<PAGE>
As Filed with the Securities and Exchange Commission on November 1, 1996
Registration No. 33-____________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------------------------
COMPASS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Delaware 6711 63-0593897
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Classification Code Identification No.)
organization) Number)
15 South 20th Street
Birmingham, Alabama 35233
(205) 933-3000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------------------
Jerry W. Powell, Esquire
General Counsel
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
(205) 933-3960
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Approximate date of commencement As soon as practicable following the
of proposed sale to the public: effective date of this Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
--------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================
Title of each
class of Amount Proposed maximum Proposed maximum Amount of
securities to to be offering price aggregate registra-
be registered registered per share offering price tion fee
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,080,740 (1) $13,558,073(2) $4,108.51(2)
$2.00 par value
====================================================================================
</TABLE>
(1) Not Applicable
(2) Computed in accordance with rule 457(f)(2) under the Securities Act of
1933, as amended, based upon the book value of all outstanding shares of
common stock of Enterprise National Bank of Jacksonville as of September
30, 1996.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
COMPASS BANCSHARES, INC.
-----------------
CROSS REFERENCE SHEET
(Pursuant to Item 501(b) of Regulation S-K
and Item 1 of Part I of Form S-4)
<TABLE>
<CAPTION>
Location of Proxy Statement/
S-4 Item Number and Heading Prospectus Heading
- ----------------------------------------- -------------------------------------
<S> <C>
A. Information About the Transaction
---------------------------------
1. Forepart of Registration Forepart of the Registration
Statement and Outside Front Cover Statement; Outside Front Cover Page
Page of Prospectus of Prospectus
2. Inside Front and Outside Back Table of Contents; Available
Cover Pages of Prospectus Information; Incorporation of Certain
Documents by Reference
3. Risk Factors, Ratio of Summary; Risk Factors; Selected
Earnings to Fixed Charges and Financial Data and Comparative Per
Other Information Share Data; The Merger; Supervision
and Regulation
4. Terms of the Transaction Forepart of the Registration
Statement; Summary; The Merger;
Description of Compass Common and
Preferred Stock; Comparison of Rights
of Shareholders of ENB and Compass;
Information About Compass; Appendix I
and Appendix II
5. Pro Forma Financial Information Not Applicable
6. Material Contacts with the Summary; Recommendation of Board of
Company Being Acquired Directors; The Merger; Information
About ENB
7. Additional Information Not applicable
Required for Reoffering by
Persons and Parties Deemed to be
Underwriters
8. Interests of Named Experts and Relationships with Independent
Counsel Accountants; Experts; Legal Opinions
9. Disclosure of Commission Indemnification
Position on Indemnification for
Securities Act Liabilities
B. Information About the Registrant
--------------------------------
10. Information with Respect to Available Information; Incorporation
S-3 Registrants of Certain Documents by Reference;
Summary; Selected Financial Data and
Comparative Per Share Data;
Information About Compass
11. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference Reference; Information About Compass
12. Information with Respect to Not applicable
S-2 or S-3 Registrants
13. Incorporation of Certain Not applicable
Information by Reference
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
(Continued)
<TABLE>
<CAPTION>
Location of Proxy Statement/
S-4 Item Number and Heading Prospectus Heading
- ------------------------------------------------- ---------------------------------------------------
<S> <C>
14. Information with respect to Not applicable
Registrants Other Than S-3 or S-2
Registrants
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies Not applicable
16. Information with Respect to Not applicable.
S-2 or S-3 Companies
17. Information with Respect to Summary; The Merger; Selected
Companies Other Than S-2 or S-3 Financial Data and Comparative Per
Companies Share Data; Information About ENB;
Comparison of Rights of Shareholders
of ENB and Compass
D. Voting and Management Information
---------------------------------
18. Information if Proxies, The Special Meeting; Incorporation of
Consents or Authorizations are to Certain Documents by Reference;
be Solicited Information About Compass;
Information About ENB; Relationships
with Independent Accountants; Experts
19. Information if Proxies, Not applicable
Consents or Authorizations are
not to be Solicited, or in an
Exchange Offer
</TABLE>
<PAGE>
ENTERPRISE NATIONAL BANK COMPASS BANCSHARES, INC.
OF JACKSONVILLE
PROXY STATEMENT/PROSPECTUS
Compass Bancshares, Inc., a Delaware corporation ("Compass"), has filed this
Proxy Statement/Prospectus with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Compass $2.00 par value
common stock ("Compass Common Stock") to be issued in the proposed merger (the
"Merger") of Enterprise National Bank of Jacksonville, a national banking
association ("ENB"), with and into Compass Bank, a Florida banking corporation
and wholly-owned subsidiary of Compass ("Compass Bank").
This Proxy Statement/Prospectus constitutes the proxy statement of ENB
relating to the solicitation of proxies for use at the Special Meeting of
Shareholders of ENB (the "Special Meeting") scheduled to be held on December
11, 1996 at 10:00 A.M. Jacksonville, Florida time, at ENB's main office
located at 4190 Belfort Road, Jacksonville, Florida, 32216 and any
adjournments thereof. At the Special Meeting, the shareholders of record of
ENB as of November 4, 1996 (the "Record Date") will consider and vote upon a
proposal to approve, ratify, confirm and adopt the Agreement and Plan of
Merger dated as of July 31, 1996 (the "Merger Agreement", a copy of which is
attached to this Proxy Statement/Prospectus as Appendix I), by and among
Compass, Compass Bank and ENB, and the transactions contemplated thereby. As
more fully described herein, pursuant to the Merger Agreement, ENB will merge
with and into Compass Bank, and the then outstanding shares of ENB common
stock, par value $5.00 ("ENB Common Stock"), together with the then
unexercised options and warrants to acquire ENB Common Stock (the "ENB
Options"), shall be converted into the right to receive, in the aggregate, a
number of shares of Compass Common Stock (the "Aggregate Merger
Consideration") equal to the sum of (i) 911,000 plus (ii) one share for every
$31.9712 of additional capital received by ENB upon exercise of ENB Options
between January 1, 1996 to the consummation of the Merger. Pursuant to certain
option and warrant cancellation agreements (the "Cancellation Agreements"),
the holders of ENB Options have exercised, or have agreed to exercise, a total
of 509,868 ENB Options between January 1, 1996 and the consummation of the
Merger for an aggregate exercise price of $5,233,060. Assuming the
Cancellation Agreements are honored, the Aggregate Merger Consideration will
be 1,074,680 shares of Compass Common Stock (rounded to the nearest whole
share).
A portion of the Aggregate Merger Consideration (the "Option Payment
Shares") will be issued to the holders of ENB Options (the "ENB Option
Holders") in cancellation of their ENB Options, and the remaining portion of
the Aggregate Merger Consideration (the "Stock Payment Shares") will be issued
to the holders of ENB Common Stock as of the time of the Merger (the "ENB
Stockholders"). The actual number of Option Payment Shares will be determined
based on a formula set forth in the Merger Agreement that takes into
consideration (i) the number of ENB Options remaining unexercised immediately
prior to the Merger and their exercise prices, and (ii) the average closing
sales price of the Compass Common Stock as reported by the NASDAQ National
Market System for the 10 trading days immediately preceding the fifth business
day prior to the closing of the transactions contemplated by the Merger
Agreement (the "Market Price" as determined during the "Valuation Period"),
all as more fully described herein. SEE "THE MERGER--MERGER CONSIDERATION."
Each ENB Stockholder shall be entitled to receive, for each share of ENB
Common Stock held, a number of shares of Compass Common Stock determined by
dividing the Stock Payment Shares by the number of shares of ENB Common Stock
outstanding immediately prior to the Merger (the "Per Share Merger
Consideration," or the "Conversion Ratio"). Assuming the Cancellation
Agreements are honored prior to the Merger, there will be 1,271,376 shares of
ENB Common Stock outstanding immediately prior to the Merger. SEE "THE
MERGER--MERGER CONSIDERATION." A table setting forth the number of Option
Payment Shares, Stock Payment Shares and Conversion Ratios based on a range of
assumed Market Prices appears elsewhere in this Proxy Statement/Prospectus.
SEE "THE MERGER--MERGER CONSIDERATION."
<PAGE>
Compass Common Stock is publicly traded in the over-the-counter market and
quoted on the NASDAQ National Market System. On , 1996, the last reported
sale price per share of Compass Common Stock was $ . No active trading market
exists for the ENB Common Stock.
This Proxy Statement/Prospectus also constitutes the prospectus of Compass
with respect to the shares of Compass Common Stock to be delivered to the ENB
Stockholders and ENB Option Holders in the Merger; however, it does not cover
resales of shares of Compass Common Stock by certain affiliates of ENB upon
consummation of the proposed reorganization, and no person is authorized to
use this Proxy Statement/Prospectus in connection with any such resale. SEE
"RESALE OF COMPASS STOCK".
Compass' principal executive offices are located at 15 South 20th Street,
Birmingham, Alabama 35233, and its telephone number is (205) 933-3000. ENB's
principal executive offices are located at 4190 Belfort Road, Jacksonville,
Florida 32216, telephone number (904) 296-2265.
THE SECURITIES OF COMPASS BANCSHARES, INC. OFFERED IN CONNECTION WITH THE
MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement/Prospectus is dated , 1996 and is first being
mailed or delivered to all holders of record of ENB Common Stock as of the
Record Date on or about , 1996.
2
<PAGE>
AVAILABLE INFORMATION
Compass is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, accordingly, files
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the Commission's public reference rooms located at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and the public reference facilities in the
New York Regional Office, 13th Floor, Seven World Trade Center, New York, New
York 10048, and the Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can
be obtained at prescribed rates by writing to the Securities and Exchange
Commission, Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C.
20549. Compass' electronic filings made through the Commission's Electronic
Data Gathering, Analysis and Retrieval ("EDGAR") system are also publicly
available at the Commission's internet web site--http: www.sec.gov.
Compass has filed with the Commission a Registration Statement on Form S-4
(the "Registration Statement") under the Securities Act for the registration
of the Compass Common Stock proposed to be issued and exchanged in the Merger.
This Proxy Statement/Prospectus was filed as a part of the Registration
Statement. This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement, as certain parts are
permitted to be omitted by the rules and regulations of the Commission. For
further information pertaining to Compass, ENB, Compass Common Stock, and
related matters, reference is made to the Registration Statement, including
the exhibits filed as a part thereof, which may be inspected at, and copies of
which may be obtained by mail from, the Public Reference Branch of the
Commission referred to above. The Registration Statement is also available
through the EDGAR web site referred to above.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT INCLUDED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS CONCERNING
COMPASS (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) ARE AVAILABLE TO EACH
BENEFICIAL OWNER OF ENB COMMON STOCK WITHOUT CHARGE AND UPON REQUEST, FROM THE
CONTROLLER OF COMPASS AT 15 SOUTH 20TH STREET, BIRMINGHAM, ALABAMA 35223
(TELEPHONE NUMBER (205) 558-5740). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY NOVEMBER 22, 1996.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Compass (File No. 0-6032)
pursuant to the Exchange Act are incorporated by reference in this Proxy
Statement/Prospectus:
(i) Compass' annual report on Form 10-K for the year ended December 31,
1995;
(ii) Compass' quarterly report on Form 10-Q for the quarter ended March
31, 1996;
(iii) Compass' quarterly report on Form 10-Q for the quarter ended June
30, 1996;
(iv) Compass' Proxy Statement dated March 6, 1996, relating to its annual
meeting of shareholders held on April 9, 1996; and
(v) The description of Compass Common Stock contained in its Proxy
Statement dated April 16, 1982, relating to its Annual Meeting held May 17,
1982;
All documents filed by Compass pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the date
of the Special Meeting are incorporated herein by reference, and shall be
deemed a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Proxy
Statement/Prospectus, shall be deemed to be modified or superseded for
purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any subsequently filed document
3
<PAGE>
which also is deemed to be incorporated herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part of this Proxy Statement/Prospectus, except as so modified or
superseded.
No person has been authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by Compass, Compass Bank, ENB or their
respective affiliates. This Proxy Statement/Prospectus does not constitute an
offer to exchange or sell, or a solicitation of an offer to exchange or
purchase, any securities other than the Compass Common Stock offered hereby,
nor does it constitute an offer to exchange or sell or a solicitation of an
offer to exchange or purchase such securities in any state or other
jurisdiction to any person to whom such an offer or solicitation would be
unlawful.
Neither the delivery of this Proxy Statement/Prospectus, nor any
distribution of securities made hereunder, shall under any circumstances
create any implication that there has been no change in the affairs of
Compass, Compass Bank, ENB or their respective affiliates since the date of
this Proxy Statement/Prospectus.
All information concerning Compass and Compass Bank has been furnished by
Compass, and all information regarding ENB has been furnished by ENB.
4
<PAGE>
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 3
SUMMARY..................................................................... 6
Parties to the Merger...................................................... 6
The Merger................................................................. 7
Reasons for the Merger; Recommendation of Board of Directors............... 8
The Special Meeting........................................................ 8
Record Date................................................................ 8
Shareholder Votes Required................................................. 8
Dissenters' Rights......................................................... 8
Conditions to Consummation and Regulatory Approvals; Termination........... 9
Federal Income Tax Consequences............................................ 9
Accounting Treatment....................................................... 9
Market Value of Securities................................................. 10
SELECTED FINANCIAL DATA AND COMPARATIVE PER SHARE DATA...................... 11
PRO FORMA FINANCIAL INFORMATION............................................. 13
RISK FACTORS................................................................ 14
THE SPECIAL MEETING......................................................... 14
General.................................................................... 14
Date, Place and Time....................................................... 14
Record Date................................................................ 15
Shareholder Votes Required................................................. 15
Voting and Revocation of Proxies........................................... 15
Solicitation of Proxies.................................................... 15
THE MERGER.................................................................. 16
General.................................................................... 16
Merger Consideration....................................................... 16
Background and Reasons for the Merger...................................... 18
Opinion of Financial Consulting Associates, Inc............................ 19
Effective Time............................................................. 22
Exchange of Shares......................................................... 22
Operations After the Merger................................................ 23
Terms and Conditions to the Merger......................................... 23
Additional Agreements...................................................... 24
Government Approvals....................................................... 25
Business Pending Effective Time............................................ 25
Amendment; Termination..................................................... 26
Dissenters' Rights......................................................... 27
Federal Income Tax Consequences............................................ 28
Accounting Treatment....................................................... 29
SUPERVISION AND REGULATION.................................................. 29
General.................................................................... 29
Compass, Compass-Texas and Compass Bancorporation.......................... 29
The Subsidiary Banks....................................................... 31
Other...................................................................... 32
DESCRIPTION OF COMPASS COMMON AND PREFERRED STOCK........................... 33
Compass Common Stock....................................................... 33
Compass Preferred Stock.................................................... 33
COMPARISON OF RIGHTS OF SHAREHOLDERS OF ENB AND COMPASS..................... 34
Charter and Bylaw Provisions Affecting Compass Stock....................... 34
Shareholder Approval of Mergers............................................ 34
Dissenters' Rights......................................................... 35
</TABLE>
<TABLE>
<S> <C>
Shareholders' Meetings and Voting......................................... 35
Dividends................................................................. 36
Preemptive Rights......................................................... 37
Liquidation Rights........................................................ 37
Limitation of Liability and Indemnification............................... 37
Antitakeover Provisions................................................... 38
RESALE OF COMPASS STOCK.................................................... 39
INFORMATION ABOUT COMPASS.................................................. 39
Incorporation of Certain Documents by Reference........................... 39
Information About Voting Securities and the Principal Holders Thereof;
Directors and Executive Officers; Certain Relationships and Related
Transactions............................................................. 39
Interests of Certain Persons.............................................. 40
INFORMATION ABOUT ENB...................................................... 40
Description of the Business............................................... 40
Information About Voting Securities and the Principal Holders Thereof..... 41
Interests of Certain Persons in the Merger................................ 41
MANAGEMENT'S DISCUSSION AND ANALYSIS Enterprise National Bank and
Subsidiaries.............................................................. 43
Summary................................................................... 43
COMPARISON OF THE YEARS ENDED
DECEMBER 31, 1995 AND 1994................................................ 43
Earning Assets............................................................ 43
Loans..................................................................... 44
Yields Earned and Rates Paid.............................................. 47
Rate/Volume Analysis...................................................... 48
Investments............................................................... 48
Asset Quality............................................................. 50
Asset/Liability Management................................................ 53
Deposits and Other Sources of Funds....................................... 54
Regulatory Capital Requirements........................................... 56
Liquidity and Capital Resources........................................... 56
Earnings.................................................................. 57
Discontinued Operations................................................... 57
Personnel................................................................. 57
COMPARISON OF THE YEARS ENDED
DECEMBER 31, 1994 AND 1993................................................ 58
Earning Assets............................................................ 58
Loans..................................................................... 58
Investments............................................................... 58
Asset Quality............................................................. 58
Deposits and Other Sources of Funds....................................... 58
Regulatory Capital Requirements........................................... 59
Liquidity and Capital Resources........................................... 59
Earnings.................................................................. 59
COMPARISON OF THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995.................................................... 60
Summary................................................................... 60
Operations................................................................ 60
Financial Condition....................................................... 60
Subsequent Events......................................................... 60
RELATIONSHIPS WITH INDEPENDENT ACCOUNTANTS................................. 60
EXPERTS.................................................................... 61
LEGAL OPINIONS............................................................. 61
INDEMNIFICATION............................................................ 61
OTHER MATTERS.............................................................. 61
ENB FINANCIAL STATEMENTS................................................... F-1
APPENDICES.................................................................
</TABLE>
5
<PAGE>
SUMMARY
The following is a brief summary of certain information relating to the
Merger contained elsewhere in this Proxy Statement/Prospectus. This summary is
not intended to describe all material information relating to the Merger and is
qualified in its entirety by reference to the more detailed information and
financial statements contained elsewhere in this Proxy Statement/Prospectus,
including the Appendices hereto and the documents referred to herein or
incorporated by reference. ENB Stockholders are urged to read carefully the
entire Proxy Statement/Prospectus and the related documents.
PARTIES TO THE MERGER
COMPASS. Compass is a Delaware corporation which was organized in 1970. It is
a bank holding company registered with the Board of Governors of the Federal
Reserve System (the "Federal Reserve") under the Bank Holding Company Act of
1956, as amended (the "BHC Act"). Substantially all of Compass' revenues are
derived from its subsidiaries, which are primarily commercial banks located in
Alabama, Texas and Florida.
Compass owns Compass Bank, which is headquartered in Jacksonville, Florida,
Compass Bank, an Alabama state bank headquartered in Birmingham, Alabama
("Compass-Alabama"), and Central Bank of the South, an Alabama state bank
headquartered in Anniston, Alabama. Compass Bank and Compass-Alabama conduct a
general, full-service commercial and consumer banking business through 87
banking offices located in 45 communities in Alabama and 33 banking offices in
Florida. Compass-Alabama also is engaged in the investment, trust and equipment
leasing businesses, and other bank operating activities. Central Bank of the
South primarily serves as a controlled disbursement facility for commercial
deposit customers of Compass-Alabama.
Compass also owns Compass Banks of Texas, Inc., a Delaware corporation
("Compass-Texas"). Compass-Texas, its wholly-owned subsidiary, Compass
Bancorporation of Texas, Inc., a Delaware corporation ("Compass
Bancorporation"), and Compass Texas Acquisition Corp, a Delaware corporation
("Compass Acquisition") are bank holding companies registered with the Federal
Reserve under the BHC Act. Compass Acquisition serves only to facilitate
acquisitions in Texas. Compass Bancorporation owns Compass Bank, a Texas state
bank headquartered in Houston, Texas ("Compass-Houston"), River Oaks Trust
Company, a trust company located in Houston, Texas ("River Oaks Trust
Company"), and Compass Texas Management, Inc., a Texas corporation ("Compass
Management"). Compass Management provides management services to its affiliated
Texas banks. The wholly owned Texas commercial bank subsidiary conducts a
general, full-service commercial and consumer banking business through 38
banking offices in Houston, 24 banking offices in Dallas, 16 banking offices in
San Antonio, 3 banking offices in Central Texas, and 3 banking offices in East
Texas.
Compass actively pursues business combinations which are deemed beneficial to
its shareholders. During 1996, Compass acquired CFB Bancorp, Inc. and its bank
subsidiary, Community First Bank, located in Jacksonville, Florida; Royall
Financial Corporation and its bank subsidiary, The Royall National Bank of
Palestine, located in Palestine, Texas; Equitable BankShares, Inc. and its bank
subsidiary, Equitable Bank, located in Dallas, Texas; Peoples Bancshares, Inc.
and its bank subsidiary, The Peoples National Bank, located in Belton, Texas;
Flower Mound Bancshares, Inc. and its bank subsidiary, Security Bank, located
in Flower Mound, Texas; Texas American Bank located in San Antonio, Texas; and
Post Oak Bank, located in Houston, Texas. During 1996, Compass also purchased
three branches from Coastal Bank, SSB, in San Antonio, Texas. Announced
acquisitions which are pending include the Merger, Horizon Bancorp, Inc. and
its bank subsidiary Horizon Bank & Trust, located in Austin, Texas; Greater
Brazos Valley Bancorp, Inc. and its bank subsidiary Commerce National Bank,
located in College Station, Texas; and ProBank, located in The Woodlands,
Texas.
On June 30, 1996, Compass and its subsidiaries had consolidated assets of
$11.6 billion, consolidated deposits of $9.1 billion, and total shareholders'
equity of $777 million. Of Compass' $11.6 billion of
6
<PAGE>
consolidated assets, approximately $5.8 billion are held in Alabama, $4.8
billion are held in Texas, and $1.0 billion are held in Florida. SEE "AVAILABLE
INFORMATION" AND "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
ENB. ENB is a national bank which commenced operations on August 31, 1987.
ENB is subject to regulation and supervision by the Office of the Comptroller
of the Currency (the "OCC"), and its deposits are insured up to applicable
limits by the Federal Deposit Insurance Corporation (the "FDIC"). ENB is also a
member of the Federal Reserve. ENB maintains its main office and two full
service branches in Jacksonville, Florida.
On June 30, 1996, ENB had assets of $161 million, deposits of $144 million,
and total shareholders' equity of $13 million.
THE MERGER
General. Pursuant to the Merger Agreement, ENB will merge with and into
Compass Bank. Compass Bank will be the surviving entity, and certain officers
of ENB will become officers of Compass Bank after the Merger. SEE "THE MERGER--
OTHER AGREEMENTS." The Merger will be consummated upon the filing of Articles
of Merger with the Florida Department of State and will be effective as of the
close of business on the day of the closing of the transactions contemplated by
the Merger Agreement (the "Closing"), which is expected to be on or about
December 12, 1996, or such other date and time within two business days after
such Closing as the parties may specify in the Articles of Merger (the
"Effective Time").
Merger Consideration. The Aggregate Merger Consideration will be the sum of
(i) 911,000 shares plus (ii) one share for each $31.9712 of additional capital
received by ENB from January 1, 1996 to the Effective Time of the Merger upon
exercise of ENB Options. Pursuant to the Cancellation Agreements, ENB Option
Holders have exercised, or committed to exercise, a total of 509,868 ENB
Options between January 1, 1996 and the Effective Time for an aggregate
exercise price of $5,233,060 (rounded to the nearest whole dollar), and have
committed to refrain from exercising the remaining 66,081 of ENB Options having
an aggregate exercise price of $809,492 (rounded to the nearest whole dollar).
The unexercised ENB Options will be cancelled at the Effective Time pursuant to
the Cancellation Agreements. Giving effect to these Cancellation Agreements,
the Aggregate Merger Consideration will be 1,074,680 shares of Compass Common
Stock.
Of the Aggregate Merger Consideration, a portion will constitute Option
Payment Shares to be delivered to the ENB Option Holders in cancellation of
their ENB Options, and the remainder will constitute Stock Payment Shares to be
delivered to ENB Stockholders in exchange for their ENB Common Stock. Assuming
the Cancellation Agreements are honored, the number of Option Payment Shares
will depend only upon the Market Price of the Compass Common Stock as
determined during the Valuation Period. A table setting forth possible
calculations of Option Payment Shares and Stock Payment Shares based upon a
range of Market Prices appears at page 17 in this Proxy Statement/Prospectus.
SEE "THE MERGER--MERGER CONSIDERATION" AND "THE MERGER--ADDITIONAL AGREEMENTS."
The Aggregate Merger Consideration of 1,074,680 shares of Compass Common
Stock is fixed pursuant to the Cancellation Agreements. Of this Aggregate
Merger Consideration, however, the number of Option Payment Shares and Stock
Payment Shares will vary depending on the Market Price of Compass Common Stock
as determined during the Valuation Period. THE RANGE OF POSSIBLE MARKET PRICES
REFLECTED IN THE TABLE AT PAGE 17 HEREIN ARE ONLY GIVEN AS EXAMPLES BASED ON
HISTORICAL TRADING VALUES, AND NO ASSURANCE CAN BE GIVEN THAT THE ACTUAL MARKET
PRICE WILL NOT BE SIGNIFICANTLY LOWER OR HIGHER THAN THESE EXAMPLES. On ,
1996, the last reported sale price per share of Compass Common Stock was $ .
Compass will not issue fractional shares of Compass Common Stock, but instead
will pay cash to any ENB Stockholder or ENB Option Holder otherwise entitled to
receive a fractional share. Such cash payment shall be
7
<PAGE>
based on the Per Share Merger Consideration. The Merger Agreement also provides
that the number of shares of Compass Common Stock to be received by ENB
Stockholders and ENB Option Holders in the Merger will be adjusted to give
effect to any stock splits with respect to Compass Common Stock occurring
between the date of execution of the Merger Agreement and the Effective Time.
SEE "THE MERGER--MERGER CONSIDERATION" AND APPENDIX I.
Opinion of Financial Advisor. ENB has received the written opinion of
Financial Consulting Associates, Inc. ("Financial"), dated October 28, 1996,
that the Per Share Purchase Price and Terms (as defined therein) of the Merger
Agreement were fair, from a financial point of view, to the ENB Stockholders
and ENB Option Holders as of the date of such opinion. A copy of such opinion
is attached to this Proxy Statement/Prospectus as Appendix II. SEE "THE
MERGER--OPINION OF FINANCIAL CONSULTING ASSOCIATES, INC."
REASONS FOR THE MERGER; RECOMMENDATION OF BOARDS OF DIRECTORS
Consummation of the Merger offers the ENB Stockholders and ENB Option Holders
the opportunity to acquire an equity interest in a larger, more diversified
financial institution, which is interested in expanding its operations in
Florida, but which is not dependent solely upon the economic conditions of the
Jacksonville, Florida metropolitan area. Compass Common Stock is publicly
traded and has a history of paying dividends. ENB's Board of Directors
anticipates that the Merger will expand the banking products and services
offered to ENB's customers and the community. ENB's Board of Directors has
determined that the proposed Merger is in the best interests of ENB and the ENB
Stockholders and ENB Option Holders. ENB'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT ENB SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER and has
authorized consummation of the Merger subject to approval of the ENB
Stockholders and the satisfaction of certain other conditions. SEE "THE
MERGER--BACKGROUND AND REASONS FOR THE MERGER".
THE SPECIAL MEETING
The Special Meeting will be held on December 11, 1996 at 10:00 A.M., local
time, at ENB's main office at 4190 Belfort Road, Jacksonville, Florida, 32216
for the purpose of approving, ratifying, confirming and adopting the Merger
Agreement and transacting such other business as may properly come before the
Special Meeting.
RECORD DATE
The Record Date has been set by ENB's Board of Directors as the close of
business on November 4, 1996. Only holders of ENB Common Stock as of such date
will be entitled to vote at the Special Meeting.
SHAREHOLDER VOTES REQUIRED
The Merger must be approved by the affirmative of the holders of at least
two-thirds ( 2/3) of the shares of the ENB Common Stock issued and outstanding
and entitled to vote at the special Meeting. Directors, certain officers and
certain shareholders of ENB who owned shares of ENB Common Stock,
comprising % of the total shares of ENB Common Stock issued and outstanding as
of the Record Date, have agreed, pursuant to a Voting Agreement and Irrevocable
Proxy, to vote their shares of ENB Common Stock in favor of the Merger.
DISSENTERS' RIGHTS
ENB Stockholders may exercise their right to dissent from the Merger by
complying with the provisions of the National Bank Act relating to rights of
dissenting stockholders, 12 U.S.C. (S) 214a, a copy of which is attached as
Appendix III. SEE "THE MERGER--DISSENTERS' RIGHTS"; COMPARISON OF RIGHTS OF
SHAREHOLDERS OF ENB AND COMPASS--DISSENTERS' RIGHTS"; AND APPENDIX III.
8
<PAGE>
CONDITIONS TO CONSUMMATION AND REGULATORY APPROVALS; TERMINATION
Consummation of the Merger is subject to approval of the Merger by holders of
the requisite number of shares of ENB Common Stock as of the Record Date, which
approval is being solicited by the Board of Directors of ENB pursuant to this
Proxy Statement/Prospectus.
Consummation of the Merger is also subject to the approval of the Federal
Reserve and the Florida Department of Banking and Finance (the "Department").
Compass Bank has filed applications with the Federal Reserve and the Department
to approve the Merger. The Federal Reserve's approval order is dated October
22, 1996, and the Department's approval is expected to be granted prior to the
Effective Time. SEE, "THE MERGER--GOVERNMENTAL APPROVALS."
The respective boards of directors of Compass and ENB may terminate the
Merger Agreement as a result of, among other things, the failure of any of the
several conditions to each of their respective obligations to close, or if the
Effective Time does not occur on or before March 1, 1997 or such later date
agreed to in writing by Compass and ENB. SEE "THE MERGER--OTHER TERMS AND
CONDITIONS," "THE MERGER--AMENDMENT; TERMINATION."
FEDERAL INCOME TAX CONSEQUENCES
Compass expects to receive an opinion from Balch & Bingham, counsel to
Compass and Compass Bank, at the Closing that the Merger will qualify as a
"reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and, as a result of such qualification, no gain or loss
will be recognized by ENB Stockholders for federal income tax purposes upon
receipt of Compass Common Stock in accordance with the Merger Agreement, except
to the extent that ENB Stockholders receive cash in lieu of fractional shares
in the Merger. Such opinion will be based upon certain assumptions and
representations. Compass' receipt of such opinion is a condition to
consummation of the Merger. No information is provided herein with respect to
the tax consequences, if any, of the Merger to the ENB Shareholders under any
state, local or foreign tax laws. ENB SHAREHOLDERS ARE URGED TO CONSULT THEIR
OWN TAX ADVISERS AS TO ALL TAX CONSEQUENCES OF THE MERGER AFFECTING THEM. SEE
"THE MERGER--FEDERAL INCOME TAX CONSEQUENCES", "THE MERGER--OTHER TERMS AND
CONDITIONS" AND "LEGAL OPINIONS."
ACCOUNTING TREATMENT
Compass intends to account for the Merger as a "pooling of interests" for
financial reporting and all other purposes. Compass expects to receive a letter
from KPMG Peat Marwick, LLP, dated as of the Effective Time, to the effect that
the Merger will qualify for pooling of interests accounting treatment. Compass'
receipt of such letter is a condition to consummation of the Merger. SEE "THE
MERGER--ACCOUNTING TREATMENT".
9
<PAGE>
MARKET VALUE OF SECURITIES
Compass Common Stock is traded in the national over-the-counter securities
market. Since July 1984, Compass Common Stock has been quoted under the symbol
"CBSS" on the NASDAQ National Market System. The following table sets forth for
the periods indicated the high and low sales prices for Compass Common Stock as
report through the NASDAQ National Market System and published in The Wall
Street Journal. The prices shown do not include retail mark-ups, mark-downs or
commissions. All share values have been rounded to the nearest 1/8 of one
dollar.
<TABLE>
<CAPTION>
COMPASS
COMMON STOCK
-------------
PERIOD HIGH LOW
------ ------ ------
<S> <C> <C>
1994
First Quarter................ 24 21
Second Quarter............... 26 3/4 23
Third Quarter................ 26 23
Fourth Quarter............... 23 3/4 21
1995
First Quarter................ 28 21 1/2
Second Quarter............... 29 1/4 25 1/2
Third Quarter................ 33 3/4 28 1/2
Fourth Quarter............... 33 1/2 30 1/8
1996
First Quarter................ 35 30 3/4
Second Quarter............... 35 5/8 32 1/4
Third Quarter................ 35 1/4 31 1/2
Fourth Quarter through .. -- --
</TABLE>
The following table sets forth certain information determined as if the
Effective Time were (A) July 30, 1996 (the business day immediately preceding
the announcement of the execution of the Merger Agreement) and (B) ,
1996, the last day for which such information could be calculated prior to the
mailing of this Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
HYPOTHETICAL CLOSING PRICE OF VALUE PER SHARE OF ENB
EFFECTIVE TIME COMPASS COMMON STOCK CONVERSION RATIO COMMON STOCK(1)
-------------- -------------------- ---------------- ----------------------
<S> <C> <C> <C>
July 30, 1996........... 32 1/16 .8223(2) $26.50
, 1996.............. -- -- (3) $--
</TABLE>
No assurance can be given as to what the actual trading value of Compass
Common Stock or the Conversion Ratio will be at the Effective Time. ENB
Shareholders are encouraged to obtain current market quotations for Compass
Common Stock. SEE "THE MERGER--MERGER CONSIDERATIONS."
- --------
(1) Equals the Conversion Ratio (based on the Market Price) multiplied by the
actual closing price of Compass Common Stock as of the Effective Time.
(2) Calculated using a Market Price of $32.23, which would have been the Market
Price if July 30, 1996 had been the Effective Time.
(3) Calculated using a Market Price of $ , which would have been the Market
Price if had been the Effective Time.
10
<PAGE>
SELECTED FINANCIAL DATA AND COMPARATIVE PER SHARE DATA
The following table, except for the lines designated as pro forma,
summarizes certain unaudited consolidated historical financial data of Compass
and ENB for each of the last five fiscal years. The historical data of ENB is
derived from, and should be read in conjunction with the audited financial
statements of ENB, including the notes thereto, which appear in this Proxy
Statement/Prospectus at pages F-1 through F-23. SEE "AVAILABLE INFORMATION"
AND "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
The table also summarizes, where indicated, certain pro forma combined
financial information for Compass Common Stock and certain pro forma
equivalent per share financial information for the ENB Common Stock. Compass'
pro forma combined information and ENB's pro forma equivalent per share
information have been calculated as if the Effective Time of the Merger were
July 30, 1996, the day before the announcement of the execution of the Merger
Agreement, at which time the Market Price of the Compass Common Stock would
have been $32.23 and the Conversion Ratio would have been .8223 (giving effect
to the Cancellation Agreements). The pro forma data do not purport to be
indicative of the results of future operations or the results that would have
occurred had the Merger been consummated prior to the period stated below. The
pro forma data should be read in conjunction with audited financial statements
of ENB, including the notes thereto, which appear in this Proxy
Statement/Prospectus at pages F-1 through F-23. SEE "AVAILABLE INFORMATION"
AND "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
AS OF AND
FOR THE
SIX MONTHS
ENDED
JUNE 30 AS OF AND FOR THE YEARS ENDED DECEMBER 31,
----------- -------------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- ----------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
TOTAL ASSETS
Compass................ $10,947,444 $10,678,369 $9,639,540 $7,808,063 $7,484,662 $7,122,202
ENB.................... 161,134 166,864 138,474 118,610 103,224 84,482
TOTAL DEPOSITS
Compass................ 8,861,703 8,090,818 7,511,470 6,047,131 5,776,902 5,425,146
ENB.................... 143,993 153,921 127,865 106,888 92,283 76,293
LONG-TERM DEBT
Compass................ 612,936 590,044 494,327 332,391 209,404 22,038
ENB.................... 0 0 0 0 0 0
TOTAL SHAREHOLDERS' EQ-
UITY
Compass................ 716,677 737,463 637,877 585,868 538,217 469,072
ENB.................... 12,721 11,741 9,757 9,145 8,063 7,375
NET INTEREST INCOME
Compass................ 194,287 368,954 353,208 347,725 334,585 271,934
ENB.................... 3,702 6,960 6,243 4,829 3,820 3,124
NET INCOME FROM CONTINU-
ING OPERATIONS(1)
Compass................ 68,671 114,225 105,438 96,920 80,938 66,130
ENB.................... 847 1,457 1,215 947 498 239
NET INCOME PER COMMON
SHARE FROM
CONTINUING OPERATIONS
Compass
Historical............. 1.70 2.82 2.62 2.37 1.97 1.68
Pro forma.............. 1.68 2.78 2.58 2.33 1.93 1.64
ENB
Historical............. 0.77 1.33 1.17 0.91 0.50 0.31
Equivalent pro
forma(2).............. 1.38 2.29 2.12 1.92 1.59 1.35
CASH DIVIDEND PER COMMON
SHARE
Compass
Historical............. 0.64 1.12 0.92 0.76 0.667 0.587
Pro forma.............. 0.60 1.03 0.82 0.66 0.54 0.47
ENB
Historical............. 0 0 0 0 0 0
Equivalent pro
forma(2).............. 0.49 0.85 0.67 0.54 0.44 . 0.39
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AS OF AND
FOR THE
SIX MONTHS
ENDED
JUNE 30 AS OF AND FOR THE YEARS ENDED DECEMBER 31,
---------- --------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
(BOOK VALUE) PER
COMMON SHARE
Compass
Historical 18.30 18.29 15.91 14.63 12.88 11.37
Pro forma.............. 18.12 18.10 15.73 14.47 12.74 11.25
ENB
Historical............. 16.17 15.42 12.85 12.04 10.69 9.78
Equivalent pro
forma(2).............. 14.90 14.88 12.93 11.90 10.48 9.25
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING
Compass
Historical............. 40,284 40,513 40,320 40,310 39,984 38,373
Pro forma.............. 41,359 41,588 41,395 41,385 41,059 39,448
ENB
Historical............. 1,095 1,095 1,038 1,044 990 761
NUMBER OF COMMON SHARES
OUTSTANDING AT
END OF PERIOD
Compass
Historical............. 39,171 40,325 40,096 40,050 39,983 39,208
Pro forma.............. 40,246 41,400 41,171 41,125 41,058 40,283
ENB
Historical............. 787 762 759 759 755 754
</TABLE>
- --------
(1) Net income per common share from continuing operations represents primary
earnings per share (i.e., the amount of earnings attributable to each
share of common stock outstanding, including common stock equivalents).
(2) ENB's Equivalent Pro Forma per share amounts are computed by multiplying
Compass' Pro Forma amounts by a Conversion Ratio of .8223, which is a
hypothetical Conversion Ratio obtained as if the Effective Time were July
30, 1996, the day before the announcement of the execution of the Merger
Agreement. The actual Conversion Ratio may vary. SEE "THE MERGER--MERGER
CONSIDERATION."
12
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
During 1996, Compass has completed several acquisitions in Texas and
Florida. Presented below are pro forma financial statements for Compass
reflecting the pro forma effect of these acquisitions on Compass' financial
position and results of operations. With regard to the balance sheet summary,
the information is presented assuming the acquisitions occurred on June 30,
1996, while the earnings summary has been prepared assuming the acquisitions
occurred on January 1, 1995.
COMPASS BANCSHARES, INC.
PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
PRO ENTERPRISE PRO FORMA
JUNE 30 PURCHASE FORMA ADJUSTED NATIONAL JUNE 30
1996 TRANSACTIONS ADJUSTMENTS BALANCE BANK 1996
----------- ------------ ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 523,281 $ 16,656 $(6,635)(a) $ 533,302 $ 8,144 $ 541,446
Interest bearing
deposits with other
banks 1,005 70 -- 1,075 -- 1,075
Investment securities 752,093 21,633 -- 773,726 733 774,459
Investment securities
available for sale 2,218,710 75,791 -- 2,294,501 21,046 2,315,547
Trading account
securities 99,886 -- -- 99,886 -- 99,886
Federal funds sold and
securities purchased
under agreements to
resell 74,687 6,377 -- 81,064 -- 81,064
Loans 6,940,811 238,444 -- 7,179,255 128,843 7,308,098
Allowance for loan
losses (116,217) (1,911) -- (118,128) (1,162) (119,290)
----------- -------- ------- ----------- -------- -----------
Net loans 6,824,594 236,533 -- 7,061,127 127,681 7,188,808
Premises and equipment,
net 235,482 5,966 (1,188)(b) 240,260 1,403 241,663
Other assets 217,706 13,707 30,815 (c) 262,228 2,187 264,415
----------- -------- ------- ----------- -------- -----------
Total assets $10,947,444 $376,733 $22,992 $11,347,169 $161,194 $11,508,363
=========== ======== ======= =========== ======== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits:
Noninterest bearing $ 1,542,630 $ 52,562 $ -- $ 1,595,192 $ 30,872 $ 1,626,064
Interest bearing 7,319,073 268,547 -- 7,587,620 113,121 7,700,741
----------- -------- ------- ----------- -------- -----------
Total deposits 8,861,703 321,109 -- 9,182,812 143,993 9,326,805
Federal funds purchased
and securities sold
under agreements to
repurchase 527,747 6,655 -- 534,402 3,700 538,102
Other short-term
borrowings 179,051 22,000 -- 201,051 -- 201,051
Accrued expenses and
other liabilities 49,330 3,852 115 (b) 53,297 780 54,077
FHLB and other
borrowings 612,936 58 -- 612,994 -- 612,994
----------- -------- ------- ----------- -------- -----------
Total liabilities 10,230,767 353,674 115 10,584,556 148,473 10,733,029
Shareholders' equity:
Common stock 81,043 1,909 (1,909)(a) 81,043 3,933 84,976
Surplus 59,641 17,774 (17,774)(a) 59,641 4,095 63,736
Loans to finance stock
purchases (6,110) -- -- (6,110) -- (6,110)
Unearned restricted
stock (1,210) -- -- (1,210) -- (1,210)
Net unrealized holding
loss on available-
for-sale securities (9,427) (906) 906 (a) (9,427) (194) (9,621)
Treasury stock (46,769) -- 45,936 (a) (833) -- (833)
Retained earnings 639,509 4,282 (4,282)(a) 639,509 4,887 644,396
----------- -------- ------- ----------- -------- -----------
Total shareholders'
equity 716,677 23,059 22,877 762,613 12,721 775,334
----------- -------- ------- ----------- -------- -----------
Total liabilities and
shareholders' equity $10,947,444 $376,733 $22,992 $11,347,169 $161,194 $11,508,363
=========== ======== ======= =========== ======== ===========
</TABLE>
13
<PAGE>
Footnotes to pro forma balance sheet:
(a) Purchase of ProBank of Houston, Texas for cash and the issuance of
treasury shares in the acquisition of CFB Bancorp, Inc.
(b) Sale of ProBank building prior to consumation of acquisition and recording
of the tax liability related to the gain on the sale.
(c) Intangible assets resulting from the purchase of ProBank and CFB Bancorp,
Inc.
COMPASS BANCSHARES, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
COMPLETED PURCHASE TRANSACTIONS COMPASS
SIX MONTHS ---------------------------------------- ENTERPRISE BANCSHARES
ENDED JUNE ACQUIRED PRO FORMA ADJUSTED NATIONAL PRO FORMA
30, 1996 ENTITIES ADJUSTMENTS TOTAL TOTAL BANK TOTAL
---------- ---------- ------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $396,324 $ 35,483 $ -- $ 35,483 $431,807 $6,426 $438,233
Interest expense 202,037 14,729 1,657 (a) 16,386 218,423 2,724 221,147
-------- ---------- ---------- ---------- -------- ------ --------
Net interest income 194,287 20,754 (1,657) 19,097 213,384 3,702 217,086
Provision for loan losses 8,502 675 -- 675 9,177 97 9,274
-------- ---------- ---------- ---------- -------- ------ --------
Net interest income
after provision for
loan losses 185,785 20,079 (1,657) 18,422 204,207 3,605 207,812
Noninterest income 78,025 7,145 -- 7,145 85,170 375 85,545
Noninterest expense 156,702 23,140 2,746 (b) 25,886 182,588 2,687 185,275
-------- ---------- ---------- ---------- -------- ------ --------
Net income before income
tax expense 107,108 4,084 (4,403) (319) 106,789 1,293 108,082
Income tax expense 38,437 (562) (1,580)(c) (2,142) 36,295 446 36,741
-------- ---------- ---------- ---------- -------- ------ --------
Net income $ 68,671 $ 4,646 ($ 2,823) $ 1,823 $ 70,494 $ 847 $ 71,341
======== ========== ========== ========== ======== ====== ========
Net income per common
share $ 1.72 $ 1.75 $ 1.72
======== ======== ========
Weighted average common
shares outstanding 39,889 40,349 (d) 1,075 41,424
</TABLE>
14
<PAGE>
COMPASS BANCSHARES, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMPLETED PURCHASE TRANSACTIONS COMPASS
YEAR ENDED --------------------------------------- ENTERPRISE BANCSHARES
DECEMBER 31, ACQUIRED PRO FORMA ADJUSTED NATIONAL PRO FORMA
1995 ENTITIES ADJUSTMENTS TOTAL TOTAL BANK TOTAL
------------ ---------- ------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $754,910 $ 58,944 $ -- $ 58,944 $813,854 $12,215 $826,069
Interest expense 385,956 25,306 3,333 (a) 28,639 414,595 5,255 419,850
-------- ---------- ---------- ---------- -------- ------- --------
Net interest income 368,954 33,638 (3,333) 30,305 399,259 6,960 406,219
Provision for loan
losses 11,008 83 -- 83 11,091 167 11,258
-------- ---------- ---------- ---------- -------- ------- --------
Net interest income
after provision for
loan losses 357,946 33,555 (3,333) 30,222 388,168 6,793 394,961
Noninterest income 127,750 11,018 -- 11,018 138,768 700 139,468
Noninterest expense 308,228 34,890 5,561 (b) 40,451 348,679 5,214 353,893
-------- ---------- ---------- ---------- -------- ------- --------
Net income before
income tax expense 177,468 9,683 (8,894) 789 178,257 2,279 180,536
Income tax expense 63,243 1,812 (3,169)(c) (1,357) 61,886 822 62,708
-------- ---------- ---------- ---------- -------- ------- --------
Net income $114,225 $ 7,871 $( 5,725) $ 2,146 $116,371 $ 1,457 $117,828
======== ========== ========== ========== ======== ======= ========
Net income per common
share $ 2.82 $ 2.87 $ 2.83
======== ======== ========
Weighted average common
shares outstanding 40,513 40,513 1,075 41,588
</TABLE>
Footnotes to pro forma statements of income:
(a) Additional interest expense incurred on additional borrowings issued in
connection with the Company's purchase transactions.
(b) Amortization of intangibles recorded in connection with purchase
transactions.
(c) Income tax effect of pro forma adjustments.
(d) Weighted average shares have been adjusted to eliminate the impact of the
treasury stock outstanding during 1996 that was issued in connection with
the acquisition of CFB Bancorp, Inc. in August, 1996.
15
<PAGE>
RISK FACTORS
ENB Stockholders currently control ENB through their ability to elect the
Board of Directors and vote on various matters affecting ENB. The Merger will
transfer control of ENB from the ENB Stockholders to Compass, and the former
offices and branches of ENB will become branches of Compass Bank. As of the
Effective Time, the ENB Stockholders and ENB Option Holders will become
shareholders of Compass, a multi-bank holding company. As a result of the
Merger, the ENB Stockholders will no longer have the ability to control or
influence the management policies of ENB's operations and as shareholders of
Compass their ability to influence the management policies of Compass will be
limited due to the fact that they will hold a relatively small percentage of
the voting stock of Compass.
Compass' banking subsidiaries compete with other banking institutions on the
basis of service, convenience and, to some extent, price. Due in part to both
regulatory changes and consumer demands, banks have experienced increased
competition from other financial entities offering similar products.
Competition from both bank and non- bank organizations is expected to
continue.
In addition, general economic conditions impact the banking industry. The
credit quality of Compass' loan portfolio necessarily reflects, among other
things, the general economic conditions in the areas in which it conducts its
business. The continued financial success of Compass and its subsidiaries
depends somewhat on factors which are beyond Compass' control, including
national and local economic conditions, the supply and demand for investable
funds, interest rates and federal, state and local laws affecting these
matters. Any substantial deterioration in any of the foregoing conditions
could have a material adverse effect on Compass' financial condition and
results of operations, which, in all likelihood, would adversely affect the
market price of Compass Common Stock.
Compass' Restated Certificate of Incorporation, as amended (the
"Certificate"), and Bylaws contain several provisions which may make Compass a
less attractive target for acquisition by anyone who does not have the support
of Compass' Board of Directors. Such provisions include, among other things,
the requirement of a supermajority vote of shareholders or directors to
approve certain business combinations and other corporate actions, a minimum
price provision, several special procedural rules, and the limitation that
shareholder actions without a meeting may only be taken by unanimous written
shareholder consent. SEE "COMPARISON OF RIGHTS OF SHAREHOLDERS OF ENB AND
COMPASS--CHARTER AND BY-LAW PROVISIONS AFFECTING COMPASS COMMON STOCK".
The Aggregate Merger Consideration is based upon a formula which is
determined in part by the Market Price of The Compass Common Stock as more
fully described in "THE MERGER--MERGER CONSIDERATION."
A description of the regulatory considerations relating to ownership of the
Compass Common Stock appears elsewhere in this Proxy Statement/Prospectus. SEE
"SUPERVISION AND REGULATION."
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus constitutes a proxy statement of ENB and is
being furnished to the holders of ENB Common Stock in connection with the
solicitation of proxies by the Board of Directors of ENB for use at the
Special Meeting to consider and vote upon a proposal to approve and adopt the
Merger Agreement and to transact such other business as may properly come
before the Special Meeting or any adjournment or postponement thereof. Each
copy of this Proxy Statement/Prospectus mailed to the ENB Stockholders is
accompanied by a Proxy Card (a "Proxy") to be used at the Special Meeting.
DATE, PLACE AND TIME
The Special Meeting is scheduled to be held on December 11, 1996 at 10:00
A.M. local time, at ENB's main office located at 4190 Belfort Road,
Jacksonville, Florida 32216.
16
<PAGE>
RECORD DATE
The Board of Directors of ENB has fixed November 4, 1996 as the Record Date
for the determination of shareholders entitled to notice of and to vote at the
Special Meeting and any adjournments thereof. As of such date, ENB had
3,000,000 shares of ENB Common Stock authorized, of which shares were
issued, outstanding and being held of record by persons or entities. Each
share of ENB Common Stock entitles the holder of record on the Record Date to
one vote as to the Merger and one vote as to any other proposal to be voted on
at the Special Meeting. The presence, in person or by proxy, of the holders of
a the shares of ENB Common Stock entitled to vote at the Special Meeting
is necessary to constitute a quorum at the Special Meeting.
SHAREHOLDER VOTES REQUIRED
The affirmative vote of the holders of at least two-thirds (2/3) of the
outstanding shares of ENB Common Stock is required for approval of the Merger.
ENB'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
MERGER.
Certain directors, executive officers and other ENB Stockholders control,
with the power to vote, an aggregate of shares of ENB Common Stock,
comprising approximately % of the total shares of ENB Common Stock issued and
outstanding as of the Record Date, have agreed, pursuant to a Voting Agreement
and Irrevocable Proxy, to vote their shares in favor of the Merger. SEE, "THE
MERGER--ADDITIONAL AGREEMENTS."
VOTING AND REVOCATION OF PROXIES
ENB's Board of Directors is soliciting Proxies from each holder of ENB Common
Stock as of the Record Date. Any Proxy, if received in time for voting and not
revoked, will be voted at the Special Meeting in accordance with the ENB
Stockholder's instructions thereon. IF A PROXY IS PROPERLY EXECUTED AND
RETURNED WITHOUT INDICATING ANY VOTING INSTRUCTIONS THEREON, THE PROXY WILL BE
VOTED IN FAVOR OF THE MERGER. Failure to submit a Proxy or to vote at the
Special Meeting will have the same effect as a vote against the Merger. At
present, ENB's Board of Directors knows of no other matters to be presented at
the Special Meeting, but if other matters are properly presented, the persons
named in the Proxy will vote or refrain from voting in accordance with the
recommendation of ENB's Board of Directors pursuant to the discretionary
authority conferred by the Proxy.
A Proxy may be revoked at any time prior to its exercise by filing, at ENB's
principal office, a duly executed Proxy bearing a later date or a written
notice revoking such Proxy. Any shareholder entitled to vote at the Special
Meeting may attend the Special Meeting and vote in person by written ballot on
any matter presented for a vote at such Special Meeting, whether or not such
shareholder has given a Proxy previously, and such action will constitute a
revocation of any prior Proxy.
SOLICITATION OF PROXIES
Proxies will be solicited initially by mail, and may also be solicited
personally, by telephone, facsimile transmission or other means by the
directors, officers and employees of ENB, with no special or extra compensation
therefor. Such officers, directors and employees may be reimbursed for out-of-
pocket expenses incurred in connection with the solicitation. Arrangements will
also be made with custodians, nominees, and fiduciaries for the forwarding of
soliciting materials to the beneficial owners of ENB Common Stock held of
record by such persons, and ENB may reimburse such custodians, nominees, and
fiduciaries for reasonable out-of- pocket expenses that they incur in that
connection. Expenses incurred in connection with the Merger, including those
attributable to the solicitation of Proxies, will be paid by the party to the
Merger Agreement incurring the expense.
17
<PAGE>
THE MERGER
The following information relating to the Merger is not intended to be a
complete description of all information relating to the Merger and is qualified
in its entirety by reference to more detailed information contained elsewhere
in this Proxy Statement/Prospectus, including the Appendices hereto and the
documents referred to herein or incorporated herein by reference. A copy of the
Merger Agreement is included as Appendix I, and is incorporated herein by
reference. Capitalized terms not otherwise defined herein have the meanings
ascribed to them in the Merger Agreement.
GENERAL
The Merger Agreement provides for the Merger of ENB with and into Compass
Bank in accordance with the terms and conditions of the Merger Agreement.
Compass Bank will be the surviving entity in the Merger and the separate
existence of ENB will cease. Following the Merger, it is anticipated that
certain executive officers of ENB will become executive officers of Compass
Bank. SEE "THE MERGER--OTHER AGREEMENTS."
MERGER CONSIDERATION
Aggregate Merger Consideration. The Aggregate Merger Consideration to be
issued to the ENB Stockholders and ENB Option Holders will be the sum of (i)
911,000 shares plus (ii) one share for each $31.9712 of additional capital
received by ENB from January 1, 1996 to the Effective Time of the Merger upon
exercise of ENB Options. Pursuant to the Cancellation Agreements between ENB
and the ENB Option Holders, ENB Option Holders have exercised, or committed to
exercise, a total of 509,868 ENB Options between January 1, 1996 and the
Effective Time for an aggregate exercise price of $5,233,060 (rounded to the
nearest whole dollar), and have committed to refrain from exercising any other
ENB Options prior to the Effective Time. SEE "THE MERGER--OTHER AGREEMENT."
Giving effect to the Cancellation Agreements, the Aggregate Merger
Consideration will be 1,074,680 shares of Compass Common Stock.
Stock Payment Shares. The number of Stock Payment Shares will be equal to the
Aggregate Merger Consideration less the Option Payment Shares. As discussed
below, the number of Option Payment Shares will depend upon the Market Price of
Compass Common Stock as determined during the Valuation Period. The number of
Option Payment Shares will also depend upon the extent to which all ENB Option
Holders honor their commitments to exercise (or refrain from exercising) a
specific number of their ENB Options prior to the Effective Time.
Option Payment Shares. As noted above, the number of Option Payment Shares
will depend upon the Market Price of Compass Common Stock as well as the
aggregate exercise prices of the ENB Options which remain unexercised as of the
Effective Time. Pursuant to the Cancellation Agreements, the ENB Option Holders
have committed to exercise all of the ENB Options prior to the Effective Time,
except for 66,081 ENB Options having an aggregate exercise price of $809,492
(rounded to the nearest whole dollar).
The ENB Option Holders who have elected to refrain from exercising ENB
Options prior to the Effective Time have agreed to accept the Option Payment
Shares in cancellation of each ENB Option then held. The number of Option
Payment Shares will be calculated in accordance with the following formula:
first, determine the aggregate dollar value of the transaction (the "Aggregate
Dollar Value") by multiplying the Aggregate Merger Consideration times the
Market Price; second, determine the selling price per share of ENB common stock
("Selling Price Per Share") by dividing the sum of the Aggregate Dollar Value
and the total dollar amount to be paid by ENB Option Holders if they were to
exercise each and every ENB Option remaining unexercised as of the Effective
Time, by the number of shares of ENB common stock issued and outstanding plus
the number of ENB Options remaining unexercised as of the Effective Time (which
will be 1,337,457 assuming no additional shares or ENB Options are issued after
July 31, 1996, the date the Merger Agreement was executed); and finally,
determine the Option Payment Shares by subtracting the average exercise price
of the ENB Options from the
18
<PAGE>
Selling Price Per Share and multiplying that difference times the number of ENB
Options outstanding and dividing that product by the Market Price. The
following is a summary of the above stated formula:
<TABLE>
<C> <C> <S>
Step 1 Aggregate Dollar Value = Aggregate Merger Consideration times
the Market Price;
Step 2 Selling Price Per Share = [Aggregate Dollar Value plus (average
exercise price times number of
unexercised ENB Options)], divided by
(shares outstanding plus unexercised
ENB Options);
Step 3 Aggregate Option Payment Shares = [(Selling Price Per Share minus
average exercise price per ENB
Option) times (number of unexercised
ENB Options)], divided by the Market
Price.
</TABLE>
Each ENB Option Holder will receive, in consideration for the cancellation of
each of his or her unexercised ENB Options, a number of shares of Compass
Common Stock determined by subtracting the exercise price for such ENB Options
from the Selling Price Per Share and dividing that difference by the Market
Price. For example, assuming that the ENB Option Holders honor their agreements
to exercise all of the ENB Options prior to the Effective Time, except for
66,081 ENB Options having an aggregate exercise price of $809,492 (with an
average exercise price of $12.25), and that the Market Price of Compass Common
Stock were $33.00, then the formula would be applied as follows:
<TABLE>
<C> <C> <S>
Step 1 Aggregate Dollar Value = $35,464,440
Step 2 Selling Price Per Share = $35,464,440 + $809,492 = 36,273,932/
$36,273,932 / 1,337,457 = $27.12 per
Share
Step 3 Aggregate Option Payment Shares = $27.12 - $12.25 = $14.87 x 66,081 =
$982,730 / 33 = 29,780
</TABLE>
The Option Payment Shares, assuming a Market Price of $33.00, would be 29,780
shares of Compass Common Stock. The Option Payment Shares for an ENB Option
Holder whose unexercised ENB Options have an exercise price of $17.00 would be
$27.12 - 17.00 = $10.12 / $33.00 = .306667 shares of Compass Common Stock per
share of ENB Common Stock which might have been acquired upon exercise.
Examples. As of July 31, 1996 (the date of execution of the Merger
Agreement), there were 786,608 shares of ENB Common Stock issued and
outstanding, and unexercised ENB Options exercisable for an additional 550,849
shares of ENB Common Stock. Assuming that the Cancellation Agreements are
honored prior to the Effective Time (and that no additional shares of ENB
Common Stock or ENB Options are issued), the number of issued and outstanding
shares of ENB Common Stock as of the Effective Time should be 1,271,376, and
the number of unexercised ENB Options should be 66,081 (having an aggregate
exercise price of $809,492 and an average exercise price of $12.25). Based upon
these assumptions, the following table sets forth the following information
based on a range of assumed Market Prices: (i) the Aggregate Merger
Consideration; (ii) the Aggregate Dollar Value of the Merger; (iii) the Selling
Price Per Share of ENB Common Stock; (iv) the Option Payment Shares; (v) the
Stock Payment Shares; and (vi) the number of shares of Compass Common Stock
which each share of ENB Common Stock would represent a right to receive (i.e.
the Conversion Ratio):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE SELLING OPTION
ARKETM MERGER DOLLAR PRICE PER PAYMENT STOCK PAYMENT CONVERSION
PRICE CONSIDERATION VALUE ENB SHARE(1) SHARES(2) SHARES RATIO
- ------ ------------- ---------- ------------ --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
28.00 1,074,680 30,091,040 23.10 25,616 1,049,064 0.8251
29.00 1,074,680 31,165,720 23.91 26,563 1,048,117 0.8244
30.00 1,074,680 32,240,400 24.71 27,448 1,047,232 0.8237
31.00 1,074,680 33,315,080 25.51 28,275 1,046,405 0.8230
32.00 1,074,680 34,389,760 26.32 29,051 1,045,629 0.8224
33.00 1,074,680 35,464,440 27.12 29,780 1,044,900 0.8219
34.00 1,074,680 36,539,120 27.93 30,465 1,044,215 0.8213
35.00 1,074,680 37,613,800 28.73 31,112 1,043,568 0.8208
36.00 1,074,680 38,688,480 29.53 31,723 1,042,957 0.8203
37.00 1,074,680 39,763,160 30.34 32,301 1,042,379 0.8199
38.00 1,074,680 40,837,840 31.14 32,848 1,041,832 0.8195
</TABLE>
- --------
(1) Rounded to the nearest whole cent.
(2) Rounded to the nearest whole share.
19
<PAGE>
In the event the Market Price is greater than $38.00, Compass shall have the
right to terminate the Merger Agreement in its discretion; provided, however,
that thereafter the Board of Directors of ENB shall have the right to cause the
Merger Agreement to remain in effect by agreeing to accept (as Aggregate Merger
Consideration) a lesser number of shares of Compass Common Stock having an
Aggregate Dollar Value which would have resulted if the Market Price were
$38.00. On the other hand, in the event the Market Price is less than $28.00,
the Board of Directors of ENB shall have the right to terminate the Merger
Agreement in its discretion; provided, however, that thereafter Compass shall
have the right to cause the Merger Agreement to remain in effect by agreeing to
deliver (as Aggregate Merger Consideration) a greater number of shares of
Compass Common Stock having an Aggregate Dollar Value which would have resulted
if the Market Price were $28.00. If the Merger Agreement is terminated, the ENB
Stockholders and ENB Option Holders would not receive the Aggregate Merger
Consideration, but would retain their ENB Common Stock and ENB Options.
Since the Market Price of the shares of Compass Common Stock to be delivered
as the Aggregate Merger Consideration is determined based on an average of the
closing prices of Compass Common Stock as reported by the NASDAQ National
Market System over the Valuation Period, which will end by definition five
trading days prior to the Effective Time, it is possible for the actual closing
price of Compass Common Stock as of the Effective Time to fall below $28 per
share even though the Market Price is determined to be above $28 per share.
Compass will not issue fractional shares of Compass Common Stock, but instead
will pay cash to any shareholder otherwise entitled to receive a fractional
share. Such cash payment shall be based on the Conversion Ratio and the Market
Price as determined during the Valuation Period.
The Merger Agreement also provides that the number of shares of Compass
Common Stock to be received by ENB Stockholders in the Merger will be adjusted
to give effect to any stock splits with respect to Compass Common Stock
occurring between the date of execution of the Merger Agreement and the
Effective Time. In the event that the Closing shall not have occurred on or
prior to December 15, 1996, because Compass has elected to delay the Closing
(as provided in the Agreement), the Aggregate Merger consideration shall be
increased by 6,060 shares of Compass Common Stock.
BACKGROUND AND REASONS FOR THE MERGER
Compass had informal discussions with ENB regarding a possible acquisition in
Spring, 1994, after which time ENB determined to remain independent. Compass
maintained periodic contact with ENB until Spring, 1996, when representatives
of ENB and Compass commenced discussions concerning a possible affiliation of
the two entities. In evaluating Compass' offer, ENB's management considered
competitive conditions in the market served by ENB, the value of the assets of
ENB, its capital and other requirements, the current regulatory environment,
the prospects for trading ENB Common Stock and its future growth prospects in
light of the Jacksonville economy. ENB's management also considered the
changing markets for financial services. In considering whether to affiliate
with Compass, ENB's management believed that Compass' size offered expansion
opportunities for services not otherwise available to ENB and its customers.
ENB and its Board of Directors determined that the value of ENB's stock could
best be enhanced through affiliation with Compass. The Board believes that the
ENB Stockholders will benefit from receiving common stock in a larger company
with a history of paying dividends on its common stock.
Compass has considered further expansion opportunities in Florida in order to
enlarge its Florida operations to a more economical size and to expand into
additional market areas. Acquiring ENB will result in economies of scale and
increase the market served by Compass' affiliates in Florida. It will also
assist Compass' Florida affiliates in providing the management and
organizational flexibility needed to expand elsewhere in Florida by branching
and other acquisitions.
In determining whether to enter into the Merger Agreement, the Board of
Directors of ENB retained Financial to render an opinion as to the fairness of
the Merger, from a financial point of view, to the ENB Stockholders. SEE "THE
MERGER--OPINION OF FINANCIAL CONSULTING ASSOCIATES, INC." Although Financial
evaluated the financial terms of the Merger and participated in discussions
concerning the consideration to be paid, Financial did not recommend any
specific consideration. The total number of shares of Compass Common
20
<PAGE>
Stock to be delivered to the ENB Stockholders and ENB Option Holders resulted
from arm's length negotiations during which the historical earnings and
dividends of Compass and ENB, the earnings potential and deposit base of ENB,
potential growth in ENB's market, ENB's asset quality and the effect of the
Merger on the shareholders, customers and employees of ENB were considered.
OPINION OF FINANCIAL CONSULTING ASSOCIATES, INC.
ENB has retained Financial to act as its financial advisor in connection with
the Merger. Representatives of Financial participated in numerous meetings of
the ENB Board including those held on July 11, 1996 and July 31, 1996. At the
latter of these meetings the ENB Board approved the final Merger Agreement with
Compass. At the July 11 meeting, subject to satisfactory modification of
certain terms of the preliminary Merger Agreement, Financial rendered its oral
opinion to the effect that, as of such date, conversion of each share of ENB
Common Stock into the right to receive a number of shares of Compass Common
Stock equal to the Conversion Ratio and the additional terms provided by the
Merger Agreement (the "Per Share Purchase Price and Terms") were fair to the
ENB Stockholders and ENB Option Holders from a financial point of view.
Financial has also rendered a written opinion to the ENB Board that, on July
11, 1996, and on October 28, based on the information set forth therein, the
Per Share Purchase Price and Terms were fair, from a financial point of view,
to the ENB Stockholders and ENB Option Holders.
THE FULL TEXT OF FINANCIAL'S WRITTEN OPINION IS ATTACHED AS APPENDIX II TO
THIS PROSPECTUS/PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. THE
DESCRIPTION OF THE OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO APPENDIX II. ENB STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS
ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE,
MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN
BY FINANCIAL IN CONNECTION THEREWITH.
Financial's opinion is directed to the ENB Board only and is directed only to
the Per Share Purchase Price and Terms and does not constitute a recommendation
to any ENB Stockholder regarding how such stockholder should vote at the
Special Meeting.
In arriving at its written opinion, Financial, among other things: (i)
analyzed certain audited and unaudited financial statements and other
information of ENB and Compass; (ii) reviewed and discussed with appropriate
management personnel of ENB and Compass the past and current business
activities and financial results and the business and financial outlook of ENB
and Compass; (iii) reviewed the historical price and trading activity of the
Compass Common Stock; (iv) compared certain financial and stock market data
relating to Compass with similar data of other publicly held banking
institutions considered to be potential alternative affiliation candidates to
Compass for ENB; (v) performed an analysis comparing the pro forma consequences
of the Merger to ENB Stockholders with respect to earnings per share, tangible
book value per share and dividends per share represented by the Compass Common
Stock they will receive in the Merger to those same measures represented by the
ENB Common Stock they currently hold; (vi) reviewed the prices paid in certain
comparable acquisition transactions of community banking institutions and the
multiples of earnings and book value and the level of deposit base premium
received by the selling institutions; (vii) reviewed the Merger Agreement and
certain related documents; (viii) considered the financial implications of
certain other strategic alternatives available to ENB; and (ix) performed such
other analyses as Financial deemed appropriate.
In conducting its analysis and arriving at its opinion, Financial assumed and
relied upon, without independent verification, the accuracy and completeness of
the information it reviewed for the purposes of the opinion. Financial also
relied upon the management of ENB with respect to the reasonableness and
achievability of the financial forecast (and the assumptions and bases
underlying such forecast) provided to it. ENB instructed Financial that, for
the purposes of its opinion, Financial should assume that such forecast will be
realized in the amounts and in the time periods currently estimated by the
management of ENB. Financial also assumed, with ENB's consent, that the
aggregate allowances for loan losses for each of ENB and Compass are adequate
to cover such losses. Financial is not an expert in the evaluation of
allowances for loan losses and has not reviewed any individual credit files.
Financial did not make, nor was it furnished with, independent valuations or
appraisals
21
<PAGE>
of the assets or liabilities of either ENB or Compass or any of their
subsidiaries. Financial did not, and was not asked to, express any opinion
about what the value of Compass Common Stock actually will be when issued to
the holders of ENB Common Stock pursuant to the Merger or the price at which
Compass Common Stock will trade subsequent to the Merger. Moreover, ENB has
informed Financial, and Financial has assumed, that the Merger will be recorded
utilizing pooling of interests accounting under generally accepted accounting
principles.
No limitations were imposed by ENB or the ENB Board on the scope of
Financial's investigation or the procedures to be followed by Financial in
rendering its opinion. As part of its procedures, Financial solicited major
regional bank holding companies for their indications of acquisition interest
in ENB. The opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Financial as
of, the date of its analysis.
