<PAGE>
As Filed with the Securities and Exchange Commission on July 9, 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)
<TABLE>
<S> <C> <C>
Delaware 6711 63-0593897
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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 effec-
of proposed sale to the public: tive 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 1,413,114(1) (2) $37,773,890(3) $13,025.48(3)
$2.00 par value
=========================================================================================
</TABLE>
(1) Based upon the maximum number of shares to be issued pursuant to a Merger
Agreement between the Registrant and CFB Bancorp, Inc.
(2) Not Applicable
(3) Computed in accordance with rule 457(f)(1) under the Securities Act of
1933, as amended, based upon the average of the high and low prices
reported for CFB Bancorp, Inc. common stock on July 5, 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 CFB 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 CFB
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>
<TABLE>
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 Not applicable
S-3 Companies
16. Information with Respect to Summary; The Merger; Selected
S-2 or S-3 Companies Financial Data and Comparative Per
Share Data; Information About CFB;
Comparison of Rights of Shareholders
of CFB and Compass; Appendix III;
Appendix IV; Appendix V
17. Information with Respect to Not applicable
Companies Other Than S-2 or S-3
Companies
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 CFB; 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>
CFB BANCORP, INC. COMPASS BANCSHARES, INC.
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 CFB Bancorp, Inc., a Florida corporation ("CFB"), with and into
Compass Florida Community, Inc. ("Compass-Florida"), a Florida corporation and
wholly-owned subsidiary of Compass formed for the purpose of effecting the
Merger.
This Proxy Statement/Prospectus constitutes the proxy statement of CFB
relating to the solicitation of proxies for use at the Special Meeting of
Shareholders of CFB (the "Special Meeting") scheduled to be held on August __,
1996 at ____ P.M., at the Jacksonville Marriott Hotel, 4670 Salisbury Road,
Jacksonville, Florida, and any adjournments thereof. At the Special Meeting,
the shareholders of record of CFB as of ____________, 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 February 13, 1996 (the "Merger
Agreement", a copy of which is attached to this Proxy Statement/Prospectus as
Appendix I), by and among Compass, its wholly owned subsidiary Compass Bank, a
Florida banking corporation ("Compass Bank"), CFB and Community First Bank, a
Florida banking corporation (the "Bank"), and the transactions contemplated
thereby. As more fully described herein, pursuant to the Merger Agreement, CFB
will merge (the "Merger") with and into Compass - Florida, and all the
outstanding shares of CFB common stock, par value $0.01 ("CFB Common Stock")
will be converted into the right to receive a number of shares of Compass Common
Stock determined as described in the Merger Agreement and elsewhere in this
Proxy Statement/Prospectus (the "Aggregate Merger Consideration"). The
Aggregate Merger Consideration will be determined based on a formula set forth
in the Merger Agreement that takes into consideration the average closing sales
price of the Compass Common Stock as reported by the NASDAQ National Market
System for the 15 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") and (ii) the
number of shares of Compass Common Stock necessary to cancel existing options to
purchase CFB Common Stock granted under various individual stock option
agreements (the "Option Payment Shares"), all as more fully described herein. A
table setting forth the number of Option Payment Shares, Aggregate Merger
Consideration, the number of shares of Compass Common Stock to be exchanged for
each share of CFB Common Stock (the "Conversion Ratio"), and the value per share
of CFB Common Stock, based on a range of assumed Market Prices, is provided
elsewhere in this Proxy Statement/Prospectus. SEE "THE MERGER -- MERGER
CONSIDERATION."
Assuming that the Market Price of Compass Common Stock will be between
$30.50 and $35.50, the range of shares of Compass Common Stock which each CFB
Shareholder will be entitled to receive in exchange for each share of CFB Common
Stock held would be from .6512 to .5925, which corresponds to a value per share
of CFB Common Stock of $19.86 to $21.03 (based upon the estimated range of
Market Prices of the Compass Common Stock provided above). The actual trading
price of the Compass Common Stock at the time of the Merger and thereafter may
vary. Compass Common Stock and CFB Common Stock are publicly traded in the
over-the-counter market and quoted on the NASDAQ National Market System. On
July ___, 1996, the last reported sale price per share of Compass Common Stock
was $_________, and the last reported sale price per share of CFB Common Stock
was $_________.
This Proxy Statement/Prospectus also constitutes the prospectus of Compass
with respect to the shares of Compass Common Stock to be delivered to the CFB
Shareholders in the Merger; however, it does not cover resales of shares of
Compass Common Stock by certain affiliates of CFB 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".
<PAGE>
Compass' principal executive offices are located at 15 South 20th Street,
Birmingham, Alabama 35233, and its telephone number is (205) 933-3000. CFB's
principal executive offices are located at 3740 Beach Boulevard, Jacksonville,
Florida 32207, telephone number (904) 396-1182.
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 first being mailed or delivered to all
holders of record of CFB Common Stock on or about July ___, 1996.
2
<PAGE>
AVAILABLE INFORMATION
Compass and CFB are subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
accordingly, file 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, Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621-
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 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, CFB, 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.
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 CFB 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). SUCH DOCUMENTS CONCERNING CFB (OTHER THAN
CERTAIN EXHIBITS TO SUCH DOCUMENTS) ARE AVAILABLE TO EACH BENEFICIAL OWNER OF
CFB COMMON STOCK WITHOUT CHARGE AND UPON REQUEST, FROM THE CHIEF FINANCIAL
OFFICER OF CFB AT 3740 BEACH BOULEVARD, JACKSONVILLE, FLORIDA 32207, TELEPHONE
NUMBER (904) 396-1182. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
SUCH REQUEST SHOULD BE MADE BY JULY ___, 1996.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by CFB (File No. 0-25402) and
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' Proxy Statement dated March 6, 1996, relating to its annual
meeting of shareholders held on April 9, 1996;
(iv) The description of Compass Common Stock contained in its Proxy
Statement dated April 16, 1982, relating to its Annual Meeting held
May 17, 1982;
(v) CFB's annual report on Form 10-K for the year ended December 31, 1995,
a portion of which accompanies this Proxy Statement/Prospectus as
Appendix III;
(vi) CFB's annual report to shareholders for the year ended December 31,
1995, a copy of which accompanies this Proxy Statement/Prospectus as
Appendix IV;
3
<PAGE>
(vii) CFB's quarterly report on Form 10-Q for the period ended March 31,
1996, as amended, a copy of which accompanies this Proxy
Statement/Prospectus as Appendix V; and
(viii) CFB's Proxy Statement dated April 2, 1996 relating to its Annual
Meeting of Shareholders held on April 30, 1996.
All documents filed by Compass and CFB 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 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 - Florida, CFB 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
- - Florida, CFB or their respective affiliates since the date of this Proxy
Statement/Prospectus.
All information concerning Compass, Compass Bank and Compass - Florida has
been furnished by Compass, and all information regarding CFB and the Bank has
been furnished by CFB.
4
<PAGE>
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
AVAILABLE INFORMATION.............................
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE......................................
SUMMARY...........................................
Parties to the Merger........................
The Merger...................................
Reasons for the Merger; Recommendation of
Board of Directors........................
The Special Meeting..........................
Record Date..................................
Shareholder Votes Required...................
Dissenters' Rights...........................
Conditions to Consummation and
Regulatory Approvals;
Termination.............................
Federal Income Tax Consequences..............
Accounting Treatment.........................
Market Value of Securities...................
SELECTED FINANCIAL DATA AND COMPARATIVE PER
SHARE DATA.....................................
RISK FACTORS......................................
THE SPECIAL MEETING...............................
General......................................
Date, Place and Time.........................
Record Date..................................
Shareholder Votes Required...................
Voting and Revocation of Proxies.............
Solicitation of Proxies......................
THE MERGER........................................
General......................................
Merger Consideration.........................
Background and Reasons for the Merger........
Opinion of Robert W. Baird & Co..............
Effective Time...............................
Exchange of Shares...........................
Operations After the Merger..................
Other Terms and Conditions...................
Additional Agreements........................
Government Approval..........................
Business Pending Effective Time..............
Amendment; Termination.......................
Dissenters' Rights...........................
Federal Income Tax Consequences..............
Accounting Treatment.........................
SUPERVISION AND REGULATION........................
General......................................
Compass, Compass of Texas and Compass
Bancorporation............................
The Subsidiary Banks.........................
Other........................................
DESCRIPTION OF COMPASS COMMON AND PREFERRED
STOCK..........................................
Compass Common Stock.........................
Compass Preferred Stock......................
COMPARISON OF RIGHTS OF SHAREHOLDERS OF CFB AND
COMPASS........................................
Charter and By-law Provisions Affecting
Compass Stock................................
Shareholder Approval of Mergers..............
Dissenters' Rights...........................
Shareholders' Meetings and Voting............
Dividends....................................
Preemptive Rights............................
Liquidation Rights...........................
Limitation of Liability and Indemnification..
Antitakeover Legislation.....................
RESALE OF COMPASS STOCK...........................
INFORMATION ABOUT COMPASS.........................
Incorporation of Certain Documents by
Reference.................................
Information About Voting Securities and the
Principal Holders Thereof; Directors
and Executive Officers; Certain
Relationships and Related Transactions....
Interests of Certain Persons.................
INFORMATION ABOUT CFB.............................
Incorporation of Certain Documents by
Reference.................................
Information About voting Securities and the
Principals Holders Thereof................
Interests of Certain Persons.................
EXPERTS...........................................
LEGAL OPINIONS....................................
INDEMNIFICATION...................................
OTHER MATTERS.....................................
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. CFB Shareholders 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, a Florida state bank headquartered in
Jacksonville, Florida ("Compass Bank"), 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. These
wholly-owned subsidiaries conduct a general, full-service commercial and
consumer banking business through 88 banking offices located in 46 communities
in Alabama and 24 banking offices in Florida. Compass-Alabama also is engaged
in the investment, trust and equipment leasing businesses, and other bank
operating activities.
Compass also owns Compass Banks of Texas, Inc., a Delaware corporation
("Compass-Texas"). Compass-Texas and its wholly-owned subsidiary, Compass
Bancorporation of Texas, Inc., a Delaware corporation ("Compass
Bancorporation"), are bank holding companies registered with the Federal Reserve
under the BHC Act. Compass Bancorporation owns Compass Bank, a Texas state bank
headquartered in Houston, Texas ("Compass-Houston"), Compass Bank - Central
Texas, a Texas state bank headquartered in Belton, Texas ("Compass-Central
Texas"), 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 affiliated banks. The wholly-owned Texas commercial bank
subsidiaries conduct a general, full-service commercial and consumer banking
business through 41 banking offices in Houston, 26 banking offices in Dallas, 10
banking offices in San Antonio, and three offices in Central Texas.
Compass actively pursues business combinations which are deemed beneficial
to its shareholders. During 1996, Compass acquired 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, Post Oak Bank, located in Houston, Texas, and Flower Mound
Bancshares, Inc. and its bank subsidiary, Security Bank, located in Flower
Mound, Texas. During 1995, Compass acquired Southwest Bankers, Inc., and its
bank subsidiary, The Bank of San Antonio, located in San Antonio, Texas.
Announced acquisitions which are pending include the Merger, Royall Financial
Corporation and its bank subsidiary, The Royall National Bank of Palestine,
located in Palestine, Texas, Texas American Bank located in San Antonio, Texas,
and ProBank located in The Woodlands, Texas. Compass has also announced the
purchase of three branches from Coastal Bank, SSB, in San Antonio, Texas.
6
<PAGE>
Compass-Florida is a Florida corporation and a wholly-owned subsidiary of
Compass formed for the purpose of effecting the Merger.
On March 31, 1996, Compass and its subsidiaries had consolidated assets of
$10.2 billion, consolidated deposits of $7.9 billion, and total shareholders'
equity of $722 million. Of Compass' $10.2 billion of consolidated assets,
approximately $6.0 billion are held in Alabama, $3.6 billion are held in Texas,
and $605 million are held in Florida. SEE "AVAILABLE INFORMATION" AND
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
CFB. CFB is a Florida corporation which was organized on July 15, 1994.
It is a bank holding company registered with the Federal Reserve under the BHC
Act. Community First Bank ("Bank"), a wholly-owned subsidiary of CFB, is a
commercial bank organized under the laws of the State of Florida in 1981. The
Bank has its principal office in Jacksonville, Florida, and has eight full
service branches, four in Jacksonville, two in Spring Hill, one in Orange Park
and one in Ponte Vedra, as well as a mortgage production office in Dunedin,
Florida.
On March 31, 1996, CFB had consolidated assets of $313 million,
consolidated deposits of $260 million, and total shareholders' equity of $20
million. SEE "AVAILABLE INFORMATION" AND "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
THE MERGER
General. Pursuant to the Merger Agreement, CFB will merge with and into
Compass - Florida. Compass - Florida will be the surviving entity in the Merger
and the officers and directors of Compass -Florida will continue to be the
officers and directors of Compass - Florida after the Merger. The Merger shall
be consummated upon the filing of Articles of Merger with the Florida Department
of State and shall 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 before September 15, 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 Merger Agreement provides for the CFB
Shareholders to receive a certain number of shares of Compass Common Stock (the
"Aggregate Merger Consideration") to be determined based on a formula set forth
in the Merger Agreement that takes into consideration (i) the average closing
sales price of the Compass Common Stock (the "Market Price") as reported by the
NASDAQ National Market System during the 15 trading days immediately preceding
the fifth business day prior to the Closing (the "Valuation Period"), and (ii)
the number of shares of Compass Common Stock (the "Option Payment Shares")
necessary to cancel existing stock options to purchase up to 299,760 shares of
CFB Common Stock (the "Options") granted under various individual stock option
agreements. Pursuant to the Merger Agreement, Compass shall deliver to the CFB
Shareholders and the Option holders a certain number of shares of Compass Common
Stock, which number will depend upon the Market Price determined during the
Valuation Period. Of this total number of shares of Compass Common Stock to be
delivered, a certain number will constitute Option Payment Shares and the
remainder will constitute the Aggregate Merger Consideration to be paid to the
CFB Shareholders. Each share of CFB Common Stock shall
7
<PAGE>
represent a right to receive a number of shares of Compass Common Stock equal to
(i) the Aggregate Merger Consideration divided by (ii) the number of shares of
CFB Common Stock outstanding immediately prior to the Effective Time (the "Per
Share Merger Consideration," or the "Conversion Ratio"). A more detailed
discussion of the calculation of Option Payment Shares and Aggregate Merger
Consideration appears elsewhere in this Proxy Statement/Prospectus. SEE "THE
MERGER -- MERGER CONSIDERATION."
As of April 15, 1996, there were 1,962,280 shares of CFB Common Stock
issued and outstanding, and outstanding Options exercisable for 299,760 shares
of CFB Common Stock. Pursuant to the Merger Agreement, CFB will not issue any
additional shares of CFB Common Stock or grant additional options to acquire
shares of CFB Common Stock. Assuming that the Market Price of Compass Common
Stock will be between $30.50 and $35.50, the range of shares of Compass Common
Stock which each CFB Shareholder will be entitled to receive in exchange for
each share of CFB Common Stock held would be from .6512 to .5925, which
corresponds to a value per share of CFB Common Stock of $19.86 to $21.03 (based
upon the estimated range of Market Prices of the Compass Common Stock provided
above). The actual trading price of the Compass Common Stock at the Effective
Time of the Merger and thereafter may vary. Compass Common Stock and CFB Common
Stock are 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 $_________, and the last reported
sale price per share of CFB Common Stock was $_________.
Compass will not issue fractional shares of Compass Common Stock, but
instead will pay cash to any CFB Shareholder otherwise entitled to receive a
fractional share. Such cash payment shall be 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 CFB shareholders 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. CFB has received the written opinion of
Robert W. Baird & Co. Incorporated, Tampa, Florida, dated February 13, 1996 and
updated as of June 21, 1996, that the Merger Consideration is fair, from a
financial point of view, to the CFB Shareholders as of the date of such opinion.
A copy of such opinion dated June 21, 1996 is attached to this Proxy
Statement/Prospectus as Appendix II. SEE "THE MERGER -- OPINION OF ROBERT W.
BAIRD & CO."
REASONS FOR THE MERGER; RECOMMENDATION OF BOARDS OF DIRECTORS
Consummation of the Merger offers the CFB Shareholders 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. CFB's Board of Directors anticipates that the Merger will
expand the banking products and services offered to CFB's customers and the
community. CFB's Board of Directors has determined that the proposed Merger is
in the best interests of CFB and its shareholders. CFB'S BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT CFB SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER and
has authorized consummation of the Merger subject to approval of the CFB
Shareholders and the satisfaction of certain other conditions. SEE "THE MERGER
- -- BACKGROUND AND REASONS FOR THE MERGER".
8
<PAGE>
THE SPECIAL MEETING
The Special Meeting will be held on August __, 1996 at _____ P.M., local
time, at the Jacksonville Marriott Hotel, 4670 Salisbury Road, Jacksonville,
Florida, 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 CFB's Board of Directors as the close of
business on ___________________, 1996. Only holders of CFB's 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 vote of the holders of a
majority of the shares of the CFB Common Stock issued and outstanding and
entitled to vote at the Special Meeting. Directors, certain officers and
certain shareholders of CFB and the Bank owning 1,030,392 shares of CFB Common
Stock, comprising 52.5% of the total shares of CFB 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. AS A RESULT,
BECAUSE SUCH OFFICERS, DIRECTORS AND SHAREHOLDERS HAVE THE POWER TO VOTE A
MAJORITY OF THE SHARES OF CFB COMMON STOCK ISSUED AND OUTSTANDING AND ENTITLED
TO VOTE AT THE SPECIAL MEETING, THE EFFECT OF THEIR AGREEMENT TO VOTE IN FAVOR
OF THE MERGER ASSURES APPROVAL OF THE MERGER BY THE CFB SHAREHOLDERS, SUBJECT TO
THE TERMINATION RIGHTS CONTAINED IN THE MERGER AGREEMENT.
Compass-Florida will have ________ shares of common stock, par value $___
per share, issued and outstanding, all of which will be owned and held by
Compass. Subject to the satisfaction or waiver of all of the conditions to the
parties' obligations to effect the Merger, Compass, as the sole shareholder of
Compass-Florida, will approve the Merger Agreement in the manner prescribed by
the Florida Business Corporation Act ("FBCA").
DISSENTERS' RIGHTS
Section 607.1302(4) of the FBCA, commonly known as the "Market Exception"
statute, provides that, with respect to a plan of merger, the right to dissent
does not apply to the holders of shares of any class or series which are
registered on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. CFB Common Stock has been designated as a national
market system security; therefore, the CFB Shareholders will not have a right to
dissent from the Merger. SEE "THE MERGER -- DISSENTERS' RIGHTS".
9
<PAGE>
CONDITIONS TO CONSUMMATION AND REGULATORY APPROVALS; TERMINATION
Consummation of the Merger is subject to approval of the Merger by the
holders of CFB Common Stock as of the Record Date, which approval is being
solicited by this Proxy Statement/Prospectus.
Consummation of the Merger is also conditioned on the receipt of certain
regulatory approvals from 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"), or the written confirmation by the Federal Reserve that such
approval is not required. Compass has requested and expects to receive such
confirmation from the Federal Reserve.
Compass Bank also has filed separate applications with the Federal Reserve
and the Florida Department of Banking and Finance (the "Department") to merge
the Bank with Compass Bank, with Compass Bank being the survivor (the "Bank
Merger"), although regulatory approval of the Bank Merger is not a condition to
consummation of the Merger. However, if the Federal Reserve and the Department
do not approve the Bank Merger, or the Bank Merger is not consummated for
another reason, Compass will be required to file an application for approval of
the Merger rather than the Federal Reserve's written confirmation that such
approval is not required. Such an application would also be subject to Justice
Department review for antitrust proposes and the applicable waiting period. It
is expected that the Federal Reserve and the Department will issue their
respective approvals of the Bank Merger. SEE, "THE MERGER - GOVERNMENTAL
APPROVALS."
The respective boards of directors of Compass and CFB 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 November 13, 1996 or such later date
agreed to in writing by Compass and CFB. 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-Florida, 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 CFB Shareholders for federal income tax purposes upon
receipt of Compass Common Stock in accordance with the Merger Agreement, except
to the extent that CFB Shareholders receive cash in lieu of fractional shares in
the Merger. Such opinion will be based upon certain assumptions and
representations, including a representation that, immediately following the
Merger, Compass-Florida will dissolve and liquidate. 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 CFB Shareholders under any state, local or foreign tax laws. CFB
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."
10
<PAGE>
ACCOUNTING TREATMENT
Compass intends to treat the Merger as a "purchase" under generally
accepted accounting principles ("GAAP"). Under the purchase method of
accounting, the assets and liabilities of CFB will be, as of the Effective Time,
recorded at their respective fair values and added to those of Compass. The
expected excess of the consideration paid by Compass over the fair value of
CFB's assets and liabilities will be recorded as goodwill. SEE "THE MERGER --
ACCOUNTING TREATMENT".
MARKET VALUE OF SECURITIES
Compass Common Stock and CFB Common Stock are both 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
"NMS"). Since July 1993, CFB Common Stock has been quoted under the symbol
"CFBN" on the NMS.
The following table sets forth for the periods indicated the high and low
sales prices for Compass and CFB Common Stock as reported through the NMS 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.
Compass Common Stock CFB Common Stock
-------------------- ----------------
Period High Low High Low
- ------ ---- --- ---- ---
1994
- ----
First Quarter 24 21 10-1/2 9-1/2
Second Quarter 26-3/4 23 10-3/4 9-3/4
Third Quarter 26 23 11-1/4 9-5/8
Fourth Quarter 23-3/4 21 11-1/2 10-1/2
1995
- ----
First Quarter 28 21-1/2 11-1/2 10-1/2
Second Quarter 29-1/4 25-1/2 11-1/2 9-1/2
Third Quarter 33-3/4 28-1/2 15-1/2 11
Fourth Quarter 33-1/2 30-1/8 19 13-1/4
1996
- ----
First Quarter 35 30-3/4 19-1/2 17-3/4
11
<PAGE>
On February 12, 1996, the business day immediately preceding the
announcement of the execution of the Merger Agreement, the closing price for
Compass Common Stock was $33.00 and the closing price of CFB Common Stock was
$17.75 per share, as reported on the NMS. As discussed elsewhere in this Proxy
Statement/Prospectus, the Aggregate Merger Consideration and value per share of
CFB Common Stock will depend upon the determination of the Market Price (i.e.,
the average of the closing prices per share of Compass Common Stock as reported
on the NMS during the Valuation Period). The following table sets forth (i) the
closing price per share of Compass Common Stock, (ii) the closing price per
share of CFB Common Stock and (iii) the equivalent price per share of CFB Common
Stock (based upon the corresponding Market Price) determined as if the Effective
Time were (A) February 12, 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:
Compass CFB Equivalent Price
Common Stock Common Stock Per Share of CFB
February 12, 1996/1/ 33 17-3/4 20.81/2/
______________, 1996/3/ /4/
No assurance can be given as to what the Market Price will be during the
actual Valuation Period or as to what the actual trading price of Compass Common
Stock will be at the time the Merger is consummated. CFB Shareholders are
encouraged to obtain current market quotations for Compass Common Stock and CFB
Common Stock. SEE, "RISK FACTORS" AND "THE MERGER -- MERGER CONSIDERATION."
/1/ The Market Price would have been $31.50 per share and would have
resulted in a Conversion Ratio of .6305 if February 12, 1996, had been the
Effective Date.
/2/ Determined by multiplying the Conversion Ratio of .6305 times the
closing price of Compass Common Stock on February 12, 1996.
/3/ The Market Price would have been $_____ per share and would have
resulted in a Conversion Ratio of _______ if _____________________ had been the
Effective Date.
/4/ Determined by multiplying the Conversion Ratio of ______ times the
closing price of Compass Stock on _______________, 1996.
12
<PAGE>
SELECTED FINANCIAL DATA AND COMPARATIVE PER SHARE DATA
The following table, except for the lines designated as pro forma,
summarizes certain consolidated historical financial data of Compass, and
certain consolidated historical financial data of CFB. Due to immateriality,
the historical data of Compass as of and for the years ended December 31, 1995,
1994, 1993, 1992, and 1991 has not been restated to reflect the February 1996
acquisition of Flower Mound Bancshares, Inc. or the April 1996 acquisition of
Equitable BankShares, Inc. which were accounted for under the pooling-of-
interests method of accounting. The historical data of Compass and CFB is
derived from, and should be read in conjunction with, the audited financial
statements of Compass incorporated herein by reference in this Proxy
Statement/Prospectus, including the notes thereto, and the audited financial
statements of CFB incorporated herein by reference and appearing in CFB's annual
report to security holders for the year ended December 31, 1995, including the
notes thereto (the "CFB Annual Report") and the CFB quarterly report on Form 10-
Q for the period ended March 31, 1996, as amended (the "CFB 10-Q"), copies of
which accompany this Proxy Statement/Prospectus as Appendices IV and V,
respectively. SEE "AVAILABLE INFORMATION," "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 CFB Common Stock. Compass' pro forma
combined information and CFB's pro forma equivalent per share information have
been calculated as if the Effective Time of the Merger were February 12, 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 $31.50
and the Conversion Ratio (number of shares of Compass Common Stock received in
exchange for each share of CFB Common Stock) would have been .6305. As discussed
under "THE MERGER -- MERGER CONSIDERATION," the Aggregate Merger Consideration,
and therefore the Conversion Ratio, are subject to adjustment as a result of a
change in the price of Compass Common Stock, and the pro forma information
presented would be different if the Conversion Ratio were so adjusted. 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 information shown below should be read in
conjunction with the historical consolidated financial statements of Compass,
including the respective notes thereto, incorporated by reference herein, and
with the historical financial statements of CFB appearing in the CFB Annual
Report and in the CFB 10-Q, copies of which accompany this Proxy
Statement/Prospectus as Appendices IV and V, respectively. SEE "AVAILABLE
INFORMATION," AND "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
As of and for the
quarter ended As of and for the Years Ended
March 31 December 31,
----------------- -------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
----------------- ---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
TOTAL ASSETS
Compass $10,165,474 10,262,247 9,265,137 7,453,859 7,210,151 6,989,873
CFB 313,454 310,442 280,704 276,283 254,546 252,728
TOTAL DEPOSITS
Compass 7,852,867 7,729,112 7,188.913 5,733,309 5,532,599 5,224,136
CFB 260,030 260,467 222,548 235,619 232,009 233,724
LONG-TERM DEBT
Compass 609,827 584,852 487,916 328,928 207,730 20,336
CFB ---- ---- ---- ---- ---- ----
TOTAL SHAREHOLDERS' EQUITY
Compass 721,637 706,668 611,673 561,587 518,269 455,455
CFB 20,574 19,708 17,416 16,913 15,777 14,316
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
As of and for the
quarter ended As of and for the Years Ended
March 31 December 31,
----------------- -------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
----------------- ---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
NET INTEREST INCOME
Compass 91,235 349,655 336,768 334,146 322,774 262,659
CFB 2,264 9,301 9,081 8,496 8,366 5,969
NET INCOME FROM CONTINUING
OPERATIONS(1)
Compass 36,043 110,265 101,246 92,679 77,870 63,009
CFB (45) 1,343 1,749 853 1,505 80
NET INCOME PER COMMON
SHARE FROM CONTINUING
OPERATIONS
Compass
Historical 0.93 2.88 2.65 2.39 2.00 1.68
Pro forma 0.89 2.81 2.61 2.33 1.97 1.62
CFB (2)
Historical 0.02 0.64 0.86 0.42 0.78 0.04
Equivalent pro forma (3) 0.56 1.77 1.65 1.47 1.24 1.02
CASH DIVIDEND PER COMMON SHARE
Compass
Historical 0.32 1.12 0.92 0.76 0.667 0.587
Pro forma 0.31 1.08 0.86 0.70 0.56 0.49
CFB
Historical -- 0.15 -- -- -- --
Equivalent pro forma (3) 0.20 0.68 0.54 0.44 0.35 0.31
SHAREHOLDERS' EQUITY (BOOK
VALUE) PER COMMON SHARE
Compass
Historical 18.66 18.52 16.13 14.83 13.10 11.57
Pro forma 18.54 18.38 16.01 14.74 13.04 11.53
CFB
Historical 10.48 10.08 9.05 8.79 8.23 7.46
Equivalent pro forma (3) 11.69 11.59 10.10 9.29 8.22 7.27
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
Compass
Historical 38,864 38,340 38,147 38,137 37,811 36,543
Pro forma 40,232 39,708 39,515 39,505 39,179 37,911
CFB(2)
Historical 2,158 2,106 2,046 2,007 1,923 1,948
NUMBER OF COMMON SHARES
OUTSTANDING AT END OF PERIOD
Compass
Historical 38,667 38,152 37,922 37,877 37,810 37,378
Pro forma 40,035 39,520 39,290 39,245 39,178 38,746
CFB
Historical 1,962 1,956 1,925 1,924 1,918 1,918
</TABLE>
- --------
(1) Net income per common share before extraordinary item represents primary
earnings per share (i.e., the amount of earnings attributable to each share
of common stock outstanding, including common stock equivalents).
(2) On September 12, 1994 and July 6, 1993, CFB paid a 10% stock dividend and a
20% stock dividend, respectively. Earnings per share and the weighted
average number of shares outstanding have been restated to give retroactive
effect to the payment of these stock dividends.
(3) CFB's Equivalent Pro Forma per share amounts are computed by multiplying
Compass' Pro Forma amounts by a Conversion Ratio of .6305, which is a
hypothetical Conversion Ratio obtained as if the Effective Time were
February 12, 1996, the day before the announcement of the execution of the
Merger Agreement. The actual Conversion Ratio may vary. SEE "THE MERGER -
- MERGER CONSIDERATION."
14
<PAGE>
RISK FACTORS
CFB Shareholders currently control CFB through their ability to elect the
Board of Directors and vote on various matters affecting CFB. The Merger will
transfer control of CFB from the CFB Shareholders to Compass, and the former
offices of the Bank will eventually become branches of Compass Bank. As of the
Effective Time, the CFB Shareholders will become shareholders of Compass, a
multi-bank holding company. As a result of the Merger, the CFB Shareholders will
no longer have the ability to control or influence the management policies of
CFB'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 CFB AND COMPASS --
CHARTER AND BY-LAW PROVISIONS AFFECTING COMPASS COMMON STOCK".
In the event the Market Price is less than $30.50, the Merger Agreement
will automatically terminate in accordance with its terms, unless either of the
following occurs: (i) Compass agrees to deliver (as Aggregate Merger
Consideration together with the Option Payment Shares) a number of shares of
Compass Common Stock equal to the quotient of $43,100,000 divided by the Market
Price, which would be more than 1,413,114 shares, or (ii) CFB agrees to accept
1,413,114 shares of Compass Common Stock as the Aggregate Merger Consideration
together with the Option Payment Shares, which would result in an Aggregate
Dollar Value of less than $43,100,000. If Compass does not elect to deliver
more than 1,413,114 shares as described in (i) above, the decision of the Board
of Directors of CFB regarding whether to allow the Merger Agreement to terminate
or to accept the 1,413,114 shares will be made in its sole discretion. If the
Board of Directors of CFB elects to allow the Merger Agreement to terminate, the
CFB Shareholders would not receive the Merger Consideration, but would retain
their CFB Common Stock.
In addition, since the Market Price of the shares of Compass Common Stock
to be delivered as the 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 CFB
Shareholders to receive shares of Compass Common Stock with an Aggregate Dollar
Value less than $43,100,000 at the Effective Time of the Merger.
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."
15
<PAGE>
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus constitutes a proxy statement of CFB and is
being furnished to the holders of CFB Common Stock in connection with the
solicitation of proxies by the Board of Directors of CFB 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 CFB Shareholders 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 August __, 1996 at ____
p.m., at the Jacksonville Marriott Hotel, 4670 Salisbury Road, Jacksonville,
Florida.
RECORD DATE
The Board of Directors of CFB has fixed _______, 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, CFB had (i)
15,000,000 shares of common stock, $0.01 par value per share ("CFB Common
Stock") authorized, of which 1,962,280 shares were issued, outstanding and being
held of record by _____ persons or entities. Each share of CFB 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 majority of the shares
of CFB 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 a majority of the
outstanding shares of CFB Common Stock is required for approval of the Merger.
CFB'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
MERGER.
The directors and executive officers of CFB and the Bank, together with
certain other CFB Shareholders, control, with the power to vote, an aggregate of
1,030,392 shares of CFB Common Stock, comprising approximately 52.5% of the
total shares of CFB Common Stock issued and outstanding as of the Record Date.
These directors, executive officers and other shareholders have agreed, pursuant
to a Voting Agreement and Irrevocable Proxy, to vote their shares in favor of
the Merger. SUCH DIRECTORS, OFFICERS AND OTHER SHAREHOLDERS HAVE THE POWER TO
VOTE A MAJORITY OF THE SHARES OF CFB COMMON STOCK ISSUED AND OUTSTANDING AND
ENTITLED TO VOTE AT THE SPECIAL MEETING. THEIR AGREEMENT TO VOTE IN FAVOR OF
THE MERGER ASSURES APPROVAL OF THE MERGER BY THE CFB SHAREHOLDERS, SUBJECT TO
THE TERMINATION RIGHTS CONTAINED IN THE MERGER AGREEMENT.
SEE, "THE MERGER -- ADDITIONAL AGREEMENTS."
VOTING AND REVOCATION OF PROXIES
A Proxy is being solicited from each CFB Shareholder by CFB's Board of
Directors. Any Proxy, if received in time for voting and not revoked, will be
voted at the Special Meeting in accordance with the shareholder'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, CFB'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
16
<PAGE>
named in the Proxy will vote or refrain from voting in accordance with the
recommendation of CFB'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
CFB'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 CFB, 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 CFB Common Stock held of record
by such persons, and CFB 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.
Brokerage firms, banks, nominees, fiduciaries and other custodians are
requested to forward these proxy materials to the beneficial owners of CFB
Common Stock held of record by them, and CFB will reimburse them, upon request,
for their reasonable expenses incurred in connection with such mailing or other
communications with such beneficial owners.
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 meaning
ascribed to them in the Merger Agreement.
GENERAL
The Merger Agreement provides for the Merger of CFB with and into Compass-
Florida in accordance with the terms and conditions of the Merger Agreement.
Compass-Florida will be the surviving entity in the Merger and the separate
existence of CFB will cease. It is also anticipated that either simultaneously
with or following the Merger, the Bank will merge into Compass Bank and the
former Bank locations will become branches of Compass Bank.
MERGER CONSIDERATION
The Merger Agreement provides for four different pricing scenarios: (i) if
the Market Price is equal to or greater than $32.50, but not greater than
$34.50, the Aggregate Merger Consideration shall be 1,326,154 shares of Compass
Common Stock, less the Option Payment Shares; (ii) if the Market Price is
greater than $34.50, the Aggregate Merger Consideration shall be the number of
shares of Compass Common Stock equal to the quotient of $45,752,313 divided by
the Market Price, less the Option Payment Shares; (iii) if the Market Price is
less than $32.50, but not less than $30.50, the Aggregate Merger Consideration
shall be the number of shares of Compass Common Stock equal to the quotient of
$43,100,000 divided by the Market Price, less the Option Payment Shares; and
(iv) in the event the Market Price is less than $30.50, the Merger Agreement
will automatically terminate in accordance with its terms, unless either of the
following occurs: (A) Compass agrees to deliver (as Aggregate Merger
Consideration together with the Option Payment Shares) a number of shares of
Compass Common Stock equal to the quotient of $43,100,000 divided by the Market
Price, which would be more than 1,413,114 shares, or (B) CFB agrees to accept
1,413,114 shares of Compass Common Stock as the Aggregate Merger Consideration
together with the Option Payment Shares, which would result in an Aggregate
Dollar Value of less than $43,100,000. If Compass does not elect to deliver
more than 1,413,114 shares as described in (A) above, the decision of the Board
of Directors of CFB regarding whether to allow the Merger Agreement to terminate
or to accept the 1,413,114 shares will be made in its sole discretion. If the
Board of Directors of CFB elects to allow the Merger Agreement to terminate, the
CFB shareholders would not receive the Merger Consideration, but would retain
their CFB Common Stock.
Holders of CFB Common Stock shall receive for each share of CFB Common
Stock held at the Effective Time a number of shares of Compass Common Stock
equal to (i) the Aggregate Merger Consideration (as determined in accordance
with the preceding paragraph) divided by (ii) the number of shares of CFB Common
Stock outstanding immediately prior to the Effective Time (the "Per Share Merger
Consideration," or the "Conversion Ratio").
Option Payment Shares. The Option holders have agreed to accept the Option
Payment Shares in cancellation of their Options. 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 number of shares of Compass Common Stock to be paid
as total consideration times the Market Price; second, determine the selling
price per share of CFB common stock ("Selling Price Per Share") by dividing the
sum of the Aggregate Dollar Value and the total dollar amount to be paid by
Option Holders if the Option Holders were to exercise each and every Option (the
average exercise price of $6.10 times the 299,760 options outstanding), by the
number of shares of CFB common stock issued and outstanding plus the number of
options outstanding; and finally, determine the Aggregate Option Payment Shares
("Aggregate Option Payment Shares") by
18
<PAGE>
subtracting the average exercise price per share from the Selling Price Per
Share and multiplying that difference times the number of Options 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 outstanding)], divided by
(shares outstanding plus options
outstanding);
Step 3 Aggregate Option [(Selling Price Per Share minus
Payment Shares = average exercise price per share)
times (number of options
outstanding)], divided by the Market
Price.
Each holder of an Option shall receive, in consideration for the
cancellation of each of his or her Options, a number of shares of Compass Common
Stock determined by subtracting the exercise price per share for each share of
stock which might have been acquired by exercise of the Options 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 $32.50, then the formula would be
applied as follows:
<TABLE>
<S> <C> <C>
Step 1 Aggregate Dollar Value = $43,100,000
Step 2 Selling Price Per Share = $43,100,000 + $1,828,536 = $44,928,536
$44,928,536 / 2,262,040 = $19.86 per Share
Step 3 Aggregate Option Payment Shares = $19.86 - $6.10 = $13.76 x 299,760 =
4,124,698 / $32.50 = 126,914
</TABLE>
The Aggregate Option Payment Shares assuming a Market price of $32.50 is
126,914 shares of Compass Common Stock. The Option Payment Shares for an
individual Option Holder whose options have an exercise price of $5.00 would be
$19.86 - $5.00 = $14.86 / $32.50 = .45723 shares of Compass Common Stock per
share of stock which might have been acquired upon exercise.
CFB Director and Officer Option Ownership. The following table sets forth
certain information regarding the Option holders:
<TABLE>
<CAPTION>
Options Held
Name Description of Offices Held at 6/30/96
- -------------------- ------------------------------------------------ ------------
<S> <C> <C>
Victor M. George Executive Vice President - Commercial 6,600
Lending/Branch Administration
John R. Lamb Executive Vice President - Mortgage Lending 6,600
Richard Stansfield Senior Vice President, Chief Information Officer 5,400
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C>
A. Richardson Tosh President of CFB since 1994; Director, President 30,800
and Chief Executive Officer of the Bank since 1987
Jack C. Demetree Chairman of the Board and Chief Executive Officer 191,400
of CFB since 1994; Chairman of the Board of the
Bank since 1980
Harry J. Bell Executive Vice President and Chief Financial Officer 6,600
Geraldine Crews Vice President - Mortgage Servicing 4,400
Andrew J. Arnold Senior Vice President - Commercial Lending 4,400
R. H. Bullard, Jr. Director, Senior Vice President of Community First 43,560
Bank from 1987 to 1992
</TABLE>
Examples. As of _____________________, 1996, there were 1,962,280 shares of
CFB Common Stock issued and outstanding, and outstanding Options exercisable for
299,760 shares of CFB Common Stock having an average exercise price of $6.10.
Assuming that the issued and outstanding shares of CFB Common Stock and
outstanding Options are the same as of the Effective Time as they were on
_________________, 1996, the following table sets forth the following
information based on a range of assumed Market Prices: (i) the total number of
shares of Compass Common Stock which would be delivered to the CFB Shareholders
and Option holders; (ii) the Aggregate Dollar Value of the Merger; (iii) the
Selling Price Per Share of CFB Common Stock; (iv) the Aggregate Option Payment
Shares; (v) the Aggregate Merger Consideration payable to the CFB Shareholders;
and (vi) the number of shares of Compass Common Stock which each share of CFB
Common Stock would represent a right to receive (i.e. the Conversion Ratio):
<TABLE>
<CAPTION>
Aggregate
Aggregate Selling Option Aggregate
Market Shares Dollar Price Per Payment Merger Conversion
Price Issued Value CFB Share (1) Shares (2) Consideration Ratio
- ----------------- --------- ---------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
30.50(3) 1,413,114 43,100,000 19.86 135,236 1,277,878 .6512
31.00 1,390,322 43,100,000 19.86 133,055 1,257,267 .6407
31.50 1,368,254 43,100,000 19.86 130,943 1,237,311 .6305
32.00 1,346,875 43,100,000 19.86 128,897 1,217,978 .6207
32.50 1,326,154 43,100,000 19.86 126,914 1,199,240 .6111
33.00 1,326,154 43,763,082 20.16 127,716 1,198,438 .6107
33.50 1,326,154 44,426,159 20.45 128,405 1,197,749 .6104
34.00 1,326,154 45,089,236 20.74 129,073 1,197,081 .6100
34.50 1,326,154 45,752,313 21.03 129,722 1,196,432 .6097
35.00 1,307,209 45,752,313 21.03 127,869 1,179,340 .6010
35.50 1,288,797 45,752,313 21.03 126,068 1,162,729 .5925
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Equals the Conversion Ratio multiplied by the corresponding Market Price
and rounded to the nearest whole cent. The actual market value of the
Compass Common Stock to be exchanged for each share of CFB Common Stock
will be subject to market fluctuation.
