-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KYt12PsCdVHbkvK9hhbgqfvdhfSCjktGbNo5ZwW158ozQWSKLVxytRUptUNliEEQ BGQDHC310urzVLknaz1LNw== 0000950134-99-007802.txt : 19990826 0000950134-99-007802.hdr.sgml : 19990826 ACCESSION NUMBER: 0000950134-99-007802 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19990825 GROUP MEMBERS: BARBARA H WILSON GROUP MEMBERS: BASIM MAHMOUD JISHI GROUP MEMBERS: CYNTHIA SHARP JISHI GROUP MEMBERS: DON G WILSON GROUP MEMBERS: EARL DELAINE BELLAMY GROUP MEMBERS: ETFS ACQUISITION CORP GROUP MEMBERS: VAUGHAN WILLIAM DUNCAN SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: EAST TEXAS FINANCIAL SERVICES INC CENTRAL INDEX KEY: 0000929646 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 752559089 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-45519 FILM NUMBER: 99699255 BUSINESS ADDRESS: STREET 1: 1200 S BECKHAM AVE CITY: TYLER STATE: TX ZIP: 75701 BUSINESS PHONE: 9035931767 MAIL ADDRESS: STREET 1: 1200 SOUTH BECKHAM AVE CITY: TYLER STATE: TX ZIP: 75701 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: VAUGHAN WILLIAM DUNCAN CENTRAL INDEX KEY: 0001088780 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 202 BONHAM CITY: PARIS STATE: TX ZIP: 75641 SC 13D/A 1 AMENDMENT NO. 1 TO SCHEDULE 13D 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO.1)* EAST TEXAS FINANCIAL SERVICES, INC. - ------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK - ------------------------------------------------------------------------------- (Title of Class of Securities) 0-24848 - ------------------------------------------------------------------------------- (CUSIP Number) Richard E. Brophy, Jr., Naman, Howell, Smith & Lee, P.C., P.O. Box 1470, Waco, TX 76703 (254) 755-4100 - ------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) August 24, 1999 - ------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ]. NOTE: The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 AMENDMENT NO. 1 TO SCHEDULE 13D CUSIP NO. 0-24848 - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) William Duncan Vaughan - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - ------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 25,000 BENEFICIALLY ----------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 0 PERSON ----------------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 25,000 ---------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,000 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.79% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 3 AMENDMENT NO. 1 TO SCHEDULE 13D CUSIP NO. 0-24848 - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Earl DeLaine Bellamy - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - ------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 68,000 BENEFICIALLY ---------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 0 PERSON ---------------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 68,000 ---------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 68,000 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.88% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 4 AMENDMENT NO. 1 TO SCHEDULE 13D CUSIP NO. 0-24848 - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Basim Mahmoud Jishi - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - ------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 0 BENEFICIALLY ---------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 10,000 PERSON ---------------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 10,000 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,000 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.72% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 5 AMENDMENT NO. 1 TO SCHEDULE 13D CUSIP NO. 0-24848 - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Cynthia Sharp Jishi - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - ------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 0 BENEFICIALLY ---------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 10,000 PERSON ---------------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 10,000 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,000 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.72% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 6 AMENDMENT NO. 1 TO SCHEDULE 13D CUSIP NO. 0-24848 - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Barbara H. Wilson, as Trustee of the Don G. Wilson Annuity Trust - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - ------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 14,550 BENEFICIALLY ---------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 0 PERSON ---------------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 14,550 ---------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 14,550 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.04% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 7 AMENDMENT NO. 1 TO SCHEDULE 13D CUSIP NO. 0-24848 - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Don G. Wilson, as Trustee of the Barbara H. Wilson Annuity Trust - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - ------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 14,550 BENEFICIALLY ---------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 0 PERSON ---------------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 14,550 ---------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 14,550 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.04% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 8 AMENDMENT NO. 1 TO SCHEDULE 13D CUSIP NO. 0-24848 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) ETFS Acquisition Corp. (applied for) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Texas - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 0 BENEFICIALLY ----------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 0 PERSON ----------------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 0 ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0 - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 9 AMENDMENT NO. 1 TO SCHEDULE 13D The Statement on Schedule 13D with respect to the shares of common stock of East Texas Financial Services, Inc., a Delaware corporation, filed on June 17, 1999 is amended as follows: Item 4. Purpose of the Transaction. Item 4. Is hereby amended by the addition of the following: The Acquiring parties met with management of the Company in June 1999 to discuss the filing of the initial Schedule 13D and the concerns of the Acquiring Parties with respect to the financial performance of the Company. In July 1999 the Acquiring Parties requested a meeting with the Board of Directors to discuss more specifically actions that might be taken to improve the Company's financial performance. This request was rejected. On July 27, 1999, William D. Vaughn delivered the letters attached hereto as Exhibit B to James W. Fair, H.H. Richardson, Jr., Charles R. Halstead, Jack W. Flock, Gerald W. Free, Jim M. Vaughn, M. Earl Davis and L. Lee Kidd, the members of the Board of Directors of the Company, requesting a meeting to discuss the Company's financial performance. This request was declined. The Acquiring Parties have submitted a proposal (the "Proposal") to the Board of Directors that the Company merge with ETFS Acquisition Co., a corporation owned by the Acquiring Parties ("Purchaser"), in which shareholders of the Company other than Purchaser would receive $16.00 per share. The Proposal is attached as Exhibit C and is incorporated by reference. If the Proposal is accepted, the Company will be owned by the Acquiring Parties and it will cease to file reports with the Commission. Each shareholder of the Company, other than Purchaser, will receive $16.00 per share in cash, subject to the terms and conditions of definitive agreements providing for the transactions contemplated by the Proposal. By letter dated August, 23, 1999, attached hereto as Exhibit D, William D. Vaughn has requested that the Company make available for inspection and copying certain corporate records, including a list of shareholders and the identity of beneficial owners of the Company's stock, all correspondence with shareholders, a copy of the Company's Bylaws and copies of all minutes of the meetings of the Board of Directors. The Acquiring Parties intend to communicate the terms of the Proposal to certain of the Company's shareholders by letter in the form attached hereto as Exhibit E and to the press by means of a release in the form attached hereof as Exhibit F. The Acquiring Parties will continue to review the Company's condition and possible methods by which the Acquiring Parties and, possibly, others may be able to influence the Company's future course of action with the goal of improving the Company's financial results and increasing stockholder value. The Acquiring Parties reserve the right to (i) modify their present intentions and formulate further plans or proposals and (ii) to increase or decrease their respective holdings of Common Stock through open market purchases, privately negotiated transactions or otherwise. Item 7. Material to be Filed as Exhibits. Exhibit B. Letters dated July 27, 1999 to members of the Board of Directors. 10 Exhibit C. Letter to the Board of Directors dated August 23, 1999. Exhibit D. Demand for Shareholder list and other corporate documents dated August 23, 1999. Exhibit E. Form of Letter to Shareholders. Exhibit F. Press Release After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: August 24, 1999. /s/ William Duncan Vaughan ------------------------------------ William Duncan Vaughan /s/ Earl DeLaine Bellamy ------------------------------------ Earl DeLaine Bellamy /s/ Basim Mahmoud Jishi ------------------------------------ Basim Mahmoud Jishi /s/ Cynthia Sharp Jishi ------------------------------------ Cynthia Sharp Jishi /s/ Barbara H. Wilson ------------------------------------ Barbara H. Wilson, as Trustee of the Don G. Wilson Annuity Trust /s/ Don G. Wilson ------------------------------------ Don G. Wilson, as Trustee of the Barbara H. Wilson Annuity Trust ETFS Acquisition Corp. By: /s/ William D. Vaughan -------------------------------- William D. Vaughan, President 11 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- B Letters dated July 27, 1999 to members of the Board of Directors. C Letter to the Board of Directors dated August 23, 1999. D Demand for Shareholder list and other corporate documents dated August 23, 1999. E Form of Letter to Shareholders. F Press Release
