<PAGE>
As filed with the Securities and Exchange Commission on January 17, 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)
DELAWARE 6711 63-0593897
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION CODE NUMBER)
OR ORGANIZATION)
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. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
======================================================================================================
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 216,000 (2) $3,206,000 $1,107
======================================================================================================
</TABLE>
(1) Based upon the maximum number of shares anticipated to be issued pursuant
to an Agreement and Plan of Merger dated as of October 2, 1996 between the
Registrant and Greater Brazos Valley Bancorp, Inc. 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, 1996 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
Cover Page of Prospectus of 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
Other Information Data; Market Prices; The Merger; Supervision and Regulation;
Index to Financial Statements of Greater Brazos
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 Greater
Brazos and Compass; Information About Compass; Appendix I
and Appendix II
5. Pro Forma Financial Information Selected Financial Data
6. Material Contacts with the Company Being Acquired Summary; Recommendation of Board of Directors; The Merger;
Information About Greater Brazos
7. Additional Information Required for Reoffering by Persons and Not Applicable
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; Recent Developments; 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 Introduction; Summary; The Merger; Selected Financial Data;
or S-3 Companies Market Prices; Information About Greater Brazos; Comparison
of Rights of Stockholders of Greater Brazos and Compass;
Index to Financial Statements of Greater Brazos
D. Voting and Management Information
---------------------------------
18. Information if Proxies, Consents or Authorizations Are to be The Proxy Card; Incorporation of Certain Documents by
Solicited Reference; Introduction; Summary; The Merger; Information
About Compass; Information About Greater Brazos;
Relationships with Independent Accountants; Experts;
Appendix II
19. Information if Proxies, Consents or Authorizations Are Not to Not Applicable
be Solicited, or in an Exchange Offer
</TABLE>
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. COMPASS BANCSHARES, INC.
PROXY STATEMENT/PROSPECTUS
Compass Bancshares, Inc., a Delaware corporation ("Compass"), has filed
this Proxy Statement/Prospectus with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), with respect to 216,000 shares of Compass $2.00 par value
common stock ("Compass Common Stock") to be issued in the proposed merger (the
"Merger") of Greater Brazos Valley Bancorp, Inc., a Texas corporation ("Greater
Brazos"), with and into Compass Banks of Texas, Inc., a Delaware corporation and
wholly-owned subsidiary of Compass ("Compass Texas"). Compass and Greater
Brazos presently intend that following consummation of the Merger, certain
subsidiaries of Compass and Greater Brazos will further merge such that (i)
Greater Brazos Valley Delaware Bancorp, Inc., a Delaware corporation and wholly-
owned subsidiary of Greater Brazos ("GBVD"), will merge with and into Compass
Bancorporation of Texas, Inc., a Delaware corporation and wholly-owned
subsidiary of Compass Texas ("Compass Bancorporation"), and (ii) Commerce
National Bank, a national banking association and wholly-owned subsidiary of
GBVD (the "Bank"), will merge with and into Compass Bank ("Compass Bank-
Houston"), a Texas state bank and wholly-owned subsidiary of Compass
Bancorporation (collectively, the "Subsequent Mergers").
This Proxy Statement/Prospectus constitutes the proxy statement of Greater
Brazos relating to the solicitation of proxies for use at the special meeting of
shareholders of Greater Brazos (the "Meeting") scheduled to be held on
_____________, ___________, 1997 at 5:30 p.m., Central time, at the offices of
the Bank located at 2405 Texas Avenue South in College Station, Texas, and any
adjournments thereof. At the Meeting, the shareholders of Greater Brazos will
consider and vote upon a proposal to approve, ratify, confirm and adopt the
Agreement and Plan of Merger dated as of October 2, 1996, as amended, by and
between Compass and Greater Brazos (the "Merger Agreement") providing for, among
other things, the merger of Greater Brazos with and into Compass Texas and, in
connection therewith, the receipt by Greater Brazos shareholders of Compass
Common Stock. Approval of the Subsequent Mergers is not a condition to
consummation of the Merger; however, approval of the Merger is a condition to
consummation of the Subsequent Mergers. The Greater Brazos shareholders will
not be asked to vote on the Subsequent Mergers. The outcome of the Subsequent
Mergers will not affect the consideration to be received by the Greater Brazos
shareholders in the Merger or the timing of the Merger.
The Merger Agreement provides for the holders of Greater Brazos common
stock, par value $1.00 per share ("Greater Brazos Common Stock"), at the
effective time of the Merger (the "Effective Time"), other than dissenting
shareholders, to receive aggregate merger consideration (the "Merger
Consideration") of 216,000 shares of Compass Common Stock less the number of
shares of Compass Common Stock (the "Option Shares") issued to the holders of
incentive stock options and phantom shares of Greater Brazos Common Stock
(collectively "Convertible Securities"). Holders of Greater Brazos Common Stock
shall receive for each share of Greater Brazos Common Stock held at the
Effective Time a number of shares of Compass Common Stock equal to (i) the
quotient of 216,000 shares of Compass Common Stock less such number of shares of
Compass Common Stock issued to the holders of Convertible Securities, (ii)
divided by the number of shares of Greater Brazos Common Stock outstanding
immediately prior to the Effective Time (the "Per Share Merger Consideration").
In the event the average closing sale price of the Compass Common Stock as
reported by the NASDAQ National Market System for the five days of trading
preceding the fifth business day prior to the Effective Time (the "Share
Determination Market Value") is less than $30.00 per share, Compass may either
(i) terminate the Merger Agreement (the "Pricing Termination Option"), or (ii)
agree to issue an aggregate number of shares of Compass Common Stock (including
the Option Shares) equal to the quotient of $6,480,000 divided by the Share
Determination Market Value ("New Shares"). In such event, each holder of
Greater Brazos Common Stock for each share so held shall receive Merger
Consideration equal to the quotient of the New Shares less the Option Shares
divided by the number of shares of Greater Brazos Common Stock outstanding
immediately prior to the Effective Time. In the event Compass exercises its
Pricing Termination Option, the Merger Agreement shall be terminated, but
Greater Brazos shall have the right to reject such termination of the Merger
Agreement by Compass (the "Termination Rejection") by agreeing to accept an
aggregate of 216,000 shares of Compass Common Stock (including the Option
Shares). Any decision by the Board of Directors of Greater Brazos regarding
whether to terminate the Merger Agreement will be made in its sole discretion
and could result in either (i) Greater Brazos shareholders receiving Merger
Consideration with an aggregate market value of less than $6,480,000, (ii) the
termination of the Merger Agreement, or (iii) Compass agreeing to increase the
number of shares of Compass Common Stock constituting the Merger Consideration.
If the Share Determination Market Value is less than $30.00 per share, there can
be no assurance that Compass will agree to increase the number of shares of
Compass Common Stock and that the Merger Agreement will not terminate, in which
event the Greater Brazos shareholders would not receive any Merger Consideration
but would retain their Greater Brazos Common Stock.
<PAGE>
On ________, 1997, there were 200,674 shares of Greater Brazos Common Stock
issued and outstanding.
Pursuant to Agreements Regarding Convertible Securities executed in
connection with the Merger Agreement, the holders of Convertible Securities will
receive a number of Option Shares equal to the difference of the selling price
per share of Greater Brazos Common Stock minus the exercise price per share of
Greater Brazos Common Stock divided by the Share Determination Market Value and
multiplying that number by the number of the holder's Convertible Securities.
The "selling price per share" is a number equal to the sum of (i) the exercise
price per share times all the Convertible Securities, plus (ii) the "aggregate
dollar value," and dividing that sum by the fully diluted Greater Brazos shares
outstanding. The "aggregate dollar value" is a number equal to the aggregate
number of shares of Compass Common Stock issuable to the shareholders of Greater
Brazos (inclusive of Convertible Securities) times the Share Determination
Market Value. The "exercise price per share" for the incentive stock options
and phantom shares is $15 per share and $0 per share, respectively.
Assuming the Share Determination Market Value (the average closing sale
price of the Compass Common Stock as reported by the NASDAQ National Market
System for the five days of trading preceding the fifth business day prior to
________, 1997) will be $_____, the holders of Convertible Securities will be
entitled to receive in the aggregate approximately ____ Option Shares at
Closing; and further assuming that, immediately prior to the Effective Time,
there will be 200,674 shares of Greater Brazos Common Stock issued and
outstanding and _________ Option Shares, Compass will be required to issue an
aggregate of 216,000 shares of Compass Common Stock to the Greater Brazos
shareholders and holders of Convertible Securities, and each shareholder of
Greater Brazos (except for shareholders choosing to exercise their dissenters'
rights) will be entitled to receive approximately _____ shares of Compass Common
Stock for each share of Greater Brazos Common Stock held.
Notwithstanding the foregoing, the Merger Consideration will be reduced by
the number of shares that would otherwise be issued to dissenting shareholders.
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.
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 Greater Brazos 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 Greater Brazos Common Stock in the Merger; however, it does not cover resales
of shares of Compass Common Stock upon consummation of the proposed
reorganization, and no person is authorized to use this Proxy
Statement/Prospectus in connection with any such resale. SEE "RESALE OF COMPASS
STOCK."
This Proxy Statement/Prospectus is first being mailed or delivered to
Greater Brazos shareholders on or about ________, 1997.
Compass Common Stock is publicly traded in the over-the-counter market and
quoted on the NASDAQ National Market System. On ________, 1997, the last
reported sale price per share of Compass Common Stock was $_____. No active
public trading market exists for the Greater Brazos Common Stock.
<PAGE>
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 regarding Greater Brazos, GBVD and the Bank has
been furnished by Greater Brazos.
GREATER BRAZOS SHAREHOLDERS ARE URGED TO REVIEW AND CAREFULLY
CONSIDER THE RISKS DESCRIBED UNDER "RISK FACTORS".
The date of this Proxy Statement/Prospectus is ________, 1997.
<PAGE>
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<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
THE MERGER...................................................................... 7
REASONS FOR THE MERGER; RECOMMENDATION OF
BOARDS OF DIRECTORS........................................................... 9
THE MEETING..................................................................... 9
RECORD DATE..................................................................... 10
SHAREHOLDER VOTES REQUIRED...................................................... 10
DISSENTERS' RIGHTS.............................................................. 10
CONDITIONS TO CONSUMMATION AND REGULATORY
APPROVALS; TERMINATION.......................................................... 10
FEDERAL INCOME TAX CONSEQUENCES................................................. 11
ACCOUNTING TREATMENT............................................................ 11
RISK FACTORS......................................................................... 12
RECENT DEVELOPMENTS.................................................................. 13
SELECTED FINANCIAL DATA.............................................................. 15
MARKET PRICES........................................................................ 17
THE MERGER........................................................................... 18
GENERAL......................................................................... 18
BACKGROUND AND REASONS FOR THE MERGER........................................... 20
OPINION OF FINANCIAL ADVISOR.................................................... 21
OPERATIONS AFTER THE MERGERS.................................................... 25
OTHER TERMS AND CONDITIONS...................................................... 25
ADDITIONAL AGREEMENTS........................................................... 27
BUSINESS PENDING EFFECTIVE TIME................................................. 27
AMENDMENT; TERMINATION.......................................................... 27
EXCHANGE OF SHARES.............................................................. 28
DISSENTERS' RIGHTS.............................................................. 29
FEDERAL INCOME TAX CONSEQUENCES................................................. 31
GOVERNMENT APPROVALS............................................................ 32
ACCOUNTING TREATMENT............................................................ 32
SUPERVISION AND REGULATION........................................................... 32
GENERAL......................................................................... 32
COMPASS, COMPASS TEXAS AND COMPASS
BANCORPORATION.................................................................. 33
THE SUBSIDIARY BANKS............................................................ 35
OTHER........................................................................... 36
DESCRIPTION OF COMPASS COMMON AND
PREFERRED STOCK................................................................. 37
COMPASS COMMON STOCK............................................................ 37
DIVIDENDS....................................................................... 37
PREEMPTIVE RIGHTS............................................................... 38
VOTING RIGHTS................................................................... 38
LIQUIDATION..................................................................... 38
COMPASS PREFERRED STOCK......................................................... 38
COMPARISON OF RIGHTS OF SHAREHOLDERS
OF GREATER BRAZOS AND COMPASS................................................... 39
CHARTER AND BYLAW PROVISIONS AFFECTING
COMPASS STOCK................................................................... 39
CERTAIN DIFFERENCES BETWEEN THE CORPORATION
LAWS OF TEXAS AND DELAWARE AND CORRESPONDING
CHARTER AND BYLAW PROVISIONS.................................................... 39
MERGERS......................................................................... 39
APPRAISAL RIGHTS................................................................ 40
SPECIAL MEETINGS................................................................ 40
ACTIONS WITHOUT A MEETING....................................................... 41
ELECTION OF DIRECTORS........................................................... 41
VOTING ON OTHER MATTERS......................................................... 41
PREEMPTIVE RIGHTS............................................................... 42
DIVIDENDS....................................................................... 42
LIQUIDATION RIGHTS.............................................................. 42
LIMITATION OF LIABILITY AND INDEMNIFICATION..................................... 43
REMOVAL OF DIRECTORS............................................................ 43
INSPECTION OF BOOKS AND RECORDS................................................. 44
ANTITAKEOVER PROVISIONS......................................................... 44
RESALE OF COMPASS STOCK.............................................................. 44
INFORMATION ABOUT COMPASS............................................................ 45
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE....................................................................... 45
INTERESTS OF CERTAIN PERSONS.................................................... 45
INFORMATION ABOUT GREATER BRAZOS..................................................... 45
SERVICES, EMPLOYEES AND PROPERTIES.............................................. 45
COMPETITION..................................................................... 46
LEGAL PROCEEDINGS............................................................... 46
MARKET PRICE AND DIVIDENDS...................................................... 46
BENEFICIAL OWNERSHIP OF GREATER BRAZOS
COMMON STOCK BY GREATER BRAZOS
MANAGEMENT AND PRINCIPAL SHAREHOLDERS........................................... 47
THE KSOP49
STOCK OPTION PLAN............................................................... 50
PHANTOM STOCK PLAN.............................................................. 50
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF GREATER BRAZOS
VALLEY BANCORP, INC............................................................. 51
RESULTS OF OPERATIONS........................................................... 51
GENERAL......................................................................... 51
NET INTEREST INCOME............................................................. 51
PROVISION FOR LOAN LOSSES....................................................... 55
NON-INTEREST INCOME............................................................. 55
NON-INTEREST EXPENSE............................................................ 55
FEDERAL INCOME TAXES............................................................ 56
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL
CONDITION....................................................................... 56
CAPITAL RESOURCES............................................................... 56
LIQUIDITY....................................................................... 57
INTEREST RATE SENSITIVITY....................................................... 58
INVESTMENT SECURITIES........................................................... 60
DEPOSITS........................................................................ 61
LOANS........................................................................... 62
ALLOWANCE FOR LOAN LOSSES AND RISK ELEMENTS..................................... 62
NONACCRUAL, PAST DUE AND RESTRUCTURED
LOANS........................................................................... 64
RETURN ON EQUITY AND ASSETS..................................................... 64
RELATIONSHIPS WITH INDEPENDENT
ACCOUNTANTS..................................................................... 65
EXPERTS.............................................................................. 65
LEGAL OPINIONS....................................................................... 65
INDEMNIFICATION...................................................................... 65
OTHER MATTERS........................................................................ 66
</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 GREATER BRAZOS 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 ________, 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,
1995 (File No. 0-6032);
(ii) Compass' Proxy Statement dated March 6, 1996, relating to its annual
meeting of shareholders held on April 9, 1996 (File No. 0-6032);
(iii) Compass' Quarterly Report on Form 10-Q for the quarter ended March
31, 1996 (File No. 0-6032);
(iv) Compass' Quarterly Report on Form 10-Q for the quarter ended June
30, 1996 (File No. 0-6032);
(v) Compass' Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 (File No. 0-6032);
(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).
-1-
<PAGE>
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.
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, Greater Brazos 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, Greater Brazos 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 Greater Brazos Valley
Bancorp, Inc., a Texas corporation ("Greater Brazos"), for use at the special
meeting of Greater Brazos 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 Greater
Brazos with and into Compass Banks of Texas, Inc., a Delaware corporation and
wholly-owned subsidiary of Compass ("Compass Texas"). Compass and Greater
Brazos presently intend that following consummation of the Merger, certain
subsidiaries of Compass and Greater Brazos will further merge such that (i)
Greater Brazos Valley Delaware Bancorp, Inc., a Delaware corporation and wholly-
owned subsidiary of Greater Brazos ("GBVD"), will merge with and into Compass
Bancorporation of Texas, Inc., a Delaware corporation and wholly-owned
subsidiary of Compass Texas ("Compass Bancorporation"), and (ii) Commerce
National Bank, a national banking association and wholly-owned subsidiary of
GBVD (the "Bank"), will merge with and into Compass Bank ("Compass Bank-
Houston"), a Texas state bank and wholly-owned subsidiary of Compass
Bancorporation (collectively the "Subsequent Mergers").
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 October 2, 1996, as amended, by and between Compass and
Greater Brazos (the "Merger Agreement"), pursuant to which Greater
Brazos 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 Greater Brazos shareholders will not be asked to vote on the Subsequent
Mergers. Approval of the Subsequent Mergers is not a condition to consummation
of the Merger; however, approval of the Merger is a condition to consummation of
the Subsequent Mergers. The outcome of the Subsequent Mergers will not affect
the consideration to be received by the Greater Brazos shareholders in the
Merger or the timing of the Merger.
The Board of Directors of Greater Brazos 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, Greater Brazos had 200,674 shares of common stock, $1.00 par value
per share ("Greater Brazos Common Stock"), authorized, all of which shares were
issued and outstanding. As of the Record Date, the Greater Brazos Common Stock
was held of record by 135 persons or entities. Each share of Greater Brazos
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 Greater Brazos 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 Greater Brazos Common Stock is
required for approval of the Merger. GREATER BRAZOS' BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER. SEE "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 Greater Brazos control, with the
power to vote, an aggregate of 93,602 shares of Greater Brazos Common Stock,
comprising approximately 46.6% of the total shares of Greater Brazos Common
Stock issued and outstanding as of the Record Date. Officers, directors and
certain shareholders of Greater
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Brazos owning 130,625 shares of Greater Brazos Common Stock, comprising
approximately 65.1% of the total shares of Greater Brazos Common Stock issued
and outstanding as of the Record Date, have agreed, pursuant to a Voting
Agreement and Irrevocable Proxy (the "Voting Agreement"), to vote their shares
in favor of the Merger. SEE "SUMMARY--REASONS FOR THE MERGER; RECOMMENDATION OF
BOARD OF DIRECTORS"; "SUMMARY--SHAREHOLDER VOTES REQUIRED"; "THE MERGER--
GENERAL"; "THE MERGER--ADDITIONAL AGREEMENTS"; AND "INFORMATION ABOUT GREATER
BRAZOS--BENEFICIAL OWNERSHIP OF GREATER BRAZOS COMMON STOCK BY GREATER BRAZOS
MANAGEMENT AND PRINCIPAL SHAREHOLDERS".
Proxies in the form enclosed are solicited by Greater Brazos' 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, Greater Brazos' 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 Greater Brazos'
Board of 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
Greater Brazos' 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 Greater Brazos, 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 Greater Brazos Common Stock held of record by such persons, and Greater
Brazos 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 Greater
Brazos Common Stock held of record by them, and Greater Brazos 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. Greater
Brazos' principal executive offices are located at 2405 Texas Avenue South,
College Station, Texas 77840, and its telephone number is (409) 693-6930.
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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. Shareholders are
urged to read carefully the entire Proxy Statement/Prospectus and the
related documents.
PARTIES TO THE MERGER
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"), an Alabama state bank
headquartered in Birmingham, Alabama, Central Bank of the South, an Alabama
state bank headquartered in Anniston, Alabama, and Compass Bank ("Compass
Bank-Florida"), a Florida state member bank headquartered in Jacksonville,
Florida. Compass Bank and Compass Bank-Florida conduct a general, full-
service commercial and consumer banking business through 87 banking offices
located in 45 communities in Alabama and 33 banking offices in Florida.
Compass Bank 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.
Compass Texas is a Delaware corporation and wholly-owned subsidiary of
Compass. Compass Texas and its wholly-owned subsidiary, Compass
Bancorporation, are bank holding companies registered with the Federal
Reserve under the BHC Act. Compass Bancorporation owns Compass Bank, a
Texas state bank headquartered in Houston, Texas ("Compass Bank-Houston"),
River Oaks Trust Company, a Texas trust company located in Houston, Texas
("River Oaks Trust Company"), and Compass Texas Management, Inc., a Texas
corporation ("Compass Management"). Compass Management provides management
services to its affiliated Texas banks. 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 and 6 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.
Announced acquisitions which are pending include the Merger; Horizon
Bancorp, Inc. and its subsidiary, Horizon Bank & Trust, ssb, located in
Austin, Texas; Enterprise National Bank of
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Jacksonville, located in Jacksonville, Florida; and the Crosby, Texas
branch of Bank One, Texas, National Association.
On September 30, 1996, Compass and its subsidiaries had consolidated
assets of $11.6 billion, consolidated deposits of $9.1 billion, and total
shareholders' equity of $777 million. Of Compass' $11.6 billion of
consolidated assets, approximately $5.8 billion are held in Alabama, $4.8
billion are held in Texas, and $1.0 billion are held in Florida. SEE
"AVAILABLE INFORMATION"; "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE";
"SELECTED FINANCIAL DATA"; AND "INFORMATION ABOUT COMPASS".
Greater Brazos was organized under the laws of the State of Texas on
March 30, 1995, in order for Greater Brazos to indirectly acquire the Bank
and become a bank holding company under the BHC Act. Greater Brazos
currently conducts no operations other than serving as a bank holding
company for the Bank. Greater Brazos derives its revenues primarily from
the operations of the Bank in the form of dividends paid from the Bank to
GBVD and by GBVD to Greater Brazos. In addition, Greater Brazos may
receive tax benefits from any future losses and may also receive income
from management fees. Greater Brazos is subject to regulation by the
Federal Reserve.
The Bank is an independent community bank located in College Station,
Texas with a full service branch located in Bryan, 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 agricultural, commercial, consumer and real estate loans. The
Bank also offers trust services, 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 2405 Texas Avenue South, College
Station, Texas, in a three story brick building. The Bank leases 10,683
square feet on the first and third floors. The College Station location
includes adequate paved parking, a four-lane drive-in facility and an ATM.
The Bank's Bryan, Texas branch is located at 1200 Briarcrest Drive in a
concrete office building. The branch occupies 5,559 square feet on two
floors which are leased by the Bank. The Bryan location also includes
adequate paved parking, an eight-lane drive-in facility and an ATM. The
Bank also has an ATM at 307 University Drive, College Station, Texas.
The Bank considers its service area to be the area encompassing Brazos
County. The activities in which the Bank engages are competitive. Each
activity engaged in 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, 1996, Greater Brazos had total assets of $57.9
million, total deposits of $54.4 million, and total shareholders' equity of
$3.2 million. SEE "SELECTED FINANCIAL DATA"; "INFORMATION ABOUT GREATER
BRAZOS"; "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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________________________________________________________________________________
CONDITION AND RESULTS OF OPERATIONS OF GREATER BRAZOS"; AND FINANCIAL
STATEMENTS OF GREATER BRAZOS.
THE MERGER
The Merger Agreement provides for the holders of Greater Brazos common
stock, par value $1.00 per share ("Greater Brazos Common Stock"), at the
effective time of the Merger (the "Effective Time"), other than dissenting
shareholders, to receive aggregate merger consideration ("Merger
Consideration") of 216,000 shares of Compass Common Stock less the number
of shares of Compass Common Stock (the "Option Shares") issued to the
holders of incentive stock options and phantom shares of Greater Brazos
Common Stock (collectively "Convertible Securities"). Holders of Greater
Brazos Common Stock shall receive for each share of Greater Brazos Common
Stock held at the Effective Time a number of shares of Compass Common Stock
equal to (i) the quotient of 216,000 shares of Compass Common Stock less
such number of shares of Compass Common Stock issued to the holders of
Convertible Securities, (ii) divided by the number of shares of Greater
Brazos Common Stock outstanding immediately prior to the Effective Time
(the "Per Share Merger Consideration"). In the event the average closing
sale price of the Compass Common Stock as reported by the NASDAQ National
Market System for the five days of trading preceding the fifth business day
prior to the Effective Time (the "Share Determination Market Value") is
less than $30.00 per share, Compass may either (i) terminate the Merger
Agreement (the "Pricing Termination Option"), or (ii) agree to issue an
aggregate number of shares of Compass Common Stock (including the Option
Shares) equal to the quotient of $6,480,000 divided by the Share
Determination Market Value ("New Shares"). In such event, each holder of
Greater Brazos Common Stock for each share so held shall receive Merger
Consideration equal to the quotient of the New Shares less the Option
Shares divided by the number of shares of Greater Brazos Common Stock
outstanding immediately prior to the Effective Time. In the event Compass
exercises its Pricing Termination Option, the Merger Agreement shall be
terminated, but Greater Brazos shall have the right to reject such
termination of the Merger Agreement by Compass (the "Termination
Rejection") by agreeing to accept an aggregate of 216,000 shares of Compass
Common Stock (including the Option Shares). Any decision by the Board of
Directors of Greater Brazos regarding whether to terminate the Merger
Agreement will be made in its sole discretion and could result in either
(i) Greater Brazos shareholders receiving Merger Consideration with an
aggregate market value of less than $6,480,000, (ii) the termination of the
Merger Agreement, or (iii) Compass agreeing to increase the number of
shares of Compass Common Stock constituting the Merger Consideration. If
the Share Determination Market Value is less than $30.00 per share, there
can be no assurance that Compass will agree to increase the number of
shares of Compass Common Stock and that the Merger Agreement will not
terminate, in which event the Greater Brazos shareholders would not receive
any Merger Consideration but would retain their Greater Brazos Common
Stock.
On ________, 1997, there were 200,674 shares of Greater Brazos Common
Stock issued and outstanding.
Pursuant to Agreements Regarding Convertible Securities executed in
connection with the Merger Agreement, the holders of Convertible Securities
will receive a number of Option Shares equal to the difference of the
selling price per share of Greater Brazos Common Stock minus the exercise
price per share of Greater Brazos Common Stock divided by the Share
Determination Market Value and multiplying that number by the number of the
holder's Convertible Securities. The "selling price per share" is a number
equal to the sum of (i) the exercise price per share times all the
Convertible Securities, plus (ii) the "aggregate dollar value," and
dividing that sum by the fully diluted Greater Brazos shares outstanding.