(2) Rounded to the nearest whole share.
(3) If the Market Price were to fall below $30.50, CFB's Board of Directors
would determine whether to accept 1,413,114 shares of Compass Common Stock,
which would result in an Aggregate Dollar Value of less than $43,100,000.
If CFB's Board of Directors elected not to do so, the Merger Agreement
would terminate automatically in accordance with its terms.
20
<PAGE>
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 CFB Shareholders 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.
BACKGROUND AND REASONS FOR THE MERGER
Compass began analyzing the possible acquisition of CFB in ____________
1995, and contacted CFB at that time. Representatives of CFB and Compass then
commenced discussions concerning a possible affiliation of the two entities. In
evaluating Compass' offer, CFB's management considered competitive conditions in
the market served by CFB, the value of the assets of CFB, its capital and other
requirements, the current regulatory environment, the prospects for trading CFB
Common Stock and its future growth prospects in light of the Jacksonville
economy. CFB's management also considered the changing markets for financial
services. In considering whether to affiliate with Compass, CFB's management
believed that Compass' size offered expansion opportunities for services not
otherwise available to CFB and its customers. CFB and its Board of Directors
determined that the value of CFB's stock could best be enhanced through
affiliation with Compass. The Board believes that the CFB Shareholders 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 CFB will result in economies of scale and
increase the market served by Compass' affiliates in the Florida market. 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 CFB retained Robert W. Baird & Co. Incorporated ("Baird") to render
an opinion as to the fairness of the Merger, from a financial point of view, to
the CFB Shareholders. SEE "THE MERGER -- OPINION OF ROBERT W. BAIRD & CO."
Although Baird evaluated the financial terms of the Merger and participated in
discussions concerning the consideration to be paid, Baird did not recommend any
specific consideration. The total number of shares of Compass Common Stock to
be delivered to the CFB Shareholders and Option holders resulted from arm's
length negotiations during which the historical earnings and dividends of
Compass and CFB, the earnings potential and deposit base of CFB, potential
growth in CFB's market, CFB's asset quality and the effect of the Merger on the
shareholders, customers and employees of Compass and CFB were considered.
OPINION OF ROBERT W. BAIRD & CO.
CFB received a written opinion dated February 13, 1996 from Baird, an
investment banking firm, and an updated opinion as of June 21, 1996, that the
consideration provided for in the Merger Agreement is fair, from a financial
point of view, to the CFB Shareholders. The full text of Baird's opinion dated
June 21, 1996 is attached as Appendix II to this Proxy Statement/Prospectus and
is incorporated herein by reference. ALL INFORMATION CONTAINED IN THE
DESCRIPTION OF THE OPINION SET FORTH HEREIN WAS PROVIDED BY BAIRD AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX II. CFB'S SHAREHOLDERS 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 BAIRD IN CONNECTION THEREWITH.
Baird's opinion is directed only to the consideration provided in the
Merger Agreement and does not constitute a recommendation to a CFB shareholder
as to how such shareholder should vote at the CFB Meeting.
21
<PAGE>
In connection with the opinion, Baird reviewed or considered among other
things, the Merger Agreement and ancillary documents related to the Merger
Agreement; CFB's and Compass' audited financial statements and management's
discussion and analysis of the financial condition and results of operation of
each of CFB and Compass for the three fiscal years ended December 31, 1995; CFB
and Compass's unaudited interim financial statements on Form 10-Q for the period
ended March 31, 1996; and financial forecasts and analyses prepared by
management of CFB. Baird also held discussions with the management of CFB
concerning its views regarding past and future business operations of CFB. In
addition, Baird reviewed reported price and trading histories for CFB and
Compass Common Stock including a comparison of certain financial and stock
market information for CFB and Compass with similar information for certain
other companies, the securities of which are publicly traded; the financial
terms of recent business combinations; the current market environment generally
and the banking environment in particular; and such other financial information,
studies, analyses and investigations as well as financial, market and economic
criteria Baird considered relevant.
Set forth below is a brief summary of selected analyses presented by Baird
to the CFB Board of Directors in connection with its fairness opinion:
Analysis of Compass Offer
- -------------------------
Baird reviewed the value of the consideration offered based on a bid range
of $19.88 to $21.05 per share of CFB Common Stock which results in a price to
book ratio of 226.03% to 239.43% and a price to earnings ratio of 26.60x to
28.27x for the CFB Common Stock. This bid results in a 9.40% to 10.43% premium
to deposit and a 14.20% to 15.09% price to assets ratio. The range reviewed by
Baird differs from the range reflected in the example chart provided herein as a
result of options exercised subsequent to Baird's February 13, 1996 opinion. SEE
"THE MERGER --MERGER CONSIDERATION."
Dilution Analysis
- -----------------
Using the $32.50 to $34.50 per share price and Compass's earnings per share
("EPS") estimates of $2.88, $3.20, $3.51 for 1995, 1996 and 1997, respectively,
and CFB EPS estimates of $0.93, $1.02, $1.13 for 1995, 1996 and 1997,
respectively, static dilution is (2.50%) for 1996 and (2.56%) for 1997. For a
detailed analysis of dilution assumptions reference is herein made to the full
text of the Opinion.
Comparative Group Analysis
- --------------------------
Baird compared the financial performance of CFB based on various financial
measures of earnings performance, capital adequacy, and asset quality to that of
a comparative group of 15 Southeastern banks, none of which have disclosed
acquisition plans or proposals. This group included Alabama National BanCorp,
Auburn National Bancorporation, Peoples BancTrust Co., South Alabama Bancorp.,
Commercial Bankshares, Inc., 1st United Bancorp, ABC Bancorp, Central and
Southern Holding, First Banking Co. of Southeast Georgia, Habersham Bancorp,
First National Bankshares, First Bancorp, First Charter Corporation, FNB Corp.
and Peoples Bank. The median asset size of the group was $294.9 million and the
group had a median return on average assets of 1.08%. This comparison showed
among other things that CFB's return on average equity was modestly lower than
that of the comparative group 8.97% versus a median of 11.07%. The comparative
group was better capitalized than CFB, with a median capital to assets ratio of
10.27% versus 6.16% for CFB and that nonperforming assets of 0.82% for CFB was
comparable to the group's median of 0.73%. However, CFB's provisions for loan
loss were only 47.9% of nonperforming assets, versus 161.9% for the comparative
group.
Trading History
- ---------------
To evaluate the current market price of CFB and its stand-alone prospects,
Baird evaluated the trading history of CFB, as well as the trading history of
Compass during the 12 months ended on February 13, 1996. During this period CFB
traded in a range of between $9.50 and $19.00 per
22
<PAGE>
share. CFB's trading history reflects surges from two major events: (a) the
termination of an equity offering in July 1995 and concurrent announcement that
it had received an unsolicited proposal for a business combination, and (b) the
announcement of a definitive agreement between CFB and Compass Bancshares. The
former pushed CFB's stock price from $9.00 per share to $14.00 per share, while
the latter pushed the price to the $18.00 to $19.00 range, where it traded in
mid-February.
Baird's opinion noted that Compass has traded in a relatively consistent
range, between $27.00 and $32.00, with volumes generally ranging from 100,000 to
500,000 shares per week. Baird found that consistent with the overall bank stock
climate and the climate for the market at-large, Compass has trended toward the
high end of its pricing range in January and February 1996.
Comparative Transaction Analysis
- --------------------------------
<TABLE>
<CAPTION>
Price/Book Price/Earnings Premium/Deposits Price/Assets
--------------- -------------- ---------------- -------------
Comparative Group Median Mean Median Mean Median Mean Median Mean
----------------- ------ ---- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-sized Bank Acquisitions 217.08% 212.50% 16.07x 15.91x 10.77% 10.36% 14.88% 14.67%
Florida Transations 194.38% 201.78% 18.56x 23.61x 11.25% 11.16% 18.12% 16.88%
Specific Comparative 153.70% 160.00% 20.92x 21.80x 5.79% 6.34% 13.48% 12.61%
+-------------------------------------------------------------------------------------------------------+
+ MEAN 188.39% 191.43% 18.52x 20.44x 9.27% 9.29% 15.49% 14.72% +
+ MEDIAN 194.38% 201.78% 18.56x 21.80x 10.77% 10.36% 14.88% 14.67% +
+-------------------------------------------------------------------------------------------------------+
CFB BANCORP, INC. 226.03% - 239.43% 26.60x - 28.42x 9.40% - 10.43% 14.20% - 15.09%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Baird evaluated more than 50 financial institution merger and acquisition
transactions in considering the fairness of the Compass proposal. The
transactions were grouped into three major categories:
(A) Mid-sized Bank Acquisitions- Institutions with assets of $200.0 million
to $500.0 million occurring between January 1, 1994 and January 31, 1996;
(B) Florida Transactions- Florida transactions that occurred between
February 2, 1995 and February 5, 1996;
(C) Specific Comparative- a specific comparative group of 11 banks that
were acquired with assets of less than $350.0 million.
The Mid-sized Bank Acquisitions group had median assets of $261.9 million,
equity to assets ranged from 4.61% to 7.98% with a median capitalization of
6.77% and a median return on average assets ("ROAA") of 0.89%, respectively.
These compare favorably to CFB's $309.6 million in assets, 6.16% capitalization
and 0.61% ROAA. Transactions in this comparative group generated price-to-book
ratio's of between 122.07% and 348.75% with a median of 217.08%. This compares
to the 226.03% for CFB. On an earnings basis, pricing ranged from nothing to
53.6x trailing 12 months earnings, with a median of 16.07x. CFB's price to
earnings of from 26.6x trailing 12 month earnings to 28.4x compares favorably
against this trend, according to the Baird opinion.
The Florida Transactions comparative group had assets ranging from $28.7
million to $1.2 billion with a median of $77.5 million. Median capitalization
was 8.08% of assets and median ROAA was 0.74%. This selling group generated
price/book ratios of between 126.97% and 348.75% with a median of 194.38%.
Price to earnings multiples ranged from 11.2x to 57.8x with a median of 18.6x.
The Specific Comparative group was slightly smaller in size and slightly
better capitalized than CFB. ROAA was essentially even as was nonperforming
assets as a percentage of assets. The median price to book ratio was
23
<PAGE>
153.7% with a range of prices of between 253.5% and 106.3%. Price to earnings
multiples ranged from nothing to 35.2x trailing 12 months earnings with a median
of 20.9x.
Discounted Cash Flow Analysis
- -----------------------------
Based on assessments of the earnings of CFB, Baird assessed CFB's value at
discount rates from 12.0% to 13.5%. The analysis uses earnings of $2.0 million
for year one and an income growth rate of 10.0% annually with terminal growth
rates of between 4.0% and 6.0%. This analysis yields per share values of
between $12.31 and $17.48.
Premium as a Percentage of Deposits
- -----------------------------------
Baird considered the value of the Company based upon the premiums paid by
acquirors of other institutions as a percentage of outstanding deposits. Baird
reviewed deposit premiums paid by other acquirors and found such ranges to yield
a low of $15.80, median of $21.45 a mean of $19.74 and a maximum of $21.97 per
share.
Summary
- -------
No company or transaction used in Baird's analysis as a comparison was
identical to CFB, Compass or the contemplated acquisition of CFB by Compass.
Accordingly, an analysis of the foregoing is not mathematical; rather, it
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.
The preparation of a fairness opinion is not necessarily susceptible to
partial analysis or summary description. Baird believes that its analyses and
the summary set forth above must be considered as a whole and selecting portions
of its analyses, without considering all analyses, or selecting part or all of
the above summary, without considering all factors and analyses, would create an
incomplete view of the processes underlying the analyses set forth in the Baird
presentation and opinion. In addition, while Baird gave the various analyses
approximately similar weight it may have used them for different purposes, and
may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuation resulting from any particular
analysis described above should not be taken to be Baird's view of the actual
value of CFB or Compass. The fact that any specific analysis has been referred
to in the summary above is not meant to indicate that any specific analysis was
given more weight than any other analyses.
In performing its analyses, Baird made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of CFB or Compass. The analyses
performed by Baird are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of Baird's
analysis of the fairness of the consideration to be received by CFB's
unaffiliated shareholders. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold or the prices at
which any securities may trade at the present time or at any time in the future.
Baird's opinion is just one of many factors taken into consideration by the CFB
Board.
Baird will receive a fee of $45,000.00 plus expenses not to exceed
$1,500.00 for investment banking services related to the Merger and related
advisory work. Baird will also be indemnified against certain liabilities,
including liabilities arising under the securities laws.
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
24
<PAGE>
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, CFB Shareholders will
become owners of Compass Common Stock and will no longer be owners of CFB Common
Stock. After the Effective Time, all certificates for CFB 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 CFB 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 CFB shares have been converted.
Promptly after the Effective Time, the Exchange Agent will furnish each
holder of record of CFB Common Stock as of the Effective Time with transmittal
materials for use in exchanging certificates. The transmittal materials will
contain information and instructions with respect to the procedure for
exchanging such certificates. The Compass certificates will be delivered to the
persons entitled thereto within a reasonable time after good delivery of CFB
certificates for exchange accompanied by the appropriate transmittal materials.
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 holder of CFB Common Stock otherwise entitled to
receive such fractional share. Such cash payment shall be determined by
multiplying such holder's fractional interest 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 surrendered their CFB certificates 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 CFB
Shareholder is entitled, until such CFB Shareholders' certificates of CFB Common
Stock are surrendered in exchange therefore.
Upon the Effective Time of the Merger, the CFB Shareholders will cease to
have any rights as shareholders of CFB, and the CFB Shareholders shall have only
the right to receive the Aggregate Merger Consideration specified in the Merger
Agreement.
OPERATIONS AFTER THE MERGER
Compass and CFB presently intend that immediately following the completion
of the Merger, the Bank will be merged with and into Compass Bank, subject to
the necessary regulatory approvals. Thereafter, the separate existence of the
Bank will cease, and the former offices of the Bank will become branches of
Compass Bank. Compass intends that most of CFB's personnel at the former
offices of the Bank will remain following the Merger.
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:
(i) 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 otherwise would
in the judgment of Compass be so burdensome as to render inadvisable
the consummation of the Merger,
25
<PAGE>
and the expiration of any applicable waiting periods with respect
thereto. SEE "THE MERGER --GOVERNMENT APPROVALS";
(ii) The consummation of the Merger will not violate any injunction, order
or decree of any court or governmental body having competent
jurisdiction;
(iii) The approval of the Merger Agreement by the CFB Shareholders
entitled to vote at the Special Meeting;
(iv) 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;
(v) All representations and warranties of CFB 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;
(vi) CFB, Compass and Compass-Florida 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;
(vii) There shall not have occurred a Material Adverse Effect, as that
term is defined in the Merger Agreement, with respect to CFB or the
Bank;
(viii) The Directors of CFB and the Bank shall have delivered to Compass
an instrument dated the Effective Time releasing CFB and the Bank from
any and all claims of such directors (except as to their deposits and
accounts and as to rights of indemnification pursuant to the Bylaws of
CFB or the Bank) and shall have delivered to Compass their
resignations as directors of the Bank;
(ix) The officers of CFB and the Bank shall have delivered to Compass an
instrument dated the Effective Time releasing CFB and the Bank from
any and all claims of such officers (except as to deposits and
accounts, accrued compensation by their respective agreements and
rights of indemnification pursuant to the Bylaws of CFB or the Bank);
(x) Compass and CFB shall have received the respective opinions of counsel
to CFB and Compass acceptable to the other as to certain matters;
(xi) Compass shall have received from each holder of 5% or more of the CFB
Common Stock a representation that they have no plan or intention to
sell or otherwise dispose of shares of Compass Common Stock received
pursuant to the Merger;
(xii) Compass and Compass-Florida shall have received an opinion of
counsel satisfactory to them that the Merger will qualify as a
reorganization under Section 368(a) of the Code;
(xiii) CFB shall have delivered to Compass a schedule of all transactions
in the capital stock (or instruments exercisable for or convertible
into capital stock) of CFB of which CFB has knowledge from and
including the date of the Merger Agreement through the Effective Time;
26
<PAGE>
(xiv) Compass shall have determined, in its reasonable judgment, that
certain liabilities and obligations of CFB and the Bank as set forth
on Schedule 5.1(K) of the Merger Agreement do not have a Material
Adverse Effect;
(xv) All warrants, options, rights, convertible debentures or other
securities entitling the holder thereof to acquire CFB Common Stock
shall have been cancelled, or shall have expired, lapsed or
terminated, prior to the Effective Time;
(xvi) 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 Compass and CFB;
(xvii) the full amount of any special assessment for premiums on Savings
Association Insurance Fund deposits held by the Bank required to be
paid by federal law shall have been (i) paid in full by the Bank, (ii)
accrued on the books of the Bank, or (iii) transferred to a general
contingency reserve account established by the Bank;
(xviii) Jack C. Demetree, Chairman of the Board of Directors of CFB and
the Bank, shall have entered into a non-competition agreement with
Compass or one of its subsidiaries. SEE "THE MERGER --ADDITIONAL
AGREEMENTS";
(xix) the Bank and CFB shall have delivered to the directors of CFB and
the Bank an instrument dated the Effective Time releasing such
directors from any and all claims of CFB and the Bank (except as to
indebtedness or other contractual liabilities); provided, however,
that such releases shall not release an action against such directors
by Compass or Compass-Florida in connection with the transactions
contemplated by the Merger Agreement; and
(xx) Compass and CFB 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
The directors and certain other shareholders of CFB and the Bank with the
power to vote an aggregate of 1,030,392 shares of CFB Common Stock, comprising
52.5% of the total shares of CFB 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. As a result, because such
directors and other shareholders have the power to vote a majority of the shares
of CFB Common Stock issued and outstanding and entitled to vote at the Special
Meeting, their agreement to vote in favor of the Merger assures approval of the
Merger by the CFB Shareholders, subject to the termination rights contained in
the Merger Agreement.
CFB has granted Options to purchase 299,760 shares of CFB Common Stock to
nine directors and officers of CFB and the Bank. Each of these nine directors
and officers have executed an "Option Cancellation Agreement" whereby they have
agreed to accept the Option Payment Shares, as set forth in the Merger Agreement
and described herein, in cancellation of all of the Options. SEE "THE MERGER --
CONSIDERATION."
The Merger Agreement provides that a number of shares of Compass Common
Stock shall be delivered into an Escrow Account if, at the time of the Closing,
certain conditions have not been met regarding the repayment of a debenture to
CFB ("Debenture"). The Debenture was paid in full on April 12, 1996, and
therefore Section 1.8 to the Merger Agreement and the Escrow Agreement in the
form of Exhibit A are no longer applicable.
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As a condition of the Merger, Jack C. Demetree, Chairman of the Board of
Directors of CFB and the Bank, will enter into a non competition agreement in
the form of Exhibit E to the Merger Agreement with Compass or one of its
subsidiaries prohibiting Mr. Demetree, with certain qualifications and for a
period of one year, from (i) owning, managing or permitting the use of his name
by any entity in Duval, Nassau, St. John, Clay, Flagler or Hernando County which
at the time is in competition with business conducted by Compass or any of its
subsidiaries or (ii) soliciting any person who is a customer of the Bank from
doing business with any person other than Compass or its affiliates. Such
noncompetition agreement will also prohibit Mr. Demetree, for a period of five
years, from owning, managing or permitting the use of his name by any business
activity operating under the name "Community First" or a name substantially
similar thereto.
GOVERNMENT APPROVALS
The Merger. The Merger is conditioned upon either approval of a formal
application under the BHC Act by the Federal Reserve, or confirmation by the
Federal Reserve that a formal application under the BHC Act is not required.
Compass has filed a request for confirmation that no formal application under
the BHC Act is required with the Federal Reserve. Compass and CFB believe that
such request will be granted because, among other things, (i) CFB will terminate
its status as a bank holding company through the Merger, (ii) Compass-Florida
should not be deemed to be a bank holding company since it is being formed
solely to facilitate the Merger and will not engage in any activities regulated
by the BHC Act, and (iii) the Federal Reserve is reviewing the Bank Merger under
the Bank Merger Act, as discussed below. However, there can be no assurance
that the Federal Reserve will not require a formal application for approval of
the Merger under the BHC Act.
If the Federal Reserve requires a formal application under the BHC Act, the
Merger may not be consummated for a period of 15 days after Federal Reserve
approval. During this "waiting period," the Justice Department may object to
the Merger on antitrust grounds, which action would stay the consummation of the
Merger unless otherwise ordered by an appropriate judicial authority. Neither
CFB nor Compass has any reason to believe that the Justice Department will take
any action to stay the approval of the Merger.
The Bank Merger. Compass and CFB also plan to merge the Bank and Compass
Bank, with Compass Bank being the survivor (the "Bank Merger"). The Bank 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, which approvals are expected to be issued
timely. The Bank 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. The approval of Bank
Merger is not a condition to consummation of the Merger. However, if the Bank
Merger were not approved, or not consummated for any reason, Compass would be
required to file a formal application for approval of the Merger under the BHC
Act, as discussed above.
BUSINESS PENDING EFFECTIVE TIME
The Merger Agreement imposes certain limitations on the conduct of CFB's
business pending consummation of the Merger. In general, CFB must conduct its
businesses only in the ordinary course, consistent with prudent banking
practices. In particular, CFB has agreed not to, and to use its best efforts
cause the Bank, or any other Subsidiary of CFB, not to:
(i) make any amendment to its Articles of Incorporation or Bylaws;
(ii) 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;
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(iii) 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;
(iv) 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;
(v) 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;
(vi) 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;
(vii) 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;
(viii) dispose of or disclose to any person other than its employees any
material trade secret not theretofore a matter of public knowledge;
(ix) except as set forth in the Merger Agreement and except for regular
salary increases granted in the ordinary course of business within
CFB or the Bank's 1995 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;
(x) declare, pay or set aside for payment any dividend or other
distribution or payment in respect of shares of its capital stock;
(xi) 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;
(xii) make any capital expenditure in excess of $50,000;
(xiii) 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;
(xiv) 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;
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(xv) 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 CFB or the Bank;
(xvi) issue any certificates of deposit except in the ordinary course of
business and in accordance with prudent banking practices;
(xvii) make any investments except in the ordinary course of business and
in accordance with prudent banking practices;
(xviii) modify, amend, waive or extend any loan documents of CFB, the Bank
or any of their respective subsidiaries or any rights under such
agreements, except for Federal Home Loan Bank advances and
repurchase sales or servicing agreements, consistent with the
Bank's prior practice;
(xix) 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;
(xx) sell or contract to sell any part of the Bank premises;
(xxi) change any fiscal year or the length thereof;
(xxii) prepay in whole or in part any indebtedness of CFB, the Bank or any
of their respective subsidiaries, except for Federal Home Loan Bank
advances and repurchase sales or servicing agreements, consistent
with the Bank's current practices and prudent banking practices; or
(xxiii) enter into any agreement, understanding or commitment, written or
oral, with any other person which is in any manner inconsistent
with the obligations of CFB and its directors and the Bank 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 Merger Consideration or
which materially and adversely affects the rights of the CFB Shareholders can be
made after the Special Meeting without the required approval of the CFB
Shareholders.
In addition to termination due to the Market Price of Compass Common Stock
being below $30.50, the Merger Agreement may be terminated and the Merger
abandoned, notwithstanding approval by CFB shareholders, at any time before the
Effective Time by:
(i) Mutual written consent duly authorized by the Boards of Directors
of Compass and CFB;
(ii) Compass if (a) Compass learns or becomes aware of a state of facts
or breach or inaccuracy of any representation or warranty of CFB
which constitutes a Material Adverse Effect, as defined in the
Merger Agreement, (b) CFB or the Bank, or any of their respective
officers, directors or advisors, initiate, solicit, encourage or
take any other action to facilitate an offer from a third party for
the acquisition of CFB (an "Acquisition Offer") (in which case
CFB and the Bank shall pay to Compass a termination fee of
$2,500,000), (c) CFB'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 Offer,
CFB and the Bank shall pay to Compass a termination fee of
$2,500,000, provided that Compass may not terminate the Merger
Agreement if such withdrawal
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or modification results from CFB's receipt of an Acquisition Offer
and CFB'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), or (d) the
conditions to the obligations of Compass and Compass-Florida to
effect the Merger contained in the Merger Agreement are not satisfied
or waived in writing by Compass;
(iii) CFB if (a) CFB shall receive an unsolicited offer from a third party
for the acquisition of CFB (an "Acquisition Proposal") which CFB's
Board of Directors is obligated to pursue in the exercise of their
fiduciary duty (in which case CFB and the Bank shall pay to Compass a
termination fee of $2,500,000), or (b) any of the conditions to CFB's
obligations contained in the Merger Agreement are not satisfied or
waived in writing by CFB;
(iv) Compass or CFB if the Effective Time shall not have occurred on or
before November 13, 1996, or such later date agreed to in writing by
Compass and CFB; or
(v) Compass or CFB 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
Under the FBCA (Chapter 607, Florida Statutes), shareholders of a
corporation generally have the right to dissent from certain corporate actions,
including the consummation of a plan of merger, and obtain payment of the fair
value of the shares. Section 607.1302(4) of the FBCA (commonly known as the
"Market Exception" statute), however, provides that, with respect to a plan of
merger, the right to dissent does not apply to the holders of shares of any
class or series which are registered on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. The CFB Common
Stock has been designated as a national market system security; therefore, the
CFB Shareholders will not have a right to dissent from the Merger.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain Federal income tax consequences
of the Merger to the CFB Shareholders. This discussion does not address other
Federal income tax considerations that may be relevant to particular CFB
Shareholders in light of their particular circumstances, such as dealers in
securities, shareholders who do not hold their CFB 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 CFB.
In addition, the following discussion reflects and is supported by an
opinion of Balch & Bingham, special counsel to Compass (the "Exhibit Opinion").
The Exhibit Opinion, which is attached as Exhibit 8 to the Registration
Statement of which this Prospectus/Proxy Statement is a part, is based on and
subject to certain qualifications and assumptions as noted therein.
The following Federal income tax consequences should result from the
Merger:
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1. The Merger of CFB with and into Compass will qualify as a
"reorganization" within the meaning of Code Section 368(a);
2. No gain or loss will be recognized by CFB Shareholders upon the
exchange of CFB Common Stock for Compass Common Stock;
3. The tax basis of the Compass Common Stock received by each CFB
Shareholder will be the same as the tax basis of CFB Common Stock
surrendered in exchange therefor;
4. The holding period of each share of Compass Common Stock received by
each CFB Shareholder will include the period during which such
shareholder held his or her CFB Common Stock surrendered in exchange
therefor; provided that such CFB Common Stock is held as a capital
asset at the Merger's Effective Time; and
5. Cash received by a CFB 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. A CFB 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. CFB Shareholders 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
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 CFB 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 intends to account for the Merger using the "purchase" method of
accounting. Under the purchase method of accounting, the assets and liabilities
of CFB will be, as of the Effective Time, recorded at their respective fair
values and added to those of Compass. The expected excess of the consideration
paid by Compass over the fair value of CFB's assets and liabilities will be
recorded as goodwill.
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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 OF 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.
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.
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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.
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 March 31, 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 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
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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 and Compass-Central Texas are organized under the laws of the State of
Texas and are not members of the Federal Reserve System. Compass-Houston and
Compass Bank-Central Texas are 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
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
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compliance examination on February 26, 1996. The Bank's last CRA examination by
the FDIC was February 28, 1994 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.
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 39,631,263 shares were issued and outstanding on April
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
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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 CFB Shareholders' 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 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. No shares of preferred stock are outstanding as of the date of
this Proxy Statement/Prospectus.
COMPARISON OF RIGHTS OF
SHAREHOLDERS OF CFB 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. CFB's
Articles of Incorporation contain provisions designed to have a similar affect,
including (a) a requirement of a supermajority vote of shareholders to approve
any "Affiliated Transaction" (defined generally to include any
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material transaction with any person who is the beneficial owner of 10% of the
outstanding voting shares of CFB) unless certain exceptions, including a minimum
price provision, are met, and (b) a staggered Board of Directors.
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 Incorporation,
as amended, and Bylaws of CFB, which are available upon request from CFB. SEE
"AVAILABLE INFORMATION"; "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".
As a result of the Merger, CFB shareholders, whose rights are governed by
the FBCA, 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 FBCA, as well as a description of the corresponding provisions contained in
Compass' and CFB's respective charter 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 FBCA and the DGCL.
SHAREHOLDER APPROVAL OF MERGERS
Both the FBCA and the DGCL generally permit 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 FBCA or the DGCL, a
merger which does not involve a "Related Person" or an "Affiliated Transaction"
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 a "Related Person" or "Affiliated Transaction";
however, both the FBCA and the DGCL impose supermajority approval requirements
with certain qualifications. In addition, both the CFB Articles of
Incorporation and the Compass Certificate impose similar and more restrictive
supermajority approval requirements, as described elsewhere in this Proxy
Statement/Prospectus. SEE "RISK FACTORS," "COMPARISON OF RIGHTS OF
SHAREHOLDERS OF CFB AND COMPASS -- CHARTER AND BYLAW PROVISIONS AFFECTING
COMPASS STOCK" AND "COMPARISON OF RIGHTS OF SHAREHOLDERS OF CFB AND COMPASS --
ANTITAKEOVER LEGISLATION."
DISSENTERS' RIGHTS.
Under the FBCA, a shareholder is entitled to dissent and obtain payment of
the fair value of his shares in the event of, among other things, (a)
consummation of a plan of merger to which the corporation is a party, if either
(i) shareholder approval is required and the shareholder is entitled to vote on
the merger or (ii) the corporation is a subsidiary that is owned 80% by and is
merged into its parent; (b) consummation of a plan of share exchange to which
the corporation is a party as the corporation whose shares will be acquired, if
the shareholder is entitled to vote on the plan; (c) consummation of a sale or
exchange of substantially all of the property of the corporation other than in
the usual and regular course of the business if shareholder approval is
required; (d) an amendment to the charter that materially and adversely affects
the rights in respect of the dissenter's shares in specified ways; or (e) any
corporate action pursuant to a shareholder vote to the extent that the charter,
bylaws or board resolutions provide that dissenters' rights shall apply. No
holder of any shares of any class or series is entitled to dissent, however, if
such shares are either registered on a national securities exchange or are held
of record by 2,000 or more shareholders. CFB shares are registered on a
national securities exchange, and, therefore, holders of CFB Common Stock will
not have dissenters' rights as a result of the Merger. 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
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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 NMS 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 CFB AND COMPASS --
SHAREHOLDER APPROVAL OF MERGERS."
SHAREHOLDERS' MEETINGS AND VOTING
Special Meetings. Under the FBCA, a special meeting of shareholders of a
Florida corporation may be called by the holders of shares entitled to cast not
less than 10% of all shares entitled to vote at the meeting, unless a different
percentage, not to exceed 50%, is provided in the articles of incorporation.
CFB's Articles of Incorporation provide that special meetings of shareholders
may be called only by: (a) resolution of the majority of the total number of
authorized directors, regardless of vacancies; (b) the Chairman of the Board and
the President; or (c) shareholders holding 25% of the outstanding shares of CFB
Common Stock.
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. Under the FBCA and 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. CFB's Articles of Incorporation expressly provide
that shareholder action may not be effected by any consent in writing. 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 FBCA and 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 articles or certificate
of incorporation provides for cumulative voting. Cumulative voting means that a
shareholder may multiply the number of votes he or she is entitled to cast
(i.e., the number of shares he or she owns) by the number of directors for whom
he or she is entitled to vote and cast the product for a single candidate or
distribute the product among two or more candidates. Neither CFB's articles of
incorporation nor Compass' Certificate provide for cumulative voting. SEE
"DESCRIPTION OF COMPASS COMMON AND PREFERRED STOCK -- VOTING RIGHTS".
Once elected, under the FBCA, a director may be removed by the affirmative
vote of a majority of the shareholders, unless the articles or certificate of
incorporation provide that directors may be removed only for cause. CFB's
Articles of Incorporation do not provide that its directors may be removed only
for cause, but do provide that their removal requires the affirmative vote of
the holders of at least 60% of the voting power of the outstanding CFB Common
Stock. 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
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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 FBCA and the DGCL, an amendment to the
articles or 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 otherwise specified in the articles of incorporation.
CFB's Articles of Incorporation provide that the affirmative vote of the holders
of at least 66% of the voting power of the outstanding CFB Common Stock shall be
required to amend certain provisions thereof, including provisions relating to:
(a) the percentage of voting power necessary to call a special meeting of
shareholders; (b) limitations on "Affiliated Transactions" and minimum price
provisions relating thereto; (c) the composition and election of the "staggered"
board of directors; and (d) indemnification of employees. The Compass
Certificate contains similar provisions relating to the amendment of certain
provisions thereof.
Under both the FBCA and 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
articles of incorporation require a greater vote. Neither CFB's Articles of
Incorporation nor the Compass Certificate require a greater vote.
Under both the FBCA and 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 articles or certificate of incorporation requires the
vote of a larger portion of the outstanding stock. Neither CFB's Articles of
Incorporation nor the Compass Certificate require a greater vote.
DIVIDENDS
The FBCA provides that a corporation may declare and pay a dividend to its
shareholders to the extent the corporation's total assets exceed the sum of its
total liabilities plus the amount that would be needed, in the case of
dissolution, to satisfy the preferential rights of shareholders whose
preferential rights are superior to those receiving the dividend (a surplus),
unless the corporation would not be able to pay its debts as they become due in
the usual course of business. In addition to these limitations, there are
various statutory limitations on the ability of the Bank to pay dividends to
CFB, which is the primary source of funds from which CFB declares dividends to
the CFB Shareholders.
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
Under both the FBCA and the DGCL, shareholders do not possess preemptive
rights as to the issuance of additional or treasury securities by the
corporation, unless the corporation's articles of incorporation provide
otherwise. Neither CFB's Articles of Incorporation nor the Compass Certificate
provide for preemptive rights.
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LIQUIDATION RIGHTS
Generally under both the FBCA and 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. Compass
Preferred Stock has a liquidation value of $100.00 per share, plus accrued and
unpaid dividends. CFB has no preferred stock outstanding and, therefore, upon
the liquidation, dissolution or winding up of the affairs of CFB, the
shareholders of CFB are presently entitled to receive their pro rata portion of
the assets of CFB available for distribution.
LIMITATION OF LIABILITY AND INDEMNIFICATION
CFB. The Bylaws of CFB provide for indemnification of directors, officers
and employees to the extent permitted by applicable law. The general effect of
the bylaw provisions is to indemnify any director or officer against any
liability arising from any action or suit to the full extent permitted by
Florida law, as discussed in the following paragraphs.
The FBCA establishes the scope of indemnification that a Florida
corporation such as CFB may provide for officers, directors, employees and
agents of such corporation. A Florida corporation is permitted to indemnify any
person who may be a party to any third party action if the person is or was a
director, officer, employee or agent of the corporation and acted in good faith
and in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation. With respect to any criminal action or
proceeding, to be indemnified, the person must have had no reasonable cause to
believe the conduct was unlawful. A Florida corporation also may advance
indemnification expenses so long as indemnification is permitted under the
circumstances.
A Florida corporation is also permitted to indemnify any person who may be
a party to a derivative action if the person is or was a director, officer,
employee or agent of the corporation and acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
corporation. However, no indemnification may be made for any claim, issue or
matter for which the person was found to be liable unless a court determines
that, despite adjudication of liability but in view of all circumstances of the
case, the person was fairly and reasonably entitled to indemnity.
Any indemnification made under the circumstances described above, unless
pursuant to a court determination, may be made only after a determination that
the person to be indemnified has met these standards of conduct. This
determination is to be made by a majority vote of a quorum consisting of the
disinterested directors of the board of directors, by independent legal counsel
or by a majority vote of the disinterested shareholders. The board of directors
also may designate a special committee of disinterested directors to make this
determination.
It is mandatory for a Florida corporation to indemnify a director, officer,
employee or agent against expenses actually and reasonably incurred, provided
the person has been successful in defense of any proceeding referred to in the
above discussion of permissive indemnifications.
A Florida corporation may to a certain extent deviate from the
indemnification procedures under the FBCA through a bylaw, agreement or vote of
shareholders or disinterested directors. Indemnification, however, may not be
made to or on behalf of any director, officer, employee or agent whose actions
or omissions were found to be material to the cause of action adjudicated and
whose actions or omissions constituted: (a) a violation of criminal
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law, unless the person believed the conduct was lawful or had no reasonable
cause to believe it was unlawful; (b) a transaction in which the person derived
an improper benefit; or (c) willful misconduct or conscious disregard for the
best interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
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
Affiliated Transactions and Certain Business Combinations. The FBCA
requires that any affiliated transaction, which term includes a merger, sale of
significant assets of the corporation and similar extraordinary corporate
transactions, between the corporation and an interested shareholder (generally
defined as any person who is the beneficial owner of more than 10% of the
outstanding voting shares of the corporation) be approved by the affirmative
vote of the holders of two-thirds of the voting shares of the corporation other
than the shares beneficially owned by the interested shareholder. The voting
requirements of the FBCA will not apply, however, to an affiliated transaction
if: (a) the affiliated transaction has been approved by a majority of the
corporation's disinterested directors; (b) the corporation has not had more than
300 shareholders at any time during the preceding three years; (c) the
interested shareholder has been the beneficial owner of at least 80% of the
corporation's outstanding voting shares for at least five years; (d) the
interested shareholder is the beneficial owner of at least 90% of the
outstanding voting shares of the corporation; or (e) certain fair price
requirements have been met. 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 CFB Articles of Incorporation do not contain such a provision and
effectively expand the effect of this statute by providing similar limitations
on "Affiliated Transactions" even if the exceptions of (a), (b) or (c) of the
statute are met.
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
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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.
Control Share Regulation. Unless the Articles of Incorporation provide
otherwise (which the CFB Articles of Incorporation do not), the FBCA restricts
the voting rights of a person who acquires "control shares" in an "issuing
public corporation." "Control shares" are defined under the FBCA as those
shares that, when added to all other shares of the issuing public corporation
owned by a person or in respect to which that person may exercise or direct the
exercise of voting power, would entitle that person to exercise the voting power
of the corporation in the election of directors within any of the following
ranges of voting power: (a) one-fifth or more but less than one-third of all
voting power; (b) one-third or more but less than a majority of all voting
power; or (c) a majority or more of all voting power. An "issuing public
corporation" is a corporation that has: (a) 100 or more shareholders; (b) its
principal place of business, its principal office or substantial assets within
Florida; and (c) either (i) more than 10% of its shareholders resident in
Florida, (ii) more than 10% of its shares owned by Florida residents, or (iii)
1,000 shareholders resident in Florida. As Compass will acquire 100% of the CFB
Common Stock pursuant to the Merger Agreement, Florida's "control share" anti-
takeover statute would not apply to the transaction contemplated thereby, and
the effect of this statute is discussed below only to illustrate the differences
between Delaware and Florida law.
If a control share acquisition has been made, the control shares have no
voting rights unless the holders of a majority of shares (other than those held
by the acquiror and the corporation's officers and directors) grant voting
rights to those shares by resolution. Any person who proposes to make or has
made a control-share acquisition (an "Acquiror") may, at his or her election,
deliver an acquiring person statement to the issuing public corporation setting
forth certain information concerning the Acquiror and the acquisition of his
shares, together with a request for a shareholders' meeting to determine his
voting rights, which meeting must be held within 50 days of the date the
request. The Acquiror must pay the expenses of the shareholders' meeting.
If an Acquiror acquires a majority of the outstanding shares of the
corporation and is granted full voting rights pursuant to the procedure outlined
above, the other shareholders of the corporation have dissenters' rights to
require the corporation to purchase their shares for a "fair value." The term
"fair value" is defined as a value not less than the highest price paid per
share by the acquiror in the control share acquisition.
The DGCL does not contain a similar "control share" provision.
Although certain of the specific differences between the voting and other
rights of CFB Shareholders and Compass shareholders are discussed above, the
foregoing summary is not intended to be a complete statement of 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 CFB. 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 FBCA and the DGCL,
and the specific provisions of Compass' Certificate and Bylaws, and CFB's
Articles of Incorporation and Bylaws.
RESALE OF COMPASS STOCK
The Compass Common Stock to be issued to the CFB Shareholders 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 CFB within
the meaning of Rule 145 under the Securities Act. The directors and executive
officers of CFB, the beneficial owners of 10% or more of CFB Common Stock and
certain of their related interests may be deemed to be affiliates of CFB. Such
affiliates are not permitted to transfer any Compass Common Stock except in
compliance with the Securities Act, the Exchange Act and the rules and
regulations thereunder.
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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 Report on Form 10-Q for the quarter ended March 31, 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
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 CFB or the Merger, except as a director,
executive officer or shareholder of Compass or its subsidiaries.
INFORMATION ABOUT CFB
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
Certain documents filed by and relating to CFB, including CFB's annual
report on Form 10-K for the year ended December 31, 1995, are incorporated
herein by reference. In addition, a portion of CFB's annual report on Form 10-K
and copies of the CFB Annual Report and the CFB 10-Q accompany this Proxy
Statement/Prospectus, and the following information contained therein is
specifically incorporated by reference into this Proxy Statement/Prospectus:
(i) Certain information regarding CFB's business segments, classes of
similar products, foreign and domestic operations and export sales appears
in that portion of CFB's annual report on Form 10-K entitled "Business"
which is attached hereto as Appendix III;
(ii) Information regarding the market price of and dividends on CFB's
common stock and related stockholder matters appears in that section
entitled "Consolidated Financial Highlights" on page 1 of the CFB Annual
Report which is attached hereto as Appendix IV;
44
<PAGE>
(iii) Certain selected financial data of CFB appears in that section
entitled "Consolidated Financial Highlights" on page 1 of the CFB
Annual Report which is attached hereto as Appendix IV;
(iv) Management's Discussion and Analysis of Financial Condition and
Results of Operations appears in that section entitled "Management's
Discussion" on pages 4 through 10 of the CFB Annual Report which is
attached hereto as Appendix IV; and
(v) Interim Financial Statements for the period ended March 31, 1996
appear at pages 1-5 of the CFB 10-Q which is attached hereto as
Appendix V.
