<PAGE>
As filed with the Securities and Exchange Commission on December 10, 1997.
REGISTRATION NO. 333-_______
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>
<CAPTION>
<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 35223
(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 of proposed sale to the public:
As soon as practicable following the effective date
of this Registration Statement
--------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each class Amount to Proposed Proposed Amount of
of securities be maximum offering maximum aggregate registration
to be registered registered (1) price per share offering price (3) fee
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $2.00 par value 350,000 (2) $4,531,559 $1,374
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) This amount is based upon the maximum number of shares anticipated to be
issued pursuant to an Agreement and Plan of Merger dated as of September
25, 1997 between the Registrant and First University Corporation. The
actual number of shares to be issued may vary depending on the closing
sales prices of Compass Bancshares, Inc. common stock over a specified
period.
(2) Not applicable.
(3) Computed in accordance with Rule 457(f) under the Securities Act of 1933,
as amended, based on the book value as of September 30, 1997 of the
securities to be received by the Registrant in exchange for the securities
registered hereby.
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>
S-4 Item Number and Heading Location of Proxy Statement/Prospectus Heading
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
A. Information About the Transaction
1. Forepart of Registration Statement and Outside Front Forepart of Registration Statement; Outside Front Cover Page of
Cover Page of Prospectus Prospectus
2. Inside Front and Outside Back Cover Pages of Table of Contents; Available Information; Incorporation of
Prospectus Certain Documents by Reference; Introduction
3. Risk Factors, Ratio of Earnings to Fixed Charges and Introduction; Summary; Risk Factors; Selected Financial Data;
Other Information Market Prices; The Merger; Supervision and Regulation; Index to
Financial Statements of First University
4. Terms of the Transaction Forepart of Registration Statement; Introduction; Summary; The
Merger; Description of Compass Common and Preferred Stock;
Comparison of Rights of Shareholders of First University and
Compass; Information About Compass; Appendix I and Appendix II
5. Pro Forma Financial Information Selected Financial Data
6. Material Contacts with the First University Summary; Recommendation of Board of Directors; The Merger;
Being Acquired Information About First University
7. Additional Information Required for Reoffering by Not Applicable
Persons and Parties Deemed to be Underwriters
8. Interests of Named Experts and Counsel Relationships with Independent Accountants; Experts; Legal
Opinions
9. Disclosure of Commission Position on Indemnification for Indemnification
Securities Act Liabilities
B. Information About the Registrant
10. Information With Respect to S-3 Registrants Available Information; Incorporation of Certain Documents by
Reference; Summary; Selected Financial Data; Market Prices;
Information About Compass
11. Incorporation of Certain Information by Reference Incorporation of Certain Documents by Reference; Information
About Compass
12. Information With Respect to S-2 or S-3 Registrants Not Applicable
13. Incorporation of Certain Information by Reference Not Applicable
14. Information With Respect to Registrants Other Than S-2 Not Applicable
or S-3 Registrants
C. Information About the Company Being Acquired
15. Information With Respect to S-3 Companies Not Applicable
16. Information With Respect to S-2 or S-3 Companies Not Applicable
17. Information With Respect to Companies Other Than S-2 or Introduction; Summary; The Merger; Selected Financial Data;
S-3 Companies Market Prices; Information About First University; Comparison of
Rights of Stockholders of First University and Compass; Index to
Financial Statements of First University
D. Voting and Management Information
18. Information if Proxies, Consents or Authorizations The Proxy Card; Incorporation of Certain Documents by Reference;
Are to be Solicited Introduction; Summary; The Merger; Information About Compass;
Information About First University; Relationships with
Independent Accountants; Experts; Appendix II
19. Information if Proxies, Consents or Authorizations Are Not Applicable
Not to be Solicited, or in an Exchange Offer
</TABLE>
<PAGE>
FIRST UNIVERSITY CORPORATION 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 350,000 shares of Compass $2.00 par value
common stock ("Compass Common Stock") to be issued in the proposed merger (the
"Merger") of First University Corporation, a Texas corporation ("First
University"), with and into Compass Texas Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Compass ("Compass Texas").
This Proxy Statement/Prospectus constitutes the proxy statement of First
University relating to the solicitation of proxies for use at the special
meeting of shareholders of First University (the "Meeting") scheduled to be held
on ________, January ___, 1998, at ____ p.m., Central Time, at the offices of
West University Bank, National Association, a national banking association and
wholly-owned subsidiary of First University (the "Bank"), located at 3633 Rice
Boulevard, Houston, Texas, and any adjournments thereof. At the Meeting, the
shareholders of First University will consider and vote upon a proposal to
approve, ratify, confirm and adopt the Agreement and Plan of Merger dated as of
September 25, 1997, as amended, by and between Compass and First University (the
"Merger Agreement") providing for, among other things, the merger of First
University with and into Compass Texas and, in connection therewith, the receipt
by First University shareholders of Compass Common Stock.
As more fully described herein, the Merger Agreement provides for the
holders of First University common stock, par value $1.00 per share ("First
University Common Stock"), at the effective time of the Merger (the "Effective
Time"), to receive aggregate merger consideration of 350,000 shares of Compass
Common Stock. Assuming that there will be 262,614 shares of First University
Common Stock issued and outstanding immediately prior to the Effective Time and
the satisfaction of all conditions to closing, each shareholder of First
University (except for shareholders choosing to exercise their dissenters'
rights) will be entitled to receive approximately 1.3328 shares of Compass
Common Stock for each share of First University Common Stock held.
Other than reductions due to the payment of cash for fractional shares and
for shares held by dissenting shareholders, in no event will the aggregate
number of shares of Compass Common Stock to be issued in the Merger be less than
350,000.
SEE "SUMMARY--THE MERGER"; "SUMMARY--DISSENTERS' RIGHTS"; "THE MERGER--
GENERAL"; "THE MERGER--DISSENTERS' RIGHTS"; APPENDIX I; AND APPENDIX II.
Consummation of the Merger is subject to the receipt of required
governmental approvals, the approval of the holders of two-thirds of the
outstanding First University Common Stock and certain other conditions, all as
more fully described in this Proxy Statement/Prospectus. SEE "SUMMARY--
SHAREHOLDER VOTES REQUIRED; CONDITIONS TO CONSUMMATION AND REGULATORY APPROVALS;
TERMINATION"; "THE MERGER--OTHER TERMS AND CONDITIONS"; AND APPENDIX I.
This Proxy Statement/Prospectus also constitutes the prospectus of Compass
with respect to the shares of Compass Common Stock to be issued to the holders
of First University Common Stock in the Merger. Compass Common Stock is publicly
traded in the over-the-counter market and quoted on the NASDAQ National Market
System. On December ___, 1997, the last reported sale price per share of Compass
Common Stock was $_______. No active public trading market exists for First
University Common Stock. SEE "RESALE OF COMPASS STOCK."
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.
All information concerning Compass and Compass Texas has been furnished by
Compass, and all information concerning First University and the Bank has been
furnished by First University.
FIRST UNIVERSITY SHAREHOLDERS ARE URGED TO REVIEW AND CAREFULLY
CONSIDER THE RISKS DESCRIBED UNDER "RISK FACTORS" ON PAGE 11.
The date of this Proxy Statement/Prospectus is _____________, 1997 and this
Proxy Statement/Prospectus is first being mailed or delivered to First
University shareholders on or about _____________, 1997.
<PAGE>
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
AVAILABLE INFORMATION.............................................. 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................... 1
PROXY STATEMENT/PROSPECTUS......................................... 3
INTRODUCTION....................................................... 3
SUMMARY............................................................ 5
Parties to the Merger.......................................... 5
Merger......................................................... 7
Reasons for the Merger; Recommendation of Boards of Directors.. 8
The Meeting.................................................... 9
Record Date.................................................... 9
Shareholder Votes Required..................................... 9
Dissenters' Rights............................................. 9
Conditions to Consummation and Regulatory Approvals............ 9
Federal Income Tax Consequences................................ 10
Accounting Treatment........................................... 10
RISK FACTORS....................................................... 11
SELECTED FINANCIAL DATA............................................ 13
MARKET PRICES...................................................... 15
THE MERGER......................................................... 16
General........................................................ 16
Background and Reasons for the Merger.......................... 17
Operations after the Mergers................................... 18
Other Terms and Conditions..................................... 18
No Solicitation................................................ 20
Additional Agreements.......................................... 20
Business Pending Effective Time................................ 21
Amendment...................................................... 21
Termination.................................................... 22
Exchange of Shares............................................. 22
Dissenters' Rights............................................. 23
Federal Income Tax Consequences................................ 25
Government Approvals........................................... 26
Accounting Treatment........................................... 26
SUPERVISION AND REGULATION......................................... 27
General........................................................ 27
Compass, Compass Banks of Texas and
Compass Bancorporation...................................... 27
The Subsidiary Banks........................................... 29
Other.......................................................... 29
DESCRIPTION OF COMPASS COMMON AND PREFERRED STOCK.................. 31
Compass Common Stock........................................... 31
Dividends...................................................... 31
Preemptive Rights.............................................. 31
Voting Rights.................................................. 32
Liquidation.................................................... 32
Compass Preferred Stock........................................ 32
COMPARISON OF RIGHTS OF SHAREHOLDERS OF
First University and Compass................................... 33
Charter and Bylaw Provisions Affecting Compass Stock........... 33
Certain Differences Between the Corporation Laws of
Texas and Delaware and Corresponding Charter
and Bylaw Provisions......................................... 33
Mergers........................................................ 33
Appraisal Rights............................................... 34
Special Meetings............................................... 34
Actions Without a Meeting...................................... 35
Election of Directors.......................................... 35
Voting on Other Matters........................................ 35
Preemptive Rights.............................................. 36
Dividends...................................................... 36
Liquidation Rights............................................. 36
Limitation of Liability and Indemnification.................... 36
Removal of Directors........................................... 37
Inspection of Books and Records................................ 38
Antitakeover Provisions........................................ 38
RESALE OF COMPASS STOCK............................................ 38
INFORMATION ABOUT COMPASS.......................................... 39
Incorporation of Certain Documents by Reference................ 39
Interests of Certain Persons................................... 39
INFORMATION ABOUT FIRST UNIVERSITY................................. 39
Services, Employees and Properties............................. 39
Competition.................................................... 39
Legal Proceedings.............................................. 40
Market Price and Dividends..................................... 40
Beneficial Ownership of First University Common Stock
by First University Management and Principal Shareholders.... 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF FIRST UNIVERSITY.......... 43
Results of Operations.......................................... 43
General........................................................ 43
Net Interest Income............................................ 43
Provision for Loan Losses...................................... 48
Non-interest Income............................................ 48
Non-interest Expense........................................... 48
Federal Income Taxes........................................... 49
Capital Resources, Liquidity and Financial Condition........... 49
Capital Resources.............................................. 49
Liquidity...................................................... 50
Interest Rate Sensitivity...................................... 50
Investment Securities.......................................... 53
Deposits....................................................... 54
Loans.......................................................... 55
Allowance for Loan Losses and Risk Elements.................... 55
Nonaccrual, Past Due and Restructured Loans.................... 57
Return on Equity and Assets.................................... 57
RELATIONSHIPS WITH INDEPENDENT ACCOUNTANTS......................... 58
EXPERTS............................................................ 58
LEGAL OPINIONS..................................................... 58
INDEMNIFICATION.................................................... 58
OTHER MATTERS...................................................... 59
</TABLE>
<PAGE>
AVAILABLE INFORMATION
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, the 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 below.
Compass is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, accordingly, files
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the Commission's public reference rooms located at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and the public reference facilities in the New
York Regional Office, 13th Floor, Seven World Trade Center, New York, New York
10048, and the Chicago Regional Office, 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. Such material may be accessed electronically by means of
the Commission's home page on the Internet at http://www.sec.gov.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT INCLUDED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS CONCERNING
COMPASS (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) ARE AVAILABLE TO EACH
BENEFICIAL OWNER OF FIRST UNIVERSITY COMMON STOCK, WITHOUT CHARGE AND UPON
REQUEST, FROM THE CONTROLLER OF COMPASS AT 15 SOUTH 20TH STREET, BIRMINGHAM,
ALABAMA 35233 (TELEPHONE NO. (205) 558-5740). IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY DECEMBER ___, 1997.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Compass with the Commission are
incorporated herein by reference:
(i) Compass' Annual Report on Form 10-K for the year ended December 31,
1996 (File No. 0-6032);
(ii) Compass' Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997 (File No. 0-6032);
(iii) Compass' Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (File No. 0-6032);
(iv) Compass' Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 (File No. 0-6032);
(v) Compass' Proxy Statement dated March 21, 1997, relating to its annual
meeting of shareholders held on April 21, 1997 (File No. 0-6032); and
(vi) The description of Compass Common Stock contained in its Proxy
Statement dated April 16, 1982, relating to its Annual Meeting held
May 17, 1982 (File No. 0-6032).
All documents filed by Compass pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the date of
the Meeting are incorporated herein by reference, and shall be deemed a part
hereof from the date of filing of such documents.
1
<PAGE>
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 Texas, First University 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
Texas, First University, the Bank or their respective affiliates since the date
of this Proxy Statement/Prospectus.
2
<PAGE>
PROXY STATEMENT/PROSPECTUS
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of First University
Corporation, a Texas corporation ("First University"), for use at the special
meeting of First University shareholders to be held at the time and place set
forth in the foregoing notice and at any adjournments thereof (the "Meeting").
This Proxy Statement/Prospectus is also a prospectus for the shares of Compass
Bancshares, Inc. ("Compass") $2.00 par value common stock ("Compass Common
Stock") to be issued in connection with the merger (the "Merger") of First
University with and into Compass Texas Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Compass ("Compass Texas").
The following proposals will be considered and voted upon at the Meeting:
(1) To approve, ratify, confirm and adopt an Agreement and Plan of
Merger dated as of September 25, 1997, as amended, by and between
Compass and First University (the "Merger Agreement"), pursuant
to which First University will be merged with and into Compass
Texas; and
(2) To consider and transact such other business as may properly come
before the Meeting.
The Board of Directors of First University has fixed _______________, 1997
as the record date for the determination of shareholders entitled to notice of
and to vote at the Meeting and any adjournments thereof (the "Record Date"). As
of such date, First University had 5,000,000 shares of common stock, $1.00 par
value per share ("First University Common Stock"), authorized, of which 262,614
shares were issued and outstanding, and 5,000,000 shares of preferred stock,
$1.00 par value per share, authorized, none of which were issued or outstanding.
As of the Record Date, the First University Common Stock was held of record by
186 persons or entities. Each share of First University 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 Meeting. The presence, in
person or by proxy, of the holders of a majority of the shares of First
University Common Stock entitled to vote at the Meeting is necessary to
constitute a quorum at the Meeting. The affirmative vote of the holders of at
least two-thirds of the outstanding shares of First University Common Stock is
required for approval of the Merger. FIRST UNIVERSITY'S BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER. SEE "SUMMARY--REASONS
FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS"; "SUMMARY--RECORD DATE";
"SUMMARY--SHAREHOLDER VOTES REQUIRED"; "THE MERGER--GENERAL"; "THE MERGER--OTHER
TERMS AND CONDITIONS"; AND APPENDIX I.
The directors and executive officers of First University (and certain of
their spouses and related interests) owning or otherwise controlling the right
to vote 177,777 shares of First University Common Stock, comprising
approximately 67.7% of the total shares of First University Common Stock issued
and outstanding as of the Record Date, have agreed, pursuant to a Voting
Agreement, to vote their shares in favor of the Merger. Therefore, it is
virtually assured that the Merger will be approved at the Meeting. SEE
"SUMMARY--SHAREHOLDER VOTES REQUIRED"; "THE MERGER--GENERAL"; "THE MERGER--
ADDITIONAL AGREEMENTS"; AND "INFORMATION ABOUT FIRST UNIVERSITY--BENEFICIAL
OWNERSHIP OF FIRST UNIVERSITY COMMON STOCK BY FIRST UNIVERSITY MANAGEMENT AND
PRINCIPAL SHAREHOLDERS".
Proxies in the form enclosed are solicited by First University's Board of
Directors. Any such proxy, if received in time for voting and not revoked, will
be voted at the Meeting in accordance with the shareholder's instructions. If no
instructions are given on the proxy, the proxy will be voted in favor of the
Merger. Failure to submit a proxy or to vote at the Meeting will have the same
effect as a vote against the Merger. At present, First University's Board of
Directors knows of no other matters to be presented at the Meeting, but if other
matters are properly presented, the persons named in the proxy will vote or
refrain from voting in accordance with the recommendation of First University's
Board of
3
<PAGE>
Directors pursuant to the discretionary authority conferred by the proxy. SEE
"OTHER MATTERS"; "THE MERGER--DISSENTERS' RIGHTS"; AND APPENDIX II.
A proxy may be revoked at any time prior to its exercise by filing, at
First University'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
Meeting may attend the Meeting and vote in person by written ballot on any
matter presented for a vote at such Meeting, whether or not such shareholder has
given a proxy previously, and such action will constitute a revocation of any
prior proxy.
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 First University, with no special or extra
compensation therefor, although 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 First University Common Stock held of record by such persons, and First
University 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 First
University Common Stock held of record by them, and First University will
reimburse them, upon request, for their reasonable expenses incurred in
connection with such mailing or other communications with such beneficial
owners.
Compass' principal executive offices are located at 15 South 20th Street,
Birmingham, Alabama 35233, and its telephone number is (205) 933-3000. First
University's principal executive offices are located at 3633 Rice Boulevard,
Houston, Texas 77005, and its telephone number is (713) 664-1020.
4
<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. All share and per share information in this Proxy
Statement/Prospectus for Compass has been adjusted to reflect a three-for-two
stock split of the Compass Common Stock effected on April 1, 1997 for the
Compass shareholders of record on March 17, 1997. 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 banks located in Alabama,
Texas and Florida.
Compass owns Compass Bank ("Compass Bank-Alabama"), an Alabama state bank
headquartered in Birmingham, Alabama, and Central Bank of the South, an Alabama
state bank headquartered in Anniston, Alabama. Compass Bank-Alabama conducts a
general, full-service commercial and consumer banking business through 88
banking offices located in 45 communities in Alabama and 34 banking offices in
Florida. Compass Bank-Alabama also is engaged in the investment, trust and
equipment leasing businesses, and other bank operating activities. Central Bank
of the South primarily serves as a controlled disbursement facility for
commercial deposit customers of Compass Bank-Alabama.
Compass Banks of Texas, Inc. ("Compass Banks of Texas") is a Delaware
corporation and wholly-owned subsidiary of Compass. Compass Banks of Texas and
its wholly-owned subsidiary, Compass Bancorporation of Texas Inc. ("Compass
Bancorporation"), are bank holding companies registered with the Federal Reserve
under the BHC Act. Compass Bancorporation owns Compass Bank ("Compass Bank-
Texas"), a Texas state bank and wholly-owned indirect subsidiary of Compass
headquartered in Houston, Texas; and Compass Texas Management, Inc., a Texas
corporation ("Compass Management"). Compass Management provides management
services to its affiliated Texas banks. These wholly-owned commercial bank
subsidiaries conduct a general, full-service commercial and consumer banking
business through 42 banking offices in Houston, Texas, 24 banking offices in the
Dallas-Ft. Worth area, 16 banking offices in San Antonio, Texas, 8 banking
offices in Austin, Texas and 8 banking offices in Central and East Texas.
During 1995, Compass acquired Southwest Bankers, Inc., and its bank
subsidiary, The Bank of San Antonio, located in San Antonio, Texas. In 1996,
Compass acquired Flower Mound Bancshares, Inc. and its bank subsidiary, Security
Bank, located in Flower Mound, Texas; Equitable BankShares, Inc. and its bank
subsidiary, Equitable Bank, located in Dallas, Texas; Post Oak Bank located in
Houston, Texas; Peoples Bancshares, Inc. and its bank subsidiary, The Peoples
National Bank located in Belton, Texas; Royall Financial Corporation and its
bank subsidiary, The Royall National Bank of Palestine, located in Palestine,
Texas; Probank, located in The Woodlands, Texas; the San Antonio, Texas branches
of Coastal Banc ssb; Texas American Bank located in San Antonio, Texas; and CFB
Bancorp, Inc. and its subsidiary, Community First Bank of Jacksonville, Florida.
In 1997, Compass acquired Horizon Bancorp, Inc. and its subsidiary, Horizon Bank
& Trust, ssb, located in Austin, Texas; Enterprise National Bank of
Jacksonville, located in Jacksonville, Florida; the
5
<PAGE>
Crosby, Texas branch of Bank One, Texas, National Association; Greater Brazos
Valley Bancorp, Inc. and its subsidiary, Commerce National Bank, located in
College Station, Texas; and Central Texas Bancorp, Inc. and its subsidiary, The
Texas National Bank of Waco, located in Waco, Texas. The Merger and the proposed
acquisition of Fidelity Resources Company and its subsidiary, Fidelity Bank,
National Association, located in University Park, Texas; and G.S.B. Investments,
Inc. and its subsidiary, Gainesville State Bank located in Gainesville, Florida
are the only announced acquisitions which are pending.
On September 30, 1997, Compass and its subsidiaries had consolidated assets
of $12.9 billion, consolidated deposits of $9.6 billion, and total shareholders'
equity of $935 million. Of Compass' $12.9 billion of consolidated assets, $5.1
billion are held in Texas. SEE "AVAILABLE INFORMATION"; "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE"; "SELECTED FINANCIAL DATA"; AND "INFORMATION
ABOUT COMPASS".
First University and the Bank. West University Bank, National Association
(the "Bank") was chartered in 1975 as First National Bank of West University
Place and adopted its present name in August 1987. First University currently
conducts no operations other than serving as a bank holding company under the
BHC Act for the Bank. First University derives its revenues primarily from the
operations of the Bank in the form of dividends paid from the Bank to First
University. First University is subject to regulation by the Federal Reserve.
The Bank is an independent community bank located in Houston, Texas. The
Bank is a full service bank offering a variety of services to satisfy the needs
of the consumer and commercial customers in the area. The principal services
offered by the Bank include most types of loans, including commercial, consumer
and real estate loans. The Bank also offers safe deposit boxes, a night deposit
facility, motor bank, wire transfers and automated teller machine ("ATM") cards.
The Bank's main office is located at 3633 Rice Boulevard, Houston, Texas.
The Bank has one full-service branch located at 2401 University and one motor
bank branch location at 5275 Buffalo Speedway.
The Bank considers its service area to be the area encompassing the West
University and Medical Center areas of Harris County, Texas. The activities in
which the Bank engages are competitive. Each activity engaged in by the Bank
involves competition with other banks, as well as with nonbanking financial
institutions and nonfinancial enterprises. In addition to competing with other
commercial banks within and outside its service area, the Bank competes with
other financial institutions engaged in the business of making loans or
accepting deposits, such as savings and loan associations, credit unions,
industrial loan associations, insurance companies, small loan companies, finance
companies, mortgage companies, real estate investment trusts, certain
governmental agencies, credit card organizations and other enterprises.
Additional competition for deposits comes from government and private issuers of
debt obligations and other investment alternatives for depositors, such as money
market funds. The Bank also competes with suppliers of equipment in furnishing
equipment financing and leasing services.
On September 30, 1997, First University had total assets of $65.7 million,
total deposits of $60.8 million, and total shareholders' equity of $4.5 million.
SEE "SELECTED FINANCIAL DATA"; "INFORMATION ABOUT FIRST UNIVERSITY";
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF FIRST UNIVERSITY"; AND FINANCIAL STATEMENTS OF FIRST UNIVERSITY.
6
<PAGE>
THE MERGER
The Merger Agreement provides that each share of First University's common
stock, par value $1.00 per share ("First University Common Stock"), issued and
outstanding immediately prior to the effective time (the "Effective Time") of
the Merger ("Common Shares Outstanding"), other than dissenting 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 (the "Merger Consideration") in the form of shares of Compass
Common Stock to the holder of record thereof, without interest thereon, upon
surrender of the certificate representing such share. As Merger Consideration,
Compass agrees to issue an aggregate number of shares of Compass Common Stock
equal to the greater of (i) 350,000 or (ii) the quotient of $10,500,000 divided
by the average closing sale price (the "Share Determination Market Value") of
the Compass Common Stock reported by the NASDAQ National Market System for the
twenty days of trading preceding the fifth business day prior to the date upon
which Compass notifies First University in writing of its proposed date for
consummation of the Merger ("Closing Notification"). In the event the Share
Determination Market Value is less than $30.00 per share, Compass may terminate
the Merger Agreement ("Pricing Termination Option") by written notice to First
University within four business days from the date of Closing Notification. In
the event Compass exercises its Pricing Termination Option and First University
fails to reject such termination of the Merger Agreement by Compass
("Termination Rejection Option"), the Merger Agreement shall be terminated and
Compass shall pay to First University an amount in cash equal to the lesser of
(i) $50,000 or (ii) one-half of First University's out-of-pocket third party
expenses incurred in connection with the Merger ("Transaction Expenses"). In the
event First University exercises its Termination Rejection Option, (i) the
number of new shares to be issued by Compass as aggregate Merger Consideration
shall be 350,000 shares of Compass Common Stock, and (ii) Compass shall have no
obligation to pay the Transaction Expenses.
Any decision by the Board of Directors of First University regarding
whether to exercise its Termination Rejection Option will be made in its sole
discretion and could result in either (i) First University shareholders
receiving Merger Consideration with an aggregate market value of less than
$10,500,000, or (ii) the termination of the Merger Agreement. If the Board of
Directors of First University does not elect to exercise its Termination
Rejection Option, the Merger Agreement will terminate, in which event First
University shareholders would not receive any Merger Consideration but would
retain their First University Common Stock.
Assuming that there will be 262,614 shares of First University Common Stock
issued and outstanding immediately prior to the Effective Time and the
satisfaction of all conditions to closing, each shareholder of First University
(except for shareholders choosing to exercise their dissenters' rights) will be
entitled to receive approximately 1.3328 shares of Compass Common Stock for each
share of First University Common Stock held.
Other than reductions due to the payment of cash for fractional shares and
for shares held by dissenting shareholders, in no event will the aggregate
number of shares of Compass Common Stock to be issued in the Merger be less than
350,000.
Compass Texas will be the surviving entity in the Merger (the "Surviving
Corporation"), and the officers and directors of Compass Texas at the Effective
Time will remain as the officers and directors of the Surviving Corporation.
Compass intends that the Bank's personnel will remain following the Merger.
Compass and First University presently intend that immediately following the
completion of the Merger, the Bank will be merged with and into Compass Bank-
Texas (the "Subsequent Merger"), subject to the necessary regulatory approvals.
Thereafter, the separate existence of the Bank will cease, and the former main
banking facility and branches of the Bank will become branches of Compass Bank-
Texas. SEE "THE MERGER--GENERAL"; AND "INFORMATION ABOUT FIRST UNIVERSITY".
7
<PAGE>
The Merger Agreement also provides that the number of shares of Compass
Common Stock to be received by First University shareholders in the Merger will
be adjusted to give effect to any stock dividends or splits, reclassifications,
recapitalizations or conversions with respect to Compass Common Stock when the
record date or payment occurs prior to the Effective Time. SEE "INTRODUCTION";
"SUMMARY--DISSENTERS' RIGHTS"; "THE MERGER--GENERAL"; "THE MERGER--DISSENTERS'
RIGHTS"; APPENDIX I; AND APPENDIX II.
The Merger Agreement was the result of arm's-length negotiations between
representatives of First University and Compass. SEE "SUMMARY--REASONS FOR THE
MERGER; RECOMMENDATION OF BOARD OF DIRECTORS"; AND "THE MERGER--BACKGROUND AND
REASONS FOR THE MERGER".
REASONS FOR THE MERGER; RECOMMENDATION OF BOARDS OF DIRECTORS
At a meeting of the First University Board held on September 19, 1997,
after considering the terms and conditions of the Merger Agreement and obtaining
the advice of its counsel, the First University Board unanimously approved the
Merger Agreement. The First University Board believes that the Merger is
advisable and in the best interests of First University and its shareholders.
The First University Board recommends that First University shareholders vote in
favor of the adoption of the Agreement. For a discussion of the circumstances
surrounding the Merger and the factors considered by the First University Board
in making its recommendations, see "THE MERGER--BACKGROUND AND REASONS FOR THE
MERGER."
Consummation of the Merger offers the holders of First University Common
Stock the opportunity to acquire an equity interest in a larger, more
diversified financial institution, which is interested in expanding its
operations in Texas, but which is not dependent solely upon the economic
conditions of the Houston metropolitan area of Texas. Compass Common Stock is
publicly traded and has a history of paying dividends. First University's Board
of Directors anticipates that the Merger and the Bank Merger will expand the
banking products and services offered to First University's customers and
community and will enable First University's facilities to compete more
effectively among banks and non-bank financial institutions. As part of a much
larger holding company, First University's facilities will be provided with
specialized staff resources in accounting, auditing, investment, trust
management, loan review, marketing, data processing and electronic funds
transfer services.
For the reasons set forth above, the First University Board of Directors
believes the Merger to be in the best interests of First University's
shareholders. FIRST UNIVERSITY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
FIRST UNIVERSITY SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER and has authorized
consummation thereof subject to approval of First University shareholders and
the satisfaction of certain other conditions. SEE "INTRODUCTION"; SEE "SUMMARY--
PARTIES TO THE MERGER"; "SUMMARY--THE MERGER"; "THE MERGER--BACKGROUND AND
REASONS FOR THE MERGER"; "THE MERGER--OTHER TERMS AND CONDITIONS"; "DESCRIPTION
OF COMPASS COMMON AND PREFERRED STOCK"; "COMPARISON OF RIGHTS OF SHAREHOLDERS OF
FIRST UNIVERSITY AND COMPASS"; "INFORMATION ABOUT COMPASS"; AND "INFORMATION
ABOUT FIRST UNIVERSITY".
THE MEETING
The Meeting will be held on _________, January ___, 1998 at _______ p.m.,
Central time, at the offices of the Bank located at 3633 Rice Boulevard,
Houston, Texas 77005, for the purpose of approving, ratifying, confirming and
adopting the Merger Agreement.
8
<PAGE>
RECORD DATE
The Record Date has been set by First University's Board of Directors as
the close of business on ______________, 1997. Only holders of First University
Common Stock as of such date will be entitled to vote at the Meeting. SEE
"INTRODUCTION".
SHAREHOLDER VOTES REQUIRED
The Merger must be approved by the affirmative vote of the holders of at
least two-thirds of the shares of First University Common Stock issued and
outstanding and entitled to vote at the Meeting.
The directors and executive officers of First University (and certain of
their spouses and related interests) owning or otherwise controlling the right
to vote 177,777 shares of First University Common Stock, comprising
approximately 67.7% of the total shares of First University Common Stock issued
and outstanding as of the Record Date, have agreed, pursuant to a Voting
Agreement, to vote their shares in favor of the Merger. Therefore, it is
virtually assured that the Merger will be approved at the Meeting.
Compass Texas has 10,000 shares of common stock, par value $.01 per share,
issued and outstanding, all of which are 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 Texas, will
approve the Merger Agreement in the manner prescribed by Delaware General
Corporation Law ("GCL"). SEE "THE MERGER--GENERAL".
DISSENTERS' RIGHTS
Holders of First University Common Stock who timely object to the Merger,
and who otherwise comply with the provisions of the Texas Business Corporation
Act ("TBCA"), will be entitled to exercise dissenters' rights. SEE "THE MERGER--
DISSENTERS' RIGHTS"; "COMPARISON OF RIGHTS OF SHAREHOLDERS OF FIRST UNIVERSITY
AND COMPASS--DISSENTERS' RIGHTS"; AND APPENDIX II.
CONDITIONS TO CONSUMMATION AND REGULATORY APPROVALS
Consummation of the Merger is subject to approval by the shareholders of
First University, the receipt of required regulatory approvals from the Federal
Reserve under the BHC Act, and the satisfaction or waiver of a number of other
conditions. In addition, consummation of the Subsequent Merger of the Bank into
Compass Bank-Texas is subject to approval by the Federal Reserve and the Banking
Commissioner of Texas (the "Commissioner"). It is expected that the Federal
Reserve and the Commissioner will issue their respective approvals of the Merger
and the Subsequent Merger.
An application under the BHC Act was filed in respect of the Merger with
the Federal Reserve on November 3, 1997. Once Federal Reserve approval has been
obtained, the Merger cannot be consummated until the expiration of a 15 day
waiting period following such approval during which the United States Department
of Justice (the "Justice Department"), pursuant to the BHC Act, may bring an
action opposing the Merger.
An application was filed with the Federal Reserve in respect of the
Subsequent Merger on November 3, 1997. The Federal Reserve approval in respect
of the Subsequent Merger is also subject to a 15 day waiting period during which
the Justice Department, pursuant to the Bank Merger Act, may bring an action
opposing the Subsequent Merger under the antitrust laws. No Justice Department
objection or adverse action is anticipated with respect to the Merger or the
Subsequent Merger.
9
<PAGE>
The Texas Finance Code allows out-of-state bank holding companies to
acquire bank holding companies that own or control state or national banks
located within Texas. An application with the Commissioner was filed on November
3, 1997. SEE "THE MERGER--GOVERNMENTAL APPROVALS".
The respective boards of directors of Compass and First University may
terminate the Merger Agreement as a result of, among other things, pricing
issues, 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
February 28, 1998. SEE "SUMMARY--THE MERGER"; "THE MERGER--GENERAL"; "THE
MERGER--OTHER TERMS AND CONDITIONS"; "THE MERGER--BUSINESS PENDING EFFECTIVE
TIME"; "THE MERGER--AMENDMENT; TERMINATION"; "THE MERGER--GOVERNMENT
APPROVALS"; AND APPENDIX I.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. ("Liddell,
Sapp"), counsel to Compass and Compass Texas, based upon certain representations
and assumptions, the Merger, if consummated in accordance with the Merger
Agreement, 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 holders of First University
Common Stock for federal income tax purposes upon receipt of Compass Common
Stock in accordance with the Merger Agreement. Any gain attributable to cash
received by holders of First University Common Stock in lieu of fractional
shares of Compass Common Stock or upon exercise of their dissenters' rights will
be taxed as ordinary income (loss) or capital gain (loss) depending upon each
shareholder's situation. 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. FIRST UNIVERSITY 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".
Compass and First University expect to receive an opinion from Liddell,
Sapp at the closing of the transaction contemplated by the Merger Agreement (the
"Closing") that the Merger will qualify as a reorganization under Section 368(a)
of the Code in satisfaction of a condition to consummation of the Merger. SEE
"THE MERGER--OTHER TERMS AND CONDITIONS" AND "LEGAL OPINIONS".
ACCOUNTING TREATMENT
Compass will account for the Merger under the pooling-of-interests method
for financial reporting and all other purposes. Compass has received a letter
from KPMG Peat Marwick LLP, which will be updated as of the Effective Time, to
the effect that, based on information provided to KPMG Peat Marwick LLP and
assuming that the Merger is consummated in accordance with the terms of the
Merger Agreement, the Merger will qualify for pooling-of-interests accounting
treatment. SEE "THE MERGER--ACCOUNTING TREATMENT".
10
<PAGE>
RISK FACTORS
First University shareholders currently control First University through
their ability to elect the Board of Directors of First University and vote on
various matters affecting First University. The Merger will transfer control of
First University from First University's shareholders to Compass. As of the
Effective Time, the shareholders of First University will become shareholders of
Compass, a multi-bank holding company. As a result of the Merger, the former
shareholders of First University will no longer have the ability to control or
influence the management policies of First University'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. SEE
"INFORMATION ABOUT FIRST UNIVERSITY--COMPETITION".
In addition, general economic conditions impact the banking industry. The
credit quality of Compass' loan portfolio necessarily reflects, among other
matters, 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. SEE "MARKET PRICES".
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, a staggered Board of Directors, and
the limitation that shareholder actions without a meeting may only be taken by
unanimous written shareholder consent. First University's Articles of
Incorporation and Bylaws do not contain similar restrictions, although under
Texas law First University's shareholders may take action without a meeting only
by unanimous written consent. SEE "COMPARISON OF RIGHTS OF SHAREHOLDERS OF FIRST
UNIVERSITY AND COMPASS--CHARTER AND BYLAW PROVISIONS AFFECTING COMPASS COMMON
STOCK" AND "INFORMATION ABOUT COMPASS-RECENT DEVELOPMENTS".
In the event the Share Determination Market Value is less than $30.00 per
share, Compass may terminate the Merger Agreement by exercising its Pricing
Termination Option. In the event Compass exercises its Pricing Termination
Option and First University fails to reject such termination of the Merger
Agreement by Compass by exercising First University's Termination Rejection
Option, the Merger Agreement shall be terminated and Compass shall pay to First
University an amount in cash equal to the lesser of (i) $50,000 or (ii) one-half
of First University's Transaction Expenses. In the event First University
exercises its Termination Rejection Option, (i) the number of new shares to be
issued by Compass as aggregate Merger Consideration shall be 350,000 shares of
Compass Common Stock, and (ii) Compass shall have no obligation to pay the
Transaction Expenses.
Any decision by the Board of Directors of First University regarding
whether to exercise its Termination Rejection Option will be made in its sole
discretion and could result in either (i) First University shareholders
receiving Merger Consideration with an aggregate market value of less than
$10,500,000, or (ii) the termination of the Merger Agreement. If the Board of
Directors of First University does not elect to exercise its Termination
Rejection Option, the Merger Agreement will terminate, in which event First
University shareholders would not receive any Merger Consideration but would
retain their First University Common Stock.
11
<PAGE>
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 a period of time, it is possible for the shareholders of
First University to receive shares of Compass Common Stock with an aggregate
market value less than $10,500,000 at the Effective Time of the Merger.
SEE "SUPERVISION AND REGULATION" for a description of the regulatory
considerations relating to the ownership of Compass Common Stock.
