<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to
_______________
Commission File #0-21466
JEFFERSON SAVINGS BANCORP, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 43-1625841
- ------------------------------ ----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) ID Number)
14915 MANCHESTER ROAD, BALLWIN, MISSOURI 63011
- ---------------------------------------- -------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code
(314) 227-3000
- ---------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
___ ___
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Class Outstanding at April 30, 1999
- ----------------------------- -----------------------------
Common Stock, Par Value $.01 10,053,791 shares
1
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
INDEX to Form 10-Q
PAGE
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- Consolidated Balance Sheets 3
- Consolidated Statements of Income 4
- Consolidated Statement of
Stockholders' Equity 5
- Consolidated Statements of Cash
Flows 6
- Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of
Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote
of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 23<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1999 1998
------ -------------- ------------
<S> <C> <C>
Cash $ 9,365,355 7,602,268
Interest-bearing deposits 32,845,060 11,271,419
-------------- ------------
Cash and cash equivalents 42,210,415 18,873,687
Investment securities available for sale, at fair value
(amortized cost of $119,413,620 and $154,058,689 at
March 31, 1999 and December 31, 1998, respectively) 119,215,343 154,610,594
Mortgage-backed securities available for sale, at fair
value (amortized cost of $104,465,082 and $32,492,371
at March 31, 1999 and December 31, 1998, respectively) 104,208,144 32,363,687
Loans receivable, net 1,180,169,154 1,118,489,946
Investment in real estate, net 2,372,613 2,880,759
Stock in Federal Home Loan Bank 18,030,900 11,881,400
Office properties and equipment, net 10,690,272 10,528,413
Excess cost over fair value of net assets acquired 21,431,794 22,141,345
Accrued income and other assets 12,293,538 11,689,680
--------------- -------------
$ 1,510,622,173 1,383,459,511
=============== =============
Liabilities and Stockholders' Equity
------------------------------------
Savings deposits $ 1,026,227,382 1,038,176,484
Borrowed money 342,751,610 209,515,534
Advance payments by borrowers for taxes and insurance 5,457,369 2,963,938
Accrued expenses and other liabilities 10,888,362 8,964,854
--------------- -------------
Total liabilities 1,385,324,723 1,259,620,810
--------------- -------------
Commitments and contingencies
Stockholders' equity:
Preferred stock ($.01 par value): Authorized
5,000,000 shares; none issued -- --
Common stock ($.01 par value): Authorized
20,000,000 shares; issued 10,098,373
shares at March 31, 1999 and
December 31, 1998, respectively 100,984 100,984
Additional paid-in capital 64,943,396 65,404,131
Retained earnings, subject to certain restrictions 65,724,121 63,957,771
Accumulated other comprehensive income (loss) (275,714) 254,221
Unamortized restricted stock awards (73,409) (74,243)
Unearned ESOP shares (4,461,674) (4,684,142)
Treasury stock, at cost: 47,291 shares and 73,240
shares at March 31, 1999 and December 31, 1998,
respectively (660,254) (1,120,021)
--------------- -------------
Total stockholders' equity 125,297,450 123,838,701
--------------- -------------
$ 1,510,622,173 1,383,459,511
=============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
3<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
Three months ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Interest and dividend income:
Loans receivable $ 21,114,513 18,601,110
Mortgage-backed securities 837,566 1,241,403
Investment securities 2,269,544 2,355,625
Interest-bearing deposits and federal funds sold 340,569 319,777
Stock in Federal Home Loan Banks 199,548 263,874
------------ -----------
Total interest and dividend income 24,761,740 22,781,789
------------ -----------
Interest expense:
Savings deposits 12,293,186 13,106,018
Borrowed money 3,010,559 930,361
------------ -----------
Total interest expense 15,303,745 14,036,379
------------ -----------
Net interest income 9,457,995 8,745,410
Provision for losses on loans -- --
------------ -----------
Net interest income after
provision for losses on loans 9,457,995 8,745,410
------------ -----------
Noninterest income:
Servicing and other loan fees 162,907 263,971
Fees for other services to customers 245,625 233,771
Gain on sales of mortgage-backed securities
available for sale, net 36,990 --
Gain on sales of loans receivable, net 247,363 628,606
Real estate operations, net (97,940) 35,492
Other 171,765 151,072
------------ ---------
Total noninterest income 766,710 1,312,912
------------ ---------
Noninterest expense:
General and administrative:
Compensation and employee benefits 3,083,888 3,319,965
Occupancy 774,019 749,474
Advertising 129,142 105,959
Federal deposit insurance premiums 161,176 249,651
Legal, examination, and other professional fees 435,517 320,985
Other 1,083,005 1,071,400
------------ ---------
Total general and administrative 5,666,747 5,817,434
Amortization of excess cost over fair value
of net assets acquired 449,435 450,916
------------ ---------
Total noninterest expense 6,116,182 6,268,350
------------ ---------
Income before income taxes 4,108,523 3,789,972
Income tax expense 1,680,000 1,593,500
------------ ---------
Net income $2,428,523 2,196,472
============ =========
Earnings per share, basic $ .26 .24
============ =========
Earnings per share, diluted $ .25 .22
============ =========
</TABLE>
See accompanying notes to consolidated financial statements.
4<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity and
Comprehensive Income
Three months ended March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Common stock Additional other
------------------- paid-in Retained comprehensive
Shares Dollars capital earnings income
------ ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 10,098,373 $100,984 65,404,131 63,957,771 254,221
Comprehensive income:
Net income -- -- -- 2,428,523 --
Other comprehensive income,
net of reclassification
adjustment -- -- -- -- (529,935)
Total comprehensive income
Dividends declared ($.07 per share) -- -- -- (662,173) --
Amortization of restricted
stock awards -- -- -- -- --
Amortization of ESOP shares -- -- 200,387 -- --
Stock options exercised -- -- (661,122) -- --
Purchase of Treasury stock -- -- -- -- --
---------- -------- ---------- ---------- -----------
Balance at March 31, 1999 10,098,373 $100,984 64,943,396 65,724,121 (275,714)
========== ======== ========== ========== ===========
<CAPTION>
Unamortized Treasury stock Total
restricted Unearned -------------- stockholders'
stock awards ESOP shares Stock Dollars equity
------------ ----------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 (74,243) (4,684,142) (73,240) (1,120,021) 123,838,701
Comprehensive income:
Net income -- -- -- -- 2,428,523
Other comprehensive income,
net of reclassification
adjustment -- -- -- -- (529,935)
------------
Total comprehensive income 1,898,588
Dividends declared ($.07 per share) -- -- -- -- (662,173)
Amortization of restricted
stock awards 834 -- -- -- 834
Amortization of ESOP shares -- 222,468 -- -- 422,855
Stock options exercised -- -- 64,249 982,367 321,245
Purchase of Treasury stock -- -- (38,300) (522,600) (522,600)
--------- ---------- --------- -------- ------------
Balance at March 31, 1999 (73,409) (4,461,674) (47,291) (660,254) 125,297,450
========= ========== ========= ========= ============
</TABLE>
See accompanying notes to consolidated financial statements.
5<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,428,523 2,196,472
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,331,376 1,585,035
Net gain on sales of assets (252,304) (682,271)
Loans originated for sale (19,432,514) (26,462,663)
Sale of loans originated for sale 19,467,627 21,516,463
Stock dividend from Federal Home Loan Bank (40,000) (53,300)
Other, net 1,300,695 2,930,417
------------ -----------
Net cash provided by operating
activities 4,803,403 1,030,153
------------ -----------
Cash flows from investing activities:
Principal repayments on:
Loans receivable 143,531,944 104,371,632
Mortgage-backed securities 1,681,809 8,112,051
Proceeds from maturity of investment securities 39,075,000 45,520,000
Proceeds from sale of:
Loans receivable -- 15,961,546
Mortgage-backed securities available for sale 4,676,186 --
Cash invested in:
Loans receivable - originated (106,029,735) (49,138,048)
Loans receivable - purchased (99,009,679) (37,198,247)
Mortgage-backed securities (78,324,238) --
Investment securities (4,421,713) (69,993,750)
Stock in Federal Home Loan Bank (6,109,500) --
Proceeds from sale of real estate 429,647 1,403,968
Other, net (513,169) (578,339)
------------ -----------
Net cash (used in) provided by
investing activities (105,013,448) 18,460,813
------------ -----------
Cash flows from financing activities:
Decrease in savings deposits, net (11,981,378) (1,032,801)
Increase (decrease) in borrowed money, net 133,236,076 (3,004,956)
Increase in advance payments by borrowers for
taxes and insurance 2,493,431 2,311,848
Dividends paid -- (649,937)
Other, net (201,356) 97,038
------------ -----------
Net cash provided by (used in)
financing activities 123,546,773 (2,278,808)
------------ -----------
Increase in cash and cash equivalents 23,336,728 17,212,158
Cash and cash equivalents at beginning of period 18,873,687 31,582,998
------------ -----------
Cash and cash equivalents at end of period $ 42,210,415 48,795,156
============ ===========
Supplemental disclosures of cash flow information:
Interest paid $ 15,319,328 14,059,759
Income taxes paid 139,435 6,459
Noncash investing activities:
Additions to real estate acquired in
settlement of loans or through foreclosure 33,471 3,422,964
Loans originated to finance the sale of
real estate 77,000 --
Noncash financing activity - interest
credited to savings deposits 9,187,625 9,648,131
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
6<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial
statements were prepared in accordance with instructions
for Form 10-Q and, therefore, do not include all informa-
tion and notes necessary for a complete presentation of
financial position, results of operations, changes in
stockholders' equity and comprehensive income, and cash
flows in conformity with generally accepted accounting
principles. However, all adjustments (consisting only of
normal recurring accruals) which, in the opinion of
management, are necessary for a fair presentation of the
unaudited consolidated financial statements have been
included in the results of operations for the three months
ended March 31, 1999 and 1998, respectively.
Operating results for the three months ended March 31,
1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999.
(2) PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial
statements include the accounts of Jefferson Savings
Bancorp, Inc. ("the Company") and its wholly owned
subsidiary, Jefferson Heritage Bank ("Jefferson Heritage"
or the "Bank"). On December 31, 1998, the Company merged
First Federal Savings Bank of North Texas into Jefferson
Savings and Loan Association, F.A. ("Jefferson Savings")
and now operates as a single business segment. On January
20, 1999, Jefferson Savings changed its name to Jefferson
Heritage Bank. Jefferson Heritage's wholly owned
subsidiaries are Jefferson Financial, Inc., Jefferson
Financial Corporation and First Service Corporation, Inc.
All significant intercompany items have been eliminated.