The "aggregate dollar value" is a number equal to the aggregate number of
shares of Compass Common Stock issuable to the shareholders of Greater
Brazos (inclusive of Convertible Securities) times the Share Determination
Market Value. The "exercise
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________________________________________________________________________________
price per share" for the incentive stock options and phantom shares is $15
per share and $0 per share, respectively.
Assuming the Share Determination Market Value (the average closing
sale price of the Compass Common Stock as reported by the NASDAQ National
Market System for the five days of trading preceding the fifth business day
prior to ________, 1997) will be $_____, the holders of Convertible
Securities will be entitled to receive in the aggregate approximately ____
Option Shares at Closing; and further assuming that, immediately prior to
the Effective Time, there will be 200,674 shares of Greater Brazos Common
Stock issued and outstanding and _________ Option Shares, Compass will be
required to issue an aggregate of 216,000 shares of Compass Common Stock to
the Greater Brazos shareholders and holders of Convertible Securities, and
each shareholder of Greater Brazos (except for shareholders choosing to
exercise their dissenters' rights) will be entitled to receive
approximately _____ shares of Compass Common Stock for each share of
Greater Brazos Common Stock held.
Notwithstanding the foregoing, the Merger Consideration will be
reduced by the number of shares that would otherwise be issued to
dissenting shareholders.
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.
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 Greater Brazos' personnel will
remain following the Merger. Compass and Greater Brazos presently intend
that immediately following the completion of the Merger, the Bank will be
merged with and into Compass Bank-Houston, subject to the necessary
regulatory approvals. Thereafter, the separate existence of the Bank will
cease, and the former branches of the Bank will become branches of Compass
Bank-Houston. SEE "THE MERGER--GENERAL"; AND "INFORMATION ABOUT GREATER
BRAZOS".
The Merger Agreement also provides that the number of shares of
Compass Common Stock to be received by Greater Brazos shareholders in the
Merger will be adjusted to give effect to any stock dividends or splits
with respect to Compass Common Stock occurring between the date of
execution of the Merger Agreement and 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 Greater Brazos and Compass. Greater Brazos'
Board of Directors believes that the terms of the Merger are fair to
Greater Brazos' shareholders. In addition, a fairness opinion has been
received from The Bank Advisory Group, Inc. ("Advisory") with respect to
the fairness, from a financial point of view, of the Merger to its
shareholders. The fairness opinion is attached to this Proxy
Statement/Prospectus as Appendix III. SEE "SUMMARY--REASONS FOR THE
MERGER; RECOMMENDATION OF BOARD OF DIRECTORS"; "THE MERGER--BACKGROUND AND
REASONS FOR THE MERGER"; "THE MERGER--OPINION OF FINANCIAL ADVISOR"; AND
APPENDIX III.
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REASONS FOR THE MERGER; RECOMMENDATION OF BOARDS OF DIRECTORS
During 1996, certain of the major shareholders of Greater Brazos
determined that the growth of Greater Brazos and the potential for
significant additional increases in value of the shares of Greater Brazos
were limited both by the size of Greater Brazos and the size of the
Bryan/College Station, Texas market. Moreover, Greater Brazos was
experiencing favorable earnings and returns on equity and thus was likely
to be an attractive acquisition for a larger banking institution which
could better afford the growth capital required.
Management recommended to the Board of Directors of Greater Brazos the
approval of the Merger based on Compass' sound financial condition and good
reputation, the consideration to be received by the shareholders, and the
positive effect on depositors and the general community that the Merger
would engender given the stated interest of Compass in increasing the size
and capital of the continuing bank and expanding the range of services to
be offered.
The Greater Brazos Board of Directors in determining to approve the
Merger considered various alternatives including seeking a merger or
consolidation with another financial institution and remaining independent.
The Board determined that, given the relatively small size of Greater
Brazos, the need and desire to reinvest profits realized by Greater Brazos
and the absence of a trading market for shares of Greater Brazos, providing
liquidity to shareholders was of primary concern, which goal would be met
best by the proposed Merger. For the reasons set forth above, the Greater
Brazos Board of Directors unanimously approved the Merger and recommends
approval of the transaction by the Greater Brazos shareholders.
The Merger Agreement was the result of arm's-length negotiations
between representatives of Greater Brazos and Compass. Subject to
satisfaction of certain conditions contained in the Merger Agreement,
Greater Brazos' Board of Directors believes the Merger to be in the best
interests of Greater Brazos' shareholders. GREATER BRAZOS' BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT GREATER BRAZOS SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER and has authorized consummation thereof subject to
approval of the Greater Brazos 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
GREATER BRAZOS AND COMPASS"; "INFORMATION ABOUT COMPASS"; AND "INFORMATION
ABOUT GREATER BRAZOS".
Advisory has delivered an opinion to the Board of Directors of Greater
Brazos to the effect that, based upon and subject to the qualifications
described in such opinion, the terms of the Merger, including the
consideration to be received by the holders of Greater Brazos Common Stock,
are fair and equitable from a financial point of view. For additional
information concerning the matters considered by Advisory in reaching its
opinion, the limitations on its review, and the fees received or to be
received by it, see "THE MERGER - OPINION OF FINANCIAL ADVISOR" AND
APPENDIX III.
THE MEETING
The Meeting will be held on ________, ________, 1997 at 5:30 p.m.,
Central time, at the offices of the Bank located at 2405 Texas Avenue
South, in College Station, Texas for the purpose of approving, ratifying,
confirming and adopting the Merger Agreement.
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RECORD DATE
The Record Date has been set by Greater Brazos' Board of Directors as
the close of business on _________, 1997. Only holders of Greater Brazos'
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 the Greater Brazos Common Stock issued
and outstanding and entitled to vote at the Meeting.
The directors and executive officers of Greater Brazos control, with
the power to vote, an aggregate of 93,602 shares of Greater Brazos Common
Stock, comprising approximately 46.6% of the total shares of Greater Brazos
Common Stock issued and outstanding and entitled to vote at the Meeting.
Officers, directors and certain shareholders of Greater Brazos owning
130,265 shares of Greater Brazos Common Stock, comprising approximately
65.1% of the total shares of Greater Brazos 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.
Compass Texas has one share 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 Greater Brazos 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 GREATER BRAZOS AND COMPASS--DISSENTERS' RIGHTS"; AND APPENDIX II.
CONDITIONS TO CONSUMMATION AND REGULATORY APPROVALS; TERMINATION
Consummation of the Merger is subject to approval by the shareholders
of Greater Brazos, 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-Houston is subject to approval by the
Federal Deposit Insurance Corporation (the "FDIC") and the Banking
Commissioner of Texas (the "Commissioner"). The Federal Reserve, the FDIC
and the Commissioner have each issued their respective approvals of the
Merger and the Subsequent Merger of the Bank into Compass Bank-Houston. SEE
"THE MERGER--GOVERNMENTAL APPROVALS".
A formal application under the BHC Act was approved by the Federal
Reserve on December 4, 1996, and the 15 day waiting period following such
approval during which the transaction could not be consummated has expired.
The FDIC approval dated December 16, 1996 was also subject to a 15 waiting
period during which the United States Department of Justice ("Justice
Department"), pursuant to the Bank Merger Act, could have opposed the
Subsequent Merger of the Bank into Compass Bank-Houston under antitrust
laws. This waiting period has also expired with no objection or adverse
action by the Justice Department.
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The respective boards of directors of Compass and Greater Brazos may
terminate the Merger Agreement as a result of, among other things, the
failure of any of the several conditions to each of their respective
obligations to close, or if the Effective Time does not occur on or before
the expiration of 240 days from the date of the Merger Agreement or such
later date agreed to in writing by Compass and Greater Brazos; provided,
however, that the Merger shall not be consummated prior to January 1, 1997.
SEE "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 Greater Brazos 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 Greater Brazos 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. GREATER BRAZOS 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 expects 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 the Merger will qualify for pooling-
of-interests accounting treatment. SEE "THE MERGER--ACCOUNTING TREATMENT".
________________________________________________________________________________
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RISK FACTORS
Greater Brazos shareholders currently control Greater Brazos through their
ability to elect the Board of Directors of Greater Brazos and vote on various
matters affecting Greater Brazos. The Merger will transfer control of Greater
Brazos from Greater Brazos' shareholders to Compass. As of the Effective Time,
the shareholders of Greater Brazos will become shareholders of Compass, a multi-
bank holding company. As a result of the Merger, the former shareholders of
Greater Brazos will no longer have the ability to control or influence the
management policies of Greater Brazos' 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 GREATER BRAZOS--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. Greater Brazos' Articles of
Incorporation and Bylaws do not contain similar restrictions, although under
Texas law Greater Brazos' shareholders may take action without a meeting only by
unanimous written consent. SEE "COMPARISON OF RIGHTS OF SHAREHOLDERS OF GREATER
BRAZOS 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 either (i) terminate the Merger Agreement, or (ii) agree to
issue an aggregate number of shares of Compass Common Stock (including the
Option Shares) equal to the quotient of $6,480,000 divided by the Share
Determination Market Value. In such event, each holder of Greater Brazos Common
Stock for each share so held shall receive Merger Consideration equal to the
quotient of the New Shares less the Option Shares divided by the number of
shares of Greater Brazos Common Stock outstanding immediately prior to the
Effective Time. In the event Compass exercises its Pricing Termination Option,
the Merger Agreement shall be terminated, but Greater Brazos shall have the
right to reject such termination of the Merger Agreement by Compass by agreeing
to accept an aggregate of 216,000 shares of Compass Common Stock (including the
Option Shares). Any decision by the Board of Directors of Greater Brazos
regarding whether to terminate the Merger Agreement will be made in its sole
discretion and could result in either (i) Greater Brazos shareholders receiving
Merger Consideration with an aggregate market value of less than $6,480,000,
(ii) the termination of the Merger Agreement, or (iii) Compass agreeing to
increase the number of shares of Compass Common Stock constituting the Merger
Consideration. If the Share Determination Market Value is less than $30.00 per
share, there can be no assurance that Compass will agree to increase the number
of shares of Compass Common Stock and that the Merger Agreement will not
terminate, in which event the Greater Brazos shareholders would not receive any
Merger Consideration but would retain their Greater Brazos Common Stock.
-12-
<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
Greater Brazos to receive shares of Compass Common Stock with a market value
less than $6,480,000 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.
RECENT DEVELOPMENTS
On January , 1997, Compass Trust I, a statutory business trust formed under
the laws of the State of Delaware (the "Series A Issuer"), issued 100,000
Capital Securities (the "Capital Securities") in a securities offering pursuant
to a registration statement filed with the Commission thereby raising $100
million. Compass is the owner of all of the beneficial interests represented by
common securities of the Series A Issuer ("Series A Common Securities" and,
collectively with the Capital Securities, the "Series A Securities"). The Series
A Issuer exists for the sole purpose of issuing the Series A Securities and
investing the proceeds thereof in Junior Subordinated Deferrable Interest
Debentures, Series A (the "Series A Subordinated Debentures"), issued by
Compass. The Capital Securities have a preference under certain circumstances
with respect to cash distributions and amounts payable on liquidation,
redemption or otherwise over the Series A Common Securities.
Holders of the Capital Securities are entitled to receive preferential
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears at an annual rate of 8.23% ("Distributions").
Subject to certain exceptions, as described herein, Compass has the right to
defer payment of interest on the Series A Subordinated Debentures at any time or
from time to time for a period not exceeding twenty consecutive quarters with
respect to each deferral period (each, an "Extension Period"), provided that no
Extension Period may extend beyond the stated maturity of the Series A
Subordinated Debentures. If interest payments on the Series A Subordinated
Debentures are so deferred, Distributions on the Capital Securities will also be
deferred and Compass will not be permitted, subject to certain exceptions, to
declare or pay any cash distributions with respect to the Compass Common Stock
or debt securities that rank pari passu with or junior to the Series A
Subordinated Debentures. During an Extension Period, interest on the Series A
Subordinated Debentures will continue to accrue (and the amount of Distributions
to which holders of the Series A Preferred Securities are entitled will
accumulate).
The Series A Subordinated Debentures are unsecured and subordinated to all
Compass senior debt and effectively subordinated to all existing and future
liabilities of Compass subsidiaries.
Compass has fully, irrevocably and unconditionally guaranteed all of the
Series A Issuer's obligations under the Capital Securities, including but not
limited to the payment of Distributions and payments on liquidation or
redemption of the Capital Securities.
The Capital Securities are subject to mandatory redemption, in whole or in
part, upon repayment of the Series A Subordinated Debentures at maturity or
their earlier redemption and are redeemable prior to maturity at the option of
Compass in certain circumstances.
-13-
<PAGE>
Compass has the right at any time to terminate the Series A Issuer and
cause the Series A Subordinate Debentures to be distributed to the holders of
the Capital Securities in liquidation of the Series A Issuer. In the event of
the termination of the Series A Issuer, after satisfaction of liabilities to
creditors of the Series A Issuer as required by applicable law, the holders of
the Capital Securities will be entitled to receive a liquidation amount of
$1,000 per Capital Security plus accumulated and unpaid Distributions thereon to
the date of payment, which may be in the form of a distribution of such amount
in Series A Subordinated Debentures, subject to certain exceptions,
-14-
<PAGE>
SELECTED FINANCIAL DATA
The following table, except for the lines designated as pro forma,
summarizes certain unaudited consolidated historical financial data of Compass,
and certain unaudited historical financial data of Greater Brazos. The table
also summarizes, where indicated, certain pro forma financial data for Compass,
giving effect to the acquisition of Greater Brazos assuming that the Merger had
been effective at the beginning of 1991. The historical data of Greater Brazos
as of and for the years ended December 31, 1995 and 1994 is derived from the
audited financial statements of Greater Brazos, and the historical data of
Greater Brazos as of and for the years ended December 31, 1993, 1992 and 1991 is
derived from the unaudited financial statements of Greater Brazos. The
historical data of Greater Brazos has been restated to give effect to the
acquisition of the Bank during 1995, which was accounted for under the pooling-
of-interest method of accounting. The historical data of Compass as of and for
the years ended December 31, 1995, 1994, 1993, 1992 and 1991 has been restated
to give effect to acquisitions accounted for under the pooling-of-interest
method of accounting, which acquisitions were consummated by Compass during
1996. The pro forma income information is not necessarily indicative of the
results of operations had the proposed transaction occurred at the beginning of
1991, 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 (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
FOR
THE NINE
MONTHS AS OF AND FOR THE YEARS ENDED
ENDED DECEMBER 31,
SEPTEMBER 30,
---------------- -----------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
TOTAL ASSETS
Compass $11,605,379 $10,678,369 $9,639,540 $7,808,063 $7,484,662 $7,122,202
Greater Brazos 57,884 54,231 53,256 47,138 42,037 33,913
TOTAL DEPOSITS
Compass 9,119,124 8,090,818 7,511,470 6,047,131 5,776,902 5,425,146
Greater Brazos 54,346 50,665 50,264 44,426 39,682 21,012
LONG-TERM DEBT
Compass 602,373 590,044 494,327 332,391 209,404 22,038
Greater Brazos -- -- -- 125 125 125
TOTAL SHAREHOLDERS' EQUITY
Compass 776,810 737,463 637,877 585,868 538,217 469,072
Greater Brazos 3,207 3,073 2,645 2,304 2,087 1,597
NET INTEREST INCOME
Compass 296,057 368,954 353,208 347,725 334,585 271,934
Greater Brazos 1,749 2,103 1,942 1,640 1,349 986
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS
Compass 94,480 114,225 105,438 96,920 80,938 66,130
Greater Brazos 164 317 283 268 490 576
NET INCOME (LOSS) PER
COMMON SHARE FROM
CONTINUING OPERATIONS
Compass
Historical 2.35 2.82 2.62 2.37 1.97 1.68
Pro Forma (1) 2.34 2.81 2.61 2.36 1.97 1.69
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
AS OF AND (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
FOR
THE NINE AS OF AND FOR THE YEARS ENDED
MONTHS DECEMBER 31,
ENDED
SEPTEMBER 30,
---------------- -----------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------------- ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET INCOME (LOSS) PER
COMMON SHARE FROM
CONTINUING OPERATIONS
Greater Brazos
Historical 0.82 1.60 1.55 1.58 2.88 3.39
Equivalent Pro Forma (2) 2.37 2.84 2.64 2.39 1.99 1.71
CASH DIVIDENDS PER
COMMON SHARE
Compass
Historical 0.96 1.12 0.92 0.76 0.667 0.587
Pro Forma 0.93 1.05 0.84 0.68 0.55 0.49
Greater Brazos
Historical -- -- -- 0.30 -- --
Equivalent Pro Forma (2) 0.94 1.06 0.85 0.69 0.56 0.50
SHAREHOLDERS' EQUITY
(BOOK VALUE) PER COMMON SHARE
Compass
Historical 19.18 18.29 15.91 14.63 12.88 11.37
Pro Forma 19.15 18.27 15.89 14.61 12.87 11.35
Greater Brazos
Historical 15.98 15.34 13.39 13.55 12.28 9.39
Equivalent Pro Forma (2) 15.37 18.47 16.07 14.77 13.01 11.49
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Compass
Historical 40,195 40,513 40,320 40,310 39,984 38,373
Pro Forma 40,411 40,729 40,536 40,526 40,200 38,589
Greater Brazos
Historical 201 198 183 170 170 170
NUMBER OF COMMON SHARES
OUTSTANDING AT END OF
PERIOD
Compass
Historical 40,510 40,325 40,096 40,050 39,983 39,208
Pro Forma 0,726 40,541 40,312 40,266 40,199 39,424
Greater Brazos
Historical 201 200 198 170 170 170
</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) Greater Brazos' Equivalent Pro Forma per share amounts are computed by
multiplying Compass' Pro Forma amounts by the exchange ratio of 1.0112
based on a Share Determination Market Value of $34.13, the average closing
sale price of Compass Common Stock as reported by the NASDAQ National
Market System for the five days of trading preceding the fifth business day
prior to October 3, 1996.
-16-
<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.
<TABLE>
<CAPTION>
Compass CommonStock
------------------
Period High Low
------ ---- ---
<S> <C> <C>
First Quarter 28 21- 1/2
Second Quarter 29- 1/4 25- 1/2
Third Quarter 33- 3/4 28- 1/2
Fourth Quarter 33- 1/2 30- 1/8
1996
----
First Quarter 35 30- 3/4
Second Quarter 35-6/8 32- 1/4
Third Quarter 35- 1/4 31- 1/2
Fourth Quarter 39- 3/4 34- 3/8
1997
----
First Quarter
(Through ___, 1997)
</TABLE>
On October 2, 1996, the business day immediately preceding the announcement
of the execution of the Merger Agreement, the last reported sale price for
Compass Common Stock was $35.25. On ________, 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 Greater Brazos Common Stock,
although it is traded infrequently in private transactions about which Greater
Brazos' management has little reliable information regarding price.
-17-
<PAGE>
THE MERGER
The following information relating to the Merger is not intended to be a
complete description of all information relating to the Merger and is qualified
in its entirety by reference to more detailed information contained elsewhere in
this Proxy Statement/Prospectus, including the Appendices hereto and the
documents referred to herein or incorporated herein by reference. A copy of the
Merger Agreement is included as Appendix I, and is incorporated herein by
reference. All shareholders of Greater Brazos are urged to read the Merger
Agreement in its entirety.
GENERAL
The Merger Agreement provides for the merger of Greater Brazos 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 Greater Brazos will cease. After the Effective Time, the
officers and directors of Compass Texas will be the officers and directors of
Greater Brazos. Compass intends that Greater Brazos' 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 for the holders of Greater Brazos Common
Stock at the Effective Time, other than dissenting shareholders, to receive
Merger Consideration of 216,000 shares of Compass Common Stock less the Option
Shares. Holders of Greater Brazos Common Stock shall receive for each share of
Greater Brazos Common Stock held at the Effective Time a number of shares of
Compass Common Stock equal to (i) the quotient of 216,000 shares of Compass
Common Stock less such number of shares of Compass Common Stock issued to the
holders of Convertible Securities, (ii) divided by the number of shares of
Greater Brazos Common Stock outstanding immediately prior to the Effective Time.
In the event the Share Determination Market Value is less than $30.00 per share,
Compass may either (i) terminate the Merger Agreement, or (ii) agree to issue an
aggregate number of shares of Compass Common Stock (including the Option Shares)
equal to the quotient of $6,480,000 divided by the Share Determination Market
Value. In such event, each holder of Greater Brazos Common Stock for each share
so held shall receive Merger Consideration equal to the quotient of the New
Shares less the Option Shares divided by the number of shares of Greater Brazos
Common Stock outstanding immediately prior to the Effective Time. In the event
Compass exercises its Pricing Termination Option, the Merger Agreement shall be
terminated, but Greater Brazos shall have the right to reject such termination
of the Merger Agreement by Compass by agreeing to accept an aggregate of 216,000
shares of Compass Common Stock (including the Option Shares). Any decision by
the Board of Directors of Greater Brazos regarding whether to terminate the
Merger Agreement will be made in its sole discretion and could result in either
(i) Greater Brazos shareholders receiving Merger Consideration with an aggregate
market value of less than $6,480,000, (ii) the termination of the Merger
Agreement, or (iii) Compass agreeing to increase the number of shares of Compass
Common Stock constituting the Merger Consideration. If the Share Determination
Market Value is less than $30.00 per share, there can be no assurance that
Compass will agree to increase the number of shares of Compass Common Stock and
that the Merger Agreement will not terminate, in which event the Greater Brazos
shareholders would not receive any Merger Consideration but would retain their
Greater Brazos Common Stock.
On ________, 1997, there were 200,674 shares of Greater Brazos Common Stock
issued and outstanding.
Pursuant to Agreements Regarding Convertible Securities executed in
connection with the Merger Agreement, the holders of Convertible Securities will
receive a number of Option Shares equal to the difference of the selling price
per share of Greater Brazos Common Stock minus the exercise price per share of
Greater Brazos Common Stock divided by the Share Determination Market Value and
multiplying that number by the number of the holder's Convertible Securities.
The "selling price per share" is a number equal to the sum of (i) the exercise
price per share times all the Convertible Securities, plus (ii) the "aggregate
dollar value," and dividing that sum by the fully diluted of Greater Brazos
shares outstanding. The "aggregate dollar value" is a number equal to the
aggregate number of shares of Compass Common Stock issuable to the shareholders
of Greater Brazos (inclusive of Convertible Securities)
-18-
<PAGE>
times the Share Determination Market Value. The "exercise price per share" for
the incentive stock options and phantom shares is $15 per share and $0 per
share, respectively.
Assuming the Share Determination Market Value (the average closing sale
price of the Compass Common Stock as reported by the NASDAQ National Market
System for the five days of trading preceding the fifth business day prior to
________, 1997) will be $_____, the holders of Convertible Securities will be
entitled to receive in the aggregate approximately ____ Option Shares at
Closing; and further assuming that, immediately prior to the Effective Time,
there will be 200,674 shares of Greater Brazos Common Stock issued and
outstanding and _________ Option Shares, Compass will be required to issue an
aggregate of 216,000 shares of Compass Common Stock to the Greater Brazos
shareholders and holders of Convertible Securities, and each shareholder of
Greater Brazos (except for shareholders choosing to exercise their dissenters'
rights) will be entitled to receive approximately _____ shares of Compass Common
Stock for each share of Greater Brazos Common Stock held.
Notwithstanding the foregoing, the Merger Consideration will be reduced by
the number of shares that would otherwise be issued to dissenting shareholders.
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.
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 with respect to Compass Common Stock occurring
between the date of execution of the Merger Agreement and 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 Greater Brazos Common Stock entitled to vote
at the Meeting. SEE "INTRODUCTION"; "SUMMARY--SHAREHOLDER VOTES REQUIRED"; "THE
MERGER--OTHER TERMS AND CONDITIONS"; AND APPENDIX I.
Officers, directors and certain shareholders of Greater Brazos owning
130,265 shares of Greater Brazos Common Stock, comprising approximately 65.1% of
the total shares of Greater Brazos 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.
Compass Texas has one share 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 Greater Brazos 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 Greater Brazos Common Stock. After
the Effective Time, all certificates for Greater Brazos 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.
-19-
<PAGE>
BACKGROUND AND REASONS FOR THE MERGER
During 1996, certain of the major stockholders of Greater Brazos determined
that the growth of Greater Brazos and the potential for significant additional
increases in value of the shares of Greater Brazos were limited both by the size
of Greater Brazos and the size of the Bryan/College Station, Texas market.
Moreover, Greater Brazos was experiencing favorable earnings and returns on
equity and thus was likely to be an attractive acquisition for a larger banking
institution which could better afford the growth capital required.
Management recommended to the Board of Directors of Greater Brazos the
approval of the Merger based on Compass' sound financial condition and good
reputation, the consideration to be received by the shareholders, and the
positive effect on depositors and the general community that the Merger would
engender given the stated interest of Compass in increasing the size and capital
of the continuing bank and expanding the range of services to be offered.
The Greater Brazos Board of Directors in determining to approve the Merger
considered various alternatives including seeking a merger or consolidation with
another financial institution and remaining independent. The Board determined
that, given the relatively small size of Greater Brazos, the need and desire to
reinvest profits realized by Greater Brazos and the absence of a trading market
for shares of Greater Brazos, providing liquidity to shareholders was of primary
concern, which goal would be met best by the proposed Merger. For the reasons
set forth above, the Greater Brazos Board of Directors unanimously approved the
Merger and recommends approval of the transaction by the Greater Brazos
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 GREATER BRAZOS--CAPITAL RESOURCES,
LIQUIDITY AND FINANCIAL CONDITION".
Compass and Compass Texas have considered expansion opportunities in the
Bryan/College Station, Texas area in order to enlarge their Texas-based
operations to a more economical size and to expand into additional market areas.
Acquiring Greater Brazos will result in economies of scale and increase the
markets served by Compass' affiliates. It will also assist Compass' Texas
affiliates in providing the management and organizational flexibility needed to
expand in the Texas market by branching and other acquisitions.
Following arm's length negotiations between representatives of Compass and
Greater Brazos, Compass and Greater Brazos entered into the Merger Agreement
dated as of October 2, 1996. The aggregate price to be paid to holders of
Greater Brazos Common Stock resulted from negotiations which considered the
historical earnings and dividends of Compass and Greater Brazos, the earnings
potential and deposit base of Greater Brazos, potential growth in Greater
Brazos' market, Greater Brazos' asset quality and the effect of the Merger on
the shareholders, customers and employees of Compass and Greater Brazos. SEE
"SUMMARY--THE MERGER".
