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Registration No. 333-_________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
JEFFERSON SAVINGS BANCORP, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 6712 43-1625841
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
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14915 Manchester Road
Ballwin, Missouri 63011
(314) 227-3000
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
_____________________________
DAVID V. MCCAY
President and Chief Executive Officer
Jefferson Savings Bancorp, Inc.
14915 Manchester Road
Ballwin, Missouri 63011
(314) 227-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
_____________________________
COPIES TO:
JOHN K. PRUELLAGE, ESQ. KEVIN L. TWINING, ESQ.
Lewis, Rice & Fingersh, L.C. Locke Purnell Rain Harrell
500 N. Broadway, Suite 2000 (A Professional Corporation)
St. Louis, Missouri 63102 2200 Ross Avenue, Suite 2200
(314) 444-7600 Dallas, Texas 75201-6776
(214) 740-8000
_____________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
_____________________________
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT PRICE(2) REGISTRATION FEE
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Common stock, $0.01 par value 262,600 $18.1732 $4,772,271 $1,645.61
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Preferred Share Purchase Rights (3) (4) (4) (4)
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(1) Based upon the assumed maximum number of shares of common stock of the
Registrant issuable to holders of common stock of Texas Heritage Savings
Association/Banc, a Texas savings association ("Texas Heritage"), in the
proposed merger of Texas Heritage into First Federal Savings Bank of North
Texas, a federal savings bank and wholly owned subsidiary of the Registrant
("First Federal").
(2) Solely for purposes of calculating the registration fee in accordance with
Rule 457(f)(2), the figure ($4,772,271) represents, as of June 30, 1996,
the book value of the securities of Texas Heritage to be received by the
Registrant in the proposed merger of Texas Heritage into First Federal.
(3) Each share of common stock includes one preferred share purchase right.
(4) Not applicable.
_____________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
PROXY STATEMENT
______________________
JEFFERSON SAVINGS BANCORP, INC.
PROSPECTUS
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to the shareholders of Texas Heritage Savings Association/Banc, a
Texas savings association ("Texas Heritage"), in connection with the
solicitation of proxies by the Board of Directors of Texas Heritage for use at
the special meeting of shareholders of Texas Heritage (the "Special Meeting") to
be held at 5:00 p.m., local time, on _______________, 1996, at the offices of
Texas Heritage, 9802 Lakeview Parkway, Rowlett, Texas, and any adjournments or
postponements thereof.
At the Special Meeting, shareholders of Texas Heritage will consider and
vote upon the Agreement and Plan of Merger, dated May 31, 1996, as amended by
the First Amendment to Agreement and Plan of Merger, dated as of August 31,
1996, as further amended by the Second Amendment to Agreement and Plan of
Merger, dated as of October 9, 1996 (as amended, the "Merger Agreement"), among
Texas Heritage, Jefferson Savings Bancorp, Inc., a Delaware corporation
("Jefferson"), and First Federal Savings Bank of North Texas, a federal savings
bank and wholly owned subsidiary of Jefferson ("First Federal"), which provides
for, among other matters, the merger of Texas Heritage with and into First
Federal (the "Merger"). Upon consummation of the Merger, each issued and
outstanding share of common stock of Texas Heritage, par value $2.50 per share
("Texas Heritage Common"), (other than shares held by any shareholder properly
exercising dissenters' rights) will be converted into the right to receive a
combination of cash and shares of common stock of Jefferson, par value $0.01 per
share, and any attached rights ("Jefferson Common") calculated in accordance
with the formula set forth in the Merger Agreement and described in this Proxy
Statement/Prospectus.
This Proxy Statement/Prospectus also constitutes a prospectus of Jefferson
with respect to up to 262,600 shares of Jefferson Common issuable in the Merger
to holders of Texas Heritage Common. The outstanding shares of Jefferson Common
are, and the shares of Jefferson Common to be issued in the Merger will be,
included for quotation on the Nasdaq National Market tier of the Nasdaq Stock
Market ("Nasdaq"). The last reported sale price of Jefferson Common on Nasdaq on
__________________, 1996, was $_________.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to shareholders of Texas Heritage on or about
_________________, 1996 (the "Mailing Date").
Any proxy given pursuant to this solicitation may be revoked by the grantor
at any time prior to the voting thereof at the Special Meeting. Holders of
Texas Heritage Common will be entitled to appraisal rights in connection with
the Merger as described herein.
This Proxy Statement/Prospectus does not cover any resales of the Jefferson
Common offered hereby to be received by the stockholders deemed to be
"affiliates" of Jefferson or Texas Heritage upon consummation of the Merger. No
person is authorized to make use of this Proxy Statement/Prospectus in
connection with such resales.
THE SHARES OF JEFFERSON COMMON ISSUABLE IN THE MERGER
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
___________________________________
THE SHARES OF JEFFERSON COMMON OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY
BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
___________________________________
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS _________________, 1996
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TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 1
SUMMARY INFORMATION......................................................... 3
Introduction............................................................. 3
The Parties.............................................................. 3
Jefferson........................................................... 3
First Federal....................................................... 4
Texas Heritage...................................................... 4
Recent Developments...................................................... 4
The Special Meeting...................................................... 4
Date, Time and Place of the Special Meeting......................... 4
Matters to be Considered at the Special Meeting..................... 5
Record Date for the Special Meeting................................. 5
Vote Required to Approve Merger Agreement........................... 5
Certain Holders of Texas Heritage Common............................ 5
Revocation of Proxies............................................... 5
The Merger............................................................... 5
Merger Consideration................................................ 6
Value of the Merger................................................. 7
Reasons for the Merger and Recommendation of the Boards of Directors 7
Conduct of Business Pending the Merger; Dividends................... 7
Conditions to the Merger; Regulatory Approvals...................... 7
Termination of the Merger Agreement................................. 8
Payment Upon Occurrence of Certain Triggering Events................ 8
Federal Income Tax Consequences..................................... 9
Accounting Treatment................................................ 10
Effective Time of the Merger........................................ 10
Interests of Certain Persons in the Merger.......................... 10
Dissenters' Rights.................................................. 10
Management and Operations After the Merger............................... 11
Comparison of Shareholder Rights......................................... 11
COMPARATIVE STOCK PRICES................................................. 12
SELECTED COMPARATIVE PER SHARE DATA......................................... 13
SELECTED FINANCIAL DATA..................................................... 14
THE SPECIAL MEETING......................................................... 17
Date, Time and Place of the Special Meeting.............................. 17
Matters to be Considered at the Special Meeting.......................... 17
Record Date for the Special Meeting...................................... 17
Vote Required to Approve the Merger Agreement............................ 17
Voting and Revocation of Proxies for the Special Meeting................. 18
Solicitation of Proxies for the Special Meeting.......................... 18
Expenses for Preparation of Proxy Statement/Prospectus................... 19
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Mailing Date of Proxy Statement/Prospectus............................... 19
THE PARTIES................................................................. 19
Jefferson................................................................ 19
General............................................................. 19
Pending Acquisition................................................. 20
First Federal............................................................ 20
Texas Heritage........................................................... 20
THE MERGER.................................................................. 21
General.................................................................. 21
Background of the Merger................................................. 21
Reasons for the Merger................................................... 21
Recommendation of the Boards of Directors................................ 22
Merger Consideration..................................................... 22
Fractional Shares........................................................ 23
Share Adjustments........................................................ 24
Form of the Merger....................................................... 24
Closing Date; Effective Time............................................. 24
Conduct of Business Pending the Merger; Dividends........................ 24
Regulatory Approvals..................................................... 24
Conditions to Consummation of the Merger................................. 25
Termination or Abandonment............................................... 26
Payment Upon Occurrence of Certain Triggering Events..................... 27
Dissenters' Rights....................................................... 28
Exchange of Texas Heritage Stock Certificates; Fractional Shares......... 29
Representations and Warranties of Texas Heritage, Jefferson and
First Federal............................................................ 30
Certain Other Agreements................................................. 31
Business of Texas Heritage in Ordinary Course....................... 31
Additional Texas Heritage Reserves, Accruals, Charges and Expenses.. 32
Environmental Inspections........................................... 32
Other Texas Heritage Agreements..................................... 33
Jefferson's Agreements.............................................. 33
No Solicitation.......................................................... 33
Waiver and Amendment..................................................... 34
Expenses and Fees........................................................ 34
Federal Income Tax Consequences.......................................... 34
Resale of Jefferson Common............................................... 35
Interests of Certain Persons in the Merger............................... 35
Insurance; Indemnification.......................................... 36
Employee Benefits................................................... 36
Advisory Directors.................................................. 36
Employment Agreement................................................ 36
Accounting Treatment..................................................... 36
Management and Operations After the Merger............................... 37
Effect on Employee Benefit Plans......................................... 37
Jefferson's Dividend Reinvestment and Stock Purchase Plan................ 37
PRO FORMA FINANCIAL DATA.................................................... 38
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DESCRIPTION OF JEFFERSON CAPITAL STOCK..................................... 43
Jefferson Common...................................................... 43
COMPARISON OF SHAREHOLDER RIGHTS........................................... 44
INFORMATION ABOUT TEXAS HERITAGE........................................... 54
Business of Texas Heritage............................................ 54
Recent Developments................................................... 54
Management's Discussion and Analysis of Financial Condition
and Results of Operations of Texas Heritage........................... 54
Security Ownership of Certain Beneficial Owners and Management........ 71
Family Relationships.................................................. 73
LEGAL OPINION.............................................................. 73
EXPERTS.................................................................... 73
Independent Auditors for Jefferson.................................... 73
Independent Auditors for Texas Heritage............................... 73
Presence at Special Meeting........................................... 73
SHAREHOLDER PROPOSALS...................................................... 73
FINANCIAL STATEMENTS OF TEXAS HERITAGE..................................... F-1
APPENDICES
Merger Agreement...................................................... A-1
Excerpts of The Texas Business Corporation Act (Dissenters' Rights)... B-1
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN AND ANY SUCH INFORMATION OR REPRESENTATION,
IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY JEFFERSON
OR TEXAS HERITAGE. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE A
SOLICITATION OR AN OFFERING OF ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
WOULD BE UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT ANY
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Jefferson is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "S.E.C."). The reports, proxy statements
and other information can be inspected and copied at the public reference
facilities of the S.E.C., Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the New York Regional Office of the S.E.C.
located at Suite 1300, 7 World Trade Center, New York, New York 10048, and at
the Chicago Regional Office of the S.E.C., Suite 1400, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661, and copies of such materials can be
obtained from the Public Reference Section of the S.E.C. at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The S.E.C.
maintains an Internet web site that contains reports, proxy and information
statements and other information regarding issuers who file electronically with
the S.E.C. The address of that site is http://www.sec.gov. In addition, reports,
proxy statements and other information concerning Jefferson may be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
Jefferson has filed with the S.E.C. a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Jefferson Common to be issued pursuant to the Merger described herein.
This Proxy Statement/Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits thereto. Such additional
information may be obtained from the S.E.C.'s principal office in Washington,
D.C. Statements contained in this Proxy Statement/Prospectus or in any document
incorporated in this Proxy Statement/Prospectus by reference as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete, and in each instance where reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement is qualified in all
respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the S.E.C. by Jefferson (File No. 0-
21466) and L&B Financial, Inc. ("L&B") (File No. 0-27142) (See "THE PARTIES --
Jefferson -- Pending Acquisition") pursuant to the Exchange Act are incorporated
by reference in this Proxy Statement/Prospectus:
1. Jefferson's Annual Report on Form 10-K for the year ended December 31,
1995;
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2. Jefferson's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1996 and June 30, 1996;
3. The description of the common stock of Jefferson contained in
Jefferson's Registration Statement on Form 8-A under the Exchange Act,
filed March 30, 1993, and the description of the preferred share
purchase rights contained in Jefferson's Registration Statement on Form
8-A under the Exchange Act, filed August 19, 1994; and
4. L&B's Annual Report on Form 10-K for the year ended June 30, 1996.
All documents and reports filed by Jefferson and L&B pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and to
be a part hereof from the dates of filing of such documents or reports. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
RELATING TO JEFFERSON AND L&B WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. THESE DOCUMENTS (EXCLUDING EXHIBITS THAT ARE NOT INCORPORATED BY
REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST TO MR. GARY G. HONERKAMP, SENIOR VICE PRESIDENT AND
SECRETARY, JEFFERSON SAVINGS BANCORP, INC., 14915 MANCHESTER ROAD, BALLWIN,
MISSOURI 63011 (TELEPHONE NUMBER (314) 227-3000). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ___________________,
1996.
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SUMMARY INFORMATION
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement/Prospectus. Although the following summary addresses
material information regarding the Merger, it is not intended to be complete and
is qualified in all respects by the information appearing elsewhere herein or
incorporated by reference into this Proxy Statement/Prospectus, the Appendices
hereto and the documents referred to herein. All information contained in this
Proxy Statement/Prospectus relating to Jefferson and its subsidiaries has been
supplied by Jefferson and all information relating to Texas Heritage has been
supplied by Texas Heritage. Shareholders are urged to read this Proxy
Statement/Prospectus and the Appendices hereto in their entirety.
Introduction
This Proxy Statement/Prospectus relates to an Agreement and Plan of Merger
dated May 31, 1996, as amended by the First Amendment to Agreement and Plan of
Merger, dated as of August 31, 1996, as further amended by the Second Amendment
to Agreement and Plan of Merger, dated as of October 9, 1996 (as amended, the
"Merger Agreement"), among Texas Heritage Savings Association/Banc, a Texas
savings association ("Texas Heritage"), Jefferson Savings Bancorp, Inc., a
Delaware corporation ("Jefferson"), and First Federal Savings Bank of North
Texas, a federal savings bank and wholly owned subsidiary of Jefferson ("First
Federal"), which provides for, among other matters, the merger of Texas Heritage
with and into First Federal (the "Merger"). As a result of the Merger, Jefferson
will retain beneficial ownership of all of the issued and outstanding stock of
First Federal, and the separate corporate existence of Texas Heritage will
cease.
The summary set forth in this Proxy Statement/Prospectus of certain
provisions of the Merger Agreement is qualified in its entirety by reference to
the full text of the Merger Agreement, which is incorporated by reference herein
and attached as Appendix A to this Proxy Statement/Prospectus.
The Parties
Jefferson
Jefferson is a savings and loan holding company headquartered in Ballwin,
Missouri, a suburb of St. Louis, Missouri. Jefferson owns all of the capital
stock of each of Jefferson Savings and Loan Association, F.A., a federal savings
and loan association ("Jefferson Savings and Loan"), and First Federal. At June
30, 1996, Jefferson had consolidated assets of approximately $1.1 billion and
shareholders' equity of approximately $82.2 million.
Jefferson's thrift subsidiaries operate from 10 locations in Missouri and
12 locations in Texas. Through these subsidiaries, Jefferson is principally
engaged in the business of accepting deposits from the general public and
originating permanent loans which are secured by first mortgages on one- to
four-family residential properties located in its market areas. It also
maintains a substantial investment portfolio and, to a lesser extent,
originates consumer and other loans secured by various types of collateral in
its market areas. The deposits of Jefferson Savings and Loan and First Federal
are insured by the Savings Association Insurance Fund (the "S.A.I.F.") of the
Federal Deposit Insurance Corporation (the "F.D.I.C.").
To improve operating efficiencies within the organization, Jefferson is
seeking regulatory approval from the Office of Thrift Supervision (the "O.T.S.")
to merge Jefferson Savings and Loan and First Federal under the charter of the
latter. It is presently anticipated that the title of the resulting entity will
be JeffersonBanc. An application to merge Jefferson's thrift subsidiaries has
been filed with the O.T.S. and
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is pending. The merger of Jefferson's thrift subsidiaries, which is expected to
be completed on or about December 31, 1996, is not conditioned upon consummation
of the Merger. The principal executive offices of Jefferson are at 14915
Manchester Road, Ballwin, Missouri 63011 (telephone number (314) 227-3000).
First Federal
First Federal is a wholly owned subsidiary of Jefferson operating from
regional locations headquartered in Longview and Denton, Texas. First Federal
has 12 full-service offices and is regulated by the O.T.S. At June 30, 1996,
First Federal had assets of approximately $372.1 million and shareholders'
equity of approximately $36.8 million.
Texas Heritage
Texas Heritage, organized in 1984, is a Texas savings association
headquartered in Rowlett, Texas, a suburb of Dallas/Fort Worth, Texas. Texas
Heritage is regulated and examined by the O.T.S. and the Texas Savings and Loan
Department (the "Texas S&L Department"). Texas Heritage offers complete banking
services through four full-service offices to the commercial and residential
areas that it serves and focuses its activity on construction lending. At June
30, 1996, Texas Heritage had assets of approximately $69.2 million and
shareholders' equity of approximately $4.8 million. The deposits of Texas
Heritage are insured by the S.A.I.F. The principal executive offices of Texas
Heritage are at 9802 Lakeview Parkway, Rowlett, Texas 75088 (telephone number
(972) 475-1213).
Recent Developments
Effective September 30, 1996, legislation was signed by President Clinton
that, among other things, recapitalizes the S.A.I.F. by instituting a one-time
assessment on all deposits insured by the S.A.I.F. The special assessment would
be computed at 0.657% of all such deposits held by affected institutions as of
March 31, 1995, including deposits held by Jefferson's thrift subsidiaries and
Texas Heritage, and must be paid by November 29, 1996. Following the special
assessment, it is anticipated that the assessment rate for deposits insured by
the S.A.I.F. would be reduced from 0.23% to approximately 0.064% of such
deposits, effective January 1, 1997.
The one-time S.A.I.F. assessment on the deposits held by Jefferson's thrift
subsidiaries which was recognized as of September 30, 1996, was approximately
$5.7 million pre-tax. The one-time S.A.I.F. assessment on the deposits of Texas
Heritage, which was also recognized as of September 30, 1996, was approximately
$285 thousand pre-tax. The financial impact of the special assessment is
expected to be offset over the next few years as a result of the reduction of
F.D.I.C. deposit premiums beginning January 1, 1997.
The Special Meeting
Date, Time and Place of the Special Meeting
The special meeting of shareholders of Texas Heritage (the "Special
Meeting") will be held at the offices of Texas Heritage, 9802 Lakeview Parkway,
Rowlett, Texas 75088, on _______________, 1996, at 5:00 p.m., local time.
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Matters to be Considered at the Special Meeting
At the Special Meeting, holders of common stock, par value $2.50 per share,
of Texas Heritage ("Texas Heritage Common") will consider and vote upon the
approval of the Merger Agreement providing for, among other matters, the Merger
of Texas Heritage with and into First Federal. In addition, the holders of Texas
Heritage Common may be asked to vote on a proposal to adjourn or postpone the
Special Meeting, which adjournment or postponement could be used for the
purpose, among others, of allowing time for the solicitation of additional votes
to approve the Merger Agreement.
Record Date for the Special Meeting
The record date for the Special Meeting is ____________________, 1996.
Vote Required to approve Merger Agreement
The presence, in person or by proxy, of a majority of the issued and
outstanding shares of Texas Heritage Common entitled to vote on the record date
is necessary to constitute a quorum at the Special Meeting. Approval of the
Merger Agreement will require the affirmative vote of a majority of the
outstanding shares of Texas Heritage Common entitled to vote thereon. Holders of
Texas Heritage Common will be entitled to one vote per share. The failure to
submit a proxy card (or to vote in person) at the Special Meeting, the
abstention from voting at the Special Meeting and, in the case of shares held in
street name, the failure of the beneficial owner thereof to give specific voting
instructions to the broker holding such shares (broker non-votes) will have the
same effect as a vote against approval of the Merger Agreement.
Certain Holders of Texas Heritage Common
As of the record date, the executive officers and directors of Texas
Heritage and their affiliates owned beneficially 232,228 shares (representing
approximately 41.40%) of Texas Heritage Common, all of which are expected by
management of Texas Heritage to be voted in favor of the Merger Agreement. See
"INFORMATION ABOUT TEXAS HERITAGE -- Security Ownership of Certain Beneficial
Owners and Management."
Revocation of Proxies
Proxies for use at the Special Meeting accompany this Proxy
Statement/Prospectus. Any proxy given pursuant to this solicitation may be
revoked by the grantor at any time prior to the voting thereof on the Merger
Agreement by filing with the Secretary of Texas Heritage a written revocation or
a duly executed proxy bearing a later date. A holder of Texas Heritage Common
may withdraw his or her proxy at the Special Meeting at any time before it is
exercised by electing to vote in person; however, attendance at the Special
Meeting will not in and of itself constitute a revocation of the proxy.
The Merger
The following summary is qualified in its entirety by reference to the full
text of the Merger Agreement, which is attached as Appendix A hereto and
incorporated by reference.
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Merger Consideration
At the time the Merger is consummated (the "Effective Time"), Texas
Heritage will merge into First Federal and, as a result thereof, each share of
Texas Heritage Common, other than any shares the holders of which have duly
exercised and perfected their dissenters' rights under the Texas Business
Corporation Act (the "Texas Act"), will be converted into the right to receive a
combination of cash and shares of common stock of Jefferson, par value $0.01 per
share ("Jefferson Common"), (together with any rights attached thereto under or
by virtue of the Rights Agreement dated August 17, 1994, between Jefferson and
Boatmen's Trust Company, as Rights Agent) in an amount equal to two hundred
percent (200%) of the per share Closing Book Value (as defined below) of Texas
Heritage determined as of the last day of the month immediately preceding the
month in which the Effective Time occurs (such aggregate amount of cash and
shares of Jefferson Common, as described herein, is referred to herein as the
"Merger Consideration"). For a description of the Rights Agreement, see
"COMPARISON OF SHAREHOLDER RIGHTS -- Shareholder Rights Plan."
Not more than one half of the total Merger Consideration received by all
shareholders of Texas Heritage shall be payable in cash (the "Cash Component"),
and the remaining portion of the Merger Consideration shall be payable in shares
of Jefferson Common (the "Stock Component"). The number of shares of Jefferson
Common issued in the Merger will equal the quotient of (A) divided by (B), where
(A) equals one-half of the value of the Merger Consideration and (B) equals the
average per share closing price of Jefferson Common as reported on the Nasdaq
National Market tier of the Nasdaq Stock Market ("Nasdaq") for the twenty (20)
trading days immediately preceding the 5th calendar day prior to the date on
which the Effective Time occurs (the "Jefferson Average Price"). No fractional
shares of Jefferson Common will be issued and, in lieu thereof, holders of
shares of Texas Heritage Common who would otherwise be entitled to a fractional
share interest in Jefferson Common (after taking into account all shares of
Texas Heritage Common held by such holder) will be paid an amount in cash (which
such cash shall be added to, and considered a part of, the Cash Component) in an
amount equal to the product of such fractional share interest and the closing
price of a share of Jefferson Common on Nasdaq on the business day immediately
preceding the date on which the Effective Time occurs. The number of whole
shares of Jefferson Common issued to each shareholder of Texas Heritage will be
increased, as necessary, and the Cash Component of the Merger Consideration
payable to each shareholder of Texas Heritage will be decreased, as necessary,
such that the aggregate value of the Stock Component, determined as of the date
on which the Merger is consummated (the "Closing Date"), will be not less than
fifty percent (50%) of the aggregate Merger Consideration payable to all
shareholders of Texas Heritage.
As used in the Merger Agreement, the term "Closing Book Value" means the
amount of the consolidated shareholders' equity account, exclusive of preferred
stock, of Texas Heritage, reduced by (i) any and all accruals, expenses, charge-
offs, deductions or adjustments to the accounts of Texas Heritage in connection
with the merger, and (ii) the amount by which Texas Heritage's aggregate legal
and accounting fees and expenses relative to the transactions contemplated by
the Merger Agreement exceeds Fifty Thousand Dollars ($50,000), and increased by
(iii) an amount equal to twenty-five percent (25%) of the difference of (a) the
aggregate price paid by Texas Heritage to redeem its outstanding class of
preferred stock and (b) the aggregate par value of such preferred stock,
provided that such amount shall not exceed Thirty-Nine Thousand Dollars
($39,000) in the aggregate, and further increased by (iv) any amounts paid by,
or accrued on the books of, Texas Heritage relative to any special assessment(s)
levied by the F.D.I.C. on the deposits of Texas Heritage through the Closing
Date to recapitalize the S.A.I.F.
The Closing Book Value shall be determined as of the last day of the month
immediately preceding the month in which the Closing Date occurs and shall be
determined by Texas Heritage's independent accountants in accordance with
generally accepted accounting principles consistently applied, which such
determination of Closing Book Value shall be verified by Jefferson's independent
accountants.
6
<PAGE>
VALUE OF THE MERGER
Based on the approximate Closing Book Value of Texas Heritage at June 30,
1996, calculated in accordance with the terms of the Merger Agreement as
described above, the Merger Consideration had an approximate per share value of
$17.01 and an approximate total value of $9.5 million to holders of Texas
Heritage Common. The value of the Merger Consideration as stated above may
increase or decrease depending on the components making up the determination of
Texas Heritage's Closing Book Value and the date on which the Effective Time
occurs.
The actual value of the Merger Consideration to be received by shareholders
of Texas Heritage, including the number of shares of Jefferson Common
constituting the Stock Component and the value of the Cash Component, cannot be
calculated as of the date of this Proxy Statement/Prospectus and will not be
known until a date five calendar days prior to the Effective Time.
REASONS FOR THE MERGER AND RECOMMENDATION OF THE BOARDS OF DIRECTORS
Texas Heritage
The Board of Directors of Texas Heritage has determined that the Merger and
the Merger Agreement, including the Merger Consideration, are fair to, and in
the best interests of, Texas Heritage and its shareholders. The Board believes
that a business combination with a larger and more geographically diversified
savings and loan holding company would, in addition to providing significant
value to all shareholders, enable Texas Heritage to compete more effectively in
its market area and participate in the expanded opportunities for growth that
the Merger will make possible. ACCORDINGLY, THE BOARD RECOMMENDS THAT
SHAREHOLDERS OF TEXAS HERITAGE VOTE FOR THE MERGER AND APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
Certain members of the management and Board of Directors of Texas Heritage
have interests in the Merger that are in addition to the interests of
shareholders of Texas Heritage generally. See "THE MERGER -- Interests of
Certain Persons in the Merger."
Jefferson
The Board of Directors of Jefferson believes the acquisition of Texas
Heritage would be a natural and desirable addition to Jefferson's franchise in
East and North Central Texas. It is also expected to create operating synergies
that will permit financial services to be delivered more efficiently in the
markets served by Jefferson.
CONDUCT OF BUSINESS PENDING THE MERGER; DIVIDENDS
Pursuant to the Merger Agreement, Texas Heritage has agreed to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as conducted prior to the execution of the Merger Agreement. The Merger
Agreement provides that Texas Heritage may declare and pay regular dividends in
such amounts and at such times as are consistent with Texas Heritage's
historical practice, but may not make any other distribution to shareholders,
whether in cash, stock or other property.
CONDITIONS TO THE MERGER; REGULATORY APPROVALS
The Merger is subject to various conditions including, among other things:
(i) approval of the Merger Agreement by the requisite majority vote of the
shareholders of Texas Heritage; (ii) receipt of regulatory approval from the
O.T.S. and the Texas S&L Department with respect to the Merger; (iii) receipt
7
<PAGE>
of an opinion of counsel to Jefferson on certain tax aspects of the Merger; and
(iv) the occurrence of no material adverse changes in the businesses of
Jefferson or Texas Heritage. The conditions described in items (i) and (ii)
above (the receipt of shareholder and regulatory approvals) may not be waived by
any party. Although the remaining conditions to effect the Merger may be waived
by any party entitled to the benefit thereof, neither Jefferson nor Texas
Heritage intend to waive any such conditions except in those circumstances where
the Board of Directors of either Jefferson or Texas Heritage, as the case may
be, deems such waiver to be in the best interests of Jefferson or Texas
Heritage, as the case may be, and its respective shareholders. There can be no
assurances as to when and if such conditions will be satisfied (or, where
permissible, waived) or that the Merger will be consummated.
The Merger may not be consummated until the 30th day after the date of
O.T.S. approval; provided, however, that the Merger may be consummated after the
15th day following the date of O.T.S. approval if the O.T.S. has not received
any adverse comments from the United States Department of Justice relating to
the competitive aspects of the transaction, and the Department of Justice has
consented to such shorter waiting period. Applications for the required
regulatory approval of the Merger from the O.T.S. and the Texas S&L Department
have been filed and are pending.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time: (i) by any party if the Merger is not consummated on or prior to January
31, 1997; (ii) by mutual written agreement of the parties; (iii) by any party in
the event of a material breach by the other of any of its representations and
warranties or agreements under the Merger Agreement not cured within 30 days
after notice of such breach is given by the non-breaching party; (iv) by any
party in the event all the conditions to its obligations are not satisfied or
waived (and not cured within any applicable cure period); (v) by any party in
the event that the other party becomes a party or subject to any new or amended
written agreement, memorandum of understanding, cease and desist order,
imposition of civil money penalties or other regulatory enforcement action or
proceeding with any federal or state agency charged with the supervision or
regulation of thrifts or banks after the date of the Merger Agreement; (vi) if
any regulatory application filed in connection with the Merger should be finally
denied or disapproved by the respective regulatory authority or, by either
party, if Jefferson fails to obtain any regulatory approvals required to
consummate the Merger on or before January 15, 1997; (vii) by any party if the
Merger is not approved by the shareholders of Texas Heritage; and (viii) by
Texas Heritage if the Jefferson Average Price is greater than $36.25 and by
Jefferson if the Jefferson Average Price is less than $21.75.
The Merger Agreement may also be terminated by Jefferson if certain reports
of environmental inspection on the real properties of Texas Heritage to be
obtained pursuant to the Merger Agreement should disclose any contamination or
presence of hazardous wastes, the remediation cost of which exceeds $100,000.
PAYMENT UPON OCCURRENCE OF CERTAIN TRIGGERING EVENTS
The Merger Agreement provides that Texas Heritage shall pay to Jefferson
the sum of $250,000 upon termination of the Merger Agreement (i) by Jefferson
upon a material breach thereof by Texas Heritage not cured within 30 days after
written notice of such breach is given by Jefferson to Texas Heritage, or (ii)
as a result of the failure of Texas Heritage's shareholders to approve the
Merger Agreement and the Merger at the Special Meeting (other than as a result
of a material breach of the Merger Agreement by Jefferson), provided that, in
either case, one or more Triggering Events (as defined below) shall have
occurred within 24 months of the occurrence of either of the foregoing events.
As used in the Merger Agreement, the term "Triggering Event" means any of the
following events: (a) any person or group of persons (other than Jefferson
and/or its affiliates) acquires, or has the right to acquire, more than 50% of
the outstanding shares
8
<PAGE>
of Texas Heritage Common; (b) the expiration date of a tender or exchange offer
by any person or group of persons (other than Jefferson and/or its affiliates)
to purchase or acquire securities of Texas Heritage if upon consummation of such
offer, such person or group of persons would own, control or acquire the right
to acquire more than 50% of the outstanding shares of Texas Heritage Common; or
(c) the entry by Texas Heritage into a definitive agreement with a person or
group of persons (other than Jefferson and/or its affiliates) for such person or
group of persons to acquire, merge or consolidate with Texas Heritage or to
acquire all or substantially all of Texas Heritage's assets or more than 50% of
the outstanding shares of Texas Heritage Common.
Notwithstanding the foregoing, a Triggering Event will not be deemed to
have occurred in the event that, subsequent to any termination of the Merger
Agreement, a holding company is formed with respect to Texas Heritage, provided
that (i) the shareholders of such holding company are identical to the
shareholders of Texas Heritage immediately prior to the formation thereof and
(ii) the holding company agrees to be bound by those provisions of the Merger
Agreement described in the preceding paragraph.
In addition, the Merger Agreement provides that Jefferson shall pay to
Texas Heritage the sum of $250,000 should the Merger Agreement be terminated by
Texas Heritage on account of a material breach of the Merger Agreement by
Jefferson that is not cured within 30 days after notice of such breach is given
to Jefferson by Texas Heritage. If such material breach by Jefferson should
occur subsequent to the redemption of Texas Heritage's preferred stock, then
Jefferson shall pay to Texas Heritage an additional $39,000 upon termination of
the Merger Agreement by Texas Heritage.
FEDERAL INCOME TAX CONSEQUENCES
The Merger has been structured to qualify as a tax-free reorganization so
that no gain would be recognized by Jefferson or Texas Heritage, and no gain or
dividend income would be recognized by Texas Heritage shareholders, except in
respect of cash received in connection with the Cash Component of the Merger
Consideration and except for any cash payments which might be received by such
shareholders properly exercising their dissenters' rights. Consummation of the
Merger is conditioned upon receipt by Jefferson and Texas Heritage of an opinion
of Lewis, Rice & Fingersh, L.C., counsel to Jefferson, that: (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended; (ii) gain or income will be realized by each
shareholder of Texas Heritage who receives both Jefferson Common and cash in
exchange for his or her shares of Texas Heritage Common, and will be recognized,
but not in excess of the amount of cash received; (iii) the basis of shares of
Jefferson Common received by a shareholder of Texas Heritage will be the same as
the basis of his or her shares of Texas Heritage Common exchanged therefor
decreased by the amount of cash received by the shareholder and increased by the
amount, if any, treated as a dividend and the amount of gain recognized by the
shareholder in the exchange; and (iv) the holding period of the shares of
Jefferson Common received by such shareholders will include, in each instance,
the holding period of the shares of Texas Heritage Common exchanged therefor,
provided such shares were held as capital assets as of the Effective Time.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO TEXAS HERITAGE SHAREHOLDERS, WITHOUT REGARD TO
THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH TEXAS HERITAGE SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING ANY SUCH SPECIFIC TAX SITUATION AND STATUS, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND THE
POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
9
<PAGE>
ACCOUNTING TREATMENT
The Merger will be accounted for by Jefferson under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations," as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time. Income of the
combined company will not include results of operations of Texas Heritage prior
to the Effective Time.
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that the Merger will become effective upon
the endorsement of the Articles of Combination by the Secretary of the O.T.S. It
is presently anticipated that the Merger will be consummated during the fourth
quarter of 1996, but no assurance can be given that such timetable will be met.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Texas Heritage's management and Board of Directors have
interests in the Merger that are in addition to, and separate from, the
interests of shareholders of Texas Heritage generally. These include, among
others, provisions in the Merger Agreement relating to director and officer
indemnification and employee benefits after the Merger.
In addition, as described herein, Joe L. Williams, President and Chief
Executive Officer of Texas Heritage, will continue as an executive officer of
First Federal following the Merger, and each member of the current board of
directors of Texas Heritage may elect to become an advisory director of First
Federal for a period of three years following the Merger with respect to the
branches of First Federal attributable to Texas Heritage.
For information about the percentage of Texas Heritage Common owned by the
directors and executive officers of Texas Heritage, see "INFORMATION ABOUT TEXAS
HERITAGE -- Security Ownership of Certain Beneficial Owners and Management."
None of the directors or executive officers of Texas Heritage would own, on a
pro forma basis giving effect to the Merger, more than 1% of the issued and
outstanding shares of Jefferson Common.
DISSENTERS' RIGHTS
The rights of dissenting shareholders of Texas Heritage are governed by the
Texas Act, which provides, in certain situations, that a shareholder will be
entitled to receive the fair value of his or her shares of Texas Heritage Common
held immediately before the Merger is consummated if such shareholder: (i) files
a written objection to the proposed Merger prior to the Special Meeting; (ii)
does not vote his or her shares in favor of approving the Merger Agreement;
(iii) makes written demand on Texas Heritage for payment of the fair value of
his or her shares within 10 days after Jefferson mails or delivers notice of the
consummation of the Merger; (iv) submits his or her certificates to Jefferson
within 20 days of demanding payment for his or her shares for notation thereon
that such demand has been made; and (v) either gives notice within 60 days of
Jefferson's offer to accept that offer or, within 120 days from the date of the
Merger, files a petition with the appropriate court for an appraisal. See "THE
MERGER -- Dissenters' Rights" and Appendix B hereto.
10
<PAGE>
Management and Operations After the Merger
First Federal will be the surviving bank in the Merger. Following
consummation of the Merger, the present offices of Texas Heritage will operate
as branch offices of First Federal. It is not anticipated that the Board of
Directors of Jefferson will be affected as a result of the Merger. Pursuant to
the terms of the Merger Agreement, each director of Texas Heritage may, at his
option, become an advisory director of First Federal upon consummation of the
Merger for a period of three years thereafter with respect to the branches of
First Federal attributable to Texas Heritage. Except as described in the
following paragraphs, each such advisory director will receive, during such
three-year period, a director's fee commensurate with the fee such director
received from Texas Heritage as of May 31, 1996, the date of the Merger
Agreement.
It is presently anticipated that Joe L. Williams, President and Chief
Executive Officer of Texas Heritage, will continue as an executive officer and
an advisory director of First Federal following the Merger. On the Closing Date,
Mr. Williams will enter into an Employment Agreement with Jefferson and First
Federal, the form of which is attached as an exhibit to the Merger Agreement
attached hereto as Appendix A.
The Employment Agreement provides that First Federal will employ Mr.
Williams as President and Chief Operating Officer of the Dallas/Fort Worth,
Texas division of First Federal for an initial period of three years, subject to
renewals for additional one year periods thereafter. Pursuant to the terms of
the Employment Agreement, Mr. Williams will receive an initial annual salary of
$125,000 and will be eligible to participate in Jefferson's executive bonus
plan. The annual salary may be increased from time to time as established by the
Board of Directors of First Federal. In addition, Mr. Williams will be entitled
to participate in all employee welfare, benefit, retirement and medical plans of
First Federal, will receive at least four weeks of paid vacation, and will be
provided an automobile for use in the performance of his duties as an officer of
First Federal. Mr. Williams will not receive director's fees for serving as an
advisory director of First Federal.
The Employment Agreement provides that, in the event that his employment
with First Federal is lawfully terminated for cause or resignation, Mr. Williams
will not compete with First Federal in Dallas, Texas for a period of two years
following such termination.
Comparison of Shareholder Rights
The rights of the shareholders of Texas Heritage Common and Jefferson
Common differ in certain respects. The rights of the shareholders of Texas
Heritage who receive shares of Jefferson Common in the Merger will be governed
by the corporate law of Delaware, the state in which Jefferson is incorporated,
and by Jefferson's Certificate of Incorporation, Bylaws and other corporate
documents. The governing law and documents of Jefferson differ from those which
apply to Texas Heritage, which is a Texas savings association, in several
respects. The material differences between Texas Heritage Common and Jefferson
Common from the perspective of shareholders, as described in detail under
"COMPARISON OF SHAREHOLDER RIGHTS," are the shareholder votes required for
certain business combinations; the procedures for shareholders to make proposals
for consideration at meetings of shareholders; the ability of shareholders to
nominate and remove directors and to amend the Certificate of Incorporation or
Articles of Association; certain rights pursuant to Jefferson's shareholder
rights plan; and rights of Jefferson and its shareholders pursuant to certain
corporate takeover statutes. See "COMPARISON OF SHAREHOLDER RIGHTS."
11
<PAGE>
COMPARATIVE STOCK PRICES
Shares of Jefferson Common are traded on Nasdaq under the symbol JSBA.
There is no established trading market for Texas Heritage Common. The following
table sets forth the high and low last sale prices of Jefferson Common for the
periods indicated, as reported on Nasdaq, and the high and low trading prices of
Texas Heritage Common known to management of Texas Heritage.
<TABLE>
<CAPTION>
Jefferson Texas Heritage
Common Stock Common Stock
----------------- --------------------
High Low High Low
----------------- --------------------
<S> <C> <C> <C> <C>
1994 First Quarter........... $16.87 $16.00 $ * $ *
Second Quarter.......... 18.12 16.62 * *
Third Quarter........... 19.00 16.25 3.00 3.00
Fourth Quarter.......... 16.75 15.00 * *
1995 First Quarter........... 16.75 16.00 4.00 4.00
Second Quarter.......... 18.87 16.25 1.00 1.00
Third Quarter........... 24.25 18.00 3.50 3.50
Fourth Quarter.......... 28.50 23.00 3.65 3.65
1996 First Quarter........... 31.00 24.12 * *
Second Quarter.......... 31.75 25.25 * *
Third Quarter........... 26.25 22.25 * *
Fourth Quarter.......... _____ _____ ____ ____
(through ____________)
- --------------------------------
</TABLE>
* Management of Texas Heritage is not aware of any sales of shares of Texas
Heritage Common during the periods indicated or, if a sale occurred, the sales
price. Given the limited trading activity of Texas Heritage Common, the prices
reflected in the chart may not be indicative of the actual value of Texas
Heritage Common, which value may be more or less than that indicated. The most
recent transaction for which the sales price was reported to, or known by,
management of Texas Heritage involving shares of Texas Heritage Common took
place on October 3, 1995, at a price per share of $3.65.
On May 31, 1996, the last trading day before the announcement of the
proposed Merger, the closing sale price of Jefferson Common, as reported on
Nasdaq, was $27.25 per share. On ________________, 1996, the closing sale price
of Jefferson Common as reported on Nasdaq was $_______ per share.
On May 31, 1996, the per share value for Texas Heritage Common, calculated
on the basis of the Merger Consideration, was approximately $16.62. As of
_______________, 1996, the per share value for Texas Heritage Common, calculated
on the basis of the Merger Consideration, was approximately $_______. The actual
value of the Merger Consideration to be received by shareholders of Texas
Heritage, including the number of shares of Jefferson Common constituting the
Stock Component and the value of the Cash Component, cannot be calculated as of
the date of this Proxy Statement/Prospectus and will not be known until a date
five calendar days prior to the Effective Time.
On __________________, 1996, there were approximately 1,100 and 245 holders
of record of Jefferson Common and Texas Heritage Common, respectively.
12
<PAGE>
SELECTED COMPARATIVE PER SHARE DATA
(unaudited)
The following summary presents for the periods indicated comparative
historical, pro forma and pro forma equivalent unaudited per share data for
Jefferson and Texas Heritage. The pro forma amounts also give effect to the
pending acquisition of L&B Financial, Inc. See "THE PARTIES -- Jefferson --
Pending Acquisition", and "PRO FORMA FINANCIAL DATA". The pro forma amounts
assume the Merger had been effective during the period presented and has been
accounted for under the purchase method of accounting. For a description of the
purchase method of accounting with respect to the Merger, see "THE MERGER --
Accounting Treatment."
The amounts designated "Pro Forma Combined Per Jefferson Share" represent
the pro forma results of the Merger, the amounts designated "Equivalent Pro
Forma Per Texas Heritage Share" are computed by multiplying the Pro Forma
Combined Per Jefferson Share amounts by a factor of .6243 to reflect the Merger
Consideration (which equals $8.51 in cash plus .3122 shares of Jefferson Common
for each share of Texas Heritage Common). See "THE MERGER -- Merger
Consideration."
The data presented should be read in conjunction with the more detailed
information and financial statements included herein or incorporated by
reference in this Proxy Statement/Prospectus and with the unaudited pro forma
financial statements included elsewhere in this Proxy Statement/Prospectus. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA FINANCIAL DATA"
and "FINANCIAL STATEMENTS OF TEXAS HERITAGE."
<TABLE>
<CAPTION>
Jefferson/ Jefferson/ Jefferson/ Jefferson/
Texas Texas All All
Texas Heritage Heritage Entities Entities
Jefferson Heritage Pro Forma Pro Forma Pro Forma Pro Forma
Historical Historical Combined Equivalent Combined Equivalent
---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE:
Six months ended June 30, 1996 $ 0.91 $1.13 $ 0.96 $ 0.60 $ 0.84 $ 0.52
Year ended December 31, 1995 1.60 1.53 1.61 1.01 1.50 0.94
DIVIDENDS PER COMMON SHARE:
Six months ended June 30, 1996 $ 0.16 $ -- $0.16/(1)/ $0.10/(2)/ $0.16/(1)/ $0.10/(2)/
Year ended December 31, 1995 -- 0.25 -- -- -- --
BOOK VALUE PER COMMON SHARE
(PERIOD END):
June 30, 1996 $21.82 $8.51 $ 22.06 $ 13.77 $ 21.96 $ 13.71
December 31, 1995 21.49 7.41 21.79 13.60 21.69 13.54
</TABLE>
____________________________________
/(1)/ Jefferson's pro forma dividends per share represent historical dividends
per share paid by Jefferson.
/(2)/ Represents historical dividends per share paid by Jefferson calculated on
the basis of the Merger Consideration.
13
<PAGE>
SELECTED FINANCIAL DATA
The following tables present selected unaudited consolidated historical
financial data for Jefferson, selected historical financial data for
Texas Heritage and pro forma combined amounts reflecting the Merger.
The pro forma amounts assume that the Merger had been effective during the
periods presented. The data presented are derived from the consolidated
financial statements of Jefferson and the financial statements of Texas Heritage
and should be read in conjunction with the more detailed information and
financial statements included herein or incorporated by reference in this Proxy
Statement/Prospectus. The data should also be read in conjunction with the
unaudited pro forma financial statements included elsewhere in this Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE,"
"PRO FORMA FINANCIAL DATA" and "FINANCIAL STATEMENTS OF TEXAS HERITAGE."
JEFFERSON SAVINGS BANCORP, INC.
SELECTED FINANCIAL DATA/(1)/
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
----------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- -------- -------- -------- --------
(dollars in thousands, except per share data)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Summarized Income Statement:
- ---------------------------
Net Interest Income......................... $ 14,126 $ 9,302 $ 22,746 $ 17,521 $ 14,016 $ 13,693 $ 12,406
Provision for Loan Losses................... 330 184 367 300 240 785 966
Noninterest Income.......................... 2,287 771 2,482 1,425 1,887 1,486 1,278
Noninterest Expense......................... 10,189 5,659 14,955 10,012 8,264 7,028 7,847
Income Tax Expense.......................... 2,287 1,522 3,536 3,272 2,639 2,961 1,628
Net Income.................................. 3,607 2,708 6,370 5,362 4,760 4,405 3,243
Per Common Share Data:
- ---------------------
Net Income.................................. $ 0.91 $ 0.66 $ 1.60 $ 1.32 $ 0.77 n/a n/a
Cash Dividends Paid......................... 0.16 0.00 0.00 0.00 0.00 n/a n/a
Stockholders' Equity (period end)........... 21.82 20.38 21.49 18.70 18.17 n/a n/a
Financial Position at Period End:
- --------------------------------
Total Assets................................ $1,125,393 $1,208,915 $1,142,929 $860,581 $566,685 $418,217 $454,643
Loans, Net.................................. 805,374 793,001 788,085 584,990 313,518 285,104 346,418
Deposits.................................... 875,823 827,188 870,179 511,936 341,386 379,190 418,486
Borrowed Money.............................. 150,425 284,776 174,962 261,960 145,694 0 0
Stockholders' Equity........................ 82,243 79,782 80,251 72,739 71,708 32,648 28,243
Selected Financial Ratios:
- -------------------------
Return on Average Assets.................... 0.64% 0.59% 0.61% 0.73% 1.02% 1.01% 0.72%
Return on Average Total Equity.............. 8.87 7.16 8.28 7.41 7.92 14.37 12.15
Nonperforming Assets as % of Net Loans and
Foreclosed Property/(2)/................... 0.91 0.57 0.85 0.50 2.46 3.95 3.28
Nonperforming Loans as % of Net Loans/(2)/.. 0.39 0.16 0.38 0.05 0.09 1.34 3.04
Loan Loss Reserve as % of Net Loans......... 0.67 0.61 0.65 0.59 1.02 1.04 0.64
Net Charge-Offs as % of Average Loans....... 0.00 0.00 0.02 0.01 0.01 0.01 0.41
Total Equity to Assets...................... 7.31 6.60 7.02 8.45 12.65 7.81 6.21
Tangible Equity to Assets/(3)/.............. 6.09 5.48 5.83 8.45 12.65 7.81 6.21
Tier 1 Risk-Based Capital................... 9.91 12.74 10.50 14.41 20.60 13.50 11.05
Total Risk-Based Capital.................... 10.71 13.36 11.33 15.25 21.80 14.58 11.33
- ---------------------------
</TABLE>
/(1)/ The information set forth in this table does not give effect to
Jefferson's pending material acquisition of L&B Financial, Inc. See "THE
PARTIES -- Jefferson -- Pending Acquisition" and "PRO FORMA FINANCIAL
DATA."
/(2)/ For periods prior to 1993, nonperforming assets consisted of restructured
and nonaccruing loans and foreclosed assets. During 1993, management
determined that a $3.1 million loan which was restructured during 1991
was not considered a nonperforming loan or a nonperforming asset because
the borrower has been current in meeting restructured terms since the
date of restructuring, the restructured loan provides for principal
amortization, and the loan has an interest rate and other features that
are at least equivalent to market terms.
/(3)/ Tangible equity to assets is defined as total equity less all intangibles
as a percentage of total tangible assets.