EX-99.B 2 LETTERS DATED JULY 27, 1999 1 WILLIAM D. VAUGHAN 3220 ABBOTT PARIS, TEXAS 75460 (903) 785-0054 work (903) 785-9792 home (903) 785-6955 fax July 27, 1999 Mr. James W. Fair P.O. Box 689 Tyler, Texas 75701 Dear Mr. Fair: As you know, I am a stockholder of East Texas Financial Services, Inc. ("ETFS"). I acquired stock in ETFS because, among other things, I believe significant improvements can be made in the operating results of ETFS which would significantly enhance stockholder value. By way of background, I have spent most of my business career as a community banker. My father and I owned control of State National Bank of Wynnwood ("State National") until the spring of 1982. State National was a locally owned and managed financial institution. From the summer of 1989 until August of 1997, I was the president and chief executive officer of First National Bank of Paris, and its parent bank holding company, Executive Bancshares, Inc., which was owned primarily by a local group of investors. I am a strong believer that there is still a niche for strong community banks in the current banking environment. If you check my background, I believe you will find that the banks in which I have been involved were conservatively run, had good earnings, and good relations with their primary banking regulators. Dr. Earl Bellamy was chairman of the board of First National Bank of Paris and Executive Bancshares, Inc. Dr. Bellamy is a successful ophthalmologist who has practiced in the Paris area since 1963. Dr. Bellamy and I worked closely together at First National Bank of Paris and we share a common philosophy to community banking. In 1996, First National Bank of Paris began exploring the possibility of acquiring the branch of another institution in McKinney, Texas. Our strategy in that case, as it has been in every opportunity we have explored, is that to be successful in another banking market, local participation and ownership was essential. In the case of the McKinney acquisition, we organized a new national bank, sold shares in our holding company to local McKinney investors, and had significant involvement of local McKinney residents on the board of directors and management of the newly organized bank, Collin County National Bank. I tell you all of this so that you will understand that our banking philosophy has always been, and continues to be, that for a community bank to be successful, local involvement in ownership and operations is essential. 2 Mr. James W. Fair -2- July 27, 1999 According to the information I have reviewed, prior to converting from a mutual to a stock association, the total assets of your institution were approximately $118,000,000. In connection with the conversion, ETFS raised over $11,000,000 in new capital. According to your financial statements as of March 31, 1999, the total assets of the institution were only $134,000,000, which reflects only a nominal increase in total assets since 1995, taking into account the additional capital that was raised in the conversion. The recent increase in total assets is in part attributed to borrowings from the Federal Home Loan Bank Board, rather than any real growth. Earnings for 1998 were less than earnings from 1997. It appears from your March 31, 1999, quarterly report that earnings for 1999 are even less than 1998. The earnings and growth of your institution are historically disappointing and the trends do not seem to be improving. We have asked your management for the opportunity to meet with the board of directors to explore alternatives to improve the direction of your institution. Consistent with our approach to community banking, we are interested in some kind of arrangement which includes continued participation of local investors. Based on discussions we have had with other stockholders of ETFS, we believe there is significant dissatisfaction with the current performance of the institution. It appears that the level of stockholder dissatisfaction approaches at least fifty percent (50%) of the outstanding shares. With this level of dissatisfaction, we believe there is a substantial likelihood that changes in the control or direction of your financial institution will occur in the near future. We believe our approach to running a community bank may be one of the better alternatives that you will face. At this point in time, we do not have any specific proposal to make with regard to your institution. We have intentionally not made any specific proposal because our strong preference has been to begin a dialogue with the board of directors with the view toward addressing our concerns and at the same time developing solutions that are satisfactory to the existing board of directors. To pursue discussions with us is entirely consistent with your fiduciary obligation to the institution and its shareholders. Unfortunately, management of your institution has advised us that the board of directors does not desire to have any further discussion with us. In view of what appears to be an increasing level of stockholder dissatisfaction, coupled with continued poor financial performance of your institution, we believe this strategy on your part, as a member of the board of directors of ETFS, is a mistake. We respectfully encourage you to reconsider. We believe that the potential exists for a "win-win" solution to the future of ETFS. This will only occur, however, if we begin an active dialogue to address and resolve the major issues facing your institution. If you would like to discuss this with me personally, I invite you to call me at 903-785-0054. I would be delighted to discuss with you on an individual basis some of our thoughts regarding your institution. Very truly yours, /s/ WILLIAM D. VAUGHAN William D. Vaughan 3 WILLIAM D. VAUGHAN 3220 ABBOTT PARIS, TEXAS 75460 (903) 785-0054 work (903) 785-9792 home (903) 785-6955 fax July 27, 1999 Mr. H.H. Richardson, Jr. 784 Fairmont Drive Tyler, Texas 75701 Dear Mr. Richardson: As you know, I am a stockholder of East Texas Financial Services, Inc. ("ETFS"). I acquired stock in ETFS because, among other things, I believe significant improvements can be made in the operating results of ETFS which would significantly enhance stockholder value. By way of background, I have spent most of my business career as a community banker. My father and I owned control of State National Bank of Wynnwood ("State National") until the spring of 1982. State National was a locally owned and managed financial institution. From the summer of 1989 until August of 1997, I was the president and chief executive officer of First National Bank of Paris, and its parent bank holding company, Executive Bancshares, Inc., which was owned primarily by a local group of investors. I am a strong believer that there is still a niche for strong community banks in the current banking environment. If you check my background, I believe you will find that the banks in which I have been involved were conservatively run, had good earnings, and good relations with their primary banking regulators. Dr. Earl Bellamy was chairman of the board of First National Bank of Paris and Executive Bancshares, Inc. Dr. Bellamy is a successful ophthalmologist who has practiced in the Paris area since 1963. Dr. Bellamy and I worked closely together at First National Bank of Paris and we share a common philosophy to community banking. In 1996, First National Bank of Paris began exploring the possibility of acquiring the branch of another institution in McKinney, Texas. Our strategy in that case, as it has been in every opportunity we have explored, is that to be successful in another banking market, local participation and ownership was essential. In the case of the McKinney acquisition, we organized a new national bank, sold shares in our holding company to local McKinney investors, and had significant involvement of local McKinney residents on the board of directors and management of the newly organized bank, Collin County National Bank. I tell you all of this so that you will understand that our banking philosophy has always been, and continues to be, that for a community bank to be successful, local involvement in ownership and operations is essential. 