12
<PAGE>
SELECTED FINANCIAL DATA
The following table summarizes, where indicated, certain pro forma
financial data for Compass, giving effect to the acquisition of First University
assuming that the Merger had been effective at the beginning of 1992. The
historical data of First University as of and for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 is derived from the audited financial statements
of First University. The historical data of Compass as of and for the years
ended December 31, 1996, 1995, 1994, 1993 and 1992 (i) is derived from the
audited financial statements of Compass, (ii) has been adjusted to reflect the
three-for-two stock split effected on April 1, 1997 (the "Stock Split") except
as noted below, and (iii) has not been restated to give effect to acquisitions
consummated by Compass in 1997 accounted for under the pooling-of-interest
method of accounting due to immateriality. The historical data of First
University and Compass as of and for the nine months ended September 30, 1997,
is derived from the unaudited financial statements of First University and
Compass, respectively. In the opinion of management of Compass and First
University, all adjustments considered necessary for a fair presentation have
been included in the unaudited interim data. The pro forma income information is
not necessarily indicative of the results of operations had the proposed
transaction occurred at the beginning of 1992, nor is it necessarily indicative
of the results of future operations. This information should be read in
conjunction with the historical consolidated financial statements and the
related notes included elsewhere or incorporated by reference in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
AS OF AND FOR (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
THE NINE
MONTHS ENDED AS OF AND FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
---------------- ----------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
TOTAL ASSETS
Compass $12,912,549 $11,814,212 $10,678,369 $9,639,541 $7,807,964 $7,484,662
First University 65,683 63,527 60,331 60,855 61,646 60,456
TOTAL DEPOSITS
Compass 9,605,101 9,220,599 8,090,818 7,511,470 6,047,131 5,776,902
First University 60,838 59,029 55,811 56,028 57,687 57,100
LONG-TERM DEBT
Compass 1,109,154 701,470 590,044 494,327 333,332 209,404
First University 40 50 61 -- -- --
TOTAL SHAREHOLDERS'
EQUITY
Compass 934,542 803,062 737,463 637,877 584,995 538,217
First University 4,532 4,214 4,068 3,480 3,678 3,113
NET INTEREST INCOME
Compass 355,269 402,427 368,954 353,208 347,966 334,862
First University 2,220 2,841 3,035 2,895 2,603 2,622
NET INCOME FROM
CONTINUING OPERATIONS
Compass 113,817 128,927 114,225 105,439 97,161 81,215
First University 287 136 599 353 564 503
NET INCOME PER
COMMON SHARE FROM
CONTINUING OPERATIONS (1)
Compass
Historical 1.71 2.13 1.88 1.74 1.58 1.32
Pro Forma 1.71 2.12 1.88 1.74 1.58 1.32
First University
Historical 1.09 0.52 2.24 1.26 1.89 1.69
Pro Forma (2) 2.28 2.83 2.51 2.32 2.11 1.76
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
AS OF AND FOR (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
THE NINE
MONTHS ENDED AS OF AND FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
---------------- ----------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CASH DIVIDENDS PER
COMMON SHARE
Compass
Historical 0.71 0.85 0.75 0.61 0.51 0.45
Pro Forma 0.71 0.85 0.74 0.61 0.50 0.44
First University
Historical -- -- -- -- -- --
Equivalent Pro
Forma(2) 0.95 1.13 0.99 0.81 0.67 0.59
SHAREHOLDERS' EQUITY
(BOOK VALUE) PER
COMMON SHARE
Compass
Historical (3) 14.18 13.21 12.19 10.61 9.74 8.59
Pro Forma 14.17 13.17 12.15 10.57 9.71 8.57
First University
Historical 17.23 16.02 15.47 12.75 12.34 10.45
Equivalent Pro
Forma(2) 18.89 17.55 16.19 14.09 12.94 11.42
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING
Compass
Historical 66,512 60,557 60,770 60,480 60,465 59,976
Pro Forma 66,862 60,907 61,120 60,830 60,815 60,326
First University
Historical 263 263 268 279 298 298
NUMBER OF COMMON
SHARES OUTSTANDING
AT END OF PERIOD
Compass
Historical (3) 65,925 40,525 40,325 40,096 40,050 39,983
Pro Forma 66,275 40,875 40,675 40,446 40,400 40,333
First University
Historical 263 263 263 273 298 298
</TABLE>
____________________
(1) Net income per common share from continuing operations represents
primary earnings per share (i.e., the amount of earnings attributable
to each share of common stock outstanding, including common stock
equivalents).
(2) First University's Equivalent Pro Forma per share amounts are computed
by multiplying Compass' Pro Forma amounts by the exchange ratio of
1.3328 based on a Share Determination Market Value of $_______, the
average closing sale price of Compass Common Stock as reported by the
NASDAQ National Market System for the twenty days of trading preceding
the fifth business day prior to_________________, 1997.
(3) For comparative purposes, book value per share for 1992-1996 has been
restated to reflect the Stock Split while period-end shares outstanding
has not been restated.
14
<PAGE>
MARKET PRICES
Compass Common Stock is traded in the national over-the-counter securities
market. Since July 1984, it has been quoted under the symbol "CBSS" on the
NASDAQ National Market System.
The following table sets forth for the periods indicated the high and low
sales prices for Compass Common Stock reported through the NASDAQ National
Market System 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 and have been adjusted to reflect the
Stock Split.
<TABLE>
<CAPTION>
Compass Common
Stock
------------------
Period High Low
- ---------------- -------- --------
<S> <C> <C>
1995
- ----------------
First Quarter 18 5/8 14 5/8
Second Quarter 19 1/2 17
Third Quarter 22 19
Fourth Quarter 22 1/4 20 3/8
1996
- ----------------
First Quarter 23 1/8 20 1/2
Second Quarter 23 3/4 21 1/2
Third Quarter 23 1/8 20 3/4
Fourth Quarter 26 1/2 23
1997
- ----------------
First Quarter 32 1/8 26
Second Quarter 37 1/4 29 1/8
Third Quarter 39 3/4 34 1/2
Fourth Quarter _____ ______
</TABLE>
On September 24, 1997, the business day immediately preceding the
announcement of the execution of the Merger Agreement, the last reported sale
price for Compass Common Stock was $39 3/4. On December ___, 1997 the last
reported sale price for Compass Common Stock was $_____. There is no assurance
that such transactions or those reflected in the table of actual high and low
sales prices represent all or a representative sample of the actual transactions
which occurred or that the high and low prices shown reflect the full ranges at
which transactions occurred during the period indicated.
There is no active public trading market for First University Common Stock,
although it is traded infrequently in private transactions about which First
University's management has little reliable information regarding price.
15
<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. All shareholders of First University are urged to read the Merger
Agreement in its entirety.
GENERAL
The Merger Agreement provides for the merger of First University with and
into Compass Texas in accordance with the terms and conditions of the Merger
Agreement. Compass Texas will be the surviving entity in the Merger and the
separate existence of First University will cease. After the Effective Time, the
officers and directors of Compass Texas will be the officers and directors of
First University. Compass intends that the Bank's personnel will remain
following the Merger. SEE "SUMMARY--CONDITIONS TO CONSUMMATION AND REGULATORY
APPROVALS"; "THE MERGER--OPERATIONS AFTER THE MERGER"; "THE MERGER--GOVERNMENT
APPROVALS"; AND APPENDIX I.
The Merger Agreement provides that each share of First University Common
Stock issued and outstanding immediately prior to the effective time of the
Merger, other than dissenting 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 Merger Consideration in the form of shares of Compass
Common Stock to the holder of record thereof, without interest thereon, upon
surrender of the certificate representing such share. As Merger Consideration,
Compass agrees to issue an aggregate number of shares of Compass Common Stock
equal to the greater of (i) 350,000 or (ii) the quotient of $10,500,000 divided
by the Share Determination Market Value. In the event the Share Determination
Market Value is less than $30.00 per share, Compass may terminate the Merger
Agreement by written notice to First University within four business days from
the date of Closing Notification. In the event Compass exercises its Pricing
Termination Option and First University fails to reject such termination of the
Merger Agreement by Compass by exercising First University's Termination
Rejection Option, the Merger Agreement shall be deemed terminated and Compass
shall pay to First University an amount in cash equal to the lesser of (i)
$50,000 or (ii) one-half of First University's Transaction Expenses. In the
event First University exercises its Termination Rejection Option, (i) the
number of new shares to be issued by Compass as aggregate Merger Consideration
shall be 350,000 share of Compass Common Stock, and (ii) Compass shall have no
obligation to pay the Transaction Expenses.
Any decision by the Board of Directors of First University regarding
whether to exercise its Termination Rejection Option will be made in its sole
discretion and could result in either (i) First University shareholders
receiving Merger Consideration with an aggregate market value of less than
$10,500,000, or (ii) the termination of the Merger Agreement. If the Board of
Directors of First University does not elect to exercise its Termination
Rejection Option, the Merger Agreement will terminate, in which event First
University shareholders would not receive any Merger Consideration but would
retain their First University Common Stock.
Assuming that there will be 262,614 shares of First University Common Stock
issued and outstanding immediately prior to the Effective Time and the
satisfaction of all conditions to closing, each shareholder of First University
(except for shareholders choosing to exercise their dissenters' rights) will be
entitled to receive approximately 1.3328 shares of Compass Common Stock for each
share of First University Common Stock held.
Other than reductions due to the payment of cash for fractional shares and
for shares held by dissenting shareholders, in no event will the aggregate
number of shares of Compass Common Stock to be issued in the Merger be less than
350,000.
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 Share Determination
Market Value.
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The Merger Agreement also provides that the Merger Consideration,
consisting of shares of Compass Common Stock, shall be adjusted to give effect
to any stock dividends or splits, reclassifications, recapitalizations or
conversions with respect to Compass Common Stock when the record date or payment
date occurs prior to the Effective Time. SEE "SUMMARY--THE MERGER"; "SUMMARY--
DISSENTERS' RIGHTS"; "THE MERGER--DISSENTERS' RIGHTS"; APPENDIX I; AND APPENDIX
II.
The Merger must be approved by the affirmative vote of the holders of two-
thirds of the outstanding shares of First University Common Stock entitled to
vote at the Meeting. The directors and executive officers of First University
(and certain of their spouses and related interests) owning or otherwise
controlling the right to vote 177,777 shares of First University Common Stock,
comprising approximately 67.7% of the total shares of First University Common
Stock issued and outstanding as of the Record Date, have agreed, pursuant to the
Voting Agreement, to vote their shares in favor of the Merger. Therefore, it is
virtually assured that the Merger will be approved at the Meeting. SEE
"INTRODUCTION"; "SUMMARY--SHAREHOLDER VOTES REQUIRED"; "THE MERGER--OTHER TERMS
AND CONDITIONS"; AND APPENDIX I.
Compass Texas has 10,000 shares of common stock, $.01 par value per share,
issued and outstanding, all of which is 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 sole shareholder of Compass Texas, will
approve the Merger Agreement in the manner prescribed by the GCL. SEE "SUMMARY--
SHAREHOLDER VOTES REQUIRED".
The Merger will be effective 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,
holders of First University Common Stock (other than those shareholders who
perfect their dissenters' rights of appraisal) will become owners of Compass
Common Stock and will no longer be owners of First University Common Stock.
After the Effective Time, all certificates for First University 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. SEE "SUMMARY--
DISSENTERS' RIGHTS"; "THE MERGER--DISSENTERS' RIGHTS"; AND APPENDIX II.
BACKGROUND AND REASONS FOR THE MERGER
During 1996 and 1997 the Board of Directors for First University monitored
developments in bank acquisitions in Texas along with developments in this
regard in the financial institutions industry generally. As the result of a
perceived improvement in the financial institutions acquisition market and the
prospect of increased competition in First University's market area, the Board
of Directors decided to explore the possibility of a business combination with
another financial institution. In that regard, the Board determined that a
competitive proposal process would be most likely to obtain the offer best
designed to maximize shareholder value.
The Board of Directors authorized First University's Chairman Brad
Bracewell to contact a list of possible acquirors in order to assess their level
of interest in an acquisition. Mr. Bracewell contacted approximately ten
financial institutions. As a result of these contacts, four institutions
expressed an interest and indicated a price that they would be willing to pay
for 100% of the stock of First University, subject to the conduct of due
diligence. One of these offers was made at an unacceptably low price, but Mr.
Bracewell continued dialogue with the three other institutions, one of which
proposed a stock for stock deal, with the other institutions offering to pay
cash.
As a result of these further discussions regarding price and other terms,
the Board of Directors decided to enter into a letter of intent with Compass
dated June 26, 1997. Pursuant to the letter of intent, Compass commenced its due
diligence investigation of First University and the parties began negotiating a
definitive merger agreement. On August 22, 1997, in order to allow the parties
further time to negotiate and execute a definitive agreement, the parties agreed
to extend until September 9, 1997, the prohibition in the letter of intent
against First University negotiating or entering into an acquisition agreement
with another institution. The Merger Agreement was approved by First
University's Board of Directors on September 19, 1997, and executed on September
25, 1997.
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In reaching its determination to enter into the Agreement, First
University's Board of Directors consulted with its legal, tax, and investment
banking advisors and considered a number of factors including, but not limited
to, the following: (i) the price to be received by the First University
shareholders, including how the price to be received related to prices received
by other comparable banking organizations and the fact that the Compass offer
was the best offer resulting from a competitive bidding process, (ii) the
increased investment liquidity that the receipt of Compass Common Stock would
provide to First University shareholders, (iii) the financial condition and
future prospects for Compass, (iv) the prospects for First University and the
Bank continuing to operate as an independent community banking organization,
including the increasing competitive and regulatory burdens and technological
challenges facing community banks, (v) the tax free nature of the exchange of
First University Common Stock for shares of Compass Common Stock, (vi) the
potential for increased dividends, and (vii) the non-economic terms of the
Merger.
In connection with its deliberations and discussions, the First University
Board did not assign any specific weights to these or any other factors.
For the reasons set forth above, the First University Board of Directors
unanimously approved the Merger and recommends approval of the transaction by
First University shareholders.
SEE "SUMMARY--THE MERGER"; "SUMMARY--REASONS FOR THE MERGER; RECOMMENDATION
OF BOARD OF DIRECTORS"; AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF FIRST UNIVERSITY--CAPITAL RESOURCES,
LIQUIDITY AND FINANCIAL CONDITION".
Compass and Compass Banks of Texas have considered expansion opportunities
in the West University and Medical Center areas of Houston, Texas. Acquiring
First University will allow Compass and Compass Banks of Texas to expand and
strengthen their presence in West Houston and will also result in some economies
of scale.
Following arm's length negotiations between representatives of Compass and
First University, Compass and First University entered into the Merger Agreement
dated as of September 25, 1997. The aggregate price to be paid to holders of
First University Common Stock resulted from negotiations which considered the
historical earnings and dividends of Compass and First University, the earnings
potential and deposit base of First University, potential growth in First
University's market, First University's asset quality and the effect of the
Merger on the shareholders, customers and employees of Compass and First
University. SEE "SUMMARY--THE MERGER".
Subject to satisfaction of certain conditions contained in the Merger
Agreement, First University's Board of Directors believes the Merger to be fair
and in the best interest of First University's shareholders. FIRST UNIVERSITY'S
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE FIRST UNIVERSITY'S
SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER and has authorized consummation
thereof, subject to approval of First University shareholders, federal and state
bank regulators and the satisfaction of certain other conditions. SEE "SUMMARY--
REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS."
OPERATIONS AFTER THE MERGERS
Compass and First University intend that following consummation of the
Merger the Bank will merge with and into Compass Bank-Texas. Following the
Subsequent Merger, the separate existence of the Bank will cease, and Compass
Bank-Texas will continue as the surviving entity.
OTHER TERMS AND CONDITIONS
The Merger Agreement contains a number of terms, conditions,
representations and covenants which must be satisfied as of the Effective Time,
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
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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,
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 First University shareholders
entitled to vote at the 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 First University 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) First University, Compass and Compass Texas 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 with respect
to First University or its subsidiaries, or Compass;
(viii)The directors of First University and its subsidiaries shall have
delivered to Compass an instrument dated the Effective Time releasing
First University and its subsidiaries from any and all claims of such
directors (except as to their deposits and accounts and as to rights
of indemnification pursuant to the Articles of Incorporation,
Association or Bylaws of First University and its subsidiaries) and
shall have delivered to Compass their resignations as directors of
First University and its subsidiaries;
(ix) The officers of First University and its subsidiaries shall have
delivered to Compass an instrument dated the Effective Time releasing
First University and its subsidiaries from any and all claims of such
officers (except as to deposits and accounts and accrued compensation
permitted by their respective agreements with First University or its
subsidiaries and to the rights of indemnification pursuant to the
Articles of Incorporation, Association or Bylaws of First University
and its subsidiaries);
(x) Compass and First University shall have received the opinions of
counsel to First University, Compass and Compass Texas acceptable to
them as to certain matters;
(xi) The holders of no more than 5% of First University Common Stock shall
have demanded or be entitled to demand payment of the fair value of
their shares as dissenting shareholders;
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(xii) Compass shall have received a letter from KPMG Peat Marwick LLP,
dated as of the Effective Time, to the effect that the Merger will
qualify for pooling-of-interests accounting treatment if closed and
consummated in accordance with the Merger Agreement;
(xiii) The aggregate amount of all First University indebtedness shall not
exceed $43,000;
(xiv) Compass shall have received from holders of First University Common
Stock receiving at least 50% of the total Merger Consideration a
representation that they have no present plan or intention to sell
or otherwise dispose of shares of Compass Common Stock received
pursuant to the Merger;
(xv) Compass and First University shall have received an opinion of
counsel that the Merger will qualify as a reorganization under
Section 368(a) of the Code; SEE "SUMMARY-FEDERAL INCOME TAX
CONSEQUENCES" AND "THE MERGER-FEDERAL INCOME TAX CONSEQUENCES";
(xvi) First University shall have delivered to Compass a schedule of all
transactions in the capital stock (or instruments exercisable for
or convertible into capital stock) of First University of which
First University has knowledge from and including the date of the
Merger Agreement through the Effective Time;
(xvii) Compass shall have reasonably determined in its sole judgment that
certain liabilities and obligations of First University and the
Bank do not have a material adverse effect;
(xviii) All warrants, options, rights, convertible debentures or other
securities entitling the holder thereof to acquire First University
Common Stock shall have been exercised or converted, or shall have
expired, lapsed or terminated, prior to the Effective Time;
(xix) First University and its subsidiaries shall have delivered to the
directors of First University and its subsidiaries an instrument
dated the Effective Time releasing such directors from any and all
claims of First University and its subsidiaries (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 Texas in connection with the
transactions contemplated by the Merger Agreement;
(xx) Compass and First University 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.
NO SOLICITATION
First University has agreed under Section 6.6 of the Merger Agreement (i)
not to solicit, entertain or negotiate with respect to any offer to acquire
First University or any of its subsidiaries from any other person, (ii) not to
provide any information to any other person in connection with a possible
acquisition of First University or any of its subsidiaries, and (iii)
immediately upon receipt of any such unsolicited offer, First University will
communicate to Compass the terms of any proposal or request for information and
the identities of the parties involved. SEE APPENDIX I.
ADDITIONAL AGREEMENTS
Voting Agreements. The directors and executive officers of First University
(and certain of their spouses and related interests) owning or otherwise
controlling the right to vote 177,777 shares of First University Common Stock,
comprising approximately 67.7% of the total shares of First University Common
Stock issued and outstanding as of the
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Record Date, have agreed, pursuant to the Voting Agreement, to vote their shares
in favor of the Merger. Therefore, it is virtually assured that the Merger will
be approved at the Meeting.
Derek S. Munger Employment Agreement. Derek S. Munger and Compass
Management have entered into an employment agreement whereby Mr. Munger will act
as a vice president of Compass Bank-Texas for a period of one year after the
Merger. Mr. Munger's base salary under the employment agreement will be
$130,000. In addition Mr. Munger shall be entitled to such benefits as are made
generally available to employees of equal title and base salary on the same
basis as Compass makes such benefits available to Compass' other employees,
including participation in the Compass retirement plan.
Harold F. Johnson Employment Agreement. Harold F. Johnson and Compass
Management have entered into an employment agreement whereby Mr. Johnson will
act as a vice president of Compass Bank-Texas for a period of one year after the
Merger. Mr. Johnson's base salary under the employment agreement will be
$______. In addition Mr. Johnson shall be entitled to such benefits as are made
generally available to employees of equal title and base salary on the same
basis as Compass makes such benefits available to Compass' other employees,
including participation in the Compass retirement plan.
Bradley F. Bracewell Consulting Agreement. Bradley F. Bracewell, Chairman
and Chief Executive officer of First University and the Bank, has entered into a
two-year Consulting Agreement dated September 25, 1997, with Compass Management
with respect to his retention by Compass after the Merger. As consideration for
his services to be provided under the Consulting Agreement, Mr. Bracewell will
receive an annual retainer fee of $100,000 per year plus a bonus equal to the
balance of annual life insurance premiums under an existing life insurance
policy plus an amount equal to Mr. Bracewell's related federal income tax
liability with respect to such premiums, which bonus is not expected to exceed
$143,068 in the aggregate.
Pooling Transfer Restrictions Agreements. The directors, executive officers
and certain principal shareholders of First University have entered into Pooling
Transfer Restrictions Agreements with Compass and First University pursuant to
which they have agreed, among other things, (i) not to transfer any of their
respective shares of First University Common Stock within 30 days prior to the
Effective Time, (ii) not to transfer any shares of Compass Common Stock acquired
by them in the Merger until the publication of financial results covering at
least 30 days of post-Merger combined operations of First University and
Compass, except for shareholder pledges to secure loans, provided the lender
agrees to be bound by the terms of the Pooling Transfer Restrictions Agreement,
and (iii) not otherwise to transfer such Compass Common Stock except in
compliance with the applicable provisions of the Securities Act and the Exchange
Act and the respective rules and regulations thereunder.
BUSINESS PENDING EFFECTIVE TIME
The Merger Agreement imposes certain limitations on the conduct of First
University's business pending consummation of the Merger. Among other things,
First University must conduct its businesses only in the ordinary course,
consistent with prudent banking practices. SEE "THE MERGER--OTHER TERMS AND
CONDITIONS"; AND APPENDIX I.
AMENDMENT
The Merger Agreement may be amended or supplemented at any time, before or
after the 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 First University shareholders can
be made after the Meeting without the required approval of First University
shareholders.
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TERMINATION
In addition to termination due to pricing issues (SEE "SUMMARY--THE
MERGER"; AND "THE MERGER--GENERAL"), the Merger Agreement may be terminated and
the Merger abandoned, notwithstanding approval by First University shareholders,
at any time before the Effective Time by:
(i) Mutual written consent duly authorized by the Boards of Directors of
Compass and First University;
(ii) Compass (a) if Compass learns or becomes aware of a state of facts or
breach or inaccuracy of any representation or warranty of First
University which constitutes a material adverse effect, (b) First
University's material breach of any representation or warranty set
forth in Section 3.23 of the Merger Agreement relating to
environmental matters, (c) the factual substance of any warranties
set forth in Section 3.23 of the Merger Agreement is not true and
accurate in all material respects irrespective of the knowledge or
lack of knowledge of First University, (d) if there shall be a breach
of Section 6.10(a), (b) or (c) of the Merger Agreement also relating
to environmental matters, (e) in the event Compass exercises its
Pricing Termination Option pursuant to the provisions of Section
1.6(b) of the Merger Agreement, (f) if any of the conditions to
Closing contained in Section 7.1 or 7.2 of the Merger Agreement are
not satisfied or waived in writing by Compass, (g) if the conditions
to the obligations of Compass and Compass Texas to effect the Merger
contained in the Merger Agreement are not satisfied or waived in
writing by Compass, or (h) if First University shareholders do not
approve the Merger Agreement and the Merger at the shareholders
meeting;
(iii) First University if the Conditions to Closing are not satisfied or
waived in writing by First University;
(iv) Compass or First University if the Effective Time shall not have
occurred on or before February 28, 1998;
(v) Compass or First University 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. SEE "SUMMARY--CONDITIONS TO CONSUMMATION
AND REGULATORY APPROVALS; TERMINATION"; "THE MERGER--GENERAL"; "THE
MERGER--OTHER TERMS AND CONDITIONS"; AND APPENDIX I.
EXCHANGE OF SHARES
Prior to the Effective Time, and pursuant to an exchange agreement in the
form attached as Exhibit B to the Merger Agreement (the "Exchange Agent
Agreement"), Compass shall deposit or cause to be deposited in trust with
Continental Stock Transfer & Trust Company (the "Exchange Agent"), cash in an
aggregate amount estimated to be sufficient to make cash payments to First
University shareholders in lieu of fractional shares of Compass Common Stock.
Promptly after the Effective Time, the Exchange Agent will furnish each
holder of record of First University Common Stock as of the Effective Time with
transmittal materials for use in exchanging certificates representing First
University Common Stock for certificates representing Compass Common Stock in
accordance with the Exchange Agent Agreement. The transmittal materials will
contain information and instructions with respect to the procedure for
exchanging such certificates. The certificates for Compass Common Stock will be
delivered to the persons entitled thereto within a reasonable time after
delivery of First University Common Stock certificates for exchange accompanied
by the appropriate transmittal materials.
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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 First University Common Stock otherwise
entitled to receive such fractional share. Such cash payment shall be based on
the Share Determination Market Value. SEE "SUMMARY-FEDERAL INCOME TAX
CONSEQUENCES"; "THE MERGER-FEDERAL INCOME TAX CONSEQUENCES"; AND APPENDIX I.
Former shareholders of First University shall be entitled to vote after the
Effective Time at any meeting of Compass shareholders the number shares of
Compass Common Stock into which their shares are converted, regardless of
whether such shareholders have exchanged their Certificates. Immediately after
the Effective Time, shareholders of First University shall be entitled to
dividends with respect to shares of Compass Common Stock received by them in the
Merger, provided that, no dividend will be disbursed with respect to the shares
of Compass Common Stock until the holder's shares of First University Common
Stock are surrendered in exchange therefor.
Upon the Effective Time of the Merger, former First University shareholders
will cease to have any rights as shareholders of First University, and First
University shareholders shall have only the right to receive the Merger
Consideration specified in the Merger Agreement or, in the case of dissenting
shareholders, to exercise their rights under Texas law. SEE "THE MERGER--
DISSENTERS' RIGHTS".
DISSENTERS' RIGHTS
By following the specific procedures set forth in the TBCA, First
University shareholders have a statutory right to dissent from the Merger. If
the Merger is approved and consummated, any First University shareholder who
properly perfects his dissenters' rights will be entitled, upon consummation of
the Merger, to receive an amount of cash equal to the fair value of his shares
of First University Common Stock rather than receiving the consideration set
forth in the Merger Agreement. The following summary is not a complete statement
of statutory dissenters' rights of appraisal, and such summary is qualified by
reference to the applicable provisions of the TBCA, which are reproduced in full
in Appendix II to this Proxy Statement/Prospectus. A shareholder must complete
each step in the precise order prescribed by the statute to perfect his
dissenter's rights of appraisal.
Any shareholder who desires to dissent from the Merger shall file a written
objection to the Merger with First University prior to the Meeting at which a
vote on the Merger shall be taken, stating that the shareholder will exercise
his right to dissent if the Merger is effective and giving the shareholder's
address to which notice thereof shall be sent. A vote against the Merger is not
sufficient to perfect a shareholder's dissenter's rights of appraisal. If the
Merger is effected, each shareholder who sent notice to First University as
described above and who did not vote in favor of the Merger will be deemed to
have dissented from the Merger ("Dissenting Shareholder"). Failure to vote
against the Merger will not constitute a waiver of the dissenters' rights of
appraisal; on the other hand, a vote in favor of the Merger will constitute such
a waiver.
Compass Texas, as survivor of the Merger, will be liable for discharging
the rights of Dissenting Shareholders and shall, within 10 days of the Effective
Time, notify the Dissenting Shareholders in writing that the Merger has been
effected. Each Dissenting Shareholder so notified must, within 10 days of the
delivery or mailing of such notice, make a written demand on Compass Texas at 15
South 20th Street, Birmingham, Alabama 35233, for payment of the fair value of
the Dissenting Shareholder's shares as estimated by the Dissenting Shareholder.
Such demand shall state the number and class of shares owned by the Dissenting
Shareholder. The fair value of the shares shall be the value thereof as of the
date immediately preceding the Meeting, excluding any appreciation or
depreciation in anticipation of the Merger. Dissenting Shareholders who fail to
make a written demand within the 10 day period will be bound by the Merger and
lose their rights to dissent. Within 20 days after making a demand, the
Dissenting Shareholder shall submit certificates representing his shares of
First University Common Stock to Compass for notation thereon that such demand
has been made. Dissenting Shareholders who fail to submit their certificates
within such 20 day period will be bound by the Merger and lose their rights to
dissent.
Within 20 days after receipt of a Dissenting Shareholder's demand letter as
described above, Compass shall deliver or mail to the Dissenting Shareholder
written notice (i) stating that Compass accepts the amount claimed in the
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demand letter and agrees to pay that amount within 90 days after the Effective
Time upon surrender of the relevant certificates of First University Common
Stock duly endorsed by the Dissenting Shareholder, or (ii) containing Compass'
written estimate of the fair value of the shares of First University Common
Stock together with an offer to pay such amount within 90 days after the
Effective Time if Compass receives notice, within 60 days after the Effective
Time, stating that the Dissenting Shareholder agrees to accept that amount and
surrender of the relevant certificates of First University Common Stock duly
endorsed by the Dissenting Shareholder. In either case, the Dissenting
Shareholder shall cease to have any ownership interest in First University or
Compass following payment of the agreed value.
If the Dissenting Shareholder and Compass cannot agree on the fair value of
the shares within 60 days after the Effective Time, the Dissenting Shareholder
or Compass may, within 60 days of the expiration of the initial 60 day period,
file a petition in any court of competent jurisdiction in Harris County, Texas
requesting a finding and determination of the fair value of the Dissenting
Shareholder's shares. If no petition is filed within the appropriate time
period, then all Dissenting Shareholders who have not reached an agreement with
Compass on the value of their shares shall be bound by the Merger and lose their
rights to dissent. After a hearing concerning the petition, the court shall
determine which Dissenting Shareholders have complied with the provisions of the
TBCA and have become entitled to the valuation of, and payment for, their
shares, and shall appoint one or more qualified appraisers to determine the
value of the shares of First University Common Stock in question. The appraisers
shall determine such value and file a report with the court. The court shall
then in its judgment determine the fair value of the shares of First University
Common Stock, which judgment shall be binding on Compass and on all Dissenting
Shareholders receiving notice of the hearing. The court shall direct Compass to
pay such amount, together with interest thereon, beginning 91 days after the
Effective Time to the date of judgment, to the Dissenting Shareholders entitled
thereto. The judgment shall be payable upon the surrender to Compass of
certificates representing shares of First University Common Stock duly endorsed
by the Dissenting Shareholders. Upon payment of the judgment, the Dissenting
Shareholders shall cease to have any interest in First University, Compass or
First University Common Stock. All court costs and fees of the appraisers shall
be allotted between the parties in the manner that the court determines is fair.
Any Dissenting Shareholder who has made a written demand on Compass for
payment of the fair value of his First University Common Stock shall not
thereafter be entitled to vote or exercise any other rights as a shareholder
except the statutory right of appraisal as described herein and the right to
maintain an appropriate action to obtain relief on the ground that the Merger
would be or was fraudulent. In the absence of fraud in the transaction, a
Dissenting Shareholder's statutory right to appraisal is the exclusive remedy
for the recovery of the value of his shares or money damages to the shareholder
with respect to the Merger.
Any Dissenting Shareholder who has made a written demand on Compass for
payment of the fair value of his First University Common Stock may withdraw such
demand at any time before payment for his shares or before a petition has been
filed with an appropriate court for determination of the fair value of such
shares. If a Dissenting Shareholder withdraws his demand, or if he is otherwise
unsuccessful in asserting his dissenters' rights of appraisal, such Dissenting
Shareholder shall be bound by the Merger and his status as a shareholder shall
be restored without prejudice to any corporate proceedings, dividends or
distributions which may have occurred during the interim. SEE SUMMARY--
DISSENTERS' RIGHTS"; "COMPARISON OF RIGHTS OF SHAREHOLDERS OF FIRST UNIVERSITY
AND COMPASS--APPRAISAL RIGHTS"; AND APPENDIX II.
It is a condition to Compass' obligations under the Merger Agreement that
not more than 5% of the outstanding shares of First University Common Stock
shall have demanded or be entitled to demand payment of the fair value of their
shares as dissenting shareholders. If such condition is not met, Compass will be
entitled to terminate the Merger Agreement. SEE "THE MERGER AGREEMENT--OTHER
TERMS AND CONDITIONS".
SEE "THE MERGER--FEDERAL INCOME TAX CONSEQUENCES" for a description of the
tax consequences of exercising dissenters' rights.
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FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Liddell, Sapp, the Merger, if consummated in accordance
with the Merger Agreement, will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code. An opinion of counsel is not binding on the
Internal Revenue Service ("IRS") or the courts.
Liddell, Sapp has relied upon certain assumptions and representations in
issuing its opinion, including those set forth in the Merger Agreement, the tax
opinion and the following:
1. First University shareholders will receive only Compass Common Stock in
the Merger (other than cash paid in lieu of fractional shares of
Compass Common Stock or cash paid to dissenters).
2. Compass has received representations from certain historic First
University shareholders who will receive at least 50% of the Compass
Common Stock issued in the Merger stating that they have no present
intention to dispose of the Compass Common Stock received pursuant to
the Merger.
In such counsel's opinion, the following federal income tax consequences to
First University shareholders will result from the qualification of the Merger
as a reorganization under Section 368(a) of the Code:
1. A First University shareholder will not recognize any gain or loss upon
the exchange of his or her First University Common Stock solely for
Compass Common Stock.
2. The aggregate tax basis of Compass Common Stock received by a First
University shareholder in the Merger will be the same as the aggregate
basis of First University Common Stock surrendered in exchange
therefor. For purposes of allocating this aggregate basis to individual
shares of Compass Common Stock received, the IRS position is that each
separate block of stock surrendered shall be treated separately. Under
this rule, for example, if a First University shareholder surrenders
two blocks of First University Common Stock in the Merger, having an
adjusted basis of $1.00 per share for the first block and $2.00 per
share for the second block, the Compass Common Stock which he or she
receives in exchange for each share of First University Common Stock in
the first block will have a basis of $1.00, and the Compass Common
Stock which he receives in exchange for each share of First University
Common Stock in the second block will have a basis of $2.00.
3. The holding period of Compass Common Stock to be received by each First
University shareholder will include the period during which he or she
held the First University Common Stock surrendered in exchange
therefor, provided that the First University Common Stock is held as a
capital asset on the date of the exchange.
4. The payment of cash in lieu of fractional shares of Compass Common
Stock will be treated as if the fractional shares were distributed as
part of the exchange and then redeemed by Compass. Such cash payment
will be treated as having been received as a distribution in full
payment in exchange for the stock redeemed as provided in Section 302
of the Code.
5. For a First University shareholder who dissents from the Merger and
receives solely cash in exchange for his or her First University Common
Stock, such cash will be treated as having been received by such
shareholder as a distribution in redemption of his or her stock,
subject to the provisions and limitations of Section 302 of the Code.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR
GENERAL INFORMATION ONLY. FIRST UNIVERSITY SHAREHOLDERS ARE URGED TO CONSULT
WITH THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM
OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN
INCOME OR OTHER TAX LAWS.
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Compass and First University expect to receive a legal opinion from
Liddell, Sapp at the Closing that the Merger will qualify as a reorganization
under Section 368(a) of the Code in satisfaction of a condition to consummation
of the Merger. SEE "THE MERGER--OTHER TERMS AND CONDITIONS".
GOVERNMENT APPROVALS
Consummation of the Merger is subject to approval by the shareholders of
First University, the receipt of required regulatory approvals from the Federal
Reserve under the BHC Act, and the satisfaction or waiver of a number of other
conditions. In addition, consummation of the Subsequent Merger of the Bank into
Compass Bank-Texas is subject to approval by the Federal Reserve and the
Commissioner. It is expected that the Federal Reserve and the Commissioner will
issue their respective approvals of the Merger and the Subsequent Merger. SEE
"THE MERGER--GOVERNMENTAL APPROVALS".
A formal application under the BHC Act was filed with the Federal Reserve
on November 3, 1997. Once Federal Reserve approval has been obtained, the Merger
cannot be consummated until the expiration of a 15 day waiting period following
such approval during which the Justice Department, pursuant to the BHC Act, may
bring an action opposing the Merger.
An application was also filed with the Federal Reserve on November 3, 1997,
with respect to the Subsequent Merger. The Federal Reserve approval of the
Subsequent Merger is also subject to a 15 day waiting period during which the
Justice Department, pursuant to the Bank Merger Act, may bring an action
opposing such Merger under the antitrust laws. No Justice Department objection
or adverse action is anticipated with respect to the Merger or the Subsequent
Merger.
The Texas Finance Code allows out-of-state bank holding companies to
acquire bank holding companies that own or control state or national banks
located within Texas. An application with the Commissioner was filed on November
3, 1997. SEE "SUMMARY--CONDITIONS TO CONSUMMATION AND REGULATORY APPROVALS";
"TERMINATION"; AND "SUPERVISION AND REGULATION".
ACCOUNTING TREATMENT
Compass expects to account for the Merger using the "pooling-of-interests"
method of accounting. Compass has received a letter from KPMG Peat Marwick LLP,
which will be updated as of the Effective Time, to the effect that, based on
information provided to KPMG Peat Marwick LLP and assuming that the Merger is
consummated in accordance with the terms of the Merger Agreement, the Merger
will qualify for pooling-of-interests accounting treatment. Under this
accounting method, at the Effective Time, First University's assets and
liabilities will be added at their recorded book values to those of Compass, and
its shareholders' equity will be added to Compass' consolidated balance sheet.
Income and other financial statements of Compass issued after consummation of
the Merger will be restated retroactively to reflect the consolidated operations
of First University and Compass as if the Merger had taken place prior to the
periods covered by such financial statements. SEE "SUMMARY--ACCOUNTING
TREATMENT"; "SELECTED FINANCIAL DATA"; AND "THE MERGER--OTHER TERMS AND
CONDITIONS".
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SUPERVISION AND REGULATION
GENERAL
Bank holding companies and banks are regulated extensively under both
federal and state law. Compass, Compass Banks of Texas and Compass
Bancorporation are subject to regulation by the Federal Reserve and their
respective bank subsidiaries (the "Subsidiary Banks") are subject to regulation
by the Federal Reserve and the Federal Deposit Insurance Corporation ("FDIC")
and the appropriate state banking departments. The deposits of each of the
Subsidiary Banks are insured by the FDIC, and Compass Bank - Alabama and Compass
Bank - Texas 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 the Subsidiary Banks and should be read in conjunction
with the more detailed information incorporated by reference herein. SEE
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".
COMPASS, COMPASS BANKS OF TEXAS AND COMPASS BANCORPORATION
Compass, Compass Banks of 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 Banks of 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
Compass 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 5% 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 5% 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) subject to
interstate acquisition of out-of-state bank holding companies).
The Federal Reserve Act generally imposes certain limitations on extensions
of credit and other transactions by and between banks which are members of the
Federal Reserve and other 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 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 September 30, 1997, 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 Bank - Alabama.
FDICIA contains numerous other provisions, including reporting
requirements, termination of the "too big to fail" doctrine except in special
cases, limitations on the FDIC's payment of deposits at foreign branches and
revised regulatory standards for, among other things, real estate lending and
capital adequacy. In addition, FDICIA required the FDIC to establish a system of
risk-based assessments for federal deposit insurance, by which banks that pose a
greater risk of loss to the FDIC (based on their capital levels and the FDIC's
level of supervisory concern) pay a higher insurance assessment.