14
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Summarized Income Statement:
- ---------------------------
Net Interest Income.................. $ 3,483 $ 2,827 $ 2,064 $ 1,470 $ 1,254
Provision for Loan Losses............ 9 186 103 166 99
Noninterest Income................... 394 208 268 289 415
Noninterest Expense.................. 2,199 1,797 1,393 1,166 1,239
Income Tax Expense................... 567 350 286 145 112
Income Before Extraordinary Item..... 1,102 702 550 282 219
Extraordinary Item................... -- -- -- 145 112
Income Before Cumulative Effect of
Change in Accounting Principle..... 1,102 702 550 427 331
Cumulative Effect of Change in
Accounting Principle............... -- -- 235 -- --
Net Income........................... 1,102 702 785 427 331
Per Common Share Data:
- ---------------------
Before Extraordinary Item............ $ 1.96 $ 1.25 $ 0.98 $ 0.50 $ 0.39
Extraordinary Item................... -- -- -- 0.26 0.20
Before Cumulative Effect of Change
in Accounting Principle............ 1.96 1.25 0.98 0.76 0.59
Cumulative Effect of Change in
Accounting Principle................ -- -- 0.42 -- --
Net Income........................... 1.96 1.25 1.40 0.76 0.59
Cash Dividends Paid.................. 0.00 0.25 0.24 0.00 0.00
Common Shareholders' Equity.......... 8.58 6.69 5.71 4.56 3.79
Financial Position at Period End:
- --------------------------------
Total Assets......................... $69,235 $62,012 $47,696 $37,462 $31,599
Loans, Net........................... 54,155 47,465 33,901 19,237 18,887
Deposits............................. 60,695 48,691 34,503 31,212 28,837
Stockholders' Equity................. 4,811 3,753 3,201 2,557 2,123
Selected Financial Ratios:
- -------------------------
Return on Average Assets............. 1.71% 1.29% 1.89% 1.26% 1.10%
Return on Average Total Equity....... 25.96 20.08 26.41 18.43 16.69
Non-Performing Assets as % of Total
Loans and Foreclosed Property/(1)/.. 2.42 1.95 2.86 4.75 6.96
Nonperforming Loans as % of
Net Loans........................... 1.10 1.59 1.64 0.43 0.85
Loan Loss Reserve as % of Net Loans.. 1.23 1.35 1.56 2.55 1.45
Net Charge-Offs as % of
Average Loans....................... 0.03 0.18 0.27 0.27 1.07
Total Equity to Total Assets......... 6.95 6.05 6.71 6.83 6.72
Tangible Equity to Assets/(2)/....... 6.95 6.05 6.71 6.83 6.72
Tier 1 Risk-Based Capital............ 10.67 9.16 10.79 13.11 10.54
Total Risk-Based Capital............. 11.92 10.32 11.69 13.84 11.02
- ---------------------------
</TABLE>
/(1)/ Nonperforming assets include nonaccrual, restructured and impaired loans,
loans past due 90 days or more, and foreclosed property.
/(2)/ Tangible equity to assets is defined as total equity less all intangibles
as a percentage of total tangible assets.
15
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
PRO FORMA COMBINED SELECTED FINANCIAL DATA/(1)/
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
-------------------- ---------------------
(dollars in thousands, except per share data)
<S> <C> <C>
Summarized Income Statement:
- ---------------------------
Net Interest Income......................... $ 17,457 $ 29,588
Provision for Loan Losses................... 298 450
Noninterest Income.......................... 2,894 3,065
Noninterest Expense......................... 13,313 20,885
Income Tax Expense.......................... 2,714 4,084
Net Income/(2)/............................. 4,026 7,234
Per Common Share Data:
- ---------------------
Net Income/(2)/............................. $ 0.84 $ 1.50
Cash Dividends Paid......................... 0.16 0.00
Stockholders' Equity (period end)........... 21.96 21.69
Financial Position at Period End:
- --------------------------------
Total Assets................................ $1,346,899 $1,356,767
Loans, Net.................................. 925,831 897,703
Deposits.................................... 1,041,023 1,025,535
Borrowed Money.............................. 184,763 211,666
Stockholders' Equity........................ 100,920 98,928
Selected Financial Ratios:
- -------------------------
Return on Average Assets.................... 0.60% 0.58%
Return on Average Total Equity.............. 8.06 7.59
Nonperforming Assets as % of Net Loans and
Foreclosed Property/(3)/................... 0.99 1.03
Nonperforming Loans as % of Net Loans/(3)/.. 0.41 0.48
Loan Reserve as % of Net Loans.............. 0.74 0.73
Net Charge-Offs as % of Average Loans....... 0.00 0.02
Equity to Assets............................ 7.49 7.29
Tangible Equity to Assets/(4)/.............. 5.73 5.64
Tier 1 Risk-Based Capital................... 9.62 10.23
Total Risk-Based Capital.................... 10.48 11.13
- ---------------------------
</TABLE>
/(1)/ The information set forth in this table gives effect to Jefferson's
pending acquisition of L&B Financial, Inc. See "THE PARTIES -- Jefferson
-- Pending Acquisition" and "PRO FORMA FINANCIAL DATA."
/(2)/ Net income includes amortization of goodwill which would result from the
acquisition of Texas Heritage and L&B Financial, Inc. as if the goodwill
existed as of the earliest period presented. Goodwill arising from the
purchase of Texas Heritage and L&B Financial, Inc. will approximate $10.6
million to be amortized over 15 years.
/(3)/ For periods prior to 1993, Jefferson's nonperforming assets consisted of
restructured and nonaccruing loans and foreclosed assets. During 1993,
Jefferson's management determined that a $3.1 million loan which was
restructured during 1991 was not considered a nonperforming loan or a
nonperforming asset because the borrower has been current in meeting
restructured terms since the date of restructuring, the restructured loan
provides for principal amortization, and the loan has an interest rate
and other features that are at least equivalent to market terms.
/(4)/ Tangible equity to assets is defined as total equity less all intangibles
as a percentage of total tangible assets.
16
<PAGE>
THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to shareholders of Texas
Heritage Savings Association/Banc, a Texas savings association ("Texas
Heritage"), in connection with the solicitation of proxies by the Board of
Directors of Texas Heritage for use at the special meeting of shareholders (the
"Special Meeting") to be held at the offices of Texas Heritage, 9802 Lakeview
Parkway, Rowlett, Texas 75088 on ___________, 1996, at 5:00 p.m., local time,
and at any adjournment or postponement thereof.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the holders of common stock, par value $2.50 per
share, of Texas Heritage ("Texas Heritage Common") will be asked to approve the
Agreement and Plan of Merger, dated May 31, 1996, as amended by the First
Amendment to Agreement and Plan of Merger, dated as of August 31, 1996 as
further amended by the Second Amendment to Agreement and Plan of Merger, dated
October 9, 1996 (as amended, the "Merger Agreement"), by and among Texas
Heritage, Jefferson Savings Bancorp, Inc., a Delaware corporation ("Jefferson"),
and First Federal Savings Bank of North Texas, a federal savings association and
wholly owned subsidiary of Jefferson ("First Federal"), providing for, among
other matters, the merger of Texas Heritage with and into First Federal. In
addition, the holders of Texas Heritage Common may be asked to vote on a
proposal to adjourn or postpone the Special Meeting, which adjournment or
postponement could be used for the purpose, among others, of allowing time for
the solicitation of additional votes to approve the Merger Agreement.
RECORD DATE FOR THE SPECIAL MEETING
The Board of Directors of Texas Heritage has fixed the close of business on
_________________, 1996, as the record date for the determination of holders of
shares of Texas Heritage Common to receive notice of and to vote at the Special
Meeting. On the record date, there were 561,000 shares of Texas Heritage Common
outstanding. Only holders of shares of Texas Heritage Common of record on the
record date are entitled to vote at the Special Meeting. No shares of Texas
Heritage Common can be voted at the Special Meeting unless the record holder is
present in person or represented by proxy.
VOTE REQUIRED TO APPROVE THE MERGER AGREEMENT
The presence in person or by proxy of a majority of the issued and
outstanding shares of Texas Heritage Common entitled to vote on the record date
is necessary to constitute a quorum at the Special Meeting. The affirmative vote
of a majority of the outstanding shares of Texas Heritage Common entitled to
vote thereon is required to approve the Merger Agreement and the transactions
contemplated thereby, including the Merger. Each holder of Texas Heritage Common
is entitled to one vote per share of Texas Heritage Common. Proxies marked as
abstentions and shares held in street name, which have been designated by
brokers on proxy cards as not voted, will not be counted as votes cast and, as a
result, will have the same effect as a vote against the Merger and the Merger
Agreement. Proxies marked as abstentions or as broker non-votes, however, will
be treated as shares present for purposes of determining whether a quorum is
present.
17
<PAGE>
As of the record date, the executive officers and directors of Texas
Heritage and their affiliates have the power to vote 232,228 shares
(representing approximately 41.40% of the shares outstanding) of Texas Heritage
Common, all of which are expected by management of Texas Heritage to be voted in
favor of the Merger Agreement. For information regarding the shares of Texas
Heritage Common beneficially owned, directly or indirectly, by certain
shareholders, by each director and executive officer of Texas Heritage, and by
all directors and officers of Texas Heritage as a group, see "INFORMATION ABOUT
TEXAS HERITAGE -- Security Ownership of Certain Beneficial Owners and
Management." As of the record date, the subsidiaries of Jefferson, and the
directors and executive officers of Jefferson, did not own beneficially any
shares of Texas Heritage Common.
VOTING AND REVOCATION OF PROXIES FOR THE SPECIAL MEETING
Proxies for use at the Special Meeting accompany this Proxy
Statement/Prospectus. A shareholder may use his or her proxy if he or she is
unable to attend the Special Meeting in person or wishes to have his or her
shares voted by proxy even if he or she does attend the Special Meeting. Shares
of Texas Heritage Common represented by a proxy properly signed and returned to
Texas Heritage at, or prior to, the Special Meeting, unless subsequently
revoked, will be voted at the Special Meeting in accordance with instructions
thereon. If a proxy is properly signed and returned and the manner of voting is
not indicated on the proxy, all shares of Texas Heritage Common represented by
such proxy will be voted FOR the Merger Agreement and the transactions
contemplated thereby, including the Merger, and FOR any proposal regarding
adjournment or postponement, if such a proposal is made. The failure to submit a
proxy card (or to vote in person) at the Special Meeting, the abstention from
voting at the Special Meeting and, in the case of shares held in street name,
the failure of the beneficial owner thereof to give specific voting instructions
to the broker holding such shares (broker non-votes), will have the same effect
as a vote against approval of the Merger Agreement.
Any proxy given pursuant to this solicitation may be revoked by the grantor
at any time prior to the voting thereof on the Merger Agreement and the Merger
by filing with the Secretary of Texas Heritage a written revocation or a duly
executed proxy bearing a later date. A holder of Texas Heritage Common who
previously signed and returned a proxy and who elects to attend the Special
Meeting and vote in person may withdraw his or her proxy at any time before it
is exercised by giving notice of such revocation to the Secretary of Texas
Heritage at the Special Meeting and voting in person by ballot at the Special
Meeting; however, attendance at the Special Meeting will not in and of itself
constitute a revocation of the proxy.
SOLICITATION OF PROXIES FOR THE SPECIAL MEETING
In addition to solicitation of proxies from shareholders of Texas Heritage
Common by use of the mail, proxies also may be solicited by personal interview,
telephone and wire by directors, officers and employees of Texas Heritage, who
will not be specifically compensated for such services, and it is expected that
banks, brokerage houses and others will be requested to forward the soliciting
material to their principals and obtain authorization for the execution of
proxies. Except as set forth herein, all costs of soliciting proxies, assembling
and mailing this Proxy Statement/Prospectus and all papers which now accompany
or hereafter may supplement the same will be borne by Texas Heritage.
18
<PAGE>
EXPENSES FOR PREPARATION OF PROXY STATEMENT/PROSPECTUS
Jefferson and Texas Heritage have agreed to share in the expense of
preparing this Proxy Statement/Prospectus, and Jefferson will bear the entire
cost of printing this Proxy Statement/Prospectus and all Securities and Exchange
Commission ("S.E.C.") and other regulatory filing fees incurred in connection
therewith.
MAILING DATE OF PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus, the attached notice of Special Meeting and
the enclosed proxy card are first being sent to shareholders of Texas Heritage
on or about _______________, 1996 (the "Mailing Date").
THE PARTIES
JEFFERSON
General.
-------
Jefferson, a Delaware corporation organized in 1993, is a savings and loan
holding company headquartered in Ballwin, Missouri, a suburb of St. Louis,
Missouri. Jefferson owns all of the capital stock of two subsidiary financial
institutions: Jefferson Savings and Loan Association, F.A., a federal savings
and loan association ("Jefferson Savings and Loan"), and First Federal.
Jefferson Savings and Loan was originally chartered as a mutual savings and loan
association by the State of Missouri in 1927 and presently serves the St. Louis
metropolitan area. First Federal, which is further described herein, is a
federal savings bank resulting from Jefferson's acquisitions of three
institutions located in Texas, which acquisitions (and related mergers into
First Federal) were completed in 1995. At June 30, 1996, Jefferson had
consolidated assets of approximately $1.1 billion and shareholders' equity of
approximately $82.2 million.
Jefferson's thrift subsidiaries operate from 10 locations in Missouri and
12 locations in Texas. Through these subsidiaries, Jefferson is principally
engaged in the business of accepting deposits from the general public and
originating permanent loans which are secured by first mortgages on one-to
four-family residential properties located in its market areas. It also
maintains a substantial investment portfolio and, to a lesser extent, originates
consumer and other loans secured by various types of collateral in its market
areas. The deposits of Jefferson Savings and Loan and First Federal are insured
by the Savings Association Insurance Fund (the "S.A.I.F.") of the Federal
Deposit Insurance Corporation (the "F.D.I.C.").
To improve operating efficiencies within the organization, Jefferson is
seeking regulatory approval from the Office of Thrift Supervision (the "O.T.S.")
to merge Jefferson Savings and Loan and First Federal under the charter of the
latter. It is presently anticipated that the title of the resulting entity will
be JeffersonBanc. An application to merge Jefferson's thrift subsidiaries has
been filed with the O.T.S. and is pending. The merger of Jefferson's thrift
subsidiaries, which is expected to be completed on or about December 31, 1996,
is not conditioned upon consummation of the Merger. The principal executive
offices of Jefferson are at 14915 Manchester Road, Ballwin, Missouri 63011
(telephone number (314) 227-3000).
19
<PAGE>
Pending Acquisition.
-------------------
On September 25, 1996, Jefferson entered into an Agreement and Plan of
Merger with L&B Financial, Inc. ("L&B"), located in Sulphur Springs, Texas, to
acquire all of the outstanding capital stock of L&B. Pursuant to the terms of
the Agreement and Plan of Merger, the shares of L&B common stock would be
exchanged for a combination of cash and shares of Jefferson Common with an
aggregate per share value equal to $18.50, increased to reflect L&B's earnings
from April 1, 1996 through the end of the month immediately preceding the month
during which the closing occurs, and decreased to reflect dividends paid or
declared on L&B common stock during such period.
L&B owns all of the outstanding capital stock of Loan & Building State
Savings Bank, a Texas chartered savings bank, which would be merged into First
Federal. Organized in 1890, Loan & Building State Savings Bank is the oldest
savings institution in the State of Texas. L&B had consolidated assets of
approximately $144 million, deposits of approximately $105 million and
shareholder's equity of approximately $25 million at June 30, 1996 and operates
from its main office in Sulphur Springs, Texas and its five branches located in
Mt. Vernon, Mt. Pleasant, Daingerfield, Pittsburg and Texarkana, Texas.
The shares of Jefferson Common to be issued in connection with the
acquisition of L&B would constitute approximately 13.6% of the outstanding
shares of Jefferson Common, assuming consummation of the Merger of Texas
Heritage with and into First Federal. The acquisition of L&B, which is subject
to, among other things, approval of the shareholders of L&B and receipt of
regulatory approval, is expected to be completed in the first quarter of 1997.
There can be no assurance that this timetable will be met or that the
transaction will be consummated. The Merger is not conditioned upon consummation
of the acquisition of L&B.
Additional information regarding Jefferson and its subsidiaries is set
forth in the Jefferson's documents incorporated by reference herein. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
FIRST FEDERAL
First Federal is a federal savings bank and wholly owned subsidiary of
Jefferson operating from regional locations headquartered in Longview and
Denton, Texas. First Federal has 12 full-service offices and is regulated by the
O.T.S. At June 30, 1996, First Federal had assets of approximately $372.1
million and shareholders' equity of approximately $36.8 million.
TEXAS HERITAGE
Texas Heritage, organized in 1984, is a Texas savings association
headquartered in Rowlett, Texas, a suburb of Dallas/Fort Worth, Texas. Texas
Heritage operates from four full-service offices located in Rowlett, Garland,
Rockwall and Bedford, Texas. Texas Heritage offers complete banking services to
the commercial and residential areas that it serves, and focuses its activity on
construction lending. At June 30, 1996, Texas Heritage had assets of
approximately $69.2 million and shareholders' equity of approximately $4.8
million. The deposits of Texas Heritage are insured by the S.A.I.F. Texas
Heritage is regulated and examined by the O.T.S. and the Texas Savings and Loan
Department (the "Texas S&L Department"). The principal executive offices of
Texas Heritage are at 9802 Lakeview Parkway, Rowlett, Texas 75088 (telephone
number (972) 475-1213).
20
<PAGE>
THE MERGER
GENERAL
This section of the Proxy Statement/Prospectus describes certain aspects of
the Merger, including the principal provisions of the Merger Agreement. The
following information relating to the Merger is qualified in its entirety by
reference to the other information contained elsewhere in this Proxy
Statement/Prospectus, including the Appendices hereto and the documents
incorporated herein by reference. A copy of the Merger Agreement is attached
hereto as Appendix A and is incorporated by reference herein. Reference is made
thereto for a complete description of the terms of the Merger. ALL SHAREHOLDERS
OF TEXAS HERITAGE ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
BACKGROUND OF THE MERGER
Several years ago, the Board of Directors of Texas Heritage considered and
adopted a strategic plan providing that the Board would entertain an offer to
purchase Texas Heritage provided all of the following principal objectives were
met:
(a) The offer must provide a return to the shareholders of Texas Heritage
equal to or greater than the market price for similar thrift purchases.
(b) The offer must have a purchase price at least equal to 1.5 times the
net book value of Texas Heritage, and the consideration to be received by
shareholders of Texas Heritage must not be less than 50% cash.
(c) The entity resulting from any business combination must have a stated
commitment to continue to provide financial services to the local community
currently served by Texas Heritage.
(d) Employees of Texas Heritage must be given consideration for continued
employment.
Representatives of Texas Heritage were initially approached in March 1996
by representatives of Jefferson regarding a proposed business combination of
Texas Heritage and a subsidiary of Jefferson. After negotiation of the principal
terms of the transaction and completion of satisfactory due diligence, the Board
of Directors of Texas Heritage decided that Jefferson's offer met the criteria
expressed above and that each shareholder of Texas Heritage should have the
opportunity to consider Jefferson's offer. On May 31, 1996, the Board of
Directors of Texas Heritage executed the Merger Agreement. The Merger is subject
to final approval by the shareholders of Texas Heritage.
REASONS FOR THE MERGER
Texas Heritage.
--------------
The Board of Directors of Texas Heritage has determined that the Merger and
the Merger Agreement, including the Merger Consideration (as defined herein),
are fair to, and in the best interests of, Texas Heritage and its shareholders.
The Board of Directors of Texas Heritage believes that a business combination
with a larger financial institution and more geographically diversified savings
and loan holding company would, in addition to providing significant value to
all shareholders, enable Texas Heritage to
21
<PAGE>
compete more effectively in its market area and participate in the expanded
opportunities for growth that the Merger will make possible. Accordingly, the
Board recommends that shareholders of Texas Heritage vote FOR approval and
adoption of the Merger Agreement.
Certain members of the management and Board of Directors of Texas Heritage
have interests in the Merger that are in addition to the interests of
shareholders generally. See "THE MERGER -- Interests of Certain Persons in the
Merger."
Jefferson.
---------
As part of its ongoing operations, Jefferson continually is presented with
and seeks out acquisition opportunities to enhance its banking franchise. A
component of Jefferson's acquisition strategy is to increase its presence in
Texas. The Board of Directors of Jefferson believes the acquisition of Texas
Heritage would be a natural and desirable addition to Jefferson's existing
banking franchise in East and North Central Texas.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF TEXAS HERITAGE
RECOMMENDS THAT THE HOLDERS OF TEXAS HERITAGE COMMON VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER.
MERGER CONSIDERATION
The Merger Agreement provides that each share of Texas Heritage Common,
other than shares held by any shareholder properly exercising dissenters' rights
under the Texas Business Corporation Act (the "Texas Act"), will be converted,
at the effective time of the Merger (the "Effective Time"), into the right to
receive a combination of cash and shares of common stock of Jefferson, $0.01 par
value per share, ("Jefferson Common"), including any attached rights thereto
under or by virtue of the Rights Agreement, dated August 17, 1994, between
Jefferson and Boatmen's Trust Company, as Rights Agent, in an amount equal to
two hundred percent (200%) of the per share Closing Book Value (as defined
herein) of Texas Heritage determined as of the last day of the month immediately
preceding the month in which the Effective Time occurs (such aggregate amount of
cash and shares of Jefferson Common as described herein, is referred to herein
as the "Merger Consideration"). For a description of the Rights Agreement, See
"COMPARISON OF SHAREHOLDER RIGHTS -- Shareholder Rights Plan." Not more than one
half of the total Merger Consideration received by all shareholders of Texas
Heritage will be payable in cash (the "Cash Component"), and the remaining
portion of the Merger Consideration will be payable in shares of Jefferson
Common (the "Stock Component"). The number of shares of Jefferson Common issued
in the Merger will equal the quotient of (A) divided by (B), where (A) equals
one-half of the value of the Merger Consideration and (B) equals the average per
share closing price of Jefferson Common as reported on the Nasdaq National
Market tier of the Nasdaq Stock Market ("Nasdaq") for the twenty (20) trading
days immediately preceding the 5th calendar day prior to the date on which the
Effective Time occurs (the "Jefferson Average Price"). No fractional shares of
Jefferson Common will be issued and, in lieu thereof, holders of shares of Texas
Heritage Common who would otherwise be entitled to a fractional share interest
in Jefferson Common (after taking into account all shares of Texas Heritage
Common held by such holder) will be paid an amount in cash (which such cash will
be added to, and considered a part of, the Cash Component) in an amount equal to
the product of such fractional share interest and the closing price of a
22
<PAGE>
share of Jefferson Common on Nasdaq on the business day immediately preceding
the date on which the Effective Time occurs. The number of whole shares of
Jefferson Common issued to each shareholder of Texas Heritage will be increased,
as necessary, and the Cash Component of the Merger Consideration payable to each
shareholder of Texas Heritage will be decreased, as necessary, such that the
aggregate value of the Stock Component, determined as of the date on which the
Merger is consummated (the "Closing Date"), will be not less than fifty percent
(50%) of the aggregate Merger Consideration payable to all shareholders of Texas
Heritage.
As used in the Merger Agreement, the term "Closing Book Value" means the
amount of the shareholders' equity account, exclusive of preferred stock, of
Texas Heritage, reduced by (i) any and all accruals, expenses, charge-offs,
deductions or adjustments to the accounts of Texas Heritage in connection with
the Merger, and (ii) the amount by which Texas Heritage's aggregate legal and
accounting fees and expenses relative to the transactions contemplated by this
Agreement exceeds Fifty Thousand Dollars ($50,000), and increased by (iii) an
amount equal to twenty-five percent (25%) of the difference of (a) the aggregate
price paid by Texas Heritage to redeem its outstanding class of preferred stock
and (b) the aggregate par value of such preferred stock, provided that such
amount shall not exceed Thirty-Nine Thousand Dollars ($39,000) in the aggregate,
and further increased by (iv) any amounts paid by, or accrued on the books of,
Texas Heritage relative to any special assessment(s) levied by the F.D.I.C. on
the deposits of Texas Heritage through the Closing Date to recapitalize the
S.A.I.F.
The Closing Book Value shall be determined as of the last day of the month
immediately preceding the month in which the Closing Date occurs and shall be
determined by Texas Heritage's independent accountants in accordance with
generally accepted accounting principles consistently applied, which such
determination of Closing Book Value shall be verified by Jefferson's independent
accountants.
The Merger Consideration was determined through negotiations between
Jefferson and Texas Heritage, taking into account the relative value of
Jefferson Common and Texas Heritage Common.
Based on the approximate Closing Book Value of Texas Heritage at June 30,
1996, calculated in accordance with the terms of the Merger Agreement as
described above, the Merger Consideration had an approximate per share value of
$17.01 and an approximate total value of $9.5 million to holders of Texas
Heritage Common. The value of the Merger Consideration as stated above may
increase or decrease depending on the components making up the determination of
Texas Heritage's Closing Book Value and the date on which the Effective Time
occurs.
The actual value of the Merger Consideration to be received by shareholders
of Texas Heritage, including the number of shares of Jefferson Common
constituting the Stock Component and the value of the Cash Component, cannot be
calculated as of the date of this Proxy Statement/Prospectus and will not be
known until five calendar days prior to the Effective Time.
FRACTIONAL SHARES
No fractional shares of Jefferson Common will be issued and, in lieu
thereof, holders of Texas Heritage Common who would otherwise be entitled to a
fractional share interest of Jefferson Common (after taking into account all
shares of Texas Heritage Common held by such holder) will be paid an amount in
cash (which such cash will be added to, and considered a part of, the Cash
Component) in an amount equal to the product of such fractional share interest
and the closing price of a share of Jefferson Common on Nasdaq on the business
day immediately preceding the date on which the Effective Time occurs.
23
<PAGE>
SHARE ADJUSTMENTS
If, prior to the Effective Time, a share of Jefferson Common would be
changed into a different number of shares of Jefferson Common or a different
class of shares (a "Share Adjustment"), by reason of reclassification,
recapitalization, splitup, exchange of shares or readjustment, or if a stock
dividend thereon should be declared with a record date prior to the Effective
Time, then the number of shares of Jefferson Common into which a share of Texas
Heritage Common would be converted pursuant to the Merger Agreement will be
appropriately and proportionately adjusted so that each shareholder of Texas
Heritage will be entitled to receive such number of shares of Jefferson Common
as such shareholder would have received pursuant to such Share Adjustment had
the record date thereof been immediately following the Effective Time.
FORM OF THE MERGER
The Merger Agreement provides that, subject to the satisfaction or waiver
(where permissible) of the conditions set forth therein, at the Effective Time,
Texas Heritage will merge into First Federal, which is a wholly owned subsidiary
of Jefferson, and First Federal will be the surviving corporation in the Merger.
Upon consummation of the Merger, First Federal will continue to be a wholly
owned subsidiary of Jefferson, and the separate corporate existence of Texas
Heritage will terminate.
CLOSING DATE; EFFECTIVE TIME
The Merger Agreement provides that the Closing of the Merger will take
place at the close of business on the last business day of the month during
which all of the conditions to the Merger are satisfied or waived (where
permissible), or on such other date thereafter as Jefferson and Texas Heritage
may agree. The Merger Agreement provides that the Merger will become effective
upon the endorsement of the Articles of Combination by the Secretary of the
O.T.S. Assuming that the Merger is approved by the requisite vote of the
shareholders of Texas Heritage and that the other conditions to the Merger are
satisfied or waived (where permissible), it is presently anticipated that the
Merger will be consummated during the fourth quarter of 1996, but no assurance
can be given that such timetable will be met.
CONDUCT OF BUSINESS PENDING THE MERGER; DIVIDENDS
Pursuant to the Merger Agreement, Texas Heritage has agreed to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as conducted prior to the execution of the Merger Agreement. The Merger
Agreement provides that Texas Heritage may declare and pay regular dividends in
such amounts and at such times as are consistent with Texas Heritage's
historical practices, but may not make any other distribution to shareholders,
whether in cash, stock or other property.
REGULATORY APPROVALS
The Merger is subject to the prior approval of the O.T.S. and the Texas S&L
Department. The Home Owners Loan Act (the "H.O.L.A.") and the Federal Deposit
Insurance Act (the "F.D.I.A.") require that the O.T.S. take into consideration
the financial and managerial resources and future prospects of the existing and
proposed institutions and the convenience and needs of the communities to be
served. The
24
<PAGE>
H.O.L.A. and the F.D.I.A. also prohibit the O.T.S. from approving the Merger if
it would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any part of the United States, or its effect in any section of the country may
be substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner be a restraint of trade, unless the O.T.S. finds that
the anticompetitive effects of the Merger are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. The O.T.S. also has the authority to
deny an application if it concludes that the combined organization would have an
inadequate capital position.
Under the F.D.I.A., the Merger may not be consummated until the 30th day
following the date of O.T.S. approval, during which time the United States
Department of Justice may challenge the Merger on antitrust grounds; provided,
however, that the Merger may be consummated after the 15th day following the
date of O.T.S. approval if the O.T.S. has not received any adverse comments from
the United States Department of Justice relating to the competitive aspects of
the transaction, and the Department of Justice has consented to such shorter
waiting period. The commencement of an antitrust action would stay the
effectiveness of the O.T.S.'s approval unless a court specifically orders
otherwise.
Under the Texas Savings and Loan Act, the Commissioner of the Texas S&L
Department would be required to deny the Merger if he or she finds that (i) the
Merger would substantially lessen competition or be in restraint of trade and
would result in a monopoly or be in furtherance of a combination or conspiracy
to monopolize or attempt to monopolize the savings and loan industry in any part
of the state, unless the anticompetitive effects of the proposed reorganization,
consolidation, or merger are clearly outweighed in the public interest by the
probable effect of the reorganization, merger, or consolidation in meeting the
convenience and needs of the community to be served; (ii) the financial
stability of either First Federal or Texas Heritage would be jeopardized by the
Merger; (iii) the Merger would not be in the best interest of First Federal or
Texas Heritage; (iv) the experience, ability, standing, competence,
trustworthiness, or integrity of the management of First Federal or Texas
Heritage is such that the Merger would not be in the best interest of First
Federal or Texas Heritage; (v) after the Merger, the surviving entity would not
be solvent, have adequate capital structure, or be in compliance with Texas
laws; (vi) First Federal and Texas Heritage have not furnished all of the
information pertinent to the application reasonably requested by the
Commissioner; or (vii) First Federal and Texas Heritage are not acting in good
faith.
Both the F.D.I.A. and the Texas Savings and Loan Act provide for the
publication of notice and public comment on the applications.
Applications for the required regulatory approvals from the O.T.S. and the
Texas S&L Department have been filed and are pending.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger is subject to various conditions. Specifically, as set forth in
the Merger Agreement, the obligations of each party to effect the Merger are
subject to the fulfillment or waiver (where permissible) by each of the parties,
at or prior to the Closing Date, of the following conditions: (i) the
representations and warranties of the respective parties to the Merger Agreement
as set forth therein will be true and correct in all material respects on and as
of the Closing Date; (ii) each of the respective parties to the Merger Agreement
will have performed and complied in all material respects with all of its
obligations and agreements required to be performed prior to the Closing Date;
(iii) no party to the Merger Agreement will be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger; (iv) all necessary regulatory
approvals and consents required
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to consummate the Merger, including the approval of the shareholders of Texas
Heritage, will have been obtained and all waiting periods in respect thereof
will have expired; (v) each party will have received all required documents from
the other party; (vi) the Registration Statement relating to the Jefferson
Common to be issued pursuant to the Merger will have become effective, and no
stop order suspending the effectiveness of the Registration Statement will have
been issued and no proceedings for that purpose will have been initiated or
threatened by the S.E.C.; and (vii) Jefferson will have received an opinion of
Lewis, Rice & Fingersh, L.C., counsel to Jefferson, and Texas Heritage will have
received a copy of such opinion, to the effect that (a) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), (b) gain will be realized by each
holder of Texas Heritage Common who receives both Jefferson Common and cash in
exchange for his or her shares of Texas Heritage Common, and will be recognized,
but not in excess of the amount of cash received, (c) the basis of shares of
Jefferson Common received by a shareholder of Texas Heritage will be the same as
the basis of his or her shares of Texas Heritage Common exchanged therefor
decreased by the amount of cash received by the shareholder and increased by the
amount, if any, treated as a dividend and the amount of gain recognized by the
shareholder in the exchange, and (d) the holding period of the shares of
Jefferson Common received by the shareholders of Texas Heritage will include, in
each instance, the holding period of the shares of Texas Heritage Common
exchanged therefor, provided such shares were held as capital assets as of the
Effective Time.
The obligations of Jefferson and First Federal to effect the Merger are
further subject to the condition that, prior to the Closing Date, Jefferson and
First Federal have received certain environmental inspection reports required to
be obtained on Texas Heritage's real properties and Jefferson will not have
elected to exercise its termination rights in connection therewith. See "THE
MERGER -- Termination or Abandonment" and "THE MERGER -- Certain Other
Agreements -- Environmental Inspections."
The conditions described in item (iv) above (the receipt of shareholder and
regulatory approvals) may not be waived by any party. Although the remaining
conditions to effect the Merger may be waived by the party entitled to the
benefit thereof, neither Jefferson, First Federal nor Texas Heritage intend to
waive any such conditions except in those circumstances where the Board of
Directors of either Jefferson, First Federal or Texas Heritage, as the case may
be, deems such waiver to be in the best interests of Jefferson, First Federal or
Texas Heritage, as the case may be, and their respective shareholders.
Applications for the required regulatory approvals of the Merger have been
filed with the O.T.S. and the Texas S&L Department, which applications are
pending.
No assurance can be provided as to if or when all of the foregoing
conditions precedent to the Merger will be satisfied or waived (where
permissible) by the party permitted to do so. If the Merger is not effected on
or before January 31, 1997, the Merger Agreement may be terminated by
Jefferson, First Federal or Texas Heritage. See "THE MERGER -- Termination or
Abandonment."
TERMINATION OR ABANDONMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time: (i) by any party if the Merger is not consummated on or prior to January
31, 1997; (ii) by mutual written agreement of the parties; (iii) by any party in
the event of a material breach by the other of any of its representations and
warranties or agreements under the Merger Agreement not cured within 30 days
after notice of such breach is given by the non-breaching party; (iv) by any
party in the event all the conditions to its obligations are not satisfied or
waived (and not cured within any applicable cure period); (v) by any party in
the event that
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the other becomes a party or subject to any new or amended written agreement,
memorandum of understanding, cease and desist order, imposition of civil money
penalties or other regulatory enforcement action or proceeding with any federal
or state agency charged with the supervision or regulation of thrifts or banks
after the date of the Merger Agreement; (vi) if any regulatory application filed
in connection with the Merger should be finally denied or disapproved by the
applicable regulatory authority or, by either party, if Jefferson fails to
obtain any regulatory approvals required to consummate the Merger on or before
January 15, 1997; (vii) by Texas Heritage if the Jefferson Average Price is
greater than $36.25 and by Jefferson if the Jefferson Average Price is less than
$21.75; and (viii) by any party if the shareholders of Texas Heritage do not
approve the Merger.
PAYMENT UPON OCCURRENCE OF CERTAIN TRIGGERING EVENTS
The Merger Agreement provides that Jefferson shall pay to Texas Heritage
the sum of $250,000 upon termination of the Merger Agreement by Texas Heritage
due to a material breach thereof by Jefferson not cured within 30 days after
written notice of such breach is given by Texas Heritage to Jefferson. If such
material breach by Jefferson should occur subsequent to the redemption of Texas
Heritage's preferred stock, then Jefferson shall pay to Texas Heritage an
additional $39,000 upon termination of the Merger Agreement by Texas Heritage.
In addition, the Merger Agreement provides that Texas Heritage shall pay to
Jefferson the sum of $250,000 upon termination of the Merger Agreement (i) by
Jefferson upon a material breach thereof by Texas Heritage not cured within 30
days after written notice of such breach is given by Jefferson to Texas
Heritage, or (ii) as a result of the failure of Texas Heritage's shareholders to
approve the Merger Agreement and the Merger at the Special Meeting (other than
as a result of a material breach of the Merger Agreement by Jefferson), provided
that, in either case, one or more Triggering Events (as defined below) shall
have occurred within 24 months of the occurrence of either of the foregoing
events. As used in the Merger Agreement, the term "Triggering Event" means any
of the following events: (a) any person or group of persons (other than
Jefferson and/or its affiliates) acquires, or has the right to acquire, more
than 50% of the outstanding shares of Texas Heritage Common; (b) the expiration
date of a tender or exchange offer by any person or group of persons (other than
Jefferson and/or its affiliates) to purchase or acquire securities of Texas
Heritage if upon consummation of such offer, such person or group of persons
would own, control or acquire the right to acquire more than 50% of the
outstanding shares of Texas Heritage Common; or (c) the entry by Texas Heritage
into a definitive agreement with a person or group of persons (other than
Jefferson and/or its affiliates) for such person or group of persons to acquire,
merge or consolidate with Texas Heritage or to acquire all or substantially all
of Texas Heritage's assets or more than 50% of the outstanding shares of Texas
Heritage Common.
Notwithstanding the foregoing, a Triggering Event will not be deemed to
have occurred in the event that, subsequent to any termination of the Merger
Agreement, a holding company is formed with respect to Texas Heritage, provided
that (i) the shareholders of such holding company are identical to the
shareholders of Texas Heritage immediately prior to the formation thereof and
(ii) the holding company agrees to be bound by those provisions of the Merger
Agreement described in the preceding paragraph.
DISSENTERS' RIGHTS
The following summary of the rights of Texas Heritage shareholders who
choose to dissent and demand payment for their shares of Texas Heritage Common
does not purport to be a complete statement of the Texas Act relating to their
rights, and is qualified by reference to the excerpts of the Texas Act that have
been set forth as Appendix B to this Proxy Statement/Prospectus. Each
shareholder of Texas Heritage
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who chooses to dissent from the Merger Agreement should consult with his or her
own legal counsel concerning his or her rights and the specific procedures and
available remedies under the Texas Act.
ANY FAILURE TO FOLLOW THE DETAILED PROCEDURES SET FORTH IN THE TEXAS ACT
MAY RESULT IN A SHAREHOLDER OF TEXAS HERITAGE LOSING ANY RIGHT HE OR SHE MAY
HAVE TO DISSENT FROM THE MERGER AGREEMENT AND DEMAND AN APPRAISAL FOR THE VALUE
FOR HIS OR HER SHARES OF TEXAS HERITAGE COMMON.
The rights of Texas Heritage shareholders who choose to dissent from the
Merger are governed by provisions of the Texas Act. An excerpt of the Texas Act
(Sections 5.11-5.13) is attached as Appendix B to this Proxy
Statement/Prospectus. Under the Texas Act, a shareholder of a Texas corporation
who wishes to assert dissenters' rights with respect to a merger must file with
the corporation, prior to the shareholders' meeting at which the merger is to be
voted upon, a written objection stating that the shareholder's right to dissent
will be exercised if the merger is effected and giving the shareholder's mailing
address for receiving notice of the merger if it becomes effective.
In addition, in order to dissent, the shareholder must not vote in favor of
the merger. It is not necessary that a shareholder vote against the merger in
order to dissent, so long as the shareholder files a written objection in
advance of the proposed action. However, merely voting against the proposal,
either by proxy or at the shareholders' meeting, will not take the place of
filing the required written objection.
If the merger is effected and the dissenters' rights provisions of the
Texas Act are applicable to such merger, the surviving corporation of such
merger must, within 10 days thereafter, mail or deliver notice thereof to each
shareholder who has filed a written objection and who has not voted in favor of
the merger. Shareholders who have not voted in favor of the merger and who have
filed objections must make written demand for the payment of the fair value of
his or her shares within 10 days of the date the surviving corporation mailed or
delivered the notice in accordance with the provisions of Article 5.12 of the
Texas Act, a copy of which is attached to this Proxy Statement/Prospectus as
Appendix B. Such written demand must state the number and class of the shares
owned by the shareholder and the shareholder's estimate of the fair value of
such shares. Also, within 20 days after demanding payment, the shareholder must
submit the certificates representing his or her shares to the surviving
corporation for notation on the certificate that such demand has been made in
accordance with the provisions of Article 5.13 of the Texas Act, a copy of which
is attached to this Proxy Statement/Prospectus as Appendix B.
A shareholder who votes for the merger, or does not file a written
objection stating an intent to assert dissenters' rights prior to the
shareholder's meeting at which the merger is voted upon, or does not demand
payment within 10 days after receiving notice of the effectiveness of the
merger, will be deemed to have waived his or her right to dissent and will be
bound by the terms of the merger. A shareholder who fails to submit his or her
certificate for notation of demand for payment will, at the option of the
surviving corporation, terminate his or her right to dissent unless a court for
good and sufficient cause directs otherwise.
Within 20 days after receiving demand for payment from a dissenting
shareholder, the surviving corporation must (i) notify the shareholder that it
agrees to the amount claimed as the fair value of the shares, or (ii) set forth
the surviving corporation's estimate of the fair value of the shares. If the
surviving corporation and the shareholder agree on a value within 60 days after
the merger, the surviving corporation must pay that value for the shares within
90 days after the merger. If the surviving corporation and the dissenting
shareholder do not so agree, either the surviving corporation or such
shareholder may file a petition in a court of competent jurisdiction in the
appropriate Texas State district court within 120 days after
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the merger asking for a finding and determination of the fair value of the
shares owned by the dissenting shareholder.
All shareholders who properly dissent from a proposed merger involving a
Texas corporation in accordance with Article 5.12 of the Texas Act will lose all
rights with respect to their shares except the right to receive payment for the
shares and the right to maintain an appropriate action to obtain relief on the
grounds that the merger would be or was fraudulent. A shareholder may withdraw
his or her demand before payment is made for the shares or before a petition has
been filed asking for a finding and determination of the fair value of such
shares, but no demand may be withdrawn after such payment has been made, or,
unless the surviving corporation consents, after any such petition has been
filed.
If a shareholder withdraws his or her demand, or if neither party timely
files a petition asking for a determination of fair value of the shares, such
shareholder shall be bound by the terms of the merger and restored to the status
of shareholder.
The dissenters' rights provisions of the Texas Act described herein are
applicable to all proposed mergers involving Texas corporations, except in those
instances where (i) the shares of such corporation are listed on a national
securities exchange or (ii) such shares are held of record by 2,000 holders or
more. Texas Heritage Common shares are not listed on a national securities
exchange, and Texas Heritage has substantially fewer than 2,000 record
shareholders (____ as of the record date for the Special Meeting). Therefore,
Texas Heritage shareholders are entitled to assert dissenters' rights under the
Texas Act in connection with the Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF SHAREHOLDERS TO DISSENT AND DEMAND
PAYMENT FOR THEIR SHARES DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE
TEXAS ACT RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS OF TEXAS HERITAGE,
AND IS QUALIFIED BY REFERENCE TO THE EXCERPTS OF THE TEXAS ACT WHICH HAVE BEEN
SET FORTH IN FULL AS APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS.
EXCHANGE OF TEXAS HERITAGE STOCK CERTIFICATES; FRACTIONAL SHARES
The conversion of Texas Heritage Common into the Merger Consideration
(other than any shares as to which dissenters' rights are properly exercised)
will occur by operation of law at the Effective Time. After the Effective Time,
certificates theretofore evidencing shares of Texas Heritage Common (such
certificates, other than certificates held by shareholders exercising their
dissenters' rights, being collectively referred to herein as the "Texas Heritage
Certificates") which may be exchanged for the Merger Consideration will be
deemed, for all corporate purposes other than the payment of dividends and other
distributions on shares of Jefferson Common, to evidence ownership of and
entitlement to receive such Merger Consideration.
As soon as reasonably practicable after the Effective Time, and in no event
more than 5 business days thereafter, Boatmen's Trust Company (the "Exchange
Agent") will mail a transmittal letter and instructions to each record holder of
a Texas Heritage Certificate whose shares were converted into the right to
receive the Merger Consideration, advising such holder of the amount of cash and
number of shares of Jefferson Common such holder is entitled to receive pursuant
to the Merger, and of the procedures for surrendering such Texas Heritage
Certificates in exchange for a certificate for the number of whole shares of
Jefferson Common constituting the Stock Component, and a check for the cash
amount such holder is entitled to
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receive for the Cash Component. The letter of transmittal will also specify
that delivery will be effected, and risk of loss and title to the Texas Heritage
Certificates will pass, only upon proper delivery of the Texas Heritage
Certificates to the Exchange Agent and will be in such form and have such other
provisions as Jefferson may reasonably specify. SHAREHOLDERS OF TEXAS HERITAGE
ARE REQUESTED NOT TO SURRENDER THEIR TEXAS HERITAGE CERTIFICATES FOR EXCHANGE
UNTIL SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. The shares of
Jefferson Common constituting the Stock Component of the Merger Consideration
into which Texas Heritage Common will be converted in the Merger will be deemed
to have been issued at the Effective Time. Unless and until the Texas Heritage
Certificates are surrendered, along with a duly executed letter of transmittal,
any other required documents and notification of the holder's federal taxpayer
identification number, dividends on the shares of Jefferson Common constituting
the Stock Component of the Merger Consideration issuable with respect to such
Texas Heritage Common, which would otherwise be payable, will not be paid to the
holders of such Texas Heritage Certificates and, in such case, upon surrender of
the Texas Heritage Certificates and a duly executed Letter of Transmittal, any
other required documents and notification of taxpayer identification number,
there will be paid any dividends on such shares of Jefferson Common which became
payable between the Effective Time and the time of such surrender and
notification. No interest on any such dividends will accrue or be paid.
REPRESENTATIONS AND WARRANTIES OF TEXAS HERITAGE, JEFFERSON AND FIRST FEDERAL
The Merger Agreement contains various representations and warranties of the
parties thereto. These include, among other things, representations and
warranties by Texas Heritage, except as otherwise disclosed to Jefferson, as to:
(i) its organization and good standing; (ii) its capitalization; (iii) the due
authorization and execution of the Merger Agreement by Texas Heritage; (iv)
subsidiaries, partnerships and joint ventures; (v) the accuracy of the financial
statements of Texas Heritage; (vi) the absence of material adverse changes in
the financial condition, results of operations, business or prospects of Texas
Heritage; (vii) the absence of certain orders, agreements or memoranda of
understanding between Texas Heritage and any federal or state agency charged
with the supervision or regulation of thrifts; (viii) the filing of tax returns
and payment of taxes; (ix) the absence of pending or threatened litigation or
other such actions; (x) agreements with employees, including employment
agreements; (xi) certain reports required to be filed with various regulatory
agencies; (xii) its investment portfolio; (xiii) its loan portfolio; (xiv)
employee matters and ERISA; (xv) title to its properties, the absence of liens
(except as specified) and insurance matters; (xvi) environmental matters; (xvii)
compliance with applicable laws and regulations; (xviii) the absence of
undisclosed liabilities; (xix) the absence of brokerage commissions or similar
finder's fees in connection with the Merger; and (xx) the accuracy of
information supplied by Texas Heritage in connection with the Registration
Statement, this Proxy Statement/Prospectus and any other documents to be filed
with the S.E.C. or any banking or other regulatory authority in connection with
the transactions contemplated by the Merger Agreement.
Jefferson's and First Federal's representations and warranties include,
among other things, those as to (i) their organization and good standing; (ii)
their capitalization; (iii) the due authorization and execution of the Merger
Agreement by each of Jefferson and First Federal, and the absence of the need
(except as specified) for governmental or third party consents to the Merger;
(iv) subsidiaries of Jefferson; (v) the accuracy of Jefferson's financial
statements and filings with the S.E.C.; (vi) the absence of material adverse
changes in the financial condition, results of operations, business or prospects
of Jefferson on a consolidated basis; (vii) the absence of material pending or
threatened litigation or other such actions; (viii) certain reports required to
be filed with various regulatory agencies; (ix) compliance with applicable laws
and regulations; (x) the accuracy of information supplied by Jefferson and First
Federal in connection with the Registration Statement, this Proxy
Statement/Prospectus and any other documents to be filed with the S.E.C. or any
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banking or other regulatory authority in connection with the transactions
contemplated by the Merger Agreement; (xi) the absence of brokerage commissions
or similar finder's fees in connection with the Merger; (xii) the absence of
certain orders, agreements or memoranda of understanding between Jefferson or
First Federal and any federal or state agency charged with the supervision or
regulation of thrifts or thrift holding companies; (xiii) the filing of tax
returns and payment of taxes; (xiv) the absence of undisclosed liabilities; and
(xv) employee matters and ERISA.