4 Mr. H.H. Richardson, Jr. -2- July 27, 1999 According to the information I have reviewed, prior to converting from a mutual to a stock association, the total assets of your institution were approximately $118,000,000. In connection with the conversion, ETFS raised over $11,000,000 in new capital. According to your financial statements as of March 31, 1999, the total assets of the institution were only $134,000,000, which reflects only a nominal increase in total assets since 1995, taking into account the additional capital that was raised in the conversion. The recent increase in total assets is in part attributed to borrowings from the Federal Home Loan Bank Board, rather than any real growth. Earnings for 1998 were less than earnings from 1997. It appears from your March 31, 1999, quarterly report that earnings for 1999 are even less than 1998. The earnings and growth of your institution are historically disappointing and the trends do not seem to be improving. We have asked your management for the opportunity to meet with the board of directors to explore alternatives to improve the direction of your institution. Consistent with our approach to community banking, we are interested in some kind of arrangement which includes continued participation of local investors. Based on discussions we have had with other stockholders of ETFS, we believe there is significant dissatisfaction with the current performance of the institution. It appears that the level of stockholder dissatisfaction approaches at least fifty percent (50%) of the outstanding shares. With this level of dissatisfaction, we believe there is a substantial likelihood that changes in the control or direction of your financial institution will occur in the near future. We believe our approach to running a community bank may be one of the better alternatives that you will face. At this point in time, we do not have any specific proposal to make with regard to your institution. We have intentionally not made any specific proposal because our strong preference has been to begin a dialogue with the board of directors with the view toward addressing our concerns and at the same time developing solutions that are satisfactory to the existing board of directors. To pursue discussions with us is entirely consistent with your fiduciary obligation to the institution and its shareholders. Unfortunately, management of your institution has advised us that the board of directors does not desire to have any further discussion with us. In view of what appears to be an increasing level of stockholder dissatisfaction, coupled with continued poor financial performance of your institution, we believe this strategy on your part, as a member of the board of directors of ETFS, is a mistake. We respectfully encourage you to reconsider. We believe that the potential exists for a "win-win" solution to the future of ETFS. This will only occur, however, if we begin an active dialogue to address and resolve the major issues facing your institution. If you would like to discuss this with me personally, I invite you to call me at 903-785-0054. I would be delighted to discuss with you on an individual basis some of our thoughts regarding your institution. Very truly yours, /s/ WILLIAM D. VAUGHAN William D. Vaughan 5 WILLIAM D. VAUGHAN 3220 ABBOTT PARIS, TEXAS 75460 (903) 785-0054 work (903) 785-9792 home (903) 785-6955 fax July 27, 1999 Mr. Charles R. Halstead 803 Ashford Court Tyler, Texas 75703 Dear Mr. Halstead: As you know, I am a stockholder of East Texas Financial Services, Inc. ("ETFS"). I acquired stock in ETFS because, among other things, I believe significant improvements can be made in the operating results of ETFS which would significantly enhance stockholder value. By way of background, I have spent most of my business career as a community banker. My father and I owned control of State National Bank of Wynnwood ("State National") until the spring of 1982. State National was a locally owned and managed financial institution. From the summer of 1989 until August of 1997, I was the president and chief executive officer of First National Bank of Paris, and its parent bank holding company, Executive Bancshares, Inc., which was owned primarily by a local group of investors. I am a strong believer that there is still a niche for strong community banks in the current banking environment. If you check my background, I believe you will find that the banks in which I have been involved were conservatively run, had good earnings, and good relations with their primary banking regulators. Dr. Earl Bellamy was chairman of the board of First National Bank of Paris and Executive Bancshares, Inc. Dr. Bellamy is a successful ophthalmologist who has practiced in the Paris area since 1963. Dr. Bellamy and I worked closely together at First National Bank of Paris and we share a common philosophy to community banking. In 1996, First National Bank of Paris began exploring the possibility of acquiring the branch of another institution in McKinney, Texas. Our strategy in that case, as it has been in every opportunity we have explored, is that to be successful in another banking market, local participation and ownership was essential. In the case of the McKinney acquisition, we organized a new national bank, sold shares in our holding company to local McKinney investors, and had significant involvement of local McKinney residents on the board of directors and management of the newly organized bank, Collin County National Bank. I tell you all of this so that you will understand that our banking philosophy has always been, and continues to be, that for a community bank to be successful, local involvement in ownership and operations is essential. 6 Mr. Charles R. Halstead -2- July 27, 1999 According to the information I have reviewed, prior to converting from a mutual to a stock association, the total assets of your institution were approximately $118,000,000. In connection with the conversion, ETFS raised over $11,000,000 in new capital. According to your financial statements as of March 31, 1999, the total assets of the institution were only $134,000,000, which reflects only a nominal increase in total assets since 1995, taking into account the additional capital that was raised in the conversion. The recent increase in total assets is in part attributed to borrowings from the Federal Home Loan Bank Board, rather than any real growth. Earnings for 1998 were less than earnings from 1997. It appears from your March 31, 1999, quarterly report that earnings for 1999 are even less than 1998. The earnings and growth of your institution are historically disappointing and the trends do not seem to be improving. We have asked your management for the opportunity to meet with the board of directors to explore alternatives to improve the direction of your institution. Consistent with our approach to community banking, we are interested in some kind of arrangement which includes continued participation of local investors. Based on discussions we have had with other stockholders of ETFS, we believe there is significant dissatisfaction with the current performance of the institution. It appears that the level of stockholder dissatisfaction approaches at least fifty percent (50%) of the outstanding shares. With this level of dissatisfaction, we believe there is a substantial likelihood that changes in the control or direction of your financial institution will occur in the near future. We believe our approach to running a community bank may be one of the better alternatives that you will face. At this point in time, we do not have any specific proposal to make with regard to your institution. We have intentionally not made any specific proposal because our strong preference has been to begin a dialogue with the board of directors with the view toward addressing our concerns and at the same time developing solutions that are satisfactory to the existing board of directors. To pursue discussions with us is entirely consistent with your fiduciary obligation to the institution and its shareholders. Unfortunately, management of your institution has advised us that the board of directors does not desire to have any further discussion with us. In view of what appears to be an increasing level of stockholder dissatisfaction, coupled with continued poor financial performance of your institution, we believe this strategy on your part, as a member of the board of directors of ETFS, is a mistake. We respectfully encourage you to reconsider. We believe that the potential exists for a "win-win" solution to the future of ETFS. This will only occur, however, if we begin an active dialogue to address and resolve the major issues facing your institution. If you would like to discuss this with me personally, I invite you to call me at 903-785-0054. I would be delighted to discuss with you on an individual basis some of our thoughts regarding your institution. Very truly