section 409A of the Code. If any payment or
benefit hereunder cannot be provided or made at the time specified herein
without incurring sanctions on Executive under Section 409A of the Code, then
such payment or benefit shall be provided in full at the earliest time
thereafter when such sanctions will not be imposed. For purposes of Section 409A
of the Code, all payments to be made upon a termination of employment under this
Agreement may only be made upon a “separation from service” (within the meaning
of such term under Section 409A of the Code), each payment made under this
Agreement shall be treated as a separate payment, the right to a series of
installment payments under this Agreement (if any) is to be treated as a right
to a series of separate payments, and if a payment is not made by the designated
payment date under this Agreement, the payment shall be made by December 31 of
the calendar year in which the designated date occurs. To the extent that any
payment provided for hereunder would be subject to additional tax under
Section 409A of the Code, or would cause the administration of this Agreement to
fail to satisfy the requirements of Section 409A of the Code, such provision
shall be deemed null and void to the extent permitted by applicable law, and any
such amount shall be payable in accordance with b. below. In no event shall
Executive, directly or indirectly, designate the calendar year of payment.

 

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  b. Notwithstanding anything herein to the contrary, if Executive is a
“specified employee” (within the meaning of Section 409A of the Code) and it is
necessary to postpone the commencement of any payments or benefits otherwise
payable under this Agreement as a result of Executive’ separation from service
with the Bank to prevent any accelerated or additional tax under Section 409A of
the Code, then the Bank will postpone the commencement of the payment of any
such payments or benefits hereunder (without any reduction in such payments or
benefits ultimately paid or provided to Executive) that are not otherwise paid
with the “short-term deferral exception” under Treasury Regulations
Section 1.409A-1(b)(4) and the “separation pay exception” under Treasury
Regulations Section 1.409A-1(b)(9)(iii), until the first payroll date that
occurs after the date that is six months following Executive’s separation of
service with the Bank. If any payments are postponed due to such requirements,
such postponed amounts will be paid to Executive in a lump sum on the first
payroll date that occurs after the date that is six months following Executive’s
separation of service with the Bank. If Executive dies during the postponement
period prior to the payment of postponed amount, the amounts withheld on account
of Section 409(A) of the Code shall be paid to the personal representative of
Executive’s estate within sixty (60) days after the date of Executive’s death.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first set forth above.

 

Attest:     JEFFERSON BANCSHARES, INC.

/s/ Jack E. Campbell

    By:  

/s/ John F. McCrary, Jr.

      Chairman of the Board of Directors Attest:     JEFFERSON FEDERAL BANK

/s/ Jack E. Campbell

    By:  

/s/ John F. McCrary, Jr.

      Chairman of the Board of Directors Witness:     EXECUTIVE

/s/ Jack E. Campbell

   

/s/ Anderson L. Smith

    Anderson L. Smith

 

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