In arriving at the fairness, from a financial point of view, of the
consideration to be received by the ENB Stockholders and ENB Option Holders,
Financial developed an opinion of the value of ENB Common Stock should the
institution remain independent and analyzed such value in light of the premium
represented by the Per Share Purchase Price and Terms. In connection with
rendering its opinion to the ENB Board, Financial also reviewed a variety of
generally recognized valuation methodologies and merger analyses and performed
those which it believed were most appropriate for developing its opinion of
fairness, from a financial point of view.
The preparation of a fairness opinion involves various determinations of the
most appropriate and relevant methods of financial analysis and the application
of those methods to the particular circumstances, and, therefore, such an
opinion is not readily susceptible to summary description. In arriving at its
fairness opinion, Financial did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments
about the significance and relevancy of each analysis and factor. None of the
analyses performed by Financial was assigned a greater significance by
Financial than any other. Accordingly, Financial believes that its analyses
must be considered as a whole and that a review of selected portions of such
analyses and the factors considered therein, without considering all analyses
and factors, could create a misleading or incomplete view of the processes
underlying its opinion and any conclusions reached therein. In its analyses,
Financial made numerous assumptions with respect to industry performance,
general business and economic conditions, and other matters, many of which are
beyond ENB's and Compass's control. Any estimates contained in Financial's
analyses are not necessarily indicative of actual values or predictive of
future results or values that may be significantly more or less favorable than
such estimates. Estimates of values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities actually may be sold. In addition, as described above, Financial's
opinion and presentation to the ENB Board was one of many factors taken into
consideration by the ENB Board in making its determination to approve the
Merger Agreement.
The following is a brief summary of analyses performed by Financial in
connection with its opinion delivered to the ENB Board on July 31, 1996:
Summary of Proposal. Financial reviewed the terms of the proposed transaction
as reflected in the Merger Agreement, including the calculation of the
Conversion Ratio. Financial stated that assuming exercise of all outstanding
ENB warrants and based on the recent price of Compass Common Stock of $32.125,
a Conversion Ratio of .8221 shares of Compass Common Stock per share of ENB
Common Stock would provide ENB Stockholders a per share value of $26.41 (the
"Per Share Purchase Price").
Indicated Value of ENB as an Independent Bank. Financial undertook an
analysis addressing the range of potential values which would be implied if ENB
were to remain an independent bank. Financial computed this range of values
based on a discounted cash flow analysis, relying on projections extrapolated
from ENB's 1996 budget and its historical performance. In this analysis
methodology, Financial assumed stockholders received, in addition to the
projected dividend stream, a terminal valuation at December 31, 2000 based upon
a 2.0 times multiple of December 31, 2000 stated book value and a 15.0 times
multiple of earnings for such year. These amounts were discounted at rates
ranging from 14% to 16% and indicated net present values to ENB stockholders on
a per share basis ranging from $21.14 to $23.01.
22
<PAGE>
Per Share Merger Consequences Analysis. Based upon a Conversion Ratio of
.8221 shares of Compass Common Stock for each share of ENB Common Stock and
using the earnings estimates for ENB prepared by ENB management and earnings
estimates for Compass prepared by independent securities analysts, Financial
compared the estimated 1996 and 1997 earnings per share of ENB Common Stock on
a stand-alone basis to the equivalent pro forma earnings per share of Compass
Common Stock which would be received in the Merger. Financial concluded that
the Merger would result in an earnings increase of 53% in 1996 and 42% in 1997
for ENB stockholders in the combined company.
Financial also analyzed the impact of the Merger on the amount of fully
diluted tangible book value represented by a share of ENB Common Stock.
Financial assumed exercise of all outstanding warrants and consummation of the
Merger as of December 31, 1996 and utilized the above described earnings
estimates for ENB and Compass. Financial concluded that the Merger would result
in an increase of 0% and 2% in fully diluted tangible book value on an
equivalent per share basis, respectively, for ENB stockholders projected as of
12/31/96 and 12/31/97.
Finally, Financial compared the amount of dividends expected to be paid on a
share of ENB Common Stock before the Merger to the level expected to be paid on
a pro forma basis reflecting the Merger. Financial concluded that the Merger
would result in an increase of 68% in dividends per share for ENB stockholders.
Although ENB had historically not paid a dividend, Financial assumed a 35%
dividend payout on 1996 net income for comparison purposes.
Analysis of Selected Other Bank Mergers Involving Southeastern Community
Banks. Financial reviewed twenty-three mergers involving southeastern community
banks and bank holding companies announced between January, 1995, and February,
1996. Financial noted in particular the prices paid in these mergers as a
multiple of earnings and book values and the transaction premiums paid in
excess of tangible book value as a percentage of core deposits. Financial also
reviewed other data in connection with each of these mergers, including the
amount of total assets and the capital level of the acquired institutions and
the return on equity and the return on assets of the acquired institutions.
Financial then compared this data to that of ENB and to the value to be
received by ENB stockholders in the Merger.
This comparison yielded a range of transaction values as multiples of latest
twelve-months earnings per share of a low of 12.8 times and a high of 45.3
times and a median value of 18.7 times. The ENB multiple of trailing earnings
was 20.1 times. The calculations yielded a range of transaction values as
multiples of book value per share of a low of 1.50 times to a high of 3.04
times and a median value of 2.26 times. The ENB multiple of book value was 2.43
times. Finally, the calculations yielded a range of deposit base premiums paid
from a low of 4.4% to a high of 28.9%, with a median value of 12.0%. The
equivalent premium on ENB deposits represented by the Per Share Purchase Price
and Terms was 11.9%.
No company or transaction used in the above analyses as a comparison is
identical to ENB, Compass, or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies to which they are being compared. Mathematical analysis (such as
determining the average or median) is not, in itself, a meaningful method of
using comparable company data.
In connection with its opinion dated the date of this Prospectus/Proxy
Statement, Financial confirmed the appropriateness of its reliance on the
analyses used to render its July 31, 1996 opinion by performing procedures to
update certain of such analyses and by reviewing and refining the assumptions
on which such analyses were based and the factors considered in connection
therewith.
Financial is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, private placements, and
valuations for estate, tax, corporate and other purposes. ENB has paid
Financial a fee of $25,000 in connection with its engagement. An additional fee
of $200,000 plus 5% of
23
<PAGE>
the aggregate market value of the consideration received by ENB Stockholders
and ENB Option Holders in excess of a Base Valuation of $30 million will be
payable to Financial upon consummation of the Merger. Based upon an assumed
Market Price and value of a share of Compass Common Stock at the Effective Time
of the Merger of $35.625 (the closing price of Compass Common Stock on October
22, 1996) this additional fee would be approximately $322,719. No compensation
payable to Financial is contingent on the conclusions reached in the opinion of
Financial. ENB has also agreed to reimburse Financial for reasonable out-of-
pocket-expenses and to indemnify Financial and certain related persons against
certain liabilities relating to or arising out of its engagement.
EFFECTIVE TIME
The Merger will be effective as of the close of business on the day of the
Closing, or such other time within two days thereafter as may be specified in
the Articles of Merger filed with the Florida Department of State. It is
anticipated that the Closing will occur, and such Articles of Merger be filed,
as soon as practicable following the receipt of all necessary regulatory
approvals and the satisfaction of all conditions to the consummation of the
Merger. At the Effective Time, by operation of law, ENB Stockholders will be
entitled to receive shares of Compass Common Stock and will no longer be owners
of ENB Common Stock. After the Effective Time, all certificates for ENB Common
Stock will represent the right to receive Compass Common Stock pursuant to the
Merger Agreement, but otherwise will be null and void after such date.
EXCHANGE OF SHARES
From and after the Effective Time, each holder of a stock certificate which
immediately prior to the Effective Time represented outstanding ENB Common
Stock will be entitled to receive in exchange therefor, upon surrender thereof
to Compass-Alabama (the "Exchange Agent"), a certificate or certificates
representing the number of whole shares of Compass Common Stock into which such
holders' ENB Common Stock have been converted pursuant to the Merger Agreement.
ENB Option Holders shall be entitled to receive, pursuant to the Cancellation
Agreements and in cancellation of their ENB Options, a certificate or
certificates representing the number of whole shares of Compass Common Stock to
which such ENB Option Holders are entitled under the Merger Agreement. SEE "THE
MERGER--MERGER CONSIDERATION."
Promptly after the Effective Time, the Exchange Agent will furnish each ENB
Stockholder as of the Effective Time with transmittal materials for use in
exchanging their certificates representing ENB Common Stock for certificates
representing Compass Common Stock. ENB Option Holders will receive similar
transmittal materials for use in claiming the Option Payment Shares to which
they are entitled pursuant to the Cancellation Agreements. The transmittal
materials will contain information and instructions with respect to the
procedure for exchanging such certificates and claiming such Option Payment
Shares. The certificates representing Compass Common Stock will be delivered to
the persons entitled thereto within a reasonable time after good delivery to
Compass of the appropriate transmittal materials, together with the
certificates representing ENB Common Stock to be exchanged by ENB Stockholders.
Under the terms of the Merger Agreement, Compass will not issue certificates
representing fractional shares of Compass Common Stock, and in lieu thereof
shall pay cash to any ENB Stockholder or ENB Option Holder otherwise entitled
to receive such fractional share. Such cash payment shall be determined by
multiplying the fraction of a share to which such ENB Stockholder or ENB Option
Holder is entitled by the Market Price.
Persons who are entitled to receive Compass Common Stock pursuant to the
Merger will not become holders of record of Compass Common Stock until they
have properly delivered the appropriate transmittal materials and surrendered
their certificates representing ENB Common Stock in exchange for Compass
certificates. No interest will be paid or accrued on the cash payable in lieu
of fractional share of Compass Common Stock, and no declared dividend will be
disbursed with respect to the shares of Compass Common Stock to which any ENB
Stockholder or ENB Option Holder is entitled, until the appropriate transmittal
materials are delivered to Compass and the certificates representing ENB Common
Stock are surrendered by ENB Stockholders in exchange for Compass certificates.
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Upon the Effective Time of the Merger, the ENB Stockholders will cease to
have any rights as shareholders of ENB, and the ENB Stockholders shall have
only the right to receive the Stock Payment Shares portion of the Aggregate
Merger Consideration specified in the Merger Agreement.
OPERATIONS AFTER THE MERGER
Compass and ENB presently intend that at the Effective Time, ENB will be
merged with and into Compass Bank, subject to the necessary regulatory
approvals. Thereafter, the separate existence of ENB will cease, and the former
offices of ENB will become branches of Compass Bank.
TERMS AND CONDITIONS TO THE MERGER
The Merger Agreement contains a number of terms, conditions, representations
and covenants which must be satisfied prior to the Closing, including, but not
limited to, the following:
(a) The receipt of regulatory approvals, which approvals shall not have
imposed any condition or requirement which, in the judgment of Compass,
would adversely impact the economic or business benefits of the
transactions contemplated by the Merger Agreement or which otherwise would,
in the judgment of Compass, be so burdensome as to render inadvisable the
consummation of the Merger, and the expiration of any applicable waiting
periods with respect thereto. SEE "THE MERGER--GOVERNMENT APPROVALS";
(b) The consummation of the Merger will not violate any injunction, order
or decree of any court or governmental body having competent jurisdiction;
(c) The approval of the Merger Agreement by the ENB Stockholders entitled
to vote at the Special Meeting;
(d) The Registration Statement relating to the Compass Common Stock shall
be effective under the Securities Act and any applicable state securities
or blue sky laws and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose, or any proceedings under the Commission or applicable state
securities authorities rules with respect to the transaction contemplated
hereby, shall be pending before or threatened by the Commission or any
applicable state securities or blue sky authorities;
(e) All representations and warranties of ENB and Compass shall be true
and correct in all material respects as of the date of the Merger Agreement
and at and as of the Effective Time;
(f) ENB, Compass and Compass Bank shall have performed in all material
respects all obligations and agreements and in all material respects
complied with all covenants and conditions contained in the Merger
Agreement to be performed or complied with by them prior to the Effective
Time;
(g) There shall not have occurred a Material Adverse Effect, as that term
is defined in the Merger Agreement, with respect to ENB or Compass;
(h) The Directors of ENB shall have delivered to Compass an instrument
dated the Effective Time releasing ENB from any and all claims of such
directors (except as to their deposits and accounts, their rights with
respect to loan agreements with ENB, and as to rights of indemnification
pursuant to the Articles of Association or Bylaws of ENB, any specific
indemnity agreement between the director and ENB and as provided by
statute) and shall have delivered to Compass their resignations as
directors of ENB;
(i) Certain officers of ENB shall have delivered to Compass an instrument
dated the Effective Time releasing ENB from any and all claims of such
officers (except as to deposits and accounts, their rights with respect to
loan agreements with ENB, accrued compensation permitted by their
respective agreements and any severance agreement listed on Schedule
3.14(c) to the Merger Agreement, and rights of indemnification pursuant to
the Articles of Association or Bylaws of ENB, any specific indemnity
agreement between the officer and ENB and as provided by statute);
(j) Compass and ENB shall have received the respective opinions of
counsel to ENB and Compass acceptable to the other as to certain matters;
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(k) The holders of no more than 5% of the ENB Common Stock shall have
demanded or be entitled to demand payment of the fair value of their shares
as dissenting shareholders;
(l) Compass shall have received a letter from KPMG Peat Marwick, dated as
of the Effective Time, to the effect that the Merger will qualify for
pooling-of-interests accounting treatment if closed and consummated in
accordance with this Agreement;
(m) There shall be no indebtedness of ENB, other than deposits;
(n) Compass shall have received from holders of the ENB Common Stock who
will receive 50% or more of the Aggregate Merger Consideration, a
representation that they have no plan or intention to sell or otherwise
dispose of 50% or more of the shares of Compass Common Stock to be received
as Aggregate Merger Consideration pursuant to the Merger;
(o) Compass and ENB shall have received an opinion of Balch & Bingham
reasonably satisfactory to it that the Merger will qualify as a
reorganization under Section 368(a) of the Code;
(p) ENB shall have delivered to Compass a schedule of all transactions in
the capital stock (or instruments exercisable for or convertible into
capital stock) of ENB of which ENB has knowledge from and including the
date of the Merger Agreement through the Effective Time;
(q) Compass shall have reasonably determined, in its sole judgment, that
certain liabilities and obligations of ENB set forth on Schedule 5.1(k) to
the Merger Agreement do not have a Material Adverse Effect;
(r) Compass shall have received all of the Cancellation Agreements
executed by the ENB Option Holders, as referred to in Section 6.12 of the
Merger Agreement, and all warrants, options, rights or other securities
entitling the holder thereof to acquire ENB Common Stock shall have been
canceled, or shall have been exercised, or shall have expired, lapsed or
terminated prior to the Effective Time, SEE "THE MERGER--OTHER AGREEMENTS";
(s) Compass shall have received the executed Pooling Transfer
Restrictions Agreements required by Section 1.8(b) of the Merger Agreement,
SEE "RESALE OF COMPASS STOCK";
(t) ENB shall have taken such write-downs of assets on its books as are
consistent with Compass' accounting methods for reserving for loan losses,
as mutually agreed to by the parties;
(u) Compass, Compass Bank and the employees of ENB indicated therein
shall have entered into the change of control agreement and the employment
agreements attached as Exhibits G, H, I, and J to the Merger Agreement, in
substantially the form of such Exhibits, SEE "THE MERGER--OTHER
AGREEMENTS";
(v) Compass Bank shall have assumed ENB's obligations under the severance
agreements listed on Schedule 3.14(c) to the Merger Agreement, SEE
"INFORMATION ABOUT ENB--INTERESTS OF CERTAIN PERSONS"; and
(w) Compass and ENB shall have received certificates of the other as to
certain items described above.
Any condition to the consummation of the Merger, except the required
shareholder and regulatory approvals, may be waived in writing by the party to
the Merger Agreement entitled to the benefit of such condition. SEE APPENDIX I.
ADDITIONAL AGREEMENTS
ENB's directors, executive officers and certain other ENB Stockholders with
the power to vote an aggregate of shares of ENB Common Stock, comprising %
of the total shares of ENB Common Stock issued and outstanding as of the Record
Date, have agreed to vote their shares in favor of the Merger pursuant to a
Voting Agreement and Irrevocable Proxy.
As of the Record Date, there were shares of ENB Common Stock issued and
outstanding, and an additional shares of ENB Common Stock were subject to
issuance upon exercise of ENB Options. Pursuant to the Cancellation Agreements,
the ENB Option Holders have agreed to exercise ENB Options to
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purchase an additional shares of ENB Common Stock prior to the Effective
Time, for an aggregate exercise price of . Giving effect to these
Cancellation Agreements, the number of shares of ENB Common Stock which will be
issued and outstanding as of the Effective Time will be 1,271,376. With respect
to the 66,081 ENB Options which the ENB Option Holders have committed to
refrain from exercising, the ENB Option Holders have agreed to accept the
Option Payment Shares, as set forth in the Merger Agreement and described
herein, in cancellation of all such ENB Options. SEE "THE MERGER--
CONSIDERATION."
GOVERNMENT APPROVALS
The Merger will require the prior approvals of the Federal Reserve and the
Department. Applications for the approval of the Bank Merger have been
submitted to the Federal Reserve and the Department. The Federal Reserve's
approval order is dated October 22, 1996, and the Department's approval is
expected to be issued timely. The Merger may not be consummated during a 15 day
"waiting period" following the approval by the Federal Reserve, during which
time the Justice Department may object to the Merger on antitrust grounds.
BUSINESS PENDING EFFECTIVE TIME
The Merger Agreement imposes certain limitations on the conduct of ENB's
business pending consummation of the Merger. In general, ENB must conduct its
businesses only in the ordinary course, consistent with prudent banking
practices. In particular, ENB has agreed not to:
(a) make any amendment to its Articles of Association or Bylaws;
(b) make any change in the methods used in allocating and charging costs,
except as may be required by applicable law, regulation or GAAP and after
notice to Compass;
(c) except as contemplated by the Cancellation Agreements, make any
change in the number of shares of the capital stock issued and outstanding,
or issue, reserve for issuance, grant, sell or authorize the issuance of
any shares of its capital stock or subscriptions, options, warrants, calls,
rights or commitments of any kind relating to the issuance or sale of or
conversion into shares of its capital stock;
(d) contract to create any obligation or liability (absolute, accrued,
contingent or otherwise) except in the ordinary course of business and
consistent with prudent banking practices;
(e) contract to create any mortgage, pledge, lien, security interest or
encumbrances, restrictions, or charge of any kind (other than statutory
liens for which the obligations secured thereby shall not become
delinquent), except in the ordinary course of business and consistent with
prudent banking practices;
(f) cancel any debts, waive any claims or rights of value or sell,
transfer, or otherwise dispose of any of its material properties or assets,
except in the ordinary course of business and consistent with prudent
banking practices;
(g) sell any real estate owned as of the date of the Merger Agreement or
acquired thereafter, which real estate qualifies as "other real estate
owned" under accounting principles applicable to it, except in the ordinary
course of business and consistent with prudent banking practices and
applicable banking laws and regulations;
(h) dispose of or permit to lapse any rights to the use of any material
trademark, service mark, trade name or copyright, or dispose of or disclose
to any person other than its employees any material trade secret not
theretofore a matter of public knowledge;
(i) except as set forth in the Merger Agreement and except for regular
salary increases granted in the ordinary course of business within ENB's
1996 budget and consistent with prior practices, grant any increase in
compensation or directors' fees, or pay or agree to pay or accrue any bonus
or like benefit to or for the credit of any director, officer, employee or
other person or enter into any employment, consulting or severance
agreement or other agreement with any director, officer or employee, or
adopt, amend or terminate any Employee Benefit Plan or change or modify the
period of vesting or retirement age for any participant of such a plan;
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(j) declare, pay or set aside for payment any dividend or other
distribution or payment in respect of shares of its capital stock;
(k) except through settlement of indebtedness, foreclosure, the exercise
of creditors' remedies or in a fiduciary capacity, acquire the capital
stock or other equity securities or interest of any person;
(l) make any capital expenditure or a series of expenditures of a similar
nature in excess of $50,000;
(m) make any income tax or franchise tax election or settle or compromise
any federal, state, local or foreign income tax or franchise tax liability,
except in the ordinary course of business consistent with prudent banking
practices, make any other tax election or settle or compromise any other
federal, state, local or foreign tax liability;
(n) except for negotiations and discussions between the parties hereto
relating to the transactions contemplated by the Merger Agreement or as
otherwise permitted thereunder, enter into any transaction, or enter into,
modify or amend any contract or commitment other than in the ordinary
course of business and consistent with prudent banking practices;
(o) except as contemplated by the Merger Agreement, adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization or business
combination of ENB;
(p) issue any certificates of deposit except in the ordinary course of
business and in accordance with prudent banking practices;
(q) make any investments except in the ordinary course of business and in
accordance with prudent banking practices;
(r) modify, amend, waive or extend any loan documents of ENB or any
rights under such agreements;
(s) modify any outstanding loan, make any new loan, or acquire any loan
participation, unless such modification, new loan, or participation is made
in the ordinary course of business and in accordance with prudent banking
practices;
(t) sell or contract to sell any part of ENB's premises;
(u) change any fiscal year or the length thereof;
(v) take or agree to take any action that would prevent Compass from
accounting for the business combination to be effected by the Merger as a
pooling of interests, including, without limitation, any action
inconsistent with the pooling of interests criteria attached as Exhibit D
to the Merger Agreement;
(w) except with respect to Federal Reserve Funds, prepay in whole or in
part any indebtedness of ENB; or
(x) enter into any agreement, understanding or commitment, written or
oral, with any other person which is in any manner inconsistent with the
obligations of ENB and its directors under the Merger Agreement or any
related written agreement.
AMENDMENT; TERMINATION
The Merger Agreement may be amended or supplemented at any time, before or
after the Special Meeting, by an instrument in writing duly executed by all the
parties thereto. However, no change which reduces the Aggregate Merger
Consideration or which materially and adversely affects the rights of the ENB
Stockholders can be made after the Special Meeting without the required
approval of the ENB Stockholders.
The Merger Agreement may be terminated and the Merger abandoned,
notwithstanding approval by the ENB Stockholders at the Special Meeting, at any
time before the Effective Time by:
(a) Mutual written consent duly authorized by the Boards of Directors of
Compass and ENB;
(b) Compass if:
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(i) Compass learns or becomes aware of a state of facts or breach or
inaccuracy of any representation or warranty of ENB which constitutes a
Material Adverse Effect, as defined in the Merger Agreement;
(ii) ENB or any of its officers, directors or advisors, initiate,
solicit, encourage or take any other action to facilitate an offer from
a third party for the acquisition of ENB (an "Acquisition Proposal"),
in which case ENB shall pay to Compass a termination fee of $1,500,000;
(iii) ENB's Board of Directors withdraws or modifies its
recommendation for the approval of the Merger. If such withdrawal or
modification results from the receipt of an Acquisition Proposal, ENB
shall pay to Compass the termination fee of $1,500,000; provided,
however, that Compass may not terminate the Merger Agreement if such
withdrawal or modification results from ENB's receipt of an Acquisition
Proposal and ENB's Board of Directors thereafter publicly reconfirms
its recommendation for the approval of the Merger and notifies Compass
of such reconfirmation prior to termination by Compass;
(iv) the conditions to the obligations of Compass and Compass Bank to
effect the Merger contained in the Merger Agreement are not satisfied
or waived in writing by Compass; or
(v) the Market Price of Compass Common Stock exceeds $38.00 (subject
to ENB's right to continue the Merger Agreement by accepting a lesser
number of shares of Compass Common Stock).
(c) ENB if:
(i) ENB shall receive an unsolicited Acquisition Proposal which ENB's
Board of Directors is obligated to pursue in the exercise of their
fiduciary duty, in which case ENB shall pay to Compass the termination
fee of $1,500,000;
(ii) any of the conditions to ENB's obligations contained in the
Merger Agreement are not satisfied or waived in writing by ENB; or
(iii) the Market Price of Compass Common Stock is less than $28.00
(subject to Compass' right to continue the Merger Agreement by
delivering additional shares of Compass Common Stock);
(d) Compass or ENB if the Effective Time shall not have occurred on or
before March 1, 1997, or such later date agreed to in writing by Compass
and ENB; or
(e) Compass or ENB if any court of competent jurisdiction in the United
States or other United States (federal or state) governmental body shall
have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action is final and nonappealable.
Upon termination of the Merger Agreement, the Merger Agreement shall be void
and have no effect, without any liability on the part of any party or its
directors, officers or shareholders, except that the parties are not relieved
of liability for any breach of the Merger Agreement. SEE "THE MERGER--OTHER
TERMS AND CONDITIONS," AND APPENDIX I.
DISSENTERS' RIGHTS
Federal law provides that a shareholder of a national banking association who
votes against a merger, or who has given notice in writing to ENB at or prior
to the shareholders' meeting at which the merger is approved that he dissents
from the plan, shall be entitled to receive in cash the value of the shares
held by him, if and when the merger is consummated. The dissenting shareholder
must make a request for payment in writing to the resulting State bank within
thirty days after the date of consummation of such merger, accompanied by the
surrender of his stock certificates. The value of such shares shall be
determined as of the date on which the shareholders' meeting was held
authorizing the merger, by a committee of three persons, one to be selected by
majority vote of the dissenting shareholders entitled to receive the value of
their shares, one by the directors of the resulting State bank, and the third
by the two so chosen. The valuation agreed upon by any two of three appraisers
shall govern. If that valuation is not satisfactory, the dissenting shareholder
may, within five days after
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being notified of the appraised value of his shares, appeal to the Comptroller
of the Currency. The Comptroller's reappraisal will be final and binding as to
the value of the shares of the appellant. If, within ninety days from the date
of consummation of the merger, for any reason one or more of the appraisers is
not selected as herein provided, or the appraisers fail to determine the value
of such shares, the Comptroller shall upon written request of any interested
party, cause an appraisal to be made, which shall be final and binding on all
parties.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain Federal income tax consequences
of the Merger to the ENB Stockholders. This discussion does not address other
Federal income tax considerations that may be relevant to particular ENB
Stockholders in light of their particular circumstances, such as dealers in
securities, shareholders who do not hold their ENB Common Stock as capital
assets, foreign persons, persons who acquired their shares in compensatory
transactions or the cancellation of outstanding options granted under any stock
option plan of ENB.
In addition, the following discussion reflects and is supported by an opinion
of Balch & Bingham, special counsel to Compass (the "Opinion"). The Opinion
attached as Exhibit 8 to the Registration Statement is based on and subject to
certain qualifications and assumptions as noted therein.
The following Federal income tax consequences should result from the Merger:
(a) The Merger of ENB with and into Compass Bank will qualify as a
"reorganization" within the meaning of Code Section 368(a);
(b) No gain or loss will be recognized by ENB Stockholders upon the
exchange of ENB Common Stock for Compass Common Stock;
(c) The tax basis of the Compass Common Stock received by each ENB
Shareholder will be the same as the tax basis of ENB Common Stock
surrendered in exchange therefor;
(d) The holding period of each share of Compass Common Stock received by
each ENB Shareholder will include the period during which such shareholder
held his or her ENB Common Stock surrendered in exchange therefor; provided
that such ENB Common Stock is held as a capital asset at the Merger's
Effective Time; and
(e) Cash received by an ENB Shareholder in lieu of a fractional share of
Compass Common Stock will be treated as if a fractional share of Compass
Common Stock had been issued in the Merger and then redeemed by Compass. An
ENB Shareholder receiving such cash will recognize gain or loss upon such
payment equal to the difference (if any) between such Shareholder's tax
basis in the fractional share (which will be a pro rata portion of the
Shareholder's tax basis in the Compass Common Stock received in the Merger)
and the amount of cash received.
As a condition to the Merger, Compass will receive an opinion from its
counsel dated as of the closing of the Merger to effect that the Merger will
constitute a reorganization as defined in Section 368(a) of the Code (the
"Closing Opinion"). Such opinion will also be based on certain assumptions and
subject to certain qualifications similar to those contained in the Exhibit
Opinion. ENB Stockholders should be aware that neither the Exhibit Opinion nor
the Closing Opinion binds the Internal Revenue Service, and the Internal
Revenue Service is therefore not precluded from successfully asserting a
contrary opinion. No information is provided herein with respect to the tax
consequences, if any, of the Merger to shareholders under any state, local or
foreign tax laws.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT
DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. THE
DISCUSSION DESCRIBED ABOVE IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE
CODE, EXISTING TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE
RULINGS AND COURT DECISIONS. THE DISCUSSION DESCRIBED ABOVE IS NOT BINDING UPON
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THE INTERNAL REVENUE SERVICE, AND NO RULINGS OF THE INTERNAL REVENUE SERVICE
WILL BE SOUGHT OR OBTAINED. THERE IS NO ASSURANCE THAT THE INTERNAL REVENUE
SERVICE WILL AGREE WITH THE FOREGOING DISCUSSION. ALL OF THE FOREGOING ARE
SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF
THIS DISCUSSION. BECAUSE OF THE COMPLEXITIES OF THE TAX LAWS IN GENERAL, AND
THE COMPLEXITIES AND UNCERTAINTIES OF THE TAX CONSEQUENCES ASSOCIATED WITH THE
RECEIPT OF CASH IN THE MERGER IN PARTICULAR, EACH ENB SHAREHOLDER SHOULD
CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF
THE MERGER TO HIM, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND
FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
Compass expects to account for the Merger using the "pooling-of-interests"
method of accounting. Compass expects to receive a letter from KPMG Peat
Marwick, LLP, dated as of the Effective Time, to the effect that the Merger
will qualify for pooling-of-interests accounting treatment. Compass' receipt of
such letter is a condition to consummation of the Merger. Under the pooling-of-
interests accounting method, at the Effective Time, ENB's assets and
liabilities will be added at their recorded book values to those of Compass,
and its shareholder's equity will be added to Compass' consolidated balance
sheet. Income and other financial statements of Compass issued after
consummation of the Merger will be restated retroactively to reflect the
consolidated operations of ENB and Compass as if the Merger had taken place
prior to the periods covered by such financial statements. SEE "SUMMARY--
ACCOUNTING TREATMENT" AND "THE MERGER--OTHER TERMS AND CONDITIONS."
SUPERVISION AND REGULATION
GENERAL
Bank holding companies and banks are regulated extensively under both federal
and state law. Compass is subject to regulation by the Federal Reserve and its
respective bank subsidiaries (the "Subsidiary Banks") are subject to regulation
by the Federal Reserve, the FDIC and/or the appropriate state banking
departments. The deposits of each of the Subsidiary Banks are insured by the
FDIC, and Compass Bank and Compass-Alabama are members of the Federal Reserve
System. Although the various laws and regulations which apply to Compass and
its Subsidiary Banks are intended to insure safe and sound banking practices,
they are mainly intended to benefit depositors and the federal deposit
insurance fund, not the shareholders of Compass. The following discussion
highlights certain laws and regulations affecting Compass and its Subsidiary
banks and should be read in conjunction with the more detailed information
incorporated by reference herein. SEE "INCORPORATION OF DOCUMENTS BY
REFERENCE".
COMPASS, COMPASS-TEXAS AND COMPASS BANCORPORATION
Compass, Compass-Texas and Compass Bancorporation are bank holding companies
within the meaning of the BHC Act and are registered as such with the Federal
Reserve. As bank holding companies, Compass, Compass-Texas and Compass
Bancorporation are required to file with the Federal Reserve an annual report
and such additional information as the Federal Reserve may require pursuant to
the BHC Act. The Federal Reserve may also make examinations of the Company and
each of its subsidiaries. Under the BHC Act, bank holding companies are
prohibited, with certain exceptions, from acquiring direct or indirect
ownership or control of more than five percent of the voting shares of any
company engaging in activities other than banking or managing or controlling
banks or furnishing services to or performing services for their banking
subsidiaries. However, the BHC Act authorizes the Federal Reserve to permit
bank holding companies to engage in, and to acquire or retain shares of
companies that engage in, activities which the Federal Reserve determines to be
so closely related to banking or managing or controlling banks as to be a
proper incident thereto.
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The BHC Act requires a bank holding company to obtain the prior approval of
the Federal Reserve before it may acquire substantially all of the assets of
any bank or ownership or control of any voting shares of any bank if, after
such acquisition, it would own or control, directly or indirectly, more than
five percent of the voting shares of any such bank. The Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 ("Interstate Act") permits bank
holding companies to acquire banks located in any state without regard to
whether the transaction is prohibited under any state law (except that states
may establish the minimum age of their local banks (up to a maximum of 5
years), and certain other restrictions.
The Federal Reserve Act generally imposes certain limitations on extensions
of credit and other transactions by and between banks and their affiliates
(which includes any holding company of which such bank is a subsidiary and any
other non-bank subsidiary of such holding company). Further, federal law
prohibits a bank holding company and its subsidiaries from engaging in certain
tie-in arrangements in connection with any extension of credit, lease or sale
of property, or the furnishing of services.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") enacted major regulatory reforms, stronger capital standards for
savings associations and stronger civil and criminal enforcement provisions.
FIRREA allows the acquisition of healthy and failed savings associations by
bank holding companies and imposes no interstate barriers on such bank holding
company acquisitions. With certain qualifications, FIRREA also allows bank
holding companies to merge acquired savings and loans into their existing
commercial bank subsidiaries. FIRREA also provides that a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989 in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to a
commonly controlled FDIC-insured depository institution in danger of default.
In December of 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") was enacted. This act recapitalized the Bank Insurance
Fund ("BIF"), of which the Subsidiary Banks are members, substantially revised
statutory provisions, including capital standards, restricted certain powers of
state banks, gave regulators the authority to limit officer and director
compensation and required holding companies to guarantee the capital compliance
of their banks in certain instances. Among other things, FDICIA requires the
federal banking agencies to take "prompt corrective action" with respect to
banks that do not meet minimum capital requirements. FDICIA establishes five
capital tiers: "well capitalized", "adequately capitalized",
"undercapitalized", "significantly undercapitalized" and "critically
undercapitalized", as defined by regulations recently adopted by the Federal
Reserve, the FDIC and the other federal depository institution regulatory
agencies. A depository institution is well capitalized if it significantly
exceeds the minimum level required by regulation for each relevant capital
measure, adequately capitalized if it meets such measure, undercapitalized if
it fails to meet any such measure, significantly undercapitalized if it is
significantly below such measure and critically undercapitalized if it fails to
meet any critical capital level set forth in the regulations. The critical
capital level must be a level of tangible equity capital equal to not less than
2% of total tangible assets and not more than 65% of the minimum leverage ratio
to be prescribed by regulation (except to the extent that 2% would be higher
than such 65% level). An institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital position if it
receives an unsatisfactory examination rating.
If a depository institution fails to meet regulatory capital requirements,
the regulatory agencies can require submission and funding of a capital
restoration plan by the institution, place limits on its activities, require
the raising of additional capital and, ultimately, require the appointment of a
conservator or receiver for the institution. The obligation of a controlling
bank holding company under FDICIA to fund a capital restoration plan is limited
to the lesser of 5% of an undercapitalized subsidiary's assets or the amount
required to meet regulatory capital requirements. If the controlling bank
holding company fails to fulfill its obligations under FDICIA and files (or has
filed against it) a petition under the Federal Bankruptcy Code, the FDIC's
claim may be entitled to a priority in such bankruptcy proceeding over third
party creditors of the bank holding company.
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An insured depository institution may not pay management fees to any person
having control of the institution nor may an institution, except under certain
circumstances and with prior regulatory approval, make any capital distribution
(including the payment of dividends) if, after making such payment or
distribution, the institution would be undercapitalized. FDICIA also restricts
the acceptance of brokered deposits by insured depository institutions and
contains a number of consumer banking provisions, including disclosure
requirements and substantive contractual limitations with respect to deposit
accounts.
At June 30, 1996, the Subsidiary Banks were "well capitalized", and were not
subject to any of the foregoing restrictions, including, without limitation,
those relating to brokered deposits. The Subsidiary Banks do not rely upon
brokered deposits as a primary source of deposit funding, although such
deposits are sold through the Correspondent and Investment Services Division of
Compass-Alabama.
FDICIA contains numerous other provisions, including reporting requirements,
termination of the "too big to fail" doctrine except in special cases,
limitations on the FDIC's payment of deposits at foreign branches and revised
regulatory standards for, among other things, real estate lending and capital
adequacy. In addition, FDICIA required the FDIC to establish a system of risk-
based assessments for federal deposit insurance, by which banks that pose a
greater risk of loss to the FDIC (based on their capital levels and the FDIC's
level of supervisory concern) pay a higher insurance assessment.
The Deposit Insurance Funds Act of 1996 (the "Funds Act"), which became
effective October 8, 1996, requires the FDIC to impose a special assessment on
institutions holding deposits subject to assessment by the Savings Association
Insurance Fund ("SAIF"). Although the Subsidiary Banks are members of BIF, they
hold deposits subject to assessment by SAIF as a result of acquisitions of SAIF
deposits or SAIF-insured institutions. Compass' deposit liability under the
Funds Act is $7.6 million based upon $1.2 billion of SAIF deposits, after
certain discounts and exemptions.
THE SUBSIDIARY BANKS
In general, federal and state banking laws and regulations govern all areas
of the operations of the Subsidiary Banks, including reserves, loans,
mortgages, capital, issuances of securities, payment of dividends and
establishment of branches. Federal and state bank regulatory agencies also have
the general authority to limit the dividends paid by insured banks and bank
holding companies if such payments may be deemed to constitute an unsafe and
unsound practice. Federal and state banking agencies also have authority to
impose penalties, initiate civil and administrative actions and take other
steps intended to prevent banks from engaging in unsafe or unsound practices.
Compass Bank is a state bank organized under the laws of Florida and is also
a member of the Federal Reserve System. It is supervised, regulated and
regularly examined by the Department and the Federal Reserve. Compass-Alabama
and Central Bank of the South are both organized under the laws of the State of
Alabama and are supervised, regulated and regularly examined by the Alabama
State Banking Department. Compass-Alabama is also a member of the Federal
Reserve System and is regulated and examined by the Federal Reserve. Compass-
Houston is organized under the laws of the State of Texas and is not a member
of the Federal Reserve System. Compass-Houston is supervised, regulated and
regularly examined by the Texas Department of Banking. All of the Subsidiary
Banks, as participants in the BIF and the Savings Association Insurance Fund of
the FDIC, are subject to the provisions of the Federal Deposit Insurance Act
and to examination by and regulations of the FDIC.
The Alabama banks are governed by Alabama laws restricting the declaration
and payment of dividends to ninety percent (90%) of annual net income until its
surplus funds equal at least twenty percent (20%) of capital stock. Compass-
Alabama's surplus exceeded this amount by $29 million as of December 31, 1995.
The Texas banks are governed by the laws of Texas restricting the declaration
and payment of dividends to undivided profits; that is, the portion of equity
capital of a state bank equal to the balance of its net profits, income, gains
and losses since the date of its formation, less subsequent distributions to
shareholders and transfers to surplus or capital under share dividends or by
board resolution. Compass Bank is governed by the laws of Florida and may
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declare and pay dividends not to exceed the current period's net profits
combined with the net retained profits of the previous two years--after
charging off bad debts, depreciation, and other worthless assets and after
making provision for reasonably anticipated future losses on loans and other
assets--and may, with the approval of the Department, declare and pay dividends
from retained net profits which accrued prior to the preceding two years;
provided that, prior to declaring any dividend, the bank shall carry twenty
percent (20%) of its net profits for such preceding period as is covered by the
dividend to its surplus fund until such surplus fund shall at least equal the
amount of the bank's common and preferred stock issued and outstanding. As
members of the Federal Reserve System, Compass Bank and Compass-Alabama are
also subject to dividend limitations imposed by the Federal Reserve that are
similar to those applicable to national banks.
Federal law further provides that no insured depository institution may make
any capital distribution (which would include a cash dividend) if, after making
the distribution, the institution would not satisfy one or more of its minimum
capital requirements. Moreover, the federal bank regulatory agencies also have
the general authority to limit the dividends paid by insured banks if such
payments may be deemed to constitute an unsafe and unsound practice. Insured
banks are prohibited from paying dividends on its capital stock while in
default in the payment of any assessment due to the FDIC except in those cases
where the amount of the assessment is in dispute and the insured bank has
deposited satisfactory security for the payment thereof.
The Community Reinvestment Act of 1977 ("CRA") and the regulations of the
Federal Reserve and the FDIC implementing that act are intended to encourage
regulated financial institutions to help meet the credit needs of their local
community or communities, including low and moderate income neighborhoods,
consistent with the safe and sound operation of such financial institutions.
The CRA and such regulations provide that the appropriate regulatory authority
will assess the records of regulated financial institutions in satisfying their
continuing and affirmative obligations to help meet the credit needs of their
local communities as part of their regulatory examination of the institution.
The results of such examinations are made public and are taken into account
upon the filing of any application to establish a domestic branch, to merge or
to acquire the assets or assume the liabilities of a bank. In the case of a
bank holding company, the CRA performance record of the banks involved in the
transaction are reviewed in connection with the filing of an application to
acquire ownership or control of shares or assets of a bank or to merge with any
other bank holding company. An unsatisfactory record can substantially delay or
block the transaction. Compass Bank received a "Satisfactory" CRA rating from
the Federal Reserve as of its last compliance examination on February 26, 1996.
ENB's last CRA examination by the OCC was February 6, 1996 and the rating was
satisfactory.
OTHER
Other legislative and regulatory proposals regarding changes in banking, and
the regulation of banks, thrifts and other financial institutions are being
considered by the executive branch of the federal government, Congress and
various state governments, including Alabama, Texas and Florida. Certain of
these proposals, if adopted, could significantly change the regulations of
banks and the financial services industry. It cannot be predicted whether any
of these proposals will be adopted or, if adopted, how these proposals will
affect Compass or the Subsidiary Banks.
The Correspondent and Investment Services Division of Compass-Alabama is
treated as a municipal securities dealer and a government securities dealer for
purposes of the federal securities laws and, therefore, is subject to certain
reporting requirements and regulatory controls by the Commission, the United
States Department of the Treasury and the Federal Reserve. Compass Brokerage,
Inc., a wholly-owned subsidiary of Compass-Alabama, is a discount brokerage
service registered with the Commission and the National Association of
Securities Dealers, Inc. and various state securities commissions. The
subsidiary is subject to certain reporting requirements and regulatory control
by these agencies. Compass Bancshares Insurance, Inc., a wholly-owned
subsidiary of Compass-Alabama, is a licensed insurance agent or broker for
various insurance companies. The insurance subsidiary and its licensed agents
are subject to reporting and licensing regulations of the Alabama Insurance
Commission and various other states.
References under the heading "SUPERVISION AND REGULATION" to applicable
statutes are brief summaries of portions thereof, do not purport to be complete
and are qualified in their entirety by reference to such statutes.
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DESCRIPTION OF COMPASS COMMON AND PREFERRED STOCK
The following summary of the terms and provisions of the Compass Common Stock
and the Compass Preferred Stock does not purport to be complete and is
qualified in its entirety by reference to Compass' Restated Certificate of
Incorporation and the Certificates of Amendment thereto, which include the
express terms of the Compass Common Stock and the Compass Preferred Stock. Such
Certificates are filed as exhibits to the Registration Statement of which this
Proxy Statement/Prospectus is a part.
COMPASS COMMON STOCK
Compass is incorporated under the General Corporation Law of the State of
Delaware ("DGCL"). Compass is authorized to issue 100,000,000 shares of Compass
Common Stock, of which 38,296,459 shares were issued and outstanding on June
30, 1996. Compass' Board of Directors may at any time, without additional
approval of the holders of Compass Common Stock, issue additional authorized
but previously unissued shares of Compass Common Stock.
Dividends. Holders of Compass Common Stock are entitled to receive dividends
ratably when, as and if declared by Compass' Board of Directors from assets
legally available therefor, after payment of all dividends on preferred stock,
if any is outstanding. Under Delaware law, Compass may pay dividends out of
surplus or net profits for the fiscal year in which declared and/or for the
preceding fiscal year, even if its surplus accounts are in a deficit position.
Dividends paid by its Subsidiary Banks, principally Compass-Alabama, are the
primary source of funds available to Compass for payment of dividends to its
shareholders and for other needs. Compass' Board of Directors intends to
maintain its present policy of paying regular quarterly cash dividends. The
declaration and amount of future dividends will depend on circumstances
existing at the time, including Compass' earnings, financial condition and
capital requirements, as well as regulatory limitations and such other factors
as Compass' Board of Directors deems relevant.
Compass' principal assets and sources of income consist of investments in its
Subsidiary Banks, which are separate and distinct legal entities. Federal and
state banking regulations applicable to Compass and its Subsidiary Banks
require minimum levels of capital which limit the amounts available for
distribution as dividends. SEE "SUPERVISION AND REGULATION."
Preemptive Rights. The holders of Compass Common Stock do not have preemptive
rights to subscribe for a proportionate share of any additional securities
issued by Compass before such securities are offered to others. The absence of
preemptive rights increases Compass' flexibility to issue additional shares of
Compass Common Stock in connection with acquisitions, employee benefit plans
and for other purposes, without affording the holders of Compass Common Stock a
right to subscribe for their proportionate share of those additional
securities. Any further issuance of Compass Common Stock after the Effective
Time may reduce former ENB Stockholders' proportionate interest in Compass.
Voting Rights. The holders of Compass Common Stock are entitled to one vote
per share on all matters presented to shareholders. Holders of Compass Common
Stock are not entitled to cumulate their votes in the election of directors.
Cumulative voting rights entitle shareholders to a number of votes equal to the
product of the number of shares held and the number of directors to be elected
and allow shareholders to distribute such votes among any number of nominees
for director or cast such votes entirely for one director. Cumulative voting
rights tend to enhance the voting power of minority shareholders.
Liquidation. Upon liquidation, dissolution or the winding up of the affairs
of Compass, holders of Compass Common Stock are entitled to receive their pro
rata portion of the remaining assets of Compass after the holders of Compass
preferred stock have been paid in full any sums to which they may be entitled.
COMPASS PREFERRED STOCK
Compass has authorized 25,000,000 shares of $.10 par value preferred stock
(the "Compass Preferred Stock"). The preferred stock is issuable in one or more
series and Compass' Board of Directors, subject to
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certain limitations, is authorized to fix the number of shares, dividend rate,
liquidation prices, redemption, conversion, voting rights, and other terms.
Compass' Board of Directors may issue preferred stock without approval of the
holders of Compass Common Stock. Compass has designated a series of Compass
Preferred Stock in the past, but all of such series previously issued has been
redeemed and there are no shares of Compass Preferred Stock outstanding as of
the date hereof.
COMPARISON OF RIGHTS OF
SHAREHOLDERS OF ENB AND COMPASS
CHARTER AND BYLAW PROVISIONS AFFECTING COMPASS STOCK
Compass' Certificate and Bylaws contain several provisions which may make
Compass a less attractive target for an acquisition of control by anyone who
does not have the support of Compass' Board of Directors and shareholders. Such
provisions include, among other things, (a) the requirement of a supermajority
vote of shareholders or directors to approve certain business combinations and
other corporate actions involving "Related Persons" (defined generally as any
person who is the beneficial owner of 5% of the voting shares of Compass), (b)
a minimum price provision, (c) several special procedural rules, (d) a
staggered Board of Directors, and (e) the limitation that shareholder action
without a meeting may only be taken by unanimous written shareholder consent.
ENB's Articles of Association and Bylaws do not contain similar restrictions on
the shareholders' ability to control ENB. However, federal law does require the
approval of the holders of two-thirds of the outstanding shares for a merger.
The foregoing summary is qualified in its entirety by reference to Compass'
Certificate and Bylaws, which are available upon written request from Compass
and which are on file with the Commission, and to the Articles of Association,
as amended, and Bylaws of ENB, which are available upon request from ENB. SEE
"AVAILABLE INFORMATION"; "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".
As a result of the Merger, ENB shareholders, whose rights are governed by the
National Bank Act, 12 U.S.C. (S) 21 et. seq. (the "NBA"), will become
shareholders of Compass, and their rights as shareholders will then be governed
primarily by the DGCL. Certain provisions of the DGCL and the NBA, as well as a
description of the corresponding provisions contained in Compass' and ENB's
respective Articles and Bylaws, as such provisions may affect the rights of
shareholders, are set forth below. The following summary does not purport to be
complete and is qualified in its entirety by reference to the provisions of the
NBA and the DGCL.
SHAREHOLDER APPROVAL OF MERGERS
The National Banking Act requires that two-thirds of the shareholders of a
national banking association approve the participation of a national banking
association in a merger, whether or not the association is the surviving
institution. However, the shareholders of the surviving institution do not have
dissenters' rights.
The DGCL generally permits a merger to become effective without the approval
of the surviving corporation's shareholders if the articles of incorporation of
the surviving corporation do not change following the merger, the amount of the
surviving corporation's common stock to be issued or delivered under the plan
of merger does not exceed 20% of the total shares of outstanding voting stock
immediately prior to the acquisition, and the board of directors of the
surviving corporation adopts a resolution approving the plan of merger.
Where shareholder approval is required under either the DGCL, a merger which
does not involve an "Interested Person" can be approved by a majority vote of
the outstanding shares of capital stock of each class entitled to vote thereon.
If the proposed merger or other business combination were to involve an
"Interested Person," however, the DGCL imposes supermajority approval
requirements with certain qualifications. The Compass Certificate imposes
similar and more restrictive supermajority approval requirements, as described
elsewhere in this Proxy Statement/Prospectus. SEE "RISK FACTORS," "COMPARISON
OF RIGHTS OF SHAREHOLDERS OF ENB AND COMPASS--CHARTER AND BYLAW PROVISIONS
AFFECTING COMPASS STOCK" AND "COMPARISON OF RIGHTS OF SHAREHOLDERS OF ENB AND
COMPASS--ANTITAKEOVER LEGISLATION."
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DISSENTERS' RIGHTS
Federal law provides that a shareholder who votes against a merger or gives
notice of his dissent in writing prior to or at the meeting at which the merger
is approved generally has the right to dissent from any merger. Any shareholder
who exercises his right to dissent in the prescribed manner will be entitled to
receive the appraised value of his shares in cash. SEE "THE MERGER--DISSENTERS'
RIGHTS."
Under the DGCL, a shareholder has the right, in connection with certain
mergers or consolidations, to dissent from certain corporate transactions and
receive the fair market value (excluding any appreciation or depreciation as a
consequence or in expectation of the transaction) of his shares in cash in lieu
of the consideration he otherwise would have received in the transaction. Such
fair value is determined by the Delaware Court of Chancery if a petition for
appraisal is timely filed. In addition, a Delaware corporation may, but is not
required to, provide in its certificate of incorporation that appraisal rights
shall be available to shareholders in certain other events regarding which
appraisal rights are not otherwise available. No such provision is included in
Compass' Certificate.
Under the DGCL, appraisal rights will not be available to shareholders of a
corporation (unless the certificate of incorporation provides otherwise, which
the Compass Certificate does not) if the shares are listed on a national
securities exchange (as is Compass Common Stock) or quoted on the NASDAQ
National Market System or held of record by more than 2,000 shareholders (as is
Compass Common Stock), and shareholders are permitted by the terms of the
merger or consolidation to accept in exchange for their shares: (a) shares of
stock of the surviving or resulting corporation; (b) shares of stock of another
corporation listed on a national securities exchange or held of record by more
than 2,000 shareholders; (c) cash in lieu of fractional shares of such stock;
or (d) any combination of the consideration listed in (a) through (c) above. In
addition, appraisal rights will not be available to shareholders of a Delaware
corporation in a merger if such corporation is the surviving corporation and no
vote of its shareholders is required. SEE, "COMPARISON OF RIGHTS OF
SHAREHOLDERS OF ENB AND COMPASS--SHAREHOLDER APPROVAL OF MERGERS."
SHAREHOLDERS' MEETINGS AND VOTING
Special Meetings. Federal law does not set forth specific rules for the
calling of special meetings of shareholders of national banking associations
such as ENB. Federal law, however, does require that a notice of all
shareholder meetings notifying all shareholders of the time, place, and purpose
of the meeting be sent by first class mail postage prepaid at least 10 days
prior to the meeting. The association bylaws or articles may require a longer
period of notice. The ENB Articles and By-Laws provide that the Board of
Directors, or any three or more shareholders owning, in the aggregate, not less
than 25 percent of the stock of ENB, may call a special meeting of shareholders
at any time. The period of notice for a special meeting set forth in ENB's
Articles is 10 days.
Under the DGCL, shareholders of Delaware corporations do not have a right to
call special meetings unless such right is conferred upon the shareholders in
the corporation's certificate of incorporation or bylaws. Compass' Certificate
prohibits shareholders from calling special meetings.
Actions Without a Meeting. Neither the Articles of Association of ENB, nor
the Bylaws of ENB, nor the NBA, nor the regulations enforcing and interpreting
the NBA addresses whether or not the shareholders of a national banking
association are entitled to take action without a meeting.
Under the DGCL, the shareholders may take action without a meeting if a
consent in writing to such action is signed by the shareholders having the
minimum number of votes that would be necessary to take such action at a
meeting, unless prohibited in the articles or certificate of incorporation.
Compass' Certificate prohibits shareholder action by written consent except
where such action is taken unanimously. SEE "RISK FACTORS."
Election and Removal of Directors. Under the NBA, each shareholder has the
right in all elections of directors to cumulative voting, i.e., each
shareholder is entitled to vote the number of shares owned by him for
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as many persons as there are directors to be elected, or to cumulate such
shares and give one candidate the number of votes equal to the number of
directors multiplied by the number of his shares, or to distribute his votes on
the same cumulative principle among as many candidates as he wishes. The
candidates receiving the highest number of votes, up to the number of directors
to be elected, are elected. Under cumulative voting, shareholders who own less
than a majority of a corporation's common stock can obtain representation on
the board of directors. If voting is not conducted by cumulative voting, each
share is entitled to one vote, and the holders of a majority of the shares
voting a the meeting can elect all of the directors if they choose to do so,
leaving the other members unable to elect a director.
According to federal regulations, a director may be removed by shareholders
at a meeting called to remove him or her, when notice of the meeting stating
that the purpose or one of the purposes is to remove him or her is provided, if
there is a failure to fulfill one of the affirmative requirements for
qualification, or for cause; provided, however, that a director may not be
removed if the number of votes sufficient to elect him or her under cumulative
voting is voted against his or her removal.
Under the DGCL, the directors of a corporation shall be elected by a
plurality of the votes cast by the holders of shares entitled to vote in the
election of directors at a meeting of shareholders at which a quorum is
present, unless the certificate of incorporation provides for cumulative
voting. Compass' Certificate does not provide for cumulative voting. SEE
"DESCRIPTION OF COMPASS COMMON AND PREFERRED STOCK--VOTING RIGHTS".
Once elected, under the DGCL, unless the certificate of incorporation
provides otherwise, in the case of a corporation whose board of directors is
staggered (as is Compass'), shareholders may effect a removal of a director
only for cause. Compass' Certificate provides for a classified board, and any
such removal must be for cause after a supermajority vote (80%) of the
shareholders.
Voting on Other Matters. Under the NBA, any action requiring the approval of
stockholders of a national banking association may be obtained by a vote of the
majority of stockholders, except where a law specifically mandates a greater
vote with respect to a particular issue. Amendments to the articles of
association require only a majority vote of stockholders. Liquidation of a
National Banking Association must be approved by two-thirds of its
shareholders.
Under the DGCL, an amendment to the certificate of incorporation requires the
approval of the holders of at least a majority of the outstanding shares of the
corporation entitled to vote thereon, unless the certificate of incorporation
requires a greater vote. The Compass Certificate does require a greater vote of
the shareholders to approve the amendment of certain, but not all, of the
provisions thereof.
Under the DGCL, a corporation may sell, lease, exchange or otherwise dispose
of all, or substantially all, of its property and assets (with or without the
goodwill), otherwise than in the usual and regular course of its business, only
with the approval of the holders of a majority of all of the outstanding shares
of the corporation entitled to vote thereon, unless the certificate of
incorporation requires a greater vote. Compass' Certificate does not require a
greater vote on this matter.
Under the DGCL, the dissolution of a corporation must be approved by the
holders of a majority of the corporation's stock entitled to vote thereon,
unless the certificate of incorporation requires a greater vote. The Compass
Certificate does not require a greater vote on this matter.
DIVIDENDS
Under the NBA, the directors of a national banking association may declare a
dividend quarterly, semiannually, or annually equal to that amount of the net
profits of the association as they determine, except that no dividend may be
declared until the surplus fund of the association at least equals its common
capital stock, and there has been carried to the surplus fund not less than 10%
of the association's net profits for the appropriate time period preceding the
dividend. The OCC must approve all dividends declared by an association where
the
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total of those dividends exceeds the total of its net profits of that year
combined with its retained net profits (defined as the remainder of all
earnings from current operations plus actual recoveries on loans and
investments and other assets, after deducting current operating expenses,
losses, taxes, and accrued dividends on preferred stock) of the preceding two
years, less any required transfers to surplus or a fund for the retirement of
any preferred stock.
The DGCL provides that dividends may be declared from the corporation's
surplus or, if there is no surplus, from its net profits (not only out of
surplus) for the fiscal year in which the dividend is declared and the
preceding fiscal year. Dividends may not be declared, however, if the
corporation's capital has been diminished to an amount less than the aggregate
amount of all capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets. In addition,
substantially all of the funds available for the payment of dividends by
Compass are derived from its Subsidiary Banks, and there are various statutory
limitations on the ability of Compass' Subsidiary Banks to pay dividends to
Compass. SEE "SUPERVISION AND REGULATION."
Holder's of Compass Common Stock are entitled to receive dividends ratably
when, as and if declared by Compass' Board of Directors from assets legally
available therefor, after payment of all dividends on preferred stock, if any
is outstanding.
PREEMPTIVE RIGHTS
Federal regulations require that the articles of association of a national
bank grant or deny preemptive rights in the shareholders thereof. Any amendment
to a national bank's articles of association modifying such preemptive rights
must be approved by affirmative vote of two thirds of the bank's outstanding
voting shares. ENB's articles of association specifically deny preemptive
rights.
Under the DGCL, shareholders do not possess preemptive rights as to the
issuance of additional or treasury securities by the corporation, unless the
corporation's certificate of incorporation provide otherwise. The Compass
Certificate does not provide for preemptive rights.
LIQUIDATION RIGHTS
Generally under the DGCL, shareholders are entitled to share ratably in the
distribution of assets upon the dissolution of their corporation. Preferred
shareholders typically do not participate in the distribution of assets of a
dissolved corporation beyond their established contractual preferences. Once
the rights of preferred shareholders have been fully satisfied, common
shareholders are entitled to the distribution of any remaining assets.
Upon liquidation, dissolution or the winding up of the affairs of Compass,
holders of Compass Common Stock are entitled to receive their pro rata portion
of the remaining assets of Compass after the holders of Compass Preferred Stock
have been paid in full any sums to which they may be entitled. Although a
series of Compass Preferred Stock has been designated with a liquidation value
of $100.00 per share, plus accrued and unpaid dividends, all of such series
previously issued has been redeemed and there are no shares of Compass
Preferred Stock outstanding as of the date hereof.
LIMITATION OF LIABILITY AND INDEMNIFICATION
ENB. Federal laws pertaining to national banking associations do not include
specific provisions regarding the limitation of liability and indemnification
of directors of the association. Federal regulations provide that a national
bank may provide in its articles of association for the indemnification of
directors, officers, and employees for expenses reasonably incurred in actions
to which the directors, officers, or employees are parties or potential parties
by reason of the performance of their official standards of law as evidenced by
the law of the state in which the bank is headquartered, or the relevant
provisions of the Model Business Corporation Act are presumed by the OCC to be
within the corporate powers of a national bank. However, the indemnification
articles
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may not allow the indemnification against expenses, penalties, or other
payments incurred in an administrative proceeding or action instituted by a
bank regulatory agency which results in a final order assessing civil money
penalties or requiring affirmative action by an individual or individuals in
the form of payments to the bank.
ENB's Articles of Association provide that a director, officer, or employee
may be indemnified for reasonable expenses actually incurred in connection with
any action, suit or proceeding, civil or criminal, to which he/she or they
shall be made a party by reason of his/her being or having been a director,
officer, or employee of the Association or of any firm, corporation, or
organization which he/she served in any such capacity at the request of the
Association. However, no indemnification is permitted where the director,
officer, or employee is finally adjudged to have been guilty of or liable for
gross negligence, willful misconduct or criminal acts in the performance of
his/her duties to the Association or where there has been a compromise
settlement unless the settlement has been approved by a court of competent
jurisdiction, or the holders of record of a majority of the outstanding shares
of the Association, or the Board of Directors, acting by vote of directors not
parties to the same or substantially the same action, suit, or proceeding,
constituting a majority of the whole number of directors.
Compass. Delaware law permits a corporation to set limits on the extent of a
director's liability. Under the Compass Certificate, a director will not be
liable to Compass or its shareholders for monetary damages for any breach of
fiduciary duty as a director, except for (a) breach of a director's duty of
loyalty, (b) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) unlawful payment of dividends or
unlawful stock purchase or redemption, or (d) any transaction from which the
director derived any improper personal benefit.
The Compass Certificate authorizes the indemnification of Compass' directors,
officers and others to the fullest extent permitted by law. Delaware law
permits a corporation to indemnify its officers, directors, employees and
agents if such person acted in good faith and in a manner he reasonable
believed to be in or not opposed to the best interests of the corporation.
Indemnification is not allowed under Delaware law, absent a court order to the
contrary, if the officer, director, employee or agent seeking indemnification
has been finally adjudged to be liable to the corporation.
ANTITAKEOVER PROVISIONS
Neither the NBA nor the federal regulations interpreting the NBA permit anti-
takeover provisions in the Articles of Association or bylaws of a national
bank.
The DGCL prohibits Compass from entering into certain "business combinations"
(as defined therein) involving persons beneficially owning 15% or more of the
outstanding Compass Common Stock (or any person who is an affiliate of Compass
and has over the past three years beneficially owned 15% or more of such stock)
(either, for the purpose of this paragraph, an "Interested Stockholder"),
unless the Compass Board has approved either (a) the business combination or
(b) prior to the stock acquisition by which such person's beneficial ownership
interest reached 15% (the "Stock Acquisition"), the Stock Acquisition. The
prohibition lasts for three years from the date of the Stock Acquisition.
Notwithstanding the preceding, the DGCL allows Compass to enter into a business
combination with an Interested Stockholder if: (a) the business combination is
approved by the Compass Board and is authorized by an affirmative vote of at
least 66 2/3% of the outstanding voting stock of Compass which is not owned by
the Interested Stockholder; or (b) upon consummation of the Stock Acquisition,
such stockholder owned at least 85% of the outstanding voting stock of Compass
(excluding Compass stock held by officers and directors of Compass or by
certain Compass stock plans). The statute also provides that the restrictions
contained therein shall not apply to any corporation whose certificate of
incorporation contains a provision expressly electing not to be governed
thereby. The Compass Certificate contains such a provision which imposes
supermajority voting requirements in the event of such a business combination
which are more stringent than those imposed by the statute.
Although certain of the specific differences between the voting and other
rights of ENB Stockholders and Compass shareholders are discussed above, the
foregoing summary is not intended to be a complete statement of
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the comparative rights of such shareholders under Florida and Delaware law, or
the rights of such persons under the respective charters and Bylaws of Compass
and ENB. Nor is the identification of certain specific differences meant to
indicate that other differences do not exist. The foregoing summary is
qualified in its entirety by reference to the particular requirements of the
NBA and the DGCL, and the specific provisions of Compass' Certificate and
Bylaws, and ENB's Articles of Association and Bylaws.
RESALE OF COMPASS STOCK
The Compass Common Stock to be issued to the ENB Stockholders and ENB Option
Holders upon consummation of the Merger will be freely transferable under the
Securities Act, except for shares issued to any person who may be an
"affiliate" of ENB within the meaning of Rule 145 under the Securities Act. The
directors and executive officers of ENB, the beneficial owners of 5% or more of
ENB Common Stock and certain of their related interests may be deemed to be
affiliates of ENB. Such affiliates have delivered to Compass written agreements
in substantially the form of Exhibit B to the Merger Agreement providing that
such affiliates will not transfer any Compass Common Stock except in compliance
with the Securities Act, the Exchange Act and the rules and regulations
thereunder. In order for the Merger to qualify for "pooling-of-interests"
accounting treatment, such agreements also provide that such affiliates will
not sell, pledge, transfer or otherwise dispose of (i) any of such affiliates'
ENB Common Stock within 30 days prior to the Effective Time or (ii) any of such
affiliates' Compass Common Stock received in the Merger until the publication
of financial results covering at least thirty (30) days of post-Merger
operations of ENB and Compass, except for loans to any such affiliates secured
by a pledge of all or part of such Compass Common Stock, provided the lender
agrees to be bound by the terms of such written agreement. SEE "SUMMARY--
ACCOUNTING TREATMENT," "THE MERGER--ACCOUNTING TREATMENT" AND APPENDIX I.
In order to assure that the Merger will qualify as a "reorganization" under
Section 368(a) of the Code, Compass has received from holders of the ENB Common
Stock who will receive 50% or more of the Aggregate Merger Consideration, a
representation that they have no plan or intention to sell or otherwise dispose
of 50% or more of the shares of Compass Common Stock to be received as
Aggregate Merger Consideration pursuant to the Merger. As a condition to the
consummation of the Merger, these representations must remain true as of the
Effective Time, and Balch & Bingham, special counsel to Compass and Compass
Bank, will rely on such representations in delivering its opinion that the
Merger will qualify as a "reorganization" under Section 368(a) of the Code. SEE
"THE MERGER--OTHER TERMS AND CONDITIONS."
INFORMATION ABOUT COMPASS
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Certain documents filed by and relating to Compass, including Compass' Annual
Report on Form 10-K for the year ended December 31, 1995, and its Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996,
are incorporated herein by reference.
INFORMATION ABOUT VOTING SECURITIES AND THE PRINCIPAL HOLDERS THEREOF;
DIRECTORS AND EXECUTIVE OFFICERS; CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Information regarding the beneficial ownership of Compass Common Stock by (a)
each person who is known by Compass to beneficially own more than 5% of
Compass' Common Stock, (b) the executive officers of Compass, (c) each director
of Compass and (d) the executive officers and directors of Compass as a group,
is incorporated by reference to Compass' annual report on Form 10-K for the
year ended December 31, 1995, which, pursuant to General Instruction G(3) of
Form 10-K, incorporates such information by reference to the sections entitled
"Proposal I--Election of Directors" and "Holdings of Voting Securities"
contained at pages 2-5 of Compass' Proxy Statement filed with the Commission
pursuant to Rule 14(a) of the Exchange Act in connection with Compass' Annual
Meeting of Shareholders held on April 9, 1996 (the "Compass Proxy Statement"),
which is incorporated herein by reference.
41
<PAGE>
Certain other information regarding: (a) the directors, executive officers
and significant employees; (b) executive compensation; and (c) certain
relationships and related transactions between Compass and such persons is also
incorporated by reference to Compass' annual report on Form 10-K for the year
ended December 31, 1995, which, pursuant to General Instruction G(3) of Form
10-K, incorporates such information by reference to the sections entitled
"Proposal I--Election of Directors" and "Holdings of Voting Securities,"
"Executive Compensation and Other Information" and "Certain Relationships and
Other Transactions" contained at pages 2-5, 8-16 and 17-18, respectively, of
the Compass Proxy Statement.
INTERESTS OF CERTAIN PERSONS
No director or executive officer of Compass has any material direct or
indirect financial interest in ENB or the Merger, except as a director,
executive officer or shareholder of Compass or its subsidiaries.
INFORMATION ABOUT ENB
DESCRIPTION OF THE BUSINESS
ENB is a national banking association which commenced operations on August
31, 1987. ENB is subject to regulation and supervision of the OCC and its
deposits are insured up to applicable limits by the FDIC. ENB is also a member
of the Federal Reserve. ENB's corporate offices are located at 4190 Belfort
Road, Suite 100, Jacksonville, Florida, and its main telephone number is (904)
296-2265. At June 30, 1996, ENB had total assets of $161 million, total
deposits of $144 million, and total shareholders' equity of $13 million.
As a commercial bank, ENB's activities are primarily directed at soliciting
deposits from the general public and investing those deposits, together with
other sources of funds, in commercial and real estate loans, as well as other
types of consumer and construction loans. ENB also invests, to a lesser extent,
in obligations of the U. S. Treasury, agencies of the federal government, and
other types of investment securities.
The primary sources of funds for ENB are deposits, repayments of loans, and
earnings from operations. In addition, ENB has from time to time utilized
overnight borrowings of federal funds from its correspondent banks, and the
sale of some of its investment securities as secondary sources of funds.
ENB's primary sources of income are interest and fees on loans, interest on
investment securities and federal funds sold, and service fees on deposit
accounts. ENB's primary costs are interest paid on deposits and operating
expenses.
ENB has three wholly owned subsidiaries: ENB Properties, Inc., formed in 1992
to manage and market ENB's other real estate owned, ENB Branch No. 3, Inc.,
formed in 1994 to acquire ENB's San Jose branch, and ENB Investment Services,
Inc., formed in 1994 to offer non-deposit investment products in conjunction
with a third party broker/dealer. All three subsidiaries are currently
inactive.
