Document:

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                                                                    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;

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                           (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

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                           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

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                           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

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                           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

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                           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

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                           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<PAGE>

                                                                    Exhibit 10.5

                              Amended and Restated
          Jefferson Federal Savings and Loan Association of Morristown

                             1995 Stock Option Plan

SECTION 1. Purpose. The purposes of the Jefferson Federal Savings and Loan
Association 1995 Stock Option Plan are to promote the interests of Jefferson
Bancshares, M.H.C., its affiliates, and its stockholders by (i) attracting and
retaining exceptional executive personnel and other key employees and directors
of the Association and its affiliates; (ii) motivating such employees and
Eligible Directors by means of performance-related incentives to achieve
longer-range performance goals; and (iii) enabling such employees and Eligible
Directors to participate in the long-term growth and financial success of the
Association.

SECTION 2. Definitions. As used in the Plan, the following terms shall have the
meanings set forth below:

         "Affiliate" shall mean Jefferson Bancshares, M.H.C. or any "subsidiary"
corporation of the Association as defined in Sections 424(f) of the Code.

         "Association" shall mean Jefferson Federal Savings and Loan Association
of Morristown, Morristown, Tennessee.

         "Award" shall mean any grant of Options.

         "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.

         "Board" shall mean the Board of Directors of the Association.

         "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

         "Effective Date" shall mean the date of shareholder approval of the
Plan.

         "Eligible Director" shall mean, on any date, a person who is serving as
a member of the Board but shall not include a person who is an Employee.

         "Employee" shall mean an employee of the Association or an Affiliate.

         "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         "Fair Market Value" shall mean a value determined as follows:

         (a)      If the Shares are traded or quoted a national securities
                  exchange market at the time of grant of the Award, then the
                  Fair Market Value shall be the average of the highest and
                  lowest selling price on such exchange on the date such Award
                  is granted or, if there were no sales on such date, then on
                  the next prior business day on which there was a sale.

         (b)      If the Shares are not traded or quoted on a national
                  securities exchange, then the Fair Market Value shall be a
                  value determined by the Committee in good faith on such basis
                  as it deems appropriate.

         "Incentive Stock Option" shall mean a right to purchase Shares from the
Association that is granted under Section 6 of the Plan and that is intended to
meet the requirements of Section 422 of the Code or any successor provision
thereto.

         "Non-Qualified Stock Option" shall mean a right to purchase Shares from
the Association that is granted under Section 6 of the Plan and that is not
intended to be an Incentive Stock Option.

         "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.

         "OTS" shall mean the Office of Thrift Supervision.

         "Participant" shall mean any Employee or Eligible Director selected by
the Committee to receive an Award under the Plan.

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         "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, government
or political subdivision thereof or other entity.

         "Plan" shall mean the Jefferson Federal Savings and Loan Association of
Morristown 1995 Stock Option Plan.

         "Shares" shall mean common shares of the Association, or such other
securities of the Association as may be designated by the Committee from time to
time.

         "Ten Percent Stockholder" shall mean any stockholder who, at the time
an Incentive Stock Option is granted to such stockholder, owns (within the
meaning of Section 424(d) of the Code) more than ten percent of the voting power
of all classes of stock of the Association.

SECTION 3.  Administration.

         (a) The Plan shall be administered by the Committee. Subject to the
terms of the Plan, applicable law and compliance with OTS regulations, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to an
eligible Employee; (iii) determine the number of Shares to be covered by, or
with respect to which payments, rights, or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any Award;
(v) determine whether, to what extent, and under what circumstances Awards may
be settled or exercised in cash, Shares, other securities, other Awards or other
property, or canceled, forfeited, or suspended; (vi) determine whether, to what
extent, and under what circumstances cash, Shares, other securities, other
Awards, other property, and other amounts payable with respect to an Award shall
be deferred either automatically or at the election of the holder thereof or of
the Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (ix) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan.

         (b)   Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive, and binding
upon all Persons, including the Association, and Participant, any holder or
beneficiary of any Award, any shareholder and any Employee.

