1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ______)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Jefferson Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
-------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
N/A
-------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
N/A
-------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
N/A
-------------------------------------------------------------------------
5) Total Fee paid:
N/A
-------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
N/A
---------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
N/A
---------------------------------------------------------------------
3) Filing Party:
N/A
---------------------------------------------------------------------
4) Date Filed:
N/A
---------------------------------------------------------------------
2
[JEFFERSON BANCSHARES, INC. LETTERHEAD APPEARS HERE]
September 15, 2004
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Jefferson Bancshares, Inc. We will hold the meeting in the Independence Room of
Jefferson Federal Bank at 120 Evans Avenue, Morristown, Tennessee, on October
21, 2004 at 2:00 p.m., local time.
The notice of annual meeting and proxy statement appearing on the
following pages describe the formal business to be transacted at the meeting.
During the meeting, we will also report on the operations of the Company.
Directors and officers of the Company, as well as a representative of Craine,
Thompson & Jones, P.C., the Company's independent auditors, will be present to
respond to appropriate questions of shareholders.
It is important that your shares are represented at this meeting, whether
or not you attend the meeting in person and regardless of the number of shares
you own. To make sure your shares are represented, we urge you to complete and
mail the enclosed proxy card. If you attend the meeting, you may vote in person
even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Anderson L. Smith
Anderson L. Smith
PRESIDENT AND CHIEF EXECUTIVE OFFICER
3
JEFFERSON BANCSHARES, INC.
120 EVANS AVENUE
MORRISTOWN, TENNESSEE 37814
(423) 586-8421
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
On October 21, 2004, Jefferson Bancshares, Inc. will hold its annual
meeting of shareholders in the Independence Room of Jefferson Federal Bank at
120 Evans Avenue, Morristown, Tennessee. The meeting will begin at 2:00 p.m.,
local time. At the meeting, shareholders will consider and act on the following:
1. The election of two directors to serve for a term of three years;
2. The ratification of the appointment of Craine, Thompson & Jones,
P.C. as independent auditors for the Company for the fiscal year
ending June 30, 2005; and
3. Such other business that may properly come before the meeting.
NOTE: The Board of Directors is not aware of any other business to come
before the meeting.
The Board of Directors set August 31, 2004 as the record date for the
meeting. This means that owners of Jefferson Bancshares, Inc. common stock at
the close of business on that date are entitled to receive notice of the meeting
and to vote at the meeting and any adjournment or postponement of the meeting.
Please complete and sign the enclosed form of proxy, which is solicited by
the Board of Directors, and mail it promptly in the enclosed envelope. The proxy
will not be used if you attend the meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jane P. Hutton
Jane P. Hutton
CORPORATE SECRETARY
Morristown, Tennessee
September 15, 2004
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
4
JEFFERSON BANCSHARES, INC.
----------------------------------
PROXY STATEMENT
----------------------------------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Jefferson Bancshares, Inc. ("Jefferson
Bancshares" or the "Company") to be used at the annual meeting of shareholders
of the Company. Jefferson Bancshares is the holding company for Jefferson
Federal Bank ("Jefferson Federal"). The annual meeting will be held in the
Independence Room of Jefferson Federal at 120 Evans Avenue, Morristown,
Tennessee on October 21, 2004, at 2:00 p.m., local time. This proxy statement
and the enclosed proxy card are being first mailed to shareholders of record on
or about September 15, 2004.
GENERAL INFORMATION ABOUT VOTING
WHO CAN VOTE AT THE MEETING
You are entitled to vote your Jefferson Bancshares common stock if the
records of the Company show that you held your shares as of the close of
business on August 31, 2004. As of the close of business on August 31, 2004, a
total of 8,330,517 shares of Jefferson Bancshares common stock were outstanding.
Each share of common stock has one vote. The Company's Charter provides that
record holders of the Company's common stock who beneficially own, either
directly or indirectly, in excess of 10% of the Company's outstanding shares are
not entitled to any vote in respect of the shares held in excess of the 10%
limit. With respect to shares held by a broker, bank or nominee, the Company
generally will look beyond the holder of the shares to the person or entity for
whom the shares are held when applying the voting limitation. However, where the
ultimate owner of the shares has granted voting authority to the broker, bank or
nominee that holds the shares, the Company would apply the 10% voting limitation
to the broker, bank or nominee.
ATTENDING THE MEETING
If you are a beneficial owner of Jefferson Bancshares common stock held by
a broker, bank or other nominee (I.E., in "street name"), you will need proof of
ownership to be admitted to the meeting. A recent brokerage statement or letter
from a bank or broker are examples of proof of ownership. If you want to vote
your shares of Jefferson Bancshares common stock held in street name in person
at the meeting, you will have to get a written proxy in your name from the
broker, bank or other nominee who holds your shares.
VOTE REQUIRED
The annual meeting will be held only if there is a quorum present. A
quorum exists if a majority of the outstanding shares of common stock entitled
to vote are represented at the meeting. If you return valid proxy instructions
or attend the meeting in person, your shares will be counted for purposes of
determining whether there is a quorum, even if you abstain from voting. Broker
non-votes also will be counted for purposes of determining the existence of a
quorum. A broker non-vote occurs when a broker, bank or other nominee holding
shares for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received voting instructions from the beneficial owner.
5
In voting on the election of directors, you may vote in favor of all
nominees, withhold votes as to all nominees, or withhold votes as to specific
nominees. There is no cumulative voting for the election of directors. Directors
must be elected by a plurality of the votes cast at the annual meeting. This
means that the nominees receiving the greatest number of votes will be elected.
Votes that are withheld and broker non-votes will have no effect on the outcome
of the election.
In voting on the ratification of the appointment of Craine, Thompson &
Jones, P.C. as independent auditors of the Company, you may vote in favor of the
proposal, vote against the proposal or abstain from voting. The ratification of
Craine, Thompson & Jones, P.C. as the Company's independent auditor will be
decided by the affirmative vote of a majority of the votes cast at the annual
meeting. On this matter, abstentions and broker non-votes will have no effect on
the voting.
VOTING BY PROXY
The Board of Directors of Jefferson Bancshares is sending you this proxy
statement for the purpose of requesting that you allow your shares of Jefferson
Bancshares common stock to be represented at the annual meeting by the persons
named in the enclosed proxy card. All shares of Jefferson Bancshares common
stock represented at the meeting by properly executed and dated proxies will be
voted according to the instructions indicated on the proxy card. If you sign,
date and return a proxy card without giving voting instructions, your shares
will be voted as recommended by the Company's Board of Directors. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR DIRECTOR AND FOR THE
RATIFICATION OF CRAINE, THOMPSON & JONES, P.C. AS INDEPENDENT AUDITORS.
If any matters not described in this proxy statement are properly
presented at the annual meeting, the persons named in the proxy card will use
their own best judgment to determine how to vote your shares. This includes a
motion to adjourn or postpone the annual meeting in order to solicit additional
proxies. If the annual meeting is postponed or adjourned, your Jefferson
Bancshares common stock may be voted by the persons named in the proxy card on
the new annual meeting date as well, unless you have revoked your proxy. The
Company does not know of any other matters to be presented at the annual
meeting.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy, you must either advise the Corporate Secretary of
the Company in writing before your common stock has been voted at the annual
meeting, deliver a later dated proxy or attend the meeting and vote your shares
in person. Attendance at the annual meeting will not in and of itself constitute
revocation of your proxy.
If your Jefferson Bancshares common stock is held in "street name," you
will receive instructions from your broker, bank or other nominee that you must
follow in order to have your shares voted. Your broker, bank or other nominee
may allow you to deliver your voting instructions via the telephone or the
Internet. Please see the instruction form provided by your broker, bank or other
nominee that accompanies this proxy statement.