RELATIONSHIPS WITH ACCOUNTANTS
CFB has not had any disagreements with its accountants on accounting and
financial disclosure during its two most recent fiscal years.
INFORMATION ABOUT VOTING SECURITIES AND THE PRINCIPAL HOLDERS THEREOF
Information regarding the beneficial ownership of CFB Common Stock by: (a)
each person who is known by CFB to beneficially own more than 5% of CFB's Common
Stock; (b) the executive officers of CFB; (c) each director of CFB; and (d) the
executive officers and directors of CFB as a group, is incorporated by reference
to CFB's 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 "Voting Securities and Principal Holders
Thereof," "Proposal I - Election of Directors" and "Executive Officers Who Are
Not Directors" contained at pages 2 through 6 of the Proxy Statement filed with
the Commission pursuant to Rule 14(a) of the Exchange Act in connection with
CFB's Annual Meeting of Shareholders held on April 30, 1996.
INTERESTS OF CERTAIN PERSONS
No Director or executive officer of CFB has any material direct or indirect
financial interest in Compass or the Merger, except as a director, executive
officer or shareholder of CFB.
EXPERTS
The consolidated financial statements of Compass as of December 31, 1995
and 1994 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 incorporated in the Proxy
Statement/Prospectus by reference from CFB's annual report on Form 10-K and
included herein, as of December 31, 1995 and 1994 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 in and
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
45
<PAGE>
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 December 31, 1995, Mr. Powell was the beneficial owner of an aggregate of
approximately 51,183 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 of
the Merger. Igler & Dougherty, P.A. and Balch & Bingham are also expected to
render legal opinions as to certain matters acceptable to CFB 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 CFB AND COMPASS -- CERTAIN DIFFERENCES BETWEEN THE CORPORATION
LAWS OF FLORIDA 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
CFB'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 CFB's
Board of Directors unless "Authority Withheld" is indicated in the appropriate
box on the Proxy.
46
<PAGE>
APPENDICES
- ----------
I. The Merger Agreement
II. Opinion of Robert W. Baird & Co.
III. Description of Business contained in CFB annual report on Form 10-K
for the year ended December 31, 1995
IV. The CFB Annual Report to Shareholders for the year ended December 31, 1995
V. The CFB quarterly report on Form 10-Q for the quarter ended March 31, 1996
47
<PAGE>
APPENDIX I
The Merger Agreement
1
<PAGE>
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
COMPASS BANCSHARES, INC.,
COMPASS BANK,
CFB BANCORP, INC.,
AND
COMMUNITY FIRST BANK
Dated as of February 13, 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............... 2
-----------------------------
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 [Intentionally Left Blank].................. 5
--------------------------
SECTION 1.8 Escrow Agreement............................ 5
----------------
SECTION 1.9 Shareholders' Meeting....................... 6
---------------------
SECTION 1.10 Registration of the Compass Common Stock.... 6
----------------------------------------
SECTION 1.11 Closing..................................... 6
-------
SECTION 1.12 Merger of Bank.............................. 7
--------------
ARTICLE II............................................................ 7
DISSENTERS' RIGHTS; EXCHANGE OF SHARES............................ 7
SECTION 2.1 Dissenters' Rights.......................... 7
------------------
SECTION 2.2 Exchange of Shares.......................... 7
------------------
ARTICLE III............................................................ 8
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE BANK........ 8
SECTION 3.1 Organization and Qualification.............. 8
------------------------------
SECTION 3.2 Company Capitalization...................... 9
----------------------
SECTION 3.3 Bank Capitalization; Other Securities....... 9
-------------------------------------
SECTION 3.4 Authority Relative to the Agreement......... 10
-----------------------------------
SECTION 3.5 No Violation................................ 10
------------
SECTION 3.6 Consents and Approvals...................... 11
----------------------
SECTION 3.7 Regulatory Reports.......................... 11
------------------
SECTION 3.8 SEC Reports; Securities Issuances........... 11
---------------------------------
SECTION 3.9 Financial Statements........................ 11
--------------------
SECTION 3.10 Absence of Certain Changes.................. 13
--------------------------
SECTION 3.11 Company Indebtedness........................ 15
--------------------
SECTION 3.12 Litigation.................................. 15
----------
SECTION 3.13 Tax Matters................................. 15
-----------
SECTION 3.14 Employee Benefit Plans...................... 16
----------------------
SECTION 3.15 Employment Matters.......................... 18
------------------
SECTION 3.16 Leases, Contracts and Agreements............ 18
--------------------------------
SECTION 3.17 Related Company Transactions................ 19
----------------------------
SECTION 3.18 Compliance with Laws........................ 19
--------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.19 Insurance.................................... 20
---------
SECTION 3.20 Loans........................................ 20
-----
SECTION 3.21 Fiduciary Responsibilities................... 20
--------------------------
SECTION 3.22 Patents, Trademarks and Copyrights........... 20
----------------------------------
SECTION 3.23 Environmental Compliance..................... 20
------------------------
SECTION 3.24 Regulatory Actions........................... 22
------------------
SECTION 3.25 Title to Properties; Encumbrances............ 22
---------------------------------
SECTION 3.26 Shareholder List............................. 23
----------------
SECTION 3.27 Proxy Statement.............................. 23
---------------
SECTION 3.28 Opinion of Investment Bankers................ 23
-----------------------------
SECTION 3.29 Section 368 Representations.................. 23
---------------------------
SECTION 3.30 Employee Stock Options....................... 24
----------------------
SECTION 3.31 Representations Not Misleading............... 25
------------------------------
ARTICLE IV............................................................. 25
REPRESENTATIONS AND WARRANTIES OF COMPASS......................... 25
SECTION 4.1 Organization and Authority................... 25
--------------------------
SECTION 4.2 Authority Relative to Agreement.............. 25
-------------------------------
SECTION 4.3 Financial Reports............................ 26
-----------------
SECTION 4.4 Capitalization............................... 27
--------------
SECTION 4.5 Consents and Approvals....................... 27
----------------------
SECTION 4.6 Proxy Statement.............................. 27
---------------
SECTION 4.7 Availability of Compass Common Stock......... 28
------------------------------------
SECTION 4.8 Representations Not Misleading............... 28
------------------------------
ARTICLE V.............................................................. 28
COVENANTS OF THE COMPANY.......................................... 28
SECTION 5.1 Affirmative Covenants of the Company......... 28
------------------------------------
SECTION 5.2 Negative Covenants of the Company............ 30
---------------------------------
ARTICLE VI............................................................. 32
ADDITIONAL AGREEMENTS............................................. 32
SECTION 6.1 Access To, and Information Concerning,
--------------------------------------
Properties and Records....................... 32
----------------------
SECTION 6.2 Filing of Regulatory Approvals............... 33
------------------------------
SECTION 6.3 Miscellaneous Agreements and Consents........ 33
-------------------------------------
SECTION 6.4 Company Indebtedness......................... 33
--------------------
SECTION 6.5 Best Good Faith Efforts...................... 33
-----------------------
SECTION 6.6 Acquisition Proposals........................ 33
---------------------
SECTION 6.7 Public Announcement.......................... 34
-------------------
SECTION 6.8 Employee Benefit Plans....................... 34
----------------------
SECTION 6.9 Employment and Severance Agreement Payments.. 35
-------------------------------------------
SECTION 6.10 Proxies...................................... 35
-------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.11 Exchange Agreement........................... 35
------------------
SECTION 6.12 Shareholder Agent............................ 35
-----------------
ARTICLE VII............................................................ 36
CONDITIONS TO CONSUMMATION OF THE MERGER.......................... 36
SECTION 7.1 Conditions to Each Party's Obligation to
----------------------------------------
Effect the Merger............................ 36
-----------------
SECTION 7.2 Conditions to the Obligations of Compass and
--------------------------------------------
Compass Florida to Effect the Merger......... 36
------------------------------------
SECTION 7.3 Conditions to the Obligations of the
------------------------------------
Company to Effect the Merger................. 38
----------------------------
ARTICLE VIII........................................................... 39
TERMINATION; AMENDMENT; WAIVER.................................... 39
SECTION 8.1 Termination.................................. 39
-----------
SECTION 8.2 Effect of Termination........................ 40
---------------------
SECTION 8.3 Amendment.................................... 40
---------
SECTION 8.4 Extension; Waiver............................ 40
-----------------
SECTION 8.5 Termination Fee.............................. 40
---------------
ARTICLE IX............................................................. 41
SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................ 41
ARTICLE X.............................................................. 41
MISCELLANEOUS..................................................... 41
SECTION 10.1 Expenses..................................... 41
--------
SECTION 10.2 Brokers and Finders.......................... 41
-------------------
SECTION 10.3 Entire Agreement; Assignment................. 41
----------------------------
SECTION 10.4 Further Assurances........................... 41
------------------
SECTION 10.5 Enforcement of the Agreement................. 42
----------------------------
SECTION 10.6 Severability................................. 42
------------
SECTION 10.7 Notices...................................... 42
-------
SECTION 10.8 Governing Law................................ 43
-------------
SECTION 10.9 Descriptive Headings......................... 43
--------------------
SECTION 10.10 Parties in Interest.......................... 43
-------------------
SECTION 10.11 Counterparts................................. 43
------------
SECTION 10.12 Incorporation by References.................. 43
---------------------------
SECTION 10.13 Certain Definitions.......................... 44
-------------------
</TABLE>
iii
<PAGE>
ATTACHMENTS
EXHIBITS
A. Escrow Agreement
B. Exchange Agent Agreement
C. Voting Agreement and Irrevocable Proxy
D. Opinion of Counsel for the Company and the Bank
E. Noncompetition Agreement
F. Opinion of Counsel for Compass
LIST OF SCHEDULES
Schedule 1.6(c) List of Outstanding Options
Schedule 3.2 Company Capitalization
Schedule 3.3 Bank Capitalization; List of Equity Ownership
Schedule 3.5 Violations of Law; Conflicts of Interest; Share Litigation;
Termination of Existence
Schedule 3.6 Company Prior Consents
Schedule 3.7 Regulatory Reports
Schedule 3.10 Absence of Material Changes or Adverse Effects
Schedule 3.12 Company 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
iv
<PAGE>
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 Company Shareholders Disposing of Stock
Schedule 3.30 Stock Option Plans
Schedule 4.2 Compass Prior Consents
Schedule 5.1(d) Insurance Policies to be Maintained
Schedule 5.1(j) List of Accounts and Safe Deposit Boxes
Schedule 5.1(k) List of Liabilities and Obligations of the Company and the
Bank
Schedule 6.10 List of Proxy Holders Voting Affirmatively for the Agreement
Schedule 7.2(e) Officer Releases
Schedule 10.2 Brokers and Finders
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of February 13 ,
-------
1996, by and among Compass Bancshares, Inc. a Delaware corporation ("Compass"),
its wholly-owned subsidiary, Compass Bank, a Florida banking corporation
("Compass Bank"), CFB Bancorp, Inc., a Florida corporation ("Company") and its
wholly owned subsidiary, Community First Bank, a Florida banking corporation
("Bank").
WHEREAS, Compass desires to affiliate with the Company, and the Company and
the Bank desire to affiliate with Compass in the manner provided in this
Agreement;
WHEREAS, Compass and the Company believe that the Merger (as defined
herein) of the Company with an existing or to-be-formed subsidiary ("Compass
Florida") of Compass incorporated under the laws of the State of Florida to be
added as a party to this Agreement after the date hereof 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;
WHEREAS, the parties intend that the Bank will be merged with and into
Compass Bank contemporaneously with the Merger; and
WHEREAS, the respective boards of directors of the Company, the Bank and
Compass 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 Business Corporation Act ("FBCA"),
the Company shall be merged with and into Compass Florida (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
Florida shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of the Company shall cease.
Compass shall not be deemed a party to the Merger for the purposes of Section
607.1106(1)(a) of the FBCA.
SECTION 1.2 Effective Time. The Merger shall be consummated upon the
--------------
filing of Articles of Merger with the Florida Department of State, in the form
required by and executed in accordance with the relevant provisions of the FBCA.
The effective time of the
<PAGE>
Merger shall be the close of business on the day of the Closing (as defined
herein) or such other time and date within two business days after the Closing
as the parties may mutually agree and specify in the Articles of Merger (the
"Effective Time").
SECTION 1.3 Certain Effects of the Merger. The Merger shall have the
-----------------------------
effects set forth in Section 607.1106 of the FBCA.
SECTION 1.4 Articles of Incorporation and By-Laws. The Articles of
-------------------------------------
Incorporation and the By-Laws of Compass Florida, 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 Florida 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.
SECTION 1.6 Conversion of Shares. (a) Each share of the Company's
--------------------
common stock, par value $.01 per share ("Company Common Stock"), issued and
outstanding immediately prior to the Effective Time (the Company Common Stock is
sometimes called the "Shares"), 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, subject to the
provisions of Section 1.8 (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, the number of Shares issued and outstanding shall be
increased by the number of Shares that may be acquired upon exercise of any
option or other security entitling the holder thereof to acquire Shares which is
in effect or outstanding immediately prior to the Effective Time.
(b) Except as set forth in Section 1.8, each holder of Company Common
Stock shall, for each such Share, receive 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 applicable number of shares of Compass
Common Stock set forth below (the "Aggregate Merger Consideration") by the
number of Shares outstanding immediately prior to the Effective Time:
(i) in the event that the average closing sale price of Compass Common
Stock as reported by the National Association of Securities Dealers, Inc.,
National Market System for the 15 days of trading immediately preceding the
fifth business day prior to the Closing (as defined in Section 1.11 hereof)
(the "Market Price") is equal to or greater than $32.50, but not greater
than $34.50, the Aggregate Merger Consideration shall be 1,326,154 shares
of Compass Common Stock less the number of shares of Compass Common Stock
required to pay for options cancelled pursuant to Section 1.6(c) hereof
(the "Option Payment Shares");
2
<PAGE>
(ii) in the event that the Market Price is greater than $34.50, the
Aggregate Merger Consideration shall be the number of shares of Compass
Common Stock equal to the quotient of $45,752,313 divided by the Market
Price, less the Option Payment Shares;
(iii) in the event that the Market Price is less than $32.50, but not
less than $30.50, the aggregate Merger Consideration shall be the number of
shares of Compass Common Stock equal to the quotient of $43,100,000 divided
by the Market Price, less the Option Payment Shares;
(iv) in the event that the Market Price is less than $30.50, this
Agreement shall automatically terminate, unless such termination is avoided
by application of subsection (v) below; and
(v) notwithstanding the above, in the event that the Market Price is
less than $30.50, by written notice at least two days before the date set
for Closing, (A) Compass shall have the right to cause this Agreement to
remain in effect by agreeing to pay Aggregate Merger Consideration of a
number of shares of Compass Common Stock equal to the quotient of
$43,100,000 divided by the Market Price, less the Option Payment Shares,
and (B) the Company shall have the right to cause this Agreement to remain
in effect by agreeing to accept Aggregate Merger Consideration of 1,413,114
shares of Compass Common Stock, less the Option Payment Shares.
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) Effective as of the Closing, the Company shall take such action as is
required to cause each outstanding option to purchase Shares (an "Option" and
plural "Options") granted under any stock option plan of the Company, to be
canceled, whether or not exercisable at such time. A list of all such
outstanding Options is set forth on Schedule 1.6(c). The Aggregate Option
Payment Shares (as defined herein) shall be a number of shares of Compass Common
Stock as determined using the following formula: first, determine the aggregate
dollar value of the Aggregate Merger Consideration ("Aggregate Dollar Value") by
multiplying the number of shares of Compass Common Stock to be paid as
consideration times 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 Holders
if the Option Holders were to exercise each and every Option (average exercise
price times number of options outstanding) by the number of Shares issued and
outstanding, and finally, determine the Aggregate Option Payment Shares
("Aggregate Option 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 outstanding and dividing that product by the Market Price.
The following is a summary of the above stated formula.
3
<PAGE>
<TABLE>
<S> <C>
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 outstanding)], divided by
(shares outstanding plus options
outstanding);
Step 3 Aggregate Option
Payment Shares = [(Selling Price Per Share minus average
exercise price per share) times (number
of options outstanding)], divided by
the Market Price.
</TABLE>
Each holder of an Option shall receive, in consideration for the cancellation of
each of his or her Options, a number of shares of Compass Common Stock
determined by subtracting the exercise price per share for each share of stock
which might have been acquired by exercise of the Options 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 $32.50, then
the formula would be applied as follows:
<TABLE>
<S> <C>
Step 1 Aggregate Dollar Value = $43,100,000
Step 2 Selling Price Per Share = $43,100,000 + $1,868,796 =
$44,968,796
$44,968,796 / 2,262,040 = $19.88 per
Share
Step 3 Aggregate Option
Payment Shares = $19.88 - $6.10 = $13.78 x 306,360 =
4,221,641 / $32.50 = 129,896
</TABLE>
The Aggregate Option Payment Shares in this hypothetical is 129,896 shares
of Compass Common Stock. The Option Payment Shares for an individual Option
Holder whose options have an exercise price of $5.00 would be $19.88 - $5.00 =
$14.88 / $32.50 = .457846 shares of Compass Common Stock per share of stock
which might have been acquired upon exercise.
Compass shall deliver to holders of Options 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 Company shall terminate, as of the Effective Time, the
Stock Option Program and any other 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 Company or
its Subsidiaries (as defined herein), and (ii) the Company shall obtain any
required consents of holders of Options for the cancellation of all Options
pursuant to this Agreement and ensure that following the Effective Time no
holder of an Option, or any participant in any employee stock option plan or
other plans, programs or arrangements shall have any right thereunder to acquire
4
<PAGE>
equity securities of the Company or its Subsidiaries, the Surviving Corporation
or any other entity.
(d) Each share of common stock of Compass Florida 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.
(e) 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 average closing sale price for Compass Common Stock as reported by
the NASDAQ National Market System for the 15 days of trading of Compass Common
Stock immediately preceding the fifth business day prior to the Effective Time.
SECTION 1.7 [Intentionally Left Blank]
--------------------------
SECTION 1.8 Escrow Agreement. At the Closing, the parties shall enter
----------------
into an escrow agreement in the form of Exhibit A hereto (the "Escrow
Agreement"), pursuant to which the Escrow Agent shall hold and distribute the
portion of the Aggregate Merger Consideration delivered to the Escrow Agent
pursuant to this Section 1.8. A number of shares of Compass Common Stock equal
to $1,791,270, divided by the Market Price (the "Escrow Consideration") shall be
delivered to the Escrow Agent pursuant to this Section 1.8 only if, at the time
of the Closing: (i) the Florida Insurance Commissioner has not given final
approval to the debt-to-equity conversion contemplated by that certain
application for approval of the acquisition of controlling interest of a
domestic insurer filed by Pafco Insurance Company Ltd. with the Florida
Department of Insurance on November 10, 1995, and (ii) the debt to equity
conversion contemplated by such application has not been consummated. The
Escrow Consideration represents the amount due from American Surety & Casualty
Holding Company to the Bank upon the payment in full of that certain debenture
dated March 4, 1994, in the principal amount of $1,835,000, payable to American
Surety & Casualty Holding Company and due June 30, 1997, as amended by a letter
dated December 15, 1995, reducing the principal amount to $1,791,270 (the
"Debenture"). The Debenture is part of the consideration for the sale by the
Bank of its previously wholly-owned subsidiary, American Surety & Casualty
Holding Company. In the event shares of Compass Common Stock are delivered to
the Escrow Agent pursuant to this Section 1.8, the number of shares of Compass
Common Stock which otherwise would be included in the Aggregate Merger
Consideration distributed pursuant to Section 1.6 shall be reduced by the Escrow
Consideration. The shareholders of the Company shall be entitled to receive the
Escrow Consideration, pursuant to the Escrow Agreement, if and when the Florida
Insurance Commissioner gives final approval to the debt-to-equity conversion
contemplated by the above described application and such debt-to-equity
conversion has been consummated. If the above described approval and
transaction consummation have not occurred prior to June 30, 1997, the Escrow
Consideration shall be returned to Compass in exchange for
5
<PAGE>
the Debenture, and thereafter shall not be considered a part of the Merger
Consideration paid to the shareholders. The Debenture shall thereafter be
considered the property of the former Company shareholders, and the Shareholder
Agent will have the authority and discretion to collect or liquidate the
Debenture on behalf of the former Company shareholders.
SECTION 1.9 Shareholders' Meeting. The Company, acting through its
---------------------
Board of Directors, shall, in accordance with applicable law:
(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 minimum 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
Company 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 1.10 Registration of the Compass Common Stock. 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 Company
shareholders in the Merger.
SECTION 1.11 Closing. Upon the terms and subject to the conditions
-------
hereof, as soon as practicable after the vote of the shareholders of the Company
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 Company and Compass Florida 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 hereto
presently intend that the Closing will take place on July 31, 1996; provided,
however, in any
6
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event, if the Closing shall not have occurred prior thereto, the Closing shall
take place on the business day next preceding the permitted termination date
referred to in Section 8.1(d) hereof.
SECTION 1.12 Merger of Bank. At Compass' election, Compass may cause the
--------------
Bank to merge into Compass Bank immediately after the Merger, and the Company
and the Bank agree to execute documents and take actions (conditioned on the
Merger being effective) and otherwise agree to cooperate with Compass during the
time the Merger transaction is pending in order to facilitate such merger of the
Bank into Compass Bank immediately after the Closing.
ARTICLE II.
DISSENTERS' RIGHTS; EXCHANGE OF SHARES
SECTION 2.1 Dissenters' Rights. The parties acknowledge that pursuant
------------------
to Section 607.302 of the FBCA, the holders of Company Common Stock are not
entitled to dissenters' rights under the FBCA.
SECTION 2.2 Exchange of Shares.
------------------
(a) Compass shall deposit or cause 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 B (the "Exchange Agreement"), prior to the Effective Time cash
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
(such amounts being hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall, pursuant to irrevocable instructions jointly given by the
Company 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).
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; provided, however, no interest
will be paid or accrued on the cash payable to holders of Company Common Stock.
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 Company 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 B to the Exchange Agreement (the "Letter of
Transmittal"). Upon surrender to the Exchange Agent of a Certificate, together
with such
7
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Letter of Transmittal duly executed, the holder of such Certificate shall be
entitled to 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 declared 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 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 Company
shall be closed and there shall be no transfers on the stock transfer books of
the Company 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 Company
for six months after the Effective Time shall be paid to Compass, which shall
assume all duties and responsibilites of the Exchange Agent regarding payment of
the Merger Consideration to holders of Shares who tender their Shares
thereafter, 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 COMPANY AND THE BANK
The Company and the Bank hereby make the representations and warranties set
forth in this Article III to Compass. The Company has delivered to Compass the
Schedules to this Agreement referred to in this Article III on the date hereof.
The Company agrees at the Closing to provide Compass with supplemental Schedules
(other than Schedule 3.23) reflecting any specific changes thereto between the
date of such Schedules and the date of the Closing.
SECTION 3.1 Organization and Qualification. The Company is a Florida
------------------------------
corporation and a bank holding company under the Bank Holding Company Act of
1956, as amended, and is duly organized, validly existing and in good standing
under the laws of the
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State of Florida and all laws, rules, and regulations applicable to bank holding
companies. The Bank is a Florida banking corporation, duly organized, validly
existing and in good standing under the laws of the State of Florida. Each of
the Company and the Bank has all requisite corporate power and authority to
carry on its business as now being conducted and to own, lease and operate its
properties and assets as now owned, leased or operated. Except as set forth on
Schedule 3.17, the Company does not own or control any Affiliate (as defined in
Section 3.17) or Subsidiary (as defined in Section 10.13(a)) other than the
Bank. True and correct copies of the Articles of Incorporation and Bylaws of
the Company and the Bank, with all amendments thereto through the date of this
Agreement, have been delivered by the Company to Compass. The Bank is duly
qualified or licensed to do business in the State of Florida. The nature of the
business of the Company and the Bank and their respective activities, as
currently conducted, do not require them to be qualified to do business in any
jurisdiction other than the State of Florida.
SECTION 3.2 Company Capitalization. As of the date hereof, the
----------------------
authorized capital stock of the Company consists solely of (a) 15,000,000 shares
of Company Common Stock per value, $.01 per share, of which 1,955,680 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 Company or
the Bank to purchase or otherwise acquire any security of or equity interest in
the Company or 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 Company to issue
any shares of the Company, or to the knowledge of the Company, 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. There are no restrictions
applicable to the payment of dividends on the Shares except pursuant to the FBCA
and applicable banking laws and regulations and all dividends declared prior to
the date hereof have been paid.
SECTION 3.3 Bank Capitalization; Other Securities. All of the issued
-------------------------------------
and outstanding shares of the capital stock of the Bank (i) are duly authorized,
validly issued, fully paid and nonassessable, (ii) except as referred to in
Schedule 3.3 are free and clear of any liens, claims, security interests and
encumbrances of any kind, and (iii) there are no irrevocable proxies with
respect to such shares and there are no outstanding or authorized subscriptions,
options, warrants, calls, rights, or other agreements or commitments of any kind
restricting the transfer of, requiring the issuance or sale of, or otherwise
relating to any of such shares of capital stock to any person. The Company
owns, directly, all of the issued and outstanding capital stock of the Bank.
Set forth on Schedule 3.3 hereto is a list of all equity ownership by the
Company or the Bank for the account of the Company or the Bank in any other
person other than the Bank (the "Other Securities"). The Company or the Bank
owns each Other Security free and clear of any lien, encumbrance, security
interest or charge.
9
<PAGE>
SECTION 3.4 Authority Relative to the Agreement. The Company has full
-----------------------------------
corporate power and authority, and, except for the approval by the Company's
shareholders, no further proceedings on the part of the Company 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 Company
and is a duly authorized, valid, legally binding and enforceable obligation of
the Company, 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 Company 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 Company or the Bank or any agreement, document or instrument
by which the Company or the Bank is obligated or bound.
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 Company's shareholders,
the SEC, the Federal Deposit Insurance Corporation ("FDIC"), the Board of
Governors of the Federal Reserve System ("FRB"), and the Florida Department of
Banking and Finance ("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 Company
or 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 Company or 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 Company or the Bank is a party or by which any of their
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 Company or the
Bank, threatened, against the Company, 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 Florida 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 Company and the
Bank will not be terminated or impaired by reason of the execution, delivery or
performance by the Company of this Agreement or consummation by the Company of
the transactions contemplated hereby, assuming the receipt of required
shareholder and regulatory approvals.
10
<PAGE>
SECTION 3.6 Consents and Approvals. The Company's Board of Directors
----------------------
(at a meeting called and duly held) has unanimously determined that the Merger
is fair to the Company's shareholders and has unanimously resolved to recommend
approval and adoption of this Agreement by the Company'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 Company in connection with the execution, delivery and
performance by the Company 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
SEC, the FRB, the FDIC and the Department and holders of Shares under the FBCA.
SECTION 3.7 Regulatory Reports. Except as set forth on Schedule 3.7,
------------------
the Company and the Bank have filed all reports, registrations and statements,
together with any amendments required to be made thereto, that are required to
be filed with the FRB, the Department, the FDIC, or any other regulatory
authority having jurisdiction over any such persons, other than plans, reports
or information.
SECTION 3.8 SEC Reports; Securities Issuances. The Company is subject,
---------------------------------
and prior to the Company's formation on July 15, 1994, the Bank was subject, to
the registration provisions of Section 12 of the Exchange Act of 1934, as
amended ("Exchange Act") and the rules and regulations of the SEC promulgated
under Section 12 of the Exchange Act. The Company or the Bank, as appropriate,
has filed all required forms, reports and documents with the SEC or the FDIC
required to be filed by it pursuant to the Exchange Act and the SEC or FDIC
rules and regulations thereunder, all of which, as thereafter amended, have to
the knowledge of the Company complied in all material respects with all
applicable requirements of the Exchange Act and the rules promulgated thereunder
(collectively, the "SEC Reports"). None of such forms, reports or documents,
including without limitation any financial statements or schedules included
therein, at the time filed, as thereafter amended, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. No amendment to
any SEC Report, or the facts or circumstances underlying the need for such
amendment, have subjected or, to the knowledge of the Company, could in the
future subject the Company or the Bank to any liability, fine, restriction or
other penalty. Until the Effective Time, the Company will provide Compass with
a copy of each SEC Report promptly after such report is filed. All issuances of
securities by the Company and the Bank have been registered under the Securities
Act, the Florida Securities Investor Protection Act, and all other applicable
laws or were exempt from any such registration requirements.
SECTION 3.9 Financial Statements.
--------------------
(a) The Company has previously furnished Compass with a true and complete
copy of (i) its annual report on Form 10-K for the year ended December 31, 1994,
including the 1994 Annual Report to Shareholders, which report (the "Company
1994 Annual Report") includes, among other things, consolidated balance sheets
of the Company and the Bank as of December
11
<PAGE>
31, 1994, the related consolidated statements of income, shareholders' equity
and changes in cash flows for the year ended December 31, 1994, plus
consolidating financial statements of the Bank, and (ii) the Company's quarterly
reports on Form 10-Q for the quarters ended March 31, June 30 and September 30,
1995 (the "Quarterly Reports"), which reports include, among other things,
unaudited consolidated balance sheets of the Company and the Bank as of March
31, June 30 and September 30, 1995 and December 31, 1994, and the related
unaudited consolidated statements of income, shareholders' equity and changes in
cash flows for the three-, six- and nine-month periods ended March 31, June 30
and September 30, 1995, and promptly following their availability the Company
will provide Compass with the Company's 1995 Annual Report to Shareholders (the
"Company 1995 Annual Report"), which report includes, among other things,
consolidated balance sheets of the Company and the Bank as of December 31, 1995
and 1994 and the related consolidated statements of income, shareholders' equity
and changes in cash flow for the years ended December 31, 1995 and 1994 (such
balance sheets and the related consolidated statements of income, shareholders'
equity and changes in cash flows, plus all consolidating financial statements
for the Bank and all related notes and schedules are collectively referred to as
the "Company Financial Statements").
(b) The Bank has previously furnished Compass with a true and complete copy
of (i) the 1993 Annual Report to Shareholders, which report ("Bank 1993 Annual
Report") includes, among other things, consolidated balance sheets of the Bank
as of December 31, 1993 and 1992, the related consolidated statements of income,
shareholders' equity and changes in cash flows for the year ended December 31,
1993 and 1992, and (ii) the Bank's quarterly reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 1994 (the "Quarterly
Reports"), which reports include, among other things, unaudited consolidated
balance sheets of the Bank as of March 31, June 30 and September 30, 1994 and
December 31, 1993, and the related unaudited consolidated statements of income,
shareholders' equity and changes in cash flows for the three-, six- and nine-
month periods ended March 31, June 30 and September 30, 1994 and 1993 (such
balance sheets and the related consolidated statements of income, shareholders'
equity and changes in cash flows, and all related notes and schedules are
collectively referred to herein as the "Bank Financial Statements").
The Bank Financial Statements and the Company Financial Statements are
together referred to herein as the "Financial Statements."
(c) Except as described in the notes to the Financial Statements, the
Financial Statements, including the consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and changes in cash
flows (including the related notes thereto) of the Company and the Bank, fairly
present the financial position of the Company and the Bank as of the dates
thereof and the results of operations and changes in consolidated financial
position of the Company and the Bank 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 footnote disclosures required by GAAP), except as
otherwise noted therein, and the accounting records underlying the Financial
Statements accurately and
12
<PAGE>
fairly reflect in all material respects the transactions of the Company and the
Bank. As of their dates, the Financial Statements conformed, or will conform
when delivered, in all material respects with all applicable rules and
regulations promulgated by the FRB, the Department, and the FDIC, to the extent
that such rules and regulations are consistent with GAAP. None of the Company,
the Bank or its Subsidiaries have any liabilities or obligations of a type which
should be included in or reflected on the 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 Financial Statements. With
the exception of commitments to sell mortgage-backed securities in the ordinary
course of business, the Company and the Bank have no off balance sheet
liabilities associated with financial derivative products or potential
liabilities associated with financial derivative products.
(d) The Company will provide Compass with the unaudited consolidated and
unconsolidated balance sheets of the Bank as of the end of each month hereafter,
prepared on a basis consistent with prior periods and promptly following their
availability, the Company will provide Compass with the quarterly reports of the
Company on form 10-Q and the Reports of Condition and Statements of Income
("Call Reports") of the Bank for all periods ending after September 30, 1995.
SECTION 3.10 Absence of Certain Changes. Except as and to the extent set
--------------------------
forth on Schedule 3.10, since September 30, 1995 (the "Balance Sheet Date")
neither the Company nor the Bank has:
(a) made any amendment to its Articles of Incorporation or Bylaws or
changed the character of its business in any material manner;
(b) suffered any Material Adverse Effect (as defined in Section 10.13(b));
(c) entered into any agreement, commitment or transaction except in the
ordinary course of business and consistent with prudent banking practices;
(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) 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) except in the
ordinary course of business and consistent with prudent banking practices;
(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;
13
<PAGE>
(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 Company's or the
Bank's 1995 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 Company or the Bank, for the directors,
employees or former employees of the Company or 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 Company by 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 which does not expose the Company or
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 change with respect to any branch or line
of business of the Company or the Bank, with the exception of the possible sale
of all or part of the mortgage servicing portfolio;
(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
14
<PAGE>
(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 Company Indebtedness. The Company has delivered to Compass
--------------------
true and complete copies of all loan documents ("Company Loan Documents")
related to indebtedness of the Company, the Bank and its Subsidiaries, other
than deposits ("Company Indebtedness"), and made available to Compass all
material correspondence concerning the status of Company 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 Company or the Bank, threatened against the Company
or the Bank or involving any of their respective 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 Company will notify Compass immediately in writing of any
Proceeding against the Company or the Bank.
SECTION 3.13 Tax Matters. The Company and the Bank have duly filed all
-----------
tax returns required to be filed by them involving a tax liability or other
material potential detriment for failure to file (the "Filed Returns"). The
Company and the Bank have paid, or have 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 Company and the
Bank have 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 Company and the Bank have no 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 Company
has not entered into any tax sharing agreement or other agreement regarding the
allocation of the tax liability of the Company or 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 1990.
Neither the Company nor the Bank have 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 Company or the Bank, nor are
there any outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of the Company or the Bank for any
period. The Company and the Bank have 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
15
<PAGE>
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 Company or 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 Company or the Bank or to which the
Company or 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 Company or 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 Company or the Bank or to which the Company or 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, 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 Company or 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
16
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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) On and after January 1, 1975, neither the Company, 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 Company, the Bank nor any corporation or other trade or
business controlled by or under common control with the Company (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 Company, 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 Company, nor 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);
(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
17
<PAGE>
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 Company or
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,
------------------
neither the Company nor the Bank is 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. To the knowledge of the Company, except as disclosed on Schedule
3.15, there are no unfair labor practice complaints pending against the Company
or the Bank before the National Labor Relations Board and no similar claims
pending before any similar state, local or foreign agency. To the knowledge of
the Company, there is no activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any employees of the
Company or the Bank, nor of any strikes, slowdowns, work stoppages, lockouts, or
threats thereof, by or with respect to any such employees. The Company and the
Bank are in compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and neither the Company nor the Bank is engaged
in any unfair labor practice.
SECTION 3.16 Leases, Contracts and Agreements. Schedule 3.16 sets forth
--------------------------------
an accurate and complete list of all leases, subleases, licenses, contracts and
agreements to which the Company or the Bank is a party or by which the Company
or the Bank is bound which obligate or may obligate the Company or the Bank in
the aggregate for an amount in excess of $50,000 over the entire term of any
such agreement or related contracts of a similar nature which in the aggregate
obligate or may obligate the Company or the Bank in the aggregate for an amount
in excess of $50,000 over the entire term of such related contracts (the
"Contracts").
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The Company 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 Company or the Bank, but do include unfunded loan commitments
and letters of credit issued by the Company or the Bank as of January 31, 1996
where the borrowers' total direct and indirect indebtedness to the Bank is in
excess of $250,000. Except for early default provisions pursuant to loans sold
with servicing rights released, no participations or loans have been sold which
have buy back, recourse or guaranty provisions which create contingent or direct
liabilities of the Company or 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 Company
and the Bank under the Contracts are current, there are no existing defaults by
the Company or 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.
Each of the Company and the Bank has a good and marketable leasehold interest in
each parcel of real property leased by such entity free and clear of all
mortgages, pledges, liens, encumbrances and security interests.
SECTION 3.17 Related Company 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 Company,
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 (including the Bank). The term "Affiliate" as used in this Agreement
means, 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.
SECTION 3.18 Compliance with Laws. To the knowledge of the Company,
--------------------
except as set forth on Schedule 3.18, neither the Company nor the Bank is in
default in 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 or the Department; and the
consummation of the transactions contemplated by this Agreement will not
constitute such a default or violation as to the Company or the Bank. The
Company and the Bank have all permits, licenses, and franchises from
governmental agencies required to conduct their businesses as they are now being
conducted.
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SECTION 3.19 Insurance. The Company and the Bank have in effect the
---------
insurance coverage (including fidelity bonds) described in Schedule 3.19 and
have had similar insurance in force for the last 5 years. Except as set forth
on Schedule 3.19, there have been no claims under such bonds within the last 5
years and neither the Company nor the Bank is aware of any facts which would
form the basis of a claim under such bonds. Neither the Company nor the Bank
has any 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 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 or nonperforming loans as
defined by the Company.
SECTION 3.21 Fiduciary Responsibilities. To the knowledge of the
--------------------------
Company, the Company and the Bank have performed in all material respects all of
their respective 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, neither the Company nor the Bank 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 Company or the
Bank. The Company and the Bank own or are licensed or otherwise have the right
to use any items listed in Schedule 3.22.
SECTION 3.23 Environmental Compliance. The representations and
------------------------
warranties in this Section 3.23 are made only as of the date of this Agreement,
and the Company and the Bank shall have no obligation to inform Compass of any
change therein at the Closing or otherwise. The representations and warranties
in this Section 3.23 are made only to the actual knowledge of the senior
officers of the Company and the Bank, and neither Compass nor any of its
affiliates shall have any ground to claim it was misled by any untrue statement
contained in this Section 3.23 unless it is established that a senior officer of
the Company or the Bank intentionally withheld information related to such
statement. Subject to the foregoing, except as set forth in Schedule 3.23:
(a) The Company, the Bank and any property owned or operated by them are
in compliance with all applicable Environmental Laws (as defined in Section
10.13(c)) and have obtained and are 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
20
<PAGE>
business of the Company or 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
Company or the Bank;
(b) None of the Company or 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 potential or threatened Proceeding under any
Environmental Law;
(c) There is no Proceeding pending or threatened against the Company or
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 neither the Company nor the Bank has 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 10.14(d)) at or on any property where
Polluting Substances generated by the Company or the Bank have been disposed,
treated or stored;
(e) There is no Property for which the Company or 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) Neither the Company nor the Bank has 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 Company and the Bank have fully complied in all material respects
with the guidelines issued by the FDIC on February 25, 1993, and any other
governmental authority with jurisdiction over the Bank or the Company, that
direct banks to implement programs to reduce
21
<PAGE>
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, "Property" includes (1) any
property (whether real or personal) which the Company or 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 Company or the Bank or property
currently proposed as security for loans or other credit the Bank or the Company
is currently evaluating whether to extend or has committed to extend a loan
("Collateral Property").
SECTION 3.24 Regulatory Actions. Except as set forth on Schedule 3.24,
------------------
there is no action or Proceeding pending or, to the knowledge of the Company and
the Bank, threatened against the Company or the Bank by or before the FRB, the
FDIC, the Department, 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, neither the Bank nor the
Company is 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. Neither the
Company nor the Bank has 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 Company
and the Bank have 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 Company and 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, each of the Company and 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
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 Financial Statements. Except as set
forth on Schedule 3.25, the Company has a title policy in full force and effect
from a title insurance company which, to the best of Company's knowledge, is
solvent, insuring good and indefeasible title to all real property owned by the
Company and the Bank in favor of the Company or the Bank, whichever is
applicable. The Company has made available to Compass all of the files and
information in the possession of the Company or the Bank concerning such
properties, including any title exceptions which might affect marketable title
or value of such property. The Company and the Bank each hold good and legal
title or good and valid leasehold rights to all assets that are necessary for
them to conduct their respective businesses as they are currently being
conducted.
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Except as set forth on Schedule 3.16, the Company 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 identified
in public records or should have been so identified as containing Polluting
Substances.
SECTION 3.26 Shareholder List. The Company has provided to Compass prior
----------------
to the date of this Agreement a list of the holders of Shares and the holders of
any outstanding warrant, option, convertible debenture or other security
entitling the holder thereof to acquire Shares as of August 12, 1995 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 Company 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 Company or the Bank, or, to the knowledge of the Company, any of
its respective directors, officers, employees or agents for inclusion in:
(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 Company;
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 Company or 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 Opinion of Investment Bankers. The Company has received the
-----------------------------
written opinion of Robert W. Baird & Co. Incorporated, Tampa, Florida, that the
Merger Consideration is fair, from a financial point of view, to the
shareholders of the Company as of the date of such opinion.
SECTION 3.29 Section 368 Representations.
---------------------------
(a) To the knowledge of the Company and its directors and executive
officers, there is no plan or intention by any Company shareholder who is
anticipated to receive five percent (5%)
23
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or more of the total Merger Consideration ("5% Shareholder"), and there is no
plan or intention by any of the remaining Company 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 Company's capital
stock outstanding immediately prior to the Effective Time. For purposes of this
Section 3.29, shares of the Company'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 Company
outstanding immediately prior to the Merger.