ENB has never declared or paid any dividends on its stock, which consists of
a single class of $5 par value common stock. ENB has never issued any class of
other stock, including preferred or convertible preferred. ENB has never
incurred any long term debt.
The only extraordinary component of income in the past five years is the
recognition of fifty-five thousand dollars of income (net of tax effect) in
1993. This was a non-recurring item arising from ENB's adoption in 1993 of
Statement No. 109 of the Financial Accounting Standards Board ("Accounting for
Income Taxes"). This was reported as the cumulative effect of a change in ENB's
method of accounting for income taxes, to conform with FASB 109.
42
<PAGE>
INFORMATION ABOUT VOTING SECURITIES AND THE PRINCIPAL HOLDERS THEREOF
The following table shows the number of shares beneficially owned by each of
the following as of August 31, 1996: (a) each person who is known by ENB to
beneficially own more than 5% of ENB's Common Stock; (b) the executive officers
of ENB; (c) each director of ENB; and (d) the executive officers and directors
of ENB as a group. The footnotes below also set forth the address of each
person who is known by ENB to beneficially own more than 5% of ENB's Common
Stock.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OWNED PERCENT OF CLASS
------------ ----------------
<S> <C> <C>
D. Hicks(1)................................ 134,200 15.71
L. Ansbacher(2)............................ 21,640 2.71
B. Brown(3)................................ 87,914 10.77
T.W. Davis(4).............................. 74,012 9.00
L. Dubow(5)................................ 9,800 1.24
W.R. Frazier(6)............................ 53,100 6.54
T. Klechak(7).............................. 30,000 3.74
W. Kyle.................................... 5,000 0.64
V.A. Lafaye(8)............................. 66,152 8.05
F.S. McGehee(9)............................ 60,000 7.34
R. Morales(10)............................. 35,200 4.38
M. Stein(11)............................... 108,600 12.90
All Directors & Executive Officers as a
Group
(14 persons)(12).......................... 731,475 64.48
</TABLE>
- --------
(1) Includes 67,100 shares from currently exercisable warrants. Mr. Hicks'
address is 801 Riverside Avenue, Jacksonville, Florida 32204.
(2) Includes 10,280 shares from currently exercisable warrants.
(3) Includes 26,957 shares from currently exercisable warrants, and 2,000
shares for which currently exercisable options have been granted. Mr.
Brown's address is 4190 Belfort Road, Suite 100, Jacksonville, Florida
32216.
(4) Includes 35,356 shares from currently exercisable warrants. Mr. Davis'
address is 1910 San Marco Boulevard, Jacksonville, Florida 32207.
(5) Includes 4,900 shares from currently exercisable warrants.
(6) Includes 24,300 shares from currently exercisable warrants. Mr. Frazier's
address is 1515 Riverside Avenue, Suite A, Jacksonville, Florida 32204.
(7) Includes 15,000 shares from currently exercisable warrants.
(8) Includes 34,876 shares from currently exercisable warrants. Mr. Lafaye's
address is 12753 Shinnecock Court, Jacksonville, Florida 32225.
(9) Includes 30,000 shares from currently exercisable warrants. Mr. McGehee's
address is Post Office Box 5369, Jacksonville, Florida 32247.
(10) Includes 16,100 shares from currently exercisable warrants.
(11) Includes 54,300 shares from currently exercisable warrants. Mr. Stein's
address is 121 West Forsyth Street, #200, Jacksonville, Florida 32202.
(12) Includes 11,785 shares owned by executive officers who are not directors,
and 14,072 currently exercisable warrants, and 19,000 shares for which
currently exercisable options have been granted.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Summary of Severance Agreements. The executive officers of ENB are parties to
one of two types of "severance agreements" which entitle them to certain
payments and other benefits upon a "Change of Control," as defined in such
agreements. The Merger will result in such a Change of Control. The terms of
these agreements are for the three years commencing on January 1, 1996 and
terminating on December 31, 1998, unless extended or terminated sooner within
the terms and conditions of the agreements. In addition to the provisions of
these agreements that are discussed below, all executive officers granted any
stock options who are also covered by severance agreements from ENB upon the
occurrence of a Change in Control followed by that
43
<PAGE>
executive officer's termination of employment (other than for Termination for
Cause, as defined in the agreements) have the right to exercise that option and
any limited rights attached thereto within one year of the Change in Control.
Type 1. William T. Hammel, R. Alan Bellamy and Bennett Brown have severance
agreements which entail the following provisions:
Mr. Hammel, Mr. Bellamy and Mr. Brown, in the event of a Change in Control,
are entitled to ENB making two annual payments for the maintenance of the SERP
plan currently in place for these employees. These payments must be a minimum
of $23,200, made on July 1 of each of the two years following the Change in
Control. The employer is required to make these payments whether or not the
employee receives termination benefits under the Agreement, until such time as
employment is terminated for cause.
If Mr. Hammel, Mr. Bellamy and Mr. Brown remain in employment from the date
of these agreements until the occurrence of a Change in Control, they will be
entitled to a full or pro-rated bonus for the year in which the Change in
Control occurs. This bonus will be paid upon the employee's bonus plan in
effect prior to the Change in Control and will be paid 90 days after the end of
the calendar year in which the Change in Control occurs.
If there is a Change in Control and Mr. Hammel, Mr. Bellamy or Mr. Brown's
employment is involuntary terminated other than for Termination for Cause or
the employee terminating for good reason, they are entitled to (i) 24 months of
severance compensation (based on the compensation rate of the month immediately
preceding the termination) in 24 substantially equal monthly payments, (ii) a
payment of the sum equal to the average of the bonuses paid for the two years
preceding the Change in Control to be paid in two equal installments, the first
due after the first twelve months severance compensation and the second after
the second twelve months of severance compensation, and (iii) life, health and
disability coverage to the employee until the employee obtains new employment
with substantially the same coverage, but for no longer than one year.
Type 2. Perry J. Kenner has an agreement which entails the following
provisions:
If Mr. Kenner remains in employment from the date of the agreement until the
occurrence of a Change in Control, he will be entitled to a pro-rated bonus for
the year in which there is a Change in Control or two times the bonus that he
earned in 1995, whichever is greater. This payment would be made within 30 days
of the Change in Control.
If there is a Change in Control and Mr. Kenner's employment is involuntarily
terminated other than for Termination for Cause or for Mr. Kenner's terminating
for good reason, he is entitled to (i) 18 months of severance compensation
(based on the compensation rate of the month immediately preceding the
termination) in 18 substantially equal monthly payments, (ii) either a full or
pro-rated bonus for the year in which the Change in Control takes place within
90 days after the calendar year in which the Change in Control takes place,
(iii) a severance bonus equal to 75% of the average of his bonuses for the past
two years paid in two installments (the first installment of 66.67% of which is
to be paid after the first twelve months of severance compensation, and the
second installment of 33.33% of which is to be paid after the twelve months of
severance compensation), and (iv) life, health and liability coverage to Mr.
Kenner for one year from the termination or until Mr. Kenner obtains new
employment with substantially the same coverage, but for no longer than one
year.
Certain other employees also are covered by similar severance agreements.
Summary of Employment Agreements. Compass Bank will employ Mr. Brown, Mr.
Bellamy and Mr. Hammell pursuant to separate employment agreements attached as
Exhibits H through J of the Merger Agreement, (See APPENDIX) as City President-
Jacksonville, Senior Vice President--Senior Loan Administrator, and Senior Vice
President--Commercial Loan Manager II, respectively, for a period of two years
following the effective date of the Merger, unless sooner terminated.
44
<PAGE>
Each of the foregoing officers will receive a base salary plus bonuses. In
addition, Compass will grant stock options as follows: Mr. Bennett--15,000
shares; Mr. Bellamy and Mr. Hammell--5,000 shares each. Other benefits include
stock incentive plan participation, life, health and disability insurance and
standard vacation benefits. Compass will also continue Mr. Brown's social club
memberships and automobile allowance. Each employment agreement contains a
confidentiality and noncompetition agreement. In the event of a termination of
the officer's employment before the expiration of two years, the officer agrees
not to compete in a surrounding geographic area for a period of two years. The
agreement regarding confidentiality of trade secrets is of perpetual duration.
Summary of Change of Control Agreement. Compass Bank and Mr. Bennett Brown
have entered into a Change of Control Agreement pursuant to which, in the event
of a corporate change of control, Compass Bank (or its successor corporation)
will retain Mr. Brown in an executive capacity for a period of three years.
During this three- year period, Mr. Brown will receive salary and benefits no
less favorable than those received by him during the period before the change
in control, and if the salary and benefits of comparable Executives following
the change of control are more favorable, Mr. Bennett is entitled to receive
such benefits. This agreement is attached Exhibit G to the Merger Agreement.
SEE APPENDIX I.
MANAGEMENT'S DISCUSSION AND ANALYSIS
ENTERPRISE NATIONAL BANK AND SUBSIDIARIES
SUMMARY
During the past three years, ENB has continued to grow profitably and improve
credit quality. ENB improved service to its customers by opening its first
free-standing branch in November, 1994, and completely upgrading its computer
system in a conversion which took place in March, 1995. ENB's annual net income
exceeded one million dollars for the first time in 1993, and annual return on
average assets reached one percent for the first time in 1995.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1995 AND 1994
EARNING ASSETS
Earning assets consist of loans and investments which provide interest
income. Earning assets at December 31,1995 were $134.4 million, an increase of
4.8% over the prior year end. This increase was due primarily to strong loan
growth.
45
<PAGE>
LOANS
Loans increased 8.2% during 1995, and represented 86.5% of earning assets at
year-end. Most of this growth was in the commercial, unsecured, and residential
real estate categories. Loans showed a net increase of $8.8 million in 1995,
compared to $17.9 million in 1994. This slowing of growth is primarily due to
increased competition for loans by other institutions in ENB's market area. At
the end of 1995, approximately 66%, of the loan portfolio is subject to
repricing annually or more frequently.
Lending Area. While ENB has the authority to originate loans secured by real
estate throughout the United States, it has chosen to concentrate its lending
activities within its market area. With three branch locations in Northeast
Florida, loan origination is emphasized in ENB's primary market areas within
Duval, St. Johns and Clay Counties, Florida. Commercial and consumer lending
activities are confined to markets directly served by ENB's branches and
lending staff. Commercial loans are generally not made to borrowers whose
residence or place of business is not in reasonable proximity of a branch
office.
Residential Real Estate Loans. As of December 31, 1995, $31.2 million, or 26%
of the total loan portfolio, consisted of permanent mortgage loans secured by
residential real estate. These loans enable borrowers to purchase existing and
new homes. ENB's lending policies generally limit the maximum loan-to-value
ratio on residential mortgage loans to 80% of the lesser of the appraised value
or purchase price.
ENB makes adjustable rate mortgage loans on which the interest rate and
payment amount can change periodically as a result of changes in interest rates
and fixed interest rate mortgage loans of up to 30 years. One-year adjustable
rate mortgage loans are currently being offered based upon the one-year
Treasury Constant Maturity Index, with maximum adjustments of 2% per year and
6% over the life of the loan. Five-year adjustable rate mortgage loans, which
provide for a fixed rate of interest for the first five years and an annual
rate adjustment thereafter are also offered by ENB.
For residential mortgage loans, ENB files a mortgage creating a valid lien on
real estate and obtains a title insurance policy which ensures that the
property is free of prior encumbrances. Borrowers must also obtain hazard
insurance policies prior to closing and, when the property is in a flood plain
as designated by the Department of Housing and Urban Development, flood
insurance policies. Residential mortgage loans generally are underwritten in
accordance with the Federal National Mortgage Association ("FNMA") and Federal
Home Loan Mortgage Corporation ("FHLMC") guidelines.
Fixed rate residential real estate loans with terms of greater than five
years are generally originated for immediate sale in the secondary market,
through various underwriters. Fixed rate residential real estate loans with
terms of five years or less and adjustable rate mortgages ("ARMs") are both
originated for several underwriters or may be held in portfolio. The
origination and sale of fixed rate residential real estate loans have provided
a relatively small source of non-interest income.
Construction and Land Development Loans. Construction and land development
loans, which totaled $5.0 million as of December 31, 1995, are primarily
comprised of residential construction loans to builders and acquisition and
development loans.
Construction loans to builders are generally made for terms of one year and
provide for disbursement of loan funds based on periodic site inspections. The
loans are then paid off or converted to permanent loans made to the owner when
the property is sold. The application process for construction loans includes
the same items which also requires the builder to submit accurate plans,
specifications and cost of the project to be constructed in addition to
standard items. This information is used as a basis to determine the appraised
value of the subject property. While construction loans are generally
considered to be of a higher credit risk than permanent loans granted on owner-
occupied residential real estate, they generally provide a higher contractual
rate of return and are more responsive to current market interest rates.
46
<PAGE>
Acquisition and development loans are made to develop either residential or
commercial real estate. Because acquisition and development loans are
considered to be of greater risk than other types of real estate lending, such
loans generally do not exceed 75% of the appraised value of the completed
property. Acquisition and development loans are made to developers who, in
management's opinion, have a high level of experience in developing the types
of property being financed. Such loans are generally granted for terms which do
not exceed 36 months. The company generally obtains personal guarantees from
the principals involved.
Commercial Real Estate Loans. As of December 31, 1995, commercial real estate
loans totaled $10.7 million, or 9% of ENB's total loan portfolio. Commercial
real estate loans have predominantly variable interest rates which adjust
immediately upon changes in the prime lending rate. This portfolio generally
consists of mortgage loans secured by office buildings (primarily owner
occupied), and industrial buildings. These loans typically do not exceed 80% of
the lesser of the purchase price or the appraised value as determined by an
independent appraisal. Term loans are amortized for periods of up to 20 years,
with balloon maturities of three-to-five years. Commercial loans to finance the
purchase, construction or expansion of owner-occupied real estate are
considered the most desirable and are actively solicited by ENB's commercial
lending officers.
In underwriting commercial real estate loans, ENB primarily considers the
anticipated cash flows generated by leases on the property along with the total
strength and duration of the leases to support the total debt service. In
addition, ENB's underwriting procedures require verification of the borrower's
credit history, an analysis of the borrower's income taxes, personal financial
statements and banking relationships, a review of the borrower's property
management experience, and a review of the property including cash flow
projections, historical operating statements, environmental concerns and
compliance with the Americans with Disabilities Act of 1990 and other
applicable requirements. Commercial real estate loans typically entail greater
risk than residential mortgage loans because such loans are often susceptible
to adverse conditions in the real estate market and the economy in general. ENB
seeks to minimize these risks by originating commercial real estate loans
principally in its primary market area where it has the ability to more closely
monitor and anticipate adverse conditions.
ENB has also originated commercial real estate loans under the Small Business
Administration ("SBA") 504 program. Under this program ENB extends a first
mortgage with a 50% loan to appraised value and issues a second mortgage at 40%
loan to value. A 10% equity requirement is made by the borrowers.
Commercial Loans. As of December 31, 1995, commercial loans totaled $62.8
million, or 54% of the total loan portfolio, and is ENB's primary lending
activity. ENB's commercial lending services are structured to promote the
development of strong relationships with business customers. Loans offered
include term loans to finance fixed assets and lines of credit for working
capital purposes. Term loans are generally secured by machinery, equipment or
other fixed assets based on ENB's loan-to-value underwriting guidelines. Term
loans are typically amortized over a three to five year term. Lines of credit
are generally secured by accounts receivable and inventory, and are subject to
renewal on an annual basis. Because the commercial borrower's primary source of
repayment is its operating income, ENB's credit policy requires a formal
financial analysis and review at least annually and, in most cases, ENB is
provided with interim financial statements. Personal guarantees are generally
obtained for both term loans and lines of credit. Both term loans and lines of
credit carry rates of interest based on a margin above the prime lending rate
and, consequently, such rates adjust to reflect changes in the prime rate.
Commercial loans are primarily marketed to businesses with sales up to $10.0
million through ENB's central commercial and professional lending staff.
Commercial loans are structured, priced and underwritten by ENB's commercial
and professional lending staff which consists of experienced commercial loan
officers. ENB actively participates in the loan guaranty program of the SBA and
has earned the designation of SBA Certified Lender.
Consumer Lending. As of December 31, 1995, $6.5 million or 5% of ENB's total
loan portfolio, consisted of consumer loans. Consumer loan products offered
within ENB's market areas include home equity lines of credit, executive lines
of credit, home improvement loans, automobile loans, overdraft protection lines
of credit
47
<PAGE>
and unsecured consumer loans. ENB is expanding its consumer loan portfolio
because these loans provide higher yields than residential mortgage loans and
the demand for such loans is strong in the markets ENB serves. In addition,
management believes that offering consumer loan products helps expand ENB's
customer base and creates stronger ties to its existing customer base.
For consumer loans, ENB's underwriters review all pertinent information prior
to making a credit decision. Consumer loans may entail greater risk than
residential mortgage loans, particularly in the case of consumer loans which
are unsecured or secured by rapidly depreciating assets such as automobiles.
Although the level of delinquencies in ENB's consumer loan portfolio generally
has been low, there can be no assurance that delinquencies will not increase in
the future.
Loan Underwriting Policies and Procedures. ENB's lending activities are
subject to ENB's written, nondiscriminatory underwriting standards and loan
origination procedures. Detailed loan applications and credit approval forms
are obtained to determine the borrower's ability to repay and are verified
through the use of credit reports, financial statements and confirmations.
Property valuations are generally performed by pre-approved independent outside
appraisers. Approval by the Board of Directors or the Executive Committee of
the Board of Directors is required for loans greater than $750,000. The Board
of Directors' Loan Committee has the authority to approve loans up to the legal
lending limit. The Officer Loan Committee, consisting of ENB's senior
management, and senior lending officers has lending authority of up to
$750,000. ENB's Credit Administration Section includes a loan review specialist
who is responsible for monitoring loan documentation discrepancies. ENB does
not provide individual lending authority. Loans of up to $300,000 must be
signed off by at least two officers with at least one signature being a member
of the Officer Loan Committee. In addition, ENB is subject to loans to one
borrower restrictions at the federal levels that limit the amounts of either
unsecured or secured credit that can be extended to a single borrower. As of
December 31, 1995, the limitation on loans to one borrower, under federal
guidelines, was $1.9 million.
ENB's loan review function consists of both internal and external loan review
which examines all commercial loans for completeness of documentation and
adherence to credit policy and management on a frequent basis, while the
external review is performed by an independent CPA firm and reported to
management and the Board of Directors.
The following table sets forth information summarizing the composition of the
loan portfolio at the dates indicated:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------------
1995 1994 1993 1992 1991
------------- ------------- ------------ ------------ ------------
% OF % OF % OF % OF % OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
------- ----- ------- ----- ------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate
Construction........... 5,084 4.4% 6,764 6.3% 5,276 5.9% 3,550 4.9% 2,333 4.0%
Real Estate Mortgage:
Residential............ 31,234 26.8% 23,860 22.2% 14,240 15.9% 9,537 13.1% 9,344 16.1%
Commercial............. 10,749 9.2% 17,300 16.1% 15,017 16.7% 15,318 21.0% 13,723 23.7%
------- ----- ------- ----- ------ ----- ------ ----- ------ -----
Total Real Estate....... 47,067 40.4% 47,924 44.6% 34,533 38.5% 28,405 39.0% 25,400 43.9%
Commercial & Other...... 62,796 54.0% 53,317 49.6% 50,939 56.8% 41,646 57.2% 30,793 53.2%
Consumer Installment.... 6,523 5.6% 6,328 5.9% 4,252 4.7% 2,753 3.8% 1,713 3.0%
------- ----- ------- ----- ------ ----- ------ ----- ------ -----
Total Gross Loans....... 116,386 100.0% 107,569 100.0% 89,724 100.0% 72,804 100.0% 57,906 100.0%
Deduct:
Deferred loan fees..... 102 168 151 152 9
Allowance for loan
losses................ 1,173 986 792 850 705
------- ------- ------ ------ ------
Total Deductions........ 1,275 1,154 943 1,002 714
------- ------- ------ ------ ------
Total loans, net........ 115,111 106,415 88,781 71,802 57,192
======= ======= ====== ====== ======
</TABLE>
48
<PAGE>
Loan Maturities. The following table sets forth at December 31, 1995, loans
by scheduled maturity. Loans maturing after one year are further distinguished
between fixed and adjustable interest rates.
<TABLE>
<CAPTION>
WITHIN 1 TO 5 AFTER
ONE YEAR YEARS 5 YEARS TOTAL
-------- ------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial & Other............................. 21,979 30,142 10,675 62,796
Real Estate Construction....................... 3,406 1,576 102 5,084
Real Estate Mortgage:
Residential.................................. 6,785 14,067 10,382 31,234
Commercial................................... 2,902 6,767 1,080 10,749
Consumer Installment........................... 2,153 3,523 847 6,523
------ ------ ------ -------
Total Gross Loans.............................. 37,225 56,075 23,086 116,386
Deferred loan fees............................. (102)
Allowance for loan losses...................... (1,173)
-------
115,111
=======
Loans maturing after one year:
Fixed interest rates........................... 22,215 6,763
Floating or adjustable interest rates.......... 33,860 16,323
------ ------
Total.......................................... 56,075 23,086
====== ======
</TABLE>
YIELDS EARNED AND RATES PAID
The following tables set forth certain information relating to the categories
of ENB's interest-earning assets and interest-bearing liabilities for the
periods indicated. All yield and rate information is calculated on an
annualized basis. Net interest margin is net interest income divided by average
interest-earning assets. Non-accrual loans are included in asset balances for
the appropriate periods, whereas recognition of interest on such loans is
discontinued and any remaining accrued interest receivable is reversed, in
conformity with federal regulations. The yields and net interest margins
appearing in the following tables have been calculated on a pre-tax basis.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1995 1994 1993
----------------------- ----------------------- -----------------------
AVERAGE YIELD AVERAGE YIELD AVERAGE YIELD
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ----- ------- -------- ----- ------- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Investments and
interest-bearing
deposits, taxable..... 22,809 1,275 5.59% 22,796 1,117 4.90% 15,315 1,118 7.30%
Investments--tax-
exempt................ 901 32 3.55% 898 29 3.23% 913 76 8.32%
Loans.................. 113,295 10,908 9.63% 97,423 8,407 8.63% 86,085 6,293 7.31%
------- ------ ---- ------- ----- ---- ------- ----- ----
Total interest-earning
assets................. 137,005 12,215 8.92% 121,117 9,553 7.89% 102,313 7,487 7.32%
======= ====== ==== ======= ===== ==== ======= ===== ====
Interest-bearing
liabilities:
Deposits............... 106,708 5,122 4.80% 95,799 3,238 3.38% 84,135 2,625 3.12%
Federal funds
purchased............. 2,177 133 6.11% 2,075 72 3.46% 909 32 3.52%
------- ------ ---- ------- ----- ---- ------- ----- ----
Total interest-bearing
liabilities............ 108,885 5,255 4.83% 97,874 3,310 3.38% 85,044 2,657 3.12%
======= ====== ==== ======= ===== ==== ======= ===== ====
Excess of interest-
earning assets over
interest-bearing
liabilities............ 28,119 23,243 17,269
======= ======= =======
Net interest income..... 6,960 6,243 4,830
====== ===== =====
Interest rate spread.... 4.09% 4.51% 4.19%
==== ==== ====
Net Interest Margin..... 5.08% 5.15% 4.72%
==== ==== ====
Ratio of interest-
earning assets to
interest-bearing
liabilities............ 125.82% 123.75% 120.31%
======= ======= =======
Loan fees included in
interest on loans...... 517 516 518
====== ===== =====
</TABLE>
49
<PAGE>
RATE/VOLUME ANALYSIS
The table below sets forth certain information regarding changes in interest
income and interest expense of ENB for the periods indicated. For each category
of interest-earning assets and interest-bearing liabilities, information is
provided on the part of the overall change attributable to (1) changes is
volume (changes in volume multiplied by the old rate); (2) changes in rates
(changes in rate multiplied by the old volume); and (3) changes in rate-volume
(changes in rate multiplied by the change in volume). The net change
attributable to both volume and rate, which cannot be segregated, has been
allocated proportionately to changes due to volume and changes due to rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER 31, 1993
VS. YEAR ENDED DECEMBER 31, 1994 VS. YEAR ENDED DECEMBER 31, 1993 VS. YEAR ENDED DECEMBER 31, 1992
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
---------------------------------- ----------------------------------- -------------------------------------
VOLUME RATE NET VOLUME RATE NET VOLUME RATE NET
---------------------- ---------- ------------ ---------- ---------- ------------ ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans............ 1,527 974 2,501 829 1,285 2,114 (374) 110 (264)
Investments--
taxable......... 6 152 158 546 (547) (1) (60) 3 (57)
Investments--tax-
exempt.......... 2 1 3 (2) (45) (47) 1,495 (417) 1,078
---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- -----------
Total Interest
Income:.......... 1,535 1,127 2,662 1,373 693 2,066 1,061 (304) 757
Interest Expense:
Deposits......... 400 1,484 1,884 364 249 613 (5) (251) (256)
Federal funds
purchased....... 3 58 61 41 (1) 40 7 (4) 3
---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- -----------
Total Interest
Expense:......... 403 1,542 1,945 405 248 653 2 (255) (253)
---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- -----------
Net Interest
Income
(Expense)........ 1,132 (415) 717 968 445 1,413 1,059 (49) 1,010
========== ========== ========== ========== ========== ========== =========== ========== ===========
</TABLE>
INVESTMENTS
Investments consist of debt securities primarily of the U.S. Treasury and
agencies of the federal government, and shares in a bond mutual fund which
invests primarily in debt obligations of agencies of the federal government.
The entire portfolio is classified as available for sale, to allow management
the flexibility to manage liquidity and meet asset-liability management goals.
The investment portfolio had a weighted average yield of 5.6% at December 31,
1995 (not adjusted for the tax equivalent yield on tax-exempt municipal bonds).
At December 31, 1995, investments with a carrying value of $6.2 million were
pledged to secure public deposits, or for other purposes as required by law.
Investments are reported at fair value, with an unrealized loss, net of tax, on
investments available for sale totaled $69,000 and $573,000 at December 31,
1995 and 1994, respectively. Approximately 73.5% of investments available for
sale at December 31, 1995 consisted of U.S. Treasury securities and obligations
of U.S. Government agencies. This unrealized loss is carried as a separate
component of capital. This carrying loss varies with conditions of the bond
market, and management does not currently plan to take actions which would
result in the realization of significant gains or losses on the sale of
investments.
As of December 31, 1995, other investments consisted of ENB's stock in the
Federal Reserve Bank and the Federal Home Loan Bank, in the amounts ENB is
required to maintain as a member of these institutions.
ENB's investment policy places limitations on the types of investments and
maximum maturities of investments held in its portfolio. Generally, municipal
bonds must be rated BAA or higher by an independent rating service.
Additionally, investments which do not meet the Federal Financial Institution
Examination Council's high-risk security test are not considered acceptable
unless the investment clearly limits interest rate risk. A collateralized
mortgage obligation held in ENB's available for sale portfolio at a carrying
value of $490,000 was considered "high risk" based on this test. ENB does not
engage in interest rate swaps, futures contracts, or the purchase or issuance
of calls or options.
50
<PAGE>
Investment Portfolio. The following table sets forth the carrying value and
fair market value of ENB's investments and the designated category within the
investment portfolio.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994 1993
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Held to maturity..................................... 0 0 0
Available for sale
U. S. Treasury securities............................ 6,293 6,394 5,635
U. S. Government Agency securities................... 7,428 7,882 10,580
Municipal bonds...................................... 912 886 918
Mortgage-backed securities........................... 2,053 2,101 3,042
------ ------ ------
Total debt securities.............................. 16,686 17,263 20,175
Bond mutual fund shares.............................. 1,961 1,935 1,988
------ ------ ------
Total investments available for sale................. 18,647 19,198 22,163
------ ------ ------
Other investments
Federal Reserve Bank stock........................... 232 232 231
Federal Home Loan Bank stock......................... 415 355 254
------ ------ ------
Total other investments.............................. 647 587 485
Total investments.................................. 19,294 19,785 22,648
====== ====== ======
</TABLE>
51
<PAGE>
Investment Maturities at December 31, 1995
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
---------------------------
AMORTIZED FAIR YEAR-END
COST VALUE YIELD (1)
--------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
U.S. Treasury securities
Within 1 year.............................. $ 1,017 $ 1,020 5.40%
1 to 5 years............................... 5,251 5,273 5.49%
5 to 10 years.............................. 0 0 --
Over 10 years.............................. 0 0 --
------- ------- ----
Total...................................... $ 6,268 $ 6,293 5.47%
U.S. Government Agency securities
Within 1 year.............................. $ 2,998 $ 2,988 4.52%
1 to 5 years............................... 4,506 4,439 4.60%
5 to 10 years.............................. 0 0 --
Over 10 years.............................. 0 0 --
------- ------- ----
Total...................................... $ 7,504 $ 7,427 4.57%
Municipal bonds
Within 1 year.............................. $ 565 $ 564 3.55%
1 to 5 years............................... 350 347 3.60%
5 to 10 years.............................. 0 0 --
Over 10 years.............................. 0 0 --
------- ------- ----
Total...................................... $ 915 $ 911 3.57%
Adjustable rate mortgage-backed securities
Within 1 year.............................. 0 0 --
1 to 5 years............................... 0 0 --
5 to 10 years.............................. 226 223 5.81%
Over 10 years.............................. 888 870 6.23%
------- ------- ----
Total...................................... $ 1,114 $ 1,093 6.14%
Fixed rate mortgage-backed securities
Within 1 year.............................. $ 844 $ 861 7.01%
1 to 5 years............................... 0 0 --
5 to 10 years.............................. 0 0 --
Over 10 years.............................. 0 0 --
------- ------- ----
Total...................................... $ 844 $ 861 7.01%
Other securities
Within 1 year.............................. $ 0 $ 0 --
1 to 5 years............................... 0 0 --
5 to 10 years.............................. 100 100 6.60%
Over 10 years.............................. 0 0 --
Total...................................... 100 100 6.60%
------- ------- ----
Total debt securities........................ $16,745 $16,685 5.11%
======= ======= ====
</TABLE>
- --------
(1) Computed on a pre-tax basis. Balance utilized in computing yield is
amortized cost.
ASSET QUALITY
During 1995, asset quality continued to improve. Net charge-offs to average
net loans was a negative 0.02%, due to net recoveries in 1995, compared to net
charge-offs of 0.07% in 1994. The allowance for loan losses to net loans was
1.00% at the end of 1995, compared to 0.92% at the end of 1994. Coverage of
non-performing
52
<PAGE>
loans by the loan loss reserve was 255.0% at the end of 1995, compared to 82.2%
at the end of 1994. Management performs a detailed review of the loan portfolio
at least quarterly to ensure the adequacy of the allowance for loan losses.
Nonperforming Assets. Nonperforming assets include non-accrual loans and
loans 90 days or more past due and still accruing, and other real estate owned.
Loans are placed on non-accrual status when, in the judgement of management,
the probability of collection of interest is deemed to be insufficient to
warrants further accrual. When a loan is placed on non-accrual status,
previously accrued but unpaid interest is deducted from interest income. Loans
delinquent 90 days or more as to principal or interest must be placed on non-
accrual status and classified as substandard, unless otherwise specifically
waived by the Loan Committee of the Board of Directors. Nonperforming assets
totaled $715,000 at the end of 1995, compared to $695,000 at the end of 1994.
This amounted to 0.58% and 0.66% of net loans plus other real estate owned at
the respective year ends.
Other real estate owned represents property which ENB has retained in
satisfaction of a nonperforming loan. This property is transferred to the other
real estate category at cost which is the estimated fair value of the property
at the time of foreclosure. Subsequent to foreclosure, the property is carried
at the lesser of cost or estimated fair value less estimated costs to sell.
Costs related to maintaining these properties are charged to expense. ENB
attempts to sell its other real estate owned when this can be done under
favorable market circumstances. Other real estate owned was $255,000 at the end
of 1995, unchanged from the end of 1994.
ENTERPRISE NATIONAL BANK OF JACKSONVILLE
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
12/31/95 12/31/94 12/31/93
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Non-Accruing Loans:
Commercial & Other........................... $344 $270 $ 96
Real Estate Construction..................... 0 0 0
Real Estate Mortgage:
Residential.................................. 0 51 51
Commercial................................... 83 84 0
Consumer Installment......................... 33 35 30
---- ---- ----
Total Nonaccruing Loans...................... $460 $440 $177
Accruing Loans delinquent 90 days or more.... $ 0 $ 0 $ 0
Total other real estate...................... 255 255 328
---- ---- ----
Total non-performing loans and other real
estate...................................... $715 $695 $505
Total non-performing loans and other real
estate to total assets...................... 0.43% 0.50% 0.43%
</TABLE>
Provision and Allowance for Loan Losses. The provision for loan losses was
$166,000 in 1995, compared to $268,000 in 1994 and $120,000 in 1993. The
provision for loan losses is a charge to earnings in the current period needed
to maintain the reserve for loan losses at an adequate level. The decline in
1995 resulted from overall improvement in credit quality and the recovery of
some loans which had been charged off in prior periods. The allowance for loan
losses is in place to absorb estimated future credit losses in the loan
portfolio. ENB's process for evaluating the adequacy of the allowance involves
the identification of problem loans, the establishment of appropriate loan loss
allowance for individual identified problem loans, and a methodology for
estimating loan losses based on inherent risk in the rest of the loan
portfolio. The allowance also includes estimates based on consideration of
ENB's actual historical loss experience for loans by type, year of origination,
delinquency statistics, location of collateral property, current and projected
economic conditions, and other trends. Based on these and other considerations,
management establishes and maintains an allowance at a level which it considers
adequate to provide for possible losses. The allowance for loan losses as of
December 31, 1995 was $1,170,000 or 1.00% of net loans receivable, as compared
to $986,000, or 0.92% and $793,000 and
53
<PAGE>
0.88% of net loans receivable as of December 31, 1994 and 1993, respectively.
During 1995, ENB had net recoveries to the allowance for loan losses, because
$45,000 was recovered on loans which had previously been charged off, while
only $25,000 in charge offs were taken that year.
The following table sets forth information regarding ENB's allowance for loan
losses for the periods and at the dates indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average Loans Outstanding, Net.............. $112,307 $96,469 $80,697
Allowance at beginning of period............ 986 793 850
Charge-Offs:
Commercial & Other.......................... 5 42 186
Real Estate Construction.................... 0 0 0
Real Estate Mortgage:
Residential............................... 0 0 0
Commercial................................ 0 0 0
Consumer Installment........................ 20 86 0
-------- ------- -------
Total Charge-Offs: $ 25 $ 128 $ 186
Recoveries:
Commercial & Other.......................... $ 32 $ 44 $ 9
Real Estate Construction.................... 0 0 0
Real Estate Mortgage:
Residential............................... 0 0 0
Commercial................................ 0 0 0
Consumer Installment........................ 13 9 0
-------- ------- -------
Total Recoveries: $ 45 $ 53 $ 9
Net charge-offs (recoveries)................ (20) 75 177
Provision for loan losses charged to
operating expenses......................... 167 268 120
-------- ------- -------
Allowance at end of year.................... $ 1,173 $ 986 $ 793
Ratio of net charge-offs (recoveries) to av-
erage loans outstanding.................... (0.02)% 0.08% 0.22%
Ratio of allowance to period-end loans...... 1.00% 0.92% 0.88%
</TABLE>
The following table shows the allocation for loan losses, as of the date
indicated, to the different categories of loans within and as a percentage of
the portfolio.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------
1995 1994 1993
----------------- ----------------- -----------------
AMOUNT % OF TOTAL AMOUNT % OF TOTAL AMOUNT % OF TOTAL
------ ---------- ------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Allowance for loan
losses allocated to:
Commercial and Other.... 858 56.1% 530 53.7% 424 53.4%
Real Estate Construc-
tion................... 43 3.7% 54 5.5% 45 5.6%
Real Estate Mortgage:
Residential........... 280 23.9% 199 20.2% 119 15.0%
Commercial............ 127 10.8% 145 14.7% 126 15.9%
Consumer Installment.... 65 5.5% 58 5.9% 80 10.0%
----- ----- --- ----- --- -----
TOTAL............... 1,173 100.0% 986 100.0% 793 100.0%
===== ===== === ===== === =====
</TABLE>
54
<PAGE>
ASSET/LIABILITY MANAGEMENT
ENB's business consists primarily of deposit gathering and lending
activities. Accordingly, ENB's results of operations are affected by its
ability to manage effectively interest rate risk and maximize net interest
income. The Asset/Liability Management Committee meets regularly to review
ENB's exposure to changing interest rates and to establish general parameters
for future balance sheet structuring strategies. ENB's Asset/Liability policy
calls for the cumulative one year repricing gap to be less than 10% of earning
assets.
One measure of ENB interest rate sensitivity is its interest rate sensitivity
gap, or the difference between assets and liabilities scheduled to mature or
reprice within a specified time frame. In prior years, ENB has experienced a
positive gap, which is an excess of assets over liabilities vulnerable to
periods of falling interest rates, in that during such periods the interest
expense paid on liabilities will generally decrease more slowly than the
interest income earned on assets. Conversely, in a rising interest rate
environment, the total expense paid on liabilities will generally increase more
slowly than the interest income earned on assets.
The interest rate sensitivity gap does not measure all potential changes in
net interest income due to changes in market rates. Experience has shown that
due to competition, changes in deposit rates do not always mirror changes in
the national market rates that serve as an index for most rate sensitive
assets. Another factor that will have a significant impact on the estimate of
loan volume repricing is the expected levels of prepayments on loans in a given
rate environment.
ENB's asset/liability strategy for 1995 was to reduce the positive gap by
diversifying the loan portfolio into residential consumer loans which are less
interest rate sensitive than commercial loans. On the liability side, demand
deposit accounts, which are largely non-interest rate sensitive, were actively
promoted during 1995. As of December 31, 1995, ENB's cumulative gap for the one
year interval was estimated at negative 9.58%.
55
<PAGE>
The following table sets forth at December 31, 1995, the amounts of interest-
earning assets and interest-bearing liabilities which are anticipated by ENB to
mature or reprice in each of the periods shown. Except as stated below, the
amounts of assets and liabilities which mature or reprice during a particular
period were determined in accordance with the contractual terms of the asset or
liability. Fixed rate loans and securities are shown on the basis of estimated
annual prepayments and contractual amortization. Loans and securities with
adjustable rates are shown as being due in the period during which the interest
rates are next subject to change. ENB has assumed that savings accounts, NOW
accounts and money market accounts reprice immediately.
<TABLE>
<CAPTION>
NON-RATE
TOTAL SENSITIVE
0-3 3-6 6-12 WITHIN AND OVER
MONTHS MONTHS MONTHS ONE YEAR ONE YEAR TOTAL
------- ------- -------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans:
Commercial & Other.... $42,287 $ 1,099 $ 2,759 $ 46,145 $16,651 $ 62,796
Real Estate
Construction......... 4,785 6 12 4,803 281 5,084
Residential Mortgage.. 26,171 2,168 1,493 29,832 1,402 31,234
Commercial Mortgage... 7,005 373 112 7,490 3,259 10,749
Consumer Installment.. 855 559 1,028 2,442 4,081 6,523
Less:
Unearned fees......... (102)
Allowance for loan
losses............... (1,173)
------- ------- -------- -------- ------- --------
Total Net Loans..... $81,103 $ 4,205 $ 5,404 $ 90,712 $25,674 $115,111
Investments............. $ 3,020 $ 1,370 $ 3,542 $ 7,932 $11,362 $ 19,294
------- ------- -------- -------- ------- --------
Total interest-earning
assets:................ $84,123 $ 5,575 $ 8,946 $ 98,644 $37,036 $134,405
Interest-bearing
liabilities:
Deposits:
NOW accounts.......... $37,164 $ 37,164 $ 37,164
Money market
accounts............. 27,818 27,818 27,818
Savings accounts...... 5,953 5,953 5,953
Time deposits......... 15,586 $10,838 $ 14,158 40,582 $10,489 51,071
------- ------- -------- -------- ------- --------
Total interest
bearing deposits:.. $86,521 $10,838 $ 14,158 $111,517 $10,489 $122,006
Federal funds pur-
chased................. 0 0
------- ------- -------- -------- ------- --------
Total interest-bearing
liabilities............ $86,521 $10,838 $ 14,158 $111,517 $10,489 $122,006
------- ------- -------- -------- ------- --------
Interest rate sensitiv-
ity gap................ $(2,398) $(5,263) $ (5,212) $(12,873) $26,547
======= ======= ======== ======== =======
Cumulative interest rate
sensitivity gap........ $(2,398) $(7,661) $(12,873) $(12,873)
======= ======= ======== ========
Cumulative interest rate
sensitivity gap/total
earning assets......... (1.78%) (5.70%) (9.58%) (9.58%)
======= ======= ======== ========
</TABLE>
DEPOSITS AND OTHER SOURCES OF FUNDS
General. Deposits grew $26 million in 1995, to $153 million at the end of
1995, compared to $127 million at the end of 1994. These increases are
attributed to growth in ENB's customer base, and the opening of its third
location in late November, 1994. Money market deposits and NOW accounts
increased $13 million during 1995, rising to $65 million at the end of 1995,
from $52 million at the end of 1994. This increase is attributed to the
competitive rates and features offered by ENB on its money market products. At
the end of 1995, money market accounts represented 42% of total deposits,
compared to 41% at the end of 1994. Time deposits increased $12 million during
1995, rising to $51 million at the end of 1995, from $39 million end of 1994.
This increase is attributed to the competitive rates paid by ENB to
certificates of deposit. Time deposits represented 33% of total deposits at the
end of 1995, compared to 30% at the end of 1994.
56
<PAGE>
In addition to deposits, the sources of funds available for lending and other
business purposes include loan repayments, loan sales, Federal Funds purchased
and net income. Loan payments are a relatively stable source of funds, while
deposit inflows and outflows are influenced significantly by general interest
rates and money market conditions. Borrowings may be used on a short-term basis
to compensate for reductions in other sources, such as deposits at less than
projected levels.
Deposits. Deposits are attracted principally from within ENB's primary market
areas in Duval, St. Johns and Clay Counties, Florida. ENB offers a broad
selection of deposit instruments including demand deposit accounts, NOW
accounts, money market accounts, regular savings accounts, term certificate
accounts and retirement savings plans (such as IRA accounts). Deposit account
terms vary, with the primary differences being the minimum balance required,
the time period the funds must remain on deposit and the interest rate.
Commercial banking relationships have been emphasized to maintain demand
deposits as a high percentage of total deposits. Certificate of deposit rates
are set based on asset/liability management objectives.
Management sets the deposit rates weekly based on a review of deposit flows
for the previous week, a survey of rates among competitors and other financial
institutions in Florida, and the results of the most recent three and six month
Treasury Bill auctions.
As of December 31, 1995, ENB's deposits were represented by the various types
of checking, savings, and time deposit programs listed below:
<TABLE>
<CAPTION>
PERCENTAGE
INTEREST OF TOTAL
RATE(1) CATEGORY BALANCES DEPOSITS
-------- -------- ----------- ----------
(DOLLARS IN
THOUSANDS)
<C> <S> <C> <C>
0.00% Non-interest bearing demand............ $ 31,914 20.7%
4.00% Regular savings........................ 5,953 3.9%
3.47% Now accounts........................... 37,164 24.1%
4.27% Money Market accounts.................. 27,818 18.1%
Certificates of Deposit of $100,000 or
6.05% more................................... 34,727 22.6%
6.27% Other time deposits.................... 16,344 10.6%
-------- -----
3.96% Total Deposits......................... $153,920 100.0%
======== =====
</TABLE>
- --------
(1) Represents weighted average interest rate as of December 31, 995.
ENB's deposit portfolio does not contain a concentration of deposits from any
one depositor or related group of depositors, with the following exceptions:
the State of Florida had a certificate of deposit with ENB at December for $4
million, bearing interest at the rate of 6.15%; a local business and its
related interests had a group of certificates of deposit with the bank totaling
approximately $9.6 million, bearing a weighted average interest rate of 7.0%.
These deposits mature during 1996. Deposit activities are not materially
affected by seasonal fluctuations.
The following table presents the average balance for each deposit type and
the average rate paid on each deposit type for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
AVERAGE RATE AVERAGE RATE AVERAGE RATE
BALANCE PAID BALANCE PAID BALANCE PAID
------- ---- ------- ---- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand........... $24,391 0.0% $22,066 0.0% $22,753 0.0%
NOW accounts.......................... 27,961 3.5% 29,835 3.2% 26,188 3.0%
Money Market accounts................. 23,362 4.1% 27,598 3.0% 22,148 3.0%
Regular savings accounts.............. 5,171 4.1% 4,865 3.0% 5,281 2.9%
Certificates of Deposit............... $50,214 5.9% $33,501 4.4% $30,518 4.4%
</TABLE>
57
<PAGE>
The following table sets forth at December 31, 1995 certificates of deposit
of $100,000 or more by time remaining until maturity for the period indicated.
<TABLE>
<CAPTION>
BALANCE PERCENT OF TOTAL
------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Less than Three Months........................... $12,134 35%
Three--Twelve Months............................. 17,913 52%
More than Twelve Months.......................... 4,680 13%
------- ---
$34,727 100%
</TABLE>
Borrowings. ENB uses Federal Funds purchased from time to time to supplement
its supply of funds available for lending and to meet deposit withdrawal
requirements. Federal Funds purchased from correspondent banks are typically
unsecured and are typically purchased on an overnight basis.
ENB had no borrowings at the end of 1995 or 1994, but had borrowings of $2
million at the end of 1993. Although ENB is a member of both the Federal
Reserve Bank and the Federal Home Loan Bank, no advances have been sought from
either of these institutions, due to the short-term nature of borrowing needs
and favorable terms obtainable from correspondent banks.
The following table sets forth certain information regarding borrowings at
the end of an during the periods indicated. The averaging method used is the
average of end-of-month totals.
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Weighted average rate paid as of the date
indicated on: Federal Funds purchased...... -- -- 6.0%
<CAPTION>
YEAR ENDED DEC. 31,
--------------------------
1995 1994 1993
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of borrowings outstanding at
any month end: Federal Funds purchased..... $ 10,000 $ 8,500 $ 4,280
<CAPTION>
YEAR ENDED DEC. 31,
--------------------------
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Approximate average short-term borrowings:
Federal Funds purchased.................... $ 2,171 $ 1,820 $ 923
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Approximate weighted average rate paid
during the period indicated: Federal Funds
purchased.................................. 6.12% 3.46% 3.52%
</TABLE>
REGULATORY CAPITAL REQUIREMENTS
Current requirements of the Office of the Comptroller of the Currency
establish a minimum total risk-based capital level of 8.0% of assets for most
banks. ENB must classify its assets and certain off-balance sheet activities
into categories and maintain specified levels of capital accordingly. At the
end of 1995, ENB reported a total risk based capital level of 11.4%, compared
to 10.5% at the end of 1994. The Tier One component of this total capital
number must be at least 4.0%, and ENB's Tier One levels at the end of years
1995 and 1994 were 10.4% and 9.5%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As a nationally chartered bank, ENB is required to maintain a liquidity
reserve of up to 12% of transaction accounts, and 3% of nontransaction
accounts. This reserve may consist of cash on hand, demand deposits due
58
<PAGE>
from correspondents, demand deposits due from the Federal Reserve Bank, and
other instruments. At the end of 1995, ENB had qualifying reserves equal to $29
million, or 18% of total deposits, which is in excess of the minimum
requirements.
Principal sources of liquidity are deposits, loan principal repayments, and
maturity of investment securities. Additional sources of liquidity are
borrowings of federal funds from correspondent banks the sale of commercial
loan participations to correspondent banks, and the sale of residential
mortgage loans in the secondary market.
At the end of 1995, ENB had commitments arising from the unused portion of
commercial, consumer, and home equity lines of credit totaling $37 million,
which may be disbursed subject to certain limitations. Management believes that
the funds necessary to meet these commitments will be available.
EARNINGS
ENB had consolidated net income of $1.45 million in 1995 and $1.21 million in
1994. Fully diluted earnings per share for 1995 and 1994 were $1.33 and $1.17,
respectively. The growth in earnings are generally attributable to the growth
of the earning assets of ENB, good credit quality, and growth of service charge
revenue.
Net Interest Margin. Net interest income is the difference between the
interest earned on loans and investments and the interest paid on deposits and
borrowings. This represents the primary component of ENB's earnings. In 1995,
ENB's net interest income was $6.9 million, compared to $6.2 million in 1994.
This increase is primarily due to the increase in earning assets in 1995.
Interest rate spread is the difference between the yield on average earning
assets and the rate paid on deposits and liabilities to fund those assets. It
is affected by changes in interest rates, and changes in the average maturities
of ENB's assets and liabilities. The interest rate spread was 5.08% in 1995,
and 5.15% in 1994. The change in interest rate between 1994 and 1995 does not
represent a material fluctuation.
Other Income. Other Income declined to $700,000 in 1995 from $746,000 in
1994. This decline was due to the recognition of income from the sale of SBA
guaranteed loans and other assets in 1994 which did not recur in 1995. This
decline would have been greater if service charge revenue on deposit accounts
had not risen to $668,000 in 1995, from $606,000 in 1994. This increase was
primarily caused by growth in ENB's deposit base.
Other Expenses. Other Expenses rose 7.9% in 1995, to $5.2 million, compared
to $4.8 million in 1994. The largest single component of this increase was a
rise in data processing expenses of $107,000, to $212,000 in 1995 from $105,000
in 1994. This was a result of ENB's conversion to a new and more modern
computer system to handle all significant areas of ENB's accounting and
transactions with its customers. This conversion is also the primary reason for
the increase in equipment costs of $31,000, to $298,000 in 1995 from $267,000
in 1994. ENB also increased spending in the category of marketing and
advertising by $53,000, to $151,000 in 1995 from $98,000 in 1994. Personnel
costs rose $66,000, to $2,806,000 in 1995 from $2,740,000 in 1994. This
increase amounts to only 2.4%, and reflects management's efforts to contain
increases in staff and the cost of benefits.
DISCONTINUED OPERATIONS
ENB has no discontinued operations.
PERSONNEL
At December 31, 1995, ENB had 55 full-time employees and three part-time
employees. Employees are not represented by any collective bargaining group.
ENB believes its relations with its employees to be good.
59
<PAGE>
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1994 AND 1993
EARNING ASSETS
Earning assets consist of loans and investments which provide interest
income. Earning assets at December 31, 1994 were $128.2 million, an increase of
15.0% over the prior year end. This increase was due primarily to strong loan
growth.
LOANS
Loans increased 19.9% during 1994, and represented 83.7% of earning assets at
year-end. Most of this growth was in the commercial and residential real estate
categories. Loans showed a net increase of $17.9 million in 1994, compared to
$16.9 million in 1993. At the end of 1994, approximately 77% of the loan
portfolio is subject to repricing annually or more frequently.
INVESTMENTS
Investments consist of debt securities, primarily of the U.S. Treasury and
agencies of the federal government, and shares in a bond mutual fund which
invests primarily in debt obligations of agencies of the federal government.
The entire portfolio was classified as available for sale, to allow management
the flexibility to manage liquidity and meet asset-liability management goals.
The investment portfolio had a weighted average yield of 5.2% at December 31,
1994 (not adjusted for the tax equivalent yield on tax-exempt municipal bonds).
At December 31, 1994, investments with a carrying value of $10.3 million were
pledged to secure public deposits, or for other purposes as required by law.
Investments were reported at fair value, with an unrealized loss, net of tax
effect, of $573,000 at December 31, 1994. This unrealized loss is carried as a
separate component of capital. This carrying loss varies with conditions of the
bond market, and management does not currently plan to take actions which would
result in the realization of significant gains or losses on the sale of
investments.
ASSET QUALITY
During 1994, asset quality remained good. Net charge-offs to average net
loans were 0.07%, compared to net charge-offs of 0.22% in 1993. The allowance
for loan losses to net loans was 0.92% at the end of 1994, compared to 0.88% at
the end of 1993. Coverage of non-performing loans by the loan loss reserve was
82.2% at the end of 1994, compared to 443.0% at the end of 1993.
Nonperforming Assets. Nonperforming assets include non-accrual loans and
loans 90 days or more past due and still accruing, and other real estate owned.
Nonperforming assets totaled $695,000 at the end of 1994, compared to $177,000
at the end of 1993. This amounted to 0.66% and 0.56% of net loans plus other
real estate owned at the respective year ends. Other real estate owned was
$255,000 at the end of 1994, down $73,000, or 22% from $328,000 at the end of
1993.
Provision and Allowance for Loan Losses. The provision for loan losses was
$268,000 in 1994, compared to $120,000 in 1993 and $303,000 in 1992. The
provision for loan losses is a charge to earnings to the current period needed
to maintain the reserve for loan losses at an adequate level. The increase in
1994 resulted from significant growth in the loan portfolio. The allowance for
loan losses was increased to $986,000 at the end of 1994, from $793,000 at the
end of 1993.
DEPOSITS AND OTHER SOURCES OF FUNDS
ENB's primary lending and investment funding source is deposits. Borrowings
represent a secondary source of funding.
60
<PAGE>
Deposits. Deposits grew $21 million in 1994, to $127 million at the end of
1994, compared to $106 million at the end of 1993. These increases are
attributed to growth in ENB's customer base. Demand deposits increased $13
million during 1944, rising to $32 million at the end of 1994, from $19 million
at the end of 1993. This increase is attributed to growth in ENB's commercial
customer base. At the end of 1994, demand deposits represented 25% of total
deposits, compared to 17% at the end of 1993.
Time deposits increased $10 million during 1994, rising to $39 million at the
end of 1994, from $29 million at the end of 1993. This increase is attributed
to the competitive rates paid by ENB on certificates of deposit. Time deposits
represented 30% of total deposits at the end of 1994, compared to 27% at the
end of 1993.
Borrowings. Borrowings by ENB consist of overnight borrowings of federal
funds from correspondent banks at variable rates of interest. ENB had no
borrowings at the end of 1994, but was borrowing $2 million at the end of 1993.
Although ENB is a member of both the Federal Reserve Bank and the Federal Home
Loan Bank, no advances have been sought from either of these institutions, due
to the short-term nature of borrowing needs and favorable terms obtainable from
correspondent banks.
REGULATORY CAPITAL REQUIREMENTS
Current requirements of the Office of the Comptroller of the Currency
establish a minimum total risk-based capital level of 8.0% of assets for most
banks. ENB must classify its assets and certain off-balance sheet activities
into categories and maintain specified levels of capital accordingly. At the
end of 1994, ENB reported a total risk based capital level of 10.5%, compared
to 10.7% at the end of 1993. The Tier One component of this total capital
number must be at least 4.0%, and ENB's Tier One levels at the end of years
1994 and 1993 were 9.5% and 9.8%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As a nationally chartered bank, ENB is required to maintain a liquidity
reserve of up to 12 percent of transaction accounts, and 3 percent of
nontransaction accounts. This reserve may consist of cash on hand, demand
deposits due from correspondents, demand deposits due from the Federal Reserve
Bank, and other instruments. At the end of 1994, ENB had qualifying reserves
equal to $9 million, or 7% of total deposits, which is in excess of the minimum
requirements.
EARNINGS
ENB had consolidated net income of $1.21 million in 1994 and $1.00 million in
1993. Fully diluted earnings per share for 1994 and 1993 were $1.17 and $0.96,
respectively. The growth in earnings is generally attributable to the growth of
the earning assets of ENB, good credit quality, and growth of service charge
revenue. In 1993, ENB recognized a gain of $55,000 from the cumulative effect
of an accounting change.
Net Interest Margin. Net interest income is the difference between the
interest earned on loans and investments and the interest paid on deposits and
borrowings. This represents the primary component of ENB's earnings. In 1994,
ENB's net interest income was $6.2 million, compared to $4.8 million in 1993.
This increase is primarily due to the increase in earning assets in 1994.
Interest rate spread is the difference between the yield on average earning
assets and the rate paid on deposits and liabilities to fund those assets. It
is affected by changes in interest rates, and changes in the average maturities
of ENB's assets and liabilities. The interest rate spread was 5.15% in 1994,
and 4.72% in 1993. The increase in spread is primarily due to an increase in
general interest rates in 1994.
Other Income. Other income rose to $746,000 in 1994 from $669,000 in 1993.
This increase was due primarily to the recognition of income from the sale of
SBA guaranteed loans and other assets in 1994 which did not occur in 1993. This
rise was partially offset by a decline in net gains on the sale of investment
securities, to zero in 1994 from $87,000 in 1993. This decrease was primarily
because ENB sold no investment securities in 1994.
61
<PAGE>
Other Expenses. Other expenses rose 23.8% in 1994, to $4.8 million, compared
to $3.9 million in 1993. The largest single component of this increase was a
rise in personnel costs from $2.1 million in 1993 to $2.7 million in 1994. This
was a result of increased staffing necessary to accommodate the growth of ENB,
and to open a new branch. ENB also increased spending in the category of
marketing and advertising by $45,000, to $98,000 in 1994 from $53,000 in 1993.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
SUMMARY
The purpose of this discussion is to address any significant events or
material changes in the operations or financial condition of ENB National Bank
and Subsidiaries (collectively, "ENB") from December 31, 1995 through June 30,
1996, and any known material subsequent events or uncertainties.
Financial information for June 30, 1996 and the six months ended June 30,
1996 and 1995 are unaudited.
OPERATIONS
ENB's consolidated net income for the six months ended June 30, 1996 was
$847,000, compared to $470,000 for the same period in 1995, an increase of
$377,000. The primary reason for the overall increase was a rise in net
interest income of $369,000, to $3,702,000 in 1996, compared to $3,333,000 for
the same period in 1995. The increase in net interest income is primarily due
to a higher level of earning assets in 1996. ENB also posted higher noninterest
income and slightly lower noninterest expenses in 1996 than 1995. These factors
combined to produce an outstanding first half.
FINANCIAL CONDITION
ENB's total assets decreased $5 million, ending the interim period at $161
million, down from $166 million at year end. This is primarily due to a small
runoff of ENB's deposits which occurs each January. ENB's customer base
consists largely of business owners and professionals, some of whom draw out
bonuses from their firms immediately after year-end. Deposits at June 30, 1996
were $143 million, down from $153 million at year end, reflecting this
occurrence. Historically, ENB enjoys significant deposit growth in the third
and fourth quarters of each year. Net loans increased $12 million, rising to
$127 million at June 30, 1996 from $115 million at year end. This is due to
very strong loan demand in ENB's market area and a favorable response by the
market to increased business development efforts by ENB. Credit quality
remained high, with nonperforming loans totaling $24,000 at June 30, 1996, and
other real estate owned at $287,000. For the six months ended June 30, 1996,
ENB had $108,000 in net charge-offs.
SUBSEQUENT EVENTS
The only reportable subsequent event was ENB's execution, on July 31, 1996,
of a definitive agreement to be acquired by and merge into Compass Bank.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Compass' Board of Directors appointed KPMG Peat Marwick LLP as independent
auditors for Compass for the year ending December 31, 1996. KPMG Peat Marwick
LLP has served as Compass' independent auditors continuously since 1971.
Compass has been advised by KPMG Peat Marwick LLP that KPMG Peat Marwick LLP
has no direct financial interest or any material indirect financial interest in
Compass other than arising from that firm's employment as auditor for Compass.
62
<PAGE>
Deloitte & Touche LLP served as independent auditors for ENB for the year
ending December 31, 1995. Deloitte & Touche LLP has served as ENB's independent
auditors continuously since its commencement of operations on August 31, 1987.
ENB has been advised by Deloitte & Touche LLP that Deloitte & Touche LLP has
no direct financial interest or any material indirect financial interest in ENB
other than arising from that firm's employment as auditor for ENB.
EXPERTS
The consolidated financial statements of Compass as of December 31, 1995 and
for each of the years in the three-year period ended December 31, 1995, have
been incorporated herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP
covering the December 31, 1995 and 1994 consolidated financial statements
refers to changes in the methods of accounting for income taxes and certain
investment securities.
The consolidated financial statements of ENB included in this Proxy
Statement/Prospectus as of December 31, 1995 and for each of the years in the
three-year period ended December 31, 1995, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report which appears
elsewhere in the Proxy Statement/Prospectus, and are included in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
LEGAL OPINIONS
Jerry W. Powell, Esquire, General Counsel, Secretary and an employee of
Compass, has rendered an opinion concerning the validity of the securities
being offered pursuant to this Proxy Statement/Prospectus and certain other
matters. As of September 30, 1996, Mr. Powell was the beneficial owner of an
aggregate of approximately 55,494 shares of Compass Common Stock. Balch &
Bingham is expected to issue its opinion to Compass at Closing that, among
other things, the qualification of the Merger as a "reorganization" within the
meaning of Section 368(a) of the Code, and the receipt by Compass of its
opinion as to such federal income tax consequences of the Merger is a condition
to the Closing. Igler & Dougherty, P.A. and Balch & Bingham are also expected
to render legal opinions as to certain matters acceptable to ENB and Compass,
respectively.
INDEMNIFICATION
Compass' Bylaws contain provisions similar to those of Section 145 of the
DGCL, which authorize Compass to indemnify its officers, directors, employees
and agents to the full extent permitted by law. SEE "COMPARISON OF RIGHTS OF
SHAREHOLDERS OF ENB AND COMPASS--CERTAIN DIFFERENCES BETWEEN THE CORPORATION
LAWS OF THE NBA AND DELAWARE AND CORRESPONDING CHARTER AND BY-LAW PROVISIONS--
LIMITATION OF LIABILITY AND INDEMNIFICATION".
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Compass, Compass
has been informed that in the opinion of the Commission, such indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.
OTHER MATTERS
ENB's Board of Directors does not know of any matters to be presented at the
Special Meeting other than those set forth above. If any other matters are
properly brought before the Special Meeting or any adjournment thereof, the
enclosed Proxy will be voted in accordance with the recommendations of ENB's
Board of Directors unless "Authority Withheld" is indicated in the appropriate
box on the Proxy.
63
<PAGE>
INDEX TO FINANCIAL STATEMENTS
of
ENTERPRISE NATIONAL BANK OF JACKSONVILLE
- --------------------------------------------------------------------------------
Page
----
1. Independent Auditors' Reports regarding the December 31, 1995 and
1994 Consolidated Financial Statements F-2
2. Selected Financial Data for the five years ended December 31, 1995 F-3
3. Consolidated Balance Sheets for the years ended December 31, 1995
and 1994 F-4
4. Consolidated Statements of Income for the three years ended
December 31, 1995 F-6
5. Consolidated Statements of Cash Flows for the three years ended
December 31, 1995 F-7
6. Consolidated Statements of Shareholders' Equity for the three
years ended December 31, 1995 F-8
7. Notes to Consolidated Financial Statements F-8
8. Consolidated Balance Sheets as of June 30, 1996 (Unaudited) F-16
9. Consolidated Statements of Income for the Three Months and
Six Months Ended June 30, 1996 and 1995 (Unaudited) F-17
10. Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1996 and 1995 (Unaudited) F-18
11. Consolidated Statement of Shareholder's Equity for the six
months ended June 30, 1996 F-19
12. Notes to Unaudited Financial Statements F-20
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Enterprise National Bank of Jacksonville
Jacksonville, Florida
We have audited the accompanying consolidated balance sheets of Enterprise
National Bank of Jacksonville and subsidiaries (the "Bank") as of December 31,
1995 and 1994, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Enterprise National Bank of Jacksonville and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
February 16, 1996
F-2
<PAGE>
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(000's omitted, except per share data) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data
Years Ended December 31,
Net interest income $ 6,960 $ 6,243 $ 4,830 $ 3,820 $ 3,124
Provision for loan losses (167) (268) (120) (303) (425)
Non-interest income 700 746 670 603 498
Non-interest expense (5,214) (4,829) (3,900) (3,275) (2,851)
Income tax expense, net of
extraordinary item (822) (677) (533) (161) (72)
Cumulative effect of accounting change 55
Net income 1,457 1,215 1,002 684 274
Net income per common share (1) 1.33 1.17 .96 .69 .36
---------------------------------------------------
Balance Sheet Data
Average for the years ended December 31,
Total assets $144,616 $126,926 $110,878 $ 93,853 $79,367
Earning assets 137,005 121,117 102,313 87,505 75,695
Loans, net of deferred loan fees 112,307 96,469 80,697 65,275 54,045
Non-interest-bearing demand deposits 24,132 20,386 16,664 15,074 8,170
Total deposits 131,081 117,819 99,585 84,288 70,861
---------------------------------------------------
At December 31,
Total assets $166,864 $138,474 $118,610 $103,224 $84,482
Earning assets 134,405 128,200 111,429 96,249 78,761
Loans, net of deferred loan fees 116,284 107,401 89,573 72,653 57,897
Allowance for loan losses 1,173 986 793 850 706
Non-interest-bearing demand deposits 31,914 32,629 19,709 17,577 12,570
Total deposits 153,921 127,865 106,888 92,283 76,293
Shareholders' equity 11,741 9,757 9,145 8,063 7,375
---------------------------------------------------
</TABLE>
(1) Net income per share includes common stock outstanding plus the dilutive
effect of common stock equivalents.
This statement has not been reviewed, or confirmed for accuracy or relevance by
the Office of the Comptroller of the Currency.