The Deposit Insurance Funds of 1996 (the "Fund Act"), which became
effective October 8, 1996, required the FDIC to impose a special assessment on
institutions holding deposits subject to assessment by the Savings Association
Insurance Fund ("SAIF"). Although the Subsidiary Banks are members of BIF, they
hold deposits subject to assessment by SAIF as a result of acquisitions of SAIF
deposits or SAIF-insured institutions. Compass' deposit liability under the
Funds Act was $7.2 million based upon $1.1 billion of SAIF deposits, after
certain discounts and exemptions.
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THE SUBSIDIARY BANKS
In general, federal and state banking laws and regulations govern all areas
of the operations of the Subsidiary Banks, including reserves, loans, mortgages,
capital, issuances of securities, payment of dividends and establishment of
branches. Federal and state bank regulatory agencies also have the general
authority to limit the dividends paid by insured banks and bank holding
companies if such payments may be deemed to constitute an unsafe and unsound
practice. Federal and state banking agencies also have authority to impose
penalties, initiate civil and administrative actions and take other steps
intended to prevent banks from engaging in unsafe or unsound practices.
Compass Bank-Alabama and Central Bank of the South are both organized under
the laws of the State of Alabama. Compass Bank-Alabama is a member of the
Federal Reserve System. Compass Bank-Alabama and Central Bank of the South
(collectively, the "Alabama Subsidiary Banks") are supervised, regulated and
regularly examined by the Alabama State Banking Department and Compass Bank-
Alabama is also regulated and examined by the Federal Reserve. Compass Bank-
Texas is organized under the laws of the State of Texas, is a member of the
Federal Reserve System, and is supervised, regulated and regularly examined by
the Texas Department of Banking and the Federal Reserve. The Subsidiary Banks,
as participants in the BIF and the SAIF 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 Subsidiary Banks are governed by Alabama laws restricting the
declaration and payment of dividends to 90% of annual net income until its
surplus funds equal at least 20% of capital stock. Compass Bank-Alabama has
surplus in excess of this amount. Compass Bank-Texas which is governed by the
laws of the State of Texas, is restricted in 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. As members of the Federal Reserve System, Compass Bank-Alabama and
Compass Bank-Texas 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 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.
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
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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 Bank 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 Bank-Alabama, offers discount
brokerage services and is registered with the Commission and the National
Association of Securities Dealers, Inc. The subsidiary is subject to certain
reporting requirements and regulatory control by these agencies. Compass
Bancshares Insurance, Inc., a wholly-owned subsidiary of Compass Bank-Alabama,
is a licensed insurance agent or broker for various insurance companies. Such
insurance subsidiary and its licensed agents are subject to reporting and
licensing regulations of the Alabama Insurance Commission and various other
states.
References under the heading "SUPERVISION AND REGULATION" to applicable
statutes are brief summaries of portions thereof, do not purport to be complete
and are qualified in their entirety by reference to such statutes.
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DESCRIPTION OF COMPASS COMMON AND PREFERRED STOCK
The following summary of the terms and provisions of the Compass Common
Stock and the Compass Preferred Stock ("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 GCL. Compass is authorized to issue
100,000,000 shares of Compass Common Stock, of which 65,929,416 shares were
issued and outstanding on October 31, 1997. 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 the GCL, 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 are the primary source of funds available to Compass for
payment of dividends to its shareholders and for other needs. Compass' Board of
Directors intends to maintain its present policy of paying regular quarterly
cash dividends. The declaration and amount of future dividends will depend on
circumstances existing at the time, including Compass' earnings, financial
condition and capital requirements, as well as regulatory limitations and such
other factors as Compass' Board of Directors deems relevant. SEE "COMPARISON OF
THE RIGHTS OF SHAREHOLDERS OF FIRST UNIVERSITY AND COMPASS--DIVIDENDS";
"SELECTED FINANCIAL DATA".
Compass' principal assets and sources of income consist of investments in
its operating subsidiaries, which are separate and distinct legal entities.
Federal and state banking regulations applicable to Compass and its banking
subsidiaries require minimum levels of capital which limit the amounts available
for payment of dividends. The Alabama Subsidiary Banks are governed by Alabama
laws restricting the declaration and payment of dividends to 90% of annual net
income until its surplus funds equal at least 20% of capital stock. Compass
Bank-Alabama has surplus in excess of this amount. Compass Bank-Texas, which is
governed by the laws of the State of Texas, is restricted in 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. As members of the Federal Reserve System, Compass Bank-Alabama
and Compass Bank-Texas are also subject to dividend limitations imposed by the
Federal Reserve that are similar to those applicable to national banks. SEE
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"; "SUMMARY--REASONS FOR THE
MERGER; RECOMMENDATION OF BOARD OF DIRECTORS"; "RISK FACTORS"; "SELECTED
FINANCIAL DATA"; "MARKET PRICES"; "COMPARISON OF RIGHTS OF SHAREHOLDERS OF FIRST
UNIVERSITY AND COMPASS--DIVIDENDS"; AND "INFORMATION ABOUT COMPASS".
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 First University shareholders' proportionate interest in Compass.
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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, if provided for, 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. SEE "COMPARISON OF
RIGHTS OF SHAREHOLDERS OF FIRST UNIVERSITY AND COMPASS--ELECTION OF DIRECTORS".
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. SEE "RECENT
DEVELOPMENTS".
COMPASS PREFERRED STOCK
Compass has authorized 25,000,000 shares of $.10 par value 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 hereof. SEE "RISK FACTORS"; AND "COMPARISON
OF RIGHTS OF SHAREHOLDERS OF FIRST UNIVERSITY AND COMPASS--DIVIDENDS" AND
"--LIQUIDATION RIGHTS".
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COMPARISON OF RIGHTS OF
SHAREHOLDERS OF FIRST UNIVERSITY 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. 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,
a staggered Board of Directors, and the limitation that shareholder actions
without a meeting may only be taken by unanimous written shareholder consent.
Other than the requirement in First University's Bylaws that shareholder actions
without a meeting be taken only upon unanimous shareholder consent, First
University's Articles of Incorporation and Bylaws do not contain similar
restrictions.
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
and Bylaws, as amended, of First University, which are available upon request
from First University. SEE "AVAILABLE INFORMATION"; "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE"; "RISK FACTORS"; AND "INFORMATION ABOUT COMPASS".
In addition to the foregoing differences between First University's and
Compass' charters, as a result of the Merger, First University shareholders,
whose rights are governed by the TBCA, will become shareholders of Compass, and
their rights as shareholders will then be governed primarily by the GCL.
CERTAIN DIFFERENCES BETWEEN THE CORPORATION LAWS OF TEXAS AND DELAWARE AND
CORRESPONDING CHARTER AND BYLAW PROVISIONS
Certain differences between the GCL and TBCA, as well as a description of
the corresponding provisions contained in Compass' and First University's
respective charter and Bylaws, as such differences 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
TBCA and the GCL and applicable charter and bylaw provisions.
MERGERS
Both the TBCA and GCL generally permit a merger to become effective without
the approval of the surviving corporation's shareholders if the articles or
certificate of incorporation, as the case may be, 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 Texas law, a merger must be
approved by the holders of two-thirds of the outstanding shares of the Texas
corporation entitled to vote thereon, unless there is a class of stock that is
entitled to vote as a class, in which event the merger must be approved by the
holders of two-thirds of the outstanding shares of stock of each class entitled
to vote as a class and by the holders of two-thirds of the outstanding shares
otherwise entitled to vote. Where shareholder approval is required under
Delaware law, a merger can be approved by a majority vote of the outstanding
shares of capital stock of each class entitled to vote thereon. Compass'
Certificate requires supermajority approval by its Board of Directors and
shareholders in certain cases, as described above. SEE "RISK FACTORS" AND
"COMPARISON OF RIGHTS OF SHAREHOLDERS OF FIRST UNIVERSITY AND COMPASS-CHARTER
AND BYLAW PROVISIONS AFFECTING COMPASS STOCK".
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APPRAISAL RIGHTS
Shareholders of Texas corporations are entitled to exercise certain
dissenters' rights in the event of a sale, lease, exchange or other disposition
of all, or substantially all, of the property and assets of the corporation,
and, with the exceptions discussed below, a merger or consolidation.
Shareholders of a Delaware corporation shall have rights of appraisal in
connection with certain mergers or consolidations. 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 the
event of an amendment to the certificate of incorporation, the sale of all or
substantially all of the assets of the corporation, or the occurrence of any
merger or consolidation regarding which appraisal rights are not otherwise
available and in which that Delaware corporation is not the surviving or
resulting company. No such provision is included in Compass' Certificate. The
rights of a dissenting shareholder of a Texas corporation are set forth in
Appendix II. SEE "SUMMARY--DISSENTERS' RIGHTS"; "THE MERGER--DISSENTERS'
APPRAISAL RIGHTS"; AND APPENDIX II.
No appraisal rights are available under either Texas or, except as
described below, Delaware law for the holders of any shares of a class or series
of stock of a Texas or Delaware corporation to a merger if that corporation
survives the merger and the merger did not require the vote of the holders of
that class or series of such corporation's stock; provided, however, that under
Delaware law appraisal rights will be available in any event to shareholders of
a Delaware corporation who are required to accept consideration for their shares
other than the consideration described below.
Both Texas and Delaware law have a provision which states that shareholders
do not have appraisal rights in connection with a merger where, on the record
date fixed to determine the shareholders entitled to vote on the merger or
consolidation, the stock of the corporation is listed on a national securities
exchange, is listed on the NASDAQ stock market or is held of record by more than
2,000 shareholders, unless any of the following exceptions concerning
consideration paid to the shareholder for his shares are met. Under Texas law, a
shareholder will be entitled to dissent and be paid for his shares if,
notwithstanding the above, the shareholder is required to accept for his shares
any consideration other than (i) shares of stock of a corporation which,
immediately after the effective date of the merger, are listed on a national
securities exchange or are held of record by not less than 2,000 shareholders,
and (ii) cash in lieu of fractional shares otherwise entitled to be received.
The Delaware statute contains a similar consideration provision which is
somewhat broader. Appraisal rights will be available to shareholders of a
Delaware corporation in the event of a merger or consolidation if such
shareholders are required by the terms of an agreement of merger or
consolidation to accept for their stock anything other than (i) shares of stock
of the corporation surviving or resulting from such merger or consolidation, or
depository receipts in respect thereof, (ii) shares of stock of any other
corporation or depository receipts in respect thereof, which at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or held of record by more than 2,000 shareholders, (iii)
cash in lieu of fractional shares or fractional depository receipts of a
corporation described in (i) and (ii) above, or (iv) any combination of the
shares of stock, depository receipts and cash in lieu of fractional shares or
fractional depositary receipts described in (i), (ii) and (iii) above.
SPECIAL MEETINGS
A special meeting of shareholders of a Texas 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. 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.
First University's Bylaws provide that special meetings of shareholders may be
called by the President or the Board of Directors, and shall be called by the
President at the request of the holders of not less than one-tenth of all of the
shares entitled to vote at the meeting. Compass' Certificate prohibits
shareholders from calling special meetings. SEE "RISK FACTORS".
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ACTIONS WITHOUT A MEETING
Under Texas law, the shareholders may act without a meeting if a written
consent is signed by all the shareholders entitled to vote on the matter, unless
the Articles of Incorporation require less than unanimous consent (but not less
than the number of votes that would be necessary to take such action at a
meeting). First University's Articles of Incorporation do not provide for less
than unanimous consent when action is taken without a meeting. Delaware law
provides that 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 Certificate of Incorporation. Compass' Certificate prohibits
shareholder action by written consent except where such action is taken
unanimously. SEE "RISK FACTORS".
ELECTION OF DIRECTORS
Pursuant to Texas law, unless otherwise provided in the Articles of
Incorporation, shareholders shall be entitled to cumulative voting in the
election of directors if they provide the secretary of the corporation with
written notice prior to the day of the election of their intent to cumulate
their votes. Absent such notice, 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. First University's Articles of Incorporation prohibit cumulative voting
in the election of directors. Holders of Compass Common stock are not entitled
to cumulate their votes in the election of directors. SEE "DESCRIPTION OF
COMPASS COMMON AND PREFERRED STOCK--VOTING RIGHTS".
VOTING ON OTHER MATTERS
Under Texas law, an amendment to the Articles of Incorporation requires the
approval of the holders of at least two-thirds of the outstanding shares of the
corporation entitled to vote thereon, and the holders of two-thirds of the
outstanding shares of each class or series entitled to vote thereon as a class,
unless a different number, not less than a majority, is specified in the
Articles of Incorporation. The Articles of Incorporation of First University do
not so specify. Delaware law provides that amendments to the Certificate of
Incorporation must be approved by the holders of a majority of the corporation's
stock entitled to vote thereon, and the holders of a majority of the outstanding
stock entitled to vote thereon as a class, unless the Certificate of
Incorporation requires the vote of a larger portion of the outstanding stock or
any class thereof. Compass' Certificate does not provide for approval of an
amendment of the Certificate by more than a majority vote.
The sale, lease, exchange or other disposition (not including any pledge,
mortgage, deed of trust or trust indenture unless otherwise provided in the
Articles of Incorporation) of all, or substantially all, the property and
assets, with or without the goodwill, of a Texas corporation, if not made in the
usual and regular course of its business, requires the approval of the holders
of at least two-thirds of the outstanding shares of the corporation entitled to
vote thereon, and the holders of two-thirds of the outstanding shares of each
class or series entitled to vote thereon as a class, unless the Articles of
Incorporation require the vote of a different number, not less than a majority,
of the shares outstanding. First University's Articles of Incorporation do not
provide for a different voting requirement. A Delaware corporation may sell,
lease or exchange all or substantially all of its property and assets when and
as authorized by the holders of a majority of the outstanding stock of the
corporation entitled to vote thereon, unless the Certificate of Incorporation
requires the vote of a larger portion of the outstanding stock. Compass'
Certificate does not so provide.
Under Texas law, the voluntary dissolution of a corporation requires the
approval of the holders of at least two-thirds of the total outstanding shares
of the corporation, and the holders of two-thirds of the outstanding shares of
each class or series entitled to vote thereon as a class, unless a different
amount, not less than a majority, is specified in the Articles of Incorporation.
Each outstanding share of a Texas corporation is entitled to vote on
dissolution. The Articles of Incorporation of First University do not provide
for a different number of shares for approval of dissolution. Delaware law
requires that dissolution must be approved by the holders of a majority of the
corporation's stock entitled to vote thereon, unless the Certificate of
Incorporation requires the vote of a larger portion of the outstanding stock.
Compass' Certificate does not provide for approval by more than a majority vote.
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PREEMPTIVE RIGHTS
Under Texas law, shareholders possess preemptive rights as to the issuance
of additional or treasury securities by the corporation, unless the
corporation's Articles of Incorporation provide otherwise. First University's
Articles of Incorporation deny preemptive rights and, therefore, First
University's shareholders do not have preemptive rights as to newly issued and
treasury shares. Shareholders of Compass also do not possess such preemptive
rights.
DIVIDENDS
A Delaware corporation may pay dividends not only out of surplus (the
excess of net assets over capital) but also out of net profits for the current
or preceding fiscal year if it has no surplus; provided, however, that if the
capital of the corporation has been decreased to an amount less than the
aggregate amount of the capital represented by the issued and outstanding stock
having a preference upon the distribution of assets, no dividends may be
declared out of net profits. A Texas corporation may make distributions only out
of surplus.
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.
First University's Articles of Incorporation provide that so long as any
shares of preferred stock are outstanding, First University shall not pay or
declare any cash dividends whatsoever on First University Common Stock unless
(i) all dividends on the preferred stock of all series for all past quarterly
dividend periods shall have been paid, or declared and a sum sufficient for the
payment thereof set apart, and (ii) there shall exist no default in respect of
any sinking fund or purchase fund for the redemption or purchase of shares of
preferred stock of any series or such default shall have been waived by the
holders of at least a majority of the then issued and outstanding shares of
preferred stock of such series by a vote at a meeting called for such purpose or
by written waiver with or without a meeting. First University has no shares of
preferred stock outstanding.
SEE "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"; "SUMMARY--PARTIES TO
THE MERGER"; "SUMMARY--REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF
DIRECTORS"; "SELECTED FINANCIAL DATA"; "MARKET PRICES"; "DESCRIPTION OF COMPASS
COMMON AND PREFERRED STOCK"; AND "INFORMATION ABOUT FIRST UNIVERSITY--MARKET
PRICE AND DIVIDENDS".
LIQUIDATION RIGHTS
Generally under Texas and Delaware corporate law, 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. Upon the
liquidation, dissolution or winding up of the affairs of First University, the
shareholders of First University Common Stock are entitled to receive, in
proportion to the number of shares held by them, all the assets that remain
after any preferential amounts have been distributed to the holders of any
preferred stock of First University. Although First University has authorized
preferred stock, it currently has none outstanding.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Both Texas and Delaware corporate law permit a corporation to set limits on
the extent of a director's liability. Both Texas and Delaware law permit a
corporation to indemnify its officers, directors, employees and agents if such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the
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corporation. Indemnification is not allowed under either Texas or Delaware law,
absent a court order to the contrary, if an officer, director, employee or agent
of the bank or corporation is finally adjudged liable to the corporation.
Under 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 (i) for breach of a director's duty of loyalty, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) unlawful payment of dividend or unlawful stock purchase
or redemption, or (iv) any transaction from which the director derived an
improper personal benefit. Compass' Certificate authorizes indemnification of
officers, directors and others to the fullest extent permitted by Delaware law.
SEE "AVAILABLE INFORMATION"; "INCORPORATION BY REFERENCE OF CERTAIN DOCUMENTS";
AND "INDEMNIFICATION".
First University's Articles of Incorporation provide that no contract or
other transaction between First University and one or more of its directors,
officers or security holders or between First University and another
corporation, partnership, joint venture, trust or other enterprise of which one
or more of First University's directors, officers or security holders are
members, officers, security holders, directors or employees or in which they are
otherwise interested, directly or indirectly, shall be invalid solely because of
such relationship, or solely because such director, officer or security holder
is present at or participates in the meeting of the Board of Directors or
committee thereof which authorizes the contract or other transaction, or solely
because his or their votes are counted for such purpose, if (i) the material
facts as to his relationship or interest and as to the contract or other
transaction are known or disclosed to the Board of Directors or committee
thereof, and such board or committee in good faith authorizes the contract or
other transaction by the affirmative vote of a majority of the disinterested
directors even though the disinterested directors be less than a quorum, or (ii)
the material facts as to his relationship or interest and as to the contract or
other transaction are known or disclosed to the shareholders entitled to vote
thereon, and the contract or other transaction is specifically approved in good
faith by vote of the shareholders or, (iii) the contract or other transaction is
fair as to First University as of the time it is authorized, approved or
ratified by the Board of Directors, a committee thereof, or the shareholders.
In addition, First University may indemnify any director or officer of
First University, and any person who may have served at the request of First
University as a director or officer of another corporation in which it owns
shares or of which it is a creditor, against any costs and expenses, including
counsel fees, actually and necessarily incurred (or reasonably expected to be
incurred) in connection with the defense of any civil, criminal, administrative
or other claim, action, suit or proceeding (whether by or in the right of First
University or otherwise) in which he may become involved or with which he may be
threatened, by reason of his being or having been such a director or officer,
and against any payments in settlement of any such claim, action, suit or
proceeding or in satisfaction of any related judgment, fine or penalty, provided
that the Board of Directors shall, in the exercise of its business judgment,
determine that such indemnification is in the best interests of First
University. Such indemnification shall not be deemed exclusive of any other
rights to which any director, officer or other person may be entitled under any
other bylaw, agreement, vote of shareholders or disinterested directors, as a
matter of law or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office and shall continue as to a
person who has ceased to be a director or officer.
REMOVAL OF DIRECTORS
A Texas corporation may provide in its Articles of Incorporation or Bylaws,
and First University's Bylaws do provide, that a director can be removed with or
without cause by a vote of the holders of not less than a majority of the shares
entitled to vote. A majority of shareholders of a Delaware corporation may
remove a director with or without cause, unless the directors are classified and
elected for staggered terms, in which case, directors may be removed only for
cause. Compass' Certificate of Incorporation provides for a classified board,
and any such removal must be for cause after a supermajority vote (80%) of the
shareholders.
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INSPECTION OF BOOKS AND RECORDS
Under Texas law, any person who has been a shareholder of record for at
least six months preceding his demand, or who is the holder of at least 5% of
all of the outstanding shares of a corporation, is entitled to examine a bank's
relevant books and records for any proper purpose. Under Delaware law, any
shareholder has such a right.
ANTITAKEOVER PROVISIONS
Delaware has enacted antitakeover legislation. Compass has opted out of
such provisions as provided thereby. Certain provisions of Compass' charter and
Bylaws limiting a takeover without the support of its Board of Directors are
described in "COMPARISON OF RIGHTS OF SHAREHOLDERS OF FIRST UNIVERSITY AND
COMPASS--CHARTER AND BYLAW PROVISIONS AFFECTING COMPASS STOCK". Texas has not
enacted similar legislation.
Although certain of the specific differences between the voting and other
rights of First University 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 Texas and Delaware law, or the
rights of such persons under the respective charters and Bylaws of Compass and
First University. 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
TBCA and the GCL, and the specific provisions of Compass' Certificate and
Bylaws, and First University's Articles of Incorporation and Bylaws, as amended.
RESALE OF COMPASS STOCK
The Compass Common Stock to be issued to holders of First University Common
Stock 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 First University within the meaning of Rule 145 under the Securities Act. The
directors and executive officers of First University, the beneficial owners of
10% or more of First University Common Stock and certain of their related
interests may be deemed to be affiliates of First University. Such affiliates
are not permitted to transfer any Compass Common Stock except in compliance with
the Securities Act and the rules and regulations thereunder. Such affiliates
have already delivered to Compass a written agreement in substantially the form
of Exhibit A to the Merger Agreement providing that each such affiliate will not
(i) sell, pledge, transfer or otherwise dispose of any of such affiliate's First
University Common Stock within 30 days prior to the Effective Time; (ii) sell,
pledge, transfer or otherwise dispose of any shares of Compass Common Stock
until the publication of financial results covering at least 30 days of post-
Merger combined operations of First University and Compass, except for pledges
by such affiliates of all or part of such affiliate's Compass Common Stock
acquired in the Merger, provided the lender agrees to be bound by the terms of
such written agreement; and (iii) transfer any Compass Common Stock except in
compliance with Rule 145 promulgated by the Commission under the Securities Act
and any new requirements imposed by the Commission or the Financial Accounting
Standards Board for Compass' accounting of the Merger as a pooling of interests.
SEE "SUMMARY--ACCOUNTING TREATMENT"; "THE MERGER--ACCOUNTING TREATMENT"; AND
APPENDIX I.
Pursuant to the Merger Agreement, holders of shares of First University
Common Stock that will be entitled to receive at least 50% of the aggregate
Merger Consideration have represented to Compass their intention not to sell or
otherwise dispose of the shares of Compass Common Stock received in the Merger.
As a condition to consummation of the Merger, the representation from First
University shareholders receiving at least 50% of the aggregate Merger
Consideration that they have no current plan or present intention to sell or
otherwise dispose of the shares of Compass Common Stock received pursuant to the
Merger must remain true as of the Effective Time. SEE "THE MERGER--OTHER TERMS
AND CONDITIONS".
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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, 1996 and Compass'
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June 30,
1997, and September 30, 1997, are incorporated herein by reference. SEE
"AVAILABLE INFORMATION"; "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".
INTERESTS OF CERTAIN PERSONS
No director or executive officer of Compass has any material direct or
indirect financial interest in First University or the Merger, except as a
director, executive officer or shareholder of Compass or its subsidiaries.
INFORMATION ABOUT FIRST UNIVERSITY
The Bank was chartered in 1975 as First National Bank of West University
Place and adopted its present name in August 1987. First University currently
conducts no operations other than serving as a bank holding company under the
BHC Act for the Bank. First University derives its revenues primarily from the
operations of the Bank in the form of dividends paid from the Bank to First
University. First University is subject to regulation by the Federal Reserve.
The Bank is an independent community bank located in Houston, Texas. The
Bank is a full service bank offering a variety of services to satisfy the needs
of the consumer and commercial customers in the area. The principal services
offered by the Bank include most types of loans, including commercial, consumer
and real estate loans. The Bank also offers safe deposit boxes, a night deposit
facility, motor bank, wire transfers and ATM cards.
SERVICES, EMPLOYEES AND PROPERTIES
On September 30, 1997, the Bank had 8 officers, 7 directors, 30 full-time
employees and 7 part-time employees. Outside Directors of the Bank are paid
$1,000 per month for their services. First University had 3 officers and 3
directors at that date. Directors of First University receive no compensation
for their services.
The Bank's main office is located at 3633 Rice Boulevard, Houston, Texas.
The Bank has one full-service branch located at 2401 University and one motor
bank branch location at 5275 Buffalo Speedway.
SEE "INFORMATION ABOUT FIRST UNIVERSITY--BENEFICIAL OWNERSHIP OF FIRST
UNIVERSITY COMMON STOCK BY FIRST UNIVERSITY MANAGEMENT AND PRINCIPAL
SHAREHOLDERS".
COMPETITION
The Bank considers its service area to be the area encompassing the West
University and Medical Center areas of Harris County, Texas. The activities in
which the Bank engages are competitive. Each activity engaged in by the Bank
involves competition with other banks, as well as with nonbanking financial
institutions and nonfinancial enterprises. In addition to competing with other
commercial banks within and outside its service area, the Bank competes with
other financial institutions engaged in the business of making loans or
accepting deposits, such as savings and loan associations, credit unions,
industrial loan associations, insurance companies, small loan companies, finance
companies, mortgage companies, real estate investment trusts, certain
governmental agencies, credit card organizations and other enterprises.
Additional competition for deposits comes from government and private issuers of
debt obligations and other investment alternatives for depositors, such as money
market funds. The Bank also competes with suppliers of equipment in furnishing
equipment financing and leasing services.
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First University also faces competition from a wide variety of depository
institutions from other geographical areas which compete for deposits, loans and
bank-related services. As deregulation of depository institutions and financial
services continues, competition from nonbank financial intermediaries such as
savings and loan associations, credit unions, mortgage companies, insurance
companies and other financial institutions may be expected to intensify. First
University and similar institutions have also experienced significant
competition for deposits from mutual funds and other money center banks'
offerings of high yielding deposit accounts. Some of the institutions with which
First University competes have capital and resources much larger than those of
First University, and some are not subject to the same regulatory restrictions.
LEGAL PROCEEDINGS
In the normal course of its businesses, First University from time to time
is involved in legal proceedings. Other than such proceedings incidental to its
business, First University's management is not aware of any pending or
threatened legal proceedings which, upon resolution, would have a material
adverse effect upon First University's financial condition, results of
operations or cash flows. The continued absence of such proceedings is a
condition to Compass' obligation to consummate the Merger. SEE "THE MERGER--
OTHER TERMS AND CONDITIONS".
MARKET PRICE AND DIVIDENDS
There is no active public trading market for the First University Common
Stock. As of the Record Date, First University Common Stock was held by 186
holders of record. First University has not paid dividends on its common stock
since 1986. SEE "SELECTED FINANCIAL DATA"; MARKET PRICES"; "COMPARISON OF RIGHTS
OF SHAREHOLDERS OF FIRST UNIVERSITY AND COMPASS DIVIDENDS"; AND "INFORMATION
ABOUT FIRST UNIVERSITY--BENEFICIAL OWNERSHIP OF FIRST UNIVERSITY COMMON STOCK BY
FIRST UNIVERSITY MANAGEMENT AND PRINCIPAL SHAREHOLDERS".
BENEFICIAL OWNERSHIP OF FIRST UNIVERSITY COMMON STOCK BY FIRST UNIVERSITY
MANAGEMENT AND PRINCIPAL SHAREHOLDERS.
The following table sets forth, as of the Record Date, the names and
addresses of each beneficial owner of more than 5% of First University Common
Stock known to the Board of Directors of First University, showing the amount
and nature of such beneficial ownership and the names of each director and
executive officer of First University, the number of shares of First University
Common Stock owned beneficially by each director and executive officer and the
number of shares of First University Common Stock owned beneficially by all
directors and executive officers as a group. None of the shareholders listed
herein would own, on a pro forma basis giving effect to the Merger, more than 1%
of the issued and outstanding shares of Compass Common Stock.
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Name and Address of Amount and Nature
Beneficial Owner of Beneficial Ownership/(1)/ Percent of Class
---------------- --------------------------- ----------------
BRADLEY F. BRACEWELL
2417 MACONDA
HOUSTON, TEXAS 77027 53,803/(2)/ 20.49%
FENTRESS BRACEWELL
2121 KIRBY, BOX 88
HOUSTON, TEXAS 77019 60,001/(3)/ 22.85%
JOSEPH S. BRACEWELL
4554 KLINGLE ST., N.W.
WASHINGTON, D.C. 20016 30,000/(4)/ 11.42%
HAROLD F. JOHNSON 2,925 1.11%
LYN BRACEWELL PHILLIPS
1708 COMWELL HILL 28,301 10.78%
AUSTIN, TEXAS 78703
DIRECTORS AND OFFICERS 115,029 43.80%
AS A GROUP (4 PERSONS)
- -------------------
/(1)/ Unless otherwise indicated, each individual is the record owner of, and
has sole voting and investment power with respect to, all shares of First
University Common Stock of which he or she is the beneficial owner. Unless
otherwise indicated, all percentages are based upon 262,614 shares of
First University Common Stock issued and outstanding.
/(2)/ Includes 5,693 shares held of record by Continental Investors, a limited
partnership in which Mr. Bradley F. Bracewell is a principal.
/(3)/ Includes 5,693 shares held of record by Continental Investors, a limited
partnership in which Mr. Fentress Bracewell is a principal.
/(4)/ Includes 5,400 shares held by Smith Barney, Inc. and 3,100 shares held by
Shearson Lehman Brothers in retirement plans for the benefit of Mr.
Bracewell and 2,000 shares held by Mr. Bracewell as custodian for minor
children.
- -------------------
The persons listed above will receive the same Merger Consideration
described in "THE MERGER--GENERAL" as the other First University shareholders
for each share of First University Common Stock held at the Effective Time.
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Derek S. Munger Employment Agreement. Derek S. Munger and Compass
Management have entered into an employment agreement whereby Mr. Munger will act
as a vice president of Compass Bank-Texas for a period of one year after the
Merger. Mr. Munger's base salary under the employment agreement will be
$130,000. In addition Mr. Munger shall be entitled to such benefits as are made
generally available to employees of equal title and base salary on the same
basis as Compass makes such benefits available to Compass' other employees,
including participation in the Compass retirement plan.
Harold F. Johnson Employment Agreement. Harold F. Johnson and Compass
Management have entered into an employment agreement whereby Mr. Johnson will
act as a vice president of Compass Bank-Texas for a period of one year after the
Merger. Mr. Johnson's base salary under the employment agreement will be
$______. In addition Mr. Johnson shall be entitled to such benefits as are made
generally available to employees of equal title and base salary on the same
basis as Compass makes such benefits available to Compass' other employees,
including participation in the Compass retirement plan.
Bradley F. Bracewell Consulting Agreement. Bradley F. Bracewell, Chairman
and Chief Executive officer of First University and the Bank, has entered into a
two year Consulting Agreement dated September 25, 1997, with Compass Management
with respect to his retention by Compass after the Merger. As consideration for
his services to be provided under the Consulting Agreement, Mr. Bracewell will
receive an annual retainer fee of $100,000 per year plus a bonus equal to the
balance of annual life insurance premiums under an existing life insurance
policy plus an amount equal to Mr. Bracewell's related federal income tax
liability with respect to such premiums, which bonus is not expected to exceed
$143,068 in the aggregate.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF FIRST UNIVERSITY
The following discussion provides certain information regarding the
financial condition and results of operations of First University. This
discussion should be read in conjunction with First University's Consolidated
Financial Statements and Notes to Consolidated Financial Statements presented
elsewhere in this Proxy Statement/Prospectus. SEE "INDEX TO FIRST UNIVERSITY
CONSOLIDATED FINANCIAL STATEMENTS".
RESULTS OF OPERATIONS
GENERAL
The earnings of First University depend primarily on First University's net
interest income (i.e., the difference between the income earned on First
University's loans and investments and the interest paid on its deposits and
other borrowed funds). Among the factors affecting net interest income are the
type and volume of its deposits and other borrowed funds, and the relative
sensitivity of its interest-earning assets and its interest-bearing liabilities
to changes in market interest rates.
First University's income is also affected by fees it receives from other
banking services, by its provisions for loan losses and by the level of its
operating expenses. All aspects of First University's operations are affected by
general market, economic and competitive conditions.
First University reported net income of $286,775 for the nine-month period
ended September 30, 1997, an increase of $298,688 from a net loss of $11,913 for
the nine-month period ended September 30, 1996. Pre-tax income was $405,094 for
the nine months ended September 30, 1997, a $407,059 increase from the $1,965
loss for the nine months ended September 30, 1996.
First University reported net income of $135,623 for the year ended
December 31, 1996, a decrease of $462,978 from net income of $598,601 for the
year ended December 31, 1995. Pretax income was $142,553 for the year ended
December 31, 1996, a $724,714 decrease from the $867,267 earned during the year
ended December 31, 1995. First University had net income of $353,489 and pretax
income of $487,821 for the year ended December 31, 1994. Changes occurring in
the major components of First University's income statement for such periods are
discussed below.
NET INTEREST INCOME
Net interest income is the primary source of income for First University
and represents the amount by which interest generated by earning assets exceeds
the cost of funds, primarily interest paid to First University's depositors on
interest bearing accounts.
Net interest income was $2,220,000 for the nine months ended September 30,
1997, a 6.57% increase from net interest income of $2,083,000 for the nine
months ended September 30, 1996. The increase in net interest income is
primarily due to the increase in interest on investment securities of $205,000.
Average rates earned on interest-bearing assets increased to 7.67% as of
September 30, 1997, from 7.65% as of September 30, 1996. Average loans, net of
unearned discount, of $37,098,000 for the nine months ended September 30, 1997,
increased 1.02% over average loans of $36,723,000 for the same period in 1996.
Average deposits for the nine months ended September 30, 1997, were $58,439,000
an increase of 5.75% over average deposits of $55,262,000 for the same period in
1996. The increase in average deposits is primarily due to the increase in NOW
accounts as a result of the Bank enhancing the interest rate and other features
of this type of account.
Net interest income was $2,841,000 for the year ended December 31, 1996, a
6.43% decrease from net interest income of $3,035,000 for the year ended
December 31, 1995. The decrease in net interest income resulted from the
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decrease in average loans outstanding as well as an increase in interest costs
on NOW accounts partially offset by the increase in the volume of Federal funds
sold. Average rates earned on interest bearing assets decreased to 7.70% as of
December 31, 1996 from 7.97% as of December 31, 1995. Average loans, net of
unearned discount, of $36,689,000 for the year ended December 31, 1996,
decreased 8.66% from average loans of $40,170,000 for the same period in 1995.
The decrease in average loans resulted from customers refinancing their variable
rate mortgage loans outstanding at the Bank to fixed rate mortgage loans with
other financial lenders. Average deposits for the year ended December 31, 1996
were $55,759,000, an increase of 3.83% over average deposits of $53,699,000 for
the same period in 1995.
Net interest income was $3,035,000 for the year ended December 31, 1995, a
4.84% increase from net interest income of $2,895,000 for 1994. The increase in
net interest income was due primarily to the increase in average loans
outstanding and the increase in the yield on average loans outstanding partially
offset by the increase in the cost of funds on certificates of deposit. Average
loans of $40,170,000 for year ended December 31, 1995 increased 13.61% over
average loans of $35,358,000 for the same period in 1994. The increase in
average loans outstanding was the result of increased loan demand for fixed and
adjustable rate mortgage loans during 1995. Average deposits for the year ended
December 31, 1995 were $53,699,000 a decrease of 4.82% from average deposits of
$56,419,000 for the same period in 1994. The decrease in average deposits was
primarily in NOW accounts and non-interest bearing demand accounts.
The following table sets forth for the periods indicated an analysis of net
interest income by each major category of interest-earning assets and interest-
bearing liabilities. The rates earned and paid on each major type of asset and
liability account are set forth beside the average level in the account for the
period, and the average yields on all interest-bearing liabilities are also
summarized.
44
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in Thousands)
1996 1995 1994
---------------------------- --------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Interest Yield/ Average Interest Yield/ Average Interest Yield/
Balance Inc/Exp Rate Balance Inc/Exp Rate Balance Inc/Exp Rate
(2) (2) (2)
-------- -------- ------ ------- -------- ------ ------- ------- --------
ASSETS
Interest earning assets:
Loans /(1)/ $36,689 $3,211 8.75% $40,170 $3,528 8.78% $35,358 $2,901 8.20%
Securities-held to maturity:
Taxable 219 6 2.74% 73 4 5.48% 73 4 5.48%
Tax exempt 1,939 95 4.90% 1,943 97 4.99% 1,738 95 5.47%
Securities-available for sale:
Taxable 5,245 286 5.45% 6,637 380 5.73% 9,331 458 4.91%
Securities-trading account 5,014 322 6.42% 4,950 313 6.32% 4,889 276 5.65%
Deposits in other banks 1,069 60 5.61% 1,622 96 5.92% 3,318 192 5.79%
Federal funds sold 5,774 329 5.70% 105 6 5.71% 1,792 63 3.52%
------- ------ ----- ------- ------ ------ ------- ------ -----
Total interest earning 55,949 4,309 7.70% 55,500 4,424 7.97% 56,499 3,989 7.06%
assets/interest income/
average yield
Non-interest earning assets:
Cash and due from banks 2,499 2,360 2,340
Other assets 2,483 2,260 1,886
Allowance for loan losses (363) (408) (353)
------- ------- -------
TOTAL $60,568 $59,712 $60,372
======= ======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest bearing liabilities:
NOW, money mkt and savings $27,896 $ 716 2.57% $27,101 $ 585 2.16% $29,371 $ 621 2.11%
Certificates of deposit 14,066 663 4.71% 13,568 632 4.66% 12,884 407 3.16%
Individual retirement accounts 1,390 66 4.75% 1,306 59 4.52% 1,532 50 3.26%
Federal funds purchased 409 19 4.65% 1,705 108 6.33% 305 16 5.25%
Note payable 53 4 7.55% 46 5 10.87% N/A N/A N/A
------- ------ ----- ------- ------ ------ ------- ------ -----
Total interest bearing 43,814 1,468 3.35% 43,726 1,389 3.18% 44,092 1,094 2.48%
liabilities/interest expense/ rate ----- ------ -----
Non-interest bearing demand
deposits 12,407 11,724 12,632
Other liabilities 247 363 290
------- ------- -------
Total liabilities 56,468 55,813 57,014
Stockholders' equity 4,100 3,899 3,358
------- ------- -------
TOTAL $60,568 $59,712 $60,372
======= ======= =======
Net interest income $2,841 4.35% $3,035 4.79% $2,895 4.58%
====== ===== ====== ====== ====== =====
Net yield on interest earning
assets 5.08% 5.47% 5.12%
===== ====== =====
</TABLE>
/(1)/ Includes Nonaccrual loans.