PARTICIPANTS IN JEFFERSON FEDERAL'S ESOP AND 401(K) PLAN
If you participate in the Jefferson Federal Bank Employee Stock Ownership
Plan (the "ESOP") or if you hold shares through the Jefferson Federal Savings
Bank Employees' Savings & Profit Sharing Plan and Trust (the "401(k) Plan"), you
will receive a voting instruction form for each plan that reflects
2
6
all shares you may vote under the plans. Under the terms of the ESOP, the ESOP
trustee votes all shares held by the ESOP, but each ESOP participant may direct
the trustee how to vote the shares of common stock allocated to his or her
account. The ESOP trustee, subject to the exercise of its fiduciary duties, will
vote all unallocated shares of Company common stock held by the ESOP and
allocated shares for which no voting instructions are received in the same
proportion as shares for which it has received timely voting instructions. Under
the terms of the 401(k) Plan, a participant is entitled to direct the trustee as
to the shares in the Jefferson Bancshares, Inc. Stock Fund credited to his or
her account. The trustee will vote all shares for which no directions are given
or for which instructions were not timely received in the same proportion as
shares for which the trustee received voting instructions. The deadline for
returning your voting instructions to each plan's trustee is October 12, 2004.
CORPORATE GOVERNANCE
GENERAL
The Company periodically reviews its corporate governance policies and
procedures to ensure that the Company meets the highest standards of ethical
conduct, reports results with accuracy and transparency and maintains full
compliance with the laws, rules and regulations that govern the Company's
operations. As part of this periodic corporate governance review, the Board of
Directors reviews and adopts best corporate governance policies and practices
for the Company.
CORPORATE GOVERNANCE POLICIES AND PROCEDURES
Jefferson Bancshares has adopted a corporate governance policy to govern
certain activities. The corporate governance policy sets forth:
(1) the duties and responsibilities of each director;
(2) the composition, responsibilities and operation of the board of
directors;
(3) the establishment and operation of board committees;
(4) succession planning;
(5) appointing an independent lead director and convening executive
sessions of independent directors;
(6) the Board of Directors' interaction with management and third
parties; and
(7) the evaluation of the performance of the Board of Directors and of
the chief executive officer.
CODE OF ETHICS AND BUSINESS CONDUCT
The Company has adopted a Code of Ethics and Business Conduct that is
designed to ensure that the Company's directors, executive officers and
employees meet the highest standards of ethical conduct. The Code of Ethics and
Business Conduct requires that the Company's directors, executive officers and
employees avoid conflicts of interest, comply with all laws and other legal
requirements, conduct
3
7
business in an honest and ethical manner and otherwise act with integrity and in
the Company's best interest. Under the terms of the Code of Ethics and Business
Conduct, directors, executive officers and employees are required to report any
conduct that they believe in good faith to be an actual or apparent violation of
the Code.
As a mechanism to encourage compliance with the Code of Ethics and
Business Conduct, the Company has established procedures to receive, retain and
treat complaints received regarding accounting, internal accounting controls or
auditing matters. These procedures ensure that individuals may submit concerns
regarding questionable accounting or auditing matters in a confidential and
anonymous manner. The Code of Ethics and Business Conduct also prohibits the
Company from retaliating against any director, executive officer or employee who
reports actual or apparent violations of the Code.
MEETINGS OF THE BOARD OF DIRECTORS
The Company and Jefferson Federal conduct business through meetings and
activities of their Boards of Directors and their committees. During the fiscal
year ended June 30, 2004, the Board of Directors of the Company held ten regular
meetings, four special meetings and one executive session of independent
directors and the Board of Directors of Jefferson Federal held 12 regular
meetings and one special meeting. No director attended fewer than 75% of the
total meetings of the Boards of Directors and committees on which he served.
COMMITTEES OF THE BOARD OF DIRECTORS OF JEFFERSON BANCSHARES
AUDIT/COMPLIANCE COMMITTEE. The Audit/Compliance Committee, consisting of
Messrs. Jack E. Campbell (Chairman), Terry M. Brimer and William T. Hale, is
responsible for ensuring that Jefferson Bancshares is maintaining reliable
accounting policies and financial reporting processes, ensuring that the
internal auditing department is adequate, and reviewing the work of Jefferson
Bancshares' independent accountants and internal auditing department to
determine its effectiveness. This committee met four times during the fiscal
year ended June 30, 2004. The Board has determined that the Audit/Compliance
Committee does not have a member who is an "audit committee financial expert" as
such term is defined under the rules and regulations of the Securities and
Exchange Commission. However, the Board believes that each of the current
members of the Audit/Compliance Committee is able to read and understand
fundamental financial statements and, in accordance with the NASD listing
standards, that at least one member possesses the necessary financial
sophistication. Each member of the Audit/Compliance Committee is independent in
accordance with the listing standards of the Nasdaq Stock Market. The
Audit/Compliance Committee acts under a written charter adopted by the Board of
Directors, a copy of which was included as APPENDIX B to Jefferson Bancshares'
proxy statement filed on December 1, 2003. The report of the Audit/Compliance
Committee required by the rules of the Securities and Exchange Commission is
included in this proxy statement. See "PROPOSAL 2 - RATIFICATION OF INDEPENDENT
AUDITORS-REPORT OF AUDIT/COMPLIANCE COMMITTEE."
COMPENSATION COMMITTEE. The Compensation Committee, consisting of Messrs.
Terry M. Brimer (Chairman), Jack E. Campbell and John F. McCrary, Jr. is
responsible for determining annual grade and salary levels for employees and
establishing personnel policies. This committee met six times during the fiscal
year ended June 30, 2004. Each member of the Compensation Committee is
independent under the listing standards of the Nasdaq Stock Market. The report
of the Compensation Committee required by the rules of the Securities and
Exchange Commission is included in this proxy statement. See "COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION."
4
8
NOMINATING/CORPORATE GOVERNANCE COMMITTEE. The Nominating/Corporate
Governance Committee, consisting of Messrs. H. Scott Reams (Chairman), Terry M.
Brimer, Jack E. Campbell, William T. Hale and William F. Young, is responsible
for the annual selection of the Board of Director's nominees for election as
directors and developing and implementing policies and practices relating to
corporate governance, including implementation of and monitoring adherence to
Jefferson Bancshares' corporate governance policy. This committee met once to
select the Board of Director's nominees for election as directors at this annual
meeting.
Each member of the Nominating/Corporate Governance Committee is
independent as independence for nominating committee members is defined in the
listing standards of the Nasdaq Stock Market. The Nominating/Corporate
Governance Committee acts under a written charter adopted by the Board of
Directors, a copy of which is included as APPENDIX A to this proxy statement.
The procedures of the Nominating/Corporate Governance Committee required to be
disclosed by the rules of the Securities and Exchange Commission are included in
this proxy statement. See "NOMINATING/CORPORATE GOVERNANCE COMMITTEE
PROCEDURES."
DIRECTORS' COMPENSATION
DIRECTORS' FEES. Jefferson Federal pays a fee to each of its directors of
$800 per month for each regular board meeting attended plus a fee of $200 for
attendance at special meetings of the board. The Chairman receives an additional
fee of $1,000 per month. Members of committees receive an additional fee of $100
per meeting attended. Directors of Jefferson Bancshares receive a retainer of
$1,000 per quarter.
INCENTIVE PLAN. On January 29, 2004, under the Jefferson Bancshares, Inc.
2004 Stock-Based Incentive Plan that was adopted by our shareholders on January
8, 2004, each of our non-employee directors received non-statutory stock options
to purchase 26,203 shares of common stock at an exercise price of $13.69, the
fair market value of the common stock on the date of grant. Additionally, these
non- employee directors were granted 10,481 shares of restricted stock. The
options become exercisable and the restricted stock awards vest in five equal
annual installments beginning on January 29, 2005.
5
9
STOCK OWNERSHIP
The following table provides information as of August 31, 2004 about the
persons, other than directors and executive officers, known to the Company to be
the beneficial owners of more than 5% of the Company's outstanding common stock.
A person may be considered to beneficially own any shares of common stock over
which he or she has, directly or indirectly, sole or shared voting or investment
power.