yours, /s/ WILLIAM D. VAUGHAN William D. Vaughan 7 WILLIAM D. VAUGHAN 3220 ABBOTT PARIS, TEXAS 75460 (903) 785-0054 work (903) 785-9792 home (903) 785-6955 fax July 27, 1999 Mr. Jack W. Flock 2231 Old Bullard Road Tyler, Texas 75701 Dear Mr. Flock: As you know, I am a stockholder of East Texas Financial Services, Inc. ("ETFS"). I acquired stock in ETFS because, among other things, I believe significant improvements can be made in the operating results of ETFS which would significantly enhance stockholder value. By way of background, I have spent most of my business career as a community banker. My father and I owned control of State National Bank of Wynnwood ("State National") until the spring of 1982. State National was a locally owned and managed financial institution. From the summer of 1989 until August of 1997, I was the president and chief executive officer of First National Bank of Paris, and its parent bank holding company, Executive Bancshares, Inc., which was owned primarily by a local group of investors. I am a strong believer that there is still a niche for strong community banks in the current banking environment. If you check my background, I believe you will find that the banks in which I have been involved were conservatively run, had good earnings, and good relations with their primary banking regulators. Dr. Earl Bellamy was chairman of the board of First National Bank of Paris and Executive Bancshares, Inc. Dr. Bellamy is a successful ophthalmologist who has practiced in the Paris area since 1963. Dr. Bellamy and I worked closely together at First National Bank of Paris and we share a common philosophy to community banking. In 1996, First National Bank of Paris began exploring the possibility of acquiring the branch of another institution in McKinney, Texas. Our strategy in that case, as it has been in every opportunity we have explored, is that to be successful in another banking market, local participation and ownership was essential. In the case of the McKinney acquisition, we organized a new national bank, sold shares in our holding company to local McKinney investors, and had significant involvement of local McKinney residents on the board of directors and management of the newly organized bank, Collin County National Bank. I tell you all of this so that you will understand that our banking philosophy has always been, and continues to be, that for a community bank to be successful, local involvement in ownership and operations is essential. 8 Mr. Jack W. Flock -2- July 27, 1999 According to the information I have reviewed, prior to converting from a mutual to a stock association, the total assets of your institution were approximately $118,000,000. In connection with the conversion, ETFS raised over $11,000,000 in new capital. According to your financial statements as of March 31, 1999, the total assets of the institution were only $134,000,000, which reflects only a nominal increase in total assets since 1995, taking into account the additional capital that was raised in the conversion. The recent increase in total assets is in part attributed to borrowings from the Federal Home Loan Bank Board, rather than any real growth. Earnings for 1998 were less than earnings from 1997. It appears from your March 31, 1999, quarterly report that earnings for 1999 are even less than 1998. The earnings and growth of your institution are historically disappointing and the trends do not seem to be improving. We have asked your management for the opportunity to meet with the board of directors to explore alternatives to improve the direction of your institution. Consistent with our approach to community banking, we are interested in some kind of arrangement which includes continued participation of local investors. Based on discussions we have had with other stockholders of ETFS, we believe there is significant dissatisfaction with the current performance of the institution. It appears that the level of stockholder dissatisfaction approaches at least fifty percent (50%) of the outstanding shares. With this level of dissatisfaction, we believe there is a substantial likelihood that changes in the control or direction of your financial institution will occur in the near future. We believe our approach to running a community bank may be one of the better alternatives that you will face. At this point in time, we do not have any specific proposal to make with regard to your institution. We have intentionally not made any specific proposal because our strong preference has been to begin a dialogue with the board of directors with the view toward addressing our concerns and at the same time developing solutions that are satisfactory to the existing board of directors. To pursue discussions with us is entirely consistent with your fiduciary obligation to the institution and its shareholders. Unfortunately, management of your institution has advised us that the board of directors does not desire to have any further discussion with us. In view of what appears to be an increasing level of stockholder dissatisfaction, coupled with continued poor financial performance of your institution, we believe this strategy on your part, as a member of the board of directors of ETFS, is a mistake. We respectfully encourage you to reconsider. We believe that the potential exists for a "win-win" solution to the future of ETFS. This will only occur, however, if we begin an active dialogue to address and resolve the major issues facing your institution. If you would like to discuss this with me personally, I invite you to call me at 903-785-0054. I would be delighted to discuss with you on an individual basis some of our thoughts regarding your institution. Very truly yours, /s/ WILLIAM D. VAUGHAN William D. Vaughan 9 WILLIAM D. VAUGHAN 3220 ABBOTT PARIS, TEXAS 75460 (903) 785-0054 work (903) 785-9792 home (903) 785-6955 fax July 27, 1999 Mr. Gerald W. Free 806 Ashford Court Tyler, Texas 75703 Dear Mr. Fair: As you know, I am a stockholder of East Texas Financial Services, Inc. ("ETFS"). I acquired stock in ETFS because, among other things, I believe significant improvements can be made in the operating results of ETFS which would significantly enhance stockholder value. By way of background, I have spent most of my business career as a community banker. My father and I owned control of State National Bank of Wynnwood ("State National") until the spring of 1982. State National was a locally owned and managed financial institution. From the summer of 1989 until August of 1997, I was the president and chief executive officer of First National Bank of Paris, and its parent bank holding company, Executive Bancshares, Inc., which was owned primarily by a local group of investors. I am a strong believer that there is still a niche for strong community banks in the current banking environment. If you check my background, I believe you will find that the banks in which I have been involved were conservatively run, had good earnings, and good relations with their primary banking regulators. Dr. Earl Bellamy was chairman of the board of First National Bank of Paris and Executive Bancshares, Inc. Dr. Bellamy is a successful ophthalmologist who has practiced in the Paris area since 1963. Dr. Bellamy and I worked closely together at First National Bank of Paris and we share a common philosophy to community banking. In 1996, First National Bank of Paris began exploring the possibility of acquiring the branch of another institution in McKinney, Texas. Our strategy in that case, as it has been in every opportunity we have explored, is that to be successful in another banking market, local participation and ownership was essential. In the case of the McKinney acquisition, we organized a new national bank, sold shares in our holding company to local McKinney investors, and had significant involvement of local McKinney residents on the board of directors and management of the newly organized bank, Collin County National Bank. I tell you all of this so that you will understand that our banking philosophy has always been, and continues to be, that for a community bank to be successful, local involvement in ownership and operations is essential. 