Subject to satisfaction of certain conditions contained in the Merger
Agreement, Greater Brazos' Board of Directors believes the Merger to be fair and
in the best interest of Greater Brazos' shareholders. In addition, a fairness
opinion has been received from Advisory with respect to the fairness, from a
financial point of view, of the Merger to its shareholders. GREATER BRAZOS'
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT GREATER BRAZOS' SHAREHOLDERS VOTE
FOR APPROVAL OF THE MERGER and has authorized consummation thereof, subject to
approval of Greater Brazos' shareholders, federal and state bank regulators and
the satisfaction of certain other conditions. SEE "SUMMARY--REASONS FOR THE
MERGER; RECOMMENDATION OF BOARD OF DIRECTORS"; "THE MERGER--OPINION OF FINANCIAL
ADVISOR"; AND APPENDIX III.
-20-
<PAGE>
OPINION OF FINANCIAL ADVISOR
Advisory is a recognized investment banking firm regularly engaged in the
valuation of financial institutions and their securities in connection with
mergers and acquisitions, and in valuations for estate, corporate and other
purposes. Prior to Greater Brazos' proposed Merger with Compass and on the
basis of Advisory's reputation and qualifications in evaluating financial
institutions, Greater Brazos engaged Advisory to provide the Board of Directors
of Greater Brazos with Advisory's opinion regarding the estimated cash fair
market value range of 100% of the outstanding common stock of Greater Brazos, as
of December 31, 1995 (the "Valuation Conclusion"). Advisory delivered the
Valuation Conclusion to the Board of Directors of Greater Brazos in a letter
dated February 29, 1996.
In April 1996, and after delivery of the Valuation Conclusion, Greater
Brazos engaged Advisory to act as an independent financial advisor to the Board
of Directors and shareholders of Greater Brazos in soliciting parties
potentially interested in the acquisition of Greater Brazos. As a result,
Advisory prepared a Confidential Descriptive Memorandum that was submitted to
Compass as well as to other parties potentially interested in the acquisition of
Greater Brazos. This action prompted the submission from Compass of an
expression of interest in acquiring Greater Brazos.
Based on the initial proposal submitted by Compass together with the market
value of Compass Common Stock at that time, the total value of merger
consideration offered by Compass approximated $7.6 million, which represented
total merger consideration that equaled, if not exceeded, the Valuation
Conclusion. Therefore, subsequent to the signing of a letter of intent with
Compass, Advisory was asked by the Board of Directors of Greater Brazos to
render advice and analysis in connection with the Merger, and to provide an
opinion with regard to fairness -- from the perspective of the shareholders of
Greater Brazos -- of the financial terms of the Merger.
Advisory has rendered a separate written opinion ("the Opinion") to the
Board of Directors of Greater Brazos to the effect that the terms of the Merger
are fair from a financial point of view to the shareholders of Greater Brazos as
of the date of the opinion letter. A copy of the Opinion is attached as
Appendix III to this Proxy Statement/Prospectus and should be read in its
entirety by Greater Brazos shareholders. Advisory's Opinion does not constitute
an endorsement of the Merger or a recommendation to any Greater Brazos
shareholder as to how such shareholder should vote regarding the Merger.
Regarding Greater Brazos, Advisory based its Opinion upon, among other
things, a review of: (i) audited consolidated financial statements of Greater
Brazos for the years ended December 31, 1995 and 1994; (ii) parent company only
financial statements of Greater Brazos, on form FR Y-9SP, for the year ended
December 31, 1995 and for the six month period ended June 30, 1996, as filed
with the Federal Reserve System; (iii) parent company only financial statements
for GBVD, on form FR Y-9SP, for the year ended December 31, 1995 and for the six
month period ended June 30, 1996, as filed with the Federal Reserve System; (iv)
reports of condition and income for the Bank, for the years ended December 31,
1995, 1994, and 1993, and for the nine month period ending September 30, 1996,
as filed with federal bank regulatory agencies; (v) the economy in general and,
in particular, the local economies in which the Bank operates; (vi) certain
internal financial analyses and forecasts for the Bank prepared by the
management of the Bank, including projections of future performance; (vii)
certain other summary materials and analyses with respect to the Bank's loan
portfolio, securities portfolio deposit base, fixed assets, and operations
including, but not limited to: (a) schedules of loans and other assets
identified by management as deserving special attention or monitoring given the
characteristics of the loan/asset and the local economy, (b) analyses concerning
the adequacy of the loan loss reserve, (c) schedules of "other real estate
owned," including current carrying values and recent appraisals, and (d)
schedules of securities, detailing book values market values, and lengths to
maturity; and (viii) such other information -- including financial studies,
analyses, investigations, and economic and market criteria -- that Advisory
deemed relevant to its assignment.
Regarding Compass, Advisory based its Opinion upon, among other things, a
review of: (i) audited consolidated financial statements, contained in Annual
Reports and Form 10-Ks, for the years ended December 31, 1995, 1994, and 1993;
(ii) quarterly financial statements for Compass, in both "press release" and
quarterly report
-21-
<PAGE>
format, for the 1995 calendar quarters, and the first three calendar quarters of
1996; (iii) consolidated financial statements for Compass, on form FR Y-9C, for
the years ended 1995, 1994, and 1993, together with consolidated financial
statements for the nine month period ended September 30, 1996, as filed with the
Federal Reserve; (iv) equity research reports regarding Compass prepared by
various stock analysts who cover the financial institutions sector; (v) the
condition of the commercial banking industry, as indicated in the financial
reports filed by all federally-insured commercial banks with various federal
bank regulatory authorities; (vi) the economy in general and, in particular, the
major trade areas in which Compass and its subsidiaries operate; and (vii) such
other information -- including financial studies, analyses, investigations, and
economic and market criteria -- that Advisory deemed relevant to its opinion.
Additionally, Advisory based its Opinion upon, among other things, a review
of: (i) the Merger Agreement, and any amendments thereto, that sets forth, among
other items, the terms, conditions to closing, pending litigation against both
Greater Brazos and Compass, and representations and warranties of Greater Brazos
and Compass with respect to the proposed Merger; (ii) the Proxy
Statement/Prospectus, to which the Opinion is appended that is being furnished
to the shareholders of Greater Brazos in connection with the proposed Merger;
(iii) the financial terms and price levels for commercial banks with assets
between $25 million and $125 million that were recently acquired in the United
States -- and specifically in Texas -- together with the financial performance
and condition of such banks; (iv) the financial terms and stated price levels
of other banking organizations, the proposed acquisition of which has been
publicly announced by Compass subsequent to January 1, 1995 and prior to the
date of Advisory's Opinion and for which the transaction terms, including price,
were available; (v) the price-to-equity and price-to-earnings multiples of the
stocks of banking organizations based in the United States that have publicly-
traded common stocks, together with the financial performance and conditions of
such banking organizations; and (vi) such other information -- including
financial studies, analyses, investigations, and economic and market criteria --
that Advisory deemed relevant to its assignment.
Advisory maintains a sizable database of information pertaining to the
prices paid for U.S. banks. The database includes transactions involving
banking organizations in Texas and the Southwest region of the United States,
and provides comparable pricing and financial performance data for banking
organizations acquired in the United State since 1989. Advisory has the
capability of sorting the records to yield transactions involving similar banks.
Similarities might include banks within a specific asset size range, banks that
generate a return on average assets ("ROA") within a specified range, banks that
have an equity-to-assets ratio within a certain range, or banks that sold for a
specific form of consideration (cash or stock). The ability to produce specific
groups of comparable banks facilitates making a valid comparative purchase price
analysis.
Advisory considered the transaction values for banking organizations with
total assets between $25 million and $125 million acquired in the United States
- - and specifically in Texas -- during 1995 and thus far in 1996, irrespective of
the form of consideration. Advisory compared those transaction values, and the
corresponding financial characteristics for the relevant banks, in relation to
the transaction value computed for Greater Brazos' merger with Compass. The
comparative analysis revealed that the merger of Greater Brazos with Compass
yields a transaction value that results in a price-equity index (purchase price
as a percent of total assets) of 14.30 and a price-earnings index (purchase
price as a percent of average assets) of 14.68, versus averages of 16.39 and
16.88, respectively, for the United States; and averages of 14.43 and 14.88,
respectively, for Texas.
The equity ratio for Greater Brazos (as measured by the equity-to-assets
ratio) as of September 30, 1996 equals 5.54%, a ratio below the average equity
ratio of 9.64% for the United States and 9.09% for Texas. Furthermore, the ROA
for Greater Brazos for the 12-month period ending September 30, 1996
approximates 0.35%, a ratio below the average ROAs of 1.06% for the United
States and 1.39% for Texas. Accordingly, the analysis suggests that the
transaction value for Greater Brazos, as measured by the price indices described
above, compares favorably with the average price indices paid during 1995 and
1996 for banks with assets between $25 million and $125 million in both the
United States and Texas alone, irrespective of the form of consideration. The
table set forth below summarizes this comparative analysis, and highlights the
Greater Brazos transaction.
-22-
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------
PRICE MULTIPLES PRICE INDICES
----------------------------------------
EQUITY- TOTAL
# OF ASSETS TO- PRICE
BANKS $(000) ASSETS ROA ROE $(000) EQUITY EARNINGS EQUITY EARNINGS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.
Transactions 197 $66,411 9.64% 1.06% 11.16% $10,885 1.70x 15.90x 16.39 16.88
Texas
Transactions 38 $60,164 9.09% 1.39% 15.58% $ 8,681 1.59x 10.69x 14.43 14.88
- ----------------------------------------------------------------------------------------------------------
Greater
Brazos* 1 $57,884 5.54% 0.35% 6.43% $ 8,276 2.67x 41.59x 14.30 14.60
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Total price for Greater Brazos based on the issuance of 216,000 shares of
Compass Common Stock, and a $38.3125 market price per share. Financial data
for Greater Brazos as of September 30, 1996, with earnings ratios/calculations
based on 12-month trailing earnings.
In the context of the Merger, Advisory specifically considered the
transaction values for Texas banking organizations below $250 million in assets
and acquired for stock during 1995 and 1996. Advisory compared those
transaction values, and the corresponding financial characteristics for the
relevant banks, in relation to the transaction value computed for Greater
Brazos' Merger with Compass. The comparative analysis reveals that the Merger of
Greater Brazos with Compass yields a transaction value that results in a price-
equity index of 14.30 and a price-earnings index of 14.68, versus averages of
17.82 and 18.68, respectively, for the United States; and averages of 15.25 and
16.02, respectively, for Texas.
The equity ratio for Greater Brazos as of September 30, 1996 equals 5.54%,
a ratio below the average equity ratio of 8.87% for the United States and 7.64%
for Texas. Furthermore, the ROA for Greater Brazos for the 12-month period
ending September 30, 1996 approximates 0.35%, a ratio below the average ROAs of
1.11% for the United States and 1.17% for Texas. Accordingly, the analysis
suggests that the transaction value for Greater Brazos, as measured by the price
indices described above, compares favorably with the average price indices paid
during 1995 and thus far in 1996 for banks with assets under $250 million in
both the United States and Texas alone, with common stock as the sole form of
consideration. The table set forth below summarizes this comparative analysis,
and highlights the Greater Brazos transaction.
<TABLE>
<CAPTION>
---------------------------------------
PRICE MULTIPLES PRICE INDICES
---------------------------------------
EQUITY- TOTAL
# OF ASSETS TO- PRICE
BANKS $(000) ASSETS ROA ROE $(000) EQUITY EARNINGS EQUITY EARNINGS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.
Transactions 139 $104,706 8.87% 1.11% 12.57% $18,659 2.01x 16.86x 17.82 18.68
Texas
Transactions 12 $ 78,871 7.64% 1.17% 15.28% $12,028 2.00x 13.65x 15.25 16.02
- ----------------------------------------------------------------------------------------------------------
Greater
Brazos* 1 $ 57,884 5.54% 0.35% 6.43% $ 8,276 2.67x 41.59x 14.30 14.68
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Total price for Greater Brazos based on the issuance of 216,000 shares of
Compass Common Stock, and a $38.3125 market price per share. Financial data
for Greater Brazos as of September 30, 1996, with earnings ratios/calculations
based on 12-month trailing earnings.
As previously noted, Advisory also considered the transaction values for
Texas banking organizations with assets below $250 million acquired by Compass
with Compass Common Stock, the announcement of which occurred subsequent to
January 1, 1995 and prior to the date of Advisory's Opinion (the "Compass
transactions in Texas"). Advisory compared those transaction values, and the
corresponding financial characteristics for the relevant banks, in relation to
the transaction value computed for Greater Brazos' merger with Compass. The
comparative analysis revealed that the merger of Greater Brazos with Compass
yields a transaction value that results in a price-equity index of 14.30 and a
price earnings index of 14.68, versus averages of 16.87 and 17.73, respectively,
for the Compass transactions in Texas. The equity ratio for Greater Brazos as
of September 30, 1996 equals 5.05%, a ratio below the average equity ratio of
7.16% for the Compass transactions in Texas. Furthermore, the ROA for Greater
Brazos for the 12-month period ending September 30, 1996 approximates 0.35%, a
ratio below the average ROA of 1.17% for
-23-
<PAGE>
the Compass Transactions in Texas. Accordingly, the analysis suggests that the
transaction value for Greater Brazos, as measured by the price indices described
above, compares favorably with the average price indices paid for the Compass
transactions in Texas.
Since the form of consideration in Greater Brazos' merger with Compass
involves the exchange of Compass Common Stock for shares of Greater Brazos
Common Stock, Advisory evaluated the financial condition and performance of
Compass, as noted above. Advisory conducted its own independent financial
analysis of Compass based on the above-mentioned information provided to or
obtained by Advisory. Advisory also reviewed and considered financial analyses
and earnings forecasts produced by financial analysts affiliated with various
brokerage firms that cover the financial institutions industry, and Compass in
particular. The intent of this financial analysis is to ascertain the current
financial condition and future earnings prospects of Compass, given that the
current shareholders of Greater Brazos will have an ownership stake in Compass
on a post-transaction basis. Advisory is satisfied with the finding obtained
from its financial analyses regarding the financial condition and earnings
prospects of Compass, and believes that sufficient foundation exists in this
regard to support Advisory's conclusion regarding the financial fairness of the
proposed transaction.
Advisory is of the belief that its review of, among other things, the
aforementioned items, provides a reasonable basis for the issuance of its
Opinion, recognizing that Advisory is issuing an informed professional opinion
- -- not a certification of value.
No limitations were imposed on the scope of Advisory's investigation by
either Greater Brazos or Compass. Advisory participated in the negotiation of
the terms of the Merger, and other related agreements associated with the
Merger, through discussions with officials at Greater Brazos and Compass.
Advisory, as part of its line of professional services, specializes in
rendering valuation opinions of banks and bank holding companies in connection
with mergers and acquisitions nationwide. Prior to its retention for this
assignment, Advisory had provided financial advisory services to Greater Brazos
and the Bank; however, the revenues derived from the delivery of such services
are insignificant when compared to Advisory's total gross revenues. Advisory
has not previously provided any services to Compass.
Advisory has relied upon the information provided by the management of
Greater Brazos and Compass, or otherwise reviewed by Advisory, as being complete
and accurate in all material respects. Advisory has not verified through
independent inspection or examination the specific assets or liabilities of
Greater Brazos, Compass or their subsidiary banks. Advisory has assumed that
there has been no material changes in the assets, financial condition, results
of operations, or business prospects of Greater Brazos and Compass since the
date of the last financial statements made available to Advisory. Advisory met
with the management of Greater Brazos and conversed with the management of
Compass for the purpose of discussing the relevant information that has been
provided to Advisory.
Based on all factors that Advisory deemed relevant and assuming the
accuracy and completeness of the information and data provided, Advisory
concluded that the financial provisions of the proposed Merger, as outlined
herein, are fair, from a financial standpoint, to the common shareholders of
Greater Brazos. For its services as an independent financial analyst and
advisor to Greater Brazos in connection with the Merger, Greater Brazos paid a
retainer fee totaling $4,500 for the preparation of the Confidential Descriptive
Memorandum. Additionally, if the Merger with Compass reaches the point of
consummation, Greater Brazos Valley has agreed to pay Advisory a "brokerage fee"
equal to one and eighty-hundredths percent (1.80%) of the aggregate dollar value
of the proposed Merger. Based on the closing price of Compass Common Stock as
of December 13, 1996, the aggregate dollar value of the proposed Merger equals
$8,275,500 (216,000 shares times $38.3125 per share); therefore, the brokerage
fee would equal $148,959. ($8,275,500 times 1.80%). Additionally, Greater
Brazos also has agreed to reimburse Advisory for reasonable out-of-pocket
expenses.
-24-
<PAGE>
OPERATIONS AFTER THE MERGERS
Compass and Greater Brazos intend that following consummation of the
Merger, certain subsidiaries of Compass and Greater Brazos will further merge
such that (i) GBVD will merge with and into Compass Bancorporation, and (ii) the
Bank will merge with and into Compass-Houston. Following the Subsequent Mergers,
the separate existences of GBVD and the Bank will cease, and Compass
Bancorporation and Compass Bank-Houston will continue as the surviving entities.
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 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 Greater Brazos'
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 Greater Brazos 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) Greater Brazos, 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 Greater Brazos, GBVD or the Bank;
(viii) The directors of Greater Brazos, GBVD and the Bank shall have
delivered to Compass an instrument dated the Effective Time
releasing Greater Brazos, GBVD and the Bank from any and all
claims of such directors (except as to their deposits and accounts
and as to rights of indemnification pursuant to the Articles or
Certificate of Association or Incorporation and Bylaws of Greater
Brazos, GBVD or the Bank, which rights shall survive the Merger)
and
-25-
<PAGE>
shall have delivered to Compass their resignations as directors of
Greater Brazos, GBVD and the Bank;
(ix) The officers of Greater Brazos, GBVD and the Bank who have the
title Vice President or above shall have delivered to Compass an
instrument dated the Effective Time releasing Greater Brazos, GBVD
and the Bank from any and all claims of such officers (except as
to deposits and accounts and accrued compensation permitted by
their respective agreements with Greater Brazos, GBVD or the Bank
and as to the rights of indemnification pursuant to the Articles
or Certificate of Incorporation or Association or Bylaws of
Greater Brazos, GBVD or the Bank, which rights shall survive the
Merger);
(x) Compass and Greater Brazos shall have received the opinions of
counsel to Greater Brazos and Compass acceptable to them as to
certain matters;
(xi) The holders of no more than 5% of the Greater Brazos Common Stock
shall have demanded or be entitled to demand payment of the fair
value of their shares as dissenting shareholders;
(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) Greater Brazos shall have no indebtedness;
(xiv) Compass shall have received from holders of Greater Brazos Common
Stock receiving at least 50% of the total Merger Consideration a
representation that they have no plan or intention to sell or
otherwise dispose of shares of Compass Common Stock received
pursuant to the Merger;
(xv) Compass and the shareholders of Greater Brazos shall have received
an opinion of counsel satisfactory to them that the Merger will
qualify as a reorganization under Section 368(a) of the Code; SEE
"SUMMARY-FEDERAL INCOME TAX CONSEQUENCES" AND "THE MERGER-FEDERAL
INCOME TAX CONSEQUENCES";
(xvi) Greater Brazos shall have delivered to Compass a schedule of all
transactions in the capital stock (or instruments exercisable for
or convertible into capital stock) of Greater Brazos of which
Greater Brazos has knowledge from and including the date of the
Merger Agreement through the Effective Time;
(xvii) Compass shall have determined, in its sole judgment, that the
liabilities and obligations of Greater Brazos, GBVD and the Bank
do not have a material adverse effect;
(xviii) Greater Brazos and the Bank shall have terminated, in a manner
satisfactory to Compass, on or before the Effective Time, certain
Executive Supplemental Income Agreements entered into with
specified officers of Greater Brazos and the Bank;
(xix) Greater Brazos shall have terminated, in a manner satisfactory to
Compass, on or before the Effective Time, the Commerce National
Bank Director's Deferred Compensation Plan and Deferred
Compensation Agreements with the directors of Greater Brazos and
the Bank;
-26-
<PAGE>
(xx) All warrants, options, rights, convertible debentures or other
securities entitling the holder thereof to acquire Greater Brazos
Common Stock shall have been exercised or converted, or shall have
expired, lapsed or terminated, prior to the Effective Time;
(xxi) The transactions contemplated by the Agreements Regarding
Convertible Securities shall have been, or shall simultaneously
with Closing be, consummated;
(xxii) Greater Brazos, GBVD and the Bank shall have delivered to the
directors of Greater Brazos, GBVD and the Bank an instrument dated
the Effective Time releasing such directors from any and all
claims of Greater Brazos, GBVD and the Bank (except as to
indebtedness or other contractual liabilities); provided, however,
that such releases shall not release an action against such
directors by Compass or Greater Brazos in connection with the
transactions contemplated by the Merger Agreement; and
(xxiii) Compass and Greater Brazos shall have received certificates of the
other as to certain items described above.
Any condition to the consummation of the Merger, except the required shareholder
and regulatory approvals, may be waived in writing by the party to the Merger
Agreement entitled to the benefit of such condition. SEE APPENDIX I.
ADDITIONAL AGREEMENTS
Each of the directors, executive officers and principal shareholders of
Greater Brazos has entered into a Pooling Transfer Restrictions Agreement with
Compass and Greater Brazos pursuant to which they have agreed, among other
things, (i) not to transfer any of their respective shares of Greater Brazos
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 Greater Brazos 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.
Officers, directors and certain shareholders of Greater Brazos owning
130,265 shares of Greater Brazos Common Stock, comprising approximately 65.1% of
the total shares of Greater Brazos 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.
BUSINESS PENDING EFFECTIVE TIME
The Merger Agreement imposes certain limitations on the conduct of Greater
Brazos' business pending consummation of the Merger. Among other things,
Greater Brazos 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; TERMINATION
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 Greater Brazos' shareholders can
be made after the Meeting without the required approval of Greater Brazos'
shareholders.
-27-
<PAGE>
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 Greater Brazos shareholders,
at any time before the Effective Time by:
(i) Mutual written consent duly authorized by the Boards of Directors of
Compass and Greater Brazos;
(ii) Compass (a) if Compass learns or becomes aware of a state of facts
or breach or inaccuracy of any representation or warranty of Greater
Brazos which constitutes a material adverse effect, (b) due to
certain unacceptable environmental circumstances pursuant to Section
6.10 of the Merger Agreement, or (c) 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;
(iii) Greater Brazos (a) if Greater Brazos' conditions to Closing
contained in the Merger Agreement are not satisfied or waived in
writing by Greater Brazos, or (b) if Greater Brazos learns or
becomes aware of a breach or inaccuracy of any representation or
warranty of Compass which constitutes a material adverse effect;
(iv) Compass or Greater Brazos if the Effective Time shall not have
occurred on or before May 30, 1997 or such later date agreed to in
writing by Compass and Greater Brazos; provided, however, that the
Merger shall not be consummate prior to January 1, 1997; or
(v) Compass or Greater Brazos 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.
Upon termination of the Merger Agreement, the Merger Agreement shall be
void and have no effect, without any liability on the part of any party or its
directors, officers or shareholders, except that the parties are not relieved of
liability for any breach of the Merger Agreement.
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 River
Oaks Trust Company (the "Exchange Agent"), cash in an aggregate amount estimated
to be sufficient to make cash payments to Greater Brazos shareholders in lieu of
fractional shares of Compass Common Stock. Such cash payments shall be made to
dissenting shareholders in proportion to the number of shares surrendered.
Promptly after the Effective Time, the Exchange Agent will furnish each
holder of record of Greater Brazos Common Stock as of the Effective Time with
transmittal materials for use in exchanging certificates representing Greater
Brazos 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 Greater Brazos Common Stock certificates for exchange accompanied by
the appropriate transmittal materials.
-28-
<PAGE>
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 Greater Brazos 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.
Persons who are entitled to receive Compass Common Stock pursuant to the
Merger will not be entitled to vote such Compass Common Stock or to receive any
dividends thereon until they have properly surrendered their Greater Brazos
Common Stock certificates in exchange for Compass Common Stock.
Upon the Effective Time of the Merger, former Greater Brazos shareholders
will cease to have any rights as shareholders of Greater Brazos, and the Greater
Brazos 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 Texas Business
Corporation Act ("TBCA"), Greater Brazos shareholders have a statutory right to
dissent from the Merger. If the Merger is approved and consummated, any Greater
Brazos 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 Greater Brazos 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 Greater Brazos 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 Greater Brazos 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
Greater Brazos 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 demand
letter and agrees to pay that amount within 90 days after the Effective Time
upon surrender of the relevant
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<PAGE>
certificates of Greater Brazos Common Stock duly endorsed by the Dissenting
Shareholder, or (ii) containing Compass' written estimate of the fair value of
the shares of Greater Brazos 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
Greater Brazos Common Stock duly endorsed by the Dissenting Shareholder. In
either case, the Dissenting Shareholder shall cease to have any ownership
interest in Greater Brazos 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 Brazos 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 Greater Brazos 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 Greater Brazos
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 Greater Brazos Common Stock duly endorsed by
the Dissenting Shareholders. Upon payment of the judgment, the Dissenting
Shareholders shall cease to have any interest in Greater Brazos, Compass or the
Greater Brazos 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 Greater Brazos 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 Greater Brazos 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 GREATER BRAZOS 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 Greater Brazos Common Stock shall
have been determined to be held by dissenting or potentially 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 the following:
1. The Merger and the Subsequent Mergers will be respected as separate
transactions for federal income tax purposes. This matter is discussed
in greater detail below.
2. Greater Brazos shareholders will receive only Compass Common Stock in
the Merger and they will not receive or be deemed by the IRS to
receive any cash (other than cash paid in lieu of fractional shares of
Compass Common Stock or cash paid to dissenters) or other property
which would constitute "boot" for federal income tax purposes.
3. Compass has received representations from certain historic Greater
Brazos 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.
In such counsel's opinion, the following federal income tax consequences to
Greater Brazos shareholders will result from the qualification of the Merger as
a reorganization under Section 368(a) of the Code:
1. A Greater Brazos shareholder will not recognize any gain or loss upon
the exchange of his or her Greater Brazos Common Stock solely for
Compass Common Stock.
2. The aggregate tax basis of Compass Common Stock received by a Greater
Brazos shareholder in the Merger will be the same as the aggregate
basis of the Greater Brazos 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 Greater Brazos
shareholder surrenders two blocks of Greater Brazos 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 Greater
Brazos 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 Greater Brazos 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
Greater Brazos shareholder will include the period during which he or
she held the Greater Brazos Common Stock surrendered in exchange
therefor, provided that the Greater Brazos 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 Greater Brazos shareholder who dissents from the Merger and
receives solely cash in exchange for his or her Greater Brazos 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.
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THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR
GENERAL INFORMATION ONLY. GREATER BRAZOS 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.
Compass expects 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
Greater Brazos, 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. Consummation of the Subsequent Merger of the Bank into Compass
Bank-Houston is subject to approval by the FDIC and the Commissioner. The
Federal Reserve, the FDIC and the Commissioner have each issued their respective
approvals of the Merger and the Subsequent Mergers of the Bank into Compass
Bank-Houston. SEE "THE MERGER--GOVERNMENTAL APPROVALS".