PERCENT OF
NUMBER OF COMMON STOCK
NAME AND ADDRESS SHARES OWNED OUTSTANDING
- ---------------- ------------ ---------------
Jefferson Federal Bank 670,089 8.0%
Employee Stock Ownership Plan
120 Evans Avenue
Morristown, Tennessee 37814
Bank of America Corporation
Fleet National Bank 432,300(1) 5.2%
Columbia Management Group, Inc.
Columbia Management Advisors, Inc.
100 North Tryon Street
Floor 25
Bank of America Corporate Center
Charlotte, North Carolina 28255
- ---------------------------------
(1) Based upon information in a Schedule 13G/A filed jointly on June 4, 2004
with the U.S. Securities and Exchange Commission ("SEC"). According to this
filing, Bank of America Corporation has shared voting power with respect to
420,700 shares and shared dispositive power with respect to 432,300; Fleet
National Bank has solve voting power with respect to 93,200 shares, shared
voting power with respect to 327,500 shares, sole dispositive power with
respect to 100,800 shares and shared dispositive power with respect to
331,500 shares; and Columbia Management Group, Inc. and Columbia Management
Advisors, Inc. have shared voting power with respect to 327,500 shares and
shared dispositive power with respect to 331,500 shares.
6
10
The following table provides information as of August 31, 2004 about the
shares of Jefferson Bancshares common stock that may be considered to be
beneficially owned by each director, each nominee for director and all directors
and executive officers of the Company as a group. A person may be considered to
beneficially own any shares of common stock over which he or she has, directly
or indirectly, sole or shared voting or investment power. Unless otherwise
indicated, each of the named individuals has sole voting power and sole
investment power with respect to the shares shown.
NUMBER OF SHARES PERCENT OF
NUMBER OF SHARES THAT MAY BE ACQUIRED COMMON
OWNED (EXCLUDING WITHIN 60 DAYS BY STOCK
NAME OPTIONS)(1) EXERCISING OPTIONS OUTSTANDING(2)
- ----- ------------------- -------------------- ---------------
Dr. Terry M. Brimer..................... 105,510(3) 6,399 1.3%
Dr. Jack E. Campbell.................... 67,289(4) 6,399 *
William T. Hale......................... 93,445(5) 4,266 1.2
John F. McCrary, Jr..................... 158,431 - 1.9
H. Scott Reams.......................... 109,228(6) 6,399 1.4
Anderson L. Smith....................... 63,813(7) 10,665 *
William F. Young........................ 92,588(8) 4,266 1.2
All directors and executive officers as
a group (10 persons)................. 758,689 53,325 9.7%
- --------------------------------------
* Less than 1% of the shares of the Company common stock outstanding.
(1) Includes unvested shares of restricted stock held in trust under the
Jefferson Bancshares, Inc. 2004 Stock-Based Incentive Plan, with respect to
which the beneficial owner has voting but not investment power as follows:
Messrs. Brimer, Campbell, Hale, McCrary, Reams and Young -- 10,481 shares;
and Mr. Smith -- 34,938 shares.
(2) Based on 8,330,517 shares of Company common stock outstanding and entitled
to vote as of the close of business on August 31, 2004, plus the number of
shares that may be acquired within 60 days by each individual (or group of
individuals) by exercising stock options.
(3) Includes 56,529 shares held jointly with his wife, 36,500 shares held by his
wife, and 2,000 shares held by his son.
(4) Includes 56,808 shares held jointly with his wife.
(5) Includes 25,000 shares held by his wife.
(6) Includes 82,697 shares held jointly with his wife, 12,500 shares held by
401(k), 1,500 shares held by IRA and 2,050 shares held by his wife.
(7) Includes 11,561 shares held jointly with his wife, 2,314 shares held by
401(k) and 15,000 shares held by IRA.
(8) Includes 24,183 shares held by his wife, 14,180 shares held by his wife's
IRA and 16,077 shares held by IRA.
7
11
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Company's Board of Directors consists of seven members, all of whom
are independent under the current listing standards of the Nasdaq Stock Market,
Inc., except for Mr. Smith and Mr. McCrary. Mr Smith is not independent because
he is an employee of Jefferson Bancshares and Jefferson Federal and Mr. McCrary
is not independent because he receives a salary from Jefferson Bancshares and
Jefferson Federal for his service as Chairman of the Board of Directors. The
Board is divided into three classes with three-year staggered terms, with
approximately one-third of the directors elected each year. Two directors will
be elected at the annual meeting to serve for a three-year term, or until their
respective successors have been elected and qualified. The nominees are Dr.
Terry M. Brimer and Mr. H. Scott Reams. Both of the nominees are currently
directors of the Company and Jefferson Federal.
The Board of Directors intends that the proxies solicited by it will be
voted for the election of the nominees named above. If any nominee is unable to
serve, the persons named in the proxy card will vote your shares to approve the
election of any substitute proposed by the Board of Directors. Alternatively,
the Board of Directors may adopt a resolution to reduce the size of the Board.
At this time, the Board of Directors knows of no reason why any nominee might be
unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES.
Information regarding the nominees for election at the annual meeting is
provided below. Unless otherwise stated, each nominee has held his current
occupation for the last five years. The age indicated for each individual is as
of June 30, 2004. The indicated period of service as a director includes service
as a director of Jefferson Federal. There are no family relationships among
directors or executive officers of Jefferson Bancshares.
BOARD NOMINEES FOR ELECTION OF DIRECTOR
DR. TERRY M. BRIMER is the President and majority owner of Midtown Drug
Company, Morristown, Tennessee. Age 56. Director since 1977.
H. SCOTT REAMS is a Partner in the law firm of Taylor, Reams, Tilson and
Harrison of Morristown, Tennessee. Age 55. Director since 1982.
DIRECTORS CONTINUING IN OFFICE
THE FOLLOWING DIRECTORS HAVE TERMS ENDING IN 2005:
WILLIAM T. HALE is the Executive Vice President and General Manager of
PFG-Hale, Inc., a wholesale food distributor. Age 52. Director since 2000.
JOHN F. MCCRARY, JR. is Chairman of the Board of Directors of Jefferson
Bancshares and Jefferson Federal. Mr. McCrary is a real estate broker and
President of Century 21 Masengill-McCrary Realtors Company and
Masengill-McCrary-Gregg Company, an insurance agency, both located in
Morristown, Tennessee. Age 79. Director since 1963.
8
12
THE FOLLOWING HAVE TERMS ENDING IN 2006:
ANDERSON L. SMITH has served as the President and Chief Executive Officer
of Jefferson Federal and Jefferson Bancshares since January 2002 and March 2003,
respectively. Prior to joining Jefferson Federal, Mr. Smith was President,
Consumer Financial Services - East Tennessee Metro, First Tennessee Bank,
National Association. Age 56. Director since 2002.
DR. JACK E. CAMPBELL is the President of Walters State Community College,
Morristown, Tennessee. Age 65. Director since 1979.
WILLIAM F. YOUNG is the President and Chief Executive Officer of Young's
Furniture Manufacturing Company, Inc., of Whitesburg, Tennessee. Age 64.
Director since 2000.
9
13
PROPOSAL 2 -- RATIFICATION OF INDEPENDENT AUDITORS
The Audit/Compliance Committee of the Board of Directors has appointed
Craine, Thompson & Jones, P.C. to be the Company's independent auditors for the
2005 fiscal year, subject to ratification by shareholders. A representative of
Craine, Thompson & Jones, P.C. is expected to be present at the annual meeting
to respond to appropriate questions from shareholders and will have the
opportunity to make a statement should he or she desire to do so.
If the ratification of the appointment of the auditors is not approved by
a majority of the votes cast by shareholders at the annual meeting, the
Audit/Compliance Committee will consider other independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT AUDITORS.
AUDIT FEES
The following table sets forth the fees billed to the Company for the
fiscal years ending June 30, 2004 and 2003 by Craine, Thompson & Jones, P.C.:
2004 2003
--------- ---------
Audit fees ...................... $30,727 $29,915
Audit related fees............... -- --
Tax fees (1)..................... 2,490 4,470
All other fees (2)............... 10,140 72,563
-----------------------------------
(1) Consists of tax filing and tax related compliance and other
advisory services.