CERTAIN OTHER AGREEMENTS
Business of Texas Heritage in Ordinary Course. Pursuant to the Merger
Agreement, Texas Heritage has agreed, among other things, that it will conduct
its business and engage in transactions only in the usual, regular and ordinary
course as previously conducted, and that it will not, without the prior written
consent of Jefferson (which consent shall not be unreasonably withheld): (i)
issue additional shares of Texas Heritage Common or other capital stock,
options, warrants or other rights to subscribe for or purchase shares of Texas
Heritage Common, or any other capital stock or any other securities convertible
into or exchangeable for any capital stock of Texas Heritage; (ii) directly or
indirectly redeem, purchase or otherwise acquire Texas Heritage Common or any
other capital stock of Texas Heritage (other than shares of preferred stock of
Texas Heritage); (iii) effect a reclassification, recapitalization, splitup,
exchange of shares, readjustment or other similar change in any capital stock or
otherwise reorganize or recapitalize; (iv) change its charter or certificate or
articles of incorporation or association, as the case may be, or bylaws; (v)
grant any increase (other than ordinary and normal increases consistent with
past practices) in the compensation payable or to become payable to directors,
officers or salaried employees, grant any stock options or, except as required
by law, adopt or change any bonus, insurance, pension, or other employee plan,
payment or arrangement made to, for or with any such directors, officers or
employees; (vi) borrow or agree to borrow any amount of funds (except for
Federal Home Loan Bank Advances and certificates of deposit originated in the
ordinary course of business and having maturities of 18 months or less) or
directly or indirectly guarantee or agree to guarantee any obligations of
others; (vii) make or commit to make any new loan or letter of credit or any new
or additional discretionary advance under any existing line of credit, in excess
of $750,000, or that would increase the aggregate credit outstanding to any one
borrower or group of affiliated borrowers to more than $750,000, provided,
however, that Texas Heritage may make single family residential mortgage loans
or construction loans in principal amounts of up to $1,000,000; (viii) purchase
or otherwise acquire any investment security for its own account having an
average remaining maturity greater than five years or any asset-backed
securities other than those issued or guaranteed by the Government National
Mortgage Association, the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation; (ix) increase or decrease the rate of interest
paid on time deposits or certificates of deposit except in accordance with past
practices; (x) enter into any agreement, contract or commitment out of the
ordinary course of business having a term in excess of three months other than
letters of credit, loan agreements, and other lending, credit and deposit
agreements and documents made in the ordinary course of business; (xi) mortgage,
pledge, subject to lien or charge or otherwise encumber any of its assets or
properties except in the ordinary course of business; (xii) cancel, accelerate
or waive any material indebtedness, claims or rights owing to Texas Heritage
except in the ordinary course of business; (xiii) sell or otherwise dispose of
any real property or any material amount of personal property other than
properties acquired in foreclosure or otherwise in the ordinary collection of
indebtedness; (xiv) foreclose or otherwise take title to or possess any real
property, other than single family, non-agricultural residential property of one
acre or less, without first obtaining a phase one environmental report which
indicates that the property is free of hazardous, toxic or polluting waste
materials; (xv) commit any act or fail to do any act which will result in a
material breach of any agreement, contract or commitment which will materially
adversely affect the business, financial condition or earnings of Texas
Heritage; (xvi) violate any law, statute, rule, governmental regulation or
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order which will materially adversely affect the business, financial condition
or earnings of Texas Heritage; (xvii) purchase any real or personal property or
make any capital expenditure in excess of $50,000; (xviii) change accounting
principles or practices, or the method of applying such principles or practices;
or (xix) engage in any transaction or take any action that would render untrue,
in any material respect, any of the representations and warranties made by Texas
Heritage in the Merger Agreement, if such representations or warranties were
given as of the date of such transaction or action.
Additional Texas Heritage Reserves, Accruals, Charges and Expenses. The
Merger Agreement provides that Jefferson and Texas Heritage will consult and
cooperate with each other prior to the Effective Time to determine the amount
and the timing for recognizing for financial accounting purposes the expenses of
the Merger and the restructuring charges related to or to be incurred in
connection with the Merger. At the request of Jefferson, Texas Heritage has
agreed to establish and take such reserves and accruals as Jefferson reasonably
shall request so as to conform Texas Heritage's loan, accrual, reserve and other
accounting policies to Jefferson's policies, and shall establish and take such
accruals, reserves and changes in order to implement such policies in respect of
excess facilities and equipment capacity, severance costs, litigation matters,
write-off or write-down of various assets and other appropriate accounting
adjustments, provided, however, that Texas Heritage is not required to take any
action which is inconsistent with generally accepted accounting principles and
provided further that any such reserve and/or accrual taken at the request of
Jefferson will not affect the calculation of the Closing Book Value.
Environmental Inspections. Texas Heritage has provided Jefferson reports
of phase one environmental investigations on certain real property owned or
leased by Texas Heritage. In addition, Jefferson has the right to obtain
similar reports of a phase one environmental investigation on all other real
properties owned, leased or operated by Texas Heritage (not including leased
space in retail and similar establishments and space leased for automatic teller
machines). If required by the phase one reports in Jefferson's reasonable
opinion, Jefferson shall have the right to obtain a report of a phase two
environmental investigation on all properties requiring additional study.
Should the cost of obtaining such phase two reports and the cost of taking all
remedial and corrective measures required by applicable law, recommended or
suggested by such report or reports, or prudent in light of serious life, health
or safety concerns exceed $100,000 as reasonably estimated by an environmental
expert retained for such purpose by Jefferson and reasonably acceptable to Texas
Heritage (or cannot be so estimated to be $100,000 or less), then Jefferson will
have the right for a period of 10 business days to terminate the Merger
Agreement by giving written notice to Texas Heritage, which shall be Jefferson's
sole remedy in such event.
Environmental investigations routinely are conducted by Jefferson in
connection with transactions involving the acquisition of real property, whether
pursuant to the acquisition of a bank or other business or in its ongoing
business operations. These investigations are intended to identify and quantify
potential environmental risks of ownership, such as contamination, which could
lead to liability for clean-up costs under the federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and
other applicable laws. A "phase one" investigation is an initial environmental
inquiry intended to identify areas of concern which might require more in-depth
assessment. The scope of a phase one investigation varies depending on the
environmental consultant utilized and the property assessed, but will typically
include (i) visual inspection of the property; (ii) review of governmental
records to ascertain the presence of such things as "Superfund" sites,
underground storage tanks or landfills, etc. on or near the site; (iii) review
of all relevant site records such as air or water discharge permits and
hazardous waste manifests; and (iv) research regarding previous owners and uses
of the property as well as those of surrounding properties. In bank or other
business acquisition transactions, Jefferson's policy is to obtain phase one
environmental investigations of real property to ensure that environmental
problems do not exist which could result in unacceptably high or unquantifiable
risk to Jefferson and its shareholders.
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Other Texas Heritage Agreements. In addition, Texas Heritage has agreed
to: (i) give Jefferson prompt written notice of any occurrence, or impending or
threatened occurrence, of any event or condition which would cause or constitute
a breach of any of Texas Heritage's representations or agreements in the Merger
Agreement or of the occurrence of any matter or event known to and directly
involving Texas Heritage (not including changes in conditions that affect the
thrift industry generally) that is materially adverse to the business,
operations, properties, assets or condition (financial or otherwise) of Texas
Heritage; (ii) use its best efforts to obtain all necessary consents with
respect to any material leases, licenses, contracts, instruments and rights
which require the consent of another person for their transfer or assumption
pursuant to the Merger; (iii) use its best efforts to perform and fulfill all
conditions and obligations to be performed or fulfilled under the Merger
Agreement and to effect the Merger; (iv) permit Jefferson reasonable access to
Texas Heritage's properties and to disclose and make available all books,
documents, papers and records relating to assets, stock ownership, properties,
operations, obligations and liabilities in which Jefferson may have a reasonable
and legitimate interest in furtherance of the transactions contemplated by the
Merger Agreement; and (v) maintain and keep all of its benefit plans fully
funded and, to the extent any such benefit plan may not be fully or adequately
funded, make such contributions as are necessary to fully restore such
inadequately funded plan.
Jefferson's Agreements. Pursuant to the Merger Agreement, Jefferson and
First Federal have agreed, as applicable, among other things, to: (i) file all
regulatory applications required in order to consummate the Merger and to keep
Texas Heritage reasonably informed as to the status of such applications; (ii)
file the Registration Statement with the S.E.C. and use its best efforts to
cause the Registration Statement to become effective; (iii) timely file all
documents required to obtain all necessary permits and approvals under
applicable state securities laws; (iv) prepare and file any other filings
required under the Securities Exchange Act of 1934, as amended, relating to the
Merger and related transactions; (v) promptly notify Texas Heritage in writing
should Jefferson or First Federal have knowledge of any event or condition which
would cause or constitute a breach of any of its representations or agreements
contained in the Merger Agreement; (vi) use their respective best efforts to
perform and fulfill all conditions and obligations to be performed or fulfilled
under the Merger Agreement and to effect the Merger; and (vii) permit Texas
Heritage reasonable access to their properties and to disclose and make
available all books, documents, papers and records relating to the assets, stock
ownership, properties, operations, obligations and liabilities of Jefferson in
which Texas Heritage may have a reasonable and legitimate interest in
furtherance of the transactions contemplated in the Merger Agreement. In
addition, the Merger Agreement states that Jefferson shall provide certain
employee benefit plans and programs to the employees of Texas Heritage who
continue their employment after the Effective Time.
NO SOLICITATION
The Merger Agreement provides that, unless and until the Merger Agreement
has been terminated, Texas Heritage will not solicit, encourage or initiate any
inquiries with respect to, or, without prior written notice to Jefferson,
participate in negotiations with, or provide information to, any person in
connection with any proposal from any person relating to the acquisition of all
or a substantial portion of the business, assets or stock of Texas Heritage.
Texas Heritage is required to promptly advise Jefferson of its receipt of, and
the substance of, any such proposal or inquiry.
33
<PAGE>
WAIVER AND AMENDMENT
Prior to or at the Effective Time, any provision of the Merger Agreement,
including, without limitation, the conditions to consummation of the Merger, may
be (i) waived, to the extent permitted under law, in writing by the party which
is entitled to the benefits thereof; or (ii) amended at any time by written
agreement of the parties, whether before or after approval of the Merger
Agreement by the shareholders of Texas Heritage at the Special Meeting. It is
anticipated that any given condition to the obligations of Texas Heritage and
Jefferson to consummate the Merger would be waived only in those circumstances
where the Board of Directors of Texas Heritage or Jefferson, as the case may be,
deems such waiver to be in the best interests of such company and its
shareholders.
EXPENSES AND FEES
In the event the Merger Agreement is terminated or the Merger is abandoned,
all costs and expenses incurred in connection with the Merger Agreement will be
paid by the party incurring such costs and expenses, and no party shall have any
liability to the other party for costs, expenses, damages or otherwise, except
that: (i) in the event the Merger Agreement is terminated on account of a
willful breach of any of the representations or warranties therein or any breach
of the agreements set forth therein, the non-breaching party is entitled to seek
damages against the breaching party; and (ii) in certain events, a fee of
$250,000 will be required to be paid to Texas Heritage or Jefferson by the other
party. See "THE MERGER -- Payment Upon Occurrence of Certain Triggering Events."
FEDERAL INCOME TAX CONSEQUENCES
The Merger has been structured to qualify as a reorganization under Section
368(a) of the Code. Except for shareholders perfecting their dissenters'
rights, and cash received constituting the Cash Component of the Merger
Consideration, holders of shares of Texas Heritage Common will recognize no gain
or dividend income on the receipt of Jefferson Common in the Merger.
Additionally, their aggregate basis in the shares of Jefferson Common received
in the Merger will be the same as their aggregate basis in their shares of Texas
Heritage Common converted in the Merger decreased by the amount of cash received
by the shareholder and increased by the amount, if any, treated as a dividend
and the amount of gain recognized by the shareholder on the exchange. Provided
the shares surrendered are held as capital assets, the holding period of the
shares of Jefferson Common received by them will include the holding period of
their shares of Texas Heritage Common exchanged therefor. Cash received as the
Cash Component of the Merger Consideration and cash received by shareholders
exercising their dissenters' rights will be treated as a distribution in full
payment of such interests, or shares surrendered in exercise of dissenters'
rights, resulting in capital gain or ordinary income, as the case may be,
depending upon each shareholder's particular situation. Jefferson, Texas
Heritage and First Federal will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code and no gain will be recognized by
Jefferson, Texas Heritage or First Federal by reason of the Merger.
Consummation of the Merger is conditioned upon receipt by Jefferson of an
opinion of Lewis, Rice & Fingersh, L.C., counsel to Jefferson, a copy of which
opinion shall be delivered to and may be relied upon by Texas Heritage, to the
effect that if the Merger is consummated in accordance with the terms set forth
in the Merger Agreement: (i) the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code; (ii) gain or income will be realized
by each holder of shares of Texas Heritage Common who receives both Jefferson
Common and cash in exchange for his or her shares of Texas Heritage
34
<PAGE>
Common, and will be recognized, but not in excess of the amount of cash
received; (iii) the basis of shares of Jefferson Common received by a
shareholder of Texas Heritage will be the same as the basis of his or her shares
of Texas Heritage Common exchanged therefor decreased by the amount of cash
received by the shareholder and increased by the amount, if any, treated as a
dividend and the amount of gain recognized by the shareholder in the exchange;
and (iv) the holding period of the shares of Jefferson Common received by such
shareholders will include, in each instance, the holding period of the shares of
Texas Heritage Common exchanged therefor, provided such shares were held as
capital assets as of the Effective Time.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO TEXAS HERITAGE SHAREHOLDERS, WITHOUT REGARD TO
THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH TEXAS HERITAGE SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING ANY SUCH SPECIFIC TAX SITUATION AND STATUS, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND THE
POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
RESALE OF JEFFERSON COMMON
The shares of Jefferson Common issued pursuant to the Merger will be freely
transferable under the Securities Act of 1933, as amended (the "Securities
Act"), except for shares issued to any Texas Heritage shareholder who may be
deemed to be an "affiliate" of Texas Heritage or Jefferson for purposes of Rule
145 under the Securities Act. The Merger Agreement provides that each such
affiliate will enter into an agreement with Jefferson providing that such
affiliate will not transfer any shares of Jefferson Common received in the
Merger except in compliance with the Securities Act. This Proxy
Statement/Prospectus does not cover resales of shares of Jefferson Common
received by any person who may be deemed to be an affiliate of Texas Heritage.
Persons who may be deemed to be affiliates of Texas Heritage generally include
individuals who, or entities which, control, are controlled by or are under
common control with Texas Heritage and will include directors and certain
executive officers of Texas Heritage and may include principal shareholders of
Texas Heritage.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of management and the Board of Directors of Texas Heritage
may be deemed to have interests in the Merger in addition to their interests as
shareholders of Texas Heritage generally. For information about the percentage
of Texas Heritage Common owned by the directors and executive officers of Texas
Heritage, see "INFORMATION ABOUT TEXAS HERITAGE -- Security Ownership of Certain
Beneficial Owners and Management." None of the directors or executive officers
of Texas Heritage would own, on a pro forma basis giving effect to the Merger,
more than 1% of the issued and outstanding shares of Jefferson Common.
Insurance; Indemnification. The Merger Agreement provides that for a period
of three years following the Effective Time, Jefferson shall cause First Federal
to continue Texas Heritage's directors' and officers' liability insurance
coverage for the benefit of its current directors and officers to the extent
that such coverage is obtainable for an aggregate premium not to exceed 150% of
the annual premium presently being paid by Texas Heritage. The Merger Agreement
also provides that for a period of six years after the Effective Time, Jefferson
will cause First Federal, as the surviving corporation in the Merger, or any
35
<PAGE>
successor of First Federal, to indemnify the present directors, officers,
employees and agents of Texas Heritage against any liability arising out of
actions occurring prior to the Effective Time, to the maximum extent such
indemnification is required under federal law and regulations applicable to
federally chartered thrifts, including provisions relating to advances of
expenses incurred in the defense of any action or suit.
Employee Benefits. The Merger Agreement contains certain provisions
regarding employee benefits which are described under "THE MERGER -- Effect on
Employee Benefit Plans."
Advisory Directors. Pursuant to the terms of the Merger Agreement, each
director of Texas Heritage may, at his option, become an advisory director of
First Federal for a period of three years beginning upon consummation of the
Merger with respect to the branches of First Federal attributable to Texas
Heritage. Except as described in the following paragraphs, each such advisory
director will receive, during such three-year period, a director's fee
commensurate with the fee such director received from Texas Heritage as of May
31, 1996, the date of the Merger Agreement.
Employment Agreement. It is presently anticipated that Joe L. Williams,
President and Chief Executive Officer of Texas Heritage, will continue as an
executive officer and an advisory director of First Federal following the
Merger. On the Closing Date, Mr. Williams will enter into an Employment
Agreement with Jefferson and First Federal, the form of which is attached as an
exhibit to the Merger Agreement attached hereto as Appendix A.
The Employment Agreement provides that First Federal will employ Mr.
Williams as President and Chief Operating Officer of the Dallas/Fort Worth,
Texas division of First Federal for a period of three years, subject to renewals
for additional one year periods thereafter. Pursuant to the terms of the
Employment Agreement, Mr. Williams will receive an initial annual salary of
$125,000 and will be eligible to participate in Jefferson's executive bonus
plan. The annual salary may be increased from time to time as established by the
Board of Directors of First Federal. In addition, Mr. Williams will be entitled
to participate in all employee welfare, benefit, retirement and medical plans of
First Federal, will receive at least four weeks of paid vacation, and will be
provided an automobile for use in the performance of his duties as an officer of
First Federal.
The Employment Agreement provides that, in the event that his employment
with First Federal is lawfully terminated for cause or resignation, Mr. Williams
will not compete with First Federal, in Dallas, Texas, for a period of two years
following such termination.
ACCOUNTING TREATMENT
The Merger will be accounted for by Jefferson under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations", as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time. Income of the
combined company will not include results of operations of Texas Heritage prior
to the Effective Time. See "PRO FORMA FINANCIAL DATA."
36
<PAGE>
MANAGEMENT AND OPERATIONS AFTER THE MERGER
First Federal will be the surviving association in the Merger. Following
consummation of the Merger, the present offices of Texas Heritage will be
operated as branch offices of First Federal. It is not anticipated that the
Board of Directors of Jefferson will be affected as a result of the Merger.
Current members of the Board of Directors of Texas Heritage may, however, at
each member's option, become an advisory director of First Federal for a period
of three years following consummation of the Merger with respect to the branches
of First Federal attributable to Texas Heritage. See "THE MERGER -- Interests of
Certain Persons in the Merger -- Advisory Directors." It is presently
anticipated that the executive officers of Texas Heritage will continue as
officers of First Federal following the Merger.
Mr. Joe L. Williams, President of Texas Heritage, will enter into a three-
year Employment Agreement with Jefferson and First Federal to be executed on the
Closing Date. See "THE MERGER -- Interests of Certain Persons in the Merger --
Employment Agreement." A copy of the form of Mr. Williams' Employment Agreement
is attached as an exhibit to the Merger Agreement attached hereto as Appendix A.
There are no other employment agreements between Jefferson, First Federal and
any other officers of Texas Heritage.
EFFECT ON EMPLOYEE BENEFIT PLANS
The Merger Agreement provides that each employee of Texas Heritage who
becomes an employee of First Federal following the Effective Time will be
entitled, as an employee of a subsidiary of Jefferson, to participate in certain
employee benefit and stock plans that may be in effect for employees of all of
Jefferson subsidiaries, from time to time, on the same basis as similarly
situated employees of other Jefferson subsidiaries, subject to the right of
Jefferson to amend, modify or terminate any such plans or programs in its sole
discretion. Jefferson will, for purposes of measuring periods of time for
vesting and any age or period of service requirements for commencement of
participation with respect to any employee benefit plans in which former
employees of Texas Heritage may participate, credit each such employee with his
or her term of service with Texas Heritage.
JEFFERSON'S DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Jefferson has an automatic Dividend Reinvestment and Stock Purchase Plan
(the "Jefferson DRP") which provides, in substance, for those shareholders of
Jefferson who elect to participate, that dividends on shares of Jefferson Common
and optional cash payments of not less than $100 per payment, up to a maximum of
$10,000 for each quarter, will be invested in shares of Jefferson Common. Shares
of Jefferson Common will be purchased either in the market, in private
transactions or directly from Jefferson. The purchase price for Jefferson Common
purchased in the market or in private transactions will be the actual purchase
price, exclusive of brokerage commissions and expenses. The purchase price of
shares of Jefferson Common purchased directly from Jefferson will equal the
average of the high and low price of Jefferson Common on the dividend payment
date, as reported on Nasdaq, reduced by a discount of at least 2%. After the
Effective Time, shareholders of Texas Heritage who receive Jefferson Common in
the Merger will have the right to participate in the Jefferson DRP.
37
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined condensed balance sheet as of
June 30, 1996, and the unaudited pro forma combined condensed statements of
income for the six month period ended June 30, 1996 and the year ended December
31, 1995, give effect to the Merger based on the historical consolidated
financial statements of Jefferson and its subsidiaries and the historical
financial statements of Texas Heritage under the assumptions and adjustments set
forth in the accompanying notes to the pro forma financial statements.
The pro forma financial statements have been prepared by the management of
Jefferson and Texas Heritage based upon their respective financial statements.
The following pro forma combined condensed balance sheet and condensed
statements of income include:
(a) Jefferson's historical consolidated financial information, which has
been designated herein as "Jefferson."
(b) Texas Heritage's historical financial information, which has been
designated herein as "Texas Heritage." The information for Texas
Heritage, the fiscal year end of which is June 30, has been restated
to conform with Jefferson's fiscal year end of December 31 by adding
the results of Texas Heritage for the six month period ended December
31, 1995 to the six month period ended June 30, 1995.
(c) The combined statements of Jefferson and Texas Heritage, which have
been designated herein as "Jefferson and Texas Heritage Pro Forma."
(d) L&B's historical consolidated financial information, which has been
designated herein as "L&B Financial." Jefferson has entered into a
definitive agreement, dated September 25, 1996, to acquire, for a
combination of cash and shares of Jefferson Common, all of the issued
and outstanding shares of common stock of L&B. The proposed
transaction would be accounted for as a purchase; accordingly,
historical financial data for L&B is included for the current period.
There can be no assurance that the acquisition of L&B will be
completed. See "THE PARTIES -- Jefferson -- Pending Acquisition."
(e) The combined statements of Jefferson, Texas Heritage and L&B which
have been designated herein as "All Entities Pro Forma."
These pro forma statements assume the Merger was consummated at the
beginning of each period presented. The pro forma statements may not be
indicative of the results that actually would have occurred if the Merger had
been in effect on the dates indicated or which may be obtained in the future.
The pro forma financial statements should be read in conjunction with the
historical consolidated financial statements and notes thereto of Jefferson and
Texas Heritage either incorporated by reference herein or contained elsewhere in
this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
38
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Texas Jefferson L&B
Heritage and Texas FINANCIAL ALL
Texas Pro Forma Heritage L&B PRO FORMA ENTITIES
Jefferson Heritage Adjustments Pro Forma FINANCIAL ADJUSTMENTS PRO FORMA
---------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash $ 1,679 $ 1,368 $ $ 3,047 $ 1,386 $ $ 4,433
Interest-bearing deposits 11,879 2,431 3,000 a 12,499 2,565 15,000 a 14,659
(4,772)b (15,405)e
(39)c
Federal funds sold 6,365 465 6,830 4,965 11,795
Investment securities
Available for sale, at fair
value 86,296 490 86,786 7,127 93,913
Held to maturity, at cost 0 503 (12)g 491 8,172 (44)g 8,619
Mortgage-backed securities, net
Available for sale, at fair
value 160,470 3,546 164,016 14,859 178,875
Held to maturity, at cost 0 2,941 (141)g 2,800 34,007 96 g 36,903
Loans receivable, net 805,374 54,155 859,529 66,302 925,831
Real estate acquired through
foreclosure, net 4,278 752 5,030 353 5,383
Stock in Federal Home Loan Bank 15,073 659 15,732 751 16,483
Office properties and
equipment, net 8,491 1,139 9,630 2,268 11,898
Deferred tax asset 0 99 (99)i 0 0 0
Excess of cost over fair value
of assets acquired 14,632 0 5,524 j 20,156 0 5,072 j 25,228
Accrued income and other assets 10,856 687 9,544 b 11,543 1,336 29,310 d 12,879
(9,544)c (29,310)e
--------- ------ ------ --------- ------- ------- ---------
$1,125,393 $69,235 $ 3,461 $1,198,089 $144,091 $ 4,719 $1,346,899
========= ====== ====== ========= ======= ======== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Savings deposits $ 875,823 $60,695 $ $ 936,518 $104,505 $ $1,041,023
Borrowed Money 150,425 2,838 3,000 a 156,263 13,500 15,000 a 184,763
Accrued interest on savings
deposits 261 0 261 106 367
Deferred tax liability 957 0 957 81 1,038
Advance payments by borrowers
for taxes and insurance 7,893 307 8,200 826 9,026
Accrued expenses and other
liabilities 7,791 584 500 h 8,875 387 500 h 9,762
--------- ------ ------ --------- ------- ------- ---------
Total liabilities 1,043,150 64,424 3,500 1,111,074 119,405 15,500 1,245,979
--------- ------ ------ --------- ------- ------- ---------
Stockholders equity:
Preferred stock 0 39 (39)c 0 0 0
Common Stock 45 1,402 (1,402)d 45 17 5 e 50
(17)f
Additional paid-in capital 43,615 1,616 1,976 b 45,591 15,165 13,591 e 59,182
(1,616)d (15,165)f
Retained earnings, subject to
certain restriction 52,148 1,797 (1,797)d 52,148 10,756 (10,756)f 52,148
Unrealized gain (loss) on
assets available for sale (2,777) (43) 43 d (2,777) (118) 118 f (2,777)
Unamortized restricted stock
awards (451) 0 (451) (308) 308 f (451)
Unallocated ESOP shares (5,732) 0 (5,732) (825) (1,500)e (7,232)
825 f
Treasury stock at cost:
288,486 shares at
June 30, 1996 1,809 e
(4,605) 0 2,796 b (1,809) (1) 1 f 0
--------- ------ ------ --------- ------- ------- ---------
Total stockholders'
equity 82,243 4,811 (39) 87,015 24,686 (10,781) 100,920
--------- ------ ------ --------- ------- ------- ---------
$1,125,393 $69,235 $ 3,461 $1,198,089 $144,091 $ 4,719 $1,346,899
========= ====== ====== ========= ======= ======== ==========
</TABLE>
See Notes to Pro Forma Condensed Balance Sheet.
39
<PAGE>
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
The accompanying pro forma condensed consolidated financial statements were
derived from the historical financial records of Jefferson, Texas Heritage and
L&B Financial, Inc. and should be read in conjunction with the historical
financial statements of Jefferson, Texas Heritage and L&B Financial, Inc.
The following is a summary of the pro forma adjustments:
(a) In connection with the proposed acquisitions of Texas Heritage and L&B
Financial, Inc., First Federal will borrow from the Federal Home Loan
Bank of Dallas.
(b) Purchase of Texas Heritage with assumed consideration of twice book
value, excluding preferred stock, paid in $4,772,000 cash and 175,129
Treasury shares of Jefferson Common at an assumed price of $27.25 per
share, which price was the closing price on May 31, 1996, the last
trading date preceeding the signing of the Merger Agreement with Texas
Heritage.
(c) Preferred stock of Texas Heritage is assumed to be redeemed at $1.00
per share.
(d) Elimination of Jefferson's investment in Texas Heritage.
(e) Purchase of L&B Financial, Inc. with assumed consideration of
$15,405,000 in cash and 684,678 shares of Jefferson Common at an
assumed price of $22.50 per share, which price was the closing price
on September 26, 1996, the last trading date preceeding the signing of
the Merger Agreement with L&B Financial. Treasury shares of Jefferson
will be utilized to the extent available and additional shares will be
issued as needed.
(f) Elimination of Jefferson's investment of L&B Financial, Inc.
(g) Adjustment of Texas Heritage's and L&B Financial, Inc.'s investment
securities and mortgage backed securities portfolios to market based
upon estimated market prices as of June 30, 1996. Remaining mark-to-
market adjustments were not deemed material.
(h) Estimates of costs to be incurred for anticipated reorganization and
restructuring expenses related to the acquisitions.
(i) Write off of Texas Heritage's deferred tax debit balance.
(j) The pro forma excess of cost over fair value of net assets acquired
(goodwill) is $5,524,000 and $5,072,000 as of June 30, 1996 for Texas
Heritage and L&B Financial, Inc., respectively.
40
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TEXAS JEFFERSON L&B ALL
HERITAGE AND TEXAS FINANCIAL ENTITIES
TEXAS PRO FORMA HERITAGE L&B PRO FORMA PRO
JEFFERSON HERITAGE ADJUSTMENTS PRO FORMA FINANCIAL ADJUSTMENTS FORMA
----------- -------- ----------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income $ 40,666 $ 3,420 $ (52)a $ 44,050 $ 5,127 $ (12)a $ 49,160
16 b (5)b
Interest expense 26,540 1,681 90 c 28,311 2,942 450 c 31,703
---------- -------- ---------- ---------- ---------- ----------- ----------
Net interest income 14,126 1,739 (126) 15,739 2,185 (467) 17,457
Provision for loan losses 330 68 398 (100) 298
---------- -------- ---------- ---------- ---------- ----------- ----------
Net interest income after
provision for loan losses 13,796 1,671 (126) 15,341 2,285 (467) 17,159
Noninterest income 2,287 476 2,763 131 2,894
Noninterest expense 10,189 1,176 184 d 11,549 1,595 169 d 13,313
---------- -------- ---------- ---------- ---------- ----------- ----------
Income before income taxes 5,894 971 (310) 6,555 821 (636) 6,740
Income tax expense 2,287 335 (45)e 2,577 305 (168)e 2,714
---------- -------- ---------- ---------- ---------- ----------- ----------
Net income $ 3,607 $ 636 $ (265) $ 3,978 $ 516 $(468) $ 4,026
---------- -------- ---------- ---------- ---------- ----------- ----------
Net income available to
common shareholders $ 3,607 $ 636 $ 3,978 $ 516 $ 4,026
========== ======== ========== ========== ==========
Net income per common share $ 0.91 $ 1.13 $ 0.96 $ 0.33 $ 0.84
========== ======== ========== ==========
Average shares outstanding 3,970,123 561,000 4,145,252 1,556,720 4,796,591
========== ======== ========== ========== ==========
</TABLE>
See Notes to Pro Forma Combined Condensed Statement of Income
41
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TEXAS JEFFERSON & L & B
HERITAGE TEXAS FINANCIAL
TEXAS PRO FORMA HERITAGE L&B PRO FORMA ALL ENTITIES
JEFFERSON HERITAGE ADJUSTMENTS PRO FORMA FINANCIAL ADJUSTMENTS PRO FORMA
---------- --------- ----------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 73,044 $ 5,805 $ (104)a $ 78,776 $ 10,173 $ (23)a $ 88,916
Interest expense 31 b (10)b
50,298 2,959 180 c 53,437 4,991 900 c 59,328
---------- -------- ----------- ---------- ---------- ----------- -----------
Net interest income 22,746 2,846 (253) 25,339 5,182 (933) 29,588
Provision for loan losses 367 83 450 0 450
---------- -------- ----------- ---------- ---------- ----------- -----------
Net interest income after
provision for loan losses 22,379 2,763 (253) 24,889 5,182 (933) 29,138
Noninterest income 2,482 597 3,079 (14) 3,065
Noninterest expense 14,955 2,035 368 d 17,358 3,189 338 d 20,885
---------- -------- ----------- ---------- ---------- ----------- -----------
Income before income taxes 9,906 1,325 (621) 10,610 1,979 (1,271) 11,318
Income tax expense
3,536 467 (91)e 3,912 508 (336)e 4,084
---------- -------- ----------- ---------- ---------- ----------- -----------
Net income $ 6,370 $ 858 $ (530) $ 6,698 $ 1,471 $ (935) $ 7,234
========== ======== =========== ========== ========== =========== ===========
Net income available to
common shareholders $ 6,370 $ 858 $ 6,698 $ 1,471 $ 7,234
---------- -------- ---------- ---------- -----------
Net income per common
share $ 1.60 $ 1.53 $ 1.61 $ 0.93 $ 1.50
========== ======== ========== ========== ===========
Average shares outstanding 3,983,317 561,000 4,158,446 1,582,540 4,809,785
========== ======== ========== ========== ===========
</TABLE>
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
(a) Interest income lost at an assumed rate of 5.75% on interest earning assets
used for acquisitions.
(b) Amortization of purchase accounting adjustments on investment and mortgage
backed securities portfolios over a five-year period.
(c) Interest expense on Federal Home Loan Bank advances at an assumed rate of
6.00.
(d) Amortization of goodwill under the straight line method over a period of
15 years.
(e) Tax effect of pro forma adjustments at an assumed effective tax rate of 36%
(goodwill is considered non-deductible).
42
<PAGE>
DESCRIPTION OF JEFFERSON CAPITAL STOCK
The Certificate of Incorporation of Jefferson currently authorizes the
issuance of 20,000,000 shares of common stock, par value $0.01 per share
(previously defined herein as the "Jefferson Common"), and 5,000,000 shares of
preferred stock, par value $0.01 per share, of which 50,000 shares of serial
preferred stock are designated "Junior Participating Preferred Stock, Series E",
stated value $6,000 per share (the "Jefferson Series E Preferred Stock").
As of June 30, 1996, 4,181,563 shares of Jefferson Common were issued
and outstanding, and 50,000 shares of Jefferson Series E Preferred Stock were
reserved for issuance with no shares outstanding.
With respect to the remaining authorized but unissued preferred shares,
Jefferson's Certificate of Incorporation provides that its Board of Directors
may, by resolution, cause such serial preferred shares to be issued from time to
time, in series, and fix the powers, designations, preferences and relative,
participating, optional and other rights and qualifications, limitations and
restrictions of such shares.
The following is a brief description of the terms of the Jefferson Common.
For a discussion of the terms of the Jefferson Series E Preferred Stock, see
"COMPARISON OF SHAREHOLDER RIGHTS -- Shareholder Rights Plan."
JEFFERSON COMMON
Dividend Rights. Jefferson may, from time to time, declare dividends to
the holders of Jefferson Common, who will be entitled to share equally in any
such dividends.
Voting Rights. Each share of Jefferson Common has the same relative rights
and is identical in all respects with every other share of Jefferson Common. The
holders of Jefferson Common possess exclusive voting rights in Jefferson, except
to the extent that shares of serial preferred stock issued in the future may
have voting rights, if any. Each holder of shares of Jefferson Common is
entitled to one vote for each share held of record on all matters submitted to
a vote of holders of shares of Jefferson Common.
Preemptive Rights. Holders of Jefferson Common do not have preemptive
rights with respect to any additional shares of Jefferson Common which may be
issued.
Liquidation Rights. In the event of a liquidation, dissolution or winding
up of Jefferson, each holder of shares of Jefferson Common would be entitled to
receive, after payment of all debts and liabilities of Jefferson, a pro rata
portion of all assets of Jefferson available for distribution to holders of
Jefferson Common. If any serial preferred stock is issued, the holders thereof
may have a priority in liquidation or dissolution over the holders of Jefferson
Common.
Assessment and Redemption. Shares of Jefferson Common are not subject to
call for redemption, and the outstanding shares of Jefferson Common, when issued
and upon receipt by Jefferson of the full purchase price therefor, will be fully
paid and nonassessable.
Transfer Agent and Registrar. Boatmen's Trust Company, St. Louis,
Missouri, is the transfer agent and registrar for the Jefferson Common.
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SERIAL PREFERRED STOCK
The Board of Directors of Jefferson is authorized to issue serial preferred
stock and to fix and state voting powers, designations, preferences or other
special rights of such shares and the qualifications, limitations and
restrictions thereof. The serial preferred stock may rank prior to the Jefferson
Common as to dividend rights or liquidation preferences, or both, and may have
full or limited voting rights. The Board of Directors of Jefferson has no
present intention to issue any of the serial preferred stock.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of holders of shares of Jefferson Common are governed by the
General Business Corporation Law of Delaware (the "Delaware Law"), the state of
Jefferson's incorporation, and by Jefferson's Certificate of Incorporation,
Bylaws and other corporate documents of Jefferson. The rights of holders of
shares of Texas Heritage Common are governed by the Texas Savings and Loan
Association Act (the "Savings and Loan Act"), the Texas Business Corporation
Act, Texas Heritage's Articles of Association, Bylaws and other corporate
documents of Texas Heritage. The rights of holders of shares of Jefferson Common
differ in certain respects from the rights which such holders would have as
shareholders of Texas Heritage. A summary of the material differences between
the respective rights of holders of Jefferson Common and Texas Heritage Common
is set forth herein.
SHAREHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
Business Combinations. The Delaware Law provides that a merger or
consolidation of domestic corporations requires the approval of holders of a
majority of the outstanding stock of the corporation entitled to vote thereon.
Jefferson's Certificate of Incorporation provides that any "Business
Combination" (as defined herein) will require the affirmative vote of the
holders of not less than 80% and at least a majority of the outstanding shares
entitled to vote. The term "Business Combination" means: (i) any merger or
consolidation of, with or into a Related Person (as defined herein); (ii) any
sale, lease, exchange, transfer or other disposition, including without
limitation, a mortgage, or any other capital device, of all or any Substantial
Part (as defined herein) of the assets of Jefferson (including without
limitation any voting securities of a subsidiary) or of a subsidiary, to a
Related Person (iii) any merger or consolidation of a Related Person with or
into Jefferson or a subsidiary of Jefferson; (iv) any sale, lease, exchange,
transfer or other disposition of all or any Substantial Part of the assets of a
Related Person to Jefferson or a subsidiary of Jefferson; (v) the issuance of
any securities of Jefferson or a subsidiary of Jefferson to a Related Person;
(vi) the acquisition by Jefferson or a subsidiary of Jefferson of any securities
of a Related Person; (vii) any reclassification of Jefferson Common or any
recapitalization involving Jefferson Common; and (viii) any agreement, contract
or other arrangement providing for any of the transactions described in Article
XV of the Certificate of Incorporation. The term "Related Person" means and
includes (i) any individual, corporation, partnership or other person or entity
which together with its affiliates beneficially owns in the aggregate 10% or
more of the outstanding shares of Jefferson Common; and (ii) any affiliate of
any such individual, corporation, partnership or other person or entity. Without
limitation, any shares of Jefferson Common which any Related Person has the
right to acquire pursuant to any agreement, or upon exercise or conversion
rights, warrants or options, or otherwise, shall be deemed beneficially owned by
such Related Person. The Term "Substantial Part" means more than 25% of the
total assets of Jefferson, as of the end of its most recent fiscal year ending
prior to the time the determination is made.
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The Savings and Loan Act provides that a Texas savings association may
merge or consolidate with another association provided that merger or
consolidation is approved by a majority of the total vote the members are
entitled to cast. Approval may be voted at either an annual meeting or at a
special meeting called to consider such action. Texas Heritage's Articles of
Association and Bylaws do not contain any specific provision relating to the
vote necessary to effect a business combination or merger.
Because of the differences between Jefferson's Certificate of Incorporation
and the Savings and Loan Act, it may be more difficult for Jefferson's
shareholders to cast sufficient votes to approve certain business combinations
than it is for shareholders of Texas Heritage.
Removal of Directors. The Certificate of Incorporation of Jefferson
provides that any director or the entire board of directors of Jefferson may be
removed, at any time, but only for cause and only by the affirmative vote of the
holders of at least 80% of the outstanding shares of capital stock of Jefferson
entitled to vote generally in the election of directors cast at a meeting of the
stockholders called for that purpose. Notwithstanding the foregoing, whenever
the holders of any one or more series of preferred stock of Jefferson shall have
the right, voting separately as a class, to elect one or more directors of
Jefferson, the removal provisions described above do not apply with respect to
the directors elected by such holders of preferred stock.
The Texas Act permits the removal of directors only by specific provision
in the articles of incorporation or bylaws at a meeting specifically called for
that purpose, which such removal is approved by not less than a majority of
shareholders then entitled to vote at any election of directors. Neither Texas
Heritage's Articles of Association nor Bylaws address the ability of
shareholders to remove a director either with or without cause from the Board
of Texas Heritage.
Because the Articles of Association and Bylaws of Texas Heritage do not
address the ability of shareholders of Texas Heritage to remove a director
either with or without cause, it may be easier for shareholders of Jefferson
to remove a director.
Amendments to Certificate of Incorporation. The Delaware Law provides that
the certificate of incorporation of a Delaware corporation may be amended only
if first approved by the corporation's board of directors and thereafter by a
majority of the outstanding stock entitled to vote thereon. The Delaware Law
also provides that if a greater vote is specified in the certificate of
incorporation, then amending such provision in the certificate of incorporation
likewise requires such a greater than majority shareholder vote.
The Certificate of Incorporation of Jefferson provides that the Corporation
reserves the right to repeal, alter, amend or rescind any provision contained in
its Certificate in the manner now or hereafter prescribed by law, and all rights
conferred on stockholders therein are granted subject to this reservation. The
Certificate of Incorporation of Jefferson further provides that the affirmative
vote of the holders of not less than 80% of the outstanding shares of capital
stock of Jefferson entitled to vote generally in the election of directors shall
be required to amend or repeal certain provisions of Jefferson's Certificate
generally related to business combinations and anti-takeover protections.
The Savings and Loan Act provides that a Texas savings association may
amend its articles of incorporation by resolution adopted by a majority vote of
shareholders attending an annual meeting or special meeting called for that
purpose. Any such amendment may not take effect before it is filed and approved
by the Texas Savings and Loan Commissioner.
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The Delaware Corporate Law and provisions of Jefferson's Certificate of
Incorporation make it more difficult for the shareholders of Jefferson to amend
the Certificate of Incorporation than it is for the shareholders of Texas
Heritage to amend its Articles of Association.
Amendments to Bylaws. Jefferson's Certificate of Incorporation provides
that the Board of Directors of Jefferson is expressly authorized to adopt,
repeal, alter, amend and rescind the bylaws of Jefferson by a vote of two-thirds
of the Board of Directors. In addition, the bylaws may be repealed, altered,
amended or rescinded by the vote of the holders of not less than 80% of the
outstanding shares of capital stock of Jefferson entitled to vote generally in
the election of directors (considered for this purpose as one class) cast at a
meeting of the stockholders called for that purpose (provided that notice of
such proposed adoption, repeal, alteration, amendment or rescission is included
in the notice of such meeting).
The Savings and Loan Act provides that any association may, by resolution
adopted by a majority vote of its shareholders at any annual meeting or any
special meeting called for such purpose, amend its bylaws in any manner not
inconsistent with the Savings and Loan Act. Any such amendment may not take
effect before it is filed with and approved by the Texas Savings and Loan
Commissioner.
Texas Heritage's Bylaws provide that the bylaws may be amended at any
regular or special meeting of the members by vote of a majority of the members
with voting rights represented at such meeting in person or by proxy, due notice
of any special meeting having been first given.
Because of the differences between Jefferson's Certificate of Incorporation
and Texas Heritage's Bylaws, it is more difficult for shareholders of Jefferson
to amend its bylaws.
VOTING RIGHTS
In accordance with Delaware law, and as provided in Jefferson's Bylaws,
each outstanding share of Jefferson is entitled to one vote on each matter voted
on at a meeting of shareholders. A shareholder of Jefferson may vote in person
or by proxy. Directors of Jefferson are elected by a plurality of the votes
cast, and shareholders of Jefferson are not entitled to cumulative voting in the
election of directors. All other matters voted on by stockholders are determined
by a majority of the stockholder votes cast, except those matters specifically
requiring a greater than majority vote pursuant to the Delaware Law or
Jefferson's Certificate of Incorporation.
The Savings and Loan Act provides that the basis for computing the number
of votes which a shareholder shall be entitled to cast may be dictated by the
bylaws.
Texas Heritage's Bylaws provide that only the holders of Capital Stock of
Texas Heritage will have the right to vote. Each holder of Capital Stock is
entitled to cast one vote for each share of the Capital Stock of Texas Heritage
owned. Voting may be by proxy, which shall conform with the requirements of the
Insurance Regulations. Texas Heritage's Bylaws specifically prohibit cumulative
voting.
The rights of shareholders of Jefferson and those of Texas Heritage are not
materially different in these respects.
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN CONSENT
Jefferson's Certificate of Incorporation provides that special meetings of
stockholders of the Corporation for any purposes may be called at any time by
the Board of Directors of Jefferson or by a
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committee of the Board of Directors which has been duly designated by the Board
of Directors and whose powers and authorities, as provided in a resolution of
the Board of Directors or in the bylaws of Jefferson, include the power and
authority to call such meetings, but such special meetings may not be called by
any other person or persons. Neither Jefferson's Certificate of Incorporation
nor its Bylaws specifically authorize shareholder action by unanimous written
consent of the shareholders.
The Savings and Loan Act provides that special meetings may be called as
provided in the bylaws. Texas Heritage's Bylaws provide that special meetings
of the shareholders may be called by the president and shall be called by the
president or secretary on the request, in writing, or by vote, of a majority of
the directors.
The Texas Act also provides that unless otherwise provided for in the
articles of incorporation, any action required or permitted to be taken at a
meeting of shareholders may be taken without a meeting if a consent, in writing,
setting forth the action taken is signed by the holders of all shares entitled
to vote on the subject matter. Under the Texas Act, the articles of
incorporation may also specifically allow for such actions to be taken by
written consent of the shareholders having not less than the minimum number of
votes necessary to authorize such action at a meeting at which all shares
entitled to vote thereon are present.
The rights of shareholders of Jefferson and those of Texas Heritage are not
materially different in these respects.
NOTICE OF SHAREHOLDER NOMINATIONS OF DIRECTORS AND PROPOSALS
The Delaware Law does not contain any specific provisions regarding notice
of shareholders' nominations of directors or proposals.
Jefferson's Certificate of Incorporation provides that nominations for the
election of directors and proposals for any new business to be taken up at any
annual or special meeting of stockholders may be made by the Board of Directors
of Jefferson or by any stockholder of Jefferson entitled to vote generally in
the election of directors. In order for a stockholder of Jefferson to make any
such nominations and/or proposals, he or she shall give notice thereof in
writing, delivered or mailed to the Secretary of Jefferson not less than thirty
days nor more than sixty days prior to any such meeting provided, however, that
if less than forty days' notice of the meeting is given to stockholders, such
written notice shall be delivered or mailed to the Secretary of Jefferson not
later than the close of the tenth day following the day on which notice of the
meeting was mailed to stockholders.
Texas Heritage's Articles of Association and Bylaws do not contain
provisions comparable to those described above.
SHAREHOLDER RIGHTS PLAN
On August 17, 1994, the Board of Directors of Jefferson declared a dividend
of one Preferred Share Purchase Right (a "Right") for each outstanding share of
Jefferson Common. The dividend was payable on September 7, 1994 (the "Record
Date") to the stockholders of record on that date. Each Right entitles the
registered holder to purchase from Jefferson one one-hundredth share of
Jefferson Series E Preferred Stock at a price of $60.00 per one one-hundredth
Jefferson Series E Preferred Stock (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between Jefferson and Boatmen's Trust
Company, as Rights Agent.
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Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") have acquired beneficial ownership of 19.9% or more of the outstanding
shares of Jefferson Common or (ii) 10 business days (or such later date as may
be determined by action of the Board of Directors prior to such time as any
person becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 19.9% or more of such outstanding shares of Jefferson Common (the
earlier of such dates being called the "Distribution Date"), the Rights are
evidenced, with respect to any of the certificates of Jefferson Common, by such
certificate.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Jefferson Common. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
certificates representing shares of Jefferson Common issued after the Record
Date, upon transfer or new issuance of Jefferson Common will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date (or
earlier redemption or expiration of the Rights), the surrender for transfer of
any certificates for Jefferson Common, outstanding as of the Record Date, even
without such notation or a copy of this Summary of Rights being attached
thereto, will also constitute the transfer of the Rights associated with the
Jefferson Common represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Jefferson
Common as of the close of business on the Distribution Date and such separate
Right Certificate alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on August 17, 2004 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed by
Jefferson, in each case, as described below.
The Purchase Price payable, and the number of Jefferson Series E Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Jefferson Series E Preferred Stock, (ii) upon the grant to holders of Jefferson
Series E Preferred Stock of certain rights or warrants to subscribe for or
purchase shares of Jefferson Series E Preferred Stock at a price, or securities
convertible into shares of Jefferson Series E Preferred Stock with a conversion
price, less than the then current market price of Jefferson Series E Preferred
Stock or (iii) upon the distribution to holders of Jefferson Series E Preferred
Stock of evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings or dividends payable on
Jefferson Common) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights and the number of one one-hundredths of a
share of Jefferson Series E Preferred Stock issuable upon exercise of each Right
are also subject to adjustment in the event of a stock split on Jefferson Common
or a stock dividend on Jefferson Common payable in Jefferson Common or
subdivisions, consolidations or combinations of Jefferson Common occurring, in
any such case, prior to the Distribution Date.