/(2)/ Average balances are based on the average balances outstanding throughout
the years ended December 31, 1996, 1995 and 1994.
45
<PAGE>
<TABLE>
<CAPTION>
Nine Months, September 30
(Dollars in Thousands)
1997 1996
--------------------------- ---------------------------
Average Interest Yield/ Average Interest Yield/
ASSETS ------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans (1) $37,098 $2,469 8.87% $36,723 $2,384 8.66%
Securities-held to maturity:
Taxable 356 15 5.62% 178 3 2.25%
Tax exempt 1,850 70 5.05% 1,939 71 4.88%
Securities-available for sale:
Taxable 8,306 384 6.16% 4,872 190 5.20%
Securities-trading account 4,949 238 6.41% 5,028 241 6.39%
Deposits in other banks 738 34 6.14% 1,084 45 5.54%
Federal funds sold 5,128 152 3.95% 5,667 248 5.83%
------- ------ ----- ------- ------ -----
Total interest earning 58,425 3,362 7.67% 55,491 3,182 7.65%
assets/interest income/
average yield
Non-interest earning assets:
Cash and due from banks 2,651 2,553
Other assets 2,297 2,519
Allowance for loan losses (319) (375)
------- -------
TOTAL $63,054 $60,188
======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest bearing liabilities:
NOW, money market and savings $31,216 $ 628 2.68% $27,331 $ 517 2.52%
Certificates of deposit 13,239 464 4.67% 14,363 510 4.73%
Individual retirement accounts 1,335 47 4.69% 1,373 50 4.86%
Federal funds purchased -- -- -- 547 19 4.63%
Note payable 56 3 7.14% 45 3 8.89%
------- ------ ----- ------- ------ -----
Total interest bearing
liabilities/interest expense/ rate 45,846 1,142 3.32% 43,659 1,099 3.36%
----- -----
Non-interest bearing demand
deposits 12,649 12,195
Other liabilities 240 251
------- -------
Total liabilities 58,735 56,105
Stockholders' equity 4,319 4,083
------- -------
TOTAL $63,054 $60,188
======= =======
Net interest income $2,220 4.35% $2,083 4.29%
====== ===== ====== =====
Net yield on interest earning assets 5.07% 5.01%
===== =====
</TABLE>
/(1)/ Includes nonaccrual loans.
/(2)/ Average balances are based on the average balances outstanding throughout
the nine months ended September 30, 1997 and 1996.
46
<PAGE>
Changes in interest income and interest expense can result from variances
in both volume and rate. First University has an asset and liability management
strategy designed to provide a proper balance between rate sensitive assets and
rate sensitive liabilities to attempt to maximize interest margins, and to
provide adequate liquidity for anticipated needs.
The following table sets forth for the periods indicated a summary of the
changes in interest earned and interest paid resulting from changes in volume
and rate.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Nine Months Ended Year Ended Year Ended
September 30, 1997 December 31, 1996 December 31, 1995
--------------------- ---------------------- --------------------
Change Attributed to Change Attributed to Change Attributed to
1997 --------------------- 1996 ---------------------- 1995 --------------------
to Volume Rate Mix to Volume Rate Mix to Volume Rate Mix
1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Loans $ 85 $ 24 $ 58 $ 3 $(317) $(306) $ (12) $ 1 $627 $ 395 $205 $ 27
Securities-held to maturity
Taxable 12 3 4 5 2 8 (2) (4) -- -- -- --
Tax Exempt (1) (3) 2 -- (2) -- (2) -- 2 11 (8) (1)
Securities-available for
sale
Taxable 194 134 35 25 (94) (80) (19) 5 (78) (132) 77 (23)
Securities-trading account (3) (4) 1 -- 9 4 5 -- 37 3 33 1
Deposits in other banks (11) (14) 5 (2) (36) (33) (5) 2 (96) (98) 4 (2)
Federal funds sold (96) (24) (80) 8 323 324 -- (1) (57) (59) 39 (37)
---- ---- ---- ---- ----- ----- ----- ----- ---- ----- ---- ----
Increase (decrease) in 180 116 25 39 (115) (83) (35) 3 435 120 350 (35)
interest income ---- ---- ---- ---- ----- ----- ----- ----- ---- ----- ---- ----
Interest-Bearing
Liabilities:
NOW, money market and 111 73 33 5 131 17 111 3 (36) (48) 15 (3)
savings
Certificates of deposit (46) (40) (6) -- 31 23 7 1 225 22 193 10
Individual retirement (3) (1) (2) -- 7 4 3 -- 9 (7) 19 (3)
accounts
Federal funds purchased (19) (19) (19) 19 (89) (82) (29) 22 92 74 3 15
Note payable -- 1 (1) -- (1) 1 (2) -- 5 -- -- 5
---- ---- ---- ---- ----- ----- ----- ----- ---- ----- ---- ----
Increase (decrease) in 43 14 5 24 79 (37) 90 26 295 41 230 24
interest expense ---- ---- ---- ---- ----- ----- ----- ----- ---- ----- ---- ----
NET INTEREST INCOME BEFORE 137 102 20 15 (194) (46) (125) (23) 140 79 120 (59)
ALLOCATION OF VOLUME/RATE
ALLOCATION OF VOLUME/RATE -- 13 2 (15) -- (6) (17) 23 -- (23) (36) 59
---- ---- ---- ---- ----- ----- ----- ----- ---- ----- ---- ----
CHANGES IN INTEREST INCOME $137 $115 $ 22 -- $(194) $ (52) $(142) -- $140 $ 56 $ 84 --
==== ==== ==== ==== ===== ===== ===== ===== ==== ===== ==== ====
</TABLE>
47
<PAGE>
PROVISION FOR LOAN LOSSES
First University's allowance for loan losses is established through charges
to operating income in the form of the provision for loan losses. Actual loan
losses or recoveries of loan losses are charged or credited directly to the
allowance for loan losses.
First University recorded no provision for loan losses for the nine months
ended September 30, 1997, and a $107,000 credit provision for loan losses for
the nine months ended September 30, 1996. The Bank provided no provision for
loan losses for the nine months ended September 30, 1997 due to the continued
quality of its loan portfolio. The allowance for loan losses expressed as a
percentage of outstanding loans was .85% and .90% as of September 30, 1997 and
September 30, 1996, respectively.
For the year ended December 31, 1996, First University recorded a credit
provision for loan losses of $107,000. For the years ended December 31, 1995 and
1994, First University recorded provisions for loan losses of $20,000 and
$106,000, respectively. Management of the Bank elected to decrease its provision
for loan losses in 1996 due to, among other things, a decrease in charge-offs
and past due and nonaccrual loans in the Bank. The allowance for loan losses as
of December 31, 1996, 1995 and 1994 were $327,000, $433,000, and $370,000,
respectively. The allowance for loan losses expressed as a percentage of
outstanding loans was .89%, 1.12% and .95% as of December 31, 1996, 1995 and
1994, respectively.
Non-accrual loans were $0 for the nine-month period ending September 30,
1997 and the year ending December 31, 1996. Non-accrual loans decreased
approximately $45,000 from 1994 to 1995.
NON-INTEREST INCOME
Non-interest income, which includes all service charges, and fees and gains
and losses from securities trading, increased 134.25% from $219,000 for the nine
months ended September 30, 1996 to $513,000 for the nine months ending September
30, 1997. The $294,000 increase was primarily due to $35,000 in gains related to
securities trading activities for the nine months ending September 30, 1997
versus a $145,000 loss for the same period in 1996 with the balance due to
increased customer fees.
Non-interest income decreased 47.66% to $392,000 for the year ended
December 31, 1996 from $749,000 for the year ended December 31, 1995. The
$357,000 decrease was due primarily to losses related to securities trading in
1996 of $88,000 compared to gains related to securities trading in 1995 of
$372,000 partially offset by increases in customer service fees.
Non-interest income increased 380.13% from $156,000 for the year ended
December 31, 1994 to $749,000 for the year ended December 31, 1995. The increase
was due primarily to gains in the Bank's trading account.
NON-INTEREST EXPENSE
Non-interest expense include expenses which First University incurs in the
course of operations such as employee compensation and benefits, occupancy
expense and general operating expenses. These expenses decreased 3.48% from
$2,411,000 for the nine months ended September 30, 1996 to $2,327,000 for the
nine months ended September 30, 1997. The decrease was mainly attributable to a
reduction in start up cost associated with staffing the new branch during 1996.
Non-interest expense increased 10.39% from $2,897,000 for the year ended
December 31, 1995 to $3,198,000 for the year ended December 31, 1996. The
increase was mainly attributable to an increase in salaries and employee
benefits which increased approximately $180,000 from the year ended December 31,
1995 to the same period in 1996 due to the start-up of the new branch facility.
48
<PAGE>
Non-interest expense for the year ended December 31, 1995 increased by
$440,000 or 17.91%, from the year ended December 31, 1994 due to increased
salary and benefit costs and other related costs of opening a new branch during
1995.
FEDERAL INCOME TAXES
In 1994, First University adopted Statement of Financial Accounting
Standards No 109, "Accounting for Income Taxes" (FAS 109). As permitted under
the new rules, prior years' financial statements have not been restated and
there was no cumulative effect on income.
First University's provision for income taxes was $118,319 and $9,948 for
the nine-month periods ended September 30, 1997 and 1996, respectively. As of
September 30, 1997, First University has no net operating loss carryforwards.
First University's provision for income taxes was $6,930, $268,666 and
$134,332 the years ended December 31, 1996, 1995 and 1994, respectively.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
CAPITAL RESOURCES
The Office of the Comptroller of Currency (the "OCC") has adopted risk-
based and leverage capital measures to assist in the assessment of the capital
adequacy of the banks it regulates. The principal objectives of the risk-based
measures are to: (i) make regulatory capital requirements more sensitive to
differences in risk profiles among financial institutions; (ii) factor off-
balance sheet exposures into the assessment of capital adequacy; (iii) minimize
disincentives to holding liquid, low-risk assets; and (iv) achieve greater
consistency in the evaluation of the capital adequacy of financial institutions.
The risk-based capital guidelines include both a definition of capital and
a framework for calculating risk weighted assets by assigning assets and off-
balance sheet items to broad risk categories. The financial institution's risk-
based capital ratio is calculated by dividing its qualifying capital (the
numerator of the ratio) by its risk weighted assets (the denominator).
The risk-based capital ratio focuses principally on broad categories of
credit risk. The risk-based ratio does not, however, incorporate other factors
that can affect a bank's financial condition. These factors include overall
interest rate exposure, liquidity, funding and market risks, the effectiveness
of loan and investment policies, and management's ability to monitor and control
financial and operating risks.
The Bank is a national bank and as such its qualifying total capital
consists of two types of capital components: "core capital elements" (comprising
Tier 1 capital) and "supplementary capital elements" (comprising Tier 2
capital). Certain assets are deducted from a financial institution's capital for
the purpose of calculating the risk-based capital ratio.
Assets and credit equivalent amounts of off-balance sheet items are
assigned to one of four risk categories, according to certain criteria. The
aggregate dollar value of the amount in each category is then multiplied by the
risk weight associated with that category. The resulting weighted values from
each of the risk categories are added together, and this sum is the financial
institution's total risk weighted assets that comprise the denominator of the
risk-based capital ratio. Assets deducted from a bank's capital in determining
the numerator of the risk-based capital ratio are not included as part of the
financial institution's risk weighted assets.
Risk weights for off-balance sheet items are determined by a two-step
process. First, the "credit equivalent amount" of off-balance sheet items is
determined, in most cases by multiplying the off-balance sheet items by a credit
conversion factor. Second, in most cases, the credit equivalent amount is
assigned to the appropriate risk category according to designated criteria.
49
<PAGE>
National banks are required to maintain a minimum risk-based capital ratio
of total capital (after deductions) to risk weighted assets of 8%. In general,
50% of this ratio must consist of Tier 1 capital. Certain restrictions and
limitations also apply regarding the calculation of Tier 1 capital. Tier 2
capital elements that are not used as part of Tier 1 capital generally will
qualify for inclusion in a financial institutions capital base up to a maximum
of 100% of the financial institution's Tier 1 capital. As of September 30, 1997,
the Bank's Tier 1 risk-based capital ratio was 13.88% and the total risk-based
capital ratio was 14.81%.
In addition, the OCC has promulgated capital leverage guidelines designed
to supplement the risk-based capital guidelines. The principal objective of the
leverage ratio is to address the extent to which a financial institution could
leverage its equity capital base. The OCC requires its regulated national banks
to meet a minimum leverage capital requirement of Tier 1 capital to total assets
of not less than 3% for a bank that is not anticipating or experiencing
significant growth and is highly rated (i.e., a composite rating of 1 on a scale
of 1 to 5). Banks that the OCC determines are anticipating or experiencing
significant growth or that are not highly rated must meet a minimum leverage
ratio of 3% plus an additional cushion of at least 100 to 200 basis points. The
Texas Banking Department's capital guidelines call for minimum equity capital to
total assets of 6%.
The Bank's leverage ratio was 6.90% for year end 1996 and 6.90% for year
end 1995. As of September 30, 1997, the leverage ratio was 6.95%.
The Federal Reserve has promulgated capital leverage guidelines designed to
supplement the risk-based capital guidelines. Bank holding companies must
maintain a minimum leverage ratio of 3%, although companies with greater risk
profiles may be required to maintain additional Core Capital of at least 100 to
200 basis points above the 3% minimum. As of September 30, 1997, First
University's leverage ratio 6.92%.
LIQUIDITY
First University's asset and liability management policy is intended to
maintain adequate liquidity and thereby enhance its ability to raise funds to
support asset growth, meet deposit withdrawals and lending needs, maintain
reserve requirements, and otherwise sustain operations. First University
accomplishes this through management of the maturities of its interest-earning
assets and interest-bearing liabilities. Liquidity is monitored and overall
interest rate risk is assessed through reports showing both sensitivity ratios
and existing dollar "gap" data. First University believes its present position
to be adequate to meet its current and future liquidity needs.
The liquidity of First University is maintained in the form of readily
marketable investment securities, demand deposits with commercial banks, vault
cash and federal funds sold. While the minimum liquidity requirement for banks
is determined by federal bank regulatory agencies as a percentage of deposit
liabilities, First University's management monitors liquidity requirements as
warranted by interest rate trends, changes in the economy and the scheduled
maturity and interest rate sensitivity of the investment and loan portfolio,
deposits and anticipated loan findings. In addition to the liquidity provided by
the foregoing, First University has correspondent relationships with other
institutions with available secured lines of credit to purchase overnight funds
totaling $1,275,000 should additional liquidity be needed. These lines are
subject to restrictions such as the financial strength of First University and
the lenders ability to facilitate credit.
Further information regarding First University's sources and uses of cash
is presented in First University's Consolidated Statements of Cash Flow on page
F-6 in First University's audited financial statements.
INTEREST RATE SENSITIVITY
Interest rate sensitivity refers to the relationship between market
interest rates and net interest income resulting from the repricing of certain
assets and liabilities. Interest rate risk arises when an earning asset matures
or when its rate of interest changes in a time frame different from that of the
supporting interest-bearing liability. One way to reduce the risk of significant
adverse effects of market rate fluctuations on net interest income is to
minimize the difference between
50
<PAGE>
rate sensitive assets and liabilities, referred to as "gap", by maintaining a
similar interest rate sensitivity position if the assets and liabilities within
a particular time frame.
Maintaining an equilibrium between rate sensitive assets and liabilities
will reduce some of the risk associated with changes in market rates, but it
will not guarantee a stable net interest spread because yields and rates may
change simultaneously and by different amounts. These changes in market spreads
could materially affect the overall net interest spread even if assets and
liabilities were perfectly matched. If more assets than liabilities reprice
within a given period, an asset sensitive position or "positive gap" is created.
During a positive gap, a decline in market rates will have a negative impact on
net interest income. Alternatively, where more liabilities than assets reprice
in a given period, a liability sensitive position or "negative gap" is created
(rate sensitivity ratio is less than 100%) and a decline in interest rates will
have a positive impact on net interest income.
51
<PAGE>
The following table shows the interest rate sensitivity gaps for different
time periods and the cumulative interest rate sensitivity gaps for the same
periods as of September 30, 1997.
<TABLE>
<CAPTION>
91 Days Over
0 to 90 Days to 1 Year 1 Year Total
------------- ---------- --------- ---------
(dollars in thousands)
INTEREST-EARNING ASSETS:
<S> <C> <C> <C> <C>
Loans $ 9,807 $ 3,470 $23,008 $36,285
Securities-held to maturity 1,839 1,839
Securities-available for sale 8,445 8,445
Securities-trading account 4,985 4,985
Deposits in other banks 108 396 504
Federal funds sold 8,460 8,460
-------- -------- ------- -------
Total Interest Earning Assets 23,252 3,578 33,688 60,518
-------- -------- ------- -------
INTEREST-BEARING LIABILITIES:
NOW, money market and savings 31,676 31,676
accounts
Time Deposits 6,810 5,773 1,618 14,201
Public Funds 1,177 1,177
Note Payable 40 40
-------- -------- ------- -------
Total interest-bearing liabilities 39,663 5,773 1,658 47,094
-------- -------- ------- -------
Period GAP $(16,411) $ (2,195) $32,030 $13,424
Cumulative GAP $(16,411) $(18,606) $13,424 $13,424
Period GAP to total earning assets (70.58)% (61.35)% 95.08% 22.18%
CUMULATIVE RATIO .59X .59X 1.29X 1.29X
</TABLE>
Varying interest rate environments can create unexpected changes in
prepayment levels of assets and liabilities which are not reflected in the
interest sensitivity analysis. These prepayments may have significant effects on
First University's net interest margin. Because of these factors, an interest
sensitivity gap report may not provide a complete assessment of First
University's exposure to changes in interest rates.
52
<PAGE>
INVESTMENT SECURITIES
Set forth is a distribution of First University's investment securities by
contractual maturity dates at September 30, 1997 (mortgage-backed securities are
classified in the period of final maturity):
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------------------
MATURING
AFTER ONE BUT AFTER FIVE BUT
WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL
--------------- ----------------- ---------------- --------------- ------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
------ ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to
maturity:
States and Political
Subdivisions $ -- --% $ -- --% $ -- --% $1,839 5.02% $1,839
------ ----- ------ ---- ------ ---- ------ ----- ------
Total Securities held to
maturity -- -- -- -- -- -- 1,839 5.02% 1,839
====== ===== ====== ==== ====== ==== ====== ===== ======
Securities available for
sale:
Government Agencies $ 943 3.27% $ 990 6.34% $2,410 6.54% $ -- --% $1,933
Mortgage-backed 1,646 6.01% 2,456 6.05 -- -- -- -- 6,512
------ ----- ------ ---- ------ ---- ------ ----- ------
Total Securities available
for sale $2,589 5.01% $3,446 6.13% $2,410 6.54% $ -- --% $8,445
====== ===== ====== ==== ====== ==== ====== ===== ======
</TABLE>
53
<PAGE>
DEPOSITS
The average balances and average rates paid by category of deposit at the
dates shown below are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
As of September 30, 1997 As of December 31
------------------------ ---------------------------------
1996 1995
---- ----
Amount Rate Amount Rate Amount Rate
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Non-interest Bearing:
Demand $ 12,649 -- $ 12,407 -- $ 11,724 --
Interest Bearing:
NOW accounts 22,151 2.66% 19,000 2.54% 17,960 2.02%
Money market 2,863 2.33% 3,134 2.36% 3,797 2.37%
Savings 5,115 2.48% 5,078 2.48% 5,344 2.49%
Time 14,574 4.67% 15,456 4.72% 14,874 4.65%
Other 1,087 4.91% 684 4.69% -- --
-------- -------- --------
TOTAL $ 58,439 $ 55,759 $ 53,699
======== ======== ========
</TABLE>
The scheduled maturities of certificates of deposit in denominations of
$100,000 or more at September 30, 1997, and December 31, 1996, including public
funds, are shown below:
(Dollars in Thousands)
September 30, 1997 December 31, 1996
------------------ -----------------
Due in three months or less $ 1,733 $ 2,151
Due in over three to twelve
months 1,892 2,005
Due in over twelve months 750 100
------------------ -----------------
Total $ 4,375 $ 4,256
================== =================
54
<PAGE>
LOANS
The following table classifies the Bank's loans according to type as of the
dates shown:
<TABLE>
<CAPTION>
(Dollars in Thousands)
December 31,
---------------------------
September 30, 1997 1996 1995 1994
------------------ ---- ---- ----
<S> <C> <C> <C> <C>
Installment $ 2,800 $ 2,454 $ 2,427 $ 2,283
Commercial, financial and agricultural 7,145 7,717 6,181 5,419
Real estate-construction 1,636 1,435 2,176 6,169
Real estate-mortgage 24,703 25,026 28,020 25,294
Credit Card 7 6 4 3
Overdrafts 44 82 12 20
------- ------- ------- -------
TOTAL 36,335 36,720 38,820 39,188
Less allowance for loan losses 309 327 433 370
Less unearned income -- -- -- 1
------- ------- ------- -------
TOTAL NET $36,026 $36,393 $38,387 $38,817
======= ======= ======= =======
</TABLE>
The maturities of loans, net of unearned discount, at September 30, 1997,
were as follows:
(Dollars in Thousands)
Less than 1 year $ 9,624
1-5 years 7,190
5-15 years 19,392
Over 15 years 129
-------
Total $36,335
-------
ALLOWANCE FOR LOAN LOSSES AND RISK ELEMENTS ALLOWANCE FOR LOAN LOSSES AND
RISK ELEMENTS
The provision for loan losses represents a determination by First
University's management of the amount necessary to be charged to operating
income and transferred to the allowance for loan losses to maintain a level
which it considers adequate in relation to the risk of losses inherent in the
loan portfolio. It is First University's policy to provide for exposure to
losses of specifically identified credits, and a general allowance for the
remainder of the loan portfolio, and, while it is also First University's policy
to charge off in the current period those loans in which a loss is deemed to
exist, risks of losses also exist which cannot be quantified precisely or
attributed to particular loans or classes of loans and, while it is also First
University's policy to charge off in the current period those loans in which a
loss is deemed to exist, risks of losses also exist which cannot be quantified
precisely or attributed to particular loans or classes of loans.
In assessing the adequacy of its allowance for loan losses, management
relies predominantly on its ongoing review of the loan portfolio, which is
undertaken both to ascertain whether there are probable losses which must be
charged off and to assess the risk characteristics of individually significant
loans and of the portfolio in the aggregate. This review takes into
consideration the judgments of the responsible lending officers, the senior
credit officer, the Chief
55
<PAGE>
Executive Officer and the Board of Directors, and also those of bank regulatory
agencies that review the loan portfolio as part of their regular examination of
First University and the Bank.
In evaluating the allowance for loan losses, management also considers
First University's loan loss experience, the amount of past due and non-
performing loans, current and anticipated economic conditions, changes in
lending and collection procedures, changes in loan volumes and quality of the
First University's loan review system.
The allowance for loan losses at September 30, 1997 was $309,000, compared
to $327,000 at December 31, 1996, $433,000 at December 31, 1995, and $370,000 at
December 31, 1994. Although additional losses may occur, management believes the
allowance for loan losses to be adequate as of the date presented.
<TABLE>
<CAPTION>
(Dollars in Thousands)
As of and for the As of and for the Years
Transaction in Allowance for Nine Months Ended Ended
Loan Losses September 30, December 31,
- ---------------------------- ----------------- -----------------------
1997/1/ 1996 1995 1994
-------- ----- ----- -----
<S> <C> <C> <C> <C>
Balance at Beginning of period $ 327 $ 433 $ 370 $ 298
Charge-offs
Commercial, financial and agricultural 33 3 5 70
Credit card loans -- -- 8 47
Real estate-mortgage -- -- -- --
Installment Loans 4 2 6 2
Credit card loans -- -- -- --
Total charge-offs 37 5 19 119
-------- ----- ----- -----
Recoveries
Commercial, financial and agricultural 19 3 9 49
Real estate-construction -- 1 53 34
Real estate-mortgage -- -- -- --
Installment Loans -- 2 -- 2
Credit card loans -- -- -- --
-------- ----- ----- -----
Total recoveries 19 6 62 85
Net charge-offs (recoveries) 18 (1) (43) 34
Provision charged (credited) to expense -- (107) 20 106
-------- ----- ----- -----
Balance at end of period $ 309 $ 327 $ 433 $ 370
======== ===== ===== =====
Net charge-offs (recoveries) as a .05% -- (.11%) .10%
percentage of average loans
</TABLE>
/(1)/ Annualized for 1997
56
<PAGE>
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
The following is an analysis of non-performing assets as of the dates
shown:
(Dollars in Thousands)
September 30, December 31,
------------- ---------------------
1997 1996 1995 1994
---- ---- ---- ----
Loans accounted for on a nonaccrual basis $ -- $ -- $ -- $ 45
Accruing loans which are contractually past
due 90 days or more as to principal or
interest payments -- $ 99 -- 334
Troubled debt restructuring -- -- -- 7
----- ----- ----- -----
Total $ -- $ 99 $ -- $ 386
===== ===== ===== =====
The accrual of interest on a loan is discontinued when, in the opinion of
management (based upon such criteria as default in payment, asset deterioration,
decline in cash flow, recurring operating loss, declining sales, bankruptcy and
other financial conditions which could result in default), the borrower's
financial condition is such that the collection of interest is doubtful.
Placing a loan on non-accrual status has a two-fold impact on net interest
income. First, it causes an immediate charge against earnings with respect to
that particular loan. Second, it eliminates future interest earnings with
respect to that particular loan. Interest on such loans is not recognized until
all of the principal is collected or until the loan is returned to a performing
status.
RETURN ON EQUITY AND ASSETS
The return on equity and return on assets for the periods shown below are
as follows:
For the Nine
Months Ended For the Years Ended
September 30, December 31,
------------- ---------------------------------
1997/1/ 1996 1995 1994
------------- ----- ------ ------
Return on Average Assets .61% 0.22% 1.00% 0.59%
Return on Average Equity 8.85% 3.31% 15.35% 10.53%
Average Equity to Average 6.85% 6.77% 6.53% 5.56%
Assets Ratio
Dividend Payout Ratio -- -- -- --
/(1)/ Annualized for 1997
57
<PAGE>
RELATIONSHIPS WITH INDEPENDENT ACCOUNTANTS
Compass' Board of Directors appointed KPMG Peat Marwick LLP as independent
auditors for Compass for the year ending December 31, 1997. KPMG Peat Marwick
LLP has served as Compass' independent auditors continuously since 1971.
First University's Board of Directors appointed Deloitte & Touche LLP as
independent auditors for First University for the year ending December 31, 1997.
Deloitte & Touche LLP has served as First University's and the Bank's
independent auditors continuously since 1984.
Compass has been advised by KPMG Peat Marwick LLP that KPMG Peat Marwick
LLP does not have any direct financial interest or any material indirect
financial interest in Compass or its affiliates other than arising from that
firm's employment as auditors for Compass.
First University has been advised by Deloitte & Touche LLP that Deloitte &
Touche LLP does not have any direct financial interest or any material indirect
financial interest in First University or its affiliates other than arising from
that firm's employment as auditors for First University.
EXPERTS
The consolidated financial statements of Compass as of December 31, 1996
and 1995 and for each of the years in the three-year period ended December 31,
1996 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 in the Registration Statement,
and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of First University Corporation as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996, included in this Proxy Statement/Prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and have been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
LEGAL OPINIONS
Jerry W. Powell, Esquire, General Counsel, Secretary and an employee of
Compass, has rendered an opinion concerning the validity of the securities being
offered pursuant to this Proxy Statement/Prospectus and certain other matters.
As of September 30, 1997, Mr. Powell was the beneficial owner of an aggregate of
approximately _________ shares of Compass Common Stock. Liddell, Sapp has passed
upon, among other things, certain federal income tax consequences of the Merger,
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.
Bracewell & Patterson, LLP and Liddell, Sapp are also expected to render legal
opinions as to certain matters acceptable to First University and Compass,
respectively.
INDEMNIFICATION
Compass' Bylaws contain provisions similar to those of Section 145 of the
GCL, 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 FIRST UNIVERSITY AND COMPASS--CERTAIN DIFFERENCES BETWEEN THE
CORPORATION LAWS OF TEXAS 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.
58
<PAGE>
OTHER MATTERS
First University's Board of Directors does not know of any matters to be
presented at the Meeting other than those set forth above. If any other matters
are properly brought before the Meeting or any adjournment thereof, the enclosed
proxy will be voted in accordance with the recommendations of First University's
Board of Directors unless "Authority Withheld" is indicated in the appropriate
box on the proxy. SEE "INTRODUCTION".
59
<PAGE>
FIRST UNIVERSITY CORPORATION AND SUBSIDIARY
TABLE OF CONTENTS
________________________________________________________________________________
Page
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets of First University Corporation
and Subsidiary as of December 31, 1996 and 1995 (audited)
and September 30, 1997 (unaudited) F-3
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 (audited) and the
Nine Months Ended September 30, 1997 and 1996 (unaudited) F-4
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994 (audited) and the
Nine Months Ended September 30, 1997 (unaudited) F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 (audited) and the
Nine Months Ended September 30, 1997 and 1996 (unaudited) F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
of First University Corporation:
We have audited the accompanying consolidated balance sheets of First University
Corporation and subsidiary (the "Company") as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity and cash
flows for the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of First University Corporation and
subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
January 17, 1997
(September 25, 1997 as to Note 16)
F-2
<PAGE>
<TABLE>
<CAPTION>
FIRST UNIVERSITY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
---------------------------
ASSETS 1997 1996 1995
(UNAUDITED)
<S> <C> <C> <C>
Cash and due from banks (Note 2) $ 2,895,766 $ 2,535,440 $ 3,810,783
Federal funds sold 8,460,000 6,540,000 1,450,916
------------ ------------ ------------
Total cash and cash equivalents 11,355,766 9,075,440 5,261,699
Trading account assets at fair value 4,984,551 4,897,417 4,972,793
Interest-bearing deposits in financial institutions 503,516 899,061 1,182,000
Available-for-sale investment securities, at fair value (Note 3) 8,444,942 7,594,996 5,889,361
Held-to-maturity investment securities (fair value of $1,861,799,
$1,920,405 and $1,914,711, respectively), at amortized cost (Note 3) 1,838,588 1,937,997 1,939,376
Loans (Notes 4 and 5) 36,335,238 36,719,914 38,819,842
Less allowance for credit losses (Note 6) (309,166) (326,870) (433,346)
------------ ------------ ------------
Loans, net 36,026,072 36,393,044 38,386,496
Premises and equipment, net (Note 7) 1,699,236 1,860,034 2,076,445
Accrued interest receivable 351,400 428,337 456,501
Other assets 478,453 440,695 166,173
------------ ------------ ------------
TOTAL ASSETS $ 65,682,524 $ 63,527,021 60,330,844
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing $ 13,783,596 $ 14,056,877 13,787,121
Interest-bearing (Note 8) 47,054,213 44,971,974 42,023,396
------------ ------------ ------------
Total deposits 60,837,809 59,028,851 55,810,517
Note payable (Note 9) 40,363 49,597 60,892
Accrued interest payable and other liabilities (Note 12) 272,793 234,155 391,250
------------ ------------ ------------
Total liabilities 61,150,965 59,312,603 56,262,659
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 11 and 13)
STOCKHOLDERS' EQUITY (Note 14):
Preferred stock, $1 par value; 5,000,000 shares authorized, none issued or
outstanding
Common stock, $1 par value; 5,000,000 shares authorized and 392,618 shares issued 302,618 302,618 302,618
Capital surplus 1,774,975 1,774,975 1,774,975
Undivided profits 3,073,811 2,787,036 2,651,413
Unrealized net losses on available-for-sale securities, net of taxes of
$5,975 (unaudited), $21,617 and $27,084, respectively (11,598) (41,964) (52,574)
------------ ------------ ------------
Total 5,139,806 4,822,665 4,676,432
Common stock in treasury, at cost, 40,004 shares in 1997 (unaudited), 1996 and 1995 (608,247) (608,247) (608,247)
------------ ------------ ------------
Total stockholders' equity 4,531,559 4,214,418 4,068,185
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 65,682,524 $ 63,527,021 $ 60,330,844
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
FIRST UNIVERSITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
---------------------------- ----------------------------------------------
1997 1996 1996 1995 1994
(Unaudited)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 2,469,492 $ 2,383,679 $ 3,211,186 $ 3,528,007 $ 2,901,142
Investment securities 468,543 263,617 386,918 481,372 557,985
Trading account assets 238,183 241,490 322,045 313,129 275,670
Federal funds sold 151,848 247,715 328,994 5,741 62,515
Deposits in financial institutions 33,541 45,601 60,308 95,734 191,936
----------- ----------- ----------- ----------- -----------
Total interest income 3,361,607 3,182,102 4,309,451 4,423,983 3,989,248
----------- ----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits 1,138,507 1,077,060 1,445,274 1,276,259 1,078,415
Federal funds purchased 19,149 19,149 107,590 15,574
Notes payable 3,493 2,839 4,152 4,764
----------- ----------- ----------- ----------- -----------
Total interest expense 1,142,000 1,099,048 1,468,575 1,388,613 1,093,989
----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME 2,219,607 2,083,054 2,840,876 3,035,370 2,895,259
----------- ----------- ----------- ----------- -----------
(CREDIT) PROVISION FOR CREDIT LOSSES (Note 6) (107,000) (107,000) 20,000 106,000
----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER (CREDIT)
PROVISION FOR CREDIT LOSSES 2,219,607 2,190,054 2,947,876 3,015,370 2,789,259
----------- ----------- ----------- ----------- -----------
NONINTEREST INCOME:
Customer service fees 265,323 238,041 323,989 249,561 302,532
Trading securities gains (losses), net 35,386 (145,494) (88,126) 371,996 (315,134)
Other 212,159 126,070 156,386 127,130 168,364
----------- ----------- ----------- ----------- -----------
Total noninterest income 512,868 218,617 392,249 748,687 155,762
----------- ----------- ----------- ----------- -----------
NONINTEREST EXPENSE:
Salaries and employee benefits 1,223,823 1,249,106 1,672,303 1,492,351 1,301,854
Net occupancy expense 396,129 400,999 534,502 397,370 305,762
Advertising and promotion 40,867 76,625 92,752 95,853 45,365
Data processing 45,460 49,339 64,184 57,476 31,542
FDIC and OCC assessments 26,525 20,700 27,816 88,947 145,027
Other 594,577 613,867 806,015 764,793 627,650
----------- ----------- ----------- ----------- -----------
Total noninterest expense 2,327,381 2,410,636 3,197,572 2,896,790 2,457,200
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 405,094 (1,965) 142,553 867,267 487,821
PROVISION FOR INCOME TAXES (Note 12) 118,319 9,948 6,930 268,666 134,332
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 286,775 $ (11,913) $ 135,623 $ 598,601 $ 353,489
=========== =========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE OF COMMON STOCK $ 1.09 $ (0.05) $ 0.52 $ 2.24 $ 1.26
=========== =========== =========== =========== ===========
AVERAGE SHARES OUTSTANDING 262,614 262,614 262,614 267,593 279,481
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
FIRST UNIVERSITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
UNREALIZED
LOSS ON
AVAILABLE-
COMMON STOCK LESS FOR-SALE TOTAL
------------------ CAPITAL UNDIVIDED TREASURY SECURITIES, STOCKHOLDERS'
SHARES AMOUNT SURPLUS PROFITS STOCK NET OF TAXES EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994 302,618 $302,618 $ 1,774,975 $ 1,699,323 $ (98,992) $ 3,677,924
Net income 353,489 353,489
Effect of adopting SFAS No. 115 $ (40) (40)
Purchase of 25,000 shares of
treasury stock (350,000) (350,000)
Change in unrealized loss on
available-for-sale investment
securities, net of taxes (201,364) (201,364)
------- -------- ----------- ----------- ---------- -------- -----------
BALANCE AT DECEMBER 31, 1994 302,618 302,618 1,774,975 2,052,812 (448,992) (201,404) 3,480,009
Net income 598,601 598,601
Purchase of 10,617 shares of
treasury stock (159,255) (159,255)
Change in unrealized loss on
available-for-sale investment
securities, net of taxes 148,830 148,830
------- -------- ----------- ----------- ---------- -------- -----------
BALANCE AT DECEMBER 31, 1995 302,618 302,618 1,774,975 2,651,413 (608,247) (52,574) 4,068,185
Net income 135,623 135,623
Change in unrealized loss on
available-for-sale investment
securities, net of taxes 10,610 10,610
------- -------- ----------- ----------- ---------- -------- -----------
BALANCE AT DECEMBER 31, 1996 302,618 302,618 1,774,975 2,787,036 (608,247) (41,964) 4,214,418
Net income (unaudited) 286,775 286,775
Change in unrealized loss on
available-for-sale investment
securities, net of taxes (unaudited) 30,366 30,366
------- -------- ----------- ----------- ---------- -------- -----------
BALANCE AT SEPTEMBER 30, 1997
(UNAUDITED) 302,618 $302,618 $ 1,774,975 $ 3,073,811 $ (608,247) $(11,598) $ 4,531,559
======= ======== =========== =========== ========== ======== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
FIRST UNIVERSITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
-------------------------- --------------------------------
1997 1996 1996 1995 1994
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 286,775 $ (11,913) $ 135,623 $ 598,601 $ 353,489
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization and accretion of premiums and discounts
on investment securities, net (7,930) 11,642 8,635 44,045 93,282
(Credit) provision for credit losses (107,000) (107,000) 20,000 106,000
Gain on sale of real estate acquired by foreclosure (30,784)
Loss on sales of investment securities 8,305 7,430
Depreciation and amortization 176,742 182,603 242,582 185,969 131,473
Decrease in accrued interest receivable 76,937 95,744 28,164 21,586 (84,667)
Decrease (increase) in other assets (37,758) (302,555) (274,522) 2,531 (17,339)
Net decrease (increase) in trading account securities (51,748) (119,460) (12,750) 328,016 (506,913)
Increase (decrease) in accrued interest payable and
other liabilities 22,996 (116,898) (162,562) 167,795 (30,809)
Realized and unrealized (gains) losses on trading
securities (35,386) 145,494 88,126 (371,996) 315,134
----------- ----------- ----------- ----------- -----------
Total adjustments 143,853 (210,430) (189,327) 406,251 (17,193)
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by operating activities 430,628 (222,343) (53,704) 1,004,852 336,296
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities (2,463,348) (3,856,005) (2,032,222)
Proceeds from sales of available-for-sale securities 1,944,438 2,122,054
Proceeds from maturities and principal paydowns of
available-for-sale securities 1,666,749 2,036,013 2,159,191 314,026 1,375,994
Purchase of held-to-maturity investment securities (1,834,823)
Proceeds from maturities of held-to-maturity securities 100,000
Net decrease in interest-bearing deposits with banks 395,545 89,060 289,939 1,289,000 2,479,000
Net decrease (increase) in loans 366,972 2,461,246 2,100,452 369,865 (6,735,862)
Purchase of bank premises and equipment (18,272) (23,335) (26,171) (962,546) (233,199)
Proceeds from sale of bank premises and equipment 2,328 40,359 278,629
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) investing activities 49,974 4,562,984 660,406 2,995,142 (4,580,429)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 1,808,958 912,989 3,218,334 (217,614) (1,658,827)
Other borrowings (1,200,000) 1,200,000
Payments to acquire treasury stock (93,120) (350,000)
Payments on note payable (9,234) (8,366) (11,295) (5,243)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities 1,799,724 904,623 3,207,039 (1,515,977) (808,827)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,280,326 5,245,264 3,813,741 2,484,017 (5,052,960)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 9,075,440 5,261,699 5,261,699 2,777,682 7,830,642
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $11,355,766 $10,506,963 $ 9,075,440 $ 5,261,699 $ 2,777,682
=========== =========== =========== =========== ===========
Interest paid $ 1,135,500 $ 1,102,574 $ 1,481,336 $ 1,356,268 $ 1,058,533
Taxes paid 59,962 140,653 140,653 159,525 180,423
Noncash investing activities:
The Company acquired certain real estate through foreclosure of collateral securing loans totaling $40,359 and $14,350 during
1995 and 1994, respectively.