A formal application under the BHC Act was approved by the Federal Reserve
on December 4, 1996, and the 15 day waiting period following such approval
during which the transaction could not be consummated has expired. The FDIC
approval dated December 16, 1996 was also subject to a 15 waiting period during
which the United States Department of Justice ("Justice Department"), pursuant
to the Bank Merger Act, could have opposed the Subsequent Merger of the Bank
into Compass Bank-Houston under antitrust laws. This waiting period has also
expired with no objection or adverse action by the Justice Department.
The Texas Banking Act allows out-of-state bank holding companies to acquire
bank holding companies that own or control state or national banks located
within Texas. Approval of the Commissioner was received on December 16, 1996.
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 the Merger
will qualify for pooling-of-interests accounting treatment. Under this
accounting method, at the Effective Time, Greater Brazos' 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 Greater Brazos 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".
SUPERVISION AND REGULATION
GENERAL
Bank holding companies and banks are regulated extensively under both
federal and state law. Compass, Compass 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/or the FDIC and the
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appropriate state banking departments. The deposits of each of the Subsidiary
Banks are insured by the FDIC, and Compass Bank and Compass Bank-Florida 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 TEXAS AND COMPASS BANCORPORATION
Compass, Compass Texas and Compass Bancorporation are bank holding
companies within the meaning of the BHC Act and are registered as such with the
Federal Reserve. As bank holding companies, Compass, Compass Texas and Compass
Bancorporation are required to file with the Federal Reserve an annual report
and such additional information as the Federal Reserve may require pursuant to
the BHC Act. The Federal Reserve may also make examinations of 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). Banks which are not members of the Federal Reserve are also
subject to these limitations. Further, federal law prohibits a bank holding
company and its subsidiaries from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property, or the
furnishing of services.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") enacted major regulatory reforms, stronger capital standards for
savings associations and stronger civil and criminal enforcement provisions.
FIRREA allows the acquisition of healthy and failed savings associations by bank
holding companies and imposes no interstate barriers on such bank holding
company acquisitions. With certain qualifications, FIRREA also allows bank
holding companies to merge acquired savings and loans into their existing
commercial bank subsidiaries. FIRREA also provides that a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989 in connection with (i)
the default of a commonly controlled FDIC-insured depository institution or (ii)
any assistance provided by the FDIC to a commonly controlled FDIC-insured
depository institution in danger of default.
In December of 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") was enacted. This act recapitalized the Bank Insurance
Fund ("BIF"), of which the Subsidiary Banks are members, substantially revised
statutory provisions, including capital standards, restricted certain powers of
state banks, gave regulators the authority to limit officer and director
compensation and required holding companies to guarantee the
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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, 1996, the Subsidiary Banks were "well capitalized", and
were not subject to any of the foregoing restrictions, including, without
limitation, those relating to brokered deposits. The Subsidiary Banks do not
rely upon brokered deposits as a primary source of deposit funding, although
such deposits are sold through the Correspondent and Investment Services
Division of Compass Bank.
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, requires the FDIC to impose a special assessment on
institutions holding deposits subject to assessment by the Savings Association
Insurance Fund ("SAIF"). Although the Subsidiary Banks are members of BIF, they
hold deposits subject to assessment by SAIF as a result of acquisitions of SAIF
deposits or SAIF-insured institutions. Compass' deposit liability under the
Funds Act is $7.6 million based upon $1.2 billion of SAIF deposits, after
certain discounts and exemptions.
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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 and Central Bank of the South are both organized under the
laws of the State of Alabama. Compass Bank is a member of the Federal Reserve
System. Compass Bank 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 is also regulated and examined
by the Federal Reserve. Compass Bank-Florida is organized under the laws of the
State of Florida, is a member of the Federal Reserve System and is subject to
supervision, regulation and examination by the Florida Department of Banking and
Finance and the Federal Reserve. Compass Bank-Houston is organized under the
laws of the State of Texas, and is not a member of the Federal Reserve System.
Compass Bank-Houston is supervised, regulated and regularly examined by the
Texas Department of Banking and the FDIC. The Subsidiary Banks, as participants
in the BIF and the Savings Association Insurance Fund of the FDIC, are subject
to the provisions of the Federal Deposit Insurance Act and to examination by and
regulations of the FDIC.
The Alabama 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 has surplus in
excess of this amount. Compass Bank-Houston 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. Compass Bank-
Florida, which is governed by the laws of the State of Florida, may declare and
pay dividends not to exceed the current period's net profits combined with the
net retained profits of the previous two years--after charging off bad debts,
depreciation, and other worthless assets and after making provision for
reasonably anticipated future losses on loans and other assets--and may, with
the approval of the Florida Department of Banking and Finance, declare and pay
dividends from retained net profits which accrued prior to the preceding two
years; provided that, prior to declaring any dividend, the bank shall carry 20%
of its net profits for such preceding period as is covered by the dividend to
its surplus fund until such surplus fund shall at least equal the amount of the
bank's common and preferred stock issued and outstanding. As members of the
Federal Reserve System, Compass Bank and Compass Bank-Florida are also subject
to dividend limitations imposed by the Federal Reserve that are similar to those
applicable to national banks.
Federal law further provides that no insured depository institution may
make any capital distribution (which would include a cash dividend) if, after
making the distribution, the institution would not satisfy one or more of its
minimum capital requirements. Moreover, the federal bank regulatory agencies
also have the general authority to limit the dividends paid by insured banks if
such payments may be deemed to constitute an unsafe and unsound practice.
Insured banks are prohibited from paying dividends on its capital stock while in
default in the payment of any assessment due to the FDIC except in those cases
where the amount of the assessment is in dispute and the insured bank has
deposited satisfactory security for the payment thereof.
The Community Reinvestment Act of 1977 ("CRA") and the regulations of the
Federal Reserve and the FDIC implementing that act are intended to encourage
regulated financial institutions to help meet the credit needs of their local
community or communities, including low and moderate income neighborhoods,
consistent with the safe and sound operation of such financial institutions. The
CRA and such regulations provide that the appropriate regulatory authority will
assess the records of regulated financial institutions in satisfying their
continuing and affirmative obligations to help meet the credit needs of their
local communities as part of their regulatory examination of the institution.
The results of such examinations are made public and are taken into account upon
the filing of any application to establish a
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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 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, 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, 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. SEE "RECENT
DEVELOPMENTS".
COMPASS COMMON STOCK
Compass is incorporated under the GCL. Compass is authorized to issue
100,000,000 shares of Compass Common Stock, of which ________ shares were issued
and outstanding on ________, 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, principally Compass Bank, 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 GREATER BRAZOS 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
has surplus in excess of this amount. Compass Bank-Houston, 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. Compass Bank-Florida, which is governed by the laws of the State of
Florida, may declare and pay dividends not to exceed the current period's net
profits combined with the net retained profits of the previous two years--after
charging off bad debts, depreciation, and other worthless assets and after
making provision for reasonably anticipated future losses on loans and other
assets--and may, with the approval of the Florida Department of Banking and
Finance, declare and pay dividends from retained net profits which accrued prior
to the preceding two years; provided that, prior to declaring any dividend, the
bank shall carry 20% of its net profits for such preceding period as is covered
by the dividend to its surplus fund until such surplus fund shall at least equal
the amount of the bank's common and preferred stock issued and outstanding. As
members of the Federal Reserve System, Compass Bank and Compass Bank-Florida 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"; "RECENT DEVELOPMENTS"; "SELECTED FINANCIAL
DATA"; "MARKET PRICES"; "COMPARISON OF RIGHTS OF SHAREHOLDERS OF GREATER BRAZOS
AND COMPASS--DIVIDENDS"; AND "INFORMATION ABOUT COMPASS".
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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 Greater Brazos shareholders' proportionate interest in Compass.
VOTING RIGHTS
The holders of Compass Common Stock are entitled to one vote per share on
all matters presented to shareholders. Holders of Compass Common Stock are not
entitled to cumulate their votes in the election of directors. Cumulative voting
rights, 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 GREATER BRAZOS 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"; "RECENT
DEVELOPMENTS"; AND "COMPARISON OF RIGHTS OF SHAREHOLDERS OF GREATER BRAZOS AND
COMPASS--DIVIDENDS" AND "--LIQUIDATION RIGHTS".
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COMPARISON OF RIGHTS OF
SHAREHOLDERS OF GREATER BRAZOS 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.
Greater Brazos' 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 of Greater Brazos, which are available upon request from Greater
Brazos. SEE "AVAILABLE INFORMATION"; "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE"; "RISK FACTORS"; AND "INFORMATION ABOUT COMPASS".
In addition to the foregoing differences between Greater Brazos' and
Compass' charters, as a result of the Merger, Greater Brazos 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 Greater Brazos'
respective charter and By-Laws, 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 GREATER BRAZOS 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 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 (a) 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 (b) 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 (a) shares
of stock of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof, (b) 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,
(c) cash in lieu of fractional shares or fractional depository receipts of a
corporation described in (a) and (b) above, or (d) any combination of the shares
of stock, depository receipts and cash in lieu of fractional shares or
fractional depositary receipts described in (a), (b) and (c) 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.
Greater Brazos' Bylaws provide that special meetings of shareholders may be
called at any time by the President, the Board of Directors or one or more
shareholders the aggregate of whose shares comprise not less than one-tenth of
all 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 consent in
writing to such action is signed by all shareholders. However, the Articles of
Incorporation may provide, and Greater Brazos' Articles of Incorporation do so
provide, that the shareholders may take action without a meeting if a consent in
writing to such action is signed by the shareholders having the minimum number
of votes that would be necessary to take such action at a meeting. 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. Greater Brazos' Articles of Incorporation do not limit cumulative
voting. 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 Greater Brazos 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. Greater Brazos' Articles of Incorporation do not
provide for a different voting requirement or entitle the shares of any class or
series to vote thereon. 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 Greater Brazos do not provide for
a different number of shares for approval of dissolution or permit
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<PAGE>
the shares of any class or series to vote thereon. 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.
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. Greater Brazos'
Articles of Incorporation deny preemptive rights and, therefore, Greater Brazos'
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.
Greater Brazos' Articles of Incorporation do not contain restrictions as to
the ability of the Greater Brazos Board of Directors to declare dividends.
SEE "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"; "SUMMARY--PARTIES TO
THE MERGER"; "SUMMARY--REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF
DIRECTORS"; "RECENT DEVELOPMENTS"; "SELECTED FINANCIAL DATA"; "MARKET PRICES";
"DESCRIPTION OF COMPASS COMMON AND PREFERRED STOCK"; AND "INFORMATION ABOUT
GREATER BRAZOS--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. The Articles of
Incorporation of Greater Brazos provide that upon the voluntary liquidation,
dissolution or winding up of the affairs of Greater Brazos, the shareholders of
Greater Brazos 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 Greater Brazos Preferred Stock
and any other class or series of stock having a preference over the common stock
then outstanding. Although Greater Brazos has authorized preferred stock, it
currently has none outstanding. See "RECENT DEVELOPMENTS".
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<PAGE>
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 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".
Greater Brazos' Articles of Incorporation provide that a director will not
be liable to Greater Brazos or its shareholders for monetary damages for an act
or omission in the director's capacity as a director, except for (i) a breach of
a director's duty of loyalty to the corporation or its shareholders, (ii) an act
or omission not in good faith that constitutes a breach of the duty of the
director to the corporation or an act or omission that involves intentional
misconduct or a knowing violation of the law, (iii) a transaction from which a
director received an improper benefit, whether or not the benefit resulted from
an action taken within the scope of the director's office, or (iv) an act or
omission for which the liability of a director is expressly provided for by
statute.
In addition, Greater Brazos shall indemnify and hold harmless any person
who was, is, or is threatened to be named a defendant or respondent in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative, any appeal in such
action, suit, or proceeding, and any inquiry or investigation that could lead to
such an action, suit or proceeding by reason of the fact that he is or was a
director or officer of the corporation or, while a director or officer of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or other
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise, against judgments, penalties (including excise and similar taxes),
fines and reasonable expenses (including attorney's fees) actually incurred;
provided that (i) he conducted himself in good faith, (ii) reasonably believed,
in the case of conduct in his official capacity as a director or officer of the
corporation, that his conduct was in the corporation's best interests, and (iii)
in the case of any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful; and provided further that (i) he was not found liable on
the basis that he improperly received a personal benefit, whether or not the
benefit resulted from an action taken in the person's official capacity and (ii)
he was not found liable to the corporation. A person found liable either to the
corporation or on the basis that personal benefit was improperly received by him
may only be indemnified for reasonable expenses (including attorneys' fees)
actually incurred by the person in connection with the proceeding. However, if
that person was found liable for willful or intentional misconduct in the
performance of his duty to the corporation, the corporation shall not indemnify
him in any respect. Greater Brazos shall indemnify a director or officer against
reasonable expenses incurred by him in connection with a proceeding in which he
is named defendant or respondent because he was wholly successful, on the merits
or otherwise, in the defense of the proceeding. The indemnification of directors
and officers by Greater Brazos shall be to the fullest extent authorized or
permitted by applicable law, including any future amendments of such law.
REMOVAL OF DIRECTORS
A Texas corporation may provide in its Articles of Incorporation or Bylaws,
and Greater Brazos' 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
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<PAGE>
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.
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 GREATER BRAZOS 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 Greater Brazos 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
Greater Brazos. 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 Greater Brazos' Articles of Incorporation and Bylaws.
RESALE OF COMPASS STOCK
The Compass Common Stock to be issued to holders of Greater Brazos 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 Greater Brazos within the meaning of Rule 145 under the Securities Act. The
directors and executive officers of Greater Brazos, the beneficial owners of 10%
or more of Greater Brazos Common Stock and certain of their related interests
may be deemed to be affiliates of Greater Brazos. 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
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 Greater Brazos
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 Greater Brazos and Compass, except for loans to any such
affiliates secured by a pledge of all or part of such Compass Common Stock,
provided the lender agrees to be bound by the terms of such written agreement,
and (iii) transfer any 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. SEE "SUMMARY--ACCOUNTING
TREATMENT"; "THE MERGER--ACCOUNTING TREATMENT"; AND APPENDIX I.
Pursuant to the Merger Agreement, holders of shares of Greater Brazos
Common Stock that will be entitled to receive more than 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 Greater
Brazos 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, 1995 and its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996, June 30,
1996 and September 30, 1996, 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 Greater Brazos or the Merger, except as a
director, executive officer or shareholder of Compass or its subsidiaries.
INFORMATION ABOUT GREATER BRAZOS
Greater Brazos was organized under the laws of the State of Texas on March
30, 1995, in order for Greater Brazos to indirectly acquire the Bank and become
a bank holding company under the BHC Act. Greater Brazos currently conducts no
operations other than serving as a bank holding company for the Bank. Greater
Brazos derives its revenues primarily from the operations of the Bank in the
form of dividends paid from the Bank to GBVD and by GBVD to Greater Brazos.
Greater Brazos is subject to regulation by the Federal Reserve.
The Bank is an independent, community bank located in College Station,
Texas with a full service branch located in Bryan, 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
agricultural, commercial, consumer and real estate loans. The Bank also offers
trust services, safe deposit boxes, a night deposit facility, motor bank, wire
transfers and ATM cards.
SERVICES, EMPLOYEES AND PROPERTIES
On September 30, 1996, the Bank had 14 officers, nine directors, 15 full-
time employees and seven part-time employees. Mr. Allan Hanson has resigned as
an officer of the Bank effective January 15, 1997. Outside directors of the Bank
are compensated for their services. Greater Brazos had three officers and five
directors at that date. Directors of Greater Brazos receive no compensation for
their services.
The Bank's main office is located at 2405 Texas Avenue South, College
Station, Texas in a three story brick building. The Bank leases 10,683 square
feet on the first and third floors. The College Station location includes
adequate paved parking, a four lane drive-in facility and an ATM. The Bank's
Bryan, Texas branch is located at 1200 Briarcrest Drive in a concrete office
building. The branch occupies 5,559 square feet on two floors which are leased
by the Bank. The Bryan location also includes adequate paved parking, an eight
lane drive-in facility and an ATM. The Bank also has an ATM at 307 University
Drive, College Station, Texas.
SEE "INFORMATION ABOUT GREATER BRAZOS--BENEFICIAL OWNERSHIP OF GREATER
BRAZOS COMMON STOCK BY GREATER BRAZOS MANAGEMENT AND PRINCIPAL SHAREHOLDERS".
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COMPETITION
The Bank considers its service area to be the area encompassing Brazos
County, Texas. The activities in which the Bank engages are competitive. Each
activity engaged in 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.
Greater Brazos 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. Greater
Brazos 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 Greater Brazos
competes have capital and resources much larger than those of Greater Brazos,
and some are not subject to the same regulatory restrictions.
LEGAL PROCEEDINGS
In the normal course of its businesses, Greater Brazos from time to time is
involved in legal proceedings. Other than such proceedings incidental to its
business, Greater Brazos' management is not aware of any pending or threatened
legal proceedings which, upon resolution, would have a material adverse effect
upon Greater Brazos' financial condition or results of operations. 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 Greater Brazos Common
Stock. As of ________, 1997, Greater Brazos Common Stock was held by 135 holders
of record. Greater Brazos has never paid dividends on its common stock. Prior to
Greater Brazos acquiring the Bank, the Bank paid a dividend to its shareholders
of $.30 per share in 1993. SEE "MARKET PRICES"; "COMPARISON OF RIGHTS OF
SHAREHOLDERS OF GREATER BRAZOS AND COMPASS DIVIDENDS"; AND "INFORMATION ABOUT
GREATER BRAZOS--BENEFICIAL OWNERSHIP OF GREATER BRAZOS COMMON STOCK BY GREATER
BRAZOS MANAGEMENT AND PRINCIPAL SHAREHOLDERS".
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<PAGE>
BENEFICIAL OWNERSHIP OF GREATER BRAZOS COMMON STOCK BY GREATER BRAZOS
MANAGEMENT AND PRINCIPAL SHAREHOLDERS.
The following table sets forth, as of September 30, 1996, the names and
addresses of each beneficial owner of more than 5% of Greater Brazos Common
Stock known to the Board of Directors of Greater Brazos, showing the amount and
nature of such beneficial ownership and the names of each director and executive
officer of Greater Brazos, the number of shares of Greater Brazos Common Stock
owned beneficially by each director and executive officer and the number of
shares of Greater Brazos 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.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature
Beneficial Owner of Beneficial Ownership/(1)/ Percent of Class
---------------- ---------------------------- -----------------
<S> <C> <C>
James R. Bradley /(2)/ 27,501 13.70%
3414 Parkway Terrace
Bryan, Texas 77801
Allan W. Hanson /(3)/ 14,585 6.95%
2901 Partridge Circle
Bryan, Texas 77802
W. Paul Huddleston /(4)/ 210 *
B. P. Huddleston & Co., Inc. 30,625 15.26%
Profit Sharing Plan & Trust
1111 Fannin, Suite 1700
Houston, Texas 77002
Ken Martin 14,175 7.06%
1500 Brook Hollow
Bryan, Texas 77801
Bill C. Presnal /(5)/ 23,677 11.80%
1605 Brookhollow
Bryan, Texas 77802
Henry L. Presnal, D.V.M./(6)/ 29,971 14.94%
3101 Camelot
Bryan, Texas 77802
James K. Presnal /(7)/ 31,033 15.46%
2848 FM 2776
Bryan, Texas 77808
The Will and Marjorie Presnal Family Trust 11,524 5.74%
c/o Dr. Henry L. Presnal
3101 Camelot
Bryan, Texas 77802
All directors and executive officers
as a group (5 persons) /(3)(5)(6)(7)/ 102,732 48.97%
</TABLE>
________________
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* Less than 1%.
/(1)/ Unless otherwise indicated, each individual is the record owner of, and
has sole voting and investment power with respect to, all shares of
Greater Brazos Common Stock of which he or she is the beneficial owner.
Unless otherwise indicated, all percentages are based upon 200,674 shares
of Greater Brazos Common Stock issued and outstanding.
/(2)/ Mr. Bradley serves as Secretary, Treasurer and a director of Greater
Brazos. Includes 284 shares of Greater Brazos Common Stock held by the
KSOP (as defined below) that were acquired during 1996 and have not been
allocated to the account of any participant in the KSOP. Mr. Bradley
serves as a Co-Trustee of the KSOP, pursuant to which authority Mr.
Bradley may generally exercise voting and investment authority with
respect to such unallocated shares.
/(3)/ Mr. Hanson serves as President and a director of Greater Brazos. Includes
655 shares held in the name of Allan W. Hanson - IRA Rollover, 53 shares
held in the name of Allan W. Hanson, Trustee for Chris A. Hanson, 53
shares held in the name of Allan W. Hanson, Trustee for Kelly A. Hanson,
and 130 shares held in the name of Jeannie M. Hanson - IRA Rollover.
Jeannie M. Hanson is Mr. Hanson's spouse. Also includes 9,130 shares of
Greater Brazos Common Stock which may be acquired upon the exercise of
options granted pursuant to the Greater Brazos Incentive Stock Option
Plan, and 3,067 shares of Greater Brazos Common Stock held by the KSOP
that are allocated to the account of Mr. Hanson. Includes 284 shares of
Greater Brazos Common Stock held by the KSOP that were acquired during
1996 and have not been allocated to the account of any participant in the
KSOP. Mr. Hanson serves as a Co-Trustee of the KSOP, pursuant to which
authority Mr. Hanson may generally exercise voting and investment
authority with respect to such unallocated shares. Percentage is based
upon 209,804 shares of Greater Brazos Common Stock issued and outstanding
upon the exercise of Mr. Hanson's Incentive Stock Options.
/(4)/ Mr. Huddleston serves as a director of Greater Brazos.
/(5)/ Includes 11,523 shares held in the name of Billy C. and/or Cecille D.
Presnal, Joint Tenants with Right of Survivorship, 210 shares held in the
name of Billy C. Presnal, Trustee for James Scott Presnal, 210 shares held
in the name of Billy C. Presnal, Trustee for Stephen Earl Presnal, and 210
shares held in the name of Billy C. Presnal, Trustee for Deanna K.
Tinsley. Also includes 11,524 shares held by The Will and Marjorie Presnal
Family Trust, of which Mr. Presnal serves as Co-Trustee.
/(6)/ Dr. Presnal serves as Chairman of the Board and a director of Greater
Brazos. Includes 210 shares held in the name of Henry L. Presnal, Trustee
for Jeffery L. Presnal, 210 shares held in the name of Henry L. Presnal,
Trustee for Bradley P. Presnal, 210 shares held in the name of Henry L.
Presnal, Trustee for Justin J. Presnal, 210 shares held in the name of
Henry L. Presnal, Trustee for Tara C. Presnal and 17,023 shares held in
the name of Henry L., and /or Lou B. Presnal, Joint Tenants with Rights of
Survivorship. Also includes 11,524 shares held by The Will and Marjorie
Presnal Family Trust, of which Dr. Presnal serves as Co-Trustee. Includes
284 shares of Greater Brazos Common Stock held by the KSOP that were
acquired during 1996 and have not been allocated to the account of any
participant in the KSOP. Dr. Presnal serves as a Co-Trustee of the KSOP,
pursuant to which authority Dr. Presnal may generally exercise voting and
investment authority with respect to such unallocated shares. Also
includes 75 shares held in the name of Lou B. Presnal, P.O.D. Bradley Paul
Presnal, 75 shares held in the name of Lou B. Presnal, P.O.D. Jeffrey L.
Presnal, 75 shares held in the name of Lou B. Presnal, P.O.D. Justin
Presnal and 75 shares held in the name of Lou B. Presnal, P.O.D. Tara
Presnal, over which Mrs. Presnal has voting control. Lou Presnal is Dr.
Presnal's spouse.
/(7)/ Mr. Presnal serves as a director of Greater Brazos. Includes 210 shares
held in the name of James K. Presnal, Trustee for Carol Ann Lemmon, 210
shares held in the name of James K. Presnal, Trustee for Forest D.
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<PAGE>
Cook, 210 shares held in the name of James K. Presnal, Trustee for James
K. Presnal, Jr., and 150 shares held in the name of Jean R. Presnal, Mr.
Presnal's spouse.
_______________
The persons listed above will receive the same Merger Consideration
described in "THE MERGER--GENERAL" as the other Greater Brazos shareholders for
each share of Greater Brazos Common Stock held at the Effective Time.
The directors and officers of Greater Brazos control, with the power to
vote, an aggregate of 93,602 shares of Greater Brazos Common Stock, representing
approximately 46.6% of the total shares of Greater Brazos Common Stock issued
and outstanding. SEE "INTRODUCTION"; "SUMMARY--SHAREHOLDER VOTES REQUIRED"; AND
"THE MERGER--GENERAL".
Officers, directors and certain shareholders of Greater Brazos owning
130,265 shares of Greater Brazos Common Stock, comprising approximately 65.1% of
the total shares of Greater Brazos 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.
THE KSOP
Greater Brazos is the sponsor of the Greater Brazos Valley Bancorp, Inc.
Employee Stock Ownership Plan (with 401(k) provisions) (the "KSOP"). The primary
purpose of the KSOP is to enable participating employees ("Participants") to
share in the growth and prosperity of Greater Brazos through employer
contributions to the KSOP and to provide the participating employees of Greater
Brazos or the Bank with an opportunity to accumulate capital for their future
economic security.
The KSOP is administered by a board of trustees (the "Trustees"), composed
of individuals appointed by the Board of Directors of Greater Brazos. Messrs.
James R. Bradley and Allan W. Hanson and Dr. Henry V. Presnal currently serve as
the Trustees for the Plan. The Trustees have authority and responsibility for
the management and investment of the KSOP assets. Under applicable law, the KSOP
is required to invest principally in securities of Greater Brazos or any parent
or subsidiary of Greater Brazos. The KSOP currently owns 9,040 shares, or 4.50%,
of the Greater Brazos Common Stock issued and outstanding.
Applicable law generally provides that the Trustees have the authority to
vote the shares held by the KSOP, whether such shares are allocated to
Participants or unallocated. With respect to such corporate matters as a
corporate merger or consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all assets of a trade or
business or similar transactions, including the Merger, however, each
Participant is entitled to direct the Trustee as to the exercise of any voting
rights attributable to the Participant. Any allocated shares of Greater Brazos
Common Stock with respect to which voting instructions are not received from
Participants may not be voted by the Trustees, and all shares of Greater Brazos
Common Stock that is not allocated is to be voted in the manner determined by
the Trustees. As of the Record Date, of the 9,040 shares of Greater Brazos
Common Stock held by the KSOP, 8,756 shares are allocated to the accounts of
Participants and 284 shares are unallocated.