Shares of Jefferson Series E Preferred Stock purchasable upon exercise of
the Rights will not be redeemable. Each share of Jefferson Series E Preferred
Stock will be entitled to a minimum preferential quarterly dividend payment of
$25.00 per share, but will be entitled to an aggregate dividend of 100 times the
dividend declared per share of Jefferson Common. In the event of liquidation,
the holders of Jefferson Series E Preferred Stock will be entitled to a minimum
preferential liquidation payment of $6,000.00 per share, but will be entitled to
an aggregate payment of 100 times the payment made per share of Jefferson
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Common. The Jefferson Series E Preferred Stock do not have general voting
rights. Finally, in the event of any merger, consolidation or other transaction
in which shares of Jefferson Common are exchanged, each share of Jefferson
Series E Preferred Stock will be entitled to receive 100 times the amount
received per share of Jefferson Common. These rights are protected by customary
anti-dilution provisions.
Because of the nature of the dividend and liquidation rights on Jefferson
Series E Preferred Stock, the value of the one one-hundredth interest in a share
of Jefferson Series E Preferred Stock purchasable upon exercise of each Right
should approximate the long term value of one share of Jefferson Common.
In the event that Jefferson is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event that (i) any
person or group of affiliated or associated persons becomes the beneficial owner
of 19.9% or more of the outstanding shares of Jefferson Common or (ii) during
such time as there is an Acquiring Person, there shall be a reclassification
of securities or a recapitalization or reorganization of Jefferson or other
transaction or series of transactions involving Jefferson which has the effect
of increasing by more than 1% of the proportionate share of the outstanding
shares of any class of equity securities of Jefferson or any of its subsidiaries
beneficially owned by the Acquiring Person, proper provision shall be made so
that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the right
to receive upon exercise that number of shares of Jefferson Common having a
market value of two times the exercise price of the Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 19.9% or more of the outstanding
shares of Jefferson Common and prior to the acquisition by such person or group
of 50% or more of the outstanding shares of Jefferson Common, the Board of
Jefferson may exchange the Rights (other than Rights owned by such person or
group which have become void), in whole or in part, at an exchange ratio of one
share of Jefferson Common per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Jefferson Series E Preferred Stock
will be issued (other than fractions which are integral multiples of one one-
hundredth of a share of Jefferson Series E Preferred Stock and which may, at the
election of Jefferson, be evidenced by depository receipts) and in lieu thereof,
an adjustment in cash will be made based on the market price of Jefferson Common
on the last trading day prior to the date of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 19.9% or more of the outstanding
shares of Jefferson Common, the Board of Directors of Jefferson may redeem the
Rights in whole, but not in part, at a price of $0.01 per Right (the "Redemption
Price"). The redemption of the Rights may be made effective at such time on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders
of Rights will be to receive the Redemption Price.
In addition, if a bidder who does not beneficially own more than 1% of the
shares of Jefferson Common and all other voting shares of Jefferson (together
the "Voting Shares") (and who has not within the past year owned in excess of 1%
of the Voting Shares and, at a time the bidder held such greater than
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1% stake, disclosed, or caused the disclosure of, an intention which relates to
or would result in the acquisition or influence of control of Jefferson)
proposes to acquire all of the Voting Shares for cash at a price which a
nationally recognized investment banker selected by such bidder states in
writing is fair, and such bidder has obtained written financing commitments (or
otherwise has financing) and complies with certain procedural requirements, then
Jefferson, upon the request of the bidder, will hold a special meeting of
shareholders to vote on a resolution requesting the Board of Directors to accept
the bidder's proposal. If a majority of the outstanding shares entitled to vote
on the proposal vote in favor of such resolution, then for a period of 60 days
after such meeting, the Rights will be automatically redeemed at the Redemption
Price immediately prior to the consummation of any tender offer for all of such
shares at a price per share in cash equal to or greater than the price offered
by such bidder; provided, however, that no redemption will be permitted or
required after the acquisition by any person or group of affiliated or
associated persons of beneficial ownership of 19.9% or more of the outstanding
shares of Jefferson Common. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of
Jefferson without the consent of the holders of the Rights, including an
amendment to lower certain thresholds described above to not less than the
greater of (i) any percentage greater than the largest percentage of the
outstanding shares of Jefferson Common then known to Jefferson to be
beneficially owned by any person or group of affiliated or associated persons
or (ii) 10%, except that from and after such time as any person becomes an
Acquiring Person no such amendment may adversely affect the interests of the
holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of Jefferson, including, without limitation, the right
to vote or to receive dividends.
The Rights Plan has certain anti-takeover effects. The Rights may cause
substantial dilution to a person or entity that attempts to acquire Jefferson
on terms not approved by the Board of Directors.
Texas Heritage does not have a shareholder rights plan.
DISSENTERS' RIGHTS
The Delaware Law provides that, unless the certificate of incorporation of
a Delaware corporation provides otherwise, no dissenters' appraisal rights are
available to holders of shares that are listed on a national securities exchange
or designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, or are held of record
by more than 2,000 stockholders. However, appraisal rights are available under
the Delaware Law where stockholders of a corporation are required to accept and
exchange for their shares (i) shares of stock of the corporation surviving or
resulting from a merger or consolidation, or depository receipts in respect
thereof; (ii) shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers or held of record by more than 2,000 holders; (iii) cash in lieu of
fractional shares or fractional depository receipts described in (i) or (ii)
above; or (iv) any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts described
in the foregoing items (i), (ii), and (iii). Jefferson's Certificate of
Incorporation does not contain provisions concerning this matter.
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Under the Texas Act, a shareholder of a Texas corporation is entitled
to receive payments for the fair value of his or her shares under certain
circumstances. See "THE MERGER -- Dissenter's Rights."
TAKEOVER STATUTES
Section 203 of the Delaware Law, in general, prohibits a Delaware
corporation (such as Jefferson) from engaging in a Business Combination (as
defined in Section 203) with an Interested Stockholder (as defined in Section
203) for a period of three years following the date that such person became an
Interested Stockholder unless (a) prior to the date that such person became an
Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction that resulted in the
stockholder becoming an Interested Stockholder, (b) upon consummation of the
transaction that resulted in the stockholder becoming an Interested Stockholder,
the Interested Stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding stock
held by directors who are also officers of the corporation and employee stock
plans that do not provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, (c) the business combination is proposed prior to the consummation or
abandonment of and subsequent to the public announcement of a proposed
transaction which (i) constitutes a merger or consolidation of the corporation,
(ii) is with or by a person who either was not an Interested Stockholder during
the previous three years or who became an Interested Stockholder with the
approval of the corporation's board of directors and (iii) is approved or not
opposed by a majority of the board of directors then in office who were
directors prior to any person becoming an Interested Stockholder during the
previous three years, or (d) on or subsequent to the date such person became an
Interested Stockholder, the Business Combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders, and
not by written consent, by the affirmative vote of the holders of at least
66-2/3% of the outstanding voting stock of the corporation not owned by the
Interested Stockholder. A copy of Section 203 of the Delaware Law has been
annexed as Appendix B hereto.
The Texas Act does not contain a takeover statute or a "control share
acquisition" provision.
Because of the differences between the Delaware Law and the Texas Act, it
is more difficult to effect an unsolicited business combination with Jefferson
than it is to effect an unsolicited business combination with Texas Heritage.
INDEMNIFICATION
The Delaware Law grants Delaware corporations broad indemnification powers,
including the authority to provide forms of indemnification set forth by the
Delaware Law. The Certificate of Incorporation of Jefferson provides
indemnification for each person who was or is made a party or threatened to be
made a party to or is otherwise involved in any proceeding by reason of the fact
that he or she is or was a director or officer of Jefferson or is or was serving
or has agreed to serve at the request of Jefferson as a director, officer,
employee, agent partner or trustee of another corporation. In derivative suits,
indemnification covers all expenses including attorneys' fees, but excludes
amounts paid in settlement actually and reasonably incurred by him in connection
with the defense or settlement of the action or suit. A person shall be
indemnified in a derivative suit only if (i) he is successful on the merits or
otherwise; or (ii) he acted in good faith in the transaction which is the
subject of the suit or action, and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation. In non-derivative
suits, indemnification covers amounts actually and reasonably incurred by him in
connection with the defense or settlement of the non-derivative suit, including
but not limited to (i) expenses (including attorneys' fees), (ii) amounts paid
in settlement, (iii) judgments, and (iv) fines. A determination that the
standard for
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indemnification has been met may be made by (i) the board of directors by a
majority vote of a quorum consisting of directors of the corporation who were
not parties to the action, suit or proceeding; or (ii) independent legal counsel
(appointed by a majority of the disinterested directors of the corporation,
whether or not a quorum) in a written opinion; or (iii) the stockholders of the
corporation. Furthermore, Jefferson will pay in advance any expenses (including
attorneys' fees) which may become subject to indemnification if the board of
directors authorizes the specific payment and the person receiving the payment
undertakes in writing to repay the same, if it is ultimately determined that he
is not entitled to indemnification by Jefferson. Jefferson's Certificate of
Incorporation also authorizes Jefferson to maintain insurance to protect
Jefferson and any director, officer, employee or agent of Jefferson or another
corporation against any expense, liability or loss, whether or not Jefferson
would have the power to indemnify such person against such expense, liability or
loss under its Certificate of Incorporation and the Delaware Law.
The Texas Act authorizes corporations to indemnify any party to any
threatened, pending or completed action, suit or proceeding who is or was a
director, officer, employee or agent of the corporation and any person who is or
was serving at the request of the corporation as director, officer, partner,
venturer, proprietor, trustee, employee or agent of another corporation or other
enterprise, if such individual acted in good faith and reasonably believed (i)
in the case of conduct in his or her official capacity as a director, that his
or her conduct was in the corporation's best interests, and (ii) in all other
cases, that his or her conduct was at least not opposed to the corporation's
best interest. In the case of any criminal proceeding, the individual must have
no reasonable cause to believe that his or her conduct was unlawful in order for
the corporation to indemnify him or her. The Texas Act provides that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged liable where the defendant's conduct
was judged to be willful or intentional misconduct in the performance of his or
her duty to the corporation, and will be limited to reasonable expenses actually
incurred in connection with the proceeding where the defendant is found liable
to the corporation or liable for receipt of improper personal benefits. Whether
such director, officer, employee or agent acted properly is determined by a
majority of a quorum of non-party directors, independent legal counsel opinion
or by non-party shareholders. A corporation may pay expenses incurred by a
director or officer before final disposition of an action or proceeding, but the
director or officer must repay such expenses if it is determined that he or she
was not entitled to indemnification. The corporation may purchase insurance on a
director, officer, employee or agent for liability asserted against him or her
whether or not the corporation could indemnify that party.
Texas Heritage's Bylaws provide that Texas Heritage will indemnify any
director or officer or former director or officer of Texas Heritage against
expenses (including the amount of judgments and the amount of settlements made
with view to the curtailment of costs of litigation, other than amounts paid to
Texas Heritage itself) actually and necessarily incurred by him or her in
connection with the defense of any action, suit, or proceeding in which he or
she is made a party by reason of being or having been such director or officer.
However, such person will not be indemnified in a suit or proceeding in which he
or she is adjudged to be liable for negligence or misconduct in performance of
his or her duty. Such indemnification will not be deemed exclusive of any other
rights to which such director or officer may be entitled, under any agreement,
vote of shareholders, or otherwise. The indemnity will not apply with respect to
a compromise settlement of any such action or suit or proceeding unless the
settlement is approved by the Board of Directors of Texas Heritage and the
Savings and Loan Commissioner of Texas. A blanket indemnity bond, as required by
law, covering all officers, employees, and any director of Texas Heritage is
maintained by Texas Heritage.
The rights of shareholders of Jefferson and those of Texas Heritage are not
materially different in these respects.
52
<PAGE>
LIMITATION ON DIRECTORS' LIABILITY
Under Jefferson's Certificate of Incorporation, a director of Jefferson
will not be personally liable to Jefferson or its stockholders for monetary
damages resulting from a breach of his fiduciary duty as a director, except: (i)
for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions that are not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
The Texas Act provides that a Texas corporation may include any provision
in its articles of incorporation which is not inconsistent with law, including
any provision which under the Texas Act is required or permitted to be set forth
in the bylaws which the incorporators elect to set forth in the articles of
incorporation for the regulation of the internal affairs of the corporation. The
Texas Miscellaneous Corporation Laws Act provides that a corporation may limit
the liability of its directors by provision in its articles of incorporation;
provided, however, such provision may not limit the liability of a director to
the extent the director is found liable for (i) breach of his or her duty of
loyalty to the corporation or it shareholders, (ii) an act or omission not in
good faith that constitutes a breach of duty or an act or omission that involves
intentional misconduct or a knowing violation of the law, (iii) a transaction
from which the director received an improper benefit, or (iv) an act or omission
for which liability is expressly provided for by statute.
CONSIDERATION OF NON-SHAREHOLDER INTERESTS
The Delaware Law does not address Delaware director's ability to consider
non-shareholder interests when discharging his or her duties. Delaware case law,
however, provides that in discharging his or her responsibilities, a director of
a Delaware corporation must limit consideration of non-shareholder interests,
and that a board of directors of a Delaware corporation may consider non-
shareholder interests only if those interests are rationally related to benefits
accruing to the shareholders of the Delaware corporation. Revlon, Inc. v.
MacAndrews & Forbes Holding, Inc., 506 A.2d 173 (Del. 1986). Delaware case law
further provides that when a board of directors of a Delaware corporation
decides to sell a Delaware corporation, concern for non-shareholder interests is
inappropriate. Id.
The Certificate of Incorporation of Jefferson grants the Board of Directors
of Jefferson broader discretion than that addressed by Delaware case law.
Specifically, Jefferson's Certificate of Incorporation provides that the Board
of Directors of Jefferson may, when evaluating a business combination or any
tender or exchange offer, give due consideration to all relevant factors
including, without limitation, social and economic effects of acceptance of such
offers on present and future customers and employees of Jefferson and
subsidiaries of Jefferson, the communities in which Jefferson and its
subsidiaries operate or are located and the ability of Jefferson and its
subsidiaries to fulfill their respective corporate objectives.
The Texas Act does not contain provisions comparable to those described
above.
These differences do not materially affect the rights of shareholders of
either organization.
53
<PAGE>
INFORMATION ABOUT TEXAS HERITAGE
BUSINESS OF TEXAS HERITAGE
Texas Heritage is a state stock institution, chartered in Texas, with
offices in Rowlett, Garland, Bedford and Rockwall, Texas. Texas Heritage's
primary business is that of providing deposit services and loans, with an
emphasis in construction lending, to customers in the North Texas area.
RECENT DEVELOPMENTS
Effective September 30, 1996, President Clinton signed legislation that
recapitalizes the S.A.I.F. by instituting a one-time special assessment on all
deposits insured by S.A.I.F. The special assessment was computed at 0.657% of
all deposits held by Texas Heritage as of March 31, 1995, and must be paid by
November 29, 1996. The special assessment on the deposits held by Texas
Heritage, which was recognized as of September 30, 1996, was approximately $285
thousand pre-tax. The financial impact of the special assessment is expected to
be offset over the next few years as a result of the anticipated reduction of
the assessment rate for deposits insured by the S.A.I.F. from 0.23% to
approximately 0.064%, effective January 1, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF TEXAS HERITAGE
This section presents an analysis of the financial condition and results of
operations of Texas Heritage for the years ended June 30, 1996, 1995 and 1994.
This review should be read in conjunction with the financial statements, notes
to financial statements and financial data presented elsewhere in this document.
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
RESULTS OF OPERATIONS
Net income for the years ended June 30, 1996, 1995 and 1994 was $1,101,640,
$702,417 and $785,478, respectively. Net income per share for such periods was
$1.96, $1.25 and $1.40, respectively. The decrease in net income from 1994 to
1995 was due primarily to a change in accounting principle (the adjustment) at
June 30, 1994, which increased net income $235,000. Excluding the adjustment,
there was an increase in net income from 1994 to 1995, due primarily to an
increase in interest earning assets. The increase in net income from 1995 to
1996 was due to an increase in net interest margin. Net income for each of the
three years, as a percent of average assets and average equity, was:
<TABLE>
<CAPTION>
Return on Average Return on Average Equity
Assets June 30,
June 30,
---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------
Net income 1.71% 1.29% 1.89% 25.96% 20.08% 26.41%
</TABLE>
Dividends declared and paid during the years ended June 30, 1995 and 1994
were $150,000 and $142,200, respectively. No dividends were declared or paid for
the year ended June 30, 1996.
Following is an analysis of the primary components of net income for the
years ended June 30, 1996, 1995 and 1994.
NET INTEREST INCOME
The major source of revenue of Texas Heritage is net interest income. Net
interest income is the difference between gross interest and fees earned on
earning assets, primarily loans and investment securities, and interest paid on
deposits and borrowed funds. Net interest income is affected by the interest
rate earned and paid, and by volume changes, principally in loans, investment
securities, deposits and borrowed funds. The following tables present, for the
periods indicated, the total dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on
54
<PAGE>
average interest-bearing liabilities, expressed both in dollars and rates. No
tax equivalent adjustments were made. All average balances are monthly average
balances. Non-accruing loans have been included in the table as loans carrying a
zero yield.
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------
PERCENT OF INTEREST AVERAGE
AVERAGE TOTAL INCOME/ YIELD/
BALANCE ASSETS EXPENSE RATE
----------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net $49,797,345 77.08% $6,065,315 12.18%
Taxable investment securities 9,089,037 14.07 529,626 5.83
FHLB deposits 2,429,825 3.76 119,621 4.92
Interest earning deposits with banks 220,769 0.34 11,373 5.15
----------- --------- ----------
Total interest earning assets 61,536,976 95.25 6,725,935 10.93
----------- --------- ----------
Non-interest earning assets:
Cash and due from banks 531,756 0.82
Other assets 2,532,258 3.93
----------- ---------
Total assets $64,600,990 100.00%
=========== =========
Interest-bearing liabilities:
Interest bearing demand and NOW
deposits $ 5,023,891 7.78% 127,144 2.53
Savings deposits 1,393,258 2.16 38,053 2.73
Time deposits 46,247,892 71.59 2,757,740 5.96
Borrowings-FHLB advances 5,551,142 8.59 320,219 5.77
----------- --------- ----------
Total interest-bearing liabilities 58,216,183 90.12 3,243,156 5.57
----------- --------- ----------
Non-interest bearing liabilities:
Non-interest bearing deposits 1,239,226 1.92
Other liabilities 901,442 1.39
Stockholders' equity 4,244,139 6.57
----------- ---------
Total liabilities and
stockholders' equity $64,600,990 100.00%
=========== =========
Net interest income $3,482,779
==========
Interest rate spread 5.36%
Net interest margin 5.66%
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1995
--------------------------------------------------
PERCENT OF INTEREST AVERAGE
AVERAGE TOTAL INCOME/ YIELD/
BALANCE ASSETS EXPENSE RATE
----------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net $39,881,919 73.26% $4,579,429 11.48%
Taxable investment securities 10,219,939 18.77 568,656 5.56
FHLB deposits 1,607,617 2.95 79,679 4.96
Interest earning deposits with banks 406,923 0.75 21,358 5.25
----------- ----- ----------
Total interest earning assets 52,116,398 95.73 5,249,122 10.07
----------- ----- ----------
Non-interest earning assets:
Cash and due from banks 287,308 0.53
Other assets 2,035,981 3.74
----------- ------
Total assets $54,439,687 100.00%
=========== ======
Interest-bearing liabilities:
Interest bearing demand and NOW deposits $ 5,261,993 9.67% 134,979 2.57
Savings deposits 1,260,594 2.31 34,902 2.77
Time deposits 32,637,198 59.95 1,680,009 5.15
Borrowings-FHLB advances 10,189,139 18.72 571,890 5.61
----------- ------ ----------
Total interest-bearing liabilities 49,348,924 90.65 2,421,780 4.91
----------- ------ ----------
Non-interest bearing liabilities:
Non-interest bearing deposits 852,357 1.56
Other liabilities 740,539 1.36
Stockholders' equity 3,497,867 6.43
----------- ------
Total liabilities and stockholders' equity $54,439,687 100.00%
=========== ======
Net interest income $2,827,342
==========
Interest rate spread 5.16%
Net interest margin 5.43%
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1994
---------------------------------------------------
PERCENT OF INTEREST AVERAGE
AVERAGE TOTAL INCOME/ YIELD/
BALANCE ASSETS EXPENSE RATE
---------- ----------- --------- -------
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net $24,280,546 58.29% $2,784,792 11.47%
Taxable investment securities 11,362,501 27.28 597,928 5.26
FHLB deposits 2,941,255 7.06 88,447 3.01
Interest earning deposits with banks 1,017,846 2.44 50,960 5.01
----------- --------- ----------
Total interest earning assets 39,602,148 95.07 3,522,127 8.89
----------- --------- ----------
Non-interest earning assets:
Cash and due from banks 275,980 0.66
Other assets 1,777,526 4.27
----------- --------
Total assets $41,655,654 100.00%
=========== ========
Interest-bearing liabilities:
Interest bearing demand and NOW
deposits $ 5,848,574 14.04% 154,006 2.63
Savings deposits 1,027,673 2.47 11,610 1.13
Time deposits 25,803,230 61.94 1,078,457 4.18
Borrowings-FHLB advances 5,001,860 12.01 214,422 4.29
----------- --------- ----------
Total interest-bearing liabilities 37,681,337 90.46 1,458,495 3.87
----------- --------- ----------
Non-interest bearing liabilities:
Non-interest bearing deposits 592,571 1.42
Other liabilities 407,773 0.98
Stockholders' equity 2,973,973 7.14
----------- ---------
Total liabilities and
stockholders' equity $41,655,654 100.00%
=========== ========
Net interest income $2,063,632
==========
Interest rate spread 5.02%
Net interest margin 5.21%
</TABLE>
57
<PAGE>
The increase in net interest income from 1994 to 1995 and from 1995 to 1996
was attributable to higher interest margins. Interest expense on deposits
increased $605,817 from 1994 to 1995 and cost of funds increased 1.04%. Interest
expense on deposits increased from 1995 to 1996 by $1,073,047 and the cost of
funds increased 0.66%, due primarily to rising interest rates. Interest income
on earning assets increased $1,726,995 from 1994 to 1995, representing an
increase in the average yield of 1.18%. Interest income on earning assets
increased from 1995 to 1996 by $1,476,813, representing an increase in the
average yield of 0.86%. The net interest margin increased by 0.22% from 1994 to
1995, due primarily to an increase in loan yields. The net interest margin
increased by 0.23% from 1995 to 1996, as loan yield continued to increase.
Average interest bearing liabilities increased from $37,681,337 at June 30, 1994
to $49,348,924 at June 30, 1995. This increase resulted in increased interest
expense. During the same period, average earning assets increased from
$39,602,148 at June 30, 1994 to $52,116,398 at June 30, 1995, and continued to
increase to $61,536,976 at June 30, 1996. Average interest bearing liabilities
increased from $49,348,924 at June 30, 1995 to $58,216,183 at June 30, 1996.
Net interest income is affected by the volume and rate of both interest-
earning assets and interest-bearing liabilities. The following table depicts the
dollar effect and rate change for the different categories of interest-earning
assets and interest-bearing liabilities and the resultant change in interest
income and interest expense. Non-performing loans are included with loans in
this table.
<TABLE>
<CAPTION>
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
1996 VS. 1995 1995 VS. 1994
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
-------------------------- TOTAL -------------------------- TOTAL
INCREASE INCREASE
VOLUME RATE/(1)/ (DECREASE) VOLUME RATE/(1)/ (DECREASE)
----------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
- ------------------
Loans $1,138,291 $347,595 $1,485,886 $1,789,477 $ 5,160 $1,794,637
Taxable investment securities (62,878) 23,848 (39,030) (60,099) 30,827 (29,272)
FHLB deposits 40,782 (840) 39,942 (40,143) 31,375 (8,768)
Interest earning (9,773) (212) (9,985) (30,607) 1,005 (29,602)
deposits with banks
---------- -------- ---------- ---------- --------- ----------
Total interest earning assets 1,106,422 370,391 1,476,813 1,658,628 68,367 1,726,995
---------- -------- ---------- ---------- --------- ----------
Interest paid on:
- ----------------
Interest bearing demand
and NOW deposits (6,119) (1,716) (7,835) (15,427) (3,600) (19,027)
Savings deposits 3,675 (524) 3,151 2,632 20,660 23,292
Time deposits 700,951 376,780 1,077,731 285,660 315,892 601,552
Borrowings-FHLB
advances (260,192) 8,521 (251,671) 222,534 134,934 357,468
---------- -------- ---------- ---------- --------- ----------
Total interest bearing
liabilities 438,315 383,061 821,376 495,399 467,886 963,285
---------- -------- ---------- ---------- --------- ----------
Net interest income $ 668,107 $(12,670) $ 655,437 $1,163,229 $(399,519) $ 763,710
========== ======== ========== ========== ========= ==========
</TABLE>
(1) Changes in interest income and interest expense due to both rate and volume
are included in rate variances.
58
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses provides a reserve (the allowance for loan
losses) against which loan losses are charged as those losses become evident.
Management determines the appropriate level of the allowance for loan losses on
a quarterly basis. These quarterly analyses take into consideration the results
of an ongoing loan review and grading process, the purpose of which is to
determine the level of credit risk within the portfolio at any given time.
Utilizing the results of the loan review and grading process, a specific
portion of the reserve is allocated to those loans which appear to represent a
more than normal exposure to risk. In addition, estimates are made for potential
losses within the acceptably graded portfolios of consumer loans, residential
mortgage loans, commercial real estate loans, and commercial loans not otherwise
specifically reviewed, based on historical loss experience and other factors and
trends. Provisions for loan loss expense of $8,594, $186,300 and $102,696 were
made in 1996, 1995 and 1994, respectively.
Following is a table setting forth the activity in the allowance for loan
losses and the allocation of the allowance for loan losses, along with certain
ratios for non-performing loans and total loans:
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Balance at beginning of period $639,309 $528,431 $491,209
Loans charged off:
Mortgage -- (14,122) (64,958)
Construction, net (6,375) -- --
Installment (19,558) (62,800) (716)
--------- -------- --------
Total charge offs (25,933) (76,922) (65,674)
--------- -------- --------
Recoveries:
Mortgage 40,500 -- --
Installment 1,500 1,500 200
--------- -------- --------
Total recoveries 42,000 1,500 200
--------- -------- --------
Net loans recovered (charged off) 16,067 (75,422) (65,474)
Provision for possible loan losses
charged against income 8,594 186,300 102,696
--------- -------- --------
Balance at end of period $663,970 $639,309 $528,431
========= ======== ========
Net charge offs (recoveries)/
average loans (0.03)% 0.19% 0.27%
Loan reserve/total loans 1.18% 1.28% 1.48%
Loan reserve/non-performing loans 111.91% 84.71% 94.85%
</TABLE>
59
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated. The allocation of an
allowance to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any other
category.
<TABLE>
<CAPTION>
JUNE 30,
---------------------------------------------------------------------
% OF % OF % OF
LOANS IN LOANS IN LOANS IN
CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL
1996 LOANS 1995 LOANS 1994 LOANS
------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage $ 78,699 66.39% $125,421 66.00% $146,703 88.52%
Construction, net 56,980 29.69 85,575 29.85 132,488 6.12
Installment -- 3.92 2,478 4.15 -- 5.36
Unallocated 528,291 -- 425,835 -- 249,240 --
-------- ------ -------- ------ -------- ------
Total Allowance $663,970 100.00% $639,309 100.00% $528,431 100.00%
======== ====== ======== ====== ======== ======
</TABLE>
Based on Texas Heritage's loan review process, historical loan loss
experience and economic conditions, management believes the allowance for loan
losses at June 30, 1996 is adequate to cover any potential losses in the loan
portfolio.
RISK ELEMENTS IN A LOAN PORTFOLIO; INTEREST RECOGNITION
Risk elements in a loan portfolio include loans accounted for as impaired,
nonaccrual loans, accruing loans that are contractually past due 90 days or more
as to interest or principal payments, loans where there are serious doubts as to
the ability of the borrower to comply with the present loan repayment terms,
other real estate and significant industry concentrations (such as real estate,
energy or agricultural loans).
Nonperforming assets are defined as loans delinquent 90 or more days,
nonaccrual and impaired loans, and foreclosed assets. Such assets do not
necessarily represent future losses to Texas Heritage, since underlying
collateral can be sold and the financial condition of the borrower may improve.
The following table sets forth the details of nonperforming assets. Texas
Heritage had no restructured loans at any of the dates listed herein.
The following table sets forth the detail of nonperforming assets:
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------
1996 1995 1994
---------- -------- ----------
<S> <C> <C> <C>
Impaired loans $ 593,314 $754,716 $ 557,116
Other real estate owned 793,099 221,334 473,405
---------- -------- ----------
Total nonperforming assets $1,386,413 $976,050 $1,030,521
========== ======== ==========
Total nonperforming assets to total assets 2.00% 1.57% 2.16%
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
The following table compares the allowance for loan losses and the total
nonperforming loans:
JUNE 30,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Allowance for loan losses $663,970 $639,309 $528,431
Nonperforming loans $593,314 $754,716 $557,116
Allowance as a percentage of
nonperforming loans 111.91% 84.71% 94.85%
</TABLE>
At June 30, 1996, 1995 and 1994, there were no significant commitments to
lend additional funds to borrowers whose loans were considered nonperforming.
NON-INTEREST INCOME
Income, other than from interest-earning assets, is derived primarily from
services provided to customers for which fees are charged. These services are
chiefly deposit services such as account service charges, overdraft and non-
sufficient funds privileges, account analysis, issuance of cashiers' checks and
letters of credit, income for other real estate transactions and income from
securities transactions. The following table lists the accounts from which non-
interest income is derived, provides the totals for those accounts and reflects
the changes from the preceding period shown to the next comparable period:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, PERCENT CHANGE
------------------------------- ----------------------
1996 1995 1994 1996/1995 1995/1994
---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Service charges on
deposit accounts $140,361 $ 99,603 $ 97,240 40.92% 2.43%
Gain on sale of
real estate 153,979 20,438 84,691 653.40 (75.87)
Other income 99,664 88,369 85,687 12.78 3.13
---------- --------- ---------- ----------------------
Total non-interest
income $394,004 $208,410 $267,618 89.05% (22.12%)
========== ========= ========== ========= ==========
</TABLE>
The decrease in non-interest income from 1994 to 1995 is due primarily to
a decrease in gains on sale of real estate. The increase in non-interest income
from 1995 to 1996 is primarily due to an increase in gains on real estate sales
during such period.
OTHER EXPENSES
Non-interest expense, which Texas Heritage incurs in the ordinary course of
business, includes salaries and other types of expenses, such as occupancy,
professional fees, ad valorem taxes and supplies. The
61
<PAGE>
following table sets forth the accounts that make up non-interest expense,
provides the totals for those accounts and reflects the changes from the
preceding period shown to the next comparable period:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, PERCENT CHANGE
------------------------------------- ----------------------
1996 1995 1994 1996/1995 1995/1994
------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Personnel expense $1,114,408 $ 945,338 $ 748,370 17.88% 26.32%
Occupancy expense 407,098 309,711 238,321 31.44 29.96
Computer/office supplies 105,734 78,813 66,878 34.16 17.85
State franchise tax expense (27,014) 37,119 21,499 (172.78) 72.65
Postage expense 29,949 26,012 23,664 15.14 9.92
Advertising expense 62,672 54,287 37,537 15.45 44.62
Insurance expense 111,399 82,552 77,172 34.94 6.97
Legal and professional fees 140,988 96,255 78,083 46.47 23.27
Real estate owned expense 58,157 29,925 39,544 94.34 (24.32)
Dues, fees and subscriptions 13,107 12,814 9,514 2.29 34.69
Courier expense 23,230 11,216 6,930 107.11 61.85
Automatic teller machine 16,080 15,440 18,928 4.15 (18.43)
expense
Other expenses 47,458 35,500 22,438 33.68 58.21
Loss on sale of securities -- 31,094 -- (100.00) 100.00
Loss on sale of real estate 96,327 30,634 3,635 214.44 742.75
------------ ----------- ---------- ---------- ----------
Total non-interest expense $2,199,593 $1,796,710 $1,392,513 22.42% 29.03%
============ =========== ========== ========== ==========
</TABLE>
The increase in personnel expense from 1995 to 1996 and from 1994 to 1995
was primarily due to increased salary levels. The increase in occupancy expense
from 1995 to 1996 was primarily due to additional bank equipment placed in
service and the additional lease expense associated with the opening of a new
branch. State franchise tax expense decreased from 1995 to 1996 due to the
receipt of an approximate $43,000 refund of franchise taxes from amending the
returns for 1991 through 1995. All other expenses increased proportionately as
Texas Heritage grew in size.
INCOME TAXES
Texas Heritage adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," in 1994. The cumulative effect on years prior to
1994 of this change in accounting principle was an increase in net income of
$235,000.
FINANCIAL CONDITION
LOANS
The loan portfolio constitutes the major earning asset of most financial
institutions and typically offers the best alternative for obtaining the maximum
interest spread above the cost of funds. The overall economic
62
<PAGE>
strength of any financial institution generally parallels the quality and yield
of its loan portfolio. Total loans (net of allowance for loan losses, net
deferred loan origination fees, and unearned discounts) were $54,155,231 (78.22%
of total assets) at June 30, 1996, $47,464,720 (76.54% of total assets) at June
30, 1995, and $33,900,509 (71.08% of total assets) at June 30, 1994. The
following table presents loans outstanding, net of the undisbursed portion of
construction loans:
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------------------------------------------------------
1996 1995 1994
----------------------- ------------------------ ------------------------
PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
------------ --------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans $37,499,422 66.39% $32,938,984 66.00% $31,516,149 88.52%
Interim loans, net 16,771,400 29.69 14,896,139 29.85 2,180,000 6.12
Installment and
savings loans 2,211,266 3.92 2,073,961 4.15 1,905,899 5.36
------------ --------- ----------- ------------ ----------- ----------
Total $56,482,088 100.00% $49,909,084 100.00% $35,602,048 100.00%
============ ========= ============ ============ =========== ==========
</TABLE>
The loan portfolio does not include any loans to foreign countries, credit
card loans or highly leveraged transaction loans. Texas Heritage primarily
originates or participates in mortgage loans to individuals and businesses in
its local lending area of North Texas. Texas Heritage has written policies
requiring security for loans, including liens on residential mortgage loans. In
addition, policies and procedures are in place to assess the creditworthiness of
borrowers for all loans and commitments. Borrowers' ability to honor their loan
contracts are largely dependent upon the economic conditions within their market
and on the national level.
MATURITY OF LOANS
The following table sets forth the maturity of total loans, gross of
unearned discount:
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------
PERCENT OF
LOANS TOTAL
------------ -----------
<S> <C> <C>
In one year or less $31,084,342 55.03%
After one year through five years 12,520,949 22.17
After five years 12,876,797 22.80
------------ -----------
Total $56,482,088 100.00%
============ ===========
</TABLE>
63
<PAGE>
INTEREST SENSITIVITY
The following table reflects the maturity by rate structure of total loans,
gross of unearned discount:
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------
VARIABLE
FIXED RATES RATES
------------ -----------
<S> <C> <C>
In one year or less $ 6,582,949 $24,501,393
After one year through five years 6,879,583 5,641,366
After five years 12,876,797 --
------------ -----------
Total $26,339,329 $30,142,759
============ ===========
</TABLE>
INVESTMENTS
On January 1, 1995, Texas Heritage adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115). Under SFAS 115, each security is classified as
either available for sale or held to maturity. Investments held to maturity are
recorded at amortized cost. Securities available for sale are recorded at their
fair value. The after-tax difference between amortized cost and fair value of
securities available for sale is recorded as an unrealized gain or loss on
securities and either increases (in the case of all unrealized gain) or
decreases (in the case of an unrealized loss) total stockholders' equity. The
tax impact of such adjustment is recorded as an adjustment to the amount of the
deferred tax liability. As permitted by the Financial Accounting Standards
Board, Texas Heritage transferred securities, on December 31, 1995, with a
carrying value of $4,472,012 and an unrealized loss of $23,531 to available for
sale from held to maturity.
64
<PAGE>
The following table presents the composition of investments and the change
in each category for the periods presented:
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------------------------------------------
1996 1995 1994
------------------------ -------------------------- -------------------------
PERCENT PERCENT PERCENT
BOOK OF TOTAL BOOK OF TOTAL BOOK OF TOTAL
VALUE SECURITIES VALUE SECURITIES VALUE SECURITIES
------------ ----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Available for sale (AFS):
U.S. Government agencies $ 490,123 6.02% $ -- --% $ -- --%
Mortgage-backed 3,546,581 43.57 -- -- -- --
Other 659,500 8.10 620,300 6.36 $461,300 4.35
------------ ---------- ---------- --------- ---------- ------------
Total AFS 4,696,204 57.69 620,300 6.36 461,300 4.35
------------ ---------- ---------- --------- ---------- ------------
Held to maturity (HTM):
U.S. Government agencies -- -- 1,003,631 10.28 1,000,000 9.42
Mortgage-backed 2,941,187 36.13 7,630,711 78.20 8,137,524 76.68
Other 502,953 6.18 503,935 5.16 1,013,008 9.55
------------ ---------- ---------- --------- ----------- ------------
Total HTM 3,444,140 42.31 9,138,277 93.64 10,150,532 95.65
------------ ---------- ---------- --------- ----------- ------------
Total securities $8,140,344 100.00% $9,758,577 100.00% $10,611,832 100.00%
============ ========== ========== ========= =========== ============
</TABLE>
The market value of investment securities was $7,987,796, $9,576,808 and
$10,166,300 at June 30, 1996, 1995 and 1994, respectively.
65
<PAGE>
The following table reflects the maturities and yields for the various types of
investment securities as of June 30, 1996:
<TABLE>
<CAPTION>
MATURITY
------------------------------------------------------------------------------------------------------
AFTER ONE THROUGH AFTER FIVE THROUGH
IN ONE YEAR OR LESS FIVE YEARS TEN YEARS AFTER TEN YEARS
------------------- ----------------------- ------------------ -------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ---------- ----- ------ ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AFS:
U.S. Government
agencies $ -- --% $ 490,123 5.44% $ -- --% $ -- --%
Mortgage-backed -- -- -- -- -- -- 3,546,581 6.16
Other -- -- -- -- -- -- 659,500 6.15
HTM:
U.S. Government
agencies -- -- -- -- -- -- -- --
Mortgage-backed -- -- 2,828,913 5.79 -- -- 112,274 5.76
Other -- -- 502,953 6.01 -- -- -- --
------ ---------- ------ ----------
Total securities $ -- $3,821,989 $ -- $4,318,355
====== ========== ====== ==========
Weighted average rate --% 5.77% --% 6.15%
===== ===== ===== =====
</TABLE>
By maturity, 46.95% of the portfolio will mature after one year through
five years and 53.05% will mature after ten years.
DEPOSITS
Deposits represent Texas Heritage's primary source of funds. The
fundamental use of funds available to Texas Heritage is to build earning assets,
principally in the form of loans. The following table reflects the deposit mix
for the periods indicated:
<TABLE>
<CAPTION>
JUNE 30,
---------------------------------------------------------------------------------------------------
1996 1995 1994
-------------------------------- ------------------------------- -------------------------------
AVERAGE AVERAGE AVERAGE
AVERAGE COST OF AVERAGE COST OF AVERAGE COST OF
BALANCE FUNDS PERCENT BALANCE FUNDS PERCENT BALANCE FUNDS PERCENT
----------- ------- ------- ----------- ------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest bearing
deposits $ 1,239,226 --% 2.30% $ 852,357 --% 2.13% $ 592,571 --% 1.78%
Interest bearing demand
and NOW deposits 5,023,891 2.53 9.32 5,261,993 2.57 13.15 5,848,574 2.63 17.58
Savings deposits 1,393,258 2.73 2.58 1,260,594 2.77 3.15 1,027,673 1.13 3.09
Time deposits 46,247,892 5.96 85.80 32,637,198 5.15 81.57 25,803,230 4.18 77.55
----------- ------ ----------- ------ ----------- ------
Total deposits $53,904,267 100.00% $40,012,142 100.00% $33,272,048 100.00%
=========== ====== =========== ====== =========== ======
Weighted average rate 5.42% 4.63% 3.74%
==== ==== ====
</TABLE>
66
<PAGE>
No material trends have been noted in the deposit mix and no foreign
deposits are maintained at Texas Heritage. No significant out-of-area deposits
are maintained. There is no single person or group of persons that represent
such a material portion of Texas Heritage's total deposits, that the loss of
such deposits would have a material adverse effect on the business of Texas
Heritage.
At June 30, 1996, demand deposits (including NOW and money market
deposits), as a percentage of savings and time deposits, was 15.12%.
Certificates of deposit, issued in amounts of $100,000 or more, represent
the type of deposit most likely to affect Texas Heritage's future earnings
because of rate sensitivity. Certificates of deposit of $100,000 or more
represented 19.90%, 17.75% and 18.60% of total deposits as of June 30, 1996,
1995 and 1994, respectively. The following table sets forth the amount and
maturities of time deposits of $100,000 or more:
<TABLE>
<CAPTION>
June 30, 1996 Percent of Total
------------- ----------------
<S> <C> <C>
Three months or less $ 1,600,000 13.25%
Over three through six months 6,531,042 54.07
Over six through twelve months 3,046,723 25.23
Over twelve months 900,000 7.45
------------- ----------------
Total $12,077,765 100.00%
============= ================
</TABLE>
The effective cost of these funds is generally higher than other time
deposits because the funds are usually obtained at premium rates of interest.
Time deposits of $100,000 or more can be a very volatile source of funds.
Management believes, however, that Texas Heritage's time deposits of $100,000 or
more exhibit core deposit characteristics and none are brokered deposits. Texas
Heritage follows prevailing market rates in determining interest rates payable
on certificates of deposits.
BORROWINGS
Borrowings from the Federal Home Loan Bank of Dallas (FHLB) may be used on
a short term basis to compensate for reductions in deposits or deposit inflows
at less than projected levels, and may be used on a longer-term basis to support
expanded activities. Texas Heritage obtains FHLB advances upon the security of
certain of its residential first mortgage loans, and other assets, including
FHLB stock, provided certain standards related to Texas Heritage's
creditworthiness have been met. FHLB advances are available for investment,
purchasing and lending activities and other general business purposes.
The following table sets forth the maximum month-end balance and average
balance of FHLB advances for the periods indicated:
<TABLE>
<CAPTION>
June 30,
-------------------------------------
1996 1995 1994
---------- ----------- ----------
<S> <C> <C>
Maximum balance FHLB advances $8,566,044 $12,016,362 $9,225,921
Average balance FHLB advances $5,551,142 $10,189,139 $5,001,860
</TABLE>
67
<PAGE>
The following table sets forth certain information as to Texas Heritage's
borrowing at thedates indicated:
<TABLE>
<CAPTION>
June 30,
---------------------------------------
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
FHLB advances $2,838,554 $8,566,044 $9,225,921
Weighted average interest rates 5.99% 6.82% 4.79%
</TABLE>
LIQUIDITY AND RATE SENSITIVITY
Liquidity is the measure of Texas Heritage's ability to meet its customers'
present and future deposit withdrawals or increased loan demand without
penalizing earnings. Interest rate sensitivity involves the relationships
between rate sensitive assets and liabilities and is an indication of the
probable effects of interest rate fluctuations on Texas Heritage's net interest
income.
Liquidity is provided by projecting credit demand and other financial
needs, and maintaining sufficient cash and assets readily convertible into cash
to meet these projected requirements. Texas Heritage provides for liquidity
needs through core deposits, maturing loans and scheduled maturities of
investment securities. Cash and cash equivalents were $4,264,090, $2,706,533 and
$1,373,633 at June 30, 1996, 1995 and 1994, respectively. These levels are
considered adequate in view of projected liquidity needs.
Interest rate-sensitive assets and liabilities are those with yields or
rates subject to change within a future time period, due to maturity or changes
in market rates. An ongoing objective of the use of an asset/liability model is
to monitor gaps between rate-adjustable assets and liabilities, and to ascertain
that these gaps fall within the Board of Director's approved ranges, given the
current interest rate market. The Board of Directors review this information to
determine if the projected future net interest income levels would be
acceptable. Texas Heritage maintains acceptable gap levels and net interest
income levels by matching as closely as possible rate-adjustment assets and
liabilities with similar maturity horizons.
68
<PAGE>
The following table sets forth an analysis of the gap levels of Texas Heritage
as of June 30, 1996:
<TABLE>
<CAPTION>
Maturity
--------------------------------------------------------------------------------------------
90 days 91-180 181 days One to Three to five More than
or less days to one year three years years five years Total
----------- ---------- ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets
Interest bearing deposits $ 2,241,106 $ 190,000 $ -- $ -- $ -- $ -- $ 2,431,106
--
Federal funds sold 465,000 -- -- -- -- -- 465,000
Investment securities 1,694,651 -- 2,613,826 738,640 3,093,227 -- 8,140,344
Loans 17,804,885 5,137,853 8,141,604 10,156,194 2,364,755 12,876,797 56,482,088
----------- ---------- ------------ ----------- ----------- ----------- -----------
Total interest earning assets 22,205,642 5,327,853 10,755,430 10,894,834 5,457,982 12,876,797 67,518,538
----------- ---------- ------------ ----------- ----------- ----------- -----------
Interest bearing
liabilities
Interest bearing demand and
NOW deposits 5,231,778 -- -- -- -- -- 5,231,778
Savings deposits 1,400,380 -- -- -- -- -- 1,400,380
Time deposits 7,529,831 6,148,558 23,566,828 12,156,060 2,703,411 -- 52,104,688
Borrowed funds 911,460 164,756 336,555 973,282 128,437 324,064 2,838,554
----------- ---------- ------------ ----------- ----------- ----------- -----------
Total interest bearing
liabilities 15,073,449 6,313,314 23,903,383 13,129,342 2,831,848 324,064 61,575,400
----------- ---------- ------------ ----------- ----------- ----------- -----------
Interest sensitivity
GAP per period $ 7,132,193 $ (985,461) $(13,147,953) $(2,234,508) $ 2,626,134 $12,552,733 $ 5,943,138
=========== ========== ============ =========== =========== =========== ===========
Cumulative GAP $ 7,132,193 $6,146,732 $ (7,001,221) $(9,235,729) ($6,609,595) $ 5,943,138
=========== ========== ============ =========== =========== =========== ===========
Cumulative GAP to total assets 10.30% 8.88% (10.11%) (13.34%) (9.55%) 8.58%
Cumulative ratio of interest
earning assets to interest
bearing liabilities 147% 129% (85%) (84%) (89%) (110%)
</TABLE>
CAPITAL RESOURCES
Management views capital as a critical element in Texas Heritage's ability
to expand its asset base and, ultimately, maintain a high level of earnings per
share over a sustained period of time. In addition, a strong capital position is
essential in order to maintain the confidence of investors, customers and
regulators, to afford protection to depositors, to ensure access to capital
markets under favorable terms, to provide a strong foundation for future growth
and to provide additional protection against the risk of asset value shrinkage
and unforeseen losses.
Total stockholders equity was $4,811,271 at June 30, 1996, an increase of
$1,058,282, or 28.20% from $3,752,989 at June 30, 1995, which was an increase of
$552,417, or 17.26% from $3,200,572 at June 30, 1994. As a percentage of total
assets, total stockholders equity was 6.95% at June 30, 1996, 6.06% at June 30,
1995 and 6.71% at June 30, 1994. Texas Heritage is subject to the issuance of
capital adequacy guidelines by its regulators, all of which have issued similar
guidelines for the measurement of capital adequacy. One measure is the leverage
ratio, which equals the ratio of ending total capital less intangible assets to
total assets less intangible assets. The guidelines include a definition of
capital and provide a framework for calculating weighted risk assets by
assigning assets and off-balance sheet instruments to broad risk categories. The
risk-based capital standards are a minimum ratio of capital to risk-weighted
assets with a minimum of 3% when using Tier 1 capital and a minimum of 8% when
using total
69
<PAGE>
capital. Tier 1 capital is the sum of the core capital elements (common
stockholders equity less intangible assets). Total capital includes the
allowance for loan losses limited to a maximum of 1.25% of risk-weighted assets.
Texas Heritage's capital and capital ratios are as follows:
<TABLE>
<CAPTION>
June 30,
----------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Tier 1 Capital $ 4,854,629 $ 3,752,989 $ 3,200,572
Total Capital $ 5,422,067 $ 4,229,396 $ 3,465,605
Risk-weighted assets $45,486,150 $40,988,040 $29,653,000
Capital Ratios:
Tier 1 (Core) Capital and
Tangible Capital 7.00% 6.05% 6.71%
Tier 1 risk-based capital 10.67% 9.16% 10.79%
Total risk-based capital 11.92% 10.32% 11.69%
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 1996, the names and
addresses of each beneficial owner of more than 5% of Texas Heritage Common
known to the Board of Directors of Texas Heritage, reflecting the amount and
nature of such beneficial ownership, the names of each director and executive
officer of Texas Heritage, the number of shares of Texas Heritage Common owned
beneficially by each director and executive officer, and the number of shares of
Texas Heritage Common owned beneficially by all directors and executive officers
as a group. None of the shareholders listed herein would own, on a pro forma
basis giving effect to the Merger, more than 1% of the issued and outstanding
shares of Jefferson Common.