10 Mr. Gerald W. Free -2- July 27, 1999 According to the information I have reviewed, prior to converting from a mutual to a stock association, the total assets of your institution were approximately $118,000,000. In connection with the conversion, ETFS raised over $11,000,000 in new capital. According to your financial statements as of March 31, 1999, the total assets of the institution were only $134,000,000, which reflects only a nominal increase in total assets since 1995, taking into account the additional capital that was raised in the conversion. The recent increase in total assets is in part attributed to borrowings from the Federal Home Loan Bank Board, rather than any real growth. Earnings for 1998 were less than earnings from 1997. It appears from your March 31, 1999, quarterly report that earnings for 1999 are even less than 1998. The earnings and growth of your institution are historically disappointing and the trends do not seem to be improving. We have asked your management for the opportunity to meet with the board of directors to explore alternatives to improve the direction of your institution. Consistent with our approach to community banking, we are interested in some kind of arrangement which includes continued participation of local investors. Based on discussions we have had with other stockholders of ETFS, we believe there is significant dissatisfaction with the current performance of the institution. It appears that the level of stockholder dissatisfaction approaches at least fifty percent (50%) of the outstanding shares. With this level of dissatisfaction, we believe there is a substantial likelihood that changes in the control or direction of your financial institution will occur in the near future. We believe our approach to running a community bank may be one of the better alternatives that you will face. At this point in time, we do not have any specific proposal to make with regard to your institution. We have intentionally not made any specific proposal because our strong preference has been to begin a dialogue with the board of directors with the view toward addressing our concerns and at the same time developing solutions that are satisfactory to the existing board of directors. To pursue discussions with us is entirely consistent with your fiduciary obligation to the institution and its shareholders. Unfortunately, management of your institution has advised us that the board of directors does not desire to have any further discussion with us. In view of what appears to be an increasing level of stockholder dissatisfaction, coupled with continued poor financial performance of your institution, we believe this strategy on your part, as a member of the board of directors of ETFS, is a mistake. We respectfully encourage you to reconsider. We believe that the potential exists for a "win-win" solution to the future of ETFS. This will only occur, however, if we begin an active dialogue to address and resolve the major issues facing your institution. If you would like to discuss this with me personally, I invite you to call me at 903-785-0054. I would be delighted to discuss with you on an individual basis some of our thoughts regarding your institution. Very truly yours, /s/ WILLIAM D. VAUGHAN William D. Vaughan 11 WILLIAM D. VAUGHAN 3220 ABBOTT PARIS, TEXAS 75460 (903) 785-0054 work (903) 785-9792 home (903) 785-6955 fax July 27, 1999 Dr. Jim M. Vaughn 553 Park Heights Circle Tyler, Texas 75701 Dear Dr. Vaughn: As you know, I am a stockholder of East Texas Financial Services, Inc. ("ETFS"). I acquired stock in ETFS because, among other things, I believe significant improvements can be made in the operating results of ETFS which would significantly enhance stockholder value. By way of background, I have spent most of my business career as a community banker. My father and I owned control of State National Bank of Wynnwood ("State National") until the spring of 1982. State National was a locally owned and managed financial institution. From the summer of 1989 until August of 1997, I was the president and chief executive officer of First National Bank of Paris, and its parent bank holding company, Executive Bancshares, Inc., which was owned primarily by a local group of investors. I am a strong believer that there is still a niche for strong community banks in the current banking environment. If you check my background, I believe you will find that the banks in which I have been involved were conservatively run, had good earnings, and good relations with their primary banking regulators. Dr. Earl Bellamy was chairman of the board of First National Bank of Paris and Executive Bancshares, Inc. Dr. Bellamy is a successful ophthalmologist who has practiced in the Paris area since 1963. Dr. Bellamy and I worked closely together at First National Bank of Paris and we share a common philosophy to community banking. In 1996, First National Bank of Paris began exploring the possibility of acquiring the branch of another institution in McKinney, Texas. Our strategy in that case, as it has been in every opportunity we have explored, is that to be successful in another banking market, local participation and ownership was essential. In the case of the McKinney acquisition, we organized a new national bank, sold shares in our holding company to local McKinney investors, and had significant involvement of local McKinney residents on the board of directors and management of the newly organized bank, Collin County National Bank. I tell you all of this so that you will understand that our banking philosophy has always been, and continues to be, that for a community bank to be successful, local involvement in ownership and operations is essential. 12 Dr. Jim M. Vaughn -2- July 27, 1999 According to the information I have reviewed, prior to converting from a mutual to a stock association, the total assets of your institution were approximately $118,000,000. In connection with the conversion, ETFS raised over $11,000,000 in new capital. According to your financial statements as of March 31, 1999, the total assets of the institution were only $134,000,000, which reflects only a nominal increase in total assets since 1995, taking into account the additional capital that was raised in the conversion. The recent increase in total assets is in part attributed to borrowings from the Federal Home Loan Bank Board, rather than any real growth. Earnings for 1998 were less than earnings from 1997. It appears from your March 31, 1999, quarterly report that earnings for 1999 are even less than 1998. The earnings and growth of your institution are historically disappointing and the trends do not seem to be improving. We have asked your management for the opportunity to meet with the board of directors to explore alternatives to improve the direction of your institution. Consistent with our approach to community banking, we are interested in some kind of arrangement which includes continued participation of local investors. Based on discussions we have had with other stockholders of ETFS, we believe there is significant dissatisfaction with the current performance of the institution. It appears that the level of stockholder dissatisfaction approaches at least fifty percent (50%) of the outstanding shares. With this level of dissatisfaction, we believe there is a substantial likelihood that changes in the control or direction of your financial institution will occur in the near future. We believe our approach to running a community bank may be one of the better alternatives that you will face. At this point in time, we do not have any specific proposal to make with regard to your institution. We have intentionally not made any specific proposal because our strong preference has been to begin a dialogue with the board of directors with the view toward addressing our concerns and at the same time developing solutions that are satisfactory to the existing board of directors. To pursue discussions with us is entirely consistent with your fiduciary obligation to the institution and its shareholders. Unfortunately, management of your institution has advised us that the board of directors does not desire to have any further discussion with us. In view of what appears to be an increasing level of stockholder dissatisfaction, coupled with continued poor financial performance of your institution, we believe this strategy on your part, as a member of the board of directors of ETFS, is a mistake. We respectfully encourage you to reconsider. We believe that the potential exists for a "win-win" solution to the future of ETFS. This will only occur, however, if we begin an active dialogue to address and resolve the major issues facing your institution. If you would like to discuss this with me personally, I invite you to call me at 903-785-0054. I would be delighted to discuss with you on an individual basis some of our thoughts regarding your institution. Very truly yours, /s/ WILLIAM D. VAUGHAN William D. Vaughan 13 WILLIAM D. VAUGHAN 3220 ABBOTT PARIS, TEXAS 75460 (903) 785-0054 work (903) 785-9792 home (903) 785-6955 fax July 27, 1999 Mr. M. Earl Davis 4021 Ferry Avenue Tyler, Texas 75701 Dear Mr. Davis: As you know, I am a stockholder of East Texas Financial Services, Inc. ("ETFS"). I acquired stock in ETFS because, among other things, I believe significant improvements can be made in the operating results of ETFS which would significantly enhance stockholder value. By way of background, I have spent most of my business career as a community banker. My father and I owned control of State National Bank of Wynnwood ("State National") until the spring of 1982. State National was a locally owned and managed financial institution. From the summer of 1989 until August of 1997, I was the president and chief executive officer of First National Bank of Paris, and its parent bank holding company, Executive Bancshares, Inc., which was owned primarily by a local group of investors. I am a strong believer that there is still a niche for strong community banks in the current banking environment. If you check my background, I believe you will find that the banks in which I have been involved were conservatively run, had good earnings, and good relations with their primary banking regulators. Dr. Earl Bellamy was chairman of the board of First National Bank of Paris and Executive Bancshares, Inc. Dr. Bellamy is a successful ophthalmologist who has practiced in the Paris area since 1963. Dr. Bellamy and I worked closely together at First National Bank of Paris and we share a common philosophy to community banking. In 1996, First National Bank of Paris began exploring the possibility of acquiring the branch of another institution in McKinney, Texas. Our strategy in that case, as it has been in every opportunity we have explored, is that to be successful in another banking market, local participation and ownership was essential. In the case of the McKinney acquisition, we organized a new national bank, sold shares in our holding company to local McKinney investors, and had significant involvement of local McKinney residents on the board of directors and management of the newly organized bank, Collin County National Bank. I tell you all of this so that you will understand that our banking philosophy has always been, and continues to be, that for a community bank to be successful, local involvement in ownership and operations is essential. 