In 1995, the Company purchased 10,617 shares of treasury stock by issuing a promissory note to a shareholder for $66,135.
Activity related to the implementatiion of SFAS No. 115: securities of $9,950,924 reclassified in 1994 from held-to-maturity
to available-for-sale.
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
FIRST UNIVERSITY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
NATURE OF OPERATIONS - First University Corporation and subsidiary (the
"Company") is a bank holding company headquartered in Houston, Texas, that
provides retail and commercial banking services through West University
Bank, N.A. (the "Bank"), its Texas-chartered bank subsidiary. The Bank
provides a broad line of financial products and services to small to
medium-sized businesses and consumers.
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - The accounting
and reporting policies of the Company conform to generally accepted
accounting principles ("GAAP") and the prevailing practices within the
banking industry. A summary of significant accounting policies is as
follows:
USE OF ESTIMATES - The preparation of financial statements in conformity
with GAAP 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.
BASIS OF PRESENTATION - The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, West University
Bank, N.A. All material intercompany transactions have been eliminated in
consolidation.
The accompanying consolidated financial statements and information as of
September 30, 1997 and for the nine months ended September 30, 1997 and
1996 are unaudited, and include all adjustments (consisting of only normal
recurring adjustments), that are necessary, in the opinion of management,
for a fair presentation. The results from operations for the periods ended
September 30, 1997 and 1996 are not necessarily reflective of the annual
results.
TRADING ACCOUNT SECURITIES - Trading account securities are carried at
market value. Gains and losses realized on the sale of trading account
assets and unrealized valuation adjustments to market value are reflected
in noninterest income. Interest earned on trading account assets is
included in interest income.
INVESTMENT SECURITIES - Held-to-maturity investment securities are carried
at cost, adjusted for the amortization of premiums and the accretion of
discounts. Premiums and discounts are amortized and accreted to operations
using the level yield method, adjusted for prepayments as applicable.
Management has the positive intent and the Company has the ability to hold
these assets as long-term investments until their estimated maturities.
Under certain circumstances (including the significant deterioration of the
issuer's credit worthiness or a significant change in tax-exempt status or
statutory or regulatory requirements), securities held to maturity may be
sold or transferred to another portfolio.
Available-for-sale investment securities are carried at fair value.
Unrealized gains and losses are excluded from earnings and reported net of
tax, as a separate component of stockholders' equity until realized.
Securities within the available-for-sale portfolio may be used as part of
the Company's assets/liability strategy and may be sold in response to
changes in interest rate risk, prepayment risk or other similar
F-7
<PAGE>
economic factors. The specific identification method is used to compute
gains or losses on the sale of these assets. Interest earned on these
assets is included in interest income.
LOANS - Loans are stated at the principal amount outstanding, net of
unearned discount. Unearned discount relates principally to consumer
installment loans. The related interest income for installment loans is
recognized principally using the "sum of the digits" method of accounting
which records interest in proportion to the declining outstanding balances
of the loans; for single payment loans, such income is recognized using the
straight-line method. Both methods approximate the interest method.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosure." SFAS No.
114 applies only to impaired loans, with the exception of groups of
smaller-balance homogeneous loans that are collectively evaluated for
impairment. A loan is defined as impaired by SFAS No. 114 if, based on
current information and events, it is probable that a creditor will be
unable to collect all amounts due, both interest and principal, according
to the contractual terms of the loan agreement. Specifically, SFAS No. 114
requires that the allowance for credit losses related to impaired loans be
determined based on the present value of expected cash flows discounted at
the loan's effective interest rate or, as a practical expedient, the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. Prior to the adoption of SFAS No. 114, the Company's
methodology for determining the adequacy of the allowance for credit losses
did not incorporate the concept of the time value of money and the expected
future interest cash flow.
As permitted by SFAS No. 118, interest revenue received on impaired loans
continues to be either applied against principal or realized as interest
revenue, according to management's judgment as to the collectibility of
principal.
NONPERFORMING LOANS AND PAST DUE LOANS - Included in the nonperforming loan
category are loans which have been categorized by management as nonaccrual
because collection of interest is doubtful and loans which have been
restructured to provide a reduction in the interest rate or a deferral of
interest or principal payments. When the payment of principal or interest
on a loan is delinquent for 90 days, or earlier in some cases, the loan is
placed on nonaccrual status, unless the loan is in the process of
collection and the underlying collateral fully supports the carrying value
of the loan. If the decision is made to continue accruing interest on the
loan, periodic reviews are made to confirm the accruing status of the loan.
When a loan is placed on nonaccrual status, interest accrued during the
current year prior to the judgment of uncollectibility is charged to
operations. Interest accrued during prior periods is charged to the
allowance for credit losses. Generally, any payments received on
nonaccrual loans are applied first to outstanding loan amounts and next to
the recovery of charged-off loan amounts. Any excess is treated as
recovery of lost interest.
Renegotiated loans are those loans on which concessions in terms have been
granted because of a borrower's financial difficulty. Interest is
generally accrued on such loans in accordance with the new terms.
ALLOWANCE FOR CREDIT LOSSES - The allowance for credit losses is a
valuation allowance available for losses incurred on loans. All losses are
charged to the allowance when the loss actually occurs or when a
determination is made that a loss is likely to occur. Recoveries are
credited to the allowance at the time of recovery.
F-8
<PAGE>
Throughout the year, management estimates the likely level of losses to
determine whether the allowance for credit losses is adequate to absorb
reasonable anticipated losses in the existing portfolio. Based on these
estimates, an amount is charged to the provision for credit losses and
credited to the allowance for credit losses in order to adjust the
allowance to a level determined to be adequate to absorb anticipated
losses.
Management's judgment as to the level of anticipated losses on existing
loans involves the consideration of current and anticipated economic
conditions and their potential effects on specific borrowers; an evaluation
of the existing relationships among loans, potential credit losses and the
present level of the allowance; results of examinations of the loan
portfolio by regulatory agencies; and management's internal review of the
loan portfolio. In determining the collectibility of certain loans,
management also considers the fair value of any underlying collateral.
It should be understood that estimates of credit losses involve judgment.
While it is possible that in particular periods the Company may sustain
losses which are substantial relative to the allowance for credit losses,
it is the judgment of management that the allowance for credit losses
reflected in the consolidated balance sheets is adequate to absorb
anticipated losses which may exist in the current loan portfolio.
PREMISES AND EQUIPMENT - Premises and equipment are carried at cost less
accumulated depreciation and amortization. Depreciation expense is
computed principally using the straight-line method over the estimated
useful lives of the assets.
REAL ESTATE ACQUIRED BY FORECLOSURE - The Company records real estate
acquired by foreclosure at the lesser of the outstanding loan amount
(including accrued interest, if any) or fair value less estimated costs to
sell at the time of foreclosure. Adjustments are made to reflect declines
in value subsequent to acquisition, if any, below the recorded amounts.
Required developmental costs associated with foreclosed property under
construction are capitalized and considered in determining the fair value
of the property. Operating expenses of such properties, net of related
income, and gains and losses on their disposition are included in other
noninterest expenses.
INCOME TAXES - The Bank and its parent, First University Corporation, file
a consolidated federal income tax return. The Bank provides an allocation
of income taxes (payable to its parent) equal to the current taxes that
otherwise would have been provided on its earnings. Deferred income taxes
are provided for temporary differences between items of income or expense
reported in the financial statements and those reported for income tax
purposes.
Deferred income taxes are accounted for by applying statutory tax rates in
effect at the balance sheet date to differences between the book basis and
the tax basis of assets and liabilities. The resulting deferred tax assets
and liabilities are adjusted to reflect changes in enacted tax laws or
rates.
STATEMENTS OF CASH FLOWS - Cash and cash equivalents include cash and due
from banks and federal funds sold; generally, federal funds are sold for
one-day periods.
RECENT ACCOUNTING STANDARDS - Effective January 1, 1996, the Bank adopted
SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." This statement establishes accounting
standards for recognizing and measuring impairment of long-lived assets
(and related goodwill) to be held and used and for such assets held for
disposal. Implementation of this pronouncement had no material adverse
effect on the Company's consolidated financial statements.
F-9
<PAGE>
In June 1996 SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," was issued. This
statement requires that after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when extinguished. This
statement provides consistent standards of distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings.
This statement is effective for transfers and servicing of financial assets
and extinguishment of liabilities occurring after December 31, 1996, and is
to be applied prospectively. Earlier or retroactive application is not
permitted. Implementation of this pronouncement should have no material
effect on the consolidated financial statements.
NET INCOME PER SHARE - Net income per share of common stock has been
computed on the basis of the weighted-average number of shares of common
stock outstanding.
2. CASH AND DUE FROM BANKS
The Company is required to maintain average reserve balances with the
Federal Reserve Bank. "Cash and due from banks" in the consolidated
balance sheets included amounts so restricted of $1,042,000 at December 31,
1996 and $702,000 at December 31, 1995.
3. INVESTMENT SECURITIES
The amortized cost and estimated market value of investments in debt
securities are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
-----------------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET CARRYING
HELD TO MATURITY COST GAINS LOSSES VALUE VALUE
<S> <C> <C> <C> <C> <C>
Obligations of states
and political subdivisions $1,937,997 $ 4,416 $ (22,008) $ 1,920,405 $ 1,937,997
========== =========== ========= =========== ===========
AVAILABLE FOR SALE
Obligations of
government agencies $2,530,777 $ 389 $ (19,382) $ 2,511,784 $ 2,511,784
Mortgage-backed securities 5,127,799 4,967 (49,554) 5,083,212 5,083,212
---------- ----------- --------- ----------- -----------
Total $7,658,576 $ 5,356 $ (68,936) $ 7,594,996 $ 7,594,996
========== =========== ========= =========== ===========
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET CARRYING
HELD TO MATURITY COST GAINS LOSSES VALUE VALUE
<S> <C> <C> <C> <C> <C>
Obligations of states
and political subdivisions $ 1,939,376 $ 5,960 $(30,625) $ 1,914,711 $1,939,376
=========== =========== ========= =========== ===========
AVAILABLE FOR SALE
U.S. Treasury securities $ 1,209,907 $ 1,843 $ 1,211,750 $1,211,750
Obligations of
government agencies 2,010,767 17,112 $(27,519) 2,000,360 2,000,360
Mortgage-backed securities 2,748,345 (71,094) 2,677,251 2,677,251
----------- ----------- --------- ----------- -----------
Total $ 5,969,019 $ 18,955 $(98,613) $ 5,889,361 $5,889,361
=========== =========== ========= =========== ===========
</TABLE>
The amortized cost and estimated market value of debt securities at December
31, 1996, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Market
Held to Maturity Cost Value
Due in one year or less $ 100,203 $ 100,363
Due after one year through five years
Due after five years through ten years 102,222 100,936
Due after ten years 1,735,572 1,719,106
---------- ----------
Total $1,937,997 $1,920,405
========== ==========
Estimated
Amortized Market
Available for Sale Cost Value
Due in one year or less $ 750,025 $ 749,140
Due after one year through five years 1,486,853 1,468,745
Due after five years through ten years
Due after ten years 293,899 293,899
---------- ----------
Subtotal 2,530,777 2,511,784
Mortgage-backed securities and collateralized
mortgage obligations 5,127,799 5,083,212
---------- ----------
Total $7,658,576 $7,594,996
========== ==========
Proceeds from sales of available-for-sale securities were $0, $1,944,438 and
$2,122,054 for 1996, 1995 and 1994, respectively. Gross losses realized on
these sales were $8,305 for 1995. Gross gains of $1,203 and gross losses of
$8,633 were realized for 1994.
F-11
<PAGE>
The Company does not own any investment securities of any one issuer the
aggregate adjusted cost of which exceeds 10% of the consolidated
stockholders' equity at December 31, 1996. Investment securities with an
amortized cost of $5,216,073 and $5,939,885 and an estimated market value of
$5,130,328 and $5,858,058 at December 31, 1996 and 1995, respectively, were
pledged to secure public deposits and securities sold under repurchase
agreements and for other purposes required or permitted by law.
4. LOANS
The loan portfolio consists of the various types of loans made principally to
borrowers located in Harris County, Texas, and is classified by major type as
follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
<S> <C> <C>
Commercial, financial and industrial $ 7,717,414 $ 6,181,072
Real estate mortgage:
1-4 family residential 23,920,782 26,230,526
Multifamily residential 137,772 138,856
Other 967,231 1,650,074
----------- -----------
Total real estate mortgage 25,025,785 28,019,456
Real estate construction (1-4 family residential) 1,434,726 2,176,247
Installment 2,541,989 2,443,124
----------- -----------
Total 36,719,914 38,819,899
Less unearned discount and unearned fees 57
----------- -----------
Loans, net $36,719,914 $38,819,842
=========== ===========
</TABLE>
Loan maturities and rate sensitivity of the loan portfolio at December 31,
1996, excluding installment and real estate mortgage loans before unearned
income, are as follows:
<TABLE>
<CAPTION>
Within One - Five Years
One Year Five Years or More Total
<S> <C> <C> <C> <C>
Commercial, financial and industrial $4,605,150 $2,812,542 $ 299,722 $7,717,414
Real estate - construction 1,286,196 148,530 1,434,726
---------- ---------- --------- ----------
Total $5,891,346 $2,961,072 $ 299,722 $9,152,140
========== ========== ========= ==========
Loans at fixed interest rates $1,745,400 $ 56,003
Loans at variable interest rates 1,215,672 243,719
---------- ---------
Total $2,961,072 $ 299,722
========== =========
</TABLE>
As of December 31, 1996 and 1995, loans outstanding to directors, officers
and their affiliates were $1,318,265 and $921,447, respectively. In the
opinion of management, all transactions entered into between the Company and
such related parties have been, and are, in the ordinary course of business,
made on the same terms and conditions as similar transactions with
unaffiliated persons.
F-12
<PAGE>
An analysis of activity with respect to these related-party loans is as
follows:
YEAR ENDED
DECEMBER 31,
---------------------------
1996 1995
Beginning balance $ 921,447 $ 844,557
New loans 1,006,979 215,828
Repayments/reductions (610,161) (138,938)
---------- ---------
Ending balance $1,318,265 $ 921,447
========== =========
As discussed in Note 1, the Company adopted SFAS No. 114 and SFAS No. 118
effective January 1, 1995. Adoption of these statements had no impact on the
Company's financial statements including the level of the allowance for
credit losses. Instead, it resulted only in a reallocation of the existing
allowance for credit losses.
At December 31, 1996, the Bank had no recorded investment in impaired loans
under SFAS No. 114. Therefore, no SFAS No. 114 reserve is required. At
December 31, 1995, the recorded investment in impaired loans under SFAS No.
114 was $202,906, which required a SFAS No. 114 allowance for credit losses
of $45,000. The Company recognized interest revenue on these impaired loans
of $23,030 in 1995.
5. NONPERFORMING LOANS AND PAST DUE LOANS
The following table presents information relating to nonperforming loans and
past due loans:
DECEMBER 31,
----------------
1996 1995
90 days or more past due loans, not on nonaccrual $99,000 $233
======= ====
Total interest foregone on nonaccrual and restructured loans was $0 for both
years ended December 31, 1996 and 1995 and $2,303 for the year ended December
31, 1994.
6. ALLOWANCE FOR CREDIT LOSSES
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
Beginning balance $ 433,346 $ 370,496 $ 297,774
Provision (107,000) 20,000 106,000
Loans charged off (4,734) (18,863) (118,844)
Loan recoveries 5,258 61,713 85,566
---------- --------- ----------
Balance at end of year $ 326,870 $ 433,346 $ 370,496
========== ========= ==========
F-13
<PAGE>
7. PREMISES AND EQUIPMENT
December 31,
--------------------------
1996 1995
Land $ 238,800 $ 238,800
Buildings 2,039,111 2,028,266
Furniture, fixtures and equipment 1,625,247 1,609,921
---------- ----------
Total 3,903,158 3,876,987
Less accumulated depreciation 2,043,124 1,800,542
---------- ----------
Premises and equipment, net $1,860,034 $2,076,445
========== ==========
8. DEPOSITS
Included in interest-bearing deposits are certificates of deposit in amounts
of $100,000 or more. These certificates and their remaining maturities at
December 31, 1996 and 1995 are as follows:
December 31,
--------------------------
1996 1995
Three months or less $2,151,253 $2,725,205
Four through twelve months 2,005,008 2,004,425
Furniture, fixtures and equipment 100,000 705,057
---------- ----------
Total $4,256,261 $5,434,687
========== ==========
Interest expense for certificates of deposit in excess of $100,000 was
$264,245, $219,021 and $126,274 for the years ended December 31, 1996, 1995
and 1994, respectively.
The Company had brokered deposits of $0 and $100,000 at December 31, 1996
and 1995, respectively. There are no major concentrations of deposits.
9. NOTE PAYABLE
In April 1995 the Company signed a promissory note with a shareholder in the
amount of $66,135 to purchase his outstanding stock. The principal and
accrued interest at 10% is payable in quarterly installments of $4,242
beginning July 1, 1995 through April 1, 2000. Interest expense of $4,152 and
$4,767 has been recognized as of December 31, 1996 and 1995, respectively.
10. INTEREST RATE RISK
The Company is principally engaged in providing short-term commercial loans
with interest rates that fluctuate with various market indices and long-
term, fixed-rate real estate loans. These loans are primarily funded through
short-term demand deposits and longer-term certificates of deposit with
variable and fixed rates. The real estate loans are more sensitive to
interest rate risk than the commercial loans because of their fixed rates
and longer maturity characteristics.
F-14
<PAGE>
11. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
To meet the financing needs of its customers and to reduce its own exposure
to fluctuations in interest rates, the Company is a party to various
financial instruments with off-balance sheet risk in the normal course of
business. These financial instruments include commitments to extend credit
and standby letters of credit. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the consolidated balance sheets. The contract or notional
amounts of these instruments reflect the extent of the Company's involvement
in particular classes of financial instruments. The Company's exposure to
credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to extend credit and standby letters of
credit is represented by the contractual or notional amount of such
instruments. The Company uses the same credit policies in making these
commitments and conditional obligations as it does for on-balance sheet
instruments.
The following is a summary of the various financial instruments entered into
by the Company as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Financial instruments whose contract amount represents credit risk -
Standby letters of credit $ 99,000 $ 57,500
Commitments to extend credit 4,234,105 2,220,504
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being fully drawn upon, the total commitment
amounts disclosed above do not necessarily represent future cash
requirements.
The Company evaluates customers' creditworthiness on a case-by-case basis.
The amount of collateral obtained, if considered necessary by the Company
upon extension of credit, is based on management's credit evaluation of the
customer.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to its customers.
12. INCOME TAXES
The components of the provision for federal income taxes for the years ended
December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994
Current $5,683 $268,666 $166,607
Deferred 1,247 (32,275)
------ -------- --------
Total $6,930 $268,666 $134,332
====== ======== ========
F-15
<PAGE>
Significant deferred tax assets and liabilities at December 31, 1996 and 1995
are as follows:
1996 1995
Deferred tax (liabilities) assets:
Franchise taxes $ (2,351) $ 8,395
Depreciable assets and other 61,788 16,265
Unrealized loss on available-for-sale securities 21,617 27,084
Allowance for credit losses (91,863) (55,839)
-------- --------
Net deferred tax (liability asset before
valuation allowance (10,809) (4,095)
Valuation allowance -------- --------
Net deferred tax (liability) asset $(10,809) $ (4,095)
======== ========
The provision for federal income taxes for the years ended December 31, 1996,
1995 and 1994 differs from the amount computed by applying the federal income
tax statutory rate on income as follows:
1996 1995 1994
Taxes calculated at statutory rate $ 48,468 $294,871 $ 165,859
(Decrease) increase resulting from:
Tax-exempt interest (30,811) (29,155) (29,405)
Graduated rate differential (16,799)
Other, net 6,072 2,950 (2,122)
-------- -------- ---------
Total $ 6,930 $268,666 $ 134,332
======== ======== =========
13. COMMITMENTS AND CONTINGENCIES
LEASES - A summary of noncancelable future operating lease commitments
follows:
1997 $ 101,000
1998 81,000
1999 78,000
2000 90,000
2001 90,000
Thereafter 822,500
----------
Total $1,262,500
==========
It is expected that in the normal course of business, leases that expire will
be renewed or replaced by leases on other property or equipment.
Rent expense under all noncancelable operating lease obligations aggregated
$129,000, $83,099 and $50,075 for 1996, 1995 and 1994, respectively.
LITIGATION - Various lawsuits are pending against the Company. Company
management, after reviewing these suits with outside counsel, considers that
the aggregate liabilities, if any, will not be material to the consolidated
financial statements.
F-16
<PAGE>
14. REGULATORY MATTERS
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Any bank that
fails to meet its minimum capital requirements is subject to actions by
regulators that could have a direct material effect on the Company's and the
Bank's financial statements. Under the capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and the Bank
must meet specific capital requirements based on the Company's and the
Bank's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices.
To meet the capital adequacy requirements, the Company and the Bank must
maintain minimum amounts and ratios as defined in the regulations.
Management believes that as of December 31, 1996, the Company and the Bank
met all capital adequacy requirements.
As of September 30, 1995, the most recent notification from the Office of
the Comptroller of the Currency ("OCC") categorized the Bank well
capitalized under the regulatory framework for prompt corrective action. To
be categorized as well capitalized, the Bank must maintain minimum capital
amounts and ratios as set forth in the table below. There have been no
conditions or events since that notification that management believes have
changed the Bank's category.
<TABLE>
<CAPTION>
TO BE WELL-
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
--------------------- -------------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted Assets)
Company $ 4,538,049 14.1% $2,577,736 8.0% N/A N/A
Bank 4,587,515 14.2% 2,577,686 8.0% $3,222,108 10.0%
Tier I Capital (to Risk Weighted Assets)
Company 4,211,179 13.1% 1,288,868 4.0% N/A N/A
Bank 4,260,645 13.2% 1,288,843 4.0% 1,933,265 6.0%
Tier I Capital (to Total Assets)
Company 4,211,179 6.8% 2,477,157 4.0% N/A N/A
Bank 4,260,645 6.9% 2,477,100 4.0% 1,611,054 5.0%
As of December 31, 1995:
Total Capital (to Risk Weighted Assets)
Company 4,544,105 14.3% 2,542,011 8.0% N/A N/A
Bank 4,608,980 14.4% 2,541,100 8.0% 3,177,450 10.0%
Tier I Capital (to Risk Weighted Assets)
Company 4,120,759 13.0% 1,271,005 4.0% N/A N/A
Bank 4,175,634 13.1% 1,270,980 4.0% 1,906,470 6.0%
Tier I Capital (to Total Assets)
Company 4,120,759 6.8% 2,423,715 4.0% N/A N/A
Bank 4,175,634 6.9% 2,423,658 4.0% 3,029,573 5.0%
</TABLE>
Dividends paid by the Bank to the Company are subject to restrictions by
certain regulatory agencies. Approximately $606,859 was available for
payment of dividends at December 31, 1996 under these restrictions.
F-17
<PAGE>
15. PARENT-COMPANY-ONLY FINANCIAL INFORMATION
The following are parent-company-only condensed balance sheets as of
December 31, 1996 and 1995, condensed statements of income and condensed
statements of cash flows for the years then ended:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS,
DECEMBER 31, 1996 AND 1995
- -----------------------------------------------------------------------------------------------------------------------
ASSETS 1996 1995
<S> <C> <C>
Cash $ 1,941 $ 9,349
Interest-bearing deposits in financial institutions 1,000 1,000
Investment in subsidiary 4,263,884 4,123,060
Premises and equipment, net 430 430
---------- ----------
TOTAL $4,267,255 $4,133,839
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable $ 49,597 $ 60,892
Other liabilities 3,240 4,762
---------- ----------
Total liabilities 52,837 65,654
---------- ----------
Common stock 302,618 302,618
Capital surplus 1,774,975 1,774,975
Retained earnings 2,787,036 2,651,413
Unrealized net losses on subsidiary's available-for-sale securities,
net of taxes of $21,617 and $27,084, respectively (41,964) (52,574)
---------- ----------
Total 4,822,665 4,676,432
Common stock in treasury, at cost (608,247) (608,247)
---------- ----------
Total stockholders' equity 4,214,418 4,068,185
---------- ----------
TOTAL $4,267,255 $4,133,839
========== ==========
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING INCOME:
Other income $ 2,019 $ 3,818 $ 8,421
Dividend from subsidiary 25,000 105,000 350,000
-------- -------- --------
Total operating income 27,019 108,818 358,421
-------- -------- --------
OPERATING EXPENSE:
Interest expense 4,152 4,767
Other expenses 17,458 16,240 15,990
-------- -------- --------
Total operating expense 21,610 21,007 15,990
-------- -------- --------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY 5,409 87,811 342,431
EQUITY IN UNDISTRIBUTED EARNINGS OF
SUBSIDIARY 130,214 510,790 11,058
-------- -------- --------
NET INCOME $135,623 $598,601 $353,489
======== ======== ========
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $135,623 $598,601 $353,489
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase (decrease) in other liabilities (1,522) 1,522 (1)
Dividends from subsidiary 25,000 105,000 350,000
-------- -------- --------
Net cash provided by operating activities 159,101 705,123 703,488
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES -
Equity in earnings of subsidiary (155,214) (615,790) (361,058)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to acquire treasury stock (93,120) (350,000)
Payments on note payable (11,295) (5,243)
-------- -------- --------
Net cash used in financing activities (11,295) (98,363) (350,000)
-------- -------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (7,408) (9,030) (7,570)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 9,349 18,379 25,949
-------- -------- --------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,941 $ 9,349 $ 18,379
======== ======== ========
</TABLE>
16. SUBSEQUENT EVENT
On September 25, 1997, the Company entered into an agreement and plan of
merger with a bank holding company to exchange all of the Company's
outstanding common stock for common stock of the bank holding company. The
letter of intent does not constitute a binding agreement and is subject to
due diligence investigations, completion of a merger agreement, regulatory
approval and approval from the bank holding company's and the Company's
Board of Directors and stockholders.
******
F-20
<PAGE>
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
-----------------------------------------
This Amendment to Agreement and Plan of Merger (this "Amendment") dated as
of November 21, 1997 is entered into by and among Compass Bancshares, Inc.
("Compass"), Compass Texas Acquisition Corp. ("CTA") and First University
Corporation. (the "Company").
WHEREAS, Compass and the Company entered into an Agreement and Plan of
Merger dated as of September 25, 1997 (the "Merger Agreement");
WHEREAS, the Merger Agreement requires that an existing or new subsidiary
of Compass shall be merged with the Company, with the existing or new subsidiary
being the surviving entity;
WHEREAS, CTA is such existing or new subsidiary;
WHEREAS, Section 8.3 of the Merger Agreement requires Compass and the
Company to amend the Merger Agreement for the purpose of making CTA a party
thereto; and
WHEREAS, the parties desire to otherwise amend the Merger Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in the Merger Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Capitalized terms used herein and not defined herein shall have
the meanings set forth in the Merger Agreement.
2. Upon execution of this Amendment, CTA shall become a party to the
Merger Agreement, shall be deemed to be Compass Texas as defined in the Merger
Agreement, and shall succeed to the rights and become subject to the obligations
of Compass Texas as provided in the Merger Agreement.
4. The execution of this Amendment shall not relieve Compass of its
obligations under the Merger Agreement.
5. Except as herein provided, the terms of the Merger Agreement
shall remain in full force and effect.
6. This Amendment may be executed in several counterparts, and by
the parties on separate counterparts, and all such counterparts, when so
executed and delivered, shall constitute but one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF the parties have executed this Amendment as of the date
first written above.
ATTEST: COMPASS BANCSHARES, INC.
By:________________________________ By:______________________________
Its Its
ATTEST: COMPASS TEXAS ACQUISITION CORP.
By:________________________________ By:______________________________
Its Its
ATTEST: FIRST UNIVERSITY CORPORATION
By:______________________________
By:________________________________ Its
Its
H1995A/168241-3
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================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
COMPASS BANCSHARES, INC.
AND
FIRST UNIVERSITY CORPORATION
Dated as of September 25, 1997
================================================================================
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TABLE OF CONTENTS
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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 Certificate of Incorporation and By-Laws..................2
SECTION 1.5 Directors and Officers....................................2
SECTION 1.6 Conversion of Shares......................................2
SECTION 1.7 Shareholders' Meeting.....................................3
SECTION 1.8 Registration of the Compass Common Stock..................4
SECTION 1.9 Closing...................................................4
ARTICLE II..........................................................................5
DISSENTING SHARES; EXCHANGE OF SHARES..........................................5
SECTION 2.1 Dissenting Shares.........................................5
SECTION 2.2 Exchange of Shares........................................5
ARTICLE III.........................................................................6
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................6
SECTION 3.1 Organization and Qualification............................6
SECTION 3.2 Company Capitalization....................................7
SECTION 3.3 Subsidiary Capitalization; Other Securities...............7
SECTION 3.4 Authority Relative to the Agreement.......................8
SECTION 3.5 No Violation..............................................8
SECTION 3.6 Consents and Approvals....................................9
SECTION 3.7 Regulatory Reports........................................9
SECTION 3.8 SEC Status; Securities Issuances..........................9
SECTION 3.9 Financial Statements......................................9
SECTION 3.10 Absence of Certain Changes...............................10
SECTION 3.11 Company Indebtedness.....................................12
SECTION 3.12 Litigation...............................................12
SECTION 3.13 Tax Matters..............................................12
SECTION 3.14 Employee Benefit Plans...................................13
SECTION 3.15 Employment Matters.......................................15
SECTION 3.16 Leases, Contracts and Agreements.........................15
SECTION 3.17 Related Company Transactions.............................16
SECTION 3.18 Compliance with Laws.....................................16
SECTION 3.19 Insurance................................................17
SECTION 3.20 Loans....................................................17
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SECTION 3.21 Fiduciary Responsibilities...............................17
SECTION 3.22 Patents, Trademarks and Copyrights.......................17
SECTION 3.23 Environmental Compliance.................................17
SECTION 3.24 Regulatory Actions.......................................19
SECTION 3.25 Title to Properties; Encumbrances........................19
SECTION 3.26 Shareholder List.........................................20
SECTION 3.27 Proxy Statement..........................................20
SECTION 3.28 Dissenting Shareholders..................................20
SECTION 3.29 Section 368 Representations..............................21
SECTION 3.30 Employee Stock Options...................................22
SECTION 3.31 Accounting Matters.......................................22
SECTION 3.32 Representations Not Misleading...........................22
ARTICLE IV.........................................................................22
REPRESENTATIONS AND WARRANTIESOF COMPASS......................................22
SECTION 4.1 Organization and Authority...............................22
SECTION 4.2 Authority Relative to Agreement..........................22
SECTION 4.3 Financial Reports........................................23
SECTION 4.4 Capitalization...........................................24
SECTION 4.5 Consents and Approvals...................................24
SECTION 4.6 Proxy Statement..........................................24
SECTION 4.7 Availability of Compass Common Stock.....................25
SECTION 4.8 Representations Not Misleading...........................25
ARTICLE V..........................................................................25
COVENANTS OF THE COMPANY......................................................25
SECTION 5.1 Affirmative Covenants of the Company.....................25
SECTION 5.2 Negative Covenants of the Company........................27
ARTICLE VI.........................................................................29
ADDITIONAL AGREEMENTS.........................................................29
SECTION 6.1 Access To, and Information Concerning, Properties
and Records..............................................29
SECTION 6.2 Filing of Regulatory Approvals and SEC Filings...........30
SECTION 6.3 Miscellaneous Agreements and Consents....................30
SECTION 6.4 Company Indebtedness.....................................30
SECTION 6.5 Best Good Faith Efforts..................................30
SECTION 6.6 Exclusivity..............................................30
SECTION 6.7 Public Announcement......................................31
SECTION 6.8 Employee Benefit Plans...................................31
SECTION 6.9 Merger of Bank...........................................32
SECTION 6.10 Environmental Matters....................................32
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SECTION 6.11 Proxies..................................................33
SECTION 6.12 Cooperation on Texas Receipts............................33
SECTION 6.13 Exchange Agreement.......................................33
SECTION 6.14 Director and Officer Indemnification....................34
SECTION 6.15 Exercise of Convertible Securities.......................34
SECTION 6.17 Periodic Filings.........................................34
SECTION 6.18 Rule 144.................................................34
ARTICLE VII........................................................................34
CONDITIONS TO CONSUMMATION OF THE MERGER......................................34
SECTION 7.1 Conditions to Each Party's Obligation to Effect the
Merger...................................................34
SECTION 7.2 Conditions to the Obligations of Compass and Compass
Texas to Effect the Merger...............................35
SECTION 7.3 Conditions to the Obligations of the Company to Effect
the Merger...............................................37
ARTICLE VIII.......................................................................37
TERMINATION; AMENDMENT; WAIVER................................................37
SECTION 8.1 Termination..............................................37
SECTION 8.2 Effect of Termination....................................38
SECTION 8.3 Amendment................................................38
SECTION 8.4 Extension; Waiver........................................39
ARTICLE IX.........................................................................39
SURVIVAL......................................................................39
SECTION 9.1 Survival of Representations and Warranties...............39
ARTICLE X..........................................................................39
MISCELLANEOUS.................................................................39
SECTION 10.1 Expenses.................................................39
SECTION 10.2 Brokers and Finders......................................39
SECTION 10.3 Entire Agreement; Assignment; Compass Successors.........39
SECTION 10.4 Further Assurances.......................................40
SECTION 10.5 Enforcement of the Agreement.............................40
SECTION 10.6 Severability.............................................40
SECTION 10.7 Notices..................................................40
SECTION 10.8 Governing Law............................................41
SECTION 10.9 Descriptive Headings.....................................42
SECTION 10.10 Parties in Interest......................................42
SECTION 10.11 Counterparts.............................................42
SECTION 10.12 Incorporation by References..............................42
SECTION 10.13 Certain Definitions......................................42
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ATTACHMENTS
EXHIBITS
A. Pooling Transfer Restrictions Agreement
B. Exchange Agent Agreement
C. Pooling of Interest Criteria
D. Voting Agreement and Irrevocable Proxy
E. Opinion of Counsel for the Company and the Bank
F. Opinion of Counsel for Compass and Compass Texas
G. Amendment to Agreement and Plan of Merger
H. Compass Texas Representations Certificate
I. Release
J. Release
LIST OF SCHEDULES
Schedule 3.2 Terms of the Undesignated Preferred Stock; Company
Capitalization
Schedule 3.3 Subsidiary 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
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Schedule 3.14(a) Employee Welfare Benefit Plans
Schedule 3.14(b) Employee Pension Benefit Plans
Schedule 3.14(c) Deferred Compensation, Bonus and Stock Purchase Plans
Schedule 3.14(l) Additional Payments Due Under Deferred Compensation, Bonus,
Employee Welfare Benefit Plans and Employee Pension
Benefit Plans
Schedule 3.15 Employment Contracts and Collective Bargaining Agreements
Schedule 3.16 Leases, Subleases, Contracts and Agreements; Participations;
Default of Contracts; Marketable Title
Schedule 3.17 Related Company Transactions
Schedule 3.18 Compliance with Laws
Schedule 3.19 Insurance Policies
Schedule 3.20 Loans Exceeding Legal Lending Limit, Troubled Loans
Schedule 3.22 Patents, Trademarks and Copyrights
Schedule 3.23 Environmental Compliance
Schedule 3.24 Regulatory Actions; Agreements
Schedule 3.25 Title to Properties; Title Policies; Property
Schedule 3.29 Company Shareholders Disposing of Stock
Schedule 3.30 Stock Option Plans
Schedule 4.2 Compass Prior Consents
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 6.11 List of Proxy Holders Voting Affirmatively for the Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of September 25,
1997, is by and between Compass Bancshares, Inc. a Delaware corporation
("Compass"), and First University Corporation, a Texas corporation ("Company").
WHEREAS, Compass desires to affiliate with the Company and its wholly owned
subsidiary, West University Bank, National Association, a national banking
association (the "Bank"), 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
Texas") of Compass incorporated under the laws of the State of Delaware 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; and
WHEREAS, the respective boards of directors of the Company 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 Texas Business Corporation Act (the "TBCA")
and the General Corporation Law of the State of Delaware (the "GCL"), the
Company shall be merged with and into Compass Texas (the "Merger") as soon as
practicable following the satisfaction or waiver, if permissible, of the
conditions set forth in Article VII hereof, but not prior to January 1, 1998.
Following the Merger, Compass Texas 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 Article 5.06 of the TBCA or the GCL.
SECTION 1.2 Effective Time. The Merger shall be consummated by the
filing by the Texas Secretary of State of Articles of Merger, in the form
required by and executed in accordance with the relevant provisions of the TBCA,
and by the filing by the Delaware Secretary of State of a Certificate of Merger
in the form required by and executed in accordance with the relevant provisions
of the GCL and by the issuance of a Certificate of Merger by the Secretary of
State of Texas. (The date of such issuance and filing or such other time and
date as may be specified in the Articles and Certificate of Merger shall be the
"Effective Time").