(b) The Company has provided to Compass true and correct copies of
statements received from each 5% Shareholder who is known to the Company with
respect to his or her plan or intention to sell or otherwise dispose of the
Compass Common Stock to be received pursuant to the Merger, and has set forth on
Schedule 3.29 all knowledge of the Company and the Bank and their respective
directors about the plans or intentions of any other Company shareholders to
sell or otherwise dispose of the Compass Common Stock to be received pursuant to
the Merger.
(c) Neither Compass nor Compass Florida will assume any debts or
obligations of the holders of the Shares as part of the Merger.
(d) To the knowledge of the Company, except as set forth on Schedule 3.29,
there have not been any sales or redemptions of the Company's capital stock in
contemplation of the Merger. Schedule 3.29 sets forth all transactions in the
capital stock of the Company since September 30, 1995.
(e) The liabilities of the Company assumed by Compass as a part of the
Merger and the liabilities to which the transferred assets of the Company are
subject were incurred by the Company in the ordinary course of its business.
(f) The Company and its shareholders will pay their own expenses which are
incurred in connection with the Merger.
(g) The Company 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 Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(i) The Company 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.
24
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SECTION 3.30 Employee Stock Options. Except as set forth on Schedule
----------------------
3.2, there are no Company 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 Company or the Bank.
SECTION 3.31 Representations Not Misleading. No representation or
------------------------------
warranty by the Company in this Agreement, nor any statement, summary, exhibit
or schedule furnished to Compass or Compass Florida by the Company or 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 IV.
REPRESENTATIONS AND WARRANTIES
OF COMPASS
Compass hereby makes the representations and warranties set forth in this
Article IV to the Company and 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 and
to enter into and carry out its obligations under this Agreement.
(b) Compass is a bank holding company under the Bank Holding Company 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.
SECTION 4.2 Authority Relative to Agreement. 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
25
<PAGE>
under which Compass is obligated or bound, or any law, order, judgment,
injunction, award, decree, statute, rule, ordinance or 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, 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, 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 Company or 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.
SECTION 4.3 Financial Reports. Compass has previously furnished the
-----------------
Company a true and complete copy of (i) the 1994 Annual Report to Shareholders,
which report (the "Compass 1994 Annual Report") includes, among other things,
consolidated balance sheets of Compass and its Subsidiaries as of December 31,
1994 and 1993, the related consolidated statements of income, shareholders'
equity and cash flows for the years ended December 31, 1994, 1993 and 1992 and
(ii) Compass' quarterly reports on Form 10-Q for the quarters ended March 31,
June 30, and September 30, 1995 (the "Quarterly Reports") which reports include
among other things unaudited balance sheets of Compass and its Subsidiaries as
of March 31, June 30, and September 30, 1995 and December 31, 1994, and the
related unaudited consolidated statements of income and cash flows for the
three-, six- and nine-month periods ending March 31, June 30, and September 30,
1995 and 1994. The financial statements contained in the Compass 1994 Annual
Report and such Quarterly Reports 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, 1994 and 1993
contained in the Compass 1994 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
26
<PAGE>
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, June 30, and September 30, 1995 and 1994, contained
in Compass' Quarterly Reports, 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 1994 Annual Report or Compass' Quarterly Reports is false or misleading
with respect 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. None of Compass or its Subsidiaries have
any liabilities or obligations of a type which should be included in or
reflected on the Compass 1994 Annual Report and the Quarterly Reports 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 in the Compass 1994 Annual
Report and the Quarterly Reports. Compass will provide the Company with its
1995 Annual Report to Shareholders and its quarterly reports on Form 10-Q for
the quarters ended March 31, June 30, and September 31, 1995, as such reports
become available prior to Closing, and none of the information contained in such
reports 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.
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 December 31, 1995, Compass had 38,138,465
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 in connection with the
execution, delivery and performance by Compass of this Agreement and the
transactions contemplated hereby or the resulting change in control of the
Company and 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 FDIC and the
Department.
SECTION 4.6 Proxy Statement. None of the information supplied or to be
---------------
supplied by Compass, or, to the best knowledge of Compass, any of its directors,
officers, employees or agents for inclusion in:
(a) the Proxy Statement; or
27
<PAGE>
(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 Company;
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 Compass 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 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 in this Agreement, nor any statement or exhibit furnished to
the Company or 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 COMPANY
SECTION 5.1 Affirmative Covenants of the Company. For so long as this
------------------------------------
Agreement is in effect, the Company shall, and shall use its best efforts to
cause the Bank and 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;
28
<PAGE>
(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 Florida in satisfying the conditions in this Agreement, (ii) assist
Compass and Compass Florida in obtaining as promptly as possible all consents,
approvals, authorizations and rulings, whether regulatory, corporate or
otherwise, as are necessary for Compass and Compass Florida and the Company (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 Company and any
governmental agency or other 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, 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 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 Company Loan Documents and
promptly notify and provide copies to Compass of any material written
communications concerning the Company 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 Company 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 Company and 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;
29
<PAGE>
(k) deliver to Compass a list (Schedule 5.1(k)), dated as of the Closing,
showing all liabilities and obligations of Company and the Bank, except those
arising in the ordinary course of their respective businesses, incurred since
the Balance Sheet Date, certified by an officer of Company;
(l) promptly notify Compass of any material change or material inaccuracy
in any data previously given or made available to Compass or Compass Florida
pursuant to this Agreement; and
(m) provide reasonable access, to the extent that the Company or the Bank
have 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 Company. Except with the prior
---------------------------------
written consent of Compass, which consent shall not be unreasonably withheld, or
as otherwise specifically permitted by this Agreement, the Company will not and
will use its best efforts not to permit the Bank, or any other Subsidiary of the
Company, to, from the date of this Agreement to the Closing:
(a) make any amendment to its articles of incorporation 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) 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;
30
<PAGE>
(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 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 Company or the
Bank's 1995 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;
(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 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;
(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 Company
or 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;
31
<PAGE>
(r) modify, amend, waive or extend either the Company Loan Documents or
any rights under such agreements, except for Federal Home Loan Bank advances and
repurchase sales or servicing agreements, consistent with the Bank's prior
practice;
(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) prepay in whole or in part the Company Indebtedness, except for
Federal Home Loan Bank advances and repurchase sales or servicing agreements,
consistent with the Bank's current practices and prudent banking practices; or
(w) 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 Company and its directors and the Bank 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 Company or 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
- -------
Company shall, to the extent permitted by law, give Compass, its legal counsel,
accountants and other representatives full access after reasonable notice,
during normal business hours, throughout the period prior to the Closing, to all
of the Company's and the Bank's properties, collateral, 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 Company and the
Bank and their affairs as Compass may reasonably request. All information
disclosed by the Company to Compass which is confidential and is so identified
to Compass as confidential 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 Company. In the event this Agreement is terminated pursuant
to the provisions of Article VIII, upon the written request of the
32
<PAGE>
Company, Compass agrees to return to the Company all copies of such confidential
information.
SECTION 6.2 Filing of Regulatory Approvals. As soon as reasonably
------------------------------
practicable, Compass shall file all notices and applications to the FRB, the
Department and the FDIC which Compass deems necessary or appropriate to complete
the transactions contemplated herein, including the merger of the Bank and
Compass Bank. Compass will deliver to the Company copies of any such
applications, except that Compass shall not be required to provide the Company
with portions of such applications which are designated by Compass as
confidential and which relate solely to Compass' business or which do not relate
to the Company other than that the information is being provided as part of such
applications.
SECTION 6.3 Miscellaneous Agreements and Consents. Subject to the terms
-------------------------------------
and conditions of this Agreement, Compass and the Company agree to use all
reasonable 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 as practicable
after the date hereof, the transactions contemplated by this Agreement. Compass
and the Company 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 Company Indebtedness. Prior to the Effective Time, the
--------------------
Company shall pay all regularly scheduled payments on all Company 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 Company Indebtedness.
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 Company and the Bank will not,
---------------------
and will use their best efforts to cause their respective 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
33
<PAGE>
extent its Board of Directors determines it is required to do so in the exercise
of its fiduciary duties to the Company's shareholders under applicable law as so
advised in writing by independent counsel, the Company and the Bank, and their
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 Company and the Bank will
promptly notify Compass orally and in writing if any such Acquisition Proposal
(including the terms thereof and identity 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 Company and Compass.
SECTION 6.8 Employee Benefit Plans. Compass presently intends that,
----------------------
after the Merger, Compass, the Company and the Bank will not make additional
contributions to the employee benefit plans sponsored by the Company or the Bank
immediately prior to the Merger.
Compass agrees that the employees of the Company and 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
Company's and the Bank's employees in such plans and programs from and after the
Effective Time, subject to the following:
(i) Employee Welfare Benefit Plans and Programs: Each employee of the
Company and the Bank will be entitled to credit for prior service with the
Company and 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 Company or the Bank sponsored a similar type of plan which the
Company or 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 or Company employee. For purposes of
determining each Company or Bank employee's benefit for the year in which the
Merger occurs under the Compass vacation program, any vacation taken by a
Company or 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 Company or Bank employee for such year. Compass
agrees that for purposes of determining the number of vacation days available
with respect to each Company or Bank employee for the year in which the Merger
occurs, that the number of vacation days for such year shall be determined under
the Company or Bank vacation policy in effect as of January 1, 1995. Compass
further agrees to credit each Company or 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 Company's group health
plan.
34
<PAGE>
(ii) Employee Pension Benefit Plans: Each Company and Bank employee shall
be entitled to credit for past service with the Company and 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).
Notwithstanding the foregoing, Compass shall not grant any prior years of
service credit to employees of the Company and the Bank with respect to any
defined benefit pension plans sponsored (or contributed to) by Compass; instead,
Company and Bank employees shall be treated as newly hired employees of Compass
as of the date following the Effective Time for purposes of determining
eligibility, vesting and benefit accruals thereunder.
On or before the Effective Time, the Company and the Bank may take such
actions as may be necessary to cause each individual employed by the Company and
the Bank immediately prior to the Effective Time to have a fully vested and
nonforfeitable interest in such employee's account balance under the Employee
Stock Ownership Plan sponsored by the Company, and such account balances as of
the Effective Time shall remain non-forfeitable upon the combination of such
plan with the Compass 401(k)/ESOP Plan after the Merger.
SECTION 6.9 Employment and Severance Agreement Payments. Compass hereby
-------------------------------------------
agrees that, at the Effective Time, Compass shall assume, or shall cause the
successors of the Company and the Bank to assume, the obligations and
responsibilities of the Company and the Bank under the two employment agreements
and the seven severance agreements described in Schedule 3.14(l), in accordance
with their respective terms.
SECTION 6.10 Proxies. The Company 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
Shareholders' Voting Agreement and Irrevocable Proxy in substantially the form
attached hereto as Exhibit C.
SECTION 6.11 Exchange Agreement. Immediately prior to the Effective
------------------
Time, the Company and Compass agree to enter into, and Compass agrees to cause
Compass Florida 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 Company and Compass.
SECTION 6.12 Shareholder Agent. The Shareholder Agent (as provided in
-----------------
the Escrow Agreement) shall have the duties, responsibilities and authority set
forth in this Agreement and the Escrow Agreement. The initial Shareholder Agent
shall be Igler & Dougherty, P.A. The Shareholder Agent may be replaced and a
successor selected by holders of a majority in value of the holders of Shares'
interest in the Escrow Account (as provided in the Escrow Agreement). All
parties hereto shall be entitled to rely on all actions and
35
<PAGE>
communications of the Shareholder Agent as being genuine and binding on all of
the former holders of Shares.
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 and the
merger of the Bank into Compass Bank, 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 Company'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 Florida
------------------------------------------------------------
to Effect the Merger.
- --------------------
The obligations of Compass and Compass Florida 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 Company 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;
36
<PAGE>
(b) the Company 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 Company or the Bank;
(d) the directors of the Company and the Bank shall have delivered to
Compass an instrument dated the Effective Time releasing the Company and the
Bank from any and all claims of such directors (except as to their deposits and
accounts, and as to rights of indemnification pursuant the Bylaws of the Company
or the Bank) and shall have delivered to Compass their resignations as directors
of the Bank;
(e) the officers of the Company and the Bank listed on Schedule 7.2(e)
shall have delivered to Compass an instrument dated the Effective Time releasing
the Company and the Bank from any and all claims of such officers (except as to
deposits and accounts, accrued compensation permitted by their respective
agreements and rights of indemnification pursuant to the Bylaws of the Company
or the Bank);
(f) Compass shall have received the opinion of counsel to the Company
acceptable to it as to the matters set forth on Exhibit D attached hereto;
(g) Compass shall have received the 5% Shareholder statements required by
Section 3.29(b);
(h) Compass shall have received an opinion of counsel satisfactory to it
that the Merger will qualify as a reorganization under Section 368(a) of the
Code;
(i) The Company 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 Company of which the Company has knowledge from and
including the date of this Agreement through the Effective Time;
(j) Compass shall have reasonably determined that the liabilities and
obligations set forth on Schedule 5.1(k) do not have a Material Adverse Effect;
(k) All warrants, options, rights or other securities entitling the holder
thereof to acquire Shares shall have been cancelled in the manner provided in
Section 1.6 or shall have expired, lapsed or terminated, prior to the Effective
Time;
(l) Compass shall have received certificates dated as of the Closing
executed by the Chairman of the Board of the Company and by the Chairman of the
Board of the Bank, and the Secretary or Cashier of the Company and the Bank,
respectively, certifying in such reasonable
37
<PAGE>
detail as Compass may reasonably request, to the effect described in Sections
7.2(a), (b), (c), (g) and (i);
(m) 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;
(n) the full amount of any special assessment for premiums on Savings
Association Insurance Fund deposits held by the Bank required to be paid by
Federal law shall have been (i) paid in full by the Bank, (ii) accrued on the
books of the Bank, or (iii) transferred to a general contingency reserve account
established by the Bank; and
(o) Jack C. Demetree, the Chairman of the Board of Directors of the Company
and the Bank as of the date hereof, shall have entered into a Noncompetition
Agreement with Compass, or one or more of its affiliates, in the form of Exhibit
E hereto.
SECTION 7.3 Conditions to the Obligations of the Company to Effect the
----------------------------------------------------------
Merger. The obligations of the Company 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 Florida 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 Company shall have received the opinion of counsel to Compass and
Compass Florida acceptable to it as to the matters set forth on Exhibit F
attached hereto;
(d) the Bank and the Company shall have delivered to the directors of the
Company and the Bank an instrument dated the Effective Time releasing such
directors from any and all claims of the Company and the Bank (except as to
indebtedness or other contractual liabilities); provided, however, that such
releases shall not release an action against such directors by Compass or
Compass in connection with the transactions contemplated by this Agreement; and
(e) the Company shall have received certificates dated the Closing,
executed by an appropriate officer of Compass and by an appropriate officer of
Compass Florida, respectively, certifying, in such detail as the Company may
reasonably request, to the effect described in Sections 7.3(a) and (b).
38
<PAGE>
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 Company,
by:
(a) mutual written consent duly authorized by the Boards of Directors
of Compass and the Company;
(b) Compass (i) if Compass learns or becomes aware of a state of
facts or breach or inaccuracy of any representation or warranty of the Company
contained in Article III which constitutes a Material Adverse Effect, and which
breach or inaccuracy is not cured after 30 days' written notice by Compass, or
(ii) if there shall have been a breach of Section 6.6, or (iii) if any of the
conditions to Closing contained in Section 7.1 or 7.2 are not satisfied or
waived in writing by Compass;
(c) the Company if any of the conditions to Closing contained in
Section 7.1 or 7.3 are not satisfied or waived in writing by the Company;
(d) Compass or the Company if the Effective Time shall not have
occurred on or before the expiration of nine months from the date of this
Agreement or such later date as is agreed to in writing by Compass and the
Company;
(e) Compass or the Company 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) automatically pursuant to Section 1.6(b)(iv), if applicable;
(g) Compass at any time within 90 days after the date of this
Agreement if the results of Compass' environmental assessments and investigation
with respect to the William Bates Property reveal conditions, the potential
remediation costs or other environmental risks of which are not acceptable to
Compass in its sole discretion;
(h) Compass if the Board of Directors of the Company 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 Company's receipt of an Acquisition Proposal from a third
party, the Company 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 Company publicly reconfirms its recommendation of the
39
<PAGE>
transactions contemplated hereby and notifies Compass of such reconfirmation
prior to termination of this Agreement by Compass pursuant to this clause; or
(i) the Company if it shall receive any Acquisition Proposal after the
date hereof from a third party or parties and the Board of Directors of the
Company 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 Company is required to pursue
such Acquisition Proposal; provided, however that the Company 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 Company, Compass and, if required, Compass Florida at any time
before or after adoption of this Agreement by the shareholders of the Company
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 Company'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 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 Company or 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(h) or 8.1(i) as a
result of receipt of such Acquisition Proposal, then the Company and the Bank
shall pay to Compass an aggregate fee of $2,500,000 in cash at the time of such
termination.
40
<PAGE>
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 Company and 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 Company and the Bank shall not exceed $200,000 excluding costs and
expenses related to any 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 as set forth in Schedule
-------------------
10.2, all negotiations on behalf of Compass and the Company 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 Florida, the Company or 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 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
Florida 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, including its obligation to pay the
Merger Consideration as provided herein.
SECTION 10.4 Further Assurances. From time to time as and when
------------------
requested by Compass or its successors or assigns, the Company, the officers and
directors of the Company, or 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 Company's title
to and possession of, all of its property, interests, assets, rights,
privileges, immunities, powers,
41
<PAGE>
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 or may elect 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, Compass Florida 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
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
42
<PAGE>
if to the Company or the Bank:
A. Richardson Tosh
CFB Bancorp, Inc.
3740 Beach Boulevard
Jacksonville, Florida 32207
Telecopy No.: (904) 396-7524
with a copy to:
A. George Igler or Ed Dougherty
Igler & Dougherty, P.A.
1501 East Park Avenue
Tallahassee, Florida 32301
Telecopy No.: (904) 561-3774
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.
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.
43
<PAGE>
SECTION 10.13 Certain Definitions.
-------------------
(a) "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.
(b) "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 Company and 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
Company and 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 Company by
more than $1,500,000.
(c) "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.
(d) "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.
(e) "Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
discarding or abandoning.
44
<PAGE>
(f) "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, or who has at
any time served, as a director or officer (or in any similar capacity) of the
corporation or bank, has, or at any time had, knowledge of such fact or other
matter. The Company and the Bank are 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 Company or the Bank.
45
<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: /s/ Daniel B. Graves By: /s/ Garrett R. Hegel
----------------------------- -------------------------------------
Its: Assistant Secretary Its: Chief Financial Officer
---------------------------- ------------------------------------
ATTEST: COMPASS BANK
By: /s/ Daniel B. Graves By: /s/ Garrett R. Hegel
----------------------------- -------------------------------------
Its: Assistant Secretary Its: Treasurer
---------------------------- ------------------------------------
ATTEST: CFB BANCORP, INC.
By: /s/ A. Richardson Tosh By: /s/ Jack C. Demetree
----------------------------- -------------------------------------
Its: President Its: Chairman of the Board
---------------------------- ------------------------------------
ATTEST: COMMUNITY FIRST BANK
By: /s/ A. Richardson Tosh By: /s/ Jack C. Demetree
----------------------------- -------------------------------------
Its: President Its: Chairman of the Board
---------------------------- ------------------------------------
46
<PAGE>
EXHIBIT A
ESCROW AGREEMENT
Escrow Agreement dated as of _________________________, 199____, by and
among Compass Bancshares, Inc., a Delaware corporation ("Compass"); CFB Bancorp,
Inc., a Florida corporation (the "Company"); _________________________as
representative (the "Shareholder Agent") of the holders of the outstanding stock
of Company (the "Shareholders"); and
______________________________________________ a __________________________ (the
"Escrow Agent").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger, dated February ___,
1996 (the "Merger Agreement") among Compass, Compass Bank, a Florida banking
corporation, the Company and Community First Bank, a Florida banking
corporation, simultaneously with the execution of this Escrow Agreement, the
Company is merging with a subsidiary of Compass and the Shareholders will
receive Merger Consideration;
WHEREAS, pursuant to Section 1.8 of the Merger Agreement, the parties
thereto have agreed that a portion of the Merger Consideration is to be held in
escrow in accordance with the terms of the Merger Agreement and this Escrow
Agreement to secure and fund the payment of the Escrow Consideration pursuant
to Section 1.8; and
WHEREAS, pursuant to Section 6.12 of the Merger Agreement, the Shareholders
have selected the Shareholder Agent to represent their interest.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Merger Agreement, the parties hereto
hereby agree as follows:
1. Definitions. All capitalized terms used in this Agreement and not
-----------
defined herein shall have the meaning assigned to them in the Merger Agreement.
2. Appointment. Compass, the Company and the Shareholders hereby appoint
-----------
Escrow Agent as the escrow agent for the purposes set forth herein, and the
Escrow Agent hereby accepts such appointment. The Escrow Agent agrees to hold
and dispose of the Escrow Fund, as defined hereinafter, in accordance with the
terms hereof.
3. Purpose of Escrow. The Escrow Fund is being created to fund payment of
-----------------
a portion of the Merger Consideration pursuant to Section 1.8 of the Merger
Agreement. Each Shareholder shall receive a Prorata Share of such additional
Merger Consideration. For purposes of this Agreement, each Shareholder's
Prorata Share shall be determined by reference to EXHIBIT A which specifies each
Shareholder's percentage interest in any sums to be paid to or by the
Shareholders pursuant to this Agreement. EXHIBIT A was prepared by dividing the
<PAGE>
number of shares of Company Common Stock held by each Shareholder at the
Effective Time by the total number of shares of Company Common Stock held by all
the Shareholders at the Effective Time. At the Closing, Company shall cause to
be delivered to the Escrow Agent EXHIBIT A and a complete and accurate list of
names, mailing addresses, and taxpayer identification numbers of the
Shareholders as of such date.
4. Initial Escrow Deposit. Concurrently with the execution of this
----------------------
Agreement, Compass has delivered to the Escrow Agent _______________ shares of
Compass Common Stock pursuant to Section 1.8 of the Merger Agreement (the
"Escrow Fund") and the Escrow Agent hereby acknowledges receipt of such shares.
5. Distributions from Escrow Fund. The Escrow Agent shall make
------------------------------
distributions from the Escrow Fund upon the following terms and conditions,
subject to Section 12 hereof:
(a) In the event that the Shareholder Agent concludes that the
Shareholders are entitled to additional Merger Consideration pursuant to Section
1.8 of the Merger Agreement, the Shareholder Agent shall deliver to the Escrow
Agent a certificate in the form attached hereto as Exhibit B ("Shareholder
Certificate") indicating thereon the amount of additional Merger Consideration
claimed to be earned, and the Escrow Agent shall on or before the tenth (10th)
business day after receipt of the Shareholder Certificate distribute to the
Shareholders their respective Prorata Share of such additional Merger
Consideration, but in no event greater than the amount being held in Escrow
Fund. At the same time that the Shareholder Agent delivers a Shareholder
Certificate to the Escrow Agent, the Shareholder Agent shall also provide notice
of such Shareholder Certificate (pursuant to Section 13 of this Agreement) to
Compass, with a copy of any notice also being delivered to the Escrow Agent.
(b) With each distribution of Compass Common Stock, the Escrow Agent
shall distribute to each shareholder the dividends and any earnings thereon
received by the Escrow Agent with respect to such shares while they were held by
the Escrow Agent. The amount of such cash distributions shall be reduced by any
taxes or charges the Escrow agent has paid with respect to such shares,
dividends or earnings pursuant to Section 7 hereof.
(c) The Escrow Agent shall not distribute any fractional shares of
Compass Common Stock. The Escrow Agent shall only distribute the number of whole
shares to which a Shareholder is entitled. The Escrow Agent shall sell and
Compass shall purchase all fractional shares at a purchase price based on the
average of the bid and asked price for Compass Common Stock as reported by the
NASDAQ National Market System for the thirty days of trading of Compass Common
Stock immediately preceding such distribution. The proceeds of such sale shall
be distributed to the Shareholder in lieu of fractional shares.
(d) Each Shareholder shall provide the Escrow Agent with all
information and shall execute all documents deemed necessary or advisable by the
Escrow Agent, including, without limitation, Form W-9. The Escrow Agent shall
not be obligated to
2
<PAGE>
make distributions to a Shareholder until all such information and documentation
has been supplied to the Escrow Agent.
(e) Any additional shares of Compass Common Stock received by the
Escrow Agent with respect to the shares held hereunder, whether as a result of
stock dividends, stock splits or otherwise, shall be held by the Escrow Agent
pursuant to the terms of this Agreement and appropriate adjustments shall be
made in the number of shares held and distributed hereunder.
(f) As soon as practicable after June 30, 1997, the Escrow Agent shall
deliver to Compass all shares of Compass Common Stock and other assets remaining
in the Escrow Fund. Simultaneously with such delivery, Compass shall deliver, or
shall cause the successors to the Company and the Bank to deliver, the Debenture
to the Shareholder Agent, for the benefit of the Shareholders.
6. Shareholder Agent. In accordance with Section 6.12 of the Merger
-----------------
Agreement, Igler & Dougherty, P.A. is the initial representative of the
Shareholders, and shall have and exercise the responsibility and authority set
forth in this Agreement and the Merger Agreement. In the event of the
resignation, death or incapacity of the Shareholder Agent, a successor shall be
selected in accordance with Section 6.12 of the Merger Agreement. Any successor
Shareholder Agent and all parties hereto shall be entitled to rely on all
actions and communications of any such predecessor Shareholder Agent as being
genuine and binding on all the Shareholders. No vacancy in the position of
Shareholder Agent shall have any effect on this Agreement.
7. Information and Taxes. Compass and the Shareholders shall provide the
---------------------
Escrow Agent with all information, and shall execute all documents, deemed
necessary or desirable by the Escrow Agent to carry out its duties under this
Agreement. The Escrow Agent shall cause to be prepared all income and other tax
returns and reports the Escrow Agent, in its sole discretion, deems necessary or
desirable in order to comply with all tax and other laws,
rules and regulations applicable to the Escrow Fund and shall pay all taxes and
charges it deems lawfully due with respect to the income, assets and operation
of the Escrow Fund.
8. Investment of Escrow Fund. The Escrow Agent shall hold the shares of
-------------------------
Compass Common Stock received by it hereunder for the purposes of this Agreement
and shall not sell or diversify such investment, except to pay expenses of the
Shareholders hereunder. With the consent of Compass and the Shareholder Agent,
in the event any cash is contained in the Escrow Fund, the Escrow Agent shall
invest that portion of the Escrow Fund in such investments as it deems
appropriate, provided such investments are backed either by the full faith and
credit of the United States government or are issued by a financial institution
that is a member of the Federal Reserve System and has combined capital and
surplus of not less than $250,000,000.
3
<PAGE>
9. Liability. The duties of the Escrow Agent hereunder are only such as
---------
herein specifically provided and are purely ministerial in nature; and the
Escrow Agent shall not be liable for any action taken by the Escrow Agent in
good faith and in accordance with the terms of this Agreement. The Escrow Agent
shall be fully protected in acting upon any written notice, request, waiver,
consent, proxy, certificate, receipt, authorization, power of attorney or other
agreement, document or instrument which the Escrow Agent receives from Compass
or the Shareholders to carry out its duties under this Agreement or which the
Escrow Agent in good faith believes to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be liable
for any error in judgment, or for any act that it takes or fails to take in good
faith, or for any mistake of fact or law, or for anything which it may do or
refrain from doing in connection herewith, except for its own gross negligence
or willful misconduct, so long as it has acted in good faith. It is understood
and agreed that the Escrow Agent is acting as a depository only and is not
responsible for or liable in any manner whatsoever for the sufficiency,
correctness, genuineness or validity of the documents described herein or any
part of the Escrow Fund.
In the event any dispute, conflict or question arises regarding
the construction of any provision hereof or the Escrow Agent's duties hereunder,
the Escrow Agent may consult with, and obtain advice from, legal counsel. The
Escrow Agent shall be reimbursed for all reasonable costs and reasonable fees
incurred in obtaining such advice. The Escrow Agent shall be paid fifty percent
(50%) by Compass and fifty percent (50%) by the Shareholders from the Escrow
Fund. The Escrow Agent shall incur no liability and shall be fully protected
from any liability when acting in good faith in accordance with the written
opinion and instructions of such counsel. Copies of all such opinions shall be
made available to the other parties hereto upon request. The Escrow Agent may,
but shall not be required to, defend itself in any legal proceeding in respect
of the Escrow Fund, or any part thereof. The Escrow Agent shall be paid from the
Escrow Fund for all reasonable costs and reasonable expenses incurred by the
Escrow Agent in connection with any such defense or action.
10. Resignation. The Escrow Agent may resign and be discharged from its
-----------
duties and obligations hereunder by giving notice of such resignation in
writing, specifying the date when such resignation shall take effect, which date
shall be not less than 10 days from the date on which such notice is given.
Upon the effective date of such resignation, the Escrow Fund shall be delivered
by the Escrow Agent to such person as may be designated in writing by Compass or
the Shareholders, whereupon all of the Escrow Agent's obligations hereunder
shall cease and terminate. If no such person shall have been designated by such
date, all obligations of the Escrow Agent thereunder shall cease and terminate.
The Escrow Agent's sole responsibility thereafter shall be to keep safely the
Escrow Fund then held by it and to deliver the same to a person designated by
Compass and the Shareholders in accordance with the directions of a final order
or judgment of a court of competent jurisdiction.
11. Indemnification. The Shareholders (solely from the Escrow Fund) and
---------------
Compass hereby agree to indemnify the Escrow Agent for, and to defend and hold
it harmless from and against, any loss, damage, tax, liability or expense
incurred in good faith on the part
4
<PAGE>
of the Escrow Agent arising out of or in connection with its entering into this
Agreement and carrying out its duties hereunder, including, without limitation,
the reasonable legal costs and expenses of defending itself against any claim or
liability in connection with its performance hereunder. Such indemnification
shall be shared by Compass and the Shareholders equally.
12. Contested Claims.
----------------
(a) Notwithstanding any other provision of this Agreement, in the
event, within five business days prior to the time all or any portion of the
Escrow Fund is to be distributed to either Compass or the Shareholders in
accordance with Section 5, the Escrow Agent shall receive a counter certificate
in the form attached hereto as Exhibit C (a "Counter Certificate"), the Escrow
Agent shall not distribute the Escrow Fund or any portion thereof but shall in
its sole discretion either (i) continue to hold the Escrow Fund pursuant to a
written agreement between Compass and the Shareholder Agent in form and
substance satisfactory to the Escrow Agent pending resolution of any dispute
concerning proper distribution of the Escrow Fund, or (ii) act in accordance
with Section 12(b) hereof and interplead the Escrow Fund or the appropriate
portion thereof.
(b) The Escrow Agent shall be required to make disbursements from the
Escrow Fund only if the Escrow Agent determines that such disbursement is
authorized under the terms of this Agreement and the Escrow Agent can do so
without incurring any liability. Should any controversy arise between Compass
and the Shareholders with respect to this Agreement or with respect to the right
to receive any amount out of the Escrow Fund, the Escrow Agent shall have the
right to consult counsel and elect to do either or both of the following: (i)
refuse to comply with any adverse or conflicting claims or demands made upon the
Escrow Agent until such are resolved to the Escrow Agent's satisfaction, or (ii)
to file a suit in interpleader or for instructions or for declaratory judgment
or for such other relief in any court of competent jurisdiction in Jefferson
County, Alabama, to determine the rights of the parties. Should a bill of
interpleader be instituted, or should the Escrow Agent become involved in
litigation in any manner whatsoever on account of this Agreement or the Escrow
Fund, Compass and the Shareholders hereby bind and obligate themselves, and
their respective successors and assigns, to pay the Escrow Agent, in addition to
any charge made hereunder for acting as the Escrow Agent, reasonable attorney's
fees incurred by the Escrow Agent, and any other disbursements, expenses,
losses, costs and damages in connection with and resulting from such litigation.
In the event the Shareholders are not the prevailing parties in any such
controversy or litigation, the reasonable and necessary expenses of Compass in
defending any such controversy, including without limitation, the expenses of
the Escrow Agent, shall be paid from the Escrow Fund.
13. 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:
5
<PAGE>
if to Compass;
D. Paul Jones, Jr.
Chairman and Chief Executive Officer
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Facsimile: (205) 933-3043
with a copy to:
Daniel B. Graves
Associate General Counsel
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Facsimile: (205) 933-3043
if to the Shareholder Agent:
A. George Igler
Ed Dougherty
Igler & Dougherty, P.A.
1501 East Park Avenue
Tallahassee, Florida 32301
Facsimile: (904) 561-3774
or to any other address which any party hereto may designate by notice given as
herein provided.
14. Escrow Agent Compensation and Expenses. As compensation for the
--------------------------------------
Escrow Agent's services hereunder, the Escrow Agent shall receive a non-
refundable total fee of $________________, which shall be paid equally by
Compass and the Shareholders from the initial deposit into the Escrow Fund, as
soon as practicable after the execution of this Agreement. In addition, on each
calendar anniversary of this Agreement while the Escrow Agent is still
performing services hereunder, the Escrow Agent shall receive from the Escrow
Fund, to be paid equally by Compass and the Shareholders: (i) $_____________;
(ii) $__________ per check issued pursuant to this Agreement; and (iii)
reimbursement for its reasonable, documented out-of-pocket expenses in
connection with the execution and delivery of this Agreement. The Escrow Agent
shall have the authority to sell shares of Compass Common Stock held hereunder
in order to pay the Shareholders' portion of any compensation and reimbursement
of expenses due from the Shareholders hereunder.
6
<PAGE>
15. Prohibition on Assignment. Notwithstanding anything to the contrary
-------------------------
herein contained, no portion of the interest or rights of any party hereto to or
in the Escrow Fund shall be sold, assigned, pledged, hypothecated or otherwise
used as security, and any attempted anticipation, assignment, pledge, sale or
transfer of any right or interest in contravention of this Agreement shall be
void. No portion of the Escrow Fund shall be subject to interference or control
by any creditor of any one or more of the Shareholders or any other party
hereto, or be subject to being taken or reached by any legal or equitable
process in satisfaction of any debt or other liability of any such party hereto
prior to the disbursement thereof to such party hereto in accordance with the
provisions of this Agreement.
16. Entire Agreement. This Agreement and the Merger Agreement constitute
----------------
the entire agreement among the parties and there are no agreements,
understandings, representations or warranties among the parties on the subject
matter hereof other than those set forth herein and therein.
17. Governing Law. This Agreement shall be construed and controlled in
-------------
all respects in accordance with the laws of the State of Florida.
18. Amendment. This Agreement may be amended only by a written
---------
instrument executed by Compass, the Escrow Agent and the Shareholder Agent.
19. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their permitted successors,
personal representatives and assigns.
20. 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
together shall constitute one and the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
the date and year first written above.
ATTEST Compass Bancshares, Inc.
By: By:
------------------------------ -------------------------------
Its: Name:
----------------------------- -----------------------------
Title:
----------------------------
ATTEST CFB Bancorp, Inc.
By: By:
------------------------------ -------------------------------
Its: Name:
----------------------------- -----------------------------
Title:
----------------------------
ATTEST [Escrow Agent]
By: By:
------------------------------ -------------------------------
Its: Name:
----------------------------- -----------------------------
Title:
----------------------------
ATTEST IGLER & DOUGHERTY, P.A.
By: By:
------------------------------ -------------------------------
Its: Name:
----------------------------- -----------------------------
Title:
----------------------------
8
<PAGE>
EXHIBIT B TO
ESCROW AGREEMENT
----------------
SHAREHOLDER CERTIFICATE
[Date]
Attention:
RE: ESCROW AGREEMENT DATED AS OF ______________, 199____(THE "ESCROW
AGREEMENT") AMONG COMPASS BANCSHARES, INC. ("COMPASS"), CFB
BANCORP, INC. (THE "COMPANY"), _____________________ AS
REPRESENTATIVE OF THE FORMER HOLDERS OF THE OUTSTANDING STOCK OF
THE COMPANY AND ________________ ________________, A
__________________ CORPORATION, AS ESCROW AGENT (THE "ESCROW
AGENT")
Reference is made to the Escrow Agreement and the related Agreement
and Plan of Merger, dated as of February _____, 1996, among Compass, Compass
Bank, a Florida banking corporation, the Company and Community First Bank, a
Florida banking corporation (the "Merger Agreement"). Capitalized terms used
but not otherwise defined herein shall have the meanings given them in the
Escrow Agreement.
The undersigned Shareholder Agent hereby certifies to you as follows:
The Shareholders are entitled to additional Merger Consideration
in the amount of $ ___________________on account of
[________________________________________________________________
_______________________]. The undersigned hereby requests that
such amount be distributed from the Escrow Fund by the Escrow
Agent to the Shareholders pursuant to the Escrow Agreement.
Attached to this Certificate is documentation supporting the
calculation of such amount.
with a copy to:
Compass
The undersigned hereby represents and warrants to you that the
foregoing certifications are true and correct.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate on _______________ _____, 199___.
---------------------------------------
Shareholder Agent
10
<PAGE>
EXHIBIT C TO
ESCROW AGREEMENT
----------------
COUNTER CERTIFICATE
[Date]
Attention:
RE: ESCROW AGREEMENT DATED AS OF ____________________, 199___ (THE
"ESCROW AGREEMENT") AMONG COMPASS BANCSHARES, INC. ("COMPASS"),
CFB BANCORP, INC. ("COMPANY"), ________________________, AS
REPRESENTATIVE OF THE FORMER HOLDERS OF THE OUTSTANDING STOCK OF
COMPANY AND ____________________________________, A CORPORATION,
AS ESCROW AGENT (THE "AGENT")
Reference is made to the Escrow Agreement and the related Agreement
and Plan of Merger, dated as of February _______, 1996, among Compass, Compass
Bank, a Florida banking corporation, the Company and Community First Bank, a
Florida banking corporation (the "Merger Agreement"). Capitalized terms used
but not otherwise defined herein shall have the meanings given them in the
Escrow Agreement.
The undersigned hereby certifies to you as follows:
(1) on _______________ _____, 199___, the undersigned received a copy
of a _________________________________________________
[Certificate] or [understands that you as Escrow agent are about
to make a distribution to the ______________________ pursuant to
Section _____ of the Escrow Agent]; and
(2) [the above-referenced certificate referred to in paragraph 1 is
materially inaccurate] or
[________________________________________ is/are not entitled to
such a distribution]; and
(3) no portion of the Escrow Fund should be distributed [pursuant to
the above-referenced Certificate]; and
The undersigned hereby represents and warrants to you that the
foregoing certifications are true and correct.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and deliver this
Counter Certificate on _______________ ______, 1996.
[Signature]
with a copy to:
[all other parties to the Escrow Agreement]
12
<PAGE>
EXHIBIT B
EXCHANGE AGENT AGREEMENT
------------------------
This Exchange Agent Agreement, dated as of ___________, 199__, is made and
entered into by and among Compass Bancshares, Inc., a Delaware corporation
("Compass"), ________________________, a Florida corporation ("Compass
Florida"), CFB Bancorp, Inc., a Florida corporation ("Company"), and Compass
Bank, an Alabama banking corporation ("Exchange Agent").
PREAMBLE:
Pursuant to the Agreement and Plan of Merger dated as of February ____,
1996 ("Merger Agreement") among Compass, Compass Bank, a Florida banking
corporation, the Company and Community First Bank, a Florida banking
corporation, the Company shall, at the Effective Time, be merged into Compass
Florida, with Compass Florida being the surviving corporation ("Surviving
Corporation").
After the Effective Time, the outstanding shares of the common stock of the
Company, par value $.01 per share (including for this purpose any shares of
common stock which can be acquired upon the exercise of any option or other
security pursuant to which shares of Common Stock may be obtained), ("Company
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 Company.
The Company has agreed with Compass to have Compass Bank serve as the
Exchange Agent in connection with the exchange of shares of Company Common Stock
for shares of Compass Common Stock (the "Exchange"), subject to the terms and
conditions hereof and of the Merger Agreement. The Exchange Agent will receive
Company Common Stock delivered for exchange pursuant to the terms of the Merger
Agreement, and will process such certificates representing Company 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. Compass Bank is hereby appointed as the
-----------------------------
Exchange Agent for payment of the Merger Consideration to shareholders of the
Company. 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 Company'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 Company 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 Company 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 Company'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 Company ("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 Company Common Stock shall be made by
Compass together with its attorneys, and such other persons as Compass
shall designate, and such
2
<PAGE>
determinations shall be final and binding; provided, 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 Company Common Stock. In addition, the Exchange
Agent shall inform Compass in writing of the number of shares of Company
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 Company 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
Associate General Counsel
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
3
<PAGE>
fractional shares (the "Exchange Fund"). This Exchange Fund shall not be
used for any purpose except as provided by this Agreement.
(d) Compass Common Stock. Compass Florida and the Company 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 Florida and the Company as follows:
(i) Company Common Stock. Each holder of Company Common Stock shall
--------------------
receive Merger Consideration equal to ___________ shares of Compass Common
Stock for each share of Company 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 Company 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 Company 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
4
<PAGE>
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
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 Company Common Stock and the proper maintenance of the
Company'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. No Dissenting Shareholders. The shareholders of the Company do not
--------------------------
have the right to dissent with respect to the Merger under the Florida Business
Corporation Act, and therefore, no shareholders will be entitled to payment of
an amount other than the Merger Consideration.
5
<PAGE>
9. Unclaimed Funds. Any moneys or certificates deposited hereunder which
---------------
shall remain unclaimed by the holders of shares of Company 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 Compass Bank, an Alabama banking corporation and an
affiliate of Compass, 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 Florida and shall inure to the benefit of and be binding upon the successors
and assigns of the parties hereto.