SECTION 4.  Shares Available for Awards.

         (a)   Shares Available. Subject to adjustment as provided in Section
4(b), the number of Shares with respect to which Options may be granted under
the Plan shall be 30,000. If, after the effective date of the Plan, any Shares
covered by an Option granted under the Plan, or to which such an Option relates,
are forfeited, or if an Option otherwise terminates or is canceled without the
delivery of Shares, then the Shares covered by such Option, or to which such
Option relates, or the number of Shares otherwise counted against the aggregate
number of Shares with respect to which Options may be granted, to the extent of
any such settlement, forfeiture, termination or cancellation, shall again be, or
shall become, Shares with respect to which Options may be granted. In the event
that any Option is exercised through the delivery of Shares, the number of
Shares available for Awards under the plan shall be increased by the number of
Shares surrendered.

         (b)   Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Association, issuance of warrants or other
rights to purchase Shares or other securities of the Association, or other
similar corporate transaction or event affects the Shares such that an
adjustment is necessary in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee shall proportionately adjust any or all (as necessary) of (i)
the number of Shares or other securities of the Association (or number and kind
of other securities or property) with respect to which Awards may be granted,
including an Award pursuant to Section 6(e), (ii) the number of Shares or other
securities of the Association (or number and kind of other securities or
property) subject to outstanding Awards, and (iii) the grant or exercise price
with respect to any Award; provided, in each case, that with respect to Awards
of Incentive Stock Option no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422(b)(1) of the
Code, as from time to time amended. In the event that the Association converts
to stock form through the formation of a stock holding company or otherwise
("Conversion"), any Options outstanding pursuant to an Award, to the extent such
Options are not exercised prior to the Conversion, shall be converted into
options for common stock of the successor stock holding company or bank with
appropriate adjustments to the number of shares or price of such option;
provides, however, that, with respect to Awards of Incentive

                                       2

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Stock Options, such exchange and any adjustments related to the exchange shall
be authorized only to the extent consistent with Section 422(b)(1) of the Code,
as from time to time amended.

         (c)   Sources of Shares. Any Shares delivered pursuant to an Option may
consist, in whole or in part, of authorized and unissued Shares or of treasury
Shares.

SECTION 5. Eligibility. An Employee or Eligible Director shall be eligible to be
designated a Participant.

SECTION 6.  Options.

         (a)   Grant. Subject to the provisions of the Plan and compliance with
OTS regulations, the Committee shall have sole and complete authority to
determine the Employees or Eligible Directors to whom Options shall be granted,
the number of Shares to be covered by each Option, the option price therefor and
the conditions and limitations applicable to the exercise of the option. The
Committee shall have the authority to grant Incentive Stock Options, or to grant
Non-Qualified Stock Options, or to grant both types of options; provided,
however, that the grant of Options to Eligible Directors shall be limited to
Non-Qualified Stock Options. In such case of Incentive Stock Options, the terms
and conditions of such grants shall be subject to and comply with such rules as
may be prescribed by Section 422 of the Code, as from time to time amended, and
any regulations implementing such statute, including without limitation, the
requirements of Code Section 422(d), which limits the aggregate fair market
value of Shares of which Incentive Stock Options are exercisable for the first
time to $100,000 per calendar year. Each provision of the Plan and of each
written option agreement relating to an Option designated an Incentive Stock
Option shall be construed so that such Option qualifies as an Incentive Stock
Option, and any provision that cannot be so construed shall be disregarded.
Notwithstanding anything herein to the contrary, no Employee may receive an
Award(s) covering in excess of twenty-five (25) percent of the Shares available
reserved pursuant to Section 4(a), no Eligible Director may receive an Award in
excess of five (5) percent of the Shares reserved pursuant to Section 4(a), and
the Eligible Directors, as a group, may not receive in excess of thirty (30)
percent of the Shares received for issuance pursuant to Section 4(a).