<TABLE>
<CAPTION>
SHARES OF TEXAS
HERITAGE
COMMON
NAME AND ADDRESS/(1)/ BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------ --------------------- ----------------
<S> <C> <C>
James Charles Garner/(2)/ 74,466 13.27%
611 Christian Court
Rockwall, Texas 75087
Gary N. Maxwell 55,964 9.98
2911 Turtle Creek Blvd. #1111
Dallas, Texas 75219
Ike Harris/(3)/ 54,400 9.70
2711 LBJ Freeway #550
Dallas, Texas 75234
Darrell Marshall/(4)/ 44,150 7.87
2402 Club Meadows
Garland, Texas 75043
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
SHARES OR TEXAS HERITAGE
COMMON
NAME AND ADDRESS/(1)/ BENEFICIALLY OWNED PERCENT OF CLASS
- --------------------------------- ------------------------ ----------------
<S> <C> <C>
Joe D. Loftis 35,000 6.24%
2001 South Goliad
Rockwall, Texas 75087
Joe L. Williams/(6)/ 30,000 5.35
5109 Greensboro
Sachse, Texas 75048
Richard M. Allen/(7)/ 29,230 5.21
2217 Shari Lane
Garland, Texas 75043
Michael L. Holden/(8)/ 10,937 1.95
Sherry Millsap/(9)/ 7,547 1.35
Directors and officers as a group 232,228 41.40
(7 persons)
- ---------------------------------
</TABLE>
(1) Addresses are provided only with respect to each beneficial owner
of more than five percent (5%) of Texas Heritage Common known to the
Board of Directors of Texas Heritage.
(2) Includes 19,500 shares held in the name of James Dale Garner,
Mr. Garner's son.
(3) Mr. Harris serves as a director of Texas Heritage. Represents shares
held in the name of Metroplex Holding L.P., of which Mr. Harris's wife
owns 89%.
(4) Mr. Marshall serves as a director of Texas Heritage. Includes 39,000
shares held in the name of Johnnie's Discount Auto Employees Trust, of
which Mr. Marshall is the Vice President.
(5) Includes 10,000 shares in Mr. Loftis' retirement account.
(6) Mr. Williams serves as the President, Chief Executive Officer and a
director of Texas Heritage.
(7) Mr. Allen serves as a director of Texas Heritage. Includes 1,300
shares held in the name of Richard A. Allen, Mr. Allen's minor child.
(8) Mr. Holden serves as a director of Texas Heritage.
(9) Ms. Millsap serves as the Senior Vice President of Lending for Texas
Heritage.
FAMILY RELATIONSHIPS
There are no family relationships, other than those disclosed above. See
"INFORMATION ABOUT TEXAS HERITAGE -- Security Ownership of Certain Beneficial
Owners and Management."
LEGAL OPINION
The legality of the securities offered hereby will be passed upon by Lewis,
Rice & Fingersh, L.C. Members of Lewis, Rice & Fingersh, L.C. and attorneys
employed by them owned, directly or indirectly, as of _______________, 1996,
__________ shares of Jefferson Common.
71
<PAGE>
EXPERTS
INDEPENDENT AUDITORS FOR JEFFERSON
The consolidated financial statements of Jefferson at December 31, 1995 and
1994 and for each of the years in the three-year period ended December 31, 1995
incorporated by reference in Jefferson's Annual Report (Form 10-K) for the year
ended December 31, 1995 have been audited by KPMG Peat Marwick LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of L&B appearing in L&B's Annual
Report (Form 10-K) for the year ended June 30, 1996, have been audited by
Oakerson, Arnold, Walker & Co., independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. The
financial statements referred to above are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
INDEPENDENT AUDITORS FOR TEXAS HERITAGE
The financial statements of Texas Heritage at June 30, 1996 and 1995 and
for each of the three years in the period ended June 30, 1996 included in this
Proxy Statement/Prospectus and Registration Statement have been audited by Grant
Thornton LLP, independent certified public accountants, as stated in their
report appearing herein, and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
PRESENCE AT SPECIAL MEETING
Representatives of Grant Thornton LLP are expected to be present at the
Special Meeting to respond to appropriate questions.
SHAREHOLDER PROPOSALS
The annual meeting of Jefferson was held on May 15, 1996. Shareholder
proposals for the annual meeting of Jefferson shareholders to be held in May
1997 must meet the requirements established by the S.E.C. for shareholder
proposals and must be received at Jefferson's executive office at 14915
Manchester Road, Ballwin, Missouri 63011 not later than December 13, 1996 in
order to be considered for inclusion in the 1997 proxy statement. Shareholder
proposals must also satisfy the requirements set forth in the Bylaws of
Jefferson described under "COMPARISON OF SHAREHOLDER RIGHTS -- Shareholder
Proposal Procedures."
Upon receipt of any such proposal, Jefferson will determine whether or not
to include such proposal in the proxy statement and proxy in accordance with the
S.E.C.'s regulations governing the solicitation of proxies.
_______________
72
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
June 30, 1996 and 1995
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Texas Heritage Savings Association/Banc
We have audited the accompanying balance sheets of Texas Heritage Savings
Association/Banc as of June 30, 1996 and 1995, and the related statements of
earnings, stockholders' equity and cash flows for each of the three years in the
period ended June 30, 1996. These financial statements are the responsibility
of the Association's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Texas Heritage Savings
Association/Banc as of June 30, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended June 30,
1996, in conformity with generally accepted accounting principles.
As described in Note A to the financial statements, the Association changed its
method of accounting for certain debt securities in 1995.
/s/ Grant Thornton LLP
----------------------
Dallas, Texas
July 26, 1996
F-2
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
BALANCE SHEETS
June 30,
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------ -----------
<S> <C> <C>
Cash and due from banks $ 1,367,984 $ 307,241
Interest-bearing deposits with banks 2,431,106 2,399,292
Federal funds sold 465,000 -
----------- -----------
CASH AND CASH EQUIVALENTS 4,264,090 2,706,533
Investment securities
Available for sale 4,696,204 620,300
Held to maturity 3,444,140 9,138,277
----------- -----------
8,140,344 9,758,577
Loans, net 54,155,231 47,464,720
Premises and equipment 1,138,847 1,067,989
Other real estate owned 751,791 200,856
Accrued interest receivable 495,125 495,548
Other assets 289,600 317,392
----------- -----------
$69,235,028 $62,011,615
=========== ===========
LIABILITIES
Noninterest-bearing deposits $ 1,959,688 $ 1,100,888
Interest-bearing demand, NOW and savings deposits 6,630,527 6,850,492
Time deposits 52,104,688 40,739,584
----------- -----------
60,694,903 48,690,964
Advances from Federal Home Loan Bank (FHLB) 2,838,554 8,566,044
Advances from borrowers for taxes and insurance 306,643 377,426
Accrued expenses and other liabilities 583,657 624,192
----------- -----------
TOTAL LIABILITIES 64,423,757 58,258,626
Commitments and contingencies - -
Stockholders' equity
Preferred stock - par value $1.00; authorized - 120,000 shares;
issued and outstanding - 39,000 shares 39,000 39,000
Common Stock - par value $2.50; authorized - 1,880,000 shares;
issued and outstanding - 561,000 shares 1,402,500 1,402,500
Additional paid-in capital 1,616,446 1,616,446
Retained earnings 1,796,683 695,043
Unrealized loss on available for sale investment securities, net of tax
benefit of $22,338 (43,358) -
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 4,811,271 3,752,989
----------- -----------
$69,235,028 $62,011,615
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
STATEMENTS OF EARNINGS
Year ended June 30,
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees $6,065,315 $4,579,429 $2,784,792
Investment securities 529,626 568,656 597,928
Deposits with banks 130,994 101,037 139,407
---------- ---------- ----------
Total interest income 6,725,935 5,249,122 3,522,127
INTEREST EXPENSE
Deposits 2,922,937 1,849,890 1,244,072
FHLB advances 320,219 571,890 214,423
---------- ---------- ----------
Total interest expense 3,243,156 2,421,780 1,458,495
---------- ---------- ----------
NET INTEREST INCOME 3,482,779 2,827,342 2,063,632
PROVISION FOR LOAN LOSSES 8,594 186,300 102,696
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,474,185 2,641,042 1,960,936
OTHER INCOME
Service charges 140,361 99,603 97,240
Gains on sales of real estate, net 153,979 20,438 84,691
Other operating income 99,664 88,369 85,687
---------- ---------- ----------
TOTAL OTHER INCOME 394,004 208,410 267,618
OTHER EXPENSES
Salaries, wages and benefits 1,114,408 945,338 748,370
Occupancy expense, net 407,098 309,711 238,321
Other operating expenses 678,087 510,567 405,822
Loss on sales of securities - 31,094 -
---------- ---------- ----------
TOTAL OTHER EXPENSES 2,199,593 1,796,710 1,392,513
EARNINGS BEFORE INCOME TAXES 1,668,596 1,052,742 836,041
INCOME TAX EXPENSE 566,956 350,325 285,563
---------- ---------- ----------
EARNINGS BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 1,101,640 702,417 550,478
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE - - 235,000
---------- ---------- ----------
NET EARNINGS $1,101,640 $ 702,417 $ 785,478
========== ========== ==========
Earnings per common share
Before cumulative effect of change in
accounting principle $1.96 $1.25 $.98
Cumulative effect of change in accounting
principle - - .42
---------- ---------- ----------
Net earnings $1.96 $1.25 $1.40
========== ========== ==========
Weighted average number of common and
common equivalent shares outstanding 561,000 561,000 561,000
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
STATEMENT OF STOCKHOLDERS' EQUITY
For the years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Preferred stock Common stock Additional Net unrealized Retained
--------------- ------------------- Paid-in loss on available earnings
Shares Amount Shares Amount Capital for sale securities (deficit) Total
------ ------- ------- ---------- ---------- ------------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at July 1, 1993 39,000 $39,000 561,000 $1,402,500 $1,616,446 $ - $ (500,652) $2,557,294
Dividends declared - - - - - - (142,200) (142,200)
Net earnings - - - - - - 785,478 785,478
------ ------- ------- ---------- ---------- ---------- ---------- ----------
Balances at June 30, 1994 39,000 39,000 561,000 1,402,500 1,616,446 142,626 3,200,572
Dividends declared - - - - - - (150,000) (150,000)
Net earnings - - - - - - 702,417 702,417
------ ------- ------- ---------- ---------- ---------- ---------- ----------
Balances at June 30, 1995 39,000 39,000 561,000 1,402,500 1,616,446 - 695,043 3,752,989
Net earnings - - - - - - 1,101,640 1,101,640
Unrealized loss on available
for sale securities, net of tax
benefit of $22,338 - - - - - (43,358) - (43,358)
------ ------- ------- ---------- ---------- ---------- ---------- ----------
Balances at June 30, 1996 39,000 $39,000 561,000 $1,402,500 $1,616,446 $(43,358) $1,796,683 $4,811,271
====== ======= ======= ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
STATEMENTS OF CASH FLOWS
Year ended June 30,
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 1,101,640 $ 702,417 $ 785,478
Adjustments to reconcile net earnings to net
cash provided by operating activities
Provisions for losses 104,922 216,934 106,331
Net amortization/accretion of premiums
and discounts 26,830 20,287 13,938
Gains on sales of real estate (131,080) (20,438) (84,691)
Deferred income taxes 67,357 44,000 -
Depreciation and amortization 154,991 119,245 69,976
FHLB stock dividends (39,200) (37,900) (8,500)
Changes in operating assets and liabilities
Accrued interest receivable 423 (147,316) (106,866)
Deferred loan fees 57,712 79,603 47,707
Other assets (17,229) (53,001) (230,728)
Accrued expenses and other liabilities (40,534) 81,490 72,627
----------- ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,285,832 1,005,321 665,272
INVESTING ACTIVITIES
Loan originations and principal collections, net (8,184,651) (14,198,426) (15,230,833)
Advances from borrowers for taxes and insurance (70,783) 3,626 197,312
Purchases of securities
Available for sale - (121,100) (268,300)
Held to maturity - (503,745) (1,000,000)
Maturities of securities
Held to maturity 500,000 500,000 750,000
Repayments on securities
Available for sale 633,914 - -
Held to maturity 430,995 995,713 2,098,319
Proceeds from sales of real estate 1,014,335 458,237 1,066,130
Capital expenditures (328,533) (334,521) (344,585)
----------- ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (6,004,723) (13,200,216) (12,731,957)
F-6
</TABLE>
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
STATEMENTS OF CASH FLOWS - CONTINUED
Year ended June 30,
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Increase in deposits $ 12,003,938 $ 14,187,672 $ 3,291,311
FHLB advances 11,100,000 10,111,401 7,250,000
Repayments of FHLB advances (16,827,490) (10,771,278) (1,362,930)
------------ ------------ -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 6,276,448 13,527,795 9,178,381
------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,557,557 1,332,900 (2,888,304)
Cash and cash equivalents at beginning of year 2,706,533 1,373,633 4,261,937
------------ ------------ -----------
Cash and cash equivalents at end of year $ 4,264,090 $ 2,706,533 $ 1,373,633
============ ============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest on deposits, FHLB advances and other
borrowings $ 3,237,833 $ 2,379,950 $ 1,449,421
============ ============ ===========
Income taxes paid $ 492,000 $ 214,000 $ 216,000
============ ============ ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Real estate acquired through foreclosure $ 1,442,925 $ 381,658 $ 456,441
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Texas Heritage Savings Association/Banc (the Association), a Texas state
stock institution, was chartered in September 1984. The Association is
located in Rowlett, Texas and has branches in Rockwall, Garland and
Bedford, Texas. The Association's primary sources of revenue are from
providing loans and services to customers and from interest on investment
securities.
A summary of the significant accounting policies of the Association
applied in the preparation of the accompanying financial statements
follows. The accounting principles followed by the Association and the
methods of applying them are in conformity with both generally accepted
accounting principles and prevailing practices of the banking industry.
Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, cash and cash equivalents
include cash, Federal funds sold, amounts due from banks, and highly
liquid debt instruments purchased with maturities of three months or less.
Investment Securities
---------------------
On July 1, 1994, the Association adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." In accordance with SFAS 115, the Association
classifies investments as either held to maturity, when the Association
has positive intent and ability to hold securities to maturity, or
available for sale. Securities classified as held to maturity are reported
at cost adjusted for amortization of premiums and accretion of discounts
using a method that approximates level yield. Securities classified as
available for sale are reported at fair value, with unrealized gains and
losses excluded from earnings and reported as a separate component of
stockholders' equity.
Realized gains and losses on sales of securities classified as available
for sale and held to maturity are reported in earnings in the year of sale
using the specific identification method.
Prior to adoption of SFAS 115, investments were carried at cost adjusted
for premiums and discounts. The effect of adoption of SFAS 115 did not
have a significant impact on financial position or results of operations.
Loans Receivable
----------------
Loans receivable are stated at unpaid principal balances, less the
allowance for loan losses, discounts, and net deferred loan origination
fees.
F-8
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
Discounts on mortgage loans purchased by the Association are amortized to
income using the interest method over the estimated average maturity.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Association's
past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, and current economic
conditions. However, it is at least reasonably possible that this estimate
may change in the near term based on unanticipated changes in the financial
strength of borrowers or in values of the underlying collateral.
Uncollectible interest on loans that are contractually past due is charged
off or an allowance is established based on management's periodic
evaluation. The allowance is established by a charge to interest income
equal to all interest previously accrued, and income is subsequently
recognized only to the extent that cash payments are received. A loan is
returned to accrual status when the borrower is able to resume periodic
interest and principal payments.
Loan-Origination Fees and Related Costs
---------------------------------------
Loan fees and related costs are deferred and recognized as an adjustment to
interest income using the interest method over the contractual life of the
loans.
Loan Impairment
---------------
A loan is identified by the Association as impaired when it is probable
that interest and principal will not be collected according to the
contractual terms of the loan agreement. Interest payments received on
impaired loans are recorded as interest income unless collection of the
remaining recorded investment is doubtful, at which time payments received
are recorded as reductions of principal.
Other Real Estate Owned and Foreclosed Real Estate
--------------------------------------------------
Real estate properties acquired through, or in lieu of, loan foreclosure
are initially recorded at the lower of cost or fair value at the date of
foreclosure. Real estate properties held for investment are carried at the
lower of cost, including cost of improvements and amenities incurred
subsequent to acquisition, or net realizable value. Costs relating to
development and improvement of property are capitalized, whereas costs
relating to the holding of property are expensed.
F-9
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
Valuations are periodically performed by management, and an allowance for
losses is established by a charge to operations if the carrying value of a
property exceeds its estimated net realizable value.
Premises and Equipment
----------------------
Land is carried at cost. Building; leasehold improvements; and furniture,
fixtures, and equipment are carried at cost, less accumulated depreciation
and amortization. Buildings and furniture, fixtures, and equipment are
depreciated using the straight-line method over the following estimated
useful lives of the assets: furniture, fixtures and equipment, 2-5 years;
buildings, 30 years. The cost of leasehold improvements is amortized using
the straight-line method over the terms of the related leases.
Federal Income Taxes
--------------------
The Association adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes", in the year ending June 30, 1994.
SFAS 109 requires a change from the deferred to the liability method of
computing deferred income taxes. Deferred income taxes are recognized for
tax consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the financial
reporting and the tax bases of existing assets and liabilities. The
cumulative effect on years prior to July 1, 1995 of this change in
accounting principle was $235,000. The effect of adoption of SFAS 109 on
earnings before the cumulative effect adjustment for the year ended June
30, 1994 was not significant.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Values of Financial instruments
------------------------------------
In 1996, the Association implemented Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosures About Fair Value of Financial
Instruments." SFAS No. 107 requires that the Association disclose estimated
fair value information of financial instruments. Such information is based
on the requirements set forth in SFAS No. 107 and does not purport to
represent the aggregate net fair value of the Association. Further, the
fair value estimates are based on various assumptions, methodologies and
subjective considerations which vary widely among
F-10
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
different financial institutions and which are subject to change. The following
methods and assumptions were used by the Association in estimating financial
instruments fair value:
Cash and cash equivalents: The balance sheet carrying amounts approximate the
estimated fair values of such assets.
Investment securities: Fair values for investment securities are based on
quoted market prices, if available. If quoted market prices are not available,
fair values are based on quoted market prices of comparable instruments.
Loans: For variable rate loans that reprice frequently and entail no
significant change in credit risk, fair values are based on the carrying values.
The fair values of other loans are estimated based on discounted cash flow
analysis using interest rates currently offered for loans with similar terms to
borrowers of similar credit quality. The carrying amount of accrued interest
approximates its fair value.
Deposit Liabilities: The fair values estimated for demand deposits (interest
and non-interest bearing accounts) are, by definition, equal to the amount
payable on demand at the reporting date (i.e., their carrying amounts). The
carrying amounts of variable rate, fixed-term money market accounts and
certificates of deposit approximate their fair values. Fair values of fixed
rate certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered to a schedule of
aggregated expected maturities. The carrying amount of accrued interest payable
approximates its fair value.
Adoption of Statement of Financial Accounting Standards No. 114 and No. 118,
"Accounting by Creditors for Impairment of a Loan"
In 1996, the Association implemented Statement of Financial Accounting
Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan" and
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures." These statements require that certain impaired
loans be measured based on either the present value of expected future cash
flows discounted at the loan's effective rate, the market price of the loan, or
fair value of the underlying collateral if the loan is collateral dependent.
Adoption of SFAS No. 114 and No. 118 did not have a significant impact on
financial position or results of operations.
Off-Balance Sheet Financial Instruments
- ---------------------------------------
In the ordinary course of business, the Association has entered into off-
balance sheet financial instruments consisting of commitments to extend credit
and letters of credit. Such financial instruments are recorded in the financial
statements when they are funded or related fees are incurred or received.
F-11
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE B - INVESTMENT SECURITIES
The amortized cost and fair values of investment securities as of June 30,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
JUNE 30, 1996
Available for sale
U.S. Government
agency obligations $ 500,000 $ - $ 9,877 $ 490,123
Mortgage-backed and
related securities 3,602,400 9,440 65,259 3,546,581
Other 659,500 - - 659,500
---------- ------- -------- ----------
$4,761,900 $ 9,440 $ 75,136 $4,696,204
========== ======= ======== ==========
Held to maturity
Mortgage-backed and
related securities $2,941,187 $ 314 $141,367 $2,800,134
Other 502,953 - 11,495 491,458
---------- ------- -------- ----------
$3,444,140 $ 314 $152,862 $3,291,592
========== ======= ======== ==========
JUNE 30, 1995
Available for sale
Other $ 620,300 $ - $ - $ 620,300
========== ======= ======== ==========
Held to maturity
U.S. Government
agency obligations $1,003,631 $ - $ 19,568 $ 984,063
Mortgage-backed and
related securities 7,630,711 11,460 166,289 7,475,882
Other 503,935 - 7,372 496,563
---------- ------- -------- ----------
$9,138,277 $11,460 $193,229 $8,956,508
========== ======= ======== ==========
</TABLE>
F-12
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE B - INVESTMENT SECURITIES - CONTINUED
There were no realized gains and losses on investment securities for the years
ended June 30, 1996 and 1994. Gross realized losses on investment securities
held to maturity for the year ended June 30, 1995 were $31,094. There were no
realized gains on sales.
The amortized cost and fair value of debt securities at June 30, 1996, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
cost value
---------- ----------
<S> <C> <C>
Available for sale
Due after one year through five years $ 500,000 $ 490,123
Due after ten years 659,500 659,500
Mortgage-backed securities 3,602,400 3,546,581
---------- ----------
$4,761,900 $4,696,204
========== ==========
Held to maturity
Due after one year through five years $ 502,953 $ 491,458
Mortgage-backed securities 2,941,187 2,800,134
---------- ----------
$3,444,140 $3,291,592
========== ==========
</TABLE>
Securities with approximate carrying values of $1,451,000 and $6,281,000 and
approximate fair values of $1,398,000 and $6,153,000 at June 30, 1996 and 1995,
respectively, were pledged for purposes required or permitted by law.
The Association at December 31, 1995, as permitted by the Financial Accounting
Standards Board, transferred securities with a carrying value of $4,472,012 and
an unrealized loss of $23,531 to available for sale from held to maturity.
F-13
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE C - LOANS
The Association extends credit to customers in North Texas. Collateral on
secured loans generally consists of residential real estate, business
inventories, receivables, equipment, vehicles and liquid assets.
The Association's loans consist of the following at June 30:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
First mortgage loans, primarily single-
family residential $37,499,422 $32,938,984
Single-family construction loans 23,910,222 20,157,945
Installment loans 1,592,972 1,505,411
Savings account loans 618,294 568,550
----------- -----------
Total loans 63,620,910 55,170,890
Less:
Undisbursed portion of (7,138,822) (5,261,806)
construction loans
Net deferred loan origination fees (356,735) (299,023)
Discount on purchased loans (1,306,152) (1,506,032)
Allowance for loan losses (663,970) (639,309)
----------- -----------
Net loans $54,155,231 $47,464,720
=========== ===========
</TABLE>
Changes in the allowance for loan losses are summarized as follows for the years
ended June 30:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Balance at July 1 $639,309 $528,431
Provision charged to income 8,594 186,300
Charge-offs (25,933) (76,922)
Recoveries 42,000 1,500
-------- --------
Balance at June 30 $663,970 $639,309
======== ========
</TABLE>
F-14
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE C - LOANS - CONTINUED
Loan impairment is measured by estimating the expected future cash flows and
discounting them at the respective effective interest rate or by valuing the
underlying collateral.
Impaired loans with carrying values of $593,314 at June 30, 1996 have been
recognized in conformity with SFAS No. 114, as amended by SFAS No. 118. The
average recorded investment in impaired loans during 1996 was $878,200. With
the adoption of SFAS No. 114 effective July 1, 1995, a valuation allowance for
credit losses related to impaired loans was established. The activity in the
allowance is as follows for the year ended June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Balance at July 1, 1995 $ 188,821
Charges to operations for impairment 116,618
Writedown of loans (44,590)
Transfers to performing loans (145,737)
---------
Balance at June 30, 1996 $ 115,112
=========
</TABLE>
This valuation allowance is included in the allowance for loan losses on the
balance sheet.
Cash payments on impaired loans of $15,155 were recognized in interest income
in 1996.
Interest income on nonaccrual loans of $32,097 and $19,009 was recognized for
cash payments received in 1996 and 1995, respectively.
Loans having carrying values of $1,248,247 and $381,658 were transferred to
foreclosed real estate in 1996 and 1995, respectively.
The Bank is not committed to lend additional funds to debtors whose loans have
been modified.
NOTE D - LOAN SERVICING
Mortgage loans serviced for others under the Federal Home Loan Mortgage
Corporation secondary market program are not included in the accompanying
balance sheets. The unpaid principal balances of these loans at June 30, 1996
and 1995 were $953,559 and $1,259,681, respectively. Custodial escrow balances
maintained in connection with the foregoing loan servicing were $25,449 and
$40,308 at June 30, 1996 and 1995, respectively.
F-15
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE E - ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at June 30, 1996 is as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Loans receivable $438,310 $420,482
Investment securities 55,727 73,147
Other 1,088 1,919
-------- --------
$495,125 $495,548
======== ========
</TABLE>
NOTE F - OTHER REAL ESTATE OWNED
Real estate held by the Association at June 30 is as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Foreclosed real estate $793,099 $221,334
Allowance for losses (41,308) (20,478)
-------- --------
$751,791 $200,856
======== ========
</TABLE>
Changes in the allowance for losses for real estate foreclosed for the years
ended June 30 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Balance at beginning of year $ 20,478 $ 214,282
Provision for losses 96,328 30,634
Charge offs (91,032) (241,330)
Recoveries 15,534 16,892
-------- ---------
$ 41,308 $ 20,478
======== =========
</TABLE>
F-16
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE G - PREMISES AND EQUIPMENT
Premises and equipment at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Land and buildings $ 823,795 $ 821,875
Leasehold improvements 179,408 79,064
Furniture, fixtures, and equipment 725,016 601,431
---------- ----------
1,728,219 1,502,370
Less accumulated depreciation and
amortization 589,372 434,381
---------- ----------
$1,138,847 $1,067,989
========== ==========
</TABLE>
The Association leases certain equipment and office space under noncancellable
operating leases. Expenses and future obligations relating to operating leases
are not significant.
NOTE H - DEPOSITS
The aggregate amount of certificates of deposit with a minimum denomination of
$100,000 was approximately $12,078,000 and $8,642,000 at June 30, 1996 and
1995, respectively.
At June 30, 1996, scheduled maturities of certificates of deposit are as
follows:
<TABLE>
<CAPTION>
Year ending June 30,
--------------------
<S> <C>
1997 $37,245,217
1998 10,851,269
1999 1,304,791
2000 743,973
2001 and thereafter 1,959,438
-----------
$52,104,688
===========
</TABLE>
F-17
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE H - DEPOSITS - CONTINUED
Interest expense on deposits for the years ended June 30 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Demand, savings, and NOW deposits $ 165,197 $ 169,881 $ 165,615
Certificates of deposit 2,757,740 1,680,009 1,078,457
---------- ---------- ----------
$2,922,937 $1,849,890 $1,244,072
========== ========== ==========
</TABLE>
NOTE I - ADVANCES FROM FEDERAL HOME LOAN BANK
Pursuant to collateral agreements with the Federal Home Loan Bank (FHLB),
advances are secured by FHLB stock owned by the Association, investment
securities with an estimated fair value of $1,398,000, and qualifying first
mortgage loans in the approximate amount of $33,235,000 at June 30, 1996.
Advances at June 30, 1996 have maturity dates as follows:
<TABLE>
<CAPTION>
During the year
ending June 30,
---------------
<S> <C>
1997 $1,412,771
1998 689,270
1999 284,012
2000 123,336
2001 5,101
Thereafter 324,064
----------
$2,838,554
==========
</TABLE>
Interest expense on advances from the Federal Home Loan Bank amounted to
$320,219, $571,890, and $214,423 for the years ended June 30, 1996, 1995 and
1994, respectively.
F-18
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE J - INCOME TAXES
Deferred income taxes, computed by applying the statutory federal income tax
rate of 34%, resulted from the following temporary differences at June 30:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Deferred tax assets:
Deferred loan fees $ 26,709 $ 88,981
Allowance for loan losses 155,519 202,300
Depreciation 17,515 6,090
Unrealized losses on securities 22,338 -
Other - 8,817
--------- ---------
Gross deferred tax asset 222,081 306,188
Deferred tax liabilities:
Accrual to cash adjustment (70,996) (123,410)
FHLB stock dividends (52,106) (38,778)
--------- ---------
Gross deferred tax liability (123,102) (162,188)
--------- ---------
Net deferred tax asset $ 98,979 $ 144,000
========= =========
</TABLE>
Federal income tax expense consisted of the following for the years ended June
30:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current $499,597 $306,325 $238,563
Deferred 67,359 44,000 47,000
-------- -------- --------
Total income tax expense $566,956 $350,325 $285,563
======== ======== ========
</TABLE>
F-19
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE K - REGULATORY MATTERS
The Association is subject to various regulatory capital requirements
administered by the Office of Thrift Supervision (OTS). Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Association's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Association must meet specific capital guidelines that involve quantitative
measures of the Association's assets, liabilities, and certain off-balance-
sheet items as calculated under regulatory accounting practices. The
Association's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios (set forth in
the table below) of Total risk based and Tier I capital to risk weighted
assets, and of Tier I (core) and tangible capital to adjusted total assets.
Management believes, as of June 30, 1996, that the Association meets all
capital adequacy requirements to which it is subject.
As of May 6, 1996, the most recent notification from the OTS, categorized the
Association as well capitalized under the regulatory framework for prompt
corrective action. There are no conditions or events since that notification
that management believes have changed the institution's category. To be
categorized as well capitalized the Association must maintain minimum Total
risk based, Tier I risk based, and Tier I (core) ratios as set forth in the
table below.
<TABLE>
<CAPTION>
To be well
capitalized under
For capital prompt corrective
Actual adequacy purposes action provisions
------------------ ------------------ ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF JUNE 30, 1996
Total risk based capital $5,422,067 11.92% $3,638,892 >8.0% $4,548,615 >10%
Tier I risk based capital 4,854,629 10.67 1,364,385 >3.0% 2,729,169 > 6%
Tier I (core) capital 4,854,629 7.00 2,079,402 >3.0% 3,465,670 > 5%
Tangible capital 4,854,629 7.00 1,039,705 >1.5% - -
AS OF JUNE 30, 1995
Total risk based capital 4,229,396 10.32 3,279,043 >8.0% 4,098,804 >10%
Tier I risk based capital 3,752,989 9.16 1,229,641 >3.0% 2,459,282 > 6%
Tier I (core) capital 3,752,989 6.05 1,860,348 >3.0% 3,100,581 > 5%
Tangible capital 3,752,989 6.05 930,174 >1.5% - -
</TABLE>
The Association is subject to various liquidity requirements of the OTS. At
June 30, 1996, the amounts of cash and other liquid assets required to meet
those requirements were approximately $2,998,000 and $600,000.
F-20
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE L - OTHER NONINTEREST EXPENSE
Other noninterest expense is summarized as follows for the years ended June 30:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Professional services $140,988 $ 96,255 $ 78,083
Insurance 111,399 82,552 77,172
Advertising 62,672 54,287 37,537
Computer and office supplies 105,734 78,813 66,878
State franchise tax (benefit) (27,014) 37,119 21,499
Postage 29,949 26,012 23,664
Operations of real estate owned 58,157 29,925 39,544
Provision for losses on real estate owned 96,327 30,634 3,635
Automatic teller machine 16,080 15,440 18,928
Dues, fees and subscriptions 13,107 12,814 9,514
Courier expense 23,230 11,216 6,930
Other 47,458 35,500 22,438
-------- -------- --------
$678,087 $510,567 $405,822
======== ======== ========
</TABLE>
NOTE M - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
To meet the financing needs of its customers, the Association is a party to
financial instruments with off-balance-sheet risk. These financial instruments
include commitments to extend credit and standby letters of credit. Those
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the statements of financial
condition. The contract or notional amounts of those instruments reflect the
extent of the Association's involvement in particular classes of financial
instruments.
The Association's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual or notional amount
of those instruments. The Association uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
F-21
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE M - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - CONTINUED
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Association evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if it is deemed necessary by the Association upon extension of
credit, is based on management's credit evaluation of the borrower. Collateral
held varies, but may include accounts receivable, inventory, property, plant,
and equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Association to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. The Association holds
marketable securities as collateral supporting those commitments for which
collateral is deemed necessary.
NOTE N - RELATED PARTY TRANSACTIONS
Certain officers and directors of the Association were customers of and had
other transactions with the Association in the ordinary course of business.
The total amount of loans to such borrowers at June 30, 1996 and 1995 was
approximately $622,000 and $604,000, respectively. During 1996, advances and
repayments were approximately $121,000 and $63,000, respectively.
NOTE O - DIVIDENDS DECLARED
On June 16, 1995, the Board of Directors declared a dividend, payable to
stockholders of record at June 30, 1995, of $.25 per common and preferred
share outstanding. The dividend, amounting to $150,000, was accrued at June
30, 1995.
NOTE P - 401(k) PLAN
The Association has a 401(k) savings plan which covers substantially all full-
time employees who meet the plan's eligibility requirements and elect to
participate. Employees may contribute up to 12% of annual compensation, tax
deferred. The Association, at its discretion, will match up to 7.5% of
employee compensation. For the years ended June 30, 1996 and 1995, the
Association's matching contribution was $26,949 and $26,259, respectively.
F-22
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE Q - CONTINGENCY
In order to recapitalize the Savings Association Insurance Fund (SAIF), Congress
is currently considering legislation which would allow the Federal Deposit
Insurance Corporation to assess a special assessment of approximately 77 to 80
basis points to be imposed on all deposits subject to SAIF assessments, based on
the deposit level as of March 31, 1995. The effect of this assessment on the
Association would be an expense of approximately $360,000 during the year ending
June 30, 1997.
NOTE R - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table provides summary information on the fair value of financial
instruments.
<TABLE>
<CAPTION>
June 30, 1996
----------------------------
Carrying
amount Fair value
------------- -------------
Financial assets:
<S> <C> <C>
Cash and cash equivalents $ 4,074,090 $ 4,074,090
Investment securities available for sale 4,696,204 4,696,204
Investment securities held to maturity 3,444,140 3,291,592
Loans 54,155,231 55,664,671
Accrued interest receivable 495,125 495,125
Financial liabilities:
Deposits (60,694,903) (60,576,468)
Long-term debt (2,838,554) (2,881,102)
</TABLE>
A summary of the notional amounts of the Association's financial instruments
with off-balance-sheet risk at June 30, 1996, follows:
<TABLE>
<CAPTION>
Notional
amount
----------
<S> <C>
Commitments to extend credit $3,318,790
Unfunded portion of interim construction loans $7,138,822
</TABLE>
F-23
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1996, 1995 and 1994
NOTE S - MERGER WITH JEFFERSON SAVINGS BANCORP, INC.
On May 31, 1996, the Association and Jefferson Savings Bancorp, Inc.
(Jefferson) signed a definitive agreement pursuant to which the Association
will merge with First Federal Savings Bank of North Texas (First Federal),
a subsidiary of Jefferson.
Under the terms of the agreement, each of the shares of the Association's
common stock outstanding, par value $2.50 per share, shall be converted into
the right to receive a combination of cash and common stock of Jefferson,
together with any attached preferred share purchase right in an amount equal
to two hundred percent of the per share closing book value of the Association.
Each share of preferred stock, par value $1.00 per share, of the Association
shall be redeemed prior to the closing of the Merger.
The consummation of the agreement is subject to the approval by the
Association's stockholders and by certain federal and state regulatory
authorities, and to certain other conditions. If the merger is approved,
it is expected to close by the fourth quarter of 1996; however, there are
no assurances the agreement will be approved by all relevant parties. This
agreement may be terminated by the mutual written agreement of the parties at
any time prior to the closing date, regardless of whether the stockholders
approve the agreement and merger.
F-24
<PAGE>
APPENDIX A
----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC,
a Texas savings association,
FIRST FEDERAL SAVINGS BANK OF NORTH TEXAS,
a federal savings bank,
and
JEFFERSON SAVINGS BANCORP, INC.,
a Delaware corporation
Dated May 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-1
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE ONE - TERMS OF THE MERGER AND CLOSING
Section 1.01. The Merger.............................................. A-1
Section 1.02. Merging Bank............................................ A-1
Section 1.03. Surviving Bank.......................................... A-1
Section 1.04. Effect of the Merger.................................... A-1
Section 1.05. Merger Consideration; Conversion of Shares.............. A-2
Section 1.06. The Closing............................................. A-4
Section 1.07. Closing Date............................................ A-4
Section 1.08. Exchange Procedures; Surrender of Certificates.......... A-4
Section 1.09. Actions At Closing...................................... A-5
Section 1.10. Tax Consequences........................................ A-6
ARTICLE TWO - REPRESENTATIONS OF TEXAS HERITAGE........................ A-6
Section 2.01. Organization and Capital Stock.......................... A-6
Section 2.02. Authorizations; No Defaults............................. A-7
Section 2.03. Subsidiaries; Partnerships; Joint Ventures.............. A-7
Section 2.04. Financial Information................................... A-7
Section 2.05. Absence of Changes...................................... A-8
Section 2.06. Regulatory Enforcement Matters.......................... A-8
Section 2.07. Tax Matters............................................. A-8
Section 2.08. Litigation.............................................. A-8
Section 2.09. Employment Agreements................................... A-8
Section 2.10. Reports................................................. A-8
Section 2.11. Investment Portfolio.................................... A-9
Section 2.12. Loan Portfolio.......................................... A-9
Section 2.13. Employee Matters and ERISA.............................. A-9
Section 2.14. Title to Properties; Insurance.......................... A-10
Section 2.15. Environmental Matters................................... A-11
Section 2.16. Compliance with Law..................................... A-11
Section 2.17. Brokerage............................................... A-11
Section 2.18. Undisclosed Liabilities................................. A-12
Section 2.19. Statements True and Correct............................. A-12
ARTICLE THREE - REPRESENTATIONS OF JEFFERSON AND FIRST FEDERAL........... A-12
Section 3.01. Organization and Capital Stock.......................... A-12
Section 3.02. Authorization; No Defaults.............................. A-13
Section 3.03. Subsidiaries............................................ A-13
Section 3.04. Financial Information................................... A-13
Section 3.05. Absence of Changes...................................... A-14
Section 3.06. Litigation.............................................. A-14
Section 3.07. Reports................................................. A-14
Section 3.08. Compliance With Law..................................... A-14
Section 3.09. Statements True and Correct............................. A-14
Section 3.10. Brokerage............................................... A-15
Section 3.11. Regulatory Enforcement Matters.......................... A-15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 3.12. Tax Matters............................................ A-15
Section 3.13. Undisclosed Liabilities................................ A-15
ARTICLE FOUR - AGREEMENTS OF TEXAS HERITAGE............................. A-16
Section 4.01. Business in Ordinary Course............................ A-16
Section 4.02. Breaches............................................... A-18
Section 4.03. Submission to Stockholders............................. A-18
Section 4.04. Consents to Contracts and Leases....................... A-19
Section 4.05. Merger Expenses and Related Matters.................... A-19
Section 4.07. Consummation of Agreement.............................. A-19
Section 4.08. Environmental Reports.................................. A-20
Section 4.09. Access to Information.................................. A-20
Section 4.10. Restriction on Resales................................. A-20
ARTICLE FIVE - AGREEMENTS OF JEFFERSON AND FIRST FEDERAL................ A-21
Section 5.01. Regulatory Approvals and Registration Statement........ A-21
Section 5.02. Breaches............................................... A-21
Section 5.03. Consummation of Agreement.............................. A-21
Section 5.04. Employee Benefits...................................... A-21
Section 5.05. Directors and Officers' Liability Insurance and
Indemnification........................................ A-22
Section 5.06. Access to Information.................................. A-23
ARTICLE SIX - CONDITIONS PRECEDENT TO THE MERGER........................ A-23
Section 6.01. Conditions to Jefferson's and First Federal's
Obligations............................................ A-23
Section 6.02. Conditions to Texas Heritage's Obligations............. A-24
ARTICLE SEVEN - TERMINATION OR ABANDONMENT.............................. A-25
Section 7.01. Mutual Agreement....................................... A-25
Section 7.02. Breach of Agreements................................... A-25
Section 7.03. Environmental Reports.................................. A-25
Section 7.04. Failure of Conditions.................................. A-25
Section 7.05. Approval Denial........................................ A-25
Section 7.06. Shareholder Approval Denial............................ A-25
Section 7.07. Regulatory Enforcement Matters......................... A-26
Section 7.08. Automatic Termination.................................. A-26
Section 7.09. Jefferson Average Price................................ A-26
Section 7.10. Termination Fee........................................ A-26
ARTICLE EIGHT - GENERAL................................................. A-27
Section 8.01. Confidential Information............................... A-27
Section 8.02. Publicity.............................................. A-27
Section 8.03. Return of Documents.................................... A-28
Section 8.04. Notices................................................ A-28
Section 8.05. Liabilities............................................ A-29
Section 8.06. Expenses............................................... A-29
Section 8.07. Nonsurvival of Representations and Warranties.......... A-29
Section 8.08. Entire Agreement....................................... A-29
Section 8.09. Headings and Captions.................................. A-29
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C>
Section 8.10. Waiver, Amendment or Modification....................... A-29
Section 8.11. Rules of Construction................................... A-29
Section 8.12. Counterparts............................................ A-29
Section 8.13. Successors and Assigns.................................. A-29
Section 8.14. Governing Law; Assignment............................... A-29
Section 8.15. Employment Agreement.................................... A-30
Section 8.16. Time.................................................... A-30
SIGNATURES............................................................... A-31
EXHIBITS
- --------
EXHIBIT 1.09(a) - Texas Heritage's Legal Opinion Matters
EXHIBIT 1.09(b) - Jefferson's Legal Opinion Matters
EXHIBIT 4.10 - Form of Affiliate Agreement
EXHIBIT 8.15 - Form of Joe L. Williams' Employment Agreement
</TABLE>
SCHEDULES
- ---------
TEXAS HERITAGE'S DISCLOSURE SCHEDULE
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
This is an AGREEMENT AND PLAN OF MERGER (this "Agreement") made May 31,
1996, by and among TEXAS HERITAGE SAVINGS ASSOCIATION/BANC, a Texas savings
association ("Texas Heritage"), FIRST FEDERAL SAVINGS BANK OF NORTH TEXAS, a
federal savings bank ("First Federal"), and JEFFERSON SAVINGS BANCORP, INC., a
Delaware corporation and parent corporation of First Federal ("Jefferson").
In consideration of the premises and the mutual terms and provisions set
forth in this Agreement, the parties agree as follows.
ARTICLE ONE
-----------
TERMS OF THE MERGER AND CLOSING
-------------------------------
SECTION 1.01. THE MERGER. Pursuant to the terms and provisions of this
Agreement and the Home Owners' Loan Act, the regulations of the Office of Thrift
Supervision (the "O.T.S.") promulgated thereunder, the Texas Savings and Loan
Act and the regulations of the Texas Savings and Loan Department (the
"T.S.L.D.") promulgated thereunder (together, the "Corporate Law"), Texas
Heritage shall merge with and into First Federal under the charter of the latter
(the "Merger").
SECTION 1.02. MERGING BANK. Texas Heritage shall be the merging bank
under the Merger, and the corporate identity and existence of Texas Heritage,
separate and apart from First Federal, shall cease on consummation of the
Merger.
SECTION 1.03. SURVIVING BANK. First Federal shall be the surviving bank
in the Merger (sometimes referred to as the "Surviving Bank" when reference is
made as of the Effective Time (as defined in Section 1.07 hereof) or
thereafter). No changes in the Charter or Bylaws of First Federal shall be
effected by the Merger, and the name of the Surviving Bank shall continue to be
"First Federal Savings Bank of North Texas." At the Effective Time, the Charter
of the Surviving Bank shall read in its entirety as does the Charter of First
Federal on the date hereof. Following the Effective Time, if not inconsistent
with or violative of applicable laws and regulations, the branches of the
Surviving Bank attributable to Texas Heritage shall be referred to in signage
and promotional materials as: "Texas Heritage, a division of First Federal
Savings Bank of North Texas."
SECTION 1.04. EFFECT OF THE MERGER. The Merger shall have all of the
effects provided by the Corporate Law. The business of the Surviving Bank shall
be that of a federal savings bank. This business shall be conducted by the
Surviving Bank at its main office which shall continue to be located at 116 East
South Street, Longview, Texas, and at its legally established branches, which
shall include all of the existing locations of Texas Heritage. The present Board
of Directors of First Federal shall continue to serve as the Board of Directors
of the Surviving Bank until the next annual meeting or until such time as their
successors have been elected and have qualified. In addition, each of the
present members of the Board of Directors of Texas Heritage shall, at his or her
option as communicated to Jefferson and First Federal not less than thirty (30)
days prior to the Effective Time, serve as an advisory director for the branches
of the Surviving Bank located in the Dallas-Fort Worth metroplex for a period of
three years from the Effective Time. Each such advisory director shall receive a
director's fee commensurate with the fee such director receives from Texas
Heritage as of the date of this Agreement.
<PAGE>
All assets as they exist at the Effective Time shall pass to and vest in the
Surviving Bank without any conveyance or other transfer.
SECTION 1.05. MERGER CONSIDERATION; CONVERSION OF SHARES.
------------ ------------------------------------------
(a) At the Effective Time, each share of common stock, par value $2.50 per
share, of Texas Heritage (the "Texas Heritage Common") issued and outstanding
immediately prior to the Effective Time, other than shares any holders of which
have duly exercised and perfected their dissenters' rights under the Corporate
Law, shall, by virtue of the Merger and without any action on the part of the
holders thereof, be converted into the right to receive a combination, in the
proportions described in Section 1.05(c) hereof, of cash and common stock, par
value $0.01 per share, of Jefferson, together with any attached preferred share
purchase rights, (the "Jefferson Common") in an amount equal to two hundred
percent (200%) of the per share Closing Book Value (as defined in Section
1.05(b) hereof) of Texas Heritage (such aggregate amount of cash and Jefferson
Common is hereinafter referred to as the "Merger Consideration").
(b) The term "Closing Book Value" shall mean the amount of the
consolidated shareholders' equity accounts, exclusive of preferred stock,
of Texas Heritage, reduced by any and all accruals, expenses, charge-offs,
deductions or adjustments to the accounts of Texas Heritage relative to each
of the following:
(i) charges, provisions or accruals incurred pursuant to Section
4.05 hereof; and
(ii) the amount by which Texas Heritage's aggregate legal and
accounting fees and expenses relative to the transactions contemplated by
this Agreement exceeds Fifty Thousand Dollars ($50,000).
Notwithstanding the foregoing, any amounts paid by, or accrued on the books of,
Texas Heritage relative to any special assessment(s) levied by the Federal
Deposit Insurance Corporation (the "F.D.I.C.") on the deposits of Texas Heritage
through the Closing Date to recapitalize the Savings Association Insurance Fund
shall be added to the Closing Book Value.
The Closing Book Value shall be determined as of the last day of the month
immediately preceding the month in which the Closing Date (as defined in Section
1.07 hereof) occurs and shall be determined by the accounting firm of Grant
Thornton LLP in accordance with generally accepted accounting principles
consistently applied ("GAAP"), which such determination of Closing Book Value
shall be verified by KPMG Peat Marwick LLP or such other accounting firm as
Jefferson shall designate.
(c) Not more than one half of the total Merger Consideration received by
all shareholders of Texas Heritage shall be payable in cash (the "Cash
Component"), and the remaining portion of the Merger Consideration shall be
payable in shares of Jefferson Common (the "Stock Component"). The number of
shares of Jefferson Common issued in the Merger will equal the quotient of (A)
divided by (B), where (A) equals one-half of the value of the Merger
Consideration and (B) equals the average per share closing price of Jefferson
Common as reported on the Nasdaq Stock Market's National Market ("Nasdaq") for
the twenty (20) trading days immediately preceding the 5th calendar day prior to
the date on which the Effective Time occurs. No fractional shares of Jefferson
Common shall be issued and, in lieu thereof, holders of shares of Texas Heritage
Common who would otherwise be entitled to a fractional share interest in
Jefferson Common (after taking into account all shares of Texas Heritage Common
held
A-2
<PAGE>
by such holder) shall be paid an amount in cash (which such cash shall be added
to, and considered a part of, the Cash Component) in an amount equal to the
product of such fractional share interest and the closing price of a share of
Jefferson Common on Nasdaq on the business day immediately preceding the date on
which the Effective Time occurs. Notwithstanding the foregoing, the number of
whole shares of Jefferson Common issued to each shareholder of Texas Heritage
will be increased, as necessary, and the Cash Component of the Merger
Consideration payable to each shareholder of Texas Heritage will be decreased,
as necessary, such that the aggregate value of the Stock Component, determined
as of the Closing Date, will be not less than 50% of the aggregate Merger
Consideration payable to all shareholders of Texas Heritage.