<PAGE>
SECTION 1.3 Certain Effects of the Merger. The Merger shall have the
effects set forth in Article 5.06 of the TBCA and in the GCL.
SECTION 1.4 Certificate of Incorporation and By-Laws. The Certificate
of Incorporation and the By-Laws of Compass Texas, in each case as in effect at
the Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation.
SECTION 1.5 Directors and Officers. The directors and officers of
Compass Texas 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 Certificate 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 $1.00 per share ("Company Common Stock" or "Shares"),
issued and outstanding immediately prior to the Effective Time ("Common Shares
Outstanding"), other than Dissenting Shares (as defined in Section 2.1), shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and represent the right to receive the consideration
payable as set forth below (the "Merger Consideration") to the holder of record
thereof, without interest thereon, upon surrender of the certificate
representing such Share. For the purposes of determining the number of Shares
issued and outstanding, the number of Shares issued and outstanding shall be
increased by the number and class of Shares that may be acquired upon exercise
or conversion of any warrant, option, convertible debenture or other security
entitling the holder thereof to acquire Shares which is in effect or outstanding
prior to the Effective Time. At the Closing the Company shall calculate and
certify to Compass the Common Shares Outstanding.
(b) (i) Each holder of Company Common Stock shall receive Merger
Consideration in the form of shares of Compass common stock, $2.00 par value per
share ("Compass Common Stock"). The "Share Determination Market Value" shall
mean the average closing sale price of the Compass Common Stock reported by the
NASDAQ National Market System for the twenty days of trading preceding the fifth
business day prior to the date upon which Compass notifies the Company in
writing of its proposed date for consummation of the Merger ("Closing
Notification"). To provide the Merger Consideration, Compass agrees to issue an
aggregate number of shares of Compass Common Stock equal to the greater of (y)
350,000 or (z) the quotient of $10,500,000 divided by the Share Determination
Market Value ("New Shares"). Each holder of Company Common Stock for each share
so held shall receive Merger Consideration equal to the quotient of the New
Shares divided by the Common Shares Outstanding.
(ii) In the event the Share Determination Market Value is less than
$30.00 per share, Compass may terminate this Agreement (the "Pricing Termination
Option") by written notice to the Company within four business days from the
date of Closing Notification to the persons and at the facsimile number(s) set
forth in Section 10.7 for the Company. In the event Compass exercises its
Pricing Termination Option and the Company fails to exercise its Termination
Rejection Option as
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set forth below, this Agreement shall be deemed terminated and Compass shall pay
to the Company an amount in cash equal to the lesser of (i) $50,000 or (ii) one-
half of the Company's out-of-pocket third party expenses incurred in connection
with the Merger ("Transaction Expenses").
(iii) In the event Compass exercises its Pricing Termination Option as
set forth above, the Company shall have the right to reject such termination of
the Agreement by Compass (the "Termination Rejection Option") by written notice
to Compass within three business days following the date on which the Company
receives notice of Compass' exercise of the Pricing Termination Option to the
persons and at the facsimile number(s) set forth in Section 10.7 for Compass.
The effect of the exercise of such Termination Rejection Option by the Company
shall be that (i) the number of New Shares to be issued by Compass as aggregate
Merger Consideration shall be 350,000 shares of Compass Common Stock, and (ii)
Compass shall have no obligation to pay the Transaction Expenses; provided,
however, that the Closing shall have taken place within three business days
following the date on which Compass receives notice of the Company's exercise of
the Termination Rejection Option. If the Closing does not take place within
three business days following the date on which Compass receives notice of the
Company's exercise of the Termination Rejection Option, then the Pricing
Termination Option previously exercised by Compass shall be null and void and of
no effect, without prejudice to Compass' right to exercise such Pricing
Termination Option at a later date.
(iv) The aggregate number of shares of Compass Common Stock to be
exchanged for each Share, the Share Determination Market Value, and the $30.00
figure referred to above, respectively, shall be adjusted appropriately to
reflect any stock dividends or splits, reclassification, recapitalization or
conversion with respect to Compass Common Stock, or any other thing of value
(except regular cash dividends) received or to be received by holders of Compass
Common Stock, when the record date or payment occurs prior to the Effective
Time.
(c) 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 Share Determination Market Value.
(d) Each share of capital stock of Compass Texas issued and outstanding
immediately before the Effective Time shall not be converted or exchanged by
virtue of the Merger and shall remain outstanding as one share of capital stock
of the Surviving Corporation.
SECTION 1.7 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 as soon as practicable for the
purpose of approving and adopting this Agreement;
3
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(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
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 1.8 Registration of the Compass Common Stock.
(a) Compass shall file a registration statement (the "Registration
Statement") with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended ("Securities Act"), covering the shares of
Compass Common Stock to be issued to Company shareholders in the Merger.
(b) Within 30 days after the date hereof, the Company shall enter into and
cause each Company shareholder who is an "affiliate" (as defined in SEC Rule
405) of the Company to enter into with Compass a written agreement in
substantially the form of Exhibit A attached hereto.
SECTION 1.9 Closing. Upon the terms and subject to the conditions
hereof, as soon as practicable after the vote of the shareholders of the 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, but no earlier than January 1, 1998, the Company and Compass
Texas shall execute and deliver 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 Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P. in Houston, Texas (or such other place as the parties may agree) for the
purpose of confirming all of the foregoing.
4
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ARTICLE II.
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 2.1 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares which are issued and outstanding immediately
prior to the Effective Time and which are held by shareholders who have not
voted such shares in favor of the Merger and who shall have delivered a written
demand for payment of the fair value of such shares within the time and in the
manner provided in Article 5.12 of the TBCA (the "Dissenting Shares") shall not
be converted into or be exchangeable for the right to receive the Merger
Consideration provided in Section 1.6 of this Agreement, unless and until such
holder shall have failed to perfect or shall have effectively withdrawn or lost
his right to appraisal and payment under the TBCA. If any such holder shall
have so failed to perfect or shall have effectively withdrawn or lost such
right, such holder's Shares shall thereupon be deemed to have been converted
into and to have become exchangeable for, at the Effective Time, the right to
receive the Merger Consideration without any interest thereon.
SECTION 2.2 Exchange of Shares.
(a) Compass shall deposit or cause to be deposited in trust with
Continental Stock Transfer & Trust Company, New York, New York (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 and to make the appropriate cash payments, if any, to holders
of Dissenting Shares (such amounts being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions jointly given by the 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). Payments to dissenting shareholders
shall be made as required by Article 5.12 of the TBCA. 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 (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. Upon surrender to the Exchange Agent of a Certificate, together with
such letter of transmittal duly executed, the holder of such Certificate shall
be entitled to 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. If payment or delivery of Compass
Common Stock is to
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be made to a person other than the person in whose name the Certificate
surrendered is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment and delivery of
Compass Common Stock to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 2.2, each Certificate (other
than Certificates representing Dissenting Shares) shall represent for all
purposes the right to receive the Merger Consideration without any interest
thereon. Former shareholders of the Company shall be entitled to vote after the
Effective Time at any meeting of Compass shareholders the number of shares of
Compass Common Stock into which their Shares are converted, regardless of
whether such shareholders have exchanged their Certificates. Immediately after
the Effective Time, shareholders of the Company shall be entitled to dividends
with respect to shares of Compass Common Stock received by them in the Merger,
provided that, no dividend will be disbursed with respect to the shares of
Compass Common Stock until the holder's Shares are surrendered in exchange
therefor.
(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, 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
The Company hereby makes 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 prior to the date hereof. The
Company agrees at the Closing to provide Compass and Compass Texas with
supplemental Schedules reflecting any changes thereto between the date of such
Schedules and the date of the Closing. Disclosure of any information on one
Schedule constitutes disclosure of such information on all Schedules under the
terms of this Agreement.
SECTION 3.1 Organization and Qualification. The Company is a Texas
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 Texas and all laws, rules, and regulations
applicable to bank holding companies. The Bank is a national banking
6
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association, duly organized, validly existing and in good standing under the
laws of the United States of America, and is a member of the Federal Reserve
System. Each of the Company and its Subsidiaries (as defined in Section
10.13(a)) 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. The Company does not own or control
any Affiliate (as defined in Section 3.17) other than the Bank. True and
correct copies of the Articles of Incorporation or Association and Bylaws of the
Company and its Subsidiaries, with all amendments thereto through the date of
this Agreement, have been delivered by the Company to Compass. The Company's
Subsidiaries are duly qualified or licensed to do business and are in good
standing in the State of Texas. The nature of the business of the Company and
its Subsidiaries 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 Texas.
SECTION 3.2 Company Capitalization. As of the date hereof, the
authorized capital stock of the Company consists solely of (a) 5,000,000 shares
of Company Common Stock, of which 302,618 shares are issued and outstanding, and
40,004 of which are held in treasury, and (b) 5,000,000 shares of Preferred
Stock, par value $1.00 per share (the "Undesignated Preferred Stock"), none of
which are outstanding. The terms of the Undesignated Preferred Stock are
described in Schedule 3.2 hereto. 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 its Subsidiaries to purchase or
otherwise acquire any security of or equity interest in the Company or its
Subsidiaries. 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 TBCA and applicable banking
laws and regulations and all dividends declared prior to the date hereof have
been paid.
SECTION 3.3 Subsidiary Capitalization; Other Securities. All of the
issued and outstanding shares of the capital stock of the Company's Subsidiaries
(i) are duly authorized, validly issued, fully paid and, except as provided in
the National Bank Act, 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 its Subsidiaries. Set forth on
Schedule 3.3 hereto is a list of all equity ownership by the Company or its
Subsidiaries for the account of the Company or its Subsidiaries in any other
person other than the Bank (the "Other Securities"). The Company or its
Subsidiaries own each Other Security free and clear of any lien, encumbrance,
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security interest or charge. The Other Securities represent less than five
percent of the outstanding equity securities of each such person.
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 Association or By-Laws of the Company or its Subsidiaries.
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 Office of the Comptroller of the Currency ("OCC"), the Federal
Deposit Insurance Corporation ("FDIC"), the Board of Governors of the Federal
Reserve System ("FRB"), and the Banking Commissioner of Texas ("Commissioner")
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 its Subsidiaries or (ii) be
in conflict with, result in a breach or termination of any provision of, cause
the acceleration of the maturity of any debt or obligation pursuant to,
constitute a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any security interest, lien,
charge or other encumbrance upon any property or assets of the Company or its
Subsidiaries 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 its Subsidiaries 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 its Subsidiaries,
threatened, against the Company, its Subsidiaries 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 Texas 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 its
Subsidiaries 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
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transactions contemplated hereby, assuming the receipt of required shareholder
and regulatory approvals.
SECTION 3.6 Consents and Approvals. The Company's Board of Directors
(at a meeting called and duly held) 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 its Subsidiaries, except the filing
of the Articles of Merger under the TBCA, the Certificate of Merger under the
GCL, and such approvals as may be required from the SEC, the FRB, the OCC, the
FDIC and the Commissioner and holders of Shares under the TBCA.
SECTION 3.7 Regulatory Reports. Except as set forth on Schedule 3.7,
the Company and its Subsidiaries 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 OCC, the Commissioner, the FDIC, or any
other regulatory authority having jurisdiction over any such persons, other than
plans, reports or information listed on Schedule 3.7.
SECTION 3.8 SEC Status; Securities Issuances. The Company is not
subject to the registration provisions of Section 12 of the Exchange Act nor the
rules and regulations of the SEC promulgated under Section 12 of the Exchange
Act, other than anti-fraud provisions of such act. All issuances of securities
by the Company and its Subsidiaries have been registered under the Securities
Act, the Securities Act of the State of Texas, the National Bank Act, the Texas
Banking Act, and all other applicable laws or were exempt from any such
registration requirements.
SECTION 3.9 Financial Statements. The Company has provided Compass with
a true and complete copy of the audited consolidated statement of financial
position of the Company and its Subsidiaries as of December 31, 1996, and the
related consolidated statements of income, shareholders' equity and changes in
cash flows for the years ended December 31, 1996 and 1995, plus consolidating
financial statements of the Company's Subsidiaries, and the consolidated
statements of financial position of the Company and its Subsidiaries as of March
31 and June 30, 1997 and the related consolidated statements of income,
shareholders' equity and changes in cash flows for the three and six-month
periods ended March 31 and June 30, 1997 (such consolidated statements of
financial position and the related consolidated statements of income,
shareholders' equity and changes in cash flows are collectively referred to
herein as the "Consolidated Financial Statements"), plus all consolidating
financial statements for its Subsidiaries (collectively, with the Consolidated
Financial Statements and the notes and schedules thereto, referred to as the
"Financial Statements"). Except as described in the notes to the Consolidated
Financial Statements, the Consolidated Financial Statements, including the
consolidated statement of financial position and the related consolidated
statements of income, shareholders' equity and changes in cash flows (including
the related notes thereto) of the Company and its Subsidiaries, fairly present
the financial position of the Company and its Subsidiaries as of the dates
thereof and the results of operations and
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changes in consolidated financial position of the Company and its Subsidiaries
for the periods then ended, in conformity with Generally Accepted Accounting
Principles ("GAAP") applied on a basis consistent with prior periods (subject,
in the case of the unaudited interim financial statements, to normal year-end
adjustments and the fact that they do not contain all of the footnote
disclosures required by GAAP), except as otherwise noted therein, and the
accounting records underlying the Consolidated Financial Statements accurately
and fairly reflect in all material respects the transactions of the Company and
its Subsidiaries. As of their dates, the Consolidated Financial Statements
conformed, or will conform when delivered, in all material respects with all
applicable rules and regulations promulgated by the FRB, the OCC, the
Commissioner, and the FDIC. Neither the Company nor 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. The Company will provide Compass with the unaudited
consolidated and unconsolidated statements of financial position of the Company
and its Subsidiaries 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 Reports of Condition and Statements of
Income ("Call Reports") of its Subsidiaries for all periods ending after June
30, 1997. The Company and its Subsidiaries have no off balance sheet liabilities
associated with financial derivative products or potential liabilities
associated with financial derivative products.
SECTION 3.10 Absence of Certain Changes. Except as and to the extent set
forth on Schedule 3.10, since June 30, 1997 (the "Balance Sheet Date") neither
the Company nor any of its Subsidiaries has:
(a) made any amendment to its Articles of Incorporation or Association 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;
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(f) except in the ordinary course of business and consistent with prudent
banking practices, canceled any debts, waived any claims or rights, or sold,
transferred, or otherwise disposed of any of its properties or assets;
(g) disposed of or permitted to lapse any rights to the use of any
trademark, service mark, trade name or copyright, or disposed of or disclosed to
any person other than its employees or agents, any trade secret not theretofore
a matter of public knowledge;
(h) except as set forth on Schedule 3.10 and except for regular salary
increases granted in the ordinary course of business within the Company's or its
Subsidiaries' budgets consistent with prior practices (provided that for
calendar year 1998, the budget contains normal procedures for officer and
employee compensation increases which cumulative increases do not exceed 4% of
the aggregate current annualized salaries of officers and employees), 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 its Subsidiaries, for the
directors, employees or former employees of the Company or its Subsidiaries
("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 its Subsidiaries;
(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
its Subsidiaries 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;
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(m) 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
(n) 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 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 its Subsidiaries, threatened against the
Company or any of its Subsidiaries 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 Proceedings against the Company or its Subsidiaries.
SECTION 3.13 Tax Matters. The Company and its Subsidiaries 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 its Subsidiaries 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 its Subsidiaries 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
its Subsidiaries 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 other
Subsidiaries. Set forth on Schedule 3.13 are the dates of filing of all Filed
Returns for all fiscal years since and including January 1, 1990 and any
amendments thereto which relate to federal or state income or franchise taxes.
Neither the Company nor its Subsidiaries 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 its
Subsidiaries, nor are there any outstanding
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agreements or waivers extending the statutory period of limitation applicable to
any tax return of the Company or its Subsidiaries for any period. The Company
and its Subsidiaries 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 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 its Subsidiaries
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 its Subsidiaries or to which
the Company or its Subsidiaries contribute or are 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 its Subsidiaries
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 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 its Subsidiaries or to which the Company or
its Subsidiaries contribute or are 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, dependent 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 its
Subsidiaries (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
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ERISA, the Code and with all other applicable laws, rules and regulations
governing the establishment and operation of the Pension Benefit Plans, Welfare
Benefit Plans and all Other Programs; all necessary governmental approvals
relating to the establishment of the Pension Benefit Plans have been obtained;
and with respect to each Pension Benefit Plan that is intended to be tax-
qualified under Section 401(a) or 403(a) of the Code, a favorable determination
letter as to the qualification under the Code of each such Pension Benefit Plan
and each material amendment thereto has been issued by the Internal Revenue
Service (and nothing has occurred since the date of the last such determination
letter which resulted in, or is likely to result in the revocation of such
determination);
(e) Each Welfare Benefit Plan, each Pension Benefit Plan and each Other
Program has been administered in compliance with the requirements of the Code,
ERISA and all other applicable laws, and all reports and disclosures required by
ERISA, the Code and any other applicable laws with respect to each Welfare
Benefit Plan, each Pension Benefit Plan and each Other Program have been timely
filed;
(f) On and after January 1, 1975, neither the Company, any Company
Subsidiary 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, its Subsidiaries 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, any Company Subsidiary
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 any Company Subsidiary
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, each 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
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Plan, Pension Benefit Plan and Other Program for the two most recent plan years,
have been furnished to Compass;
(i) All Welfare Benefit Plans, Pension Benefit Plans, and Other Programs
related trust agreements or annuity contracts (or any other funding
instruments), are legally valid and binding and in full force and effect and
there are no promised increases in benefits (whether expressed, implied, oral or
written) under any of these plans nor any obligations, commitments or
understandings to continue any of these plans, (whether expressed, implied, oral
or written) except as required by Section 4980B of the Code and Sections 601-608
of ERISA;
(j) There are no claims pending with respect to, or under, any Pension
Benefit Plan, Welfare Benefit Plan or any Other Program, other than routine
claims for plan benefits, and there are no disputes or litigation pending or
threatened with respect to any such plans;
(k) No action has been taken, nor has there been a failure to take any
action that would subject any person or entity to any liability for any income,
excise or other tax or penalty in connection with any Pension Benefit Plan,
Welfare Benefit Plan or any Other Program, other than for income taxes due with
respect to benefits paid; and
(l) Except as otherwise set forth in Schedule 3.14(l), neither the
execution and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment to be made by the Company or
any Company Subsidiary (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 any Company Subsidiary 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. There are no unfair labor practice complaints
pending against the Company or any Company Subsidiary 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 any Company Subsidiary, nor of
any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any such employees. The Company and its Subsidiaries 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 its Subsidiaries are engaged in any
unfair labor practice.
SECTION 3.16 Leases, Contracts and Agreements. Schedule 3.16 sets forth
an accurate and complete description of all leases, subleases, licenses,
contracts and agreements to
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which the Company or any Company Subsidiary is a party or by which the Company
or any Company Subsidiary is bound which obligate or may obligate the Company or
any Company Subsidiary in the aggregate for an amount in excess of $25,000 over
the entire term of any such agreement or related contracts of a similar nature
which in the aggregate obligate or may obligate the Company or any of its
Subsidiaries in the aggregate for an amount in excess of $25,000 over the entire
term of such related contracts (the "Contracts"). 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 its Subsidiaries, but does include unfunded loan commitments
and letters of credit issued by the Company or its Subsidiaries where the
borrowers' total direct and indirect indebtedness to its Subsidiaries is in
excess of $25,000. Except as set forth in Schedule 3.16, no participations or
loans have been sold which have buy back, recourse or guaranty provisions which
create contingent or direct liabilities of the Company or its Subsidiaries. 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 its Subsidiaries under the Contracts are
current, there are no existing defaults by the Company or its Subsidiaries under
the Contracts and no termination, condition or other event has occurred which
(whether with or without notice, lapse of time or the happening or occurrence of
any other event) would constitute a default. The Company and each of its
Subsidiaries has a good and valid leasehold interest in each parcel of real
property leased by it free and clear of all mortgages, pledges, liens,
encumbrances and security interests.
SECTION 3.17 Related Company Transactions. Except as set forth on
Schedule 3.17, there are no agreements, instruments, commitments, extensions of
credit, tax sharing or allocation agreements 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 its Subsidiaries). 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. Except as set forth on Schedule 3.18,
neither the Company nor any of its Subsidiaries is in default in respect to or
is in material 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 OCC, the
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FDIC or the Commissioner; and the consummation of the transactions contemplated
by this Agreement will not constitute such a default or violation as to the
Company or any of its Subsidiaries. The Company and its Subsidiaries have all
permits, licenses, and franchises from governmental agencies required to conduct
their businesses as they are now being conducted.
SECTION 3.19 Insurance. The Company and its Subsidiaries 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. There have been no
claims under such bonds within the last 5 years and neither the Company nor its
Subsidiaries is aware of any facts which would form the basis of a claim under
such bonds. Neither the Company nor its Subsidiaries 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;
provided, however, that no representation or warranty is made as to the
sufficiency of the collateral securing or the collectibility of such loans. The
Company's Subsidiaries do not have in their portfolios any loan exceeding their
legal lending limit, and except as disclosed on Schedule 3.20, the Company's
Subsidiaries have no known significant delinquent, substandard, doubtful, loss,
nonperforming or problem loans.
SECTION 3.21 Fiduciary Responsibilities. The Company and its
Subsidiaries 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 its Subsidiaries 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 its Subsidiaries. The Company and its Subsidiaries own or are
licensed or otherwise have the right to use the items listed in Schedule 3.22.
SECTION 3.23 Environmental Compliance. Except as set forth in Schedule
3.23:
(a) The Company, its Subsidiaries and any property owned or operated by
any of 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 business of the Company or its Subsidiaries in the manner now conducted
relating to such entity's compliance
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with Environmental Laws, (2) constitute a violation of any Environmental Law or
(3) which could have a Material Adverse Effect upon the Company or any Company
Subsidiary;
(b) Neither the Company nor any Subsidiary currently leases, operates,
owns, or exercises managerial functions at nor has formerly leased, operated,
owned, or exercised managerial functions at any facility or real property that
is subject to any actual, or, to the knowledge of the Company or any Company
Subsidiary, any potential or threatened Proceeding under any Environmental Law;
(c) There are no Proceedings pending or, to the knowledge of the Company
or any Company Subsidiary, threatened against the Company or any Company
Subsidiary under any Environmental Law, or relating to the release, threatened
release, management, treatment, storage or disposal of, or exposure to Polluting
Substances (as defined in Section 10.13(d)), and neither the Company nor any
Company Subsidiary has received any notice (whether from any regulatory body or
private person) of any claim under, or violation, or potential or threatened
violation of, any Environmental Law;
(d) There are no actions or Proceedings pending or, to the knowledge of
the Company or any Company Subsidiary, threatened under any Environmental Law
involving the release or threat of release of any Polluting Substances at, on or
under any property where Polluting Substances generated by the Company or any
Company Subsidiary have been disposed, treated or stored;
(e) There is no Property for which the Company or any Company Subsidiary
is or was required to obtain any Permit under an Environmental Law to construct,
demolish, renovate, occupy, operate, or use such Property or any portion of it;
(f) Neither the Company nor any Company Subsidiary 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 at or under any
Property in violation of any Environmental Laws or which would require any
remediation or report or notification 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 for any releases in
compliance with all Environmental Laws;
(i) There is no asbestos containing material present in any Controlled
Property (as defined below) or any Collateral Property (as defined below); and
(j) The Company and its Subsidiaries have fully complied with the
guidelines issued by the OCC contained in Section 213.1 of the Comptroller's
Handbook for National Bank Examiners,
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and any other governmental authority with jurisdiction over the Company and its
Subsidiaries, that directs banks to implement programs to reduce the potential
for banks to incur liability under, or to assess the compliance of borrowers or
Collateral Property with, Environmental Laws.
(k) For purposes of this Section 3.23 and Section 6.10, "Property"
includes (1) any property (whether real or personal) which the Company or any
Company Subsidiary 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 ("Controlled Property") and (2) property now
held as security for a loan or other indebtedness by the Company or any Company
Subsidiary or property currently proposed as security for loans or other credit
the Company or any Company Subsidiary is currently evaluating whether to extend
or has committed to extend ("Collateral Property"). With respect to any
Collateral Property, the representations of this Section 3.23 shall be limited
to the knowledge of the Company.
SECTION 3.24 Regulatory Actions. Except as set forth on Schedule 3.24,
there are no actions or proceedings pending or, to the knowledge of the Company
and its Subsidiaries, threatened against the Company or its Subsidiaries by or
before the FRB, the OCC, the FDIC, the Commissioner, the Environmental
Protection Agency, the Texas Natural Resource Conservation Commission, 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 Company nor any of its Subsidiaries are 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 any of its Subsidiaries have 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 its Subsidiaries 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 its Subsidiaries, there is no fact or circumstance
that would form the basis of any such complaint or inquiry.
SECTION 3.25 Title to Properties; Encumbrances. Except as set forth on
Schedule 3.25, the Company and each of its Subsidiaries has unencumbered, good,
legal, and indefeasible 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 its Subsidiaries in favor of the Company or its Subsidiaries,
whichever is applicable. The Company has made available to Compass all of the
files and information in the possession of the Company or its Subsidiaries
concerning such properties, including any title exceptions which
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might affect indefeasible title or value of such property. The Company and its
Subsidiaries 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. Except as set forth on Schedule 3.25, 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 deed recorded or otherwise been identified in public
records or should have been recorded or so identified as containing Polluting
Substances.
SECTION 3.26 Shareholder List. The 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 July 1, 1997
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 its Subsidiaries, or, to the knowledge of the Company
or its Subsidiaries, any of their 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 any of
its Subsidiaries is responsible for filing with any regulatory or governmental
agency in connection with the Merger will comply in all material respects with
the provisions of applicable law.
SECTION 3.28 Dissenting Shareholders. The Company and its Subsidiaries
have no knowledge of any plan or intention on the part of Company shareholders
owning in the aggregate 5% or more of the Shares to make written demand for
payment of the fair value of such Shares in the manner provided in Article 5.12
of the TBCA.
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SECTION 3.29 Section 368 Representations. (a) There is no plan or
intention by any Company shareholder who is anticipated to receive one percent
(1%) or more of the total Merger Consideration ("1% Shareholder") and, to the
knowledge of the Company, 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
surrendered by dissenting shareholders and 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 1% Shareholder with respect to his 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 its Subsidiaries 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 Texas will assume any debts or obligations
of the holders of the Shares as part of the Merger.
(d) 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 March 31, 1996.
(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 will pay its own expenses which are incurred in connection
with the Merger and neither the Company nor Compass will pay any personal
expenses of the Company's shareholders 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.
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SECTION 3.30 Employee Stock Options. Except as set forth on Schedule
3.30, 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 any Company
Subsidiary.
SECTION 3.31 Accounting Matters. Neither the Company nor any of its
affiliates has taken or agreed to take any action that would prevent Compass
from accounting for the business combination to be effected by the Merger as a
pooling of interests, including, without limitation, any action inconsistent
with the provisions of Exhibit C hereto.
SECTION 3.32 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 Texas by the Company or its
Subsidiaries 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, in light of the circumstances in which they were made, 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.
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 its Subsidiaries 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
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have been duly and validly authorized by Compass' Board of Directors. This
Agreement has been duly executed and delivered by Compass and is a duly
authorized, valid, legally binding and enforceable obligation of Compass,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium, or
other similar laws relating to creditors' rights generally and general equitable
principles, and subject to such shareholder approvals and such approval of
regulatory agencies and other governmental authorities having authority over
Compass as may be required by statute or regulation. Compass is not in violation
of or default under its Certificate of Incorporation or By-Laws or any
agreement, document or instrument under which Compass is obligated or bound, or
any law, order, judgment, injunction, award, decree, statute, rule, ordinance or
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 OCC, the FRB, the FDIC,
and the Commissioner 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
its Subsidiaries 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 1996 Annual Report to Shareholders,
which report (the "Compass 1996 Annual Report") includes, among other things,
consolidated balance sheets of Compass and its Subsidiaries as of December 31,
1996 and 1995, the related consolidated statements of income, shareholders'
equity and cash flows for the years ended December 31, 1996, 1995 and 1994 and
(ii) Compass' quarterly report on Form 10-Q for the quarter ended March 31, 1997
(the "Quarterly Report") which report includes among other things unaudited
balance sheets of Compass and its Subsidiaries as of March 31, 1997 and 1996,
respectively, and the related unaudited consolidated statements of income and
cash flows for the three-month period ending March 31, 1997 and 1996. The
financial statements contained in the Compass 1996 Annual Report and such
Quarterly Report
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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, 1996 and 1995 contained in the Compass 1996 Annual Report
fairly present the consolidated financial condition of Compass and its
Subsidiaries as of the dates thereof, and the related consolidated statements of
income, shareholders' equity and cash flows of Compass and its Subsidiaries
contained therein fairly present the results of operations and cash flows
thereof for the fiscal years then ended. The unaudited consolidated financial
statements of Compass and its Subsidiaries as of March 31, 1997 and 1996,
contained in Compass' Quarterly Report, fairly presents the financial condition,
the results of the operations and changes in cash flows thereof as of 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 1996 Annual Report or Compass' Quarterly Report 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.
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 April 30, 1997, Compass had 64,242,434 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 its Subsidiaries, except the filing of Articles of Merger under the
TBCA, the filing of the Certificate of Merger under the GCL, and such approvals
as may be required from the SEC, the FRB, the OCC, the Commissioner and the
FDIC.
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
(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
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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 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, in light of the circumstances in which they were made, 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 its Subsidiaries (collectively, the "Acquired Companies") to, from the
date of this Agreement to the Closing, except as specifically contemplated by
this Agreement:
(a) operate and conduct the businesses of the Acquired Companies in the
ordinary course of business and consistent with prudent banking practices;
(b) preserve intact the Acquired Companies' corporate existence, business
organization, assets, licenses, permits, authorizations, and business
opportunities;
(c) comply with all material contractual obligations applicable to the
Acquired Companies' operations;
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(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 3.19 (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 Texas in satisfying the conditions in this Agreement, (ii) assist
Compass and Compass Texas in obtaining as promptly as possible all consents,
approvals, authorizations and rulings, whether regulatory, corporate or
otherwise, as are necessary for Compass and Compass Texas 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 OCC, the Commissioner, 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, domestic and foreign;
(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 Acquired
Companies 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;
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(k) deliver to Compass a list (Schedule 5.1(k)), dated as of the Effective
Time, showing all liabilities and obligations of the Acquired Companies, 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 inaccuracies in any
data previously given or made available to Compass or Compass Texas pursuant to
this Agreement; and
(m) provide access, to the extent that the Company or its Subsidiaries
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 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 association or
bylaws;
(b) make any change in the methods used in allocating and charging costs,
except as may be required by applicable law, regulation or GAAP and after notice
to Compass;
(c) make any change in the number of shares of the capital stock issued
and outstanding, or issue, reserve for issuance, grant, sell or authorize the
issuance of any shares of its capital stock or subscriptions, options, warrants,
calls, rights or commitments of any kind relating to the issuance or sale of or
conversion into shares of its capital stock;
(d) contract to create any obligation or liability (absolute, accrued,
contingent or otherwise) except in the ordinary course of business and
consistent with prudent banking practices;
(e) contract to create any mortgage, pledge, lien, security interest or
encumbrances, restrictions, or charge of any kind (other than statutory liens
for which the obligations secured thereby shall not become delinquent), except
in the ordinary course of business and consistent with prudent banking
practices;
(f) cancel any debts, waive any claims or rights of value or sell,
transfer, or otherwise dispose of any of its material properties or assets,
except in the ordinary course of business and consistent with prudent banking
practices;
(g) sell any real estate owned as of the date of this Agreement or acquired
thereafter, which real estate qualifies as "other real estate owned" under
accounting principles applicable to it,
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except in the ordinary course of business and consistent with prudent banking
practices and applicable banking laws and regulations;
(h) dispose of or permit to lapse any rights to the use of any material
trademark, service mark, trade name or copyright, or dispose of or disclose to
any person other than its employees any material trade secret not theretofore a
matter of public knowledge;
(i) except as set forth on Schedule 3.10 and except for regular salary
increases granted in the ordinary course of business within the Company or its
Subsidiaries' budgets consistent with prior practices (provided that for
calendar year 1998, the budget contains normal procedures for officer and
employee compensation increases which cumulative increases do not exceed 4% of
the aggregate current annualized salaries of officers and employees), 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, except for
dividends from the Bank to the Company permitted by Section 6.12;
(k) except through settlement of indebtedness, foreclosure,
the exercise of creditors' remedies or in a fiduciary capacity, acquire the
capital stock or other equity securities or interest of any person;
(l) make any capital expenditure or a series of expenditures of a similar
nature in excess of $25,000 in the aggregate;
(m) make any income tax or franchise tax election or settle or compromise
any federal, state, local or foreign income tax or franchise tax liability, or,
except in the ordinary course of business consistent with prudent banking
practices, make any other tax election or settle or compromise any other
federal, state, local or foreign tax liability;
(n) except for negotiations and discussions between the parties hereto
relating to the transactions contemplated by this Agreement or as otherwise
permitted hereunder, enter into any transaction, or enter into, modify or amend
any contract or commitment other than in the ordinary course of business and
consistent with prudent banking practices;
(o) except as contemplated by this Agreement, adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, or other reorganization or business combination of the Company
or any of its Subsidiaries;
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(p) issue any certificates of deposit except in the ordinary course of
business and in accordance with prudent banking practices;
(q) make any investments except in the ordinary course of business and in
accordance with prudent banking practices;
(r) modify, amend, waive or extend either the Company Loan Documents or
any rights under such agreements;
(s) modify any outstanding loan, make any new loan, or acquire any loan
participation, unless such modification, new loan, or participation is made in
the ordinary course of business, consistent with existing practice, and in
accordance with prudent banking practices;
(t) sell or contract to sell any part of the Company's or its
Subsidiaries' premises;
(u) change any fiscal year or the length thereof;
(v) take or agree to take any action that would prevent Compass from
accounting for the business combination to be effected by the Merger as a
pooling of interests, including, without limitation, any action inconsistent
with the provisions of Exhibit C hereto; or
(w) prepay in whole or in part the Company Indebtedness; or
(x) enter into any agreement, understanding or commitment, written or
oral, with any other person which is in any manner inconsistent with the
obligations of the Company and its directors and its Subsidiaries 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 its Subsidiaries 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, during normal business hours,
throughout the period prior to the Closing, to all of the Company's and its
Subsidiaries' properties, books, contracts, commitments and records, permit
Compass to make such inspections (including without limitation physical
inspection of the surface and subsurface of any property thereof and any
structure thereon) as they may require and furnish to Compass during such period
all such information concerning the Company and its Subsidiaries and their
affairs as Compass may reasonably request. All information disclosed by the
Company to Compass which
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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 Company, Compass agrees to destroy or return to the Company all
copies of such confidential information.
SECTION 6.2 Filing of Regulatory Approvals and SEC Filings. As soon as
reasonably practicable, Compass shall file all notices and applications to the
FRB, the OCC, the Commissioner and the FDIC which Compass deems necessary or
appropriate to complete the transactions contemplated herein, including the
merger of the Bank and Compass Bank, Houston, Texas, ("Compass Bank"). Compass
will deliver to the Company, and the Company will deliver to Compass, copies of
all non-confidential portions of any such applications. As soon as reasonably
practical, Compass shall file with the SEC a Registration Statement on Form S-4
and make any required filings with the state securities authorities and take any
other required actions to cause the Registration Statement and any state
securities filings to become effective.
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 outstanding indebtedness of the
Company or its Subsidiaries with respect to which a consent is required to be
obtained to effectuate the Merger and the transactions contemplated by this
Agreement and has not been so obtained.
SECTION 6.5 Best Good Faith Efforts. All parties hereto agree that the
parties will use their best good faith efforts to secure all regulatory
approvals necessary to consummate the Merger and other transactions provided
herein and to satisfy the other conditions to Closing contained herein.
SECTION 6.6 Exclusivity. The Company shall not solicit, entertain or
negotiate with respect to any offer to acquire the Company or any of its
Subsidiaries from any other person. During the term of this Agreement, neither
the Company nor any of
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its Subsidiaries shall provide information to any other person in connection
with a possible acquisition of the Company or any of its Subsidiaries.
Immediately upon receipt of any such unsolicited offer, the Company will
communicate to Compass the terms of any proposal or request for information and
the identity of parties involved.
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 its Subsidiaries will not make
additional contributions to the employee benefit plans that were sponsored by
the Company or its Subsidiaries immediately prior to the Merger. Compass agrees
that the employees of the Company and its Subsidiaries who are retained as
employees of Compass or Compass 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 its Subsidiaries'
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 its Subsidiaries will be entitled to credit for prior service with
the Company and its Subsidiaries 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 any of its Subsidiaries sponsored a similar
type of plan which the Company or Company Subsidiary 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
Company or Company Subsidiary employee. For purposes of determining each
Company or Company Subsidiary employee's benefit for the year in which the
Merger occurs under the Compass vacation program, any vacation taken by a
Company or Company Subsidiary employee preceding the Effective Time for the year
in which the Merger occurs will be deducted from the total Compass vacation
benefit available to such employee for such year. Compass agrees that for
purposes of determining the number of vacation days available with respect to
each Company 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 its
Subsidiaries vacation policies in effect as of January 1, 1996.
(ii) Employee Pension Benefit Plans: Each Company and Company Subsidiary
employee shall be entitled to credit for past service with the Company and its
Subsidiaries 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 its
Subsidiaries with respect to any defined
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benefit pension plans sponsored (or contributed to) by Compass; instead, Company
and Company Subsidiary 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, but effective as of the Effective Time, the Company and its
Subsidiaries may take such actions as may be necessary to cause each individual
employed by the Company and its Subsidiaries immediately prior to the Effective
Time to have a fully vested and nonforfeitable interest in such employee's
account balance under the 401(k) plan sponsored by the Company as of the
Effective Time.
SECTION 6.9 Merger of Bank. Compass presently intends to cause its
Subsidiaries to merge into Compass Bank immediately after the Merger, and the
Company agrees to cause its Subsidiaries to execute documents and take actions
(conditioned on the Merger being effective) and otherwise cooperate with Compass
during the time the Merger transaction is pending in order to facilitate such
merger of its Subsidiaries into Compass Bank immediately after the Closing.