F-3
<PAGE>
ENTERPRISE NATIONAL BANK OF JACKSONVILLE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks $ 29,280,856 $ 6,989,663
Federal funds sold 2,000,000
------------ ------------
Total cash and cash equivalents 29,280,856 8,898,663
Investment securities:
Investments available for sale (Amortized cost
of $18,745,339 and $20,096,555) 18,646,486 19,198,843
Other investments 647,750 586,550
------------ ------------
Total investment securities 19,294,236 19,785,033
Loans:
Commercial, financial and agricultural 50,284,038 49,230,268
Real estate - construction 5,083,914 6,764,306
Real estate - mortgage 41,983,067 41,159,934
Installment 6,522,846 6,327,794
Other 12,511,927 4,086,537
------------ ------------
Total loans 116,385,792 107,568,839
Less deferred loan fees (101,577) (167,544)
Less allowance for loan losses (1,173,142) (986,209)
------------ ------------
Net loans 115,111,073 106,415,086
Other real estate owned 255,209 255,209
Properties and equipment, net 1,270,698 1,371,760
Accrued income 998,453 911,326
Deferred income taxes 338,352 599,309
Other assets 315,227 237,962
------------ ------------
Total Assets $166,864,104 $138,474,348
============ ============
</TABLE>
(See notes to consolidated financial statements)
F-4
<PAGE>
ENTERPRISE NATIONAL BANK OF JACKSONVILLE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Liabilities:
Deposits:
Non-interest-bearing demand $ 31,914,322 $ 32,629,320
Interest-bearing demand 64,982,448 52,006,329
Regular savings 5,953,240 5,110,476
Time, $100,000 and over 34,726,505 21,601,226
Other time 16,344,453 16,517,718
------------ ------------
Total deposits 153,920,968 127,865,069
Accrued interest payable 718,706 293,763
Income taxes payable 83,998 66,643
Other liabilities 399,585 492,004
------------ ------------
Total liabilities 155,123,257 128,717,479
------------ ------------
Commitments (Note 7)
Shareholders' Equity:
Common stock, $5 par value; 3,000,000 shares
authorized; 761,508 and 759,308 shares
issued and outstanding 3,807,540 3,796,540
Additional paid-in capital 3,962,793 3,950,213
Retained earnings 4,040,075 2,583,186
Unrealized loss on investment securities, net (69,561) (573,070)
------------ ------------
Total shareholders' equity 11,740,847 9,756,869
------------ ------------
Total Liabilities and Shareholders' Equity $166,864,104 $138,474,348
============ ============
</TABLE>
(See notes to consolidated financial statements)
F-5
<PAGE>
ENTERPRISE NATIONAL BANK OF JACKSONVILLE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31
1995 1994 1993
- ----------------------------------------------------------------------------
Interest Income:
Loans, including fees $10,907,626 $8,407,614 $6,293,383
Investment securities;
Taxable 920,252 951,885 950,979
Non-taxable 32,639 32,621 13,940
Dividends 50,454 54,190 14,056
Federal funds sold 303,681 107,012 138,678
Interest bearing deposits
in banks 337 76,275
----------- ---------- ----------
Total interest
income 12,214,989 9,553,322 7,487,311
----------- ---------- ----------
Interest Expense:
Deposits:
Interest-bearing
demand 1,938,781 1,615,054 1,208,597
Regular savings 211,176 142,389 132,382
Time, $100,000 and
over 1,980,924 859,442 751,870
Other time 991,426 621,759 532,341
Federal funds purchased 132,727 71,841 32,476
----------- ---------- ----------
Total interest
expense 5,255,034 3,310,485 2,657,666
----------- ---------- ----------
Net Interest Income 6,959,955 6,242,837 4,829,645
Provision for Loan Losses 166,500 268,024 120,000
----------- ---------- ----------
Net Interest Income After
Provision For Loan Losses 6,793,455 5,974,813 4,709,645
----------- ---------- ----------
Non-Interest Income:
Service fees 668,757 606,394 481,105
Gains (losses) on sales
of investment securities,
net (6,278) 87,566
Other 37,838 139,713 101,174
----------- ---------- ----------
700,317 746,107 669,845
----------- ---------- ----------
Non-Interest Expenses:
Salaries and benefits 2,806,709 2,740,516 2,122,777
Occupancy 506,400 429,180 374,305
Data processing 212,765 105,639 92,069
Equipment 298,979 267,541 253,612
Insurance 180,595 278,845 245,666
Marketing 151,329 98,513 53,283
Legal and professional
services 162,403 119,028 82,366
Printing, stationery
and supplies 148,207 150,332 53,095
Other 747,096 638,935 622,684
----------- ---------- ----------
5,214,483 4,828,529 3,899,857
----------- ---------- ----------
Income Before Income Taxes
and Cumulative Effect of
Accounting Change 2,279,289 1,892,391 1,479,633
Provision (Benefit) for
Income Taxes:
Current 857,156 686,273 491,247
Deferred (34,756) (9,173) 41,320
----------- ---------- ----------
Total 822,400 677,100 532,567
----------- ---------- ----------
Income Before Cumulative
Effect of Accounting
Change 1,456,889 1,215,291 947,066
Cumulative Effect of
Accounting Change 55,000
----------- ---------- ----------
Net Income $1,456,889 $1,215,291 $1,002,066
----------- ---------- ----------
Net Income per Common
Share $1.33 $1.17 $0.96
----------- ---------- ----------
(See notes to consolidated financial statements)
F-6
<PAGE>
ENTERPRISE NATIONAL BANK OF JACKSONVILLE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31
1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 1,456,889 $ 1,215,291 $ 1,002,066
------------ ------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of
properties and equipment 257,258 229,319 218,416
Amortization of premiums
on investment securities - net 59,182 152,612 280,670
Provisions for losses 166,500 268,024 120,000
Increase in accrued income (87,127) (228,111) (40,701)
Deferred income taxes (34,756) (12,877) (13,680)
Increase in other assets (144,263) (114,263) (12,676)
Increase (decrease) in accrued interest payable 424,943 36,741 (7,391)
Increase (decrease) in income taxes payable 17,355 62,778 (335,210)
Increase (decrease) in other liabilities (92,419) 174,761 41,810
------------ ------------ ------------
Total adjustments 566,673 568,984 251,238
------------ ------------ ------------
Net cash provided by operating activities 2,023,562 1,784,275 1,253,304
------------ ------------ ------------
Investing Activities:
Proceeds from sales, paydowns and
maturities of investment securities 6,463,442 2,744,138 14,088,494
Purchases of investment securities (5,232,607) (979,300) (17,473,882)
Net increase in loans (8,795,487) (17,902,536) (17,097,828)
Sales of other real estate owned 72,715 177,340
Purchases of properties and equipment - net (156,196) (858,463) (136,705)
------------ ------------ ------------
Net cash used in investing activities (7,720,848) (16,923,446) (20,442,581)
------------ ------------ ------------
Financing Activities:
Proceeds from exercise of stock options 23,580 50,070
Net increase in demand deposits, NOW accounts,
money market accounts and savings accounts 13,103,885 12,624,876 15,924,464
Net increase (decrease) in time deposits 12,952,014 8,352,614 (1,319,408)
Decrease in federal funds purchased (2,000,000)
------------ ------------ ------------
Net cash provided by financing activities 26,079,479 18,977,490 14,655,126
------------ ------------ ------------
Net Increase (Decrease) In Cash and Cash Equivalents 20,382,193 3,838,319 (4,534,151)
Cash and Cash Equivalents:
At beginning of year 8,898,663 5,060,344 9,594,495
------------ ------------ ------------
At end of year $ 29,280,856 $ 8,898,663 $ 5,060,344
------------ ------------ ------------
Supplemental Disclosures:
Cash paid for:
Interest $ 4,830,091 $ 3,347,226 $ 2,665,057
------------ ------------ ------------
Income taxes $ 840,000 $ 627,200 $ 826,457
------------ ------------ ------------
Noncash investing and financing activities:
Other real estate owned transferred
to properties and equipment $ 0 $ 0 $ 81,711
------------ ------------ ------------
Unrealized gain (loss) on investment securities $ 503,509 $ (602,955) $ 29,885
------------ ------------ ------------
</TABLE>
(See notes to consolidated financial statements)
F-7
<PAGE>
ENTERPRISE NATIONAL BANK OF JACKSONVILLE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
SHAREHOLDER'S EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock Add'l Unrealized Gain(loss) Total
------------------ Paid-In Retained on Investment Shareholders'
Shares Amount Capital Earnings Securities, net Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1992 754,508 $3,772,540 $3,924,143 $ 365,829 $8,062,512
Issuance of common stock 4,800 24,000 26,070 50,070
Net income 1,002,066 1,002,066
Unrealized gain
on investment securities, net $ 29,885 29,885
-------- ---------- --------- --------- ---------- ---------
Balances, December 31, 1993 759,308 3,796,540 3,950,213 1,367,895 29,885 9,144,533
Net income 1,215,291 1,215,291
Unrealized loss on
investment securities, net (602,955) (602,955)
-------- ---------- --------- --------- ---------- ---------
Balances, December 31, 1994 759,308 3,796,540 3,950,213 2,583,186 (573,070) 9,756,869
Issuance of common stock 2,200 11,000 12,580 23,580
Net income 1,456,889 1,456,889
Unrealized gain
on investment securities, net $ 503,509 503,509
-------- ---------- --------- --------- ---------- ---------
Balances, December 31, 1995 761,508 $3,807,540 $3,962,793 $4,040,075 $ (69,561) $11,740,847
======= ========== ========== ========== ========== ===========
</TABLE>
(See notes to consolidated financial statements)
ENTERPRISE NATIONAL BANK OF JACKSONVILLE AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1. BUSINESS
Enterprise National Bank of Jacksonville (the "Bank") was incorporated and
commenced operations August 31, 1987. The Bank is a nationally chartered
bank and is subject to the regulations of the Office of the Comptroller of
the Currency ("OCC"). The Bank's wholly owned subsidiaries are: ENB
Properties, Inc., formed in 1992 to manage and market the Bank's other real
estate owned, ENB Branch No. 3, Inc., formed in 1994 to acquire the Bank's
San Jose branch, and ENB Investment Services, Inc., formed in 1994 to offer
non-deposit investment products, in conjunction with a third party
broker/dealer. All significant intercompany accounts and transactions have
been eliminated in consolidation.
The accounting and reporting Policies of the Bank and its subsidiaries
conform to generally accepted accounting principles and to general practices
within the banking industry.
2. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
a. Investment Securities - Debt securities for which the Bank has the
positive intent and ability to hold to maturity are classified as held to
maturity and reported at amortized cost. Securities are classified as
trading securities if bought and held principally for the purpose of selling
them in the near future. No investments are classified as held to maturity
or trading. All securities not classified as held to maturity or trading are
classified as available for sale and reported at fair market value with
unrealized gains and losses excluded from earnings and reported, net of tax,
as a separate component of shareholders' equity until realized. Other
investments consisting of Federal Reserve Stock
F-8
<PAGE>
ENTERPRISE NATIONAL BANK OF JACKSONVILLE AND SUBSIDIARIES
and Federal Home Loan Bank Stock are carried at cost as there is no readily
determinable fair value for such securities.
Gains and losses on sales of investment securities are recognized upon
disposition based upon the adjusted cost of the specific security.
b. Loans - Loans are stated at the principal amount outstanding, net of
deferred loan fees and an allowance for loan losses. Nonrefundable fees and
certain direct costs associated with originating or acquiring loans are
recognized over the life of related loans as an adjustment of yield.
c. Allowance for Loan Losses - The allowance for loan losses to absorb
estimated future losses is maintained by additions charged to operations as
provisions for loan losses and by loan recoveries, with actual losses
charged as reductions to the allowance. The Bank's process for evaluating
the adequacy of the allowance for loan losses has three basic elements:
first, the identification of problem loans; second, the establishment of
appropriate loan loss allowances once individual specified problem loans are
identified; and third, a methodology for identifying loan losses based on
the inherent risk in the rest of the loan portfolio.
The identification of problem loans is achieved mainly through individual
review of attributes of all large loans such as delinquency, debt coverage,
loan-to-value ratio and location of collateral property. Loss allowances are
established for specifically identified problem loans based on reviews of
current operating financial information and the fair value of the underlying
collateral. The Bank considers a loan to be impaired when, based upon
current information and events, it believes it is probable that the Bank
will be unable to collect all amounts due according to the contractual terms
of the loan agreement. The Bank's impaired loans include nonaccrual large
loans, troubled debt restructurings, and large loans more than 90 days
delinquent for which full payment of principal or interest is not expected.
The Bank bases the measurement of these impaired loans on the fair value of
the loans' underlying collateral. Installment loans, executive credit lines,
home equity loans and single family mortgage loans are collectively reviewed
for impairment. Cash receipts on impaired loans not performing according to
contractual terms are used to reduce principal balances. Impairment losses
are included in the allowance for loan losses through a charge to the
provision for loan losses. Adjustments to impairment losses due to changes
in the fair value of impaired loans' underlying collateral are included in
the provision for loan losses. Upon disposition of an impaired loan, any
related valuation allowance is reversed through a charge-off to the
allowance for loan losses.
The allowance for loan losses also includes estimates based upon
consideration of actual loss experience of loans for the past several years
by loan type, year of origination, delinquency statistics, location of
collateral property and projected economic conditions and other trends.
Based upon this process, consideration of the current economic environment
and other factors, management determines what it considers to be an
appropriate allowance for loan losses. Although the Bank believes it has a
sound basis for this estimation, actual charge-offs incurred in the future
are highly dependent upon future events, including the economics of the
areas in which the Bank lends. Charge-offs to the allowance are made when
the loan is considered uncollectible or is transferred to other real estate
owned. Recoveries are credited to the allowance.
d. Other Real Estate Owned - Property acquired by foreclosure or deed in-lieu
of foreclosure is recorded at cost which is the estimated fair value of the
property at the time the loan is foreclosed. Subsequent to foreclosure,
these properties are carried at the lower of cost or estimated fair value
minus estimated costs to sell. Costs relating to maintaining the properties
are charged to expense.
The amounts the Bank could ultimately recover from other real estate owned
could differ from the amounts used in arriving at the net carrying value of
the assets because of future market factors beyond the Bank's control or
changes in the Bank's strategy for recovering its investment.
e. Properties and Equipment - Properties and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation expense for
furniture, fixtures and equipment is computed on the straight-line method
over the estimated useful lives of 5 to 7 years. Leasehold improvements are
amortized over the shorter of their estimated useful lives or the remaining
life of the lease. Depreciation expense for building is computed on the
straight-line basis over the estimated useful life of 39 years. Maintenance
and repairs are charged to expense as incurred.
f. Revenue Recognition - Interest income on loans is accrued based on the
outstanding daily balances. If, as a result of loan evaluation procedures,
it is determined that collectibility of future interest on a particular loan
is questionable, that loan is placed on a non-accrual status. Interest
previously accrued but uncollected on such loans is charged against current
income when the receivable is estimated to be uncollectible. Interest income
on non-accrual loans is recognized only as received.
F-9
<PAGE>
g. Income Taxes - The Bank used an asset and liability approach to
financial reporting for income taxes. Under this method, deferred tax
assets and liabilities are recognized based on differences between
financial statement and tax bases of assets and liabilities using
presently enacted tax rates.
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and tax basis of assets and liabilities.
The Bank adopted Statement No. 109 of the Financial Accounting Standards
Board ("Accounting for Income Taxes") in 1993 and has reported the
cumulative effect of the change in method of accounting for income taxes
as of January 1, 1993 in the consolidated statements of income. The
cumulative effect of this change in accounting increased net income by
$55,000.
h. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
i. Recent Accounting Pronouncements - In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123).
SFAS 123 establishes a fair value based method of accounting for stock-
based employee compensation plans, however, it also allows companies to
continue to measure cost for such plans using the method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25). Companies that elect to
continue with the accounting under APB 25 must provide pro forma
disclosures of net income and earnings per share, as if SFAS 123 had
been applied. The accounting and disclosure requirements of SFAS 123 are
effective for the Bank for transactions entered into in 1996. The Bank
is currently evaluating its alternatives under SFAS 123 and its impact
on operating results when initially adopted is not presently known.
j. Cash and Cash Equivalents - Cash and cash equivalents include cash on
hand, cash due from banks and federal funds sold. Generally, federal
funds are sold for one day periods.
k. Off Balance Sheet Financial Instruments - The Bank is a party to off
balance sheet financial instruments in the ordinary course of business
consisting of commitments to extend credit and standby letters of
credit. Such financial instruments are recorded in the financial
statements when they become payable.
l. Reclassifications - Certain reclassifications have been made to the
comparative financial statements to conform to the presentation adopted
for 1995.
3. INVESTMENT SECURITIES
The amortized cost and related fair values of investment securities having
readily determinable fair values are summarized as follows:
<TABLE>
<CAPTION>
1995 Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- -------- -------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
agencies $13,772,097 $ 29,244 $ 81,245 $13,720,082
Mortgage-backed securities 1,958,689 16,581 21,453 1,953,817
State, county and municipal securities 914,553 2,821 911,732
Other debt securities 100,000 100,000
----------- -------- -------- -----------
Total debt securities 16,745,339 45,825 105,533 16,685,631
Mutual fund shares 2,000,000 39,145 1,960,855
----------- -------- -------- -----------
Total investments available for sale $18,745,339 $ 45,825 $144,678 $18,646,486
=========== ======== ======== ===========
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
1994 Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
agencies $14,945,521 $668,311 $14,277,210
Mortgage-backed securities 2,236,921 136,368 2,100,553
State, county and municipal securities 914,113 27,973 886,140
----------- --------- --------- -----------
Total debt securities 18,096,555 832,652 17,263,903
Mutual Fund shares 2,000,000 65,420 1,934,580
----------- --------- --------- -----------
Total investments available for sale $20,096,555 $0 $898,072 $19,198,483
=========== ========= ======== ===========
</TABLE>
The amortized cost and fair value of debt securities at December 31, 1995, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less $ 4,564,906 $ 4,553,294
Due after one year
through five years 10,121,744 10,078,520
Due after five years 100,000 100,000
Mortgage-backed securities 1,958,689 1,953,817
----------- -----------
$16,745,339 $16,685,631
=========== ===========
</TABLE>
Proceeds from the sales of investment securities for 1995, 1994 and 1993 were
$995,156, $0 and $5,711,818 respectively. Gross gains of $0, $0 and $91,308 and
gross losses of $6,278, $0 and $3,742 were realized on these sales during 1995,
1994 and 1993, respectively.
At December 31, 1995, investment securities with a carrying value of $6,276,000
were pledged to secure public deposits or for other purposes as required by law.
F-11
<PAGE>
ENTERPRISE NATIONAL BANK OF JACKSONVILLE AND SUBSIDIARIES
4. LOANS
Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 986,209 $ 792,817 $ 850,000
Provision for loan losses 166,500 268,024 120,000
Recoveries 45,343 53,300 9,289
Charge-offs (24,910) (127,932) (186,472)
---------- --------- ---------
Balance, end of year $1,173,142 $ 986,209 $ 792,817
---------- --------- ---------
</TABLE>
Loans outstanding to directors, officers and principal shareholders (owning
more than 5% of common stock) and their affiliates were approximately
$5,783,000 and $4,684,000, as of December 31, 1995 and 1994, respectively.
The loan activity for the year ended December 31, 1995 for those directors,
officers and principal shareholders and their affiliates is summarized as
follows:
<TABLE>
<S> <C>
Beginning principal balance $ 4,684,000
Loan originations 2,383,000
Principal reductions (1,284,000)
-----------
Ending principal balance $ 5,783,000
-----------
</TABLE>
The Bank's primary lending area is Northeast Florida. As of December 31,
1995 and 1994, the Bank had concentrations of credit risk in its loan
portfolio as follows:
<TABLE>
<CAPTION>
Collateral 1995 1994
---------- ----------- -----------
<S> <C> <C>
Commercial real estate $30,381,000 $34,826,000
----------- -----------
Residential real estate $37,195,000 $29,897,000
----------- -----------
Unsecured $14,107,000 $11,420,000
----------- -----------
</TABLE>
The Bank's aggregate recorded investment in impaired loans measured based
upon the fair value of the loans' underlying collateral was $459,516 and
$1,199,746 as of December 31, 1995 and 1994 which included non-accrual loans
totaling $459,516 and $440,000. Total interest foregone on these loans for
the years ended December 31, 1995, 1994 and 1993 was $33,962, $13,274 and
$3,311.
5. PROPERTIES AND EQUIPMENT
Properties and equipment as of December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land $ 342,080 $ 338,718
Building 148,885 145,149
Improvements 745,708 757,112
Furniture, fixtures and equipment 1,299,144 1,287,270
----------- -----------
2,535,817 2,528,249
Accumulated depreciation and
amortization (1,265,119) (1,156,489)
----------- -----------
$ 1,270,698 $ 1,371,760
----------- -----------
</TABLE>
F-12
<PAGE>
ENTERPRISE NATIONAL BANK OF JACKSONVILLE AND SUBSIDIARIES
6. INCOME TAXES
The Bank's provision for income taxes differs from the amount computed
by applying the statutory Federal income tax rate to pretax income for
the following reasons:
1995 1994 1993
-------- -------- --------
Tax at Federal statutory rate
of 34% $774,958 $643,413 $503,075
Increase resulting from:
State income tax (net of Federal
income tax benefit) 49,992 41,506 18,799
Other - net (2,550) (7,819) 10,693
-------- -------- --------
Total $822,400 $677,100 $532,567
======== ======== ========
The tax effect of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31, 1995 and 1994 is
presented below:
1995 1994
-------- --------
Deferred tax assets:
Allowance for loan losses $337,000 $274,570
Loan fees 0 63,047
Unrealized loss on investments
securities 29,290 325,003
Other 45,956 14,971
-------- --------
Gross deferred tax assets 412,246 677,591
Valuation allowance for deferred
tax assets 0 0
-------- --------
Net deferred tax assets 412,246 677,591
-------- --------
Deferred tax liabilities:
Prepaid expenses 56,659 61,047
Other 17,235 17,235
-------- --------
Gross deferred tax liabilities 73,894 78,282
-------- --------
Net deferred tax asset $338,352 $599,309
-------- --------
The Bank had no valuation allowance for deferred tax assets as of
January 1, 1994; therefore, there was no change in the valuation
allowance for deferred tax assets for the year ended December 31, 1994.
7. COMMITMENTS
In the normal course of business, the Bank makes various commitments
that are not presented in the accompanying consolidated financial
statements. The Bank's liability from the unused portion of consumer,
home equity and commercial lines of credit totaled approximately
$37,590,000 and $23,433,000 at December 31, 1995 and 1994. Also, the
Bank had $811,000 and $1,478,000 of standby letters of credit
outstanding at December 31, 1995 and 1994. Such commitments all include
exposure to some credit loss in the event of nonperformance of the
customer. The Bank's credit policies and procedures for credit
commitments and financial guarantees are the same as those for
extensions of credit that are recorded on the consolidated balance
sheets. Management does not believe that these commitments present any
significant liquidity risk to the Bank.
The Bank leases its Southpoint and Independent Square bank facilities
under long-term noncancelable leases with original lease terms of five
to ten years, with two five-year renewal options. Rent expense is
recognized on a straight-line basis over the term of the leases.
F-13
<PAGE>
Aggregate future minimum rental commitments for the leases are as
follows:
Years ending December 31,
------------------------
1996 $310,000
1997 175,000
--------
$485,000
--------
Rent expense amounted to approximately $324,000,$322,000 and $286,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
8. SHAREHOLDERS' EQUITY
Stock warrants - The Bank has entered into a stock warrant agreement
among the organizing shareholders of the Bank and BEI Holdings, Ltd.
and its affiliates, entitling each to purchase shares equal to the
number of shares purchased in the initial stock offering (except for the
Bank president who may purchase an additional 25,000 shares). The
subscription price is $10.25 per share. Such warrants for an aggregate
of 534,999 shares expire August 31, 1997. No warrants have been
exercised as of December 31, 1995.
Stock options - On March 15, 1988, the Bank adopted an employee
incentive stock option plan (the "Plan") which reserves an aggregate of
50,000 common shares for purchase. The Plan grants to certain key
employees (as defined) options to purchase such shares at a price not
less than the fair market value at the date of grant (the option price
is 110% of fair market value at date of grant as to optionees who hold
more than 10% of the combined voting power of all classes of stock of
such date). Generally, options granted must be exercised within ten
years from the date of grant. The Plan will terminate on December 31,
1997. A summary of stock option activity follows:
Option
Number Price
of Shares Per Share
-------- -------------
Outstanding at December 31, 1993 33,500 $10.25 - 12.50
Granted 3,500 13.90
Exercised 0
Surrendered (2,500) 11.75
-------- -------------
Outstanding at December 31, 1994 34,500 $10.25 - 13.90
6,100 15.00 - 17.00
Granted (2,200) 10.25 - 11.75
Exercised (1,300) 11.70 - 13.90
Surrendered -------- -------------
Outstanding at December 31, 1995 37,100 $10.25 - 17.00
-------- -------------
At December 31, 1995, options for the purchase of 1,392 shares were
available for future granting under this plan.
On March 21, 1995, the Bank adopted a second employee incentive stock
option plan (the "1995 Plan") which reserves an aggregate of 25,000
common shares for purchase. The terms of the 1995 Plan are substantially
the same as those of the Bank's first employee incentive stock option
plan, which was adopted March 15, 1988. At December 31, 1995, 25,000
shares were available for future granting under this plan.
9. EMPLOYEE BENEFIT PLAN
The Bank has a contributory, defined contribution 401(k) plan covering
substantially all of its employees. Employees may contribute up to 15
percent of their compensation. The Bank may make matching contributions
at the discretion of the Board of Directors. Matching contributions of
$24,959, $17,803 and $13,227, equating to 25% of the employees'
eligible contributions, were made in 1995, 1994 and 1993 respectively.
10. REGULATORY MATTERS
The Bank is required under OCC regulations to maintain minimum amounts
of capital to total "risk weighted" assets, as defined by the banking
regulators. At December 31, 1995, the Bank is required to have minimum
Tier 1 and Total capital ratios of 4.00% and 8.00%, respectively. The
Bank's actual ratios at that date were 10.40% and 11.43%, respectively.
The Bank's leverage ratio at December 31, 1995 was 7.08%.
F-14
<PAGE>
ENTERPRISE NATIONAL BANK OF JACKSONVILLE AND SUBSIDIARIES
Banking regulations limit the amount of dividends that may be paid by the
Bank. The approval of the OCC is required if the Bank desires to pay a
dividend in excess of the total of its net profits of the current year
combined with its retained net profits of the two preceding years, subject
to certain adjustments.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by the Bank using
available market information and appropriate valuation methodologies.
However, considerable judgment is required to interpret market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Bank could realize
in a current market exchange. The use of different market assumptions and/
or estimated methodologies may have a material effect on the estimated fair
value amounts.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments.
Cash and Cash Equivalents - The carrying amount is a reasonable estimate
of the fair value.
Investments - Fair value equals quoted market price, if available. If a
quoted market price is not available, fair value is estimated using quoted
market prices for similar securities.
Loans - The fair value of loans is estimated by discounting expected future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities.
Deposits - For deposits without stated maturities, the carrying amount is a
reasonable estimate of fair value. For deposits with stated maturities,
fair value is estimated using the rates currently offered for similar
deposits of similar remaining maturities.
Financial Instruments with Off-Balance-Sheet Risk - The Bank is a party to
financial instruments with off-balance-sheet risk in the normal course of
business. These financial instruments include commitments to extend
credit. Those instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the
consolidated balance sheet. The Bank's loan commitments are negotiated at
current market rates and are relatively short-term in nature and, as a
matter of policy, the Bank generally makes commitments for fixed rate loans
for relatively short-periods of time, therefore, the estimated value of the
Bank's loan commitments approximates carrying amount.
The estimated fair values of the Bank's financial instruments as of
December 31, 1995, are as follows:
Carrying Fair
Value Value
------------ ------------
Financial Assets:
Cash and cash equivalents $ 29,280,856 $ 29,280,856
Investments 19,294,236 19,294,236
Loans - net of deferred fees 116,284,215 116,394,820
------------ ------------
Total $164,859,307 $164,969,912
============ ============
Financial Liabilities:
Deposits:
Without stated maturities $102,850,010 $102,850,010
With stated maturities 51,070,958 51,365,236
------------ ------------
Total $153,920,968 $154,215,246
============ ============
F-15
<PAGE>
Enterprise National Bank and Subsidiaries
Consolidated Balance Sheets
June 30, 1996 December 31, 1995
ASSETS: (Unaudited)
--------------- -----------------
Cash and due from banks $8,143,785 $29,280,856
Investments available for sale 21,046,414 18,646,486
Other Investments 732,850 647,750
--------------- -----------------
Total investment securities 21,779,264 19,294,236
Loans:
Commercial, financial and
agricultural 61,260,735 50,284,038
Real estate - construction 4,626,426 5,083,914
Real estate - mortgage 42,053,728 41,983,067
Installment 6,742,236 6,522,846
Other 14,300,123 12,511,927
--------------- -----------------
Total loans 128,983,248 116,385,792
Less deferred loan fees (140,669) (101,577)
Less allowance for loan losses (1,161,782) (1,173,142)
--------------- -----------------
Net Loans 127,680,777 115,111,073
Other real estate owned 287,209 255,209
Properties and equipment, net 1,403,011 1,270,698
Accrued income 1,063,845 998,453
Deferred income taxes 398,251 338,352
Other assets 437,668 315,227
--------------- -----------------
TOTAL ASSETS: 161,193,810 166,864,104
=============== =================
LIABILITIES:
Deposits:
Non-interest-bearing demand $30,871,783 $31,914,322
Interest-bearing demand 57,404,774 64,982,448
Regular savings 7,188,350 5,953,240
Time, $100,000 and over 32,462,837 34,726,505
Other time 16,064,933 16,344,453
--------------- -----------------
Total Deposits 143,992,677 153,920,968
Federal funds purchased 3,700,000 --
Accrued interest payable 457,415 718,706
Income taxes payable 26,314 83,998
Other liabilities 296,140 399,585
--------------- -----------------
148,472,546 155,123,257
SHAREHOLDERS' EQUITY
Common Stock, $5 par value, 3,000,000
shares authorized, 786,608 and 761,508
shares outstanding 3,933,040 3,807,540
Additional paid-in capital 4,095,043 3,962,793
Retained earnings 4,887,154 4,040,075
Unrealized loss on investment
securities, net of tax effect (193,973) (69,561)
--------------- -----------------
12,721,264 11,740,847
--------------- -----------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY: $161,193,810 $166,864,104
=============== =================
F-16
<PAGE>
Enterprise National Bank and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $2,942,306 $2,682,272 $5,775,717 $5,236,565
Investment securities:
Taxable 284,724 224,785 606,845 479,600
Tax exempt 16,330 16,318 8,158 8,158
Federal funds sold 7,398 34,703 33,561 35,303
Interest bearing deposits in banks 1,620 0 2,165 0
---------- ---------- ---------- ----------
Total interest income 3,252,378 2,958,078 6,426,446 5,759,626
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Deposits 1,328,080 1,266,256 2,670,478 2,293,706
Federal funds purchased 30,241 6,424 53,444 132,645
---------- ---------- ---------- ----------
Total Interest Expense 1,358,321 1,272,680 2,723,920 2,426,351
---------- ---------- ---------- ----------
Net Interest Income 1,894,057 1,685,398 3,702,526 3,333,275
Provision for loan losses 61,625 73,000 97,250 131,500
---------- ---------- ---------- ----------
Net Interest Income After Provision
for Loan Losses 1,832,432 1,612,398 3,605,276 3,201,775
NON-INTEREST INCOME:
Service fees 163,929 140,031 298,353 264,421
Other 9,715 2,293 76,756 8,765
---------- ----------- ---------- ----------
Total Noninterest Income 173,644 142,324 375,109 273,186
NONINTEREST EXPENSE:
Salaries and benefits 704,894 700,040 1,418,683 1,460,891
Occupancy 104,739 115,479 215,025 226,424
Data processing 78,463 65,198 150,804 123,729
Equipment 78,699 69,990 148,274 146,856
Insurance and regulatory assessment 3,980 91,165 19,382 182,202
Marketing 26,795 31,916 59,389 69,836
Legal and professional services 42,905 99,665 126,355 149,139
Other 296,954 152,584 549,194 378,749
---------- ---------- ---------- ----------
Total Noninterest Expense 1,337,429 1,326,037 2,687,106 2,737,826
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES: 668,647 428,685 1,293,279 737,135
Provision for income taxes 218,600 152,900 446,200 266,200
---------- ---------- ---------- ----------
NET INCOME: $450,047 $275,785 $847,079 $470,935
========== ========== ========== ==========
Net Income per common share: $0.41 $0.27 $0.77 $0.45
========== ========== ========== ==========
</TABLE>
F-17
<PAGE>
Enterprise National Bank and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
6 Months Ended
June 30,
1996 1995
------------ -------------
<S> <C> <C>
Operating Activities:
Net Income $847,079 $470,935
------------ -------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization
of properties and equipment 128,506 125,899
Amortization of premiums on
investment securities-net 45,431 45,131
Provision for loan losses 97,250 131,500
Decrease (increase) in accrued income (65,392) 100,057
Deferred income taxes (59,899) 116,365
Decrease (increase) in other assets (182,459) 134,002
Decrease in accrued interest payable (261,291) (207,525)
Decrease in income taxes payable (56,784) (60,763)
Decrease (increase) in other liabilities (103,445) 92,462
------------ -------------
Total adjustments (458,083) 477,128
------------ -------------
Net cash provided by operating
activities 388,996 948,063
------------ -------------
Investing Activities:
Proceeds from sales, paydowns, and
maturities of investment securities 2,476,996 2,122,099
Purchases of investment securities (5,068,750) 0
Decrease in federal funds sold 0 300,000
Net increase in loans (12,666,954) (5,986,611)
Purchases of properties and equipment-net (260,818) (239,129)
------------ -------------
Net cash used in investing
activities (15,519,526) (3,803,641)
------------ -------------
Financing Activities
Proceeds from exercise of stock warrants
and option 257,750 4,680
Net increase (decrease) in demand
deposits, NOW accounts, money market
accounts and savings accounts (7,385,103) (11,615,870)
Net increase (decrease) in time deposits (2,579,188) 14,767,989
Increase in federal funds purchased 3,700,000 0
------------ -------------
Net cash provided by financing
activities (6,006,541) 3,156,799
------------ -------------
Net Increase (Decrease)in Cash and Cash ------------ -------------
Equivalents (21,137,071) 301,221
------------ -------------
Cash and cash equivalents:
At beginning of period 29,280,856 6,898,663
At end of period $8,143,785 $7,199,884
============ =============
Supplemental Disclosures:
Cash paid for:
Interest $1,619,612 $2,849,295
============ =============
Income taxes $216,385 $266,200
============ =============
Noncash investing and financing
activities:
Unrealized gain (loss) in investment
securities, net of tax effect ($124,412) $341,224
============ =============
</TABLE>
F-18
<PAGE>
Enterprise National Bank and Subsidiaries
Consolidated Statement of Shareholders' Equity
For the six months ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Unrealized Loss Total
------------------------ Paid - In Retained on Investment Stockholders'
Shares Amount Capital Earnings Securities, Net Equity
-------- ------------ ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995: 761,508 $3,807,540 $3,962,793 $4,040,075 ($69,561) $11,740,847
Net Income 847,079 847,079
Issuance of common stock 25,100 125,500 132,250 257,750
Unrealized loss on securities, net (124,412) (124,412)
-------- ------------ ----------- ---------- --------------- ------------
Balances, June 30 1996: 786,608 $3,933,040 $4,095,043 $4,887,154 $193,973 $12,721,264
======== ============ =========== =========== =============== =============
</TABLE>
F-19
<PAGE>
ENTERPRISE NATIONAL BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
For the Three and Six Month Periods Ended June 30, 1996 and 1995
NOTE 1 - General
The consolidated financial statements in this report have not been audited.
In the opinion of management, all adjustments necessary to present fairly the
financial position and results of operations for the interim periods have been
made. All such adjustments are of a normal recurring nature. The results of
operations are not necessarily indicative of the results of operations for the
full year or any other interim periods. For further information, refer to the
consolidated financial statements and footnotes included in the Bank's annual
report for the year ended December 31, 1995.
Note 2 - Allowance for loan losses
The activity in the allowance for loan losses for the six month period
ended June 30, 1996 is summarized as follows:
Beginning balance $1,173,142
Provision for loan losses 97,250
Charge-offs 111,800
Recoveries 3,190
----------
Ending balance $1,161,782
Note 3 - Impaired Loans
At June 30, 1996, the recorded investment in loans that are considered
impaired under generally accepted accounting principles was $219,000, of which
$31,000 were on nonaccrual status. At June 30, 1995, impaired loans totaled
$443,000, of which $426,000 were on nonaccrual status.
Note 4 - Subsequent Event
Effective July 31, 1996, the Bank executed a definitive agreement to be
acquired by and merged into Compass Bank, a wholly-owned subsidiary of Compass
Bancshares, Inc.
F-20
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Results of Operations - The Bank had net income of $450,000 for the three months
ended June 30, 1996, compared to $275,000 for the three months ended
June 30, 1995. Net income per common share for the three months ended
June 30, 1996 and 1995 was $0.41 and $0.27, respectively. The increased net
income for 1996 was due primarily to higher net interest income.
Interest Income - Interest income increased $294,000 to $3.2 million for the
three months ended June 30, 1996, from $2.9 million for the same period in 1995.
This increase was due to a higher level of interest-earning assets during the
three months ended June 30, 1996, compared to the three months ended
June 30, 1995, with most of this increase in the Bank's loan portfolio.
Interest Expense - Interest expense increased $85,000 to $1.3 million for the
three months ended June 30, 1996, from $1.2 million for the three months ended
June 30, 1995. This increase was primarily due to a higher level of
interest-bearing liabilities during the three months ended June 30, 1996,
compared to the three months ended June 30, 1995.
Provision for Loan Losses - The provision for the loan losses was $61,625 for
the three months ended June 30, 1996, down $11,375 from $73,000 for the three
months ended June 30, 1995. The allowance for loan losses increased to
$1,161,000 as of June 30, 1996 from $1,134,910 as of June 30, 1995.
Management believes the allowance at June 30, 1996 is appropriate. However,
future economic conditions and other factors affecting the level of future
charge-offs, adversely classified assets and loan loss provisions cannot be
predicted with certainty.
Noninterest Income - Noninterest income increased to $173,000 for the three
months ended June 30, 1996, from $142,000 for the three months ended June 30,
1995. This was primarily due to increased service charge revenues on deposit
accounts.
Noninterest Expense - Noninterest expense increased $11,000, to $1,337,000 for
the three months ended June 30, 1996, from $1,326,000 for the three months ended
June 30, 1995. Regulatory assessments declined $78,000, from $82,000 for the
three months ended June 30, 1995, to $4,000 for the three months ended
June 30, 1996, due to a reduction in the Bank's insurance rates by the Federal
Deposit Insurance Corporation.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Results of Operations - The Bank had net income of $847,000 for the six months
ended June 30, 1996, compared to $470,000 for the six months ended
June 30, 1995. Net income per
F-21
<PAGE>
common share for the six months ended June 30, 1996 and 1995 was $0.77 and
$0.45, respectively. The increased net income for 1996 was due primarily to
higher net interest income.
Interest Income - Interest income increased $666,000 to $6.4 million for the six
months ended June 30, 1996, from $5.8 million for the same period in 1995. This
increase was due to a higher level of interest-earning assets during the six
months ended June 30, 1996, compared to the six months ended June 30, 1995, with
most of this increase in the Bank's loan portfolio.
Interest Expense - Interest expense increased $298,000 to $2.7 million for the
six months ended June 30, 1996, from $2.4 million for the six months ended June
30, 1995. This increase was primarily due to a higher level of interest-bearing
liabilities during the six months ended June 30, 1996, compared to the six
months ended June 30, 1995.
Provision for Loan Losses - The provision for loan losses was $97,250 for the
six months ended June 30, 1996, down $34,250 from $131,500 for the six months
ended June 30, 1995. Net charge offs for the six months ended June 30, 1996
totaled $108,000, compared to net recoveries of $17,000 for the same period in
1995.
Noninterest Income - Noninterest income increased to $375,000 for the six months
ended June 30, 1996, from $273,000 for the six months ended June 30, 1995. This
was primarily due to $55,000 in current gains on the sale of loans to
correspondent banks.
Noninterest Expense - Noninterest expense decreased $51,000, to $2,687,000 for
the six months ended June 30, 1996, from $2,738,000 for the six months ended
June 30, 1995. Regulatory assessments declined $133,000, from $164,000 for the
six months ended June 30, 1995, to $31,000 for the six months ended June 30,
1996, due to a reduction in the Bank's insurance rates by the Federal Deposit
Insurance Corporation.
FINANCIAL CONDITION
The investment portfolio increased from $19.3 million at December 31, 1995 to
$21.8 million at June 30, 1996, primarily because the Bank purchased several
two-year U.S. Treasury notes to replace bonds maturing in 1996.
Total loans increased from $116.3 million at December 31, 1995 to $128.9 million
at June 30, 1996, primarily due to strong loan demand in the Bank's primary
market area, together with increased borrowings by existing customers under
previously opened credit facilities with the Bank.
Deposits decreased from $153.9 million at December 31, 1995 to $144.0 million at
June 30, 1996, with most of the decrease coming in the interest-bearing demand
category, which included NOW accounts and money market accounts.
LIQUIDITY AND CAPITAL RESOURCES
F-22
<PAGE>
As a nationally chartered bank, the Bank is required to maintain a liquidity
reserve of up to 12 percent of transaction accounts, and 3 percent of
nontransaction accounts. This reserve may consist of cash on hand, demand
deposits due from correspondents, demand deposits due from the Federal Reserve
Bank, and other instruments. At June 30, 1996, the Bank had qualifying reserves
equal to $8.1 million, or 5.6% of total deposits, which is in excess of the
minimum requirements.
Principal sources of liquidity are deposits, loan principal repayments, and
maturity of investment securities. Additional sources of liquidity are
borrowings of federal funds from correspondent banks the sale of commercial loan
participations to correspondent banks, and the sale of residential mortgage
loans in the secondary market. At June 30, 1996, the Bank purchased $3.7
million in federal funds from correspondent banks on an overnight basis.
At June 30, 1996, the Bank had commitments arising from the unused portion of
commercial, consumer, and home equity lines of credit totaling $20.9 million,
which may be disbursed subject to certain limitations. Management believes that
the funds necessary to meet these commitments will be available.
Capital Requirements - The following table sets forth capital ratios required by
federal regulation and the Bank's actual ratios of capital to risk-weighted
assets at June 30, 1996.
Regulatory Actual at
Minimum June 30, 1996
Leverage Ratio 1.0% 8.2%
Tier One Capital 4.0% 10.1%
Total Risk Based Capital 8.0% 11.0%
F-23
<PAGE>
---------------------------------
APPENDIX I
The Merger Agreement
---------------------------------
<PAGE>
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
COMPASS BANCSHARES, INC.,
COMPASS BANK,
AND
ENTERPRISE NATIONAL BANK OF JACKSONVILLE
Dated as of July 31, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I................................................................... 1
THE MERGER............................................................. 1
SECTION 1.1 The Merger.......................................... 1
----------
SECTION 1.2 Effective Time...................................... 1
--------------
SECTION 1.3 Certain Effects of the Merger....................... 1
-----------------------------
SECTION 1.4 Articles of Incorporation and By-Laws............... 2
-------------------------------------
SECTION 1.5 Directors and Officers.............................. 2
----------------------
SECTION 1.6 Conversion of Shares................................ 2
--------------------
SECTION 1.7 Shareholders' Meeting............................... 5
---------------------
SECTION 1.8 Registration of the Compass Common Stock............ 6
----------------------------------------
SECTION 1.9 Closing............................................. 6
-------
ARTICLE II.................................................................. 7
DISSENTING SHARES; EXCHANGE OF SHARES.................................. 7
SECTION 2.1 Dissenting Shares................................... 7
-----------------
SECTION 2.2 Exchange of Shares.................................. 7
------------------
ARTICLE III................................................................. 8
REPRESENTATIONS AND WARRANTIES OF THE BANK............................. 8
SECTION 3.1 Organization and Qualification...................... 8
------------------------------
SECTION 3.2 Bank Capitalization................................. 9
-------------------
SECTION 3.3 Other Securities.................................... 9
----------------
SECTION 3.4 Authority Relative to the Agreement................. 9
-----------------------------------
SECTION 3.5 No Violation........................................ 10
------------
SECTION 3.6 Consents and Approvals.............................. 10
----------------------
SECTION 3.7 Regulatory Reports.................................. 10
------------------
SECTION 3.8 Securities Issuances................................ 11
--------------------
SECTION 3.9 Financial Statements................................ 11
--------------------
SECTION 3.10 Absence of Certain Changes.......................... 11
--------------------------
SECTION 3.11 Bank Indebtedness................................... 13
-----------------
SECTION 3.12 Litigation.......................................... 13
----------
SECTION 3.13 Tax Matters......................................... 13
-----------
SECTION 3.14 Employee Benefit Plans.............................. 14
----------------------
SECTION 3.15 Employment Matters.................................. 16
------------------
SECTION 3.16 Leases, Contracts and Agreements.................... 17
--------------------------------
SECTION 3.17 Related Bank Transactions........................... 17
-------------------------
SECTION 3.18 Compliance with Laws................................ 17
--------------------
SECTION 3.19 Insurance........................................... 18
---------
SECTION 3.20 Loans............................................... 18
-----
SECTION 3.21 Fiduciary Responsibilities.......................... 18
--------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.22 Patents,Trademarks and Copyrights................... 18
---------------------------------
SECTION 3.23 Environmental Compliance............................ 18
------------------------
SECTION 3.24 Regulatory Actions.................................. 20
------------------
SECTION 3.25 Title to Properties;Encumbrances.................... 20
--------------------------------
SECTION 3.26 Shareholder List.................................... 20
----------------
SECTION 3.27 Proxy Statement..................................... 20
---------------
SECTION 3.28 Dissenting Shareholders............................. 21
-----------------------
SECTION 3.29 Section 368 Representations......................... 21
---------------------------
SECTION 3.30 Employee Stock Options.............................. 22
----------------------
SECTION 3.31 Accounting Matters.................................. 22
------------------
SECTION 3.32 Representations Not Misleading...................... 22
------------------------------
SECTION 3.33 Opinion of Investment Bankers....................... 22
-----------------------------
SECTION 4.2 Authority Relative to Agreement..................... 23
-------------------------------
SECTION 4.3 Financial Reports................................... 25
-----------------
SECTION 4.4 Capitalization...................................... 26
--------------
SECTION 4.5 Consents and Approvals.............................. 26
----------------------
SECTION 4.6 Proxy Statement..................................... 26
---------------
SECTION 4.7 Availability of Compass Common Stock................ 27
------------------------------------
SECTION 4.8 Representations Not Misleading...................... 27
------------------------------
ARTICLE V................................................................... 27
COVENANTS OF THE BANK.................................................. 27
SECTION 5.1 Affirmative Covenants of the Bank................... 27
---------------------------------
SECTION 5.2 Negative Covenants of the Bank...................... 28
------------------------------
ARTICLE VI.................................................................. 31
ADDITIONAL AGREEMENTS.................................................. 31
SECTION 6.1 Access To, Information Concerning, Properties
---------------------------------------------
and Records......................................... 31
-----------
SECTION 6.2 Filing of Regulatory Approvals...................... 31
------------------------------
SECTION 6.3 Miscellaneous Agreements and Consents............... 31
-------------------------------------
SECTION 6.4 Bank Indebtedness................................... 32
-----------------
SECTION 6.5 Best Good Faith Efforts............................. 32
-----------------------
SECTION 6.6 Acquisition Proposals............................... 32
---------------------
SECTION 6.7 Public Announcement................................. 32
-------------------
SECTION 6.8 Employee Benefit Plans.............................. 33
----------------------
SECTION 6.9 Environmental Investigation: Right to Terminate
-----------------------------------------------
Agreement........................................... 34
---------
SECTION 6.10 Proxies............................................. 37
-------
SECTION 6.11 Exchange Agreement.................................. 37
------------------
SECTION 6.12 Cancellation of Buy-Sell, Option and Warrant
--------------------------------------------
Agreements.......................................... 37
----------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VII................................................................. 38
CONDITIONS TO CONSUMMATION OF THE MERGER............................... 38
SECTION 7.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger............................................. 38
------
SECTION 7.2 Conditions to the Obligations of Compass and
--------------------------------------------
Compass Bank to Effect the Merger.................. 38
---------------------------------
SECTION 7.3 Conditions to the Obligations of the Bank to Effect
---------------------------------------------------
the Merger......................................... 40
----------
ARTICLE VIII................................................................ 41
TERMINATION;AMENDMENT; WAIVER.......................................... 41
SECTION 8.1 Termination........................................ 41
-----------
SECTION 8.2 Effect of Termination.............................. 42
---------------------
SECTION 8.3 Amendment.......................................... 42
---------
SECTION 8.4 Extension; Waiver.................................. 42
-----------------
SECTION 8.5 Termination Fee.................................... 43
---------------
ARTICLE IX.................................................................. 43
SURVIVAL............................................................... 43
................................................................. 43
................................................................. 43
ARTICLE X................................................................... 43
MISCELLANEOUS.......................................................... 43
SECTION 10.1 Expenses........................................... 43
--------
SECTION 10.2 Brokers and Finders................................ 43
-------------------
SECTION 10.3 Entire Agreement; Assignment....................... 43
----------------------------
SECTION 10.4 Further Assurances................................. 44
------------------
SECTION 10.5 Enforcement of the Agreement....................... 44
----------------------------
SECTION 10.6 Severability....................................... 44
------------
SECTION 10.7 Notices............................................ 44
-------
SECTION 10.8 Governing Law...................................... 45
-------------
SECTION 10.9 Descriptive Headings............................... 46
--------------------
SECTION 10.10 Parties in Interest................................ 46
-------------------
SECTION 10.11 Counterparts....................................... 46
------------
SECTION 10.12 Incorporation by References........................ 46
---------------------------
SECTION 10.13 Certain Definitions................................ 46
-------------------
</TABLE>
iii
<PAGE>
ATTACHMENTS
EXHIBITS
A. Plan of Merger
B. Pooling Transfer Restrictions Agreement
C. Exchange Agent Agreement
D. Pooling of Interest Criteria
E. Voting Agreement and Irrevocable Proxy
F. Opinion of Counsel for the Bank
G. Bennett Brown Change of Control Agreement
H. Bennett Brown Employment Agreement
I. R. Alan Bellamy Employment Agreement
J. William J. Hammel Employment Agreement
K. Opinion of Counsel for Compass and Compass Bank
LIST OF SCHEDULES
Schedule 1.6(c) Payments for Option Cancellation
Schedule 3.2 Bank Capitalization
Schedule 3.3 List of Equity Ownership
Schedule 3.5 Violations of Law; Conflicts of Interest; Share Litigation;
Termination of Existence
Schedule 3.6 Bank Prior Consents
Schedule 3.7 Regulatory Reports
Schedule 3.10 Absence of Material Changes or Adverse Effects
iv
<PAGE>
Schedule 3.12 Bank Legal Proceedings
Schedule 3.13 Tax Liabilities
Schedule 3.14(a) Employee Welfare Benefit Plans
Schedule 3.14(b) Employee Pension Benefit Plans
Schedule 3.14(c) Deferred Compensation, Bonus and Stock Purchase Plans
Schedule 3.14(l) Additional Payments Due Under Deferred Compensation, Bonus,
Employee Welfare Benefit Plans and Employee Pension Benefit
Plans
Schedule 3.15 Employment Contracts and Collective Bargaining Agreements
Schedule 3.16 Leases, Subleases, Contracts and Agreements; Participations;
Default of Contracts; Marketable Title
Schedule 3.17 Related Company Transactions
Schedule 3.18 Compliance with Laws
Schedule 3.19 Insurance Policies
Schedule 3.20 Loans Exceeding Legal Lending Limit, Troubled Loans
Schedule 3.22 Patents, Trademarks and Copyrights
Schedule 3.23 Environmental Compliance
Schedule 3.24 Regulatory Actions; Agreements
Schedule 3.25 Title to Properties; Title Policies; Property
Schedule 3.29 Bank Shareholders Disposing of Stock
Schedule 3.30 Stock Options
Schedule 4.2 Compass Prior Consents
Schedule 5.1(d) Insurance Policies to be Maintained
Schedule 5.1(g) Compliance with Laws Pending Merger
v
<PAGE>
Schedule 5.1(j) List of Accounts and Safe Deposit Boxes
Schedule 5.1(k) List of Liabilities and Obligations of the Bank
Schedule 6.10 List of Shareholders Agreeing to Vote for the Agreement
Schedule 7.2(e) Bank Officers Executing Releases
Schedule 9.2 List of Shareholders of the Bank
Schedule 10.13(c) Officers of the Bank to whom knowledge is attributable
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of July 31, 1996, by
and among Compass Bancshares, Inc. a Delaware corporation ("Compass"), its
wholly owned subsidiary, Compass Bank, a Florida banking corporation ("Compass
Bank") and Enterprise National Bank of Jacksonville, a national banking
association (the "Bank").
WHEREAS, Compass desires to affiliate with the Bank and the Bank desires to
affiliate with Compass in the manner provided in this Agreement;
WHEREAS, Compass and the Bank believe that the Merger (as defined herein)
of the Bank with Compass Bank in the manner provided by, and subject to the
terms and conditions set forth in, this Agreement and all exhibits, schedules
and supplements hereto, is desirable and in the best interests of their
respective institutions and shareholders; and
WHEREAS, the respective boards of directors of Compass, Compass Bank and
the Bank have approved this Agreement and the proposed transactions
substantially on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
----------
hereof, and in accordance with the Florida Statutes, the Bank shall be merged
with and into Compass Bank (the "Merger") as soon as practicable following the
satisfaction or waiver, if permissible, of the conditions set forth in Article
VII hereof. Following the Merger, Compass Bank shall continue as the surviving
corporation (the "Surviving Corporation") and the separate corporate existence
of the Bank shall cease.
SECTION 1.2 Effective Time. The Merger shall be consummated by the
--------------
filing of a Plan of Merger with the Florida Department of Banking and Finance
(the "Department"), in substantially the form of Exhibit A attached hereto and
in accordance with the relevant provisions of the Florida Statutes. The
effective time of the Merger shall be the close of business on the day of the
Closing (as defined herein) or such other time within two business days of the
Closing as the parties may mutually agree and request the Department to specify
in the Certificate of Merger (the "Effective Time").
SECTION 1.3 Certain Effects of the Merger. The Merger shall have the
-----------------------------
effects set forth in Section 658.45 of the Florida Statutes and 12 U.S.C.
Section 214b.
<PAGE>
SECTION 1.4 Articles of Incorporation and By-Laws. The Articles of
-------------------------------------
Incorporation and the By-Laws of Compass Bank in each case as in effect at the
Effective Time, shall be the Articles of Incorporation and By-Laws of the
Surviving Corporation.
SECTION 1.5 Directors and Officers. The directors and officers of
----------------------
Compass Bank at the Effective Time shall be the directors and officers of the
Surviving Corporation and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation and By-Laws of the Surviving
Corporation, or as otherwise provided by law. Certain employees of the Bank
also will be officers of the Surviving Corporation pursuant to their Employment
Agreement described hereinafter.
SECTION 1.6 Conversion of Shares.
--------------------
(a) Each share of the Bank's common stock, par value $5.00 per share
("Bank Common Stock"), issued and outstanding immediately prior to the Effective
Time (the Bank Common Stock is sometimes called the "Shares"), other than
Dissenting Shares (as defined in Section 2.1), shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into and
represent the right to receive the consideration payable as set forth below (the
"Merger Consideration") to the holder of record thereof, without interest
thereon, upon surrender of the certificate representing such Share. For the
purposes of determining the number of Shares issued and outstanding at the
Effective Time, the number of Shares issued and outstanding at the Effective
Time shall be increased by the number and class of Shares that may be acquired
upon exercise or conversion of any warrant, option, convertible debenture or
other security entitling the holder thereof to acquire Shares.
(b) Each holder of Bank Common Stock shall receive, for each such Share,
Merger Consideration equal to the number of shares of Compass common stock, par
value $2.00 per share ("Compass Common Stock") determined by dividing the Bank
Common Stock Merger Consideration (as defined below) by the number of Shares
outstanding immediately prior to the Effective Time. The total number of shares
of Compass Common Stock to be received in exchange for Bank Common Stock by all
holders of Shares as of the Effective Time (the "Bank Common Stock Merger
Consideration") shall be (i) the sum of (x) 911,000 shares and (y) one share for
each $31.9712 of additional capital received by the Bank from January 1, 1996 to
the Effective Time upon exercise of Options and Warrants (each as defined in
Section 1.6(c)), less (ii) the number of shares of Compass Common Stock required
to pay for Options and Warrants pursuant to Section 1.6(c) hereof. Subject to
Section 1.6 (d) hereof, the Bank Common Stock Merger Consideration shall not
exceed 1,100,000 shares of Compass Common Stock subject to the adjustments set
forth in Section 1.6(d)(i) of this Section if all Options and Warrants are
exercised, or be less than 911,000 shares of Compass Common Stock less the
shares required to pay for Options and Warrants if any Options or Warrants are
not exercised; less in any event the equivalent cash amounts paid or incurred
with respect to fractional shares and the Merger Consideration which otherwise
would have been payable with respect to Dissenting Shares. The total number of
shares of Compass Common Stock to be received by holders of Shares as Bank
2
<PAGE>
Common Stock Merger Consideration plus the number of shares of Compass Common
Stock to be paid for Options and Warrants is hereinafter referred to as the
"Aggregate Merger Consideration." The ratio and number of shares of Compass
Common Stock to be exchanged for each Share, respectively, shall be adjusted
appropriately to reflect any stock dividends or splits with respect to Compass
Common Stock, with respect to which the record date or payment occurs prior to
the Effective Time.
(c) Pursuant to the agreements described in Section 6.12, effective as of
the Effective Time, any outstanding option to purchase Shares (an "Option")
granted under any stock option plan of the Bank, or otherwise, including without
limitation to the Bank's 1988 Stock Option Plan and its 1995 Stock Option Plan,
and any right to purchase Shares pursuant to the warrants issued by the Bank
pursuant to certain resolutions adopted by the Board of Directors of the Bank on
August 18, 1987, or otherwise (a "Warrant"), shall be cancelled. A list of all
outstanding Options and Warrants as of the date of this Agreement is set forth
on Schedule 1.6(c) hereof. The Aggregate Option and Warrant Payment Shares (as
defined herein) shall be a number of shares of Compass Common Stock determined
using the following formula: first, determine the aggregate dollar value of the
Aggregate Merger Consideration ("Aggregate Dollar Value") by multiplying the
Aggregate Merger Consideration times the average closing sale price of Compass
Common Stock as reported by the National Association of Securities Dealers,
Inc., National Market System for the ten (10) days of trading immediately
preceding the fifth business day prior to the Closing (as defined in Section
1.11 hereof) (the "Market Price"); second, determine the selling price per share
of the Shares ("Selling Price Per Share") by dividing the sum of the Aggregate
Dollar Value and the total consideration to be paid by Option and Warrant
Holders if the Holders were to exercise each and every Option and Warrant
(average exercise price times number of options outstanding) by the number of
Shares issued and outstanding plus Options and Warrants outstanding, and
finally, determine the Aggregate Option and Warrant Payment Shares ("Aggregate
Option and Warrant Payment Shares") by subtracting the average exercise price
per share from the Selling Price Per Share and multiplying that difference times
the number of Options and Warrants outstanding and dividing that product by the
Market Price. The following is a summary of the above stated formula.
Step 1 Aggregate Dollar Value = Aggregate Merger Consideration in
terms of Number of Shares of
Compass Common Stock times the
Market Price;
Step 2 Selling Price Per Share = [Aggregate Dollar Value plus
(average exercise price times
number of Options and Warrants
outstanding)], divided by (Shares
outstanding plus Options and
Warrants outstanding);
Step 3 Aggregate Option and Warrant [(Selling Price Per Share minus
Payment Shares = average exercise price per
Share) times (number of Options
and Warrants outstanding)],
divided by the Market Price.
3
<PAGE>
Each holder of an Option or Warrant shall receive, in consideration for the
cancellation of each of his or her Options and Warrants, a number of shares of
Compass Common Stock determined by subtracting the exercise price per share for
each Share of Bank stock which might have been acquired by exercise of the
Options and Warrants from the Selling Price Per Share and dividing that
difference by the Market Price.
For example, if the Market Price of Compass Common Stock is $33.00, and
between January 1, 1996 and the Closing all Warrants are exercised and Options
on 100 shares are exercised at $15.00 per share, then the formula would be
applied as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Step 1 Aggregate Dollar Value = $35,726,163
Step 2 Selling Price Per Share = $35,726,163 + $557,310 = $36,283,473
$36,283,473/1,337,457 = $27.13 per share
Step 3 Aggregate Option and $27.13 - $13.64 = $13.49 x 40,850 =
Warrant Payment Shares = $551,067/33 = 16,699
</TABLE>
The example assumes outstanding at December 31, 1995, 761,508 Shares,
534,999 Warrants and 37,100 Options and that 40,850 Options are outstanding as
of the Closing. The Aggregate Option and Warrant Payment Shares in this
hypothetical is 16,699 shares of Compass Common Stock. The Option and Warrant
Payment Shares for an individual Option or Warrant Holder whose options or
warrants have an exercise price of $13.64 would be $27.13 - $13.64 = $13.49/$33
= .40879 shares of Compass Common Stock per Share of Bank stock which might have
been acquired upon exercise.
Compass shall deliver to holders of Options and Warrants at the Closing,
the number of shares of Compass Common Stock required to be paid in
consideration for the cancellation thereof. Except as provided herein, or as
otherwise agreed to by the parties, (i) the Bank shall terminate, as of the
Effective Time, all employee stock option plans and all provisions in any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Bank or its Subsidiaries (as
defined herein), and (ii) the Bank shall obtain any required consents of holders
of Options and Warrants for the cancellation of all Options pursuant to this
Agreement and ensure that following the Effective Time no holder of an Option
and Warrant, or any participant in any employee stock option plan or other
plans, programs or arrangements shall have any right thereunder to acquire
equity securities of the Bank or its Subsidiaries, the Surviving Corporation or
any other entity.
(d) Notwithstanding the provisions of Section 1.6(b) and Section 1.6 (c),
in the following circumstances the number of shares of Compass Common Stock to
be paid to holders of Shares, Options and Warrants shall be appropriately
adjusted:
(i)In the event that the Closing shall not have occurred on or prior
to December 15, 1996 because Compass has elected to delay the Closing, the
Aggregate Merger Consideration
4
<PAGE>
shall be increased by 6,060 shares of Compass Common Stock. For purposes of
this provision, Compass shall be deemed to have elected to delay the Closing if
(x) the Bank has complied with the requirements of Section 6.2 but Compass has
failed to submit the regulatory applications for filing within 21 business days
as required by Section 6.2, or (y) if prior to December 15, 1996 all applicable
regulatory, shareholder and other approvals have been obtained, and conditions
to Closing met, but, nevertheless, Compass has determined to postpone the
Closing.
(ii) In the event the Market Price for Compass Common Stock is less
than $28.00, the Board of Directors of the Bank shall have the right to
terminate this Agreement by written notice given to Compass at least two days
prior to the date set for Closing; provided, however, that Compass shall
thereafter have the right, by written notice to the Bank prior to the date set
for Closing, to cause this Agreement to remain in effect by agreeing to pay a
number of additional shares of Compass Common Stock sufficient to produce an
Aggregate Dollar Value equal to such value as if Market Value were $28.00.
(iii) In the event the Market Price of Compass Common Stock exceeds
$38.00, then Compass shall have the right to terminate this Agreement by written
notice given to the Bank at least two days prior to the date set for Closing;
provided, however, that the Bank shall thereafter have the right, by written
notice to Compass prior to the date set for Closing, to cause this Agreement to
remain in effect by agreeing to accept a lesser number of shares of Compass
Common Stock so that the Aggregate Dollar Value will be the equal to the
Aggregate Dollar Value which would have occurred if the Market Price were
$38.00; and, provided, further that this subsection (d)(iii) shall become null,
void and of no further effect in the event Compass issues a press release or a
Form 8-K disclosing it has entered into discussions concerning an agreement
pursuant to which a change in control of Compass will occur, or in the event any
person files a Schedule 14D-1 pursuant to the Securities Exchange Act of 1934
announcing an offer for shares of Compass Common Stock pursuant to which it
would acquire control of Compass through a tender offer, share exchange, merger,
consolidation, or any other form of business combination.
(e) Each share of common stock of Compass Bank issued and outstanding
immediately prior to the Effective Time shall continue to be outstanding at and
after the Effective Time without any change therein and shall continue as a
share of common stock of the Surviving Corporation.
(f) Compass will not issue any certificates for any fractional shares of
Compass Common Stock otherwise issuable pursuant to the Merger. In lieu of
issuing such fractional shares, Compass shall pay cash to any holder of Shares
otherwise entitled to receive such fractional share. Such cash payment shall be
based on the Market Price for Compass Common Stock.
SECTION 1.7 Shareholders' Meeting. The Bank acting through its Board of
---------------------
Directors, shall, in accordance with applicable law:
5
<PAGE>
(a) duly call, give notice of, convene and hold a meeting (the
"Shareholders' Meeting") of its shareholders approximately sixty days prior to
the Closing for the purpose of approving and adopting this Agreement;
(b) require no greater than the two-thirds vote required by applicable law
of each class of the Shares in order to approve the Merger;
(c) include in the Proxy Statement (defined in paragraph (d) below) the
unanimous recommendation of its Board of Directors that the shareholders of the
Bank vote in favor of the approval and adoption of this Agreement; and
(d) use its best efforts (i) to obtain and furnish the information
required to be included by it in the Proxy Statement and cause the Proxy
Statement to be mailed to its shareholders at the earliest practicable time
following the date of this Agreement, and (ii) to obtain the approval and
adoption of the Merger by shareholders holding at least the minimum number of
Shares of each class of the Shares entitled to vote at the Shareholders' Meeting
to approve the Merger under applicable law. The letter to shareholders, notice
of meeting, proxy statement and form of proxy to be distributed to shareholders
in connection with the Merger shall be in form and substance reasonably
satisfactory to Compass, and are collectively referred to herein as the "Proxy
Statement."
SECTION 1.8 Registration of the Compass Common Stock.
----------------------------------------
(a) Compass shall file a registration statement (the "Registration
Statement") with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933 ("Securities Act") covering the shares of Compass Common
Stock to be issued to Bank shareholders in the Merger and shall comply with any
applicable state securities or "blue sky" acts in connection therewith.
(b) Within 30 days after the date hereof, the Bank shall enter into and
cause each Bank shareholder who is an "affiliate" (as defined in SEC Rule 405)
of the Bank to enter into with Compass a Pooling Transfer Restriction Agreement
in substantially the form of Exhibit B attached hereto.
SECTION 1.9 Closing. Upon the terms and subject to the conditions
-------
hereof, as soon as practicable after the vote of the shareholders of the Bank in
favor of the approval and adoption of this Agreement has been obtained, and the
satisfaction or waiver, if permissible, of the conditions set forth in Article
VII hereof, the Bank and Compass Bank shall execute and file the Articles of
Merger and the Certificate of Merger, as described in Section 1.2, and the
parties hereto shall take all such other and further actions as may be required
by law to make the Merger effective. Prior to the filing referred to in this
Section, a closing (the "Closing") will be held at the office of Balch & Bingham
in Birmingham, Alabama (or such other place as the parties may agree) for the
purpose of confirming all of the foregoing. The parties presently intend that
the Closing will take place in December of 1996 or January of 1997.
6
<PAGE>
ARTICLE II.
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 2.1 Dissenting Shares. Notwithstanding anything in this
-----------------
Agreement to the contrary, Shares which are issued and outstanding immediately
prior to the Effective Time and which are held by shareholders who have voted
such shares against the Merger or who have given notice to the Bank in writing
at or prior to the Shareholders Meeting that such shareholders dissent from the
Merger and who shall have delivered a written request for payment of the value
of such shares within the time and in the manner provided in 12 U.S.C. Section
214(b) (the "Dissenting Shares") shall not be converted into or be exchangeable
for the right to receive the Merger Consideration provided in Section 1.6 of
this Agreement, unless and until such holder shall have failed to perfect or
shall have effectively withdrawn or lost his right to appraisal and payment
under 12 U.S.C. Section 214(b). If any such holder shall have so failed to
perfect or shall have effectively withdrawn or lost such right, such holder's
Shares shall thereupon be deemed to have been converted into and to have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration without any interest thereon.
SECTION 2.2 Exchange of Shares.
------------------
(a) Prior to the Effective Time, Compass shall deposit or cause cash to be
deposited in trust with Compass Bank, Birmingham, Alabama, an affiliate of
Compass (the "Exchange Agent"), pursuant to an exchange agent agreement in
substantially the form attached hereto as Exhibit C (the "Exchange Agent
Agreement"), in an aggregate amount estimated to be sufficient to make the cash
payments in lieu of fractional shares of Compass Common Stock pursuant to
Section 1.6 hereof and to make the appropriate cash payments, if any, to holders
of Dissenting Shares (such amounts being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions jointly given by the Bank and Compass, promptly make the payments
in lieu of fractional shares out of the Exchange Fund upon surrender of Shares
in accordance with Section 2.2(b). Payments to dissenting shareholders shall be
made as required by 12 U.S.C. Section 214(b). Subject to holding sufficient
cash to make prompt payments to holders of Shares, the Exchange Agent shall
invest the Exchange Fund in The Starburst Government Money Market Fund, managed
by the Exchange Agent. The Exchange Fund shall not be used for any other
purpose, except as provided in this Agreement.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder of an outstanding certificate or certificates which as of the
Effective Time represented Shares, or proof of loss thereof (the
"Certificates"), a form letter of transmittal approved by the Bank and Compass
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and instructions for use in effecting the surrender of the
Certificates for payment therefor in substantially the form attached hereto as
Exhibit A to the Exchange Agent Agreement (the "Letter of Transmittal"). Upon
surrender to the Exchange Agent of a Certificate, together with such Letter of
Transmittal duly executed, the holder of such Certificate shall be entitled to
7
<PAGE>
receive in exchange therefor cash and Compass Common Stock in the amount
provided in Section 1.6, and such Certificate shall forthwith be canceled.
Compass shall provide the Exchange Agent with certificates for Compass Common
Stock, as requested by the Exchange Agent, in the amounts provided in Section
1.6 hereof. No interest will be paid or accrued on the cash payable upon
surrender of the Certificate and no dividend will be disbursed with respect to
the shares of Compass Common Stock until the holder's Shares are surrendered in
exchange therefor. If payment or delivery of Compass Common Stock is to be made
to a person other than the person in whose name the Certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment and delivery of Compass Common Stock to
a person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 2.2, each Certificate (other than Certificates
representing Dissenting Shares) shall represent for all purposes the right to
receive the Merger Consideration without any interest thereon.
(c) After the Effective Time, the stock transfer ledger of the Bank shall
be closed and there shall be no transfers on the stock transfer books of the
Bank of the Shares which were outstanding immediately prior to such time of
filing. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be promptly presented to the Exchange Agent
and exchanged as provided in this Article II.
(d) Any portion of the Exchange Fund (including the proceeds of any
investments thereof) that remains unclaimed by the shareholders of the Bank for
six months after the Effective Time shall be paid to Compass, and the holders of
Shares not theretofore presented to the Exchange Agent shall look to Compass
only, and not the Exchange Agent, for the payment of any Merger Consideration in
respect of such shares.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank hereby makes the representations and warranties set forth in this
Article III to Compass and Compass Bank. All references to the Bank herein shall
be construed to be references to the Bank and its Subsidiaries (as defined in
Section 10.13(g)). The Bank has delivered to Compass and Compass Bank the
Schedules to this Agreement referred to in this Article III on the date hereof.
The Bank agrees at the Closing to provide Compass and Compass Bank with
supplemental Schedules reflecting any changes thereto between the date of such
Schedules and the date of the Closing.
SECTION 3.1 Organization and Qualification. The Bank is a national
------------------------------
banking association, duly organized, validly existing and in good standing under
the laws of United States. The Bank has all requisite corporate power and
authority to carry on its business as now
8
<PAGE>
being conducted and to own, lease and operate its properties and assets as now
owned, leased or operated. Except as set forth on Schedule 3.1, the Bank does
not own or control any Affiliate (as defined in Section 10.13(a)) or Subsidiary.
True and correct copies of the Articles of Incorporation and Bylaws of the Bank,
with all amendments thereto through the date of this Agreement, have been
delivered by the Bank to Compass. The Bank is duly qualified or licensed to do
business and is in good standing in the State of Florida. The nature of the
business of the Bank and its activities, as currently conducted, do not require
it to be qualified to do business in any jurisdiction other than the State of
Florida.