(d) At the Effective Time, all of the outstanding shares of Texas Heritage
Common, by virtue of the Merger and without any action on the part of the
holders thereof, shall no longer be outstanding and shall be canceled and
retired and shall cease to exist, and each holder of any certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Texas Heritage Common (the "Certificates") shall
thereafter cease to have any rights with respect to such shares, except the
right of such holders to receive, without interest, the Merger Consideration
upon the surrender of such Certificate or Certificates in accordance with
Section 1.08 hereof.
(e) Each share of preferred stock, par value $1.00 per share, of Texas
Heritage (the "Texas Heritage Preferred") outstanding immediately prior to the
Effective Time shall be converted into one share of preferred stock of First
Federal having the same rights, preferences and designations as the Texas
Heritage Preferred.
(f) Each share of common stock, par value $0.01 per share, of First
Federal ("First Federal Common") outstanding immediately prior to the Effective
Time shall remain outstanding unaffected by the Merger.
(g) If, between the date hereof and the Effective Time, a share of
Jefferson Common shall be changed into a different number of shares of Jefferson
Common or a different class of shares by reason of reclassification,
recapitalization, splitup, exchange of shares or readjustment, or if a stock
dividend thereon shall be declared with a record date within such period, then
the number of shares of Jefferson Common into which a share of Texas Heritage
Common will be converted pursuant to Sections 1.05(a) and 1.05(c) hereof will be
appropriately and proportionately adjusted so that each shareholder of Texas
Heritage shall be entitled to receive such fraction of a share or such number of
shares of Jefferson Common as such shareholder would have received pursuant to
such reclassification, recapitalization, splitup, exchange of shares or
readjustment or as a result of such stock dividend had the record date therefor
been immediately following the Effective Time of the Merger.
(h) If holders of Texas Heritage Common are entitled to and do object to
the Merger and demand payment of the value of their shares under the Corporate
Law, any issued and outstanding shares of Texas Heritage Common held by an
objecting holder shall not be converted as described in this Section 1.05 but
from and after the Effective Time shall represent only the right to receive such
value as may be determined to be due to such objecting holder pursuant to the
Corporate Law; provided, however, that each share of Texas Heritage Common
outstanding immediately prior to the Effective Time and held by an objecting
holder who shall, after the Effective Time, either withdraw his or her demand
for payment of value or lose his or her right to so object shall have only such
rights as are provided under the Corporate Law.
A-3
<PAGE>
SECTION 1.06. THE CLOSING. The closing of the Merger (the "Closing")
shall take place at the main offices of Jefferson at 10:00 A.M. Central Time on
the Closing Date described in Section 1.07 of this Agreement.
SECTION 1.07. CLOSING DATE. The Closing shall take place at the close of
business on the last business day of the month during which each of the
conditions in Sections 6.01 and 6.02 is satisfied or waived by the appropriate
party or on such other date after such satisfaction or waiver as Jefferson and
Texas Heritage may agree (the "Closing Date"). The effective time of the Merger
(the "Effective Time") shall be the time of the endorsement of the Articles of
Combination by the Secretary of the O.T.S., which the parties shall use their
best efforts to cause to occur on the Closing Date.
SECTION 1.08. EXCHANGE PROCEDURES; SURRENDER OF CERTIFICATES.
(a) Boatmen's Trust Company shall act as Exchange Agent in the Merger
(the "Exchange Agent").
(b) As soon as reasonably practicable after the Effective Time, and in no
event later than five (5) business days thereafter, the Exchange Agent shall
mail or cause to be delivered to each record holder of any Certificate or
Certificates whose shares were converted into the right to receive the Merger
Consideration, a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Jefferson may reasonably specify)
(each such letter, the "Merger Letter of Transmittal") and instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender to the Exchange Agent of a Certificate, together
with a Merger Letter of Transmittal duly executed and any other required
documents, the holder of such Certificate shall be entitled to receive in
exchange therefor solely the Merger Consideration. No interest on the Merger
Consideration issuable upon the surrender of the Certificates shall be paid or
accrued for the benefit of holders of Certificates. If the Merger Consideration
is to be issued to a person other than a person in whose name a surrendered
Certificate is registered, it shall be a condition of issuance that the
surrendered Certificate shall be properly endorsed or otherwise in proper form
for transfer and that the person requesting such issuance shall pay to the
Exchange Agent any required transfer or other taxes or establish to the
reasonable satisfaction of the Exchange Agent that such tax has been paid or is
not applicable.
(c) At any time following six (6) months after the Effective Time,
Jefferson shall be entitled to terminate the Exchange Agent relationship, and
thereafter holders of Certificates shall be entitled to look only to Jefferson
(subject to abandoned property, escheat or other similar laws) with respect to
the Merger Consideration issuable upon surrender of their Certificates.
(d) No dividends that are otherwise payable on shares of Jefferson Common
constituting the Stock Component of the Merger Consideration shall be paid to
persons entitled to receive such shares of Jefferson Common until such persons
surrender their Certificates. Upon such surrender, there shall be paid to the
person in whose name the shares of Jefferson Common shall be issued any
dividends which may have become payable with respect to such shares of Jefferson
Common (without interest and less the amount of taxes, if any, which may have
been imposed thereon), between the Effective Time and the time of such
surrender.
A-4
<PAGE>
(e) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by Jefferson, the posting by such
person of a bond in such amount as Jefferson may determine is reasonably
necessary as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration deliverable in
respect thereof pursuant to this Agreement.
SECTION 1.09. ACTIONS AT CLOSING.
(a) At the Closing, Texas Heritage shall deliver to Jefferson and First
Federal:
(i) a certified copy of the Charter of Texas Heritage;
(ii) a Certificate signed by an appropriate officer of Texas
Heritage stating that (A) each of the representations and warranties
contained in Article Two is true and correct in all material respects at
the time of the Closing with the same force and effect as if such
representations and warranties had been made at Closing, (B) all of the
conditions set forth in Sections 6.01(b) and 6.01(d) (but, with respect to
the latter section, only to approvals which Texas Heritage is required by
law to obtain) have been satisfied or waived as provided therein and (C)
this Agreement has been approved by the requisite vote of Texas Heritage's
stockholders in accordance with the Corporate Law and Texas Heritage's
articles of association and bylaws;
(iii) a certified copy of the resolutions of Texas Heritage's
Board of Directors and stockholders, as required for valid approval of the
execution of this Agreement and the consummation of the Merger and the
other transactions contemplated hereby;
(iv) Certificates issued by each of the O.T.S. and the T.S.L.D.,
dated a recent date, as to the good standing and/or existence of Texas
Heritage;
(v) Articles of Combination executed by Texas Heritage, reflecting
the terms and provisions of this Agreement and in proper form for filing
with the O.T.S. and the T.S.L.D. in order to cause the Merger to become
effective at Closing pursuant to the Corporate Law; and
(vi) a legal opinion from counsel for Texas Heritage, in form
reasonably acceptable to Jefferson's counsel, opining with respect to the
matters listed on Exhibit 1.09(a) hereto.
(b) At the Closing, Jefferson and First Federal shall deliver to Texas
Heritage:
(i) a Certificate signed by an appropriate officer of Jefferson and
First Federal stating that (A) each of the representations and warranties
contained in Article Three is true and correct in all material respects at
the time of the Closing with the same force and effect as if such
representations and warranties had been made at Closing, and (B) all of the
conditions set forth in Sections 6.02(b) and 6.02(d) (but only with respect
to approvals other than by Texas Heritage's shareholders) have been
satisfied or waived as provided therein;
(ii) a certified copy of the resolutions of Jefferson's Board of
Directors authorizing the execution of this Agreement and the consummation
of the transactions contemplated hereby;
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(iii) Certificate issued by Secretary of State of the State of
Delaware, dated a recent date as to the good standing of Jefferson, and
certificates issued by the O.T.S. and the T.S.L.D., dated a recent date,
as to the good standing and/or existence of First Federal;
(iv) a certified copy of the resolutions of First Federal's Board
of Directors and sole shareholder, as required for valid approval of the
execution of this Agreement and the consummation of the transactions
contemplated hereby;
(v) Articles of Combination executed by First Federal, reflecting
the terms and provisions of this Agreement and in proper form for filing
with the O.T.S. and the T.S.L.D. in order to cause the Merger to become
effective at Closing pursuant to the Corporate Law; and
(vi) a legal opinion from counsel for Jefferson and First Federal,
in form reasonably acceptable to Texas Heritage's counsel, opining with
respect to the matters listed on Exhibit 1.09(b) hereto.
(c) At the Closing, Jefferson shall deposit with the Exchange Agent
pursuant to the Exchange Agreement immediately available funds in the amount of
the aggregate Cash Component of the Merger Consideration for the Texas Heritage
Common and certificates representing the shares of Jefferson Common to be issued
pursuant to Section 1.05 in exchange for outstanding shares of Texas Heritage
Common.
SECTION 1.10. TAX CONSEQUENCES. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code.
ARTICLE TWO
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REPRESENTATIONS OF TEXAS HERITAGE
---------------------------------
Texas Heritage hereby makes the following representations and warranties:
SECTION 2.01. ORGANIZATION AND CAPITAL STOCK.
(a) Texas Heritage is a state chartered, stock-form savings association
duly organized, validly existing and in good standing under the laws of the
State of Texas with full corporate power to own all of its properties and
assets, to incur all of its liabilities and to carry on its business as
presently conducted.
(b) The authorized capital stock of Texas Heritage consists of (i)
1,880,000 shares of Texas Heritage Common, of which, as of the date hereof,
561,000 shares are issued and outstanding, and (ii) 120,000 shares of preferred
stock, par value $1.00 per share (the "Texas Heritage Preferred"), of which, as
of the date hereof, 39,000 shares are issued and outstanding. All of the issued
and outstanding shares of Texas Heritage Common are duly and validly issued and
outstanding and are fully paid and non-assessable. None of the outstanding
shares of Texas Heritage Common has been issued in violation of any preemptive
rights of the current or past stockholders of Texas Heritage. As of the date
hereof, Texas
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Heritage has neither granted nor is there outstanding any warrants, stock
options or the like representing the right to acquire any shares of Texas
Heritage Common. Except as disclosed in Section 2.01(b) of that certain
confidential writing delivered by Texas Heritage to Jefferson and First Federal
and executed by each of Texas Heritage, Jefferson and First Federal concurrently
with the delivery and execution of this Agreement (the "Disclosure Schedule"),
each Certificate representing shares of Texas Heritage Common issued by Texas
Heritage in replacement of any Certificate theretofore issued by it which was
claimed by the record holder thereof to have been lost, stolen or destroyed was
issued by Texas Heritage only upon receipt of an affidavit of lost stock
certificate and an indemnity agreement to indemnify Texas Heritage against any
claim that may be made against it on account of the alleged loss, theft or
destruction of any such Certificate or the issuance of such replacement
Certificate.
(c) Except as set forth in subsection 2.01(b), there are no shares of
capital stock or other equity securities of Texas Heritage outstanding and no
outstanding options, warrants, rights to subscribe for, calls, or commitments of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of the capital stock of Texas Heritage or contracts,
commitments, understandings or arrangements by which Texas Heritage is or may be
obligated to issue additional shares of its capital stock or options, warrants
or rights to purchase or acquire any additional shares of its capital stock.
SECTION 2.02. AUTHORIZATIONS; NO DEFAULTS. Texas Heritage's Board of
Directors has, by all appropriate action, approved this Agreement and the Merger
and authorized the execution hereof on its behalf by its duly authorized
officers and, subject to the approval of this Agreement by the stockholders of
Texas Heritage and to receipt of all regulatory approvals, the performance by
Texas Heritage of its obligations hereunder. Nothing in the charter or bylaws
of Texas Heritage, as amended, or any other agreement, instrument, decree,
proceeding, law or regulation (except as specifically referred to in or
contemplated by this Agreement) by or to which it is bound or subject which is
material to Texas Heritage or to the Merger would prohibit or inhibit Texas
Heritage from consummating this Agreement and the Merger on the terms and
conditions herein contained. This Agreement has been duly and validly executed
and delivered by Texas Heritage and constitutes a legal, valid and binding
obligation of Texas Heritage, enforceable against Texas Heritage in accordance
with its terms subject to the provisions of bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally from time to time in effect, and equitable
principles relating to the granting of specific performance and other equitable
remedies as a matter of judicial discretion. Texas Heritage is not in default
in any material respect under or in violation in any material respect of any
provision of its charter or articles of incorporation, bylaws, or any promissory
note, indenture or any evidence of indebtedness or security therefor, lease,
contract, purchase or other commitment or any other agreement which is material
to Texas Heritage.
SECTION 2.03. SUBSIDIARIES; PARTNERSHIPS; JOINT VENTURES. Except as may
be disclosed in Section 2.03 of the Disclosure Schedule, Texas Heritage has no
subsidiaries and is not a party to any partnership or joint venture.
SECTION 2.04. FINANCIAL INFORMATION. The audited balance sheets of Texas
Heritage as of June 30, 1995 and 1994, and related audited statements of income,
changes in stockholders' equity and cash flows for the three (3) years ended
June 30, 1995, together with the notes thereto, and the unaudited balance sheet
of Texas Heritage as of March 31, 1996, and the related unaudited income
statement and statement of changes in shareholders' equity and cash flows for
the nine (9) months then ended, all of which are included in Section 2.04 of the
Disclosure Schedule (together, the "Texas Heritage Financial
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Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as disclosed
therein) and fairly present in all material respects the financial position
and the results of operations, changes in stockholders' equity and cash flows
of Texas Heritage as of the dates and for the periods indicated (subject, in the
case of interim financial statements, to normal recurring year-end adjustments,
none of which will be material, and the absence of footnotes).
SECTION 2.05. ABSENCE OF CHANGES. Since June 30, 1995, there has not been
any material adverse change in the financial condition, the results of
operations or the business or prospects of Texas Heritage, nor have there been
any events or transactions having such a material adverse effect which should be
disclosed in order to make the Texas Heritage Financial Statements not
misleading. Since the date of the most recent O.T.S. and T.S.L.D. examination
reports, there has been no material adverse change in the financial condition,
the results of operations or the business or prospects of Texas Heritage.
Notwithstanding the foregoing, any actions taken or changes made by Texas
Heritage pursuant to Section 4.05 hereof shall not, individually or in the
aggregate, be deemed to be a material adverse change in the financial condition,
the results of operations or the business or prospects of Texas Heritage.
SECTION 2.06. REGULATORY ENFORCEMENT MATTERS. Except as may be disclosed
in Section 2.06 of the Disclosure Schedule, Texas Heritage is not subject to,
and has not received any notice or advice that it may become subject to, any
order, agreement or memorandum of understanding with any federal or state agency
charged with the supervision or regulation of thrifts or thrift holding
companies or engaged in the insurance of thrifts deposits or any other
governmental agency having supervisory or regulatory authority with respect to
Texas Heritage.
SECTION 2.07. TAX MATTERS. Except as may be disclosed in Section 2.07 of
the Disclosure Schedule, Texas Heritage has filed all federal, state and, to the
best knowledge of Texas Heritage, material local tax returns due in respect of
any of its business or properties in a timely fashion and has paid or made
provision for all amounts due as shown on such returns. All such returns fairly
reflect the information required to be presented therein. All provisions for
accrued but unpaid taxes contained in the Texas Heritage Financial Statements
were made in accordance with generally accepted accounting principles and in the
aggregate do not materially fail to provide for anticipated tax liabilities.
SECTION 2.08. LITIGATION. Except as may be disclosed in Section 2.08 of
the Disclosure Schedule, there is no litigation, claim or other proceeding
pending or, to the knowledge of Texas Heritage, threatened, against Texas
Heritage, or of which the property of Texas Heritage is or would be subject.
SECTION 2.09. EMPLOYMENT AGREEMENTS. Except as may be disclosed in
Section 2.09 of the Disclosure Schedule, Texas Heritage is not a party to and
is not bound by any contract for the employment, retention or engagement of any
officer, employee, agent, consultant or other person or entity which, by its
terms, is not terminable by Texas Heritage on thirty (30) days written notice
or less without the payment of any amount by reason of such termination. A true,
accurate and complete copy of each such agreement is included in Section 2.09 of
the Disclosure Schedule.
SECTION 2.10. REPORTS. Except as may be disclosed in Section 2.10 of the
Disclosure Schedule, since January 1, 1991, Texas Heritage has filed all reports
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the O.T.S., (ii) any applicable
state securities or banking or thrift authorities, and (iii) any other
governmental authority with jurisdiction over Texas Heritage. As of their
respective dates, each of such reports and documents, including the financial
statements, exhibits and schedules thereto, complied in all material respects
with
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the relevant statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they were filed, and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 2.11. INVESTMENT PORTFOLIO. All United States Treasury
securities, obligations of other United States Government agencies and
corporations, obligations of States and political subdivisions of the United
States and other investment securities held by Texas Heritage, as reflected in
the latest balance sheet of Texas Heritage included in the Texas Heritage
Financial Statements, are carried in the aggregate at no more than cost adjusted
for amortization of premiums and accretion of discounts, except as otherwise
required by FASB 115.
SECTION 2.12. LOAN PORTFOLIO. Except as may be disclosed in Section 2.12
of the Disclosure Schedule, to the best knowledge of Texas Heritage, (i) all
loans and discounts shown on the Texas Heritage Financial Statements at March
31, 1996 or which were entered into after March 31, 1996, but before the Closing
Date, were and will be made in all material respects for good, valuable and
adequate consideration in the ordinary course of the business of Texas Heritage,
in accordance in all material respects with sound banking practices, and are not
subject to any known defenses, setoffs or counterclaims, including without
limitation any such as are afforded by usury or truth in lending laws, except as
may be provided by bankruptcy, insolvency or similar laws or by general
principles of equity that would materially affect the value of such loans or
discounts; (ii) the notes or other evidences of indebtedness evidencing such
loans and all forms of pledges, mortgages and other collateral documents and
security agreements are and will be, in all material respects, enforceable
(except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting creditor's rights and except as may be limited by the exercise of
judicial discretion in applying principles of equity), valid, true and genuine
and what they purport to be; and (iii) Texas Heritage has complied and will
prior to the Closing Date comply with all laws and regulations relating to such
loans, or to the extent there has not been such compliance, such failure to
comply will not materially interfere with the collection of a material amount of
such loans.
SECTION 2.13. EMPLOYEE MATTERS AND ERISA.
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(a) Except as may be disclosed in Section 2.13(a) of the Disclosure
Schedule, Texas Heritage has not entered into any collective bargaining
agreement with any labor organization with respect to any group of employees of
Texas Heritage and to the knowledge of Texas Heritage there is no present effort
nor existing proposal to attempt to unionize any group of employees of Texas
Heritage.
(b) Except as may be disclosed in Section 2.13(b) of the Disclosure
Schedule, (i) Texas Heritage is and has been in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation, any
such laws respecting employment discrimination and occupational safety and
health requirements, and Texas Heritage is not engaged in any unfair labor
practice; (ii) there is no unfair labor practice complaint against Texas
Heritage pending or, to the knowledge of Texas Heritage, threatened before the
National Labor Relations Board; (iii) there is no labor dispute, strike,
slowdown or stoppage actually pending or, to the knowledge of Texas Heritage,
threatened against or directly affecting Texas Heritage; and (iv) Texas Heritage
has not experienced any work stoppage or other labor difficulty during the past
five (5) years that has had a material adverse effect on Texas Heritage's
business.
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(c) Except as may be disclosed in Section 2.13(c) of the Disclosure
Schedule, Texas Heritage does not maintain, contribute to or participate in or
have any liability under any employee benefit plans, as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including any plans intended to be qualified under Section 401(a) of the Code,
or any nonqualified employee benefit plans or deferred compensation, bonus,
stock or incentive plans, or other employee benefit or fringe benefit programs
for the benefit of former or current employees of Texas Heritage (the "Employee
Plans"). No present or former employee of Texas Heritage has been charged with
breaching nor has breached a fiduciary duty under any of the Employee Plans.
Except as may be disclosed in Section 2.13(c) of the Disclosure Schedule, Texas
Heritage does not participate in, nor has it in the past five (5) years
participated in, nor has it any present or future obligation or liability under,
any multiemployer plan (as defined at Section 3(37) of ERISA). Except as may be
disclosed in Section 2.13(c) of the Disclosure Schedule, Texas Heritage does not
maintain, contribute to, or participate in, any plan that provides health, major
medical, disability or life insurance benefits to former employees of Texas
Heritage except as provided in Section 4980B of the Internal Revenue Code of
1986, as amended (the "Code").
(d) Except as may be disclosed in Section 2.13(d) of the Disclosure
Schedule, (i) Texas Heritage does not maintain, nor has it maintained for the
past five (5) years, any Employee Plans subject to Title IV of ERISA or Section
412 of the Code; (ii) no reportable event (as defined in Section 4043 of ERISA)
has occurred with respect to any Employee Plans as to which a notice would be
required to be filed with the Pension Benefit Guaranty Corporation; (iii) no
claim is pending, and Texas Heritage has not received notice of any threatened
or imminent claim with respect to any Employee Plan (other than a routine claim
for benefits for which plan administrative review procedures have not been
exhausted) for which Texas Heritage would be liable after June 30, 1995, except
as will be reflected in future financial statements of Texas Heritage; (iv)
Texas Heritage does not have any liabilities for excise taxes under Sections
4971, 4975, 4976, 4977, 4979 or 4980B of the Code or for a fine under Section
502 of ERISA with respect to any Employee Plan; and (v) all Employee Plans have
been operated, administered and maintained in all material respects in
accordance with the terms thereof and in material compliance with the
requirements of all applicable laws, orders, rules and regulations, including,
without limitation, ERISA and the Code.
(e) Except as may be disclosed in Section 2.13(e) of the Disclosure
Schedule, each benefit plan maintained by Texas Heritage for the benefit of
its directors, officers and employees (including, but not limited to, defined
contribution or savings plans and deferred compensation plans) is fully funded
and, except with respect to the vested rights of participants in any such plan,
unencumbered.
SECTION 2.14. TITLE TO PROPERTIES; INSURANCE. Except as may be disclosed
in Section 2.14 of the Disclosure Schedule, Texas Heritage has good, marketable
and insurable title, free and clear of all liens, charges and encumbrances
(except taxes which are a lien but not yet payable and liens, charges or
encumbrances reflected in the Texas Heritage Financial Statements and easements,
rights-of-way, and other restrictions which are not material and further
excepting in the case of Other Real Estate Owned ("O.R.E.O."), as such real
estate is internally classified on the books of Texas Heritage, rights of
redemption under applicable law) to all real properties used by Texas Heritage
in its main banking office and branch facility operations and all other real
properties reflected on the Texas Heritage Financial Statements as being owned
by it. All leasehold interests used by Texas Heritage in its thrift operations
are held pursuant to lease agreements which are valid and enforceable in
accordance with their terms (except as may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting creditor's rights and except as may
be limited by the exercise of judicial discretion in applying principles
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of equity). To the best knowledge of Texas Heritage, all such properties comply
in all material respects with all applicable private agreements, zoning
requirements and other governmental laws and regulations relating thereto and
there are no condemnation proceedings pending or, to the knowledge of Texas
Heritage, threatened with respect to such properties. Texas Heritage has valid
title or other ownership or license rights under licenses to all material
intangible personal or intellectual property used by Texas Heritage in its
business, free and clear of any claim, defense or right of any other person or
entity which is material to such property, subject only to rights of the
licensors pursuant to applicable license agreements, which rights do not
materially adversely interfere with the use of such property. All material
insurable properties owned or held by Texas Heritage are insured by the title
insurers listed on Schedule 2.14 of the Disclosure Schedule in such amounts and
against fire and other risks insured against by extended coverage and public
liability insurance, as is customary with thrift institutions of the same size
and in the same geographic area.
SECTION 2.15. ENVIRONMENTAL MATTERS.
(a) As used in this Agreement, "Environmental Laws" means all local,
state and federal environmental, health and safety laws and regulations in
all jurisdictions in which Texas Heritage has done business or owned property,
including, without limitation, the Federal Resource Conservation and Recovery
Act, the Federal Comprehensive Environmental Response, Compensation and
Liability Act, the Federal Clean Water Act, the Federal Clean Air Act, and the
Federal Occupational Safety and Health Act.
(b) Except as disclosed in Section 2.15(b) of the Disclosure Schedule,
neither the conduct nor operation of Texas Heritage nor any condition of any
property presently or previously owned, leased or operated by it violates or
violated Environmental Laws in any respect material to the business of Texas
Heritage and no condition has existed or event has occurred with respect to it
or any such property that, with notice or the passage of time, or both, would
constitute a violation material to the business of Texas Heritage of
Environmental Laws or obligate (or potentially obligate) Texas Heritage to
remedy, stabilize, neutralize or otherwise alter the environmental condition of
any such property where the aggregate cost of such actions would be material to
Texas Heritage. Except as may be disclosed in Section 2.15(b) of the Disclosure
Schedule, Texas Heritage has not received any notice from any person or entity
that Texas Heritage or the operation or condition of any property ever owned,
leased or operated by it are or were in violation of any Environmental Laws or
that it is responsible (or potentially responsible) for remedying, or the
cleanup of, any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on or beneath any such property.
(c) Except as disclosed in Section 2.15(c) of the Disclosure Schedule,
Texas Heritage has not received notice and does not have knowledge that any
property in which Texas Heritage has a security interest, lien or other
encumbrance violates or violated Environmental Laws in any material respect.
SECTION 2.16. COMPLIANCE WITH LAW. Texas Heritage has all licenses,
franchises, permits and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects and is in
compliance in all material respects with all applicable laws and regulations.
SECTION 2.17. BROKERAGE. There are no claims or agreements for brokerage
commissions, finders' fees, or similar compensation in connection with the
transactions contemplated by this Agreement payable by Texas Heritage.
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SECTION 2.18. UNDISCLOSED LIABILITIES. Texas Heritage has no material
liability, whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and whether due or
to become due (and there is no past or present fact, situation, circumstance,
condition or other basis for any present or future action, suit or proceeding,
hearing, charge, complaint, claim or demand against Texas Heritage giving rise
to any such liability), except (i) for liabilities set forth in the Texas
Heritage Financial Statements, and (ii) as may be disclosed in Section 2.18 of
the Disclosure Schedule.
SECTION 2.19. STATEMENTS TRUE AND CORRECT. None of the information
supplied or to be supplied by Texas Heritage for inclusion in (i) the
Registration Statement (as defined in Section 4.06 hereof), (ii) the Proxy
Statement/Prospectus (as defined in Section 4.03 hereof), and (iii) any document
to be filed with the Securities and Exchange Commission (the "S.E.C.") or any
banking or regulatory authority in connection with the transactions contemplated
by this Agreement, will, at the respective times such documents are filed, and,
in the case of the Registration Statement, when it becomes effective, and, with
respect to the Proxy Statement/Prospectus, when first mailed to the stockholders
of Texas Heritage, be false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements
therein not misleading, or, in the case of the Proxy Statement/Prospectus or
any amendment thereof or supplement thereto, at the time of the Stockholders'
Meeting (as defined in Section 4.03 hereof), be false or misleading with respect
to any material fact, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
any proxy for the Stockholders' Meeting. All documents that Texas Heritage is
responsible for filing with the O.T.S. or any other regulatory authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable law and the applicable
rules and regulations thereunder.
ARTICLE THREE
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REPRESENTATIONS OF JEFFERSON AND FIRST FEDERAL
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Jefferson and First Federal, as applicable, hereby make the following
representations and warranties:
SECTION 3.01. ORGANIZATION AND CAPITAL STOCK.
(a) Jefferson is a corporation duly incorporated, validly existing, and in
good standing under the laws of the State of Delaware with full corporate power
and authority to own all of its properties and assets, to incur all of its
liabilities and to carry on its business as it is now being conducted. First
Federal is a federal savings bank duly organized, validly existing and in good
standing under the laws of the United States with full corporate power and
authority to own all of its properties and assets, to incur all of its
liabilities and to carry on its business as it is now being conducted.
(b) The authorized capital stock of Jefferson consists of (i) 20,000,000
shares of Jefferson Common, of which, as of March 31, 1996, 4,173,563 shares
were issued and outstanding, and (ii) 5,000,000 shares of preferred stock, par
value $0.01 per share, none of which have been issued or are outstanding. All of
the issued and outstanding shares of Jefferson Common are duly and validly
issued and outstanding and are fully paid and non-assessable and were not issued
in violation of any preemptive rights.
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(c) First Federal has authorized capital of 2,000,000 shares of First
Federal Common. As of the date hereof, 1,000 shares of First Federal Common are
issued and outstanding, fully paid and non-assessable and owned by Jefferson and
were not issued in violation of any preemptive rights.
(d) The shares of Jefferson Common that are to be issued to the
shareholders of Texas Heritage pursuant to the Merger have been duly authorized
and, when so issued in accordance with the terms of this Agreement, will be
validly issued and outstanding, fully paid and nonassessable, with no personal
liability attaching to the ownership thereof and will not have been issued in
violation of any preemptive rights.
SECTION 3.02. AUTHORIZATION; NO DEFAULTS. The Board of Directors of each
of Jefferson and First Federal has, by all appropriate action, approved this
Agreement and the Merger and authorized the execution hereof on its behalf by
its duly authorized officers and the performance by it of its obligations
hereunder. Nothing in the certificate of incorporation or bylaws of Jefferson
and First Federal, as amended, or any other agreement, instrument, decree,
proceeding, law or regulation (except as specifically referred to in or
contemplated by this Agreement) by or to which it or any of its subsidiaries are
bound or subject would prohibit or inhibit Jefferson or First Federal from
entering into and consummating this Agreement and the Merger on the terms and
conditions herein contained. This Agreement has been duly and validly executed
and delivered by Jefferson and First Federal and constitutes a legal, valid and
binding obligation of Jefferson and First Federal, enforceable against Jefferson
and First Federal in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or other laws affecting creditors rights generally
or the rights of creditors of savings institutions, the accounts of which
savings institutions are insured by the Savings Association Insurance Fund or
laws relating to the safety and soundness of insured financial institutions and
by judicial discretion in applying principles of equity, and no other corporate
acts or proceedings are required to be taken by Jefferson or First Federal to
authorize the execution, delivery and performance of this Agreement. Except for
the requisite approvals of the O.T.S., the T.S.L.D. and the Board of Governors
of the Federal Reserve System, no notice to, filing with, authorization by, or
consent or approval of, any federal or state regulatory authority is necessary
for the execution and delivery of this Agreement or consummation of the Merger
by Jefferson or First Federal. Jefferson and First Federal are not in default
under or in violation of any provision of their respective Charter or Articles
of Incorporation, by-laws or any promissory note, indenture or any evidence of
indebtedness or security therefor, lease, contract, purchase or other commitment
or any other agreement which is material to Jefferson or First Federal, as
applicable.
SECTION 3.03. SUBSIDIARIES. Each of Jefferson's significant subsidiaries
(as such term is defined under S.E.C. regulations), including First Federal, is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power to own its
respective properties and assets, to incur its respective liabilities and to
carry on its respective business as now being conducted.
SECTION 3.04. FINANCIAL INFORMATION. The audited consolidated balance
sheets of Jefferson and its subsidiaries as of December 31, 1995 and 1994 and
related audited consolidated statements of income, changes in stockholders'
equity and cash flows for the three (3) years ended December 31, 1995, together
with the notes thereto, included in Jefferson's Annual Report on Form 10-K for
the year ended 1995, as currently on file with the S.E.C., and Jefferson's
Quarterly Report on Form 10-Q for the three (3) months ended March 31, 1996
(together, the "Jefferson Financial Statements"), have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as disclosed therein)
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and fairly present in all material respects the consolidated financial position
and the consolidated results of operations, changes in stockholders' equity and
cash flows of Jefferson and its consolidated subsidiaries as of the dates and
for the periods indicated (subject, in the case of interim financial statements,
to normal recurring year-end adjustments, none of which will be material, and
the absence of footnotes).
SECTION 3.05. ABSENCE OF CHANGES. Since December 31, 1995, Jefferson, on
a consolidated basis, has not experienced or suffered a material adverse change
excluding declines from interest rate movements, and there have not been any
events or transactions having such a material adverse affect which should be
disclosed in order to make the Jefferson Financial Statements not misleading.
SECTION 3.06. LITIGATION. There is no litigation, claim or other
proceeding pending or, to the knowledge of Jefferson, threatened, against
Jefferson or any of its subsidiaries, or of which the property of Jefferson or
any of its subsidiaries is or would be subject which, if adversely determined,
would have a material adverse effect on the business of Jefferson and its
subsidiaries taken as a whole.
SECTION 3.07. REPORTS. Jefferson and each of its significant subsidiaries
(including First Federal) has filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required to
file with (i) the S.E.C., (ii) the O.T.S., (iii) the F.D.I.C., (iv) any state
securities or banking authorities having jurisdiction, (v) Nasdaq and (vi) any
other governmental authority with jurisdiction over Jefferson or any of its
significant subsidiaries (including First Federal). As of their respective
dates, each of such reports and documents, as amended, including the financial
statements, exhibits and schedules thereto, complied in all material respects
with the relevant statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they were filed, and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
SECTION 3.08. COMPLIANCE WITH LAW. Jefferson and its significant
subsidiaries (including First Federal) have all licenses, franchises, permits
and other governmental authorizations that are legally required to enable them
to conduct their respective businesses in all material respects and are in
compliance in all material respects with all applicable laws and regulations.
SECTION 3.09. STATEMENTS TRUE AND CORRECT. None of the information
supplied or to be supplied by Jefferson for inclusion in (i) the Registration
Statement (as defined in Section 4.06 hereof), (ii) the Proxy
Statement/Prospectus (as defined in Section 4.03 hereof) and (iii) any document
to be filed with the S.E.C., or any thrift or other regulatory authority in
connection with the transactions contemplated hereby, will, at the respective
times such documents are filed, and, in the case of the Registration Statement,
when it becomes effective, and, with respect to the Proxy Statement/Prospectus,
when first mailed to the stockholders of Texas Heritage, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading, or, in the case of the
Proxy Statement/Prospectus or any amendment thereof or supplement thereto, at
the time of the Stockholders' Meeting, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Stockholders' Meeting. All documents that Jefferson or First
Federal is responsible for filing with the S.E.C., the O.T.S., or any other
regulatory authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable law and any rules and regulations thereunder.
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SECTION 3.10. BROKERAGE. There are no claims or agreements for brokerage
commissions, finders' fees, or similar compensation in connection with the
transactions contemplated by this Agreement payable by Jefferson or First
Federal.
SECTION 3.11. REGULATORY ENFORCEMENT MATTERS. Neither Jefferson nor First
Federal are subject to, nor have they received any notice or advice that either
may become subject to, any order, agreement or memorandum of understanding with
any federal or state agency charged with the supervision or regulation of
thrifts or thrift holding companies or engaged in the insurance of thrifts
deposits or any other governmental agency having supervisory or regulatory
authority with respect to Jefferson and First Federal.
SECTION 3.12. TAX MATTERS. Jefferson and First Federal have filed all
federal, state and, to the best knowledge of Jefferson and First Federal,
material local tax returns due in respect of their respective business or
properties in a timely fashion and have paid or made provision for all amounts
due as shown on such returns. All such returns fairly reflect the information
required to be presented therein. All provisions for accrued but unpaid taxes
contained in the Jefferson Financial Statements were made in accordance with
generally accepted accounting principles and in the aggregate do not materially
fail to provide for anticipated tax liabilities.
SECTION 3.13. UNDISCLOSED LIABILITIES. Jefferson and First Federal have
no material liability, whether known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and
whether due or to become due (and there is no past or present fact, situation,
circumstance, condition or other basis for any present or future action, suit or
proceeding, hearing, charge, complaint, claim or demand against either Jefferson
or First Federal giving rise to any such liability), except for liabilities set
forth in the Jefferson Financial Statements.
SECTION 3.14. EMPLOYEE MATTERS AND ERISA.
------------ --------------------------
(a) Except as disclosed in Section 3.14(a) of the Disclosure Schedule,
Jefferson does not maintain, contribute to or participate in or have any
liability under any employee benefit plans, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), including
any plans intended to be qualified under Section 401(a) of the Code, or any
nonqualified employee benefit plans or deferred compensation, bonus, stock or
incentive plans, or other employee benefit or fringe benefit programs for the
benefit of former or current employees of Jefferson (the "Jefferson Employee
Plans"). No present or former employee of Jefferson has been charged with
breaching nor has breached a fiduciary duty under any of the Jefferson Employee
Plans. Jefferson does not participate in, nor has it in the past five (5) years
participated in, nor has it any present or future obligation or liability under,
any multiemployer plan (as defined at Section 3(37) of ERISA). Except as
disclosed in Section 3.14(a) of the Disclosure Schedule, Jefferson does not
maintain, contribute to, or participate in, any plan that provides health, major
medical, disability or life insurance benefits to former employees of Jefferson
except as provided in Section 4980B of the Code.
(b) Except as disclosed in Section 3.14(b) of the Disclosure Schedule, (i)
Jefferson does not maintain, nor has it maintained for the past five (5) years,
any Jefferson Employee Plans subject to Title IV of ERISA or Section 412 of the
Code; (ii) no reportable event (as defined in Section 4043 of ERISA) has
occurred with respect to any Jefferson Employee Plans as to which a notice would
be required to be filed with the Pension Benefit Guaranty Corporation; (iii) no
claim is pending, and Jefferson has not received notice of any threatened or
imminent claim with respect to any Employee Plan (other than a
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routine claim for benefits for which plan administrative review procedures have
not been exhausted) for which Jefferson would be liable after December 30, 1995,
except as will be reflected in future financial statements of Jefferson; (iv)
Jefferson does not have any liabilities for excise taxes under Sections 4971,
4975, 4976, 4977, 4979 or 4980B of the Code or for a fine under Section 502 of
ERISA with respect to any Jefferson Employee Plan; and (v) all Jefferson
Employee Plans have been operated, administered and maintained in all material
respects in accordance with the terms thereof and in material compliance with
the requirements of all applicable laws, orders, rules and regulations,
including, without limitation, ERISA and the Code.
ARTICLE FOUR
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AGREEMENTS OF TEXAS HERITAGE
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SECTION 4.01. BUSINESS IN ORDINARY COURSE.
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(a) Texas Heritage shall not declare or pay a dividend or make any other
distribution to stockholders, whether in cash, stock or other property, after
the date of this Agreement, except that Texas Heritage may declare and pay
regular dividend(s) in such amounts and at such times as are consistent with
Texas Heritage's historical practice.
(b) Texas Heritage shall continue to carry on, after the date hereof, its
business and the discharge or incurrence of obligations and liabilities, only in
the usual, regular and ordinary course of business, as heretofore conducted, and
by way of amplification and not limitation, Texas Heritage will not, without the
prior written consent of Jefferson, which consent shall not be unreasonably
withheld and shall be provided by Jefferson within twenty-four (24) hours
following receipt of such request:
(i) issue any Texas Heritage Common or other capital stock or any
options, warrants, or other rights to subscribe for or purchase Texas
Heritage Common or any other capital stock or any securities convertible
into or exchangeable for any capital stock; or
(ii) directly or indirectly redeem, purchase or otherwise acquire
any Texas Heritage Common or any other capital stock of Texas Heritage,
other than Texas Heritage Preferred; or
(iii) effect a reclassification, recapitalization, splitup,
exchange of shares, readjustment or other similar change in or to any
capital stock or otherwise reorganize or recapitalize; or
(iv) change its charter or certificate or articles of
incorporation or association, as the case may be, or bylaws; or
(v) grant any increase (other than ordinary and normal increases
consistent with past practices) in the compensation payable or to become
payable to directors, officers or salaried employees or grant any stock
options or, except as required by law, adopt or make any change in any
bonus, insurance, pension, or other Employee Plan, payment or arrangement
made to, for or with any of such directors, officers or employees; or
(vi) borrow or agree to borrow any funds, except for Federal Home
Loan Bank Advances and certificates of deposit originated in the ordinary
course of business and having
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maturities of eighteen (18) months or less, or directly or indirectly
guarantee or agree to guarantee any obligations of others; or
(vii) make or commit to make any new loan or letter of credit or any
new or additional discretionary advance under any existing line of credit,
in principal amounts in excess of $750,000 or that would increase the
aggregate credit outstanding to any one borrower (or group of affiliated
borrowers) by more than $750,000 (excluding for this purpose any accrued
interest or overdrafts), without the prior written consent of Jefferson
acting through its Chief Credit Officer or such other designation as
Jefferson may specify in a written notice to Texas Heritage; provided,
however, that Texas Heritage may, without such prior written consent, make
single family residential mortgage loans or construction loans that conform
to Texas Heritage's lending policies as of the date hereof in principal
amounts of up to $1,000,000; or
(viii) purchase or otherwise acquire any investment security for its
own account having an average remaining life to maturity greater than five
(5) years or any asset-backed securities other than those issued or
guaranteed by the Government National Mortgage Association, the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation
(and Texas Heritage shall consult and confer with Jefferson with respect to
all securities transactions, even in circumstances where approval is not
required hereunder); or
(ix) increase or decrease the rate of interest paid on time deposits,
or on certificates of deposit, except in a manner and pursuant to policies
consistent with past practices; or
(x) enter into any agreement, contract or commitment out of the
ordinary course of business or having a term in excess of three (3) months
other than letters of credit, loan agreements, deposit agreements, and
other lending, credit and deposit agreements and documents made in the
ordinary course of business; or
(xi) except in the ordinary course of business, place on any of its
assets or properties any mortgage, pledge, lien, charge, or other
encumbrance; or
(xii) except in the ordinary course of business, cancel or accelerate
any material indebtedness owing to Texas Heritage or any claims which Texas
Heritage may possess or waive any material rights of substantial value; or
(xiii) sell or otherwise dispose of any real property or any material
amount of any tangible or intangible personal property other than
properties acquired in foreclosure or otherwise in the ordinary collection
of indebtedness to Texas Heritage; or
(xiv) foreclose upon or otherwise take title to or possession or
control of any real property without first obtaining a phase one
environmental report thereon which indicates that the property is free of
pollutants, contaminants or hazardous or toxic waste materials; provided,
however, that Texas Heritage shall not be required to obtain such a report
with respect to single family, non-agricultural residential property of one
acre or less to be foreclosed upon unless it has reason to believe that
such property might contain any such waste materials or otherwise might be
contaminated; or
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(xv) commit any act or fail to do any act which will cause a breach of
any agreement, contract or commitment and which will have a material
adverse effect on Texas Heritage's business, financial condition, or
earnings; or
(xvi) violate any law, statute, rule, governmental regulation, or
order, which violation might reasonably be expected to have a material
adverse effect on Texas Heritage's business, financial condition, or
earnings; or
(xvii) purchase any real or personal property or make any other
capital expenditure where the amount paid or committed therefor is in
excess of Fifty Thousand Dollars ($50,000); or
(xviii) change accounting principles or practices, or the method of
applying such principles or practices.
(c) Texas Heritage shall not, without the prior written consent of
Jefferson, which consent shall not be unreasonably withheld, engage in any
transaction or take any action that would render untrue in any material respect
any of the representations and warranties of Texas Heritage contained in Article
Two hereof, if such representations and warranties were given as of the date of
such transaction or action.
(d) Texas Heritage shall promptly notify Jefferson in writing of the
occurrence of any matter or event known to and directly involving Texas
Heritage, which would not include any changes in conditions that affect the
thrift industry generally, that is materially adverse to the business,
operations, properties, assets, or condition (financial or otherwise) of Texas
Heritage.
(e) Except in the exercise of the fiduciary duties of its directors,
unless and until this Agreement shall have been properly terminated by either
party pursuant to Article Seven hereof, Texas Heritage shall (i) not, directly
or indirectly, through any of its officers, directors, agents, or affiliates,
solicit, encourage, or initiate any inquiries with respect to, or, without prior
written notice to Jefferson, participate in any negotiations leading to, any
offers or proposals relating to the possible sale or other disposition of all or
substantially all of its assets or capital stock to, or merger or consolidation
with, any other person, (ii) not disclose any information not customarily
disclosed to any person or provide access to its properties, books, or records
or otherwise assist or encourage any person in connection with any of the
foregoing, and (iii) give Jefferson prompt written notice of any such inquiries,
offers, or proposals, including the name of the other party or parties and the
substance of such inquiry, offer or proposal.
SECTION 4.02. BREACHES. Texas Heritage shall, in the event it has knowledge
of the occurrence, or impending or threatened occurrence, of any event or
condition which would cause or constitute a breach (or would have caused or
constituted a breach had such event occurred or been known prior to the date
hereof) of any of its representations or agreements contained or referred to
herein, give prompt written notice thereof to Jefferson and, to the extent
practical, use its best efforts to prevent or promptly remedy the same.
SECTION 4.03. SUBMISSION TO STOCKHOLDERS. Texas Heritage shall cause to be
duly called and held, on a date mutually selected by Jefferson and Texas
Heritage, a special meeting of its shareholders (the "Stockholders' Meeting")
for submission of this Agreement and the Merger for approval of such
shareholders as required by law. In connection with the Stockholders' Meeting,
(i) Texas Heritage shall cooperate and assist Jefferson in preparing and filing
a Proxy Statement/Prospectus (the "Proxy
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Statement/Prospectus") with the S.E.C., the O.T.S. and the T.S.L.D., if
required, and, upon approval from the O.T.S. or the T.S.L.D. if such approval is
required, Texas Heritage shall mail such Proxy Statement/Prospectus to its
shareholders, (ii) Texas Heritage shall furnish Jefferson all information
concerning itself that Jefferson may reasonably request in connection with such
Proxy Statement/Prospectus, and (iii), subject to its fiduciary duty, the Board
of Directors of Texas Heritage shall recommend to its stockholders the approval
of this Agreement and the Merger contemplated hereby and use all reasonable
efforts to obtain such stockholder approval.
SECTION 4.04. CONSENTS TO CONTRACTS AND LEASES. Texas Heritage shall use
its best efforts to obtain all necessary consents with respect to all interests
of Texas Heritage in any material leases, licenses, contracts, instruments and
rights which require the consent of another person for their transfer or
assumption pursuant to the Merger, if any.
SECTION 4.05. MERGER EXPENSES AND RELATED MATTERS.
------------ -----------------------------------
(a) Texas Heritage and Jefferson shall consult and reasonably cooperate
with each other with respect to determining, as specified in a written notice
from Jefferson to Texas Heritage, based upon such consultation and as
hereinafter provided, the amount and the timing for recognizing for financial
accounting purposes the expenses of the Merger and the restructuring charges
related to or to be incurred in connection with the Merger.
(b) From and after the date of this Agreement to the Effective Time, Texas
Heritage shall maintain and keep all of its benefit plans (including, but not
limited to, defined contribution plans and deferred compensation plans) fully
funded, and shall, to the extent any such benefit plan may not be fully or
adequately funded, make such contributions as are necessary to fully fund any
such inadequately funded benefit plan.
SECTION 4.06. CONFORMING ACCOUNTING AND RESERVE POLICIES. At the request of
Jefferson, Texas Heritage shall, within five (5) business days prior to the
Closing, establish and take such reserves and accruals as Jefferson reasonably
shall request so as to conform Texas Heritage's loan, accrual, reserve and other
accounting policies to Jefferson's policies, and shall establish and take such
accruals, reserves and charges in order to implement such policies in respect of
excess facilities and equipment capacity, severance costs, litigation matters,
write-off or write-down of various assets and other appropriate accounting
adjustments; provided, however, that Texas Heritage shall not be required to
take any such action that is not consistent with GAAP; and provided further,
however, that any such reserve and/or accrual taken pursuant to this Section
4.06 shall not affect the Closing Book Value calculated in accordance with
Section 1.05 hereof.
SECTION 4.07. CONSUMMATION OF AGREEMENT. Texas Heritage shall use its best
efforts to perform and fulfill all conditions and obligations on its part to be
performed or fulfilled under this Agreement, to effect the Merger in accordance
with the terms and provisions hereof and to obtain all necessary approvals and
consents on its part to be obtained pursuant to this Agreement. Texas Heritage
shall furnish to Jefferson in a timely manner all information, data and
documents in the possession of Texas Heritage requested by Jefferson as may
reasonably be required to obtain any necessary regulatory or other approvals of
the Merger or to file with the S.E.C. a registration statement on Form S-4 (the
"Registration Statement") relating to the shares of Jefferson Common that may be
issued to the shareholders of Texas Heritage pursuant to the Merger and this
Agreement and shall otherwise cooperate fully with Jefferson to carry out the
purpose and intent of this Agreement.