14 Mr. M. Earl Davis -2- July 27, 1999 According to the information I have reviewed, prior to converting from a mutual to a stock association, the total assets of your institution were approximately $118,000,000. In connection with the conversion, ETFS raised over $11,000,000 in new capital. According to your financial statements as of March 31, 1999, the total assets of the institution were only $134,000,000, which reflects only a nominal increase in total assets since 1995, taking into account the additional capital that was raised in the conversion. The recent increase in total assets is in part attributed to borrowings from the Federal Home Loan Bank Board, rather than any real growth. Earnings for 1998 were less than earnings from 1997. It appears from your March 31, 1999, quarterly report that earnings for 1999 are even less than 1998. The earnings and growth of your institution are historically disappointing and the trends do not seem to be improving. We have asked your management for the opportunity to meet with the board of directors to explore alternatives to improve the direction of your institution. Consistent with our approach to community banking, we are interested in some kind of arrangement which includes continued participation of local investors. Based on discussions we have had with other stockholders of ETFS, we believe there is significant dissatisfaction with the current performance of the institution. It appears that the level of stockholder dissatisfaction approaches at least fifty percent (50%) of the outstanding shares. With this level of dissatisfaction, we believe there is a substantial likelihood that changes in the control or direction of your financial institution will occur in the near future. We believe our approach to running a community bank may be one of the better alternatives that you will face. At this point in time, we do not have any specific proposal to make with regard to your institution. We have intentionally not made any specific proposal because our strong preference has been to begin a dialogue with the board of directors with the view toward addressing our concerns and at the same time developing solutions that are satisfactory to the existing board of directors. To pursue discussions with us is entirely consistent with your fiduciary obligation to the institution and its shareholders. Unfortunately, management of your institution has advised us that the board of directors does not desire to have any further discussion with us. In view of what appears to be an increasing level of stockholder dissatisfaction, coupled with continued poor financial performance of your institution, we believe this strategy on your part, as a member of the board of directors of ETFS, is a mistake. We respectfully encourage you to reconsider. We believe that the potential exists for a "win-win" solution to the future of ETFS. This will only occur, however, if we begin an active dialogue to address and resolve the major issues facing your institution. If you would like to discuss this with me personally, I invite you to call me at 903-785-0054. I would be delighted to discuss with you on an individual basis some of our thoughts regarding your institution. Very truly yours, /s/ WILLIAM D. VAUGHAN William D. Vaughan 15 WILLIAM D. VAUGHAN 3220 ABBOTT PARIS, TEXAS 75460 (903) 785-0054 work (903) 785-9792 home (903) 785-6955 fax July 27, 1999 Mr. L. Lee Kidd 3720 Ferry Avenue Tyler, Texas 75701 Dear Mr. Kidd: As you know, I am a stockholder of East Texas Financial Services, Inc. ("ETFS"). I acquired stock in ETFS because, among other things, I believe significant improvements can be made in the operating results of ETFS which would significantly enhance stockholder value. By way of background, I have spent most of my business career as a community banker. My father and I owned control of State National Bank of Wynnwood ("State National") until the spring of 1982. State National was a locally owned and managed financial institution. From the summer of 1989 until August of 1997, I was the president and chief executive officer of First National Bank of Paris, and its parent bank holding company, Executive Bancshares, Inc., which was owned primarily by a local group of investors. I am a strong believer that there is still a niche for strong community banks in the current banking environment. If you check my background, I believe you will find that the banks in which I have been involved were conservatively run, had good earnings, and good relations with their primary banking regulators. Dr. Earl Bellamy was chairman of the board of First National Bank of Paris and Executive Bancshares, Inc. Dr. Bellamy is a successful ophthalmologist who has practiced in the Paris area since 1963. Dr. Bellamy and I worked closely together at First National Bank of Paris and we share a common philosophy to community banking. In 1996, First National Bank of Paris began exploring the possibility of acquiring the branch of another institution in McKinney, Texas. Our strategy in that case, as it has been in every opportunity we have explored, is that to be successful in another banking market, local participation and ownership was essential. In the case of the McKinney acquisition, we organized a new national bank, sold shares in our holding company to local McKinney investors, and had significant involvement of local McKinney residents on the board of directors and management of the newly organized bank, Collin County National Bank. I tell you all of this so that you will understand that our banking philosophy has always been, and continues to be, that for a community bank to be successful, local involvement in ownership and operations is essential. 16 Mr. L. Lee Kidd -2- July 27, 1999 According to the information I have reviewed, prior to converting from a mutual to a stock association, the total assets of your institution were approximately $118,000,000. In connection with the conversion, ETFS raised over $11,000,000 in new capital. According to your financial statements as of March 31, 1999, the total assets of the institution were only $134,000,000, which reflects only a nominal increase in total assets since 1995, taking into account the additional capital that was raised in the conversion. The recent increase in total assets is in part attributed to borrowings from the Federal Home Loan Bank Board, rather than any real growth. Earnings for 1998 were less than earnings from 1997. It appears from your March 31, 1999, quarterly report that earnings for 1999 are even less than 1998. The earnings and growth of your institution are historically disappointing and the trends do not seem to be improving. We have asked your management for the opportunity to meet with the board of directors to explore alternatives to improve the direction of your institution. Consistent with our approach to community banking, we are interested in some kind of arrangement which includes continued participation of local investors. Based on discussions we have had with other stockholders of ETFS, we believe there is significant dissatisfaction with the current performance of the institution. It appears that the level of stockholder dissatisfaction approaches at least fifty percent (50%) of the outstanding shares. With this level of dissatisfaction, we believe there is a substantial likelihood that changes in the control or direction of your financial institution will occur in the near future. We believe our approach to running a community bank may be one of the better alternatives that you will face. At this point in time, we do not have any specific proposal to make with regard to your institution. We have intentionally not made any specific proposal because our strong preference has been to begin a dialogue with the board of directors with the view toward addressing our concerns and at the same time developing solutions that are satisfactory to the existing board of directors. To pursue discussions with us is entirely consistent with your fiduciary obligation to the institution