         (b)   Exercise Price. The Committee shall establish the exercise price
at the time each Option is granted, which price shall not be less than one
hundred (100) percent of the per Share Fair Market Value on the date of grant.
Notwithstanding any provision contained herein, in the case of an Incentive
Stock Option, the exercise price at the time such Incentive Stock Option is
granted to any Employee who, at the time of such grant, is a Ten Percent
Stockholder, shall not be less than one hundred ten (110) percent of the per
Share Fair Market Value on the date of grant.

         (c)   Exercise. Each Option shall exercisable over a five (5) year
period whereby twenty (20) percent of the Award shall vest on each of the first
through the fifth anniversaries of the date of grant and shall remain
exercisable over the period specified in the applicable Award Agreement, in the
case of an Incentive Stock Option, a Participant may not exercise such Option as
an Incentive Stock Option after the earlier of (i) the date which is ten years
(five years in the case of a Participant who is a Ten Percent Stockholder) after
the date on which such Incentive Stock Option is granted, or (ii) the date which
is three months (twelve months in the case of a Participant who becomes
disabled, as defined in Section 22(e)(3) of the Code, or who dies) after the
date on which he ceases to be an employee of the Association or an Affiliate.
The Committee may impose such conditions with respect to the exercise of
Options, including without limitation, any relating to the application of
federal or state securities laws, as it may deem necessary or advisable.

         (d)   Payment. No Shares shall be delivered pursuant to any exercise of
an Option until payment in full of the option price therefor is received by the
Association. Such payment may be made in cash or its equivalent, or, if and to
the extent permitted by the Committee, by exchanging Shares owned by the
optionee (which are not the subject of any pledge or other security interest),
or by a combination of the foregoing, provided that the combined value of all
cash and cash equivalents and the Fair Market Value of any such Shares so
tendered to the Association as of the date of such tender is at least equal to
such option price.

SECTION 7.  Amendment and Termination.

         (a)   Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without stockholder approval if such approval is necessary to
comply with any tax or regulatory requirement.

         (b)   Amendments to Awards. Except as provided under Section 3, the
Committee may waive any conditions or rights under, amend any terms of, or
alter, suspend, discontinue, cancel or terminate, any Award theretofore granted,
prospectively or retroactively; provided that any such waiver, amendment,
alteration, suspension, discontinuance, cancellation or termination that would
impair the rights of any Participant or any holder or beneficiary

                                       3

<PAGE>

of any Award theretofore granted shall not to that extent be effective without
the consent of the affected Participant, holder or beneficiary.

         (c)   Cancellation. Any provision of this Plan or any Award Agreement
to the contrary notwithstanding, the Committee may cause any Award of Options
granted hereunder to be canceled in consideration of the granting to the holder
of an alternative Award of Options having a Fair Market Value equal to the Fair
Market Value of such canceled Award.

SECTION 8.  General Provisions.

         (a)   Nontransferability.

               (i)    Each Award, and each right under any Award, shall be
exercisable only by the Participant's lifetime, or, if permissible under
applicable law, by the Participant's guardian or legal representative or a
transferee receiving such Award pursuant to a domestic relations order, as
determined by the Committee.

               (ii)   No Award may be assigned, alienated, pledged, attached,
sold or otherwise transferred or encumbered by a Participant otherwise than by
will or by the laws of descent and distribution or pursuant to a domestic
relations order, and any such purported assignment, alienation, pledge,
attachment, sale, transfer or encumbrance shall be void and unenforceable
against the Association; provided that the designation of a beneficiary shall
not constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.

         (b)   No Rights to Awards. No Employee, Participant or other Person
shall have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants, or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with respect
to each recipient.

         (c)   Share Certificates. All Shares or other securities of the
Association delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the Plan or the rules, regulations, and
other requirements of any regulatory agency, any stock exchange or national
securities association upon which such Shares or other securities are then
listed, and any applicable Federal or state laws, and the Committee may cause a
legend or legends to be put on any certificates representing such Shares or
other securities to make appropriate reference to such restrictions.