14. 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:
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 Company prior
to the Effective Time:
CFB Bancorp, Inc.
3740 Beach Boulevard
Jacksonville, Florida 32207
Attn: Mr. Jack C. Demetree
If to Compass Florida or,
the Surviving Corporation:
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:
---------------------------------------
_____________________________________
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
_____________________________________
CFB BANCORP, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
_____________________________________
COMPASS BANK
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
_____________________________________
Exhibit A - Form of Letters of Transmittal
Exhibit B - Shareholder List
8
<PAGE>
EXHIBIT C
VOTING AGREEMENT AND IRREVOCABLE PROXY
--------------------------------------
This Voting Agreement and Irrevocable Proxy, dated as of February ___,
1996, is executed by and among CFB Bancorp, Inc., a Florida corporation (the
"Company"), Compass Bancshares, Inc., a Delaware corporation ("Compass"), and
the other persons who are signatories hereto (referred to herein individually as
a "Shareholder" and collectively as the "Shareholders").
WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated
February ____, 1996 (the "Merger Agreement"), among Compass, Compass Bank, a
Florida banking corporation, the Company, and Community First Bank, a Florida
banking corporation, the Company will merge with an existing or to-be-formed
wholly-owned subsidiary of Compass (the "Merger");
WHEREAS, Section 6.10 of the Merger Agreement requires that the Company
deliver to Compass the irrevocable proxies of certain Shareholders; and
WHEREAS, Compass and the Company are relying on the irrevocable proxies in
incurring expense in reviewing the Company's business, in preparing a
proxy/registration 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 Company that they are the registered holders of and have the exclusive right
to vote the shares of common stock, par value $.01 of the Company ("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
<PAGE>
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 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, which consent shall not be
unreasonably withheld, 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 Company are relying
on this Agreement in incurring expense in reviewing the Company'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 Company 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 Company
agrees, subject to Section 2 herein, 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 Company, Compass and the Shareholder.
2
<PAGE>
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.
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
when delivered if in person, by telegram, telex, or by telecopy, two days if
sent by overnight courier, or five business days after mailing if delivered by
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.
CFB BANCORP, INC.
By:
________________________________
Name:
______________________________
Title:
_____________________________
Address:
CFB Bancorp, Inc.
3740 Beach Boulevard
Jacksonville, Florida 32207
Jack C. Demetree, Chief Executive Officer
3
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COMPASS BANCSHARES, INC.
By:
_______________________________
Name:
_____________________________
Title:
____________________________
Address:
15 South 20th Street
Birmingham, Alabama 35233
Attention: Daniel B. Graves
Associate General Counsel
SHAREHOLDERS:
___________________________________
___________________________________
Address: _________________________
_________________________
____________ shares of Stock
Pledgee: _________________________
Address: _________________________
_________________________
Loan No.: _________________________
4
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EXHIBIT D
OPINIONS REQUIRED FROM COUNSEL
TO THE COMPANY AND THE BANK
---------------------------
As to questions of fact material to our opinion, we have, when relevant
facts have not been otherwise established by us, relied upon the truth and
accuracy of (i) the representations set forth in the Agreement and Plan of
Merger dated February ___, 1996 ("Merger Agreement"), and (ii) the
certifications and statements by government officials and by officers and
representatives of the Company and the Bank. Copies of such certifications have
been delivered to you.
Whenever our opinion is indicated to be "to our knowledge," we are
referring solely to the actual knowledge of the individual Igler & Doughtery
attorneys who have participated in the representation of the Company and the
Bank. With respect to such actual knowledge of such attorneys, we have not
undertaken any independent investigation or due diligence examination to
determine the existence or absence of any facts, and no inference as to
knowledge concerning such facts should be drawn. Without limiting the
generality of the foregoing, we express no opinion upon any provision or matter
that would require a financial, mathematical or accounting calculation or
determination.
On the basis of the foregoing and the further qualifications and
limitations set forth below, as of the date hereof (or as of the date of any
assumption made herein or any certificate, schedule, exhibit, or inquiry stated
to have been examined, made or otherwise relied upon by us), we are of the
opinion that:
(i) the Company is a Florida corporation and a bank holding company under
the Bank Holding Company Act of 1956, as amended, and is duly organized, validly
existing and in good standing under the laws of the State of Florida. The Bank
is a banking corporation, duly organized, validly existing and in good standing
under the laws of the State of Florida. The Company and the Bank have 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 Company and the Bank are duly qualified and in
good standing in Florida.
(ii) the Company 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 Company 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 Company enforceable
against the Company in accordance with their terms, subject to the effect of (a)
any applicable bankruptcy, insolvency, reorganization or other law relating to
or affecting creditors'
<PAGE>
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 Company consists solely of
15,000,000 shares of Company Common Stock (as defined in the Merger Agreement)
of which _________ shares are issued and outstanding The Company does not have
any treasury stock. The Company is the record holder of all of the issued and
outstanding capital stock of the Bank; all of the outstanding shares of the
Company Common Stock are validly issued, fully paid and nonassessable and all of
the capital stock of the Bank is validly 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 Company or 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 Company 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 Company or 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 Company or the Bank is a party or by which
the Company or the Bank or any of their respective 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 Company or the
Bank, or their respective assets or properties;
(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 Florida, 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 Company of the
Merger Agreement;
(vii) to our knowledge, neither the Company nor the Bank is a party to
any Proceeding (as defined in the Merger Agreement), nor is any Proceeding
threatened against or affecting the Company or the Bank, which by the terms of
the Merger Agreement would required to be set forth in Schedule 3.12;
(viii) and except as set forth on Schedule 3.18 to the Merger Agreement,
neither the Company nor the Bank is in material default under any law,
regulation, order or judgment of any court, the violation of which would have a
Material Adverse Effect on the Company as defined in Section 10.13(b) of the
Merger Agreement; and
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(ix) upon consummation of the transaction contemplated by the Merger
Agreement in accordance with its terms and upon filing of the Articles of Merger
relating to the Merger with the Department of State of Florida, the Merger will
have been legally consummated in accordance with the laws of the State of
Florida as specified in Section 607.1106 of the Florida Business Corporation
Act.
3
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EXHIBIT E
NONCOMPETITION AGREEMENT
------------------------
NONCOMPETITION AGREEMENT, dated ___________, 1996, by and among Compass
Bancshares, Inc., a Delaware corporation ("Compass"), Compass Bank, a Florida
banking corporation ("Compass Bank") and Jack C. Demetree ("Demetree").
WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of February
___, 1996 (the "Merger Agreement"), among Compass, Compass Bank, CFB Bancorp,
Inc., a Florida corporation (the "Company"), and Community First Bank, a Florida
banking corporation (the "Bank"), such parties have agreed to the Merger as
defined therein;
WHEREAS, Demetree is an executive officer, director and shareholder of the
Bank;
WHEREAS, the Merger Agreement requires, as a condition to the closing, that
Demetree execute and deliver this agreement to Compass; and
WHEREAS, Demetree acknowledges that the restrictions against competition
and the other agreements set forth in this Agreement have constituted a
substantial inducement to Compass to enter into the Merger Agreement, and that
none of such restrictions or agreements set forth in the Agreement will be
unduly burdensome on Demetree.
NOW, THEREFORE, in consideration of the the sum of $10.00, and of the
mutual promises set forth in this Agreement, the parties hereto agree as
follows:
1. Definitions. Terms used but not defined in this Agreement shall have
------------
the meanings ascribed to them in the Merger Agreement.
2. Noncompetition.
---------------
(a) Noncompetition. Demetree agrees that, for a period of one year
---------------
following the Closing, 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 business activity in Duval, Nassau, St. John, Clay, Flagler or
Hernando County, Florida, which at the time is conducted by Compass or by any
affiliate of Compass in such county, except that this prohibition shall not
apply to the ownership of up to 5 percent of the equity of any other entity; or
(ii) solicit any person (natural or otherwise) who is a customer of the Bank to
do business with any person other than Compass or its affiliates. Demetree
further agrees that, for a period of five years following the Closing, 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
<PAGE>
connected in any manner with, any business activity in the State of Florida that
operates under or uses or identifies itself with the name "Community First," or
a name substantially similar thereto.
(b) Restrictions Reasonable. The restrictions against competition set
------------------------
forth above are considered by the parties to be reasonable for the purposes of
protecting the value intended to be received by Compass in connection with the
transactions contemplated by the Merger Agreement. If any such restriction is
found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too broad a range of activities or
over too large a geographic area, such restriction shall be interpreted to
extend only over the maximum period of time, range of activities or geographic
area as to which it may be enforceable.
(c) Specific Performance. Demetree acknowledges that Compass would be
---------------------
irreparably harmed and that monetary damages would not provide an adequate
remedy in the event of a breach of the provisions of this Section 2.
Accordingly, Demetree agrees that, in addition to any other remedies available
to Compass, Compass shall be entitled to specifically enforce the provisions of
this Section. In the event of such a breach, in addition to any other remedies
available to Compass, Compass shall be entitled to receive reimbursement for
Compass's reasonable attorney's fees and disbursements incurred in enforcing any
such provision.
3. Miscellaneous.
--------------
(a) Entire Agreement. This Agreement contains every obligation and
-----------------
understanding between the parties relating to the subject matter hereof and
merges all prior discussions, negotiations and agreements, if any, between them,
and none of the parties shall be bound by any conditions, definitions,
understanding, warranties or representations other than as expressly provided or
referred to herein.
(b) Governing Law. This Agreement has been entered into and shall be
--------------
construed and enforced in accordance with the laws of the State of Florida
without reference to the choice of law principles thereof.
(c) Waiver and Amendment. Any representation, warranty, covenant, term or
---------------------
condition of this Agreement which may be legally waived, may be waived, or the
time of performance thereof extended, at any time by the party hereto entitled
to the benefit thereof, and any term, condition or covenant hereof (including,
without limitation, the period during which any condition is to be satisfied or
any obligation performed) may be amended by the parties hereto at any time. Any
such waiver, extension or amendment shall be evidenced by an instrument in
writing executed by Demetree and by Compass (by its Chairman and Chief Executive
Officer or any Vice President or other person, who has been authorized by its
Board of Directors to execute waivers, extensions or amendments on its behalf).
No waiver by any party hereto, whether express or implied, of its rights under
any provision of this Agreement
2
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shall constitute a waiver of such party's rights under such provisions at any
other time or a waiver of such party's rights under any other provision of this
Agreement. No failure by any party hereto to take any action against any breach
of this Agreement or default by another party shall constitute a waiver of the
former party's right to enforce any provision of this Agreement or to take
action against such breach or default or any subsequent breach or default by
such other party.
(d) Assignment. This Agreement shall inure to the benefit of Compass and
-----------
its successors and assigns.
(e) 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 (or at such other address as a party may specify by notice to the
others):
If to Demetree, to:
Mr. Jack C. Demetree
345 Beach Boulevard
Jacksonville, Florida 32561
If to Compass, to:
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attention: Jerry W. Powell
General Counsel
(f) Severability. In the event that any one or more of the provisions
-------------
contained in this Agreement shall be declared invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force and
effect, and such invalid, void or unenforceable provision shall be interpreted
as closely as possible to the manner in which is was written.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(h) Section Headings. The section headings in this Agreement are for
----------------
convenience of reference only and shall not be deemed to alter or affect any
provision hereof.
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IN WITNESS WHEREOF, each of the parties hereto have duly executed this
Agreement as of the date set forth above.
- ------------------------------------ --------------------------------------
Witness Jack C. Demetree, as an individual
ATTEST COMPASS BANCSHARES, INC.
By: By:
--------------------------------- -----------------------------------
Its: Its:
-------------------------------- ----------------------------------
ATTEST COMPASS BANK
By: By:
--------------------------------- -----------------------------------
Its: Its:
-------------------------------- ----------------------------------
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EXHIBIT F
OPINIONS REQUIRED FROM COUNSEL
TO COMPASS AND COMPASS FLORIDA
------------------------------
(i) Compass and Compass Florida are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and Compass is a bank holding company under the Bank Holding Company Act of
1956, as amended. Compass and Compass Florida 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 Florida are duly qualified and in good standing in the
respective states where such qualification is required.
(ii) Compass and Compass Florida each have all requisite power and
authority to execute and deliver the 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
Florida (or either of them) to execute and deliver the Agreement and to
consummate the transactions contemplated therein have been duly and validly
taken; and the Agreement has been duly executed and delivered by, and
constitutes the valid and binding obligation of each of Compass and Compass
Florida enforceable against Compass and Compass Florida 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
Agreement are validly issued, fully paid and nonassessable; and, except as
contemplated by the Agreement, the shares of Compass Common Stock issued
pursuant to the 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 Florida of the
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 Florida,
(b) except as disclosed in the 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 Florida is
a party or by which Compass or Compass Florida 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 Agreement, any law, regulation, rule, administrative
regulation or decree of any court or any governmental agency or body applicable
to Compass or Compass Florida or their respective assets or properties;
<PAGE>
(v) except as disclosed in the 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 Florida of the Agreement;
(vi) neither Compass nor Compass Florida is in violation of or default
under the respective Certificates of Incorporation or Bylaws of Compass or
Compass Florida or any agreement, document or instrument under which Compass or
Compass Florida is obligated or bound, or any law, order, judgment, or
regulation applicable to Compass or Compass Florida 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
Agreement have been registered under the Securities Act of 1933, as amended.
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APPENDIX II
Opinion of Robert W. Baird & Co.
1
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[LETTERHEAD OF BAIRD GOES HERE]
June 21, 1996
Board of Directors
CFB Bancorp, Inc.
3740 Beach Boulevard
Jacksonville, Florida 32207
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of CFB Bancorp, Inc. (the "Company")
common stock, par value $0.01 per share (the "CFB Common Stock") of the
consideration (the "Consideration") to be paid for the CFB Common Stock pursuant
to the Agreement and Plan of Merger dated as of February 13, 1996 (the
"Agreement") between Compass Bancshares Inc. ("Compass") and the Company.
Pursuant to the agreement, the Company will be merged into Compass Florida, a
wholly-owned subsidiary of Compass, (the "Merger") and each share of CFB Common
Stock immediately prior to the merger shall be converted into a number of shares
of Compass common stock, par value $2.00 per share ("Compass Common Stock") as
set forth in the Agreement. Holders of CFB Common Stock Options shall receive
the number of shares of Compass Common Stock as set forth in the Agreement.
Robert W. Baird & Co. Incorporated ("Baird"), as part of its investment banking
business, is engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwriting, competitive
bidding, secondary distributions of listed and unlisted securities, private
placements, and valuations for estate, corporate and other purposes. Baird makes
a market in CFB Common Stock and has provided investment banking services to the
Company in the past for which Baird has received customary fees.
In connection with the opinion, we have reviewed or considered among other
things, the Agreement and ancillary documents related to the Agreement; the
Company's and Compass's audited financial statements and management's discussion
and analysis of the financial condition and results of operation of each the
Company and Compass for the three fiscal years ended December 31, 1995; the
Company and Compass's unaudited interim financial statements on Form 10-Q for
the period ended March 31, 1996; and financial forecasts and analyses prepared
by management of the Company. We have also held discussions with the management
of the Company concerning their views regarding past and future business
operations of the Company. In addition, we have reviewed reported price and
trading histories for the Company and Compass Common Stock including a
comparison of certain financial and stock market information for the
<PAGE>
Board of Directors
CFB Bancorp, Inc.
June 21, 1996
Page two
Company and Compass with similar information for certain other companies, the
securities of which are publicly traded; the financial terms of recent business
combinations; the current market environment generally and the banking
environment in particular; and such other financial information, studies,
analyses and investigations as well as financial, market and economic criteria
we considered relevant.
In performing our review, we have relied without independent verification upon
the accuracy and completeness of all of the financial and other
information, written or otherwise provided to us, for purposes of this opinion.
We have not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the specific assets, the collateral securing assets
and liabilities of the Company or Compass or the collectability of any such
assets. We have assumed that there has been no material change it the Company's
or Compass's assets, financial condition, results of operation, business or
prospects since the date of the last financial statements made available to us.
We also have assumed that Compass will receive regulatory approvals without
undue delay.
Our opinion is necessarily based on economic, market and other conditions in
effect on and material made available to us as of the date hereof. Subsequent
events could materially effect the assumptions used in this opinion. We have not
undertaken to reaffirm or revise this opinion or otherwise comment on any events
occurring after the date hereof.
It is understood that this opinion is not to be quoted or referred to, in whole
or part, in a registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without Baird's prior written
consent. Baird hereby consents to the inclusion of this opinion in any
registration statement or proxy statement used in connection with the Merger so
long as the opinion is quoted in full in such registration statement or proxy
statement.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration to be received by the holders of the CFB Common Stock
pursuant to the Agreement is fair, from a financial point of view, to such
holders.
Very truly yours,
/s/ Robert W. Baird & Co. Incorporated
- ------------------------------------------
ROBERT W. BAIRD & CO. INCORPORATED
<PAGE>
APPENDIX III
Description of Business contained in CFB annual report on Form 10-K
for the year ended December 31, 1995
<PAGE>
PART I
ITEM 1 - BUSINESS
THE HOLDING COMPANY
CFB BANCORP, INC. ("CFB", or the "COMPANY" when discussed collectively with
Community First Bank). CFB is a one-bank holding company organized under the
laws of the State of Florida on July 15, 1994. CFB owns all of the outstanding
shares of capital stock of Community First Bank ("Community"). CFB's
headquarters are located at 3740 Beach Boulevard, Jacksonville, Florida,
telephone number is (904) 396-1182.
CFB became a one-bank holding company as a result of the reorganization of
Community, which was consummated on December 31, 1994. The reorganization was
accomplished pursuant to an Agreement and Plan of Reorganization which was
approved by Community's shareholders at the Special Meeting of Shareholders held
December 28, 1994, and resulted in Community becoming a wholly-owned subsidiary
of CFB. Community is CFB's only operating subsidiary. For the fiscal year
ended December 31, 1995, the Company had net consolidated earnings of $1.3
million as compared to $1.9 million for the same period in 1994. At December
31, 1995, the Company had consolidated total assets of $310.4 million, total
deposits of $260.5 million and total shareholders' equity of $19.7 million.
PENDING MERGER
On February 13, 1996, CFB entered into an Agreement and Plan of Merger
("Merger Agreement") with Compass Bancshares, Inc., Birmingham, Alabama, a bank
holding company, with $10.2 billion in total assets ("Compass Bancshares") under
which the Company will be merged into a to-be-formed subsidiary of Compass
Bancshares ("Compass Florida") with Compass Florida continuing as the surviving
corporation. Each share of CFB's common stock, par value $.01 per share, issued
and outstanding immediately prior to the effective time shall, by virtue of the
Merger Agreement and without any action on the part of the holder thereof, be
converted into and represent the right to receive shares of Compass Bancshares'
common stock ("Merger Consideration"). For the purposes of determining the
number of CFB's shares issued and outstanding, the number of shares issued and
outstanding shall be increased by the number of shares that may be acquired upon
exercise of any option or other security entitling the holder thereof to acquire
shares which are in effect or outstanding immediately prior to the effective
time.
Each holder of CFB's common stock shall, for each such share, receive
Merger Consideration equal to the number of shares of Compass Bancshares' common
stock, par value $2.00 per share determined by dividing the applicable number of
shares of Compass Bancshares' common stock set forth below (the "Aggregate
Merger Consideration") by the number of shares outstanding immediately prior to
the effective time. The Merger Agreement provides for four different pricing
scenarios: (i) in the event that the average closing sale price of Compass
Bancshares' common stock as reported by the "NASDAQ-NMS" for the 15 days of
trading immediately preceding the fifth business day prior to the Closing (the
"Market Price") is equal to or greater than $32.50, but not greater than $34.50,
the Aggregate Merger Consideration shall be 1,326,154 shares of Compass
Bancshares' common stock less the number of shares of Compass Bancshares' common
stock required
1
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to pay for the options canceled (the "Option Payment Shares"); (ii) in the event
that the Market Price is greater than $34.50, the Aggregate Merger Consideration
shall be the number of shares of Compass Bancshares' common stock equal to the
quotient of $45,752,313 divided by the Market Price, less the Option Payment
Shares; (iii) in the event that the Market Price is less than $32.50, but not
less than $30.50, the Aggregate Merger Consideration shall be the number of
shares of Compass Bancshares' common stock equal to the quotient of $43,100,000
divided by the Market Price, less the Option Payment Shares; (iv) in the event
that the Market Price is less than $30.50, the Merger Agreement shall
automatically terminate, unless at least two days before the date set for
Closing: (A) Compass Bancshares shall have the right to cause this Merger
Agreement to remain in effect by agreeing to pay Aggregate Merger Consideration
of a number of shares of Compass Bancshares' common stock equal to the quotient
of $43,100,000 divided by the Market Price, less the Option Payment Shares, and
(B) CFB shall have the right to cause this Merger Agreement to remain in effect
by agreeing to accept Aggregate Merger Consideration of 1,413,114 shares of
Compass Bancshares' common stock, less the Option Payment Shares.
CFB SUBSIDIARY
COMMUNITY FIRST BANK. Community is a Florida-chartered commercial bank
which commenced operations on April 17, 1981, as a savings and loan association.
On December 28, 1990, Community converted from a state savings association
charter to a Florida-chartered commercial bank. Community's deposits are
federally insured up to applicable limits by the Federal Deposit Insurance
Corporation ("FDIC"). Community is a member of the Federal Home Loan Bank
System ("FHLB"). Community's corporate offices are located in Jacksonville,
Florida, and its main telephone number is (904) 396-1182. At December 31, 1995,
Community had total assets of $309.3 million, total deposit accounts of $260.5
million and total shareholders' equity of $18.4 million.
As a commercial bank, Community's activities are primarily directed at
soliciting deposits from the general public and investing such deposits,
together with other sources of funds, in loans secured by residential and
commercial properties, as well as other types of commercial and consumer loans.
Community, to a lesser extent, invests its funds in mortgage-backed securities
and other types of investment securities.
The principal sources of funds for Community's lending activities
traditionally have been deposits, repayment of loans and mortgage-backed
securities, and earnings from operations. In addition, Community has from time
to time utilized advances from the FHLB of Atlanta and the sale of securities
under agreements to repurchase as secondary sources of funds.
Community's primary sources of income are interest and fees on loans, gains
on sales of mortgage loans in the secondary markets, mortgage servicing fees,
fees on transaction accounts, and interest and dividends on mortgage-backed
securities and investments. Community's principal costs are interest paid on
deposit accounts and operating expenses.
COMMUNITY'S SUBSIDIARIES
At December 31, 1995, Community had one wholly-owned subsidiary, Community
Savings Mortgage Company ("CSM"). CSM is currently inactive and its sole asset
at December 31, 1995 was cash totaling $355,874.
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At December 31, 1995, the Company had a $465,000 note receivable and a $1.8
million debenture which were received in connection with the sale of Community's
wholly-owned subsidiary American Surety and Casualty Holding Company ("American
Surety") in 1994. American Surety is the parent company of American Surety and
Casualty Company, an insurance company underwriting property, casualty, marine
and surety insurance. The sale was finalized on June 27, 1994, after receipt of
regulatory approval. A pre-tax gain of $238,000 was recorded for the sale in
1994. See "Discontinued Operations".
MARKET AREA
The Company provides a full range of banking services throughout Northeast
Florida and Southwest Florida. In addition to the home office in Jacksonville,
the Company has eight full-service branches, with four located in Jacksonville,
two in Spring Hill, one in Orange Park and one in Ponte Vedra, as well as a
mortgage production office in Dunedin, Florida. The primary market area for
lending and deposits are Duval, Clay, St. John's, Hernando, Hillsborough and
Pinellas Counties.
COMPETITION
The Company experiences competition for attracting deposits and making
loans from other financial institutions, including some larger regional bank
holding companies, commercial banks, savings institutions and credit unions, as
well as other businesses such as securities brokerage firms and mutual funds.
Additional competition for deposits comes from government securities and money
market funds. The primary factors in competing for deposits are interest rates,
the range of financial services offered, convenience of office locations, and
flexible office hours. The primary factors in competing for loans include
interest rates, loan fees, flexible terms, and timely loan decisions.
The Company competes with larger institutions for deposits by offering a
variety of savings and checking programs geared to its customers. The Company
responds to its competition by developing strong ties with the communities it
services and providing a high quality of personal banking services to retirees,
families, professionals, and owner-operated businesses with emphasis on quick
and flexible responses to customer demands.
With respect to loans, since converting to a commercial bank in 1990, the
Company has steadily increased the deployment of its funds into commercial and
consumer loan products. The Company has targeted medium and small businesses as
its potential customer base. The Company, however, continues to originate
residential mortgage loans by offering various adjustable rate and fixed rate
loan products. Consolidation within the financial industry, and particularly
within Florida, has been dramatic. The end result has been more realistic
pricing with rates and fees being more closely tied to the actual cost of
providing products and services.
Geographic deregulation has also had a material impact on the financial
industry. Federally-chartered savings institutions have interstate banking
authority. As for commercial banks, to date, all but three states have enacted
some form of interstate banking legislation. The most common form of interstate
banking statutes have either regional limitations or reciprocity requirements.
A growing number of states, however, now provide for unrestricted entry. Recent
legislation in Florida and on the national level will remove most of the final
barriers to interstate banking. As of September 29, 1995,
3
<PAGE>
bank holding companies are now permitted to acquire banks across state lines.
Beginning June 1, 1997, a bank holding company may consolidate its interstate
subsidiary banks into branches and merge with a bank in another state depending
upon state laws. See "Regulation and Supervision-Interstate Banking".
LENDING ACTIVITIES
GENERAL. The Company has traditionally concentrated its lending activities
on conventional first mortgage loans secured by residential property. In recent
years, the Company has steadily increased its commercial and consumer lending
activities to further diversify its loan portfolio. Commercial and consumer
loan growth will continue to be emphasized while adhering to the Company's
strict underwriting standards. As of December 31, 1995, commercial and consumer
loans totaled $71.3 million, a 33.1% increase over the prior year, or 32.9% of
the total loan portfolio. As a result, residential mortgage loans and
construction-permanent residential mortgage loans declined slightly as a percent
of the total loan portfolio from 71.7% as of December 31, 1994, to 64.0% as of
December 31, 1995. At December 31, 1995, the total loan portfolio, net, totaled
$205.8 million representing approximately 66.3% of the Company's total assets.
Additionally, the Company had loans held for sale totaling $4.2 million, or 1.4%
of its total assets as of December 31, 1995. Loans held for sale consisted of
residential mortgage loans originated for immediate sale and residential
mortgage loans designated for securitization into mortgage-backed securities.
[ TABLE FOLLOWS THIS PAGE ]
4
<PAGE>
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
----------------- ----------------- ----------------- ------------------ -----------------
(DOLLARS IN THOUSANDS)
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
--------- ------ --------- ------ -------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential real
estate $124,341 57.3% $122,971 57.3% $100,911 51.9% $110,892 62.1% $120,720 70.8%
Construction-permanent
residential
mortgage 14,418 6.7 30,992 14.4 45,588 23.4 25,536 14.3 7,458 4.4
Construction and land
development 6,763 3.1 7,234 3.4 12,761 6.6 11,002 6.2 19,904 11.7
Commercial real estate 40,977 18.9 25,175 11.7 19,527 10.0 17,321 9.7 12,559 7.4
-------- ----- -------- ----- -------- ------ -------- -------- -------- ------
Total real estate loans 186,499 86.0 186,372 86.8 178,787 91.9 164,751 92.3 160,641 94.3
Commercial 19,622 9.1 20,793 9.7 10,134 5.2 8,018 4.5 4,175 2.5
Consumer 10,654 4.9 7,564 3.5 5,598 2.9 5,793 3.2 5,415 3.2
-------- ----- -------- ----- -------- ------ -------- -------- -------- ------
Total loan portfolio 216,776 100.0% 214,729 100.0% 194,519 100.0% 178,562 100.0% 170,231 100.0%
======== ===== ======== ===== ======== ====== ======== ======== ======== ======
Deduct:
Undisbursed portion of
loans in process 8,901 17,037 25,534 13,144 9,202
Deferred loan fees, net 306 442 369 1,167 797
Discount on loans
purchased 69 344 394 504 777
Allowance for loan
losses 1,686 1,218 1,078 1,647 1,208
-------- -------- -------- -------- --------
Total deductions 10,962 19,041 27,375 16,462 11,984
-------- -------- -------- -------- --------
Total loan portfolio -
net $205,814 $195,688 $167,144 $162,100 $158,247
======== ======== ======== ======== ========
</TABLE>
5
<PAGE>
LOAN MATURITIES
The following table sets forth at December 31, 1995, loans by scheduled due
date for the periods indicated. Loans maturing after one year are further
distinguished between fixed and adjustable interest rates. For construction
loans, the undisbursed portion of loans-in-process has been netted against the
corresponding loan amount. For construction-permanent residential mortgage
loans, the scheduled due date is for the construction phase of the loan.
<TABLE>
<CAPTION>
WITHIN 1 TO 5 AFTER
1 YEAR YEARS 5 YEARS TOTAL
------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Residential real estate $ 492 $ 20,467 $103,382 $124,341
Construction-permanent residential
mortgage 6,938 -- -- 6,938
Construction and land development 6,367 -- -- 6,367
Commercial real estate 5,230 23,498 11,557 40,285
Commercial 5,462 10,942 2,887 19,291
Consumer 2,373 7,279 1,000 10,652
Deferred loan fees and discount on
loans purchased -- -- ( 374) ( 374)
Allowance for loan losses -- -- ( 1,686) ( 1,686)
------- -------- -------- --------
Loans, net $26,862 $ 62,186 $116,766 $205,814
======= ======== ======== ========
Loans maturing after one year:
Fixed interest rates $ 33,971 $ 40,156
Floating or adjustable interest rates 28,215 76,610
-------- --------
Total $ 62,186 116,766
======== ========
</TABLE>
LENDING AREA. While the Company 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 branch locations
on the Northeast and Southwest Coasts of Florida, loan origination is emphasized
in the Company's primary market areas within Duval, St. Johns, Clay, Hernando,
Pinellas and Pasco Counties, Florida. Commercial and consumer lending
activities are confined to markets directly served by the Company'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, $124.3 million, or
57.3% of the total loan portfolio, consisted of permanent mortgage loans secured
by residential real estate. The primary lending activity of the Company has
been the origination of conventional and government insured or guaranteed loans
to enable borrowers to purchase existing and new homes. The Company's lending
policies generally limit the maximum loan-to-value ratio on residential mortgage
loans to 95% of the lesser of the appraised value or purchase price, with the
condition that private mortgage insurance be required on substantially all loans
with loan-to-value ratios in excess of 80%.
6
<PAGE>
The Company 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 interest rate adjustment thereafter are also offered by the Company.
For residential mortgage loans, the Company 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. Most borrowers are also required to advance funds on a
monthly basis together with each payment of principal and interest to a mortgage
escrow account from which disbursements are made for items such as real estate
taxes and insurance premiums. Residential mortgage loans generally are
underwritten in accordance with the Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") guidelines.
Community is an approved seller/servicer of FNMA and FHLMC residential mortgage
loans.
Fixed rate residential real estate loans with terms of greater than five
years are generally originated for immediate sale in the secondary market.
Fixed rate residential real estate loans with terms of five years or less and
adjustable rate mortgages ("ARMs") are typically originated to be held in
portfolio. The origination and sale of fixed rate residential real estate loans
have provided a significant source of non-interest income. Such loans are sold
to various other lenders or securitized and sold as mortgage-backed securities.
The gain on sale of residential loans for the year ended December 31, 1995,
totaled $1.3 million.
CONSTRUCTION-PERMANENT RESIDENTIAL MORTGAGE LOANS. As of December 31,
1995, $14.4 million, or 6.7% of the total loan portfolio consisted of
construction-permanent mortgage loans. Construction-permanent residential
mortgage loans are loans granted to home buyers for both the construction and
permanent financing of newly-built homes. During the construction phase, funds
are disbursed to the borrower and builder based on periodic site inspections.
After the construction phase, the loans automatically convert to permanent
mortgage loans. Such loans have provided a steady source of permanent mortgage
loans which can later be converted to mortgage-backed certificates and sold in
the secondary market. Such loans are made at fixed and adjustable rates of
interest. The interest rate on fixed rate construction-permanent mortgage loans
may be adjusted within certain limitations when the loan is converted to
permanent financing to reduce interest rate exposure during the construction
phase. Because such loans are made to home buyers rather than builders,
construction-permanent mortgage loans are generally considered to have less
credit risk than loans made directly to builders.
CONSTRUCTION AND LAND DEVELOPMENT LOANS. Construction and land development
loans, which totaled $6.8 million as of December 31, 1995, are primarily
comprised of residential construction loans to builders and acquisition and
development loans.
7
<PAGE>
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.
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. The largest acquisition and development loan as of
December 31, 1995 was a $1.8 million loan for the acquisition of a 200 acre
parcel of land for the purpose of restoring the land to its natural state so
that it may be used as a mitigation bank for developers of real estate projects.
COMMERCIAL REAL ESTATE LOANS. As of December 31, 1995, commercial real
estate loans totaled $41.0 million, or 18.9% of the Company'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,
mini-warehouses, industrial buildings and retail centers. These loans typically
do not exceed 75% 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 25 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 the
Company's commercial lending officers.
In underwriting commercial real estate loans, the Company 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, the Company'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. The Company 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.
8
<PAGE>
The Company has also originated commercial real estate loans which are
partially guaranteed as to the payment of principal and interest by the Small
Business Administration ("SBA"). Generally, the SBA will guarantee 85% of the
principal balance of qualifying loans up to a specified dollar amount. The
guaranteed portions of such loans have been sold in the secondary market and
comprise the largest portion of commercial loan participations sold. As of
December 31, 1995, commercial loan participations sold totaled $4.3 million.
COMMERCIAL LOANS. As of December 31, 1995, commercial loans totaled
$19.6 million, or 9.1% of the total loan portfolio. The Company'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 the Company's loan-to-value underwriting guidelines. Term loans are
typically amortized over a five- to seven-year term. Lines of credit are
generally secured by accounts receivable and are subject to renewal on an annual
basis. Because the commercial borrower's primary source of repayment is its
operating income, the Company's credit policy requires a formal financial
analysis and review at least annually and, in most cases, the Company 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 the Company's retail branch network. Commercial loans are
structured, priced and underwritten by the Company's commercial lending staff
which consists of experienced commercial loan officers. The Company actively
participates in the loan guaranty program of the SBA and has earned the
designation of an SBA Certified Lender.
CONSUMER LENDING. As of December 31, 1995, $10.7 million, or 4.9% of the
Company's total loan portfolio, consisted of consumer loans. Consumer loan
products offered within the Company's market areas include home equity lines of
credit, home improvement loans, automobile loans, overdraft protection lines of
credit and unsecured consumer loans. The Company 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 the Company serves.
In addition, management believes that offering consumer loan products helps
expand the Company's customer base and creates stronger ties to its existing
customer base.
For consumer loans, the Company'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 the Company'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. The Company's lending
activities are subject to the Company's written, nondiscriminatory underwriting
standards and loan origination procedures. Detailed loan applications 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
9
<PAGE>
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 $1.5 million. The Board of Directors' Loan
Committee has the authority to approve loans up to $1.5 million. Approval by
unanimous consent of the Chairman of the Board, President and an Executive Vice
President is permitted for loans not exceeding $750,000. The Chairman has
individual lending authority of up to $500,000. The Management Committee,
consisting of the Company's senior management, has lending authority of up to
$350,000. All commercial loan requests of $100,000 or more must be certified by
the Company's Credit Administration Officer that the loan request conforms to
the credit policy prior to approval. The Company's Credit Administration
Section includes a loan review specialist who is responsible for monitoring loan
documentation discrepancies. The Board of Directors has granted individual
lending authority to certain individuals for the approval of residential
mortgage loans not exceeding FNMA/FHLMC maximums, as well as individual lending
authority to commercial and consumer loan officers at various amounts not
exceeding $100,000. In addition, the Company is subject to loans-to-one
borrower restrictions at both the state and 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 unsecured loans to one
borrower, under state guidelines, which are more restrictive than federal
guidelines, was $2.8 million.
The Company's loan review function consists of both an internal and
external loan review which examines all commercial loans for completeness of
documentation and adherence to credit policy and procedures. A loan exception
monitoring system also is maintained and results are reported to senior
management on a frequent basis, while the external review is performed by an
independent loan review firm and reported to management and the Board of
Directors.
MORTGAGE BANKING ACTIVITIES. Since 1991, the Company has emphasized its
mortgage banking activities, which includes the origination and subsequent sale
of mortgage loans in the secondary market. At that time, the Company increased
its loan origination staff and adopted a policy of selling, to the extent
practicable, all of its long-term, fixed-rate residential mortgage loans and a
portion of its adjustable-rate residential mortgage loans. The origination and
sale of mortgage loans has provided and will continue to provide a significant
source of non-interest income, which includes loan origination fees and gains on
the sale of loans.
Loans sold through mortgage banking activities are primarily generated from
commissioned loan officers. Loans originated under these programs are
underwritten, approved and funded based upon the requirements of the purchaser.
Loans are generally sold in the secondary market on a non-recourse basis.
Many of the loans are first converted into mortgage-backed securities
issued by FNMA or FHLMC and subsequently sold to investors. The Company
continues to service these loans after the sale. In the event interest rates
rise between the time the loans are originated (or purchase commitments are
issued) and the time these loans are sold, the Company may be unable to sell
such loans without incurring losses. The Company has attempted to protect
itself from this interest rate risk by purchasing commitments to sell the
mortgage-backed securities at a stated price on a future date. Because these
commitments are based on existing and assumed market conditions, this hedging
technique may not be fully successful in offsetting the Company's exposure to
rising interest rates.
10
<PAGE>
The Company also sells individual mortgage loans to other financial
institutions on a servicing-released basis. Because the servicing rights are
transferred to the buyer, the Company obtains higher purchase prices for these
loans as compared to loan sales in which the servicing rights are retained. The
Company does not incur interest rate risk on these sales because commitments for
the purchase of these loans are obtained from the purchaser at the time the
application for the loan is taken from the borrower.
MORTGAGE LOAN SERVICING. As of December 31, 1995, the Company serviced
approximately $564.4 million in mortgage loans for investors, which were
obtained through the purchase of mortgage servicing rights ("PMSRs") from third
parties and to a lesser extent, through the origination and subsequent sale of
mortgage loans where the servicing rights are retained by the Company ("OMSRs").
Mortgage loan servicing involves collecting principal, interest and escrow
funds for taxes and insurance premiums from mortgage loan borrowers, paying
principal and interest to mortgage loan investors, paying property taxes and
insurance premiums on mortgaged property, supervising foreclosures in the event
of unremedied defaults, and performing all related accounting and reporting
activities. For these services, the Company is paid a monthly loan servicing
fee which is based on the unpaid principal balance of the loans serviced. Loan
servicing fees have been a significant source of non-interest income to the
Company. Additionally, mortgage loan servicing provides non-interest bearing
demand deposit accounts consisting primarily of escrow funds which further
support the Company's lending activities.
Over the past several years, significant emphasis has been placed on
building the mortgage loan servicing portfolio. Recognizing that a greater
volume of loans could be serviced with little incremental costs due to existing
excess capacity, the Company began purchasing servicing rights to mortgage
loans. The Company has also added to its mortgage loan servicing portfolio by
retaining the servicing rights on many loans which it had sold in the secondary
market. Capitalized mortgage servicing rights attributable to the mortgage loan
servicing portfolio totaled $7.0 million as of December 31, 1995, on a total
mortgage loan servicing portfolio of $564.4 million. As of December 31, 1995,
capitalized mortgage servicing rights consisted of PMSRs and OMSRs totaling $6.9
million, net of a valuation allowance for impairment of $423,000, and excess
servicing receivables totaling $63,000. Excess servicing receivables represent
the capitalized portion of excess servicing fees on loans which have been
originated by the Company and sold in the secondary market. Mortgage servicing
rights are amortized against loan servicing fees over the estimated period of
the servicing revenues.
PMSRs are typically purchased from other financial institutions and
mortgage banking companies. Before purchasing additional mortgage servicing
rights, the Company conducts a valuation of such servicing rights and an
assessment of the loan servicing portfolio to be acquired. A pricing model is
utilized in this evaluation process which assesses prepayment expectations,
costs to establish servicing files, on-going costs of servicing, mortgage loan
coupon range, geographic concentrations, payment remittance cycles and the
utilization of escrow funds.
The Company evaluates mortgage servicing rights for impairment based on
their fair values by making its best estimate as to the future net cash flows
considering primarily historical portfolio prepayment rates and future
prepayment forecasts. Based on such evaluations, the Company recorded
11
<PAGE>
a valuation adjustment of $423,000 as of December 31, 1995. The valuation
adjustment was required due to increased estimates of prepayments of the
underlying mortgage loans.
During certain periods, the Company sells loan servicing rights based upon
prevailing prices for such servicing and asset/liability management goals.
During the year ended December 31, 1995, the Company sold the mortgage loan
servicing rights to $97.0 million principal amount of mortgage loans.