SECTION 3.2 Bank Capitalization. As of the date hereof, the authorized
-------------------
capital stock of the Bank consists solely of 3,000,000 shares of Bank Common
Stock par value $5.00 per share, of which 786,608 shares are issued and
outstanding, and none of which are held in treasury. Except as set forth on
Schedule 3.2, there are no outstanding subscriptions, options, convertible
securities, rights, warrants, calls, or other agreements or commitments of any
kind issued or granted by, or binding upon, the Bank to purchase or otherwise
acquire any security of or equity interest in the Bank. Except as set forth on
Schedule 3.2, there are no outstanding subscriptions, options, rights, warrants,
calls, convertible securities or other agreements or commitments obligating the
Bank to issue any shares of the Bank, or to the knowledge of the Bank,
irrevocable proxies or any agreements restricting the transfer of or otherwise
relating to shares of its capital stock of any class. All of the Shares that
have been issued have been duly authorized, validly issued and are fully paid
and non-assessable, and are free of preemptive rights. The Bank has never
declared or paid a dividend on the Shares.
SECTION 3.3 Other Securities. Set forth on Schedule 3.3 hereto is a
----------------
list of all equity ownership by the Bank for the account of the Bank in any
other person (the "Other Securities"). The Bank owns each Other Security free
and clear of any lien, encumbrance, security interest or charge.
SECTION 3.4 Authority Relative to the Agreement. The Bank has full
-----------------------------------
corporate power and authority, and, except for the approval by the Bank's
shareholders, no further proceedings on the part of the Bank are necessary, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby which have been duly and validly authorized by its Board of
Directors. This Agreement has been duly executed and delivered by the Bank and
is a duly authorized, valid, legally binding and enforceable obligation of the
Bank, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to creditors' rights generally and
general equitable principles, and subject to such shareholder approvals and such
approval of regulatory agencies and other governmental authorities having
authority over the Bank as may be required by statute or regulation. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with, or result in any
violation or breach of or default under the respective Articles of Incorporation
or By-Laws of the Bank or any agreement, document or instrument by which the
Bank is obligated or bound.
9
<PAGE>
SECTION 3.5 No Violation. Except as set forth on Schedule 3.5, neither
------------
the execution, delivery nor performance of this Agreement in its entirety, nor
the consummation of all of the transactions contemplated hereby, following the
receipt of such approvals as may be required from the Bank's shareholders, the
Federal Deposit Insurance Corporation ("FDIC"), the Board of Governors of the
Federal Reserve System ("FRB"), the Office of the Comptroller of the Currency
("OCC") and the Department will (i) violate (with or without the giving of
notice or the passage of time), any law, order, writ, judgment, injunction,
award, decree, rule, statute, ordinance or regulation applicable to the Bank or
(ii) be in conflict with, result in a breach or termination of any provision of,
cause the acceleration of the maturity of any debt or obligation pursuant to,
constitute a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any security interest, lien,
charge or other encumbrance upon any property or assets of the Bank pursuant to,
any terms, conditions or provisions of any note, license, instrument, indenture,
mortgage, deed of trust or other agreement or understanding or any other
restriction of any kind or character, to which the Bank is a party or by which
any of its assets or properties are subject or bound. Except as set forth on
Schedule 3.5, there are no proceedings pending or, to the knowledge of the Bank,
threatened, against the Bank or involving the Shares, at law or in equity or
before or by any foreign, federal, state, municipal or other governmental court,
department, commission, board, bureau, agency, instrumentality or other person
which may result in liability to Compass or Compass Bank upon the consummation
of the transactions contemplated hereby or which would prevent or delay such
consummation. Except as set forth in Schedule 3.5, or as contemplated hereby,
the corporate existence, business organization, assets, licenses, permits,
authorizations and contracts of the Bank will not be terminated or impaired by
reason of the execution, delivery or performance by the Bank of this Agreement
or consummation by the Bank of the transactions contemplated hereby, assuming
the receipt of required shareholder and regulatory approvals.
SECTION 3.6 Consents and Approvals. The Bank's Board of Directors (at a
----------------------
meeting called and duly held) has unanimously determined that the Merger is fair
to the Bank's shareholders and has unanimously resolved to recommend approval
and adoption of this Agreement by the Bank's shareholders. Except as described
in Schedule 3.6 hereto, no prior consent, approval or authorization of, or
declaration, filing or registration with any person, domestic or foreign, is
required of the Bank in connection with the execution, delivery and performance
by the Bank of this Agreement and the transactions contemplated hereby or the
resulting change of control of the Bank, except the filing of the Articles of
Merger under the FBCA and such approvals as may be required from the FRB, the
OCC, the Department and holders of Shares under 12 U.S.C. Section 214a.
SECTION 3.7 Regulatory Reports. Except as set forth on Schedule 3.7,
------------------
the Bank has filed all reports, registrations and statements, together with any
amendments required to be made thereto, that are required to be filed with the
OCC, the FDIC, or any other regulatory authority having jurisdiction over the
Bank, other than plans, reports or information listed on Schedule 3.7.
10
<PAGE>
SECTION 3.8 Securities Issuances. The Bank is not subject to the
--------------------
registration provisions of Section 12 of the Exchange Act of 1934, as amended
("Exchange Act") or the rules and regulations of the SEC promulgated under
Section 12 of the Exchange Act, other than the anti-fraud provisions of such
Act. All issuances of securities by the Bank were exempt from registration
under the Securities Act, the Florida Securities Investor Protection Act, and
all other applicable laws.
SECTION 3.9 Financial Statements. The Bank has previously furnished
--------------------
Compass with a true and complete copy of the audited consolidated balance sheets
of the Bank and its Subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of income, shareholders' equity and in cash
flows for the years ended December 31, 1995, 1994 and 1993 (such balance sheets
and the related consolidated statements of income, shareholders' equity and cash
flows are collectively referred to herein as the "Bank Financial Statements").
The Bank Financial Statements, including the consolidated balance sheets and the
related consolidated statements of income, shareholders' equity and cash flows
(including the related notes thereto) of the Bank and its Subsidiaries, fairly
present the financial position of the Bank and its Subsidiaries as of the dates
thereof and the results of operations and cash flows of the Bank and its
Subsidiaries for the periods then ended, in conformity with Generally Accepted
Accounting Principles ("GAAP") applied on a basis consistent with prior periods
(subject, in the case of the unaudited interim financial statements, to normal
year-end adjustments and the fact that they do not contain all of the
disclosures required by GAAP), except as otherwise noted therein, and the
accounting records underlying the Bank Financial Statements fairly reflect in
all material respects the transactions of the Bank and its Subsidiaries. As of
their dates, the Bank Financial Statements conformed, or will conform when
delivered, in all material respects with all applicable rules and regulations
promulgated by the OCC and the FDIC. Neither the Bank nor any of its
Subsidiaries have material liabilities or obligations of a type which should be
included in or reflected on the Bank Financial Statements if prepared in
accordance with GAAP, whether related to tax or non-tax matters, accrued or
contingent, due or not yet due, liquidated or unliquidated, or otherwise, except
as and to the extent disclosed or reflected in the Bank Financial Statements.
Promptly following their availability, the Bank will provide Compass with the
unaudited consolidated and unconsolidated balance sheets of the Bank and its
Subsidiaries as of the end of each month hereafter, prepared on a basis
consistent with prior periods. Promptly following their availability, the Bank
will provide Compass with the Reports of Condition and Statements of Income
("Call Reports") of the Bank for all periods ending after March 31, 1996.
Neither the Bank nor any of its Subsidiaries have off balance sheet liabilities
associated with financial derivative products or potential liabilities
associated with financial derivative products.
SECTION 3.10 Absence of Certain Changes. Except as and to the extent set
--------------------------
forth on Schedule 3.10, since December 31, 1995 (the "Balance Sheet Date") the
Bank has not:
(a) made any amendment to its Articles of Incorporation or Bylaws or
changed the character of its business in any material manner;
11
<PAGE>
(b) suffered any Material Adverse Effect (as defined in Section 10.13(d));
(c) except in the ordinary course of business and consistent with prudent
banking practices, entered into any agreement, commitment or transaction;
(d) except in the ordinary course of business and consistent with prudent
banking practices, incurred, assumed or become subject to, whether directly or
by way of any guarantee or otherwise, any obligations or liabilities (absolute,
accrued, contingent or otherwise);
(e) except in the ordinary course of business and consistent with prudent
banking practices, permitted or allowed any of its property or assets to be
subject to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind (other than statutory liens not yet
delinquent);
(f) except in the ordinary course of business and consistent with prudent
banking practices, canceled any debts, waived any claims or rights, or sold,
transferred, or otherwise disposed of any of its properties or assets;
(g) disposed of or permitted to lapse any rights to the use of any
trademark, service mark, trade name or copyright, or disposed of or disclosed to
any person other than its employees or agents, any trade secret not theretofore
a matter of public knowledge;
(h) except as set forth on Schedule 3.10 and except for regular salary
increases granted in the ordinary course of business within the Bank's 1996
budget and consistent with prior practices, granted any increase in compensation
or paid or agreed to pay or accrue any bonus, percentage compensation, service
award, severance payment or like benefit to or for the credit of any director,
officer, employee or agent, or entered into any employment or consulting
contract or other agreement with any director, officer or employee or adopted,
amended or terminated any pension, employee welfare, retirement, stock purchase,
stock option, stock appreciation rights, termination, severance, income
protection, golden parachute, savings or profit-sharing plan (including trust
agreements and insurance contracts embodying such plans), any deferred
compensation, or collective bargaining agreement, any group insurance contract
or any other incentive, welfare or employee benefit plan program or agreement
maintained by the Bank, for the directors, employees or former employees of the
Bank ("Employee Benefit Plan");
(i) directly or indirectly declared, set aside or paid any dividend or
made any distribution in respect to its capital stock or redeemed, purchased or
otherwise acquired, or arranged for the redemption, purchase or acquisition of,
any shares of its capital stock or other of its securities, except for dividends
paid to the Bank;
(j) organized or acquired any capital stock or other equity securities or
acquired any equity or ownership interest in any person (except through
settlement of indebtedness, foreclosure, the exercise of creditors' remedies or
in a fiduciary capacity, the ownership of
12
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which does not expose the Bank to any liability from the business, operations or
liabilities of such person);
(k) issued, reserved for issuance, granted, sold or authorized the
issuance of any shares of its capital stock or subscriptions, options, warrants,
calls, rights or commitments of any kind relating to the issuance or sale of or
conversion into shares of its capital stock;
(l) made any or acquiesced with any change in any accounting methods,
principles or practices;
(m) experienced any significant adverse change with respect to any branch
or line of business of the Bank;
(n) except for the transactions contemplated by this Agreement or as
otherwise permitted hereunder, entered into any transaction, or entered into,
modified or amended any contract or commitment, other than in the ordinary
course of business and consistent with prudent banking practices; or
(o) agreed, whether in writing or otherwise, to take any action the
performance of which would change the representations contained in this Section
3.10 in the future so that any such representation would not be true in all
material respects as of the Closing.
SECTION 3.11 Bank Indebtedness. The Bank has delivered to Compass true
-----------------
and complete copies of all loan documents ("Bank Loan Documents") related to
indebtedness of the Bank, other than deposits ("Bank Indebtedness"), and made
available to Compass all material correspondence concerning the status of Bank
Indebtedness.
SECTION 3.12 Litigation. Except as set forth on Schedule 3.12, there are
----------
no actions, suits, claims, investigations, reviews or other proceedings pending
or, to the knowledge of the Bank, threatened against the Bank or involving any
of its properties or assets, at law or in equity or before or by any foreign,
federal, state, municipal, or other governmental court, department, commission,
board, bureau, agency, or other instrumentality or person or any board of
arbitration or similar entity ("Proceeding"). The Bank will notify Compass
immediately in writing of any Proceedings against the Bank.
SECTION 3.13 Tax Matters. The Bank has duly filed all tax returns
-----------
required to be filed by it involving a tax liability or other material potential
detriment for failure to file (the "Filed Returns"). The Bank has paid, or has
established adequate reserves for the payment of, all federal income taxes and
all state and local income taxes and all franchise, property, sales, employment,
foreign or other taxes required to be paid with respect to the periods covered
by the Filed Returns. With respect to the periods for which returns have not
yet been filed, the Bank has established adequate reserves determined in
accordance with GAAP for the payment of all federal income taxes and all state
and local income taxes and all franchise, property, sales, employment, foreign
or other taxes. Except as described in Schedule 3.13, the Bank has no
13
<PAGE>
direct or indirect liability for the payment of federal income taxes, state and
local income taxes, and franchise, property, sales, employment or other taxes in
excess of amounts paid or reserves established. Except as set forth on Schedule
3.13, the Bank has not entered into any tax sharing agreement or other agreement
regarding the allocation of the tax liability of the Bank or similar arrangement
with its Subsidiaries. Set forth on Schedule 3.13 are the dates of filing of
all Filed Returns and any amendments thereto which relate to federal or state
income or franchise taxes for the last five years, beginning with 1991. The
Bank has not filed any Internal Revenue Service ("IRS") Forms 1139 (Application
for Tentative Refund). Except as set forth on Schedule 3.13, there are no
pending questions raised in writing by the IRS or other taxing authority for
taxes or assessments of the Bank, nor are there any outstanding agreements or
waivers extending the statutory period of limitation applicable to any tax
return of the Bank for any period. The Bank has withheld from employee wages
and paid over to the proper governmental authorities all amounts required to be
so withheld and paid over. For the purposes of this Agreement, the term "tax"
shall include all federal, state and local taxes and related governmental
charges and any interest or penalties payable in connection with the payment of
taxes.
SECTION 3.14 Employee Benefit Plans. With respect to all employee
----------------------
benefit plans and programs in which employees of the Bank participate, the
following are true and correct:
(a) Schedule 3.14(a) lists each "employee welfare benefit plan" (as
defined in Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) maintained by the Bank or to which the Bank contributes or
is required to contribute, including any multiemployer welfare plan (such
employee welfare benefit plans being hereinafter collectively referred to as the
"Welfare Benefit Plans") and sets forth (i) the amount of any liability of the
Bank for contributions more than thirty days past due with respect to each
Welfare Benefit Plan as of the date hereof and as of the end of any subsequent
month ending prior to the Closing and (ii) the annual cost attributable to each
of the Welfare Benefit Plans; no Welfare Benefit Plan provides for continuing
benefits or coverage for any participant, beneficiary or former employee after
such participant's or former employee's termination of employment except as may
be required by Section 4980B of the Internal Revenue Code of 1986, as amended
(the "Code") and Sections 601-608 of ERISA;
(b) Schedule 3.14(b) lists each "employee pension benefit plan" (as
defined in Section 3(2) of ERISA and not exempted under Section 4(b) or 201 of
ERISA) maintained by the Bank or to which the Bank contributes or is required to
contribute, including any multiemployer plan (as defined in Section 3(37) of
ERISA) (such employee pension benefit plans being hereinafter collectively
referred to as the "Pension Benefit Plans");
(c) Schedule 3.14(c) lists each deferred compensation plan, bonus plan,
stock option plan, employee stock purchase plan, restricted stock, excess
benefit plan, incentive compensation, stock bonus, cash bonus, severance pay,
golden parachute, life insurance, all nonqualified deferred compensation
arrangements, rabbi trusts, cafeteria plans, dependant care plans, all unfunded
plans and any other employee benefit plans or programs, agreements,
14
<PAGE>
arrangements or commitments not required under a previous subsection to be
listed (other than normal policies concerning holidays, vacations and salary
continuation during short absences for illness or other reasons) maintained by
the Bank (referred to as "Other Programs");
(d) All of the Pension Benefit Plans and Welfare Benefit Plans and any
related trust agreements or annuity contracts (or any other funding instruments)
and all Other Programs comply currently, and have complied in the past, both as
to form and operation, with the provisions of ERISA, the Code and with all other
applicable laws, rules and regulations governing the establishment and operation
of the Pension Benefit Plans, Welfare Benefit Plans and all Other Programs; all
necessary governmental approvals relating to the establishment of the Pension
Benefit Plans have been obtained; and with respect to each Pension Benefit Plan
that is intended to be tax-qualified under Section 401(a) or 403(a) of the Code,
a favorable determination letter as to the qualification under the Code of each
such Pension Benefit Plan and each material amendment thereto has been issued by
the Internal Revenue Service (and nothing has occurred since the date of the
last such determination letter which resulted in, or is likely to result in the
revocation of such determination);
(e) Each Welfare Benefit Plan, each Pension Benefit Plan and each Other
Program has been administered in compliance with the requirements of the Code,
ERISA and all other applicable laws, and all reports and disclosures required by
ERISA, the Code and any other applicable laws with respect to each Welfare
Benefit Plan, Pension Benefit Plan and each Other Program have been timely
filed;
(f) Neither the Bank nor any plan fiduciary of any Welfare Benefit Plan or
Pension Benefit Plan has engaged in any transaction in violation of Section 406
of ERISA (for which transaction no exemption exists under Section 408 of ERISA)
or in any "prohibited transaction" as defined in Section 4975(c)(1) of the Code
(for which no exemption exists under Section 4975(c)(2) or 4975(d) of the Code);
(g) Neither the Bank nor any corporation or other trade or business
controlled by or under common control with the Bank (as determined under
Sections 414(b) and 414(c) of the Code) ("Common Control Entity") is, or has
been within the past five years, a contributing sponsor (as defined in Section
4001(a)(13) of ERISA) of a Pension Benefit Plan subject to the provisions of
Title IV of ERISA, nor has the Bank or a Common Control Entity maintained or
participated in any employee pension benefit plan (defined in Section 3(2) of
ERISA) subject to the provision of Title IV of ERISA. In addition, neither the
Bank nor a Common Control Entity (i) is a party to a collective bargaining
agreement, (ii) has maintained or contributed to, or has participated in or
agreed to participate in, a multiemployer plan (as defined in Section 3(37) of
ERISA), or (iii) has made a complete or partial withdrawal from a multiemployer
plan (as defined in Section 3(37) of ERISA) so as to incur withdrawal liability
as defined in Section 4201 of ERISA (without regard to subsequent reduction or
waiver of such liability under Section 4207 or 4208 of ERISA);
15
<PAGE>
(h) True and complete copies of each Welfare Benefit Plan, Pension Benefit
Plan and each Other Program, related trust agreements or annuity contracts (or
any other funding instruments), summary plan descriptions, the most recent
determination letter issued by the Internal Revenue Service with respect to each
Pension Benefit Plan, the most recent application for a determination letter
from the Internal Revenue Service with respect to each Pension Benefit Plan and
Annual Reports on Form 5500 Series filed with any governmental agency for each
Welfare Benefit Plan, Pension Benefit Plan and Other Program for the two most
recent plan years, have been furnished to Compass;
(i) All Welfare Benefit Plans, Pension Benefit Plans, and Other Programs,
related trust agreements or annuity contracts (or any other funding
instruments), are legally valid and binding and in full force and effect and
there are no promised increases in benefits (whether expressed, implied, oral or
written) under any of these plans nor any obligations, commitments or
understandings to continue any of these plans, (whether expressed, implied, oral
or written) except as required by Section 4980B of the Code and Sections 601-608
of ERISA;
(j) There are no claims pending with respect to, or under, any Pension
Benefit Plan, Welfare Benefit Plan or any Other Program, other than routine
claims for plan benefits, and there are no disputes or litigation pending or
threatened with respect to any such plans;
(k) No action has been taken, nor has there been a failure to take any
action that would subject any person or entity to any liability for any income,
excise or other tax or penalty in connection with any Pension Benefit Plan,
Welfare Benefit Plan or any Other Program, other than for income taxes due with
respect to benefits paid; and
(l) Except as otherwise set forth in Schedule 3.14(l), neither the
execution and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment to be made by the Bank
(including, without limitation, severance, unemployment compensation, golden
parachute (defined in Section 280G of the Code), or otherwise) becoming due to
any employee, director or consultant or (ii) increase any benefits otherwise
payable under any Welfare Benefit Plan, Pension Benefit Plan, or any Other
Program.
SECTION 3.15 Employment Matters. Except as disclosed on Schedule 3.15,
------------------
(i) the Bank is not a party to any oral or written contracts or agreements
granting benefits or rights to employees or any collective bargaining agreement
or to any conciliation agreement with the Department of Labor, the Equal
Employment Opportunity Commission or any federal, state or local agency which
requires equal employment opportunities or affirmative action in employment,
(ii) there are no unfair labor practice complaints pending against the Bank
before the National Labor Relations Board and no similar claims pending before
any similar state, local or foreign agency; and (iii) to the knowledge of the
Bank, there is no activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any employees of the Bank,
nor of any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by
or with respect to any such employees. The Bank is in compliance in all
material respects with all
16
<PAGE>
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and the Bank is not engaged in any
unfair labor practice.
SECTION 3.16 Leases, Contracts and Agreements. Schedule 3.16 sets forth
--------------------------------
an accurate and complete description of all leases, subleases, licenses,
contracts and agreements to which the Bank is a party or by which the Bank is
bound which obligate or may obligate the Bank in the aggregate for an amount in
excess of $25,000 over the entire term of any such agreement or related
contracts of a similar nature which in the aggregate obligate or may obligate
the Bank in the aggregate for an amount in excess of $25,000 over the entire
term of such related contracts (the "Contracts"). The Bank has delivered to
Compass true and correct copies of all Contracts. For the purposes of this
Agreement, the Contracts shall be deemed not to include loans made by,
repurchase agreements made by, spot foreign exchange transactions of, bankers
acceptances of, agreements with Bank customers for trust services, or deposits
by the Bank. The Bank has provided Compass with a list of all unfunded loan
commitments and letters of credit issued by the Bank as of the end of the most
recent preceding month. Except as set forth in Schedule 3.16, no participations
or loans have been sold which have buy back, recourse or guaranty provisions
which create contingent or direct liabilities of the Bank. All of the Contracts
are legal, valid and binding obligations of the parties to the Contracts
enforceable in accordance with their terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to
creditors' rights generally and to general equitable principles, and are in full
force and effect. Except as described in Schedule 3.16, all rent and other
payments by the Bank under the Contracts are current, there are no existing
defaults by the Bank under the Contracts and no termination, condition or other
event has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default. The
Bank has a good and marketable leasehold interest in each parcel of real
property leased by it free and clear of all mortgages, pledges, liens,
encumbrances and security interests.
SECTION 3.17 Related Bank Transactions. Except as set forth on Schedule
-------------------------
3.17, there are no agreements, instruments, commitments, extensions of credit,
or other contractual agreements of any kind between or among the Bank, whether
on its own behalf or in its capacity as trustee or custodian for the funds of
any employee benefit plan (as defined in ERISA), and any of its Affiliates (as
defined herein).
SECTION 3.18 Compliance with Laws. To the knowledge of the Bank, except
--------------------
as set forth on Schedule 3.18, the Bank is not in default with respect to or is
in violation of (i) any judgment, order, writ, injunction or decree of any court
or (ii) any statute, law, ordinance, rule, order or regulation of any
governmental department, commission, board, bureau, agency or instrumentality,
federal, state or local, including (for purposes of illustration and not
limitation) capital and FRB reserve requirements, capital ratios and loan
limitations of the FRB, the FDIC, the OCC or the Department; and the
consummation of the transactions contemplated by this Agreement will not
constitute such a default or violation as to the Bank. The Bank has all
permits, licenses, and franchises from governmental agencies required to conduct
their businesses as they are now being conducted.
17
<PAGE>
SECTION 3.19 Insurance. The Bank has in effect the insurance coverage
---------
(including fidelity bonds) described in Schedule 3.19 and has had similar
insurance in force for the last 5 years. There have been no claims under such
bonds within the last 5 years and the Bank is not aware of any facts which would
form the basis of a claim under such bonds. The Bank has no reason to believe
that the existing fidelity coverage would not be renewed by its carrier on
substantially the same terms.
SECTION 3.20 Loans. Each loan reflected as an asset in the Bank
-----
Financial Statements is the legal, valid and binding obligation of the obligor
of each loan, enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
relating to creditors' rights generally and to general equitable principles.
The Bank does not have in its portfolio any loan exceeding its legal lending
limit, and except as disclosed on Schedule 3.20, the Bank has no known
significant delinquent, substandard, doubtful, loss, nonperforming or problem
loans as of the end of the most recent preceding month.
SECTION 3.21 Fiduciary Responsibilities. To the knowledge of the Bank,
--------------------------
the Bank has performed in all material respects all of its duties as a trustee,
custodian, guardian or as an escrow agent in a manner which complies in all
respects with all applicable laws, regulations, orders, agreements, instruments
and common law standards.
SECTION 3.22 Patents, Trademarks and Copyrights. Except as set forth in
----------------------------------
Schedule 3.22, the Bank does not require the use of any material patent, patent
application, invention, process, trademark (whether registered or unregistered),
trademark application, trade name, service mark, copyright, or any material
trade secret for the business or operations of the Bank. The Bank owns or is
licensed or otherwise has the right to use any items listed in Schedule 3.22.
SECTION 3.23 Environmental Compliance. Except as set forth in Schedule
------------------------
3.23, to the knowledge of the Bank:
(a) The Bank and any property owned or operated by it are in compliance
with all applicable Environmental Laws (as defined in Section 10.13(b)) and has
obtained and is in compliance with all permits, licenses and other
authorizations (individually a "Permit," and collectively "Permits") required
under any Environmental Law. There is no past or present event, condition or
circumstance that could (1) interfere with the conduct of the business of the
Bank in the manner now conducted relating to such entity's compliance with
Environmental Laws, (2) constitute a violation of any Environmental Law or (3)
which could have a Material Adverse Effect upon the Bank;
(b) Neither the Bank nor any of its Subsidiaries currently leases,
operates, owns, or exercises managerial functions at, nor has formerly leased,
operated, owned, or exercised managerial functions at, any facility or real
property that is subject to any actual, or, to the knowledge of the Bank,
threatened or potential Proceeding under any Environmental Law;
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(c) There is no Proceeding pending or threatened against the Bank under
any Environmental Law or relating to the release, threatened release,
management, treatment, storage, or disposal of, or exposure to Polluting
Substances, and the Bank has not received any notice (whether from any
regulatory body or private person) of any claim under or violation of, or
potential or threatened violation of, any Environmental Law;
(d) There is no action or Proceeding pending or threatened under any
Environmental Law involving the release or threat of release of any Polluting
Substances (as defined in Section 10.13(d)) at or on any property where
Polluting Substances generated by the Bank have been disposed, treated or
stored;
(e) There is no Property for which the Bank is or was required to obtain,
or is or was required to have, any Permit under an Environmental Law to
construct, demolish, renovate, occupy, operate, or use such Property or any
portion of such Property;
(f) The Bank has not generated any Polluting Substances for which it was
required under an Environmental Law to execute any waste disposal manifest or
receipt;
(g) There has been no release of Polluting Substances in or on any
Property in violation of any Environmental Laws or which would require
remediation or any report or notification (other than routine, non-incident
specific, annual reporting under applicable Environmental Laws) to any
governmental or regulatory authority;
(h) There are no underground or above ground storage tanks on or under any
Property which are not in compliance with Environmental Laws and any Property
previously containing such tanks has been remediated in compliance with all
Environmental Laws;
(i) There is no asbestos containing material on any Current Controlled
Property (as defined below) or any Collateral Property (as defined below); and
(j) The Bank has fully complied with the guidelines issued by the FDIC on
February 25, 1993, and any other governmental authority with jurisdiction over
the Bank, that direct banks to implement programs to reduce the potential for
banks to incur liability under, or to assess the compliance of borrowers or
Collateral Property with, Environmental Laws.
(k) For purposes of this Section 3.23 and Section 6.9, "Property" includes
(1) any property (whether real or personal) which the Bank currently or in the
past has leased, operated or owned or managed in any manner including without
limitation any property acquired by foreclosure or deed in lieu thereof
(respectively, "Current Controlled Property" and "Former Controlled Property,"
and collectively "Controlled Property") and (2) property now held as security
for a loan or other indebtedness to the Bank or property currently proposed as
security for loans or other credit the Bank is currently evaluating whether to
extend or has committed to extend a loan ("Collateral Property").
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SECTION 3.24 Regulatory Actions. Except as set forth on Schedule 3.24,
------------------
there are no actions or proceedings pending or, to the knowledge of the Bank,
threatened against the Bank by or before the FRB, the FDIC, the OCC, the
Environmental Protection Agency, the Florida Department of Environmental
Protection or any other nation or government, any state or political subdivision
thereof, or any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government. Except as set forth
on Schedule 3.24, the Bank is not subject to a formal or informal agreement,
memorandum of understanding, enforcement action with or any type of financial
assistance by any regulatory authority having jurisdiction over such entity.
The Bank has not taken or agreed to take any action or has knowledge of any fact
or circumstance that would materially impede or delay receipt of any required
regulatory approval. Except as set forth in Schedule 3.24, the Bank has not
received or been made aware of any complaints or inquiries under the Community
Reinvestment Act, the Fair Housing Act, the Equal Credit Opportunity Act or any
other state or federal anti-discrimination fair lending law and, to the
knowledge of the Bank, there is no fact or circumstance that would form the
basis of any such complaint or inquiry.
SECTION 3.25 Title to Properties; Encumbrances. Except as set forth on
---------------------------------
Schedule 3.25, the Bank has unencumbered, good, legal, and marketable title to
all its properties and assets, real and personal, including, without limitation,
all the properties and assets reflected in the Bank Financial Statements, except
for those properties and assets disposed of for fair market value in the
ordinary course of business and consistent with prudent banking practice since
the date of the Bank Financial Statements. Except as set forth on Schedule
3.25, the Bank has a title policy in full force and effect from a title
insurance company which, to the best of Bank's knowledge, is solvent, insuring
good and indefeasible title to all real property owned by the Bank in favor of
the Bank. The Bank has made available to Compass all of the files and
information in the possession of the Bank concerning such properties, including
any title exceptions which might affect marketable title or value of such
property. The Bank holds good and legal title or good and valid leasehold
rights to all assets that are necessary for it to conduct its business as it is
currently being conducted. Except as set forth on Schedule 3.25, the Bank owns
all furniture, equipment, art and other property used to transact business
presently located on its premises. Except as set forth on Schedule 3.25, no
Property has been deed recorded or otherwise been identified in public records
or should have been recorded or so identified as containing Polluting
Substances.
SECTION 3.26 Shareholder List. The Bank has provided to Compass prior to
----------------
the date of this Agreement a list of the holders of Shares as of June 12, 1996
containing the names, addresses and number of Shares or such other securities
held of record, which is accurate in all respects as of such date, and the Bank
will promptly, and in any event prior to the mailing of the Proxy Statement,
advise Compass of any significant changes thereto.
SECTION 3.27 Proxy Statement. None of the information supplied or to be
---------------
supplied by the Bank, or, to the knowledge of the Bank, any of their respective
directors, officers, employees or agents for inclusion in:
20
<PAGE>
(a) the Proxy Statement; or
(b) any registration statement or other documents to be filed with the SEC
or any regulatory or governmental agency or authority in connection
with the transactions contemplated hereby, at the respective times
such documents are filed, and, with respect to the Proxy Statement,
when first mailed to the shareholders of Bank;
will be false or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement thereto, at the time
of the Shareholders' Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meeting. All documents that the Bank is responsible
for filing with any regulatory or governmental agency in connection with the
Merger will comply in all material respects with the provisions of applicable
law.
SECTION 3.28 Dissenting Shareholders. The Bank, and its directors, have
-----------------------
no knowledge of any plan or intention on the part of any Bank shareholders to
make written demand for payment of the fair value of such Shares in the manner
provided in 12 U.S.C. Section 214(b).
SECTION 3.29 Section 368 Representations. (a) To the knowledge of the
---------------------------
Bank and its directors, there is no plan or intention by any Bank shareholder
who is anticipated to receive one percent (1%) or more of the total Merger
Consideration ("1% Shareholder") and, to the knowledge of the Bank and its
directors, there is no plan or intention by any of the remaining Bank
shareholders, to sell or otherwise dispose of shares of Compass Common Stock
received pursuant to the Merger that would reduce all such shareholders'
holdings to a number of shares having a total fair market value at the Effective
Time of less than fifty percent (50%) of the total fair market value of all of
the Bank's capital stock outstanding immediately prior to the Effective Time.
For purposes of this Section 3.29, shares of the Bank's capital stock
surrendered by dissenting shareholders and shares of the Bank's capital stock
sold, redeemed or otherwise disposed of prior or subsequent to and as a part of
the overall transaction contemplated by the Merger will be considered to be
capital stock of the Bank outstanding immediately prior to the Merger.
(b) The Bank shall use its best efforts to obtain from holders of the
Bank's capital stock who will receive 50% or more of the shares of Compass
Common Stock to be received as Merger Consideration, a representation that they
have no plan or intention to sell or otherwise dispose of 50% or more of the
shares of Compass Common Stock to be received as Merger Consideration pursuant
to the Merger.
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<PAGE>
(c) Neither Compass nor Compass Bank will assume any debts or obligations
of the holders of the Shares as part of the Merger.
(d) To the knowledge of the Bank, except as set forth on Schedule 3.29,
there have not been any sales or redemptions of the Bank's capital stock in
contemplation of the Merger. Schedule 3.29 sets forth all transactions in the
capital stock of the Bank from December 31, 1995 until June 30, 1996.
(e) The liabilities of the Bank assumed by Compass as a part of the Merger
and the liabilities to which the transferred assets of the Bank are subject were
incurred by the Bank in the ordinary course of its business.
(f) The Bank and its shareholders will pay their own expenses which are
incurred in connection with the Merger.
(g) The Bank has not disposed of any assets (either as a dividend or
otherwise) constituting more than 10% of the fair market value of all of its
assets (ignoring any liabilities) at any time either during the past twelve
months or in contemplation of the Merger.
(h) The Bank is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(i) The Bank is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
SECTION 3.30 Employee Stock Options. Except as set forth on Schedule
----------------------
3.30, there are no Bank employee stock option plans or provisions in any other
plan, program, or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Bank.
SECTION 3.31 Accounting Matters. Neither the Bank nor any of its
------------------
affiliates has taken or agreed to take any action that would prevent Compass
from accounting for the business combination to be effected by the Merger as a
pooling of interests, including, without limitation, any action inconsistent
with the Pooling of Interest Criteria set forth on Exhibit D hereto.
SECTION 3.32 Representations Not Misleading. No representation or
------------------------------
warranty by the Bank in this Agreement, nor any statement, summary, exhibit or
schedule furnished to Compass or Compass Bank by the Bank under and pursuant to,
or in anticipation of this Agreement, contains or will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained herein or therein not misleading.
SECTION 3.33 Opinion of Investment Bankers. The Bank has received the
-----------------------------
written opinion of Financial Consulting Associates, Inc., Atlanta, Georgia that
the Merger Consideration
22
<PAGE>
is fair, from a financial point of view, to the shareholders of the Bank as of
the date of such opinion.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF COMPASS AND COMPASS BANK
Compass and Compass Bank hereby make the representations and warranties set
forth in this Article IV to the Bank.
SECTION 4.1 Organization and Authority.
--------------------------
(a) Compass is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to conduct its business as now conducted, to own,
lease and operate its properties and assets as now owned, leased or operated.
Compass is a bank holding company under the Bank Holding Bank Act of 1956, as
amended, and in good standing under all laws, rules and regulations applicable
to bank holding companies. Compass is duly qualified or licensed and in good
standing in each jurisdiction which requires such qualification where it owns or
leases properties or conducts business.
(b) Compass Bank is a Florida banking corporation, duly organized,
validly existing, and in good standing under the laws of the State of Florida.
Compass Bank has all requisite corporate power and authority to conduct its
business as now conducted and to own, lease and operate its properties and
assets as now owned, leased or operated. Compass Bank is duly qualified or
licensed and in good standing in each jurisdiction which requires such
qualification where it owns or leases properties or conducts business.
SECTION 4.2 Authority Relative to Agreement.
-------------------------------
(a) Compass has full corporate power and authority and no further
corporate proceedings on the part of Compass are necessary to execute and
deliver this Agreement and to consummate the transactions contemplated hereby,
all of which have been duly and validly authorized by Compass' Board of
Directors. This Agreement has been duly executed and delivered by Compass and
is a duly authorized, valid, legally binding and enforceable obligation of
Compass, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to creditors' rights generally and
general equitable principles, and subject to such shareholder approvals and such
approval of regulatory agencies and other governmental authorities having
authority over Compass as may be required by statute or regulation. Compass is
not in violation of or default under its Certificate of Incorporation or By-Laws
or any agreement, document or instrument under which Compass is obligated or
bound, or any law, order, judgment, injunction, award, decree, statute, rule,
ordinance or
23
<PAGE>
regulation applicable to Compass or any of its Subsidiaries, the violation or
breach of which could have a Material Adverse Effect on Compass and its
Subsidiaries taken as a whole. Except as set forth on Schedule 4.2, neither the
execution, delivery nor performance of this Agreement in its entirety, nor the
consummation of all the transactions contemplated hereby, following the receipt
of such approvals as may be required from the SEC, the FRB, the FDIC, the OCC
and the Department will (i) violate (with or without the giving of notice or
passage of time), any law, order, writ, judgment, injunction, award, decree,
rule, statute, ordinance or regulation applicable to Compass, and its
Subsidiaries or (ii) be in conflict with, result in a breach or termination of
any provision of, cause the acceleration of the maturity of any debt or
obligation pursuant to, constitute a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of
any security interest, lien, charge or other encumbrance upon any property or
assets of Compass pursuant to, any terms, conditions or provisions of any note,
license, instrument, indenture, mortgage, deed of trust or other agreement or
understanding or any other restriction of any kind or character, to which
Compass is a party or by which any of its assets or properties are bound.
Except as set forth on Schedule 4.2, there are no proceedings pending or, to the
knowledge of Compass, threatened, against Compass, at law or in equity or before
any foreign, federal, state, municipal or other governmental court, department,
commission, board, bureau, agency, instrumentality or other person which may
result in liability to the Bank on the consummation of the transactions
contemplated hereby or which would prevent or delay such consummation. Except
as set forth in Schedule 4.2, or as contemplated hereby, the corporate
existence, business, organization, assets, licenses, permits, authorizations and
contracts of Compass will not be terminated or impaired by reason of the
execution, delivery or performance by Compass of this Agreement or consummation
by Compass of the transactions contemplated hereby, assuming receipt of the
required regulatory approvals.
(b) Compass Bank has full corporate power and authority and no further
corporate proceedings on the part of Compass Bank are necessary to execute and
deliver this Agreement and to consummate the transactions contemplated hereby,
all of which have been duly and validly authorized by Compass Bank's Board of
Directors. This Agreement has been duly executed and delivered by Compass Bank
and is duly authorized, valid, legally binding and enforceable obligation to
Compass Bank subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to creditors' rights generally and
general equitable principles, and subject to such shareholder approvals and such
approval of regulatory agencies and other governmental authorities having
authority over Compass Bank as may be required by statute or regulation.
Compass Bank is not in violation of or default under its Certificate of
Incorporation or By-Laws or any agreement, document or instrument under which
Compass Bank is obligated or bound, or any law, order, judgment, injunction,
award, decree, statute, rule, ordinance or regulation applicable to Compass
Bank, the violation or breach of which could have a Material Adverse Effect on
Compass Bank. Except as set forth on Schedule 4.2, neither the execution,
delivery nor performance of this Agreement in its entirety, nor the consummation
of all the transactions contemplated hereby, following the receipt of such
approvals as may be required from the SEC, the FRB, the FDIC, the OCC and the
Department will (i) violate (with or without the giving of notice or passage of
time), any law,
24
<PAGE>
order, writ, judgment, injunction, award, decree, rule, statute, ordinance or
regulation applicable to Compass Bank, or (ii) be in conflict with, result in a
breach or termination of any provision of, cause the acceleration of the
maturity of any debt or obligation pursuant to, constitute a default (or give
rise to any right of termination, cancellation or acceleration) under, or result
in the creation of any security interest, lien, charge or other encumbrance upon
any property or assets of Compass Bank pursuant to, any terms, conditions or
provisions of any note, license, instrument, indenture, mortgage, deed of trust
or other agreement or understanding or any other restriction of any kind or
character, to which Compass Bank is a party or by which any of its assets or
properties are bound. Except as set forth on Schedule 4.2, there are no
proceedings pending or, to the knowledge of Compass Bank, threatened, against
Compass Bank, at law or in equity or before any foreign, federal, state,
municipal or other governmental court, department, commission, board, bureau,
agency, instrumentality or other person which may result in liability to Compass
Bank on the consummation of the transactions contemplated hereby or which would
prevent or delay such consummation. Except as set forth in Schedule 4.2, or as
contemplated hereby, the corporate existence, business, organization, assets,
licenses, permits, authorizations and contracts of Compass Bank will not be
terminated or impaired by reason of the execution, delivery or performance by
Compass Bank of this Agreement or consummation by Compass Bank of the
transactions contemplated hereby, assuming receipt of the required regulatory
approvals.
SECTION 4.3 Financial Reports. Compass has previously furnished the
-----------------
Bank a true and complete copy of (i) the 1995 Annual Report to Shareholders,
which report (the "Compass 1995 Annual Report") includes, among other things,
consolidated balance sheets of Compass and its Subsidiaries as of December 31,
1995 and 1994, the related consolidated statements of income, shareholders'
equity and cash flows for the years ended December 31, 1995, 1994 and 1993 and
(ii) Compass' quarterly report on Form 10-Q for the quarter ended March 31, 1996
(the "Quarterly Report") which reports include among other things unaudited
balance sheets of Compass and its Subsidiaries as of March 31, 1996 and December
31, 1995, and the related unaudited consolidated statements of income and cash
flows for the three month period ending March 31, 1996 and 1995. The financial
statements contained in the Compass 1995 Annual Report and such Quarterly Report
have been prepared in conformity with GAAP applied on a basis consistent with
prior periods. The consolidated balance sheets of Compass and its subsidiaries
as of December 31, 1995 and 1994 contained in the Compass 1995 Annual Report
fairly present the consolidated financial condition of Compass and its
Subsidiaries as of the dates thereof, and the related consolidated statements of
income, shareholders' equity and cash flows of Compass and its Subsidiaries
contained therein fairly present the results of operations and cash flows
thereof for the fiscal years then ended. The unaudited consolidated financial
statements of Compass and its Subsidiaries as of March 31, 1995 and 1994,
contained in Compass' Quarterly Report, fairly present the financial condition,
the results of the operations and changes in cash flows thereof as at such dates
and for the periods indicated. For the purposes of this Agreement, all
financial statements referred to in this Section 4.3 shall be deemed to include
any notes to such financial statements. Compass has made all filings required
to be made in compliance with the Exchange Act. None of the information
contained in the Compass 1995 Annual Report or Compass' Quarterly Report is
false or misleading with respect
25
<PAGE>
to any material fact, or omits to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 4.4 Capitalization. The shares of Compass Common Stock to
--------------
be issued pursuant to this Agreement, when so issued, will be duly and validly
authorized and issued, fully paid and nonassessable, and not issued in violation
of any preemptive rights. As of June 30, 1996, Compass had 38,251,775 shares of
common stock, $2.00 per share par value, issued and outstanding. None of the
shares of Compass Common Stock to be issued pursuant to this Agreement will be
subject to any lien, charge, encumbrance, claim, rights of others, mortgage,
pledge or security interest, and none will be subject to any agreements or
understandings among any persons with respect to the voting or transfer of such
shares of Compass Common Stock except as contemplated hereby.
SECTION 4.5 Consents and Approvals. No prior consent, approval or
----------------------
authorization of, or declaration, filing or registration with any person,
domestic or foreign, is required of or by Compass or Compass Bank in connection
with the execution, delivery and performance by Compass or Compass Bank of this
Agreement and the transactions contemplated hereby or the resulting change in
control of the Bank, except the filing of Articles of Merger under the FBCA,
and such approvals as may be required from the SEC, the FRB, the OCC, the
Department and the FDIC.
SECTION 4.6 Proxy Statement. None of the information supplied or to
---------------
be supplied by Compass or Compass Bank, or, to the best knowledge of Compass and
Compass Bank, any of its directors, officers, employees or agents for inclusion
in:
(a) the Proxy Statement; or
(b) any registration statement or other documents to filed with the SEC or
any regulatory or governmental agency or authority in connection with
the transactions contemplated herein, at the respective times such
documents are filed, and, with respect to the Proxy Statement, when
first mailed to the shareholders of the Bank;
will be false or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement thereto, at the time
of the Shareholders' Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meeting. All documents that either Compass or
Compass Bank is responsible for filing with any regulatory or governmental
agency in connection with the Merger will comply in all material respects with
the provisions of applicable law.
26
<PAGE>
SECTION 4.7 Availability of Compass Common Stock. Compass has available
------------------------------------
a sufficient number of authorized and unissued shares of Compass Common Stock to
pay the Merger Consideration, and Compass will not take any action during the
term of this Agreement that will cause it not to have a sufficient number of
authorized and unissued shares of Compass Common Stock to pay the Merger
Consideration.
SECTION 4.8 Representations Not Misleading. No representation or
------------------------------
warranty by Compass or Compass Bank in this Agreement, nor any statement or
exhibit furnished to the Bank under and pursuant to, or in anticipation of this
Agreement, contains or will contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements contained herein
or therein not misleading.
ARTICLE V.
COVENANTS OF THE BANK
SECTION 5.1 Affirmative Covenants of the Bank. For so long as this
---------------------------------
Agreement is in effect, the Bank shall, and shall use its best efforts to cause
its Subsidiaries (collectively, the "Acquired Companies") to, from the date of
this Agreement to the Closing, except as specifically contemplated by this
Agreement:
(a) operate and conduct the businesses of the Acquired Companies in the
ordinary course of business and consistent with prudent banking practices;
(b) preserve intact the Acquired Companies' corporate existence, business
organization, assets, licenses, permits, authorizations, and business
opportunities;
(c) comply with all material contractual obligations applicable to the
Acquired Companies' operations;
(d) maintain all the Acquired Companies' properties in good repair, order
and condition, reasonable wear and tear excepted, and maintain the insurance
coverages described in Schedule 5.1(d) (which shall list all Property insured by
such coverages) or obtain comparable insurance coverages from reputable insurers
which, in respect to amounts, types and risks insured, are adequate for the
business conducted by the Acquired Companies and consistent with the existing
insurance coverages;
(e) in good faith and in a timely manner (i) cooperate with Compass and
Compass Bank in satisfying the conditions in this Agreement, (ii) assist Compass
and Compass Bank in obtaining as promptly as possible all consents, approvals,
authorizations and rulings, whether regulatory, corporate or otherwise, as are
necessary for Compass and Compass Bank and the Bank (or any of them) to carry
out and consummate the transactions contemplated by this Agreement, including
all consents, approvals and authorizations required by any agreement or
understanding existing at the Closing between the Bank and any governmental
agency or other
27
<PAGE>
third party, (iii) furnish information concerning the Acquired Companies not
previously provided to Compass required for inclusion in any filings or
applications that may be necessary in that regard and (iv) perform all acts and
execute and deliver all documents necessary to cause the transactions
contemplated by this Agreement to be consummated at the earliest possible date;
(f) timely file with the FRB, the Department, the OCC and the FDIC, all
financial statements and other reports required to be so filed by any of the
Acquired Companies and to the extent permitted by applicable law, promptly
thereafter deliver to Compass copies of all financial statements and other
reports required to be so filed;
(g) comply in all material respects with all applicable material laws and
regulations;
(h) promptly notify Compass upon obtaining knowledge of any default, event
of default or condition with which the passage of time or giving of notice would
constitute a default or an event of default under the Bank Loan Documents and
promptly notify and provide copies to Compass of any material written
communications concerning the Bank Loan Documents;
(i) between the date of this Agreement and Closing, promptly give written
notice to Compass upon obtaining knowledge of any event or fact that would cause
any of the representations or warranties of the Bank contained in or referred to
in this Agreement to be untrue or misleading in any material respect;
(j) deliver to Compass a list (Schedule 5.1(j)), dated as of the Effective
Time, showing (i) the name of each bank or institution where the Bank have
accounts or safe deposit boxes, (ii) the name(s) in which such accounts or boxes
are held and (iii) the name of each person authorized to draw thereon or have
access thereto;
(k) deliver to Compass a list (Schedule 5.1(k)), dated as of the Closing,
showing all liabilities and obligations of the Bank, except those arising in the
ordinary course of their respective businesses, incurred since the Balance Sheet
Date, certified by an officer of Bank;
(l) promptly notify Compass of any material change or inaccuracies in any
data previously given or made available to Compass or Compass Bank pursuant to
this Agreement; and
(m) provide access, to the extent that the Bank has the right to provide
access, to any or all Property (as defined in Section 3.23) so as to enable
Compass to physically inspect any structure or components of any structure on
such Property, including without limitation surface and subsurface testing and
analyses.
SECTION 5.2 Negative Covenants of the Bank. Except with the prior
------------------------------
written consent of Compass or as otherwise specifically permitted by this
Agreement, the Bank will not and will use its best efforts not to permit any
Subsidiary of the Bank, to, from the date of this Agreement to the Closing:
28
<PAGE>
(a) make any amendment to its articles of incorporation or association or
bylaws;
(b) make any change in the methods used in allocating and charging costs,
except as may be required by applicable law, regulation or GAAP and after notice
to Compass;
(c) except upon exercise of Options and Warrants as contemplated by
Section 1.6(c) and (d) hereof, make any change in the number of shares of the
capital stock issued and outstanding, or issue, reserve for issuance, grant,
sell or authorize the issuance of any shares of its capital stock or
subscriptions, options, warrants, calls, rights or commitments of any kind
relating to the issuance or sale of or conversion into shares of its capital
stock;
(d) contract to create any obligation or liability (absolute, accrued,
contingent or otherwise) except in the ordinary course of business and
consistent with prudent banking practices;
(e) contract to create any mortgage, pledge, lien, security interest or
encumbrances, restrictions, or charge of any kind (other than statutory liens
for which the obligations secured thereby shall not become delinquent), except
in the ordinary course of business and consistent with prudent banking
practices;
(f) cancel any debts, waive any claims or rights of value or sell,
transfer, or otherwise dispose of any of its material properties or assets,
except in the ordinary course of business and consistent with prudent banking
practices;
(g) sell any real estate owned as of the date of this Agreement or
acquired thereafter, which real estate qualifies as "other real estate owned"
under accounting principles applicable to it, except in the ordinary course of
business and consistent with prudent banking practices and applicable banking
laws and regulations;
(h) dispose of or permit to lapse any rights to the use of any material
trademark, service mark, trade name or copyright, or dispose of or disclose to
any person other than its employees any material trade secret not theretofore a
matter of public knowledge;
(i) except as set forth on Schedule 3.10 and except for regular salary
increases granted in the ordinary course of business within the Bank's 1996
budget and consistent with prior practices, grant any increase in compensation
or directors' fees, or pay or agree to pay or accrue any bonus or like benefit
to or for the credit of any director, officer, employee or other person or enter
into any employment, consulting or severance agreement or other agreement with
any director, officer or employee, or adopt, amend or terminate any Employee
Benefit Plan or change or modify the period of vesting or retirement age for any
participant of such a plan;
(j) declare, pay or set aside for payment any dividend or other
distribution or payment in respect of shares of its capital stock;
29
<PAGE>
(k) except through settlement of indebtedness, foreclosure, the exercise
of creditors' remedies or in a fiduciary capacity, acquire the capital stock or
other equity securities or interest of any person;
(l) make any capital expenditure or a series of expenditures of a similar
nature in excess of $50,000;
(m) make any income tax or franchise tax election or settle or compromise
any federal, state, local or foreign income tax or franchise tax liability, or,
except in the ordinary course of business consistent with prudent banking
practices, make any other tax election or settle or compromise any other
federal, state, local or foreign tax liability;
(n) except for negotiations and discussions between the parties hereto
relating to the transactions contemplated by this Agreement or as otherwise
permitted hereunder, enter into any transaction, or enter into, modify or amend
any contract or commitment other than in the ordinary course of business and
consistent with prudent banking practices;
(o) except as contemplated by this Agreement, adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, or other reorganization or business combination of the Bank;
(p) issue any certificates of deposit except in the ordinary course of
business and in accordance with prudent banking practices;
(q) make any investments except in the ordinary course of business and in
accordance with prudent banking practices;
(r) modify, amend, waive or extend either the Bank Loan Documents or any
rights under such agreements;
(s) modify any outstanding loan, make any new loan, or acquire any loan
participation, unless such modification, new loan, or participation is made in
the ordinary course of business and in accordance with prudent banking
practices;
(t) sell or contract to sell any part of the Bank premises;
(u) change any fiscal year or the length thereof;
(v) take or agree to take any action that would prevent Compass from
accounting for the business combination to be effected by the Merger as a
pooling of interests, including, without limitation, any action inconsistent
with the provisions of Exhibit D hereto;
(w) except with respect to Federal Reserve Funds, prepay in whole or in
part the Bank Indebtedness; or
30
<PAGE>
(x) enter into any agreement, understanding or commitment, written or
oral, with any other person which is in any manner inconsistent with the
obligations of the Bank and its directors under this Agreement or any related
written agreement. Nothing contained in this Section 5.2 or in Section 5.1 is
intended to influence the general management or overall operations of the Bank
in a manner not permitted by applicable law and the provisions thereof shall
automatically be reduced in compliance therewith.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1 Access To, and Information Concerning, Properties and
-----------------------------------------------------
Records. During the pendency of the transactions contemplated hereby, the Bank
- -------
shall, to the extent permitted by law, give Compass, its legal counsel,
accountants and other representatives full access, during normal business hours,
throughout the period prior to the Closing, to all of the Bank's properties,
books, contracts, commitments and records, permit Compass to make such
inspections (including without limitation, physical inspection of the surface
and subsurface of any property thereof and any structure thereon) as they may
require and furnish to Compass during such period all such information
concerning the Bank and its affairs as Compass may reasonably request. All
information disclosed by the Bank to Compass which is not in the public domain
shall be held confidential by Compass and its representatives, except to the
extent counsel to Compass has advised it such information is required to or
should be disclosed in filings with regulatory agencies or governmental
authorities or in proxy materials delivered to shareholders of the Bank. In the
event this Agreement is terminated for any reason, upon the written request of
the Bank, Compass agrees to return to the Bank all copies of such confidential
information, and this Section 6.1 shall survive such termination.
SECTION 6.2 Filing of Regulatory Approvals. Subject to the Bank
------------------------------
providing the information required pursuant to this Section 6.2, Compass shall
submit for filing all notices and applications to the FRB and the Department
which Compass deems necessary or appropriate to complete the transactions
contemplated herein within 21 business days after the date of this Agreement.
The Bank agrees to provide the information necessary for the filing of such
applications within 13 business days after the date of this Agreement, provided
that such information has been requested in writing by Compass pursuant to a
document setting forth the necessary information in detail, no later than 4
business days after the date of this Agreement. Compass will deliver to the
Bank copies of all non-confidential portions of any such applications; provided,
however, that Compass shall not be required to provide to the Bank portions of
such applications which are designated by Compass as confidential and which do
not contain information regarding the Bank or which relate to the business of
Compass after the Closing.
SECTION 6.3 Miscellaneous Agreements and Consents. Subject to the terms
-------------------------------------
and conditions of this Agreement, Compass and the Bank each agrees to use its
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper, or advisable under applicable laws and
regulations to consummate and make effective, as soon
31
<PAGE>
as practicable after the date hereof, the transactions contemplated by this
Agreement. Compass and the Bank shall use their respective best efforts to
obtain or cause to be obtained consents of all third parties and governmental
and regulatory authorities necessary or desirable for the consummation of the
transactions contemplated herein.
SECTION 6.4 Bank Indebtedness. Prior to the Effective Time, the Bank
-----------------
shall pay all regularly scheduled payments on all Bank Indebtedness and shall
cooperate with Compass in taking such actions as are reasonably appropriate or
necessary in connection with the redemption, prepayment, modification,
satisfaction or elimination of any outstanding indebtedness of the Bank with
respect to which a consent is required to be obtained to effectuate the Merger
and the transactions contemplated by this Agreement and has not been so
obtained.
SECTION 6.5 Best Good Faith Efforts. All parties hereto agree that the
-----------------------
parties will use their best good faith efforts to secure all regulatory
approvals necessary to consummate the Merger and other transactions provided
herein and to satisfy the other conditions to Closing contained herein.
SECTION 6.6 Acquisition Proposals. The Bank will not, and will use its
---------------------
best efforts to cause its directors, officers, financial advisors, legal
counsel, accountants and other agents and representatives (for purposes of this
Section 6.6 only, being referred to as "affiliates") not to, initiate, solicit
or encourage, directly or indirectly, or take any other action to facilitate any
inquiries or the making of any proposal with respect to, engage or participate
in negotiations concerning, provide any nonpublic information or data to or have
any discussions with any person other than a party hereto or their affiliates
relating to any acquisition, tender offer (including a self-tender offer),
exchange offer, merger, consolidation, acquisition of beneficial ownership of or
the right to vote securities of such entity or any of its subsidiaries,
dissolution, business combination, purchase of all or any significant portion of
the assets or any division of, or any equity interest in, such entity or any
Subsidiary, or similar transaction other than the Merger (such proposals,
announcements, or transactions being referred to as "Acquisition Proposals").
Notwithstanding the preceding sentence, to the extent its Board of Directors
determines it is required to do so in the exercise of its fiduciary duties to
the Bank's shareholders under applicable law as so advised in writing by
independent counsel, the Bank, and its affiliates, may engage and participate in
negotiations concerning, provide nonpublic information or data to and have
discussions with any person or their affiliates relating to an Acquisition
Proposal. The Bank will promptly notify Compass orally and in writing if any
such Acquisition Proposal (including the terms thereof and identify of the
persons making such proposal) is received and furnish to Compass a copy of any
written proposal.
SECTION 6.7 Public Announcement. Subject to written advice of counsel
-------------------
with respect to legal requirements relating to public disclosure of matters
related to the subject matter of this Agreement, the timing and content of any
announcements, press releases or other public statements concerning the proposal
contained herein will occur upon, and be determined by, the mutual consent of
the Bank and Compass.
32
<PAGE>
SECTION 6.8 Employee Benefit Plans. Compass presently intends that,
----------------------
after the Merger, neither Compass, nor the Bank will make additional
contributions to the employee benefit plans sponsored by the Bank immediately
prior to the Merger. Nevertheless, Compass and the Bank agree that the Bank may
make a 25% matching contribution to its 401(k) plan of up to $27,000 and a 1.5%
profit sharing contribution up to $31,000 for the 1996 year.
Compass agrees that the employees of the Bank will be entitled to
participate as newly hired employees in the employee benefit plans and programs
maintained for employees of Compass and its affiliates, in accordance with the
respective terms of such plans and programs, and Compass shall take all actions
necessary or appropriate to facilitate coverage of the Bank's employees in such
plans and programs from and after the Effective Time, as follows:
(i) Employee Welfare Benefit Plans and Programs: Each employee of the Bank
will be entitled to credit for prior service with the Bank for all purposes
under the employee welfare benefit plans and other employee benefit plans and
programs (other than those described in subparagraph (ii) below and any stock
option plans) sponsored by Compass to the extent the Bank sponsored a similar
type of plan which the Bank employee participated in immediately prior to the
Effective Time. Any preexisting condition exclusion applicable to such plans and
programs shall be waived with respect to any Bank employee. For purposes of
determining each Bank employee's benefit for the year in which the Merger occurs
under the Compass vacation program, any vacation taken by a Bank employee
immediately preceding the Effective Time for the year in which the Merger occurs
will be deducted from the total Compass vacation benefit available to such Bank
employee for such year. Compass agrees that for purposes of determining the
number of vacation days available with respect to each Bank employee for the
year in which the Merger occurs, that the number of vacation days for such year
shall be determined under the Bank vacation policy in effect as of January 1,
1996. Unused sick leave and vacation leave accrued by employees of the Bank as
of the Effective Time will be recognized by Compass to the extent it is used in
the fiscal year of Compass in which the Effective Time occurs. Compass further
agrees to credit each Bank employee for the year during which such coverage
under the Compass welfare benefit plan begins, with any deductibles already
incurred during such year under the Bank's group health plan.
(ii) Employee Pension Benefit Plans: Each Bank employee shall be entitled
to credit for past service with the Bank for the purpose of satisfying any
eligibility or vesting periods applicable to the Compass employee pension
benefit plans which are subject to Sections 401(a) and 501(a) of the Code
(including, without limitation, the Compass 401(k)/ESOP Plan). Uninterrupted
service with the Bank shall be treated as service with Compass for purposes of
determining (x) whether an employee has satisfied the conditions for eligibility
for participation and retirement and (y) the vested portion of a participant's
accrued benefit under the Compass Bancshares, Inc. Retirement Plan; provided,
however such service shall not be counted as service with Compass to determine a
participant's benefit under such plan.
On or before, but effective as of, the Effective Time, the Bank may take
such actions as may be necessary to cause each individual employed by the Bank
immediately prior to the
33
<PAGE>
Effective Time to have a fully vested and nonforfeitable interest in such
employee's account balance under the 401(k) plan sponsored by the Bank as of the
Effective Time.
SECTION 6.9 Environmental Investigation; Right to Terminate Agreement.
---------------------------------------------------------
(a) Compass and its consultants, agents and representatives, shall have the
right to the same extent that the Bank has such right, but not the obligation or
responsibility, to inspect any Property, including, without limitation, for the
purpose of conducting asbestos surveys and sampling, and other environmental
assessments and investigations ("Environmental Inspections"). Compass' right to
conduct Environmental Inspections shall include the right to sample and analyze
air, sediment, soil and groundwater of any Property to the same extent that the
Bank has such right. Compass may conduct such Environmental Inspections at any
time but shall complete such inspections on or prior to the 35th day after the
date hereof.
(b) The Bank shall give to Compass written notice of any Property acquired,
leased, managed or controlled by the Bank or in which the Bank acquires a
security interest between the date hereof and the Closing ("Interim
Acquisition"). Such written notice shall be given to Compass within 5 business
days of the date of an Interim Acquisition. Compass may elect to conduct an
Environmental Inspection of any such Property which is the subject of an Interim
Acquisition and the time periods set forth in this Section 6.9 for the
performance of Environmental Inspections, secondary investigations (hereinafter
defined) and for Compass' giving of notice to the Bank of non-acceptability and
need for remediation (as set forth below) shall commence on the date written
notice of the respective Interim Acquisition is received by Compass; provided
however, Compass shall in all events notify the Bank of any Property which is
unacceptable and requires remediation on or before the 77th day after the date
hereof.
(c) Compass shall notify the Bank prior to any physical inspections of
Property, and the Bank may place reasonable restrictions on the time of such
inspections. If, as a result of any such Environmental Inspection, further
investigation ("secondary investigation") including, without limitation, test
borings, soil, water and other sampling is deemed desirable by Compass, Compass
shall notify the Bank of the Properties on which it intends to conduct a
secondary investigation on or prior to the 42nd day after the date hereof.
Compass shall notify the Bank of any Properties that, in the sole discretion of
Compass, are not acceptable and require remediation on or prior to the 77th day
after the date hereof.
(d) With respect to any Current Controlled Property that Compass has
notified the Bank is not acceptable and requires remediation, the Bank shall
promptly prepare a remediation plan acceptable to Compass and obtain approval of
such remediation plan by the Florida Department of Environmental Protection and
any other appropriate governmental authority ("Environmental Regulatory
Authority"), on or prior to the 120th day after the date hereof ("Remediation
Plan Completion Date").
(e) With respect to any Collateral Property that Compass has notified the
Bank is not acceptable and requires remediation, the Bank agrees promptly to
request the person ("Third
34
<PAGE>
Party Owner") who owns, operates, leases or otherwise exercises managerial
control over any such Collateral Property to prepare a remediation plan and
obtain approval thereof by the appropriate Environmental Regulatory Authority,
and satisfactory to Compass, by the Remediation Plan Completion Date. If a
Third Party Owner refuses or fails to obtain any approved remediation plan with
respect to any Collateral Property, the Bank agrees to obtain a written estimate
("Remediation Estimate") from an environmental professional acceptable to
Compass of all costs of remediating any such Collateral Property (including the
costs of preparing a remediation plan acceptable to Compass and approved by the
appropriate Environmental Regulatory Authority). In any event, the Bank agrees
to add to its loan loss reserve the lesser of (a) the expenditures arising in
connection with (i) remediation, removal or monitoring described in any
remediation plan or Remediation Estimate, (ii) correction of any violation of
any applicable Environmental Law, (iii) preparing and obtaining approval by the
appropriate Environmental Regulatory Authority of remediation plans with respect
to Collateral Properties, and (iv) obtaining Remediation Estimates, and (b) the
outstanding balance of the loan or indebtedness secured by such Collateral
Property. A remediation plan prepared by the Third Party Owner and acceptable
to Compass may be the basis of the Remediation Estimate. If the expenditures
set forth in clause (a) above would exceed 80% of the outstanding balance of
such loan or indebtedness, the Bank will increase its loan loss reserve by the
outstanding amount of the loan or indebtedness.
(f) Compass and the Bank each agree to indemnify and hold harmless the
other for any claims for damage to property or injury or death to person in
connection with the Environmental Inspections or secondary investigations
conducted by it or its agents, which damage or injury is directly or indirectly
attributable to the negligent actions or negligent omissions of it or its agents
or employees. Compass shall have no liability or responsibility of any nature
whatsoever for the results, conclusions or other findings related to any
Environmental Inspection, secondary investigation or other environmental survey.
If this Agreement is terminated, then except as otherwise required by law,
Compass shall have no obligation to make any reports to any governmental
authority of the results of any Environmental Inspection, secondary
investigation or other environmental survey, but such reporting shall remain the
responsibility of and within the discretion of the Bank, as the case may be.
Compass shall have no liability to the Bank or its Subsidiaries for making any
report of such results to any governmental authority.
(g) Compass shall have the right to terminate this Agreement in the
following circumstances, if such circumstance, together with any other
circumstances set forth below and any breach or inaccuracy of any representation
or warranty of the Bank contained in Article III, would have a Material Adverse
Effect or would in the future have a Material Adverse Effect if the potential
adverse effects indicated thereby were to occur:
(i) the factual substance of any representation or warranty set
forth in Section 3.23 is not true and accurate irrespective of the knowledge or
lack of knowledge of the Bank;
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(ii) the results of such Environmental Inspection, secondary
investigation or other environmental survey are disapproved by Compass because
the Environmental Inspection, secondary investigation or other environmental
survey identifies violations or potential violations of Environmental Laws;
(iii) if the Environmental Inspection, secondary investigation or
other environmental survey identifies any past or present event, condition or
circumstance that, based on the estimates of the environmental professionals
referred to in this Section 6.9, may require expenditures by the Bank, in
connection with (1) remediation or monitoring of any Controlled Property, (2)
preparing and obtaining approval by the appropriate Environmental Regulatory
Authority of remediation plans with respect to Controlled Properties, or (3)
obtaining Remediation Estimates in connection with Collateral Properties;
(iv) the presence of any underground or above ground storage tank
in, on or under any Property (1) which has not been registered or which has not
fully qualified for and met all conditions necessary to be entitled to
applicable governmental remediation funds in the event a release of Polluting
Substances were to occur from any such tank, (2) from which a release of any
Polluting Substances has occurred or (3) which otherwise is in violation of an
Environmental Law;
(v) the presence of any asbestos containing material in, on or
under any Controlled Property, the removal or monitoring of which would
constitute a Material Adverse Effect or which, based on the estimates of the
environmental professionals referred to in this Section 6.9, may require
expenditures by the Bank;
(vi) additions to the Bank's loan loss reserve pursuant to
(viii)(b)(2) below;
(vii) Compass is not permitted to conduct an Environmental
Inspection or secondary investigation of any Property within the time frame and
in the manner provided in Section 6.9;
(viii) if on or before the Remediation Plan Completion Date,
(a) for each Controlled Property identified by Compass as
unacceptable and requiring remediation the Bank does not deliver to Compass
written evidence acceptable to Compass that the Bank has developed a remediation
plan approved by the applicable Environmental Regulatory Authority; or
(b) for each Collateral Property identified by Compass as
unacceptable and requiring remediation, the Bank does not provide evidence
acceptable to Compass that: (A) the Remediation Estimate for a particular
Collateral Property prepared by the Bank was satisfactory to Compass, and (B)
the Bank increased its loan loss reserve by (1) the aggregate sum of the
expenditures associated with (A) remediation, removal or monitoring, (B)
correction of any violations of any applicable Environmental Law, (C) preparing
and obtaining approval
36
<PAGE>
by the appropriate Environmental Regulatory Authority of remediation plans with
respect to Collateral Properties, or (D) obtaining Remediation Estimates, or (2)
the outstanding amount of the loan or indebtedness secured by such Collateral
Property, whichever is less.
Compass and the Bank agree that the Bank's willful failure
to comply with (vii) and (viii) above shall be conclusively deemed to cause a
Material Adverse Effect.
(h) The Bank agrees to make available to Compass and its consultants,
agents and representatives all documents and other material relating to
environmental conditions of the Property including, without limitation, the
results of other environmental inspections and surveys. The Bank also agrees
that all engineers and consultants who prepared or furnished such reports may
discuss such reports and information with Compass and shall be entitled to
certify the same in favor of Compass and its consultants, agents and
representatives and make all other data available to Compass and its
consultants, agents and representatives. At the written request of the Bank,
Compass agrees to provide the Bank with a copy of all environmental reports
prepared by its consultants as a result of the Environmental Inspections.
SECTION 6.10 Proxies. The Bank acknowledges that the persons listed in
-------
Schedule 6.10 have agreed that they will vote the Shares owned by them in favor
of this Agreement and the transactions contemplated hereby, subject to required
regulatory approvals, and that they will retain the right to vote such Shares
during the term of this Agreement and have given Compass a proxy to vote such
Shares in favor of the Merger if they should fail to do so, pursuant to a Voting
Agreement and Irrevocable Proxy in substantially the form attached hereto as
Exhibit E.