Simultaneously with the mailing of this Proxy Statement/Prospectus to the
shareholders of record on the Record Date, Greater Brazos will mail to each of
the Participants a copy of this Proxy Statement, together with a form for the
Participants to give instructions to the Trustees as to the voting of such
shares. The Trustees intend to vote the allocated shares as instructed by the
Participants, and the Trustees intend to vote the unallocated shares in favor of
the Merger.
As a shareholder of Greater Brazos, the KSOP will participate in the Merger
and will receive the same consideration as the other shareholders of Greater
Brazos.
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<PAGE>
STOCK OPTION PLAN
Effective September 1, 1994, the Bank adopted an Incentive Stock Option
Plan and authorized the issuance of a maximum of 20,090 shares of stock of the
Bank under the Plan. During 1994, the Board of Directors of the Bank authorized
and granted stock options to certain officers of the Bank to acquire an
aggregate of 20,900 shares of common stock of the Bank. Subsequently, such
options were assumed by Greater Brazos. Such options are exercisable at a price
of $15.00 per share beginning in September 1995. Accordingly, there are
currently options to acquire 20,090 shares of Greater Brazos Common Stock
outstanding. The Merger Agreement provides for the exchange of all outstanding
options to acquire Greater Brazos Common Stock for shares of Compass Common
Stock. See "THE MERGER--GENERAL".
PHANTOM STOCK PLAN
Effective March 1993, the Bank adopted a Phantom Stock Plan for the benefit
of certain key employees of the Bank, and authorized the award of phantom stock
in an amount not to exceed 15% of the total outstanding capital stock of the
Bank. The Bank subsequently awarded a total of 1,575 shares of phantom stock.
The shares of phantom stock do not represent shares of Greater Brazos Common
Stock outstanding, but represent the right of the persons who have received such
phantom shares to receive capital stock or an equivalent amount of cash upon
termination of such person's employment, subject to certain vesting
requirements. The shares of phantom stock have no voting rights. The Merger
Agreement provides for the exchange of all outstanding shares of phantom stock
for shares of Compass Common Stock. SEE "THE MERGER--GENERAL."
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF GREATER BRAZOS VALLEY BANCORP, INC.
The following discussion provides certain information regarding the
financial condition and results of operations of Greater Brazos. This discussion
should be read in conjunction with Greater Brazos' Financial Statements and
Notes to Financial Statements presented elsewhere in this Proxy
Statement/Prospectus. SEE "INDEX TO GREATER BRAZOS FINANCIAL STATEMENTS". The
historical data of Greater Brazos has been restated to give effect to the
acquisition of the Bank during 1995.
RESULTS OF OPERATIONS
GENERAL
The earnings of Greater Brazos depend primarily on Greater Brazos' net
interest income (i.e., the difference between the income earned on Greater
Brazos' 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.
Greater Brazos' 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 Greater Brazos' operations are affected by
general market, economic and competitive conditions.
Greater Brazos' reported net income of $164,000 for the nine month period
ended September 30, 1996, a decline of $118,000 from net income of $282,000 for
the nine month period ended September 30, 1995. Pretax income was $343,000 for
the nine months ended September 30, 1996, a $25,000 decrease from the $368,000
earned during the nine months ended September 30, 1995. Greater Brazos had net
income of $317,000 for the year ended December 31, 1995, $283,000 for the year
ended December 31, 1994 and $268,000 for the year ended December 31, 1993.
Changes occurring in the major components of Greater Brazos' income statement
for such periods are discussed below.
NET INTEREST INCOME
Net interest income is the primary source of income for Greater Brazos and
represents the amount by which interest generated by earning assets exceed the
cost of funds, primarily interest paid to Greater Brazos' depositors on
interest-bearing accounts. Net interest income was $1,749,000 for the nine
months ended September 30, 1996, an 11.5% increase from net interest income of
$1,569,000 for the nine months ended September 30, 1995. Average rates earned
on interest-bearing assets increased to 7.82% as of September 30, 1996 from
7.78% as of September 30, 1995. Average loans of $34 million for the nine
months ended September 30, 1996, increased 6.6% over average loans of $32
million for the same period in 1995. Average deposits for the nine months ended
September 30, 1996 were $54 million, an increase of 4% over average deposits of
$52 million for the same period in 1995.
Net interest income was $2,103,000 for the year ended December 31, 1995, an
8.3% increase from net interest income of $1,942,000 for 1994. Average loans of
$31 million for year ended December 31, 1995 decreased 4.6% over average loans
of $32.5 million for the same period in 1994. Average interest-bearing deposits
for the year ended December 31, 1995 were $42 million, an increase of 2.9% over
average interest-bearing deposits of $40.7 million for the same period in 1994.
For the year ended December 31, 1995, net interest income increased
$161,000, or 8.3%, over net interest income for the year ended December 31,
1994. Net interest income increased $302,000 in 1994, or 18.4%, over 1993
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<PAGE>
net interest income of $1,640,000. These increases were primarily due to an
increase in loan volume and total earning assets.
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.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Nine Months Nine Months
Ended September 30, Ended September 30,
1996 1995
--------------------------------------- ---------------------------------------
Average Interest Yield/ Average Interest Yield/
Balance Inc/Exp Rate Balance Inc/Exp Rate
---------- ---------- -------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans(1) $ 33,857 $ 2,308 9.08% $ 31,753 $ 2,139 9.03%
Securities-Available for sale 16,479 700 5.66% 15,933 663 5.58%
Federal funds sold 2,849 114 5.34% 2,688 122 6.06%
---------- ---------- -------- ----------- --------- -------
Total interest-earning assets/interest
income/average yield 53,184 3,123 7.82% 50,375 2,924 7.78.%
Non-interest earning assets:
Cash and due from banks 1,986 2,033
Other assets 2,794 2,833
Allowance for possible loan losses (127) (152)
---------- -----------
Total $ 57,838 $ 55,089
========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest bearing liabilities:
NOW, money market and savings $ 19,226 $ 359 2.49% $ 17,358 $ 318 2.46%
Certificates of deposit 24,725 1,014 5.46% 24,714 1,022 5.54%
Federal funds purchased 6 -- 5.61% 332 15 6.19%
---------- ---------- -------- ----------- --------- -------
Total interest-bearing liabilities/interest
expense/rate 43,956 1,373 4.16% 42,404 1,355 4.28%
Noninterest bearing demand deposits 10,194 9,342
Other liabilities 415 393
---------- -----------
Total liabilities 10,609 9,735
Stockholders' equity 3,273 2,951
---------- -----------
Total $ 57,838 $ 55,090
========== ---------- =========== ---------
Net interest income $ 1,750 $ 1,569
========== -------- ========= -------
Net yield on interest earning assets 3.29% 3.11%
======== =======
</TABLE>
(1) Includes non-accrual loans. See notes to Financial Statements of Greater
Brazos.
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<PAGE>
<TABLE>
<CAPTION>
(Dollars in Thousands)
Year Ended December 31,
1995 1994 1993
--------------------------------- -------------------------- ----------------------------------
Average Interest Yield/ Average Interest Yield/ Average Interest Yield/
Balance Inc/Exp Rate Balance Inc/Exp Rate Balance Inc/Exp Rate
----------- --------- -------- -------- --------- ------ ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (1) $ 31,447 $ 2,832 9.01% $ 28,458 $ 2,369 8.33% $ 19,960 $ 1,752 8.78%
Securities 15,879 896 5.64% 16,293 841 5.16% 17,731 940 5.30%
Federal funds sold 3,430 203 5.91% 1,446 64 4.41% 2,034 60 2.95%
----------- ---------- ------- --------- -------- ------- --------- ---------- -------
Total interest-earning
assets/interest income/
average yield 50,755 3,930 7.74% 46,197 3,274 7.09% 39,725 2,752 6.93%
Non-interest earning
assets:
Cash and due from banks 2,050 2,040 1,698
Other assets 2,807 2,704 2,516
Allowance for possible
loan losses (148) (147) (135)
---------- --------- ---------
Total $ 55,464 $ 50,795 $ 43,804
========== ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest bearing
liabilities:
NOW, money market and
savings $ 17,233 $ 420 2.44% $ 18,958 $ 450 2.37% $ 17,432 $ 436 2.50%
Certificates of deposit 25,024 1,392 5.56% 19,409 876 4.51% 15,812 669 4.23%
Subordinated debt -- -- -- 30 2 6.07% 125 8 6.00%
Federal funds purchased 251 16 6.09% 112 5 4.06% 17 1 3.39%
----------- ---------- ------- --------- -------- ------- --------- ---------- -------
Total interest bearing
liabilities/interest
expense/ rate 42,509 1,828 4.30% 38,510 1,332 3.46% 33,386 1,112 3.33%
Noninterest bearing demand
deposits 9,519 9,431 7,926
Other liabilities 437 291 233
----------- --------- ---------
Total liabilities 52,484 48,232 41,544
Stockholders' equity 2,999 2,563 2,260
----------- --------- ---------
Total $ 55,464 $ 50,795 $ 43,804
=========== ---------- ========= --------- ========= ----------
Net interest income $ 2,102 $ 1,942 $ 1,640
========== ======== ==========
Net yield on interest -------- -------- --------
earning assets 4.14% 4.20% 4.13%
======== ======== ========
</TABLE>
(1) Includes Nonaccrual loans.
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<PAGE>
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, 1996 December 31, 1995 December 31, 1994
---------------------- ------------------------- ---------------------
Change Change Change
1996 Attributed to 1995 Attributed to 1994 Attributed to
---------------------- -------------------------- ---------------------
to to to
1995 Volume Rate Mix 1994 Volume Rate Mix 1993 Volume Rate Mix
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans $ 169 $144 $ 13 $12 $ 463 $ 212 $ 268 $ 17 $ 617 $ 706 $ (130) $ (41)
Securities 37 33 10 (6) 55 (23) 77 1 (99) (74) (23) (2)
Federal funds sold (8) 8 (17) 1 139 117 52 -- 4 (26) 21 1
----- ---- ---- --- ----- ----- ---- ---- ----- ----- ------- ------
Increase (decrease) in
interest income $ 198 $185 $ 6 $ 7 $ 657 $ 306 $ 397 $ 18 $ 522 $ 606 $(312) $ (42)
===== ==== ==== === ===== ===== ===== ==== ===== ===== ======= ======
Interest expense:
Savings, NOW & MMDA $ 41 $ 35 $ 4 $ 2 $(30) $(43) $ 12 $ 1 15 $ 37 $ (24) $ 2
Time deposits (8) 2 (9) (1) 516 313 263 (60) 207 163 55 (11)
Federal funds purchased (9) (8) (1) -- 10 6 4 -- 4 3 1 --
Subordinated debt -- -- -- -- (2) (2) -- -- (6) (6) -- --
----- ---- ---- --- ----- ----- ----- ----- ----- ----- ------- ------
Increase (decrease) in
interest expense $ 24 $ 29 $ (6) $ 1 $ 494 $ 274 $ 279 $(59) $ 220 $ 197 $ 32 $ (9)
===== ==== ==== === ===== ===== ===== ===== ===== ===== ======= ======
</TABLE>
Changes in interest income and interest expense can result from variances
in both volume and rate. Greater Brazos 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 .
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<PAGE>
PROVISION FOR LOAN LOSSES
Greater Brazos' 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.
Greater Brazos recorded a $212,000 provision for loan losses for the nine
months ended September 30, 1996 and a $61,000 provision for loan losses for the
nine months ended September 30, 1995. The allowance for loan losses expressed
as a percentage of outstanding loans net of unearned interest was .78% and .49%
as of September 30, 1996 and September 30, 1995, respectively. The increase in
the provision was primarily due to concerns regarding the Bank's indirect loan
portfolio and increasing concerns with consumer credits. The consumer indirect
portfolio constituted $2.8 million of the Bank's total loan portfolio as of
September 30, 1996.
Greater Brazos recorded a $99,000 provision for loan losses for the year
ended December 31, 1995, a $33,000 provision for loan losses for the year ended
December 31, 1994 and a $15,000 provision for loan losses for the year ended
December 31, 1993. Greater Brazos' allowance for loan losses as a percentage of
outstanding loans net of unearned interest was .43% as of December 31, 1995,
.43% as of December 31, 1994, and .69% as of December 31, 1993.
Non-accrual loans increased $483,000 for the period ended September 30,
1996. This increase was primarily due to the addition of three Small Business
Administration ("SBA") loans. For the years ended December 31, 1995, 1994 and
1993, total non-accrual, past due greater than 90 days and restructured loans
were $167,000, $270,000 and $0, respectively. The non-accruals of government
guaranteed loans have some impact on interest income, but are not considered
significant in credit risk because of the government guarantee.
NON-INTEREST INCOME
Non-interest income, which includes all service charges and fees, decreased
16.8% from $967,000 for the nine months ended September 30, 1995 to $804,000 for
the nine months ended September 30, 1996. The $163,000 decrease was due to the
decision not to sell SBA guaranteed loans and student loans in 1996 as had been
the practice in 1995.
Non-interest income increased 11.3% from $1,164,000 for the year ended
December 31, 1994 to $1,295,000 for the year ended December 31, 1995. This
increase was primarily due to increased business activity of the premium sale of
government guaranteed loans.
Non-interest income increased 10.8% from $1,051,000 for the year ended
December 31, 1993 to $1,164,000 for the year ended December 31, 1994. This
increase was primarily due to increased business activity and the premium sale
of government guaranteed loans.
NON-INTEREST EXPENSE
Non-interest expense include expenses which Greater Brazos incurs in the
course of operations such as employee compensation and benefits, occupancy
expense, data processing charges, communication expense, professional fees,
advertising, supplies and depreciation and amortization of furniture and
equipment. These expenses decreased $208,000, or 5%, from $2,207,000 for the
nine months ended September 30, 1995 to $1,999,000 for the nine months ended
September 30, 1996. The decrease was mainly attributable to a decline in
employee salaries and benefits which decreased $14,000 for the nine months ended
September 30, 1995 from the same period in 1996 and a decline in total other
expenses of $108,000 through cost controls for the same period.
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<PAGE>
Operating expenses for the year ending December 31, 1995 increased by
$108,000 or 4% for the year ended December 31, 1994. Comparing years 1994 to
1993, operating expenses increased by $596,000 or 27%. These increases are
primarily due to the addition of Greater Brazos' Bryan Branch location which
opened the end of 1993.
FEDERAL INCOME TAXES
Greater Brazos' provision for income taxes was $179,000 and $86,000 for the
nine month periods ended September 30, 1996 and 1995, respectively. The increase
was primarily due to an underaccrual in 1995 which was corrected in 1996.
Greater Brazos' provision for income taxes was $93,000 for year end 1995,
$9,000 for the year ended 1994 and $223,000 for year end 1993. The high federal
tax paid in 1993 was due to a taxable gain on the sale of the bank's building
for that year. The low effective tax rate in 1994 was attributed to a large
portfolio of municipal securities, which were subsequently sold in 1995 due to
FAS 115 revisions.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
CAPITAL RESOURCES
The Federal Reserve and the OCC have adopted risk-based and leverage
capital measures to assist in the assessment of the capital adequacy of the
holding companies and banks they regulate. The Federal Reserve regulations
apply to Greater Brazos and the OCC regulations apply to the Bank. Although
there are differences between these regulations, in general the Federal Reserve
and the OCC regulations employ uniform capital ratios and consistent capital
frameworks. 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 and, effective in January of 1997, market 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 risks, the effectiveness of loan and investment policies, and
management's ability to monitor and control financial and operating risks.
A financial institution's 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
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<PAGE>
conversion factor. Second, in most cases, the credit equivalent amount is
assigned to the appropriate risk category according to designated criteria.
Financial institutions 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, 1996, Greater Brazos' Tier 1 risk-based capital ratio was 11.1%
and the Bank's Tier 1 risk-based capital ratio was 11.1% and the total risk-
based capital ratio was 12.0%. As of year end 1995, Greater Brazos' Tier 1
capital ratio was 11.7% and its total risk-based capital ratio was 11.8%, and
the Bank's Tier 1 capital ratio was 11.7% and its total risk-based capital ratio
was 11.8%.
In addition, the Federal Reserve and the OCC have 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 Federal
Reserve and the OCC require their regulated institutions to meet a minimum
leverage capital requirement of Tier 1 capital to total assets of not less than
3% for an institution that is not anticipating or experiencing significant
growth and is highly rated (i.e., a composite examination rating of 1 on a scale
of 1 to 5). Institutions that the Federal Reserve and the OCC determine 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.
Greater Brazos' leverage ratio was 5.8% for year end 1995 and 5.3% for year
end 1994. Currently, as of September 30, 1996, the leverage ratio is 5.7%. The
Bank's leverage ratio was 5.8% for year end 1995 and 5.3% for year end 1994.
Currently, as of September 30, 1996, the leverage ratio is 5.7%.
LIQUIDITY
Greater Brazos' 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. Greater Brazos
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. Greater Brazos believes its present position to
be adequate to meet its current and future liquidity needs.
The liquidity of Greater Brazos 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, Greater Brazos' 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, Greater Brazos has correspondent relationships with other
institutions with available secured lines of credit to purchase overnight funds
totaling $3,000,000 should additional liquidity be needed. These lines are
subject to restrictions such as the financial strength of Greater Brazos and the
lenders ability to facilitate credit.
On January 1, 1994, Greater Brazos adopted the provisions of FAS 115. The
opening balance of shareholder's equity was decreased by $171,000 to reflect the
net unrealized holding losses on securities classified as available for sale
which were previously carried at amortized cost. As of September 30, 1996,
Greater Brazos' portfolio totaled $14,443,000 of which all of the securities are
classified as available for sale.
Average non-interest bearing demand deposits were $10,194,000 for the nine
months ended September 30, 1996, an increase of $852,000 over the average
balance for the same period in 1995. Average interest bearing
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<PAGE>
deposits were $43,950,000 for the nine months ended September 30, 1996 compared
to $42,072,000 for the same period in September 30, 1995.
Average non-interest bearing demand deposits were $8,790,000, $9,572,000
and $8,671,000 for the years ended December 1995, 1994 and 1993, respectively.
Average interest bearing deposits for the same years were $43,875,000,
$40,692,000 and $35,755,000, respectively.
Net cash generated by operating activities was $585,000, $132,000 and
$276,000 as of the end of 1995, 1994 and 1993, respectively. Proceeds from
sales, principal paydowns, and maturities of investment securities were
$10,637,000, $5,523,000 and $10,424,000 for the same periods. Proceeds from the
sale of assets during 1995, 1994 and 1993 were $192,000, $232,000 and
$1,674,000, respectively. Greater Brazos utilized these funds to originate
loans and purchase investment securities. Greater Brazos purchased investment
securities of $12,922,000 in 1995, $991,000 in 1994 and $16,002,000 in 1993.
Net cash provided by operating activities was $279,000 for the nine months
ended September 30, 1996 and $444,000 for the nine months ended September 30,
1995. A net increase in deposit accounts of $3,681,000 was realized during the
nine months ended September 30, 1996 compared to an increase of $1,182,000 for
the same period in 1995. For the nine months ended September 30, 1996, Greater
Brazos utilized funds to originate loans. For the same period in 1995 funds
were utilized to originate loans and purchase securities totaling $9,661,000.
Funds utilized for the purchase of bank premises and equipment were
$37,000, $557,000 and $686,000 during 1995, 1994 and 1993. The funds utilized
for 1993 was the opening of Greater Brazos' Bryan banking center and in 1994 for
the restoration of its College Station banking center.
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 on net interest income of market rate fluctuations
is to minimize the difference between 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 diverse 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.
-58-
<PAGE>
The following table shows interest sensitivity gaps for these different
intervals as of September 30, 1996.
ESTIMATED PERIOD OF POTENTIAL REPRICING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Over
One Day to Over Six Months
Three Three to Six to One Over One
Months Months Year Year Total
------ ------ ---- ---- -----
<S> <C> <C> <C> <C> <C>
INTEREST SENSITIVE ASSETS ("ISA")
Loans
(Fixed rate) $ 2,095 $ 4,230 $16,761 $ 1,353 $24,439
(Floating rate) 8,406 1,478 463 -- 10,617
Investment securities (fixed rate) 2,006 -- 7,051 3,404 12,461
Investment securities (floating rate) 1,868 -- -- -- 1,868
Fed funds sold 2,990 -- -- -- 2,990
Time deposits in banks -- -- -- -- --
------- ------- ------- ------- -------
TOTAL INTEREST SENSITIVE ASSETS 17,365 5,978 24,275 4,757 52,375
INTEREST SENSITIVE LIABILITIES ("ISL")
Interest bearing deposits -- -- -- -- --
Savings accounts 775 -- 3,100 -- 3,875
Money market checking 1,663 -- 6,652 -- 8,315
Certificates of deposit 4,211 12,038 8,219 -- 24,468
------- ------- ------- ------- -------
TOTAL INTEREST SENSITIVE ASSETS 6,649 12,038 17,971 -- 36,658
PERIODIC GAP $10,716 $(6,060) $ 6,304 $ 4,757 $15,717
======= ========= ======= ======= =======
CUMULATIVE GAP $10,716 $ 4,656 $10,960 $15,717
======= ========= ======= =======
</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
Greater Brazos' net interest margin. Because of these factors, an interest
sensitivity gap report may not provide a complete assessment of Greater Brazos'
exposure to changes in interest rates.
-59-
<PAGE>
INVESTMENT SECURITIES
Set forth is a distribution of Greater Brazos' investment securities by
contractual maturity dates at September 30, 1996 (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 available for
sale: /(1)/
U.S. Treasury $2,006 5.20% $3,929 5.45% $ -- -- $ -- -- $ 5,936
Government agency -- -- 3,122 6.20% 1,247 6.48% 832 7.23% 5,201
Collateralized mtg oblig -- -- -- -- -- -- 3,194 6.69% 3,194
Other investments -- -- -- -- -- -- 113 5.17% 113
------ ---- ------ ----- ------ ----- ------ ----- -------
Total securities
available for sale $2,006 5.20% $7,051 5.78% $1,247 6.48% $4,138 6.76% $14,443
====== ===== ====== ===== ====== ===== ====== ===== =======
</TABLE>
(1) Greater Brazos and subsidiaries have no tax-exempt securities and no
securities which are classified as held to maturity.
-60-
<PAGE>
DEPOSITS
The daily 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, 1996 As of December 31,
------------------------ ------------------------------
1995 1994
---- ----
Amount Rate Amount Rate Amount Rate
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Demand $10,194 -- $ 9,519 -- $ 9,431 --
NOW accounts 7,249 1.90% 6,941 1.88% 7,399 1.88%
Money market 8,151 3.12% 6,560 3.09% 7,600 2.83%
Savings 3,825 2.25% 3,732 2.33% 3,960 2.42%
Time 24,725 5.46% 25,024 5.56% 19,409 4.51%
======= ===== ======= ===== ======= =====
TOTAL $54,145 3.38% $ 51,776 3.50% $47,799 2.77%
======= ===== ======= ===== ======= =====
</TABLE>
The scheduled maturities of certificates of deposit in denominations of
$100,000 or more at September 30, 1996 and December 31, 1995, including public
funds, are shown below:
<TABLE>
<CAPTION>
(Dollars in Thousands)
September 30, 1996 December 31, 1995
---------------------- -----------------
<S> <C> <C>
Due in three months or less $1,357 $ 825
Due in over three to six 1,015 1,000
months
Due in over six to twelve 1,776 1,925
months
Due in over twelve months 2,300 3,300
---------------------- -----------------
Total $6,448 $7,050
====================== =================
</TABLE>
-61-
<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,
1996 1995 1994 1993
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Real estate
Construction and land development $ 905 $ 568 $ 1,012 $ 891
Mortgage loans 6,421 6,255 5,969 4,081
Other 6,559 5,092 4,195 3,197
Installment 13,672 13,073 15,210 10,727
Commercial 8,149 6,553 6,299 3,367
Less unearned discounts (53) (98) (139) (239)
-------------- ------------- -------------- -------------
Total $35,653 $31,433 $32,546 $22,024
============== ============= ============== =============
</TABLE>
Disclosure of loan maturity balances is excluded due to the information not
being readily accessible.
Total loans net of unearned income and allowance for possible loan losses
decreased 3.4% in 1995 from 1994 levels. At December 31, 1994, total loans
exceeded year end 1993 levels by 47.7%. This increase was primarily attributed
to increases in commercial SBA loans, purchases of automotive installment loans
and mortgage refinancings. At September 30, 1996, total loans exceeded year end
1995 loans by 13.0%.
ALLOWANCE FOR LOAN LOSSES AND RISK ELEMENTS
The provision for loan losses represents a determination by Greater Brazos'
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 future losses inherent in the loan
portfolio. It is Greater Brazos' 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 Greater Brazos' policy to charge off
in the current period those loans in which a loss is deemed to exist, risks of
future 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 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 Greater Brazos.
In evaluating the allowance for loan losses, management also considers
Greater Brazos' 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 Greater
Brazos' loan review system.
The allowance for loan losses at September 30, 1996 was $279,000, compared
to $135,000 at December 31, 1995 and $140,000 at December 31, 1994. Although
additional losses may occur, management believes the allowance for loan losses
to be adequate as of the date presented.
-62-
<PAGE>
<TABLE>
<CAPTION>
(Dollars in Thousands)
As of and for
the Nine As of and for the Years
Months Ended Ended
Transaction in allowance for possible loan losses September 30, December 31,
- ------------------------------------------------- ------------- ------------------------------------
1996 1995 1994 1993
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 135 $ 140 $ 151 $ 129
Charge-offs
- -----------
Commercial 117 146 118 --
Real estate -- -- -- 10
Installments -- 7 -- --
------------- ---------- ---------- ----------
Total charge-offs 117 153 118 10
Recoveries
- ----------
Commercial 49 48 67 14
Real estate -- -- 7 2
Installment loans -- -- -- 1
------------- ---------- ---------- ----------
Total recoveries 49 48 74 17
Net charge-offs (recoveries) 68 105 44 (7)
Provision charged to expense 212 99 33 15
------------- ---------- ---------- ----------
Balance at end of period $ 279 $ 135 $ 140 $ 151
============= ========== ========== ==========
Net charge-offs (recoveries) as a percentage of
average loans (annualized for 1996) 0.27% 0.33% 0.15% 0.04%
</TABLE>
-63-
<PAGE>
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
The following is an analysis of non-performing assets as of the dates
shown:
<TABLE>
<CAPTION>
(Dollars in Thousands)
September 30, December 31,
-------------------------------------------
1996 1995 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis $ 650 $ 167 $ 270 --
Accruing loans which are contractually past
due 90 days or more as to principal or
interest payments 37 382 14 15
Troubled debt restructuring 78 -- -- --
Total
------------- ------------- ------------- -------------
Interest income included in net income for period $ 765 $ 549 $ 284 $ 15
Foregone interest on nonaccrual loans
</TABLE>
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. As of
September 30, 1996, loans totaling $650,000 or 1.8% of total net loans
outstanding, were on a non-accrual basis, therefore, no income was being
recognized. As of year end 1995, loans totaling $167,000, or .53% of total net
loans outstanding, were on a non-accrual basis and, therefore, no income was
being recognized. Management believes the risks of collection of the principal
amounts of these loans not to be significant. The non-accruals, for the most
part, are in the bank's SBA portfolio, which has a significant portion of
principal guaranteed by the U.S. government.