(3) EARNINGS PER SHARE
The following table reconciles the numerators and
denominators for basic and diluted earnings per share for
the three-month periods ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
---- ----
<S> <C> <C>
Numerator:
Net income (basic and diluted earnings per share) $2,428,523 2,196,472
========== =========
Denominator:
Average shares outstanding (basic earnings per share) 9,466,949 9,300,761
Effect of dilutive stock options 238,391 508,360
---------- ---------
Average shares outstanding after assumed
conversions (diluted earnings per share) 9,705,340 9,809,121
========== =========
</TABLE>
Only employee stock ownership plan shares that have
been allocated or committed to be released are considered
outstanding for earnings per share calculations.
7
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) COMPREHENSIVE INCOME
Comprehensive income for the three-month periods ended
March 31, 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Net income $ 2,428,523 2,196,472
Other comprehensive income (loss):
Realized and unrealized holding gain (loss)
arising during the period, net of tax (505,522) 62,236
Less: reclassification adjustment for realized
gain (loss) included in net income, net of tax 24,413 --
----------- ---------
Total other comprehensive income (loss) (529,935) 62,236
----------- ---------
Total comprehensive income $ 1,898,588 2,258,708
=========== =========
</TABLE>
8
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion reviews the financial condition and the
results of operations of the Company as of and for the three
months ended March 31, 1999.
FINANCIAL CONDITION
The Company's primary strategy is to continue building its
core retail banking business, which is the origination of loans
funded by savings deposits. The Company has targeted new loan
markets to provide another source of loan production. It
recently announced the formation of Jefferson Heritage Mortgage
Company, a wholly owned subsidiary of Jefferson Heritage. The
mortgage company will initially penetrate markets outside the
Bank's primary lending areas with the production of permanent
mortgage and higher yielding construction loans. The secondary
markets include El Paso and Austin, Texas, Phoenix and Tucson,
Arizona, Las Vegas, Nevada, and Oklahoma City, Oklahoma. The
Company has also developed new products designed to attract
noninterest bearing deposits and increase fee income. To
highlight this strategy, the Company changed the name of its
principal retail subsidiary, Jefferson Savings and Loan
Association, F.A., to Jefferson Heritage Bank during the first
quarter of 1999.
The Company's total assets increased $127.2 million, or
9.2%, to $1.51 billion at March 31, 1999 from $1.38 billion at
December 31, 1998. Loans receivable increased $61.7 million, or
5.5%, to $1.18 billion at March 31, 1999 from $1.12 billion at
December 31, 1998.
The Company supplements asset growth with the purchase of
investment and mortgage-backed securities. It chooses between
these two types of investments depending on the instruments'
interest rate risk characteristics and the yields available in
the market. Mortgage-backed securities increased $71.8 million,
or 222.0%, to $104.2 million at March 31, 1999 from $32.4
million at December 31, 1998. Investment securities decreased
$35.4 million, or 22.9%, to $119.2 million at March 31, 1999
from $154.6 million at December 31, 1998. The increase in
mortgage-backed securities was funded by the decrease in
investment securities of $35.4 million and advances from the
Federal Home Loan Bank ("FHLB") of Des Moines and was undertaken
as part of the Company's strategy to better leverage its
capital.
The Company has substantial borrowing capacity with the
FHLB and generally chooses between savings deposits and
borrowings, depending on their relative costs, when funding its
investing activities. Savings deposits decreased $11.9 million,
or 1.2%, from $1.04 billion at December 31, 1998 to $1.03
billion at March 31, 1999. Borrowed money increased $133.2
million, or 63.6%, from $209.5 million at December 31, 1998 to
$342.8 million at March 31, 1999. The growth in borrowed money
was used to fund asset growth during the quarter.
Stockholders' equity increased $1.5 million, or 1.2%, to
$125.3 million at March 31, 1999 from $123.8 million at December
31, 1998. The ratio of stockholders' equity to assets declined
to 8.29% at March 31, 1999 compared to 8.95% at December 31,
1998 consistent with management's plan to better leverage stock-
holders' equity. The Company's book value per share at March
31, 1999 was $13.20 compared to $13.13 at December 31, 1998.
Unearned ESOP shares of 561,387 and 591,503 were
9<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
excluded in calculating book value per share at March 31, 1999
and December 31, 1998, respectively. The Company's board of
directors approved, on September 3, 1998, the repurchase of up
to 300,000 shares of its common stock in the open market. The
Company repurchased 38,300 shares during the first quarter of
1999 and 104,500 shares remain to be purchased under the current
program. There were 10,051,082 common shares outstanding at
March 31, 1999.
RESULTS OF OPERATIONS
NET INCOME. Net income for the first quarter of 1999
increased to $2.4 million compared to $2.2 million for the first
quarter of 1998. Basic and diluted earnings per share increased
to $0.26 and $0.25, respectively for the first quarter of 1999
compared to $0.24 and $0.22, respectively for the comparable
period a year ago. Annualized return on average equity and
annualized return on average assets for the first quarter of
1999 were 7.77% and 0.69%, respectively compared to 7.48% and
0.71%, respectively for the first quarter of 1998.
NET INTEREST INCOME. Net interest income for the first
quarter of 1999 increased $713,000, or 8.1%, to $9.5 million
compared to $8.7 million for the first quarter of 1998. The
increase was the result of an increase in the average balance of
net interest-earning assets partially offset by a decrease in
the Company's interest rate spread from 2.64% for the quarter
ended March 31, 1998 to 2.48% for the quarter ended March 31,
1999. The growth in net interest-earning assets was primarily
the result of strong growth in loans receivable. The decrease
in the interest rate spread was primarily the result of a
decrease in the average yield on loans receivable due to the
continued low interest rate environment.
INTEREST AND DIVIDEND INCOME. Total interest and dividend
income increased $2.0 million, or 8.7%, from $22.8 million for
the first quarter of 1998 to $24.8 million for the first quarter
of 1999. The increase resulted from an increase in the average
balance of interest-earning assets from $1.18 billion for the
first quarter of 1998 to $1.36 billion for the first quarter of
1999 partially offset by a decline in the average yield on
interest earning assets from 7.71% to 7.31% during the same
periods.
Interest income on loans receivable increased $2.5 million,
or 13.5%, as the result of a $198.6 million increase in the
average balance of loans receivable between the comparable
periods partially offset by a decrease in the average yield from
8.15% for the first quarter of 1998 to 7.59% for the first
quarter of 1999. Loan originations grew 66%, to approximately
$125 million for the first quarter of 1999 compared to
approximately $76 million for the comparable period in 1998.
The Company experienced an increase in construction loan
activity in its Dallas, Texas market and in its new market areas
of Austin and El Paso, Texas and Phoenix, Arizona. In addition,
the Company saw an increase in commercial real estate lending in
its St. Louis, Missouri market. As expected in the current rate
environment, the Company continued to experience significant
loan repayments. Principal repayments totaled approximately
$144 million for the first quarter of 1999 compared to approxi-
mately $104 million for the first quarter of 1998. The 1999
repayment activity equates to an annualized repayment rate of
approximately 51% of the portfolio balance at December 31, 1998.
Refinancings continued to erode the Company's higher yielding
loans resulting in a shift in the Company's loan portfolio into
lower margin loans. The Company began supplementing its loan
origination activity with loan purchases during the
10<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
latter part of 1998 to help offset the effect of this high
repayment activity. Loan purchases totaled $99 million for the
first quarter of 1999 compared to $37 million for the first
quarter of 1998.
Combined interest income on all other interest-earning
assets decreased $533,000, or 12.8%, mainly as the result of a
$24.6 million decrease in the combined average balance. Funds
from repayments, sales, and maturities were reinvested in higher
yielding loans receivable.
INTEREST EXPENSE. Interest expense increased $1.3 million,
or 9.0%, from $14.0 million for the first quarter of 1998 to
$15.3 million for the first quarter of 1999 due to an increase
in interest expense on borrowed money partially offset by a
decline in interest expense on savings deposits. Interest
expense on borrowed money increased $2.1 million mainly as the
result of a $176.0 million increase in the average balance as
the Company used borrowed money to fund asset growth. Interest
expense on savings deposits decreased $813,000 as the result of
a decrease in the average cost from 5.03% for the first quarter
on 1998 to 4.79% for the first quarter of 1998 combined with a
$16.0 million decrease in the average balance.
PROVISION FOR LOSSES ON LOANS. The allowance for losses on
loans is maintained at a level considered adequate to absorb
potential loan losses determined on the basis of management's
continuing review and evaluation of the loan portfolio and its
judgement as to the impact of economic conditions on the
portfolio. The evaluation by management includes consideration
of past loan loss experiences and trends, changes in the
composition of the loan portfolio, the current volume and
condition of loans outstanding and the probability of collecting
all amounts due. Based on this evaluation, no provision for
losses on loans was recorded during the first quarter of 1999 or
1998. At March 31, 1999, the allowance for losses on loans was
$6.7 million, which represented .56% of net loans receivable
compared to $6.7 million, or .60% of net loans receivable at
December 31, 1998. Loan charge-offs declined to $4,000 for the
first three months of 1999 compared to $209,000 for the first
three months of 1998. At March 31, 1999, the ratio of
nonaccruing loans to net loans receivable was .62% compared to
.33% at December 31, 1998. The increase in the ratio was due to
a $2.9 million increase in nonaccruing loans partially offset by
a $61.7 million, or 5.5%, increase in net loans receivable.
NONINTEREST INCOME. Total noninterest income decreased
$546,000, or 41.6%, from $1.3 million for the quarter ended
March 31, 1998 to $767,000 for the quarter ended March 31, 1999
primarily due to lower gains on sale of loans and real estate
operations and reduced servicing and other loan fees. Gain on
sale of loans decreased $381,000, or 60.6%, from $629,000 for
the first quarter of 1998 to $247,000 for the first quarter of
1999. Loan sales declined from $37.5 million to $19.5 million
during the same periods as the result of a decline in the demand
for the Company's thirty-year, fixed-rate loan products which
the Company sells at the time of origination to limit its
exposure to interest rate risk. Real estate operations
decreased $133,000 primarily due to $66,000 in losses on the
sale of foreclosed properties in 1999 compared to gains of
$39,000 during the first quarter of 1998. Servicing and other
fees decreased $101,000, or 38.3%, primarily due to a $46,000
decrease in loan conversion fees collected and a $27,000
increase in expense related to the amortization of capitalized
mortgage servicing rights.