SECTION 6.11 Exchange Agreement. Immediately prior to the Effective
------------------
Time, the Bank, Compass and Compass Bank agree to enter into, and Compass agrees
to cause the Exchange Agent to enter into, the Exchange Agreement with the
Exchange Agent, or if the Exchange Agent refuses to serve as exchange agent,
such other exchange agent as shall mutually agreed to by the Bank and Compass.
SECTION 6.12 Cancellation of Buy-Sell, Option and Warrant Agreements.
-------------------------------------------------------
The Bank agrees that, within forty-five days after the date of this Agreement,
the Bank will have executed and delivered, and will use its best efforts to
cause (i) each of the current shareholders of the Bank who are parties to the
Buy-Sell Agreement, dated September 1, 1987 (the "Buy-Sell Agreement"), and (ii)
the holders of all Options and Warrants, as appropriate, to have executed and
delivered to the Bank written agreements with the Bank, in form and substance
satisfactory to Compass (x) cancelling the Buy-Sell Agreement at or before the
Effective Time, and (y) irrevocably agreeing to exercise all the Options and
Warrants held by them and purchase all of the Shares subject to such agreements,
or cancel such Options and Warrants in consideration of the payment of shares of
Compass Common Stock set forth in Section 1.6(c), at or before the Effective
Time. Compass shall have the right to terminate this Agreement if all of the
written agreements required by this Section 6.12 have not been executed and
delivered to Compass and the Bank within the forty-five day period described
above; provided, however, Compass must
37
<PAGE>
notify the Bank within ten days after the expiration of such forty-five day
period if it elects to terminate this Agreement. If Compass fails to give such
notice to the Bank, Compass shall be deemed to have waived its right to
terminate this Agreement based upon the failure of the Bank to obtain the
written agreements required by this Section 6.12 and the conditions to closing
set forth in Section 7.2(n) shall be deemed to have been met.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver of the following conditions prior to the Effective Time:
(a) the receipt of regulatory approvals required for the Merger, which
approvals shall not have imposed any condition or requirement which in the
judgment of Compass would adversely impact the economic or business benefits of
the transactions contemplated by this Agreement or otherwise would in the
judgment of Compass be so burdensome as to render inadvisable the consummation
of the Merger, and the expiration of any applicable waiting period with respect
thereto;
(b) the Closing will not violate any injunction, order or decree of any
court or governmental body having competent jurisdiction;
(c) the approval of the Merger by the Bank's shareholders entitled to vote
at the Shareholders' Meeting; and
(d) a registration statement covering the Compass Common Stock to be
issued in the Merger shall be effective under the Securities Act and any
applicable state securities or "blue sky" acts and no stop order suspending the
effectiveness of such registration statement shall be in effect and no
proceedings for such purpose, or any proceedings under the SEC or applicable
state securities authorities rules with respect to the transactions contemplated
hereby, shall be pending before or threatened by the SEC or any applicable state
securities or blue sky authorities.
SECTION 7.2 Conditions to the Obligations of Compass and Compass Bank to
------------------------------------------------------------
Effect the Merger.
- -----------------
The obligations of Compass and Compass Bank to effect the Merger are
subject to the satisfaction or waiver of the following conditions prior to the
Effective Time:
(a) all representations and warranties of the Bank shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing;
38
<PAGE>
(b) the Bank shall have performed in all material respects all obligations
and agreements and in all material respects complied with all covenants and
conditions, contained in this Agreement to be performed or complied with by it
prior to the Effective Time;
(c) there shall not have occurred a Material Adverse Effect with respect
to the Bank;
(d) the directors of the Bank shall have delivered to Compass an
instrument dated the Effective Time releasing the Bank from any and all claims
of such directors (except as to their deposits and accounts, their rights with
respect to loan agreements with the Bank, and as to rights of indemnification
pursuant to the Articles of Incorporation and Bylaws of the Bank, any specific
indemnification agreement between the director and the Bank and as provided by
statute) and shall have delivered to Compass their resignations as directors of
the Bank;
(e) the officers of the Bank identified on Schedule 7.2(e) shall have
delivered to Compass an instrument dated the Effective Time releasing the Bank
from any and all claims of such officers (except as to deposits and accounts,
their rights with respect to loan agreements with the Bank, accrued compensation
permitted by their respective agreements and any Severance Agreement listed on
Schedule 3.14(c) hereto, and rights of indemnification pursuant to the Articles
of Incorporation and Bylaws of the Bank, any specific indemnification agreement
between the officer and the Bank and as provided by statute);
(f) Compass shall have received the opinion of counsel to the Bank
acceptable to it as to the matters set forth on Exhibit F attached hereto;
(g) the holders of no more than 5% of the Shares shall have demanded or be
entitled to demand payment of the fair value of their shares as dissenting
shareholders;
(h) Compass shall have received a letter from KPMG Peat Marwick, dated as
of the Effective Time, to the effect that the Merger will qualify for pooling-
of-interests accounting treatment if closed and consummated in accordance with
this Agreement;
(i) there shall be no Bank Indebtedness;
(j) Compass shall have received from holders of the Bank's capital stock
who will receive 50% more of the shares of Compass Common Stock to be received
as Merger Consideration, a representation that they have no plan or intention to
sell or otherwise dispose of 50% or more of the shares of Compass Common Stock
to be received as Merger Consideration pursuant to the Merger;
(k) Compass shall have received an opinion of Balch & Bingham reasonably
satisfactory to it that the Merger will qualify as a reorganization under
Section 368(a) of the Code;
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<PAGE>
(l) the Bank shall have delivered to Compass a schedule of all
transactions in the capital stock (or instruments exercisable for or convertible
into capital stock) of the Bank of which the Bank has knowledge from and
including the date of this Agreement through the Effective Time;
(m) Compass shall have reasonably determined, in its sole judgment, that
the liabilities and obligations set forth on Schedule 5.1(k) do not have a
Material Adverse Effect;
(n) Compass shall have received all of the cancellation agreements
referred to in Section 6.12 and all warrants, options, rights or other
securities entitling the holder thereof to acquire Shares shall have been
canceled, or shall have exercised, or shall have expired, lapsed or terminated
prior to the Effective Time;
(o) Compass shall have received the executed Pooling Transfer Restrictions
Agreements required by Section 1.8(b);
(p) the Bank shall have taken such write-downs of assets on its books as
are consistent with Compass' accounting methods for reserving for loan losses,
as mutually agreed to by the parties;
(q) Compass, Compass Bank and the employees of the Bank indicated therein
shall have entered into the change of control agreement and the employment
agreements attached hereto as Exhibits G, H, I, and J, in substantially the form
of such Exhibits; and
(r) Compass shall have received certificates dated the Closing executed by
the Chairman of the Board of the Bank, and the Secretary or Cashier of the Bank,
certifying in such reasonable detail as Compass may reasonably request, to the
effect described in Sections 7.2(a), (b), (c), (g) and (i).
SECTION 7.3 Conditions to the Obligations of the Bank to Effect the
-------------------------------------------------------
Merger. The obligations of the Bank to effect the Merger are subject to the
- ------
satisfaction or waiver of the following conditions prior to the Effective Time:
(a) all representations and warranties of Compass shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing;
(b) Compass and Compass Bank shall have performed in all material respects
all obligations and agreements and in all material respects complied with all
covenants and conditions contained in this Agreement to be performed or complied
with by either of them prior to the Effective Time;
(c) the Bank shall have received the opinion of counsel to Compass and
Compass Bank acceptable to it as to the matters set forth on Exhibit K attached
hereto;
40
<PAGE>
(d) the Bank shall have received certificates dated the Closing, executed
by an appropriate officer of Compass and by an appropriate officer of Compass
Bank, respectively, certifying, in such detail as the Bank may reasonably
request, to the effect described in Sections 7.3(a) and (b);
(e) the Bank shall have received an opinion of Balch & Bingham reasonably
satisfactory to it that the Merger will qualify as a reorganization under
Section 368(a) of the Code;
(f) there shall not have occurred a Material Adverse Effect with respect
to Compass; and
(g) Compass Bank shall have assumed the Bank's obligation under the
severance agreements listed on Schedule 3.14(c) hereto.
ARTICLE VIII.
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1 Termination. Prior to the Effective Time, this Agreement
-----------
may be terminated and the Merger contemplated hereby may be abandoned at any
time notwithstanding approval thereof by the shareholders of the Bank:
(a) by mutual written consent duly authorized by the Boards of Directors
of Compass and the Bank;
(b) by Compass (i) if Compass learns or becomes aware of a state of facts
or breach or inaccuracy of any representation or warranty of the Bank contained
in Article III which constitutes a Material Adverse Effect, and which breach or
inaccuracy is not cured after thirty days written notice by Compass, (ii) if
there shall have been a breach of Section 6.6, (iii) pursuant to Section 6.9 or
6.12, (iv) if any of the conditions to Closing contained in Section 7.1 or 7.2
are not satisfied or waived in writing by Compass, or (v) pursuant to Section
1.6(d)(iii);
(c) by the Bank (i) if the Bank learns or becomes aware of a state of
facts or breach or inaccuracy of any representation or warranty of Compass or
Compass Bank contained in Article IV which constitutes a Material Adverse
Effect, and which breach or inaccuracy is not cured after thirty days written
notice by the Bank, (ii) if the conditions to Closing contained in Section 7.1
or 7.3 are not satisfied or waived in writing by the Bank, or (iii) pursuant to
Section 1.6(d)(ii).
(d) by Compass or the Bank if the Effective Time shall not have occurred
on or before March 1, 1997, or such later date agreed to in writing by Compass
and the Bank;
41
<PAGE>
(e) by Compass or the Bank if any court of competent jurisdiction in the
United States or other United States (federal or state) governmental body shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have been final and nonappealable;
(f) by Compass if the Board of Directors of the Bank shall have withdrawn
or modified in any manner its approval or recommendation of this Agreement or
the Merger, or shall have resolved to do the same; provided, however, that
Compass may not terminate this Agreement pursuant to this clause if, as a result
of the Bank's receipt of an Acquisition Proposal from a third party, the Bank
withdraws or modifies its approval or recommendation of this Agreement or the
Merger but thereafter (and prior to termination of this Agreement by Compass)
the Bank publicly reconfirms its recommendation of the transactions contemplated
hereby and notifies Compass of such reconfirmation prior to termination of this
Agreement by Compass pursuant to this clause; or
(g) by the Bank if it shall receive any Acquisition Proposal after the
date hereof from a third party or parties and the Board of Directors of the Bank
shall have received a written opinion from independent legal counsel to the
effect that, and the Board of Directors shall have determined in good faith in
the exercise of its fiduciary duties that the Bank is required to pursue such
Acquisition Proposal; provided, however that the Bank may only terminate this
Agreement pursuant to this clause if it simultaneously with such termination
delivers to Compass the termination fee provided for in Section 8.5 hereof.
SECTION 8.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 8.1 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party or its directors, officers or shareholders, other than the
provisions of this Section 8.2 and Section 9.1. Nothing contained in this
Section 8.2 shall relieve any party from liability for any breach of this
Agreement.
SECTION 8.3 Amendment. To the extent permitted by applicable law, this
---------
Agreement may be amended by action taken by or on behalf of the Board of
Directors of the Bank, Compass and, if required, Compass Bank at any time before
or after adoption of this Agreement by the shareholders of the Bank but, after
any submission of this Agreement to such shareholders for approval, no amendment
shall be made which reduces the Merger Consideration or which materially and
adversely affects the rights of the Bank's shareholders hereunder without any
required approval of such shareholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of all the parties.
SECTION 8.4 Extension; Waiver. At any time prior to the Effective Time,
-----------------
the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the
42
<PAGE>
part of any party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
SECTION 8.5 Termination Fee. If the Bank either (a) violates its
---------------
obligations set forth in Section 6.6 hereof and this Agreement is thereafter
terminated pursuant to Section 8.1(b)(ii), or (b) prior to termination of this
Agreement receives any Acquisition Proposal and this Agreement is thereafter
terminated pursuant to Sections 8.1(f) or 8.1(g) as a result of receipt of such
Acquisition Proposal, then the Bank shall pay to Compass a fee of $1,500,000 in
cash at the time of such termination.
ARTICLE IX.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The parties hereto agree that their respective representations and
warranties contained in this Agreement shall not survive after the Effective
Time.
ARTICLE X.
MISCELLANEOUS
SECTION 10.1 Expenses. All costs and expenses incurred in connection
--------
with the transactions contemplated by this Agreement, including without
limitation, attorneys' fees, accountants' fees, other professional fees and
costs related to expenses of officers and directors of the Bank, shall be paid
by the party incurring such costs and expenses; provided, however, without the
consent of Compass, which consent shall not be unreasonably withheld, all such
costs and expenses paid or accrued as of the Effective Time by the Bank shall
not exceed $500,000, not including stay bonuses approved by Compass or legal
fees and expenses relating to litigation regarding this Agreement. Each party
hereto hereby agrees to and shall indemnify the other party hereto against any
liability arising from any such fee or payment incurred by such party.
SECTION 10.2 Brokers and Finders. Except for the Bank's engagement of
-------------------
Financial Consulting Associates, Inc., Atlanta, Georgia (the cost of which shall
be paid by the Bank and included in the expenses of the Bank referred to in
Section 10.1), all negotiations on behalf of Compass and the Bank relating to
this Agreement and the transactions contemplated by this Agreement have been
carried on by the parties hereto and their respective agents directly without
the intervention of any other person in such manner as to give rise to any claim
against Compass, Compass Bank, the Bank for financial advisory fees, brokerage
or commission fees, finder's fees or other like payment in connection with the
consummation of the transactions contemplated hereby.
SECTION 10.3 Entire Agreement; Assignment. This Agreement (a)
----------------------------
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all
43
<PAGE>
other prior agreements and understandings, both written and oral, among the
parties or any of them with respect to the subject matter hereof, and (b) shall
not be assigned by operation of law or otherwise, provided that Compass may
assign its rights and obligations or those of Compass Bank to any direct or
indirect, wholly-owned, subsidiary of Compass, but no such assignment shall
relieve Compass of its obligations hereunder if such assignee does not perform
such obligations.
SECTION 10.4 Further Assurances. From time to time as and when requested
------------------
by Compass or its successors or assigns, the Bank and the officers and directors
of the Bank, shall execute and deliver such further agreements, documents,
deeds, certificates and other instruments and shall take or cause to be taken
such other actions, including those as shall be necessary to vest or perfect in
or to confirm of record or otherwise the Bank's title to and possession of, all
of its property, interests, assets, rights, privileges, immunities, powers,
franchises and authority, as shall be reasonably necessary or advisable to carry
out the purposes of and effect the transactions contemplated by this Agreement.
SECTION 10.5 Enforcement of the Agreement. The parties hereto agree that
----------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
SECTION 10.6 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 10.7 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered if delivered in person, by cable, telegram or telex or
by telecopy; five business days after mailing if delivered by registered or
certified mail (postage prepaid, return receipt requested); and two business
days after sending if delivered by overnight courier; to the respective parties
as follows:
if to Compass or Compass Bank:
D. Paul Jones, Jr.
Chairman and Chief Executive Officer
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Telecopy No.: (205) 933-3043
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with a copy to:
Daniel B. Graves
Associate General Counsel
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Telecopy No.: (205) 933-3043
if to the Bank:
Bennett Brown
President and Chief Executive Officer
Enterprise National Bank of Jacksonville
4190 Belfort Road
Jacksonville, Fl 32216-7851
Telecopy No: (904) 281-8657
with a copy to:
A. George Igler
Igler & Dougherty, P.A.
1501 East Park Avenue
Tallahassee, Florida 32301
Telecopy No.: (904) 561-3774
Luther F. Sadler, Jr.
Foley & Lardner
The Greenleaf Building
200 Laura Street
Post Office Box 240
Jacksonville, Florida 32201-0240
Telecopy No.: (904) 359-0319
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 10.8 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Florida, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
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SECTION 10.9 Descriptive Headings. The descriptive headings are inserted
--------------------
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
SECTION 10.10 Parties in Interest. This Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 10.11 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 10.12 Incorporation by References. Any and all schedules,
---------------------------
exhibits, annexes, statements, reports, certificates or other documents or
instruments referred to herein or attached hereto are incorporated herein by
reference hereto as though fully set forth at the point referred to in the
Agreement.
SECTION 10.13 Certain Definitions.
-------------------
(a) "Affiliate" shall mean, with respect to any person, any person that,
directly or indirectly, controls, is controlled by, or is under common control
with, such person in question. For the purposes of this definition, "control"
(including, with correlative meaning, the terms "controlled by" and "under
common control with") as used with respect to any person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities or by contract or otherwise.
(b) "Environmental Laws" shall mean all federal, state and local laws,
ordinances, rules, regulations, guidance documents, directives, and decisions,
interpretations and orders of courts or administrative agencies or authorities,
relating to the release, threatened release, recycling, processing, use,
handling, transportation treatment, storage, disposal, remediation, removal,
inspection or monitoring of Polluting Substances or protection of human health
or safety or the environment (including, without limitation, wildlife, air,
surface water, ground water, land surface, and subsurface strata), including,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, as amended ("SARA"), the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"), Hazardous and Solid Waste Amendments
of 1984, as amended ("HSWA"), the Hazardous Materials Transportation Act, as
amended ("HMTA"), the Toxic Substances Control Act ("TSCA"), Occupational Safety
and Health Act ("OSHA"), Federal Water Pollution Control Act, Clean Air Act, and
any and all regulations promulgated pursuant to any of the foregoing.
46
<PAGE>
(c) "Knowledge" or "known" -- An individual shall be deemed to have
"knowledge" of or to have "known" a particular fact or other matter if (i) such
individual is actually aware of such fact or other matter, or (ii) a prudent
individual could be expected to discover or otherwise become aware of such fact
or other matter in the course of conducting a reasonably comprehensive
investigation concerning the truth or existence of such fact or other matter. A
corporation or bank shall be deemed to have "knowledge" of or to have "known" a
particular fact or other matter if any individual who is serving, as a director,
or as an officer listed on Schedule 10.13(c) hereto, of the corporation or bank,
has, or at any time had, knowledge of such fact or other matter. The Bank is
understood to have undertaken a separate investigation in connection with the
transactions contemplated hereby to determine the existence or absence of facts
or other matters in the statement qualified as "known" by, or the "knowledge"
of, the Bank.
(d) "Material Adverse Effect" shall mean any material adverse change in
the financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, business or results of operations of the Bank taken as a
whole (or when the reference is to Compass, to Compass and its Subsidiaries,
taken as a whole); provided, however, that with respect to the Bank, a Material
Adverse Effect shall not be deemed to have occurred until, but shall be deemed
to have occurred when, such changes, either individually or in the aggregate,
reduce shareholders' equity of the Bank by more than five percent (5%),
calculated as of the end of the month next preceding such change.
(e) "Polluting Substances" shall mean those substances included within the
statutory or regulatory definitions, listings or descriptions of "pollutant,"
"contaminant," "toxic waste," "hazardous substance," "hazardous waste," "solid
waste," or "regulated substance" pursuant to CERCLA, SARA, RCRA, HSWA, HMTA,
TSCA, OSHA, and/or any other Environmental Laws, as amended, and shall include,
without limitation, any material, waste or substance which is or contains
explosives, radioactive materials, oil or any fraction thereof, asbestos, or
formaldehyde. To the extent that the laws or regulations of the State of
Florida establish a meaning for "hazardous substance," "hazardous waste,"
"hazardous materials," "solid waste," or "toxic waste," which is broader than
that specified in any of CERCLA, SARA, RCRA, HSWA, HMTA, TSCA, OSHA or other
Environmental Laws such broader meaning shall apply.
(f) "Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, discarding or abandoning.
(g) "Subsidiary" shall mean, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity or any partnership, joint venture or other
enterprise in which any entity has, directly or indirectly, any equity interest.
47
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
ATTEST: COMPASS BANCSHARES, INC.
By [SIGNATURE APPEARS HERE] By /s/ D. Paul Jones, Jr.
--------------------------- -----------------------------------------
Its Assistant Secretary Its Chairman and Chief Executive Officer
ATTEST: COMPASS BANK
By [SIGNATURE APPEARS HERE] By [SIGNATURE APPEARS HERE]
--------------------------- -----------------------------------------
Its Assistant Secretary Its Chairman, Chief Executive Officer
and President
ATTEST: ENTERPRISE NATIONAL BANK OF
JACKSONVILLE
By /s/ Lynn Sandberg By /s/ Bennett Brown
--------------------------- -----------------------------------------
Its VP/Cashier Its
<PAGE>
EXHIBIT A
ARTICLES AND
PLAN OF MERGER
--------------
THESE ARTICLES AND PLAN OF MERGER ("Plan of Merger") are made and entered
into as of September ___, 1996, by and among Compass Bank, 76 South Laura
Street, Jacksonville, Florida 32202 ("Compass Bank") and Enterprise National
Bank of Jacksonville, 4190 Belfort Road, Jacksonville, Florida 32216-7851
("Bank") in order to provide for the merger (the "Merger") of the Bank with and
into Compass Bank.
PREAMBLE:
Compass Bank is a Florida banking corporation and a member of the Federal
Reserve System, with its principal office in Jacksonville, Florida. Compass
Bank is a wholly owned subsidiary of Compass Bancshares, Inc. ("Compass"), a
bank holding company duly organized under the laws of the State of Delaware,
with its principal office in Birmingham, Alabama. The Bank is a national
banking association with its principal office in Jacksonville, Florida.
Compass, Compass Bank and the Bank entered into an Agreement and Plan of
Merger dated July 31, 1996 (the "Merger Agreement"), providing for all the terms
of the Merger of the Bank with and into Compass Bank.
The Merger Agreement, and this Plan of Merger providing for the Merger
pursuant to Section 658.42, Florida Statues, have been approved by a majority of
---------------
the entire respective Boards of Directors of Compass Bank, the Bank and Compass
and these Boards of Directors have authorized their execution and consummation.
In consideration of the premises and of the covenants contained in this
Plan of Merger and the Merger Agreement, Compass Bank and the Bank hereby make,
adopt and approve the Plan of Merger and prescribe the terms and conditions of
the Merger, along with the mode, manner and basis of carrying the Merger into
effect, as follows:
1. The Merger.
1.1 Resulting Bank. Upon the terms and subject to the conditions
hereof, and in accordance with the Florida Statutes, the National Bank Act, the
Bank Holding Company Act of 1956, as amended (the "Act") and other applicable
law, the Bank shall be merged with and into Compass Bank as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions set
forth in Sections 5 and 6 hereof. Following the Merger, Compass Bank shall
continue as the resulting bank (the "Resulting Bank") under the name "Compass
Bank," and the separate corporate existence of the Bank shall cease.
1.2 Effective Time. The Merger shall not be effective unless and
until it is approved by the shareholders of each institution and all applicable
federal and state regulatory
<PAGE>
agencies, and the Boards of Directors of the respective institutions shall not
have withdrawn their approvals. The Merger shall be consummated by the issuance
of a certificate of merger pursuant to Section 658.45, Florida Statutes (the
----------------
time of such issuance being the "Effective Time").
1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 658.45, Florida Statutes, the National Bank Act, codified at 12
----------------
U.S.C. Section 214b, and other applicable laws and regulations.
1.4 Articles of Incorporation and By-Laws. The Articles of
Incorporation and By-Laws of Compass Bank, in each case as in effect at the
Effective Time, shall be the Articles of Incorporation and By-Laws of the
Resulting Bank. The Articles of Incorporation of the Resulting Bank is attached
hereto as Exhibit 1.
---------
1.5 Directors and Officers. The directors and officers of Compass
Bank, at the Effective Time, shall be the directors and officers of the
Resulting Bank and will hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation and By-Laws of the Resulting Bank, or
as otherwise provided by law.
There shall be six directors of the Resulting Bank. The name, residence
address and term of the directors of the Resulting Bank shall be as follows:
Name Residence Address
---- -----------------
Byrd Williams 7613 Gunston Place
Birmingham, Alabama 35242
David N. Wright 7100 Old Overton Club Drive
Vestavia Hills, Alabama 35242
Nelson Johnson 4321 Whiteleaf Court
Pensacola, Florida 32504
William H. Tinsley 215 Natures Trail Court
Fort Walton Beach, Florida 32548
Charles Allcott III 3309 Whiteleaf Circle
Pensacola, Florida 32504
Bennett Brown 3007 Forest Circle
Jacksonville, Florida 32257
The directors of the Resulting Bank will be elected annually and shall serve
until the next election of directors, or until their successors are elected and
qualified.
2
<PAGE>
The names and addresses of executive officers of the Resulting Bank are as
follows:
Williams, Byrd President, Chief Executive Officer, and Chairman
of the Board of Directors
Tinsley, William H. City President for the Northwest Florida Region
Director
White, Robert E. Vice-Chairman
Brown, Bennett City President - Jacksonville, Director
Hammel, William J. Commercial Loan Manager II
Bellamy, R. Alan Senior Vice President
Senior Loan Administrator
Allcott, Charles City President for Pensacola Region, Director
Wright, David N. Senior Vice President and Regional Executive,
Director
Johnson, Nelson Director
Powell, Jerry W. Secretary
Graves, Daniel B. Assistant Secretary
Hegel, Garrett R. Treasurer
Bishop, Thomas E. Compliance Officer
Bean, Michael A. Controller
1.6 Office Location. The home office of the Resulting Bank shall be
76 South Laura Street, Jacksonville, Florida 32202. A list of the branches of
the Resulting Bank is attached as Schedule 1.6.
------------
1.7 Savings Accounts. The Resulting Bank shall issue savings
accounts on the same basis as Compass Bank issued savings accounts prior to the
Merger.
1.8 Liquidation Accounts. The Merger will have no effect on the
liquidation account of Compass Bank.
3
<PAGE>
2. Capitalization of the Continuing Bank.
2.1 Conversion of Shares. At the Effective Time, the common stock of
the Bank shall, ipso facto, and without any further action on the part of the
Bank, Compass Bank or any other party, no longer represent capital stock of the
Bank, and the outstanding certificates representing shares of the Bank's capital
stock shall be converted into and represent the right to the Merger
Consideration as defined in the Merger Agreement which is attached hereto as
Exhibit A and incorporated herein by reference.
- ---------
2.2 Common Stock. At the Effective Time, the Resulting Bank shall
have authorized capital stock of Ten Thousand Dollars ($10,000.00) divided into
ten thousand (10,000) shares of One Dollar ($1.00) par value common stock, of
which One Thousand (1,000) shares are issued to Compass, and the Resulting Bank
shall have surplus and retained earnings equal to the capital accounts of
Compass Bank and the Bank immediately prior to the Effective Time. All such
amounts of surplus and retained earnings shall be adjusted for normal earnings
and expenses, and for any accounting adjustments relating to the Merger provided
for herein.
3. Trust Powers. The Resulting Bank shall not have trust powers.
4. Approval. This Plan of Merger has been approved by the
affirmative vote of Compass, the sole shareholder of Compass Bank, and the
affirmative vote of the shareholders of the Bank (See Exhibit 2), in accordance
---------
with the applicable provisions of law and the Articles of Incorporation,
Articles of Association and By-Laws of the respective institutions. Compass
Bank and the Bank shall proceed expeditiously and cooperate fully in the
procurement of any other consents and approvals and in the taking of any other
actions, and the satisfaction of all other requirements prescribed by law or
otherwise necessary or appropriate for consummation of the Merger and any other
transactions contemplated hereby, including, without limitation, any approvals
of the Florida Department of Banking and Finance ("Department"), the Federal
Reserve Board ("FRB"), the Federal Deposit Insurance Corporation ("FDIC"), the
Office of the Comptroller of the Currency ("OCC") and any other federal or state
governmental agency which may be required.
5. Conditions to Consummation of the Merger. The parties hereto
agree that the closing of the Merger is expressly conditioned upon (i) the
approval of the shareholders of each of the constituent banks and of the
Department, the FRB and any other federal or state governmental agency which may
be required and (ii) the satisfaction of all the terms and conditions contained
in the Merger Agreement.
6. Closing. Upon the terms and subject to the conditions hereof,
including the provisions of Section 5 hereof, as soon as practicable after the
obtaining of all necessary shareholder and regulatory approvals, and the
satisfaction of all conditions and requirements to closing of this Plan of
Merger, Compass Bank and the Bank shall take all actions as may be required by
law to make the Merger effective. Prior to the filing referred to in this
Section, a closing will be held as described in the Merger Agreement for the
purpose of confirming all of the foregoing. See Exhibit 2.
---------
4
<PAGE>
7. Amendment. Compass Bank and the Bank, by mutual consent of their
respective Boards of Directors, to the extent permitted by law, may amend,
modify and supplement this Plan of Merger in such manner as may be mutually
agreed upon by them in writing.
8. Counterparts. This Plan of Merger may be executed in two or more
identical counterparts, each of which when executed and delivered by the parties
hereto shall be an original, but all of which together shall constitute a single
agreement.
9. Binding Effect; Governing Law. This Plan of Merger shall be
binding upon and inure to the benefit of the successors and assigns of each
party hereto, and shall be governed by and construed in accordance with the
Florida Statutes, the National Bank Act, the Act, and all other applicable laws
and regulations.
IN WITNESS WHEREOF, Compass Bank and the Bank have caused this Plan of
Merger to be executed in counterparts by their duly authorized officers and
their corporate seals to be hereunto affixed as of the date first above written.
ATTEST: COMPASS BANK
By: By:
--------------------------- ----------------------------
Its: Its:
------------------------ --------------------------
[CORPORATE SEAL]
ATTEST: ENTERPRISE NATIONAL BANK OF
JACKSONVILLE
By: By:
-------------------------- ----------------------------
Its: Its: President and Chief
------------------------ Executive Officer
[CORPORATE SEAL]
5
<PAGE>
Schedule 1.6
Resulting Bank Offices
Compass Bank
- ------------
Main Argyle
76 South Laura Street 8430 Blanding Boulevard
Jacksonville, Florida 32202 Jacksonville, Florida 32244
North Davis Mandarin
6701 North Davis Highway 9550 San Jose Boulevard
Pensacola, Florida 32504 Jacksonville, Florida 32257
Mariner Mall Jacksonville Beach
4395 West Fairfield Drive 2300 South Third Street
Pensacola, Florida 32505 Jacksonville Beach, Florida 32250
Gulf Breeze Deerwood
1170 Gulf Breeze Parkway 8730 Baymeadows Road
Gulf Breeze, Florida 32561 Jacksonville, Florida 32256
Ensley Clay Plaza
8890 Pensacola Boulevard 1339 Blanding Boulevard, Suite E
Pensacola, Florida 32534 Orange Park, Florida 32065
Cordova Mall Fort Caroline
5055 Bayou Boulevard 3560 University Boulevard North
Pensacola, Florida 32503 Jacksonville, Florida 32277
Destin Fernandina Beach
230 Main Street 1742 Eighth Street South
Destin, Florida 32541 Fernandina Beach, Florida 32034
Niceville Park Avenue
1130 East John Sims Parkway 2183 Park Avenue
Niceville, Florida 32578 Orange Park, Florida 32073
Crestview Main
728 Ferdon Boulevard, North 1695 U.S. Highway 1 South
Crestview, Florida 32536 Saint Augustine, Florida 32084
Racetrack Middleburg
206 Racetrack Road N.W. 2380 Blanding Boulevard
Fort Walton Beach, Florida 32547 Middleburg, Florida 32068
<PAGE>
Mary Esther Edgewood
429 Mary Esther Cutoff 1090 South Edgewood Avenue
Fort Walton Beach, Florida 32548 Jacksonville, Florida 32205
Main Anastasia Island
198 Eglin Parkway, N.E. 1965 State Road #3
Fort Walton Beach, Florida 32548 Saint Augustine, Florida 32084
Former main office of Community First Bank Regency Office
3740 Beach Boulevard 299 Monument Road
Jacksonville, FL 32207 Jacksonville, FL 32225
Mandarin Office Baymeadows Office
10304 San Jose Boulevard 9559 Baymeadows Road
Jacksonville, FL 32257 Jacksonville, FL 32256
Ponte Vedra (Sawgrass) Orange Park Office
226-8 Solana Road 536 Blanding Boulevard
Ponte Vedra Beach, FL 32082 Orange Park, FL 32073
Spring Hill Office Northside Office
8550 Forest Oaks Boulevard 10865 Harts Road
Spring Hill, FL 34608 Jacksonville, FL 32218
Seven Hills Office Mortgage Servicing Department
401 Mariner Boulevard 3436 Beach Boulevard
Spring Hill, FL 34608 Jacksonville, FL 32207
Enterprise National Bank of Jacksonville
- ----------------------------------------
Main Office
1190 Belfort Road
Jacksonville, Florida 32216
1 Independent Square
Jacksonville, Florida 32202
5992 St. Augustine Road
Jacksonville, Florida
<PAGE>
Exhibit 1
---------
ARTICLES OF INCORPORATION OF
COMPASS BANK
The undersigned, acting as directors for the purpose of forming a
corporation under and by virtue of the Laws of the State of Florida, adopt the
following Articles of Incorporation.
ARTICLE I
The name of the corporation shall be Compass Bank, and its initial place of
business shall be at 76 South Laura Street, in the City of Jacksonville, in the
county of Duval and State of Florida.
ARTICLE II
The general nature of the business to be transacted by this corporation
shall be: That of a general commercial banking business with all the rights,
powers, and privileges granted and conferred by the Florida Banking Code,
regulating the organization, powers, and management of banking corporations, all
to the fullest extent and with all rights, powers and privileges granted and
conferred under Florida law.
ARTICLE III
The total number of shares authorized to be issued by the corporation shall
be ten thousand. Such shares shall be of a single class and shall have a par
value of 1.00 per share. The corporation shall begin business with at least
$1,000 in paid-in common capital stock to be
<PAGE>
divided into one thousand shares. The amount and surplus with which the
corporation will begin business shall be not less than $60,753,000.00 and the
amount of undivided profits not less than $196,000.00 all of which (capital
stock, surplus and undivided profits) shall be paid in cash.
ARTICLE IV
The term for which said corporation shall exist shall be perpetual unless
terminated pursuant to the Florida Banking Code.
ARTICLE V
The number of directors shall not be fewer than five (5). A majority of
the full board of directors may, at any time during the year following the
annual meeting of shareholders in which such action has been authorized,
increase the number of directors by not more than two and appoint persons to
fill resulting vacancies. The names and street addresses of the directors of
the corporation are:
Name Residence Address
---- -----------------
Byrd Williams 3368 South Cove Trace
Birmingham, Alabama 35216
David N. Wright 7100 Old Overton Club Drive
Vestavia Hills, Alabama 35242
Nelson Johnson 4321 Whiteleaf Court
Pensacola, Florida 32504
William H. Tinsley 215 Natures Trail Court
Fort Walton Beach, Florida 32548
Charles Allcott III 3309 Whiteleaf Circle
Pensacola, Florida 32504
Bennett Brown 3007 Forest Circle
Jacksonville, Florida 32257
<PAGE>
EXHIBIT B
POOLING TRANSFER RESTRICTIONS AGREEMENT
---------------------------------------
POOLING TRANSFER RESTRICTIONS AGREEMENT ("Agreement"), dated as of
_____________ ____, 199___, by and between Compass Bancshares, Inc., a Delaware
corporation ("Compass"), Enterprise National Bank of Jacksonville, a national
banking association (the "Bank"), and the undersigned shareholder of the Bank
(the "Shareholder").
WHEREAS, Compass, Compass Bank, a Florida banking corporation ("Compass
Bank") and the Bank entered into an Agreement and Plan of Merger, dated July 31,
1996, ("Merger Agreement") pursuant to which the Bank will be merged with
Compass Bank (the "Merger"), and
WHEREAS, Compass has required as a condition to entering into the Merger
Agreement that the Bank and the Shareholder and each other affiliate of the Bank
deliver to Compass an agreement in substantially the form hereof,
NOW, THEREFORE, in consideration of Compass' agreement to enter into the
Merger Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned, intending to be
legally bound, hereby agree as follows:
1. The Shareholder agrees that he will not sell, pledge, transfer or
otherwise dispose of any shares of the Bank's common stock, par value $5.00 per
share ("Bank Common Stock"), within 30 days prior to the Effective Time (as
defined in the Merger Agreement). The Shareholder further agrees that until the
publication of financial results covering at least 30 days of post-Merger
combined operations of the Bank and Compass, he will not sell, pledge, transfer
or otherwise dispose of any shares of the Compass Common Stock (as defined in
the Merger Agreement) to be acquired by him in the Merger, except for pledges by
the Shareholder of all or part of such Shareholder's Compass Common Stock
acquired in the Merger to secure loans, provided the lender accepts any pledge
of such Compass Common Stock subject to the terms of this Agreement. The
Shareholder further agrees that he will not sell, pledge, transfer or otherwise
dispose of any shares of the Compass Common Stock to be acquired by him in the
Merger except in a manner which is consistent with any additional requirements
for Compass' accounting for the Merger as a pooling of interests, including
without limitation any new requirements imposed by the applicable provisions of
the Securities Act of 1933, the Securities Exchange Act of 1934, and the
respective rules and regulations thereunder.
2. The Shareholder further acknowledges and agrees that he will be subject
to Rule 145 promulgated by the Securities and Exchange Commission under the
Securities Act, and agrees not to transfer any Compass Common Stock received by
him in the Merger except in compliance with the applicable provisions of the
Securities Act, the Exchange Act, and the respective rules and regulations
thereunder.
3. The Shareholder agrees that the shares of Compass Common Stock to be
issued to him in the Merger will bear a restrictive transfer legend in
substantially the following form:
<PAGE>
The shares represented by this certificate are subject to a Pooling
Transfer Restrictions Agreement dated _______ __, 199___ which restricts
any sale or other transfer of such shares prior to ____________, 1996 [due
date of filing of next Quarterly Report on Form 10-Q or Annual Report on
Form 10-K that will contain required combined financial results]. The
issuer will furnish to the record holder of this certificate, without
charge, upon written request to the issuer at its principal place of
business, a copy of the Pooling Transfer Restrictions Agreement.
Compass agrees to instruct its transfer agent to remove the restrictive legend
from any certificates evidencing shares subject hereto promptly following the
expiration of the transfer restrictions described in Section 1 of the Agreement.
4. The Bank agrees and the Shareholder acknowledges and agrees that the
Bank will not permit the transfer of any shares of Bank Common Stock by the
Shareholder or any other Bank affiliate within 30 days prior to the Effective
Time.
5. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned set his hand effective as of the day
first written above.
COMPASS BANCSHARES, INC.
By: /s/ Garrett R. Hegel
---------------------------------
Name: Garrett R. Hegel
-------------------------------
Title: Chief Financial Officer
-------------------------------
ENTERPRISE NATIONAL BANK OF
JACKSONVILLE
By: /s/ Bennett Brown
---------------------------------
Name: Bennett Brown
-------------------------------
Title: President
------------------------------
-------------------------------------
Signature of Shareholder
-------------------------------------
Printed Name of Shareholder
2
<PAGE>
EXHIBIT C
EXCHANGE AGENT AGREEMENT
------------------------
EXCHANGE AGENT AGREEMENT ("Agreement"), dated as of ___________, 199__,
made and entered into by and among Compass Bancshares, Inc., a Delaware
corporation ("Compass"), Compass Bank, a Florida banking corporation ("Compass
Bank"), Enterprise National Bank of Jacksonville, a national banking association
(the "Bank"), and Compass Bank, an Alabama banking corporation ("Exchange
Agent").
PREAMBLE:
Pursuant to an Agreement and Plan of Merger, dated as of July 31, 1996
("Merger Agreement") among Compass, Compass Bank and the Bank, the Bank shall,
at the Effective Time, be merged into Compass Bank, with Compass Bank being the
surviving corporation ("Surviving Corporation").
After the Effective Time, the outstanding shares of the common stock, par
value $5.00 per share (including for this purpose any shares of common stock
which can be acquired upon the exercise of any warrant, option, right,
convertible debt instrument or other security pursuant to which shares of common
stock may be obtained (collectively, "Derivative Securities")), of the Bank
("Bank Common Stock") shall solely represent, in the aggregate, the right to
payment by Compass of total Merger Consideration of ____________ shares of
Compass common stock, par value $2.00 per share ("Compass Common Stock") (or
cash in lieu of fractional shares), subject to the rights of qualified
dissenting shareholders of the Bank.
The Bank has requested Compass to designate the Exchange Agent in
connection with the exchange (the "Exchange") of shares of Bank Common Stock for
shares of Compass Common Stock, subject to the terms and conditions hereof and
of the Merger Agreement. The Exchange Agent will receive Bank Common Stock
delivered for exchange pursuant to the terms of the Merger Agreement, and will
process such certificates representing Bank Common Stock ("Certificates") and
related documents. Compass desires that the Exchange Agent act in such capacity.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants contained herein, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties,
intending to be legally bound, hereby agree as follows:
1. Appointment of Exchange Agent. The Exchange Agent is hereby appointed
-----------------------------
as the Exchange Agent for payment of the Merger Consideration to shareholders of
the Bank. Such appointment shall be in accordance with the terms and conditions
set forth herein.
2. Closing of Stock Transfer Books. At the Effective Time, the Bank's stock
-------------------------------
transfer books will be closed and no transfers shall be permitted.
<PAGE>
3. Duties of Exchange Agent. The Exchange Agent is authorized and directed
------------------------
to perform the following functions contemplated by the Merger Agreement and the
Letters of Transmittal (defined below):
(a) Distribution of Letters of Transmittal. The Exchange Agent shall
--------------------------------------
mail to the holders of record of Bank Common Stock, by first class United
States mail, postage prepaid, copies of Letters of Transmittal, including
Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 in substantially the form attached hereto as Exhibit A
---------
("Letters of Transmittal"), and return envelopes to the Exchange Agent, at
the earliest practicable time following the Effective Time. A form of Stock
Assignment, Power of Attorney and Lost Stock Certificate Affidavit will be
provided to the Exchange Agent for use by shareholders if necessary.
(b) Acceptance of Certificates.
--------------------------
(i) The Exchange Agent will examine the Letters of Transmittal,
Certificates and other documents and instruments delivered to the Exchange
Agent by or on behalf of holders tendering Bank Common Stock and shall
determine whether (i) the Letters of Transmittal have been completed and
executed properly, and are accompanied by proper evidence of authority,
(ii) Certificates corresponding to the names of the registered holders,
Certificate numbers and the number of shares represented thereby with the
information set forth in the Bank's shareholder and other records and which
appear to be in negotiable, good delivery form, properly endorsed or
accompanied by stock powers with transfer tax stamps or evidence of payment
or exemption from transfer taxes affixed (where required), and (iii)
signatures are guaranteed (where required), all in accordance with the
terms and conditions of the Merger Agreement and the Letters of
Transmittal. The Exchange Agent shall accept Certificates which are
surrendered in accordance with the provisions of the Merger Agreement and
accompanied by the executed Letters of Transmittal. Such Certificates and
Letters of Transmittal shall only be accepted by the Exchange Agent and
eligible for payment hereunder if they have been properly executed and
completed in accordance with the instructions contained in the Letters of
Transmittal and if the person or persons surrendering such Certificates and
Letters of Transmittal appears as a shareholder of record of the number of
shares surrendered on the list of shareholders supplied and certified to
the Exchange Agent by the Bank ("Shareholder List") attached as Exhibit B
---------
hereto. In the event the Exchange Agent shall have any questions as to
whether a Certificate and Letters of Transmittal have been properly
executed and completed or whether the Certificates have been surrendered by
the holder of record thereof, the Exchange Agent shall promptly refer such
questions to Compass for resolution by Compass and the Exchange Agent shall
be able to rely on the written instructions and decisions of any officer of
Compass. Determination of all questions as to the proper completion or
execution of the Letters of Transmittal or as to the proper form for
transfer of the Certificates for Bank Common Stock shall be made by Compass
together with its attorneys, and such other persons as Compass shall
designate, and such determinations shall be final and binding; provided,
2
<PAGE>
however, that the rejection by Compass of any Letters of Transmittal or
Certificates deemed by Compass to be ineffective to transfer the
Certificates shall not affect the right of any shareholder in or to his
respective share of the Merger Consideration;
(ii) If any defect or irregularity appears to exist in connection
with a purported tender, the Exchange Agent will notify promptly the
persons by whom the tender was made and will return all documents delivered
in connection therewith or take such action as is necessary or advisable to
cause such defect or irregularity to be cured;
(iii) Tenders may be made only as set forth in the Letters of
Transmittal;
(iv) Letters of Transmittal, and facsimiles thereof submitted to the
Exchange Agent, shall be marked by the Exchange Agent's designated officers
to show the date and time of receipt and their review and acceptance
thereof;
(v) At the close of business each Friday, the Exchange Agent shall
provide Compass and First National Bank of Boston, Compass' transfer agent
and registrar ("Transfer Agent") with a list of shareholders who have
properly tendered their Bank Common Stock. In addition, the Exchange Agent
shall inform Compass in writing of the number of shares of Bank Common
Stock which have been properly tendered and the number which have been
improperly tendered to the Exchange Agent during the week then ended and on
a cumulative basis through that day. The Exchange Agent shall provide
Compass such other information concerning the Bank Common Stock as it may
reasonably request. Such communications should be sent to:
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attn: Daniel B. Graves
Telephone No. (205) 933-3880
With a copy to: First National Bank of Boston
Post Office Box 1865
Boston, Massachusetts 02105
Attn: Janet L. Moor, Shareholder
Services Officer
Telephone No. (617) 575-2130
(c) Exchange Fund. In order to provide for payment of the Merger
-------------
Consideration in accordance with the terms of the Merger Agreement,
Compass, from time to time prior to or after the Effective Time, shall
deposit or cause to be deposited with the Exchange Agent cash in an amount
sufficient to make payments in lieu of fractional shares (the "Exchange
Fund"). This Exchange Fund shall not be used for any purpose except as
provided by this Agreement.
3
<PAGE>
(d) Compass Common Stock. Compass and the Bank shall jointly advise
--------------------
the Exchange Agent as to the number of shares of Compass Common Stock to be
distributed to each shareholder which shall be calculated by Compass and
the Bank as follows:
(i) Bank Common Stock. Each holder of Bank Common Stock shall
-----------------
receive Merger Consideration equal to ___________ shares of Compass Common
Stock for each share of Bank Common Stock held immediately prior to the
Effective Time.
(ii) Fractional Shares. For each fractional share of Compass Common
-----------------
Stock which would be delivered upon the surrender of Bank Common Stock,
each holder of Stock shall receive cash in an amount equal to the product
of such fraction and $_______________.
As soon as practicable after acceptance of properly executed
Certificates and accompanying Letters of Transmittal in accordance with the
terms of paragraph 3(b) hereof, the Exchange Agent shall instruct and
Compass shall cause the Transfer Agent to issue and mail certificates
representing shares of Compass Common Stock to the shareholder surrendering
such certificates. The Exchange Agent shall promptly make the payments in
lieu of fractional shares out of the Exchange Fund upon surrender of the
Certificates.
(e) Other Duties of Exchange Agent.
------------------------------
(i) The Exchange Agent shall have no obligation to make payment for
surrendered Certificates unless Compass shall have issued sufficient
Compass Common Stock or caused such stock to be issued and shall have
deposited or caused to be deposited in the Exchange Fund sufficient cash
with which to pay all amounts due and payable for such shares.
(ii) The Exchange Agent shall be regarded as having made no
representations or warranties as to the validity, sufficiency, value or
genuineness of any Certificates or the shares of Bank Common Stock
represented thereby, and the Exchange Agent shall not be deemed to have
made any representations as to the value of such shares.
(iii) The Exchange Agent may rely on and shall be protected in acting
upon the written instructions of any officer of Compass or the Surviving
Corporation with respect to any matter relating to its actions or duties
hereunder; and the Exchange Agent shall be entitled to request further
instructions from Compass or the Surviving Corporation, as appropriate, and
to act in accordance therewith.
(iv) The Exchange Agent may consult attorneys satisfactory to the
Exchange Agent (including, without limitation, attorneys for Compass or the
4
<PAGE>
Surviving Corporation) and the written advice and opinion of such attorneys
shall constitute full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and
in accordance with such advice or opinion.
(v) The Exchange Agent shall take all other actions which it or
Compass deems necessary or appropriate under the terms of the Merger
Agreement, the Letters of Transmittal and under the customs and practices
normally applied to transactions of this type and appropriate to the proper
transfer of the Bank Common Stock and the proper maintenance of the Bank's
and Compass' shareholder books and records. Following payment in
accordance with the terms hereof, the Exchange Agent shall forward to
Compass all documents received by it in connection with tenders of
Certificates (including Letters of Transmittal, telegrams, facsimile
transmissions or letters representing tenders made without concurrent
deposit of certificates) and the tendered Certificates prominently marked
"CANCELLED" on the front thereof, via Federal Express or other means
acceptable to Compass.
5. Alteration of Instructions. The Exchange Agent shall follow
--------------------------
and act upon any written amendments, modifications or supplements to these
instructions and upon any further instructions from Compass or the Surviving
Corporation in connection with the Merger Agreement or any of the transactions
contemplated thereby.
6. Indemnification of Exchange Agent. Compass and the Surviving
---------------------------------
Corporation covenant and agree to indemnify the Exchange Agent and hold it
harmless against any loss, liability or expense it may incur in the absence of
negligence or bad faith on the part of the Exchange Agent arising out of or in
connection with the administration of its duties hereunder, including but not
limited to legal fees and other costs and expenses of defending or preparing to
defend against any claim or liabilities in connection with this Agreement.
7. Compensation for Services. Compass shall compensate the
-------------------------
Exchange Agent for its services hereunder.
8. Payment of Amounts Due Dissenting Shareholders. In the event
----------------------------------------------
that qualified dissenting shareholders of the Bank exercise the rights afforded
them under 12 U.S.C. Section 214(b), such shareholders may be entitled to
payment of an amount other than the Merger Consideration. Any payment for shares
other than the Merger Consideration will be paid only upon the written
instructions of the Surviving Corporation. The Exchange Agent may request and
shall be provided additional funds from the Surviving Corporation in order to
make any required payment to dissenting shareholders, and the Exchange Agent
shall return to Compass any Merger Consideration which would have otherwise been
payable to such persons. The Exchange Agent shall rely on the instructions of
the Surviving Corporation as to all matters covered by this paragraph,
including, without limitation, the time and amount of payment to dissenting
shareholders.
5
<PAGE>
9. Unclaimed Funds. Any moneys or certificates deposited
---------------
hereunder which shall remain unclaimed by the holders of shares of Bank Common
Stock for a period of six (6) months following the Effective Time shall, upon
written request of the Surviving Corporation, be returned to Compass, plus
interest earned on the cash portion thereof and the shareholders of Certificates
not theretofore presented to and accepted by the Exchange Agent shall look to
Compass only, and not the Exchange Agent, for the payment of any Merger
Consideration in respect of such Certificates.
10. Investment of Exchange Fund. At the direction of the Surviving
---------------------------
Corporation, the Exchange Agent shall invest portions of the Exchange Fund and
remit earnings thereon monthly to the Surviving Corporation, provided that all
such investments shall be in The Starburst Government Money Market Fund (the
"Fund"), managed by the Exchange Agent, or if for any reason the Fund is not
available to the Exchange Agent as an investment alternative, as otherwise
directed by the Surviving Corporation.
11. Amendment. Except as otherwise expressly provided herein,
---------
neither this Agreement nor any provision hereof may be amended, modified,
waived, discharged or terminated except in a writing signed by all of the
parties hereto prior to the Effective Time or by Compass and the Exchange Agent
after the Effective Time; provided, however, that no amendment shall be made if
such modification shall reduce the amount of or eliminate the opportunity of any
shareholder to receive his share of the Merger Consideration contemplated by the
Merger Agreement.
12. Section Headings. The section headings used herein are for
----------------
convenience of reference only and shall not define or limit the provisions of
this Agreement.
13. GOVERNING LAW. THIS AGREEMENT AND THE APPOINTMENT OF THE
-------------
EXCHANGE AGENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF ALABAMA AND SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON THE
SUCCESSORS AND ASSIGNS OF THE PARTIES HERETO.
14. Notices. Notices under this Agreement shall be deemed given if
-------
made in writing and sent via prepaid first-class United States mail, or by
nationally recognized overnight courier, to:
If to Compass:
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attn: Daniel B. Graves
Associate General Counsel
6
<PAGE>
If to the Exchange Agent:
Compass Bank
Trust Department
701 S. 32nd Street
Birmingham, Alabama 35233
Attn: Thomas J. Radigan, Jr.
Vice President and Senior Trust Officer
If to the Bank prior
to the Effective Time:
Enterprise National Bank of Jacksonville
4190 Belfort Road
Jacksonville, Florida 32216
Attn: Bennett Brown
If to Compass Bank or, following
the Effective Time, the
Surviving Corporation:
Compass Bank
c/o Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attn: Daniel B. Graves
15. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. Conflict. In the event the terms of this Agreement conflict
--------
with the terms and provisions of the Merger Agreement, the terms and provisions
of the Merger Agreement shall be controlling.
17. Defined Terms. Capitalized terms not defined herein have the
-------------
meanings ascribed to them in the Merger Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized appointed officers on the date first
written above.
COMPASS BANCSHARES, INC.
By:
Name:
Title:
COMPASS BANK
(a Florida banking corporation)
By:
Name:
Title:
ENTERPRISE NATIONAL BANK
OF JACKSONVILLE
By:
Name:
Title:
COMPASS BANK, as Exchange Agent
(an Alabama banking corporation)
By:
Name:
Title:
Exhibit A - Form of Letter of Transmittal
Exhibit B - Shareholder List
8
<PAGE>
EXHIBIT "A"
TO
EXCHANGE AGENT AGREEMENT
LETTER OF TRANSMITTAL
For Shares of Common Stock of
ENTERPRISE NATIONAL BANK OF JACKSONVILLE
Delivered Pursuant to the Agreement and Plan of Merger
dated as of July 31, 1996
By Mail or Overnight Delivery Service:
Compass Bank
15 South 20th Street
Birmingham, Alabama 35233
Attention: Troy Kilpatrick
DO NOT HAND DELIVER
DESCRIPTION OF SHARES SURRENDERED
---------------------------------
Based on its stock transfer records, Enterprise National Bank of
Jacksonville (the "Bank") has listed below your name, address and the
certificate numbers representing your shares of Common Stock, par value $5.00
per share ("Shares"), of the Bank. If any of the listed information appears to
be incorrect, please notify Troy Kilpatrick at (205) 558-6945 at once.
<TABLE>
<CAPTION>
================================================================================
Name, Address and Social Security
Number of Registered Holders Certificate(s) Surrendered
- --------------------------------------------------------------------------------
Total Number of
Certificate Shares Represented
Number(s) by Certificate(s)
<S> <C> <C>
- ------------------------------- -------------- --------------------
Name
-------------- --------------------
-------------- --------------------
- -------------------------------
- -------------------------------
Address
Total Shares
- ------------------------------- --------------------
Social Security Number
================================================================================
</TABLE>
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Gentlemen:
I, as the registered holder of the above described Shares of the Bank,
hereby tender to Compass Bancshares, Inc. ("Compass"), such Shares pursuant to
the Agreement and Plan of Merger dated as of July 31, 1996 ("the Merger
Agreement"), by and among Compass, Compass Bank, a Florida banking corporation
("Compass Bank"), and the Bank. I hereby acknowledge receipt of the Proxy
Statement dated _______________, 1996, which described the merger ("Merger")
provided by the Merger Agreement.
I represent and warrant to Compass and Compass Bank that I am the true and
lawful owner of the Shares, and have full capacity, power and authority to
exchange the Shares, free and clear of all liens, restrictions and encumbrances
of any kind whatsoever, and the Shares will not be subject to any adverse claim.
I understand that ______________________________, as Exchange Agent for this
exchange, may require additional documentation, and I agree, upon request, to
execute and deliver any additional documents or instruments deemed by the
Exchange Agent or Compass reasonably necessary to complete the exchange of the
Shares.
The authority conferred in this Letter of Transmittal shall not be affected
by, and shall survive, my death or incapacity, and any obligation I may have
hereunder shall be binding upon my successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and personal and legal representatives.
I acknowledge that the tender of my Shares is irrevocable.
INSTRUCTIONS REGARDING ISSUANCE OF SHARES
If you wish to have the shares of Compass Common Stock to be issued
pursuant to the Merger Agreement in the name and at the address set forth above,
please sign and date this letter on page 3. If you wish to have the shares of
Compass Common Stock to be issued pursuant to the Merger Agreement in a name or
to an address other than the name and address specified above, please complete
the following section. You will be required to pay any transfer or other taxes
required by reason of the payment and delivery of Compass Common Stock to such
other person.
NEW CERTIFICATES TO BE ISSUED
IN A DIFFERENT NAME OR TO A DIFFERENT ADDRESS
If you are entitled to receive shares of Compass Common Stock and wish to
have certificates representing Compass Common Stock issued in a name or to an
address other than the name or address shown on your Bank stock certificates,
please indicate the name and address of your assignee below:
Name and Address of Assignee
----------------------------
Name: Taxpayer I.D. No. or
--------------------------- Social Security No.:
(Type or print full name) -------------------------
Address:
------------------------------------------------------------------------
City, State, Zip Code:
----------------------------------------------------------
<PAGE>
PLEASE SIGN AND DATE BELOW AS INDICATED
THEN PLEASE COMPLETE SUBSTITUTE FORM W-9
Signatures
---------------------------------
---------------------------------
Dated , 1996
-------------------------
Name(s)
-------------------------------------------------------------
(Please Print)
Capacity
-----------------------------------
(Full Title)
Address
------------------------------------
------------------------------------
(Include Zip Code)
Area Code and Telephone Number
-----------------------------
Tax Identification or Social Security Number
-----------------------------
===============================================================================
GUARANTEE OF SIGNATURES
(Must be signed by registered holder(s) as name(s) appear on the certificate(s)
or by person(s) authorized to become registered holder(s) by certificate(s) and
documents transmitted. If signing is by an officer or a corporation, or by an
attorney, executor, administrator, trustee, guardian, agent or other person
acting in a fiduciary or representative capacity, please set forth full title.
See Instruction 1.)
- -----------------
Authorized Signature
----------------------------------
Name
----------------------------------
(Please Print)
Title
----------------------------------
Name of Firm
----------------------------------
Address
----------------------------------
----------------------------------
(Include Zip Code)
Area Code and Telephone Number
------------------
Dated , 1996
----------------------------
===============================================================================
PLEASE COMPLETE SUBSTITUTE FORM W-9
IT IS THE LAST FORM IN THIS PACKAGE
===============================================================================
DO NOT WRITE IN SPACE BELOW
<PAGE>
Date Received:_________________ By:_________________ Date:_________________,1996
<TABLE>
<CAPTION>
====================================================================================================================================
Bank Compass No. of
Shares Shares Accepted Stock Certificate Fractional Cash Check
Surrendered for Exchange Certificate Nos. No. issued Shares Paid No.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
Accepted by:______________ Checked By:______________ Date:______________, 1996
<PAGE>
LETTER OF TRANSMITTAL
INSTRUCTIONS
1. Delivery of Letter of Transmittal and Certificates; Signature
Guarantees. Please send all certificates for Shares to Compass Bank, as
Exchange Agent (the "Exchange Agent"), with the Letter of Transmittal, or a
facsimile thereof, fully completed and signed by you, the registered holder(s).
Compass retains the right to require that a signature on the Letter of
Transmittal and the Share certificates be guaranteed by an Eligible Institution.
An Eligible Institution is a member of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. (the "NASD") or a
commercial bank or trust company having an office, branch or agency located in
the United States. If Compass wishes to have your signature guaranteed by an
Eligible Institution, you will be notified by separate letter.
If certificates are registered in the name of a person other than you,
the certificate(s) must be duly endorsed or accompanied by stock powers signed
by the registered holder and the Letter of Transmittal. If the Letter of
Transmittal is executed by an officer on behalf of a corporation or by an
executor, administrator, trustee, guardian, attorney, agent or other person
acting in a fiduciary or representative capacity, the Exchange Agent reserves
the right to require that proper documentary evidence of the authority of the
person executing the Letter of Transmittal. If the tendered certificates are
owned of record by two or more joint owners, each of you must sign the Letter of
Transmittal. Questions regarding such evidence of authority may be referred to
Troy Kilpatrick, a representative of the Exchange Agent, at (205) 558-6945.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS STRONGLY RECOMMENDED.
2. Issuance of Compass Common Stock. You will receive the Compass Common
Stock for your Shares only after receipt and acceptance by the Exchange Agent
and Compass of all of the certificates representing your Shares, a properly
completed and executed Letter of Transmittal, and any other required documents
and upon processing of the documents by the Exchange Agent.
3. Payment for Fractional Shares. As provided in Section 1.6(f) of the
Merger Agreement, Compass will not issue any certificates of Compass Common
Stock for fractional shares. In lieu of issuing fractional shares, Compass will
pay to any Bank shareholder entitled to receive a fractional share of Compass
Common Stock, a cash payment based on a price of $_______ per share.
4. No Conditional Tenders; Waiver of Notice. No alternative, conditional,
irregular or contingent deliveries of Shares will be accepted. By execution of
the Letter of Transmittal or any manually signed facsimile thereof, you waive
any rights to receive any notice of the acceptance of your Shares for exchange.
5. Signatures on Letter of Transmittal. In order for the Letter of
Transmittal to be properly signed by you, the signature must correspond exactly
with the name(s) as written on the face of the certificate(s).
If the Shares tendered hereby are owned of record by two or more joint
owners, all of you must sign the Letter of Transmittal.
If your Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If the certificate(s) representing the Shares transmitted hereby are
registered in your name and the Letter of Transmittal is properly signed by you,
no endorsements of certificates or separate stock powers are required. In all
other cases, the certificate(s) representing the Shares transmitted hereby must
be endorsed or
<PAGE>
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear on the certificate(s), and if
required, signature(s) on such certificate(s) or stock power(s) must be
guaranteed by an Eligible Institution.
If the Letter of Transmittal or any certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of corporation or other acting in a fiduciary or representative
capacity, such person should so indicate when signing, and the Exchange Agent
reserves the right to require proper evidence of their authority to so act.
6. Irregularities. All questions as to the validity, form, eligibility,
acceptance of and delivery of Shares and the issuance of Compass Common Stock
and the payment of cash in lieu of fractional shares will be determined by
Compass, which determination shall be final and binding. Compass reserves the
absolute right to reject any or all tenders determined by Compass not to be in
appropriate form or which would, in the opinion of Compass' counsel, be
unlawful. Compass also reserves the absolute right in its sole discretion, to
waive any of the conditions hereof, or any defect in any tender with respect to
any particular Shares of any particular shareholder, and Compass'
interpretations of the terms and conditions of the Merger Agreement and these
instructions shall be final and binding. The Exchange Agent and Compass shall
not be obligated to give notice of defects or irregularities in tenders, nor
shall they incur any liability for failure to give any such notice. Tenders will
be deemed not to have been made until all defects and irregularities have been
cured or waived.
7. 31% Backup Withholding. Under the Federal income tax law, you must
provide Compass with a correct taxpayer identification number ("TIN") unless an
exemption applies. If the correct TIN is not provided, a $50 penalty may be
imposed upon you by the Internal Revenue Service and you will be subject to
backup withholding of 31% of the payments to be received by you.
8. Request for Assistance of Additional Copies. Questions and requests
for assistance or additional copies of the Letter of Transmittal may be directed
to the Exchange Agent at the address set forth at the top of page 1.
IMPORTANT TAX INFORMATION
Under the Federal income tax law, you are to provide Compass (as
payer) with a correct taxpayer identification number on Substitute Form W-9
below. If Compass is not provided with the correct taxpayer identification
number, you may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, all payments that are made to you with respect to Shares
(including any cash payable to you under the Merger Agreement in lieu of
fractional shares) may be subject to backup withholding.
Exempt shareholders (including among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Nonetheless, exempt shareholders should complete the
Substitute Form W-9 below and so indicate their exempt status by writing
"exempt" across the face of the Substitute Form W-9. In order for a foreign
individual to qualify as an exempt recipient, that shareholder must submit a
statement, signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the Exchange Agent. See
the enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional information.
If backup withholding applies, Compass is required to withhold 31% of
any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
<PAGE>
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to you with
respect to shares of Compass Common Stock acquired as a result of the Merger or
with respect to cash payments, if any, receivable in lieu of fractional shares
pursuant to the Merger Agreement, you are required to notify Compass of your
correct taxpayer identification number by completing the form below certifying
that the taxpayer identification number provided on Substitute Form W-9 is
correct (or that you are awaiting a taxpayer identification number).
What Number to Give
As the record owner of the Shares, you are required to give Compass
your Social Security Number or Employer Identification Number. If the Shares
are in more than one name or are not in the name of the actual owners, consult
the enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidelines on which number to report.
<PAGE>
SUBSTITUTE FORM W-9
Department of the Treasury
Internal Revenue Service
Taxpayer Identification Number
Part 1 - PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION -----------------------
NUMBER IN THE BOX AT RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW -----------------------
Social Security Number
or Employer
Identification Number
Part 2 - Check the following box if you are NOT subject to backup ---------
withholding under the provisions of Section 3406(a)(1)(C)
of the Internal Revenue Code because (1) you have not ---------
been notified that you are subject to backup withholding
as a result of failure to report all interest or dividends
or (2) the Internal Revenue Service has notified you that
you are no longer subject to backup withholding.
Part 3 - Check the following box if you are awaiting a Taxpayer ---------
Identification Number.
---------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
By checking the box in Part 3, I certify under penalties of perjury that a
taxpayer identification number has not been issued to me, and either (a) I have
mailed or delivered an application to receive a taxpayer identification number
to the appropriate Internal Revenue Service Center or Social Security
Administration Office, or (b) I intend to mail or deliver an application in the
near future. I understand that if I do not provide a taxpayer identification
number within sixty (60) days, 31% of all reportable payments made to me
thereafter will be withheld until I provide a number.
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
Signature: Date:
---------------------------- ----------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES
FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM
W-9 FOR ADDITIONAL DETAILS.
- --------------------------------------------------------------------------------
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer.--
- -Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- --------------------------------------------------------------- ----------------------------------------------------------------
Give the SOCIAL Give the EMPLOYER
For this type of account: SECURITY number For this type of account: IDENTIFICATION
of ---- number of ----
- --------------------------------------------------------------- ----------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
2. Two or more individuals The actual owner of the number of the personal
(joint account) account or, if combined representative or trustee
funds, any one of the unless the legal entity
individuals (1) itself is not designated
in the account title.) (5)
3. Husband and wife (joint The actual owner of the
account) account or, if joint funds,
either person(1)
4. Custodian account of a The minor(2) 10. Corporate account The corporation
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the minor 11. Religious, charitable, or The organization
account) is the only contributor, educational organization
the minor(1) account
12. Partnership account held in The partnership
the name of the business
6. Account in the name of The ward, minor, or 13. Association, club, or other The organization
guardian or committee for incompetent person (3) tax-exempt organization
a designated ward, minor,
or incompetent person
7. a The usual revocable The grantor-trustee(1) 14. A broker or registered The broker or nominee
savings trust account nominee
(grantor is also trustee)
b So-called trust account The actual owner(1) 15. Account with the The public entity
that is not a legal or Department of Agriculture
valid trust under State in the name of a public
law account entity (such as a
State or local government,
8. Sole proprietorship The owner(4) school district, or prison)
that receives agricultural
program payments
- --------------------------------------------------------------- ----------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
Privacy Act Notice.--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information With Respect to Withholdings.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
EXHIBIT D
POOLING OF INTEREST CRITERIA
----------------------------
ATTRIBUTES OF COMBINING ENTERPRISES
(a) Autonomy Condition. Each of the combining enterprises is autonomous and
has not been a subsidiary or division of another enterprise within two
years before the plan of combination is initiated.
(b) Independence Condition. Each of the combining enterprises is independent
of the other combining enterprises.
MANNER OF COMBINING INTERESTS
(c) One-Year Rule. The combination is effected in a single transaction or is
completed in accordance with a specific plan within one year after the
plan is initiated.
(d) Common-Stock-for-Common-Stock-Condition. An enterprise offers and issues
only common stock with rights identical to those of the majority of its
outstanding voting common stock in exchange for substantially all of the
voting common stock interest of another enterprise at the date the plan of
combination is consummated.
(e) Change-in-Equity-Interests Condition. None of the combining enterprises
changes the equity interest of the voting common stock in contemplation of
effecting the combination either within two years before the plan of
combination is initiated or between the dates the combination is initiated
and consummated; changes in contemplation of effecting the combination may
include distributions to stockholders and additional issuances, exchanges,
and retirements of securities.
(f) Treasury-Stock Condition. Each of the combining enterprises reacquires
shares of voting common stock only for purposes other than business
combinations, and no enterprise reacquires more than a normal number of
shares between the dates the plan of combination is initiated and
consummated.
(g) Proportionate-Interest Condition. The ratio of the interest of an
individual common stockholder to those of other common stockholders in a
combining enterprise remains the same as a result of the exchange of stock
to effect the combination.
(h) Voting-Rights Condition. The voting rights to which the common stock
ownership interests in the resulting combined enterprise are entitled are
exercisable by the stockholders; the stockholders are neither deprived of
nor restricted in exercising those rights for a period.