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.
Non-accrual loans increased by $426,000 to $650,000 at September 30, 1996,
from $224,000 at September 30, 1995. The increase was primarily due to the
addition of three SBA loans.
RETURN ON EQUITY AND ASSETS
The return on equity and return on assets for the periods shown below are
as follows:
<TABLE>
<CAPTION>
For the Nine
Months Ended For the Years Ended
September 30, December 31,
------------- ----------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Return on Average Assets 0.38% 0.57% 0.56%
Return on Average Equity 5.01% 10.57% 11.04%
Average Equity to Average Assets Ratio 5.66% 5.41% 5.05%
Dividend Payout Ratio -- -- --
</TABLE>
-64-
<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, 1996. KPMG Peat Marwick
LLP has served as Compass' independent auditors continuously since 1971.
Greater Brazos' Board of Directors appointed Fisk & Robinson, a
Professional Corporation, as independent auditors for Greater Brazos for the
year ending December 31, 1996. Fisk & Robinson, P.C., has served as Greater
Brazos' and the Bank's independent auditors continuously since 1994.
Compass and Greater Brazos have been advised by KPMG Peat Marwick LLP and
Fisk & Robinson, P.C., that neither KPMG Peat Marwick LLP nor Fisk & Robinson,
P.C., has any direct financial interest or any material indirect financial
interest in Compass, Greater Brazos, or their affiliates other than arising from
that firm's employment as auditors for Compass and Greater Brazos, respectively.
EXPERTS
The consolidated financial statements of Compass as of December 31, 1995
and 1994 and for each of the years in the three-year period ended December 31,
1995 have been incorporated herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein and in the Registration Statement,
and upon the authority of said firm as experts in accounting and auditing. KPMG
Peat Marwick LLP's report refers to changes in the method of accounting for
income taxes and in the method of accounting for certain investments in debt and
equity securities.
The consolidated financial statements of Greater Brazos as of and for the
years ended December 31, 1995 and 1994 have been included herein and in the
Registration Statement in reliance upon the report by Fisk & Robinson, P.C.,
independent certified public accountants, and upon the authority of said firm as
experts in accounting and auditing.
LEGAL OPINIONS
Jerry W. Powell, Esquire, General Counsel, Secretary and an employee of
Compass, has rendered an opinion concerning the validity of the securities being
offered pursuant to this Proxy Statement/Prospectus and certain other matters.
As of September 30, 1996, Mr. Powell was the beneficial owner of an aggregate of
approximately 55,494 shares of Compass Common Stock. 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. Jenkens
and Gilchrist, a Professional Corporation, and Liddell, Sapp are also expected
to render legal opinions as to certain matters acceptable to Greater Brazos 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 GREATER BRAZOS AND COMPASS--CERTAIN DIFFERENCES BETWEEN THE
CORPORATION LAWS OF TEXAS AND DELAWARE AND CORRESPONDING CHARTER AND BY-LAW
PROVISIONS--LIMITATION OF LIABILITY AND INDEMNIFICATION".
-65-
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Compass, Compass
has been informed that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
OTHER MATTERS
Greater Brazos' 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 Greater Brazos'
Board of Directors unless "Authority Withheld" is indicated in the appropriate
box on the proxy. SEE "INTRODUCTION".
H1995A/81870-18
-66-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF
GREATER BRAZOS VALLEY BANCORP, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
================================================================================
PAGE
----
<S> <C>
1. Auditors' Reports regarding the December 31, 1995 and 1994
Consolidated Financial Statements. F-3
2. Consolidated Balance Sheet as of December 31, 1995
and 1994. F-5
3. Consolidated Statement of Income for the three years
ended December 31, 1995. F-6
4. Consolidated Statement of Changes in Stockholders'
Equity for the three years ended December 31, 1995. F-7
5. Consolidated Statement of Cash Flows for the three
years ended December 31, 1995. F-8
6. Notes to Consolidated Financial Statements. F-10
7. Consolidated Balance Sheet as of September 30, 1996
and 1995 (unaudited). F-33
8. Consolidated Statement of Income for the Nine Months
Ended September 30, 1996 and 1995 (unaudited). F-34
9. Consolidated Statement of Cash Flows for the Nine
Months Ended September 30, 1996 and 1995 (unaudited). F-35
10. Selected Notes to Unaudited Consolidated Financial
Statements. F-37
</TABLE>
F-1
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 (UNAUDITED)
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-2
<PAGE>
[LOGO OF FISK ROBINSON APPEARS HERE]
Independent Auditors' Report
----------------------------
The Board of Directors
Greater Brazos Valley Bancorp, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Greater Brazos
Valley Bancorp, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the year then ended. 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 audit.
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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Greater
Brazos Valley Bancorp, Inc. and Subsidiaries as of December 31, 1995 and 1994,
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", effective January 1, 1994.
As discussed in note 5 to the consolidated financial statements, effective
January 1, 1995, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of
a Loan", as amended by SFAS No. 118.
F-3
<PAGE>
The 1993 financial statement data is presented for comparative purposes only.
We have not audited, reviewed, or compiled the financial statement data, and,
accordingly, express no opinion or any other form of assurance on that
information.
March 9, 1995 /s/ Fisk & Robinson P. C.
F-4
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1995 and 1994
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 1,823 $ 2,803
Federal funds sold 1,160 234
------- -------
Total cash and cash equivalents 2,983 3,037
Investment securities:
Available for sale (at market value) 17,037 2,929
Held to maturity (market values of
$0 and $10,939, respectively) - 11,826
Loans held for sale 7,278 7,191
Loans, net of allowance for loan losses
of $135 and $140 in 1995 and 1994 24,030 25,215
Bank premises and equipment, net 1,021 1,142
Accrued interest receivable 425 365
Other real estate owned, net 278 483
Other assets 1,179 1,068
------- -------
Total assets $54,231 $53,256
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Noninterest bearing $ 8,790 $ 9,572
Interest bearing 41,875 40,692
------- -------
Total deposits 50,665 50,264
Other liabilities 493 347
------- -------
Total liabilities 51,158 50,611
------- -------
Commitments and contingencies - -
Stockholders' equity:
Common stock; $1 and $5 par value; 1,000,000
and 500,000 shares authorized; 200,390 and
197,553 shares issued and outstanding at
December 31, 1995 and 1994, respectively 200 988
Paid-in capital 1,903 1,070
Retained earnings 1,060 743
Net unrealized loss on available for sale
securities, net of tax of $46 and $80
at December 31, 1995 and 1994,
respectively ( 90) ( 156)
------- -------
Total stockholders' equity 3,073 2,645
------- -------
Total liabilities and stockholders'
equity $54,231 $53,256
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Three Years Ended December 31, 1995
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1993
1995 1994 (Unaudited)
---- ---- -------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 2,832 $ 2,369 $ 1,752
Federal funds sold 169 64 60
Interest and dividends on
investment securities:
Taxable 793 696 913
Nontaxable 137 145 41
-------- -------- --------
930 841 940
-------- -------- --------
Total interest income 3,931 3,274 2,752
-------- -------- --------
Interest expense:
Deposit accounts, including interest expense
on certificates of deposit of $100,000
and over of $409, $248 and $185 in
1995, 1994 and 1993, respectively 1,813 1,326 1,104
Short term borrowings 15 6 8
-------- -------- --------
Total interest expense 1,828 1,332 1,112
-------- -------- --------
Net interest income 2,103 1,942 1,640
Provision for possible loan losses 99 33 15
-------- -------- --------
Net interest income after provision for
possible loan losses 2,004 1,909 1,625
-------- -------- --------
Noninterest income:
Service charges on deposit accounts 664 653 637
Gain on sales of investment securities 20 13 64
Premium on sales of loans 326 257 180
Gain on sale of other real estate owned 17 39 1
Other 268 202 169
-------- -------- --------
Total noninterest income 1,295 1,164 1,051
-------- -------- --------
Noninterest expense:
Salaries and employee benefits 1,222 1,172 948
Occupancy of bank premises 264 250 117
Furniture and equipment 140 156 96
Data processing 270 295 262
Other 993 908 762
-------- -------- --------
Total noninterest expense 2,889 2,781 2,185
-------- -------- --------
Income before income tax expense 410 292 491
Income tax expense 93 9 223
-------- -------- --------
Net income $ 317 $ 283 $ 268
======== ======== ========
Weighted average common shares outstanding 198,972 183,777 170,000
======== ======== ========
Earnings per common share $ 1.59 $ 1.54 $ 1.58
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the Three Years Ended December 31, 1995
(In Thousands, Except Share Amounts)
<TABLE>
<CAPTION>
Common Stock;
$1 and $5 Par
Value; 1,000,000
and 500,000 Net
Shares Authorized Unrealized
at December 31, Loss on
1995 and 1994 and Retained Available
1993, Respectively Paid-in Earnings For Sale
Shares Amount Capital (Deficit) Securities Total
------ ------ ------- --------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances January 1, 1993 (unaudited) 170,000 $ 850 $ 850 $ 387 $ - $ 2,087
Net income - - - 268 - 268
Cash dividends paid - - - (51) - (51)
------- --------- -------- --------- ---------- ---------
Balances December 31, 1993 (unaudited) 170,000 850 850 604 - 2,304
Conversion of subordinated debentures 12,500 62 63 - - 125
5% stock dividend 9,134 46 98 (144) - -
KSOP stock purchases 5,919 30 59 - - 89
Adoption of SFAS 115 - - - - 15 15
Net income - - - 283 - 283
Change in unrealized depreciation on
available for sale securities - - - - (171) (171)
------- --------- -------- --------- ---------- ---------
Balances December 31, 1994 197,553 988 1,070 743 (156) 2,645
KSOP stock purchases 2,837 14 31 - - 45
Changes in unrealized depreciation on
available for sale securities - - - - 66 66
Formation of holding company - (802) 802 - - -
Net income - - - 317 - 317
------- --------- -------- --------- ---------- ---------
Balances December 31, 1995 200,390 $ 200 $ 1,903 $ 1,060 $ (90) $ 3,073
======= ========= ======== ========= ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Three Years Ended December 31, 1995
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1993
1995 1994 (Unaudited)
---- ---- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 317 $ 283 $ 268
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 144 150 95
Provision for possible loan
losses 99 33 15
Net amortization of investment
securities 14 35 90
Gain on sale of investment
securities (20) (13) (64)
Gain on sales of other real
estate owned (17) (39) (1)
(Increase) in other assets (98) (381) (201)
Increase in other liabilities 146 64 74
-------- -------- ----------
Net cash provided by operating
activities 585 132 276
-------- -------- ----------
Cash flows from investing activities:
Proceeds from sales, maturities, and
paydowns of securities available
for sale 10,637 3,872 -
Purchases of securities available for sale (12,922) - -
Proceeds from maturities and paydowns
of securities held to maturity - 1,651 10,424
Purchases of securities held to
maturity - (991) (16,002)
Net loan repayments (originations) 1,045 (10,478) (2,306)
Net capital expenditures (37) (557) (687)
Proceeds from sale of other real
estate owned 173 220 32
Proceeds from sales of bank premises
and equipment 19 12 1,642
-------- -------- ----------
Net cash used by investing
activities (1,085) (6,271) (6,897)
-------- -------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Three Years Ended December 31, 1995
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1993
1995 1994 (Unaudited)
--------- --------- -----------
<S> <C> <C> <C>
Cash flows from financing activities:
Net (decrease) increase in demand
deposits, NOW and savings accounts (2,344) 10,905 2,295
Net proceeds from (payments for)
certificates of deposit 2,745 (5,067) 2,498
Issuance of common stock 45 89 -
-------- -------- --------
Net cash provided by financing
activities 446 5,927 4,793
-------- -------- --------
Net (decrease) increase in cash and cash
equivalents (54) (212) (1,828)
Cash and cash equivalents at beginning
of year 3,037 3,249 5,077
-------- -------- --------
Cash and cash equivalents at end of year $ 2,983 $ 3,037 $ 3,249
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993 (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The accounting and reporting policies of Greater Brazos Valley Bancorp, Inc.
(Bancorp) and its wholly-owned subsidiaries (collectively referred to as
Company) conform to generally accepted accounting principles and to general
practices within the banking industry. The following is a description of the
more significant of those policies.
Basis of presentation
- ---------------------
The accompanying consolidated financial statements include the accounts of
Greater Brazos Valley Bancorp, Inc. (GBVB) and its wholly-owned subsidiary,
Greater Brazos Valley Delaware Bancorp, Inc. (GBVDB), and its wholly-owned
subsidiary, Commerce National Bank (CNB).
During 1995, GBVB (a Texas corporation) and GBVDB (a Delaware corporation) were
formed. On November 1, 1995, a transaction was consummated whereby the
stockholders of CNB effectively exchanged all of their outstanding shares
(198,803) for 198,803 shares of GBVB. Following the consummation of this
transaction the Bank became a wholly-owned subsidiary of the Delaware company
which in turn, became a wholly-owned subsidiary of GBVB. Because the
stockholder group both before and after the exchange were substantially the
same, the transaction was accounted for in a manner similar to a pooling of
interests. Because the formation of these holding companies occurred subsequent
to December 31, 1994 the accounts included in the accompanying financial
statements as of and for the periods ending December 31, 1994 and 1993 include
only Commerce National Bank.
All significant intercompany transactions and balances have been eliminated in
consolidation.
Cash and cash equivalents
- -------------------------
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks, and federal funds sold. Federal funds are normally
sold for one-day periods. The Company normally considers all highly liquid
investments with an initial maturity less than ninety days to be cash
equivalents.
F-10
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Investment securities
- ---------------------
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115). In accordance with SFAS 115, the Bank classifies its
investments as either held to maturity, when the Bank has positive intent and
ability to hold securities to maturity, or available for sale. Securities
classified held to maturity are recorded in the financial statements at
amortized cost. Securities classified as available for sale are reported at fair
value, with unrealized gains and losses excluded from earnings and reported as a
separate component of stockholders' equity. As a result of the accounting
change, investment securities and stockholders' equity reflect unrealized losses
of approximately $236,000 and $156,000 (net of tax), respectively at December
31, 1994.
Realized gains and losses for securities classified as available for sale and
held to maturity are reported in earnings in the year of sale.
Prior to adoption of SFAS 115, all investment in securities were classified as
held to maturity and were carried at cost, adjusted for amortization or premiums
and accretion of discounts under methods approximating the interest method over
the remaining period to contractual maturity. In the case that these securities
were sold, gains and losses were computed under the specific identification
method.
Loans held for sale
- -------------------
Small Business Administration (SBA) and student loans originated and intended
for sale in the secondary market are carried at the lower of cost or estimated
market value in the aggregate. Net unrealized losses are recognized through a
valuation allowance by charges to income.
Loans and allowance for possible loan losses
- --------------------------------------------
Loans are stated net of participations sold without recourse, allowance for
possible loan losses and unearned income. Unearned income on installment loans
is taken into income over the term of the loan by the sum-of-the-periodic
balances method. The effect of not using the interest method is not material to
the financial statements.
F-11
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Loans on which the accrual of interest has been discontinued are designated as
nonaccrual loans. Accrual of interest on loans is discontinued either when
reasonable doubt exists as to the full, timely collection of interest or
principal or when a loan becomes contractually past due by ninety days or more
with respect to principal or interest. Generally when a loan is placed on
nonaccrual status, all interest previously accrued but not collected is reversed
against current period income. Income on such loans is then recognized to the
extent that cash is received and where the future collection of principal is
probable. Accruals are resumed on loans when they are brought fully current
with respect to interest and principal and when, in the judgment of management,
the loan is estimated to be fully collectible as to both principal and interest.
The allowance for possible loan losses represents provisions for possible loan
losses charged to earnings, less loan charge-offs net of recoveries. Loans are
charged against the allowance for possible loan losses when management believes
that the collectibility of the principal is unlikely. The provision for
possible loan losses charged to earnings is the amount which is necessary to
establish the allowance at a level management believes will be adequate to
absorb possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of any specific
problem loans and current economic conditions that may affect the borrowers'
ability to repay.
Management believes that the allowance for possible loan losses is adequate.
While management uses available information to recognize losses on loans, future
provisions for loan losses may be necessary based on changes in economic
conditions. In addition, the Office of the Comptroller of the Currency (OCC),
as an integral part of its examination process, periodically reviews the Bank's
allowance for loan losses. The OCC may require the Bank to recognize provisions
for loan losses based on its judgement of information available at the time of
examination.
Fees and costs associated with originating loans
- ------------------------------------------------
Fees and costs associated with originating loans are generally recognized in
income in the period in which fees were received and/or costs were incurred.
Under generally accepted accounting principles, such fees and costs generally
are deferred and recognized over the life of the loan as an adjustment of the
yield. Management believes the effect of not deferring such fees and costs and
amortizing them over the life of the related loans is not material to the
financial statements.
F-12
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Bank premises and equipment
- ---------------------------
Bank premises and equipment are stated at cost less accumulated depreciation.
Provisions for depreciation are computed using the straight-line method.
Average useful lives used for depreciation with respect to major classifications
of property are as follows:
Buildings 30 years
Leasehold improvements 2 to 10 years
Furniture, fixtures and equipment 2 to 15 years
Automobiles 3 years
Maintenance and repairs are charged to expense; betterments and renewals are
capitalized. Upon retirement or replacement, the cost of the asset and the
related allowance for depreciation are eliminated with the resulting gain or
loss included in the statement of income.
Other real estate owned
- -----------------------
Real estate properties acquired through, or in lieu of, loan foreclosure are to
be sold and are initially recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure, valuations are periodically
performed by management and the real estate is carried at the lower of carrying
amount or fair value less cost to sell. Revenue and expenses from operations
and changes in the valuation allowance are included in gain or loss on
foreclosed real estate.
Federal income taxes
- --------------------
Bancorp files a consolidated income tax return with its subsidiaries. Federal
income tax expense or benefit has been allocated on a separate return basis.
Effective January 1, 1993, the Company prospectively adopted the provisions of
SFAS No. 109, "Accounting for Income Taxes". The Company determined that there
was no cumulative effect of that change in the method of accounting for income
taxes in its 1993 statement of income. Under SFAS No. 109, deferred income
taxes are recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial reporting
amounts based on enacted tax laws and statutory tax rates applicable to the
periods in which the differences are expected to affect taxable income. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable for the period together
with the change during the period in deferred tax assets and liabilities.
F-13
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Pursuant to the deferred method under APB Opinion 11, which was applied in years
prior to 1993, deferred income taxes were recognized for income and expense
items that were reported in different years for financial reporting purposes and
income tax purposes using the tax rate applicable in the year of calculation.
Under the deferred method, deferred taxes are not adjusted for subsequent
changes in tax rates.
Financial instruments
- ---------------------
The Company has not acquired or issued any derivative financial instruments.
In the ordinary course of business the Company has entered into off balance
sheet financial instruments consisting of commitments to extend credit and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they are funded or related fees are incurred or
received.
Fair values of financial instruments
- ------------------------------------
The following methods and assumptions were used by the Company in estimating
fair values of financial instruments as disclosed herein:
CASH AND SHORT TERM INSTRUMENTS
The carrying amounts of cash and short term instruments approximate their
fair value.
AVAILABLE FOR SALE AND HELD TO MATURITY SECURITIES
Fair values for securities excluding restricted equity securities, are based
on quoted market prices. The carrying values of restricted equity
securities approximate fair values.
LOANS
For variable-rate loans that reprice frequently and have significant changes
in credit risk, fair values are based on carrying values. Fair values for
certain mortgage loans (for example, one-to-four family residential) and
other consumer loans are based on quoted market prices of similar loans sold
in conjunction with securitization transactions, adjusted for differences in
loan characteristics. Fair values for commercial real estate and commercial
loans are estimated using discounted cash flow analyses, using interest
rates currently being offered for loans with similar terms to borrowers of
similar credit quality. Fair values for impaired loans are estimated using
discounted cash flow analyses or underlying collateral values, where
applicable.
F-14
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
DEPOSIT LIABILITIES
The fair values disclosed for demand deposits are, by definition, equal to
the amount payable on demand at the reporting date (that is their carrying
amounts). The carrying amounts of variable-rate, fixed term money market
accounts and certificates of deposit (CD's) approximate their fair values at
the reporting date. Fair values for fixed-rate CD's are estimated using
discounted cash flow calculation that apply interest rates currently being
offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.
ACCRUED INTEREST
The carrying amounts of accrued interest approximate their fair values.
OFF BALANCE SHEET INSTRUMENTS
Fair values for off balance sheet lending commitments are based on fees
currently charged to enter into similar agreements taking into account the
remaining terms of the agreements and the counterparties' credit standings.
Earnings per share
- ------------------
Earnings per common share were computed by dividing net income by the weighted
average number of shares of common stock outstanding during each year presented.
Estimates
- ---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Reclassifications
- -----------------
Certain amounts previously reported have been reclassified to conform to the
current format.
2. STATEMENT OF CASH FLOWS
-----------------------
The Company has chosen to report its cash flows by the indirect method and has
chosen to report on a net basis its cash receipts and cash payments for time
deposits accepted and repayments of those deposits, and loans made to customers
and principal collections on those loans.
F-15
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Supplemental information on cash flows and non-cash transactions for the three
years ended December 31, 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1993
1995 1994 (Unaudited)
---- ---- -----------
<S> <C> <C> <C>
Cash transactions:
Interest income received $ 3,758 $ 3,569 $ 2,178
======== ======== ========
Interest expense paid $ 1,731 $ 1,294 $ 1,027
======== ======== ========
Federal income taxes paid $ 39 $ 37 $ 223
======== ======== ========
Noncash transactions:
Net unrealized depreciation on
securities available for sale $ 100 $ 156 $ -
======== ======== ========
Conversion of subordinated
debentures $ - $ 125 $ -
======== ======== ========
Reclassification of securities
held to maturity to available
for sale $ 10,932 $ - $ -
======== ======== ========
</TABLE>
3. INVESTMENT SECURITIES
---------------------
Investment securities, classified in accordance with provisions of SFAS 115, and
their approximate unrealized gains and losses and related estimated fair values
at December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1995
--------------------------------
Amortized Unrealized Fair
----------
Securities Available for Sale Cost Gain Loss Value
----------------------------- --------- ---- ----- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 9,833 $ - $ 9 $ 9,824
Pass-through certificates
guaranteed by FNMA and
FHLMC 3,767 3 33 3,737
Privately issued collateralized
mortgage obligations 3,460 - 97 3,363
Other 113 - - 113
------- ---- ---- -------
Total available for sale $17,173 $3 $139 $17,037
======= ==== ==== =======
</TABLE>
F-16
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
1994
----------------------------------------------
Amortized Unrealized Fair
----------
Securities Available for Sale Cost Gain Loss Value
----------------------------- --------- ---- ---- -----
<S> <C> <C> <C> <C>
Pass-through certificates
guaranteed by FNMA and FHLMC $ 314 $ - $ 8 $ 306
Privately issued collateralized
mortgage obligations 2,851 - 228 2,623
--------- -------- --------- --------
Total available for sale $ 3,165 $ - $ 236 $ 2,929
========= ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
1994
----------------------------------------------
Amortized Unrealized Fair
----------
Securities Held to Maturity Cost Gain Loss Value
--------------------------- --------- ---- ---- -----
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 751 $ - $ 64 $ 687
State and political
subdivisions 3,110 - 252 2,858
Pass-through certificates
guaranteed by FNMA and FHLMC 7,853 - 572 7,282
Other 112 - - 112
--------- -------- --------- --------
Total held to maturity $ 11,826 $ - $ 888 $ 10,939
========= ======== ========= ========
</TABLE>
During 1995 and, in connection with the issuance of "A Guide to Implementation
of SFAS No. 115," (Guide) by the Financial Accounting Standards Board in
November 1995, management reassessed the appropriateness of the classification
of securities held and, as allowed by the Guide, reclassified securities in the
held-to-maturity category to the available-for-sale category. The securities
transferred had an amortized cost and fair value of approximately $10,932,000
and $10,735,000, respectively. The related unrealized appreciation of $197,000
was included as a component of stockholders' equity.
Proceeds from sales of securities available for sale were approximately
$9,615,000 and $3,845,000 for the years ended December 31, 1995 and 1994,
respectively. Proceeds from sales of investment securities during 1993 were
approximately $10,424,000. Gains and losses of approximately $20,000, $109,000
and $64,000 and $13,000, $14,000 and $-0-, respectively were recorded on those
sales for the years ended December 31, 1995, 1994, and 1993, respectively.
Investment securities with an amortized cost of approximately $3,500,000 and
$2,565,000 were pledged to secure a federal funds line with a financial
institution at December 31, 1995 and 1994, respectively.
F-17
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
The amortized cost and estimated market value of debt securities at December 31,
1995, by contractual maturity, are shown below (in thousands). Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Available for Sale
------------------
Amortized Fair
Cost Value
--------- -----
<S> <C> <C>
Due in one year or less $ 5,051 $ 5,046
Due from one year to five years 4,782 4,778
---------- ----------
9,833 9,824
Pass-through certificates guaranteed
by FNMA and FHLMC and privately
issued collateralized mortgage
obligations 7,227 7,100
Other 113 113
---------- ----------
Total $ 17,173 $ 17,037
========== ==========
</TABLE>
4. LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
--------------------------------------------
Loans and allowance for possible loan losses at December 31, 1995 and 1994
consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commercial and industrial $ 3,456 $ 3,462
Real estate - construction and
development 568 1,012
Real estate - mortgage 11,354 10,163
Installment loans 1,071 1,608
Other consumer loans 7,814 9,249
----------- ------------
Total loans 24,263 25,494
Unearned income (98) (139)
Allowance for possible loan losses (135) (140)
----------- ------------
Net loans $ 24,030 $ 25,215
=========== ============
</TABLE>
F-18
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
The Bank extends commercial and consumer credit primarily to customers in the
state of Texas. At December 31, 1995, and 1994 substantially all of the Bank's
loans were collateralized with real estate, inventory, accounts receivable,
equipment, marketable securities and/or other assets. Although the Bank has a
diversified loan portfolio, its debtors' ability to honor their contracts is
substantially dependent upon the general economic conditions of the region.