NONINTEREST EXPENSE. Noninterest expense decreased
$152,000, or 2.4%, from $6.3 million for
11<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
the quarter ended March 31, 1998 to $6.1 million for the quarter
ended March 31, 1999 primarily due to decreases in compensation
and employee benefits and federal, deposit insurance premiums,
partially offset by an increase in legal, examination and other
professional fees. Compensation and employee benefits decreased
$236,000, or 7.1%, from $3.3 million during the first quarter of
1998 to $3.1 million during the first quarter of 1999. The
decrease was primarily due to a $325,000 reduction in expense
related to the Company's employee stock ownership plan ("ESOP")
partially offset by a $126,000 increase in salary expense and a
$97,000 increase in retail sales commissions. ESOP expense is
based on the average market value of the Company's stock which
decreased approximately 42.3% between the respective periods.
Federal deposit insurance premiums decreased $88,000, or 35.4%,
from $250,000 for the quarter ended March 31, 1998 to $161,000
for the quarter ended March 31, 1999 due to a decrease in the
balance of savings deposits and a reduction in the premium rate
from 0.091% to 0.061% effective January 1, 1999. These
decreases were partially offset by a $115,000, or 35.7%,
increase in legal, examination and other professional fees which
was due primarily to expenses related to acquisition and merger
activities.
INCOME TAX EXPENSE. The Company provides for state and
federal income tax expense based upon earnings before income
taxes. Under the asset and liability method of accounting for
income taxes, the Company establishes deferred tax assets and
liabilities for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and
liabilities at enacted tax rates expected to be in effect when
such amounts are realized or settled. The effective tax rate
prior to the non deductible amortization of excess cost over
fair value of net assets acquired for the three months ended
March 31, 1999 was 36.9% compared to 37.6% for the like period
in 1998.
12
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
NONPERFORMING ASSETS
Summarized below are nonperforming assets at March 31, 1999 and
December 31, 1998
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
(dollars in thousands)
<S> <C> <C>
Restructured loans $ 1,165 1,245
-------- ------
Nonaccruing loans:
Residential real estate $ 2,929 1,740
Commercial real estate 2,589 121
Construction 1,738 1,766
Commercial 35 --
Consumer 74 82
-------- ------
Total nonaccruing loans 7,365 3,709
Applicable allowance for losses (822) (30)
-------- ------
Nonaccruing loans, net 6,543 3,679
-------- ------
Foreclosed real estate, net 2,373 2,881
-------- ------
Nonperforming assets, net $ 10,081 7,804
======== =====
Nonperforming assets, net as a
percentage of total assets 0.67% 0.56%
======== =====
</TABLE>
Total nonperforming assets increased $2.3 million ($3.1
million prior to the increase in applicable allowance for losses
on nonperforming assets) from $7.8 million at December 31, 1998
to $10.1 million at March 31, 1999 primarily as the result of a
$2.5 million increase in nonaccruing commercial real estate
loans and a $1.2 million increase in nonaccruing residential
real estate loans. This was partially offset by a $508,000
decrease in foreclosed assets. The increase in nonaccruing
commercial real estate loans was primarily due to a $2.3 million
loan secured by a retail shopping center in St. Louis, Missouri.
The increase in nonaccruing residential loans was due to the net
addition of twelve single-family permanent loans classified as
nonaccrual during the first three months of 1999. The decrease
in foreclosed real estate was primarily due to the sale of
approximately $507,000 in foreclosed real estate during the
three-month period ending March 31, 1999 partially offset by one
foreclosure for $33,000 during the same period.
Not included in restructured loans is a loan secured by
commercial real estate. Management determined that this loan
should not be considered a nonperforming asset since 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.
The unpaid balance of this loan was approximately $3,029,000 and
$3,035,000 at March 31, 1999 and December 31, 1998, respective-
ly. At March 31, 1999, the Company had five loans totaling
$260,000 that were more than 90 days past the maturity date
stated in the note with regard
13 <PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
to principal repayment. The Company has continued collecting
interest payments on the loans which were less than 90 days past
due and still accruing interest. Loans are generally placed on
nonaccrual status when either principal or interest is more than
90 days past due or at such time when management concludes that
payment in full is not likely, whichever is sooner. Any
subsequent interest payments received are recorded as interest
income in the period received.
Impaired loans, which are represented by loans on
nonaccrual status and loans where management believes it is
probable that they will be unable to collect principal and
interest under the contractual terms of the loans, were $7.4
million and $6.2 million at March 31, 1999 and December 31,
1998, respectively. At March 31, 1999 $2.4 million of impaired
loans had specific reserves of $835,000 and the remaining
impaired loans of $5.0 million had no specific reserves. At
December 31, 1998 $62,000 of impaired loans had specific
reserves of $30,000 and the remaining impaired loans of $6.1
million had no specific reserves. The increase in impaired
loans was primarily due to a $3.7 million increase in nonaccrual
loans during the first three months of 1999.
Activity in the allowance for loan losses is summarized as
follows:
Three months ended March 31,
1999 1998
---- ----
Balance at beginning of period $ 6,659,294 8,182,268
Provision charged to expense -- --
Recoveries 244 1,761
Charge-offs (4,332) (209,485)
----------- ---------
Balance at end of period $ 6,655,206 7,974,544
=========== =========
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has no business other than that of
Jefferson Heritage. The Company is dependent on future
earnings, dividends from Jefferson Heritage, or borrowings for
sources of funds. Jefferson Heritage is subject to certain
regulatory limitations with respect to the payment of dividends
to the Company.
The capital regulations of the OTS require thrift
institutions to maintain tangible capital equal to 1.5% of total
adjusted assets, a minimum 3% leverage (core capital) ratio, and
an 8% risk-based capital ratio. The risk-based capital require-
ment is calculated based on the credit risk presented by both
on-balance-sheet assets and off-balance-sheet commitments and
obligations. Assets are assigned a credit-risk weighting based
upon their relative risk ranging from 0% for assets backed by
the full faith and credit of the United States or that pose no
credit risk to the institution to 100% for assets such as
delinquent or repossessed assets. As of March 31, 1999,
Jefferson Heritage met all OTS capital requirements.
Jefferson Heritage is also subject to the capital based
framework for prompt corrective action.
14<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
To be categorized as well capitalized, an institution must
maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table below. For purposes
of this regulation, Tier I capital has the same definition as
core capital. As of March 31, 1999, Jefferson Heritage was
considered well capitalized.
Following are the actual and required capital amounts and
ratios of Jefferson Heritage as of March 31, 1999:
<TABLE>
<CAPTION>
Prompt Corrective
action requirements -
Actual Requirements well capitalized
----------------- ------------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Tangible capital: (1) $ 95,550,217 6.42% $ 22,340,915 1.50% NA
Core capital: (1) 95,550,217 6.42% 44,681,830 3.00% $74,469,716 5.00%
Risk-based capital: (2) 101,008,195 11.10% 72,796,809 8.00% 90,996,011 10.00%
Tier I capital: (2) 95,550,217 10.50% NA 54,597,607 6.00%
<FN>
(1) To adjusted total assets
(2) To risk-weighted assets
</FN>
</TABLE>
Jefferson Heritage is required by federal regulations to
maintain specified levels of liquid assets, consisting of cash
and eligible investments. The current level of liquidity
required by the OTS is 4% of the sum of net withdrawable
deposits and borrowings due within one year. Jefferson Heritage
has consistently maintained liquidity in excess of required
amounts. Jefferson Heritage's liquidity ratio was 19.80% and
18.42% at March 31, 1999 and December 31, 1998, respectively.
The Company's primary sources of funds are deposits,
principal and interest payments on loans and mortgage-backed
securities, proceeds from maturing investment securities and
cash flows from operations. In addition, Jefferson Heritage has
substantial borrowing capacity with the Federal Home Loan Bank
and the ability to borrow against it's investment portfolio.
The principal uses of funds by the Company include the
origination and purchase of loans secured by real estate and the
purchase of investment securities and mortgage-backed
securities.
Cash flows used by investing activities totaled $105.0
million during the first three months of 1999. Cash flows from
these investing activities, which consisted primarily of $145.2
million in principal repayments on loans and mortgage-backed
securities, $39.1 million in proceeds from maturity of
investment securities and $4.7 million in sales of
mortgage-backed securities, and were used primarily to fund the
Company's investing activities of originating and purchasing
loans and purchasing mortgage-backed securities during the three
months ended March 31, 1999 and to increase liquidity.
15<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company anticipates that it will have sufficient funds
available to meet its current commitments. At March 31, 1999,
the Company had commitments to originate loans of $46.0 million,
to purchase residential adjustable-rate mortgages of $1.6
million, to purchase investment securities of $7.8 million and
to sell fixed-rate loans of $10.0 million. Certificates of
deposit, which are scheduled to mature in one year or less at
March 31, 1999, totaled $578.6 million. Management believes
that a significant portion of such deposits will remain with the
Company. In addition, at March 31, 1999, Jefferson Heritage has
an available line of credit with the FHLB of Des Moines totaling
$25.0 million.
IMPACT OF INFLATION AND CHANGING PRICES
The unaudited consolidated financial statements and related
data presented herein have been prepared in accordance with
generally accepted accounting principles, which require the
measurement of financial position and results of operations in
the measurements of historical dollars without considering
changes in the relative purchasing power of money over time
because of inflation. Unlike most industrial companies,
virtually all of the assets and liabilities of the Company are
monetary in nature. As a result, interest rates have a more
significant impact on the Company's performance than the effects
of general levels of inflation. Interest rates do not
necessarily move in the same direction or in the same magnitude
as the prices of goods and services. In the present interest
rate environment, the liquidity, maturity structure, and quality
of the Company's assets and liabilities are important factors in
the maintenance of acceptable performance levels.
IMPACT OF NEW ACCOUNTING STANDARDS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities,"
which establishes standards for derivative instruments,
including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 requires an
entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure
those instruments at fair value. SFAS No. 133 is effective for
fiscal years beginning after June 15, 1999. Earlier application
of SFAS No. 133 is encouraged but should not be applied
retroactively to financial statements of prior periods. The
Company is currently evaluating the requirements and impact of
SFAS No. 133.
YEAR 2000 READINESS DISCLOSURE
The Company is subject to risks associated with the "Year
2000" issue, a term which refers to uncertainties about the
ability of various date processing hardware and software systems
to interpret dates correctly after the beginning of the Year
2000. The Company began working on its Year 2000 plan in 1997
and formed a Project Committee ("Committee") that reports
monthly to the Board of Directors. The Committee has formulated
a Comprehensive Year 2000 Plan ("Plan") which follows guidelines
outlined by the Federal Financial Institutions Examination
Council ("FFIEC"). The FFIEC requires all banks to develop a
plan that includes five phases relating to awareness,
assessment, renovation, validation and implementation. The
Plan establishes a timetable and summarizes each major phase of
the project and the estimated costs to renovate and test systems
in preparation for the Year 2000.