12
<PAGE>
YIELDS EARNED AND RATES PAID. The following tables set forth certain
information relating to the categories of the Company'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 $ 59,871 $ 3,718 6.21% $ 46,385 $ 2,913 6.28% $ 44,411 $ 2,780 6.26%
Investments - tax-exempt 11,228 585 5.21 11,208 588 5.25 9,258 501 5.41
Loans 209,527 17,286 8.25 194,736 15,080 7.74 182,938 14,584 7.97
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-earning assets $280,626 $21,589 7.75% $252,329 $18,581 7.36% $236,607 $17,865 7.55%
======== ======= ==== ======== ======= ==== ======== ======= ====
Interest-bearing liabilities:
Deposits $242,646 $10,361 4.27% $231,633 $ 8,293 3.58% $230,658 $ 8,972 3.89%
FHLB advances 18,574 1,146 6.17 20,710 1,116 5.39 6,567 397 6.04
Securities sold under agreements
to repurchase 12,845 781 6.08 1,471 91 6.18 -- -- --
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-bearing liabilities $274,065 $12,288 4.48% $253,814 $ 9,500 3.76% $237,225 $ 9,369 3.95%
======== ======= ==== ======== ======= ==== ======== ======= ====
Excess of interest-earning assets over
interest-bearing liabilities $ 6,561 $ (1,485) $ (618)
======== ======== ========
Net interest income $ 9,301 $ 9,081 $ 8,496
======= ======== ========
Interest rate spread 3.27% 3.60% 3.60%
==== ==== ====
Net interest margin 3.31% 3.60% 3.59%
==== ==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 102.39% 99.41% 99.74%
====== ===== =====
Loan Fee Amortization included in
interest on loans $510 $413 $722
==== ==== ====
</TABLE>
13
<PAGE>
RATE/VOLUME ANALYSIS. The table below sets forth certain information regarding
changes in interest income and interest expense of the Company 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 in volume (changes in volume multiplied by old
rate); (2) changes in rates (change in rate multiplied by 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
---------- -------- -------- ---------- ------ ------ ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 846 $1,361 $2,207 $ 945 $(450) $ 495 $1,096 $(1,803) $ (707)
Investments:
Taxable 885 (81) 804 126 7 133 (383) (610) (993)
Tax exempt -- (3) (3) -- 88 88 96 (48) 48
------ ------ ------ ------ ------ ----- ------ ------- -------
Total interest income 1,731 1,277 3,008 1,071 (355) 716 809 (2,461) (1,652)
------ ------ ------ ------ ------ ----- ------ ------- -------
INTEREST EXPENSE:
Deposits 970 1,098 2,068 (279) (400) (679) 191 (2,080) (1,889)
FHLB advances 42 (12) 30 863 (144) 719 218 (112) 106
Repurchase agreements 710 (20) 690 91 -- 91 -- -- --
------ ------ ------ ------ ------ ----- ------ ------- -------
Total interest expense 1,722 1,066 2,788 675 (544) 131 409 (2,192) (1,783)
------ ------ ------ ------ ------ ----- ------ ------- -------
Net interest income (expense) $ 9 $ 211 $ 220 $ 396 $ 189 $ 585 $ 400 $ (269) $ 131
====== ====== ====== ====== ====== ===== ====== ======= =======
</TABLE>
14
<PAGE>
ASSET/LIABILITY MANAGEMENT
The Company's business consists primarily of deposit gathering and lending
activities. Accordingly, the Company'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 the
Company's exposure to changing interest rates and to establish general
parameters for future balance sheet structuring strategies.
One measure of the Company's 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, the Company has
experienced a negative gap, which is an excess of liabilities over assets
maturing or repricing within a given time period. This negative gap has left
the Company's earnings vulnerable to periods of rising interest rates, in that
during such periods the interest expense paid on liabilities will generally
increase more rapidly than the interest income earned on assets. Conversely, in
a falling interest rate environment the total expense paid on liabilities will
generally decrease more rapidly than the decrease in 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.
The Company's asset/liability strategy for 1995 was to continue working on
reducing the negative gap by diversifying the loan portfolio into higher-
yielding commercial and consumer loans which are more interest rate sensitive
than long-term residential mortgage 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, the cumulative negative gap for
the one year interval was estimated at 4.95%.
15
<PAGE>
The following table sets forth at December 31, 1995, the amounts of
interest-earning assets and interest-bearing liabilities which are anticipated
by the Company to mature or reprice in each of the periods shown. Except as
stated below, the amounts of assets and liabilities shown which mature or
reprice during a particular period were determined in accordance with the
contractual terms of the asset or liability. Fixed rate loans 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. The Company has assumed
that its regular savings and NOW accounts are non-rate sensitive and its 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
--------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Residential real estate and
construction-permanent $ 12,818 $ 11,583 $ 29,441 $ 53,842 $ 76,027 $129,869
Construction, commercial
real estate and commercial 47,160 804 1,525 49,489 17,488 66,977
Consumer loans 1,796 95 249 2,140 8,514 10,654
Less: Allowance for loan losses -- -- -- -- (1,686) (1,686)
Total loans 61,774 12,482 31,215 105,471 100,343 205,814
Loans held for sale 4,244 -- -- 4,244 -- 4,244
Investments 28,477 -- -- 28,477 37,782 66,259
Interest-bearing deposits 12,483 -- -- 12,483 -- 12,483
Total interest-earning assets,
including interest-bearing deposits 106,978 12,482 31,215 150,675 138,125 288,800
Interest-bearing liabilities:
Demand deposits -- -- -- -- 36,947 36,947
NOW accounts -- -- -- -- 30,005 30,005
Money market accounts 19,813 -- -- 19,813 -- 19,813
Savings accounts -- -- -- -- 15,476 15,476
Certificates of deposit 46,710 36,562 32,749 116,021 42,205 158,226
Total deposits 66,523 36,562 32,749 135,834 124,633 260,467
FHLB advances 15,500 -- -- 15,500 -- 15,500
Securities sold under agreements to
repurchase 13,650 -- -- 13,650 -- 13,650
Total interest-bearing
liabilities 95,673 36,562 32,749 164,984 124,633 289,617
Interest rate sensitivity gap $ 11,305 $(24,080) $ (1,534) $(14,309) $ 13,492
======== ======== ======== ======== ========
Cumulative interest rate sensitivity gap $ 11,305 $(12,775) $(14,309) $(14,309)
======== ======== ======== ========
Cumulative interest rate sensitivity gap/
Total interest earning assets,
including interest-bearing deposits 3.91% (4.42)% (4.95)% (4.95)%
======== ======== ======== ========
</TABLE>
16
<PAGE>
NON-PERFORMING ASSETS
Non-performing assets include non-accruing loans, certain accruing
loans that are delinquent up to 90 days and other real estate. Loans are placed
on non-accrual status when, in the judgment of management, the probability of
collection of interest is deemed to be insufficient to warrant 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
substandard, unless otherwise specifically waived by the Executive Committee.
Real estate acquired by the Company as a result of foreclosure or by
deed in lieu of foreclosure is classified as other real estate until it is sold.
When property is acquired, it 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 fair value.
The Company's asset quality continued to improve during 1995 as a
result of new policies and controls that were put in place in earlier years. An
independent consultant is used from time to time to perform a loan review to
assist management in identifying, in a timely manner, potential problem loans
and to help determine their impact on the adequacy of the allowance for loan
losses. A loan grading system is used for commercial loans so that management
can better monitor the credit quality of the loan portfolio. Non-performing
loans and other real estate declined $1.7 million, or 43.4% during 1995 to $2.2
million, or 1.1% of net loans, as of December 31, 1995, from $3.9 million, or
2.0% of net loans, as of December 31, 1994.
17
<PAGE>
The following table summarizes the Company's non-performing assets as of
the dates indicated:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accruing loans:
Residential real estate $ 626 $ 610 $ 672 $ 972 $ 907
Construction - permanent residential
mortgage; and Construction and
land development 264 -- 126 524 712
Commercial real estate 178 149 2,575 3,470 4,268
Commercial 646 -- 4 774 396
Consumer -- -- -- -- --
------ ------ ------ ------ -------
Total 1,714 759 3,377 5,740 6,283
------ ------ ------ ------ -------
Accruing loans delinquent 90
days or more:
Residential real estate -- -- -- -- --
Construction - permanent residential
mortgage; and Construction and
land development -- -- -- -- 591
Commercial real estate -- -- -- -- --
Commercial -- -- -- -- --
Consumer 60 53 49 51 62
------ ------ ------ ------ -------
Total 60 53 49 51 653
------ ------ ------ ------ -------
Total non-performing loans 1,774 812 3,426 5,791 6,936
Total other real estate, net of
related reserves 419 3,063 1,277 1,548 4,119
------ ------ ------ ------ -------
Total non-performing loans and
other real estate $2,193 $3,875 $4,703 $7,339 $11,055
====== ====== ====== ====== =======
Total non-performing loans and real
estate owned to total assets 0.7% 1.4% 1.7% 2.8% 4.4%
====== ====== ====== ====== =======
</TABLE>
18
<PAGE>
As of December 31, 1995, non-performing loans and other real estate totaled
$2.2 million, or 0.7% of total assets. The following table reflects the
composition of other real estate as of December 31, 1995.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Residential real estate $141
Residential lots purchased for resale 278
----
TOTAL $419
====
</TABLE>
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is maintained at
a level believed adequate by management to absorb losses in the loan portfolio.
Management's determination of the adequacy of the allowance is based upon an
evaluation of the loan portfolio, past loan loss experience, current economic
conditions, volume, growth and composition of the loan portfolio, and other
relevant factors. The allowance is increased by provisions for loan losses
which are charged against income. While management uses the best information
available to make such determinations, additional provisions for loan losses may
be required to be established in the future should economic or other conditions
change substantially. The allowance for loan losses as of December 31, 1995,
totaled $1.7 million, or 0.82% of net loans receivable, as compared to $1.2
million, or 0.62% and $1.1 million, or 64% of net loans receivable as of
December 31, 1994, and 1993, respectively. Non-performing loans totaled $1.8
million, $0.8 million and $3.4 million as of December 31, 1995, 1994, and 1993,
respectively. The significant increase in the allowance for loan losses was
due to net recoveries of $463,000 for 1995 as compared to net charge-offs of
$100,000 for 1994. During 1995 the Company entered into Settlement Agreements
with the guarantors of a large commercial real estate loan which had been
foreclosed on in the previous year. Under the terms of the Settlement
Agreements the Company received cash payments totaling $125,000 and notes
totaling $605,000 which require principal payments through March 2002.
Accordingly, cash payments totaling $171,000 and notes receivable with an unpaid
principal balance of $409,000 at December 31, 1995 have been recorded as
recoveries to the allowance for loan losses.
19
<PAGE>
The following table sets forth information regarding the Company's
allowance for loan losses for the periods and at the dates indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Average loans outstanding, net $199,360 $199,389 $187,120 $176,431 $169,952
======== ======== ======== ======== ========
Allowance at beginning of period $ 1,218 $ 1,078 $ 1,647 $ 1,208 $ 1,088
Charge-offs:
Residential real estate (37) (3) (99) (154) (145)
Construction - permanent residential
mortgage; and Construction and
land development -- (97) (60) (25) (121)
Commercial real estate -- -- (1,036) -- (230)
Commercial loans (49) (84) (30) (160) (113)
Consumer (151) (22) (42) (97) (90)
-------- -------- -------- -------- --------
Total loans charged-off (237) (206) (1,267) (436) (699)
Recoveries 700 106 86 8 1
-------- -------- -------- -------- --------
Net recoveries (charge-offs) 463 (100) (1,181) (428) (698)
Provisions for loan losses charged
to operating expenses 5 240 611 867 818
-------- -------- -------- -------- --------
Allowance at end of year $ 1,686 $ 1,218 $ 1,077 $ 1,647 $ 1,208
======== ======== ======== ======== ========
Ratio of net recoveries (charge-offs) to
average loans outstanding 0.23% (0.05)% (0.63)% (0.24)% (0.41)%
======== ======== ======== ======== ========
Ratio of allowance to period-end loans 0.82% 0.62% 0.64% 1.02% 0.76%
======== ======== ======== ======== ========
</TABLE>
20
<PAGE>
The following table shows the allocation of the allowance for loan
losses, as of the dates indicated, to different categories of loans within and
as a percentage of the loan portfolio:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------------- ----------------- ----------------- ----------------- --------------------
PERCENT PERCENT PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
------ --------- ------ --------- ------ --------- ------ --------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Allowance for loan losses
allocated to:
Residential real estate $ 214 12.7% $ 192 15.8% $ 160 14.9% $ 181 11.0% $ 229 19.0%
Construction - permanent
residential
mortgage; and Construction
and land development 78 4.6 47 3.9 121 11.2 139 8.4 256 21.1
Commercial real estate 413 24.5 265 21.8 525 48.7 1,040 63.1 525 43.5
Commercial loans 481 28.5 226 18.6 169 15.7 219 13.3 115 9.5
Consumer 213 12.6 123 10.1 77 7.1 64 3.9 83 6.9
Unallocated 287 17.1 365 29.8 26 2.4 4 .3 -- --
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Total allowance for
loan losses $1,686 100% $1,218 100% $1,078 100% $1,647 100% $1,208 100%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
</TABLE>
21
<PAGE>
INVESTMENTS
As of December 31, 1995, investments totaling $66.3 million consisted of
investments available for sale of $63.8 million and other investments of $2.4
million.
Investments available for sale were comprised of U.S. Treasury securities,
municipal bonds and mortgage-backed securities at December 31, 1995.
Investments available for sale represent those investments which may be sold for
various reasons including changes in interest rates and liquidity
considerations. These investments are reported at fair market value with
unrealized gains and losses being reported as a separate component of
stockholders equity, net of income taxes. The unrealized loss, net of tax, on
investments available for sale totaled $386,000 and $1.4 million as of December
31, 1995 and December 31, 1994, respectively. Approximately 45.5% of
investments available for sale at December 31, 1995 consisted of adjustable-rate
mortgage-backed securities.
As of December 31, 1995, other investments included an investment in a
limited partnership mutual fund totaling $874,000, which was originally
purchased in October 1988 at a cost of $2.0 million. The limited partnership
mutual fund is primarily invested in subordinated debt and related equity
securities issued in conjunction with leveraged buyouts, leveraged acquisitions
and leveraged recapitalizations. Since 1988, the investment in the limited
partnership mutual fund has been written down by an aggregate amount of $604,000
due to declines in its fair value. The limited partnership mutual fund has paid
cash distributions to the Company of $1.8 million during the period beginning
with its inception date in October 1988 through December 1995. The Company
believes that the limited partnership mutual fund is in the process of
liquidating its positions in such investments. The Company no longer invests in
limited partnership mutual funds in accordance with its investment policy.
The Company's investment policy places limitations on the types of
investments and maximum maturities of investments held in its portfolio.
Generally, corporate bonds and municipal bonds must be rated BAA or better 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 the Company's available for
sale portfolio totaling $2.5 million as of December 31, 1995, was considered a
"high-risk security" based on this test. The Company does not engage in
interest rate swaps, futures contracts and the issuance of calls or options.
22
<PAGE>
INVESTMENT PORTFOLIO. The following table sets forth the carrying value
and fair value of the Company's investments and the designated category within
the investment portfolio.
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------
1995 1994 1993
----------------- ----------------- -------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE
-------- ------- -------- ------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY
- ----------------
U.S. Treasury securities $ 3,490 $ 3,340
Municipal bonds 8,442 8,251
Mortgage-backed securities 4,736 4,423
------- -------
Total $16,668 $16,014
======= =======
AVAILABLE FOR SALE
- ------------------
U. S. Treasury securities $ 3,494 $ 3,540
U.S. Government sponsored agency bonds 5,000 5,001
Municipal bonds 11,204 11,691 $ 2,770 $ 2,706
Mortgage-backed securities 44,758 43,615 25,828 23,681
------- ------- -------- -------
Total $64,456 $63,847 $28,598 $26,387
======= ======= ======= =======
OTHER INVESTMENTS
- -----------------
Federal Home Loan Bank stock $ 1,512 $ 1,512 $ 1,535 $ 1,535 $ 1,786 $ 1,786
Limited partnership units 874 874 1,154 1,154 1,660 1,660
Other equity securities 25 25 25 25 43 43
------- ------- ------- ------- -------- -------
Total $ 2,411 $ 2,411 $ 2,714 $ 2,714 $ 3,489 $ 3,489
======= ======= ======= ======= ======== =======
HELD FOR INVESTMENT
- -------------------
U.S. Treasury securities $ 3,487 $ 3,623
U.S. Government agency obligations 740 722
Municipal bonds 11,221 11,706
Mortgage-backed securities 33,028 33,038
------- -------
Total $48,476 $49,089
======= =======
</TABLE>
23
<PAGE>
INVESTMENT MATURITIES
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
---------------------------------
AMORTIZED FAIR YEAR-END
COST VALUE YIELD/(1)/
--------- ------- ----------
DECEMBER 31, 1995 (DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
U.S. Treasury
Within 1 year
1 to 5 years $ 3,494 $3,540 5.95%
5 to 10 years -- -- --
More than 10 years -- -- --
------- ------- ------
Total 3,494 3,540 5.95
------- ------- ------
U.S. Government sponsored agency bonds
Within 1 year -- -- --
1 to 5 years 5,000 5,001 6.68
5 to 10 years -- -- --
More than 10 years -- -- --
------- ------- ------
Total 5,000 5,001 6.68
------- ------- ------
Municipal Bonds
Within 1 year -- -- --
1 to 5 years 3,107 3,160 4.74
5 to 10 years 8,097 8,531 5.40
More than 10 years -- -- --
------- ------- ------
Total 11,204 11,691 5.22
------- ------- ------
Adjustable rate mortgage-backed securities
Within 1 year -- -- --
1 to 5 years -- -- --
5 to 10 years -- -- --
More than 10 years 30,179 29,033 5.64
------- ------- ------
Total 30,179 29,033 5.64
------- ------- ------
Fixed rate mortgage-backed securities
Within 1 year -- -- --
1 to 5 years -- -- --
5 to 10 years -- -- --
More than 10 years 14,579 14,582 6.32
------- ------- ------
Total 14,579 14,582 6.32
------- ------- ------
Total debt securities $64,456 $63,847 5.60%
======= ======= ======
</TABLE>
___________________
(1) Computed on a pre-tax basis. Balance utilized in calculating yields is
amortized cost.
24
<PAGE>
DEPOSITS AND OTHER SOURCES OF FUNDS
GENERAL. In addition to deposits, the sources of funds available for
lending and other business purposes include loan repayments, loan sales, FHLB
advances, securities sold under agreements to repurchase 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 and
are also used to fund the origination of mortgage loans designated to be sold in
the secondary markets.
DEPOSITS. Deposits are attracted principally from within the Company's
primary market areas in Duval, St. Johns, Clay, and Hernando Counties, Florida.
The Company offers a broad selection of deposit instruments including demand
deposit accounts, NOW accounts, money market accounts, regular passbook 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.
The Company continues to work on improving its deposit mix by promoting
checking and savings deposits to reduce the Company's cost of funds. Commercial
banking relationships have been emphasized in an effort to continue to increase
demand deposits as a 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.
25
<PAGE>
As of December 31, 1995, the Company's deposits were represented by the
various types of checking and savings programs described below:
<TABLE>
<CAPTION>
PERCENTAGE
INTEREST OF TOTAL
RATE/(1)/ CATEGORY BALANCES DEPOSITS
- ----------- --------------------------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
0.00% Non-interest bearing demand $ 36,947 14.2%
2.99 Regular savings 15,476 5.9
3.69 Money market 19,813 7.6
2.58 NOW 30,005 11.5
5.58 Certificates of deposit of
$100,000 or more 35,319 13.6
5.78 Other time deposits 122,907 47.2
-------- -----
4.28% Total Deposits $260,467 100.0%
======== =====
- ----------------------------
</TABLE>
/(1)/ Represents Weighted Average Interest Rate, as of December 31, 1995.
The Company's deposit portfolio does not contain a concentration of deposits
from any one depositor or related group of depositors, with the exception of
$8.0 million in certificates of deposit from the State of Florida which bear a
weighted average interest rate of 6.01% as of December 31, 1995 and mature
during 1996. Deposit activities are not materially affected by seasonal
fluctuations.
The following table presents the average balance of each deposit type and the
average rate paid on each deposit type for the periods indicated.
<TABLE>
<CAPTION>
AT 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 35,851 -- % $ 30,572 --% $ 22,300 --%
Money Market and NOW 41,432 2.96 47,101 2.45 39,804 2.28
Regular savings 16,644 3.03 23,974 2.52 27,503 2.53
Certificates 149,486 5.71 134,892 4.97 146,566 5.13
</TABLE>
26
<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 periods
indicated.
<TABLE>
<CAPTION>
PERCENT
BALANCE OF TOTAL
------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Less than three months $10,949 31.0%
Three - twelve months 16,609 47.0
More than twelve months 7,761 22.0
------- -----
$35,819 100.0%
======= =====
</TABLE>
BORROWINGS
The Company uses FHLB advances and securities sold under agreements from
time to time to supplement its supply of funds available for lending and to meet
deposit withdrawal requirements. Advances from the FHLB of Atlanta are typically
secured by the Company's stock in the FHLB of Atlanta and a portion of its first
mortgage loans. Advances from the FHLB of Atlanta decreased from $30.7 million
as of December 31, 1994, to $15.5 million as of December 31, 1995 as a result of
the Company's ability to replace the deposits which were sold in 1994 as part of
the sale of the Port Richey Branch.
The FHLB of Atlanta functions as a central reserve bank providing credit
for member financial institutions. As a member, the Company is required to own
capital stock in the FHLB of Atlanta and is authorized to apply for advances on
the security of such stock and certain of its home mortgages and other assets
(principally, securities which are obligations of, or guaranteed by, the United
States) provided certain standards related to creditworthiness have been met.
Advances are made pursuant to several different programs. Each credit program
has its own interest rate and range of maturities. The Company has an
established credit availability of $38.0 million with the FHLB of Atlanta.
Advances from the FHLB of Atlanta as of December 31, 1995, consisted of short-
term advances maturing within 90 days at a weighted average interest rate of
5.84%. The Company may request additional advances or an increase in its credit
availability by applying to the FHLB of Atlanta.
Securities sold under agreements to repurchase are financing transactions
which include the sale of investment securities and the simultaneous agreement
to repurchase those securities at a stated price on a specific date. As of
December 31, 1995, securities sold under agreements to repurchase totaled $13.7
million while the weighted average interest rate on the financing transactions
was 5.92%. The original terms of the agreements were for various periods not
exceeding three months.
27
<PAGE>
The following table sets forth certain information regarding borrowings at
the end of and 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:
FHLB of Atlanta advances 5.82% 6.32% 4.14%
Securities sold under agreements
to repurchase 5.92% 6.18% --
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
Maximum amount of borrowings
outstanding at any month end:
FHLB of Atlanta advances $33,500 $33,000 $20,500
Securities sold under agreements
to repurchase $13,650 $ 8,650 --
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
Approximate average short-term borrowings:
FHLB of Atlanta advances $19,992 $23,974 $ 6,654
Securities sold under agreements
to repurchase $12,350 $ 1,331 --
DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
Approximate weighted average rate
paid during the period indicated: /(1)/
FHLB of Atlanta advances 6.17% 5.39% 6.04%
Securities sold under agreements
to repurchase 6.08% 6.18% --
</TABLE>
28
<PAGE>
DISCONTINUED OPERATIONS
The sale of American Surety, a wholly-owned subsidiary of Community, was
closed in June 1994. The terms of the sale included the payment of cash
proceeds of $6.5 million, the issuance by American Surety to Community of an
operating note receivable totaling $465,000, and the issuance by the buyer to
Community of a non-interest bearing debenture totaling $1.8 million. A pre-tax
gain was recorded on the sale of $238,000. The computation of the gain on the
sale of American Surety did not include the value of the $1.8 million debenture
because repayment of the debentures cannot be expected to be made solely from
profits generated from the operations of American Surety. The debenture is to
be paid in full by the buyer within three years from the date of its issuance.
PERSONNEL
As of December 31, 1995, the Company had 191 full-time employees and 22
part-time employees. Employees are not represented by any collective bargaining
group. The Company believes its relations with its employees to be good.
29
<PAGE>
APPENDIX IV
The CFB Annual Report to Shareholders
for the year ended December 31, 1995
<PAGE>
CFB Bancorp
1995
Annual Report
CORPORATE PROFILE
CFB Bancorp, Inc. is the parent company of Community First Bank which has ten
full-service banking offices in Jacksonville, Orange Park, Ponte Vedra Beach
and Spring Hill. Community First also has mortgage offices in Jacksonville and
Dunedin.
With $310.4 million in assets, CFB Bancorp is the largest, publicly-traded
community bank in Northeast Florida. The principal business activities for
Community First include mortgage banking and commercial and consumer lending.
CFB Bancorp's stock is listed on the Nasdaq national market under the trading
symbol of CFBN.
CONTENTS
Consolidated Financial Highlights 1
To Our Stockholders and Friends 2
Management's Discussion 4
Consolidated Financial Statements 11
Notes to Consolidated Financial Statements 15
Independent Auditors' Report 29
Board of Directors 30
Officers 31
Directory 32
CONSOLIDATED FINANCIAL HIGHLIGHTS
CFB Bancorp and Subsidiary
For the Year (in thousands) 1995 1994 1993 1992 1991
Interest income $21,589 $18,581 $17,865 $19,517 $ 21,391
Interest expense 12,288 9,500 9,369 11,151 15,422
Net interest income 9,301 9,081 8,496 8,366 5,969
Provision for loan losses 5 240 611 867 818
Other income 5,016 5,725 5,220 3,613 2,545
Other expenses 12,504 12,053 11,988 8,928 7,586
Income taxes 465 764 264 679 30
Income from
continuing operations 1,343 1,749 853 1,505 80
Income (loss) from
discontinued operations, net 151 251 (44) 465
Net income $ 1,343 $ 1,900 $ 1,104 $ 1,461 $ 545
Per Share Data
Income from
continuing operations $0.64 $0.86 $0.42 $0.78 $0.05
Net income 0.64 0.93 0.55 0.76 0.28
Book value 10.08 9.05 8.79 8.23 7.46
Stock price:
1
<PAGE>
High 19.00 11.50 11.50 8.00 9.75
Low 9.50 9.50 7.50 5.50 8.75
Close 19.00 10.88 9.50 7.50 8.75
Key Performance Ratios
Return on average assets 0.45% 0.68% 0.42% 0.58% 0.22%
Return on average
stockholders' equity 7.25 10.93 6.76 9.60 3.89
Stockholders' equity to
total assets 6.35 6.20 6.12 6.20 5.66
Leverage capital ratio 6.27 6.21 5.53 5.83 4.90
Total risk-based capital ratio 11.84 11.96 10.53 10.43 9.10
At Year-end(in thousands)
Investments $ 66,259 $ 45,769 $ 51,964 $ 49,936 $ 52,334
Loans, net 205,814 195,688 167,144 162,100 158,247
Total assets 310,442 280,704 276,283 254,546 252,728
Deposits 260,467 222,548 235,619 232,009 233,724
Borrowings 29,150 39,350 20,500 3,000 3,000
Stockholders' equity 19,708 17,416 16,913 15,777 14,316
TO OUR STOCKHOLDERS AND FRIENDS
BUILDING VALUE
These two words express the primary goal of CFB Bancorp, Inc. and
its subsidiary, Community First Bank. This goal has guided our
efforts since forming our company fifteen years ago. When value
is created, both stockholders and customers benefit.
STOCKHOLDER VALUE
Over the years, we have created value for our stockholders in a
number of different ways. We have consistently expanded our asset
base by emphasizing internal growth, building our branch network
and maintaining good asset quality.
With this approach, we surpassed $300 million in total assets for
the first time in 1995. We also expanded our branch network to
ten branch offices at the end of 1995 from one branch office in
1981. Our newest branch office is strategically located in an
area of Jacksonville which represents a new growth market for
Community First.
In addition to internal expansion, asset quality is also critical
to creating stockholder value. Value was created in this area
through developing a diversified loan portfolio while reducing
nonperforming assets. Our loan portfolio is increasingly
diversified between residential, commercial and consumer loans.
Commercial and consumer loans represent 28% of our loan portfolio
at the end of 1995, up from 14% just three years ago.
Nonperforming assets at the end of 1995 were $2.1 million, down
from $7.3 million in 1992. Our success in this area is due to
consistent credit standards and aggressive management of nonper-
forming assets.
CUSTOMER VALUE
Service delivery is a key element in creating customer value.
Our customers appreciate the value we create for them every day
through our personalized, community bank service. "Community
First-It's In Our Name" was the common theme in our 1995 marketing
program. We utilized these marketing efforts to increase customer
awareness of our service approach in the markets we serve.
2
<PAGE>
In addition to how we deliver service to our customers, another
key element in creating customer value is the actual services we
provide to our customers. With products such as totally free
checking, low fee checking and commercial checking, our checking
products and services arc designed to meet the needs of
individuals, families and businesses who seek quality bank service
without high bank fees.
Strong deposit growth during 1995 reflects how our customers have
recognized and responded to our service approach. During the
year, deposits increased to $260 million from $223 million at the
end of 1994.
Creating value attracts attention. Many of you already know that
in November 1995, Compass Bancshares, Inc. offered to acquire CFB
Bancorp and its subsidiary, Community First Bank, in a transaction
valued at approximately $43 million. In February 1996, a
definitive agreement was signed for this proposed merger which is
subject to both regulatory approval and the approval of our
stockholders. If approved, this transaction is expected to be
completed in the third quarter of 1996.
We will continue to operate as a community bank, earning the
trust of our customers by demonstrating a personal interest in
each one. We are still a community-style bank and we will stay
true to our identity in the marketplace.
FUTURE VALUE
We are delighted that Compass Bank recognizes the stockholder and
customer value we have created over the years. We look forward to
sharing in the resources which the $10 billion Compass Bank will
bring to Community First Bank. These big bank resources, along
with the community bank service our customers have come to expect,
will provide a unique blend of synergies and quality services.
Our stockholders and customers should both be winners and this is
the direct result of our outstanding team of employees and their
dedication to their customers. We also thank our stockholders and
customers for their continued support and loyalty over the years.
Our employees, stockholders, and customers are the people that
have made us the fine, community-based bank we are today and who
will help us continue to "build value" for the future.
Jack C. Demetree
Chairman of the Board and Chief Executive Officer
A. Richardson Tosh
President
MANAGEMENT'S DISCUSSION
- --------------------------
CFB Bancorp and Subsidiary
HIGHLIGHTS
CFB Bancorp, Inc. ("CFB", or the "Company" when discussed
collectively with Community First Bank) continued its efforts to
improve asset quality, increase its customer base and improve oper-
ating efficiencies during 1995.
Nonperforming assets totaled $2.1 million at year-end, down from
$3.9 million a year ago. Loan recoveries were significantly
higher in 1995 and the Company successfully sold a $2.5 million
property held in other real estate.
3
<PAGE>
In August 1995, the Company opened its newest branch office
location in Jacksonville. This branch is strategically located in
an area of Jacksonville that is experiencing steady growth.
In October 1995, the Company restructured its operations and
consolidated its mortgage production offices in Southwest Florida
as part of management's strategy to reduce costs and increase
profits.
During 1995, the Company experienced strong growth in loans,
investments and deposits. This growth helped the Company surpass
$300 million in total assets for the first time in its fifteen
year history.
EARNING ASSETS
Earning assets, consisting of loans and investments which
provide interest income, grew to $276.3 million at December 31,
1995, an 11.6% increase over the prior year. This increase is
due to strong loan growth in both residential and commercial
lending.
The Company receives local market deposits and invests these funds
in either high quality loans or investments. Loans are generally
preferred because they provide a higher risk-adjusted rate of
return. The Company maintains its investment portfolio to manage
liquidity and interest rate risk.
LOANS Loans increased 4% during the year and represented 76% of
earning assets at the end of 1995. Much of this new growth
occurred in commercial and consumer lending. Since converting to
a commercial bank in 1990, the Company has continued to diversify
its loan portfolio by emphasizing commercial and consumer loan
products. The Company continues to originate a large volume of
residential mortgage loans, most of which are sold in the
secondary market.
Commercial and consumer loans increased by 32% to $71.3 million at
the end of 1995 from $53.5 million at December 31, 1994. The
significant growth reflects the successful efforts of our
commercial and consumer lenders to create solid banking
relationships with both new and existing customers.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
LOAN PORTFOLIO COMPOSITION 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Residential 121,173,323 119,415,622 119,823,511 137,525,713 129,772,503
Commercial 20,488,393 24,584,850 29,079,641 43,454,963 58,734,088
Consumer 6,785,517 7,208,085 5,562,307 7,517,506 10,586,060
Construction 9,799,805 10,891,156 12,678,743 7,189,719 6,721,220
-----------------------------------------------------------------------
TOTALS 158,247,038 162,099,713 167,144,203 195,687,901 205,813,871
=======================================================================
</TABLE>
During 1995, residential lending activities were reduced as
interest rates rose steadily before declining later in the year.
Loan originations were $77.5 million compared to $123.7 million
the previous year. As a result, loan sales declined by 15.7% to
$86 million in 1995 from $102 million in 1994.
Management carefully adjusts the Company's residential loan
portfolio mix by maintaining primarily adjustable-rate and short-
term mortgage loans in the loan portfolio and selling long-term,
fixed-rate mortgage loans in the secondary market. At the end of
1995, 87% of the residential loan portfolio either reprices
annually or matures within five years.
INVESTMENTS The investment portfolio consists of U.S. government
obligations, mortgage backed certificates, and municipal bonds.
These investments are categorized as either "held to maturity" or
"available for sale" based on management's intent. Investments
totaled $66.3 million as of December 31, 1995 compared to $45.8
million as of the end of 1994.
The Company increased its investment portfolio in 1995 to provide
greater flexibility in managing liquidity and to further utilize
borrowing arrangements where investments are pledged as collateral
to obtain lower interest rates on borrowings.
INVESTMENTS HELD TO MATURITY During 1995, the Financial Accounting
Standards Board permitted financial institutions to reclassify all
or a portion of their held to maturity investment portfolios
without penalty. Under this provision, management reclassified
all investments held to maturity as investments available for sale
4
<PAGE>
to provide greater flexibility in managing the Company's
investment portfolio,
INVESTMENTS AVAILABLE FOR SALE Investments categorized as
available for sale totaled $63.8 million at December 31, 1995.
These investments are purchased to provide a stable source of
interest income and may be sold for various reasons including
asset-liability management needs and liquidity considerations.
Investments available for sale had a weighted average yield of
5.60% (unadjusted for the tax equivalent yield of tax-exempt
bonds). These investments are reported at fair value with an
unrealized loss, net of tax, of $386,000 at the end of 1995,
recorded as a separate component of stockholder's equity.
Management considers this unrealized loss to be temporary.
ASSET QUALITY
During 1995, management made significant progress in improving
overall asset quality as nonperforming assets were significantly
reduced. In addition, management carefully reviewed the Company's
loan portfolio to reduce net chargeoffs and ensure the adequacy of
the loan loss reserve. These actions helped minimize credit risk
and strengthened the overall loan portfolio.
NONPERFORMING ASSETS Nonperforming assets declined 46% to $2.1
million, or 1.02% of net loans at December 31, 1995 from $3.9 mil-
lion at December 31, 1994, or 1.98% of net loans. Nonperforming
assets at December 31, 1995 consisted of $1.7 million in
nonperforming loans and $419,000 in other real estate.
Nonperforming loans are classified as such when the accrual of
interest is stopped, typically when a loan becomes 90 days
delinquent. Loans are reclassified to accrual status only when
interest and principal payments are restored and future payments
are reasonably anticipated. Other real estate is primarily loan
collateral for which the Company has retained possession of in
satisfaction of a nonperforming loan. Once the Company obtains
clear title to other real estate, attempts are made to sell the
property under favorable circumstances in a timely manner.
<TABLE>
<CAPTION>
[GRAPH GOES HERE]
NONPERFORMING ASSETS (In Thousands) 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Other Real Estate 5,602 2,696 1,277 3,063 419
Nonperforming loans 5,453 4,643 3,426 812 1,682
------------------------------------------
Total Nonperforming assets 11,055 7,339 4,703 3,875 2,101
==========================================
</TABLE>
Other real estate declined to $419,000 from $3.1 million at the
end of 1994. This decline was primarily due to the successful
sale of the Company's largest nonperforming asset, a $2.5 million
commercial real estate property held in other real estate.
PROVISION AND ALLOWANCE FOR LOAN LOSSES The loan loss provision
was $5,000 in 1995 compared to $240,000 in 1994. The provision
for loan losses is a charge to earnings in the current period
needed to maintain the allowance for loan losses at an adequate
level. The significant decline was due to the overall improvement
in credit quality and recoveries of previously charged-off loans.
The allowance for loan losses represents a reserve for potential
losses on loans in the loan portfolio. The appropriate level of
the allowance is based upon careful analysis and review of the
loan portfolio and reflects an amount which management considers
adequate to provide for possible losses. Accordingly, the
allowance for loan losses increased to $1.7 million at the end of
1995 compared to $1.2 million at the end of 1994. This increase
was primarily due to higher loan recoveries of $700,000 in 1995
compared to $106,000 in 1994.
FUNDING SOURCES
The primary lending and investment funding sources for the Company
consist of both deposits and borrowings.
DEPOSITS Deposits grew $38.0 million during the year to $260.5
million at December 31, 1995 from $222.5 million at December 31,
1994. Deposit growth during 1995 was primarily the result of
increased marketing efforts and the addition of a new branch
5
<PAGE>
office during the year.
Time deposits increased 22% to $158.2 million at the end of 1995
from $129.2 million at the end of 1994. Most of this growth occurred
early in 1995 as customers responded favorably to a competitive time
deposit product offered by the Company. Time deposits represented
61% of total deposits compared to 58% at the end of 1994.
Other changes in the deposit mix resulted from transaction
account growth. These accounts include both checking and money
market accounts. During the year, transaction accounts grew 17%
to $86.8 million at the end of 1995 from $74.3 million at the end
of 1994.
Overall, the changes in the deposit base during the year were
consistent with management's strategy of further diversifying the
deposit portfolio while increasing the level of transaction
accounts.
[GRAPH GOES HERE]
<TABLE>
<CAPTION>
DEPOSIT BASE COMPOSITION 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Time Deposits 163,915,202 148,756,434 137,899,420 129,246,145 158,226,323
Checking 43,402,166 54,639,579 71,566,563 74,262,209 86,764,493
Savings 26,406,632 28,613,423 26,152,670 19,039,587 15,475,798
---------------------------------------------------------------
233,724,000 232,009,436 235,618,653 222,547,941 260,466,614
===============================================================
</TABLE>
BORROWINGS Total borrowings decreased 26% to $29.2 million at the
end of 1995 from $39.4 million at the end of 1994. During the
year, management consistently implemented its strategy of reducing
borrowings by increasing the Company's core deposit base.
Borrowings consisted of advances from the Federal Home Loan Bank
of Atlanta totaling $15.5 million and reverse repurchase
agreements totaling $13.7 million at the end of 1995. Advances
are short-term and at variable rates of interest. Reverse
repurchase agreements are for specified terms not exceeding three
months and are at fixed rates of interest. The weighted average
interest rate on all borrowings as of December 31, 1995 was 5.86%
compared to 6.28% at the end of 1994.
REGULATORY CAPITAL REQUIREMENTS
Current Federal Reserve Bank ("FRB") minimum capital requirements
establish a minimum 3% leverage capital ratio requirement for the
most highly-rated bank holding companies. All other bank holding
companies will need to meet a minimum leverage ratio that is at
least 100 to 200 basis points above 3%. Under the FRB's riskbased
regulation, a bank holding company must classify its assets and
certain off-balance sheet activities into categories, and maintain
specified levels of capital for each category. Furthermore, a
bank holding company must maintain a total risk-based capital
ratio of 4% by December 31, 1993. As of December 31, 1995, the
Company had a leverage capital ratio of 6.27%, a Tier 1 risk-based
capital ratio of 10.90% and a total riskbased capital ratio of
11.84%.
LIQUIDITY AND CAPITAL RESOURCES
As a Florida-chartered commercial bank, Community First Bank is
required to maintain a liquidity reserve of at least 15% of its
total transaction accounts and 8% of its total non-transaction
accounts subject to certain restrictions. This reserve may
consist of cash-on-hand, demand deposits due from correspondent
banks, and other investments and short-term marketable
securities. At December 31, 1995, cash and other qualifying
liquid assets were $53.1 million, or 20% of deposits, well in
excess of the minimum requirements.
Principal sources of liquidity are increases in deposits and loan
principal repayments. Other sources of liquidity include advances
from the Federal Home Loan Bank of Atlanta, reverse repurchase
agreements, and the sale of mortgage loans in the secondary
market.
At December 31, 1995, the Company had loan commitments
approximating $33.1 million. Commitments, which are disbursed
subject to certain limitations, extend over periods of time with
the majority disbursed within a three month period. Management
anticipates that the funds necessary to meet these commitments
will be available.
6
<PAGE>
EARNINGS
The Company had consolidated net income of $1.3 million in 1995
compared to $1.9 million in 1994. Earnings per share for the
years ended December 31, 1995 and 1994 were $0.64 and $0.93,
respectively. The decrease in earnings resulted from lower gains
on the sale of mortgage servicing rights and the recognition of an
impairment valuation adjustment for the Company's capitalized
mortgage servicing rights. In 1994, the Company recognized a one-
time gain on the sale of a branch office and its related deposits.
NET INTEREST INCOME Net interest income, the difference between
the interest earned on loans and investments and the interest paid
for deposits and borrowings, represents the largest component of
the Company's earnings. For 1995, net interest income was $9.3
million compared to $9.1 million in 1994.
This increase in net interest income is largely due to a higher
level of average earning assets during 1995 compared to 1994. The
interest rate spread remained relatively constant during both
years.
The interest rate spread represents the difference between the
average yield on earning assets and the average rate paid on
deposits and borrowings. The interest rate spread is affected by
changes in interest rates and by changes in overall
asset/liability volumes.
The Company's interest rate spread declined to 3.27% for 1995
from 3.60% for 1994 as the average yield on earning assets
increased to 7.75% for 1995 from 7.36% for 1994 while the average
cost of deposits and borrowings increased to 4.48% for 1995 from
3.74% for 1994. A significant portion of the Company's deposit
base consists of time deposits which are generally more sensitive
to changes in interest rates than the majority of the Company's
earning assets, most of which are residential mortgage loans.
