This excerpt taken from the KFFB DEF 14A filed Oct 12, 2007.
Potential Post-Termination Benefits
Employment Agreements. Each of the named executive officers has entered into an employment agreement with the Company and either First Federal of Hazard (in the case of Mr. Whitaker) or First Federal of Frankfort (in the case of Messrs. Jennings and Hulette) See -- Employment Agreements. If either Kentucky First, First Federal of Hazard or First Federal of Frankfort terminates the employment of Messrs. Whitaker, Jennings, or Hulette without cause, or if Messrs. Whitaker, Jennings, or Hulette resigns under specified circumstances that constitute constructive termination, he receives his base salary and continued employee benefits for the remaining term of the Agreement, as well as continued health, life and disability coverage under the same terms such coverage is provided to other senior executives, or comparable individual coverage. Had Messrs. Whitaker, Jennings and Hulette terminated employment under these provisions of the agreements as of June 30, 2007, they would have received severance payments and benefits of $497,694, $325,140 and $270,768, respectively, based on current costs of the applicable benefit plans.
Under the Agreements, if, within one year after a change in control (as defined in the Agreements), any of Messrs. Whitaker, Jennings, or Hulette voluntarily terminate his employment under circumstances discussed in the Agreement, or involuntarily terminates employment, the executive receives a cash payment equal to three times his average annual compensation over the five most recently completed calendar years preceding the change in control. He also receives continued employee benefits and health, life and disability insurance coverage for thirty-six months following termination of employment. Had Messrs. Whitaker, Jennings and Hulette terminated employment as of June 30, 2007, in connection with a change in control, they would have received severance payments and benefits of $476,094, $277,740 and $244,829, respectively, based on current costs of the applicable benefit plans.
Section 280G of the Internal Revenue Code provides that severance payments that equal or exceed three times the individuals base amount are deemed to be excess parachute payments if they are contingent upon a change in control. Individuals receiving excess parachute payments are subject to a 20% excise tax on the amount of the payment in excess of their base amount, and the employer is not entitled to deduct any parachute payments over the base amount. The Agreements limit payments made to Messrs. Whitaker and Jennings in connection with a change in control to amounts that will not exceed the limits imposed by Section 280G.
Equity Grants. The Company granted each of the named executive officers equity awards of restricted stock and stock options in 2006. Upon a change in control, all outstanding stock options become immediately exercisable and the restrictions on restricted stock immediately lapse. Had a change in control occurred as of June 30, 2007, Messrs. Whitaker, Jennings and Hulette would have immediately vested in 33,600, 12,200 and 12,200 shares, respectively, of restricted stock, with a value of $337,680, $122,610, and $122,610, respectively, at June 30, 2007 based on the closing sale price for the Kentucky First common stock as quoted on the Nasdaq Global Market. In addition, had a change in control occurred as of June 30, 2007, Messrs. Whitaker, Jennings and Hulette would have immediately vested in options to acquire 84,000, 41,600 and 41,600 shares, respectively, of Kentucky First common stock.
Supplemental Executive Retirement Plan. First Federal of Hazard has implemented the SERP to provide for benefits lost under tax-qualified plans as a result of the Internal Revenue Code limitations. See -- Pension Benefits -- Supplemental Executive Retirement Plan. In addition, the SERP also provides supplemental benefits upon a change of control prior to the scheduled repayment of the ESOP loan. Upon a change in control, the SERP will provide participants with a benefit equal to what they would have received under the ESOP, had they remained employed throughout the term of the loan, less the benefits actually provided under the ESOP on the participants behalf. Had Mr. Whitaker terminated employment (other than in connection with a change in control) as of June 30, 2007, he would not have received any benefit under the SERP. Had a change in control occurred as of June 30, 2007, Mr. Whitaker would have received a benefit under the SERP of $754,443 and an allocation under the ESOP of $36,114.
Retirement Plan. Messrs. Whitaker, Jennings and Hulette are entitled to benefits upon termination of employment under the Retirement Plan. See -- Pension Benefits -- Retirement Plan. Had Messrs. Whitaker, Jennings and Hulette terminated employment at June 30, 2007, under the Retirement Plan they would have received annual benefits of $107,558, $16,100 and $7,783, respectively, starting at age 65. In Mr. Whitakers case, he alternatively would have been entitled to elect to receive a lump sum distribution of $1,071,000. The Company would not be required to accrue further expenses in connection with these payments.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis that is required by the rules established by the Securities and Exchange Commission. Based on such reviews and discussions, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement. See Compensation Discussion and Analysis.