         (d)   Delegation. Subject to the terms of the Plan and applicable law,
the Committee may delegate to one or more officers or managers of the
Association, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to grant
Awards to, or to cancel, modify or waive rights with respect to, or to alter,
discontinue, suspend, or terminate Awards held by.

         (e)   Withholding. A Participant may be required to pay to the
Association and the Association shall have the right and is hereby authorized to
withhold from any Award, from any payment due or transfer made under any Award
or from any compensation or other amount owing to a Participant the amount of
any applicable withholding taxes in respect of an Award, its exercise, or any
payment or transfer under an Award and take such other action as may be
necessary in the opinion of the Association to satisfy all obligations for the
payment of such taxes.

         (f)   Award Agreements. Each Award hereunder shall be evidenced by an
Award Agreement which shall be delivered to the Participant and shall specify
the terms and conditions of the Award and any rules applicable thereto.

         (g)   No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Association or any Affiliate from adopting or
continuing in effect other compensation arrangements, which may, but need not,
provide for the grant of options, restricted stock, Shares and other types of
Awards provided for hereunder (subject to shareholder approval if such approval
is required), and such arrangements may be either generally applicable or
applicable only in specific cases.

         (h)   No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Association or an Affiliate. Further, the Association may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provide in the Plan or in any Award Agreement.

         (i)   No Rights as Stockholder. Subject to the provisions of the
applicable Award, no Participant or holder or beneficiary of any Award shall
have any rights as a stockholder with respect to any Shares to be distributed
under the Plan until he or she has become the holder of such Shares.

                                       4

<PAGE>

         (j)   Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan and any Award Agreement shall
be determined in accordance with the laws of the State of Tennessee.

         (k)   Severability. If any provisions of the Plan or any Award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall be
stricken as to such jurisdiction, Person or Award and the remainder of the Plan
and any such Award shall remain in full force and effect.

         (l)   Other Laws. The Committee may refuse to issue or transfer any
Shares or other consideration under an Award if, acting in its sole discretion,
it determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation, and any payment
tendered to the Association by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Award granted hereunder shall be construed as an offer to sell
securities of the Association, and no such offer shall be outstanding, unless
and until the Committee in its sole discretion has determined that any such
offer, if made, would be in compliance with all applicable requirements of the
federal securities laws.

         (m)   No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Association and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Association pursuant to an Award, such rights shall be no greater than the
right of any unsecured general creditor of the Association.

         (n)   Headings. Heading are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.

         (o)   No Impact on Benefits. Unless specifically provided under any
other benefit plan of the Association or its Affiliates, Awards shall not be
treated as compensation for purposes of calculating an Employee's or Eligible
Director's rights under such benefit plans.

         (p)   Indemnification. Each person who is or shall have been a member
of the Committee or of the Board shall be indemnified and held harmless by the
Association against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be made a party or in
which he may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him in settlement
thereof, with the Association's approval, or paid by him in satisfaction of any
judgement in any such action, suit, or proceeding against him, provided he shall
give the Association an opportunity, at its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under the Association's articles of incorporation or bylaws, by
contract, as a matter of law, or otherwise.

SECTION 9.  Term of the Plan.

         (a)   Effective Date. The Plan shall be effective on the date of
shareholder approval of the Plan.

         (b)   Expiration Date. The Plan shall terminate on and no Award shall
be granted under the Plan after the tenth anniversary of the Effective Date.
Unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award granted hereunder may, and the authority of the Board or
the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Award or to waive any conditions or rights under any such Award shall,
continue after the tenth anniversary of the effective date of the Conversion.

         (c)   Shareholder Approval. Notwithstanding anything herein to the
contrary, this Plan shall automatically terminate and shall be of no further
force or effect in the event that a majority of the stockholders of the
Association (determined without regard to Shares held by Jefferson Bancshares,
M.H.C.) do not approve this Plan within 12 months of the date of adoption of the
Plan by the Board.

                                       5

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