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SECTION 4.08. ENVIRONMENTAL REPORTS. Texas Heritage shall provide to
Jefferson, within ten (10) days after the date hereof, all environmental reports
in its possession relating to real property owned by Texas Heritage. Jefferson,
as soon as reasonably practical, but not later than forty-five (45) days after
the date hereof, shall have the right to obtain a report ("Phase I Report") of a
phase one environmental site assessment ("Phase I ESA") on all real property
owned (including, without limitation, O.R.E.O. property), leased or operated by
Texas Heritage as of the date hereof (other than space in retail and similar
establishments leased by Texas Heritage for automatic teller machines) and
within ten (10) days after the acquisition or lease of any real property
acquired, leased or operated by Texas Heritage after the date hereof (other than
space in retail and similar establishments leased by Texas Heritage for
automatic teller machines), except as otherwise provided in Section
4.01(b)(xiv). If required by the Phase I ESA in Jefferson's reasonable opinion,
Jefferson shall have the right to obtain a report ("Phase II ESA") of a phase
two environmental site assessment on properties reasonably requiring such
additional study. Jefferson shall have fifteen (15) business days from the
receipt of any such Phase II ESA to notify Texas Heritage of any objection to
the environmental condition of such property or properties. Should the cost of
(A) obtaining a Phase II ESA on properties requiring such additional study and
(B) taking all remedial and corrective actions and measures (i) required by
applicable law, or (ii) recommended or suggested by such report or reports, or
(iii) prudent in light of serious life, health or safety concerns, in the
aggregate, exceed the sum of $100,000 as reasonably estimated by an
environmental expert retained for such purpose by Jefferson and reasonably
acceptable to Texas Heritage, or if the cost of such actions and measures cannot
be so reasonably estimated by such expert to be $100,000 or less with any
reasonable degree of certainty, then Jefferson shall have the right pursuant to
Section 7.03 hereof, for a period of ten (10) business days following receipt of
such estimate or indication that the cost of such actions and measures can not
be so reasonably estimated, to terminate this Agreement, which shall be
Jefferson's sole remedy in such event. The scope of work required by any Phase
II ESA shall be subject to the reasonable approval of Texas Heritage, and
Jefferson agrees to maintain the findings of all environmental studies
confidential in accordance with Section 8.01 hereof.
SECTION 4.09. ACCESS TO INFORMATION. Texas Heritage shall permit Jefferson
and First Federal reasonable access in a manner which will avoid undue
disruption or interference with Texas Heritage's normal operations to its
properties and, to the extent permitted by law, shall disclose and make
available to Jefferson and First Federal all books, documents, papers and
records relating to its assets, stock, ownership, properties, operations,
obligations and liabilities, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of directors' and
shareholders' meetings, organizational documents, material contracts and
agreements, loan files, filings with any regulatory authority, accountants'
workpapers (if available and subject to the respective independent accountants'
consent), litigation files, plans affecting employees, and any other business
activities or prospects in which Jefferson or First Federal may have a
reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. Notwithstanding anything to the contrary
contained herein, Texas Heritage will include in the Disclosure Schedule all
available environmental information, including without limitation environmental
and regulatory reports, studies, notices, claims and any material of whatever
kind. Jefferson and First Federal will hold any such information which is
nonpublic in confidence in accordance with the provisions of Section 8.01
hereof.
SECTION 4.10. RESTRICTION ON RESALES. Texas Heritage shall obtain and
deliver to Jefferson, at least 31 days prior to the Closing Date, the signed
agreement, in the form of Exhibit 4.10 hereto, of each person who may reasonably
be deemed an "affiliate" of Texas Heritage within the meaning of such term as
used in Rule 145 under the Securities Act of 1933, as amended (the "Securities
Act"), regarding compliance with the provisions of Rule 145.
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ARTICLE FIVE
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AGREEMENTS OF JEFFERSON AND FIRST FEDERAL
-----------------------------------------
SECTION 5.01. REGULATORY APPROVALS AND REGISTRATION STATEMENT. Jefferson
and First Federal shall use their respective best efforts to file all regulatory
applications required in order to consummate the Merger, including but not
limited to the necessary applications for the prior approval of the O.T.S., the
T.S.L.D. and the Board of Governors of the Federal Reserve System. Jefferson
shall keep Texas Heritage reasonably informed as to the status of such
applications and make available to Texas Heritage a draft of all such
applications for the review and comment of Texas Heritage and its counsel prior
to the filing thereof and copies of such applications as filed and any
supplementally filed materials. The shares of Jefferson Common to be exchanged
for the shares of Texas Heritage Common shall be issued from treasury shares
held by Jefferson. Jefferson shall file with the S.E.C. the Registration
Statement relating to the shares of Jefferson Common to be issued to the
shareholders of Texas Heritage pursuant to this Agreement, and shall use its
best efforts to cause the Registration Statement to become effective. At the
time the Registration Statement becomes effective, the Registration Statement
shall comply in all material respects with the provisions of the Securities Act
and the published rules and regulations thereunder, and shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not false or
misleading, and at the time of mailing thereof to the shareholders of Texas
Heritage, at the time of the Stockholders' Meeting and at the Effective Time the
Proxy Statement/Prospectus included as part of the Registration Statement, as
amended or supplemented by any amendment or supplement, shall not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not false or misleading. Jefferson and First
Federal shall timely file all documents required to obtain all necessary permits
and approvals from state securities agencies or authorities, if any, required to
carry out the transactions contemplated by this Agreement, shall pay all
expenses incident thereto and shall use its best efforts to obtain such permits
and approvals on a timely basis. Jefferson shall promptly and properly prepare
and file any other filings required under the Securities Exchange Act of 1934
(the "Exchange Act") relating to the Merger and the transactions contemplated
herein.
SECTION 5.02. BREACHES. Jefferson and First Federal shall, in the event
either of them has knowledge of the occurrence, or impending or threatened
occurrence, of any event or condition which would cause or constitute a breach
(or would have caused or constituted a breach had such event occurred or been
known prior to the date hereof) of any of its representations or agreements
contained or referred to herein, give prompt written notice thereof to Texas
Heritage and use its best efforts to prevent or promptly remedy the same.
SECTION 5.03. CONSUMMATION OF AGREEMENT. Jefferson and First Federal shall
use their respective best efforts to perform and fulfill all conditions and
obligations on their part to be performed or fulfilled under this Agreement, to
effect the Merger in accordance with the terms and conditions of this Agreement,
and to obtain all necessary approvals and consents on their respective parts to
be obtained pursuant to this Agreement.
SECTION 5.04. EMPLOYEE BENEFITS. Jefferson shall, with respect to each
employee of Texas Heritage who remains an employee of Surviving Bank following
the Closing Date (each a "Continued Employee"), provide the benefits described
in this Section 5.04. Subject to the right of subsequent amendment or
termination in Jefferson's discretion, each Continued Employee shall be
entitled, as a new
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employee of a subsidiary or subsidiaries of Jefferson, to participate in
whatever employee benefit plans, as defined in Section 3(3) of ERISA, including
any plans intended to be qualified under Section 401(a) of the Code, or other
non-qualified employee plans that may be in effect generally for employees of
Jefferson's subsidiaries from time to time (the "Jefferson Plans"), if and as a
Continued Employee such Continued Employee shall be eligible for participation
therein and otherwise shall not be participating in a similar plan maintained by
Texas Heritage after the Effective Time. Continued Employees will be eligible
to participate on the same basis as similarly situated employees of other
Jefferson subsidiaries. All such participation shall be subject to such terms
of such plans as may be in effect from time to time and this Section 5.04 is not
intended to give Continued Employees any rights or privileges superior to those
of other employees of Jefferson's subsidiaries. Jefferson may terminate or
modify all Employee Plans except insofar as benefits thereunder shall have
accrued or vested on the Closing Date, and Jefferson's obligation under this
Section 5.04 shall not be deemed or construed so as to provide duplication of
similar benefits but, subject to that qualification, Jefferson shall, for
purposes of vesting and eligibility to begin participation with respect to any
Jefferson Plans in which Continued Employees may participate, credit each
Continued Employee with his or her term of service with Texas Heritage as
defined in a similar plan maintained by Texas Heritage.
SECTION 5.05. DIRECTORS AND OFFICERS' LIABILITY INSURANCE AND
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INDEMNIFICATION.
---------------
(a) For a period of three (3) years following the Effective Time,
Jefferson shall cause First Federal (the survivor in the Merger) to continue
for the benefit of the current directors and officers of Texas Heritage the
Directors and Officers Liability Insurance in existence as of the date hereof.
(b) For a period of six (6) years after the Effective Time, Jefferson
shall cause First Federal or any successor thereto to provide indemnification
through conclusion of any such proceeding to the current directors, officers,
employees and agents of Texas Heritage, with respect to any claims, causes of
action, regulatory proceedings, lawsuits, criminal proceedings commenced within
said six (6) year period, relating to acts or omissions occurring on, prior to
or after the Effective Time to the maximum extent required under federal law and
regulations applicable to federally chartered thrifts, provided, however,
indemnification with respect to alleged criminal conduct shall be limited to
attorneys fees and expenses incurred in defending against any such allegations
and such indemnification shall cease upon conviction of a crime. In connection
therewith, wherever the Board of Directors of the First Federal or any successor
thereto has discretion to advance costs or otherwise act in favor of an
indemnified person, it shall exercise such discretion, to the extent consistent
with its fiduciary duties, in favor of each current and former director,
officer, employee and agent of Texas Heritage.
(c) The obligation of Jefferson to cause Surviving Bank to take the
actions provided under Section 5.05(a) and (b) above is intended to benefit, and
be enforceable against Jefferson directly by, the individual beneficiaries
covered by such Section 5.05(a) and (b), and shall be binding on all successors
of Jefferson; nothing contained herein shall obligate Jefferson to directly
provide the benefits contained in Section 5.05(a) and (b) above, but rather,
Jefferson is obligated to cause Surviving Bank to provide such benefits.
(d) The obligations of Jefferson under Section 5.05(a) are contingent upon
Surviving Bank being able to continue the directors and officers liability
insurance policy maintained by Texas Heritage at the date of execution of this
Agreement without such policy being terminated due to consummation of the
transactions contemplated in this Agreement or being subject to a premium equal
to or greater than 150% of the amount of Texas Heritage's last premium payment
prior to the date hereof.
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SECTION 5.06. ACCESS TO INFORMATION. Jefferson and First Federal shall
permit Texas Heritage reasonable access in a manner which will avoid undue
disruption or interference with Jefferson's and First Federal's normal
operations to its properties and, to the extent permitted by law, shall disclose
and make available to Texas Heritage all books, documents, papers and records
relating to its assets, properties, operations, obligations and liabilities,
including, but not limited to, all books of account (including the general
ledger), tax records, minute books of directors' and shareholders' meetings,
organizational documents, material contracts and agreements, filings with any
regulatory authority, accountants' workpapers (if available and subject to the
respective independent accountants' consent), litigation files, plans affecting
employees, and any other business activities or prospects in which Texas
Heritage may have a reasonable and legitimate interest in furtherance of the
transactions contemplated by this Agreement. Texas Heritage will hold any such
information which is nonpublic in confidence in accordance with the provisions
of Section 8.01 hereof.
ARTICLE SIX
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CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
SECTION 6.01. CONDITIONS TO JEFFERSON'S AND FIRST FEDERAL'S OBLIGATIONS.
Jefferson's and First Federal's obligations to effect the Merger shall be
subject to the satisfaction (or waiver by Jefferson and First Federal) prior to
or on the Closing Date of the following conditions:
(a) The representations and warranties made by Texas Heritage in this
Agreement shall be true in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
or given on and as of the Closing Date;
(b) Texas Heritage shall have performed and complied in all material
respects with all of its obligations and agreements required to be performed
prior to the Closing Date under this Agreement;
(c) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger shall be in effect, nor shall any proceeding by any bank or thrift
regulatory authority or other person seeking any of the foregoing be pending.
There shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal;
(d) All necessary regulatory approvals, consents, authorizations and other
approvals required by law for consummation of the Merger shall have been
obtained and all waiting periods required by law shall have expired;
(e) Jefferson and First Federal shall have received the environmental
reports required by Section 4.08 hereof, and shall not have elected, pursuant to
Section 7.03 hereof, to terminate and cancel this Agreement;
(f) Jefferson and First Federal shall have received all documents required
to be received from Texas Heritage on or prior to the Closing Date, all in form
and substance reasonably satisfactory to Jefferson and First Federal;
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<PAGE>
(g) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceedings for such purpose pending before or threatened
by the S.E.C.;
(h) Jefferson shall have received an opinion of its counsel to the effect
that if the Merger is consummated in accordance with the terms set forth in this
Agreement, (i) the Merger will constitute a reorganization within the meaning of
Section 368 of the Code; (ii) no gain or loss will be recognized by the holders
of shares of Texas Heritage Common upon receipt of the Stock Component of the
Merger Consideration; (iii) the basis of shares of Jefferson Common received by
the shareholders of Texas Heritage will be the same as the basis of shares of
Texas Heritage Common exchanged therefor; and (iv) the holding period of the
shares of Jefferson Common received by such shareholders will include the
holding period of the shares of Texas Heritage Common exchanged therefor,
provided such shares were held as capital assets as of the Effective Time; and
(i) Jefferson and First Federal shall have received a legal opinion
substantially in the form of Exhibit 1.09(a) attached hereto.
SECTION 6.02. CONDITIONS TO TEXAS HERITAGE'S OBLIGATIONS. Texas Heritage's
obligation to effect the Merger shall be subject to the satisfaction (or waiver
by Texas Heritage) prior to or on the Closing Date of the following conditions:
(a) The representations and warranties made by Jefferson and First Federal
in this Agreement shall be true in all material respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made or given on the Closing Date;
(b) Jefferson and First Federal shall have performed and complied in all
material respects with all of their obligations and agreements hereunder
required to be performed prior to the Closing Date under this Agreement;
(c) No Injunction preventing the consummation of the Merger shall be in
effect, nor shall any proceeding by any thrift regulatory authority or other
governmental agency seeking any of the foregoing be pending. There shall not be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the consummation of the
Merger illegal;
(d) All necessary regulatory approvals, consents, authorizations and other
approvals, if any, to be obtained by Jefferson, First Federal and Texas Heritage
including the requisite approval of this Agreement and the Merger by the
shareholders of Texas Heritage, required by law for consummation of the Merger
shall have been obtained and all waiting periods required by law shall have
expired;
(e) Texas Heritage shall have received all documents required to be
received from Jefferson and First Federal on or prior to the Closing Date, all
in form and substance reasonably satisfactory to Texas Heritage;
(f) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceeding for such purpose pending before or threatened
by the S.E.C.;
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<PAGE>
(g) Texas Heritage shall have received a copy of the opinion of
Jefferson's counsel contemplated by Section 6.01(h) of this Agreement; and
(h) Texas Heritage shall have received a legal opinion substantially in
the form of Exhibit 1.09(b) attached hereto.
ARTICLE SEVEN
-------------
TERMINATION OR ABANDONMENT
--------------------------
SECTION 7.01. MUTUAL AGREEMENT. This Agreement may be terminated by the
mutual written agreement of the parties at any time prior to the Closing Date,
regardless of whether stockholder approval of this Agreement and the Merger by
the shareholders of Texas Heritage shall have been previously obtained.
SECTION 7.02. BREACH OF AGREEMENTS. In the event that there is a material
breach in any of the representations and warranties or agreements of Jefferson
and First Federal, on one hand, or Texas Heritage, on the other hand, which
breach is not cured within thirty (30) days after written notice to cure such
breach is given by the non-breaching party, then the non-breaching party,
regardless of whether shareholder approval of this Agreement and the Merger
shall have been previously obtained, may terminate and cancel this Agreement by
providing written notice of such action to the other party hereto.
SECTION 7.03. ENVIRONMENTAL REPORTS. Jefferson may terminate this Agreement
to the extent provided by Section 4.08 by giving written notice thereof to Texas
Heritage.
SECTION 7.04. FAILURE OF CONDITIONS. In the event any of the conditions to
the obligations of either party are not satisfied or waived on or prior to the
Closing Date, and if any applicable cure period provided in Section 7.02 has
lapsed, then such party may, regardless of whether shareholder approval of this
Agreement and the Merger shall have been previously obtained, terminate and
cancel this Agreement by delivery of written notice of such action to the other
party on such date.
SECTION 7.05. APPROVAL DENIAL. If any regulatory application filed pursuant
to Section 5.01 should be finally denied or disapproved by the respective
regulatory authority, or if Jefferson should fail to obtain any regulatory
approvals required to consummate the Merger on or before August 31, 1996, then
this Agreement thereupon shall be deemed terminated and canceled; provided,
however, that a request for additional information or undertaking by Jefferson,
as a condition for approval, shall not be deemed to be a denial or disapproval
so long as Jefferson diligently provides the requested information or
undertaking. In the event an application is denied pending an appeal, petition
for review, or similar such act on the part of Jefferson (hereinafter referred
to as the "appeal"), then the application will be deemed denied unless Jefferson
prepares and timely files such appeal, continues the appellate process and
obtains the necessary approval by August 31, 1996.
SECTION 7.06. SHAREHOLDER APPROVAL DENIAL. If the Merger is not approved by
the requisite vote of the shareholders of Texas Heritage at the Stockholders'
Meeting, then either party may terminate this Agreement.
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<PAGE>
SECTION 7.07. REGULATORY ENFORCEMENT MATTERS. In the event that any party
hereto shall become a party or subject to any new or amended written agreement,
memorandum of understanding, cease and desist order, imposition of civil money
penalties or other regulatory enforcement action or proceeding with any federal
or state agency charged with the supervision or regulation of thrifts or banks
after the date of this Agreement which is significant to its overall business,
operations or financial condition, then the other party(ies) hereto may
terminate this Agreement.
SECTION 7.08. AUTOMATIC TERMINATION. If the Closing Date does not occur
on or prior to December 31, 1996, then this Agreement may be terminated by
either party by giving written notice to the other; provided, however, a party
who is then in breach of its obligation or covenants under this Agreement in any
material respect may not exercise such right of termination unless the other
party is also in breach of its obligations or covenants under this Agreement in
any material respect.
SECTION 7.09. JEFFERSON AVERAGE PRICE. Texas Heritage may terminate this
Agreement if the average per share closing price of Jefferson Common as reported
on Nasdaq for the twenty (20) trading days immediately preceding the 5th
calendar day prior to the date on which the Effective Time occurs (the
"Jefferson Average Price") is greater than $36.25, and Jefferson may terminate
this Agreement if the Jefferson Average Price is less than $21.75. The
Jefferson Average Price shall be appropriately adjusted to reflect any share
adjustment as contemplated by Section 1.05(g) hereof.
SECTION 7.10. TERMINATION FEE.
------------ ---------------
(a) Jefferson shall pay to Texas Heritage the sum of Two Hundred Fifty
Thousand Dollars ($250,000.00) as an agreed upon termination fee and as
liquidated damages, in lieu of all remedies at law or in equity and in full
satisfaction of all obligations or liabilities of Jefferson hereunder, upon the
termination of this Agreement by Texas Heritage due to a material breach of this
Agreement by Jefferson that has not been cured as provided in Section 7.02
hereof.
(b) Texas Heritage shall pay to Jefferson the sum of Two Hundred Fifty
Thousand Dollars ($250,000.00) as an agreed upon termination fee and as
liquidated damages, in lieu of all remedies at law or in equity and in full
satisfaction of all obligations or liabilities of Texas Heritage hereunder, upon
the termination of this Agreement (i) by Jefferson due to a material breach of
this Agreement by Texas Heritage (including, without limitation, the entering
into an agreement between Texas Heritage and a third party which is in breach of
this Agreement), which breach has not been cured by Texas Heritage within thirty
(30) days following written notice of such breach from Jefferson to Texas
Heritage, or (ii) as a result of the failure of Texas Heritage's stockholders to
approve this Agreement and the Merger at the Shareholder's Meeting (other than
for a material breach by Jefferson under this Agreement), provided that within
twenty-four (24) months of the date of either event set forth in (A) or (B) of
this Section 7.10, one of the following events (each a "Triggering Event") has
also occurred:
(A) any person or group of persons (other than Jefferson and/or its
affiliates) shall acquire, or acquire the right to acquire, more than fifty
percent (50%) of the outstanding Texas Heritage Common;
(B) the expiration date of a tender or exchange offer by any person
or group of persons (other than Jefferson and/or its affiliates) to
purchase or acquire securities of Texas Heritage if upon consummation of
such offer, such person or group of persons would own, control or acquire
A-26
<PAGE>
the right to acquire more than fifty percent (50%) of the outstanding
shares of Texas Heritage Common; or
(C) the entry by Texas Heritage into a definitive agreement with a
person or group of persons (other than Jefferson and/or its affiliates) for
such person or group of persons to acquire, merge or consolidate with Texas
Heritage or to acquire all or substantially all of Texas Heritage's assets
or more than fifty percent (50%) of the outstanding shares of Texas
Heritage Common.
For purposes of this Section 7.10, "person" and "group of persons" shall
have the meanings conferred thereon by Section 13(d) of the Exchange Act.
Notwithstanding any of the provisions of this Agreement, a Triggering Event
shall not be deemed to have occurred in the event that, subsequent to the
termination of this Agreement, a holding company is formed with respect to Texas
Heritage, provided that (a) upon such holding company's acquisition of Texas
Heritage, the shareholders of the holding company are identical, except for such
change in shareholders as results from the exercise and perfection of
dissenter's rights, in all respects to the shareholders of Texas Heritage
immediately prior to such acquisition, and (b) the holding company agrees to be
bound by the provisions of this Section 7.10.
ARTICLE EIGHT
-------------
GENERAL
-------
SECTION 8.01. CONFIDENTIAL INFORMATION. The parties acknowledge the
confidential and proprietary nature of the "Information" (as hereinafter
described) which has heretofore been exchanged and which will be received from
each other hereunder and agree to hold and keep the same confidential. Such
"Information" will include any and all financial, technical, commercial,
marketing, customer or other information concerning the business, operations and
affairs of a party that may be provided to the other, irrespective of the form
of the communications, by such party's employees or agents. Such Information
shall not include information which is or becomes generally available to the
public other than as a result of a disclosure by a party or its representatives
in violation of this Agreement. The parties agree that the Information will be
used solely for the purposes contemplated by this Agreement and that such
Information will not be disclosed to any person other than employees and agents
of a party who are directly involved in evaluating the transaction. The
Information shall not be used in any way detrimental to a party, including use
directly or indirectly in the conduct of the other party's business or any
business or enterprise in which such party may have an interest, now or in the
future, and whether or not now in competition with such other party.
SECTION 8.02. PUBLICITY. Jefferson, First Federal and Texas Heritage
shall cooperate with each other in the development and distribution of, and
mutually agree upon the form and content of, all news releases and other written
public disclosures concerning this Agreement and the Merger and shall not issue
any news release or make any other written public disclosure without the prior
consent of the other party, unless such is required by law or the written advice
of counsel or is in response to published newspaper or other mass media reports
regarding the transaction contemplated hereby, in which such latter event the
parties shall consult with each other regarding such responsive public
disclosure.
A-27
<PAGE>
SECTION 8.03. RETURN OF DOCUMENTS. Upon termination of this Agreement
without the Merger becoming effective, each party shall deliver to the other
originals and all copies of all Information made available to such party and
will not retain any copies, extracts or other reproductions in whole or in part
of such Information.
SECTION 8.04. NOTICES. Any notice or other communication shall be in
writing and shall be deemed to have been given or made on the date of delivery,
in the case of hand delivery, or three (3) business days after deposit in the
United States Registered Mail, postage prepaid, or upon receipt if transmitted
by facsimile telecopy or any other means, addressed (in any case) as follows:
(a) if to Jefferson:
Mr. David V. McCay
Chairman of the Board
Jefferson Savings Bancorp, Inc.
14915 Manchester Road
Ballwin, Missouri 63011
Facsimile: (314) 227-5009
with a copy to:
John K. Pruellage, Esq.
Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Facsimile: (314) 241-6056
and
(b) if to Texas Heritage:
Mr. Joe L. Williams
President and Chief Executive Officer
Texas Heritage Savings Association/Banc
P.O. Box 880
9802 Lakeview Parkway
Rowlett, Texas 75088
Facsimile: (214) 475-5221
with a copy to:
Kevin L. Twining, Esq.
Locke Purnell Rain Harrell
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201-6776
Facsimile: (214) 740-8800
or to such other address as any party may from time to time designate by notice
to the others.
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<PAGE>
SECTION 8.05. LIABILITIES. In the event that this Agreement is terminated
pursuant to the provisions of Article Seven hereof, except as provided in
Section 7.10 thereof, no party hereto shall have any liability to any other
party for costs, expenses, damages or otherwise; provided, however, that,
notwithstanding the foregoing, in the event that this Agreement is terminated
pursuant to Section 7.02 hereof on account of a willful breach of any of the
representations and warranties set forth herein or a willful breach of any of
the agreements set forth herein, then the non-breaching party shall be entitled
to recover appropriate damages from the breaching party.
SECTION 8.06. EXPENSES. Each of the parties to this Agreement shall bear
their respective costs, fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby.
SECTION 8.07. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
provided in this Section 8.07, no representation, warranty or covenant contained
in this Agreement shall survive the Effective Time or the earlier termination of
this Agreement. The agreements set forth in Sections 1.03, 1.04, 1.08, 5.04,
5.05, and 5.06 shall survive the Effective Time, and the agreements set forth in
Sections 7.10, 8.01, 8.02 8.03, 8.05 and 8.06 hereof shall survive the Effective
Time or the earlier termination of this Agreement.
SECTION 8.08. ENTIRE AGREEMENT. This Agreement, including the Exhibits
and Schedules hereto, constitute the entire agreement between the parties and
supersedes and cancels any and all prior discussions, negotiations, undertakings
and agreements between the parties relating to the subject matter hereof.
SECTION 8.09. HEADINGS AND CAPTIONS. The captions of Articles and
Sections hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions of this Agreement.
SECTION 8.10. WAIVER, AMENDMENT OR MODIFICATION. The conditions of this
Agreement which may be waived may only be waived by notice to the other party
waiving such condition. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. This Agreement may not be amended or
modified except by a written document duly executed by the parties hereto.
SECTION 8.11. RULES OF CONSTRUCTION. Unless the context otherwise
requires: (a) a term has the meaning assigned to it; (b) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles; (c) "or" is not exclusive; and (d) words in the
singular may include the plural and in the plural include the singular.
SECTION 8.12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument.
SECTION 8.13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Except as expressly provided in this Agreement, there
shall be no third party beneficiaries hereof.
SECTION 8.14. GOVERNING LAW; ASSIGNMENT. THIS AGREEMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF MISSOURI, EXCEPT TO THE EXTENT THAT APPLICABLE
FEDERAL AND TEXAS LAWS AND REGULATIONS MUST GOVERN ASPECTS OF THE
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<PAGE>
MERGER PROCEDURES AND SHAREHOLDER RIGHTS RELATED THERETO. THIS AGREEMENT MAY
NOT BE ASSIGNED BY EITHER OF THE PARTIES HERETO.
SECTION 8.15. EMPLOYMENT AGREEMENT. Effective on the Closing Date,
Jefferson and Joe L. Williams will enter into an employment agreement for a
duration of three (3) years, renewable annually, in substantially the form
attached hereto as Exhibit 8.15.
SECTION 8.16. TIME. Time is of the essence in connection with this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
A-30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
By /s/ Joe L. Williams
------------------------------------
Joe L. Williams
President and Chief Executive Officer
FIRST FEDERAL SAVINGS BANK OF NORTH TEXAS
By /s/ Leland B. Camp
-------------------------------------
Leland B. Camp
President and Chief Operating Officer
(Longview Region)
JEFFERSON SAVINGS BANCORP, INC.
By /s/ David V. McCay
-------------------------------------
David V. McCay
Chairman of the Board and President
A-31
<PAGE>
EXHIBIT 1.09(a)
---------------
TEXAS HERITAGE'S LEGAL OPINION MATTERS
1. The organization, valid existence and good standing of Texas Heritage
under the laws of the State of Texas, its corporate power and authority to
execute, deliver and perform its obligations under the Agreement, to merge with
First Federal in accordance with the Agreement, to consummate the transactions
contemplated by the Agreement and to own and operate its properties and to carry
on its business as now conducted.
2. The number of authorized and, based solely on its best knowledge,
including a review of Texas Heritage's stock transfer records and a certificate
of the Directors of Texas Heritage, the number of issued and outstanding shares
of common stock of Texas Heritage.
3. The due authorization of the execution, performance and delivery of
the Agreement by all necessary corporate action on the part of Texas Heritage.
The due execution and delivery of the Agreement by Texas Heritage.
4. The Agreement is enforceable against Texas Heritage, subject to the
qualifications regarding enforceability opinions set forth in the State Bar of
Texas Business Law Section Report of the Legal Opinions and Business
Transactions (1992). The opinion expressed herein that the Agreement is
enforceable against Texas Heritage is also subject to the qualification that
certain of the remedial waiver and other provisions of the Agreement may not be
enforceable; but such enforceability will not, in our judgment, render the
Agreement invalid as a whole, or substantially interfere with the realization of
the principal legal benefits provided by the Agreement, except to the extent of
any procedural delay which may result therefrom.
5. The execution and delivery of the Agreement by Texas Heritage and the
consummation of the Merger do not (i) violate any provision of its articles of
incorporation or bylaws, (ii) violate any Texas or federal statute or
regulation, (iii) breach or otherwise violate any judgment, order or decree
known to counsel or identified to counsel of Texas Heritage in a certificate of
the Directors of Texas Heritage, or (iv) breach or otherwise violate any
agreement binding upon Texas Heritage known to counsel or identified to counsel
of Texas Heritage in a certificate of the Directors of Texas Heritage.
6. Except for the regulatory approvals and consents obtained by Jefferson
and the approval of the Merger by the Commissioner of the Texas Savings and Loan
Department, no other consent, approval, order, waiver, registration, notice,
authorization or other action by or filing with any governmental authority is
required under Texas law or regulations in connection with the execution and
delivery by Texas Heritage of the Agreement or the consummation of the
transactions contemplated by the Agreement.
7. Except as disclosed in Section 2.08 of the Disclosure Statement to the
Agreement, to the knowledge of counsel to Texas Heritage, there are no actions
or proceedings against Texas Heritage, pending or otherwise threatened in
writing, before any court, governmental agency or arbitrator.
A-Ex. 1.09(a)-1
<PAGE>
EXHIBIT 1.09(b)
---------------
JEFFERSON'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of Jefferson
under the laws of the State of Delaware, and its power and authority to enter
into the Agreement and to consummate the transactions contemplated thereby.
2. The due organization, valid existence and good standing of First
Federal under the laws of the United States of America, and its power and
authority to enter into the Agreement, to merge with Texas Heritage in
accordance with the terms of the Agreement and to consummate the transactions
contemplated thereby.
3. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by Jefferson and First Federal to
authorize the execution, delivery and performance of the Agreement, the due
execution and delivery of the Agreement by Jefferson and First Federal, the
Agreement as a valid and binding obligation of Jefferson and First Federal
enforceable against Jefferson and First Federal in accordance with its terms
(subject to the provisions of bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforceability of creditors' rights generally from
time to time in effect, and equitable principles relating to the granting of
specific performance and other equitable remedies as a matter of judicial
discretion).
4. The execution and delivery of the Agreement by Jefferson and First
Federal, and the consummation of the transactions contemplated therein, does not
conflict with or cause a breach of or a default under, or result in the
acceleration of, or create in any party the right to accelerate, terminate,
modify or cancel, or violate, any provision of Jefferson's and First Federal's
respective articles of incorporation or charter, as applicable, or bylaws, or
any statute, regulation, rule, judgment, order or decree or material agreement
binding upon Jefferson or First Federal which would be materially adverse to the
business of Jefferson and its subsidiaries taken as a whole.
5. The receipt of all required consents, approvals, orders or
authorizations of, or registrations, declarations or filings with or without
notices to, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, or any other person or entity
required to be obtained or made by or with respect to Jefferson or First Federal
in connection with the execution and delivery of the Agreement or the
consummation of the transactions contemplated by the Agreement.
6. The certificates evidencing shares of Jefferson Common to be delivered
pursuant to the Agreement are in due and proper form under Delaware law, and
when duly countersigned by the transfer agent and registrar, and delivered to
the Exchange Agent against delivery of the Certificates in accordance with the
provisions of the Agreement, will pass good and marketable title to the shares
of Jefferson Common, and the shares of Jefferson Common represented by such
certificates will be duly authorized and validly issued, fully paid and
nonassessable, will not have been issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, will
be free and clear of all liens, encumbrances, equities and claims and will
conform to the description thereof contained in the Prospectus.
A-Ex. 1.09(b)-1
<PAGE>
7. The Registration Statement has become effective under the Securities
Act, and no stop order suspending the effectiveness of the Registration
Statement or preventing the use of the Prospectus has been issued and no
proceedings for that purpose have been instituted or, to our knowledge, are
pending or overtly threatened by the S.E.C. Any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) of the S.E.C. has
been made in the manner and within the time period required by such Rule 424(b).
8. As of the filing date of each respective document, the Registration
Statement, the Prospectus and each amendment or supplement thereto (except for
the financial statements and schedules included therein, as to which we express
no opinion) comply as to form in all material respects with the requirements of
the Securities Act and the rules and regulations of the S.E.C.
A-Ex. 1.09(b)-2
<PAGE>
EXHIBIT 4.10
------------
___________________, 1996
Jefferson Savings Bancorp, Inc.
14915 Manchester Road
Ballwin, Missouri 63011
RE: AGREEMENT AND PLAN OF MERGER, DATED AS OF MAY 31, 1996 (THE "MERGER
AGREEMENT"), BY AND AMONG TEXAS HERITAGE SAVINGS ASSOCIATION ("TEXAS
HERITAGE"), FIRST FEDERAL SAVINGS BANK OF NORTH TEXAS, AND JEFFERSON
SAVINGS BANCORP, INC. ("JEFFERSON")
Gentlemen:
I have been advised that I may be deemed to be an affiliate of Texas
Heritage, as that term is defined for purposes of paragraphs (c) and (d) of Rule
145 ("Rule 145") of the Rules and Regulations of the Securities and Exchange
Commission (the "Commission") promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
Pursuant to the terms and conditions of the Merger Agreement, each share of
common stock of Texas Heritage owned by me as of the effective time of the
merger contemplated by the Merger Agreement (the "Merger") may be converted into
the right to receive a combination of cash and shares of common stock of
Jefferson (the "Jefferson Shares"). This letter is delivered to Jefferson
pursuant to Section 4.10 of the Merger Agreement.
A. I represent and warrant to Jefferson and agree that:
1. I shall not make any sale, transfer or other disposition of the
Jefferson Shares I receive pursuant to the Merger in violation of the
Securities Act or the Rules and Regulations of the Commission promulgated
thereunder.
2. I understand that the issuance of the Jefferson Shares to me
pursuant to the Merger will be registered with the Commission under the
Securities Act. I also understand that because I may be deemed an
"affiliate" of Texas Heritage and because any distributions by me of the
Jefferson Shares will not be registered under the Securities Act, such
Jefferson Shares must be held by me unless (i) the sale, transfer or other
distribution has been registered under the Securities Act, (ii) the sale,
transfer or other distribution of such Jefferson Shares is made in
accordance with the provisions of Rule 145, or (iii) in the opinion of
counsel acceptable to Jefferson some other exemption from registration
under the Securities Act is available with respect to any such proposed
distribution, sale, transfer or other disposition of such Jefferson Shares.
B. I understand and agree that:
1. Stop transfer instructions will be issued with respect to the
Jefferson Shares and there will be placed on the certificates representing
such Jefferson Shares, or any certificate delivered in substitution
therefor, a legend stating in substance:
A-EX. 4.10-1
<PAGE>
Jefferson Savings Bancorp, Inc.
_____________________, 1996
Page 2
"The shares represented by this Certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933, as
amended, applied. The shares represented by this certificate may be
transferred only in accordance with the terms of a letter agreement
dated ___________________, 1996, by the registered holder in favor of
Jefferson Savings Bancorp, Inc., a copy of which agreement is on file
at the principal offices of Jefferson Savings Bancorp, Inc."
2. Unless the transfer by me of Jefferson Shares is a sale made in
compliance with the provisions of Rule 145(d) or made pursuant to an
effective registration statement under the Securities Act, Jefferson
reserves the right to place the following legend on the Certificates issued
to my transferee:
"The shares represented by this Certificate have not been registered
under the Securities Act of 1933, as amended, and were acquired from a
person who received such shares in a transaction to which Rule 145
under the Securities Act of 1933, as amended, applied. The shares have
not been acquired by the holder with a view to, or for resale in
connection with, any distribution thereof within the meaning of the
Securities Act of 1933, as amended, and may not be sold or otherwise
transferred unless the shares have been registered under the
Securities Act of 1933, as amended, or an exemption from registration
is available."
I understand and agree that the legends set forth in paragraphs 1 and 2
above shall be removed by delivery of substitute Certificates without any legend
if I deliver to Jefferson a copy of a letter from the staff of the Commission,
or an opinion of counsel in form and substance satisfactory to Jefferson, to the
effect that no such legend is required for the purpose of the Securities Act.
I have carefully read this letter and the Merger Agreement and understand
the requirements of each and the limitations imposed upon the distribution,
sale, transfer or other disposition of Jefferson Shares by me.
Very truly yours,
A-Ex. 4.10-2
<PAGE>
EXHIBIT 8.15
------------
FORM OF
JOE L. WILLIAMS' EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the _____ day of _______________, 1996, by and among JEFFERSON SAVINGS BANCORP,
INC., a Delaware corporation ("Jefferson"), FIRST FEDERAL SAVINGS BANK OF NORTH
TEXAS, a Federal savings bank and wholly owned subsidiary of Jefferson ("First
Federal"), and JOE L. WILLIAMS ("Officer").
RECITALS
A. WHEREAS, Jefferson, First Federal and Texas Heritage Savings
Association/Banc, a Texas state savings association ("Texas Heritage"), have
entered into that certain Agreement and Plan of Merger dated May 31, 1996 (the
"Merger Agreement"), pursuant to which Texas Heritage will merge with and into
First Federal (the "Merger"), with First Federal being the survivor (referred to
herein as the "Resulting Bank").
B. WHEREAS, the Resulting Bank and Jefferson desire to assure themselves
of the services of Officer to the Resulting Bank after the consummation of the
Merger, and Officer also desires to provide his services to the Resulting Bank
on a full time basis pursuant to the terms and conditions set forth in this
Agreement.
C. WHEREAS, The parties hereto desire to set forth their mutual
understandings and agreements with respect to the foregoing.
AGREEMENT
In consideration of the foregoing, the mutual covenants herein contained and
other good and valuable consideration (the receipt, adequacy and sufficiency of
which are hereby acknowledged by the parties by their execution hereof), the
parties agree as follows:
SECTION 1. EMPLOYMENT. Resulting Bank agrees to employ, and Jefferson
agrees to cause Resulting Bank to employ, Officer as an executive officer of
Resulting Bank under the title of President and Chief Operating Officer of the
Dallas/Fort Worth division of Resulting Bank and Officer agrees to be so
employed during the term of this Agreement, upon the terms and conditions
hereinafter set forth (the "Employment").
SECTION 2. TERM OF AGREEMENT. The term of the Employment under this
Agreement (the "Term") shall commence on the Closing Date (as such term is
defined in the Merger Agreement) and shall continue in full force and effect for
a period of three (3) years thereafter subject to the provisions
A-Ex. 8.15-1
<PAGE>
of Section 5 and Section 10 hereof. The Term may be extended for such additional
one (1) year periods as the parties hereto may agree upon in writing from time
to time.
SECTION 3. DUTIES. During the Term of this Agreement, Officer shall
devote his full business time and best efforts in carrying out his duties as an
executive officer of Resulting Bank as aforesaid, including without limitation
(i) maintaining, promoting and developing customer relations, (ii) supporting
and promoting the interests of the Resulting Bank, and (iii) such other duties
as are appropriate for an employee holding an executive level position as may be
assigned to Officer by the Resulting Bank; provided, however, that Officer's
duties shall be commensurate with and no less than the duties generally assigned
to the head of a savings association branch of Texas Heritage's size. Officer
covenants and agrees to diligently, exclusively and faithfully serve the
Resulting Bank or its successors and, consistent with his historical practices,
to devote his full business time, attention, time, care, undivided loyalty and
best efforts to the performance of such services and the fulfillment of duties
attendant thereto.
SECTION 4. COMPENSATION. As full consideration for all services Officer
shall render to the Resulting Bank hereunder, Jefferson shall cause the
Resulting Bank to compensate Officer in the following manner:
(a) ANNUAL SALARY. Resulting Bank shall pay Officer an annual
salary of One Hundred Twenty Five Thousand Dollars ($125,000.00), payable in the
manner and in accordance with the customary payroll practices of the Resulting
Bank. Officer's annual salary may be increased from time to time in accordance
with the normal business practices of the Resulting Bank as determined by the
Board of Directors of the Resulting Bank. Officer shall not receive additional
compensation or fees for service on the Board of Directors of the Resulting Bank
or any committees thereof.
(b) BONUS. In addition to his annual salary, Officer shall, during
the Term of this Agreement, be eligible to participate in Jefferson's executive
bonus plan, as such plan may exist from time to time, at such level as
determined at the sole discretion of the Board of Directors of Jefferson.
(c) OTHER BENEFITS.
(i) CORPORATE BENEFITS. Officer shall, during the Term of
this Agreement, be entitled to participate in any and all employee welfare
plans, employee benefit plans, retirement plans, medical plans and similar
plans of the Resulting Bank generally now or hereafter in effect and open
to participation by qualifying employees of the Resulting Bank generally
(in accordance with the eligibility and other requirements established for
such corporate benefits).
(ii) REIMBURSEMENT FOR BUSINESS EXPENSES. Officer shall,
during the Term of this Agreement, receive reimbursement in full for all
reasonable business and travel expenses incurred by Officer in performing
his duties hereunder.
(iii) VACATION. Officer shall, during the Term of this
Agreement, receive such amount of paid vacation during each calendar year
in accordance with the normal vacation policy of the Resulting Bank, but in
no event less than four (4) weeks during each calendar year.
(iv) AUTOMOBILE. Officer shall, during the Term of this
Agreement, be provided an automobile for use in the performance of his
duties to Resulting Bank, as consistent with
A-Ex.815-2
<PAGE>
Resulting Bank's policy as now or hereafter in effect with respect to the
furnishing of automobiles to Resulting Bank's officers.
SECTION 5. TERMINATION. The Board of Directors of the Resulting Bank may
terminate Officer's employment at any time, but any termination by the Board
other than for Cause (as hereinafter defined) shall not prejudice Officer's
right to compensation or other benefits expressly provided for under this
Agreement. Upon termination of Officer's employment during the Term of this
Agreement because of death, Disability, Resignation or Cause, this Agreement
shall terminate with neither party having any further rights or obligations
except as provided in this Section 5 and Sections 6, 7 and 9 below. As used
above, the terms "Disability," "Resignation" and "Cause" shall have the meanings
set forth below.
(a) DISABILITY. "Disability" shall mean termination because of
Officer's absence from duties with the Resulting Bank on a full time basis for
the waiting period specified in the Disability Insurance Policy of the Resulting
Bank, as a result of incapacity due to physical or mental illness.
(b) RESIGNATION. "Resignation" shall mean voluntary termination by
Officer for any reason whatsoever.
(c) CAUSE. "Cause" shall mean termination by the Resulting Bank upon
(A) Officer's continued failure to substantially perform duties for the
Resulting Bank (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to Officer by the Board of Directors of Jefferson, which
specifically identifies the manner in which such Board of Directors believes
that Officer has not been substantially performing his duties, or (B) Officer's
misconduct which is reasonably believed to be materially injurious to Jefferson
or the Resulting Bank, which shall be deemed to include Officer's personal
dishonesty, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than minor traffic violations or similar
offenses) or final cease and desist order, or material breach of this Agreement.
(d) NOTICE OF TERMINATION. Any termination pursuant to this Section
5 shall be communicated by written Notice of Termination delivered to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth, in reasonable detail, the facts and
circumstances claimed to provide a basis for termination of Officer's employment
under the provision so indicated.
(e) DATE OF TERMINATION. "Date of Termination" shall mean the date
on which a Notice of Termination is given.
SECTION 6. CERTAIN BENEFITS UPON TERMINATION DUE TO DISABILITY;
TERMINATION FOR CAUSE. If, during the Term of this Agreement, Officer's
employment by the Resulting Bank shall be terminated because of Disability, then
Officer shall receive the benefits provided by the Resulting Bank's Disability
Insurance Policy, which benefits shall be no less than those currently provided
under Texas Heritage's Disability Insurance Policy. Officer shall have no right
to receive compensation or benefits for any period after termination for Cause.
SECTION 7. COVENANT NOT TO COMPETE. Officer agrees that, in the event
that his employment with the Resulting Bank is lawfully terminated because of
Cause or Resignation, he will not Carry on or
A-Ex. 8.15-3
<PAGE>
Participate in the Banking or Financial Business (as such activity is defined
below) in Dallas, Texas (the "Trade Area"), for a period of two (2) years (the
"Noncompetition Period") after such termination. As used in this Agreement, the
term "Carry on or Participate in the Banking or Financial Business" shall mean
engaging in material competition, directly or indirectly, with Jefferson or the
Resulting Bank (and/or their subsidiaries or affiliates, or their successors or
assigns) solely or jointly with others, as a director, officer, employee, agent,
partner, joint venturer, advisor, consultant, stockholder, individual proprietor
or lender or, in any other manner or capacity whatever, engaging in or rendering
material banking or financial services to any other bank, savings association,
holding company, mortgage company, finance company, loan company or other
financial institution or business which is in competition with Jefferson or the
Resulting Bank (and/or their subsidiaries or affiliates or their successors or
assigns) and which such other business has a main office, branch office, loan
production office or which otherwise solicits business directly or indirectly
within the Trade Area. In addition to the foregoing, for a period of two (2)
years after such termination, Officer shall not solicit any banking business
from any customer of Jefferson or the Resulting Bank or their subsidiaries. As
used in this Section 7, the term "stockholder" shall not include any investment
in a public corporation where Officer owns less than 5% of the stock issued and
outstanding.
SECTION 8. PROVISIONS RELATING TO THE NON-COMPETE COVENANT. Officer
acknowledges and agrees that the restrictions contained in Section 7 are
reasonable. In the event, however, that any of such restrictions are considered
unreasonable by a court of competent jurisdiction, then the court so holding may
effect any change to the restrictions necessary to render the same enforceable
by the court. Officer acknowledges that any violation by him of the provisions
of Section 7 could cause serious and irreparable harm to Jefferson and the
Resulting Bank incapable of being measured in money damages. Accordingly,
Officer acknowledges and agrees that, in the event of a breach or threatened
breach by him of the provisions of Section 7, Jefferson and the Resulting Bank,
or either of them, shall be entitled to seek, in addition to other rights or
remedies, an injunction or restraining order against Officer.
SECTION 9. CONFIDENTIAL INFORMATION. Officer agrees that he shall not, to
the detriment of Jefferson or the Resulting Bank (and/or their subsidiaries or
affiliates, or their successors or assigns), impart any confidential information
or knowledge relative to Jefferson or the Resulting Bank (and/or their
subsidiaries or affiliates, or their successors or assigns), to any person or
entity, corporate or otherwise, without specific prior written permission from
Jefferson to do so, and Officer agrees that all such information or knowledge
shall be kept strictly confidential. Officer confirms and agrees that such
information constitutes the exclusive property of Jefferson and the Resulting
Bank. The provisions of this Section 9 shall survive any termination of this
Agreement for a period of two (2) years.
SECTION 10. REGULATORY COMPLIANCE MATTERS.
(a) If Officer is suspended and/or temporarily prohibited from
participating in the conduct of the Resulting Bank's affairs as the result of a
notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act, the Resulting Bank's obligations hereunder shall be suspended for the
period of time Officer is so suspended or temporarily prohibited beginning on
the date of service of such notice to the Resulting Bank, unless such suspension
of Officer is stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Resulting Bank may in its discretion (i) pay Officer all or
part of the compensation withheld while its obligations hereunder were
suspended, and (ii) reinstate, in whole or in part, any of such obligations.
A-Ex. 8-15-4
<PAGE>
(b) If Officer is removed and/or permanently prohibited from
participating in the conduct of the Resulting Bank's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, all
obligations of the Resulting Bank hereunder shall terminate as of the effective
date of the order and the Resulting Bank shall not be required to provide
Officer with a Notice of Termination. Notwithstanding the foregoing, the
obligations provided in Section 9 hereof, and any rights of the parties
hereunder which have vested as of such effective date, shall not be affected.