and its shareholders. Unfortunately, management of your institution has advised us that the board of directors does not desire to have any further discussion with us. In view of what appears to be an increasing level of stockholder dissatisfaction, coupled with continued poor financial performance of your institution, we believe this strategy on your part, as a member of the board of directors of ETFS, is a mistake. We respectfully encourage you to reconsider. We believe that the potential exists for a "win-win" solution to the future of ETFS. This will only occur, however, if we begin an active dialogue to address and resolve the major issues facing your institution. If you would like to discuss this with me personally, I invite you to call me at 903-785-0054. I would be delighted to discuss with you on an individual basis some of our thoughts regarding your institution. Very truly yours, /s/ WILLIAM D. VAUGHAN William D. Vaughan EX-99.C 3 LETTER TO THE BOARD OF DIRECTORS 1 EXHIBIT C ETFS Acquisition Co. 201 Bonham Paris, Texas 75641 August 23, 1999 Board of Directors East Texas Financial Services, Inc. 1200 South Beckham Tyler, Texas 75701 Gentlemen: This letter sets forth the general terms of a proposal whereby ETFS Acquisition Corp. (the "Purchaser") will acquire (the "Acquisition") all of the outstanding capital stock of East Texas Financial Services, Inc. ("ETFS") for cash consideration of $16 per share. We request that you meet with us and our advisors at your earliest convenience to discuss this proposal. If the proposed terms of this transaction are acceptable to you, we are prepared to promptly begin a due diligence review as contemplated by paragraph 3 below and to negotiate a definitive written agreement (the "Agreement") containing customary terms, agreements, representations, warranties, indemnities and conditions, which will be subject to the approval of Purchaser and the board of directors and shareholders of ETFS. 1. Consideration. The consideration to be received by the shareholders of ETFS is $16.00 per issued and outstanding share of common stock of ETFS, subject to the satisfactory negotiation of the Agreement and completion of our due diligence review and the other conditions stated below. The Acquisition will be structured as a merger of ETFS and the Purchaser in which all shares of ETFS Common Stock not owned by the Purchaser will be converted into the right to receive cash. 2. Conditions. The Acquisition will be subject to such terms and conditions as are contained in the Agreement, including without limitation the following: (a) receipt of all applicable regulatory approvals, including, but not limited to, approvals or confirmations from the appropriate state and federal bank regulatory agencies with respect to of the recapitalization of First Federal Savings ("First Federal"); (b) compliance with all applicable laws and regulations; (c) the approval of the Acquisition by the board of directors and shareholders of ETFS; (d) satisfaction of any other necessary corporate action or requirements; (e) the absence of any condition to regulatory approvals objectionable to Purchaser; (f) the absence of any material adverse change in the financial condition, business operations, or prospects of First Federal that would render the Acquisition inadvisable; (g) there shall not be any extraordinary expenses paid by ETFS through the date of closing; and 2 (h) resolution of the obligations of ETFS under the existing employment agreements with Gerald Free and Derrell Chapman on terms reasonably satisfactory to Purchaser. We have obtained assurance that the necessary financing for the Acquisition is available to the Purchaser and we will provide the details of this financing to you as we continue our discussions. 3. Due Diligence Review. Purchaser will review the financial condition of First Federal prior to the execution of the Agreement for a period of time not to exceed thirty (30) calendar days. ETFS agrees to provide Purchaser and its employees and agents full access to the premises of First Federal and to all of ETFS' books and records and to furnish such financial, operating, and other information with respect to ETFS and First Federal as may be necessary to enable Purchaser to conduct such review. Such review will be conducted in a manner that will be the least disruptive to the daily operations of ETFS and First Federal, and in a manner that will cause the least concern to its customers and employees. All information which is not in the public domain will be maintained on a confidential basis by Purchaser and its employees and agents unless and until such information does not enter the public domain as a result of a breach of this provision. Upon request by ETFS, all information and documents provided to Purchaser shall be returned to ETFS. 4. Prohibited Negotiations. Between the date of the execution of this letter by ETFS and Purchaser and the earlier to occur of (a) the execution of the Agreement, (b) the date on which either party provides the other party with written notice that negotiations regarding an Agreement are terminated, or (c) the sixtieth (60th) calendar day after ETFS signs this letter, neither ETFS, First Federal nor any of their respective employees or agents, shall negotiate with any other party, or enter into any agreement, arrangement, or understanding, regarding the sale or transfer of substantially all of the assets or stock of ETFS or First Federal, the merger of ETFS or First Federal, or any other business combination involving ETFS or First Federal without the prior written approval of Purchaser. In addition, during such period, ETFS and First Federal will not (a) negotiate or agree to issue shares of its capital stock or options with respect to the purchase of its capital stock, or (b) enter into negotiations which would result in a recapitalization or any other major corporate change. 5. Nonbinding Nature of Letter of Intent. Notwithstanding any indication in this letter of intent to the contrary, except for the terms and provisions of paragraphs 3, 4, 5 and 6, the matters set forth herein represent only a nonbinding summary of the discussions to date between the parties hereto with respect to the proposed Acquisition outlined herein, and do not constitute a binding agreement between the parties with respect to the proposed Acquisition and are contingent on the negotiation, execution and delivery of the Agreement, setting forth in detail the terms, provisions and conditions for the proposed Acquisition. Except as expressly provided herein, neither ETFS nor Purchaser, nor their respective directors, officers, employees or shareholders, will have any liability or obligation with respect to the proposed Acquisition hereunder or otherwise, unless and until the Agreement is executed and delivered by the parties hereto. Consummation of the Acquisition is conditioned upon, among other things, the due diligence review contemplated by paragraph 3 and the execution of the Agreement. 6. Expenses. The parties hereto will each bear their own costs and expenses from the date of this proposal through the consummation of the Acquisition including, but not limited to, legal, accounting, brokerage, travel, telephone and other expenses. 7. Acceptance. This letter of intent must be executed and delivered to Purchaser by and authorized representative of ETFS on or before 5:00 p.m., local time, September 7, 1999 (the "Termination Date"). If this letter of intent is not executed by the Termination Date, then it shall be void and of no force and effect. 3 Please sign in the space below to indicate your agreement to this letter of intent and return the extra copy of this letter to us. Very truly yours, /s/ WILLIAM D. VAUGHAN William D. Vaughan, on behalf of Purchaser AGREED TO ON __________, 1999 EAST TEXAS FINANCIAL SERVICES, INC. By: ----------------------------------------- Gerald W. Free, President and Chief Executive Officer EX-99.D 4 DEMAND FOR SHAREHOLDER LIST 1 EXHIBIT D William D. Vaughan 201 Bonham Paris, Texas 75641 August 23, 1999 East Texas Financial Services, Inc. 1200 South Beckman Avenue Tyler, Texas 76701 Gentlemen: I am the owner of 25,000 shares of common stock of East Texas Financial Services, Inc. (the "Company"), held through my brokerage account at J.C. Bradford & Co. Attached to this letter is written confirmation of my ownership of these shares. In accordance with Section 220 of the Delaware General Corporation Law, I hereby demand the right, during the usual hours for business, to inspect and to make copies or extracts of the following records of the Company: 1. A complete record or list of the Company's shareholders (the "Shareholders") certified by the Company's transfer agents showing the name and address of each shareholder and the number of shares registered in the name of each such shareholder, as of August 1, 1999 (the "Requested Date"). 