16
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The awareness phase included a Company-wide campaign to
communicate the problem and the potential ramifications to the
organization. Concurrent with this phase, the committee began
the assessment phase, which included the inventorying of systems
that may be impacted. The business use of each inventoried item
was then analyzed and prioritized in varying degrees from
critical to non-critical, based upon the perceived adverse
effect on the financial condition of the Company in the event of
a loss or interruption in the use of each system. The renova-
tion, validation and implementation phases consist of testing
the individual systems and replacing or reconfiguring systems
that are not Year 2000 compliant. The Company has completed the
awareness and assessment phases of the project.
The Company has identified its most critically important
system as its on-line account processing system which the
Company maintains on its own mainframe computer using third
party vendor application software. The Company has extensively
tested the ability of the mainframe computer to handle the Year
2000 date change under a variety of circumstances and believes
that its mainframe hardware and software, as currently
configured, will not be adversely affected by the Year 2000
problem. The Company has identified various other less critical
internal data-processing and software systems that could
potentially be affected by the Year 2000 problem. These consist
primarily of desk-top personal computers and the word-processing
and other software used on them. These systems have been tested
and have either been found to be Year 2000 ready or replaced
with systems that are Year 2000 ready. In the normal course of
business, the Company continually upgrades its computer systems
and software. These upgrades are tested as they are installed.
To date, the primary expense involved in the implementation
of the Company's Year 2000 Plan has been management and staff
time which the Company estimates to have been approximately
2,600 hours through March 31, 1999. To the extent that any
modifications to third party vendor software have been required,
these modifications have been made by the vendors without any
direct additional cost to the Company. The costs of equipment
upgrades have either not been material or involved equipment
that had already reached the end of its useful life and was due
for replacement in any event.
As part of its Year 2000 Plan, the Company has been
identifying and assessing the Year 2000 risks posed by third
parties including customers and other entities whose operations
may affect the Company's business. In this regard, the Company
has been working to increase the Year 2000 awareness of its loan
customers through mailings and other communications. The
Company has surveyed its larger commercial loan customers as to
their Year 2000 readiness and considers Year 2000 exposure in
underwriting commercial loans. The majority of the Company's
loan customers, however, are either individuals or small
businesses which are not highly dependent on information
technology in their day-to-day operations and are therefore not
considered to pose a direct Year 2000 risk. Although the
Company's loan customers may be collaterally affected by the
Year 2000 problems of others (such as the failure of their
employers to make timely salary payments), the Company believes
that its portfolio is sufficiently diversified that such
failures will not have a material impact on operations.
In its day-to-day operations, the Company also deals with a
number of other third parties whose Year 2000 readiness may
affect the Company's operations. These third parties include
FNMA and
17<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
FHLMC to which it sells mortgage loans, various mortgage banks
from which it purchases mortgage loans, credit bureaus, the
FHLBs and a variety of other third parties. Pursuant to its
Year 2000 Plan, the Company has corresponded with each of these
entities and received assurances as to their Year 2000
readiness. When feasible, the Company has participated in
testing of all automated links to these entities. On the basis
of these inquires and testing, the Company does not believe that
Year 2000 issues related to these entities will have a material
impact on the Company operations.
The Plan also includes provisions which address the Year
2000 compliance of environmental systems, which include items
such as security systems and heating and air conditioning
systems. No significant business risks have been revealed
regarding these types of systems. Additional investigating is
scheduled for second quarter 1999.
Concurrent with the development and execution of the Plan
is the evolution of the Company's Year 2000 Contingency Plan
("Contingency Plan"). The Contingency Plan addresses a wide
variety of issues including: failure of a system during Year
2000 testing, failure of electrical, telecommunications, or
water systems, failure of a system during the century date
change and liquidity plan. Special consideration has been given
to the weekend of the century date change. The Contingency Plan
is intended to be a changing document based on the ongoing
results of the project and is updated on a regular basis.
The risks associated with the Year 2000 issue can be
grouped into two categories. The first is the risk that one or
more of the Company's internal systems will be adversely
affected by the century date change. On the basis of its
testing and preparation, the Company believes that the risk of a
failure in a critical system is low. Accordingly, the Company
believes that its primary internal risk is a failure in a less
critical environment that will not materially disrupt
operations.
The second risk category consists of external risks which are
largely outside of the Company's control. The Company would be
most seriously affected if Year 2000 failures of others caused
basic services such as electrical power, telecommunications or
government agencies to be disrupted. Although the preparation
of such providers has been reviewed, there can be no assurance
that Year 2000 failures of third parties will not have a
material adverse impact on the Company.
18
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Quantitative and Qualitative Disclosures
About Market Risk
The Company does not believe that its exposure to market
risk has materially changed from the levels reported at December
31, 1998 in its Annual Report on Form 10-K. The Company's
principal market risk continues to consist of its exposure to
changes in interest rates. Since the end of the last fiscal
year, declining long-term interest rates have resulted in the
prepayment or conversion to fixed rates of certain
adjustable-rate residential mortgages. In order to maintain its
rate sensitivity position, the Company has sold the resulting
fixed-rate loans on the secondary market and invested the
proceeds from these sales and from prepayments in additional
adjustable-rate mortgages or in other rate-sensitive investment
and mortgage backed securities. The decline in interest rates
has benefited the net portfolio value of its assets, which are
measured, by the present value of the expected cash flows from
its assets, liabilities and off balance sheet contracts. The
Company continues to monitor changes in the interest rate
environment and adjust its asset/liability mix as necessary.
19
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
On May 5, 1999, the Company entered into an
agreement (the "Shareholder Agreement") with Gary L.
Holland, The Gary Holland Trust, Brad Barkau, William
Drake, Mary K. Drake, The Mary K. Drake Family Limited
Partnership, The William K. Drake Defined Benefit
Plan, Contango Limited Partnership, Howard Watson,
Susan M. Watson and Intrepid, Ltd. (the "Share-
holders") pursuant to which the Board of Directors
agreed to increase the size of the Board of Directors
to seven members and to nominate, recommend to
stockholders and solicit proxies in favor of the
election of Gary L. Holland, Brad Barkau and Lloyd D.
Doerflinger as management's nominees for election for
three-year terms as directors at the 1999 Annual
Meeting and Mr. Holland agreed to terminate his
solicitation of proxies for a separate slate of
nominees and to withdraw certain regulatory filings
made in connection therewith. Upon their election to
the Board of Directors, the Company has agreed to
elect Messrs. Holland and Barkau to the Bank's Board
of Directors and to cause them to remain on such board
for as long as they serve as directors of the Company.
The Company has further agreed to appoint either Mr.
Holland or Mr. Barkau (but not both) to the Executive
Committee, the Outside Loan Committee, and the
Employee Compensation and Benefit Committee of the
Company or the Bank (as requested by Messrs. Holland
and Barkau) and to allow them to remain on such
committees for so long as they serve as directors of
the Company. Under the Shareholder Agreement, the
Company will not take any action to prevent Messrs.
Holland and Barkau from participating in the
management and affairs of the Company to the same
extent as other directors and will extend the same
benefits and treatment to Messrs. Holland and Barkau
as are extended to other directors. In the event that
either Mr. Holland or Mr. Barkau is unwilling or
unable to serve his initial term, the Board of
Directors agreed to promptly fill the vacancy
with a nominee recommended by whichever of Mr. Holland
or Mr. Barkau remains in office and agreed to by
two-thirds of the directors then in office. The
Company has agreed not to seek the removal of either
Mr. Holland or Mr. Barkau as a director absent a
determination by the unanimous vote of the Board of
Directors (other than Messrs. Holland and Barkau) that
there is clear and convincing evidence that removal
should be submitted to shareholders in accordance with
the Company's Certificate of Incorporation. The
Company also has agreed not to reconfigure, reclassify
or increase or decrease the size of its Board of
Directors, except in accordance with its Certificate
of Incorporation, during the initial term of Messrs.
Holland and Barkau, In addition,
20<PAGE>
<PAGE>
the Company has agreed not to allege that activities of the
Shareholders violate certain provisions of the federal
securities and banking laws or of the Company's Certificate of
Incorporation. For as long as Messrs. Holland and Barkau serve
on the Board of Directors pursuant to the Shareholder
Agreement, the Company has agreed not to issue any preferred
stock with voting rights (other than in the event of default in
the payment of dividends) or securities convertible into or
rights to acquire such preferred stock unless the issuance has
been approved either by a unanimous vote of the Board of
Directors or by 80% of the outstanding shares. Pursuant to the
Shareholder Agreement, the Company has agreed to reimburse Mr.
Holland for up to $100,000 in expenses incurred by him in
connection with his proxy solicitation and related matters and
to reimburse Messrs. Holland and Barkau for up to $15,000 in
legal fees per calendar year in the event they believe they need
separate counsel in order to carry out their duties as
directors. The Company also agreed to use its reasonable
efforts to cause any new director nominated by the
Board of Directors to agree to be bound by the Shareholder
Agreement. The Shareholders each agreed to vote in favor of
management's three class I nominees at the Annual Meeting and
also agreed, among other things, that until the earlier of the
day after the 2000 annual meeting or July 31, 2000: (i) except
in connection with a merger, consolidation or other combination
or a sale of substantially all the Company's assets, they will
not participate in any proxy solicitation in opposition to the
recommendation of a majority of the Board of Directors or
initiate a shareholder proposal; (ii) they will vote for
management's nominees at the 2000 annual meeting provided that
Messrs. Holland and Barkau will have certain rights to object to
a nominee other than Messrs. Canfield, Throop or Joe L.
Williams; and (iii) except to the extent that action is required
of Messrs. Holland and Barkau to fill a vacancy in the Board
created in the event that the other is unwilling or unable to
serve, they will not nominate any individual to the Board of
Directors other than management's nominees. In addition to the
Company, the present directors and, in certain circumstances,
officers have agreed to the covenants described above.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits. The following is a list of exhibits
filed as part of this Quarterly Report on Form 10-Q
and is also the Exhibit Index.