SECTION 6.10 Environmental Matters. (a) Compass and its consultants,
agents and representatives, shall have the right to the same extent that the
Company and its Subsidiaries have such right, but not the obligation or
responsibility, to inspect any Property, including, without limitation, for the
purpose of conducting asbestos surveys and sampling, and other environmental
assessments and investigations ("Environmental Inspections"). Compass' right to
conduct Environmental Inspections shall include the right to sample and analyze
air, sediment, soil and groundwater of any Property to the same extent that the
Company or its Subsidiaries have such right. Compass may conduct such
Environmental Inspections at any time subject to Section 6.10(d) below.
(b) The Company and its Subsidiaries shall cause to be performed by an
environmental consulting firm acceptable to Compass an environmental
investigation of any Property acquired, leased, foreclosed, managed or
controlled by the Company or its Subsidiaries between the date hereof and the
Closing Date, the scope and results of which shall be acceptable to Compass in
its sole discretion.
(c) The Company and its Subsidiaries shall cause to be performed by an
environmental consulting firm acceptable to Compass an environmental
investigation of any Property in which the Company or its Subsidiaries acquires
a security interest between the date hereof and the Closing Date, scope and
results of which are equivalent to the policies of Compass with respect to
acquiring security interests on real or personal property and the compliance
with which shall be acceptable to Compass in its sole discretion.
(d) Compass shall notify the Company of any physical inspections of
Property which it intends to conduct, and the Company may place reasonable
restrictions on the time of such inspections. Upon Compass' notification to the
Company of the Property upon which it intends to conduct such physical
inspections, the Company and its Subsidiaries shall notify the owner of such
Property and use their best efforts to secure access to such Property for
Compass.
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(e) Each party hereto agrees to indemnify and hold harmless the other party
for any claims for damage to the Property or injury or death to persons in
connection with any Environmental Inspection or secondary investigation of the
Property to the extent such damage, injury or death is directly attributable to
the negligent actions or negligent omissions of such indemnifying party.
Compass shall have no liability or responsibility of any nature whatsoever for
the results, conclusions or other findings related to any Environmental
Inspection, secondary investigation or other environmental survey. If this
Agreement is terminated, then except as otherwise required by law, Compass shall
have no obligation to make any reports to any governmental authority of the
results of any Environmental Inspection, secondary investigation or other
environmental survey, but such reporting shall remain the responsibility of and
within the discretion of the Company. Compass shall have no liability to the
Company or its Subsidiaries for making any report of such results to any
governmental authority.
(f) The Company agrees to make available to Compass and its consultants,
agents and representatives all documents and other material relating to
environmental conditions of the Property including, without limitation, the
results of all other environmental inspections and surveys. The Company also
agrees that all engineers and consultants who prepared or furnished such reports
may discuss such reports and information with Compass and shall be entitled to
certify the same in favor of Compass and its consultants, agents and
representatives in such a manner which will entitle Compass to rely upon such
reports and make all other data available to Compass and its consultants, agents
and representatives. At the written request of the Company, Compass agrees to
provide the Company with a copy of all environmental reports prepared by its
consultants as a result of the Environmental Inspections.
SECTION 6.11 Proxies. The Company acknowledges that the persons listed
in Schedule 6.11 have agreed that they will vote the Shares owned by them in
favor of this Agreement and the transactions contemplated hereby, subject to
required regulatory approvals, and that they will retain the right to vote such
Shares during the term of this Agreement and have given Compass a proxy to vote
such Shares in favor of the Merger if they should fail to do so, pursuant to a
Voting Agreement and Irrevocable Proxy in substantially the form attached hereto
as Exhibit D.
SECTION 6.12 Cooperation on Texas Receipts. The Company and Compass
agree to cooperate in good faith and to use their best efforts, and the Company
agrees to take action reasonably requested by Compass, so as to cause the
Company not to have any Texas gross receipts, including dividends from its
Subsidiaries, for purposes of Texas franchise taxes after the date of
incorporation of Compass Texas.
SECTION 6.13 Exchange Agreement. Immediately prior to the Effective
Time, the Company and Compass agree to enter into, and Compass agrees to cause
Compass Texas 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.
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SECTION 6.14 Director and Officer Indemnification. Compass agrees to
permit the Company to obtain an extended reporting period (otherwise known as
"tail coverage") under the Company's existing director's and officer's
liability policy; provided, however, that the premium expense for such extended
reporting period shall not exceed $20,000. Compass agrees that all rights to
indemnification that the directors and officers of the Company and the Bank have
pursuant to the Articles of Incorporation or Association (and their respective
Bylaws as of the date of this Agreement) of the Company and the Bank shall
survive the Merger four (4) years from the Effective Time and shall continue in
full force and effect. Nothing contained in this Section 6.14 shall require
Compass to indemnify any person who was a director or officer of the Company or
the Bank to a greater extent than the Company or the Bank is, as of the date of
this Agreement, required to indemnify any such person. The indemnification
provisions currently contained in the Articles of Incorporation and Bylaws of
the Company and the Bank shall not be amended after the date hereof.
SECTION 6.15 Exercise of Convertible Securities. The Company shall use
its best efforts to cause each holder of outstanding warrants, options, rights,
convertible debentures or other securities entitling the holder thereof to
acquire Shares (collectively, the "Convertible Securities") to exercise or
convert such Convertible Securities in full prior to the Effective Time.
SECTION 6.16 Inclusion of the Company. Compass agrees that it will not
agree to any provision in a merger agreement or other agreement that would
impede the ability of the Company and Compass to consummate the Merger.
SECTION 6.17 Periodic Filings. From the date hereof to the Effective
Date, Compass shall deliver to the Company, when reasonable available copies of
its periodic reports filed under the Securities Act and the Exchange Act.
SECTION 6.18 Rule 144. From and for a period of three years after the
Effective Time, Compass shall file all reports with the SEC necessary to permit
the stockholders of the Company who may be deemed "underwriters" (within the
meaning of Rule 145 under the Securities Act) of the Company Common Stock to
sell Compass Common Stock received by them in connection with the Merger
pursuant to Rules 144 and 145(d) under the Securities Act if they would
otherwise be so entitled; provided, however, that Compass is otherwise obligated
to file such reports with the SEC.
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:
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(a) the receipt of regulatory approvals which approvals shall not have
imposed any condition or requirement which in the judgment of Compass would
adversely impact the economic or business benefits of the transactions
contemplated by 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 Texas
to Effect the Merger.
The obligations of Compass and Compass Texas 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;
(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 its Subsidiaries;
(d) the directors of the Company and its Subsidiaries shall have delivered
to Compass an instrument in the form of Exhibit J attached hereto dated the
Effective Time releasing the Company and its Subsidiaries from any and all
claims of such directors (except as to their deposits and accounts, and as to
their rights of indemnification pursuant to the Articles of Incorporation,
Association or Bylaws of the Company and the Bank) and shall have delivered to
Compass their resignations as directors of the Company and its Subsidiaries;
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(e) the officers of the Company and its Subsidiaries shall have delivered
to Compass an instrument in the form of Exhibit J attached hereto dated the
Effective Time releasing the Company and its Subsidiaries from any and all
claims of such officers (except as to deposits and accounts and accrued
compensation permitted by their respective agreements with the Company or its
Subsidiaries and as to their rights of indemnification pursuant to the Articles
of Incorporation, Association or Bylaws of the Company and the Bank);
(f) Compass shall have received the opinions of counsel to the Company
acceptable to it as to the matters set forth on Exhibit E attached hereto;
(g) the holders of no more than 5% of the Shares shall have demanded or be
entitled to demand payment of the fair value of their shares as dissenting
shareholders;
(h) Compass shall have received a letter from KPMG Peat Marwick, dated as
of the Effective Time, to the effect that the Merger will qualify for pooling-
of-interests accounting treatment if closed and consummated in accordance with
this Agreement;
(i) the aggregate principal amount of all Company Indebtedness shall not
exceed $43,000;
(j) Compass shall have received from holders of the Company's capital
stock receiving at least 50% of the total Merger Consideration a representation
that they have no present plan or intention to sell or otherwise dispose of
shares of Compass Common Stock received pursuant to the Merger.
(k) Compass shall have received an opinion of counsel satisfactory to it
and addressed to Compass and the Company that the Merger will qualify as a
reorganization under Section 368(a) of the Code;
(l) 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;
(m) Compass shall have determined, in its sole judgment, that the
liabilities and obligations set forth on Schedule 5.1(k) do not have a Material
Adverse Effect;
(n) all warrants, options, rights, convertible debentures or other
securities entitling the holder thereof to acquire Shares shall have been
exercised or converted, or shall have expired, lapsed or terminated, prior to
the Effective Time; and
(o) Compass shall have received certificates dated the Closing executed by
the Chairman of the Board of the Company and by the Chairman of the Board of its
Subsidiaries, and the Secretary
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or Cashier of the Company and its Subsidiaries, respectively, certifying in such
reasonable detail as Compass may reasonably request, to the effect described in
Sections 7.2(a), (b), (c), (g), (i) and (n).
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 Texas 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; and
(c) the Company shall have received the opinion of counsel to Compass and
Compass Texas acceptable to it, as to the matters set forth on Exhibit E
attached hereto;
(d) there shall not have occurred a Material Adverse Effect with respect
to Compass;
(e) the Company and its Subsidiaries shall have delivered to the directors
of the Company and its Subsidiaries an instrument in the form of Exhibit F
attached hereto dated the Effective Time releasing such directors from any and
all claims of the Company and its Subsidiaries (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 Texas in
connection with the transactions contemplated by this Agreement; and
(f) the Company shall have received certificates dated the Closing,
executed by an appropriate officers of Compass and Compass Texas, respectively,
certifying, in such detail as the Company may reasonably request, to the effect
described in Sections 7.3(a) and (b).
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1 Termination. 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, but prior to the Effective Time:
(a) by mutual written consent duly authorized by the Boards of Directors
of Compass and the Company;
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(b) by Compass (i) if Compass learns or becomes aware of a state of facts
or breach or inaccuracy of any representation or warranty of the Company
contained in Article III which constitutes a Material Adverse Effect; (ii) the
Company's material breach of any representation or warranty set forth in Section
3.23; (iii) the factual substance of any warranties set forth in Section 3.23 is
not true and accurate in all material respects irrespective of the knowledge or
lack of knowledge of the Company; (iv) if there shall be a breach of Section
6.10(a), (b) or (c); (v) pursuant to the provisions of Section 1.6(b), or (vi)
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) by the Company if the conditions to Closing contained in Section 7.1
or 7.3 are not satisfied or waived in writing by the Company;
(d) by Compass or the Company if the Effective Time shall not have
occurred on or before February 28, 1998; or
(e) by 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.
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 Sections 6.10, 8.2, 9.1, 10.1 and 10.8. Nothing contained in
this Section 8.2 shall relieve any party from liability for any breach of this
Agreement.
SECTION 8.3 Amendment. (a) 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 Texas 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.
(b) The parties hereto hereby agree to enter into an amendment of this
Agreement in substantially the form of Exhibit G attached hereto for the purpose
of adding Compass Texas as a party hereto, which amendment shall be made prior
to any submission of this Agreement to shareholders of the Company for their
approval. As a condition to the Company's entry into such an amendment, Compass
Texas shall deliver to the Company a certificate in substantially the form of
Exhibit H attached hereto.
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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.
ARTICLE IX.
SURVIVAL
SECTION 9.1 Survival of Representations and Warranties. The parties
hereto agree that all of 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 its
Subsidiaries, 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 incurred by the Company and
its Subsidiaries shall not exceed $175,000. Each party hereto hereby agrees to
and shall indemnify the other parties hereto against any liability arising from
any such fee or payment incurred by such party.
SECTION 10.2 Brokers and Finders. 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 Texas, the Company or its
Subsidiaries 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; Compass Successors. 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 Texas 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. This Agreement
shall be binding upon Compass' successors and assigns.
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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 its Subsidiaries, 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 or its
Subsidiaries' title to and possession of, all of their respective property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority, as shall be reasonably necessary or advisable to carry out the
purposes of and effect the transactions contemplated by this Agreement.
SECTION 10.5 Enforcement of the Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
SECTION 10.6 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 10.7 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered if in person, by cable, telegram or telex or by
telecopy, or five business days after mailing if delivered by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties as follows:
if to Compass or Compass Texas:
D. Paul Jones, Jr.
Chairman and Chief Executive Officer
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Telecopy No.: (205) 933-3043
Charles E. McMahen
Chairman and Chief Executive Officer
Compass Banks of Texas, Inc.
24 Greenway Plaza
Houston, Texas 72046
Telecopy No.: (713) 993-8500
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with copies to:
Daniel B. Graves
Associate General Counsel
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Telecopy No.: (205) 933-3043
and
Annette L. Tripp
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
3400 Texas Commerce Tower, 600 Travis
Houston, Texas 77002
Telecopy No.: (713) 223-3717
if to the Company:
Bradley F. Bracewell
Chairman and Chief Executive Officer
First University Corporation
3633 Rice Boulevard
Houston, Texas 77005
Telecopy No.: (713) 668-2967
with a copy to:
William T. Luedke IV
Bracewell & Patterson
2900 South Tower
711 Louisiana
Houston, Texas 77002
Telecopy No.: (713) 221-1212
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 Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof, except to the extent that the GCL governs aspects of the Merger.
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<PAGE>
SECTION 10.9 Descriptive Headings. The descriptive headings are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
SECTION 10.10 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 10.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 10.12 Incorporation by References. Any and all schedules,
exhibits, annexes, statements, reports, certificates or other documents or
instruments referred to herein or attached hereto are incorporated herein by
reference hereto as though fully set forth at the point referred to in the
Agreement.
SECTION 10.13 Certain Definitions.
(a) "Subsidiary" or "Subsidiaries" 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
circumstance, event or series of events with respect to the financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves,
business or results of operations of the Company and its Subsidiaries taken as a
whole (or when the reference is to Compass, to Compass and its Subsidiaries,
taken as a whole).
(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
42
<PAGE>
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 Texas
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.
(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 its Subsidiaries 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 its Subsidiaries.
[SIGNATURE PAGE FOLLOWS]
43
<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: FIRST UNIVERSITY CORPORATION
By /s/ Debbie Darileh By /s/ Bradley Bracewell
--------------------------- -----------------------------
Its: Assistant Secretary Its: President
H1995A/150524-7
<PAGE>
EXHIBIT A
POOLING TRANSFER RESTRICTIONS AGREEMENT
---------------------------------------
This Pooling Transfer Restrictions Agreement (this "Agreement") is executed
and delivered this ____ day of _________, 1997 by and between Compass
Bancshares, Inc. ("Compass"), First University Corporation (the "Company"), and
the undersigned shareholder of the Company (the "Shareholder").
WHEREAS, Compass and the Company entered into an Agreement and Plan of
Merger dated ______________, 1997 ("Merger Agreement") pursuant to which the
Company will be merged with an existing or to-be-formed subsidiary of Compass
(the "Merger"), and
WHEREAS, Compass has required as a condition to entering into the Merger
Agreement that the Company and the Shareholder and each other affiliate of the
Company deliver to Compass an agreement in substantially the form hereof,
NOW, THEREFORE, in consideration of Compass' agreement to enter into the
Merger Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned, intending to be
legally bound, hereby agree as follows:
1. The Shareholder agrees that he will not sell, pledge, transfer or
otherwise dispose of any shares of the Company's common stock, par value $1.00
per share ("Company Common Stock"), within 30 days prior to the Effective Time
(as defined in the Merger Agreement). The Shareholder further agrees that until
the publication of financial results covering at least 30 days of post-Merger
combined operations of the Company and Compass, he will not sell, pledge,
transfer or otherwise dispose of any shares of the Compass Common Stock to be
acquired by him in the Merger, except for pledges by the Shareholder of all or
part of such Shareholder's Compass Common Stock acquired in the Merger to secure
loans, provided the lender accepts any pledge of such Compass Common Stock
subject to the terms of this Agreement. The Shareholder further agrees that he
will not sell, pledge, transfer or otherwise dispose of any shares of the
Compass Common Stock to be acquired by him in the Merger except in a manner
which is consistent with any additional requirements for Compass' accounting for
the Merger as a pooling of interests, including without limitation any new
requirements imposed by the applicable provisions of the Securities Act of 1933,
the Securities Exchange Act of 1934, and the respective rules and regulations
thereunder.
2. The Shareholder further acknowledges and agrees that he will be
subject to Rule 145 promulgated by the Securities and Exchange Commission under
the Securities Act, and agrees not to transfer any Compass Common Stock received
by him in the Merger except in compliance with the applicable provisions of the
Securities Act, the Exchange Act, and the respective rules and regulations
thereunder.
3. The Shareholder agrees that the shares of Compass Common Stock to be
issued to him in the Merger will bear a restrictive transfer legend in
substantially the following form:
<PAGE>
The shares represented by this certificate are subject to a Pooling
Transfer Restrictions Agreement dated _______ __, 1997 which restricts any
sale or other transfer of such shares prior to the earlier to occur of (i)
the public release by Compass Bancshares, Inc. of 30 days of post-merger
combined operations of ___________ and Compass Bancshares, Inc or (ii)
[insert due date of next Quarterly Report on Form 10-Q or Annual Report on
Form 10-K that will contain required combined financial results]. The
issuer will furnish to the record holder of this certificate, without
charge, upon written request to the issuer at its principal place of
business, a copy of the Pooling Transfer Restrictions Agreement.
Compass agrees to instruct its transfer agent to remove the restrictive legend
from any certificates evidencing shares subject hereto promptly following the
expiration of the transfer restrictions described in Section 1.
4. The Company agrees and the Shareholder acknowledges and agrees that
the Company will not permit the transfer of any shares of Company Common Stock
by the Shareholder or any other Company affiliate within 30 days prior to the
Effective Time.
5. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
2
<PAGE>
IN WITNESS WHEREOF, the undersigned set his hand effective as of the day
first written above.
COMPASS BANCSHARES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
FIRST UNIVERSITY CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
_____________________________________
Signature of Shareholder
_____________________________________
Printed Name of Shareholder
Pooling Transfer Restrictions Agreement
H1995A\150570-2
3
<PAGE>
EXHIBIT B
EXCHANGE AGENT AGREEMENT
------------------------
This Exchange Agent Agreement, dated as of _______, 1998, is made and
entered into by and among Compass Bancshares, Inc., a Delaware corporation
("Compass"), __________________, a Delaware corporation ("Compass Texas"), First
University Corporation, a Texas corporation ("Company"), and Continental Stock
Transfer & Trust Company, a New York banking corporation ("Exchange Agent").
PREAMBLE:
Pursuant to the Agreement and Plan of Merger dated as of ________, 1997
("Merger Agreement") among Compass, Compass Texas and the Company, the Company
shall, at the Effective Time, be merged with Compass Texas. The name of the
surviving corporation shall be Compass Texas Acquisition Corp. ("Surviving
Corporation").
After the Effective Time, the outstanding shares of the Common Stock, par
value $_____ per share (including for this purpose any shares of Common Stock
which can be acquired upon the exercise of any warrant, option, right,
convertible debt instrument or other security pursuant to which shares of Common
Stock may be obtained (collectively, "Derivative Securities")), of the Company
("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 requested Compass to designate the Exchange Agent in
connection with the exchange (the "Exchange") of shares of Company Common Stock
for shares of Compass Common Stock, subject to the terms and conditions hereof
and of the Merger Agreement. The Exchange Agent will receive 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. Continental Stock Transfer & Trust
Company 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 the executed Letters of
Transmittal accompanied by Certificates which are surrendered in accordance
with the provisions of the Merger Agreement. 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, subject to the following sentence, if the person or persons
surrendering such Certificates and Letters of Transmittal appear as a
holder of record of the number of shares surrendered on the list of
shareholders ("Shareholder List") supplied and certified to the Exchange
Agent by the Company 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 determinations
shall be final and binding;
2
<PAGE>
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) From time to time as requested by Compass, the Exchange Agent
shall provide Compass 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.
701 South 20th Street
Birmingham, Alabama 35233
Attn: Michael A. Bean
Telephone No. (205) 558-5740
(c) Exchange Fund. In order to provide for payment of the Merger
Consideration in accordance with the terms of the Merger Agreement,
Compass, from time to time prior to or after the Effective Time, shall
deposit or cause to be deposited with the Exchange Agent cash in an amount
sufficient to make payments in lieu of fractional shares (the "Exchange
Fund"). This Exchange Fund shall not be used for any purpose except as
provided by this Agreement.
(d) Compass Common Stock. Compass Texas 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 Texas and the Company as follows:
3
<PAGE>
(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 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.
4
<PAGE>
(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.
4. 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.
5. 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.
6. Compensation for Services. Compass shall compensate the Exchange
Agent for its services hereunder.
7. Payment of Amounts Due Dissenting Shareholders. In the event that
qualified dissenting shareholders of the Company exercise the rights afforded
them under the Texas Business Corporation Act, such shareholders may be entitled
to payment of an amount other than the Merger Consideration. Any payment for
shares other than the Merger Consideration will be paid only upon the written
instructions of the Surviving Corporation. The Exchange Agent may request and
shall be provided additional funds from the Surviving Corporation in order to
make any required payment to dissenting shareholders, and the Exchange Agent
shall return to Compass any Merger Consideration which would have otherwise been
payable to such persons. The Exchange Agent shall rely on the instructions of
the Surviving Corporation as to all matters covered by this paragraph,
including, without limitation, the time and amount of payment to dissenting
shareholders.
8. 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
5
<PAGE>
only, and not the Exchange Agent, for the payment of any Merger Consideration in
respect of such Certificates.
9. Investment of Exchange Fund. The Exchange Agent shall deposit
portions of the Exchange Fund only as directed or consented to in writing by the
Surviving Corporation.
10. 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.
11. Section Headings. The section headings used herein are for convenience
of reference only and shall not define or limit the provisions of this
Agreement.
12. 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 TEXAS AND SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON THE SUCCESSORS
AND ASSIGNS OF THE PARTIES HERETO.
13. Notices. Notices under this Agreement shall be deemed given if made
in writing and sent via prepaid first-class United States mail, or by nationally
recognized overnight courier, to:
If to Compass:
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attn: Daniel B. Graves
Associate General Counsel
If to the Exchange Agent:
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, New York 10004
Attn: Steven G. Nelson
Chairman of the Board
6
<PAGE>
If to the Company prior
to the Effective Time:
First University Corporation
3633 Rice Boulevard
Houston, Texas 77005
Attn.: Bradley F. Bracewell
Chairman and Chief Executive Officer
If to Compass Texas or, following
the Effective Time, the
Surviving Corporation:
_________________________
c/o Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attn: Daniel B. Graves
14. 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.
15. 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.
16. Defined Terms. Capitalized terms not defined herein have the meanings
ascribed to them in the Merger Agreement.
[SIGNATURE PAGE FOLLOWS]
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:_____________________________________
FIRST UNIVERSITY CORPORATION
By:________________________________________
Name:______________________________________
Title:_____________________________________
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By:________________________________________
Name:______________________________________
Title:_____________________________________
_______________________________
By:________________________________________
Name:______________________________________
Title:_____________________________________
Exhibit A - Form of Letters of Transmittal
Exhibit B - Shareholder List
Exchange Agent Agreement
H1995A\150619-2
8
<PAGE>
EXHIBIT A
LETTER OF TRANSMITTAL
For Shares of Common Stock of First University Corporation
Delivered Pursuant to the Agreement and Plan of Merger dated as of ________,
1997
<TABLE>
<CAPTION>
<S> <C>
By Mail or Overnight Delivery Service to the Exchange Agent: Continental Stock
Transfer & Trust Company
2 Broadway, 19th Floor
New York, New York 10004
Attention: Reorganization Department
</TABLE>
DESCRIPTION OF SHARES SURRENDERED
---------------------------------
Gentlemen:
I, as the registered holder of the below described Shares of First
University Corporation ("Company") hereby surrender to Compass Bancshares, Inc.
("Compass"), such Shares pursuant to the Agreement and Plan of Merger dated as
of ______________, as amended ("Merger Agreement"), by and between Compass,
______________________________. ("Compass Texas"), and the Company in exchange
for ____ shares of Compass Common Stock for each Share so surrendered. I hereby
acknowledge receipt of the Proxy Statement dated__________, 1997, which
described the merger ("Merger") provided by the Merger Agreement.
I represent and warrant to Compass and Compass Texas that I am the true and
lawful owner of the Shares, and have full capacity, power and authority to
exchange the Shares, free and clear of all liens, restrictions and encumbrances
of any kind whatsoever, and the Shares will not be subject to any adverse claim.
I understand that Continental Stock Transfer & Trust Company, as Exchange Agent
for this exchange, may require additional documentation, and I agree, upon
request, to execute and deliver any additional documents or instruments deemed
by the Exchange Agent or Compass reasonably necessary to complete the exchange
of the Shares.
<TABLE>
<CAPTION>
<S> <C>
===============================================================================================================
Name, Address and Social Security Number of Registered Holders | Certificate(s) Surrendered
(correct if wrong) |
- ---------------------------------------------------------------------------------------------------------------
| Certificate Number(s) Total Number of Shares
| Represented
| by Certificate(s)
| ____________________ ____________________
| ____________________ ____________________
| ____________________ ____________________
|
|
| Total Shares _____________________
|
===============================================================================================================
</TABLE>
INSTRUCTIONS REGARDING ISSUANCE OF SHARES
If you wish to have the shares of Compass Common Stock to be issued
pursuant to the Merger Agreement in the name and at the address set forth above,
please sign and date this letter in the space below
<TABLE>
<CAPTION>
<S> <C>
SIGNATURES _________________________________ Date___________________________________
_________________________________ Date___________________________________
Printed Name(s)_________________________________ TIN or SSN#______________________________________
_________________________________
Capacity (Full Title)___________________________
Address ____________________________
(Include Zip Code) ____________________________ Area Code and Telephone No. _____________________
</TABLE>
================================================================================
NEW CERTIFICATES TO BE ISSUED IN A DIFFERENT NAME OR TO A DIFFERENT ADDRESS
If you are entitled to receive shares of Compass Common Stock and wish to
have certificates representing Compass Common Stock issued in a name or to an
address other than the name or address shown on your Company stock certificates,
please indicate the name and address of your assignee below ( You will be
required to pay any transfer or other taxes required by reason of the payment
and delivery of Compass Common Stock to such other person.) (Assignees must
execute the Substitute W-9 enclosed):
Name and Address of Assignee
----------------------------
Name:________________________________ Taxpayer I.D. No. or
(Type or print full name) Social Security No.:____________________
Address:________________________________________________________________________
City, State, Zip Code:__________________________________________________________
================================================================================
GUARANTEE OF SIGNATURES (See Instruction 1.)
-----------------
<TABLE>
<CAPTION>
<S> <C>
AUTHORIZED SIGNATURE __________________________ Date______________, 1997
Printed Name __________________________
Title __________________________ PLACE MEDALLION GUARANTY IN SPACE BELOW
Name of Firm __________________________
Address __________________________
__________________________ Area Code and Telephone No.___________
</TABLE>
================================================================================
<PAGE>
================================================================================
PLEASE COMPLETE SUBSTITUTE FORM W-9. IT IS THE LAST FORM IN THIS PACKAGE
================================================================================
LETTER OF TRANSMITTAL INSTRUCTIONS
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; SIGNATURES;
SIGNATURE GUARANTEES. Please send all certificates for Shares to the Exchange
Agent (the "Exchange Agent"), with the Letter of Transmittal, or a facsimile
thereof, fully completed and signed by you, the registered holder(s). Compass
retains the right to require that a signature on the Letter of Transmittal and
the Share certificates be guaranteed by a participant in a Securities Transfer
Association recognized signature program. If Compass wishes to have your
signature guaranteed, you will be notified by separate letter.
If certificates are registered in the name of a person other than you,
the certificate(s) must be duly endorsed or accompanied by stock powers signed
by the registered holder and the Letter of Transmittal. If the Letter of
Transmittal is executed by an officer on behalf of a corporation or by an
executor, administrator, trustee, guardian, attorney, agent or other person
acting in a fiduciary or representative capacity, the Exchange Agent reserves
the right to require that proper documentary evidence of the authority of the
person executing the Letter of Transmittal. If your Shares are registered in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate Letters of Transmittal as there are different
registrations of certificates. If the tendered certificates are owned of
record by two or more joint owners, each of you must sign the Letter of
Transmittal. Questions regarding evidence of authority, requests for
assistance or additional copies of the Letter of Transmittal may be referred to
the Reorganization Department of the Exchange Agent, at (212) 509-4000,
extension 535.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ANY OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
STRONGLY RECOMMENDED.
2. ISSUANCE OF COMPASS COMMON STOCK AND PAYMENT FOR FRACTIONAL SHARES. You
will receive the Compass Common Stock for your Shares only after receipt and
acceptance by the Exchange Agent and Compass of all of the certificates
representing your Shares, a properly completed and executed Letter of
Transmittal, and any other required documents and upon processing of the
documents by the Exchange Agent. In lieu of issuing fractional shares, Compass
will pay to any Company shareholder entitled to receive a fractional share of
Compass Common Stock, a cash payment based on a price of $_____ per share.
3. TRANSFERS. If the certificate(s) representing the Shares transmitted
hereby are registered in your name and the Letter of Transmittal is properly
signed by you, no endorsements of certificates or separate stock powers are
required. In all other cases, the certificate(s) representing the Shares
transmitted hereby must be endorsed or accompanied by appropriate stock powers,
in either case signed exactly as the name(s) of the registered holder(s) appear
on the certificate(s), and if required, signature(s) on such certificate(s) or
stock power(s) must be guaranteed by an Eligible Institution.
4. IRREGULARITIES. All questions as to the validity, form, eligibility,
acceptance of and delivery of Shares and the issuance of Compass Common Stock
and the payment of cash in lieu of fractional shares will be determined by
Compass, which determination shall be final and binding. Compass reserves the
absolute right to reject any or all tenders determined by Compass not to be in
appropriate form or which would, in the opinion of Compass' counsel, be
unlawful. Compass also reserves the absolute right in its sole discretion, to
waive any of the conditions hereof, or any defect in any tender with respect to
any particular Shares of any particular shareholder, and Compass'
interpretations of the terms and conditions of the Merger Agreement and these
instructions shall be final and binding. The Exchange Agent and Compass shall
not be obligated to give notice of defects or irregularities in tenders, nor
shall they incur any liability for failure to give any such notice. Tenders
will be deemed not to have been made until all defects and irregularities have
been cured or waived.
5. LOST CERTIFICATES. If your share certificates are lost, contact the
Exchange Agent in writing for further instructions.
IMPORTANT TAX INFORMATION
Under the Federal income tax law, you are to provide Compass (as payer)
with a correct taxpayer identification number on Substitute Form W-9 below. As
the record owner of the Shares, you are required to give Compass your Social
Security Number or Employer Identification Number. If the Shares are in more
than one name or are not in the name of the actual owners, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidelines on which number to report. If Compass is not
provided with the correct taxpayer identification number, you may be subject to
a $50 penalty imposed by the Internal Revenue Service. In addition, all
payments that are made to you with respect to Shares (including any cash payable
to you under the Merger Agreement in lieu of fractional shares) may be subject
to backup withholding in which event Compass will be required to withhold 31% of
any payments made to the shareholder.
Exempt shareholders should complete the Substitute Form W-9 below and so
indicate their exempt status by writing "exempt" across the face of the
Substitute Form W-9. In order for a foreign individual to qualify as an exempt
recipient, that shareholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Exchange Agent. See the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 for additional
information.
<PAGE>
COMPASS BANCSHARES, INC.
SUBSTITUTE FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
Taxpayer Identification Number
<TABLE>
<CAPTION>
<S> <C>
----------------------------
PART 1 - PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER IN THE BOX AT | |
NUMBER IN THE BOX AT RIGHT AND CERTIFY BY -----------------------------
SIGNING AND DATING BELOW Social Security Number or
Employer Identification
Number
PART 2 - CHECK THE FOLLOWING BOX IF YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING -------------
UNDER THE PROVISIONS OF SECTION 3406(A)(1)(C) OF THE INTERNAL REVENUE CODE | |
BECAUSE (1) YOU HAVE NOT BEEN NOTIFIED THAT YOU ARE SUBJECT TO BACKUP ------------
WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL INTEREST OR DIVIDENDS OR
(2) THE INTERNAL REVENUE SERVICE HAS NOTIFIED YOU THAT YOU ARE NO LONGER
SUBJECT TO BACKUP WITHHOLDING.
PART 3 - Check the following box if you are awaiting a Taxpayer Identification Number. -------------
| |
------------
</TABLE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
BY CHECKING THE BOX IN PART 3, I CERTIFY UNDER PENALTIES OF PERJURY THAT A
TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE
MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER
TO THE APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY
ADMINISTRATION OFFICE, OR (B) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE
NEAR FUTURE. I understand that if I do not provide a taxpayer identification
number within sixty (60) days, 31% of all reportable payments made to me
thereafter will be withheld until I provide a number.
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
SIGNATURE: _______________________________________
DATE:_______________________________________
PRINTED NAME:_____________________________________
ADDRESS:_____________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
______________________________________________________________________________
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--
- -Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------- -------------------------------------------------------------
GIVE THE SOCIAL GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SECURITY NUMBER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
OF --- NUMBER OF ---
- ---------------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying number
2. Two or more individuals The actual owner of the of the personal representative
(joint account) account or, if combined or trustee unless the legal
funds, any one of the entity itself is not
individuals (1) designated in the account
title.) (5)
3. Husband and wife (joint The actual owner of the
account) account or, if joint funds,
either person(1)
4. Custodian account of a The minor(2) 10. Corporate account The corporation
minor (Uniform Gift to
Minors Act)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5. Adult and minor (joint The adult or, if the minor 11. Religious, charitable, or The organization
account) is the only contributor, the educational organization
minor(1) account
12. Partnership account held The partnership
in the name of the business
6. Account in the name of The ward, minor, or 13. Association, club, or other The organization
guardian or committee incompetent person (3) tax-exempt organization
for a designated ward,
minor, or incompetent
person
7. a The usual revocable The grantor-trustee(1) 14. A broker or registered The broker or nominee
savings trust account nominee
(grantor is also trustee)
b So-called trust The actual owner(1) 15. Account with the The public entity
account that is not a Department of Agriculture
legal or valid trust in the name of a public
under State law entity (such as a State or
local government, school
8. Sole proprietorship The owner(4) district, or prison) that
account receives agricultural
program payments
- ---------------------------------------------------- -------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
<TABLE>
<CAPTION>
<S> <C>
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't .Payments described in section 6049(b)(5) to nonresident
know your number, obtain Form SS-5, Application for a Social aliens.
Security Number Card, or Form SS-4, Application for Employer .Payments on tax-free covenant bonds under section
Identification Number, at the local office of the Social Security 1451.
Administration or the Internal Revenue Service and apply for a .Payments made by certain foreign organizations.
number. .Payments made to a nominee.
Exempt payees described above should file Form W-9 to
PAYEES EXEMPT FROM BACKUP WITHHOLDING avoid possible erroneous backup withholding. FILE THIS
Payees specifically exempted from backup withholding on ALL payments FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
include the following: IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF
.A corporation. THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS
.A financial institution. ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO
.An organization exempt from tax under section 501(a), or an SIGN AND DATE THE FORM.
individual retirement plan. Certain payments other than interest, dividends,
.The United States or any agency or instrumentality thereof. and patronage dividends, that are not subject to
.A State, the District of Columbia, a possession of the United information reporting are also not subject to backup
States, or any subdivision or instrumentality thereof. withholding. For details, see the regulations under
.A foreign government, a political subdivision of a foreign sections 6041, 6041A(a), 6045 and 6050A.
government, or any agency or instrumentality thereof. PRIVACY ACT NOTICE.--Section 6109 requires most recipient
.An international organization or any agency, or instrumentality of dividend, interest or other payments to give taxpayer
thereof. identification numbers to payers who must report the
.A registered dealer in securities or commodities registered in payments to the IRS. The IRS uses the numbers for
the U.S. or a possession of the U.S. identification purposes. Payers must be given the
.A real estate investment trust. numbers whether or not recipients are required to file
.A common trust fund operated by a bank under section 584(a). tax returns. Beginning January 1, 1993, payers must
.An exempt charitable remainder trust, or a non-exempt trust generally withhold 31% of taxable interest, dividend,
described in section 4947(a)(1). and certain other payments to a payee who does not
.An entity registered at all times under the Investment Company furnish a taxpayer identification number to a payer.
Act of 1940. Certain penalties may also apply.
.A foreign central bank of issue.
Payments of dividends and patronage dividends not generally PENALTIES
subject to backup withholding include the following: (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER
.Payments to nonresident aliens subject to withholding under IDENTIFICATION NUMBER.--If you fail to furnish your
section 1441. taxpayer identification number to a payer, you are
.Payments to partnerships not engaged in a trade or business subject to a penalty of $50 for each such failure
in the U.S. and which have at least one nonresident partner. unless your failure is due to reasonable cause and not
.Payments of patronage dividends where the amount received is to willful neglect.
not paid in money. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST
.Payments made by certain foreign organizations. PAYMENTS.--If you fail to include any portion of an
.Payments made to a nominee. includible payment for interest, dividends, or patronage
Payments of interest not generally subject to backup withholding dividends in gross income, such failure will be treated
include the following: as being due to negligence and will be subject to a
.Payments of interest on obligations issued by individuals. penalty of 5% on any portion of an under-payment
Note: You may be subject to backup withholding if this attributable to that failure unless there is clear and
interest is $600 or more and is paid in the course of the convincing evidence to the contrary.
payer's trade or business and you have not provided your (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT
correct taxpayer identification number to the payer. TO WITHHOLDINGS.--If you make a false statement with
.Payments of tax-exempt interest (including exempt-interest no reasonable basis which results in no imposition
dividends under section 852). of backup withholding, you are subject to a penalty
of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.
.Payments described in section 6049(b)(5) to nonresident --Falsifying certifications or affirmations may subject
aliens. you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT
OR THE INTERNAL REVENUE SERVICE
</TABLE>
H1995A/150620-2
<PAGE>
EXHIBIT C
POOLING OF INTEREST CRITERIA
----------------------------
ATTRIBUTES OF COMBINING ENTERPRISES
- -----------------------------------
(a) Autonomy Condition. Each of the combining enterprises is autonomous and
has not been a subsidiary or division of another enterprise within two
years before the plan of combination is initiated.
(b) Independence Condition. Each of the combining enterprises is independent
of the other combining enterprises.
MANNER OF COMBINING INTERESTS
- -----------------------------
(c) One-Year Rule. The combination is effected in a single transaction or is
completed in accordance with a specific plan within one year after the plan
is initiated.
(d) Common-Stock-for-Common-Stock-Condition. An enterprise offers and issues
only common stock with rights identical to those of the majority of its
outstanding voting common stock in exchange for substantially all of the
voting common stock interest of another enterprise at the date the plan of
combination is consummated.