<PAGE>
(i) Contingency Condition. The combination is resolved at the date the plan is
consummated and no provisions of the plan relating to the issue of
securities or other consideration are pending.
ABSENCE OF PLANNED TRANSACTIONS
(j) The combined enterprise does not agree directly or indirectly to retire or
reacquire all or part of the common stock issued to effect the
combination.
(k) The combined enterprise does not enter into other financial arrangements
for the benefit of the former stockholders of a combining enterprise, such
as a guaranty of loans secured by stock issued in the combination, that in
effect negates the exchange of equity securities.
(l) The combined enterprise does not intend or plan to dispose of a
significant part of the assets of the combining enterprises within two
years after the combination other than disposals in the ordinary course of
business of the formerly separate enterprise and to eliminate duplicate
facilities or excess capacity.
-2-
<PAGE>
EXHIBIT E
VOTING AGREEMENT AND IRREVOCABLE PROXY
--------------------------------------
VOTING AGREEMENT AND IRREVOCABLE PROXY ("Agreement"), dated as of
______________ ___, 1996, made and entered into by and among Compass Bancshares,
Inc., a Delaware corporation ("Compass"), Enterprise National Bank of
Jacksonville, a national banking association (the "Bank") and the other persons
who are signatories hereto (referred to herein individually as a "Shareholder"
and collectively as the "Shareholders").
WHEREAS, Compass, Compass Bank, a Florida banking corporation
("Compass Bank"), and the Bank have entered into that certain Agreement and Plan
of Merger, dated July 31, 1996 (the "Merger Agreement") whereby the Bank will
merge with Compass Bank (the "Merger");
WHEREAS, Section 6.10 of the Merger Agreement requires that the Bank
deliver to Compass the irrevocable proxies of the Shareholders; and
WHEREAS, Compass and the Bank are relying on the irrevocable proxies
in incurring expense in reviewing the Bank's business, in preparing a proxy
statement, in proceeding with the filing of applications for regulatory
approvals, and in undertaking other actions necessary for the consummation of
the Merger;
NOW, THEREFORE, the parties hereto agree as follows:
1. Each of the Shareholders hereby represents and warrants to
Compass and the Bank that they are the registered holders of and have the
exclusive right to vote the shares of common stock, par value $5.00 of the Bank
("Stock") set forth below his name on the signature pages hereto. Each
Shareholder hereby agrees to vote at the shareholders' meeting referred to in
Section 1.7 of the Merger Agreement (the "Meeting") the shares of Stock set
forth below his name on the signature pages hereto and all other shares of Stock
such Shareholder owns of record as of the date of the Meeting and to direct the
vote of all shares of Stock which the Shareholders own beneficially and have the
power and authority to direct the voting thereof as of the date of the Meeting
(the "Shares") in favor of approval of the Merger Agreement, and the other
agreements and transactions contemplated thereby.
2. In order better to effect the provisions of Section 1, each
Shareholder hereby revokes any previously executed proxies and hereby
constitutes and appoints Compass (the "Proxy Holder"), with full power of
substitution, his true and lawful proxy and attorney-in-fact to vote at the
Meeting all of such Shareholder's Shares in favor of the authorization and
approval of the Merger Agreement and the other agreements and transactions
contemplated thereby, with such modifications to the Merger Agreement and the
other agreements and transactions contemplated thereby as the parties thereto
may make, in the event such Shareholder does not vote in favor of the
authorization and approval of the Merger Agreement and the other agreements and
transactions contemplated thereby; provided, however, that this proxy shall not
apply with respect to any vote on the Merger Agreement, and the other agreements
and
<PAGE>
transactions contemplated thereby, if the Merger Agreement shall have been
modified so as to reduce the amount of consideration to be received by the
Shareholders under the Merger Agreement in its present form.
3. Each Shareholder hereby covenants and agrees that until this
Agreement is terminated in accordance with its terms, each Shareholder will not,
and will not agree to, without the consent of Compass, directly or indirectly,
sell, transfer, assign, pledge, hypothecate, cause to be redeemed or otherwise
dispose of any of the Shares or grant any proxy or interest in or with respect
to any such Shares or deposit such shares into a voting trust or enter into
another voting agreement or arrangement with respect to such Shares except as
contemplated by this Agreement, unless the Shareholder causes the transferee of
such Shares to deliver to Compass an amendment to this Agreement whereby such
transferee or other holder becomes bound by the terms of this Agreement.
4. This proxy shall be limited strictly to the power to vote the
Shares in the manner set forth in Section 2 and shall not extend to any other
matters.
5. The Shareholders acknowledge that Compass and the Bank are
relying on this Agreement in incurring expense in reviewing the Bank's business,
in preparing a proxy statement, in proceeding with the filing of applications
for regulatory approvals, and in undertaking other actions necessary for the
consummation of the Merger and that the proxy granted hereby is coupled with an
interest and is irrevocable to the full extent permitted by applicable law. The
Shareholders and the Bank acknowledge that the performance of this Agreement is
intended to benefit Compass.
6. The irrevocable proxy granted pursuant hereto shall continue in
effect until the earlier to occur of (i) the termination of the Merger
Agreement, as it may be amended or extended from time to time, or (ii) the
consummation of the Merger. In no event shall this Agreement apply to shares of
common stock, par value $2.00 per share, of Compass to be received by the
Shareholders upon consummation of the Merger.
7. The vote of the Proxy Holder shall control in any conflict
between its vote of the Shares and a vote by the Shareholders of the Shares and
the Bank agrees to recognize the vote of the Proxy Holder instead of the vote of
the Shareholders in the event the Shareholders do not vote in favor of the
approval of the Merger Agreement as set forth in Section 1 hereof.
8. This Agreement may not be modified, amended, altered or
supplemented with respect to a particular Shareholder except upon the execution
and delivery of a written agreement executed by the Bank, Compass and the
Shareholder.
9. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
2
<PAGE>
10. This Agreement, together with the Merger Agreement and the
agreements contemplated thereby, embody the entire agreement and understanding
of the parties hereto in respect to the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings among the parties
with respect to such subject matter contained herein.
11. All notices, requests, demands and other communications required
or permitted hereby shall be in writing and shall be deemed to have been duly
given if delivered by hand or mail, certified or registered mail (return receipt
requested) with postage prepaid to the addresses of the parties hereto set forth
on below their signature on the signature pages hereof or to such other address
as any party may have furnished to the others in writing in accordance herewith.
12. This Agreement and the relations among the parties hereto arising
from this Agreement shall be governed by and construed in accordance with the
laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date above written.
ENTERPRISE NATIONAL BANK
OF JACKSONVILLE
By: /s/ Bennett Brown
--------------------------------
Name: Bennett Brown
------------------------------
Title: President
-----------------------------
Address:
4190 Belfort Road
Jacksonville, Florida 32216-7851
COMPASS BANCSHARES, INC.
By: /s/ D. Paul Jones, Jr.
--------------------------------
Name: D. Paul Jones, Jr.
------------------------------
Title: Chairman and Chief Executive Officer
-----------------------------
Address:
15 South 20th Street
Birmingham, Alabama 35233
Attention: Mr. Daniel B. Graves
Associate General Counsel
<PAGE>
SHAREHOLDER SIGNATURE PAGE
VOTING AGREEMENT AND IRREVOCABLE PROXY
--------------------------------------
SHAREHOLDER:
------------------------------------
------------------------------------
Address:
-------------------------
-------------------------
shares of Stock
------------
Pledgee:
-------------------------
Address:
-------------------------
-------------------------
Loan No.:
-------------------------
4
<PAGE>
EXHIBIT F
OPINIONS REQUIRED
FROM COUNSEL TO THE BANK
------------------------
(i) the Bank is a national banking corporation, duly organized,
validly existing and in good standing under the laws of the United States. The
Bank has all requisite corporate power and authority to carry on its business as
we know it to be conducted and to own, lease and operate its properties and
assets as now owned, leased or operated. The Bank is duly qualified and in good
standing in the State of Florida.
(ii) the Bank has all requisite power and authority to execute and
deliver the Merger Agreement and any other agreements contemplated by the Merger
Agreement (collectively, the "Agreements") and to consummate the transactions
contemplated thereby; all acts (corporate or otherwise) and other proceedings
required to be taken by or on the part of the Bank to execute and deliver the
Agreements and to consummate the transactions contemplated therein have been
duly and validly taken; and the Agreements have been duly executed and delivered
by, and constitute the valid and binding obligations of the Bank enforceable
against the Bank in accordance with their respective terms, subject to the
effect of (a) any applicable bankruptcy, insolvency, reorganization or other law
relating to or affecting creditors' rights generally and (b) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(iii) the authorized capital stock of the Bank consists solely of
__________ shares of Bank Common Stock (as defined in the Merger Agreement) of
which __________ shares are issued and outstanding (__________ of which are held
in the treasury); all of the outstanding shares of the Bank Common Stock are
validly issued, fully paid and nonassessable; and none of such stock was issued
in violation of the preemptive rights of any person;
(iv) except as set forth on Schedule 3.2 to the Merger Agreement,
there are no outstanding subscriptions, options, rights, warrants, calls,
convertible securities, irrevocable proxies, or other agreements or commitments
obligating the Bank to issue any shares of, restricting the transfer of, or
otherwise relating to shares of their respective capital stock of any class;
(v) the execution and delivery by the Bank of the Merger Agreement
does not, and the consummation of the transactions contemplated thereby will
not, contravene or violate any provision of or constitute a default under (a)
the articles of incorporation or bylaws of the Bank, (b) except as disclosed in
the Merger Agreement, any note, license, instrument, mortgage, deed of trust, or
other agreement or understanding, permit, authorization or contract, order,
arbitration award, judgment or decree, or any other restriction of any kind or
character to which the Bank is a party or by which the Bank or any of its assets
or properties is bound, and (c) except as disclosed in the Merger Agreement, any
law, regulation, rule, administrative regulation or decree of any court or any
governmental agency or body whether domestic or foreign applicable to the Bank,
or its assets or properties;
<PAGE>
(vi) except as disclosed in the Merger Agreement and except for such
consents, approvals, authorizations, actions or filings as have already been
obtained by Compass or Compass Bank, no consent, approval, authorization, action
or filing with any court, governmental agency or public body is required in
connection with the execution, delivery and performance by the Bank of the
Merger Agreement;
(vii) except as set forth in Schedule 3.12 to the Merger Agreement, the
Bank is not a party to any Proceeding (as defined in the Merger Agreement), nor
is any Proceeding threatened against or affecting the Bank, which by the terms
of the Merger Agreement would be required to be set forth in Schedule 3.12;
(viii) and except as set forth on Schedule 3.18 to the Merger Agreement,
the Bank is not in material default under any law or regulation, or under any
order of any court, commission, board, bureau, agency or instrumentality
wherever located; and
(ix) upon consummation of the transactions contemplated by the Merger
Agreement in accordance with its terms and upon filing of the Articles of Merger
relating to the Merger by the Department of State of Florida, the Merger will
have been legally consummated in accordance with the laws of the States of
Florida and the United States with the consequences specified in Section
607.1106 of the Florida Business Corporation Act.
-2-
<PAGE>
EXHIBIT G
BENNETT BROWN
CHANGE OF CONTROL AGREEMENT
---------------------------
AGREEMENT by and between COMPASS BANCSHARES, INC., a Delaware corporation
(the "Company"), and BENNETT BROWN (the "Executive"), dated July 31, 1996.
Executive has been an employee of Enterprise National Bank of Jacksonville
("Bank") which is being acquired (the "Merger") by Compass Bank, a subsidiary of
the Company, pursuant an Agreement and Plan of Merger dated as of July 31, 1996
("the Merger Agreement") among the Company, Compass Bank, a Florida banking
corporation, and the Bank. The Company and the Executive wish to enter into
this Agreement contemporaneously with the execution of the Merger Agreement,
with terms and provisions of this Agreement to become effective automatically as
of the effective date of the Merger.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined in Section
2) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, it is hereby agreed, effective as of the date of the
consummation of the Merger, as follows:
1. Certain Definitions.
-------------------
(a) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if a
Change of Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and
if it is reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control or (ii) otherwise
arose in connection with or anticipation of the Change of Control, then for
all purposes
<PAGE>
of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of such date;
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), the Change of Control Period shall be automatically extended so as
to terminate three years from such Renewal Date, unless at least 60 days
prior to the Renewal Date the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses (i), (ii) and
(iii) of subsection (c) of this Section 2 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
2
<PAGE>
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation and
the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such reorganization, merger or consolidation and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more of the Outstanding
Company Common Stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock of the corporation resulting
from such reorganization, merger or consolidation or the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (iii) at least
a majority of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company and
any employee benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly,
3
<PAGE>
20% or more of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (C) at least a majority of the members of the
board of directors of such corporation were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the
Board providing for such sale or other disposition of assets of the
Company.
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, in accordance with the terms and provisions of this Agreement,
for the period commencing on the Effective Date and ending on the third
anniversary of such date (the "Employment Period"). Nothing contained herein
shall be construed as conferring upon the Executive any right to continue to be
employed by the Company prior to the Effective Date, as defined in Section 1(a),
unless this agreement is modified in writing as provided for in Section 11(a).
4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding the Effective Date.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. To the extent
permitted by the Code of Conduct of the Company then applicable during
the Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach
at educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood
and agreed that to the extent that any such activities were permitted
by the Code of Conduct prior to the Effective Date and have been
conducted by the Executive prior to the Effective Date, the continued
conduct of such activities
4
<PAGE>
(or the conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to
the Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the Executive
-----------
shall receive an annual base salary ("Annual Base Salary"), which shall
be paid in equal installments on a bi-monthly basis, at least equal to
twenty-four times the highest bi-monthly base salary paid or payable to
the Executive by the Company or its affiliated companies in respect of
the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually and shall be increased at
any time and from time to time as shall be substantially consistent
with increases in base salary generally awarded in the ordinary course
of business to other peer executives of the Company and its affiliated
companies. Any increase in Annual Base Salary shall not serve to limit
or reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase and the
term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
------------
Executive shall be awarded, for each calendar year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at
least equal to the greater of (A) the annualized bonus payable to the
Executive for the year in which the Effective Date occurs or (B) the
average annualized (for any year with respect to which the Executive
has been employed by the Company for less than twelve full months)
bonus paid or payable, including by reason of any deferral, to the
Executive by the Company and its affiliated companies in respect of the
three calendar years immediately preceding the calendar year in which
the Effective Date occurs (the "Recent Average Bonus"). Each such
Annual Bonus shall be paid no later than the end of February of the
year next following the year for which the Annual Bonus is awarded,
unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
---------------------------------------
Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs applicable generally to other peer executives of the Company
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive
5
<PAGE>
opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately
preceding the Effective Date or if more favorable to the Executive,
those provided generally at any time after the Effective Date to other
peer executives of the Company and its affiliated companies.
(iv) Leave Programs. During the Employment Period, the Executive
--------------
shall be eligible for participation in and shall receive all benefits
under leave programs provided by the Company and its affiliated
companies (including, without limitation, sick leave, short-term
disability, emergency leave, jury duty, military leave, and family and
medical leave) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event
shall such programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such programs
in effect for the Executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective
Date to other peer executives of the Company and its affiliated
companies.
(v) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by the
Company and its affiliated companies (including, without limitation,
medical, prescription, dental, disability, salary continuance, employee
life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event
shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices, policies and programs
in effect for the Executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective
Date to other peer executives of the Company and its affiliated
companies.
(vi) Expenses. During the Employment Period, the Executive shall
--------
be entitled to receive prompt reimbursement for all reasonable
employment expenses incurred by the Executive in accordance with the
most favorable policies, practices and procedures of the Company and
its affiliated companies in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any
6
<PAGE>
time thereafter with respect to other peer executives of the Company
and its affiliated companies.
(vii) Fringe Benefits. During the Employment Period, the
---------------
Executive shall be entitled to fringe benefits in accordance with the
most favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(viii) Office and Support Staff. During the Employment Period,
------------------------
the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable
of the foregoing provided to the Executive by the Company and its
affiliated companies at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(ix) Vacation. During the Employment Period, the Executive
--------
shall be entitled to paid vacation and other vacation benefits in
accordance with the most favorable plans, policies, programs and
practices of the Company and its affiliated companies as in effect for
the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. If
the Company determines in good faith that the Disability of the Executive
has occurred and has continued for a period of 180 consecutive days during
the Employment Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance with
Section 12(b) of its intention to terminate the Executive's employment. In
such event, the Executive's employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement, a
"Disability" shall occur when a physician confirms, because of sickness or
injury, that the Executive cannot perform each of the material duties of
his or her regular occupation.
7
<PAGE>
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall include (i) a willful and material violation of applicable
banking laws and regulations, (ii) dishonesty, (iii) theft, (iv) fraud, (v)
embezzlement, (vi) commission of a felony or a crime involving moral
turpitude, (vii) substantial dependence or addiction to alcohol or any
drug, (viii) conduct disloyal to the Company or its affiliates or (ix)
willful disregard of lawful instructions or directions of the officers or
directors of the Company or its affiliates relating to a material matter.
(c) Good Reason; Window Period. The Executive's employment may be
--------------------------
terminated (i) during the Employment Period by the Executive for Good
Reason or (ii) during the Window Period by the Executive without any
reason. For purposes of this Agreement, the "Window Period" shall mean the
30-day period immediately following the first anniversary of the Effective
Date. For purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) or any other action
by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied
by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B);
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
8
<PAGE>
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive without any reason during the Window Period or for Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall not be more
than 15 days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Company hereunder or
preclude the Executive or the Company from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive during the Window Period or for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by the
Company other than for Cause or Disability, the Date of Termination shall
be the date on which the Company notifies the Executive of such termination
and (iii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Good Reason or during the Window Period; Other Than for Cause,
--------------------------------------------------------------
Death or Disability. If, during the Employment Period, the Company shall
-------------------
terminate the Executive's employment other than for Cause or Disability or
the Executive shall terminate employment either for Good Reason or without
any reason during the Window Period:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the amount of any Compensation for
services rendered previously earned through the Date of
Termination to the extent not theretofore paid and (2) any
compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the
9
<PAGE>
sum of the amounts described in clauses (1) and (2) shall be
hereinafter referred to as the "Accrued Obligations" and are
hereby agreed to constitute reasonable compensation for services
rendered); and
B. two hundred percent (200%) of the Executive's Annual Base
Salary and Annual Bonus as of the Date of Termination (the
"Severance Amount").
(ii) for the remainder of the Employment Period, or such longer
period as any plan, program, practice or policy may provide, the
Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(v) if the Executive's employment
had not been terminated in accordance with the most favorable plans,
practices, programs or policies of the Company and its affiliated
companies as in effect and applicable generally to other peer
executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive medical and other
welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility (such continuation of such benefits for the applicable
period herein set forth shall be hereinafter referred to as "Welfare
Benefit Continuation"). For purposes of determining eligibility of
the Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until the end of the Employment Period and to have
retired on the last day of such period; and
(iii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive and/or the
Executive's family any other amounts or benefits required to be paid
or provided or which the Executive and/or the Executive's family is
eligible to receive pursuant to this Agreement and under any plan,
program, policy or practice or contract or agreement of the Company
and its affiliated companies as in effect and applicable generally to
other peer executives and their families during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally thereafter with respect to other
peer executives of the Company and its affiliated companies and their
families (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits"); and
10
<PAGE>
(iv) any stock options held by the Executive pursuant to the
1989 Long Term Incentive Stock Option Agreement or any other stock
option agreement with Company (the "Option Agreements") shall remain
exercisable following the Effective Date and during the Employment
Period notwithstanding any provision in the Option Agreements to the
contrary. Further, any covenant not to compete in an Option Agreement
shall become null and void as of the Effective Date. Notwithstanding
any provision herein deemed to be to the contrary, nothing herein
shall extend the maximum period of time in which the Executive shall
have the right to exercise such options.
(b) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for (i) payment of Accrued
Obligations (which shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of the Date of
Termination) and the timely payment or provision of the Welfare Benefit
Continuation and Other Benefits (excluding, in each case, Death Benefits
(as defined below)) and (ii) payment to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the
Date of Termination of an amount equal to the Severance Amount.
(c) Disability. If the Executive's employment is terminated by
----------
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive,
other than for (i) payment of Accrued Obligations (which shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination) and the timely payment or provision of the Welfare Benefit
Continuation and Other Benefits (excluding, in each case, Disability
Benefits (as defined below)) and (ii) payment to the Executive in a lump
sum in cash within 30 days of the Date of Termination of an amount equal to
the greater of (A) the Severance Amount and (B) the present value
(determined as provided in Section 280G(d)(4) of the Code) of any cash
amount to be received by the Executive as a disability benefit pursuant to
the terms of any plan, policy or arrangement of the Company and its
affiliated companies, but not including any proceeds of disability
insurance covering the Executive to the extent paid for directly or on a
contributory basis by the Executive (which shall be paid in any event as an
Other Benefit) (the benefits included in this clause (B) shall be
hereinafter referred to as the "Disability Benefits").
(d) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive Annual Base Salary through the Date of
Termination plus the amount of any compensation previously deferred by the
Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Employment Period, excluding a termination
either for Good Reason or without any reason during the
11
<PAGE>
Window Period, this Agreement shall terminate without further obligations
to the Executive, other than for Accrued Obligations and the timely payment
or provision of Other Benefits. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the
Date of Termination.
7. Non-exclusivity of Rights. Except as provided in Sections 6(a)(ii),
-------------------------
6(b) and 6(c), nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement; Resolution of Disputes.
---------------------------------------
(a) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others, except as provided in Section 8(b) of this Agreement. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
6(a)(ii), such amounts shall not be reduced whether or not the Executive
obtains other employment. The Company agrees to pay promptly as incurred,
to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of
the outcome thereof) by the Company, the Executive or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any contest by the Executive about the amount of any payment pursuant to
this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.
(b) If there shall be any dispute between the Company and the
Executive (i) in the event of any termination of the Executive's employment
by the Company, whether such termination was for Cause, or (ii) in the
event of any termination of employment by the Executive, whether Good
Reason existed, then, unless and until there is a final, nonappealable
judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by the Executive of the
existence of Good Reason was not made in good faith, the Company shall pay
all amounts, and provide all benefits, to the Executive and/or the
Executive's family or other beneficiaries,
12
<PAGE>
as the case may be, that the Company would be required to pay or provide
pursuant to Section 6(a) as though such termination were by the Company
without Cause or by the Executive with Good Reason; provided, however, that
the Company shall not be required to pay any disputed amounts pursuant to
this paragraph except upon receipt of an undertaking by or on behalf of the
Executive to repay all such amounts to which the Executive is ultimately
adjudged by such court not to be entitled.
9. Limitation on Amounts to be Received. Notwithstanding anything to the
------------------------------------
contrary herein contained, if any amount payable to the Executive or for his
benefit pursuant to the terms of this Agreement or otherwise would not be
deductible by the Company by reason of Section 280G of the Internal Revenue
Code, as amended from time to time, or any regulations promulgated pursuant
thereto, then such amount shall not be paid to the extent that it would cause
the aggregate amount payable by the Company to the Executive or for his benefit
pursuant to the terms of this Agreement or otherwise to exceed the amount which
may be paid without causing a loss of deduction under said Section 280G. The
Executive shall determine which of the amounts payable under this Agreement
shall be eliminated or reduced consistent with the requirements of this Section
9; provided, however, that, if the Executive does not make such determination
within ten (10) business days of receipt by the Executive of a notice from the
Company or its agent (including, without limitation, attorneys or accountants)
indicating that the amount deductible under Section 280G would be exceeded by
the amounts payable to the Executive under this Agreement or otherwise, then the
Company shall elect which of the amounts payable under this Agreement shall be
eliminated or reduced consistent with the requirements of this Section 9 and
shall notify the Executive promptly of such election.
10. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place.
13
<PAGE>
11. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed
by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Bennett Brown
3007 Forest Circle
Jacksonville, Florida 32257
If to the Company: Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attention: D. Paul Jones, Jr.
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company
may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Section
5(c)(i)-(v), shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.
14
<PAGE>
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company
is "at will" and, prior to the Effective Date, may be terminated by either
the Executive or the Company at any time. Moreover, if prior to the
Effective Date, the Executive's employment with the Company terminates,
then the Executive shall have no further rights under this Agreement.
(g) Notwithstanding any provision to the contrary contained herein,
Executive and the Company acknowledge and agree that, during the Employment
Period, Executive's compensation and other benefits shall be governed
solely by this Agreement and Executive shall not be entitled to additional
compensation under that certain Employment Agreement by and between
Executive and Compass Bank, a Florida banking corporation dated July _____,
1996, nor any other similar agreement between Executive and Company or an
affiliate of Company.
15
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
WITNESS: EXECUTIVE:
[SIGNATURE APPEARS HERE] /s/ Bennett Brown
- -------------------------------- --------------------------------
Bennett Brown
ATTEST: COMPASS BANCSHARES, INC.
By: [SIGNATURE APPEARS HERE] By: [SIGNATURE APPEARS HERE]
----------------------------- -----------------------------
Its: Assistant Secretary Title: Chairman and Chief Executive Officer
---------------------------- --------------------------
<PAGE>
EXHIBIT H
BENNETT BROWN
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made and entered into as of July ____, 1996, by and
between Compass Bank, a Florida banking corporation ("Compass Bank"), and
Bennett Brown ("Employee").
WHEREAS, Compass Bank desires to enter into an employment agreement with
Employee to provide for the continued management and success of its operations
and those of its affiliates, and Employee desires to engage in such services,
under the terms and conditions set forth in this Agreement;
WHEREAS, Employee has been an employee of Enterprise National Bank of
Jacksonville ("Bank") which is being acquired (the "Merger") by Compass
Bancshares, Inc. ("Compass") and its affiliates pursuant to an Agreement and
Plan of Merger dated as of July 31, 1996 (the "Merger Agreement") among Compass,
Compass Bank and the Bank; and
WHEREAS, Employee acknowledges that (i) the Bank has been engaged for a
number of years in the business of banking, lending, deposit taking, and related
banking and trust services (the "Business") in the State of Florida; (ii)
Employee is one of a limited number of persons instrumental in the development
of the Business of the Bank; (iii) Employee's work for the Bank has given him
and will continue to give him access to trade secrets and confidential
information concerning the Business and the relationships between the Bank and
its customers; (iv) Employee's employment with Compass Bank will give him access
to trade secrets and confidential information concerning the business and
customer relationships of Compass Bank and its affiliates; (v) the agreements
and covenants contained in this Agreement are essential to protect the Business
and goodwill of the Bank being acquired by Compass and the business and goodwill
of Compass Bank and its affiliates; and (vi) Compass Bank would not employ
Employee except for such covenants and agreements.
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the receipt and sufficiency of which are hereby acknowledged, Compass
Bank and Employee hereby agree, effective as of the date of the consummation of
the Merger, as follows:
1. Employment
----------
During the Term (as defined herein), Compass Bank agrees to employ Employee
and Employee agrees to serve as City President - Jacksonville, Florida (the
"City President"). Employee hereby accepts such employment on the terms and
conditions set forth in this Agreement.
<PAGE>
2. Position and Responsibilities
-----------------------------
As the City President, Employee will be engaged by Compass Bank to provide
such services consistent with such position as may be determined by the Chief
Executive Officer of Compass Bank and its Board of Directors. In furtherance of
such duties, Employee shall have the responsibility and authority to:
(a) Formulate the commercial development strategies for Compass Bank in the
Jacksonville, Florida market area;
(b) Represent Compass Bank as the Jacksonville market's "executive officer"
and City President in various civic, community and business development
activities;
(c) Manage multiple commercial banking functions such as commercial
lending, professional banking, real estate lending and small business banking;
(d) Extend credit through own initiatives or lending staff to business and
professional clients;
(e) Exercise the usual authority of an executive concerning staff
development, performance appraisals, compensation management and status of
employment;
(f) Meet regularly with officers and other key staff of Compass Bank,
communicate policies and goals to Compass Bank staff in Jacksonville, and
supervise and delegate responsibility for the day-to-day operations of Compass
Bank in Jacksonville;
(g) Assist in the development and maintenance of a standard for operating
efficiency with comprehensive, specific, and measurable goals for Compass Bank
in Jacksonville;
(h) Assist in developing and implementing new strategies for profitability
and operating efficiency for Compass Bank in Jacksonville;
(i) Evaluate the operation of Compass Bank to identify needs and resolve
problems of the Jacksonville market; and
(j) Coordinate the activities of the Compass Bank city board in the
Jacksonville market.
3. Term of Employment; Place of Employment
---------------------------------------
Employee's employment under this Agreement shall commence as of the
effective date of the Merger and shall continue (unless sooner terminated) for
two (2) years ("Term"). Employee's place of employment during the Term shall be
in Jacksonville, Florida.
2
<PAGE>
4. Extent of Services
------------------
During the Term, Employee shall devote his full business time and efforts
to the performance of his duties hereunder. It is, however, understood and
agreed that the preceding sentence shall not prohibit Employee from spending a
reasonable amount of time managing his personal investments and discharging his
civic responsibilities as long as such activities do not interfere with the
discharge of his duties hereunder. Employee hereby agrees and represents that
his employment, and the performance of his duties as required by this Agreement,
do not violate any agreements or relationships existing between Employee and any
other person. During the Term, Employee will not serve as an officer or
director of any business enterprise (other than Compass Bank) without the prior
approval of the Chief Executive Officer of Compass Bank, which shall not be
unreasonably withheld.
5. Compensation
------------
(a) Compass Bank shall pay Employee for all services and agreements of
Employee pursuant to this Agreement, and any other duties as may reasonably be
assigned to him by Compass Bank, an annual base salary of $185,000 per year,
with merit increases in accordance with Compass Bank's salary administration
program based upon performance, which shall be payable in accordance with
Compass Bank's customary payroll practices with respect to time and manner of
payment. No compensation shall be payable until and unless the Merger becomes
effective.
(b) If Employee's employment under this Agreement is terminated by Compass
Bank for other than death or "good cause," as defined in Section 8 hereof,
Compass Bank will pay (or cause to be paid) the compensation and benefits
(excluding disability and leave program benefits) provided by this Agreement for
a period of two (2) years following such termination. For this purpose, should
Employee's employment be terminated prior to the completion of the first period
utilized to calculate bonuses pursuant to the Compass Bank Executive Incentive
Plan ("Bonus Period"), Employee shall be entitled to one-half (1/2) the value of
the maximum bonus owing to him if he had remained in Compass Bank's employ
during the entire Bonus Period and met the bonus target required to earn his
maximum bonus. If Employee is terminated after completion of the first Bonus
Period, his bonus during the two-year period contemplated in this Section 5(b)
shall be based upon the bonus earned in the most recently completed Bonus
Period. In the event of the termination of Employee's employment under this
Agreement because of Employee's disability, as defined in Section 8 hereof, any
payments of disability benefits to Employee payable during the two years
following such termination under any disability insurance policy or disability
benefit plan covering Employee maintained by Compass Bank or its affiliates, as
it may exist from time to time, shall be treated as payments by Compass Bank
toward satisfaction of its obligations under this Agreement. Such payments
shall be paid in accordance with Compass Bank's customary payroll practices with
respect to the time and manner of payment. Payments received under medical
insurance policies are not counted toward this obligation. If Employee dies,
resigns or is terminated for "good cause," Compass Bank shall have no further
obligation to Employee under this Agreement.
3
<PAGE>
(c) Employee shall have the right, upon prior written notice as provided in
Section 12 herein, voluntarily to terminate his employment hereunder ("Voluntary
Termination"), but in such event, Employee shall have no right after the date of
termination to compensation or other benefits as provided in this Agreement. In
the event of Voluntary Termination, Employee shall be subject to the
noncompetition provision of Section 7(c) herein, but only to the extent of any
time remaining under the Term of this Agreement.
6. Benefits
--------
(a) During the Term, Compass Bank shall provide Employee such benefits,
including life, health and disability insurance, as are made generally available
to employees of equal title and base salary on the same basis as Compass Bank
makes such benefits available to Compass Bank's other employees, including
participation in the Compass Bank retirement plan.
(b) During the Term, Compass Bank shall provide Employee an automobile
allowance of $6,000 per year, payable in monthly installments of $500.
(c) As an employee of Compass Bank or one of its affiliates, Employee shall
be eligible to participate in such employee stock option plan as an employee in
a similar position may participate, including the 1996 Long Term Incentive Plan.
Employee shall also receive, promptly following the commencement of the Term, a
grant of options to acquire 15,000 shares of Compass Bancshares, Inc. common
stock, at an exercise price equal to the fair market value of such common stock
on the date of grant, fifty percent (50%) of such grant becoming exercisable one
year after the commencement of the Term, the remainder of such grant becoming
exercisable two years after the commencement of the Term and with an expiration
date ten (10) years following such date of grant. Notwithstanding any provision
herein to the contrary, the entire grant of options shall become fully vested
and exercisable upon the occurrence of a Change of Control (as hereinafter
defined), or if Employee is terminated by Compass Bank or Compass other than for
"good cause" as defined in Section 8 hereof, during the Term.
(d) As an employee of Compass Bank or one of its affiliates, Employee
shall be eligible to participate in Compass Bank's Executive Incentive Plan to
the extent that Employee may receive incentives up to fifty percent (50%) of
base salary per annum during the Term.
(e) During the Term, Compass Bank shall reimburse Employee for the amount
of dues paid by Employee as a member of Epping Forest Yacht Club and San Jose
Country Club. Compass Bank shall also designate Employee as one of its named
officers entitled to utilize Compass Bank's corporate membership in the River
Club, Jacksonville, Florida.
(f) Compass Bank shall pay for the benefit of Employee the first two
annual premiums coming due after the effective date of the Merger with respect
to that certain policy No. 2535790 maintained with Principal Mutual Life
Insurance Company. Said annual premiums are in the amount of $23,220 and shall
be made payable to the Employee.
4
<PAGE>
(g) Employee shall be entitled to four (4) weeks paid vacation per year
during the Term, and thereafter as long as Employee is employed by Compass Bank
or any of its affiliates, on a non-cumulative basis.
(h) Employee shall be entitled to reimbursement of reasonable business
expenses which are incurred by Employee in connection with his employment as
provided by the policies, practices and procedures of Compass Bank.
7. Confidentiality; Noncompetition; Nonsolicitation
------------------------------------------------
(a) Employee recognizes and acknowledges that he has and will have access
to confidential information of a special and unique value concerning Compass
Bank and its affiliates which may include, without limitation, books and records
relating to operations, customer names and addresses, customer service
requirements, customer financial statements and other financial, business and
personal information relating to Compass Bank and its affiliates, their
customers, markets, officers and employees, cost of providing service and
equipment, operating and maintenance costs, and pricing criteria. Employee also
recognizes that a portion of the business of Compass Bank and its affiliates is
dependent upon trade secrets, including techniques, methods, systems, processes,
data and other confidential information. The protection of these trade secrets
and confidential information against unauthorized disclosure or use is of
critical importance to Compass Bank. Employee therefore agrees that, without
prior written authorization from the Chief Executive Officer of Compass Bank, he
will not at any time, either while employed by Compass Bank or afterwards, make
any independent use of, or disclose to any other person, any trade secrets or
confidential information of Compass Bank. The agreements contained in this
Section 7(a) shall survive the termination of this Agreement.
(b) All records, files, memoranda, reports, price lists, customer lists,
documents, and other information (together with all copies thereof) which relate
to Compass Bank or its affiliates which Employee, either prior to or during the
Term, has obtained or obtains, uses, prepares, or comes in contact with shall
remain the sole property of Compass Bank and its affiliates. Upon the
termination of Employee's employment by Compass Bank, or upon the prior demand
of Compass Bank, all such materials and all copies thereof shall be returned to
the Bank (or its successors by merger) immediately.
(c) To support the agreements contained in Section 7(a) hereof, during the
Term and, if Employee's employment with Compass Bank is terminated for any or no
reason during the Term, for a period of two years after such termination, or
such lesser period as is applicable pursuant to Section 5(c) hereof, Employee,
on behalf of himself and his present and future affiliates and employers (other
than the Bank or its successors by merger), agrees he will not, directly or
indirectly as a partner, stockholder, consultant, agent, joint venturer,
investor, lender, or in any other capacity whatsoever, alone or in association
with others (i) own, manage, operate, control or participate in the ownership,
management, operation or control of, or work for or permit the use of his name
by, or be connected in any manner with, any specific business activity in Duval
or Clay County, Florida (the "Geographic Area"), which at the time, is conducted
by Compass Bank or by any affiliate of Compass Bank in such Geographic Area,
5
<PAGE>
except that this prohibition shall not apply to the ownership of up to 5 percent
(5%) of the equity of any other entity; (ii) solicit any person (natural or
otherwise) who is a customer of the Bank to do business with any person other
than Compass Bank or its affiliates or (iii) use in any competition,
solicitation or marketing effort any proprietary list of or other information
concerning customers of the Bank, Compass Bank or its affiliates developed by
the Bank, Compass Bank or its affiliates. Employee further agrees that, for a
period of two years following such termination, he will not, directly or
indirectly, in any capacity whatsoever, own manage, operate, control or
participate in the ownership, management, operation or control of, or work for
or permit the use of his name by, or be connected in any manner with, any
business activity in the Geographic Area that operates under or uses or
identifies itself with the name "Enterprise National Bank," or a name
substantially similar thereto. Notwithstanding anything to the contrary
contained herein, this Section 7(c) shall not be enforceable in the event of the
occurrence of a Change of Control.
(d) In the event of a breach or threatened breach by Employee of the
provisions of this Section 7, Compass Bank shall be entitled to seek temporary
or permanent injunctions and other appropriate relief restraining Employee from
using or disclosing, in whole or in part, trade secrets and confidential
information or violating the other provisions hereof. Nothing herein shall be
construed as prohibiting Compass Bank from pursuing any other remedies available
to it.
(e) Employee has read and considered the provisions of this Section 7 and,
having done so, agrees that the restrictions on competition set forth in Section
7(c) herein are fair and reasonable as to time, geographical area, and scope of
activities to be restrained, and are reasonably required for the protection of
the Business, goodwill and other business interests of Compass Bank and its
affiliates and the Bank. In the event a court of competent jurisdiction
determines as a matter of law that any of the terms of Section 7 are
unreasonable or too broad, the parties expressly allow such court to reform this
agreement to the extent necessary to make it reasonable as a matter of law and
to enforce it as so reformed.
8. Termination of Employment
-------------------------
Employee's employment with Compass Bank shall be terminated upon the
occurrence of any one or more of the following events:
(a) Compass Bank gives written notice of termination for good cause to
Employee. For the purposes of this Agreement, "good cause" shall include,
without limitation, a willful and material violation of applicable banking laws
and regulations; dishonesty; theft; fraud; embezzlement; the commission of a
felony or a crime involving moral turpitude; substantial dependence or addiction
to alcohol or any drug not used in accordance with the instructions of a
licensed physician; conduct disloyal to Compass Bank; willful disregard of
lawful instructions of the officers or directors of Compass Bank relating to a
material matter reasonably related to Employee's duties hereunder; or any other
material breach of this or any other agreement between Employee and Compass
Bank.
6
<PAGE>
(b) Death.
(c) Disability of Employee. For purposes of this Agreement, "disability"
shall mean a mental or physical condition resulting from an injury or illness
which shall render Employee incapable of performing the essential functions of
his position with reasonable accommodations from Compass Bank pursuant to the
criteria set forth in such disability plan as is maintained by Compass Bank. If
Employee is terminated pursuant to this Section 8(c), nothing herein shall
preclude Employee from being able to receive disability benefits pursuant to any
plan or policy that Compass Bank or Compass maintains for its executive officers
or employees.
(d) Resignation of Employee, who agrees to provide not less than 45 days
prior written notice of his resignation to Compass Bank.
9. Compliance with Rules
---------------------
Employee agrees to observe and comply with the rules and regulations of
Compass Bank as adopted either orally or in writing by the Board of Directors of
Compass Bank and communicated to Employee in writing with respect to the
performance of Employee's duties, and to carry out and to perform orders,
directions, and policies announced to Employee by Compass Bank, unless such
orders, directions or policies violate applicable laws or regulations.
10. Withholding
-----------
There shall be deducted from the payment of any amounts due under this
Agreement the amount of tax required by any governmental authority to be
withheld and paid over by Compass Bank or its affiliates to such governmental
authority because of such payment.
11. Attorneys Fees
--------------
In the event that the Employee is terminated in a manner which violates any
provisions of this Agreement, as determined through arbitration as provided
herein or by a court of competent jurisdiction, the Employee shall be entitled
to reimbursement for all reasonable costs, including attorneys fees, in
challenging such termination, whether such challenge takes place in a court of
law or by means of arbitration or mediation. Compass Bank agrees to advance
Employee reasonable attorneys fees and costs in the maximum amount of $15,000 to
enforce the terms of this Agreement or recover damages for breach of this
Agreement, as follows: $10,000 at the commencement of litigation or mediation
proceedings and an additional $5,000 six months thereafter. In the event the
Employee is unsuccessful in his claim or defense, the Employee shall reimburse
Compass Bank for any attorneys fees, expenses and costs that have been advanced.
If the Employee is successful, any attorney's fee award will be reduced by the
amount of attorneys fees and costs that have been advanced. Such reimbursement
shall be in addition to all rights to which the Employee is otherwise entitled
under this Agreement.
7
<PAGE>
12. Notices
-------
Any notice required or desired to be given under this Agreement shall be
deemed given if in writing mailed or delivered as follows:
If to Employee:
Bennett Brown
3007 Forest Circle
Jacksonville, Florida 32257
If to Compass Bank:
Jerry W. Powell, Esquire
General Counsel
Compass Bank
P. O. Box 10566
Birmingham, Alabama 35296
13. Entire Agreement
----------------
(a) In consideration of this Agreement, Compass Bank, as the successor to
the rights and obligations of the Bank pursuant to the Merger and otherwise, and
Employee hereby agree that the Severance Employment Agreement, dated May 21,
1996, between Employee and the Bank shall terminate automatically as of the
effective date of the Merger.
(b) This Agreement contains the entire agreement of the parties regarding
the employment of Employee by Compass Bank and supersedes any prior agreement,
arrangement or understanding, whether oral or written, between Compass Bank and
Employee concerning Employee's employment hereunder.
14. Choice of Law
-------------
This Agreement shall be governed by, and enforced according to, the laws of
the State of Florida. The invalidity of any provision shall be automatically
reformed to the extent permitted by applicable law and shall not affect the
enforceability of the remaining provisions hereof.
15. Assignment
----------
This Agreement is for the personal service of Employee and may not be
assigned by Employee but may be assigned by Compass Bank to any affiliate or
successor in interest to Compass Bank's business. In the event Compass Bank
makes such an assignment, Employee
8
<PAGE>
shall continue to perform, on behalf of such affiliate or successor, the
services required of Employee by this Agreement and the provisions of this
Agreement shall be binding upon, and inure to the benefit of, such successor or
affiliate. This Agreement shall be binding upon and inure to the benefit of
Employee, his heirs, representatives and estate.
16. Modification; Termination
-------------------------
This Agreement may be modified only by written agreement signed by Employee
and by a duly authorized officer of Compass Bank. The failure to insist upon
compliance with any provision hereof shall not be deemed a waiver of such
provision or any other provision hereof. This Agreement shall terminate if the
Merger Agreement shall be terminated; provided however, Employee agrees that if
this Agreement is terminated he will keep confidential any confidential
information received from Compass Bank or its affiliates prior to such
termination.
17. Counterparts
------------
This Agreement may be executed in several identical counterparts, and by
the parties hereto on separate counterparts, and each counterpart, when so
executed and delivered, shall constitute an original instrument, and all such
separate counterparts shall constitute but one and the same instrument.
18. Arbitration
-----------
Any claims or controversies governing this Agreement, or arising in any way
out of the performance of this Agreement, shall be subject to binding
arbitration by a single arbitrator, in accordance with the rules of the American
Arbitration Association. Such arbitration shall be held in Jacksonville,
Florida. Nothing herein shall prohibit a party from seeking equitable relief in
a court of law to maintain the status quo while the arbitration is pending.
19. Change of Control
-----------------
For the purpose of this Agreement, "Change of Control" shall have the
meaning given such term in the Change of Control Agreement between Employee and
Compass of even date herewith (the "Change of Control Agreement"); provided,
however, Change of Control shall include a sale or other disposition of all or
substantially all of the stock or assets of Compass Bank, other than to an
affiliate of Compass. In the event of the occurrence of a Change of Control,
this Agreement shall be subordinate to the terms of the Change of Control
Agreement.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed by the parties as of the day
and year first above written.
ATTEST COMPASS BANK
By: /s/ Daniel B. Graves By: /s/ David N. Wright
--------------------------------- -------------------------------------
Name: Daniel B. Graves Name: David N. Wright
------------------------------- -----------------------------------
Title: Assistant Secretary Title: Senior Vice President and
------------------------------ ----------------------------------
Regional Executive
----------------------------------
WITNESS:
/s/ signature appears here /s/ Bennett Brown
--------------------------------- -------------------------------------
Employee
10
<PAGE>
EXHIBIT I
R. ALAN BELLAMY
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made and entered into as of July 31, 1996, by and
between Compass Bank, a Florida banking corporation ("Compass Bank"), and R.
Alan Bellamy ("Employee").
WHEREAS, Compass Bank desires to enter into an employment agreement with
Employee to provide for the continued management and success of its operations
and those of its affiliates, and Employee desires to engage in such services,
under the terms and conditions set forth in this Agreement;
WHEREAS, Employee has been an employee of Enterprise National Bank of
Jacksonville ("Bank") which is being acquired (the "Merger") by Compass
Bancshares, Inc. ("Compass") and its affiliates pursuant to an Agreement and
Plan of Merger dated as of July 31, 1996 (the "Merger Agreement") among Compass,
Compass Bank and the Bank; and
WHEREAS, Employee acknowledges that (i) the Bank has been engaged for a
number of years in the business of banking, lending, deposit taking, and related
banking and trust services (the "Business") in the State of Florida; (ii)
Employee is one of a limited number of persons instrumental in the development
of the Business of the Bank; (iii) Employee's work for the Bank has given him
and will continue to give him access to trade secrets and confidential
information concerning the Business and the relationships between the Bank and
its customers; (iv) Employee's employment with Compass Bank will give him access
to trade secrets and confidential information concerning the business and
customer relationships of Compass Bank and its affiliates; (v) the agreements
and covenants contained in this Agreement are essential to protect the Business
and goodwill of the Bank being acquired by Compass and the business and goodwill
of Compass Bank and its affiliates; and (vi) Compass Bank would not employ
Employee except for such covenants and agreements.
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the receipt and sufficiency of which are hereby acknowledged, Compass
Bank and Employee hereby agree, effective as of the date of the consummation of
the Merger, as follows:
1. Employment
----------
During the Term (as defined herein), Compass Bank agrees to employ Employee
and Employee agrees to serve as Senior Vice President - Senior Loan
Administrator or in such other capacity as a Senior Vice President of equivalent
authority and responsibility ("Senior Vice President") as the Chief Executive
Officer of Compass Bank may determine. Employee hereby accepts such employment
on the terms and conditions set forth in this Agreement.
<PAGE>
2. Position and Responsibilities
-----------------------------
As Senior Vice President, Employee will be engaged by Compass Bank to
provide such services as may be determined by the Chief Executive Officer of
Compass Bank. In furtherance of such duties, Employee shall have the
responsibility and authority to:
(a) Provide technical assistance to lending personnel within the Florida
region;
(b) Develop, initiate and implement loan policies, systems and procedures
within the Jacksonville market that are consistent with corporate guidelines;
(c) Keep abreast with financial trends in the Jacksonville market and
industries served therein;
(d) Ensure that the loan portfolio in the Florida region meets the credit
and documentation standards established by Compass Bank or Compass;
(e) Act as the final loan approval authority for the Florida region within
approved limits;
(f) Exercise the usual authority of a manager concerning staffing, staff
development, performance appraisals, competition management and status of
employment; and
(g) Supervise loan administration support services, such as credit
analysis, when instructed to do so by Compass Bank's Chief Executive Officer.
3. Term of Employment; Place of Employment
---------------------------------------
Employee's employment under this Agreement shall commence as of the
effective date of the Merger and shall continue (unless sooner terminated) for
two (2) years ("Term"). Employee's place of employment during the Term shall be
in Jacksonville, Florida.
4. Extent of Services
------------------
During the Term, Employee shall devote his full business time and efforts
to the performance of his duties hereunder. It is, however, understood and
agreed that the preceding sentence shall not prohibit Employee from spending a
reasonable amount of time managing his personal investments and discharging his
civic responsibilities as long as such activities do not interfere with the
discharge of his duties hereunder. Employee hereby agrees and represents that
his employment, and the performance of his duties as required by this Agreement,
do not violate any agreements or relationships existing between Employee and any
other person. During the Term, Employee will not serve as an officer or
director of any business enterprise (other than Compass Bank) without the prior
approval of the Chief Executive Officer of Compass Bank, which shall not be
unreasonably withheld.
2
<PAGE>
5. Compensation
------------
(a) Compass Bank shall pay Employee for all services and agreements of
Employee pursuant to this Agreement, and any other duties as may reasonably be
assigned to him by Compass Bank, an annual base salary of $124,000 per year,
with merit increases in accordance with Compass Bank's salary administration
program based upon performance, which shall be payable in accordance with
Compass Bank's customary payroll practices with respect to time and manner of
payment. No compensation shall be payable until and unless the Merger becomes
effective.
(b) If Employee's employment under this Agreement is terminated by
Compass Bank for other than death or "good cause," as defined in Section 8
hereof, Compass Bank will pay (or cause to be paid) the compensation and
benefits (excluding disability and leave program benefits) provided by this
Agreement for a period of two (2) years following such termination. For this
purpose, should Employee's employment be terminated prior to the completion of
the first period utilized to calculate bonuses pursuant to the Compass Bank
Executive Incentive Plan ("Bonus Period"), Employee shall be entitled to one-
half (1/2) the value of the maximum bonus owing to him if he had remained in
Compass Bank's employ during the entire Bonus Period and met the bonus target
required to earn his maximum bonus. If Employee is terminated after completion
of the first Bonus Period, his bonus during the two-year period contemplated in
this Section 5(b) shall be based upon the bonus earned in the most recently
completed Bonus Period. In the event of the termination of Employee's employment
under this Agreement because of Employee's disability, as defined in Section 8
hereof, any payments of disability benefits to Employee payable during the two
years following such termination under any disability insurance policy or
disability benefit plan covering Employee maintained by Compass Bank or its
affiliates, as it may exist from time to time, shall be treated as payments by
Compass Bank toward satisfaction of its obligations under this Agreement. Such
payments shall be paid in accordance with Compass Bank's customary payroll
practices with respect to the time and manner of payment. Payments received
under medical insurance policies are not counted toward this obligation. If
Employee dies, resigns or is terminated for "good cause," Compass Bank shall
have no further obligation to Employee under this Agreement.
(c) Employee shall have the right, upon prior written notice as
provided in Section 12 herein, voluntarily to terminate his employment hereunder
("Voluntary Termination"), but in such event, Employee shall have no right after
the date of termination to compensation or other benefits as provided in this
Agreement. In the event of Voluntary Termination, Employee shall be subject to
the noncompetition provision of Section 7(c) herein, but only to the extent of
any time remaining under the Term of this Agreement.
6. Benefits
--------
(a) During the Term, Compass Bank shall provide Employee such benefits,
including life, health and disability insurance, as are made generally available
to employees of
<PAGE>
equal title and base salary on the same basis as Compass Bank makes such
benefits available to Compass Bank's other employees, including participation in
the Compass Bank retirement plan.
(b) As an employee of Compass Bank or one of its affiliates, Employee
shall be eligible to participate in such employee stock option plan as an
employee in a similar position may participate, including the 1996 Long Term
Incentive Plan. Employee shall also receive, promptly following the commencement
of the Term, a grant of options to acquire 5,000 shares of Compass Bancshares,
Inc. common stock, at an exercise price equal to the fair market value of such
common stock on the date of grant, fifty percent (50%) of such grant becoming
exercisable one year after the commencement of the Term, the remainder of such
grant becoming exercisable two years after the commencement of the Term and with
an expiration date ten (10) years following such date of grant. Notwithstanding
any provisions herein to the contrary, the entire grant of options shall become
fully vested and exercisable upon the occurrence of a Change of Control (as
hereinafter defined), or if Employee is terminated by Compass Bank other than
for "good cause" or defined in Section 8 hereof, during the Term.
(c) As an employee of Compass Bank or one of its affiliates, Employee
shall be eligible to participate in Compass Bank's Executive Incentive Plan to
the extent that Employee may receive incentives up to thirty percent (30%) of
base salary per annum during the Term.
(d) Compass Bank shall pay for the benefit of Employee the first two
annual premiums coming due after the effective date of the Merger with respect
to that certain policy No. 2535809 maintained with Principal Mutual Life
Insurance Company. Said annual premiums are in the amount of $18,360 and shall
be made payable to the Employee.
(e) Employee shall be entitled to four (4) weeks paid vacation per year
during the Term, and thereafter as long as Employee is employed by Compass Bank
or any of its affiliates, on a non-cumulative basis.
(f) Employee shall be entitled to reimbursement of reasonable business
expenses which are incurred by Employee in connection with his employment as
provided by the policies, practices and procedures of Compass Bank.
7. Confidentiality; Noncompetition; Nonsolicitation
------------------------------------------------
(a) Employee recognizes and acknowledges that he has and will have
access to confidential information of a special and unique value concerning
Compass Bank and its affiliates which may include, without limitation, books and
records relating to operations, customer names and addresses, customer service
requirements, customer financial statements and other financial, business and
personal information relating to Compass Bank and its affiliates, their
customers, markets, officers and employees, cost of providing service and
equipment, operating and maintenance costs, and pricing criteria. Employee also
recognizes that a portion of the business of Compass Bank and its affiliates is
dependent upon trade secrets, including techniques, methods, systems, processes,
data and other confidential information. The protection of these trade secrets
and confidential information against unauthorized disclosure or
4
<PAGE>
use is of critical importance to Compass Bank. Employee therefore agrees that,
without prior written authorization from the Chief Executive Officer of Compass
Bank, he will not at any time, either while employed by Compass Bank or
afterwards, make any independent use of, or disclose to any other person, any
trade secrets or confidential information of Compass Bank. The agreements
contained in this Section 7(a) shall survive the termination of this Agreement.
(b) All records, files, memoranda, reports, price lists, customer
lists, documents, and other information (together with all copies thereof) which
relate to Compass Bank, its affiliates, or the Bank, and which Employee, either
prior to or during the Term, has obtained or obtains, uses, prepares, or comes
in contact with shall remain the sole property of Compass Bank and its
affiliates. Upon the termination of Employee's employment by Compass Bank, or
upon the prior demand of Compass Bank, all such materials and all copies thereof
shall be returned to the Bank (or its successors by merger) immediately.
(c) To support the agreements contained in Section 7(a) hereof, during
the Term and, if Employee's employment with Compass Bank is terminated for any
or no reason during the Term, for a period of two years after such termination,
or such lesser period as is applicable pursuant to Section 5(c) hereof,
Employee, on behalf of himself and his present and future affiliates and
employers (other than the Bank or its successors by merger), agrees he will not,
directly or indirectly as a partner, stockholder, consultant, agent, joint
venturer, investor, lender, or in any other capacity whatsoever, alone or in
association with others (i) own, manage, operate, control or participate in the
ownership, management, operation or control of, or work for or permit the use of
his name by, or be connected in any manner with, any specific business activity
in Duval or Clay County, Florida (the "Geographic Area"), which at the time is
conducted by Compass Bank or by any affiliate of Compass Bank in such Geographic
Area, except that this prohibition shall not apply to the ownership of up to 5
percent (5%) of the equity of any other entity; (ii) solicit any person (natural
or otherwise) who is a customer of the Bank to do business with any person other
than Compass Bank or its affiliates or (iii) use in any competition,
solicitation or marketing effort any proprietary list of or other information
concerning customers of the Bank, Compass Bank or its affiliates developed by
the Bank, Compass Bank or its affiliates. Employee further agrees that, for a
period of two years following such termination, he will not, directly or
indirectly, in any capacity whatsoever, own manage, operate, control or
participate in the ownership, management, operation or control of, or work for
or permit the use of his name by, or be connected in any manner with, any
business activity in the Geographic Area that operates under or uses or
identifies itself with the name "Enterprise National Bank," or a name
substantially similar thereto. Notwithstanding anything to the contrary
contained herein, this Section 7(c) shall not be enforceable in the event of the
occurrence of a Change of Control (as hereinafter defined).
(d) In the event of a breach or threatened breach by Employee of the
provisions of this Section 7, Compass Bank shall be entitled to seek temporary
or permanent injunctions and other appropriate relief restraining Employee from
using or disclosing, in whole or in part, trade secrets and confidential
information or violating the other provisions hereof. Nothing herein shall be
construed as prohibiting Compass Bank from pursuing any other remedies available
to it.
5
<PAGE>
(e) Employee has read and considered the provisions of this Section 7
and, having done so, agrees that the restrictions on competition set forth in
Section 7(c) herein are fair and reasonable as to time, geographical area, and
scope of activities to be restrained, and are reasonably required for the
protection of the Business, goodwill and other business interests of Compass
Bank and its affiliates and the Bank. In the event a court of competent
jurisdiction determines as a matter of law that any of the terms of Section 7
are unreasonable or too broad, the parties expressly allow such court to reform
this agreement to the extent necessary to make it reasonable as a matter of law
and to enforce it as so reformed.
8. Termination of Employment
-------------------------
Employee's employment with Compass Bank shall be terminated upon the
occurrence of any one or more of the following events:
(a) Compass Bank gives written notice of termination for good cause to
Employee. For the purposes of this Agreement, "good cause" shall include,
without limitation, a willful and material violation of applicable banking laws
and regulations; dishonesty; theft; fraud; embezzlement; the commission of a
felony or a crime involving moral turpitude; substantial dependence or addiction
to alcohol or any drug not used in accordance with the instructions of a
licensed physician; conduct disloyal to Compass Bank; willful disregard of
lawful instructions of the officers or directors of Compass Bank relating to a
material matter reasonably related to Employee's duties hereunder; or any other
material breach of this or any other agreement between Employee and Compass
Bank.
(b) Death.
(c) Disability of Employee. For purposes of this Agreement,
"disability" shall mean a mental or physical condition resulting from an injury
or illness which shall render Employee incapable of performing the essential
functions of his position with reasonable accommodations from Compass Bank,
pursuant to the criteria set forth in such disability plan as is maintained by
Compass Bank. If Employee is terminated pursuant to this Section 8(c), nothing
herein shall preclude Employee from being able to receive disability benefits
pursuant to any plan or policy that Compass Bank or Compass maintains for its
executive officers or employees.
(d) Resignation of Employee, who agrees to provide not less than 45
days prior written notice of his resignation to Compass Bank.
9. Compliance with Rules
---------------------
Employee agrees to observe and comply with the rules and regulations of
Compass Bank as adopted either orally or in writing by the Board of Directors of
Compass Bank and communicated to Employee in writing with respect to the
performance of Employee's duties, and to carry out and to perform orders,
directions, and policies announced to Employee by Compass Bank, unless such
orders, directions or policies violate applicable laws or regulations.
6
<PAGE>
10. Withholding
-----------
There shall be deducted from the payment of any amounts due under this
Agreement the amount of tax required by any governmental authority to be
withheld and paid over by Compass Bank or its affiliates to such governmental
authority because of such payment.
11. Attorneys Fees
--------------
In the event that the Employee is terminated in a manner which violates
any provisions of this Agreement, as determined through arbitration as provided
herein or by a court of competent jurisdiction, the Employee shall be entitled
to reimbursement for all reasonable costs, including attorneys fees, in
challenging such termination, whether such challenge takes place in a court of
law or by means of arbitration or mediation. Compass Bank agrees to advance
Employee reasonable attorneys fees and costs in the maximum amount of $15,000 to
enforce the terms of this Agreement or recover damages for breach of this
Agreement, as follows: $10,000 at the commencement of litigation or mediation
proceedings and an additional $5,000 six months thereafter. In the event the
Employee is unsuccessful in his claim or defense, the Employee shall reimburse
Compass Bank for any attorneys fees, expenses and costs that have been advanced.
If the Employee is successful, any attorney's fee award will be reduced by the
amount of attorneys fees and costs that have been advanced. Such reimbursement
shall be in addition to all rights to which the Employee is otherwise entitled
under this Agreement.
12. Change of Control
-----------------
For the purpose of this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of Compass (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of Compass entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from Compass (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any acquisition by
Compass, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Compass or any corporation controlled by Compass or
(iv) any acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of subsection (c) of this
Section 12 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board of
Directors of Compass (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by Compass' shareholders, was approved by a vote
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of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of Compass of a reorganization, merger
or consolidation, in each case, unless, following such reorganization, merger or
consolidation, (i) more than 60% of, respectively, the then outstanding shares
of common stock of the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding Compass, any employee benefit plan
(or related trust) of Compass or such corporation resulting from such
reorganization, merger or consolidation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Common Stock or Outstanding
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors and (iii) at least a majority of the members of the board of directors
of the corporation resulting from such reorganization, merger or consolidation
were members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of Compass of (i) a complete
liquidation or dissolution of Compass or (ii) the sale or other disposition of
all or substantially all of the assets of Compass, other than to a corporation,
with respect to which following such sale or other disposition, (A) more than
60% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding Compass and any employee benefit plan (or related trust) of Compass
or such corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of the
Outstanding Company
8
<PAGE>
Common Stock or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (C) at least a
majority of the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other disposition of
assets of Compass.
(e) Sale or other disposition of all or substantially all of the stock
or assets of Compass Bank, other than to an affiliate of Compass.
13. Notices
-------
Any notice required or desired to be given under this Agreement shall
be deemed given if in writing mailed or delivered as follows:
If to Employee:
R. Alan Bellamy
12741 Shinnecock Court
Jacksonville, Florida 32225
If to Compass Bank:
Jerry W. Powell, Esquire
General Counsel
Compass Bank
P. O. Box 10566
Birmingham, Alabama 35296
14. Entire Agreement
----------------
(a) In consideration of this Agreement, Compass Bank, as the successor
to the rights and obligations of the Bank pursuant to the Merger and otherwise,
and Employee hereby agree that the Severance Employment Agreement, dated May 21,
1996, between Employee and the Bank shall terminate automatically as of the
effective date of the Merger.
(b) This Agreement contains the entire agreement of the parties
regarding the employment of Employee by Compass Bank and supersedes any prior
agreement, arrangement or understanding, whether oral or written, between
Compass Bank and Employee concerning Employee's employment hereunder.
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15. Choice of Law
-------------
This Agreement shall be governed by, and enforced according to, the
laws of the State of Florida. The invalidity of any provision shall be
automatically reformed to the extent permitted by applicable law and shall not
affect the enforceability of the remaining provisions hereof.
16. Assignment
----------
This Agreement is for the personal service of Employee and may not be
assigned by Employee but may be assigned by Compass Bank to any affiliate or
successor in interest to Compass Bank's business. In the event Compass Bank
makes such an assignment, Employee shall continue to perform, on behalf of such
affiliate or successor, the services required of Employee by this Agreement and
the provisions of this Agreement shall be binding upon, and inure to the benefit
of, such successor or affiliate. This Agreement shall be binding upon and inure
to the benefit of Employee, his heirs, representatives and estate.
17. Modification; Termination
-------------------------
This Agreement may be modified only by written agreement signed by
Employee and by a duly authorized officer of Compass Bank. The failure to insist
upon compliance with any provision hereof shall not be deemed a waiver of such
provision or any other provision hereof. This Agreement shall terminate if the
Merger Agreement shall be terminated; provided however, Employee agrees that if
this Agreement is terminated he will keep confidential any confidential
information received from Compass Bank or its affiliates prior to such
termination.
18. Counterparts
------------
This Agreement may be executed in several identical counterparts, and
by the parties hereto on separate counterparts, and each counterpart, when so
executed and delivered, shall constitute an original instrument, and all such
separate counterparts shall constitute but one and the same instrument.
19. Arbitration
-----------
Any claims or controversies governing this Agreement, or arising in
any way out of the performance of this Agreement, shall be subject to binding
arbitration by a single arbitrator, in accordance with the rules of the American
Arbitration Association. Such arbitration shall be held in Jacksonville,
Florida. Nothing herein shall prohibit a party from seeking equitable relief in
a court of law to maintain the status quo while the arbitration is pending.
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IN WITNESS WHEREOF, this Agreement is executed by the parties as of the day
and year first above written.
ATTEST COMPASS BANK
By: /s/ Daniel B. Graves By: /s/ David N. Wright
--------------------------- -------------------------------
Name: Daniel B. Graves Name: David N. Wright
------------------------- -----------------------------
Title: Assistant Secretary Title: Senior Vice President and
------------------------ ----------------------------
Regional Executive
WITNESS:
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
- ------------------------------ ----------------------------------
Employee
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EXHIBIT J
WILLIAM J. HAMMEL
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made and entered into as of July 31, 1996, by and
between Compass Bank, a Florida banking corporation ("Compass Bank"), and
William J. Hammel ("Employee").
WHEREAS, Compass Bank desires to enter into an employment agreement with
Employee to provide for the continued management and success of its operations
and those of its affiliates, and Employee desires to engage in such services,
under the terms and conditions set forth in this Agreement;
WHEREAS, Employee has been an employee of Enterprise National Bank of
Jacksonville ("Bank") which is being acquired (the "Merger") by Compass
Bancshares, Inc. ("Compass") and its affiliates pursuant to an Agreement and
Plan of Merger dated as of July 31, 1996 (the "Merger Agreement") among Compass,
Compass Bank and the Bank; and
WHEREAS, Employee acknowledges that (i) the Bank has been engaged for a
number of years in the business of banking, lending, deposit taking, and related
banking and trust services (the "Business") in the State of Florida; (ii)
Employee is one of a limited number of persons instrumental in the development
of the Business of the Bank; (iii) Employee's work for the Bank has given him
and will continue to give him access to trade secrets and confidential
information concerning the Business and the relationships between the Bank and
its customers; (iv) Employee's employment with Compass Bank will give him access
to trade secrets and confidential information concerning the business and
customer relationships of Compass Bank and its affiliates; (v) the agreements
and covenants contained in this Agreement are essential to protect the Business
and goodwill of the Bank being acquired by Compass and the business and goodwill
of Compass Bank and its affiliates; and (vi) Compass Bank would not employ
Employee except for such covenants and agreements.
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the receipt and sufficiency of which are hereby acknowledged, Compass
Bank and Employee hereby agree, effective as of the date of the consummation of
the Merger, as follows:
1. Employment
----------
During the Term (as defined herein), Compass Bank agrees to employ
Employee and Employee agrees to serve as Senior Vice President - Commercial Loan
Manager II or in such other capacity as a Senior Vice President of equivalent
authority and responsibility ("Commercial Loan Manager II") as the Chief
Executive Officer of Compass Bank may determine. Employee hereby accepts such
employment on the terms and conditions set forth in this Agreement.
<PAGE>
2. Position and Responsibilities
-----------------------------
As a Commercial Loan Manager II, Employee will be engaged by Compass
Bank to provide such services as may be determined by the Chief Executive
Officer of Compass Bank, and shall report to the Chief Executive Officer of
Compass Bank or the City President in Jacksonville. In furtherance of such
duties, Employee shall have the responsibility and authority to:
(a) Provide direct guidance and supervision to a full staff of
commercial lenders and support staff of Compass Bank in Jacksonville, Florida
and the surrounding markets;
(b) Develop, initiate and implement business development strategies and
programs for the Jacksonville market;
(c) Extend credit to business and professional clients through lending
staff and own initiatives for the Jacksonville market;
(d) Keep abreast with financial trends for the Jacksonville market and
provide financial advice to commercial clients;
(e) Ensure that the loan portfolio of Compass Bank in Jacksonville
meets the credit and documentation standards established by Compass Bank or
Compass;
(f) Make business development calls to solicit new banking
relationships for Compass Bank in Jacksonville; and
(g) Exercise the usual authority of a commercial lending manager
concerning staffing, staff development, performance appraisals, compensation
management and status of employment.
3. Term of Employment; Place of Employment
---------------------------------------
Employee's employment under this Agreement shall commence as of the
effective date of the Merger and shall continue (unless sooner terminated) for
two (2) years ("Term"). Employee's place of employment during the Term shall be
in Jacksonville, Florida.
4. Extent of Services
------------------
During the Term, Employee shall devote his full business time and
efforts to the performance of his duties hereunder. It is, however, understood
and agreed that the preceding sentence shall not prohibit Employee from spending
a reasonable amount of time managing his personal investments and discharging
his civic responsibilities as long as such activities do not interfere with the
discharge of his duties hereunder. Employee hereby
2
<PAGE>
agrees and represents that his employment, and the performance of his duties as
required by this Agreement, do not violate any agreements or relationships
existing between Employee and any other person. During the Term, Employee will
not serve as an officer or director of any business enterprise (other than
Compass Bank) without the prior approval of the Chief Executive Officer of
Compass Bank, which shall not be unreasonably withheld.
5. Compensation
------------
(a) Compass Bank shall pay Employee for all services and agreements of
Employee pursuant to this Agreement, and any other duties as may reasonably be
assigned to him by Compass Bank, an annual base salary of $114,000 per year,
with merit increases in accordance with Compass Bank's salary administration
program based upon performance, which shall be payable in accordance with
Compass Bank's customary payroll practices with respect to time and manner of
payment. No compensation shall be payable until and unless the Merger becomes
effective.