(2) In 2003, included fees for services related to the conversion of
Jefferson Federal from the mutual holding company to the stock
holding company form of organization. For both 2003 and 2004,
includes fees for assistance with securities filings other than
periodic reports and other services.
The Audit/Compliance Committee believes that the provision of non-audit
services by Craine, Thompson & Jones, P.C. is compatible with maintaining
Craine, Thompson & Jones, P.C.'s independence.
POLICY ON AUDIT/COMPLIANCE COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE
NON-AUDIT SERVICES OF INDEPENDENT AUDITORS
The Audit/Compliance Committee is responsible for appointing and
overseeing the work of the independent auditors and setting the independent
auditors' compensation. In accordance with its charter, the Audit/Compliance
Committee approves, in advance, all audit and permissible non-audit services to
be performed by the independent auditors. This approval process ensures that the
external auditor does not provide any non-audit services to the Company that are
prohibited by law or regulation.
10
14
REPORT OF THE AUDIT/COMPLIANCE COMMITTEE
The Audit/Compliance Committee of the Company's Board of Directors is
comprised of three non-employee directors and operates under a written charter
adopted by the Board of Directors. The Board of Directors has determined that
each Audit/Compliance Committee member is independent in accordance with the
listing standards of the Nasdaq Stock Market, Inc.
The Company's management is responsible for the Company's internal control
over financial reporting. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements and issuing an opinion on the conformity of those financial
statements with generally accepted accounting principals. The Audit/Compliance
Committee oversees the Company's internal control over financial reporting on
behalf of the Board of Directors.
In this context, the Audit/Compliance Committee has met and held
discussions with management and the independent auditors. Management represented
to the Audit/Compliance Committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles, and the Audit/Compliance Committee has reviewed and discussed the
consolidated financial statements with management and the independent auditors.
The Audit/Compliance Committee discussed with the independent auditors matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees), including the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements.
In addition, the Audit/Compliance Committee has received the written
disclosures and the letter from the independent auditors required by the
Independence Standards Board Standard No. 1 (Independence Discussions With Audit
Committees) and has discussed with the independent auditors the auditors'
independence from the Company and its management. In concluding that the
auditors are independent, the Audit/Compliance Committee considered, among other
factors, whether the non-audit services provided by the auditors were compatible
with its independence.
The Audit/Compliance Committee discussed with the Company's independent
auditors the overall scope and plans for their audit. The Audit/Compliance
Committee meets with the independent auditors, with and without management
present, to discuss the results of their examination, their evaluation of the
Company's internal control over financial reporting, and the overall quality of
the Company's financial reporting process.
In performing all of these functions, the Audit/Compliance Committee acts
only in an oversight capacity. In its oversight role, the Audit/Compliance
Committee relies on the work and assurances of the Company's management, which
has the primary responsibility for financial statements and reports, and of the
independent auditors who, in their report, express an opinion on the conformity
of the Company's financial statements to generally accepted accounting
principles. The Audit/Compliance Committee's oversight does not provide it with
an independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or policies, or appropriate
internal control over financial reporting designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the
Audit/Compliance Committee's considerations and discussions with management and
the independent auditors do not assure that the Company's financial statements
are presented in accordance with generally accepted accounting principles, that
the audit of the Company's financial statements has been carried out in
accordance with generally accepted auditing standards or that the Company's
independent auditors are in fact "independent."
11
15
In reliance on the reviews and discussions referred to above, the
Audit/Compliance Committee recommended to the Board of Directors, and the Board
has approved, that the audited consolidated financial statements be included in
the Company's Annual Report on Form 10-K for the year ended June 30, 2004 for
filing with the Securities and Exchange Commission. The Audit/Compliance
Committee has appointed, subject to shareholder ratification, the selection of
the Company's independent auditors for the fiscal year ended June 30, 2005.
THE AUDIT/COMPLIANCE COMMITTEE OF THE BOARD OF DIRECTORS
OF JEFFERSON BANCSHARES, INC.
DR. JACK E. CAMPBELL (CHAIRMAN)
DR. TERRY M. BRIMER
WILLIAM T. HALE
12
16
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following information is furnished for Mr. Anderson L. Smith, our
current President and Chief Executive Officer. No other executive officers of
Jefferson Federal or the Company received a salary and bonus of $100,000 or more
during the year ended June 30, 2004.
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
POSITIONS YEAR ($) ($) ($)(1) ($) (#) ($)
- ------------------------ ------ --------- --------- ------------- ----------- ------------ --------------
Anderson L. Smith....... 2004 $165,000 $ 36,300 $16,000 $478,301(2) 69,875 $20,139(3)
President and Chief 2003 165,000 104,750 16,000 -- -- 19,891
Executive Officer 2002 120,577 -- 7,000 3,674(4) 10,665 82,325
- ----------------------------------
(1) Represents fees received for service on the board of directors.
(2) The dollar amount represents the market value of 34,938 shares on the date
of grant. The restricted stock awards will vest over five years, beginning
in January of 2005. Restricted stock award recipients are entitled to
receive all dividends paid (if any) on the shares of common stock, subject
to the restricted stock awards.
(3) Includes life, medical and dental insurance premiums that Jefferson Federal
paid on his behalf of $4,539, an automobile allowance of $12,000, and
taxable fringe benefits of $3,600.
(4) The dollar amount represents the market value of 708 shares on the date of
grant. The stock award was vested on the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUE AT FISCAL YEAR
END
The following table provides Mr. Smith's information regarding the
exercise of options during the year ended June 30, 2004 and unexercised stock
options as of June 30, 2004.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES DOLLAR OPTIONS AT FISCAL YEAR END (1)
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ------------- --------------- ------------- ---------------
Anderson L. Smith..... -- -- 10,665 69,875 $83,187 --
- -----------------------------------
(1) Value of unexercised in-the-money stock options equals the market value
($12.99) of shares covered by in-the-money options on June 30, 2004 less
the option exercise price. Options are in-the-money if the market value of
shares covered by the options is greater than the exercise price.
EMPLOYMENT AGREEMENT. Effective June 25, 2003, Anderson L. Smith entered
into a three- year employment agreement with Jefferson Federal and Jefferson
Bancshares. The agreement was amended on July 1, 2004. Under the employment
agreement, the base salary for Mr. Smith is $165,000, which amount may be
increased at the discretion of the Board of Directors. The employment agreement
provides Mr. Smith with a bonus program that enables him to earn up to 50% of
his base salary, on an annual basis. The amount of the bonus is determined by
specific performance standards and a formula agreed to by Mr. Smith and
Jefferson Federal annually. Commencing on the first year anniversary date
13
17
of the employment agreement, and continuing on each anniversary thereafter, the
disinterested members of the Board of Directors may extend the agreement for an
additional year so that the remaining term of the agreement is 36 months, unless
Mr. Smith gives notice of termination. The agreement is terminable by Jefferson
Federal or Jefferson Bancshares at any time, with or without cause, and by Mr.
Smith at any time, with or without cause, or for Good Reason (as defined in the
employment agreement). If Mr. Smith is terminated from employment without cause
or he elects to terminate the agreement following an event constituting Good
Reason, Jefferson Federal would be required to honor the terms of the agreement
through the expiration of the current term, including payment of current cash
compensation and continuation of employee benefits.
The employment agreement also provides for severance payments and other
benefits in the event Mr. Smith is terminated without cause or he elects to
terminate the agreement with Good Reason in connection with any change in
control of Jefferson Bancshares or Jefferson Federal. The maximum present value
of the severance benefits under his employment agreement is 2.99 times the
average of Mr. Smith's five taxable years' annual compensation preceding the
change in control. The employment agreement provides that the value of the
maximum benefit is to be distributed in the form of a lump sum cash payment.
Also, upon such event, Mr. Smith will continue to participate in any retirement
plans he participated in prior to the change in control and under any health,
life or disability plans for 36 months following his termination of employment.