(e) Change-in-Equity-Interests Condition. None of the combining enterprises
changes the equity interest of the voting common stock in contemplation of
effecting the combination either within two years before the plan of
combination is initiated or between the dates the combination is initiated
and consummated; changes in contemplation of effecting the combination may
include distributions to stockholders and additional issuances, exchanges,
and retirements of securities.
(f) Treasury-Stock Condition. Each of the combining enterprises reacquires
shares of voting common stock only for purposes other than business
combinations, and no enterprise reacquires more than a normal number of
shares between the dates the plan of combination is initiated and
consummated.
(g) Proportionate-Interest Condition. The ratio of the interest of an
individual common stockholder to those of other common stockholders in a
combining enterprise remains the same as a result of the exchange of stock
to effect the combination.
(h) Voting-Rights Condition. The voting rights to which the common stock
ownership interests in the resulting combined enterprise are entitled are
exercisable by the stockholders; the stockholders are neither deprived of
nor restricted in exercising those rights for a period.
<PAGE>
(i) Contingency Condition. The combination is resolved at the date the plan is
consummated and no provisions of the plan relating to the issue of
securities or other consideration are pending.
ABSENCE OF PLANNED TRANSACTIONS
- -------------------------------
(j) The combined enterprise does not agree directly or indirectly to retire or
reacquire all or part of the common stock issued to effect the combination.
(k) The combined enterprise does not enter into other financial arrangements
for the benefit of the former stockholders of a combining enterprise, such
as a guaranty of loans secured by stock issued in the combination, that in
effect negates the exchange of equity securities.
(l) The combined enterprise does not intend or plan to dispose of a significant
part of the assets of the combining enterprises within two years after the
combination other than disposals in the ordinary course of business of the
formerly separate enterprise and to eliminate duplicate facilities or
excess capacity.
H1995A/150596-1
<PAGE>
EXHIBIT D
VOTING AGREEMENT AND IRREVOCABLE PROXY
--------------------------------------
This Voting Agreement and Irrevocable Proxy (this "Agreement") dated
as of ________ __, 1997 is executed by and among First University Corporation, a
Texas 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, the Company and Compass have executed that certain Agreement
and Plan of Merger dated as of _______ ___, 1997 (the "Merger Agreement")
whereby the Company will merge with an existing or to-be-formed wholly-owned
subsidiary of Compass (the "Merger"); and
WHEREAS, Section 6.11 of the Merger Agreement requires that the
Company deliver to Compass the irrevocable proxies of the 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 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 capital stock ("Stock") of the Company 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 proposed Amendment to
Agreement and Plan of Merger set forth as Exhibit G thereto (the "Amendment").
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 Amendment, in the event such
Shareholder does not vote in favor of the authorization and approval of the
Merger Agreement and the Amendment.
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
<PAGE>
consent of Compass, directly or indirectly, sell, transfer, assign, pledge,
hypothecate, cause to be redeemed or otherwise dispose of any of the Shares or
grant any proxy or interest in or with respect to any such Shares or deposit
such shares into a voting trust or enter into another voting agreement or
arrangement with respect to such Shares except as contemplated by this
Agreement, unless the Shareholder causes the transferee of such Shares to
deliver to Compass an amendment to this Agreement whereby such transferee or
other holder becomes bound by the terms of this Agreement.
4. This proxy shall be limited strictly to the power to vote the
Shares at the time, for the purpose and 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, including Article 2.29C of the Texas Business Corporation Act.
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, (ii) February 28, 1998, or (iii) 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 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 and the Amendment 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.
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
exhibits thereto, 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.
2
<PAGE>
11. All notices, requests, demands and other communications required
or permitted hereby shall be in writing and shall be deemed to have been duly
given if delivered by hand or mail, certified or registered mail (return receipt
requested) with postage prepaid to the addresses of the parties hereto set forth
on below their signature on the signature pages hereof or to such other address
as any party may have furnished to the others in writing in accordance herewith.
12. This Agreement and the relations among the parties hereto arising
from this Agreement shall be governed by and construed in accordance with the
laws of the State of Texas.
[SIGNATURE PAGES FOLLOW]
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
above written.
FIRST UNIVERSITY CORPORATION
By:_______________________________________
Name:_____________________________________
Title:____________________________________
Address:
3633 Rice Boulevard
Houston, Texas 77005
Attention: Mr. Bradley F. Bracewell
Chairman and Chief Executive Officer
COMPASS BANCSHARES, INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Address:
15 South 20th Street
Birmingham, Alabama 35233
Attention: Mr. Daniel B. Graves
Associate General Counsel
Voting Agreement and Irrevocable Proxy
H1995A/150560-4
4
<PAGE>
SHAREHOLDERS:
___________________________________
___________________________________
Address: _________________________
_________________________
____________ shares of Common Stock
Pledgee: _________________________
Address: _________________________
_________________________
Loan No.: _________________________
Voting Agreement and Irrevocable Proxy
H1995A\1505060-4
5
<PAGE>
EXHIBIT E
OPINIONS REQUIRED FROM COUNSEL
TO THE COMPANY AND THE BANK
---------------------------
(i) the Company is a Texas 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 Texas. The Bank is
a national banking association, duly organized, validly existing and in good
standing under the laws of the United States of America. Each of the Company and
the Bank has all requisite corporate power and authority to carry on its
business as we know it to be conducted and to own, lease and operate its
properties and assets as now owned, leased or operated. Each of the Company and
the Bank is duly qualified and in good standing in Texas;
(ii) the Company has all requisite power and authority to execute and
deliver the Agreement and any other agreements contemplated by the Agreement
(collectively, the "Other 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
Agreement and the Other Agreements and to consummate the transactions
contemplated therein have been duly and validly taken; and the Agreement and the
Other 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' 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
5,000,000 shares of Company Common Stock (as defined in the Agreement) of which
302,618 shares are issued and outstanding (40,0004 of which are held in the
treasury) and 5,000,000 shares of Preferred Stock, none of which is outstanding;
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 to the best of our knowledge,
none of such stock was issued in violation of the preemptive rights of any
person;
(iv) to the best of our knowledge and except as set forth on Schedule 3.2
to the 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 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 association or bylaws of the Company or the Bank,
(b) to the best of our knowledge and except as disclosed in the Agreement,
<PAGE>
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 known to
us 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) to the
best of our knowledge and except as disclosed in the 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 Agreement and except for such consents,
approvals, authorizations, actions or filings as have already been obtained by
Compass or Compass Texas, 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 Agreement;
(vii) except as set forth in Schedule 3.12 to the Agreement, to the best
of our knowledge, neither the Company nor the Bank is a party to any Proceeding
(as defined in the Agreement), nor to the best of our knowledge, is any
Proceeding threatened against or affecting the Company or the Bank, which by the
terms of the Agreement would required to be set forth in Schedule 3.12;
(viii) to the best of our knowledge and except as set forth on Schedule
3.18 to the Agreement, neither the Company nor the Bank is in material default
under any law or regulation, or under any order of any court, commission, board,
bureau, agency or instrumentality wherever located; and
(ix) upon consummation of the transactions contemplated by the Agreement
in accordance with its terms and upon filing of the Articles of Merger relating
to the Merger by the Secretary of State of Texas, and upon filing by the
Secretary of State of Delaware of a Certificate of Merger the Merger will have
been legally consummated in accordance with the laws of the States of Texas and
Delaware with the consequences specified in Article 5.06 of the Texas Business
Corporation Act and Section 259 of the GCL.
H1995A\150600-2
<PAGE>
EXHIBIT F
OPINIONS REQUIRED FROM COUNSEL
TO COMPASS AND COMPASS TEXAS
----------------------------
(i) Compass and Compass Texas 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 Texas 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 Texas are duly qualified and in good standing in the respective states
where such qualification is required;
(ii) Compass and Compass Texas 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 Texas
(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 Texas enforceable against
Compass and Compass Texas 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, to the best of
our knowledge 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 Texas 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 Texas, (b)
to the best of our knowledge and 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 Texas is a party or by which Compass or Compass Texas 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) to the best of our knowledge and 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 Texas 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 Texas of the Agreement;
(vi) to the best of our knowledge, neither Compass nor Compass Texas is
in violation of or default under the respective Certificates of Incorporation or
Bylaws of Compass or Compass Texas or any agreement, document or instrument
under which Compass or Compass Texas is obligated or bound, or any law, order,
judgment, or regulation applicable to Compass or Compass Texas 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.
H1995A\150607-2
<PAGE>
EXHIBIT G
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
-----------------------------------------
This Amendment to Agreement and Plan of Merger (this "Amendment") dated as
of _________________ is entered into by and among Compass Bancshares, Inc.
("Compass"), _________________ ("_____") and First University Corporation. (the
"Company").
WHEREAS, Compass and the Company entered into an Agreement and Plan of
Merger dated as of ______________ (the "Merger Agreement");
WHEREAS, the Merger Agreement requires that an existing or new subsidiary
of Compass shall be merged with the Company, with the existing or new subsidiary
being the surviving entity;
WHEREAS, ______ is such existing or new subsidiary;
WHEREAS, Section 8.3 of the Merger Agreement requires Compass and the
Company to amend the Merger Agreement for the purpose of making ______ a party
thereto; and
WHEREAS, the parties desire to otherwise amend the Merger Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in the Merger Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Capitalized terms used herein and not defined herein shall have
the meanings set forth in the Merger Agreement.
2. Upon execution of this Amendment, ______ shall become a party to
the Merger Agreement, shall be deemed to be Compass Texas as defined in the
Merger Agreement, and shall succeed to the rights and become subject to the
obligations of Compass Texas as provided in the Merger Agreement.
4. The execution of this Amendment shall not relieve Compass of its
obligations under the Merger Agreement.
5. Except as herein provided, the terms of the Merger Agreement
shall remain in full force and effect.
6. This Amendment may be executed in several counterparts, and by
the parties on separate counterparts, and all such counterparts, when so
executed and delivered, shall constitute but one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF the parties have executed this Amendment as of the date
first written above.
ATTEST: COMPASS BANCSHARES, INC.
By:____________________________ By:_________________________________
Its Its
ATTEST: _____________________________________
By:____________________________ By:_________________________________
Its Its
ATTEST: FIRST UNIVERSITY CORPORATION
By:_________________________________
By:____________________________ Its
Its
H1995A/168241-1
2
<PAGE>
EXHIBIT H
---------
COMPASS TEXAS REPRESENTATIONS CERTIFICATE
____________ ("Compass Texas") hereby represents and warrants to the
Company as follows. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Agreement and Plan of Merger dated
_________________, 1997 by and between Compass Bancshares, Inc. and First
University Corporation (the "Agreement").
1. Compass Texas 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 the Agreement.
2. Compass Texas has full corporate power and authority and no further
corporate proceedings on the part of Compass Texas are necessary to execute and
deliver the Amendment to Agreement and Plan of Merger dated ___________, 1997
("Amendment") and to consummate the transactions contemplated thereby, all of
which have been duly and validly authorized by Compass Texas' Board of
Directors. The Amendment has been duly executed and delivered by Compass Texas
and is a duly authorized, valid, legally binding and enforceable obligation of
Compass Texas, 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 Texas as may be required by statute or regulation.
Except as set forth on the Schedule attached hereto, neither the execution,
delivery nor performance of the Amendment in its entirety, nor the consummation
of all the transactions contemplated thereby, following the receipt of such
approvals as may be required from the SEC, the OCC, 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 Texas.
3. No representation or warranty by Compass Texas in the Amendment, nor
any statement or exhibit furnished to the Company or the Bank under and pursuant
to, or in anticipation of the Amendment, 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.
IN WITNESS WHEREOF, Compass Texas has executed this Certificate this
_____ day of ____________, 1997.
_____________________________________
By:__________________________________________
Name:________________________________________
Title:_______________________________________
Compass Texas Representations Certificate
H1995A\150601-2
<PAGE>
EXHIBIT I
RELEASE OF CLAIMS
-----------------
THIS RELEASE OF CLAIMS ("Release") dated the __ day of ______, 1998, is
executed and delivered by the person executing below to First University
Corporation, a Texas corporation (the "Company"), and West University Bank,
National Association, a national bank, and __________, a ___________
(collectively, the "Subsidiaries").
WHEREAS, Compass Bancshares, Inc. ("Compass") is to acquire the Company
pursuant to that certain Agreement and Plan of Merger dated as of _____________,
1997, by and between Compass and the Company, as amended (the "Agreement"),
whereby the Company will be merged with a wholly-owned subsidiary of Compass;
and
WHEREAS, Compass has required as a condition to such acquisition that the
undersigned execute and deliver this Release to confirm the absence of any
claims by the undersigned against the Company or its subsidiaries, including the
Bank ("Subsidiaries");
NOW, THEREFORE, in consideration of the premises contained herein and ten
dollars and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the undersigned hereby agrees as follows:
Section 1. Release. The undersigned hereby RELEASES and FOREVER
DISCHARGES the Company and its Subsidiaries from all manners of action, causes
of action, suits, debts, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, premises,
variances, trespasses, damages, judgments, executions, claims and demands
whatsoever in law or in equity which the undersigned ever had, now has, or
hereafter can, shall or may have against the Company or its Subsidiaries, in
respect of any and all agreements and obligations incurred on or prior to the
date hereof, or in respect of any event occurring or circumstances existing on
or prior to the date hereof; provided, however, that the Company and its
Subsidiaries shall not be released from any of their respective obligations or
liabilities to the undersigned (i) in respect of accrued compensation permitted
by any written agreement with the Company or its Subsidiaries which is attached
hereto as Exhibit A or which has been scheduled and made part of the Agreement;
(ii) in connection with any indebtedness or contractual obligation or liability
to the undersigned existing on the date hereof; and (iii) as to rights of
indemnification pursuant to the Articles of Incorporation or Association of the
Company and its Subsidiaries.
Section 2. Successors. This Release shall be binding upon the undersigned
and his or her heirs, devisees, administrators, executors, personal
representatives, successors and assigns and shall inure to the benefit of the
Company and its Subsidiaries and their respective successors and assigns.
Section 3. Governing Law. This Release shall be governed by and construed
in accordance with the laws of the State of Texas, without giving effect to
Texas principles of conflicts of law.
<PAGE>
Section 4. Counterparts. This Release may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
Section 5. Modification. This Release may be modified only by a written
instrument executed by the undersigned and the Company and its Subsidiaries.
IN WITNESS WHEREOF, the undersigned has executed this Release effective as
of the date first above written.
_______________________________________
Signature
_______________________________________
Printed Name
STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
This instrument was acknowledged before me on ________, 1998 by
____________________.
_______________________________________
Notary Public in and for the
State of Texas
_______________________________________
Notary's Name Typed or Printed
My Commission Expires:__________________
H1995A\150612-2
2
<PAGE>
EXHIBIT A
---------
3
<PAGE>
EXHIBIT J
RELEASE OF CLAIMS
-----------------
THIS RELEASE OF CLAIMS ("Release") dated the ___ day of ____, 1998, is
executed and delivered by First University Corporation, a Texas corporation (the
"Company"), West University Bank, National Association, a national bank and
___________________, a _______________ corporation (collectively, the
"Subsidiaries").
WHEREAS, the persons listed on Exhibit A attached hereto and made a part
hereof constitute the duly elected directors ("Directors") of the Company and
the Subsidiaries on the date hereof;
WHEREAS, Compass Bancshares, Inc., a Delaware corporation ("Compass"), is
to acquire the Company pursuant to that certain Agreement and Plan of Merger
dated as of ______________, 1997 by and between Compass and the Company, as
amended ("Agreement"), whereby the Company will be merged with a wholly-owned
subsidiary of Compass; and
WHEREAS, the Company has required as a condition to such acquisition that
the Directors be released of any claims by the Company or its Subsidiaries
against the Directors;
NOW, THEREFORE, in consideration of the premises contained herein and ten
dollars and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and its Subsidiaries hereby agree
as follows:
Section 1. Release. The Company and the Subsidiaries hereby RELEASE and
FOREVER DISCHARGE the Directors from all manners of action, causes of action,
suits, debts, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, premises, variances,
trespasses, damages, judgments, executions, claims and demands whatsoever in law
or in equity which the Company or the Subsidiaries ever had, now have, or
hereafter can, shall or may have against the Directors, in respect of any and
all agreements and obligations incurred on or prior to the date hereof, or in
respect of any event occurring or circumstances existing on or prior to the date
hereof; provided, however, that no Director shall be released from (i) any
action arising from intentional fraud, deceit or wilful misconduct in connection
with the transactions contemplated by the Agreement or otherwise, or (ii) his or
her obligations or liabilities to the Company or the Subsidiaries in connection
with any indebtedness or any contractual obligation or liability of such
Director to the Company or the Subsidiaries existing on the date hereof.
Section 2. Successors. This Release shall be binding upon the Company,
and the Subsidiaries and their respective successors and assigns and shall inure
to the benefit of the Directors and their respective heirs, devisees,
administrators, executors, successors and assigns.
<PAGE>
Section 3. Governing Law. This Release shall be governed by and construed
in accordance with the laws of the State of Texas, without giving effect to
Texas principles of conflicts of law.
Section 4. Counterparts. This Release may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
Section 5. Modification. This Release may be modified as to any Director
only by a written instrument executed by the undersigned and such Director.
IN WITNESS WHEREOF, the Company and the Subsidiaries have executed this
Release effective as of the date first above written.
FIRST UNIVERSITY CORPORATION
By:__________________________________________
Name:________________________________________
Title:_______________________________________
WEST UNIVERSITY BANK, NATIONAL
ASSOCIATION
By:__________________________________________
Name:________________________________________
Title:_______________________________________
_____________________________________
By:__________________________________________
Name:________________________________________
Title:_______________________________________
2
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
This instrument was acknowledged before me on ________, 1998 by
____________________, the ______________ of First University Corporation.
----------------------------------------------
Notary Public in and for the
State of Texas
----------------------------------------------
Notary's Name Typed or Printed
My Commission Expires:_________________________
STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
This instrument was acknowledged before me on ______, 1998 by
___________________, the __________________ of West University Bank, National
Association, a national bank.
----------------------------------------------
Notary Public in and for the
State of Texas
----------------------------------------------
Notary's Name Typed or Printed
My Commission Expires:_________________________
3
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF ________ (S)
This instrument was acknowledged before me on ________, 199_ by
____________________, the ______________ of ___________________.
----------------------------------------------
Notary Public in and for the
State of Texas
----------------------------------------------
Notary's Name Typed or Printed
My Commission Expires:_________________________
H1995A\150614-2
4
<PAGE>
EXHIBIT A
---------
Directors
<PAGE>
PROVISIONS OF THE TEXAS BUSINESS CORPORATION ACT
RELATING TO
RIGHTS OF DISSENTING STOCKHOLDERS
ART. 5.11. RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN CORPORATE
ACTIONS
a. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and the
shareholder holds shares of a class or series that was entitled to vote thereon
as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise provided in
the articles of incorporation) of all, or substantially all, the property and
assets, with or without good will, of a corporation if special authorization of
the shareholders is required by this Act and the shareholders hold shares of a
class or series that was entitled to vote thereon as a class or otherwise;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which
the shares of the corporation of the class or series held by the shareholder are
to be acquired
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if;
(1) the shares held by the shareholder are part of a class or series,
shares of which are on the record date fixed to determine the shareholders
entitled to vote on the plan of merger or plan of exchange:
(a) listed on a national securities exchange;
(b) listed on the Nasdaq Stock Market (or successor quotation
system) or designated as a national market security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or successor
entity; or
(c) held of record by not less than 2,000 holders;
(2) the shareholder is not required by the terms of the plan of merger
or plan of exchange to accept for the shareholder's shares any consideration
that is different than the consideration (other than cash in lieu of fractional
shares that the shareholder would otherwise be entitled to receive) to be
provided to any other holder of shares of the same class or series of shares
held by such shareholder; and
(3) the shareholder is not required by the terms of the plan of merger
or the plan of exchange to accept for the shareholder's shares any consideration
other than:
(a) shares of a domestic or foreign corporation that, immediately
after the effective time of the merger or exchange, will be part of a class or
series, shares of which are:
(i) listed, or authorized for listing upon official notice
of issuance, on a national securities exchange;
(ii) approved for quotation as a national market security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc., or successor entity; or
<PAGE>
(iii) held of record by not less than 2,000 holders;
(b) cash in lieu of fractional shares otherwise entitled to be
received; or
(c) any combination of the securities and cash described in
Subdivisions (a) and (b) of this subsection.
ART. 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:
(1) (a) With respect to proposed corporate action that is submitted to a
vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action, setting
out that the shareholder's right to dissent will be exercised if the action is
effective and giving the shareholder's address, to which notice thereof shall be
delivered or mailed in that event. If the action is effected and the
shareholder shall not have voted in favor of the action, the corporation, in the
case of action other than a merger, or the surviving or new corporation (foreign
or domestic) or other entity that is liable to discharge the shareholder's right
of dissent, in the case of a merger, shall, within ten (10) days after the
action is effected, deliver or mail to the shareholder written notice that the
action has been effected, and the shareholder may, within ten (10) days from the
delivery or mailing of the notice, make written demand on the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the case
may be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and class
of the shares owned by the shareholder and the fair value of the shares as
estimated by the shareholder. Any shareholder failing to make demand within the
ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the case
of action other than a merger, and the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, shall, within ten (10) days after the date the
action is effected, mail to each shareholder of record as of the effective date
of the action notice of the fact and date of the action and that the shareholder
may exercise the shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any articles or documents
filed by the corporation with the Secretary of State to effect the action. If
the shareholder shall not have consented to the taking of the action, the
shareholder may, within twenty (20) days after the mailing of the notice, make
written demand on the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, for payment of the fair value of
the shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was delivered
to the corporation pursuant to Section A of Article 9.10 of this Act, excluding
any appreciation or depreciation in anticipation of the action. The demand
shall state the number and class of shares owned by the dissenting shareholder
and the fair value of the shares as estimated by the shareholder. Any
shareholder failing to make demand within the twenty (20) day period shall be
bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, of a
demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or other
entity shall deliver or mail to the shareholder a written notice that shall
either set out that the corporation (foreign or domestic) or other entity
accepts the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was effected, and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed, or shall contain an estimate by the corporation
(foreign or domestic) or other entity of the fair value of the shares, together
with an offer to pay the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder agrees to
2
<PAGE>
accept that amount and, in the case of shares represented by certificates, upon
the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate action
was effected, the value of the shares is agreed upon between the shareholder and
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, payment for the shares shall be made within ninety
(90) days after the date on which the action was effected and, in the case of
shares represented by certificates, upon surrender of the certificates duly
endorsed. Upon payment of the agreed value, the shareholder shall cease to have
any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The
appraisers shall have power to examine any of the books and records of the
corporation the shares of which they are charged with the duty of valuing, and
they shall make a determination of the fair value of the shares upon such
investigation as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them pertinent
evidence as to the value of the shares. The appraisers shall also have such
power and authority as may be conferred on Masters in Chancery by the Rules of
Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the judgment
entered for the value of the shares, as in this Article provided, shall, in the
case of a merger, be treated as provided in the plan of merger and, in all other
cases, may be held and disposed of by the corporation as in the case of other
treasury shares.
3
<PAGE>
F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of a merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action.
If the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
ART. 5.13. PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him shall be conclusively presumed to have
approved and ratified the corporate action from which he dissented and shall be
bound thereby, the right of such shareholder to be paid the fair value of his
shares shall cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20:
Section 17 of Article V of Compass' Bylaws provides in part as follows:
Without limitation, the Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against 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 "GCL"),
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
GCL, 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 Securities 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 Securities
Act and will be governed by the final adjudication of such issue.
Item 21: Exhibits and Financial Statement Schedules.
An index to Exhibits appears at pages II-5 through II-7 hereof.
<PAGE>
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.
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 December 10, 1997.
COMPASS BANCSHARES, INC.
By:*
-------------------------------------
D. Paul Jones, Jr.
Chairman and Chief Executive Officer
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.
3
<PAGE>
SIGNATURE TITLE DATE
* Director, Chairman and Chief December 10, 1997
- --------------------------- Executive Officer
D. Paul Jones, Jr.
* Chief Financial Officer December 10, 1997
- ---------------------------
Garrett R. Hegel
* Chief Accounting Officer December 10, 1997
- --------------------------- and Controller
Michael A. Bean
* Director December 10, 1997
- ---------------------------
Charles W. Daniel
* Director December 10, 1997
- ---------------------------
W. Eugene Davenport
* Director December 10, 1997
- ---------------------------
Jack C. Demetree, Jr.
* Director December 10, 1997
- ---------------------------
Marshall Durbin, Jr.
* Director December 10, 1997
- ---------------------------
Tranum Fitzpatrick
* Director December 10, 1997
- ---------------------------
George W. Hansberry, M.D.
* Director December 10, 1997
- ---------------------------
John S. Stein
* Director December 10, 1997
- ---------------------------
Robert J. Wright
*By: /s/ Daniel B. Graves
-----------------------
Daniel B. Graves,
Attorney-in-fact
4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
- -------------- -----------------------
2 Agreement and Plan of Merger by and between
Compass Bancshares, Inc. and First University
Corporation, dated as of September 25, 1997,
as amended (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 4(b) to
Registration Statement on Form S-8,
Registration No. 33-39095, 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,
1997, 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 Liddell, Sapp, Zivley,
Hill & LaBoon, L.L.P., regarding tax matters
*10(a) Compass Bancshares, Inc., 1982 Long Term
Incentive Plan (incorporated by reference to
Exhibit 1 to the Company's Registration
Statement on Form S-8 filed July 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)
5
<PAGE>
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
- -------------- -----------------------
*10(c) Compass Bancshares, Inc. 1996 Long Term
Incentive Plan (filed as Exhibit 4(g) to
Registration Statement on Form S-8 Registration
No. 333-15117 filed October 30, 1996, with the
Commission and incorporated herein by
reference) (File No. 0-6032)
*10(d) Employment Agreement dated December 14, 1994,
between Compass Bancshares, Inc. and D. Paul
Jones, Jr. (filed as Exhibit 10(d) to the
December 31, 1994 Form 10-K of the Registrant
and incorporated herein by reference)
(File No. 0-6032)
*10(e) Employment Agreement dated December 14, 1994,
between Compass Bancshares, Inc. and Jerry W.
Powell (filed as Exhibit 10(e) to the December
31, 1994 Form 10-K of the Registrant and
incorporated herein by reference)
(File No. 0-6032)
*10(f) Employment Agreement dated December 14, 1994,
between Compass Bancshares, Inc. and Garrett R.
Hegel (filed as Exhibit 10(f) to the
December 31, 1994 Form 10-K of the Registrant
and incorporated herein by reference)
(File No.0-6032)
*10(g) Employment Agreement dated December 14, 1994,
between Compass Bancshares, Inc. and
Byrd Williams (filed as Exhibit 10(g) to the
December 31, 1994 Form 10-K of the Registrant
and incorporated herein by reference)
(File No. 0-6032)
*10(h) Employment Agreement dated December 14, 1994,
between Compass Bancshares, Inc. and Charles E.
McMahen (filed as Exhibit 10(h) to the December
31, 1994 Form 10-K of the Registrant and
incorporated herein by reference)
(File No. 0-6032)
*10(i) Employment Agreement dated December 14, 1994,
between Compass Bancshares, Inc. and G. Ray
Stone (filed as Exhibit 10(i) to the
Registration Statement on Form S-4
Registration No. 333-15373 filed November
1, 1996 with the Commission 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, 1996 (File No. 0-6032)
*13(b) The Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997
(File No. 0-6032)
*13(c) The Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997
(File No. 0-6032)
*13(d) The Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997
(File No. 0-6032)
21 List of Subsidiaries of Compass Bancshares, Inc.
6
<PAGE>
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
- -------------- -----------------------
23(a) Consent of KPMG Peat Marwick LLP, Independent
Certified Public Accountants--Compass
Bancshares, Inc.
23(b) Consent of Deloitte & Touche LLP, Independent
Auditors--First University Corporation
23(a) Consent of Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P. (included in the opinion in Exhibit 8)
24(a) Power of Attorney
24(b) Compass Board of Directors Resolutions
99(a) Notice of Special Meeting of Shareholders of
First University
99(b) Form of Proxy for Special Meeting of
Shareholders of First University
99(c) Chairman's letter to First University
Shareholders
__________________________
* Incorporated by reference
7
<PAGE>
EXHIBIT 5
December 10, 1997
Board of Directors
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Re: Compass Bancshares, Inc. -- Registration of 350,000 Shares of Common
Stock, $2.00 Per Share Par Value, on Securities and Exchange
Commission Form S-4
Gentlemen:
In connection with the registration under the Securities Act of 1933, as
amended, of 350,000 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.
On the basis of the foregoing, I am of the opinion that the shares of the
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>
EXHIBIT 8
December 10, 1997
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 First University Corporation, a Texas corporation ("First
University"), 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 First University with
and into Compass Texas Acquisition Corp. ("Compass Texas"), a Delaware
corporation and wholly-owned subsidiary of Compass, as described in the Proxy
Statement /Prospectus relating to the Merger (the "Proxy Statement/Prospectus")
forming a part of the Registration Statement on Form S-4 (the "Registration
Statement") being filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act").
It is our opinion that the discussions and legal conclusions set forth in
the Proxy Statement/Prospectus under the heading "Summary-Federal Income Tax
Consequences" and "The Merger-Federal Income Tax Consequences" are accurate and
complete in all material respects and constitute our opinion of the material tax
consequences to shareholders of First University 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. 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,
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
<PAGE>
EXHIBIT 21
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 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 Banks of Texas, Inc. Delaware
Compass Bancorporation of Texas, Inc. Delaware
Compass Mortgage Corporation Delaware
Compass Texas Acquisition Corp. Delaware
Compass Texas Management, Inc. Texas
Oaks Trust Corporation Texas
Compass Bank 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
<PAGE>
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
The 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.
KPMG PEAT MARWICK LLP
Birmingham, Alabama
December 5, 1997
<PAGE>
EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Compass Bancshares, Inc.
on Form S-4 of our report dated January 17, 1997 (September 25, 1997 as to Note
16) relating to the consolidated Financial Statements of First University
Corporation as of December 31, 1996, appearing in the Prospectus, which is part
of the Registration Statement.
We also consent to the reference to us under the heading "Experts" in the
Prospectus.
Deloitte & Touche llp
Houston, Texas
December 10, 1997
<PAGE>
EXHIBIT 24(a)
POWER OF ATTORNEY
WHEREAS, Compass Bancshares, Inc. (the "Company") has agreed to file a
registration statement 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 First
University Corporation, Houston, Texas.
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 3rd day of November, 1997.
COMPASS BANCSHARES, INC.
By: /s/ D. Paul Jones, Jr.
-----------------------------
D. Paul Jones, Jr.
Its Chairman and Chief Executive
Officer
/s/ D. Paul Jones, Jr.
-----------------------------
D. Paul Jones, Jr.
/s/ Garrett R. Hegel
-----------------------------
Garrett R. Hegel
/s/ Michael A. Bean
-----------------------------
Michael A. Bean
/s/ Charles W. Daniel
-----------------------------
Charles W. Daniel
/s/ W. Eugene Davenport
-----------------------------
W. Eugene Davenport
/s/ Marshall Durbin, Jr.
-----------------------------
Marshall Durbin, Jr.
<PAGE>
/s/ Tranum Fitzpatrick
-------------------------------
Tranum Fitzpatrick
/s/ George W. Hansberry, M.D.
-------------------------------
George W. Hansberry, M.D.
/s/ John S. Stein
-------------------------------
John S. Stein
/s/ Robert J. Wright
-------------------------------
Robert J. Wright
2
<PAGE>
EXHIBIT 24(b)
CERTIFICATE OF THE ASSISTANT SECRETARY REGARDING
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF COMPASS BANCSHARES, INC., RELATING TO
PROPOSED ACQUISITION OF FIRST UNIVERSITY CORPORATION,
AND ITS SUBSIDIARY, WEST UNIVERSITY BANK NATIONAL ASSOCIATION
HOUSTON, TEXAS
I, the undersigned 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 August 18, 1997:
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 "First University Acquisition") First University
Corporation (the "Company") and its subsidiary, West University Bank,
National Association (the "Bank"), the principal offices of which are
located in Houston, Texas, 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 First University 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 First University 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 First
University Acquisition or the Agreement, and the Board of Directors of the
Corporation hereby approves, authorizes, and ratifies the First University
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 First University Acquisition or the Agreement by the
Corporation as a stockholder; and further
<PAGE>
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 Texas Department of
Banking, and any other appropriate bank and bank holding company regulatory
authorities with respect to the First University Acquisition; and further
RESOLVED, that, in the event that the Agreement shall contemplate that
the Corporation shall issue as consideration in connection with the First
University 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 First University 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 First
University 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 First University
Acquisition, to execute, acknowledge, verify, deliver, file or cause to be
published any application, surety bonds, reports, irrevocable consents to
service of process, appointment of attorneys for service of process, and
any other documents or instruments that may be required under such laws,
and to take any and all further action that they may deem necessary or
advisable in order to maintain any such registration, qualification, or
exemption for so long as they deem necessary as required by law; and
further
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 First University 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
2
<PAGE>
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
Corporation in connection with the First University 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 13th day of November, 1997.
/s/ Daniel B. Graves
---------------------
Daniel B. Graves
Assistant Secretary
Compass Bancshares, Inc.
3
<PAGE>
EXHIBIT 99(a)
FIRST UNIVERSITY CORPORATION
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a Special Meeting of Shareholders ("Meeting")
of First University Corporation, a Texas corporation ("First University"), will
be held at the offices of West University Bank, National Association, a national
banking association and wholly-owned subsidiary of First University, located at
3633 Rice Boulevard, Houston, Texas, on ________, January ____, 1998, at _____
p.m., Central time, for the following purposes:
(1) To approve, ratify, confirm and adopt an Agreement and Plan of Merger
dated as of September 25, 1997 ("Merger Agreement"), as amended,
providing for the merger ("Merger") of First University with and into
Compass Texas Acquisition Corp., a Delaware corporation and a wholly-
owned subsidiary of Compass Bancshares, Inc., a Delaware corporation.
The terms of the Merger Agreement are described in the attached Proxy
Statement/Prospectus, which the Board of Directors of First University
encourages each shareholder to review carefully; and
(2) To consider and transact such other business as may properly come
before the Meeting and any adjournments thereof.
The Board of Directors of First University has fixed ___________, 1997 as
the record date for the determination of the shareholders entitled to notice of
and to vote at the Meeting and any adjournments thereof. Only the holders of
shares of First University's common stock of record at the close of business on
_____________, 1997 are entitled to notice of, and to vote at, the Meeting and
any adjournments thereof.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU OWN, SINCE FAILURE TO VOTE BY PROXY OR IN PERSON AT THE
MEETING IS EQUIVALENT TO A VOTE AGAINST THE MERGER. EVEN IF YOU PLAN TO ATTEND
THE MEETING, AND CERTAINLY IF YOU DO NOT, PLEASE COMPLETE, SIGN AND MAIL THE
ENCLOSED PROXY IN THE ENCLOSED RETURN ENVELOPE PROMPTLY. SUCH PROXY CAN BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE BY FILING A DULY EXECUTED PROXY
BEARING A LATER DATE, BY FILING A WRITTEN NOTICE OF REVOCATION, OR BY APPEARING
IN PERSON AT THE MEETING AND VOTING BY WRITTEN BALLOT.
By Order of the Board of Directors
of First University Corporation
Chairman of the Board
Houston, Texas
____________, 1997
<PAGE>
PROXY FIRST UNIVERSITY CORPORATION PROXY
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
JANUARY ___, 1998
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 First University
Corporation, to be held at the offices of West University Bank, National
Association, a national banking association and wholly-owned subsidiary of First
University, located at 3633 Rice Boulevard, Houston, Texas, on _____________,
January ___, 1998 at _____ p.m., Central time, and at all adjournments thereof
as follows:
(1) Approval, ratification, confirmation and adoption of the Agreement and
Plan of Merger, dated as of September 25, 1997, as amended, by and
between Compass Bancshares, Inc. and First University Corporation.
[ ] For [ ] Against [ ] Abstain
(2) In their discretion, upon any other business which may properly come
before said meeting.
[ ] Authority Withheld
This Proxy will be voted as you specify above. If no specification is
made, the Proxy will be voted FOR proposal (1) and authority will be granted
with respect to (2) above. Receipt of the Notice of Special Meeting of
Shareholders and the Proxy Statement/Prospectus dated ____________, 1997 is
hereby acknowledged.
THIS PROXY IS SOLICITED BY THE FIRST UNIVERSITY CORPORATION 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 or
officer.
Dated _____________________________________, 199__
__________________________________________________
Signature
___________________________________________________
Signature, if held jointly, or office or title held
<PAGE>
EXHIBIT 99(c)
________________, 1997
Dear Shareholders:
A special meeting of shareholders (the "Meeting") of First University
Corporation, a Texas corporation ("First University"), will be held at the
offices of West University Bank, National Association, a national banking
association and wholly-owned subsidiary of First University, located at 3633
Rice Boulevard, Houston, Texas, on _________, January ____, 1998, at _____ p.m.,
Central time. At the Meeting, First University's shareholders will consider and
vote to approve, ratify, confirm and adopt an Agreement and Plan of Merger
pursuant to which it is proposed that First University merge (the "Merger") with
and into Compass Texas Acquisition Corp. ("Compass Texas"), a Delaware
corporation and a wholly-owned subsidiary of Compass Bancshares, Inc., a
Delaware corporation ("Compass"). The enclosed Notice of Special Meeting of
Shareholders outlines the business to be transacted at the Meeting, and the
enclosed Proxy Statement/Prospectus explains the terms of the proposed Merger
and provides other information concerning First University, Compass Texas and
Compass. We urge you to read these materials carefully.
Your Board of Directors believes that the affiliation of First University
with Compass through the Merger will enable First University to serve its
customers and communities better and to compete more effectively with other
financial institutions. After the Merger, First University's shareholders will
own publicly traded stock in a much larger, more diversified financial
institution with a history of paying dividends on its common stock.
For the Merger to become effective, among other conditions described in the
Proxy Statement/Prospectus, the holders of at least two-thirds of the
outstanding shares of First University's common stock must vote in favor of the
Merger. THE BOARD OF DIRECTORS OF FIRST UNIVERSITY RECOMMENDS A VOTE FOR
APPROVAL OF THE MERGER.
You are cordially invited to attend the Meeting. Your Board of Directors
cannot stress strongly enough that the vote of every shareholder, regardless of
the number of shares owned, is important. FAILURE TO VOTE BY PROXY OR IN PERSON
AT THE MEETING IS EQUIVALENT TO A VOTE AGAINST THE MERGER. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. If you
need assistance in completing your Proxy, please call the undersigned or Mr.
Harold Johnson at (713) 664-1020.
Very truly yours,
Chairman of the Board