No. Description
__ ___________
3.1 Certificate of Incorporation *
3.2 Bylaws **
4.1 Specimen Stock Certificate ***
4.2 Rights Agreement, dated August 17, 1994,
between Jefferson Savings Bancorp, Inc.
and Boatmen's Trust Company ****
10.1 Jefferson Savings Bancorp, Inc. 1993 Stock
Option and Incentive Plan *
10.2 Jefferson Savings Bancorp, Inc. Management
Recognition Plan "A" *
10.3 Jefferson Savings Bancorp, Inc. Management
Recognition Plan "B" *
10.4 Jefferson Savings Bancorp, Inc. Management
Recognition Plan "C" *
10.5 Jefferson Savings Bancorp, Inc. Management
Recognition Plan "D" *
10.6 Jefferson Savings Bancorp, Inc. Directors'
Retirement Plan *****
10.7 Employment Agreement between Jefferson
Savings Bancorp, Inc., Jefferson Savings
and Loan Association and David V. McCay *
10.8 Supplemental Retirement Agreement between
Jefferson Savings and Loan Association and
David V. McCay **
10.9 Form of Director's Deferred Compensation
Agreement *
21<PAGE>
<PAGE>
10.10 Jefferson Savings and Loan Association
Bonus Plan *
10.11 Employment Agreement between Jefferson
Savings Bancorp, Inc. and Joe L. Williams
10.12 Sixth Amendment to Employment Agreement,
dated May 20, 1998, between Jefferson
Savings Bancorp, Inc., Jefferson Savings
and Loan Association and David V. McCay. ******
10.13 First Amendment to Jefferson Savings and
Loan Association Supplemental Retirement
Agreement, dated May 20, 1998, by and
between Jefferson Savings and Loan
Association and David V. McCay. ******
10.14 Amendment No. 2 to Jefferson Savings
Bancorp, Inc. 1993 Stock Option and
Incentive Plan, dated May 20, 1998. ******
10.15 Trust Agreement for Jefferson Savings
and Loan Association Supplemental
Retirement Agreement, dated May 20,
1998, by and between Jefferson Savings
and Loan Association and Mercantile
Bank, N.A. ******
10.16 Shareholder Agreement, dated May 5,
1999, by and among Jefferson Savings
Bancorp, Inc., Gary L. Holland, The
Gary Holland Trust, Brad Barkau,
William Drake, Mary K. Drake, The
Mary K. Drake Family Limited Partnership,
The William K. Drake Defined Benefit Plan,
Contango Limited Partnership, Howard Watson,
Susan M. Watson and Intrepid, Ltd.
27 Financial Data Schedule (EDGAR only)
_______________
* Incorporated by reference from Registration Statement on
form S-1 filed December 23, 1992 (File No. 33-56324)
** Incorporated by reference from Form 10-K/A filed
April 30, 1999.
*** Incorporated by reference from Registration Statement on
Form 8-A filed March 30, 1993 (File No. 0-21466)
**** Incorporated by reference from Registration Statement on
Form 8-A filed August 19, 1994.
***** Incorporated by reference from Pre-Effective Amendment
No. 2 to Registration Statement on Form S-1 filed
February 10, 1993 (File No. 33-56324)
****** Incorporated by reference from Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
(b) Reports on Form 8-K. The Registrant did not file
any Current Reports on Form 8-K during the quarter
ending March 31, 1999.
22
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
JEFFERSON SAVINGS BANCORP, INC.
Registrant
Date: May 14, 1999 /s/ Paul J. Milano
------------------------------------
Paul J. Milano
Senior Vice President and Chief
Financial Officer
(Duly Authorized Representative and
Principal Financial Officer)
23
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of the 30th day of December, 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, as amended on August 31, 1996
and October 9, 1996 (as amended, 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 of Section 5 and
Section 10 hereof. The Term may be extended for such additional
one (l) 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<PAGE>
<PAGE>
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, 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
services 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 use in the
performance of his duties to Resulting Bank, as consistent
with Resulting Bank's policy as now or hereafter in effect
with 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
2<PAGE>
<PAGE>
employment at any time, but any termination by the Board other
than for Cause (as hereafter 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 Participate in the Banking or Financial Business (as
such activity is defined below) in Dallas, Texas (the
3<PAGE>
<PAGE>
"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, Office 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.
4
<PAGE>
<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
obligation of the parties hereunder shall terminate as of the
date of the default and the Resulting Bank shall not be require
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 of 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 an 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
5
<PAGE>
<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 give 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
6
<PAGE>
<PAGE>
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 contrary to, applicable law.
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.
7
<PAGE>
<PAGE>
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: /s/ David V. McCay
_______________________________________
David V. McCay
Chairman of the Board and President
FIRST FEDERAL SAVINGS BANK OF
NORTH TEXAS
By: /s/ David V. McCay
_______________________________________
David V. McCay
Chairman of the Board and President
/s/ Joe L. Williams
_______________________________________
JOE L. WILLIAMS
8
<PAGE>
SHAREHOLDER AGREEMENT
---------------------
THIS SHAREHOLDER AGREEMENT (this "Agreement") is made and
entered into as of the 5th day of May, 1999, by and among
JEFFERSON SAVINGS BANCORP, INC., a Delaware corporation (the
"Company"), and GARY L. HOLLAND, THE GARY HOLLAND TRUST (the
"Trust"), BRAD BARKAU, WILLIAM DRAKE, MARY K. DRAKE, THE MARY K.
DRAKE FAMILY LIMITED PARTNERSHIP, THE WILLIAM K. DRAKE DEFINED
BENEFIT PLAN, CONTANGO LIMITED PARTNERSHIP, HOWARD WATSON, SUSAN
M. WATSON, and INTREPID, LTD. (individually, a "Shareholder,"
collectively, the "Shareholders").
RECITALS
--------
A. Each Shareholder beneficially owns that number of
shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") set forth opposite the name of such
Shareholder on the signature page hereof.
B. The Company has requested that the Shareholders
enter into this Agreement and has made the covenants set forth
herein in exchange for the Shareholders entering into this
Agreement.
C. The Board of Directors of the Company believes that
the arrangements and understandings set forth herein with
respect to the Company and the Shareholders are in the best
interest of the Company and all of its shareholders.
AGREEMENT
---------
In consideration of the foregoing and the mutual covenants
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Company and the Shareholders hereby agree as follows:
ARTICLE I
----------
REPRESENTATIONS AND AGREEMENTS OF COMPANY
-----------------------------------------
SECTION 1.01. REPRESENTATIONS OF COMPANY. The Company and,
------------ --------------------------
with respect to the representation and warranty set forth in
Section 1.01(d) hereof, the present directors of the Company,
represent and warrant to the Shareholders that (a) it is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, (b) it has
full power, right and authority to enter into this Agreement and
consummate and perform each of the transactions and obligations
of the Company provided for herein, (c) the execution, delivery
and performance of this Agreement has been duly authorized and
approved by all necessary corporate action of the Company, (d)
this Agreement constitutes a valid and binding obligation of the
Company and each of its present directors enforceable in
accordance with its terms, (e) there are no pending or, to its
best knowledge, threatened claims, actions, proceedings or
litigation against the Company, Jefferson Heritage Bank
("Jefferson Heritage"), any other subsidiary or affiliate of the
Company or any of the respective directors of the Company or its
subsidiaries or affiliates (other than those which, individually
or together, are not material to the Company and its
subsidiaries on a consolidated basis), (f) the execution,
delivery and performance of this Agreement does not violate the
Company's Certificate of Incorporation or Bylaws or any law,
rule, regulation or governmental requirement or result in a
breach of or default under any contract, agreement, commitment,
arrangement or understanding to
<PAGE>
<PAGE>
which the Company is a party or otherwise bound, and (g) the
number of directors of the Company is currently fixed at six
(6), but may range from three (3) to seven (7) as provided in
the Company's Certificate of Incorporation and Bylaws.
SECTION 1.02. NOMINATIONS AND RELATED MATTERS.
------------ -------------------------------
(a) Promptly following the execution of this
Agreement by all parties hereto, the Board of Directors of the
Company shall (i) increase the size of the Board of Directors
from six (6) members to seven (7) members (to be comprised of
three (3) directors in Class I, two (2) directors in Class II,
and two (2) directors in Class III); (ii) nominate Gary L.
Holland, Brad Barkau and Lloyd D. Doerflinger as the Company's
sole nominees for election as directors of the Company (to serve
as Class I directors of the Company with three year terms each
expiring at the annual meeting of shareholders in 2002) and
revoke the prior nomination of Joe L. Williams; (iii) include
Messrs. Holland, Barkau and Doerflinger as the only slate of
nominees to be set forth in the Company's proxy statement
relating to its 1999 annual meeting of shareholders ("1999
Annual Meeting"); (iv) recommend each of Messrs. Holland, Barkau
and Doerflinger to the Company's shareholders for election as
directors at the 1999 Annual Meeting; (v) solicit proxies and
vote pursuant thereto in favor of the election of each of
Messrs. Holland, Barkau and Doerflinger as directors of the
Company in accordance with this Section 1.02; and (vi) convene
the 1999 Annual Meeting no later than July 3, 1999. As a result
of the foregoing, Messrs. Barkau, Holland and Doerflinger shall
be Class I directors, Messrs. Canfield and Throop shall be Class
II directors and Messrs. McCay and Miller shall be Class III
directors. Messrs. Holland and Barkau and their respective
successors in office pursuant to Section 2.05 hereof are
referred to herein together as the "New Directors" and
individually as a "New Director". Each of the New Directors
shall, at the time of his election to the Board of Directors of
the Company, affirm his duty of confidentiality to the Company
with regard to any non-public, confidential Company information
by means of a confidentiality agreement reasonably satisfactory
to the Company and the New Directors (provided that the New
Directors shall have no obligation to sign such an agreement
unless a similar agreement shall have been signed by each of the
other outside directors).
(b) The Company shall not, for so long as the New
Directors are directors of the Company pursuant to this
Agreement, issue any shares of preferred stock of the Company,
or options or rights to acquire or securities convertible into
preferred stock of the Company, with features that provide the
holders thereof with any voting rights (including, without
limitation, the right to vote as a separate class to elect one
or more directors of the Company) (other than upon default in
the payment of dividends thereon); provided, however, that the
Company may issue preferred stock or options or rights to
acquire or securities convertible into preferred stock, of the
type described above, if such issuance shall have been approved
by either the unanimous vote of the entire Board of Directors of
the Company or by the affirmative vote of the holders of 80% of
the issued and outstanding shares of Common Stock entitled to
vote generally in the election of directors (or such greater
vote as may be required by applicable law or by the Company's
Certificate of Incorporation).
(c) The Board of Directors of the Company currently
intends to nominate William W. Canfield and Edward G. Throop for
election as directors at the annual meeting of shareholders of
the Company to be held in 2000 (the "2000 Annual Meeting") to
serve as Class II directors with three year terms each expiring
at the annual meeting of shareholders of the Company in 2003
and, if either of Messrs. Canfield or Throop are unwilling or
unable to serve in such capacity at such time, then the Board of
Directors of the Company currently intends to nominate Joe L.
Williams for election as a director of the Company at the 2000
Annual Meeting.