Section 280G of the Internal Revenue Code provides that severance payments that
equal or exceed three times the individual's 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 the base amount, and we would not be
entitled to deduct such amount.
The employment agreement restricts Mr. Smith's right to compete against us
for a period of two years following his termination of employment for any
reason.
SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM. The Jefferson Federal
Supplemental Executive Retirement plan provides for supplemental retirement
benefits with respect to the ESOP. The plan provides participating executives
with benefits otherwise limited by other provisions of the Internal Revenue Code
or the terms of the ESOP loan. Specifically, the plan provides benefits to
eligible individuals (those designated by the Board of Directors) that cannot be
provided under the ESOP as a result of the limitations imposed by the Internal
Revenue Code, but that would have been provided under the ESOP but for such
limitations. In addition to providing for benefits lost under tax-qualified
plans as a result of limitations imposed by the Internal Revenue Code, the plan
provides supplemental benefits to designated individuals upon a change of
control before the complete scheduled repayment of the ESOP loan. Generally,
upon such an event, the supplemental executive retirement plan will provide the
individual with a benefit equal to what the individual would have received under
the ESOP had he or she remained employed throughout the term of the ESOP loan
less the benefits actually provided under the ESOP on behalf of such individual.
An individual's benefits under the supplemental executive retirement plan
generally become payable upon the change in control of Jefferson Federal or
Jefferson Bancshares. The plan provides for Mr. Smith's participation as the
chief executive officer of the Bank. The Board of Directors may designate other
officers as participants in future years.
14
18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is a report of the Compensation Committee of the Board of
Directors regarding executive compensation. The Compensation Committee's
membership and duties are described on pages 4 and 5.
COMPENSATION POLICIES
The Compensation Committee bases its executive compensation policy on the
same principles that guide the Company in establishing all of its compensation
programs. The Company designs programs to attract, retain and motivate highly
talented individuals at all levels of the organization while balancing the
interests of stockholders. The compensation program for executives consists of
three key elements:
o Annual base salary;
o Performance-based annual bonus; and
o Long-term stock incentive compensation.
COMPONENTS OF EXECUTIVE COMPENSATION
BASE SALARY. Salary levels for all employees, including executive
officers, are set so as to reflect the duties and levels of responsibilities
inherent in the position and to reflect competitive conditions in the banking
business in the Company's market area. Comparative salaries paid by other
financial institutions are considered in establishing the salary for a given
position. The Compensation Committee utilizes the Compensation Survey and the
Salary and Benefits Survey compiled by the America's Community Bankers and the
Tennessee Bankers Association, respectively, as well as other surveys prepared
by trade groups and independent benefits consultants. Base salaries for all
employees, including the executive officers, are reviewed annually by the
Compensation Committee, which takes into account the competitive level of pay as
reflected in the surveys consulted. In setting base salaries, the Compensation
Committee also considers a number of factors relating to the particular
executive, including individual performance, job responsibilities, level of
experience, ability and knowledge of the position. These factors are considered
subjectively in the aggregate and none of the factors is accorded a specific
weight.
BONUS. During fiscal 2004, bonuses were awarded to executive officers
based on the Compensation Committee's recognition of the individual
contributions made by executive officers that enabled the Company to perform
well both financially and operationally despite the very difficult economic
environment and based on competitive levels of compensation at similar
companies. Cash bonuses are paid pursuant to a Management Incentive Plan which
focuses on components such as asset quality, financial performance and strategy.
Goals are weighted differently at each level.
LONG-TERM INCENTIVE COMPENSATION. Under the Company's 1995 Jefferson
Federal Savings and Loan Association Stock Option Plan (the "1995 Stock Option
Plan") and 2004 Stock-Based Incentive Plan, the Compensation Committee is
authorized, in its discretion, to grant stock options and restricted stock
awards in such proportions and upon such terms and conditions as the
Compensation Committee may determine, subject to regulatory limits. All stock
options granted have an exercise price equal to the fair market value of the
Company's common stock at the time of grant and are exercisable within a
ten-year period. In order to assure the retention of high level executives and
to tie the compensation of those executives to the creation of long term value
for stockholders, the Compensation
15
19
Committee requires that stock options granted under the 1995 Stock Option Plan
and the 2004 Stock-Based Incentive Plan vest proportionately over a five-year
period.
The awards of restricted stock to executive officers and other key
employees represent shares of Jefferson Bancshares common stock that the
recipient cannot sell or otherwise transfer until the applicable restriction
period lapses. Restricted stock awards are also intended to increase the
ownership of executives in the Company, thereby further integrating the
compensation of the executive with the creation of long term value for
stockholders. The Compensation Committee has provided that restricted stock
awards granted under the 2004 Stock-Based Incentive Plan vest in equal portions
over five years.
ANDERSON L. SMITH - CHIEF EXECUTIVE OFFICER COMPENSATION
Jefferson Federal and Mr. Smith entered into an employment agreement
effective June 25, 2003. The terms of Mr. Smith's employment agreement are set
forth under "Executive Compensation" in this proxy statement. In determining Mr.
Smith's cash compensation for fiscal 2004, the board focused on the Company's
financial performance during the year, the number of initiatives begun, expanded
or completed by the Company since Mr. Smith's employment began, competitive
levels of compensation for CEOs managing operations of similar size, complexity
and performance level and the importance of retaining a President and Chief
Executive Officer with the strategic, financial and leadership skills to ensure
the Company's continued growth into the foreseeable future. Under the Management
Incentive Plan, Mr. Smith received a cash payment of $36,300 in March of 2004
for the last six months of the 2003 calendar year. In September 2004, he will
receive a cash payment for the first six months of 2004, the amount of which has
yet to be determined. The Committee believes that Mr. Smith's total compensation
package for 2004 will be slightly above the median of total compensation for
CEOs in the peer group, based on data obtained via the 2004 Tennessee Bankers
Association Salary and Benefits Survey and the America's Community Bankers
Compensation Survey.
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF JEFFERSON BANCSHARES, INC.
DR. TERRY M. BRIMER (CHAIRMAN)
DR. JACK E. CAMPBELL
JOHN F. MCCRARY, JR.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company or the Bank serves or has served as a
member of the compensation committee of any other entity, one of whose executive
officers serves on the Compensation Committee of the Company. No executive
officer of the Company or the Bank serves or has served as a director of another
entity, one of whose executive officers serves on the Compensation Committee of
the Company.
16
20
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
Jefferson Bancshares common stock with the cumulative total return on the Nasdaq
Index (U.S. Companies) and with the SNL Thrift Index. Total return assumes the
reinvestment of all dividends.
[GRAPH APPEARS HERE]
PERIOD ENDING
----------------------------------------------------
6/30/99 6/30/00 6/30/01 6/30/02 6/30/03 6/30/04
------- ------- ------- ------- ------- -------
Jefferson Bancshares, Inc...... $100.00 $ 84.38 $ 83.74 $176.46 $283.26 $328.76
NASDAQ - Total US.............. 100.00 147.94 80.83 54.94 61.23 77.62
SNL NASDAQ Thrift Index........ 100.00 78.58 127.65 173.63 204.72 257.89
THE REPORT OF THE AUDIT/COMPLIANCE COMMITTEE, THE REPORT OF THE
COMPENSATION COMMITTEE AND THE STOCK PERFORMANCE GRAPH SHALL NOT BE DEEMED
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE
THIS PROXY STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE
EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE,
AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
17
21
OTHER INFORMATION RELATING TO DIRECTORS AND EXECUTIVE OFFICERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% of
any registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than 10% shareholders are required by
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on the Company's review of the copies of the reports it has
received and written representations provided to it from the individuals
required to file the reports, the Company believes that each of its executive
officers, directors and greater than 10% beneficial owners has complied with the
applicable reporting requirements for transactions in the Company's common stock
during the year ended June 30, 2004.
TRANSACTIONS WITH MANAGEMENT
LOANS TO OFFICERS AND DIRECTORS. The Sarbanes-Oxley Act generally
prohibits loans by Jefferson Bancshares to its executive officers and directors.