Loans on which the accrual of interest has been discontinued at December 31,
1995, 1994 and 1993 amounted to approximately $167,000, $270,000 and $0,
respectively. If interest had been accrued on these loans, such income would
have been approximately $6,000, $8,000 and $0, during 1995, 1994 and 1993,
respectively.
At December 31, 1995, 1994 and 1993, loans on which the Bank was accruing
interest that were contractually delinquent ninety days and over amounted to
approximately $382,000, $14,000 and $15,000, respectively.
An analysis of the allowance for possible loan losses for the three years ended
December 31, 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1993
1995 1994 (Unaudited)
---- ---- -----------
<S> <C> <C> <C>
Balance at beginning of the year $ 140 $ 151 $ 129
Provision for possible loan losses 99 33 15
Loans charged to the allowance (153) (118) (10)
Recoveries on loans previously
charged-off 49 74 17
---------- --------- --------
Balance at the end of the year $ 135 $ 140 $ 151
========== ========= ========
</TABLE>
In May 1993, the Financial Accounting Standards Board issued Statement 114 which
was subsequently revised by Statement 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures". These Statements
collectively require creditors to account for impaired loans (as defined in the
Statements) at the net present value of expected future cash flows discounted at
the loan's original effective interest rate, the observable market price, or the
fair value of the collateral of a collateral-dependent loan. These Statements
also provide guidance for income and expense recognition associated with
impaired loans. These Statements became effective for fiscal years beginning
after December 15, 1994.
F-19
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Impairment of loans having recorded investments of approximately $167,000 at
December 31, 1995 has been recognized in conformity with SFAS No. 114 as amended
by SFAS No. 118. The average recorded investment in impaired loans during 1995
was approximately $219,000. The total allowance for loan losses related to these
loans was approximately $31,000. No significant amount of interest income on
impaired loans was recognized for cash payments received in 1995.
5. BANK PREMISES AND EQUIPMENT
---------------------------
Bank premises and equipment at December 31, 1995 and 1994 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Furniture, fixtures and equipment $ 1,006 $ 975
Leasehold improvements 549 546
Automobiles 51 70
------------- ------------
1,606 1,591
Less accumulated depreciation and
amortization 585 449
------------- ------------
$ 1,021 $ 1,142
============= ============
</TABLE>
6. OTHER REAL ESTATE OWNED
-----------------------
Other real estate owned at December 31, 1995 and 1994 consisted of foreclosed
properties in the approximate amounts of $278,000 and $483,000, respectively.
For the three years ended December 31, 1995, management believed that the
carrying values of other real estate owned properties approximated their related
fair market values. Therefore, there was no allowance for possible losses on
other real estate or changes related thereto.
F-20
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
7. DEPOSITS
--------
Deposits at December 31, 1995 and 1994 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Noninterest bearing
demand accounts $ 8,790 17.3% $ 9,572 19.0%
Interest bearing
demand accounts 6,933 13.7 6,812 13.6
Passbook savings
accounts 3,508 6.9 3,654 7.3
Limited access money
market accounts 6,127 12.1 7,664 15.2
Certificates of deposit,
less than $100,000 18,257 36.0 16,864 33.6
Certificates of deposit,
$100,000 and greater 7,050 14.0 5,698 11.3
----------- ----- ---------- -----
$ 50,665 100.0% $ 50,264 100.0%
=========== ===== ========== =====
</TABLE>
Included in deposits at December 31, 1995 and 1994 were public fund deposits of
approximately $70,000 and $156,000, respectively.
The weighted average interest rate on deposits at December 31, 1995 and 1994 was
approximately 3.1% and 3.3%, respectively.
8. INCOME TAXES
------------
Income tax expense (benefit) for the three years ended December 31, 1995
consists of the following (in thousands):
<TABLE>
<CAPTION>
1993
1995 1994 (Unaudited)
---- ---- -----------
<S> <C> <C> <C>
Current $ 145 $ 39 $ 305
Deferred (benefit) (52) (30) (82)
------- --------- --------
$ 93 $ 9 $ 223
======= ========= ========
</TABLE>
F-21
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
As discussed in note 1, the Company adopted SFAS No. 109 as of January 1, 1993.
The cumulative effect of this accounting change as of January 1, 1993 was not
material. Prior years' consolidated financial statements have not been restated
to apply the provisions of SFAS No. 109. The consolidated federal income tax
expense for the years presented differs from "expected" consolidated federal
income tax for these years, computed by applying the statutory U.S. federal
corporate tax rate of 34% to income before income tax expense as follows (in
thousands):
<TABLE>
<CAPTION>
1993
1995 1994 (Unaudited)
---- ---- -----------
<S> <C> <C> <C>
Computed "expected" income tax expense $ 139 $ 99 $ 167
Increase (decrease) resulting from:
Tax exempt interest (39) (41) (13)
Other (7) (49) 69
-------- -------- --------
$ 93 $ 9 $ 223
======== ======== ========
</TABLE>
Significant components of deferred income tax expense (benefit) for the years
ended December 31, 1995, 1994 and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1993
1995 1994 (Unaudited)
---- ---- -----------
<S> <C> <C> <C>
Provision for possible loan losses
for books in excess of tax $ (31) $ (11) $ (7)
Other real estate owned losses for
tax in excess of books - 36 -
Bank premises and equipment deductions
for tax in excess of (less than) books 5 9 (74)
Other (26) (64) (1)
-------- -------- ---------
$ (52) $ (30) $ (82)
======== ======== =========
</TABLE>
F-22
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Deferred income taxes reflect the net tax effects of temporary differences
between the recorded amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of December 31, 1995 and
1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Deferred tax assets:
Net unrealized depreciation on
securities available for sale $ 46 $ 80
Basis of other real estate owned
for tax in excess of book 16 16
Allowance for loan losses for
book in excess of tax 59 28
Deferred compensation deducted
for books in excess of tax 18 3
Other 11 -
-------------- --------------
Total deferred tax assets 150 127
Deferred tax liabilities:
Bank premises and equipment basis
for book in excess of tax 22 17
-------------- --------------
Total deferred tax
liabilities 22 17
-------------- --------------
Net deferred tax asset $ 128 $ 110
============== ==============
</TABLE>
As of December 31, 1995 and 1994, the Company had a net deferred federal income
tax asset of approximately $128,000 and $110,000, respectively. As of December
31, 1995 and 1994, the Company had a current federal income tax payable of
approximately $109,000 and a current federal income tax receivable of
approximately $2,000, respectively.
F-23
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
9. EMPLOYEE BENEFITS
-----------------
Effective in March 1993, the Bank adopted a long-term deferred compensation
plan, known as the Performance Share Plan, for the benefit of certain key
employees. Performance shares are equivalent in value to shares of capital
stock of the Bank at book value and entitle the participants to defer
compensation in amounts equivalent to dividends, but do not entitle the
participants to voting rights. Participants become 100% vested at the end of six
years from the date of award or upon retirement, death, total disability, or a
change in ownership of the Bank. Rights to performance shares are forfeited if
the participant is discharged for cause, engages in competition with the bank
within a two year period following termination of employment, or for acts of
willful malfeasance or gross negligence. The maximum number of performance
shares to be awarded may not exceed 15% of the total outstanding capital stock
of the Bank. Benefit payments will be made in cash or capital stock of the Bank
only after participants terminate their employment with the Bank and have
satisfied the vesting requirements. As of December 31, 1995, 1,575 performance
shares have been granted.
Effective September 1, 1994, the Bank adopted an Incentive Stock Option Plan and
authorized the issuance of a maximum of 20,090 shares under the plan. Options
for 20,090 shares were granted by the Board of Directors to the officers during
1994. The Options are exercisable at a price of $15.00 per share beginning in
September 1995 and expiring in September 2004, provided the officers remain
employed with the Bank.
Effective January 1, 1994, the Bank's Employee Savings Plan was amended and
restated and became an Employee Stock Ownership Plan (KSOP) and provides for
"before-tax" employee contributions through salary reduction contributions under
Section 401(K) of the Internal Revenue Code. A participant may choose a salary
reduction from 1% to 15% of compensation, not to exceed $9,240 annually. The
participant may increase or decrease the percentage of compensation to be
contributed, subject to a 1% minimum and 15% maximum, effective as of January 1,
or July 1, of any Plan year. The KSOP allows the Bank to make 401(K) matching
contributions of up to 100% of the participant's salary reduction contributions
not to exceed 6% of such participant's annual compensation as well as
discretionary contributions as determined by the Board of Directors. Employee
contributions are 100% vested. 50% of the Bank's matching contributions are
100% vested, with the remaining 50% and any discretionary contributions vested
over a five year period. During 1995 and 1994, the Company made 401(K) matching
contributions vested over a five year period. During 1995 and 1994, the Company
made 401(K) matching contributions of
F-24
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
approximately $18,000 and $17,000, respectively. Contributions are used to
purchase shares of the Company's capital stock. 8,746 shares of Company stock
are owned by the KSOP at December 31, 1995. Distributions of vested interests to
participants upon termination of their participation in the KSOP may be made in
cash or stock. Stock distributed will be subject to a put option under which
the Bank can be required for a period of time to repurchase the stock at fair
market value.
The Bank has Director Deferred Compensation Plan (DDC Plan), a nonqualified
deferred compensation plan, which provides deferral of all or part of directors'
fees earned by DDC Plan participants. The deferral period is until retirement.
The Company has purchased life insurance policies to fund future DDC Plan
obligations. These policies had an aggregate cash surrender value of
approximately $315,000 and $24,000 at December 31, 1995 and 1994, respectively,
and are included in other assets in the accompanying consolidated balance
sheets. The recorded obligation for the DDC Plan was $37,000 and $5,000 at
December 31, 1995 and 1994, respectively, and is included in other liabilities
in the accompanying consolidated balance sheets.
The Bank has an Executive Supplemental Income Plan (ESI Plan), a nonqualified
defined benefit plan, which provides death and retirement benefits to certain
employees. The benefits are based on years of service and the employee's
compensation. The Bank has purchased life insurance policies to fund future ESI
Plan obligations. These policies had an aggregate cash surrender value at
December 31, 1995 and 1994, respectively, of approximately $251,000 and $133,000
which are included in other assets in the accompany consolidated balance sheets.
The recorded obligation for the ESI Plan was approximately $19,000 and $3,000 at
December 31, 1995 and 1994, respectively, and are included in other liabilities
in the accompanying consolidated balance sheets.
10. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company leases its office facilities, certain equipment and an automobile
under noncancelable operating lease agreements. The College Station lease
expires in 2003 and is renewable for two ten year periods at the then current
market rate. The Bryan lease expires in 1998 and is renewable for two five year
periods at the then current market rate. Rental expense for the years ended
December 31, 1995, 1994 and 1993 amounted to approximately $160,000, $76,000 and
$76,000, respectively.
F-25
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Future minimum lease payments under the leases are as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1996 $ 183
1997 185
1998 176
1999 147
2000 147
Thereafter 223
--------
$ 1,061
========
</TABLE>
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the balance
sheet. The contract amounts of these instruments reflect the extent of
involvement the Bank has 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 amount of these
instruments. The Company uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments. At
December 31, 1995 and 1994, the approximate amounts of these financial
instruments were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $5,768 $8,901
Standby letters of credit 177 54
------ -------
$5,945 $8,955
====== =======
</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 drawn upon, the total commitment amounts do not necessarily
represent future cash
F-26
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
requirements. The Company evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained if deemed necessary by
the Company upon extension of credit is based on management's credit evaluation
of the counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment and income-producing
commercial properties.
Standby letters of credit are conditional commitments issued by the Bank 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 customers.
The Company is involved in certain legal actions arising from normal business
activities. Management believes that the outcome of such proceedings will not
materially affect the financial position or results of operations of the
Company.
The Company does not anticipate any material losses as a result of the
commitments and contingent liabilities.
11. RELATED PARTY TRANSACTIONS
--------------------------
In the ordinary course of business, the Company has and expects to continue to
have transactions, including borrowings, with its directors and their
affiliates. In the opinion of management, such transactions are on the same
terms, including interest rates and collateral requirements, as those prevailing
at the time for comparable transactions with unaffiliated persons. The
aggregate amount of such loans was approximately $587,000 and $480,000 at
December 31, 1995 and 1994, respectively. During 1995 and 1994, repayments of
loans totaled approximately $151,000 and $169,000, respectively, and new loans
funded totalled approximately $258,000 and $256,000, respectively.
12. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
-----------------------------------------------
Most of the Company's business activity is with customers located within Texas.
Such customers are normally also depositors of the Company.
The distribution of commitments to extend credit approximates the distribution
of loans outstanding. Commercial and standby letters of credit were granted
primarily to commercial borrowers.
F-27
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
The contractual amounts of credit related financial instruments such as
commitments to extend credit, credit card arrangements, and letters of credit
represent the amounts of potential accounting loss should the contract be fully
drawn upon, the customer default, and the value of any existing collateral
become worthless.
13. STOCKHOLDERS' EQUITY AND REGULATORY MATTERS
-------------------------------------------
The Company is authorized to issue 1,000,000 shares of preferred stock with a
par value of $1.00 per share. The Board of Directors is authorized to determine
the terms and conditions associated with the preferred stock at the time of
issuance. There have been no shares issued as of December 31, 1995.
Under federal banking law, there are legal restrictions limiting the amount of
dividends the Bank can declare. Subject to other limiting factors, approval of
the OCC is required if dividends declared exceed the net profits for that year
combined with the retained net profits for the two preceding years. The
calculation of the amount available for payment of dividends, under this
formula, is based on the net profits determined in accordance with regulatory
accounting principles, reduced by the amount of dividends declared. As of
January 1, 1996, dividends available under the above formula for further
distribution would be approximately $456,000. Therefore, subject to regulatory
capital requirements and certain other limiting factors, the Bank may declare
dividends in 1996 up to $456,000 plus 1996 retained net profits to the date of
dividend declaration without receiving OCC approval.
Further, the OCC may prohibit the payment of dividends at anytime if it
determines that certain circumstances exist in the Bank, including those
relating to the financial condition of the Bank, such that the payment of
dividends would be considered an unsafe and unsound practice.
The Bank is subject to various regulatory capital requirements administered by
federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
F-28
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to risk
weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1995, that the
Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 1995, the Bank's regulatory capital ratios exceeded those
levels necessary to be categorized as "well capitalized" under the regulatory
framework for prompt corrective action. To be categorized as "well capitalized"
the Bank must maintain minimum total risk based, Tier I risk based, Tier I
leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the Bank's
category.
The Bank's actual capital amounts and ratios are presented in the following
table (in thousands):
<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> <C> <C> <C> <C>
As of December 31, 1995:
Total capital (to risk weighted
assets) $ 3,262 11.8% GREATER THAN $ 2,205 GREATER THAN 8.0% GREATER THAN $ 2,756 GREATER THAN 10.0%
Tier I capital (to risk weighted
assets) 3,128 11.7% GREATER THAN 1,102 GREATER THAN 4.0% GREATER THAN 1,378 GREATER THAN 6.0%
Tier I capital (to average assets) 3,128 5.8% GREATER THAN 2,148 GREATER THAN 4.0% GREATER THAN 2,685 GREATER THAN 5.0%
</TABLE>
F-29
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
14. SUPPLEMENTARY INCOME AND EXPENSE INFORMATION
--------------------------------------------
The following amounts are included in other noninterest income and noninterest
expense in the accompanying consolidated statements of income for the three
years ended December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
1993
1995 1994 (Unaudited)
----- ----- -----------
<S> <C> <C> <C>
Noninterest income
------------------
Rental income - other real
estate owned $ 54 $ 50 $ 65
All other 214 152 104
----- ----- -----
$ 268 $ 202 $ 169
===== ===== =====
Noninterest expense
-------------------
Legal and professional $ 146 $ 148 $ 93
Miscellaneous losses 112 22 6
Postage and delivery 92 94 84
Supplies and stationary 81 98 89
Advertising 67 63 81
FDIC assessment 65 104 97
Service contracts 58 55 39
Other real estate owned expense 52 63 61
Dues and subscriptions 47 45 36
All other 273 216 176
----- ----- -----
$ 993 $ 908 $ 762
===== ===== =====
</TABLE>
F-30
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
15. FAIR VALUES OF FINANCIAL INSTRUMENTS
------------------------------------
The estimated fair value of the Company's financial instruments were as follows
at December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- -------
<S> <C> <C>
Financial assets:
Cash and due from banks $ 1,823 $ 1,823
Federal funds sold 1,160 1,160
Securities available for sale 17,037 17,037
Loans held for sale 7,278 7,350
Loans, net 24,030 23,850
Financial liabilities:
Noninterest bearing demand deposits 8,790 8,790
Interest bearing accounts 14,276 14,276
Savings accounts 3,508 3,508
Time deposits 24,091 25,783
Unrecognized financial instruments:
Commitments - -
Credit card lines - -
Standby letters and financial
guarantees - -
</TABLE>
F-31
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
F-32
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
September 30, 1996 and 1995
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 2,169 $ 2,581
Federal funds sold 2,990 2,001
-------- --------
Total cash and cash equivalents 5,159 4,582
Investment securities:
Available for sale (at market value) 14,443 6,072
Held to maturity (market value of $10,728 in 1995) - 10,975
Loans held for sale - 10,247
Loans, net of allowance for loan losses of $279
in 1996 and $151 in 1995) 35,367 20,148
Bank premises and equipment, net 968 1,039
Accrued interest receivable 520 403
Other real estate owned, net 278 278
Other assets 1,149 1,108
-------- --------
Total assets $ 57,884 $ 54,852
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Noninterest bearing $ 10,629 $ 9,514
Interest bearing 43,717 41,896
-------- --------
Total deposits 54,346 51,410
Other liabilities 332 463
-------- --------
Total liabilities 54,678 51,873
-------- --------
Commitments and contingencies - -
Stockholders' equity:
Common stock; $1 and $5 par value; 1,000,000
and 500,000 shares authorized; 200,674 and
200,390 shares issued and outstanding at
September 30, 1996 and 1995, respectively 200 995
Paid-in capital 1,907 1,083
Retained earnings 1,224 1,025
Unrealized loss on available for sale
securities ( 125) ( 124)
-------- --------
Total stockholders' equity 3,206 2,979
-------- --------
Total liabilities and stockholders' equity $ 57,884 $ 54,852
======== ========
</TABLE>
F-33
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 2,308 $ 2,139
Federal funds sold 108 122
Interest and dividends on investment securities:
Taxable 707 554
Nontaxable - 109
-------- --------
707 663
-------- --------
Total interest income 3,123 2,924
-------- --------
Interest expense:
Deposit accounts including interest expense on
certificates of deposit of $100,000 and over
of $295 and $301 in 1996 and 1995, respectively 1,373 1,340
Short term borrowings - 15
-------- --------
Total interest expense 1,373 1,355
-------- --------
Net interest income 1,750 1,569
Provision for possible loan losses 212 61
-------- --------
Net interest income after provision
for possible loan losses 1,538 1,508
-------- --------
Noninterest income:
Service charges on deposit accounts 526 495
Gain on sales of investment securities 15 1
Premium on sales of loans 40 246
Gain on sale of other real estate owned - 17
Other 223 208
-------- --------
Total noninterest income 804 967
-------- --------
Noninterest expense:
Salaries and employee benefits 914 908
Occupancy of bank premises 203 210
Furniture and equipment 101 113
Data processing 214 211
Other 567 665
-------- --------
Total noninterest expense 1,999 2,107
-------- --------
Income before income tax expense 343 368
Income tax expense 179 86
-------- --------
Net income $ 164 $ 282
======== ========
Weighted average common shares outstanding 200,532 198,972
======== ========
Earnings per common share $ .82 $ 1.42
======== ========
</TABLE>
F-34
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 164 $ 282
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 108 128
Provision for possible loan losses 212 61
Net amortization of investment securities 9 11
Gain on sale of investment securities ( 15) ( 1)
Gain on sale of other real estate owned - ( 17)
Increase in other assets ( 65) ( 94)
(Decrease) increase in other liabilities ( 161) 116
----------- ------------
Net cash provided by operating
activities 252 486
----------- ------------
Cash flows from investing activities:
Proceeds from sales of securities available
for sale 8,551 7,978
Purchases of securities available for sale ( 5,986) ( 10,232)
Net (originations) paydowns of loans ( 4,271) 1,950
Net capital expenditures ( 55) ( 25)
Proceeds from sale of other real estate owned - 222
----------- ------------
Net cash used by investing
activities ( 1,761) ( 107)
----------- ------------
</TABLE>
F-35
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows (Continued)
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in demand deposits, NOW
and savings accounts 4,519 ( 1,670)
Net (payments for) proceeds from certificates
of deposits ( 838) 2,816
Issuance of common stock 4 20
------------- -------------
Net cash provided by financing
activities 3,685 1,166
------------- -------------
Net increase (decrease) in cash and cash
equivalents 2,176 1,545
Cash and cash equivalents at beginning of period 2,983 3,037
------------- -------------
Cash and cash equivalents at end of period $ 5,159 $ 4,582
============= =============
</TABLE>
F-36
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
Selected Notes to Consolidated Financial Statements
September 30, 1996 and 1995
(Unaudited)
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited interim consolidated financial statements as of and
for the nine month periods ended September 30, 1996 and 1995, respectively,
reflect all adjustments which are, in the opinion of management, necessary to
represent a fair statement of the results for such periods presented.
Management has determined that all such adjustments are of a normal recurring
nature.
2. STATEMENT OF CASH FLOWS
-----------------------
The Company has chosen to report its cash flows by the indirect method and has
chosen to report on a net basis its cash receipts and cash payments for time
deposits accepted and repayments of those deposits, and loans made to customers
and principal collections on those loans.
Supplemental information on cash flows and noncash transactions for the nine
months ended September 30, 1996 and 1995 (unaudited) is as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash transactions:
Interest income received $ 612 $ 625
============ ============
Interest expense paid $ 1,380 $ 1,256
============ ============
Federal income taxes paid $ 305 $ 39
============ ============
Noncash transactions:
Net (increase) decrease in
unrealized loss on securities
available for sale $ 53 $ 48
============ ============
</TABLE>
F-37
<PAGE>
GREATER BRAZOS VALLEY BANCORP, INC. AND SUBSIDIARIES
3. IMPAIRMENT OF LOANS
-------------------
Impairment of loans having a recorded investment of approximately $650 at
September 30, 1996 has been recognized in conformity with FASB Statement No.
114, as amended by FASB Statement No. 118. The average recorded investment in
impaired loans during the nine months ended September 30, 1996 was approximately
$325. The total allowance for loan losses related to these loans amounted to
approximately $31 at September 30, 1996. There was no significant interest
income on impaired loans recognized for the nine months ended September 30,
1996.
F-38
<PAGE>
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
COMPASS BANCSHARES, INC.
AND
GREATER BRAZOS VALLEY BANCORP, INC.