2
<PAGE>
<PAGE>
SECTION 1.03. JEFFERSON HERITAGE. Immediately following
------------ ------------------
each New Director's election to the Board of Directors of the
Company, the Company, as the sole shareholder of Jefferson
Heritage, shall take all necessary and appropriate action to
elect each New Director to the Board of Directors of Jefferson
Heritage and to cause each New Director to remain on such Board
of Directors for so long as he serves as a director of the
Company.
SECTION 1.04. APPOINTMENT TO COMMITTEES. The Board of
------------ -------------------------
Directors and/or the Chairman of the Company and Jefferson
Heritage shall appoint either of the New Directors (but not
both) to the current Executive Committee, the Outside Loan
Committee and the Employee Compensation and Benefit Committee of
the Company and/or Jefferson Heritage (as requested by the New
Directors) and shall allow either of the New Directors to remain
on such committees for so long as he serves as a director of the
Company. For so long as the New Directors are directors of the
Company pursuant to this Agreement, the Company shall not
consider matters or conduct business at committees of the
Company, Jefferson Heritage or any other subsidiary or affiliate
of the Company with the intent being to prevent or otherwise
"freeze out" the New Directors from participating in the
management of the affairs of the Company, Jefferson Heritage or
their respective subsidiaries to the same extent as the other
outside directors of the Company.
SECTION 1.05. NO REMOVAL OR RECLASSIFICATION. The Board
------------ ------------------------------
of Directors of the Company shall not initiate or recommend or
submit to shareholders of the Company any proposal to remove
either of the New Directors as a director of the Company unless
the Board of Directors of the Company has determined, by clear
and convincing evidence, and by the unanimous affirmative vote
of the full Board of Directors of the Company (excluding the New
Directors from such vote) that the removal of either of them, as
the case may be, should be submitted to a vote of the
shareholders of the Company in accordance with Article XIII of
the Company's Certificate of Incorporation. In addition, for so
long as the New Directors are directors of the Company pursuant
to this Agreement, the Company and its present directors hereby
covenant and agree not to reconfigure, reclassify or increase or
decrease the size of the Board of Directors of the Company
except in accordance with the Certificate of Incorporation of
the Company (including, without limitation, a prohibition of any
reclassification of the Board of Directors of the Company that
shall not comply with Article XII.B of the Company's Certificate
of Incorporation).
SECTION 1.06. INSURANCE; STOCK OPTIONS AND OTHER BENEFITS.
------------ -------------------------------------------
Immediately upon the election of the New Directors to the Boards
of Directors of the Company and Jefferson Heritage, the Company
shall effective as of the date of the 1999 Annual Meeting (a)
cause the New Directors to become covered under the Company's
and Jefferson Heritage's directors and officers liability
insurance policies and all other insurance policies covering any
directors of the Company and Jefferson Heritage, (b) allow the
New Directors to participate in all stock option, management
recognition and other plans to the same extent and on the same
terms and conditions as the other outside directors of the
Company shall be entitled to participate from and after the 1999
Annual Meeting (but in no event shall the New Directors be
entitled to receive any such benefits that shall have been
received by any director of the Company prior to the date
hereof), (c) pay the New Directors the same director's fees as
the other outside directors of the Company, (d) reimburse the
New Directors for their reasonable travel expenses in connection
with their attendance at meetings of shareholders, directors and
committees of the Company and Jefferson Heritage, and (e)
otherwise treat the New Directors the same as the other outside
directors of the Company and its subsidiaries from and after the
date hereof.
3
<PAGE>
<PAGE>
SECTION 1.07. VIOLATION OF CERTIFICATE OF INCORPORATION.
------------ -----------------------------------------
Provided that the Shareholders abide by and comply with the
terms hereof in all material respects, the Company and its
present directors represent, warrant and agree that none of them
will take any action or allege, claim, determine, deem or
declare the existence of this Agreement or any or all of the
actions or activities of any or all of the Shareholders pursuant
hereto or prior to the date hereof, or any or all of the
Shareholders taking any action subsequent to the date hereof to
comply with any filing, notice or disclosure requirement under
any statute, law, rule, regulation or governmental requirement
(including, without limitation, the filing of any Schedule 13D
with the Securities and Exchange Commission) (a) to result in
any or all of the Shareholders being a group or "acting in
concert," as that term is defined in Article XIV of the
Company's Certificate of Incorporation, (b) to treat any or all
of the Shareholders as, or make any allegation or claim that any
or all of the Shareholders are or have been, a group or "acting
in concert" under Article XIV of the Company's Certificate of
Incorporation or under any statute, law, rule, regulation or
governmental requirement, including, without limitation, the
federal securities laws and the rules and regulations of the
Securities and Exchange Commission and the Office of Thrift
Supervision, and/or (c) to reduce the voting power of any shares
of Common Stock owned beneficially or of record by the
Shareholders as of the date of this Agreement. In addition,
neither the Company nor any of its present directors will,
directly or indirectly, take or attempt to take, or induce or
encourage or attempt to induce or encourage any person to take,
any action, or make any allegation, claim or determination
otherwise prohibited by this Section 1.07. This Section 1.07
shall not, however, prohibit the Company or any of its present
directors from testifying under oath or otherwise defending
itself or himself in a legal proceeding not initiated by the
Company or any present director.
SECTION 1.08. REIMBURSEMENT FOR COSTS. Within one
------------ -----------------------
business day after the execution of this Agreement by each of
the parties hereto, the Company shall pay Mr. Holland's
attorney's fees and expenses incurred through the date hereof
relating to this Agreement, his proposed proxy contest, any
applications filed with any regulatory agencies and his
discussions and efforts to become a director of the Company (up
to an aggregate of One Hundred Thousand Dollars ($100,000));
subject to the delivery by Mr. Holland to the Company of a copy
of a summary invoice for legal services actually rendered by his
attorneys in connection with the matters described above
(although such summary invoice need not disclose a description
or the nature or scope of any work performed by such attorneys
if to do so could jeopardize any applicable attorney-client
privilege). In addition, for so long as the New Directors are
directors of the Company pursuant to the terms hereof, the
Company shall promptly upon any New Director's request reimburse
the New Director for his attorneys' fees and expenses (up to an
amount for both New Directors in the aggregate equal to Fifteen
Thousand Dollars ($15,000) per calendar year) incurred in
situations and under circumstances where the New Director
reasonably believes after consultation with the Board of
Directors of the Company that he needs legal counsel separate
from the legal counsel of the Company in order to carry out his
duties as a director of the Company or Jefferson Heritage.
SECTION 1.09. ENFORCEMENT. For so long as the New
------------ -----------
Directors are directors of the Company pursuant to this
Agreement, neither the Company nor its present directors shall
file, join or otherwise participate as a party plaintiff, or
promote, recommend, induce, solicit, encourage or support any
other person to file, join or otherwise participate, in any
litigation, suit, proceeding or cause of action that alleges, or
otherwise relates to facts or circumstances alleging, (a) that
any of the terms of this Agreement are not enforceable in
accordance with their terms, or (b) that any Shareholder should
not enforce this Agreement in any particular case or
circumstance.
SECTION 1.10. SUCCESSOR DIRECTORS. The Company shall use
------------ -------------------
its reasonable efforts, for so long as the New Directors are
directors of the Company pursuant to this Agreement, to cause
each person
4<PAGE>
<PAGE>
nominated by the Board of Directors of the Company or the
Nominating Committee to become a director of the Company to
agree to be bound by the provisions of this Agreement to the
same extent as the present directors are expressly bound by the
terms hereof.
SECTION 1.11. OTS FILING. Upon the execution of this
------------ ----------
Agreement by all parties, the Company shall promptly withdraw
all requests made by it or on its behalf for the confidential
portions of the OTS Filing (as defined in Section 2.01 hereof)
filed by Mr. Holland with the OTS in connection with the 1999
Annual Meeting.
ARTICLE II
----------
REPRESENTATIONS AND AGREEMENTS OF SHAREHOLDERS
-----------------------------------------------
SECTION 2.01. TERMINATION OF PROXY SOLICITATION AND
------------- --------------------------------------
WITHDRAWAL OF NOTICE. Within one business day after the
- --------------------
execution of this Agreement by each of the parties hereto, Mr.
Holland and the Trust shall terminate and discontinue their
proxy solicitation and withdraw all proxy materials filed with
the Securities and Exchange Commission (including, without
limitation, the material filed on April 14, 1999) (the "SEC
Filing"), and withdraw the Notice of Change in Control filed by
Mr. Holland with the Office of Thrift Supervision in connection
with the 1999 Annual Meeting (the "OTS Filing"). The
Shareholders shall vote their shares of Common Stock at the 1999
Annual Meeting in favor of the nominees for Class I directors
set forth in Section 1.02 hereof (and shall provide evidence of
such vote as provided in Section 2.03(b) hereof).
SECTION 2.02. REPRESENTATIONS OF SHAREHOLDERS. Each
------------ -------------------------------
Shareholder represents and warrants to the Company that (a) such
Shareholder has full power, right and authority to enter into
this Agreement and consummate and perform each of the
transactions and obligations of such Shareholder provided for
herein and that this Agreement constitutes a valid and binding
obligation of such Shareholder enforceable in accordance with
its terms, (b) such Shareholder is the beneficial owner of the
number of shares of Common Stock set forth opposite the name of
such Shareholder on the signature page hereto and does not,
directly or indirectly, beneficially own any other shares of
Common Stock, (c) the execution of this Agreement does not
violate any law, rule, regulation or governmental requirement or
result in a breach of or a default under any contract,
agreement, commitment, arrangement or understanding to which
such Shareholder is a party or otherwise bound (including,
without limitation, any agreement or understanding with the
record owner of any shares of Common Stock beneficially owned by
such Shareholder), and (d) the Shareholder has not engaged in
actions or activities prior to the date hereof with any one or
more other Shareholders such that the Shareholder and any such
other Shareholder or Shareholders are or have been a group or
"acting in concert," as that term is defined in Article XIV of
the Company's Certificate of Incorporation or under any statute,
law, rule, regulation or governmental requirement, including,
without limitation, the federal securities laws and the rules
and regulations of the Securities and Exchange Commission and
the Office of Thrift Supervision.