However, the Sarbanes-Oxley Act contains a specific exemption from such
prohibition for loans by Jefferson Federal to its executive officers and
directors in compliance with federal banking regulations. Federal regulations
require that all loans or extensions of credit to executive officers and
directors of insured institutions must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and must not involve more than the
normal risk of repayment or present other unfavorable features. Jefferson
Federal is therefore prohibited from making any new loans or extensions of
credit to executive officers and directors at different rates or terms than
those offered to the general public, except for loans made pursuant to programs
generally available to all employees. Notwithstanding this rule, federal
regulations permit Jefferson Federal to make loans to executive officers and
directors at reduced interest rates if the loan is made under a benefit program
generally available to all other employees and does not give preference to any
executive officer or director over any other employee. Jefferson Federal has
adopted a policy of offering employees residential mortgage loans at a discount
of 1/2% to published rates and personal consumer loans at a discount of 1% to
published rates. Jefferson Federal gives employees a discount of 50% on closing
fees.
In addition, loans made to a director or executive officer in an amount
that, when aggregated with the amount of all other loans to the person and his
or her related interests, are in excess of the greater of $25,000 or 5% of
Jefferson Federal's capital and surplus, up to a maximum of $500,000, must be
approved in advance by a majority of the disinterested members of the Board of
Directors.
The aggregate amount of loans by Jefferson Federal to its executive
officers and directors was $1,158,000 at June 30, 2004, or approximately 1.24%
of stockholders' equity at June 30, 2004. These loans were performing according
to their original terms at June 30, 2004.
OTHER TRANSACTIONS. H. Scott Reams is a partner in the law firm of Taylor,
Reams, Tilson & Harrison of Morristown, Tennessee. We pay a monthly retainer of
$500 to the law firm. In fiscal 2004, Jefferson Federal paid a total of $31,000
in legal fees to Mr. Reams' firm. We believe that the fees paid to Mr. Reams'
firm were based on normal terms and conditions as would apply to other clients
of the firm.
18
22
NOMINATING/CORPORATE GOVERNANCE COMMITTEE PROCEDURES
GENERAL
It is the policy of the Nominating/Corporate Governance Committee of the
Board of Directors of the Company to consider director candidates recommended by
stockholders who appear to be qualified to serve on the Company's Board of
Directors. The Nominating/Corporate Governance Committee may choose not to
consider an unsolicited recommendation if no vacancy exists on the Board of
Directors and the Nominating/Corporate Governance Committee does not perceive a
need to increase the size of the Board of Directors. In order to avoid the
unnecessary use of the Nominating/Corporate Governance Committee's resources,
the Nominating/Corporate Governance Committee will consider only those director
candidates recommended in accordance with the procedures set forth below.
PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS
To submit a recommendation of a director candidate to the
Nominating/Corporate Governance Committee, a stockholder should submit the
following information in writing, addressed to the Chairman of the
Nominating/Corporate Governance Committee, care of the Corporate Secretary, at
the main office of the Company:
1. The name of the person recommended as a director candidate;
2. All information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended;
3. The written consent of the person being recommended as a director
candidate to being named in the proxy statement as a nominee and to
serving as a director if elected;
4. As to the stockholder making the recommendation, the name and
address, as they appear on the Company's books, of such stockholder;
provided, however, that if the stockholder is not a registered
holder of the Company's common stock, the stockholder should submit
his or her name and address along with a current written statement
from the record holder of the shares that reflects ownership of the
Company's common stock; and
5. A statement disclosing whether such stockholder is acting with or on
behalf of any other person and, if applicable, the identity of such
person.
In order for a director candidate to be considered for nomination at the
Company's annual meeting of stockholders, the recommendation must be received by
the Nominating/Corporate Governance Committee at least 120 calendar days prior
to the date the Company's proxy statement was released to stockholders in
connection with the previous year's annual meeting, advanced by one year.
MINIMUM QUALIFICATIONS
The Nominating/Corporate Governance Committee has adopted a set of
criteria that it considers when it selects individuals to be nominated for
election to the Board of Directors. A candidate must meet any qualification
requirements set forth in any Board or committee governing documents.
19
23
The Nominating/Corporate Governance Committee will consider the following
criteria in selecting nominees: financial, regulatory and business experience;
familiarity with and participation in the local community; integrity, honesty
and reputation; dedication to the Company and its stockholders; independence;
and any other factors the Nominating/Corporate Governance Committee deems
relevant, including age, diversity, size of the Board of Directors and
regulatory disclosure obligations.
In addition, prior to nominating an existing director for re-election to
the Board of Directors, the Nominating/Corporate Governance Committee will
consider and review an existing director's Board and committee attendance and
performance; length of Board service; experience, skills and contributions that
the existing director brings to the Board; and independence.
PROCESS FOR IDENTIFYING AND EVALUATING NOMINEES
The process that the Nominating/Corporate Governance Committee follows
when it identifies and evaluates individuals to be nominated for election to the
Board of Directors is as follows:
IDENTIFICATION. For purposes of identifying nominees for the Board of
Directors, the Nominating/Corporate Governance Committee relies on personal
contacts of the committee members and other members of the Board of Directors,
as well as their knowledge of members of the communities served by Jefferson
Federal. The Nominating/Corporate Governance Committee also will consider
director candidates recommended by stockholders in accordance with the policy
and procedures set forth above. The Nominating/Corporate Governance Committee
has not previously used an independent search firm to identify nominees.
EVALUATION. In evaluating potential nominees, the Nominating/Corporate
Governance Committee determines whether the candidate is eligible and qualified
for service on the Board of Directors by evaluating the candidate under the
selection criteria set forth above. In addition, the Nominating/Corporate
Governance Committee will conduct a check of the individual's background and
interview the candidate.
SUBMISSION OF BUSINESS PROPOSALS AND STOCKHOLDER NOMINATIONS
The Company must receive proposals that shareholders seek to include in
the proxy statement for the Company's next annual meeting no later than May 18,
2005. If next year's annual meeting is held on a date more than 30 calendar days
from October 21, 2005, a shareholder proposal must be received by a reasonable
time before the Company begins to print and mail its proxy solicitation for such
annual meeting. Any shareholder proposals will be subject to the requirements of
the proxy rules adopted by the Securities and Exchange Commission.
The Company's Bylaws provide that, in order for a shareholder to make
nominations for the election of directors or proposals for business to be
brought before the annual meeting, a shareholder must deliver notice of such
nominations and/or proposals to the Corporate Secretary not less than 90 days
prior to the date of the annual meeting; however, if less than 100 days' notice
of the annual meeting is given to shareholders, such notice must be delivered
not later than the close of the tenth day following the day on which notice of
the annual meeting was mailed to shareholders or public disclosure of the
meeting date. A copy of the Bylaws may be obtained from the Company.
20
24
BOARD POLICIES REGARDING STOCKHOLDER COMMUNICATIONS
AND ATTENDANCE AT ANNUAL MEETINGS
The Company encourages stockholder communications to the Board of
Directors and/or individual directors. Stockholders who wish to communicate with
the Board of Directors or an individual director should send their
communications to the care of Jane P. Hutton, Corporate Secretary, Jefferson
Bancshares, Inc., 120 Evans Avenue, Morristown, Tennessee 37814. Communications
regarding financial or accounting policies should be sent to the attention of
the Chairman of the Audit Committee. All other communications should be sent to
the attention of the Chairman of the Nominating/Corporate Governance Committee.
Directors are expected to prepare themselves for and to attend all Board
meetings, the Annual Meeting of Stockholders and the meetings of the committees
on which they serve, with the understanding that on occasion a director may be
unable to attend a meeting. All of the Company's directors attended the
Company's 2003 Annual Meeting of Stockholders.
MISCELLANEOUS
The Company will pay the cost of this proxy solicitation. The Company will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Jefferson Bancshares common stock. In addition to
soliciting proxies by mail, directors, officers and regular employees of the
Company may solicit proxies personally or by telephone without receiving
additional compensation.