(c) If the Resulting Bank is in default (as defined in Section
3(x)(1) of the Federal Deposit Insurance Act), all obligations of the parties
hereunder shall terminate as of the date of the default and the Resulting Bank
shall not be required to provide Officer with a Notice of Termination.
Notwithstanding the foregoing, the obligations provided in Section 9 hereof, and
any rights of the parties hereunder which have vested as of the date of default,
shall not be affected.
(d) All obligations hereunder shall be terminated, except to the
extent it is determined that continuation of this Agreement is necessary for the
continued operation of the Resulting Bank (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee, at the time the
Federal Deposit Insurance Corporation or Resolution Trust Corporation enters
into an agreement to provide assistance to or on behalf of the Resulting Bank
under the authority contained in Section 13(c) of the Federal Deposit Insurance
Act, or (ii) by the Director or his or her designee, at the time the Director or
his or her designee approves a supervisory merger to resolve problems related to
the operation of the Resulting Bank or when the Resulting Bank is determined by
the Director to be in an unsafe or unsound condition. In any such event, the
Resulting Bank shall not be required to provide Officer with a Notice of
Termination. Notwithstanding the foregoing, any rights of the parties hereunder
which have already vested shall not be affected by any action described in this
Section 10(d).
SECTION 11. NOTICES. All notices or other communications hereunder shall
be in writing and shall be deemed to have been given when personally delivered
or deposited in the United States mail, certified or registered, return receipt
requested, postage prepaid, or sent by Federal Express or other recognized
overnight courier service that provides proof of delivery, and addressed as
follows:
(a) if to Jefferson:
Jefferson Savings Bancorp, Inc.
14915 Manchester Road
Ballwin, Missouri 63011
Attention: David V. McCay
Chairman of the Board and President
with a copy to,
John K. Pruellage, Esq.
Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
A-Ex. 8.15-5
<PAGE>
(b) if to the Resulting Bank:
First Federal Savings Bank of North Texas
116 E. South Street
Longview, Texas 75606
Attention: David V. McCay
Chairman of the Board and President
with a copy to,
John K. Pruellage, Esq.
Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
(c) if to Officer:
Joe L. Williams
5109 Greensboro
Sachse, Texas 75048
with a copy to,
Kevin L. Twining, Esq.
Locke Purnell Rain Harrell
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
or to such other address as notice shall have been given pursuant to the
provisions hereof.
SECTION 12. AMENDMENT AND MODIFICATION. No amendment, modification,
supplement, termination, consent or waiver of any provision of this Agreement,
nor consent to any departure herefrom, shall in any event be effective unless
the same is in writing and is signed by the party against whom enforcement of
the same is sought. Any waiver of any provision of this Agreement and any
consent to any departure from the terms of any provision of this Agreement is to
be effective only in the specific instance and for the specific purpose for
which given.
SECTION 13. ASSIGNMENT. No party may assign or transfer any of its rights
or obligations under this Agreement to any other person without the prior
written consent of the other party hereto.
SECTION 14. CAPTIONS. Captions contained in this Agreement have been
inserted herein only as a matter of convenience and in no way define, limit,
extend or describe the scope of this Agreement or the intent of any provision
hereof.
SECTION 15. COMPLIANCE WITH LAW. None of the terms or provisions of this
Agreement require any of the parties to take any action prohibited by, or
A-Ex. 8.15-6
<PAGE>
SECTION 16. COUNTERPARTS. This Agreement may be executed by the parties
on any number of separate counterparts, and all such counterparts so executed
constitute one agreement binding on all the parties notwithstanding that all the
parties are not signatories to the same counterpart.
SECTION 17. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, letters of intent, understandings, negotiations
and discussions of the parties, whether oral or written.
SECTION 18. FAILURE OR DELAY. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or privilege hereunder
operates as a waiver thereof; nor does any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof, or the exercise of any other right, power or privilege. No notice to
or demand on any party in any case entitles such party to any other or further
notice or demand in similar or other circumstances.
SECTION 19. FURTHER ASSURANCES. The parties shall execute and deliver
such further instruments and do such further acts and things as may reasonably
be required to carry out the intent and purpose of this Agreement.
SECTION 20. GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder are to be governed by and construed and interpreted in
accordance with the laws of the State of Texas applicable to contracts made and
to be performed wholly within Texas, without regard to choice or conflict of
laws rules.
SECTION 21. SUCCESSORS AND ASSIGNS. All provisions of this Agreement are
binding upon, inure to the benefit of, and are enforceable by or against, the
parties and their respective heirs, executors, administrators or other legal
representatives and permitted successors and assigns.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
JEFFERSON SAVINGS BANCORP, INC.
By:
-----------------------------------
David V. McCay
Chairman of the Board and President
FIRST FEDERAL SAVINGS BANK OF NORTH TEXAS
By:
-----------------------------------
David V. McCay
Chairman of the Board and President
----------------------------------------
JOE L. WILLIAMS
A-Ex. 8.15-7
<PAGE>
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "First
Amendment") is made and entered into as of the 31st day of August, 1996, by and
among TEXAS HERITAGE SAVINGS ASSOCIATION/BANC, a Texas savings association
("Texas Heritage"), FIRST FEDERAL SAVINGS BANK OF NORTH TEXAS, a federal savings
bank ("First Federal"), and JEFFERSON SAVINGS BANCORP, INC., a Delaware
corporation and parent corporation of First Federal ("Jefferson").
RECITALS
--------
WHEREAS, Texas Heritage, First Federal and Jefferson entered into that
certain Agreement and Plan of Merger dated May 31, 1996 (the "Merger Agreement")
pursuant to which Texas Heritage has agreed to merge with and into First Federal
under the charter of First Federal; and
WHEREAS, Texas Heritage, First Federal and Jefferson now desire to amend
the Merger Agreement as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth in this First Amendment, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to amend the Merger Agreement as follows.
AMENDMENT
---------
SECTION 1. AMENDMENT. Section 7.05 of the Merger Agreement is hereby
amended by deleting such section in its entirety and substituting in lieu
thereof the following:
SECTION 7.05. APPROVAL DENIAL. If any regulatory application filed
pursuant to Section 5.01 should be finally denied or disapproved by
the respective regulatory authority, or if Jefferson should fail to
obtain any regulatory approvals required to consummate the Merger on
or before October 15, 1996, then either party may terminate this
Agreement by delivery of written notice of such termination to the
other party within thirty (30) days of such date; provided, however,
that a request for additional information or undertaking by Jefferson,
as a condition for approval, shall not be deemed to be a denial or
disapproval so long as Jefferson diligently provides the requested
information or undertaking. In the event an application is denied
pending an appeal, petition for review, or similar such act on the
part of Jefferson (hereinafter referred to as the "appeal"), then the
application will be deemed denied unless Jefferson prepares and timely
files such appeal, continues the appellate process and obtains the
necessary approval by October 15, 1996.
SECTION 2. CONTINUED FORCE AND EFFECT. Except as expressly amended
herein, the Merger Agreement shall remain in full force and effect. Nothing
contained in this First Amendment shall prevent further amendment or
modification of any provision of the Merger Agreement.
SECTION 3. DEFINED TERMS. All capitalized terms used herein, but not
defined herein have the meanings set forth in the Merger Agreement.
A-Amendment(1)-1
<PAGE>
SECTION 4. MULTIPLE COUNTERPARTS. This First Amendment may be executed
in multiple counterparts, each of which shall be deemed an original and all of
which taken together shall constitute but one and the same document.
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment as of the day and year first above written.
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC,
a Texas savings association
By: /s/ Joe L. Williams
-------------------------------------
Title: President & C.E.O.
----------------------------------
FIRST FEDERAL SAVINGS BANK OF NORTH
TEXAS, a federal savings bank
By: /s/ David V. McCay
-------------------------------------
Title: Chairman of the Board and Chief
Executive Officer
----------------------------------
JEFFERSON SAVINGS BANCORP, INC., a
Delaware corporation
By: /s/ David V. McCay
-------------------------------------
Title: Chairman of the Board and Chief
Executive Officer
----------------------------------
A-Amendment (1)-2
<PAGE>
SECOND AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Second
Amendment") is made and entered into as of the 9th day of October, 1996, by and
among TEXAS HERITAGE SAVINGS ASSOCIATION/BANC, a Texas savings association
("Texas Heritage"), FIRST FEDERAL SAVINGS BANK OF NORTH TEXAS, a federal savings
bank ("First Federal"), and JEFFERSON SAVINGS BANCORP, INC., a Delaware
corporation and parent corporation of First Federal ("Jefferson").
RECITALS
--------
WHEREAS, Texas Heritage, First Federal and Jefferson entered into that
certain Agreement and Plan of Merger dated May 31, 1996, as amended on August
31, 1996 (as amended, the "Merger Agreement"), pursuant to which Texas Heritage
has agreed to merge with and into First Federal under the charter of First
Federal; and
WHEREAS, Texas Heritage, First Federal and Jefferson now desire to further
amend the Merger Agreement as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth in this Second Amendment, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to further amend the Merger Agreement as
follows.
AMENDMENT
---------
SECTION 1. Section 1.05(b) of the Merger Agreement is hereby amended by
deleting such section in its entirety and substituting in lieu thereof the
following:
(b) The term "Closing Book Value" shall mean the amount of the
consolidated shareholders' equity accounts, exclusive of any preferred
stock account, of Texas Heritage
(1) reduced by any and all accruals, expenses, charge-offs,
deductions or adjustments to the accounts of Texas Heritage relative
to:
(i) charges, provisions or accruals incurred pursuant to
Section 4.05 hereof; and
(ii) the amount by which Texas Heritage's aggregate legal
and accounting fees and expenses relative to the transactions
contemplated by this Agreement exceeds Fifty Thousand Dollars
($50,000); and
A-Amend (2)-1
<PAGE>
(2) increased by:
(i) an amount equal to twenty-five percent (25%) of the
difference between (A) and (B), where (A) equals the aggregate
price paid by Texas Heritage to redeem the Texas Heritage
Preferred (as defined in Section 1.05(e) hereof), and (B) equals
the aggregate par value of such Texas Heritage Preferred;
provided, however, that such amount shall not exceed Thirty Nine
Thousand Dollars ($39,000) in the aggregate; and
(ii) any amounts paid by, or accrued on the books of, Texas
Heritage relative to any special assessment(s) levied by the
Federal Deposit Insurance Corporation (the "F.D.I.C.") on the
deposits of Texas Heritage through the Closing Date to
recapitalize the Savings Association Insurance Fund.
The Closing Book Value shall be determined as of the last day of the
month immediately preceding the month in which the Closing Date (as
defined in Section 1.07 hereof) occurs and shall be determined by the
accounting firm of Grant Thornton LLP in accordance with generally
accepted accounting principles consistently applied ("GAAP"), which
such determination of Closing Book Value shall be verified by KPMG
Peat Marwick LLP or such other accounting firm as Jefferson shall
designate.
SECTION 2. Section 1.05(e) of the Merger Agreement is hereby amended by
deleting such section in its entirety and substituting in lieu thereof the
following:
Each share of preferred stock, par value $1.00 per share, of Texas
Heritage (the "Texas Heritage Preferred"), outstanding on the date
hereof shall be redeemed by Texas Heritage and canceled prior to the
Closing Date.
SECTION 3. Section 1.09(a) of the Merger Agreement is hereby amended by
deleting the reference to "and" at the end of the third line of subsection (v)
thereof, by deleting the reference to "hereto." at the end of the second line of
subsection (vi) thereof and substituting in lieu thereof "hereto; and", and by
adding the following subsection (vii) thereto:
(vii) documentary evidence satisfactory to Jefferson, in its sole
discretion, confirming the redemption and cancellation of all
outstanding shares of Texas Heritage Preferred.
SECTION 4. Section 7.05 of the Merger Agreement is hereby amended by
deleting both references therein to "October 15, 1996" and substituting in lieu
thereof "January 15, 1997."
A-Amend (2)-2
<PAGE>
SECTION 5. Section 7.08 of the Merger Agreement is hereby amended by
deleting the reference to "December 31, 1996" in the second line thereof and
substituting in lieu thereof "January 31, 1997."
SECTION 6. Section 7.10 of the Merger Agreement is hereby amended by
deleting the reference to "(A) and (B) of this Section 7.10" at the end of the
tenth line of subsection (b) thereof and substituting in lieu thereof "(i) and
(ii) of this Section 7.10(b)", and by adding the following subsection (c)
thereto:
(c) Notwithstanding anything in this Section 7.10 to the contrary,
upon the termination of this Agreement by Texas Heritage due to a
material breach of this Agreement by Jefferson that has not been cured
as provided in Section 7.02 hereof, and provided that Texas Heritage
has redeemed and canceled all outstanding shares of Texas Heritage
Preferred prior to the date of the material breach of this Agreement
by Jefferson, Jefferson shall pay to Texas Heritage Thirty Nine
Thousand Dollars ($39,000), which shall be in addition to any other
fee which may be payable pursuant to this Section 7.10.
SECTION 7. Except as expressly amended herein, the Merger Agreement shall
remain in full force and effect. Nothing contained in this Second Amendment
shall prevent further amendment or modification of any provision of the Merger
Agreement.
SECTION 8. All capitalized terms used herein, but not defined herein have
the meanings set forth in the Merger Agreement.
SECTION 9. This Second Amendment may be executed in multiple counterparts,
each of which shall be deemed an original and all of which taken together shall
constitute but one and the same document.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
A - Amend (2) - 3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Second
Amendment as of the day and year first above written.
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC,
a Texas savings association
By: /s/ Joe L. Williams
----------------------------------------
Title: President & Chief Executive Officer
-------------------------------------
FIRST FEDERAL SAVINGS BANK OF NORTH TEXAS,
a federal savings bank
By: /s/ David V. McCay
----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
JEFFERSON SAVINGS BANCORP, INC., a Delaware
corporation
By: /s/ David V. McCay
----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
A - Amend (2) - 4
<PAGE>
APPENDIX B
----------
EXCERPTS OF TEXAS BUSINESS CORPORATION ACT (DISSENTERS' RIGHTS)
5.11 RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN CORPORATE
ACTIONS.--A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if shareholder
approval is required by Article 5.03 or 5.16 of this Act and the shareholder
holds shares of a class or series that was entitled to vote thereon as a class
or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise provided in
the articles of incorporation) of all, or substantially all, the property and
assets, with or without good will, of a corporation requiring the special
authorization of the shareholders as provided by this Act;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which the
shares of the corporation of the class or series held by the shareholder are to
be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if (1) the shares held by the shareholder are part of a class
shares of which are listed on a national securities exchange, or are held of
record by not less than 2,000 holders, on the record date fixed to determine the
shareholders entitled to vote on the plan of merger or the plan of exchange, and
(2) the shareholder is not required by the terms of the plan of merger or the
plan of exchange to accept for his or her shares any consideration other than
(a) shares of a corporation that, immediately after the effective time of the
merger or exchange, will be part of a class or series of shares of which are (i)
listed, or authorized for listing upon official notice of issuance, on a
national securities exchange, or (ii) held of record by not less than 2,000
holders, and (b) cash in lieu of fractional shares otherwise entitled to be
received. (Last amended by Ch. 901 L. '91, eff. 8-26-91.)
5.12 PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTION.--A.
Any shareholder of any domestic corporation who has the right to dissent from
any of the corporate actions referred to in Article 5.11 of this Act may
exercise that right to dissent only by complying with the following procedures:
(1) (a) With respect to proposed corporate action that is submitted to a
vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action, setting
out that the shareholder's right to dissent will be exercised if the action is
effective and giving the shareholder's address, to which notice thereof shall be
delivered or mailed in that event. If the action is effected and the
shareholder shall not have voted in favor of the action, the corporation, in the
case of action other than a merger, or the surviving or new corporation (foreign
or domestic) or other entity that is liable to discharge the shareholder's right
of dissent, in the case of a merger, shall, within ten (10) days after the
action is effected, deliver or mail to the shareholder written notice that the
action
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<PAGE>
has been effected, and the shareholder may, within ten (10) days from the
delivery or mailing of the notice, make written demand on the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the case
may be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and
class of the shares owned by the shareholder and the fair value of the shares as
estimated by the shareholder. Any shareholder failing to make demand within the
ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved pursuant to
Section A of Article 9.10 of this Act, the corporation, in the case of action
other than a merger, and the surviving or new corporation (foreign or domestic)
or other entity that is liable to discharge the shareholder's right of dissent,
in the case of a merger, shall, within ten (10) days after the date the action
is effected, mail to each shareholder of record as of the effective date of the
action notice of the fact and date of the action and that the shareholder may
exercise the shareholder's right to dissent from the action. The notice shall
be accompanied by a copy of this Article and any articles or documents filed by
the corporation with the Secretary of State to effect the action. If the
shareholder shall not have consented to the taking of the action, the
shareholder may, within twenty (20) days after the mailing of the notice, make
written demand on the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, for payment of the fair value of
the shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was delivered
to the corporation pursuant to Section A of Article 9. 10 of this Act, excluding
any appreciation or depreciation in anticipation of the action. The demand
shall state the number and class of shares owned by the dissenting shareholder
and the fair value of the shares as estimated by the shareholder. Any
shareholder failing to make demand within the twenty (20) day period shall be
bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, of a
demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or other
entity shall deliver or mail to the shareholder a written notice that shall
either set out that the corporation (foreign or domestic) or other entity
accepts the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was effected, and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed, or shall contain an estimate by the corporation
(foreign or domestic) or other entity of the fair value of the shares, together
with an offer to pay the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder agrees to
accept that amount and, in the case of shares represented by certificates, upon
the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall be
made within ninety (90) days after the date on which the action was effected
and, in the case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the shareholder
shall cease to have any interest in the shares or in the corporation.
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B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The
appraisers shall have power to examine any of the books and records of the
corporation the shares of which they are charged with the duty of valuing, and
they shall make a determination of the fair value of the shares upon such
investigation as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them pertinent
evidence as to the value of the shares. The appraisers shall also have such
power and authority as may be conferred on Masters in Chancery by the Rules of
Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs, shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
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<PAGE>
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the judgment
entered for the value of the shares, as in this Article provided, shall, in the
case of a merger, be treated as provided in the plan of merger and, in all other
cases, may be held and disposed of by the corporation as in the case of other
treasury shares.
F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his or her shares or money damages to the shareholder with respect to the
action. If the existing, surviving, or new corporation (foreign or domestic)
or other entity, as the case may be, complies with the requirements of this
Article, any shareholder who fails to comply with the requirements of this
Article shall not be entitled to bring suit for the recovery of the value of his
or her shares or money damages to the shareholder with respect to the action.
(Last amended by Ch. 215, L. '93, eff. 9-1-93.)
5.13 PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS.--A. Any
shareholder who has demanded payment for his or her shares in accordance with
either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to vote
or exercise any other rights of a shareholder except the right to receive
payment for his or her shares pursuant to the provisions of those articles and
the right to maintain an appropriate action to obtain relief on the ground that
the corporate action would be or was fraudulent, and the respective shares for
which payment has been demanded shall not thereafter be considered outstanding
for the purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his or her shares
in accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of
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<PAGE>
this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him shall be conclusively presumed to have
approved and ratified the corporate action from which he dissented and shall be
bound thereby, the right of such shareholder to be paid the fair value of his
shares shall cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim. (Last amended by Ch.
215, L. '93, eff. 9-1-93.)
B-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Jefferson's directors, officers, employees and agents have certain rights
of indemnification provided under Article XVII of Jefferson's Certificate of
Incorporation and Section 145 of the General Corporation Law of the State of
Delaware ("Delaware Corporation Law").
Section 145 of the Delaware Corporation Law provides that a director,
officer, employee or agent of a Delaware corporation who was or is a party or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (a) must be indemnified by the corporation for all expenses
of such litigation which are actually and reasonably incurred when he is
successful on the merits or otherwise in defense of an action; (b) may be
indemnified by the corporation for expenses actually and reasonably incurred,
judgments, fines and amounts paid in settlement of such litigation (other than a
suit by or in the right or the corporation), even if he or she is not successful
on the merits, if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation (and in the case of a criminal proceeding, had no reason to believe
his or her conduct was unlawful); and (c) may be indemnified by the corporation
for expenses of a suit by which are actually and reasonably incurred by or in
the right of the corporation, even if he or she is not successful on the merits,
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation, provided, that
no such indemnification may be made if such person is found liable to the
corporation unless a court determines, in view of all the circumstances, that he
or she is fairly and reasonably entitled to indemnification.
Section 145 of the Delaware Corporation Law also empowers a corporation to
advance litigation expenses to a director, officer, employee or agent upon
receipt of an undertaking by such person to repay the amount advanced if it is
ultimately determined that he or she is not entitled to indemnification.
The Delaware indemnification statute described above also provides that the
indemnification and advancement of expenses provisions of such statute are not
exclusive of any rights an individual may have under any by-law, agreement, vote
of shareholders or disinterested directors or otherwise. In addition, the
corporation retains the power to purchase and maintain liability insurance
covering such persons, whether or not the corporation would have the power to
indemnify him or her against such liability.
Article XVII of Jefferson's Certificate of Incorporation contain provisions
which are substantially similar to Section 145 of the Delaware Corporation Law
described above, but such provisions make mandatory the permissive
indemnification and advancement of expenses provisions of the statute. Article
XVII further provides that, the indemnification provided by such articles shall
be deemed to be a contract between Jefferson and the persons entitled to
indemnification thereunder, and any repeal or modification of such Article shall
not affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought based in whole or in part upon any such state of facts.
The indemnification and advance payments provided for in Article XVII shall
continue as to a person who has ceased to hold a position as a director,
officer, employee or agent and shall inure to his or her heirs, executors and
administrators. Article XVII further provides that if it or any portion thereof
shall be invalidated on any ground by any court of competent
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<PAGE>
jurisdiction, Jefferson shall nevertheless indemnify each director, officer,
employee, and agent of Jefferson as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of Jefferson to the full
extent permitted by any applicable portion of Article XVII that shall not have
been invalidated and to the full extent permitted by applicable law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Jefferson
pursuant to the foregoing provisions, Jefferson has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration
Statement:
(2) Agreement and Plan of Merger, dated May 31, 1996, by and among
Jefferson Savings Bancorp, Inc., First Federal Savings Bank of
North Texas and Texas Heritage Savings Association/Banc, as
amended by the First Amendment to Agreement and Plan of
Merger, dated as of August 31, 1996, as further amended by the
Second Amendment to Agreement and Plan of Merger, dated as of
October 9, 1996 (Appendix A to Proxy Statement/Prospectus).
The Registrant agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request;
(5) Opinion of Lewis, Rice & Fingersh, L.C. regarding legality;
(8) Opinion of Lewis, Rice & Fingersh, L.C. regarding federal
income tax consequences;
(23)(a) Consent of KPMG Peat Marwick LLP;
(23)(b) Consent of Grant Thornton LLP;
(23)(c) Consent of Oakerson, Arnold, Walker & Co.
(23)(d) Consent of Lewis, Rice & Fingersh, L.C. (in opinion regarding
legality);
(23)(e) Consent of Lewis, Rice & Fingersh, L.C. (in opinion regarding
federal income tax consequences);
(24) Powers of Attorney;
(99)(a) Form of Proxy Card for Texas Heritage Savings Association/Banc
Special Meeting;
(99)(b) Form of Letter to Shareholders of Texas Heritage Savings
Association/Banc to accompany Proxy Statement/Prospectus;
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<PAGE>
(99)(c) Form of Notice of Texas Heritage Savings Association/Banc
Special Meeting; and
(99)(d) Excerpts of the Texas Business Corporation Act (Dissenters'
Rights) (Appendix B to Proxy Statement/Prospectus).
The following exhibits are incorporated herein by reference:
(3)(a) Certificate of Incorporation of Jefferson Savings Bancorp,
Inc.;
(3)(b) Bylaws of Jefferson Savings Bancorp, Inc., as amended; and
(4) Rights Agreement, dated August 17, 1994, between Jefferson
Savings Bancorp, Inc. and Boatmen's Trust Company.
Note: No long-term debt instrument issued by Jefferson Savings
Bancorp, Inc. exceeds 10% of the consolidated total assets of
Jefferson Savings Bancorp, Inc. and its subsidiaries. In
accordance with paragraph 4(iii) of Item 601 of Regulation S-
K, Jefferson Savings Bancorp, Inc. will furnish to the S.E.C.
upon request copies of long-term debt instruments and related
agreements.
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) or (c) of this Form.
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes as follows: That prior to
any public reoffering of the securities registered hereunder through the use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c)
promulgated pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The undersigned Registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act, and is used
in connection with an offering of securities subject to Rule 415 promulgated
pursuant to the Securities Act, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
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<PAGE>
(4) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(6) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(7) Insofar as indemnification for liabilities arising under the
Securities Act, may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions (see Item 20 --
Indemnification of Directors and Officers), or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for
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<PAGE>
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act, and will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of St.
Louis, State of Missouri, on October 11, 1996.
JEFFERSON SAVINGS BANCORP, INC.
By /s/ David V. McCay
----------------------------------------
David V. McCay
Chairman of the Board, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on October 11, 1996.
/s/ David V. McCay Chairman of the Board, President and Chief
- -------------------------- Executive Officer (principal executive officer)
David V. McCay
/s/ Paul J. Milano Senior Vice President, Treasurer, Chief Financial
- -------------------------- Officer and Senior Accounting Officer (principal
Paul J. Milano financial and accounting officer)
* Director
- --------------------------
Frank C. Bick
* Director
- --------------------------
William W. Canfield
* Director
- --------------------------
Lloyd D. Doerflinger
* Director
- --------------------------
Dorian D. Magwitz
* Director
- --------------------------
Forrest W. Miller, Jr.
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<PAGE>
* Director
- --------------------------
Edward G. Throop
/s/ Paul J. Milano
-----------------------
*Attorney-in-fact
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<PAGE>
INDEX TO EXHIBITS
Number Exhibit
- ------ -------
(2) Agreement and Plan of Merger, dated May 31, 1996, as amended by the
First Amendment to Agreement and Plan of Merger, dated as of August 31,
1996, as further amended by the Second Amendment to Agreement and Plan
of Merger, dated as of October 9, 1996, by and among Jefferson Savings
Bancorp, Inc., First Federal Savings Bank of North Texas and Texas
Heritage Savings Association/Banc (Appendix A to the Proxy
Statement/Prospectus).
(3)(a) Certificate of Incorporation of Jefferson Savings Bancorp, Inc.
(incorporated herein by reference from Registration Statement on Form S-
1 filed December 23, 1992 (File No. 33-56324)).
(3)(b) Bylaws of Jefferson Savings Bancorp, Inc., as amended, (incorporated
herein by reference from Registration Statement on Form S-1 filed
December 23, 1992 (File No. 33-56324)).
(4) Rights Agreement, dated August 17, 1994, between Jefferson Savings
Bancorp, Inc. and Boatmen's Trust Company (incorporated herein by
reference from Registration Statement on Form 8-A, filed August 19,
1994).
(5) Opinion of Lewis, Rice & Fingersh, L.C. regarding legality.
(8) Opinion of Lewis, Rice & Fingersh, L.C. regarding federal income tax
consequences.
(23)(a) Consent of KPMG Peat Marwick LLP.
(23)(b) Consent of Grant Thornton LLP.
(23)(c) Consent of Oakerson, Arnold, Walker & Co.
(23)(d) Consent of Lewis, Rice & Fingersh, L.C. (in opinion regarding legality).
(23)(e) Consent of Lewis, Rice & Fingersh, L.C. (in opinion regarding federal
income tax consequences).
(24) Powers of Attorney.
(99)(a) Form of Proxy Card for Texas Heritage Savings Association/Banc
Special Meeting.
(99)(b) Form of Letter to Shareholders of Texas Heritage Savings
Association/Banc to accompany Proxy Statement/Prospectus.
(99)(c) Form of Notice of Texas Heritage Savings Association/Banc
Special Meeting.
(99)(d) Excerpts of the Texas Business Corporation Act (Dissenters' Rights)
(Appendix B to Proxy Statement/Prospectus).
<PAGE>
EXHIBIT (5)
-----------
<PAGE>
LEWIS, RICE & FINGERSH
A LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
500 N. BROADWAY, SUITE 2000
ST. LOUIS, MISSOURI 63102-2147
TEL (314) 444-7600
October 11, 1996
Jefferson Savings Bancorp, Inc.
14915 Manchester Road
Ballwin, Missouri 63011
RE: REGISTRATION STATEMENT ON FORM S-4
Dear Sirs:
In connection with a certain Registration Statement on Form S-4 (the
"Registration Statement") filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, you have requested that we furnish you our
opinion as to the legality of the shares of the common stock, $0.01 par value
(the "Common Stock"), of Jefferson Savings Bancorp, Inc. (the "Company")
registered thereunder, which Common Stock is to be issued pursuant to an
Agreement and Plan of Merger (the "Merger Agreement"), dated May 31, 1996, as
amended, among the Company, First Federal Savings Bank of North Texas and Texas
Heritage Savings Association/Banc.
As counsel to the Company, we have participated in the preparation of the
Registration Statement. We have examined and are familiar with the Company's
Certificate of Incorporation, Bylaws, as amended, records of corporate
proceedings and such other information and documents as we have deemed necessary
or appropriate.
Based upon the foregoing, we are of the opinion that the Common Stock has
been duly authorized and will, when issued as contemplated in the Registration
Statement and the Merger Agreement, be validly issued, fully paid and non-
assessable.
We consent to the use of this opinion as an Exhibit to the Registration
Statement.
Very truly yours,
LEWIS, RICE & FINGERSH, L.C.
/s/ Lewis, Rice & Fingersh, L.C.
<PAGE>
EXHIBIT (8)
-----------
<PAGE>
LEWIS, RICE & FINGERSH
A LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
500 N. BROADWAY, SUITE 2000
ST. LOUIS, MISSOURI 63102-2147
TEL (314) 444-7600
October 11, 1996
Board of Directors
Jefferson Savings Bancorp, Inc.
14915 Manchester Road
Ballwin, MO 63011
ATTN: David V. McCay
Chairman of the Board
RE: MERGER OF TEXAS HERITAGE SAVINGS ASSOCIATION/BANC INTO FIRST FEDERAL
SAVINGS BANK OF NORTH TEXAS
Gentlemen:
You have requested our opinion as to the Federal income tax consequences of
the proposed merger ("Merger") of Texas Heritage Savings Association/Banc
("Texas Heritage") into First Federal Savings Bank of North Texas ("First
Federal") pursuant to the Agreement and Plan of Merger dated May 31, 1996, as
amended August 31, 1996 and October 9, 1996 (the "Merger Agreement"), by and
among Texas Heritage, First Federal and Jefferson Savings Bancorp, Inc.
("Jefferson Savings").
In issuing the opinions set forth in this letter, we have relied upon (i)
the factual representations made by Jefferson Savings, First Federal and Texas
Heritage in written statements dated October 11, 1996 (the "Representations"),
(ii) the Merger Agreement and (iii) the facts, information and documentation set
forth in the registration statement on Form S-4 filed with the Securities and
Exchange Commission in connection with the Merger (the "Registration
Statement").
The opinions set forth in this letter are predicated upon our understanding
of the facts set forth in the Merger Agreement and the Representations and upon
the assumption that neither Jefferson
ST. LOUIS, MISSOURI . KANSAS CITY, MISSOURI . CLAYTON, MISSOURI . WASHINGTON,
MISSOURI . BELLEVILLE, ILLINOIS . HAYS, KANSAS . LEAWOOD, KANSAS
<PAGE>
LEWIS, RICE & FINGERSH
Board of Directors
October 11, 1996
Page 2
Savings nor First Federal will take any action prior or subsequent to the
transaction which would cause it not to qualify as a reorganization under
section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Any change in such facts or facts contrary to the foregoing assumption may
adversely affect our opinion.
Based on our review of the Merger Agreement, the Representations and the
Registration Statement and assuming the transactions described therein are
completed as described, our opinion as to the Federal income tax consequences of
the Merger is as follows.
1. Assuming the Merger qualifies as a statutory merger under the laws of
the state of Texas, the Merger will constitute a reorganization within the
meaning of section 368 of the Code. Jefferson Savings, Texas Heritage and First
Federal will each be "a party to a reorganization" within the meaning of section
368(b) of the Code.
2. Pursuant to section 356(a)(1) of the Code, each shareholder who
receives both Jefferson Savings common stock and cash in exchange for his Texas
Heritage common stock must recognize gain realized on the exchange, if any, but
not in excess of the amount of cash received. If the exchange has the effect of
a distribution of a dividend (determined with application of section 318(a) of
the Code with respect to a Texas Heritage shareholder), then the amount of gain
recognized that is not in excess of its ratable share of undistributed
accumulated earnings and profits of Texas Heritage will be treated as a dividend
(section 356(a)(2) of the Code). The determination of whether the exchange has
the effect of a distribution of a dividend will be made in accordance with the
principles set forth in Commissioner v. Clark, 489 U.S. 726 (1989). Pursuant to
section 356(c) of the Code, no loss will be recognized by any shareholder on the
exchange of Texas Heritage stock for Jefferson Savings stock and cash.
<PAGE>
LEWIS, RICE & FINGERSH
Board of Directors
October 11, 1996
Page 3
3. If a cash payment is received by a Texas Heritage shareholder in lieu
of a fractional share interest in Jefferson Savings common stock, the cash will
be treated as a distribution in redemption of that fractional share interest
subject to the provisions and limitations of section 302 of the Code and
considering the application of section 318 of the Code.
4. Pursuant to section 358(a)(1) of the Code, the basis of the Jefferson
Savings common stock received by the shareholders of Texas Heritage will be the
same as the basis of the Texas Heritage common stock surrendered in the
exchange, decreased by the amount of cash received by the shareholder and
increased by the amount, if any, treated as a dividend and the amount of gain,
if any, recognized by the shareholder in the exchange.
5. Pursuant to section 1223(1) of the Code, the holding period of the
Jefferson Savings common stock received by the shareholders of Texas Heritage
will include, in each instance, the period during which the Texas Heritage
common stock surrendered in exchange therefor was held, provided that such stock
is held as a capital asset in the hands of such shareholders on the date of the
exchange.
6. Pursuant to sections 361 and 351 of the Code, no gain or loss will be
recognized by Texas Heritage upon the transfer of substantially all of its
assets to, and the assumption of its liabilities by, First Federal in exchange
for Jefferson Savings common stock.
7. Pursuant to Revenue Ruling 57-278, 1957 C.B. 124, no gain or loss will
be recognized by First Federal upon the receipt by First Federal of
substantially all of the assets of Texas Heritage in exchange for Jefferson
Savings common stock, cash and the assumption by First Federal of the
liabilities of Texas Heritage.
This opinion letter is based upon our understanding of the existing
provisions of the Code, currently applicable regulations
<PAGE>
LEWIS, RICE & FINGERSH
Board of Directors
October 11, 1996
Page 4
promulgated under the Code, current published administrative positions of the
Internal Revenue Service such as revenue rulings and revenue procedures, and
existing judicial decisions, all of which are subject to change either
prospectively or retroactively. Any change in such authority may adversely
affect our opinions.
We assume no obligation to update our opinions for any deletions or
additions to or modification of any law applicable to the Merger. We express no
opinion with regard to the Federal income tax consequences of the Merger not
addressed expressly by the above opinions. In addition, we express no opinion
as to any state or local tax consequences with respect to these transactions.
Each shareholder of the company should consult his or her own tax advisor
for assurance as to the particular tax consequences to him or her of the Merger
and any reporting requirements which may be applicable, or any other tax
considerations not expressly addressed herein.
We consent to the use of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not thereby admit that we come within
the category of persons whose consent is required by the Securities Act of 1933,
as amended, or the rules and regulations promulgated thereunder.
Very truly yours,
Lewis, Rice & Fingersh, L.C.
/s/ Lewis, Rice & Fingersh, L.C.
cc: Texas Heritage Savings Association/Banc
<PAGE>
LEWIS, RICE & FINGERSH
Board of Directors
October 11, 1996
Page 5
P.O. Box 880
9802 Lakeview Parkway
Rowlett, Texas 75088
ATTN: Joe L. Williams
President and Chief Executive Officer
<PAGE>
EXHIBIT (23)(A)
---------------
<PAGE>
Independent Auditors' Consent
-----------------------------
The Board of Directors
Jefferson Savings Bancorp, Inc.:
We consent to incorporation by reference in the registration statement on Form
S-4 of Jefferson Savings Bancorp, Inc. of our report dated March 15, 1996,
relating to the consolidated balance sheets of Jefferson Savings Bancorp, Inc.
and subsidiaries as of December 31, 1994 and 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1995, which report appears in the
December 31, 1995 Annual Report on Form 10-K of Jefferson Savings Bancorp, Inc.
and to the reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
October 11, 1996
<PAGE>
EXHIBIT (23)(B)
---------------
<PAGE>
AUDITOR'S CONSENT
We have issued our reports dated July 26, 1996, accompanying the financial
statements of Texas Heritage Savings Association/Banc contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts."
/s/ Grant Thornton LLP
Dallas, Texas
October 11, 1996
<PAGE>
EXHIBIT (23)(C)
---------------
<PAGE>
EXHIBIT 23(c)
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the incorporation by reference in
this Jefferson Savings Bancorp, Inc. Form S-4 of our report dated August 14,
1996 on the consolidated financial statements of L&B Financial, Inc. and
subsidiary as of June 30, 1996 and 1995 and for the years ended June 30, 1996,
1995, and 1994 included in L&B Financial, Inc.'s June 30, 1996 Form 10-K.
/s/ Oakerson, Arnold, Walker & Co.
OAKERSON, ARNOLD, WALKER & CO.
Mt. Pleasant, Texas
October 8, 1996
<PAGE>
EXHIBIT (24)
------------
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
OF
JEFFERSON SAVINGS BANCORP, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints David V. McCay, Gary G. Honerkamp and Paul
J. Milano, and each of them, the true and lawful attorneys-in-fact and agents
for him and in his name, place or stead, in any and all capacities, to sign and
file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of Jefferson Savings Bancorp, Inc. in connection with the Agreement
and Plan of Merger, dated May 31, 1996, by and among Jefferson Savings Bancorp,
Inc., First Federal Savings Bank of North Texas and Texas Heritage Savings
Association/Banc, and any and all amendments and supplements thereto, before or
after effectiveness of such statements, and any and all other documents required
to be filed with the Commission in connection therewith, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully and to all
intents and purposes as the undersigned might or could do in person, and
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue hereof.
Dated: October 7, 1996
---------------
/s/ Frank C. Bick
-----------------
Frank C. Bick
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
OF
JEFFERSON SAVINGS BANCORP, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints David V. McCay, Gary G. Honerkamp and Paul
J. Milano, and each of them, the true and lawful attorneys-in-fact and agents
for him and in his name, place or stead, in any and all capacities, to sign and
file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of Jefferson Savings Bancorp, Inc. in connection with the Agreement
and Plan of Merger, dated May 31, 1996, by and among Jefferson Savings Bancorp,
Inc., First Federal Savings Bank of North Texas and Texas Heritage Savings
Association/Banc, and any and all amendments and supplements thereto, before or
after effectiveness of such statements, and any and all other documents required
to be filed with the Commission in connection therewith, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully and to all
intents and purposes as the undersigned might or could do in person, and
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue hereof.
Dated: October 7, 1996
---------------
/s/ William W. Canfield
-----------------------
William W. Canfield
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
OF
JEFFERSON SAVINGS BANCORP, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints David V. McCay, Gary G. Honerkamp and Paul
J. Milano, and each of them, the true and lawful attorneys-in-fact and agents
for him and in his name, place or stead, in any and all capacities, to sign and
file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of Jefferson Savings Bancorp, Inc. in connection with the Agreement
and Plan of Merger, dated May 31, 1996, by and among Jefferson Savings Bancorp,
Inc., First Federal Savings Bank of North Texas and Texas Heritage Savings
Association/Banc, and any and all amendments and supplements thereto, before or
after effectiveness of such statements, and any and all other documents required
to be filed with the Commission in connection therewith, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully and to all
intents and purposes as the undersigned might or could do in person, and
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue hereof.
Dated: October 7, 1996
---------------
/s/ Lloyd D. Doerflinger
------------------------
Lloyd D. Doerflinger
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
OF
JEFFERSON SAVINGS BANCORP, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints David V. McCay, Gary G. Honerkamp and Paul
J. Milano, and each of them, the true and lawful attorneys-in-fact and agents
for her and in her name, place or stead, in any and all capacities, to sign and
file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of Jefferson Savings Bancorp, Inc. in connection with the Agreement
and Plan of Merger, dated May 31, 1996, by and among Jefferson Savings Bancorp,
Inc., First Federal Savings Bank of North Texas and Texas Heritage Savings
Association/Banc, and any and all amendments and supplements thereto, before or
after effectiveness of such statements, and any and all other documents required
to be filed with the Commission in connection therewith, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully and to all
intents and purposes as the undersigned might or could do in person, and
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue hereof.
Dated: October 7, 1996
---------------
/s/ Dorian D. Magwitz
---------------------
Dorian D. Magwitz
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
OF
JEFFERSON SAVINGS BANCORP, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints David V. McCay, Gary G. Honerkamp and Paul
J. Milano, and each of them, the true and lawful attorneys-in-fact and agents
for him and in his name, place or stead, in any and all capacities, to sign and
file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of Jefferson Savings Bancorp, Inc. in connection with the Agreement
and Plan of Merger, dated May 31, 1996, by and among Jefferson Savings Bancorp,
Inc., First Federal Savings Bank of North Texas and Texas Heritage Savings
Association/Banc, and any and all amendments and supplements thereto, before or
after effectiveness of such statements, and any and all other documents required
to be filed with the Commission in connection therewith, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully and to all
intents and purposes as the undersigned might or could do in person, and
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue hereof.
Dated: October 7, 1996
---------------
/s/ Forrest W. Miller, Jr.
--------------------------
Forrest W. Miller, Jr.
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
OF
JEFFERSON SAVINGS BANCORP, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints David V. McCay, Gary G. Honerkamp and Paul
J. Milano, and each of them, the true and lawful attorneys-in-fact and agents
for him and in his name, place or stead, in any and all capacities, to sign and
file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of Jefferson Savings Bancorp, Inc. in connection with the Agreement
and Plan of Merger, dated May 31, 1996, by and among Jefferson Savings Bancorp,
Inc., First Federal Savings Bank of North Texas and Texas Heritage Savings
Association/Banc, and any and all amendments and supplements thereto, before or
after effectiveness of such statements, and any and all other documents required
to be filed with the Commission in connection therewith, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully and to all
intents and purposes as the undersigned might or could do in person, and
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue hereof.
Dated: October 7, 1996
---------------
/s/ Edward G. Throop
--------------------
Edward G. Throop
<PAGE>
EXHIBIT (99)(A)
---------------
<PAGE>
PROXY
SPECIAL MEETING OF SHAREHOLDERS
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
____________________, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE ASSOCIATION
The undersigned shareholder of Texas Heritage Savings Association/Banc, a
Texas savings association (the "Association"), hereby appoints Joe L. Williams
and Ike Harris (the "Proxies"), and either of them, with full power to act
alone, as proxies, each with full power of substitution and revocation, to vote
all shares of common stock of the Association that the undersigned is entitled
to vote at the Special Meeting of Shareholders to be held at the offices of the
Association, 9802 Lakeview Parkway, Rowlett, Texas 75088 on
____________________, 1996, at 5:00 p.m. local time, and at any adjournments or
postponements thereof, with all powers the undersigned would possess if
personally present, as follows:
Proposal to approve an Agreement and Plan of Merger, dated May 31, 1996, as
amended by First Amendment to Agreement and Plan of Merger, dated as of
August 31, 1996, as further amended by the Second Amendment to Agreement
and Plan of Merger, dated as of October 9, 1996, by and among Jefferson
Savings Bancorp, Inc., a Delaware corporation ("Jefferson"), First Federal
Savings Bank of North Texas, a federal savings bank and wholly owned
subsidiary of Jefferson, and Texas Heritage Savings Association/Banc.
______ FOR ______ AGAINST ______ ABSTAIN
Proposal to permit the Special Meeting of Shareholders to be adjourned or
postponed, in the discretion of the Proxies, which adjournment or
postponement could be used for the purpose, among others, of allowing time
for the solicitation of additional votes to approve the referenced
Agreement and Plan of Merger.
______ FOR ______ AGAINST ______ ABSTAIN
The undersigned hereby ratifies and confirms all that said proxies, or either of
them or their substitutes, may lawfully do or cause to be done by virtue hereof,
and acknowledges receipt of the notice of said meeting and the Proxy
Statement/Prospectus accompanying it.
THIS PROXY WILL BE VOTED AS SPECIFIED BY YOU ABOVE. IF NO SPECIFICATION IS
MADE, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS DESCRIBED ABOVE.
Dated _________________, 1996
-----------------------------------------------
Please insert date of signing. Sign exactly as
name appears at left. Where stock is issued in
two or more names, all should sign. If signing
as attorney, administrator, executor, trustee
or guardian, give full title as such. A
corporation should sign by an authorized
officer and affix seal.
<PAGE>
EXHIBIT (99)(B)
---------------
<PAGE>
On letterhead of:
Texas Heritage Savings Association/Banc
________, 1996
Dear Shareholder:
We are pleased to invite you to attend the Special Meeting of Shareholders
(the "Special Meeting") of Texas Heritage Savings Association/Banc ("Texas
Heritage") on _________________, 1996. The Special Meeting will be held at the
offices of Texas Heritage, 9802 Lakeview Parkway, Rowlett, Texas 75088,
commencing at 5:00 p.m. local time.
At the Special Meeting, shareholders of Texas Heritage will be asked to
approve the merger of Texas Heritage with First Federal Savings Bank of North
Texas, a federal savings bank located in Longview, Texas and wholly owned
subsidiary of Jefferson Savings Bancorp, Inc. ("Jefferson"), St. Louis,
Missouri. The merger terms provide that upon consummation of the merger each
outstanding share of common stock of Texas Heritage will be converted into a
combination of cash and shares of common stock of Jefferson.
Your Board of Directors submits this proposed merger to you after careful
review and consideration. We believe that this proposed merger will provide
significant value to all shareholders, enabling holders of Texas Heritage common
stock to participate in the expanded opportunities for growth that association
with a larger, more geographically-diversified financial organization makes
possible and position Texas Heritage and its shareholders to take advantage of
future opportunities as the banking industry continues to consolidate and
restructure. Accordingly, the Board has approved the merger as being in the
best interests of Texas Heritage and its shareholders and recommends that you
vote in favor of the merger at the Special Meeting.
You are urged to read carefully the accompanying Proxy
Statement/Prospectus, which contains detailed information concerning the matters
to be acted upon at the Special Meeting.
Your participation in the meeting, in person or by proxy, is important.
Therefore, we ask that you please mark, sign and date the enclosed proxy card
and return it as soon as possible in the enclosed postage-paid envelope. If you
attend the Special Meeting, you may vote in person if you wish, even if you have
previously mailed in your proxy card.
Sincerely,
Joe L. Williams
<PAGE>
EXHIBIT 99(C)
-------------
<PAGE>
TEXAS HERITAGE SAVINGS ASSOCIATION/BANC
A TEXAS SAVINGS ASSOCIATION
---------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ____________________, 1996
----------------------------
The Special Meeting of Shareholders (the "Special Meeting") of Texas
Heritage Savings Association/Banc ("Texas Heritage") will be held on
_________________, 1996, at 5:00 p.m., local time, at the offices of Texas
Heritage, 9802 Lakeview Parkway, Texas 75088, for the purpose of considering and
voting upon a proposal to approve and adopt the Agreement and Plan of Merger,
dated May 31, 1996, as amended, attached as Appendix A to the accompanying Proxy
Statement/Prospectus, providing for the merger of Texas Heritage with and into
First Federal Savings Bank of North Texas, a federal savings bank located in
Longview, Texas and wholly owned subsidiary of Jefferson Savings Bancorp, Inc.,
St. Louis, Missouri.
Only the holders of common stock of Texas Heritage of record at the close
of business on ______________, 1996 are entitled to notice of and to vote at the
Special Meeting or at any adjournments or postponements thereof.
EACH SHAREHOLDER IS URGED TO COMPLETE AND RETURN PROMPTLY THE ACCOMPANYING
PROXY WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE SPECIAL MEETING. The prompt
return of your signed proxy will help assure a quorum and aid Texas Heritage in
reducing the expense of additional proxy solicitation. The giving of such proxy
does not affect your right to vote in person in the event you attend the Special
Meeting.
By Order of the Board of Directors
Secretary
Rowlett, Texas
____________________, 1996
TEXAS HERITAGE SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS FOR SUBMITTING SUCH
CERTIFICATES.