SECTION 2.03. AGREEMENTS OF SHAREHOLDERS. Anything herein
------------ --------------------------
to the contrary notwithstanding, during the period commencing on
the date hereof and continuing until the first day following the
date of the 2000 Annual Meeting, but in any event not beyond
July 31, 2000 if the 2000 Annual Meeting shall not have been
held by such date (such period referred to herein as the
"Restricted Period"), each Shareholder shall (and each
Shareholder shall cause the record holder of any shares of
Common Stock beneficially owned by the Shareholder with respect
to the shares of Common Stock now or at any time during the
Restricted Period hereof beneficially owned by the Shareholder
and held by the record holder to):
5<PAGE>
<PAGE>
(a) except in connection with any sale, merger,
consolidation, combination, share exchange or sale of
substantially all of the assets of the Company (other than any
such transactions involving only the Company and/or its
subsidiaries), not engage, initiate or otherwise participate in,
or induce or attempt to induce any other person to engage,
initiate or participate in, any proxy fight or contest or
consent solicitation involving the Company and shall not solicit
proxies or consents or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) or induce or attempt to induce any other person
to solicit proxies or consents or become a "participant" in a
"solicitation" in opposition to the recommendation of a majority
of the Board of Directors of the Company, and shall not
initiate, propose or otherwise solicit shareholders of the
Company in connection with a shareholder proposal or induce or
attempt to induce any person to initiate any shareholder
proposal (and the term "person," as used in this Agreement,
shall mean any individual, partnership, corporation, limited
liability company, trust or other entity);
(b) vote or assent (in person, by proxy, by written
consent or otherwise) at the 2000 Annual Meeting (provided the
2000 Annual Meeting is held prior to July 31, 2000), all shares
of Common Stock owned of record or beneficially by such
Shareholder in favor of the election as directors of William W.
Canfield and Edward G. Throop or, if one of the foregoing
individuals is unable or unwilling to serve as a director of the
Company, Joe L. Williams (Messrs. Canfield, Throop and Williams
are referred to herein collectively as the "Proposed 2000
Nominees"). In the event that two or more of the Proposed 2000
Nominees shall be unable or unwilling to accept the nomination
for election as directors at the 2000 Annual Meeting such that
the two Class II director positions currently up for election at
the 2000 Annual Meeting would not include any two of the three
Proposed 2000 Nominees, then the Shareholders shall nevertheless
vote or assent as provided above in this Section 2.03(b) for the
nominees proposed by the Board of Directors of the Company or
its Nominating Committee, provided such nominees are determined
as provided in the next two sentences. The Board of Directors
of the Company or the Nominating Committee shall propose one new
individual as the management nominee in the event that two of
the Proposed 2000 Nominees shall be unable or unwilling to
accept the nomination for election as a director at the 2000
Annual Meeting and two new individuals as the management
nominees in the event that all three of the Proposed 2000
Nominees shall be unable or unwilling to accept the nomination
for election as directors at the 2000 Annual Meeting. If the
nominee or nominees, as the case may be, initially proposed by
the Board of Directors of the Company or the Nominating
Committee as provided in the preceding sentence shall not be
satisfactory to both of the New Directors, then the Board of
Directors of the Company or the Nominating Committee shall
propose a new nominee, or nominees, as the case may be, and such
new nominee or nominees, as the case may be, shall be the
management nominees for the 2000 Annual Meeting, and the
Shareholders shall vote or assent for such nominees at the 2000
Annual Meeting as provided above in this Section 2.03(b) (i.e.,
the New Directors shall only have the right to one objection for
each board seat to be filled by a person other than a Proposed
2000 Nominee and thereafter the Shareholders shall be obligated
to vote or assent all of their shares of Common Stock in favor
of such nominees at the 2000 Annual Meeting as provided above in
this Section 2.03(b)). The Shareholder shall, not later than
five (5) days prior to the date of such annual meeting, deliver
to the Secretary of the Company (i) in the case of shares of
Common Stock beneficially owned by the Shareholder, a copy of
the proxy card or other voting instructions evidencing the
Shareholder's vote or assent as provided in this Section 2.03(b)
which shall have been theretofore delivered by the Shareholder
to the record owner of the shares of Common Stock, or (ii) in
the case of shares of Common Stock owned of record by the
Shareholder, the original executed proxy card or other voting
instructions evidencing the Shareholder's vote or assent as
provided in this Section 2.03(b); and the Shareholder shall not
thereafter revoke or otherwise modify or terminate such proxy
card or other voting instructions;
(c) not nominate any individual as a candidate for
election to, or to fill a vacancy on, the Board of Directors of
the Company, or support, endorse or otherwise encourage the
election of any
6<PAGE>
<PAGE>
candidate for election to the Board of Directors of the Company
other than a candidate nominated pursuant to Section 2.03(b)
hereof; provided, however, that this Section 2.03(c) shall not
prohibit or be deemed to prohibit the New Directors from (i)
participating in the same manner as any other director of the
Company in the nomination process employed by the Board of
Directors of the Company to nominate candidates for election
to the Board of Directors of the Company, or (ii) making the
proposals described in Section 2.05 hereof;
(d) ensure, with respect to the shares of Common
Stock owned of record or beneficially by such Shareholder at any
time during the Restricted Period, that such shares of Common
Stock are counted as being present for the purposes of any
quorum required for shareholder action of the Company; and
(e) not take or attempt to take any action, directly
or indirectly, alone or in concert with any other person or
group, to circumvent the obligations of the Shareholders set
forth herein, and shall not seek, initiate, promote, recommend,
induce, encourage or support any person to undertake or attempt
to undertake any of the actions or activities which the
Shareholders are not permitted to engage in under this Section
2.03.
SECTION 2.04. AGREEMENT OF NOMINEES. The New Directors
------------ ---------------------
agree to provide the Company with any information required to be
disclosed with respect to them in the Company's Proxy Statement
for the 1999 Annual Meeting and each annual meeting of the
shareholders of the Company thereafter as long as they are a
director of the Company under Regulation 14A under the Exchange
Act.
SECTION 2.05. REPLACEMENT OF NEW DIRECTORS. In the event
------------ ----------------------------
that, during the period between the date of the 1999 Annual
Meeting and the annual meeting of shareholders of the Company in
2002, either of the New Directors become unable or unwilling to
continue to serve as a director of the Company, then the vacancy
created as a result of such inability or unwillingness of such
New Director, as the case may be, shall be filled by the
affirmative vote of two-thirds (2/3) of the directors of the
Company then in office as provided in Article XII.A. of the
Company's Certificate of Incorporation; provided, however, that
the Board of Directors shall only consider persons to fill such
vacancy that shall have been proposed by the New Director that
then remains in office, that the Board of Directors shall not
unreasonably withhold its approval of any person proposed by the
remaining New Director and that the Board of Directors shall act
promptly (including, without limitation, calling a special
meeting of directors) in order to vote to fill such vacancy.
SECTION 2.06. ENFORCEMENT. For so long as the New
------------ -----------
Directors are directors of the Company pursuant to this
Agreement, no Shareholder shall file, join or otherwise
participate as a party plaintiff, or promote, recommend, induce,
encourage, solicit, or support any other person to file, join or
otherwise participate, in any litigation, suit, proceeding or
cause of action (including any derivative suit) that alleges, or
otherwise relates to facts or circumstances alleging, (i) that
any of the terms of this Agreement are not enforceable in
accordance with their terms, or (ii) that the Board of Directors
of the Company should not enforce this Agreement in any
particular case or circumstance.
7<PAGE>
<PAGE>
ARTICLE III
-----------
MISCELLANEOUS
-------------
SECTION 3.01. ENFORCEMENT; SPECIFIC PERFORMANCE. Each of
------------ ---------------------------------
the Shareholders and the Company expressly acknowledge that it
would be extremely difficult to measure the damages that might
result from any breach of the obligations of the parties
hereunder, and that any breach of such obligations by one party
would result in irreparable injury to the nonbreaching party for
which money damages could not adequately compensate. If,
therefore, a Shareholder, a present director or the Company
shall breach any of his, her or its obligations hereunder, then
the nonbreaching party or parties shall be entitled, in addition
to all other rights and remedies that he, she or it may have at
law or in equity, to have an injunction issued by any competent
court enjoining and restraining such breaching party and all
other persons involved therein from continuing such breach. If
any of the obligations of a Shareholder, a present director or
the Company hereunder, or any part thereof, or the application
thereof, shall be construed to be invalid, illegal or
unenforceable, then the other obligations of such Shareholder,
present director or the Company hereunder, or the other portion
thereof, or the application thereof, shall not be affected
thereby and shall be enforceable without regard thereto. If any
of the obligations of a Shareholder, a present director or the
Company hereunder shall be determined to be unenforceable
because of its scope, duration or other factor, then the court
making such determination shall have the power to reduce or
limit such scope, duration or other factor, and such obligation
shall then be enforceable against such Shareholder, present
director or the Company in its reduced or limited form.
SECTION 3.02. ATTORNEYS' FEES. In the event of any suit
------------ ---------------
or other proceeding between the Company and/or any present
director, on the one hand, and any Shareholder or Shareholders,
on the other hand, with respect to any of the transactions
contemplated hereby or the subject matter hereof, the prevailing
party shall, in addition to such other relief as the court may
award, be entitled to recover reasonable attorneys' fees,
expenses and costs of investigation from the breaching party or
parties, as the case may be, and not any non-breaching party,
all as actually incurred, including, without limitation,
attorneys' fees, costs and expenses of investigation incurred in
trial or appellate proceedings. In the event that the Company
and/or any present director shall be entitled to fees, expenses
and costs under this Section 3.02, then such recovery shall be
against only the breaching Shareholder or Shareholders, as the
case may be, and not against any non-breaching Shareholder.
SECTION 3.03. FAIR CONSTRUCTION. This Agreement is the
------------ -----------------
product of negotiation and shall be deemed to have been drafted
by all of the parties hereto. It shall be construed in
accordance with the fair meaning of its terms and its language
shall not be strictly construed against, nor shall ambiguities
be resolved against, any particular party.
SECTION 3.04. AMENDMENT AND MODIFICATION; ENTIRE
------------ ----------------------------------
AGREEMENT. This Agreement contains the entire agreement between
- ---------
the parties hereto regarding the subject matter hereof, and may
not be amended, altered, modified or terminated prior to the
expiration of the Term except by a writing signed by all parties
hereto or except as otherwise expressly provided herein. This
Agreement supersedes all prior agreements, representations,
warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied,
with respect to the subject matter hereof, all of which are
specifically integrated into this Agreement.
SECTION 3.05. COUNTERPARTS; FACSIMILE. This Agreement may
------------ -----------------------
be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument. For purposes of this Agreement, a
document (or signature page thereto) signed
8<PAGE>
<PAGE>
and transmitted by facsimile machine or telecopier shall be
treated as an original document. The signature of any party
thereon, for purposes hereof, shall be considered as an original
signature, and the document transmitted shall be considered to
have the same binding effect as an original signature on an
original document. At the request of any party, any facsimile
or telecopied document shall be re-executed in original form by
the parties who executed the facsimile or telecopied document.
No party may raise the use of a facsimile machine or telecopier
or the fact that any signature was transmitted through the use
of a facsimile or telecopier machine as a defense to the
enforcement of this Agreement or any amendment or other document
executed in compliance with this Section 3.05.