The Company's Annual Report to Shareholders has been mailed to persons who
were shareholders as of the close of business on August 31, 2004. Any
shareholder who has not received a copy of the Annual Report may obtain a copy
by writing to the Corporate Secretary of the Company. The Annual Report is not
to be treated as part of the proxy solicitation material or as having been
incorporated in this proxy statement by reference.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, WITHOUT EXHIBITS, FOR
THE YEAR ENDED JUNE 30, 2004, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO PERSONS WHO WERE SHAREHOLDERS AS
OF THE CLOSE OF BUSINESS ON AUGUST 31, 2004 UPON WRITTEN REQUEST TO JANE P.
HUTTON, CORPORATE SECRETARY, JEFFERSON BANCSHARES, INC., 120 EVANS AVENUE,
MORRISTOWN, TENNESSEE 37814.
If you and others who share your address own your shares in "street name,"
your broker or other holder of record may be sending only one annual report and
proxy statement to your address. This practice, known as "householding," is
designed to reduce our printing and postage costs. However, if a shareholder
residing at such an address wishes to receive a separate annual report or proxy
statement in the future, he or she should contact the broker or other holder of
record. If you own your shares in "street name" and are receiving multiple
copies of our annual report and proxy statement, you can request householding by
contacting your broker or other holder of record.
21
25
Whether or not you plan to attend the annual meeting, please vote by
marking, signing, dating and promptly returning the enclosed proxy card in the
enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jane P. Hutton
Jane P. Hutton
CORPORATE SECRETARY
Morristown, Tennessee
September 15, 2004
22
26
APPENDIX A
JEFFERSON BANCSHARES, INC.
NOMINATING/CORPORATE GOVERNANCE COMMITTEE CHARTER
I. PURPOSE
The primary objectives of the Nominating/Corporate Governance Committee (the
"Committee") are to assist the Board of Directors (the "Board") of Jefferson
Bancshares, Inc. (the "Company") by: (i) identifying individuals qualified to
become Board members and recommending that the Board select a group of director
nominees for each annual meeting of the Company's stockholders; (ii) ensuring
that the Audit/Compliance and Nominating/Corporate Governance Committees of the
Board shall have the benefit of qualified and experienced "independent"
directors; and (iii) developing and recommending to the Board a set of effective
corporate governance policies and procedures applicable to the Company.
II. ORGANIZATION
The Committee shall consist of three or more directors, each of whom shall
satisfy the definition of independent director as defined in any qualitative
listing requirements for Nasdaq Stock Market, Inc. issuers and any applicable
Securities and Exchange Commission rules and regulations.
Committee members shall be elected by the Board at the annual organizational
meeting of the Board of Directors. Members shall serve until their successors
are appointed. The Committee's chairperson shall be designated by the full Board
or, if it does not do so, the Committee members shall elect a Chairman by vote
of a majority of the full Committee.
The Committee may form and delegate authority to subcommittees when appropriate.
III. STRUCTURE AND MEETINGS
The chairperson of the Committee will preside at each meeting and, in
consultation with the other members of the Committee, will set the frequency and
length of each meeting and the agenda of items to be addressed at each meeting.
The chairperson of the Committee shall ensure that the agenda for each meeting
is circulated to each Committee member in advance of the meeting.
IV. GOALS AND RESPONSIBILITIES
The Committee shall: (i) develop and recommend to the Board a Corporate
Governance Policy (the "Policy") applicable to the Company, and review and
reassess the adequacy of such Policy annually and recommend to the Board any
changes deemed appropriate; (ii) develop policies on
A-1
27
the size and composition of the Board; (iii) review possible candidates for
Board membership consistent with the Board's criteria for selecting new
directors; (iv) perform Board performance evaluations on an annual basis; (v)
annually recommend a slate of nominees to the Board with respect to nominations
for the Board at the annual meeting of the Company's stockholders; and (vi)
generally advise the Board (as a whole) on corporate governance matters.
The Committee shall also advise the Board on (a) committee member
qualifications, (b) committee member appointments and removals, (c) committee
structure and operations (including authority to delegate to subcommittees), and
(d) committee reporting to the Board. The Committee shall maintain an
orientation program for new directors and a continuing education program for all
directors.
The Committee will annually review and reassess the adequacy of this charter and
recommend any proposed changes to the Board for approval.
The Committee shall perform any other activities consistent with this charter,
the Company's bylaws and governing law and regulations as the Committee or the
Board deems appropriate.
V. PERFORMANCE EVALUATION
The Committee shall conduct an annual performance evaluation of the Board. The
evaluation shall be of the Board's contribution as a whole and specifically
review areas in which the Board and/or management believes a better contribution
could be made.
VI. COMMITTEE RESOURCES
The Committee shall have the authority to obtain advice and seek assistance from
internal or external legal, accounting or other advisors. The Committee shall
have the sole authority to retain and terminate any search firm to be used to
identify director candidates, including sole authority to approve such search
firm's fees and other retention terms.
Adopted March 19, 2003
A-2
28
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
JEFFERSON BANCSHARES, INC.
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 21, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William T. Hale and Jack E. Campbell, and
each of them, with full power of substitution, to act as proxy for the
undersigned and to vote all shares of common stock of Jefferson Bancshares, Inc.
that the undersigned is entitled to vote at the annual meeting of shareholders,
to be held on October 21, 2004 at 2:00 p.m. local time, in the Independence Room
of Jefferson Federal Bank at 120 Evans Avenue, Morristown, Tennessee and at any
and all adjournments thereof, as indicated on this proxy card.
FOR WITHHOLD FOR ALL EXCEPT
1. The election as directors of all /_/ /_/ /_/
nominees listed (except as
marked to the contrary below).
DR. TERRY M. BRIMER AND H. SCOTT REAMS
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"FOR ALL EXCEPT" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. The ratification of the appointment of /_/ /_/ /_/
Craine, Thompson & Jones, P.C. as
independent auditors of Jefferson
Bancshares, Inc. for the year ending June 30, 2005.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSALS 1 AND 2.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED AS DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL
BE VOTED "FOR" ALL OF THE PROPOSALS LISTED. THIS PROXY ALSO CONFERS
DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON AS
DIRECTOR WHERE THE NOMINEES ARE UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE
AND WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL
MEETING OR ANY ADJOURNMENT THEREOF.
Please be sure to sign and date this Proxy in the box below.
Date
- ------------------------------- ----------------------------
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE-PAID ENVELOPE PROVIDED.
JEFFERSON BANCSHARES, INC.
- --------------------------------------------------------------------------------
The above signed acknowledges receipt from the Company prior to the execution
of this proxy of a notice of annual meeting of shareholders and of a proxy
statement and of the annual report to shareholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
- --------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
- -----------------------------------------------
- -----------------------------------------------
B-1
29
[JEFFERSON FEDERAL BANK LETTERHEAD]
Dear ESOP Participant:
On behalf of the Board of Directors of Jefferson Bancshares, Inc. (the
"Company"), I am forwarding you the attached BLUE vote authorization form
provided for the purpose of conveying your voting instructions to First Bankers
Trust Services, Inc. (the "Trustee") on the proposals presented at the Annual
Meeting of Shareholders of the Company to be held on October 21, 2004. Also
enclosed is a copy of the Company's Annual Report and a Notice and Proxy
Statement for the Company's Annual Meeting.
As a participant in Jefferson Federal Bank's Employee Stock Ownership Plan
(the "ESOP") you are entitled to vote all shares of Company common stock
allocated to your account as of August 31, 2004. All allocated shares of Company
common stock will be voted as directed by participants, as long as participant
instructions are received by the ESOP Trustee on or before OCTOBER 12, 2004.
The unallocated shares of Company common stock in the ESOP Trust and the
allocated shares of Company common stock for which no instructions are provided,
or for which no timely instructions are received by the ESOP Trustee, will be
voted by the ESOP Trustee in a manner calculated to most accurately reflect the
instructions the ESOP Trustee has received from participants regarding the
shares of Company common stock allocated to their accounts, so long as such vote
is in accordance with the Employee Retirement Income Security Act of 1974, as
amended.