<TABLE>
<CAPTION>
[GRAPH GOES HERE]
<S> <C> <C> <C> <C> <C>
INTEREST RATE SPREAD 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------
Yield on Earning Assets 9.82% 8.44% 7.55% 7.36% 7.75%
Cost of Funds 6.88% 4.92% 3.95% 3.76% 4.48%
Interest Rate Spread 2.94% 3.52% 3.60% 3.60% 3.27%
</TABLE>
Consequently, the Company's average cost of deposits and
borrowings increased more rapidly than its yield on earnings
assets during the rising interest rate environment that prevailed
during most of 1995. Management is continuing its efforts to
increase the Company's average yield on earning assets through
increased commercial lending while reducing its average cost of
deposits and borrowings by promoting transaction account deposit
growth.
OTHER INCOME Other income decreased 12% to $5.0 million from $5.7
million in 1994. The decrease is due to lower gains on the sale
of mortgage servicing rights and a one-time gain in 1994 on the
sale of a branch office and its related deposits.
During 1995, the Company sold the mortgage servicing rights to
$97.0 million principal amount of mortgage loans at a gain of
$235,000 compared to $89.4 million principal amount of mortgage
loans at a gain of $1.1 million in 1994. The lower gains realized
in 1995 resulted from selling mortgage servicing rights which
carried a higher cost basis relative to those sold in 1994.
The Company's loan servicing portfolio increased to $564.4 million
at December 31, 1995 from $511.9 million at December 31, 1994.
This helped increase loan servicing fee income to $666,000 for
1995 from $467,000 for 1994.
The gain on the sale of other real estate was higher in 1995 due
to the sale of the Company's largest nonperforming asset at a gain
of $221,000.
OTHER EXPENSES Other expenses increased 4% to $12.5 million in
1995 from $12.1 million in 1994 primarily because of the
recognition of a $423,000 impairment valuation adjustment for the
Company's capitalized mortgage servicing rights. The impairment
adjustment was the result of a decline in the fair value of the
capitalized mortgage servicing rights caused by estimates of
increased prepayments of the underlying mortgage loans.
Apart from recognizing the mortgage servicing rights impairment,
other expenses were held relatively constant in a year where the
Company experienced significant deposit growth. This is
7
<PAGE>
attributed to management's ongoing efforts to control operating
costs.
Increases in certain operating costs were offset by savings in
other areas. For example, while both professional fees and data
processing expenses were higher in 1995, other expenses were lower
due to successful cost control measures.
The writedown of investment in equity security decreased to
$93,000 in 1995 from $309,000 in 1994. This writedown resulted
from adjusting an investment in a limited partnership mutual fund
to its fair value of $874,000 at December 31, 1995.
COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1993
The Company had consolidated net income of $1.9 million in 1994
compared to $1.1 million in 1993. Earnings per share for the years
ended December 31, 1993 and 1992, were $0.93 and $0.55, respectively.
The earnings increase was due primarily to improvements in asset
quality, the sale of the Company's insurance subsidiary and the
sale of a branch office location. As a reflection of the improved
earnings, return on assets grew to 0.68% from 0.42% in 1993.
Likewise, return on average stockholders' equity rose to 10.93%
from 6.76% in 1993.
Asset quality improvements were reflected in a lower provision
for loan losses as a direct result of reductions in both
nonperforming assets and loan chargeoffs. Nonperforming assets
declined to $3.9 million at the end of 1994 from $4.7 million at
the end of 1995. Likewise, net chargeoffs for 1994 totaled
$100,000 compared to $1.2 million in 1993.
NET INTEREST INCOME Net interest income was $9.1 million in 1994
compared to $8.5 million in 1993. The improvement was due to a
higher level of earning assets during 1994 compared to 1993.
Interest expense on deposits declined due to the sale of a branch
office and its related deposit base in 1994, but interest expense
on FHLB advances increased as additional borrowings were utilized
to fund the transfer of the deposit base for this branch office.
OTHER INCOME Other income increased to $5.7 million in 1994 from
$5.2 million in 1993. This increase was due to an increase in
customer service fees, higher loan servicing fees, and the one-
time gain recognized on the sale of the branch office in 1994.
Lower gains on the sale of loans in 1994 were partially offset by
gains on the sale of mortgage servicing rights.
OTHER EXPENSES Other expenses were $12.1 million in 1994 compared
to $12.0 million in 1993. Decreases in operating expenses were
offset by a $309,000 writedown of an investment in an equity
security which resulted from a decline in the value of this
investment.
8
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
As of December 31, 1995 and 1994
Assets 1995 1994
Cash and cash equivalents:
Cash and due from banks $ 5,980,516 $ 1,422,754
Interest bearing deposits 12,482,689 14,085,613
------------- -------------
Total cash and cash equivalents 18,463,205 15,508,367
Investments:
Held to maturity, at amortized cost 16,668,123
Available for sale, at fair value 63,847,452 26,386,567
Other investments 2,411,186 2,714,537
------------- -------------
Total investments 66,258,638 45,769,227
Loans - net 205,813,871 195,687,901
Loans held for sale 4,243,620 6,161,583
Premises and equipment - net 4,692,083 5,036,057
Other real estate - net 418,695 3,063,162
Accrued interest receivable 1,938,234 1,473,126
Mortgage servicing rights - net 7,025,266 6,285,930
Deferred income taxes 757,918 1,072,143
Income taxes receivable 97,392
Other assets 733,541 646,714
------------- -------------
Total assets $310,442,463 $280,704,210
============= =============
Liabilities and Stockholders' Equity
Deposits $260,466,614 $222,547,941
Advances from Federal Home Loan Bank 15,500,000 30,700,000
Securities sold under agreements to repurchase 13,650,000 8,650,000
Accrued interest payable 198,984 208,976
Income taxes payable 125,896
Other liabilities 918,393 1,055,574
------------- -------------
Total liabilities 290,733,991 263,288,387
Commitments and Contingencies (Notes 4 & 10)
Stockholders' Equity
Common stock, $0.01 par value:
15,000,000 shares authorized; 1,955,680 and
1,925,242 shares issued and outstanding 19,557 19,252
Additional paid-in capital 13,811,447 13,590,116
Retained earnings 6,263,639 5,210,643
Unrealized loss on investments available for
sale, net of income taxes (386,171) (1,404,188)
------------- -------------
Total stockholders' equity 19,708,472 17,415,823
------------- -------------
9
<PAGE>
Total liabilities and stockholders' equity $310,442,463 $280,704,210
============= =============
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF INCOME
For Each of the Three Years in the Period Ended December 31, 1995
1995 1994 1993
Interest Income
Interest on loans $17,286,230 $15,079,641 $14,584,399
Interest on investments:
Taxable 3,717,764 2,912,953 2,780,151
Tax-exempt 585,154 588,395 500,839
----------- ----------- -----------
Total interest income 21,589,148 18,580,989 17,865,389
Interest Expense
Interest on deposits 10,361,227 8,292,459 8,972,585
Interest on FHLB advances 1,146,340 1,116,267 396,671
Interest on repurchase agreements 780,673 90,910
----------- ----------- -----------
Total interest expense 12,288,240 9,499,636 9,369,256
----------- ----------- -----------
Net interest income 9,300,908 9,081,353 8,496,133
Provision for loan losses 5,000 240,225 611,059
----------- ----------- -----------
Net interest income after provision for
loan losses 9,295,908 8,841,128 7,885,074
Other Income
Customer service fees 1,938,155 1,886,839 1,601,742
Loan servicing fees, net 665,622 467,012 99,254
Gain on sale of loans 1,295,933 1,198,518 2,709,307
Gain on sale of mortgage servicing rights 235,283 1,063,900
Gain on sale of other real estate 255,159 33,490 5,667
Gain on sale of branch office 483,350
Gain on sale of investments 31,106 117,365
Other 625,743 560,302 687,098
----------- ----------- -----------
Total other income 5,015,895 5,724,517 5,220,433
Other Expenses
Salaries and employee benefits 6,160,282 5,974,212 5,973,489
Occupancy and equipment 1,835,010 1,860,775 1,692,359
Insurance 661,895 767,678 780,397
Professional fees 620,039 500,528 469,459
Maintenance of other real estate 117,197 126,377 329,585
Data processing 330,083 146,432 254,165
10
<PAGE>
Advertising and promotion 400,558 264,560 288,796
Provision for mortgage servicing rights
impairment 423,126
Writedown of investment in equity security 93,448 308,948
Other 1,861,676 2,103,592 2,199,958
----------- ----------- -----------
Total other expenses 12,503,314 12,053,102 11,988,208
----------- ----------- -----------
Income from continuing operations before
provision for income taxes 1,808,489 2,512,543 1,117,299
Provision for income taxes 465,322 763,602 264,235
----------- ----------- -----------
Income from continuing operations 1,343,167 1,748,941 853,064
Discontinued operations:
Income from discontinued operations,
net of income taxes of $92,330 251,517
Gain on sale of American Surety &
Casualty Holding Company, net
of income taxes of $87,043 151,433
----------- ----------- -----------
Net Income $ 1,343,167 $ 1,900,374 $ 1,104,581
=========== =========== ===========
Earnings Per Share
Continuing operations $0.64 $0.86 $0.42
Discontinued operations 0.07 0.13
----------- ----------- -----------
Net income $0.64 $0.93 $0.55
=========== =========== ===========
See Notes To Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For Each of the Three Years in the Period Ended December 31, 1995
<TABLE>
<CAPTION>
Unrealized
Additional Gain (Loss) on Total
Common Stock Paid-in Retained Investments, Stockholders'
Shares Amount Capital Earnings Net Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992 1,453,368 $ 14,534 $ 9,306,649 $ 6,456,308 $ 15,777,491
Stock dividend 290,665 2,906 2,322,414 (2,325,377) (57)
Stock options exercised 5,000 50 31,210 31,260
Net income 1,104,581 1,104,581
---------- --------- ------------ ---------- -------------- -------------
Balance at December 31,
1993 1,749,033 17,490 11,660,273 5,235,512 16,913,275
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Cumulative effect of
change in method of
accounting for
investments, net of
income taxes (Note 1) $ 33,428 33,428
Stock dividend 175,009 1,750 1,923,351 (1,925,243) (142)
Stock options exercised 1,200 12 6,492 6,504
Net change in unrealized
loss on investments
available for sale,
net of income taxes (1,437,616) (1,437,616)
Net income 1,900,374 1,900,374
---------- -------- ------------- ----------- -------------- -------------
Balance at December 31,
1994 1,925,242 19,252 13,590,116 5,210,643 (1,404,188) 17,415,823
Cash dividends paid (290,171) (290,171)
Stock options exercised 31,230 313 231,223 231,536
Common stock canceled (792) (8) (9,892) (9,900)
Net change in
unrealized loss on
investments available
for sale, net of
income taxes 1,018,017 1,018,017
Net income 1,343,167 1,343,167
---------- -------- -------------- ----------- -------------- -------------
Balance at December 31,
1995 1,955,680 $19,557 $13,811,447 $6,263,639 $ (386,171) $19,708,472
========== ======== ============== =========== ============== =============
</TABLE>
See Notes To Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Each of the Three Years in the Period Ended December 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating Activities
Net income $ 1,343,167 $ 1,900,374 $ 1,104,581
Reconcilement of net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 702,373 858,013 766,004
Amortization of mortgage servicing rights 848,410 978,794 1,344,545
Provision for loan losses 5,000 240,225 611,059
Provision for mortgage servicing rights
impairment 423,126
Accretion of deferred loan fees (509,659) (442,275) (721,883)
Gain on sale of investments and loans (1,295,933) (1,229,624) (2,718,917)
Gain on sale of mortgage servicing rights (235,283) (1,063,900)
Writedown of investment in equity security 93,448 308,948
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net (gain) loss on sale of other real
estate (215,144) 166,750 203,892
Proceeds from sales of residential
mortgage loans 86,724,862 102,772,002 125,803,949
Originations of loans held for sale (88,460,292) (85,402,259) (135,519,223)
Other - net (1,231,113) 1,551,105 (1,017,784)
------------ ------------ -------------
Total adjustments (3,150,205) 18,737,779 (11,248,358)
------------ ------------ -------------
Net cash provided by (used in)
operating activities (1,807,038) 20,638,153 (10,143,777)
Investing Activities
Purchases of available for sale
investments (15,596,820) (2,907,656)
Purchases of held to maturity investments (4,706,250)
Purchases of investments (23,881,999)
Proceeds from sale and maturities of
available for sale investments 162,600 9,184,352
Proceeds from sale and maturities of
investments 9,245,575
Principal repayments on investments 853,789 1,824,846 14,401,220
Net increase in loans (7,797,357) (31,235,504) (3,834,800)
Proceeds from sales of other real estate 933,854 731,435 1,272,302
Purchases of mortgage servicing rights (2,528,961) (2,321,891) (3,290,305)
Proceeds from sales of mortgage
servicing rights 1,362,722 1,457,005
Proceeds from sale of insurance
subsidiary 4,549,189 2,000,000
Purchases of premises and equipment,
net of disposals (287,989) (200,943) (2,210,336)
------------ ------------ -------------
Net cash used in investing activities (22,898,162) (23,625,417) (6,298,343)
------------ ------------ -------------
Financing Activities
Decrease in deposits from sale of branch (33,783,506)
Net increase in demand, NOW, savings and
money market accounts 8,938,495 3,685,930 14,466,231
Net increase (decrease) in certificates
of deposit 28,980,178 16,155,272 (10,857,014)
Net increase (decrease) in Federal Home
Loan Bank advances (15,200,000) 10,200,000 17,500,000
Net increase in securities sold under
agreements to repurchase 5,000,000 8,650,000
Cash dividends (290,171)
Proceeds from issuance of common stock 231,536 6,504 27,100
------------ ------------ -------------
Net cash provided by financing activities 27,660,038 4,914,200 21,136,317
------------ ------------ -------------
Net increase in cash and cash equivalents 2,954,838 1,926,936 4,694,197
Cash and cash equivalents at beginning of
period 15,508,367 13,581,431 8,887,234
------------ ------------ -------------
Cash and cash equivalents at end of period $18,463,205 $15,508,367 $ 13,581,431
============ ============ =============
</TABLE>
13
<PAGE>
For the years ended December 31, 1995, 1994 and 1993, interest of $12.3
million, $9.4 million and $9.3 million was paid, respectively. Income taxes of
$960,000, $891,000 and $778,000 were paid in the years ended December 31, 1995,
1994 and 1993, respectively. During the years ended December 31, 1995, 1994 and
1993, $318,000, $2.9 million and $1.5 million in loans were transferred to
other real estate, respectively. The Company paid stock dividends amounting to
$1.9 million and $2.3 million in 1994 and 1993, respectively. The Company
capitalized excess servicing fees on the sale of loans amounting to $238,000 in
1993.
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each of the Three Years in the Period Ended December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY - CFB Bancorp, Inc. (the "Holding Company") was incorporated under
Florida law on July 15, 1994 as a bank holding company. On December 31, 1994,
all shares of common stock of Community First Bank (the "Bank") were exchanged,
on a one-for-one basis, for 1,925,242 shares of common stock, with a $0.01 par
value in the Holding Company. At the same time, the Holding Company became the
parent company for the Bank. Accordingly, common stock value was reclassified
to additional paid-in capital and prior year amounts have been restated.
The accounting and reporting policies of the Holding Company and its subsidiary
(collectively, the "Company") conform to generally accepted accounting
principles and to general practices within the banking industry. The following
summarizes these policies and practices:
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of CFB Bancorp and its wholly-owned subsidiary, Community First Bank,
and its wholly-owned subsidiary, Community Savings Mortgage Company. All
significant intercompany balances and transactions have been eliminated. On
July 8, 1993 (the "measurement date"), the Company adopted a formal plan of
disposal for its insurance subsidiary, American Surety and Casualty Holding
Company, and its wholly-owned subsidiary, American Surety and Casualty Company
(collectively, "ASCH"). ASCH was sold on March 7, 1994. The results of
operations of ASCH have been reported as discontinued operations (See note 17).
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.
14
<PAGE>
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash and due from
banks and interest bearing deposits. Interest bearing deposits consist
primarily of amounts due from other financial institutions and overnight funds
with an original maturity of less than three months.
INVESTMENTS - On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"), which addresses the accounting and
reporting for certain investments in debt and equity securities. This
Statement requires that debt securities for which the Bank has the positive
intent and ability to hold to maturity to be classified as investments 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 held for trading purposes. Securities not
classified as held to maturity are classified as available for sale, and
reported at fair value with unrealized gains and losses excluded from earnings
and reported, net of tax, as a separate component of stockholders' equity until
realized. Other investments consist of Federal Home Loan Bank stock, a limited
partnership mutual fund and other equity securities, which do not have a
readily determinable fair value because ownership in these investments is
restricted and they are not traded in a recognized market.
The effect of the initial adoption of SFAS No. 115 was to increase
stockholders' equity as of January 1, 1994 by $33,428, net of income taxes of
$19,215.
Under SFAS No. 115, financial institutions are prohibited from reclassifying
held to maturity investments to the available for sale category unless certain
conditions are met. During 1995, the Financial Accounting Standards Board
issued SFAS No. 115 implementation guidelines which permitted financial
institutions a one-time opportunity to reassess the appropriateness of all
investment security classifications and to transfer securities classified as
held to maturity to available for sale without calling into question
management's intent to hold other investment securities to maturity in the
future. Accordingly, the Company transferred all held to maturity investments
with an amortized cost of $16,704,764 to available for sale in December 1995.
The unrealized gains related to this transfer were $684,509.
Gains and losses on sales of investment securities are recognized upon
disposition based upon the adjusted cost of the specific security.
LOANS - Interest income on loans is accrued based on the outstanding daily
balances. Interest income on all other loans, except for those designated as
non-accrual loans is recognized only as collected. Non-accrual loans are those
which management has determined represent more than normal risk of
collectibility of future interest regardless of the presence of collateral
which may be sufficient to provide for ultimate payment. Loan origination fees
and certain direct origination costs are capitalized and are amortized using
the interest method over the contractual lives of the related loans.
15
<PAGE>
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is maintained at a
level believed adequate by management to absorb potential losses in the loan
portfolio. The allowance for loan losses is increased by charges against
income and decreased by chargeoffs (net of recoveries). Chargeoffs to the
allowance are made when the loan is considered uncollectible or is transferred
to real estate owned. Recoveries are credited to the allowance. Management's
periodic evaluation of the adequacy of the allowance is based upon the
Company's past loan loss experience, known and inherent risks in the loan
portfolio, adverse situations that may affect the borrower's ability to repay,
the estimated value of any underlying collateral, and current economic
conditions. While management uses the best information available to make such
determinations, additional provision for loan losses may be required to be
established in the future should economic or other conditions change
substantially.
Impaired loans are loans for which it is probable that the creditor will be
unable to collect all amounts due according to the contract terms of the loan
agreement. The Company's impaired loans include nonaccrual loans, troubled
debt restructurings, and large loans more than 90 days delinquent in which full
payment of principal and interest is not expected. Cash receipts on impaired
loans 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. Impairment losses are measured by the present value of expected future
cash flows discounted at the loan's effective interest rate, or at either the
loan's observable market price or the fair value of the collateral.
Adjustments to impairment losses due to changes in the fair value of an
impaired loan's underlying collateral are included in provision for loan
losses. Upon disposition of an impaired loan, any related valuation allowance
is reversed through a chargeoff to the allowance for loan losses.
Large groups of smaller balance homogeneous loans (installment, home equity and
single family mortgage loans) are collectively evaluated for impairment.
Nonaccrual large loans, trouble debt restructurings, performing large loans and
large loans more than 90 days past due in which full payment of principal and
interest is not expected are individually evaluated for impairment.
LOANS HELD FOR SALE - Loans held for sale are principally fixed-rate mortgage
loans on one-to-four family units originated by the Bank for which the intent
of management is to sell the loans at some point in the future. Loans held for
sale are reported at the lower of cost or market value, determined on an
aggregate basis, net of unamortized loan origination fees and related costs.
In the normal course of its business, the Company enters into mandatory formal
delivery commitments with investors to hedge its interest rate risk on fixed-
rate mortgage loans, both closed and committed. Loans subject to mandatory
forward commitments are marked to market based upon the commitment prices. All
other loans held for sale are sold to various institutions under agreements
obtained at the time the Bank extends commitments to borrowers. Such loans are
recorded at the lower of cost or market value as determined by prices and
yields quoted by such institutions
16
<PAGE>
PREMISES AND EQUIPMENT - Premises and equipment are carried at cost less
accumulated depreciation. Depreciation is computed on the straight-line method
over the estimated useful lives of the related assets. Maintenance and repair
costs are expensed as incurred.
OTHER REAL ESTATE - Other real estate, 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 fair value. An allowance is
established for subsequent adjustments determined necessary based upon the
estimated fair value of the underlying collateral. Costs relating to the
development and improvement of property are capitalized, whereas those relating
to maintaining the property are charged to expense.
The amounts the Company could ultimately recover from other real estate could
differ from the amounts used in arriving at the net carrying value of the
assets because of the future market factors beyond the Company's control or
changes in the Company's strategy for recovering its investment.
MORTGAGE SERVICING RIGHTS - Effective January 1, 1995, the Company adopted SFAS
No. 122, "Accounting for Mortgage Servicing Rights." This statement requires
the recognition of the rights to service mortgage loans for others as separate
assets, however those servicing rights are acquired, and requires that
capitalized mortgage servicing rights ("MSRs") be evaluated for impairment
based on their fair values.
The fair value of MSRs is based upon assumptions regarding the projected impact
of prepayment speeds and interest rate changes on the underlying mortgage loans
represented by the MSRs. As a result of this impairment evaluation, a
valuation allowance of $423,126 was established at December 31, 1995.
In evaluating MSRs for impairment, management stratifies the Company's MSRs;
based upon loan type and loan interest rate.
Originated MSRs ("OMSRs") generally represent the MSRs; acquired when an
institution originates and subsequently sells mortgage loans, but retains the
servicing rights. Purchased MSRs ("PMSRs") are MSRs that have been purchased
from other parties. Prior to adopting SFAS No. 122, only PMSRs, but not OMSRs,
could be capitalized as assets. Under the provisions of this standard, the
Company capitalized $585,706 in OMSRs; as assets during 1995 and
correspondingly reduced the cost basis of originated loans.
MSRs; also include capitalized excess servicing fees. Capitalized excess
servicing fees represent the amount of the present value of estimated future
servicing revenues in excess of normal servicing revenues which are included in
the computation of the gain on sale of mortgage loans. MSRs are capitalized
and amortized in proportion to, and over the estimated life of, the net
servicing income stream and are periodically evaluated as to changes in
assumptions used to project such servicing revenues.
INCOME TAXES - The Company files consolidated federal and state income tax
returns. Income taxes, if any, are allocated to the Company and its subsidiary
as though separate returns were being filed.
17
<PAGE>
The Company uses an asset and liability approach to financial accounting 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.
EARNINGS PER COMMON SHARE - Earnings per common share is calculated by dividing
net income by the weighted average number of shares outstanding and common
stock equivalents assumed outstanding, where applicable.
RECLASSIFICATIONS - Certain previously reported amounts in the 1994 and 1993
consolidated financial statements have been reclassified to conform with 1995
classifications.
2. INVESTMENTS
The amortized cost and fair values of investments, as of December 31, 1995 and
1994, are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
1995 Cost Gains Losses Value
Available for sale
U.S. Treasury securities $ 3,493,765 $ 46,655 $ 0 $ 3,540,420
U.S. Government sponsored
agency bonds 5,000,000 482 0 5,000,482
Municipal bonds 11,204,166 487,223 0 11,691,389
Mortgage-backed securities 44,757,664 198,256 1,340,759 43,615,161
----------- -------- ---------- -----------
Total 64,455,595 732,616 1,340,759 63,847,452
Other investments
Federal Home Loan Bank stock 1,512,400 0 0 1,512,400
Limited partnership mutual fund 873,786 0 0 873,786
Other equity securities 25,000 0 0 25,000
----------- -------- ---------- -----------
Total 2,411,186 0 0 2,411,186
----------- -------- ---------- -----------
Total $66,866,781 $732,616 $1,340,759 $66,258,638
=========== ======== ========== ===========
1994
Held to maturity
U.S. Treasury securities $ 3,490,266 $ 1,073 $ 151,497 $ 3,339,842
Municipal bonds 8,441,957 55,031 246,201 8,250,787
Mortgage-backed securities 4,735,900 0 312,400 4,423,500
----------- -------- ---------- -----------
Total 16,668,123 56,104 710,098 16,014,129
18
<PAGE>
Available for sale
Municipal bonds 2,770,325 0 64,998 2,705,327
Mortgage-backed securities 25,827,562 0 2,146,322 23,681,240
----------- -------- ---------- -----------
Total 28,597,887 0 2,211,320 26,386,567
Other investments
Federal Home Loan Bank stock 1,535,000 0 0 1,535,000
Limited partnership mutual
fund 1,154,537 0 0 1,154,537
Other equity securities 25,000 0 0 25,000
----------- -------- ---------- -----------
Total 2,714,537 0 0 2,714,537
----------- -------- ---------- -----------
Total $47,980,547 $ 56,104 $2,921,418 $45,115,233
=========== ======== ========== ===========
At December 31, 1995, other investments included a $873,786 investment in a
limited partnership mutual fund. This fund primarily invests in subordinated
debt and related equity securities issued in conjunction with leveraged buy
outs, leveraged acquisitions and leveraged recapitalizations. The gross
unrealized losses on this investment of $93,448 in 1995 and $308,948 in 1994
were considered other than temporary in nature and are reflected in the
consolidated statements of income. Accordingly, this investment was written
down to its fair value of $873,876 and $1,154,537 at December 31, 1995 and
1994, respectively.
The amortized cost and estimated fair value of available for sale investments,
as of 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.
Amortized Fair
Cost Value
Due after one year through five years $11,600,491 $11,700,593
Dues after five years through ten years 8,097,440 8,531,698
Due after ten years 0 0
----------- -----------
Subtotal 19,697,931 20,232,291
Mortgage-backed securities 44,757,664 43,615,161
----------- -----------
Total $64,455,595 $63,847,452
=========== ===========
Proceeds from the sale of investments available for sale in 1995, 1994, and
1993 amounted to $162,600, $9,048,487 and $7,802,044, respectively. Gross
gains of $0, $51,272, and $117,365 and gross losses of $0, $20,164, and $0 were
realized on sales of investments in 1995, 1994, and 1993, respectively.
At December 31, 1995, the Federal Home Loan Bank stock totaling $1,512,400 and
mortgage-backed securities totaling $6,443,214 were pledged as collateral for
advances from the Federal Home Loan Bank of Atlanta. U.S. Treasury securities
totaling $3,493,765 were pledged with the Federal Reserve Bank as collateral
for Treasury Tax and Loan deposits. Mortgage-backed securities totaling
$10,204,623 and municipal bonds totaling $854,135 were pledged with the State
of Florida as collateral for public deposits held in the Company by the State
of Florida.
19
<PAGE>
3. LOANS
Loans at December 31, 1995 and 1994 are summarized as follows:
1995 1994
Residential real estate $124,340,830 $122,970,283
Construction-permanent mortgage 14,418,098 30,992,282
Construction 6,762,905 7,234,475
Commercial real estate 40,976,621 25,174,868
Commercial 19,622,333 20,793,169
Installment 8,982,506 5,551,244
Home equity loans 1,672,242 2,013,059
------------ ------------
Total 216,775,535 214,729,380
Deduct:
Undisbursed portion of loans in process 8,901,458 17,037,329
Deferred loan fees, net 305,793 442,317
Discount on loans purchased 68,562 343,669
Allowance for loan losses 1,685,851 1,218,164
------------ ------------
Total 10,961,664 19,041,479
------------ ------------
Loans - net $205,813,871 $195,687,901
============ ============
Impaired loans on which the accrual of interest has been either discontinued
or reduced, amounted to approximately $1,774,000 and $812,000 at December 31,
1995 and 1994, respectively. If interest on these loans had been accrued,
income would have been increased by approximately $93,000, $62,000 and $408,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
Activity in the allowance for loan losses for the years ended December 31,
1995, 1994 and 1993 is as follows:
1995 1994 1993
Beginning balance $1,218,164 $1,077,770 $1,647,299
Provision for loan losses 5,000 240,225 611,059
Charge-offs (237,059) (205,942) (1,266,910)
Recoveries 699,746 106,111 86,322
----------- ----------- -----------
Ending balance $1,685,851 $1,218,164 $1,077,770
=========== =========== ===========
20
<PAGE>
In 1992, the Company began foreclosure action on a commercial real estate loan
with an unpaid principal balance of $3.7 million. In December 1994, the
Company obtained legal title to the property and recorded it as other real
estate at its fair value of $2.5 million. The Company recorded charge-offs
relating to this loan totaling $230,000, $895,000 and $75,000 in 1992, 1993 and
1994, respectively. In 1995, the property was sold for $2,750,000, of which
$795,000 was received in cash and the balance financed by the Bank under normal
terms. Also, during 1995 the Company entered into Settlement Agreements with
the guarantors of the original loan and received cash payments totaling
$125,000 and notes totaling $605,000 with interest rates from 8 to 9% and
principal payments due through March 2002. Cash payments totaling $171,000 and
notes receivable with an unpaid principal balance of $409,000 at December 31,
1995 have been recorded as recoveries to the allowance for loan losses in 1995.
4. PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1995 and 1994 are summarized as follows:
1995 1994
Land $ 1,192,323 $ 1,041,043
Buildings 1,537,030 1,313,286
Furniture, fixtures and equipment 4,096,015 4,288,059
Leasehold improvements 1,026,906 1,114,951
------------ ------------
Total 7,852,274 7,757,339
Accumulated depreciation and amortization (3,160,191) (2,721,282)
------------ ------------
Premises and equipment - net $ 4,692,083 $ 5,036,057
============ ============
The Company has entered into several operating lease agreements for equipment
and facilities in the normal course of business. Certain of the leases provide
for options to renew and for payment of taxes, insurance and maintenance costs.
The future minimum rental commitments as of December 31, 1995, for all
noncancelable leases are as follows:
Amount
1996 $ 570,000
1997 476,000
1998 464,000
1999 407,000
2000 382,000
Thereafter 702,000
----------
Total $3,001,000
==========
Rent expense for the years ended December 31, 1995, 1994 and 1993 was
approximately $586,000, $597,000, and $566,000, respectively.
21
<PAGE>
5. MORTGAGE SERVICING RIGHTS
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal balances
of mortgage loans serviced for others was $564,446,000 and $511,944,000 at
December 31, 1995 and 1994, respectively.
Custodial escrow balances maintained in connection with the foregoing loan
servicing, and included in demand deposits, were approximately $3,433,693 and
$2,926,514 at December 31, 1995 and 1994, respectively.
An analysis of the changes in mortgage servicing rights for 1995 and 1994 is
as follows:
Mortgage Capitalized
Servicing Excess Servicing Valuation
Rights Fees Allowance Total
Balance, December 31, 1993 $ 5,582,527 $ 539,580 $ 6,122,107
Purchased 1,490,404 1,490,404
Amortization (815,534) (77,130) (892,664)
Valuation adjustments due
to changes in
prepayment assumptions (65,000) (21,130) (86,130)
Sales (347,787) (347,787)
------------ ---------- ----------- ------------
Balance, December 31, 1994 6,192,397 93,533 6,285,930
Purchased 2,552,606 2,552,606
Originated 585,706 585,706
Amortization (817,828) (30,582) (848,410)
Sales (1,127,440) (1,127,440)
------------ ---------- ----------- ------------
Subtotal 7,385,441 62,951 $ 0 7,448,392
Valuation adjustment (423,126) (423,126)
------------ ---------- ----------- ------------
Balance, December 31, 1995 $ 7,385,441 $ 62,951 $ (423,126) $ 7,025,266
============ ========== =========== ============
6. DEPOSITS
Deposits at December 31, 1995 and 1994 are summarized as follows:
1995 1994
Non-interest bearing demand $ 36,947,106 $ 30,152,614
Regular savings 15,475,798 19,039,587
Money market and NOW 49,817,387 44,109,595
Certificates of deposit of $100,000 or more 35,319,473 24,519,395
Other time deposits 122,906,850 104,726,750
------------ ------------
Total $260,466,614 $222,547,941
============ ============
22
<PAGE>
Certificates of deposit of $100,000 or more includes $8,000,000 in public
funds deposited by the State of Florida with the Company. These public funds
are collateralized by mortgage-backed securities totaling $10,204,623 and
municipal bonds totaling $854,135, mature within six months, and have a
weighted average interest rate of 6.01%.
Interest expense on deposits for the years ended December 31, 1995, 1994 and
1993 is summarized as follows:
1995 1994 1993
Regular savings $ 478,374 $ 579,595 $ 691,249
Money market and NOW 1,340,048 1,090,146 848,386
Certificates of deposit of $100,000
or more 1,558,647 1,256,347 1,251,754
Other time deposits 6,984,158 5,366,371 6,181,196
------------ ---------- ----------
Total $ 10,361,227 $8,292,459 $8,972,585
============ ========== ==========
7. ADVANCES FROM THE FEDERAL HOME LOAN BANK
As of December 31, 1995, advances from the Federal Home Loan Bank totaling
$15,500,000 consisted of short-term advances maturing within 90 days at a
weighted average interest rate of 5.82%. These advances were collateralized by
the Company's Federal Home Loan Bank stock totaling $1,512,400, mortgage-backed
securities totaling $6,443,214 and the residential first mortgage loan
portfolio (under a Blanket Floating Lien Agreement with the Federal Home Loan
Bank of Atlanta).
As of December 31, 1994, advances from the Federal Home Loan Bank totaling
$30,700,000 consisted of short-term advances maturing within 90 days at a
weighted average interest rate of 6.32%.
8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
As of December 31, 1995, securities sold under agreements to repurchase
consisted of mortgage-backed securities which had a book value, including
accrued interest, of $15,095,322 and a market value of $14,442,718. The
weighted average interest rate of the agreements at December 31, 1995 was
5.92%.
As of December 31, 1994, securities sold under agreements to repurchase
consisted of mortgage-backed securities which had a book value, including
accrued interest, of $9,770,200 and a market value of $9,083,275. The weighted
average interest rate of the agreements at December 31, 1994 was 6.18%.
The agreements involve the repurchase of substantially the same mortgage-
backed securities sold. The securities underlying these agreements were
delivered to a broker-dealer who may have sold, loaned, or otherwise disposed
of such securities to other parties in the normal course of their operation,
and the broker-dealer has agreed to resell to the Company substantially
identical securities at the maturities of the agreements. Thus, the mortgage-
backed securities underlying the agreements were not under the Company's
control. The agreements at December 31, 1995 mature within 90 days.
Securities sold under agreements to repurchase averaged $12,350,000 during
1995, and the maximum amount of outstanding agreements at any month-end during
1995 was $13,650,000.
23
<PAGE>
9. INCOME TAXES
The provision (benefit) for income taxes for the years ended December 31, 1995,
1994 and 1993, and the amounts allocated to continuing operations are as
follows:
1995 1994 1993
Current $ 747,313 $ 1,279,514 $302,069
Deferred (281,991) (515,912) (37,834)
---------- ------------ ---------
Total $ 465,322 $ 763,602 $264,235
========== ============ =========
The components of net deferred tax assets (liabilities) at December 31, 1995
and 1994 are as follows:
1995 1994
Deferred tax assets
Unrealized loss on available for sale investments $ 221,972 $ 818,188
Writedown of investment in equity security 217,987 189,086
Allowance for loan losses 169,370 136,613
MSR valuation allowance 159,222 0
Gain on sale of ASCH 505,654 464,423
Other 114,938 40,729
------------ ------------
Total deferred tax assets 1,389,143 1,649,039
Valuation allowance for deferred tax assets 0 0
------------ ------------
Net deferred tax assets 1,389,143 1,649,039
Deferred tax liabilities
Deferred loan fees (15,162) (99,476)
Federal Home Loan Bank stock (203,407) (173,133)
Premises and equipment (326,456) (244,139)
Other (86,200) (60,148)
------------ ------------
Total deferred tax liabilities (631,225) (576,896)
------------ ------------
Net deferred tax asset $ 757,918 $ 1,072,143
============ ============
24
<PAGE>
The effective tax rate differs from the statutory federal income tax rate for
the years ended December 31, 1995, 1994 and 1993 for the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------- ------------------- -------------------
Amount % Amount % Amount %
------------ ------ ---------- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Provision at federal
income tax rate $ 614,886 34.00 $ 854,265 34.00 $ 379,882 34.00
Increase (decrease)
resulting from:
Tax-exempt interest
income (166,578) (9.21) (145,232) (5.78) (170,285) (15.24)
Other 175,014 0.94 54,569 2.17 54,638 4.89
------------ ------ ---------- ------ ---------- -------
Provision at effective
tax rate $ 465,322 25.73 $ 763,602 30.39 $ 264,235 23.65
============ ====== ========== ====== ========== =======
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company makes various commitments that
are not represented in the accompanying consolidated financial statements. At
December 31, 1995 and 1994, the Company had commitments to fund loans,
excluding the undisbursEd portion of loans in process, of $33.1 and $20.7
million, respectively. The Company also had $1,636,000 and $943,000 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 by the customer. The Company'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 statements of
financial condition. Management does not believe that these commitments
present any significant liquidity risk to the Company.
The Company is a defendant in certain claims and legal actions arising in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, the ultimate disposition of these matters is not expected
to have a material adverse effect on the Company's consolidated financial
position.
11. STOCK OPTIONS
Stock options have been granted periodically to officers and directors of the
Bank. All options are granted at an exercise price equal to fair market value
at the date of grant. During 1994, the Company increased the shares under
option and reduced the option price on all outstanding options as a result of
a 10% stock dividend paid in September 1994. During 1993, the Bank increased
the shares under option and reduced the option price on all outstanding
options as a result of a 20% stock dividend paid in July 1993. The following
is a summary of option activity for the years ended December 31, 1995, 1994
and 1993:
1995 1994 1993
Shares under option at beginning
of year 337,590 244,600 178,000
Granted 67,500 30,000
Increase due to stock dividend 30,690 41,600
Exercised (31,230) (1,200) (5,000)
Expired, unexercised (4,000)
------------ ------------ ------------
Shares under option at end of year 306,360 337,590 244,600
============ ============ ============
Option price per share for options
exercised $4.93-$9.32 $4.93-$9.32 $5.42-$7.50
Shares exercisable at end of year 306,360 337,590 244,600
25
<PAGE>
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments." The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily 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
Company could realize in a current market exchange. The use of different
market assumptions and/or estimation 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 for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS - The carrying amount is a reasonable estimate of
fair value.
INVESTMENTS - The 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 the 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.
LOANS HELD FOR SALE - The carrying amount is a reasonable estimate of fair
value.
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.
ADVANCES FROM FEDERAL HOME LOAN BANK - Fair value is estimated using the rates
currently offered for advances of similar remaining maturities.
SECURITIES SOLD UNDER AGREEMENTS To REPURCHASE - The carrying amount is a
reasonable estimate of fair value.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - The Company 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 and
forward contracts. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated balance sheet.
26
<PAGE>
FORWARD CONTRACTS - Forward contracts are contracts for future delivery of
mortgages in which the Company agrees to make delivery to investors of mortgage
loans at a specified date, at a specified price. Risk arises from the possible
inability of counterparties to meet the terms of their contracts and from
movements in interest rates. The fair value of forward contracts is the
estimated amount that the Company would receive or pay to terminate the forward
contracts at the report date based on market prices for similar financial
instruments.
The estimated fair values of the Company's financial instruments as of December
31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash equivalents $ 18,463,205 $ 18,463,205 $ 15,508,367 $ 15,508,367
Investments 66,258,638 66,258,638 45,769,227 45,115,233
Loans - net 205,813,871 205,956,096 195,687,901 186,686,085
Loans held for sale 4,243,620 4,243,620 6,161,583 6,161,583
------------ ------------ ------------ ------------
Total $294,779,334 $294,921,559 $263,127,078 $253,471,268
============ ============ ============ ============
1995 1994
-------------------------- --------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------ ------------ ------------ ------------
Financial Liabilities
Deposits:
Without stated
maturities $102,240,291 $102,240,291 $ 93,301,796 $ 93,301,796
With stated maturities 158,226,323 154,523,318 129,246,145 125,782,066
Advances from Federal
Home Loan Bank 15,500,000 15,500,000 30,700,000 30,700,000
Securities sold under
agreements to repurchase 13,650,000 13,650,000 8,650,000 8,650,000
------------ ------------ ------------ ------------
Total $289,616,614 $285,913,609 $261,897,941 $258,433,862
============ ============ ============ ============
</TABLE>
27
<PAGE>
13. REGULATORY MATTERS
The Federal Reserve Bank's ("FRB") capital regulations require a minimum 3%
leverage capital ratio requirement for the most highly-rated bank holding
companies. All other bank holding companies will need to meet a minimum lever
age ratio that is at least 100 to 200 basis points above 3%. Under the FRB's
risk-based regulation, a bank holding company must classify its assets and
certain off-balance sheet activities into categories, and maintain specified
levels of capital for each category. The least capital is required for the
category deemed by the FRB to have the least risk and the most capital is
required for the category deemed by the FRB to have the greatest risk. The
regulation requires a bank holding company to maintain a total risk-based
capital ratio of 8% and a Tier 1 risk-based capital ratio of 4%. As of
December 31, 1995, the Company had a leverage capital ratio of 6.27%, a Tier I
risk-based capital ratio of 10.90%, and a total risk-based capital ratio of
11.84%.
The Company is subject to certain restrictions on the amount of cash dividends
that it may declare without prior regulatory approval. Under these
restrictions, the Company may not pay a cash dividend that would cause the
Bank's capital to fall below the minimum amount required by federal or Florida
law. Otherwise, the Company may pay a dividend out of the total of current net
profits plus retained net profits of the preceding two years.