2. All information in or which comes into the Company's possession or control or which can reasonably be obtained from nominees of any central certificate depository system concerning the number and identity of the actual beneficial owners of the Company's stock, including all list containing the names, address and number of shares of Common Stock attributable to any participant in any employee stock ownership or other employee benefit plan of the Company in which the decision whether to vote shares of Common Stock held by such plan is made directly or indirectly, individually or collectively, by the participants in the plan. 3. All information in, or which comes into, the Company's possession or control or which can reasonably be obtained from brokers, dealers, banks, clearing agencies or voting trustees relating to the names of the non-objecting beneficial owners of the Company's stock (which information with respect to brokers and dealers is readily available to the Company under Rule 14b-1 of the Securities Exchange Act of 1934, as amended from ADP Proxy Services.) 4. A correct and complete copy of the Bylaws of the Company and any and all changes of any sort to the Bylaws of the Company hereafter made, including, without limitation, any amendment to existing Bylaws, any adoption of new Bylaws or deletions of existing Bylaws. The purpose of this demand is to enable me to communicate with the Company's shareholders regarding the following: 1. A proposal by ETFS Acquisition Corp. to merge with the Company. 2. Other actions intended to increase the value of the Company to its shareholders. 2 It is requested that the information identified above be made available on or prior to September 3, 1999. Please immediately advise as to when and where the items listed above will be available for review by me and representatives of my legal counsel, Naman, Howell, Smith & Lee, P.C. and/or Bracewell & Patterson, L.L.P. Further correspondence on this matter should be directed to William D. Vaughan, 201 Bonham, Paris, Texas 75641, with copies directed to the attention of Richard E. Brophy, Jr., Naman, Howell, Smith & Lee, P.C., Post Office Box 1470, Waco, Texas 76703 and Michael W. Tankersley, Bracewell & Patterson, L.L.P., 500 N. Akard, Suite 4000, Dallas, Texas 75201. Very truly yours, /s/ WILLIAM D. VAUGHAN William D. Vaughan STATE OF TEXAS ) ) COUNTY OF DALLAS ) SWORN TO AND SUBSCRIBED before me on this the 23rd day of August, 1999. /s/ LISA M. SPARKS ----------------------------------- Notary Public Lisa M. Sparks ----------------------------------- Printed Name My Commission Expires: 7/23/01 - ---------------------------- 3 August 18, 1999 East Texas Financial Services, Inc. Board of Directors 1200 South Beckham Tyler, Texas 75701 Gentlemen: This letter is to inform you that Mr. William D. Vaughan has an account with J. C. Bradford & Co. which holds 25,000 shares of East Texas Financial Services, Inc. Sincerely, /s/ JAMES E. BASHAW James E. Bashaw Partner/Branch Manager In witness whereof, I, a Notary Public in and for said County and State have here unto subscribed my name and affixed my seal of office. /s/ SUSAN TAYLOR 8-18-99 - ------------------------------- -------------------------- Notary Public Date Harris, Texas - ------------------------------- County & State EX-99.E 5 LETTER TO SHAREHOLDERS 1 EXHIBIT E William D. Vaughan 201 Bonham Paris, Texas 75641 Re: East Texas Financial Services, Inc. Dear Fellow Shareholder: I am a shareholder of East Texas Services, Inc. (the "Company"). On June 17, 1999, I and several other shareholders filed a Schedule 13D with the SEC indicating that we planned to consider a range of actions that would be directed at improving the value of the Company for its shareholders. On August 24, 1999, ETFS Acquisition Corp., a company we own, delivered a proposal to the Company proposing a merger in which you and other shareholders of the Company would receive cash of $16.00 for each share of Common Stock you own (the "Proposal"). The Proposal is attached as Exhibit A. We believe that the Company has experienced unacceptably poor results in recent years, and it does not appear that current management is likely to take action to improve this. Two key measures of performance, return on assets and return on equity, show that the Company is performing substantially below similar institutions. According to a recent report available on MarketGuide.com, the Company's return on assets for the most recent twelve months was 0.39%, compared to 1.26% for the industry; the Company's return on equity for the same period was 2.38%, compared to 14.5% for the industry. Over the past 9 months the Company's net income has decreased by 34% compared to the prior year and earnings per share for the nine months ended June 30, 1999 has fallen to $0.21 from $0.29 from the prior year, a decrease of 27.5%. After looking at the situation, we concluded that a careful redirection of the Company could, in time, improve its financial performance. Left alone, we believe it is likely to continue to suffer disappointing operating results, and will produce a depressed stock value for its shareholders. We have attempted to engage management and the Board of Directors in a discussion of other alternatives to increase shareholder value. They have rejected our most recent request for a meeting to discuss our ideas, and I am doubtful they will on their own adopt policies that will improve the Company's financial performance. I have lived and worked as a community banker in East Texas for almost 20 years. I live in Paris, Texas and was an owner and President of First National Bank of Paris for a number of years. The other owners of ETFS Acquisition Corp. also live and work in East Texas. It is our intention that the Company remain a community based financial institution with strong roots in the Tyler area. We would expect there to be continuing participation in the Company's oversight by members of the Company's Board. The current Board and management do not appear interested in listening to shareholders. The Company's common stock no longer trades on NASDAQ. The Company's financial results continue to decline. The Company's common stock closed at $11 3/8 the day before we announced our interest in the Company by filing a Schedule 13D. The stock has traded up since then, but we do not believe current market prices will be sustained if our proposal is rejected by the Company's Board of Directors. I believe the Proposal represents the best opportunity the shareholders of the Company will have to realize the fair value of their shares. I encourage you to communicate to the Board your response to the Proposal and to the Company's recent financial results. Very truly yours, William D. Vaughan EX-99.F 6 PRESS RELEASE 1 EXHIBIT F PRESS RELEASE FOR IMMEDIATE RELEASE Contact: William D. Vaughan 903-785-0054 ETFS ACQUISITION CORP. PROPOSES A MERGER WITH EAST TEXAS FINANCIAL SERVICES, INC. PARIS, TEXAS, August 23, 1999 - ETFS Acquisition Corp.,("Acquisition") announced today its proposal to acquire East Texas Financial Services, Inc. ("East Texas"), through a merger in which shareholders of East Texas would receive $16.00 per share in cash for each of their shares of Common Stock, representing an aggregate value to the shareholders of East Texas, excluding shareholders of Acquisition, of approximately $20 million. East Texas is the parent company of First Federal Savings & Loan Association of Tyler, Texas. Acquisition is owned by William D. Vaughan, Dr. Earl D. Bellamy, Dr. Basin M. Jishi and Donald G. Wilson. They filed a Schedule 13D with the SEC in June 1999 disclosing that they together own approximately 9.8% of East Texas. They became interested in East Texas because they believe significant improvements can be made in its operating results. According to a recent report available on MarketGuide.com, East Texas Financial Service's return on assets for the most recent twelve months was 0.39%, compared to 1.26% for the industry; and East Texas Financial Service's return on equity for the same period was 2.38%, compared to 14.5% for the industry. Over the past 9 months East Texas Financial Service's net income has decreased by 34% compared to the prior year and earnings per share for the nine months ended June 30, 1999 has fallen to $0.21 from $0.29 from the prior year, a decrease of 27.5%. William D. Vaughan has worked as a community banker in East Texas for almost 20 years most recently serving as President of First National Bank of Paris from 1989 to 1997. Mr. Vaughan stated: "Recent requests by our group to meet with management and the board to discuss specific proposals and improve the financial performance of East Texas have been refused. Left alone, I believe East Texas is likely to continue to suffer disappointing operating results. We believe this proposal represents an opportunity for the shareholders of East Texas to realize the fair value of their shares and for East Texas to realize its potential as a strong, community based financial institution." East Texas Common Stock closed at 11 3/8 on June 16, 1999, the day prior to the filing of the Schedule 13D by the owners of Acquisition disclosing their interest in considering a range of alternative actions intended to increase the value of East Texas to its shareholders. The proposed transaction is subject to completion of a due diligence review, agreement or definitive terms, regulatory approvals and approval by the Board of Directors and shareholders of East Texas. -----END PRIVACY-ENHANCED MESSAGE-----