In order to direct the voting of the shares of Company common stock
allocated to your ESOP account, please complete and sign the enclosed BLUE vote
authorization form and return it in the enclosed postage-paid envelope no later
than OCTOBER 12, 2004. Your vote will not be revealed, directly or indirectly,
to any employee or director of the Company or Jefferson Federal Bank (the
"Bank").
As an employee of the Bank, and a participant in several of the Company
and Bank employee benefit plans, you will receive voting materials for each
stock-based plan in which you are a participant. Please vote all of the voting
materials you receive.
Sincerely,
/s/ Anderson L. Smith
Anderson L. Smith
PRESIDENT AND CHIEF EXECUTIVE OFFICER
30
Name:______________________
Shares:____________________
VOTE AUTHORIZATION FORM
-----------------------
I understand that First Bankers Trust Services, Inc., the ESOP Trustee, is
the holder of record and custodian of all shares of Jefferson Bancshares, Inc.
(the "Company") common stock allocated to me under the Jefferson Federal Bank
Employee Stock Ownership Plan. I understand that my voting instructions are
solicited on behalf of the Company's Board of Directors for the Annual Meeting
of Shareholders to be held on October 21, 2004.
You are to vote my shares as follows:
(1) The election as directors of all nominees listed (except as marked to the
contrary below).
Dr. Terry M. Brimer and H. Scott Reams
VOTE
FOR WITHHELD EXCEPTIONS
|_| |_| |_|
INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
"EXCEPTIONS" box and write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
(2) The ratification of the appointment of Craine, Thompson & Jones, P.C. as
independent auditors of Jefferson Bancshares, Inc. for the year ending
June 30, 2005.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
The ESOP Trustee is hereby authorized to vote the shares allocated to me
in its trust capacity as indicated above.
- -------------------------------- ------------------------------------
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE NO
LATER THAN OCTOBER 12, 2004.
31
[JEFFERSON FEDERAL BANK LETTERHEAD]
Dear 401(k) Plan Participant:
On behalf of the Board of Directors of Jefferson Bancshares, Inc. (the
"Company"), I am forwarding to you the enclosed GREEN vote authorization form
for the purpose of conveying your voting instructions to the Bank of New York,
as trustee for the Jefferson Bancshares, Inc. Stock Fund ("Employee Stock Fund")
in the Jefferson Federal Bank Employees' Savings and Profit Sharing Plan and
Trust ("401(k) Plan") on the proposals presented at the Annual Meeting of
Shareholders of the Company to be held on October 21, 2004. Also enclosed is a
copy of the Company's Annual Report to Shareholders and a Notice and Proxy
Statement for the Company's Annual Meeting.
As a 401(k) Plan Participant investing in the Employer Stock Fund, you are
entitled to direct the Employer Stock Fund Trustee as to the voting of Company
common stock credited to your account. The Employer Stock Fund Trustee will vote
all shares of Company common stock for which no directions are given or for
which timely instructions were not received in a manner calculated to most
accurately reflect the instructions the Employer Stock Fund Trustee received
from participants regarding shares of Company common stock in their 401(k) Plan
accounts.
In order to direct the voting of Company common stock credited to your
401(k) Plan account, you must complete and sign the enclosed GREEN vote
authorization form and return it in the accompanying postage-paid envelope by
OCTOBER 12, 2004. Your vote will not be revealed, directly or indirectly, to any
employee or director of the Company or Jefferson Federal Bank (the "Bank").
As an employee of the Bank, and a participant in several of the Company
and Bank employee benefit plans, you will receive voting materials for each
stock-based plan in which you are a participant. Please vote all of the voting
materials you receive.
Sincerely,
/s/ Anderson L. Smith
ANDERSON L. SMITH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
32
Name:____________________
Shares: ___________________
VOTE AUTHORIZATION FORM
-----------------------
I understand that the Bank of New York, the Stock Fund Trustee, is the
holder of record and custodian of all shares of Jefferson Bancshares, Inc. (the
"Company") common stock credited to me under the Jefferson Federal Bank
Employees' Savings and Profit Sharing Plan and Trust ("401(k) Plan"). I
understand that my voting instructions are solicited on behalf of the Company's
Board of Directors for the Annual Meeting of Shareholders to be held on October
21, 2004.
You are to vote my shares as follows:
(1) The election as directors of all nominees listed (except as marked to the
contrary below).
Dr. Terry M. Brimer and H. Scott Reams
VOTE
FOR WITHHELD EXCEPTIONS
--- -------- ----------
|_| |_| |_|
INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
"EXCEPTIONS" box and write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
(2) The ratification of the appointment of Craine, Thompson & Jones, P.C. as
independent auditors of Jefferson Bancshares, Inc. for the year ending
June 30, 2005.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
The Stock Fund Trustee is hereby authorized to vote the shares credited to
me in its trust capacity as indicated above.
- -------------------------------- ------------------------------------
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE NO
LATER THAN OCTOBER 12, 2004.
33
[JEFFERSON BANCSHARES, INC. LETTERHEAD]
Dear Stock Award Recipient:
On behalf of the Board of Directors of Jefferson Bancshares, Inc. (the
"Company"), I am forwarding to you the attached YELLOW vote authorization form
for the purpose of conveying your voting instructions to First Bankers Trust
Services, Inc. (the "Trustee") on the proposals presented at the Annual Meeting
of Shareholders of the Company to be held on October 21, 2004. Also enclosed is
a copy of the Company's Annual Report to Shareholders and a Notice and Proxy
Statement for the Company's Annual Meeting.
As a recipient of a Stock Award under the Jefferson Bancshares, Inc. 2004
Stock-Based Incentive Plan (the "Incentive Plan"), you are entitled to vote all
shares of restricted Company common stock awarded to you under the Incentive
Plan that are unvested as of August 31, 2004. The Incentive Plan Trustee will
vote the shares of Company common stock held in the Incentive Plan Trust in
accordance with instructions it receives from you and other Stock Award
Recipients.
In order to direct the voting of the unvested shares of Company common
stock awarded to you under the Incentive Plan, you must complete and sign the
enclosed YELLOW vote authorization form and return it in the accompanying
postage-paid envelope no later than OCTOBER 12, 2004.
If you are an employee of Jefferson Federal Bank, and a participant in
several of the Company and Bank employee benefit plans, you will receive voting
materials for each stock-based plan in which you are a participant. Please vote
all of the voting materials you receive.
Sincerely,
/s/ Anderson L. Smith
Anderson L. Smith
PRESIDENT AND CHIEF EXECUTIVE OFFICER
34
Name:____________________
Shares:___________________
VOTE AUTHORIZATION FORM
-----------------------
I understand that First Bankers Trust Services, Inc. (the "Trustee") is
the holder of record and custodian of all unvested shares of Jefferson
Bancshares, Inc. (the "Company") common stock awarded to me under the Jefferson
Bancshares, Inc. 2004 Stock-Based Incentive Plan (the "Incentive Plan"). I
understand my voting instructions are solicited on behalf of the Company's Board
of Directors for the Annual Meeting of Shareholders to be held on October 21,
2004.
You are to vote my shares as follows:
(1) The election as directors of all nominees listed (except as marked
to the contrary below).
Dr. Terry M. Brimer and H. Scott Reams
VOTE
FOR WITHHELD EXCEPTIONS
--- -------- ----------
|_| |_| |_|
INSTRUCTION: To withhold authority to vote for any individual nominee,
mark the "EXCEPTIONS" box and write that nominee's name on the line
provided below.
-------------------------------------------------------------------------
(2) The ratification of the appointment of Craine, Thompson & Jones,
P.C. as independent auditors of Jefferson Bancshares, Inc. for the
year ending June 30, 2005.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
The Incentive Plan Trustee is hereby authorized to vote any unvested
shares awarded to me under the Incentive Plan in its trust capacity as
indicated above.
-------------------- ---------------------
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID
ENVELOPE NO LATER THAN OCTOBER 12, 2004.