SECTION 3.06. SUCCESSORS. All provisions of this Agreement
------------ ----------
shall be binding upon, inure to the benefit of, and shall be
enforceable by or against, the parties hereto and their
respective successors, assigns, heirs, executors, administrators
or other legal representatives; provided, however, that no party
hereto may assign this Agreement without the prior written
consent of each of the parties hereto; provided further,
however, that anything herein to the contrary notwithstanding,
this Agreement shall not be binding upon a successor or assign
of the Company in connection with a merger, consolidation or
other business combination transaction to which the Company is a
party (an "Acquisition") provided (i) the Company shall not be
the surviving entity in the Acquisition, (ii) the counter-party
to the Acquisition shall not be an affiliate of the Company (as
defined in the Exchange Act), and (iii) the Acquisition shall
have been approved by the shareholders of the Company entitled
to vote thereon under the Delaware General Corporation Law or
pursuant to other applicable law or the rules of The Nasdaq
Stock Market or any national securities exchange or automated
quotation system on which the Common Stock shall then be listed
or quoted.
SECTION 3.07. GOVERNING LAW. This Agreement shall be
------------ -------------
governed by and construed in accordance with the laws of the
State of Delaware, without reference to conflicts of laws
principles.
SECTION 3.08. PUBLIC ANNOUNCEMENTS. Promptly following
------------ --------------------
execution of this Agreement, the Company shall issue a press
release in the form attached hereto as Exhibit A. The Company,
each of its present directors and each of the Shareholders
agrees not to (i) make any public statement that is contrary to
such press release, or (ii) make any public statement or issue
any press release concerning the subject matter hereof which
contains any untrue information or statements regarding the
other parties hereto or their representatives.
SECTION 3.09. TERMINATION. This Agreement, and the
------------ -----------
covenants, agreements and obligations contained herein, shall
terminate automatically, without the need for any further action
or writing by any party hereto, if both of the New Directors are
not elected to the Board of Directors of the Company at the 1999
Annual Meeting and are not elected by the Company as directors
of Jefferson Heritage as required by this Agreement (provided
that the Shareholders shall have complied with the voting
requirements of Section 2.01 hereof and the Company and its
present directors shall have complied with their obligations set
forth in Sections 1.02(a) and 1.03 hereof).
SECTION 3.10. HEADINGS. The headings contained in this
------------ --------
Agreement have been inserted solely for ease of reference and
shall not be considered in the interpretation, construction or
enforcement of this Agreement.
[Signature pages follow on page 10.]
9
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed,
entered into and delivered this Agreement on the day and year
first above written.
JEFFERSON SAVINGS BANCORP, INC.,
A DELAWARE CORPORATION
By: /s/ David V. McCay
------------------------------------
David V. McCay
Chairman and Chief Executive Officer
/s/ Gary L. Holland
------------------------------------
GARY L. HOLLAND
THE GARY L. HOLLAND TRUST
By: /s/ Gary L. Holland
------------------------------------
Gary L. Holland
Trustee
Address:
540 North Commercial
Harrisburg, Illinois 62946
Number of shares beneficially owned:
411,200
Name of record holder and number of
shares held:
The Gary L. Holland Trust: 100
Solomon Smith Barney: 411,100
10
<PAGE>
<PAGE>
/s/ Brad Barkau
---------------------------------------------
* BRAD BARKAU
Address:
239 E. St. Louis
P.O. Box 244
Nashville, Illinois 62263
Number of shares beneficially owned: 17,978
Name and address of record holder:
Charles Schwab & Co., Inc.
P.O. Box 7187
Indianapolis, IN 46207-7187
*Brad Barkau Cust For Erica L. Barkau UILUTMA
*Brad Barkau Cust For Erin K. Barkau UILUTMA
/s/ William Drake
---------------------------------------------
WILLIAM DRAKE
Address:
1329 Old Trenton Road
Highland, Illinois 62249-2027
Number of shares beneficially owned: 200
Name and address of record holder:
Same as above
WILLIAM K. DRAKE DEFINED BENEFIT PLAN
By: /s/ Mary K. Drake
------------------------------------
Mary K. Drake
Trustee
Address:
2104 Dornoch
League City, TX 77573
Number of shares beneficially owned: 25,000
Name and address of record holder:
Same as above
11
<PAGE>
<PAGE>
THE DRAKE FAMILY LIMITED PARTNERSHIP
By: DRAKE FAMILY MANAGEMENT CO.
(n/k/a ALTA TIERRA CO.)
general partner
By: /s/ Mary K. Drake
------------------------------------
Mary K. Drake
Vice President
Address:
2104 Dornoch
League City, TX 77573
Number of shares beneficially owned: 938,600
Name and address of record holder:
Same as above
CONTANGO LIMITED PARTNERSHIP
By: ALTA TIERRA CO.
general partner
By: /s/ William Drake
------------------------------------
William Drake
President
Number of shares beneficially owned: 938,600
Name and address of record holder:
Contango Limited Partnership
2104 Dornoch
League City, TX 77573
12
<PAGE>
<PAGE>
/s/ Mary K. Drake
---------------------------------------------
MARY K. DRAKE
Address:
2104 Dornoch
League City, Texas 77573
Number of shares beneficially owned: 963,800
Name and address of record holder:
Same as above
/s/ Howard Watson
---------------------------------------------
HOWARD WATSON
/s/ Susan M. Watson
---------------------------------------------
SUSAN M. WATSON
Address:
#7 Wild Tamarind Drive
Camperdown Heights, Nassau, Bahamas
Number of shares beneficially owned: 748,500
Name and address of record holder:
Intrepid Ltd.
P.O. Box F42643
Suite 5, Insurance Management Bldg.
Pioneers Way, Grand Bahama
Freeport, Bahamas
13
<PAGE>
<PAGE>
INTREPID, LTD.
By: /s/ Howard G. Watson
---------------------------------------
Howard G. Watson
Chief Executive Officer, Intrepid Ltd.
Address:
#7 Wild Tamarind Drive
Camperdown Heights, Nassau, Bahamas
Number of shares beneficially owned: 748,500
Name and address of record holder:
Intrepid Ltd.
P.O. Box F42643
Suite 5, Pioneers Way
Grand Bahama, Freeport, Bahamas
Each of the undersigned directors and, if
applicable, officers of the Company hereby
signs this Agreement and is a party hereto
in his capacity as a director and, if
applicable, officer of the Company and solely
for the purpose of (a) agreeing to comply
with and be bound by his covenants,
agreements and obligations set forth in this
Agreement, and (b) making his representations
and warranties set forth in this Agreement.
/s/ David V. McCay
---------------------------------------------
David V. McCay
/s/ Frank C. Bick
---------------------------------------------
Frank C. Bick
/s/ William W. Canfield
---------------------------------------------
William W. Canfield
/s/ Lloyd D. Doerflinger
---------------------------------------------
Lloyd D. Doerflinger
/s/ Forrest W. Miller, Jr.
---------------------------------------------
Forrest W. Miller, Jr.
/s/ Edward G. Throop
----------------------------------------------
Edward G. Throop
14
<PAGE>
<PAGE>
EXHIBIT A
---------
JEFFERSON SAVINGS NAMES SLATE OF NOMINEES;
------------------------------------------
SHAREHOLDER WITHDRAWS PROXY FILINGS
-----------------------------------
St. Louis, May 5, 1999 - - Jefferson Savings Bancorp, Inc.
(Nasdaq:JSBA) announced that it reached an agreement with Gary
Holland pursuant to which he agreed to withdraw the proxy and
regulatory filings he made recently in his attempt to elect a
slate of his nominees to the board. As part of the agreement
the Company agreed to increase the size of the board from six to
seven members and to nominate and support Holland and one of his
other proposed nominees, Brad Barkau, for election as directors
at the 1999 annual meeting. The Company's third nominee for
election in 1999 will be Lloyd Doerflinger, a current member of
the board. The six individual shareholders who entered into the
agreement and who own in the aggregate approximately 22% of the
Company's stock also agreed to vote in favor of the Company's
proposed slate of directors at the June 21 annual meeting and
not to engage in a proxy contest at next year's annual meeting.
David V. McCay, chairman and chief executive officer of the
Company, commented, "We are pleased that this matter has been
resolved amicably and in the spirit of cooperation by all
parties involved. This is a positive result for the Company.
We have resolved this matter without the significant additional
costs and diversion of management attention that oftentimes
results from a prolonged proxy contest and, at the same time, we
are pleased to welcome two very fine businessmen to our board.
We expect that Mr. Holland and Mr. Barkau will make a meaningful
contribution to the organization."
Holland said, "I am pleased to serve on the board and I
commend the current directors for the professional manner in
which they approached this situation. I am committed to
enhancing shareholder value and representing the best interests
of all of the shareholders. I look forward to the opportunity
to work productively with management and my fellow board
members."
Jefferson Savings Bancorp has total assets in excess of
$1.5 billion and operates 10 offices in Missouri and 19 offices
in Texas.
A-1
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted
from consolidated financial statements and notes thereto to
Jefferson Savings Bancorp, Inc. at and for the three months
ended March 31, 1999 and is qualified in its entirety by
reference to such financial statements.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 9,365,355
<INT-BEARING-DEPOSITS> 32,845,060
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 223,423,487
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,186,824,360
<ALLOWANCE> 6,655,206
<TOTAL-ASSETS> 1,510,622,173
<DEPOSITS> 1,026,227,382
<SHORT-TERM> 342,751,610
<LIABILITIES-OTHER> 16,345,731
<LONG-TERM> 0
0
0
<COMMON> 100,984
<OTHER-SE> 125,196,466
<TOTAL-LIABILITIES-AND-EQUITY> 1,510,622,173
<INTEREST-LOAN> 21,114,513
<INTEREST-INVEST> 3,107,110
<INTEREST-OTHER> 540,117
<INTEREST-TOTAL> 24,761,740
<INTEREST-DEPOSIT> 12,293,186
<INTEREST-EXPENSE> 15,303,745
<INTEREST-INCOME-NET> 9,457,995
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 36,990
<EXPENSE-OTHER> 6,116,182
<INCOME-PRETAX> 4,108,523
<INCOME-PRE-EXTRAORDINARY> 2,428,523
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,428,523
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 2.79
<LOANS-NON> 7,365,000
<LOANS-PAST> 260,000
<LOANS-TROUBLED> 1,165,000
<LOANS-PROBLEM> 1,143,523
<ALLOWANCE-OPEN> 6,659,294
<CHARGE-OFFS> 4,332
<RECOVERIES> 244
<ALLOWANCE-CLOSE> 6,665,206
<ALLOWANCE-DOMESTIC> 4,425,456
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,229,750
</TABLE>