14. EMPLOYEE STOCK OWNERSHIP PLAN
During 1995, the Company converted its profit-sharing plan ("Plan") into a
employee stock ownership plan ("ESOP") which covers substantially all
employees. Under the terms of the ESOP, the Company may contribute to the ESOP
an amount of its net profits as determined by the Board of Directors. The
Company contributed approximately $100,000 to the ESOP for the year ended
December 31, 1995, and $0 and $80,000 to the Plan for the years ended December
31, 1994, and 1993. The ESOP acquired 5,000 shares of the Company's common
stock using the proceeds of the 1995 contribution to the ESOP. All of these
shares are allocated to ESOP participants as of December 31, 1995.
15. STOCKHOLDERS' EQUITY
On September 12, 1994, the Company paid a 10% stock dividend to all
stockholders of record of the Company's common stock, at the close of business
on September 2, 1994. Amounts equal to the fair value of the shares issued
have been charged to retained earnings. Cash totaling $142 was paid for
fractional shares. Earnings per share and the weighted average shares
outstanding have been restated to give retroactive effect to the dividend.
16. RELATED PARTY TRANSACTIONS
The Company leases office space from affiliates under long-term operating
leases. Rent expense attributable to these leases was $429,891, $423,260 and
$380,385 for the years ended December 31, 1995, 1994 and 1993, respectively.
28
<PAGE>
Activity in loans to directors, executive officers and principal shareholders
(exclusive of loans to any person that, in total, do not exceed $60,000) for
the years ended December 31, 1995 and 1994, is as follows:
1995 1994
------------ ------------
Balance, January 1 $ 4,219,046 $ 3,621,370
New loans during the year 1,240,265 1,774,264
Repayments during the year (761,666) (1,176,588)
------------ ------------
Balance, December 31 $ 4,697,645 $ 4,219,046
============ ============
17. DISCONTINUED OPERATIONS
In July 1993, the Company adopted a formal plan of disposal for its insurance
subsidiary, American Surety and Casualty Holding Company, and its wholly-owned
subsidiary, American Surety and Casualty Company (collectively, "ASCH"). In
November 1993 and December 1993, approximately 18% of the Company's interests
in ASCH was sold. The remaining 82% of the Company's interests in ASCH was
sold in March 1994, subject to regulatory approval. In June 1994, regulatory
approval was obtained and sales proceeds were released to the Company. As of
December 31, 1995 and 1994, the Company had no recorded investment in ASCH.
The gain on the sale of ASCH, including the estimated loss during the
phase-out period, is as follows:
Proceeds
Cash proceeds $ 6,549,189
Note receivable 465,000
Debenture 1,835,000
Valuation allowance on debenture (1,835,000)
------------
Total proceeds 7,014,189
Investment in ASCH
Investment in ASCH 6,516,540
Loss during phase-out period 100,300
Goodwill and selling costs 158,873
------------
Total investment 6,775,713
------------
Gain on sale of ASCH $ 238,476
============
The $1,835,000 debenture, issued by ASCH, was reduced by $43,730 to $1,791,270
during 1995 to compensate ASCH for tax benefits received by the Company. The
debenture is non-interest bearing and payable in full in June 1997. A
valuation allowance of 100% of the debenture was established due to
uncertainties regarding its collectibility.
ASCH's income from operations, net of income taxes, totaled $251,517 for 1993.
29
<PAGE>
18. FOURTH QUARTER FINANCIAL INFORMATION
Significant items affecting net income in the fourth quarter of 1995 included a
$423,000 provision for impairment of mortgage servicing rights, which resulted
from adjusting the Company's mortgage servicing rights to their fair value at
December 31, 1995.
19. PARENT COMPANY
Condensed statements of financial condition, statements of income and
statements of cash flows for CFB Bancorp, Inc. (Parent Company Only), which was
formed in July 1994, are presented as follows:
STATEMENTS OF FINANCIAL CONDITION
as of December 31 1995 1994
Assets
Cash $ 25,930 $ 30,733
Accrued interest receivable 69,696 31,332
Investment in limited partnership mutual fund 873,786 1,154,537
Investment in subsidiary, at equity 18,350,752 16,199,221
Other real estate, net 277,647
Income taxes receivable 77,364
Other assets 33,297 10,000
------------- -------------
Total assets $ 19,708,472 $ 17,425,823
============= =============
Liabilities and stockholders' equity
Accounts payable $ 10,000
-------------
Total liabilities 10,000
Stockholders' equity
Common stock $ 19,557 19,252
Additional paid-in capital 13,811,447 13,590,116
Retained earnings 6,263,639 5,210,643
Unrealized loss on available for sale
investments, net of income tax (386,171) (1,404,188)
------------- -------------
Total stockholders' equity 19,708,472 17,415,823
------------- -------------
Total liabilities and stockholders' equity $ 19,708,472 $ 17,425,823
============= =============
STATEMENTS OF INCOME
for the Years Ended December 31 1995 1994
Income
Interest income on investments $ 154,981 $ 31,332
Gain on sale of other real estate 26,767
Equity in undistributed income of bank subsidiary 1,477,759 1,967,822
------------ ------------
Total income 1,659,507 1,999,154
Expenses
Salaries and employee benefits 81,798
Professional fees 176,514
Writedown of investment in limited partnership
mutual fund 93,448 98,780
Other 41,944
------------ ------------
Total expenses 393,704 98,780
------------ ------------
Income before provision for income taxes 1,265,803 1,900,374
Benefit for income taxes (77,364)
------------ ------------
Net income $ 1,343,167 $ 1,900,374
============ ============
30
<PAGE>
STATEMENTS OF CASH FLOWS
for the Years Ended December 31 1995 1994
Operating Activities
Net income $ 1,343,167 $ 1,900,374
Reconcilement of net income to net cash provided
by (used in) operating activities:
Amortization 5,858
Writedown of investment in limited partnership
mutual fund 93,448 98,780
Increase in interest receivable (38,364) (31,332)
Increase in income taxes receivable (77,364)
Gain on sale of other real estate (26,766)
Equity in undistributed income of bank
subsidiary (1,477,759) (1,967,822)
Other - net 11,855
------------ ------------
Net cash provided by (used in) operating activities (165,925) 0
------------ ------------
Investing Activities
Principal repayments on limited partnership mutual
fund 93,425 30,733
Proceeds from sales of other real estate 67,697
------------ ------------
Net cash provided by investing activities 161,122 30,733
------------ ------------
Net increase (decrease) in cash (4,803) 30,733
Cash at beginning of year 30,733 0
------------ ------------
Cash at end of year $ 25,930 $ 30,733
============ ============
20. MERGER WITH COMPASS BANCSHARES, INC.
In November 1995, the Company signed a non-binding letter of intent with
Compass Bancshares, Inc. ("Compass") under which Compass would acquire all of
the outstanding stock of the Company.
31
<PAGE>
The definitive agreement for the sale of the Company to Compass was signed in
February 1996. Under the terms of this agreement, Compass will exchange shares
of its common stock for all the common stock and unexercised stock options of
the Company in a transaction valued at approximately $43 million. The
acquisition is subject to both regulatory and stockholder approval and is
expected to be completed in the third quarter of 1996.
21. SUBSEQUENT EVENTS
In March 1996, the Company entered into an agreement to sell the mortgage
servicing rights to approximately $346 million principal amount of mortgage
loans serviced for others. The Company's capitalized mortgage servicing rights
attributable to these loans totaled $4,564,000 as of December 31, 1995. The
sale is expected to close in April 1996 and the estimated loss on the sale is
$281,000.
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
CFB Bancorp, Inc. and Subsidiary
Jacksonville, Florida
We have audited the consolidated statements of financial condition of CFB
Bancorp, Inc. and Subsidiary (the "Company") as of December 31, 1995 and 1994,
and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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.
32
<PAGE>
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company 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.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," and effective January 1, 1995, the Company adopted SFAS No.
122, "Accounting for Mortgage Servicing Rights."
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Certified Public Accountants
March 14, 1996
Jacksonville, Florida
BOARD OF DIRECTORS
[Picture of Board of Directors]
(Left, from bottom) (Right, from bottom)
Jack C. Demetree A. Richardson Tosh Directors Emeritus
Chairman of the Board and President
Chief Executive Officer CFB Bancorp, Inc. Donald W. Howell
CFB Bancorp, Inc. CFB Bancorp, Inc. Vice President
Jacksonville Kennel
Raymond A. Nasrallah Robert F. King Club, Inc.
President President
American Import Lighting Kinco, Ltd. James B. Lumpkins
Retired
W.W. Gay R.H. Bullard, Jr.
President & Retired J. Albert Ziegler
Chief Executive Officer Retired
W.W. Gay Mechanical Robert B. Massey
Contractor, Inc. President
Massey Motors, Inc.
H.W. Goodall
Senior Vice President Jack C. Demetree, Jr.
Continental Cablevision, President
Inc. Demetree Brothers, Inc.
V. Hawley Smith, Jr.
President
H. Smith, Inc.
33
<PAGE>
OFFICERS
CFB Bancorp, Inc. Vice Presidents
Jack C. Demetree Barbara T. Adams
Chairman of the Board & Geraldine Crews
Chief Executive Officer W. Richard Doeschler
Genie Hamilton
A. Richardson Tosh Timothy R. Hilyer
President Vicki D. Lingle
Patricia A. Meide
Harry J. Bell Donald J. Odom
Executive Vice President W. Larry O'Steen
Chief Financial Officer Karen A. Self
Corporate Secretary Ronald E. Taylor
Assistant Vice Presidents
Community First Bank
Donna M. Askren
Jack C. Demetree John T. Avery
Chairman of the Board Cynthia Brookins-Beck
Jacquelyn A. Brinson
A. Richardson Tosh Irene L. Cappa
President and Marie P. Cumby
Chief Executive Officer Barabara Franklin
William Gallup
Executive Vice Presidents Kimberlee G. Milam
Ann R. Penhallegon
Harry J. Bell Stephan M. Penza
Victor M. George Nancy S. Woods
John R. Lamb
Kenneth S. Hartwig
Senior Vice Presidents Comptroller
Andrew J. Arnold Vickie L. Fields
Richard C. Stansfield Assistant Corporate Secretary
Cleve E. Warren
Regional Vice President
Anne Marie Comeau
34
<PAGE>
DIRECTORY
Northeast Florida Operations Southwest Florida Operations
Home Office Dunedin Residential Mortgage Center
3740 Beach Boulevard 1661 Main Street
Jacksonville, Florida 32207 Dunedin, Florida 34698
(904) 396-1182 (813) 733-9003
Baymeadows Branch Seven Hills Branch
9559 Baymeadows Road 401 Mariner Boulevard
Jacksonville, Florida 32256 Spring Hill, Florida 34609
(904) 636-0813 (352) 686-8770
Downtown Branch Spring Hill Branch
33 South Hogan Street 8550 Forest Oaks Boulevard
Jacksonville, Florida 32202 Spring Hill, Florida 34606
(Closed February 1996) (352) 686-5930
Mandarin Branch
10304 San Jose Boulevard
Jacksonville, Florida 32257
(904) 262-7255
Northside Branch
10865 Harts Road
Jacksonville, Florida 32218
(904) 751-9611
Orange Park Branch
536 Blanding Boulevard
Orange Park, Florida 32073
(904) 272-3373
Ponte Vedra Branch
226-8 Solana Road
Ponte Vedra Beach, Florida 32082
(904) 285-3001
Regency Branch
299 Monument Road
Jacksonville, Florida 32225
(904) 721-8002
STOCKHOLDER INFORMATION
Securities Markets
The common stock of CFB Bancorp, Inc. is listed on the Nasdaq national market
under the trading symbol of CFBN. The listing found in most newspapers is
either "CFB Bcp" or "CFB Bncp".
35
<PAGE>
Stockholder Assistance
Stockholders requiring a change of address, records, or information about
lost/missing stock certificates, should contact CFB Bancorp's transfer agent:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, NY 10005
Telephone: (800) 937-5449
Information
Analysts, investors and others seeking financial data or general information
are asked to contact Kenneth S. Hartwig, Stockholder Relations, at (904) 396-
1182.
Publications
Requests for printed materials, including annual
and quarterly reports, proxy statements, 10-K
and 10-Q reports, should be directed to Harry J.
Bell, Chief Financial Officer, at (904) 396-1182.
Annual Meeting
CFB Bancorp's 1996 annual meeting of stockholders will be held at 4:30 p.m. on
Tuesday, April 30, 1996, at the Marriott at Southpoint, 4670 Salisbury Road,
Jacksonville, Florida 32256.
Independent Auditors
The independent auditors for CFB Bancorp are:
Deloitte & Touche LLP
Suite 2801, Independent Square
One Independent Drive
Jacksonville, Florida 32202
Legal Counsel
The legal counsel for CFB Bancorp is:
Igler & Dougherty, P.A.
1501 Park Avenue East
Tallahassee, Florida 32301
36
<PAGE>
APPENDIX V
The CFB quarterly report on Form 10-Q
for the quarter ended March 31, 1996
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO FORM 10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
-----------------
Commission file number 0-25402
---------------
CFB BANCORP, INC.
-----------------
(Exact name of registrant as specified in its charter)
------------------------------------------------------
Florida 59-3277000
- ------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3740 Beach Boulevard, Jacksonville, Florida 32207
------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(904) 396-1182
--------------
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the bank
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.01 par value, as of March 31, 1996: 1,962,280 shares
--------------------
outstanding
- -----------
================================================================================
In accordance with Rule 202 of Regulation S-T, this Form 10-Q/A is being filed
in paper pursuant to a continuing hardship exemption.
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition
March 31, 1996 (unaudited) and December 31, 1995............. 1
Consolidated Statements of Income
Three months ended March 31, 1996 and 1995 (unaudited)....... 2
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995 (unaudited)....... 3
Notes to Consolidated Financial Statements (unaudited)....... 4
ITEM 2 - MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS................................................ 6
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K............................. 8
SIGNATURES.............................................................. 9
<PAGE>
CFB BANCORP AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-----------------------------
<S> <C> <C>
(Unaudited)
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 3,412,108 $ 5,980,516
Interest bearing deposits 17,642,670 12,482,689
-------------- ------------
Total cash and cash equivalents 21,054,779 18,463,205
-------------- ------------
Investments:
Available for sale, at fair value 63,487,879 63,847,452
Other investments 3,933,025 2,411,186
-------------- ------------
Total investments 67,420,904 66,258,638
-------------- ------------
Loans - net 206,282,478 205,813,871
Loans held for sale 3,486,999 4,243,620
Premises and equipment -- net 4,536,996 4,692,083
Other real estate -- net 459,052 418,695
Accrued interest receivable 1,812,548 1,938,234
Mortgage servicing rights -- net 6,817,456 7,025,266
Deferred income taxes 328,632 757,918
Income taxes receivable 276,698 97,392
Other assets 977,657 733,541
-------------- ------------
Total assets $313,454,199 $310,442,463
============== ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits $260,029,904 $260,466,614
Advances from Federal Home Loan Bank 20,000,000 15,500,000
Securities sold under agreements to 10,508,821 13,650,000
repurchase
Accrued interest payable 221,724 198,984
Other liabilities 2,119,447 918,393
-------------- ------------
Total liabilities 292,879,896 290,733,991
-------------- ------------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value:
15,000,000 shares authorized; 1,962,280
and
1,955,680 shares issued and outstanding 19,623 19,557
Additional paid-in capital 13,848,869 13,811,447
Retained earnings 7,224,842 6,263,639
Unrealized loss on investments available
for sale,
net of income taxes (519,031) (386,171)
-------------- ------------
Total stockholders' equity 20,574,303 19,708,472
-------------- ------------
Total liabilities and stockholders' equity $313,454,199 $310,442,463
============== ============
See Notes To Consolidated Financial Statements
</TABLE>
1
<PAGE>
CFB BANCORP AND SUBSIDIARY
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
----------------------------
<S> <C> <C>
(Unaudited)
INTEREST INCOME
Interest on loans $4,268,674 $4,174,224
Interest on investments:
Taxable 937,199 744,920
Tax-exempt 146,339 146,448
------------ ----------
Total interest income 5,352,212 5,065,592
------------ ----------
INTEREST EXPENSE
Interest on deposits 2,745,682 2,255,233
Interest on FHLB advances 190,545 441,162
Interest on repurchase agreements 151,716 158,463
------------ ----------
Total interest expense 3,087,943 2,854,858
------------ ----------
Net interest income 2,264,269 2,210,734
Provision for loan losses 550,000 5,000
------------ ----------
Net interest income after provision for loan
losses 1,714,269 2,205,734
------------ ----------
OTHER INCOME
Customer service fees 477,292 487,567
Loan servicing fees, net 166,294 141,997
Gain on sale of loans 204,574 122,943
Gain on sale of mortgage servicing rights 105,558
Gain on sale of other real estate 33,065 221,488
Other 139,392 121,581
------------ ----------
Total other income 1,020,617 1,201,134
------------ ----------
OTHER EXPENSES
Salaries and employee benefits 1,470,706 1,423,189
Occupancy and equipment 456,640 440,248
Insurance 171,319 166,036
Professional fees 169,094 88,816
Data processing 72,561 69,080
Advertising and promotion 68,697 58,509
Other 467,605 477,751
------------ ----------
Total other expenses 2,876,622 2,723,629
------------ ----------
Income (loss) before provision for income (141,736) 683,239
taxes
Provision (benefit) for income taxes (97,135) 206,619
------------ ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (44,601) 476,620
DISCONTINUED OPERATIONS:
Gain on sale of American Surety &
Casualty Holding Company,
net of income taxes of $578,140 1,005,804
------------ ----------
NET INCOME $ 961,203 $ 476,620
============ ==========
EARNINGS PER SHARE
Continuing operations ($0.02) $0.23
Discontinued operations 0.47
------------ ----------
Net income $0.45 $0.23
============ ==========
See Notes To Consolidated Financial Statements
</TABLE>
2
<PAGE>
CFB BANCORP AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
----------------------------
<S> <C> <C>
(Unaudited)
OPERATING ACTIVITIES
Net income $ 961,203 $ 476,620
------------- ------------
Reconcilement of net income to net cash
provided by (used in)
operating activities:
Depreciation and amortization 177,660 175,769
Amortization of mortgage servicing rights 238,261 185,766
Provision for loan losses 550,000 5,000
Accretion of deferred loan fees (106,841) (87,710)
Gain on sale of investments and loans (204,574) (122,943)
Gain on sale of mortgage servicing rights (105,558)
Net (gain) loss on sale of other real estate (33,065) (213,696)
Proceeds from sales of residential mortgage
loans 9,581,365 11,188,891
Originations of loans held for sale (8,620,170) (13,583,668)
Other - net (352,072) (101,789)
------------- ------------
Total adjustments 1,230,564 (2,484,518)
------------- ------------
Net cash provided by (used in) operating
activities 2,191,767 (2,007,898)
------------- ------------
INVESTING ACTIVITIES
Purchases of available for sale investments (5,000,000) (140,000)
Proceeds from sale and maturities of available
for sale investments 5,022,300 162,600
Principal repayments on investments 202,231 199,032
Net increase in loans (978,006) (7,831,379)
Proceeds from sales of other real estate 174,113 878,969
Purchases of mortgage servicing rights (702,498)
Proceeds from sales of mortgage servicing
rights 350,558
Net disposals of premises and equipment 19,570 266,538
------------- ------------
Net cash used in investing activities (559,792) (6,816,180)
------------- ------------
FINANCING ACTIVITIES
Net decrease in demand, NOW, savings
and money market accounts (944,936) (633,609)
Net increase in certificates of deposit 508,226 16,940,031
Net increase (decrease) in Federal Home Loan
Bank advances 4,500,000 (10,700,000)
Net increase (decrease) in securities sold
under agreements to repurchase (3,141,179) 4,600,000
Cash dividends (192,524)
Proceeds from issuance of common stock 37,488 12,714
------------- ------------
Net cash provided by financing activities 959,599 10,026,612
------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,591,574 1,202,534
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 18,463,205 15,508,367
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $21,054,779 $ 16,710,901
============= ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during period for:
Interest $ 3,100,000 $ 2,700,000
============= ============
Taxes $ 140,000 $ 125,000
============= ============
See Notes to Consolidated Financial Statements
</TABLE>
3
<PAGE>
CFB BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the three months ended March 31, 1996 and 1995
1. BASIS OF PRESENTATION - The accompanying unaudited financial statements of
CFB Bancorp, Inc. ("Company") have been prepared in accordance with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. However, such information
reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim period.
The results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1996. The financial statements and notes thereto should be
read in conjunction with the audited financial statements and notes thereto
included in the CFB Bancorp Annual Report for the year ended December 31,
1995.
2. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary, Community
First Bank ("Community"). All significant intercompany balances and
transactions have been eliminated.
3. COMMITMENTS - As of March 31, 1996, the Company had loan commitments
approximating $22.8 million which includes undisbursed portions of loans in
process. Commitments, which are disbursed subject to certain limitations,
extend over periods of time with the majority disbursed within a one year
period.
4. ALLOWANCE FOR LOAN LOSSES - The activity in the allowance for loan losses
for the three month periods ended March 31, 1996 and 1995 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Beginning balance $1,685,851 $1,218,164
Provision for loan losses 550,000 5,000
Chargeoffs (489,913) (43,181)
Recoveries 14,134 131,916
---------- ----------
Ending balance $1,760,072 $1,311,899
========== ==========
</TABLE>
5. DISCONTINUED OPERATIONS - In July 1993, the Company adopted a formal plan
of disposal for its insurance subsidiary, American Surety and Casualty
Holding Company, and its wholly-owned subsidiary, American Surety and
Casualty Company (collectively, "ASCH"). In November 1993 and December
1993, approximately 18% of the Company's interests in ASCH was sold. The
remaining 82% of the Company's interests in ASCH was sold in March 1994,
subject to regulatory approval. In June 1994, regulatory approval was
obtained and sales proceeds were released to the Company.
Included in the sales proceeds was a $1,835,000 non-interest bearing
debenture issued by ASCH and payable in full in July 1997. A valuation
allowance of 100% of the debenture was established due to uncertainties
regarding its collectibility. This debenture was subsequently reduced by
$43,730 to $1,791,270 during 1995 to compensate ASCH for certain tax
benefits received by the Company. In March 1996, the Company increased its
valuation of the debenture to $1,583,944 resulting in an additional gain on
sale of ASCH of $1,583,944. On April 12, 1996, the debenture was sold
without recourse to a third party for cash totaling $1,583,944.
4
<PAGE>
6. MERGER WITH COMPASS BANCHARES, INC. - In February 1996, the Company signed
a definitive agreement with Compass Bancshares, Inc. ("Compass") for
Compass to acquire all of the outstanding stock of the Company. Under the
terms of this agreement, Compass will exchange shares of its common stock
for all the common stock and unexercised stock options of the Company in a
transaction valued at approximately $43 million. The acquisition is
subject to both regulatory and shareholder approval and is expected to be
completed in the third quarter of 1996.
7. SUBSEQUENT EVENT - In April 1996, the Company sold the mortgage servicing
rights to approximately $341 million principal amount of mortgage loan
serviced for others. The Company's capitalized mortgage servicing rights
attributable to these loans totaled $4,494,000 as of March 31, 1996.
8. EARNINGS PER COMMON SHARE - Earnings per common share is calculated by
dividing net income by the weighted average number of shares outstanding
and common stock equivalents, where applicable.
5
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND 1995
RESULTS OF OPERATIONS - The Company's net income increased $484,000 to $961,000
for the three months ended March 31, 1996 from $477,000 for the three months
ended March 31, 1995. Earnings per share for the three months ended March 31,
1996 and 1995 were $0.45 and $0.23, respectively. Net income was higher in 1996
primarily due to income from discontinued operations of $1.0 million, net of
taxes.
INTEREST INCOME - Interest income increased to $5.4 million for the three months
ended March 31, 1996 from $5.1 million for the same period in 1995. This modest
increase is due to a higher level of average interest-earning assets during the
first quarter in 1996 as compared to the same period in 1995. In addition, the
Company is continuing to originate more commercial and consumer loans which
typically provide greater yields than residential mortgage loans.
INTEREST EXPENSE - Interest expense increased to $3.1 million for the three
months ended March 31, 1996 from $2.9 million for the same period in 1995. The
increase is primarily due to higher levels of interest-bearing deposits during
1996 as compared to the same period in 1995.
PROVISION FOR LOAN LOSSES - The provision for loan losses was $550,000 for the
three months ended March 31, 1996 compared to $5,000 for the three months ended
March 31, 1995. Net chargeoffs totaled $476,000 during 1996 compared to net
recoveries of $89,000 during the same period in 1995. The allowance for loan
losses increased slightly to $1.8 million at March 31, 1996 from $1.7 million at
December 31, 1995.
Based upon general trends in the economy and upon local market conditions,
management believes the $1.8 million allowance for loan losses at March 31, 1996
is appropriate. However, future economic conditions cannot be predicted with
certainty. The extent and duration of the current economic climate will depend
upon a number of factors, including economic activity in the region and
government activities. These factors will affect future levels of chargeoffs,
adversely classified assets, loan loss provisions and credit-related expenses.
OTHER INCOME - Other income declined $181,000 to $1.0 million for the three
months ended March 31, 1996 from $1.2 million for the three months ended March
31, 1995. The decline is primarily the result of lower gains on the sale of
other real estate during 1996. In March 1995, the Company sold other real
estate acquired by foreclosure at a gain of $221,000. Additionally, the Company
did not sell any mortgage servicing rights during the three months ended March
31, 1996. During the same period in 1995, the Company sold the mortgage
servicing rights to $98.0 million principal amount of mortgage loans at a gain
of $106,000.
OTHER EXPENSES - Other expenses increased $153,000 to $2.9 million for the three
months ended March 31, 1996 from $2.7 million for the three months ended March
31, 1995. The increase was primarily the result of higher professional fees
incurred during the three months ended March 31, 1996. These higher fees
resulted from legal and accounting services performed for the Company in
conjunction with the proposed merger with Compass.
DISCONTINUED OPERATIONS - During the three months ended March 31, 1996, the
Company recorded a valuation adjustment to a debenture issued in conjunction
with the sale of its insurance subsidiary, ASCH, in 1994. This valuation
adjustment resulted in an additional gain on the sale of ASCH of $1.6 million.
Accordingly, income from discontinued operations was $1.0 million, net of taxes,
for the three months ended March 31, 1996.
6
<PAGE>
FINANCIAL CONDITION
Investments increased $1.2 million to $67.4 million as of March 31, 1996 from
$66.3 million as of December 31, 1995. This increase resulted from the increase
in value recognition of a debenture issued by the Company's former insurance
subsidiary, ASCH.
Deposits decreased $437,000 to $260.0 million as of March 31, 1996 from $260.5
million as of December 31, 1995. Advances from the Federal Home Loan Bank
increased $4.5 million to $20.0 million as of March 31, 1996 from $15.5 million
as of December 31, 1995. At the same time, securities sold under agreements to
repurchase decreased $3.1 million to $10.5 million as of March 31, 1996 from
$13.6 million as of December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY - As a Florida-chartered commercial bank, Community is required to
maintain a liquidity reserve of at least 15% of its total transaction accounts
and 8% of its total non-transaction accounts, subject to certain restrictions
This reserve may consist of cash-on-hand, demand deposits due from correspondent
banks, and other investments and short-term marketable securities. As of March
31, 1996, cash and other qualifying liquid assets were $51.2 million, or $25.3
million in excess of the requirement.
Principal sources of liquidity are increases in deposits and loan principal
repayments. Other sources of liquidity include advances from the Federal Home
Loan Bank of Atlanta, securities sold under agreements to repurchase, and the
sale of mortgage loans in the secondary market. At the present time, the
Company is not aware of any trends, demands or commitments that would have an
effect on the its liquidity position by increasing or decreasing liquidity in
any material way.
As of March 31, 1996, the Company had loan commitments approximating $22.8
million including undisbursed portions of loans in process. Company management
is unaware of any other material commitments.
CAPITAL REQUIREMENTS - The following table sets forth capital ratios required by
the Federal Reserve Board to be maintained by the Company and the Company's
actual ratios of capital to total regulatory or risk-weighted assets, as
applicable, at March 31, 1996.
<TABLE>
<CAPTION>
Regulatory Actual at
Minimum March 31, 1966
----------- --------------
<S> <C> <C>
Leverage capital.................. 4.00% 6.54%
Tier 1 risk-based capital......... 4.00% 11.57%
Total risk-based capital.......... 8.00% 12.56%
</TABLE>
COMMON STOCK
STOCK PRICE INFORMATION - Stock price information for the three month periods
ended March 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
High.......................... $19.50 $11.50
Low........................... 17.75 10.50
Close......................... 19.50 10.50
</TABLE>
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 2: Agreement and Plan of Merger By and Among Compass Bancshares,
Inc., Compass Bank, CFB Bancorp, Inc., and Community First
Bank/(1)/
Exhibit 99: Press Release Dated February 20, 1996/(1)/
(b) A Form 8-K was filed with the Securities and Exchange Commission on
February 20, 1996. The only item reported on this Form 8-K was Item 5.
Other Events, which disclosed the signing of an Agreement and Plan of
Merger By and Among Compass Bancshares, Inc. ("Compass"), Compass Bank, CFB
Bancorp, Inc. ("CFB"), and Community First Bank whereby Compass has agreed
to acquire all of the outstanding stock of CFB, subject to the approval of
CFB's shareholders.
There were no financial statements filed with this Form 8-K.
- -------------------
/(1)/ Previously filed with the Securities and Exchange Commission under Form
8-K dated February 20, 1996.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CFB BANCORP, INC.
Dated: May 31, 1996 By: /s/ A. Richardson Tosh
--------------- -------------------------------
A. Richardson Tosh
President
Dated: May 31, 1996 By: /s/ Harry J. Bell
--------------- ------------------------------
Harry J. Bell
Executive Vice President and
Chief Financial Officer
9
<PAGE>
[ARTICLE] 9
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] MAR-31-1996
[CASH] 3,412
[INT-BEARING-DEPOSITS] 17,643
[FED-FUNDS-SOLD] 0
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 63,488
[INVESTMENTS-CARRYING] 0
[INVESTMENTS-MARKET] 0
[LOANS] 211,530
[ALLOWANCE] 1,760
[TOTAL-ASSETS] 313,454
[DEPOSITS] 260,030
[SHORT-TERM] 30,509
[LIABILITIES-OTHER] 2,341
[LONG-TERM] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 20
[OTHER-SE] 20,554
[TOTAL-LIABILITIES-AND-EQUITY] 313,454
[INTEREST-LOAN] 4,269
[INTEREST-INVEST] 1,083
[INTEREST-OTHER] 0
[INTEREST-TOTAL] 5,352
[INTEREST-DEPOSIT] 2,746
[INTEREST-EXPENSE] 3,088
[INTEREST-INCOME-NET] 2,264
[LOAN-LOSSES] 550
[SECURITIES-GAINS] 0
[EXPENSE-OTHER] 2,877
[INCOME-PRETAX] (142)
[INCOME-PRE-EXTRAORDINARY] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 961
[EPS-PRIMARY] 0.45
[EPS-DILUTED] 0
[YIELD-ACTUAL] 3.39
[LOANS-NON] 969
[LOANS-PAST] 30
[LOANS-TROUBLED] 1,732
[LOANS-PROBLEM] 0
[ALLOWANCE-OPEN] 1,686
[CHARGE-OFFS] 490
[RECOVERIES] 14
[ALLOWANCE-CLOSE] 1,760
[ALLOWANCE-DOMESTIC] 1,760
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 0
</TABLE>
<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 July 8, 1996.
COMPASS BANCSHARES, INC.
By: *
--------------------------------------
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
* and Treasurer July 8, 1996
- ---------------------------
D. Paul Jones, Jr.
* Chief Financial Officer July 8, 1996
- ---------------------------
Garrett R. Hegel
* Chief Accounting Officer July 8, 1996
- ---------------------------
Michael A. Bean
Director ______, 1996
- ---------------------------
Stanley M. Brock
Director ______, 1996
- ---------------------------
Charles W. Daniel
* Director July 8, 1996
- ---------------------------
W. Eugene Davenport
* Director July 8, 1996
- ---------------------------
Marshall Durbin, Jr.
* Director July 8, 1996
- ---------------------------
Tranum Fitzpatrick
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C>
*
- --------------------------- Director July 8, 1996
George W. Hansberry, M.D.
* Director July 8, 1996
- ---------------------------
John S. Stein
Director ______, 1996
- ---------------------------
Robert J. Wright
</TABLE>
*By:/s/ Daniel B. Graves
--------------------
Daniel B. Graves, Attorney-in-fact
II-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
2 Agreement and Plan of Merger by and between Compass
Bancshares, Inc. and CFB Bancorp, Inc., dated as of February
13, 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).
*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)
II-5
<PAGE>
*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) Supplemental Retirement Agreement dated as of March 18,
1991, between the Registrant and Harry B. Brock, Jr. (filed
as Exhibit 10 to the December 31, 1991 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 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(f) 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(g) 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(h) 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(i) 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)
*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)
21 List of Subsidiaries of Compass Bancshares, Inc.
23(a) Consent of KPMG Peat Marwick LLP, Independent Certified
Public Accountants--Compass Bancshares, Inc.
23(b) Consent of Deloitte & Touche LLP, Independent Auditors--
CFB Bancorp, Inc.
23(c) Consent of Balch & Bingham (included in the opinion in
Exhibit 8)
II-6
<PAGE>
24(a) Power of Attorney
24(b) Compass Board of Directors Resolutions
99(a) Notice of Special Meeting of Shareholders of CFB
99(b) Chairman's letter to CFB Shareholders
99(c) Form of Proxy
___________________________
*Incorporated by reference
II-7
<PAGE>
EX-5
OPINION & CONSENT OF JERRY W. POWELL
July 8, 1996
Board of Directors
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Re: Compass Bancshares, Inc. -- Registration of 1,413,114 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 1,413,114 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, General Counsel
<PAGE>
EX-8
OPINION & CONSENT OF B&B
July 8, 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 CFB Bancorp, Inc., a Florida corporation ("CFB"), 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 CFB with and into Compass Florida Community,
Inc., a Florida corporation ("Compass-Florida") and a wholly-owned subsidiary of
Compass formed for the purpose of effecting the Merger, 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 tax
consequences to shareholders of CFB 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
February 13, 1996, as amended (the "Merger Agreement") among Compass, Compass
Bank, Compass-Florida, CFB and Community First Bank, 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.
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
July 8, 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 FEBRUARY 13, 1996, AS AMENDED (AS SO AMENDED, THE
"AGREEMENT"), BY AND AMONG COMPASS BANCSHARES, INC. ("COMPASS"),
COMPASS BANK ("COMPASS BANK"), COMPASS FLORIDA COMMUNITY, INC.
("COMPASS-FLORIDA"), CFB BANCORP, INC. ("CFB") AND COMMUNITY
FIRST BANK ("COMMUNITY")
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 CFB immediately prior to
the Merger. For purposes of this representation, amounts used by CFB to
pay its reorganization expenses, amounts paid by CFB to shareholders of CFB
who receive cash or other property, and all redemptions and distributions
(except for regular, normal dividends) made by CFB immediately preceding
the Merger will be included as assets of CFB held immediately prior to the
Merger.
2. Immediately following the Merger and as an integral part of the
overall transaction, all assets of Compass-Florida will be distributed to
Compass in complete liquidation of Compass-Florida.
3. The fair market value of the Compass common stock received by each
CFB shareholder will be approximately equal to the fair market value of the
CFB common stock surrendered in the Merger.
4. Compass has no plan or intention to reacquire any of its common
stock issued in the Merger.
5. Compass has no plan or intention to sell or otherwise dispose of
any of the assets of CFB acquired in the Merger, except for (i)
dispositions made in the ordinary course of business, (ii) the distribution
of CFB assets that occurs in the liquidation of Compass-Florida as
described in paragraph 2 above, and (iii) the merger of Community with and
into Compass Bank.
<PAGE>
6. To the best knowledge of Compass, the liabilities of CFB assumed in
the Merger and the liabilities to which the transferred assets of CFB are
subject were incurred by CFB in the ordinary course of its business.
7. Following the Merger, Compass will, directly or indirectly,
continue the historic business of CFB or use a significant portion of CFB's
historic business assets in a business.
8. There is no intercorporate indebtedness existing between Compass
and either CFB or Community that was issued, acquired or will be settled at
a discount.
9. The fair market value of the assets of CFB 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:
--------------------------------------
Title: Assistant Secretary
-------------------------------------
<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 Bank-Central Texas Texas
Peoples Bancshares, Inc. Texas
<PAGE>
EX-23.A
CONSENT OF KPMG - COMPASS
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.
KPMG PEAT MARWICK LLP
Birmingham, Alabama
July 3, 1996
<PAGE>
EX-23.B
CONSENT OF DELOITTE & TOUCHE, L.L.P. - CFB
ACCOUNTANT'S CONSENT
Board of Directors
CFB Bancorp, Inc.
WE consent to the use in and incorporation by reference in this Registration
Statement of Compass Bancshares, inc. on Form S-4 of our report dated March 14,
1996, incorporated by reference in the Annual Report on Form 10-K of CFB
Bancorp., Inc. for the year ended December 31,1995 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
July 5, 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 CFB Bancorp,
Inc.;
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 20th day of November, 1995.
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
-------------------------------------------------
Stanley M. Brock
-------------------------------------------------
Charles W. Daniel
<PAGE>
/s/ W. Eugene Davenport
-------------------------------------------------
W. Eugene Davenport
/s/ Marshall Durbin, Jr.
-------------------------------------------------
Marshall Durbin, Jr.
/s/ Tranum Fitzpatrick
-------------------------------------------------
Tranum Fitzpatrick
/s/ George W. Hansberry, M.D.
-------------------------------------------------
George W. Hansberry, M.D.
/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 CFB BANCORP, INC.,
AND ITS SUBSIDIARY, COMMUNITY FIRST BANK,
JACKSONVILLE, FLORIDA
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 November 20, 1995:
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 "Community Acquisition") CFB Bancorp, Inc. (the "Company")
and its subsidiary, Community First Bank (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 Company, 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 Company and 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 Company and 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 Community 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 Company and 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 Community 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 Community Acquisition or the
<PAGE>
Agreement, and the Board of Directors of the Corporation hereby approves,
authorizes, and ratifies the Community Acquisition and the Agreement as the
stockholder of its subsidiaries now existing or to be 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 Community 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 Community Acquisition;
and further
RESOLVED, that, in the event that the Agreement shall contemplate that
the Corporation shall issue as consideration in connection with the
Community 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 Community 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 Community
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 Community 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
<PAGE>
in order to maintain any such registration, qualification, or exemption for
so long as they deem necessary as required by law; and further
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 Community 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 Community 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 3rd day of July, 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 CFB APPEARS HERE]
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ______________, 1996
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of CFB Bancorp, Inc. ("CFB") will be held on _______________ ____,
1996 at __________ p.m., local time, at the Jacksonville Marriott Hotel, 4670
Salisbury Road, Jacksonville, Florida, for the following purposes:
(1) To approve, ratify, confirm and adopt an Agreement and Plan of Merger,
dated as of February 13, 1996, by and among Compass Bancshares, Inc.,
Compass Bank, CFB and Community First Bank (the "Merger Agreement"),
pursuant to which CFB will be merged with and into an affiliate of
Compass 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 CFB has fixed _______________ ____, 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 CFB'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
Jack C. Demetree
Chairman of the Board
Jacksonville, Florida
_________________ ____, 1996
<PAGE>
EX-99.B
CHAIRMAN'S LETTER
[LETTERHEAD OF CFB APPEARS HERE]
, 1996
Dear Shareholders:
You are cordially invited to attend the Special Meeting of Shareholders of
CFB Bancorp, Inc. ("CFB") to be held on ____________________ ____, 1996 at
________ p.m., local time, at the Jacksonville Marriott Hotel, 4670 Salisbury
Road, Jacksonville, Florida.
At the Special Meeting, the shareholders of CFB will consider and vote upon
a proposal to approve an Agreement and Plan of Merger ("Merger Agreement")
pursuant to which CFB will merge (the "Merger") with and into Compass Florida
Community, Inc. ("Compass-Florida"), a Florida corporation. Compass-Florida, a
wholly owned subsidiary of Compass Bancshares, Inc., a Delaware corporation
("Compass"), was formed for the purpose of accomplishing the Merger. Your Board
of Directors has determined that the Merger is in the best interests of CFB and
its shareholders and unanimously recommends that you vote "FOR" approval of the
Merger.
Under the Merger Agreement, each common shareholder of CFB will receive
shares of Compass common stock in exchange for all his or her shares of CFB
common stock. The number of shares of Compass common stock that will be
exchanged for each share of CFB common stock will be determined by applying the
formula set forth in the Merger Agreement. The formula is based upon the
average closing price of Compass' common stock over a fifteen-day pricing period
ending shortly before the Merger is consummated.
Consummation of the Merger is subject to certain conditions, including the
approval and adoption of the Merger Agreement by CFB'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 A MAJORITY OF THE OUTSTANDING SHARES OF CFB 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
CFB, and for your serious consideration of the important matter at hand.
Sincerely yours,
Jack C. Demetree
Chairman of the Board and
Chief Executive Officer
<PAGE>
EX-99.C
FORM OF PROXY
PROXY CFB BANCORP, INC. PROXY
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
________, 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
CFB Bancorp, Inc. to be held on _____________________, 1996 at ____________
a.m., local time, at the Jacksonville Marriott Hotel, 4670 Salisbury 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 February 13, 1996, by and between Compass
Bancshares, Inc. and CFB Bancorp, Inc., as amended.
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
______________________________________, 1996 is hereby acknowledged.
THIS PROXY IS SOLICITED BY THE CFB BANCORP, INC. 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
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Signature