(b) If Employee's employment under this Agreement is terminated by
Compass Bank for other than death or "good cause," as defined in Section 8
hereof, Compass Bank will pay (or cause to be paid) the compensation and
benefits (excluding disability and leave program benefits) provided by this
Agreement for a period of two (2) years following such termination. For this
purpose, should Employee's employment be terminated prior to the completion of
the first period utilized to calculate bonuses pursuant to the Compass Bank
Executive Incentive Plan ("Bonus Period"), Employee shall be entitled to one-
half (1/2) the value of the maximum bonus owing to him if he had remained in
Compass Bank's employ during the entire Bonus Period and met the bonus target
required to earn his maximum bonus. If Employee is terminated after completion
of the first Bonus Period, his bonus during the two-year period contemplated in
this Section 5(b) shall be based upon the bonus earned in the most recently
completed Bonus Period. In the event of the termination of Employee's employment
under this Agreement because of Employee's disability, as defined in Section 8
hereof, any payments of disability benefits to Employee payable during the two
years following such termination under any disability insurance policy or
disability benefit plan covering Employee maintained by Compass Bank or its
affiliates, as it may exist from time to time, shall be treated as payments by
Compass Bank toward satisfaction of its obligations under this Agreement. Such
payments shall be paid in accordance with Compass Bank's customary payroll
practices with respect to the time and manner of payment. Payments received
under medical insurance policies are not counted toward this obligation. If
Employee dies, resigns or is terminated for "good cause," Compass Bank shall
have no further obligation to Employee under this Agreement.
(c) Employee shall have the right, upon prior written notice as
provided in Section 12 herein, voluntarily to terminate his employment hereunder
("Voluntary Termination"), but in such event, Employee shall have no right after
the date of termination to compensation or other benefits as provided in this
Agreement. In the event of Voluntary Termination, Employee shall be subject to
the noncompetition provision of Section 7(c) herein, but only to the extent of
any time remaining under the Term of this Agreement.
3
<PAGE>
6. Benefits
--------
(a) During the Term, Compass Bank shall provide Employee such benefits
including life, health and disability insurance, as are made generally available
to employees of equal title and base salary on the same basis as Compass Bank
makes such benefits available to Compass Bank's other employees, including
participation in the Compass Bank retirement plan.
(b) As an employee of Compass Bank or one of its affiliates, Employee
shall be eligible to participate in such employee stock option plan as an
employee in a similar position may participate, including the 1996 Long Term
Incentive Plan. Employee shall also receive, promptly following the commencement
of the Term, a grant of options to acquire 5,000 shares of Compass Bancshares,
Inc. common stock, at an exercise price equal to the fair market value of such
common stock on the date of grant, fifty percent (50%) of such grant becoming
exercisable one year after the commencement of the Term, the remainder of such
grant becoming exercisable two years after the commencement of the Term and with
an expiration date ten (10) years following such date of grant. Notwithstanding
any provisions herein to the contrary, the entire grant of options shall become
fully vested and exercisable upon the occurrence of a Change of Control (as
hereinafter defined), or if Employee is terminated by Compass Bank other than
for "good cause" as defined in Section 8 hereof, during the Term.
(c) As an employee of Compass Bank or one of its affiliates, Employee
shall be eligible to participate in Compass Bank's Executive Incentive Plan to
the extent that Employee may receive incentives up to thirty percent (30%) of
base salary per annum during the Term.
(d) Compass Bank shall pay for the benefit of Employee the first two
annual premiums coming due after the effective date of the Merger with respect
to that certain policy No. 2535762 maintained with Principal Mutual Life
Insurance Company. Said annual premiums are in the amount of $12,360 and shall
be made payable to the Employee.
(e) Employee shall be entitled to four (4) weeks paid vacation per
year during the Term, and thereafter as long as Employee is employed by Compass
Bank or any of its affiliates, on a non-cumulative basis.
(f) Employee shall be entitled to reimbursement of reasonable business
expenses which are incurred by Employee in connection with his employment as
provided by the policies, practices and procedures of Compass Bank.
4
<PAGE>
7. Confidentiality; Noncompetition; Nonsolicitation
------------------------------------------------
(a) Employee recognizes and acknowledges that he has and will have
access to confidential information of a special and unique value concerning
Compass Bank and its affiliates which may include, without limitation, books and
records relating to operations, customer names and addresses, customer service
requirements, customer financial statements and other financial, business and
personal information relating to Compass Bank and its affiliates, their
customers, markets, officers and employees, cost of providing service and
equipment, operating and maintenance costs, and pricing criteria. Employee also
recognizes that a portion of the business of Compass Bank and its affiliates is
dependent upon trade secrets, including techniques, methods, systems, processes,
data and other confidential information. The protection of these trade secrets
and confidential information against unauthorized disclosure or use is of
critical importance to Compass Bank. Employee therefore agrees that, without
prior written authorization from the Chief Executive Officer of Compass Bank, he
will not at any time, either while employed by Compass Bank or afterwards, make
any independent use of, or disclose to any other person, any trade secrets or
confidential information of Compass Bank. The agreements contained in this
Section 7(a) shall survive the termination of this Agreement.
(b) All records, files, memoranda, reports, price lists, customer
lists, documents, and other information (together with all copies thereof) which
relate to Compass Bank, its affiliates, or the Bank, and which Employee, either
prior to or during the Term, has obtained or obtains, uses, prepares, or comes
in contact with shall remain the sole property of Compass Bank and its
affiliates. Upon the termination of Employee's employment by Compass Bank, or
upon the prior demand of Compass Bank, all such materials and all copies thereof
shall be returned to the Bank (or its successors by merger) immediately.
(c) To support the agreements contained in Section 7(a) hereof,
during the Term and, if Employee's employment with Compass Bank is terminated
for any or no reason during the Term, for a period of two years after such
termination, or such lesser period as is applicable pursuant to Section 5(c)
hereof, Employee, on behalf of himself and his present and future affiliates and
employers (other than the Bank or its successors by merger), agrees he will not,
directly or indirectly as a partner, stockholder, consultant, agent, joint
venturer, investor, lender, or in any other capacity whatsoever, alone or in
association with others (i) own, manage, operate, control or participate in the
ownership, management, operation or control of, or work for or permit the use of
his name by, or be connected in any manner with, any specific business activity
in Duval or Clay County, Florida (the "Geographic Area"), which at the time is
conducted by Compass Bank or by any affiliate of Compass Bank in such Geographic
Area except that this prohibition shall not apply to the ownership of up to 5
percent (5%) of the equity of any other entity; (ii) solicit any person (natural
or otherwise) who is a customer of the Bank to do business with any person other
than Compass Bank or its affiliates or (iii) use in any competition,
solicitation or marketing effort any proprietary list of or other information
concerning customers of the Bank, Compass Bank or its affiliates developed by
the Bank, Compass Bank or its affiliates. Employee further agrees
5
<PAGE>
that, for a period of two years following such termination, he will not,
directly or indirectly, in any capacity whatsoever, own manage, operate, control
or participate in the ownership, management, operation or control of, or work
for or permit the use of his name by, or be connected in any manner with, any
business activity in the Geographic Area that operates under or uses or
identifies itself with the name "Enterprise National Bank," or a name
substantially similar thereto. Notwithstanding anything to the contrary
contained herein, this Section 7(c) shall not be enforceable in the event of the
occurrence of a Change of Control (as hereinafter defined).
(d) In the event of a breach or threatened breach by Employee of the
provisions of this Section 7, Compass Bank shall be entitled to seek temporary
or permanent injunctions and other appropriate relief restraining Employee from
using or disclosing, in whole or in part, trade secrets and confidential
information or violating the other provisions hereof. Nothing herein shall be
construed as prohibiting Compass Bank from pursuing any other remedies available
to it.
(e) Employee has read and considered the provisions of this Section 7
and, having done so, agrees that the restrictions on competition set forth in
Section 7(c) herein are fair and reasonable as to time, geographical area, and
scope of activities to be restrained, and are reasonably required for the
protection of the Business, goodwill and other business interests of Compass
Bank and its affiliates and the Bank. In the event a court of competent
jurisdiction determines as a matter of law that any of the terms of Section 7
are unreasonable or too broad, the parties expressly allow such court to reform
this agreement to the extent necessary to make it reasonable as a matter of law
and to enforce it as so reformed.
8. Termination of Employment
-------------------------
Employee's employment with Compass Bank shall be terminated upon the
occurrence of any one or more of the following events:
(a) Compass Bank gives written notice of termination for good cause
to Employee. For the purposes of this Agreement, "good cause" shall include,
without limitation, a willful and material violation of applicable banking laws
and regulations; dishonesty; theft; fraud; embezzlement; the commission of a
felony or a crime involving moral turpitude; substantial dependence or addiction
to alcohol or any drug not used in accordance with the instructions of a
licensed physician; conduct disloyal to Compass Bank; willful disregard of
lawful instructions of the officers or directors of Compass Bank relating to a
material matter reasonably related to Employee's duties hereunder; or any other
material breach of this or any other agreement between Employee and Compass
Bank.
(b) Death.
(c) Disability of Employee. For purposes of this Agreement,
"disability" shall mean a mental or physical condition resulting from an injury
or illness which shall render Employee incapable of performing the essential
functions of his position with
6
<PAGE>
reasonable accommodations from Compass Bank, pursuant to the criteria set forth
in such disability plan as is maintained by Compass Bank. If Employee is
terminated pursuant to this Section 8(c), nothing herein shall preclude Employee
from being able to receive disability benefits pursuant to any plan or policy
that Compass Bank or Compass maintains for its executive officers or employees.
(d) Resignation of Employee, who agrees to provide not less than 45
days prior written notice of his resignation to Compass Bank.
9. Compliance with Rules
---------------------
Employee agrees to observe and comply with the rules and regulations of
Compass Bank as adopted either orally or in writing by the Board of Directors of
Compass Bank and communicated to Employee in writing with respect to the
performance of Employee's duties, and to carry out and to perform orders,
directions, and policies announced to Employee by Compass Bank, unless such
orders, directions or policies violate applicable laws or regulations.
10. Withholding
-----------
There shall be deducted from the payment of any amounts due under this
Agreement the amount of tax required by any governmental authority to be
withheld and paid over by Compass Bank or its affiliates to such governmental
authority because of such payment.
11. Attorneys Fees
--------------
In the event that the Employee is terminated in a manner which violates
any provisions of this Agreement, as determined through arbitration as provided
herein or by a court of competent jurisdiction, the Employee shall be entitled
to reimbursement for all reasonable costs, including attorneys fees, in
challenging such termination, whether such challenge takes place in a court of
law or by means of arbitration or mediation. Compass Bank agrees to advance
Employee reasonable attorneys fees and costs in the maximum amount of $15,000 to
enforce the terms of this Agreement or recover damages for breach of this
Agreement, as follows: $10,000 at the commencement of litigation or mediation
proceedings and an additional $5,000 six months thereafter. In the event the
Employee is unsuccessful in his claim or defense, the Employee shall reimburse
Compass Bank for any attorneys fees, expenses and costs that have been advanced.
If the Employee is successful, any attorney's fee award will be reduced by the
amount of attorneys fees and costs that have been advanced. Such reimbursement
shall be in addition to all rights to which the Employee is otherwise entitled
under this Agreement.
12. Change of Control
-----------------
For the purpose of this Agreement, a "Change of Control" shall mean:
7
<PAGE>
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of Compass (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of Compass entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from Compass (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any acquisition by
Compass, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Compass or any corporation controlled by Compass or
(iv) any acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of subsection (c) of this
Section 2 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by Compass'
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or
(c) Approval by the shareholders of Compass of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such reorganization,
merger or consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding Compass, any employee benefit plan
(or related trust) of Compass or such corporation resulting from such
reorganization, merger or consolidation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Common Stock or Outstanding
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization, merger or
8
<PAGE>
consolidation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors and (iii) at least a majority of the members of the board of directors
of the corporation resulting from such reorganization, merger or consolidation
were members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of Compass of (i) a complete
liquidation or dissolution of Compass or (ii) the sale or other disposition of
all or substantially all of the assets of Compass, other than to a corporation,
with respect to which following such sale or other disposition, (A) more than
60% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding Compass and any employee benefit plan (or related trust) of Compass
or such corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities, as
the case may be) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and (C) at
least a majority of the members of the board of directors of such corporation
were members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other disposition of
assets of Compass.
(e) Sale or other disposition of all or substantially all of the
stock or assets of Compass Bank, other than to an affiliate of Compass.
13. Notices
-------
Any notice required or desired to be given under this Agreement shall
be deemed given if in writing mailed or delivered as follows:
If to Employee:
William J. Hammel
9528 Kuhn Road
Jacksonville, Florida 32257
9
<PAGE>
If to Compass Bank:
Jerry W. Powell, Esquire
General Counsel
Compass Bank
P. O. Box 10566
Birmingham, Alabama 35296
14. Entire Agreement
----------------
(a) In consideration of this Agreement, Compass Bank, as the
successor to the rights and obligations of the Bank pursuant to the Merger and
otherwise, and Employee hereby agree that the Severance Employment Agreement,
dated May 21, 1996, between Employee and the Bank shall terminate automatically
as of the effective date of the Merger.
(b) This Agreement contains the entire agreement of the parties
regarding the employment of Employee by Compass Bank and supersedes any prior
agreement, arrangement or understanding, whether oral or written, between
Compass Bank and Employee concerning Employee's employment hereunder.
15. Choice of Law
-------------
This Agreement shall be governed by, and enforced according to, the
laws of the State of Florida. The invalidity of any provision shall be
automatically reformed to the extent permitted by applicable law and shall not
affect the enforceability of the remaining provisions hereof.
16. Assignment
----------
This Agreement is for the personal service of Employee and may not be
assigned by Employee but may be assigned by Compass Bank to any affiliate or
successor in interest to Compass Bank's business. In the event Compass Bank
makes such an assignment, Employee shall continue to perform, on behalf of such
affiliate or successor, the services required of Employee by this Agreement and
the provisions of this Agreement shall be binding upon, and inure to the benefit
of, such successor or affiliate. This Agreement shall be binding upon and inure
to the benefit of Employee, his heirs, representatives and estate.
17. Modification; Termination
-------------------------
This Agreement may be modified only by written agreement signed by
Employee and by a duly authorized officer of Compass Bank. The failure to insist
upon compliance with any provision hereof shall not be deemed a waiver of such
provision or any other provision hereof. This Agreement shall terminate if the
Merger Agreement shall be terminated; provided however, Employee agrees that if
this Agreement is terminated he will
10
<PAGE>
keep confidential any confidential information received from Compass Bank or its
affiliates prior to such termination.
18. Counterparts
------------
This Agreement may be executed in several identical counterparts, and
by the parties hereto on separate counterparts, and each counterpart, when so
executed and delivered, shall constitute an original instrument, and all such
separate counterparts shall constitute but one and the same instrument.
19. Arbitration
-----------
Any claims or controversies governing this Agreement, or arising in any
way out of the performance of this Agreement, shall be subject to binding
arbitration by a single arbitrator, in accordance with the rules of the American
Arbitration Association. Such arbitration shall be held in Jacksonville,
Florida. Nothing herein shall prohibit a party from seeking equitable relief in
a court of law to maintain the status quo while the arbitration is pending.
11
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed by the parties as of the day
and year first above written.
ATTEST COMPASS BANK
By: /s/ Daniel B. Graves By: /s/ David N. Wright
----------------------- ------------------------------
Name: Daniel B. Graves Name: David N. Wright
--------------------- ---------------------------
Title: Assistant Secretary Title: Senior Vice President and
------------------- --------------------------
Regional Executive
WITNESS:
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
- -------------------------- --------------------------------
Employee
12
<PAGE>
EXHIBIT K
OPINIONS REQUIRED FROM COUNSEL
TO COMPASS AND COMPASS BANK
---------------------------
(i) Compass and Compass Bank are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware
and the State of Florida, respectively, and Compass is a bank holding company
under the Bank Holding Company Act of 1956, as amended. Compass and Compass Bank
have all requisite corporate power and authority to carry on their business as
now being conducted and to own, lease and operate their properties as now owned,
leased or operated. Compass and Compass Bank are duly qualified and in good
standing in the respective states where such qualification is required;
(ii) Compass and Compass Bank each have all requisite power and
authority to execute and deliver the Merger Agreement and to consummate the
transactions contemplated thereby; all acts (corporate or otherwise) and other
proceedings required to be taken by or on the part of Compass and Compass Bank
(or either of them) to execute and deliver the Merger Agreement and to
consummate the transactions contemplated thereby have been duly and validly
taken; and the Merger Agreement has been duly executed and delivered by, and
constitutes the valid and binding obligation of each of Compass and Compass Bank
enforceable against Compass and Compass Bank, respectively, in accordance with
its terms, subject to the effect of (a) any applicable bankruptcy, insolvency,
reorganization or other law relating to or affecting creditors' rights generally
and (b) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law);
(iii) the shares of Compass Common Stock to be issued pursuant to the
Merger Agreement are validly issued, fully paid and nonassessable; and, except
as contemplated by the Merger Agreement, the shares of Compass Common Stock
issued pursuant to the Merger Agreement are not subject to any agreements or
understandings to which Compass is a party with respect to the voting or
transfer of such shares, are not subject to any agreements or understandings
among any other parties with respect to the voting or transfer of such shares,
and have not been issued in violation of the preemptive rights of any person;
(iv) the execution and delivery by Compass and Compass Bank of the
Merger Agreement does not and the consummation of the transactions contemplated
thereby will not contravene or violate any provision of or constitute a default
under (a) the certificate of incorporation or bylaws of Compass or Compass Bank,
(b) except as disclosed in the Merger Agreement, any note, license, instrument,
mortgage, deed of trust, or other agreement or understanding, permit,
authorization or contract, order, arbitration award, judgment of decree, or any
other restriction of any kind known to us to which Compass or Compass Bank is a
party or by which Compass or Compass Bank or any of their assets or properties
is bound, the breach or violation of which could have a material adverse effect
on Compass and its Subsidiaries taken as a whole, and (c) except as disclosed in
the Merger Agreement, any law, regulation, rule,
<PAGE>
administrative regulation or decree of any court or any governmental agency or
body applicable to Compass or Compass Bank or their respective assets or
properties;
(v) except as disclosed in the Merger Agreement and except for such
consents, approvals, authorizations, actions or filings as have already been
obtained, no consent, approval, authorization, action or filing with any court,
governmental agency or public body is required in connection with the execution,
delivery and performance by Compass and Compass Bank of the Merger Agreement;
(vi) neither Compass nor Compass Bank is in violation of or default
under the respective Certificates of Incorporation or Bylaws of Compass or
Compass Bank or any agreement, document or instrument under which Compass or
Compass Bank is obligated or bound, or any law, order, judgment, or regulation
applicable to Compass or Compass Bank or any of their Subsidiaries, the
violation of which could have a material adverse effect on Compass and its
Subsidiaries taken as a whole; and
(vii) the shares of Compass Common Stock to be issued pursuant to the
Merger Agreement have been registered under the Securities Act of 1933, as
amended.
-2-
<PAGE>
---------------------------------
APPENDIX II
Opinion of Financial Consulting
Associates, Inc.
---------------------------------
<PAGE>
[LETTERHEAD OF FINANCIAL CONSULTING ASSOCIATES, INC.
APPEARS HERE]
October 28, 1996
Board of Directors
Enterprise National Bank of Jacksonville
4190 Belfort Road
Jacksonville, FL 32216
Dear Members of the Board:
You have asked us to advise you with respect to the fairness to the
shareholders and warrantholders of Enterprise National Bank of Jacksonville
(the "Company"), from a financial point of view, of the per share purchase
price and terms provided for in the draft Agreement and Plan of Merger (the
"Merger Agreement") dated July 31, 1996 between the Company and Compass
Bancshares, Inc. ("Compass"). The Merger Agreement provides for a merger (the
"Merger") of the Company and Compass pursuant to which the common shareholders,
the warrantholders and the optionholders of the Company will receive 911,000
Compass common shares, subject to an upward adjustment to a maximum of
1,100,000 Compass common shares depending on the amount of capital received by
the Company based on the exercise of outstanding warrants and options since
December 31, 1995.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to Compass and the Company. We
have also reviewed certain other information, including financial forecasts and
budgets, provided to us by Compass and the Company, and have discussed with the
Company's management the business and prospects of the Company.
We have also considered certain financial and stock market data of Compass and
the Company and we have compared that data with similar data for other publicly
held bank holding companies and we have considered the financial terms of
certain other comparable transactions which have recently been effected. We
also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant. In connection with our review, we have not independently verified
any of the foregoing information and have relied on its being complete and
accurate in all material respects. With respect to the financial forecasts and
budgets, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of Compass's
and the Company's managements as to the future financial performance of Compass
and the Company. In addition, we have not made
<PAGE>
Board of Directors
Enterprise National Bank of Jacksonville
October 28, 1996
Page 2
an independent evaluation or appraisal of the assets of Compass or the Company
and we have assumed that the aggregate allowances for loan losses for Compass
and the Company are adequate to cover such losses. We have solicited third
party indications of interest in acquiring the Company and have considered the
results of that solicitation in arriving at our opinion.
It should be noted that this opinion is based on market conditions and other
circumstances existing on the date hereof and this opinion does not represent
our view as to what the value of the Compass common stock necessarily will be
when the Compass common stock is issued to the stockholders of the Company upon
consummation of the Merger.
We have acted as financial advisor to the Company in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger.
We agree to the inclusion of this opinion letter in the Proxy
Statement/Prospectus relating to the Merger. The opinion may not, however, be
summarized, excerpted from or otherwise publicly referred to without our prior
written consent.
Based upon and subject to the foregoing, it is our opinion that as of the date
hereof, the Per Share Purchase Price and Terms of the Merger are fair to the
common shareholders and warrantholders of the Company from a financial point of
view.
Very truly yours,
FINANCIAL CONSULTING ASSOCIATES, INC.
<PAGE>
---------------------------------
APPENDIX III
Provisions of the National
Banking Act Relating to
Dissenters' Rights of Appraisal
---------------------------------
<PAGE>
(S) 214a. Procedure for conversion, merger, or consolidation; vote of
stockholders
A national banking association may, by vote of the holders of at least
two-thirds of each class of its capital stock, convert into, or merge or
consolidate with, a State bank in the same State in which the national banking
association is located, under a State charter, in the following manner:
(a) Approval of board of directors; publication of notice of stockholders'
meeting; waiver of publication; notice by registered or certified mail
The plan of conversion, merger, or consolidation must be approved by a
majority of the entire board of directors of the national banking association.
The bank shall publish notice of the time, place, and object of the
shareholders' meeting to act upon the plan, in some newspaper with general
circulation in the place where the principal office of the national banking
association is located, at least once a week for four consecutive weeks:
Provided, That newspaper publication may be dispensed with entirely if waived
by all the shareholders and in the case of a merger or consolidation one
publication at least ten days before the meeting shall be sufficient if
publication for four weeks is waived by holders of at least two-thirds of each
class of capital stock and prior written consent of the Comptroller of the
Currency is obtained. The national banking association shall send such notice
to each shareholder of record by registered mail or by certified mail at least
ten days prior to the meeting, which notice may be waived specifically by any
shareholder.
(b) Rights of dissenting stockholders
A shareholder of a national banking association who votes against the
conversion, merger, or consolidation, or who has given notice in writing to the
bank at or prior to such meeting that he dissents from the plan, shall be
entitled to receive in cash the value of the shares held by him, if and when
the conversion, merger, or consolidation is consummated, upon written request
made to the resulting State bank at any time before thirty days after the date
of consummation of such conversion, merger, or consolidation, accompanied by
the surrender of his stock certificates. The value of such shares shall be
determined as of the date on which the shareholders' meeting was held
authorizing the conversion, merger, or consolidation, by a committee of three
persons, one to be selected by majority vote of the dissenting shareholders
entitled to receive the value of their shares, one by the directors of the
resulting State bank, and the third by the two so chosen. The valuation agreed
upon by any two of three appraisers thus chosen shall govern; but, if the value
so fixed shall not be satisfactory to any dissenting shareholder who has
requested payment as provided herein, such shareholder may within five days
after being notified of the appraised value of his shares appeal to the
Comptroller of the Currency, who shall cause a reappraisal to be made, which
shall be final and binding as to the value of the shares of the appellant. If,
within ninety days from the date of consummation of the conversion, merger, or
consolidation, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such shares,
the Comptroller shall upon written request of any interested party, cause an
appraisal to be made, which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal, or the appraisal as the
case may be, shall be paid by the resulting State bank. The plan of
conversion, merger, or consolidation shall provide the manner of disposing of
the shares of the resulting State bank not taken by the dissenting shareholders
of the national banking association.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20: Indemnification of Directors and Officers.
- -------- -----------------------------------------
Section 17 of Article V of Compass' By-Laws provides in part as follows:
Without limitation, the Corporation shall indemnify any person who
was or is a party or is threatened to become a party to litigation against
any expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding to the full extent permitted by the General
Corporation Law of Delaware, upon such determination having been made as to
his good faith and conduct as is required by said General Corporation Law.
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding to the extent, if any,
authorized by the Board of Directors in accordance with the provisions of
said General Corporation Law, officer, employee or agent to repay such
amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation.
Under Section 145 of the Delaware General Corporation Law (the "DGCL"),
directors, advisory directors and officers of a Delaware corporation are
entitled to indemnification permitted by the statute as provided in such
corporation's certificate of incorporation, by-laws, resolutions and other
proper action.
In addition, Article 8 of Compass' Restated Certificate of Incorporation, as
amended, provides:
No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty of such
director, except (i) for breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the Delaware General Corporation Law,
or (iv) for any transaction from which the director derived an improper
personal benefit. No amendment to or repeal of this Article 8 shall apply
to or have any effect on the liability or alleged liability of any director
of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
This provision is identical to, and is authorized by, 1986 amendments to the
DGCL, Section 102(b)(7).
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Compass
pursuant to the foregoing provisions, or otherwise, Compass has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Compass of expenses incurred or paid by a director, officer or
controlling person of Compass in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Compass will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-1
<PAGE>
Item 21: Exhibits and Financial Statement Schedules.
- -------- -------------------------------------------
An index to Exhibits appears at pages II-5 through II-7 hereof.
Item 22: Undertakings.
- -------- ------------
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama, on October 22, 1996.
COMPASS BANCSHARES, INC.
By: */s/ D. Paul Jones, Jr.
------------------------------------
D. Paul Jones, Jr.
Chairman, Chief Executive Officer and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Director, Chairman,
Chief Executive Officer
*/s/ D. Paul Jones, Jr. and Treasurer October 22, 1996
- ---------------------------
D. Paul Jones, Jr.
*/s/ Garrett R. Hegel Chief Financial Officer October 22, 1996
- ---------------------------
Garrett R. Hegel
*/s/ Michael A. Bean Chief Accounting Officer October 22, 1996
- ---------------------------
Michael A. Bean
*/s/ Charles W. Daniel Director October 22, 1996
- ---------------------------
Charles W. Daniel
*/s/ W. Eugene Davenport Director October 22, 1996
- ---------------------------
W. Eugene Davenport
*/s/ Marshall Durbin, Jr. Director October 22, 1996
- ---------------------------
Marshall Durbin, Jr.
*/s/ Tranum Fitzpatrick Director October 22, 1996
- ---------------------------
Tranum Fitzpatrick
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C>
*/s/ George W. Hansberry Director October 22, 1996
- ----------------------------------------
George W. Hansberry, M.D.
*/s/ John S. Stein Director October 22, 1996
- ----------------------------------------
John S. Stein
Director
- -----------------------------------------
Robert J. Wright
*By:/s/ Daniel B. Graves
-------------------------------------
Daniel B. Graves, Attorney-in-fact
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
2 Agreement and Plan of Merger by and among Compass
Bancshares, Inc., Compass Bank and Enterprise National Bank
of Jacksonville, dated as of July 31, 1996 (included as
Appendix I to the Proxy Statement/Prospectus in Part I of
this Registration Statement)
*3(a) Restated Certificate of Incorporation of the Registrant
dated May 17, 1982 (Filed with the December 31, 1982 Form
10-K of the Registrant and incorporated herein by reference)
(File No. 0-6032)
*3(b) Certificate of Amendment dated May 20, 1986 to Restated
Certificate of Incorporation of the Registrant (filed as
Exhibit 3.2 to Registration Statement on Form S-4
Registration No. 33-46086, and incorporated herein by
reference) (File No. 0-6032)
*3(c) Certificate of Amendment dated May 15, 1987 to Restated
Certificate of Incorporation of the Registrant (filed as
Exhibit 3.1.2 to Post-Effective Amendment No. 1 to
Registration Statement on Form S-4, Registration
No. 33-10797 and incorporated herein by reference)
(File No. 0-6032)
*3(d) Certificate of Amendment dated November 8, 1993 to Restated
Certificate of Incorporation of the Registrant (filed as
Exhibit 3(d) to Registration Statement on Form S-4
Registration No. 33-51919 and incorporated herein by
reference) (File No. 0-6032)
*3(e) Certificate of Amendment, dated September 19, 1994, to the
Restated Certificate of Incorporation of the Registrant
(filed as Exhibit 3.5 to Registration Statement on Form S-4
Registration No. 33-55899, and incorporated herein by
reference) (File No. 0-6032)
*3(f) Bylaws of the Registrant (Amended and Restated as of March
15, 1982) (Filed with the December 31, 1982 10-K of the
Registrant and incorporated herein by reference) (File No.
0-6032)
5 Opinion and consent of Jerry W. Powell, Esquire, as to the
legality of the securities being registered
8 Opinion and consent of Balch & Bingham regarding tax matters
*10(a) Compass Bancshares, Inc., 1982 Long Term Incentive Plan
(filed as Exhibit 1 to the Company's Registration Statement
on Form S-8 filed June 15, 1983, with the Commission).
II-5
<PAGE>
*10(b) Compass Bancshares, Inc. 1989 Long Term Incentive Plan
(filed as Exhibit 28 to Registration Statement on Form S-8
Registration No. 39095 and incorporated herein by reference)
(File No. 0-6032)
*10(c) Compass Bancshares, Inc. 1996 Long Term Incentive Plan
(filed as Exhibit A to the Registrant's Proxy Statement
filed March 13, 1996 relating to its annual meeting of
shareholders held April 9, 1996 and incorporated herein by
reference) (File No. 0-6032)
*10(d) Employment Agreement dated December 14, 1994, between
Compass Bancshares, Inc. and D. Paul Jones, Jr. (filed as
Exhibit 10(d) to the December 31, 1994 Form 10-K of the
Registrant and incorporated herein by reference) (File No.
0-6032).
*10(e) Employment Agreement dated December 14, 1994, between
Compass Bancshares, Inc. and Jerry W. Powell (filed as
Exhibit 10(e) to the December 31, 1994 Form 10-K of the
Registrant and incorporated herein by reference) (File No.
0-6032)
*10(f) Employment Agreement dated December 14, 1994, between
Compass Bancshares, Inc. and Garrett R. Hegel (filed as
Exhibit 10(f) to the December 31, 1994 Form 10-K of the
Registrant and incorporated herein by reference) (File No.
0-6032)
*10(g) Employment Agreement dated December 14, 1994, between
Compass Bancshares, Inc. and Byrd Williams (filed as Exhibit
10(g) to the December 31, 1994 Form 10-K of the Registrant
and incorporated herein by reference) (File No. 0-6032)
*10(h) Employment Agreement dated December 14, 1994, between
Compass Bancshares, Inc. and Charles E. McMahen (filed as
Exhibit 10(h) to the December 31, 1994 Form 10-K of the
Registrant and incorporated herein by reference) (File No.
0-6032)
10(i) Employment Agreement dated December 14, 1994 between Compass
Bancshares, Inc. and G. Ray Stone.
*13(a) The Registrant's Annual Report to Shareholders and Annual
Report on Form 10-K for the fiscal year ended December 31,
1995 (File No. 0-6032)
*13(b) The Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 (File No. 06032)
*13(c) The Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 (File No. 06032)
21 List of Subsidiaries of Compass Bancshares, Inc.
23(a) Consent of KPMG Peat Marwick LLP, Independent Certified
Public Accountants
II-6
<PAGE>
23(b) Consent of Deloitte & Touche LLP, Independent Auditors
23(c) Consent of Balch & Bingham (included in the opinion in
Exhibit 8)
24(a) Power of Attorney
24(b) Compass Board of Directors Resolutions
99(a) Notice of Special Meeting of Shareholders of Enterprise
National Bank of Jacksonville
99(b) President's letter to Shareholders of Enterprise National
Bank of Jacksonville
99(c) Form of Proxy
- -----------------------------
*Incorporated by reference
II-7
<PAGE>
EX-5
OPINION & CONSENT OF JERRY W. POWELL
[LETTERHEAD OF COMPASS BANCSHARES, INC. APPEARS HERE]
October 22, 1996
Board of Directors
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Re: Compass Bancshares, Inc. -- Registration of 1,080,740 Shares of Common
Stock $2.00 Per Share Par Value on Securities and Exchange Commission
Form S-4
Dear Sirs:
In connection with the registration under the Securities Act of 1933, as
amended, of 1,074,680 shares of common stock, $2.00 per share par value (the
"Company Stock") of Compass Bancshares, Inc., a Delaware corporation (the
"Company"), for issuance and sale in the manner described in the Company's
registration statement on Form S-4 filed with the Securities and Exchange
Commission, to which this opinion is an exhibit (the "Registration Statement"),
I, as General Counsel to the Company, have examined such corporate records,
certificates and other documents as I have considered necessary or appropriate
for the purposes of this opinion.
Based on the foregoing, I am of the opinion that the shares of Company
stock offered pursuant to the Registration Statement have been duly and validly
authorized and are, or when issued in accordance with appropriate corporate
proceedings and the terms of the respective governing documents will be, duly
and validly issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Yours very truly,
/s/ Jerry W. Powell
----------------------------------------
Jerry W. Powell
<PAGE>
EX-8
OPINION & CONSENT OF B&B
[LETTERHEAD OF BALCH & BINGHAM APPEARS HERE]
October 28, 1996
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Gentlemen:
You have requested our opinion with respect to the disclosures relating to
the material federal income tax consequences generally applicable to the receipt
by shareholders of Enterprise National Bank of Jacksonville, a national banking
association ("ENB"), of shares of common stock, $2.00 par value per share
("Compass Common Stock"), of Compass Bancshares, Inc., a Delaware corporation
("Compass"), in connection with the proposed merger (the "Merger") of ENB with
and into Compass Bank, a Florida banking corporation ("Compass Bank") and a
wholly-owned subsidiary of Compass, as described in the Proxy
Statement/Prospectus relating to the Merger (the "Proxy Statement/Prospectus")
forming a part of the Registration Statement on Form S-4 (the "Registration
Statement") being filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act").
It is our opinion that the discussions and legal conclusions set forth in
the Proxy Statement/Prospectus under the heading "Summary-Federal Income Tax
Consequences" and "The Merger-Federal Income Tax Consequences" are accurate and
complete in all material respects and constitute our opinion of the material
federal income tax consequences to shareholders of ENB receiving Compass Common
Stock in the Merger.
Our opinion is based and conditioned upon the initial and continuing
accuracy of the facts and the factual matters assumed as set forth in the Proxy
Statement/Prospectus. In addition, in rendering this opinion, we have assumed
(without any independent investigation or review thereof) (i) that the Merger
will be consummated pursuant to the Agreement and Plan of Merger dated as of
July 31, 1996 (the "Merger Agreement") by and among Compass, Compass Bank and
ENB, and (ii) the truth and accuracy at all relevant times (including the
Effective Time of the Merger) of all representations, warranties and statements
made or agreed to by the parties to the Merger Agreement and their managements
and shareholders in connection with the Merger, including but not limited to
those set forth in the Merger Agreement and the Certificate attached hereto;
that any such representation, warranty or statement made "to the best knowledge
of" or otherwise similarly qualified is correct without such qualification; and
that all covenants contained in the Merger Agreement are performed without
waiver or breach of any material provision thereof. Our opinion is also based
upon existing provisions of the Internal Revenue Code of 1986, as amended,
regulations promulgated or proposed thereunder and interpretations thereof by
the Internal Revenue Service and the courts, all of which are subject to change
with prospective or retroactive effect, and our opinion could be adversely
affected or rendered obsolete by any such change.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the use of our name in the Proxy Statement/Prospectus
under the captions "Summary-Federal Income Tax Consequences", "The Merger-
Federal Income Tax Consequences" and "Legal Opinions". In giving this consent,
we do not thereby admit that we are within the category of persons whose consent
is required under Section 7 of the Act and the rules and regulations thereunder.
Very truly yours,
BALCH & BINGHAM
<PAGE>
ATTACHMENT TO EX-8
CERTIFICATE
October 22, 1996
Balch & Bingham
1901 Sixth Avenue North
Suite 2600
Birmingham, Alabama 35203
Re: Merger pursuant to that certain Agreement and Plan of Merger
dated as of July 31, 1996 (the "Agreement"), by and among
Compass Bancshares, Inc. ("Compass"), Compass Bank ("Compass
Bank") and Enterprise National Bank of Jacksonville ("ENB").
Ladies and Gentlemen:
This Certificate is supplied to you in connection with your rendering of an
opinion regarding certain federal income tax consequences of the Merger. Unless
otherwise indicated, capitalized terms not defined herein have the meanings set
forth in the Agreement.
After consulting with its counsel and auditors regarding the meaning of and
the factual support for the following representations, the undersigned hereby
certifies and represents that the following facts are now true and will continue
to be true as of the Effective Time of the Merger and thereafter where relevant.
1. In the Merger, Compass will, directly or indirectly, acquire at
least 90% of the fair market value of the net assets and at least 70% of
the fair market value of the gross assets held by ENB immediately prior to
the Merger. For purposes of this representation, amounts used by ENB to
pay its reorganization expenses, amounts paid by ENB to shareholders of ENB
who receive cash or other property, and all redemptions and distributions
(except for regular, normal dividends) made by ENB immediately preceding
the Merger will be included as assets of ENB held immediately prior to the
Merger.
2. The fair market value of the Compass common stock received by
each ENB shareholder will be approximately equal to the fair market value
of the ENB common stock surrendered in the Merger.
3. Compass has no plan or intention to reacquire any of its common
stock issued in the Merger.
4. Compass has no plan or intention to sell or otherwise dispose of
any of the assets of ENB acquired in the Merger, except for dispositions
made in the ordinary course of business.
5. To the best knowledge of Compass, the liabilities of ENB assumed
in the Merger and the liabilities to which the transferred assets of ENB
are subject were incurred by ENB in the ordinary course of its business.
6. Following the Merger, Compass will, directly or indirectly,
continue the historic business of ENB or use a significant portion of ENB's
historic business assets in a business.
<PAGE>
7. There is no intercorporate indebtedness existing between Compass
and ENB that was issued, acquired or will be settled at a discount.
8. The fair market value of the assets of ENB transferred in the
Merger will equal or exceed the sum of the liabilities assumed in the
Merger, plus the amount of liabilities, if any, to which the transferred
assets are subject.
The undersigned recognizes that your opinion will be based on, among other
things, the representations set forth in this Certificate.
Very truly yours,
COMPASS BANCSHARES, INC.
By:/s/ Daniel B. Graves
----------------------------------------
Name: Daniel B. Graves
Title: Assistant Secretary
<PAGE>
EX-10(i)
EMPLOYMENT AGREEMENT OF G. RAY STONE
EMPLOYMENT AGREEMENT
AGREEMENT by and between COMPASS BANCSHARES, INC., a Delaware corporation
(the "Company"), and G. RAY STONE (the "Executive"), dated December 14, 1994.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined in Section
2) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
-------------------
(a) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if a
Change of Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and
if it is reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control or (ii) otherwise
arose in connection with or anticipation of the Change of Control, then for
all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof shall be hereinafter referred to as the "Renewal Date"), the Change
of Control Period shall be automatically extended so as to terminate three
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
<PAGE>
2. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses (i), (ii) and
(iii) of subsection (c) of this Section 2 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation and
the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no
2
<PAGE>
Person (excluding the Company, any employee benefit plan (or related trust)
of the Company or such corporation resulting from such reorganization,
merger or consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Common Stock or
Outstanding Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent Board
at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company and
any employee benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of the Company.
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, in accordance with the terms and provisions of this Agreement,
for the period commencing on the Effective Date and ending on the third
anniversary of such date (the "Employment Period"). Nothing contained herein
shall be construed as conferring upon the Executive any right to
3
<PAGE>
continue to be employed by the Company prior to the Effective Date, as defined
in Section 1(a), unless this agreement is modified in writing as provided for in
Section 11(a).
4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period
immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. To the
extent permitted by the Code of Conduct of the Company then applicable
during the Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent
that any such activities were permitted by the Code of Conduct prior
to the Effective Date and have been conducted by the Executive prior
to the Effective Date, the continued conduct of such activities (or
the conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to
the Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the Executive
-----------
shall receive an annual base salary ("Annual Base Salary"), which
shall be paid in equal installments on a bi-monthly basis, at least
equal to twenty-four times the highest bi-monthly base salary paid or
payable to the Executive by the Company or its affiliated companies in
respect of the twelve-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed at least annually and shall be
4
<PAGE>
increased at any time and from time to time as shall be substantially
consistent with increases in base salary generally awarded in the
ordinary course of business to other peer executives of the Company
and its affiliated companies. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies"
shall include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
------------
Executive shall be awarded, for each calendar year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at
least equal to the greater of (A) the annualized bonus payable to the
Executive for the year in which the Effective Date occurs or (B) the
average annualized (for any year with respect to which the Executive
has been employed by the Company for less than twelve full months)
bonus paid or payable, including by reason of any deferral, to the
Executive by the Company and its affiliated companies in respect of
the three calendar years immediately preceding the calendar year in
which the Effective Date occurs (the "Recent Average Bonus"). Each
such Annual Bonus shall be paid no later than the end of February of
the year next following the year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such
Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
---------------------------------------
Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs applicable generally to other peer executives of the Company
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction
is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than
the most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately
preceding the Effective Date or if more favorable to the Executive,
those provided generally at any time after the Effective Date to other
peer executives of the Company and its affiliated companies.
(iv) Leave Programs. During the Employment Period, the Executive
--------------
shall be eligible for participation in and shall receive all benefits
under leave programs provided by the Company and its affiliated
companies (including, without limitation, sick leave, short-term
disability, emergency leave, jury duty, military leave, and family and
medical leave) to the extent applicable generally
5
<PAGE>
to other peer executives of the Company and its affiliated companies,
but in no event shall such programs provide the Executive with
benefits which are less favorable, in the aggregate, than the most
favorable of such programs in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally at any
time after the Effective Date to other peer executives of the Company
and its affiliated companies.
(v) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by
the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and
programs provide the Executive with benefits which are less favorable,
in the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and its
affiliated companies.
(vi) Expenses. During the Employment Period, the Executive shall
--------
be entitled to receive prompt reimbursement for all reasonable
employment expenses incurred by the Executive in accordance with the
most favorable policies, practices and procedures of the Company and
its affiliated companies in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vii) Fringe Benefits. During the Employment Period, the
---------------
Executive shall be entitled to fringe benefits in accordance with the
most favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(viii) Office and Support Staff. During the Employment Period,
------------------------
the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable
of the foregoing provided to the Executive by
6
<PAGE>
the Company and its affiliated companies at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable
to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
(ix) Vacation. During the Employment Period, the Executive shall
--------
be entitled to paid vacation and other vacation benefits in accordance
with the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the Executive at
any time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. If
the Company determines in good faith that the Disability of the Executive
has occurred and has continued for a period of 180 consecutive days during
the Employment Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance with
Section 12(b) of its intention to terminate the Executive's employment. In
such event, the Executive's employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement, a
"Disability" shall occur when a physician confirms, because of sickness or
injury, that the Executive cannot perform each of the material duties of
his or her regular occupation.
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall include (i) a willful and material violation of applicable
banking laws and regulations, (ii) dishonesty, (iii) theft, (iv) fraud, (v)
embezzlement, (vi) commission of a felony or a crime involving moral
turpitude, (vii) substantial dependence or addiction to alcohol or any
drug, (viii) conduct disloyal to the Company or its affiliates or (ix)
willful disregard of lawful instructions or directions of the officers or
directors of the Company or its affiliates relating to a material matter.
(c) Good Reason; Window Period. The Executive's employment may be
--------------------------
terminated (i) during the Employment Period by the Executive for Good
Reason or (ii) during the Window Period by the Executive without any
reason. For purposes of this Agreement, the "Window Period" shall mean the
30-day period immediately following the first anniversary of the Effective
Date. For purposes of this Agreement, "Good Reason" shall mean:
7
<PAGE>
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) or any other action
by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied
by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B);
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive without any reason during the Window Period or for Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall not be more
than 15 days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Company hereunder or
preclude the Executive or the Company from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive during the
8
<PAGE>
Window Period or for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be, (ii)
if the Executive's employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Good Reason or during the Window Period; Other Than for Cause,
--------------------------------------------------------------
Death or Disability. If, during the Employment Period, the Company shall
-------------------
terminate the Executive's employment other than for Cause or Disability or
the Executive shall terminate employment either for Good Reason or without
any reason during the Window Period:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the amount of any Compensation for
services rendered previously earned through the Date of
Termination to the extent not theretofore paid and (2) any
compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1) and (2) shall be
hereinafter referred to as the "Accrued Obligations" and are
hereby agreed to constitute reasonable compensation for services
rendered); and
B. two hundred, fifty percent (250%) of the Executive's
Annual Base Salary and Annual Bonus as of the Date of Termination
(the "Severance Amount").
(ii) for the remainder of the Employment Period, or such longer
period as any plan, program, practice or policy may provide, the
Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(v) if the Executive's employment
had not been terminated in accordance with the most favorable plans,
practices, programs or policies of the Company and its affiliated
companies as in effect and applicable generally to other peer
executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their
families,
9
<PAGE>
provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical and other welfare
benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility
(such continuation of such benefits for the applicable period herein
set forth shall be hereinafter referred to as "Welfare Benefit
Continuation"). For purposes of determining eligibility of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until the end of the Employment Period and to have
retired on the last day of such period; and
(iii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive and/or the
Executive's family any other amounts or benefits required to be paid
or provided or which the Executive and/or the Executive's family is
eligible to receive pursuant to this Agreement and under any plan,
program, policy or practice or contract or agreement of the Company
and its affiliated companies as in effect and applicable generally to
other peer executives and their families during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally thereafter with respect to other
peer executives of the Company and its affiliated companies and their
families (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits"); and
(iv) any stock options held by the Executive pursuant to the 1989
Long Term Incentive Stock Option Agreement or any other stock option
agreement with Company (the "Option Agreements") shall remain
exercisable following the Effective Date and during the Employment
Period notwithstanding any provision in the Option Agreements to the
contrary. Further, any covenant not to compete in an Option Agreement
shall become null and void as of the Effective Date. Notwithstanding
any provision herein deemed to be to the contrary, nothing herein
shall extend the maximum period of time in which the Executive shall
have the right to exercise such options.
(b) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for (i) payment of Accrued
Obligations (which shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of the Date of
Termination) and the timely payment or provision of the Welfare Benefit
Continuation and Other Benefits (excluding, in each case, Death Benefits
(as defined below)) and (ii) payment to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the
Date of Termination of an amount equal to the Severance Amount.
10
<PAGE>
(c) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than
for (i) payment of Accrued Obligations (which shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination)
and the timely payment or provision of the Welfare Benefit Continuation and
Other Benefits (excluding, in each case, Disability Benefits (as defined
below)) and (ii) payment to the Executive in a lump sum in cash within 30
days of the Date of Termination of an amount equal to the greater of (A)
the Severance Amount and (B) the present value (determined as provided in
Section 280G(d)(4) of the Code) of any cash amount to be received by the
Executive as a disability benefit pursuant to the terms of any plan, policy
or arrangement of the Company and its affiliated companies, but not
including any proceeds of disability insurance covering the Executive to
the extent paid for directly or on a contributory basis by the Executive
(which shall be paid in any event as an Other Benefit) (the benefits
included in this clause (B) shall be hereinafter referred to as the
"Disability Benefits").
(d) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive Annual Base Salary through the Date of
Termination plus the amount of any compensation previously deferred by the
Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Employment Period, excluding a termination
either for Good Reason or without any reason during the Window Period, this
Agreement shall terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely payment or provision of
Other Benefits. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Except as provided in Sections 6(a)(ii),
-------------------------
6(b) and 6(c), nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement; Resolution of Disputes.
---------------------------------------
(a) The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the
11
<PAGE>
Company may have against the Executive or others, except as provided in
Section 8(b) of this Agreement. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and, except as provided in Section 6(a)(ii),
such amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay promptly as incurred, to the
full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of
the outcome thereof) by the Company, the Executive or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any contest by the Executive about the amount of any payment pursuant to
this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.
(b) If there shall be any dispute between the Company and the
Executive (i) in the event of any termination of the Executive's employment
by the Company, whether such termination was for Cause, or (ii) in the
event of any termination of employment by the Executive, whether Good
Reason existed, then, unless and until there is a final, nonappealable
judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by the Executive of the
existence of Good Reason was not made in good faith, the Company shall pay
all amounts, and provide all benefits, to the Executive and/or the
Executive's family or other beneficiaries, as the case may be, that the
Company would be required to pay or provide pursuant to Section 6(a) as
though such termination were by the Company without Cause or by the
Executive with Good Reason; provided, however, that the Company shall not
be required to pay any disputed amounts pursuant to this paragraph except
upon receipt of an undertaking by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such
court not to be entitled.
9. Limitation on Amounts to be Received. Notwithstanding anything to the
------------------------------------
contrary herein contained, if any amount payable to the Executive or for his
benefit pursuant to the terms of this Agreement or otherwise would not be
deductible by the Company by reason of Section 280G of the Internal Revenue
Code, as amended from time to time, or any regulations promulgated pursuant
thereto, then such amount shall not be paid to the extent that it would cause
the aggregate amount payable by the Company to the Executive or for his benefit
pursuant to the terms of this Agreement or otherwise to exceed the amount which
may be paid without causing a loss of deduction under said Section 280G. The
Executive shall determine which of the amounts payable under this Agreement
shall be eliminated or reduced consistent with the requirements of this Section
9; provided, however, that, if the Executive does not make such determination
within ten (10) business days of receipt by the Executive of a notice from the
Company or its agent (including, without limitation, attorneys or accountants)
indicating that the amount deductible under Section 280G would be exceeded by
the amounts payable to the Executive under this Agreement or otherwise, then the
Company shall elect which of the
12
<PAGE>
amounts payable under this Agreement shall be eliminated or reduced consistent
with the requirements of this Section 9 and shall notify the Executive promptly
of such election.
10. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place.
11. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed
by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: G. Ray Stone
3320 Hermitage Road
Birmingham, Alabama 35223
If to the Company: Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attention: D. Paul Jones, Jr.
13
<PAGE>
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company
may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Section
5(c)(i)-(v), shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company
is "at will" and, prior to the Effective Date, may be terminated by either
the Executive or the Company at any time. Moreover, if prior to the
Effective Date, the Executive's employment with the Company terminates,
then the Executive shall have no further rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
WITNESS: EXECUTIVE:
/s/ Carol Turner Smedley /s/ G. Ray Stone
- ------------------------ ----------------
G. Ray Stone
ATTEST: COMPASS BANCSHARES, INC.
By: /s/ Jerry W. Powell By: /s/ D. Paul Jones, Jr.
------------------- ----------------------
Its: Secretary and General Counsel Title: Chairman and Chief Executive
----------------------------- ----------------------------
Officer
-------
14
<PAGE>
EX-21
LIST OF SUBSIDIARIES OF COMPASS BANCSHARES, INC.
LIST OF SUBSIDIARIES OF
COMPASS BANCSHARES, INC.
Name of Subsidiary Place of Incorporation
- ------------------ ----------------------
Compass Bank Alabama
Compass Bancshares Insurance, Inc. Alabama
Compass Brokerage, Inc. Alabama
Compass Mortgage Corporation Delaware
Compass Capital Markets, Inc. Alabama
Compass Multistate Services Corporation Alabama
Compass Fiduciary Services, Ltd., Inc. Alabama
Compass Financial Corporation Alabama
Central Bank of the South Alabama
Compass Securities, Inc. Alabama
Central Land Holding Corporation Alabama
Compass Investments, Inc. Alabama
Compass Underwriters, Inc. Alabama
Compass Bank Florida
Compass Banks of Texas, Inc. Delaware
Compass Bancorporation of Texas, Inc. Delaware
Compass Bank Texas
River Oaks Trust Company Texas
Compass Bancshares Management, Inc. Texas
River Oaks Trust Corporation Texas
River Oaks Bank Building, Inc. Texas
River Oaks Securities, Inc. Texas
P.I. Holdings No. 1, Inc. Texas
P.I. Console, Inc. Texas
P.I. Holdings No. 2, Inc. Texas
Compass Texas Acquisition Corp. Delaware
<PAGE>
EX-23.A
CONSENT OF KPMG - COMPASS
[LETTERHEAD OF KPMG PEAT MARWICK LLP APPEARS HERE]
ACCOUNTANT'S CONSENT
Board of Directors
Compass Bancshares, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Prospectus.
Our report refers to changes in the method of accounting for income taxes and in
the method of accounting for certain investments in debt and equity securities.
/s/ KPMG PEAT MARWICK LLP
Birmingham, Alabama
October 28, 1996
<PAGE>
EX-23.B
CONSENT OF DELOITTE & TOUCHE LLP - ENB
[LETTERHEAD OF DELOITTE & TOUCHE LLP APPEARS HERE]
INDEPENDENT AUDITOR'S CONSENT
Board of Directors and Shareholders
Enterprise National Bank of Jacksonville
Jacksonville, Florida
We consent to the use in this Registration Statement of Compass bancshares, inc.
on Form S-4 of our report dated February 16, 1996, appearing in the Prospectus,
which is a part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
November 1, 1996
<PAGE>
EX-24.A
POWER OF ATTY
POWER OF ATTORNEY
WHEREAS, Compass Bancshares, Inc. (the "Company") has agreed to file
registration statements and amendments thereto under the Securities Act of 1933,
as amended, with respect to the issuance and sale of shares of common stock of
the Company in connection with the acquisition by the Company of Enterprise
National Bank of Jacksonville;
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that the Company and the
undersigned directors and officers of said Company, individually as a director
and/or as an officer of the Company, hereby make, constitute and appoint each of
D. Paul Jones, Jr., Garrett R. Hegel, Jerry W. Powell, and Daniel B. Graves
their true and lawful attorney-in-fact for each of them and in each of their
names, places and steads to sign and cause to be filed with the Securities and
Exchange Commission said registration statement and any appropriate amendments
thereto, to be accompanied by prospectuses and any appropriately amended
prospectuses and any necessary exhibits.
The Company hereby authorizes said persons or any one of them to execute
said registration statement and amendments thereto on its behalf as attorney-in-
fact for it and its authorized officers, and to file the same as aforesaid.
The undersigned directors and officers of the Company hereby authorize said
persons or any one of them to sign said registration statements on their behalf
as attorney-in-fact and to amend, or remedy any deficiencies with respect to,
said registration statements by appropriate amendment or amendments and to file
the same as aforesaid.
DONE as of this the 19th day of February, 1996.
COMPASS BANCSHARES, INC.
By: /s/ D. Paul Jones, Jr.
-----------------------------------------
D. Paul Jones, Jr.
Its Chairman and Chief Executive Officer
/s/ D. Paul Jones, Jr.
----------------------------------------------
D. Paul Jones, Jr.
/s/ Garrett R. Hegel
----------------------------------------------
Garrett R. Hegel
/s/ Michael A. Bean
----------------------------------------------
Michael A. Bean
/s/ Harry B. Brock, Jr.
----------------------------------------------
Harry B. Brock, Jr.
/s/ Stanley M. Brock
----------------------------------------------
Stanley M. Brock
/s/ Charles W. Daniel
----------------------------------------------
Charles W. Daniel
<PAGE>
/s/ W. Eugene Davenport
----------------------------------------------
W. Eugene Davenport
----------------------------------------------
Garry Neil Drummond, Sr.
/s/ Marshall Durbin, Jr.
----------------------------------------------
Marshall Durbin, Jr.
/s/ Tranum Fitzpatrick
----------------------------------------------
Tranum Fitzpatrick
/s/ George W. Hansberry, M.D.
----------------------------------------------
George W. Hansberry, M.D.
/s/ Goodwin L. Myrick
----------------------------------------------
Goodwin L. Myrick
/s/ John S. Stein
----------------------------------------------
John S. Stein
<PAGE>
EX-24.B
COMPASS BOARD OF DIRECTORS RESOLUTIONS
CERTIFICATE OF THE ASSISTANT SECRETARY REGARDING
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF COMPASS BANCSHARES, INC., RELATING TO
PROPOSED ACQUISITION OF ENTERPRISE
NATIONAL BANK OF JACKSONVILLE
I, the undersigned Assistant Secretary of Compass Bancshares, Inc., a
Delaware corporation, and the custodian of the minutes book and other records of
the Board of Directors of said Corporation, do hereby certify that the following
resolutions were adopted by the Board of Directors of said Corporation in a
meeting, duly called and held on February 19, 1996:
RESOLVED, that the Board of Directors of Compass Bancshares, Inc., a
Delaware corporation (the "Corporation"), has determined that it is
desirable and in the best interests of the Corporation and its stockholders
to acquire (the "Enterprise Acquisition") Enterprise National Bank of
Jacksonville (the "Bank"), the principal offices of which are located in
Jacksonville, Florida, in accordance with the basic terms of such
transaction as described to this Board by the Chairman and Chief Executive
Officer, the Chief Financial Officer, and/or the General Counsel and
Secretary of the Corporation at the meeting at which these resolutions were
adopted; and further
RESOLVED, that the proper officers of the Corporation, in
consultation with counsel, are authorized, empowered, and directed to
negotiate the terms and conditions of a definitive agreement and plan or
plans of merger, as well as any amendments or supplements thereto, among
the Corporation, the Bank, and any subsidiary banks or subsidiary
corporations of the Corporation now in existence or to be formed for the
purposes of effectuating the acquisition by the Corporation of the Bank
(referred to collectively herein as the "Agreement"), and to execute,
attest, and deliver the Agreement in such form as they, in their sole
discretion, shall approve, such approval to be conclusively evidenced by
their execution, attestation, and delivery of the Agreement; and further
RESOLVED, that all negotiations and any other actions taken and
things done heretofore by the officers of the Corporation with respect to
the execution, attestation, and delivery of written agreements in principle
or definitive agreements relating to the acquisition of the Bank are hereby
ratified and approved; and further
RESOLVED, that the organization of one or more corporations as a
subsidiary or subsidiaries of the Corporation or as a subsidiary or
subsidiaries of an existing affiliate of the Corporation for the purpose of
effectuating the Enterprise Acquisition is hereby authorized, approved, and
ratified in the event that it shall be determined or has been determined by
the officers of the Corporation, after consultation with counsel, that such
organization of a subsidiary is necessary or appropriate for the
effectuation of the acquisition of the Bank; and further
RESOLVED, that to the extent that the approval of the Corporation as
the sole stockholder of any of its subsidiaries is required in connection
with the Enterprise Acquisition, the Corporation hereby waives any and all
notice of a meeting or meetings of stockholders of any such subsidiary or
subsidiaries for the purposes of approving the Enterprise Acquisition or
the Agreement, and the Board of Directors of the Corporation hereby
approves, authorizes, and ratifies the Enterprise Acquisition and the
Agreement as the stockholder of its subsidiaries now existing or to be
<PAGE>
organized, it being the intent of the Board of Directors of the Corporation
that the approval by the Corporation set forth in this resolution shall
constitute any and all approval required by law for the approval of the
Enterprise Acquisition or the Agreement by the Corporation as a
stockholder; and further
RESOLVED, that the Corporation's and the Corporation's subsidiaries'
officers are authorized, empowered, and directed to prepare, or cause to be
prepared, and to execute, attest, and file all applications, or requests
for waiver of application requirements, which they shall deem necessary or
appropriate with the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the Office of Thrift Supervision,
the Office of the Comptroller of the Currency, the Florida Department of
Banking and Finance, and any other appropriate bank and bank holding
company regulatory authorities with respect to the Enterprise Acquisition;
and further
RESOLVED, that, in the event that the Agreement shall contemplate
that the Corporation shall issue as consideration in connection with the
Enterprise Acquisition shares of its common stock or other securities of
the Corporation, the proper officers of the Corporation, in consultation
with counsel, are authorized and directed to prepare, execute, attest, and
file a Registration Statement on Form S-4 or other appropriate form for the
registration of securities (the "Registration Statement") with the United
States Securities and Exchange Commission (the "Commission") relating to
the Enterprise Acquisition and the proposed issuance of securities of the
Corporation as consideration in such transaction; and further
RESOLVED, that the proper officers of the Corporation are authorized,
empowered, and directed for and on behalf of the Corporation to do any and
all acts and things necessary or appropriate in connection with such filing
of the Registration Statement, including the execution, attestation, and
filing of any amendments or supplements thereto, to effectuate the
registration of securities of the Corporation to be issued in the
Enterprise Acquisition and the continuation of the effectiveness of the
Registration Statement; and further
RESOLVED, that each officer or director who may be required to
execute the Registration Statement or any amendment or supplement to the
Registration Statement (whether on behalf of the Corporation or as an
officer or director thereof) is hereby authorized to constitute and appoint
D. Paul Jones, Jr., Garrett R. Hegel, Jerry W. Powell, and Daniel B.
Graves, and each of them acting singularly, his true and lawful
attorney-in-fact and agent, with full power of substitution for him and in
his name, place, and stead, in any and all capacities, to sign the
Registration Statement and any and all amendments and supplements thereto;
and further
RESOLVED, that the proper officers of the Corporation are authorized
in the name and on behalf of the Corporation to take any and all action
that they deem necessary or appropriate in order to effect the
registration, qualification, or exemption from registration or
qualification of securities of the Corporation included in the Registration
Statement for issue, offer, sale, or trade under the "blue sky" or
securities laws of any of the states of the United States of America or the
securities laws of any jurisdiction or foreign country where such action
may be advisable or necessary, to effect the registration of securities of
the Corporation to issued in connection with the Enterprise Acquisition, to
execute, acknowledge, verify, deliver, file or cause to be published any
application, surety bonds, reports, irrevocable consents to service of
process, appointment of attorneys for service of process, and any other
documents or instruments that may be required under such laws, and to take
any and all further action that they may deem necessary or advisable in
order to maintain any such registration, qualification, or exemption for so
long as they deem necessary as required by law; and further
<PAGE>
RESOLVED, that the Corporation hereby consents to service of process
in any state or jurisdiction in which such consent is required under the
blue sky laws as a precondition to the offer and sale of securities of the
Corporation to be issued in the Enterprise Acquisition, and that Jerry W.
Powell, General Counsel and Secretary of the Corporation, is hereby
designated as agent for service of process in connection with the
Registration Statement and any consent to service of process that may be
required by the blue sky laws of any jurisdiction as a precondition to the
offer and sale of such securities; and further
RESOLVED, that the appropriate officers of the Corporation are hereby
authorized, empowered, and directed to do any and all other or further
acts, and to prepare, or cause to be prepared, and to execute, attest, and
deliver all other or further instruments, certificates, applications,
reports, and documents, including without limitation obtaining any
necessary or appropriate regulatory approvals, all on behalf of the
Corporation as they, in their discretion, may deem necessary or appropriate
to effectuate the purposes of these resolutions, and that all acts and
things undertaken and completed heretofore by the proper officers of the
Corporation in connection with the Enterprise Acquisition as contemplated
by these resolutions are hereby approved, ratified, and confirmed.
I further certify that the foregoing resolutions have not been modified,
amended, or rescinded and that said resolutions are in full force and effect as
of the date of this certificate.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of the
Corporation this the 22nd day of October, 1996.
/s/ Daniel B. Graves
-------------------------------------------
Daniel B. Graves
Assistant Secretary
Compass Bancshares, Inc.
[Corporate Seal]
<PAGE>
EX-99.A
NOTICE OF SPECIAL MEETING
[LETTERHEAD OF ENB APPEARS HERE]
---------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 11, 1996
---------------------------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Enterprise National Bank of Jacksonville ("ENB") will be held on
December 11, 1996 at 10:00 A.M., local time, at ENB's main offices located at
4190 Belfort Road, Jacksonville, Florida, for the following purposes:
(1) To approve, ratify, confirm and adopt an Agreement and Plan of
Merger, dated as of July 31, 1996, by and among Compass Bancshares,
Inc., Compass Bank and ENB (the "Merger Agreement"), pursuant to
which ENB will be merged with and into Compass Bank and become a
wholly owned subsidiary of Compass;
(2) To consider and conduct such other business as may come before the
Special Meeting.
The Board of Directors of ENB has fixed November 4, 1996 as the record date
for the determination of shareholders entitled to notice of and to vote at the
Special Meeting and any adjournments thereof (the "Record Date").
Shareholders who do not plan to attend the Special meeting are requested to
sign, date and return the enclosed Proxy Card in the enclosed postage paid
envelope. Any Proxy given by a shareholder may be revoked at any time before it
is exercised. A Proxy may be revoked by filing with ENB's Corporate Secretary a
written revocation or a duly executed Proxy bearing a later date. Any
shareholder present at the Special Meeting may revoke his or her Proxy and vote
personally on each matter brought before the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
David M. Hicks
Chairman of the Board
Jacksonville, Florida
October ____, 1996
<PAGE>
EX-99.B
PRESIDENT'S LETTER
[LETTERHEAD OF ENB APPEARS HERE]
October ___, 1996
Dear Shareholders:
You are cordially invited to attend the Special Meeting of Shareholders of
Enterprise National Bank of Jacksonville ("ENB") to be held on December 11, 1996
at 10:00 A.M., local time, at ENB's main offices located at 4190 Belfort Road,
Jacksonville, Florida.
At the Special Meeting, the shareholders of ENB will consider and vote upon
a proposal to approve an Agreement and Plan of Merger ("Merger Agreement")
pursuant to which ENB will merge (the "Merger") with and into Compass Bank
("Compass Bank"), a Florida banking corporation and a wholly owned subsidiary of
Compass Bancshares, Inc., a Delaware corporation ("Compass"). Your Board of
Directors has determined that the Merger is in the best interests of ENB and its
shareholders and unanimously recommends that you vote "FOR" approval of the
Merger.
Under the Merger Agreement, each common shareholder of ENB will receive
shares of Compass common stock in exchange for all his or her shares of ENB
common stock. The number of shares of Compass common stock that will be
exchanged for each share of ENB common stock will be determined by applying the
formula set forth in the Merger Agreement and discussed in the Proxy
Statement/Prospectus which accompanies this letter.
Consummation of the Merger is subject to certain conditions, including the
approval and adoption of the Merger Agreement by ENB's shareholders and approval
by various regulatory agencies. The terms of the Merger are described in detail
in the Proxy Statement/Prospectus that follows. I urge you to read this
document as you consider your vote.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. THE
AFFIRMATIVE VOTE OF TWO-THIRDS (2/3) OF THE OUTSTANDING SHARES OF ENB COMMON
STOCK ARE REQUIRED TO APPROVE THE MERGER AGREEMENT. CONSEQUENTLY, THE FAILURE TO
VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER. IT IS ESSENTIAL
THAT YOU TAKE THE TIME TO CONSIDER AND TO VOTE UPON THIS SIGNIFICANT MATTER AND
THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING.
On behalf of the Board of Directors, I thank you for your investment in
ENB, and for your serious consideration of the important matter at hand.
Sincerely yours,
Bennett Brown,
President
<PAGE>
EX-99.C
FORM OF PROXY
PROXY ENTERPRISE NATIONAL BANK OF JACKSONVILLE
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
October ___, 1996
The undersigned hereby appoints _________________, ________________ and
__________________, and each of them, with or without the other, proxies, with
full power of substitution, to vote all shares of common stock that the
undersigned is entitled to vote at the Special Meeting of the Shareholders of
Enterprise National Bank of Jacksonville ("ENB") to be held on December 11, 1996
at 10:00 A.M., local time, at ENB's main offices located at 4190 Belfort Road,
Jacksonville, Florida,, and at all adjournments thereof as follows:
(1) Approval, ratification, confirmation and adoption of the Agreement and
Plan of Merger, dated as of July 31, 1996, by and among Compass Bancshares,
Inc., Compass Bank and ENB.
For [ ] Against [ ] Abstain [ ]
(2) In their discretion, upon any other business which may properly come
before said meeting.
This Proxy will be voted as you specify above. IF NO SPECIFICATION IS MADE,
THE PROXY WILL BE VOTED FOR PROPOSAL (1) ABOVE. Receipt of the Notice of Special
Meeting and the Proxy Statement/Prospectus dated October ____, 1996 is hereby
acknowledged.
THIS PROXY IS SOLICITED BY THE ENB BOARD OF DIRECTORS. PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Please sign your name, exactly as it appears below. Joint owners must each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as it appears hereon. If held by a corporation, please sign in
full corporate name by the president or other authorized officer. If held by a
partnership, please sign in the partnership's name by an authorized partner of
officer.
Dated , 1996
-------------------------
----------------------------------
Signature