Dated as of October 2, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I.......................................................................................................... 1
THE MERGER................................................................................................. 1
SECTION 1.1 The Merger......................................................................... 1
----------
SECTION 1.2 Effective Time..................................................................... 1
--------------
SECTION 1.3 Certain Effects of the Merger...................................................... 2
-----------------------------
SECTION 1.4 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........................................................................................................ 7
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................................. 7
SECTION 3.1 Organization and Qualification..................................................... 7
------------------------------
SECTION 3.2 Company Capitalization............................................................. 7
----------------------
SECTION 3.3 Subsidiary Capitalization; Other Securities........................................ 8
-------------------------------------------
SECTION 3.4 Authority Relative to the Agreement................................................ 8
-----------------------------------
SECTION 3.5 No Violation....................................................................... 9
------------
SECTION 3.6 Consents and Approvals............................................................. 9
----------------------
SECTION 3.7 Regulatory Reports................................................................. 10
------------------
SECTION 3.8 SEC Status; Securities Issuances................................................... 10
--------------------------------
SECTION 3.9 Financial Statements............................................................... 10
--------------------
SECTION 3.10 Absence of Certain Changes......................................................... 11
--------------------------
SECTION 3.11 Company Indebtedness............................................................... 13
--------------------
SECTION 3.12 Litigation......................................................................... 13
----------
SECTION 3.13 Tax Matters........................................................................ 14
-----------
SECTION 3.14 Employee Benefit Plans............................................................. 14
----------------------
SECTION 3.15 Employment Matters................................................................. 17
------------------
SECTION 3.16 Leases, Contracts and Agreements................................................... 18
--------------------------------
SECTION 3.17 Related Company Transactions....................................................... 18
----------------------------
SECTION 3.18 Compliance with Laws............................................................... 19
--------------------
SECTION 3.19 Insurance.......................................................................... 19
---------
SECTION 3.20 Loans.............................................................................. 19
-----
SECTION 3.21 Fiduciary Responsibilities......................................................... 19
--------------------------
SECTION 3.22 Patents, Trademarks and Copyrights................................................. 20
----------------------------------
SECTION 3.23 Environmental Compliance........................................................... 20
------------------------
SECTION 3.24 Regulatory Actions................................................................. 21
------------------
SECTION 3.25 Title to Properties; Encumbrances.................................................. 22
---------------------------------
SECTION 3.26 Shareholder List................................................................... 22
----------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 3.27 Proxy Statement................................................................... 23
---------------
SECTION 3.28 Dissenting Shareholders........................................................... 23
-----------------------
SECTION 3.29 Section 368 Representations....................................................... 23
---------------------------
SECTION 3.30 Employee Stock Options............................................................ 24
----------------------
SECTION 3.31 Accounting Matters................................................................ 25
------------------
SECTION 3.32 Representations Not Misleading.................................................... 25
------------------------------
ARTICLE IV........................................................................................................ 25
REPRESENTATIONS AND WARRANTIES OF COMPASS................................................................. 25
SECTION 4.1 Organization and Authority........................................................ 25
--------------------------
SECTION 4.2 Authority Relative to Agreement................................................... 25
-------------------------------
SECTION 4.3 Financial Reports................................................................. 26
-----------------
SECTION 4.4 Capitalization.................................................................... 27
--------------
SECTION 4.5 Consents and Approvals............................................................ 27
----------------------
SECTION 4.6 Proxy Statement................................................................... 28
---------------
SECTION 4.7 Availability of Compass Common Stock.............................................. 28
------------------------------------
SECTION 4.8 Regulatory Approvals.............................................................. 28
--------------------
SECTION 4.9 Representations Not Misleading.................................................... 28
------------------------------
ARTICLE V......................................................................................................... 29
COVENANTS OF THE COMPANY.................................................................................. 29
SECTION 5.1 Affirmative Covenants of the Company.............................................. 29
------------------------------------
SECTION 5.2 Negative Covenants of the Company................................................. 30
---------------------------------
ARTICLE VI........................................................................................................ 33
ADDITIONAL AGREEMENTS..................................................................................... 33
SECTION 6.1 Access To, and Information Concerning, Properties and Records..................... 33
-------------------------------------------------------------
SECTION 6.2 Filing of Regulatory Approvals.................................................... 34
------------------------------
SECTION 6.3 Miscellaneous Agreements and Consents............................................. 34
-------------------------------------
SECTION 6.4 Company Indebtedness.............................................................. 34
--------------------
SECTION 6.5 Best Good Faith Efforts........................................................... 34
-----------------------
SECTION 6.6 Exclusivity....................................................................... 34
-----------
SECTION 6.7 Public Announcement............................................................... 35
-------------------
SECTION 6.8 Employee Benefit Plans............................................................ 35
----------------------
SECTION 6.9 Merger of Bank.................................................................... 36
--------------
SECTION 6.10 Environmental Investigation; Right to Terminate Agreement......................... 36
---------------------------------------------------------
SECTION 6.11 Proxies........................................................................... 39
-------
SECTION 6.12 Cooperation on Texas Receipts..................................................... 40
-----------------------------
SECTION 6.13 Exchange Agreement................................................................ 40
------------------
SECTION 6.14 Exercise of Convertible Securities................................................ 40
----------------------------------
SECTION 6.15 Employee Bonuses.................................................................. 40
----------------
SECTION 6.16 Director and Officer Insurance and Indemnification................................ 40
--------------------------------------------------
SECTION 6.17 Section 368 Certificates.......................................................... 41
------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII....................................................................................................... 41
CONDITIONS TO CONSUMMATION OF THE MERGER.................................................................. 41
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger........................ 41
----------------------------------------------------------
SECTION 7.2 Conditions to the Obligations of Compass and Compass Texas to Effect the Merger... 41
-------------------------------------------------------------------------------
SECTION 7.3 Conditions to the Obligations of the Company to Effect the Merger................ 44
------------------------------------------------------------------
ARTICLE VIII...................................................................................................... 44
TERMINATION; AMENDMENT; WAIVER............................................................................ 44
SECTION 8.1 Termination....................................................................... 44
-----------
SECTION 8.2 Effect of Termination............................................................. 45
---------------------
SECTION 8.3 Amendment......................................................................... 45
---------
SECTION 8.4 Extension; Waiver................................................................. 46
-----------------
ARTICLE IX........................................................................................................ 46
SURVIVAL.................................................................................................. 46
SECTION 9.1 Survival of Representations and Warranties........................................ 46
------------------------------------------
ARTICLE X......................................................................................................... 46
MISCELLANEOUS............................................................................................. 46
SECTION 10.1 Expenses.......................................................................... 46
--------
SECTION 10.2 Brokers and Finders............................................................... 46
-------------------
SECTION 10.3 Entire Agreement; Assignment...................................................... 46
----------------------------
SECTION 10.4 Further Assurances................................................................ 47
------------------
SECTION 10.5 Enforcement of the Agreement...................................................... 47
----------------------------
SECTION 10.6 Severability...................................................................... 47
------------
SECTION 10.7 Notices........................................................................... 47
-------
SECTION 10.8 Governing Law..................................................................... 49
-------------
SECTION 10.9 Descriptive Headings.............................................................. 49
--------------------
SECTION 10.10 Parties in Interest............................................................... 49
-------------------
SECTION 10.11 Counterparts...................................................................... 49
------------
SECTION 10.12 Incorporation by References....................................................... 49
---------------------------
SECTION 10.13 Certain Definitions............................................................... 49
-------------------
</TABLE>
iii
<PAGE>
ATTACHMENTS
EXHIBITS
A. Pooling Transfer Restrictions Agreement
B. Exchange Agent Agreement
C. Pooling of Interest Criteria
D. Voting Agreement and Irrevocable Proxy
E-1 Agreement Regarding Convertible Securities (Incentive Stock
Options)
E-2 Agreement Regarding Convertible Securities (Phantom Shares)
F. Opinion of Counsel for the Company, GBVD and the Bank
G. Opinion of Counsel for Compass and Compass Texas
H. Compass Texas Representations Certificate
iv
<PAGE>
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
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
v
<PAGE>
Schedule 3.24 Regulatory Actions; Agreements
Schedule 3.25 Title to Properties; Title Policies; Property
Schedule 3.29 Company Shareholders Disposing of Stock
Schedule 3.30 Stock Option Plans
Schedule 4.2 Compass Prior Consents
Schedule 5.1(d) Insurance Policies to be Maintained
Schedule 5.1(j) List of Accounts and Safe Deposit Boxes
Schedule 5.1(k) List of Liabilities and Obligations of the Company, GBVD and
the Bank
Schedule 6.11 List of Proxy Holders Voting Affirmatively for the Agreement
Schedule 6.10 List of Environmental Properties
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of October 2, 1996, by
and between Compass Bancshares, Inc. a Delaware corporation ("Compass"), and
Greater Brazos Valley Bancorp, Inc., a Texas corporation ("Company").
WHEREAS, Compass desires to affiliate with the Company and its wholly owned
subsidiaries, Greater Brazos Valley Delaware Bancorp, Inc., a Delaware
corporation ("GBVD"), and Commerce National Bank, a national banking association
(the "Bank"), and the Company, GBVD 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. 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
<PAGE>
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").
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, other than Dissenting
Shares (as defined in Section 2.1) ("Common Shares Outstanding"), 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. At the Closing, the Company shall calculate and certify to Compass the
Common Shares Outstanding.
(b) Each holder of Company Common Stock for each share of Company Common
Stock so held shall receive Merger Consideration equal to the quotient of
216,000 shares of Compass common stock, $2.00 par value per share ("Compass
Common Stock") less such number of shares of Compass Common Stock ("Option
Shares") issued to the holders of Convertible Securities (as defined in Section
6.14) pursuant to, and as defined in, Section 6.14 and the Agreements Regarding
Convertible Securities, divided by the Common Shares Outstanding. In the event
the average closing sale price of the Compass Common Stock as reported by the
NASDAQ National Market System for the five days of trading preceding the fifth
business day prior to the Effective Time (the "Share Determination Market
Value") is less than $30.00 per share, Compass may either (i)
2
<PAGE>
terminate this Agreement (the "Pricing Termination Option") by written notice to
the Company within three business days after the Share Determination Market
Value of less than $30.00 per share is capable of being determined, or (ii)
agree to issue an aggregate number of shares of Compass Common Stock (including
the Option Shares) equal to the quotient of $6,480,000 divided by the Share
Determination Market Value ("New Shares"). In such event, each holder of Company
Common Stock for each share so held shall receive Merger Consideration equal to
the quotient of the New Shares less the Option Shares divided by the Common
Shares Outstanding. In the event Compass exercises its Pricing Termination
Option pursuant to the preceding sentence within the specified three business
day period, this Agreement shall be terminated, but the Company shall have the
right to reject such termination of the Agreement by Compass (the "Termination
Rejection") by agreeing to accept an aggregate of 216,000 shares of Compass
Common Stock (including the Option Shares). Such Termination Rejection shall be
exercised by a notice to Compass within two business days following the date on
which the Company receives notice of Compass' exercise of the Pricing
Termination Option. In the event the Company fails to notify Compass of its
exercise of the Termination Rejection within the two business day period after
the receipt of notice from Compass of its exercise of the Pricing Termination
Option, the Company shall be deemed to have agreed to accept an aggregate of
216,000 shares of Compass Common Stock (including the Option Shares) and each
holder of Company Common Stock shall receive for each share so held the per
share Merger Consideration set forth in the first sentence of this subsection
1.6(b). The aggregate number of shares of Compass Common Stock to be exchanged
for each Share, respectively, shall be adjusted appropriately to reflect any
stock dividends or splits with respect to Compass Common Stock, 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
3
<PAGE>
practicable for the purpose of approving and adopting this Agreement;
(b) require no greater than the minimum vote required by applicable law of
each class of the Shares in order to approve the Merger;
(c) include in the Proxy Statement (defined in paragraph (d) below) the
unanimous recommendation of its Board of Directors that the shareholders of the
Company vote in favor of the approval and adoption of this Agreement, unless the
Board of Directors shall have determined, in good faith after consultation with
special outside securities counsel, that so to recommend at the time of the
mailing of the Company's proxy statement to the Company's shareholders will
breach the directors' legal duties, including fiduciary duties, to the Company
and the Company's shareholders; 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 the Company, 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, the Company and Compass Texas shall execute and deliver the
4
<PAGE>
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.
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 River
Oaks Trust Company, Houston, Texas (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. Subject to holding sufficient cash to make prompt payments to holders
of Shares, the Exchange Agent shall invest the Exchange Fund in The Starburst
Government Money Market Fund, managed by Compass Bank, Birmingham, Alabama, an
affiliate of Compass. The Exchange Fund shall not be used for any other purpose,
except as provided in this Agreement.
5
<PAGE>
(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 and no dividend will be disbursed with respect to
the shares of Compass Common Stock until the holder's Shares are surrendered in
exchange therefor. If payment or delivery of Compass Common Stock is to be made
to a person other than the person in whose name the Certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment and delivery of Compass Common Stock to
a person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 2.2, each Certificate (other than Certificates
representing Dissenting Shares) shall represent for all purposes the right to
receive the Merger Consideration without any interest thereon.
(c) After the Effective Time, the stock transfer ledger of the 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.
6
<PAGE>
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.
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, ("BHCA") 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. GBVD is a Delaware corporation
and a bank holding company under the BHCA and is duly organized, validly
existing and in good standing under the laws of the State of Delaware and all
laws, rules and regulations applicable to bank holding companies. The Bank is a
national banking 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, GBVD, and the Bank has all
requisite corporate power and authority to carry on its business as now being
conducted and to own, lease and operate its properties and assets as now owned,
leased or operated. Except as set forth on Schedule 3.17, the Company does not
own or control any Affiliate (as defined in Section 3.17) or Subsidiary (as
defined in Section 10.13(a)) other than GBVD and the Bank. True and correct
copies of the Articles of Incorporation or Association and Bylaws of the
Company, GBVD and the Bank, with all amendments thereto through the date of this
Agreement, have been delivered by the Company to Compass. The Bank is duly
qualified or licensed to do business and is in good standing in the State of
Texas. The nature of the business of the Company, GBVD and the Bank and their
respective activities, as currently conducted, do not require them to be
qualified to do business in any jurisdiction other than the State of Texas.
SECTION 3.2 Company Capitalization. As of the date hereof, the
----------------------
authorized capital stock of the Company consists solely of (a) 1,000,000 shares
of Company Common Stock, of which 200,674 shares are issued and outstanding, and
none of which are held in treasury and (b) 1,000,000 shares of preferred stock,
par value $1.00 per share, none of which are issued and outstanding and none of
which are held in treasury. Except as set forth on Schedule 3.2, there are no
outstanding subscriptions, options, convertible securities, rights, warrants,
calls, or other agreements or commitments of any kind issued or granted by, or
binding upon, the Company or its Subsidiaries to purchase or otherwise acquire
any security of or equity interest in the Company or its Subsidiaries.
7
<PAGE>
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 GBVD and the Bank (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 GBVD. GBVD owns, directly, all of the
issued and outstanding capital stock of the Bank. Set forth on Schedule 3.3
hereto is a list of all equity ownership by the Company, GBVD or the Bank for
the account of the Company, GBVD or the Bank in any other person other than the
Bank (the "Other Securities"). The Company, GBVD or the Bank owns each Other
Security free and clear of any lien, encumbrance, security interest or charge.
SECTION 3.4 Authority Relative to the Agreement. The 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
8
<PAGE>
Incorporation or Association or By-Laws of the Company or its Subsidiaries or
any agreement, document or instrument by which the Company or its Subsidiaries
is obligated or bound.
SECTION 3.5 No Violation. Except as set forth on Schedule 3.5, neither
------------
the execution, delivery nor performance of this Agreement in its entirety, nor
the consummation of all of the transactions contemplated hereby, following the
receipt of such approvals as may be required from the Company's shareholders,
the SEC, the 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 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 determined that the Merger is
fair to the Company's shareholders and has unanimously resolved to recommend
approval and adoption of this Agreement by the Company's shareholders. Except as
described in Schedule 3.6 hereto, no prior consent, approval or authorization
of, or declaration, filing or registration with any person,
9
<PAGE>
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, 1995, and the
related consolidated statements of income, shareholders' equity and changes in
cash flows for the years ended December 31, 1994 and 1995, plus consolidating
financial statements of its Subsidiaries, and the consolidated statements of
financial position of the Company and its Subsidiaries as of March 31 and June
30, 1996 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, 1995 and 1996, and promptly following their availability the
Company will provide Compass with the Company's 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 flow for the year ended December 31, 1996 (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 the Company's 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
10
<PAGE>
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 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 Company's and its Subsidiaries' monthly board reports,
which reports contain 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 the Bank for all periods ending after June 30, 1996.
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, 1996 (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));
11
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(c) entered into any agreement, commitment or transaction except in the
ordinary course of business and consistent with prudent banking practices;
(d) except in the ordinary course of business and consistent with prudent
banking practices, incurred, assumed or become subject to, whether directly or
by way of any guarantee or otherwise, any obligations or liabilities (absolute,
accrued, contingent or otherwise);
(e) permitted or allowed any of its property or assets to be subject to
any mortgage, pledge, lien, security interest, encumbrance, restriction or
charge of any kind (other than statutory liens not yet delinquent) except in the
ordinary course of business and consistent with prudent banking practices;
(f) except in the ordinary course of business and consistent with prudent
banking practices, canceled any debts, waived any claims or rights, or sold,
transferred, or otherwise disposed of any of its properties or assets;
(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, as provided in Section 6.15, and
except for regular salary increases granted in the ordinary course of business
within the Company's or its Subsidiaries' 1996 budget and consistent with prior
practices, granted any increase in compensation or paid or agreed to pay or
accrue any bonus, percentage compensation, service award, severance payment or
like benefit to or for the credit of any director, officer, employee or agent,
or entered into any employment or consulting contract or other agreement with
any director, officer or employee or adopted, amended or terminated any pension,
employee welfare, retirement, stock purchase, stock option, stock appreciation
rights, termination, severance, income protection, golden parachute, savings or
profit-sharing plan (including trust agreements and insurance contracts
embodying such plans), any deferred compensation, or collective bargaining
agreement, any group insurance contract or any other incentive, welfare or
employee benefit plan, program or agreement maintained by the 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
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stock or other of its securities, except for dividends paid to the Company by
GBVD and to GBVD by the Bank;
(j) organized or acquired any capital stock or other equity securities or
acquired any equity or ownership interest in any person (except through
settlement of indebtedness, foreclosure, the exercise of creditors' remedies or
in a fiduciary capacity, the ownership of which does not expose the Company or
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;
(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, including GBVD and
the Bank, if any, 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 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.
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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 its Subsidiaries or similar arrangement with its
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 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 is required to contribute,
including any multiemployer welfare plan (such employee welfare benefit plans
being hereinafter collectively referred to as the "Welfare Benefit
14
<PAGE>
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 is required to contribute, including any
multiemployer plan (as defined in Section 3(37) of ERISA) (such employee pension
benefit plans being hereinafter collectively referred to as the "Pension Benefit
Plans");
(c) Schedule 3.14(c) lists each deferred compensation plan, bonus plan,
stock option plan, employee stock purchase plan, restricted stock, excess
benefit plan, incentive compensation, stock bonus, cash bonus, severance pay,
golden parachute, life insurance, all nonqualified deferred compensation
arrangements, rabbi trusts, cafeteria plans, 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, in all
material respects, both as to form and operation, with the provisions of ERISA,
the Code and with all other applicable laws, rules and regulations governing the
establishment and operation of the Pension Benefit Plans, Welfare Benefit Plans
and all Other Programs; all necessary governmental approvals relating to the
establishment of the Pension Benefit Plans have been obtained; and with respect
to each Pension Benefit Plan that is intended to be tax-qualified under Section
401(a) or 403(a) of the Code, a favorable determination letter as to the
qualification under the Code of each such Pension Benefit Plan and each material
amendment thereto has been issued by the Internal Revenue Service (and nothing
has occurred since the date of the last such determination letter which resulted
in, or is likely to result in the revocation of such determination);
15
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(e) Each Welfare Benefit Plan, each Pension Benefit Plan and each Other
Program has been administered in compliance in all material respects 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, its Subsidiaries
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, its Subsidiaries 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 its Subsidiaries 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 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
16
<PAGE>
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
its Subsidiaries (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 its Subsidiaries 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 its Subsidiaries before the National Labor
Relations Board and no similar claims pending before any similar state, local or
foreign agency. There is no activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any employees of the
Company or its Subsidiaries, 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 is engaged in any unfair labor practice.
17
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SECTION 3.16 Leases, Contracts and Agreements. Schedule 3.16 sets forth
--------------------------------
an accurate and complete description of all leases, subleases, licenses,
contracts and agreements to which the Company or its Subsidiaries is a party or
by which the Company or its Subsidiaries is bound which obligate or may obligate
the Company or its Subsidiaries 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
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 Company or 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. Each of
the Company and its Subsidiaries has a good and marketable leasehold interest in
each parcel of real property leased by it free and clear of all mortgages,
pledges, liens, encumbrances and security interests.
SECTION 3.17 Related 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
18
<PAGE>
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 its Subsidiaries is in default in respect to or is in
violation of (i) any judgment, order, writ, injunction or decree of any court or
(ii) any statute, law, ordinance, rule, order or regulation of any governmental
department, commission, board, bureau, agency or instrumentality, federal, state
or local, including (for purposes of illustration and not limitation) capital
and FRB reserve requirements, capital ratios and loan limitations of the FRB,
the OCC, the 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 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
collectibility of the loans. Its Subsidiaries does not have in its portfolio any
loan exceeding its legal lending limit, and except as disclosed on Schedule
3.20, its Subsidiaries has 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.
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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 reasonably be expected to (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 with Environmental
Laws, (2) constitute a violation of any Environmental Law or (3) have a Material
Adverse Effect upon the Company or its Subsidiaries;
(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, potential, or, to the knowledge of the Company or its
Subsidiaries, threatened Proceeding under any Environmental Law;
(c) There are no Proceedings pending or, to the knowledge of the Company
or its Subsidiaries, threatened against the Company or its Subsidiaries 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 its
Subsidiaries have 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 its Subsidiaries, 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 its
Subsidiaries have been disposed, treated or stored;
(e) There is no Property for which the Company or its Subsidiaries are or
was required to obtain any Permit under an
20
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Environmental Law to construct, demolish, renovate, occupy, operate, or use such
Property or any portion of it;
(f) Neither the Company nor its Subsidiaries have 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 Comptroller of the Currency and contained in Section
213.1 of the Comptroller's Handbook for National Bank Examiners, and any other
governmental authority with jurisdiction over 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 its
Subsidiaries currently or in the past have 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 its Subsidiaries or
property currently proposed as security for loans or other credit the Company or
its Subsidiaries are currently evaluating whether to extend or has committed to
extend ("Collateral Property").
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,
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regulatory or administrative functions of or pertaining to government. Except as
set forth on Schedule 3.24, neither Company nor the 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 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, each of the Company and its Subsidiaries have 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 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 and
its Subsidiaries own 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 March 1, 1996 containing
the names, addresses and number of Shares or such other securities held of
22
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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 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,
-----------------------
and their respective directors, have no knowledge of any plan or intention on
the part of any Company shareholders to make written demand for payment of the
fair value of such Shares in the manner provided in Article 5.12 of the TBCA.
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, its Subsidiaries, and their respective directors,
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
23
<PAGE>
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 set forth on Schedule 3.29 all knowledge of the
Company and its Subsidiaries and their respective directors about the plans or
intentions of any other Company shareholders to sell or otherwise dispose of the
Compass Common Stock to be received pursuant to the Merger.
(c) Neither Compass nor Compass 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 June 30, 1995.
(e) The liabilities of the Company assumed by Compass or Compass Texas 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 or as disclosed in the Financial Statements.
(f) The Company and its shareholders will pay their own expenses which are
incurred in connection with the Merger.
(g) The Company has not disposed of any assets (either as a dividend or
otherwise) constituting more than 10% of the fair market value of all of its
assets (ignoring any liabilities) at any time either during the past twelve
months or in contemplation of the Merger.
(h) The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(i) The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
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 its
Subsidiaries.
24
<PAGE>
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 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 BHCA, and in good standing
under all laws, rules and regulations applicable to bank holding companies.
Compass is duly qualified or licensed and in good standing in each jurisdiction
which requires such qualification where it owns or leases properties or conducts
business.
SECTION 4.2 Authority Relative to Agreement. Compass has full corporate
-------------------------------
power and authority and no further corporate proceedings on the part of Compass
are necessary to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, all of which have been duly and validly
authorized by Compass' Board of Directors. This Agreement has been duly executed
and delivered by Compass and is a duly authorized, valid, legally binding and
enforceable obligation of Compass, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to
creditors' rights generally and general equitable principles, and subject to
such shareholder approvals and such approval of regulatory agencies and other
governmental authorities having authority over Compass as may
25
<PAGE>
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 1995 Annual Report to Shareholders,
which report (the "Compass 1995 Annual Report") includes, among other things,
consolidated balance sheets of Compass and its Subsidiaries as of December 31,
1995 and 1994, the related consolidated statements of income, shareholders'
equity and cash flows for the years ended December 31, 1995, 1994 and 1993 and
(ii) Compass' quarterly reports on Form 10-Q for the quarters ended March 31 and
June 30, (the "Quarterly Reports") which reports include among other things
unaudited balance sheets
26
<PAGE>
of Compass and its Subsidiaries as of March 31 and June 30, 1996 and 1995,
respectively, and the related unaudited consolidated statements of income and
cash flows for the three- and six-month periods ending March 31 and June 30,
1996 and 1995. The financial statements contained in the Compass 1995 Annual
Report and such Quarterly Reports have been prepared in conformity with GAAP
applied on a basis consistent with prior periods. The consolidated balance
sheets of Compass and its subsidiaries as of December 31, 1995 and 1994
contained in the Compass 1995 Annual Report fairly present the consolidated
financial condition of Compass and its Subsidiaries as of the dates thereof, and
the related consolidated statements of income, shareholders' equity and cash
flows of Compass and its Subsidiaries contained therein fairly present the
results of operations and cash flows thereof for the fiscal years then ended.
The unaudited consolidated financial statements of Compass and its Subsidiaries
as of March 31 and June 30, 1996 and 1995, contained in Compass' Quarterly
Reports, fairly present 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 1995 Annual
Report or Compass' Quarterly Reports is false or misleading with respect to any
material fact, or omits to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
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 September 30, 1996, Compass had 40,509,654
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.
27
<PAGE>
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 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 Regulatory Approvals. Compass is not aware of any fact or
--------------------
circumstance on the part of Compass which would delay approval by the FRB, the
FDIC or the Commissioner.
SECTION 4.9 Representations Not Misleading. No representation or
------------------------------
warranty by Compass in this Agreement, nor any statement or exhibit furnished to
the Company or the Bank under and pursuant to, or in anticipation of this
Agreement, contains or will contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements contained herein
or therein not misleading.
28
<PAGE>
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, including GBVD and the Bank (collectively, the "Acquired
Companies") to, from the date of this Agreement to the Closing, except as
specifically contemplated by this Agreement:
(a) operate and conduct the businesses of the Acquired Companies in the
ordinary course of business and consistent with prudent banking practices;
(b) preserve intact the Acquired Companies' corporate existence, business
organization, assets, licenses, permits, authorizations, and business
opportunities;
(c) comply with all material contractual obligations applicable to the
Acquired Companies' operations;
(d) maintain all the Acquired Companies' properties in good repair, order
and condition, reasonable wear and tear excepted, and maintain the insurance
coverages described in Schedule 5.1(d) (which shall list all Property insured by
such coverages) or obtain comparable insurance coverages from reputable insurers
which, in respect to amounts, types and risks insured, are adequate for the
business conducted by the Acquired Companies and consistent with the existing
insurance coverages;
(e) in good faith and in a timely manner (i) cooperate with Compass and
Compass 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
29
<PAGE>
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 any Company Loan Documents, if
any, and promptly notify and provide copies to Compass of any material written
communications concerning any Company Loan Documents, if any;
(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;
(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) amend The Commerce National Bank College Station, Texas Employee Stock
Ownership Plan (the "ESOP") to reflect that participants in the ESOP receive
shares of Company Common Stock rather than shares of capital stock of the Bank;
(m) 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
(n) 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 or as otherwise specifically permitted by this
Agreement, the Company will not and will use its best efforts not to permit GBVD
or the Bank, or any other
30
<PAGE>
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, 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, as provided in Section 6.15, and
except for regular salary increases granted in the ordinary course of business
within the Company or its Subsidiaries' 1996 budget and consistent with prior
practices, grant any increase in compensation or directors' fees, or pay or
agree to pay or accrue any bonus or like benefit to or for the credit of any
director, officer, employee or other person or enter into any employment,
consulting or severance agreement or other
31
<PAGE>
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 GBVD and from GBVD 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 its Subsidiaries;
(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 and in accordance with prudent banking
practices;
32
<PAGE>
(t) sell or contract to sell any part of its or its Subsidiaries premises;
(u) change any fiscal year or the length thereof;
(v) knowingly 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 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.
33
<PAGE>
SECTION 6.2 Filing of Regulatory Approvals. 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 its
Subsidiaries and Compass Bank, Houston, Texas, a Texas banking corporation and
indirect wholly-owned subsidiary of Compass ("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.
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,
if any, 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 its Subsidiaries
from any other person. During the term of this Agreement, neither the Company
nor its Subsidiaries shall provide information to any other person in connection
with a possible acquisition of the Company or 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.
34
<PAGE>
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 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's employees in such
plans and programs from and after the Effective Time, subject to the following:
(i) Employee Welfare Benefit Plans and Programs: Each employee of the
Company and 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 its Subsidiaries sponsored a similar type
of plan which the Company or Company Subsidiary employees 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 its 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 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 Company or Company Subsidiary employee for such year. Compass
agrees that for purposes of determining the number of vacation days available
with respect to each Company or Company Subsidiary 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 Subsidiary vacation policy in effect as of
January 1, 1996. Compass further agrees to credit each Company or Subsidiary
employee for the year during which such coverage under the Compass welfare
benefit plan begins, with any deductibles already incurred during such year
under the Company's group health plan.
35
<PAGE>
(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 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 Investigation; Right to Terminate Agreement.
---------------------------------------------------------
(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 described on
the attached Scheduled 6.10 or any real or personal property which becomes
Property between the date hereof and the Effective Time, 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
36
<PAGE>
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 acquire a
security interest between the date hereof and the Closing Date, the scope and
results of which shall be acceptable to Compass in its sole reasonable
discretion and the scope and results of which are equivalent to the policies of
Compass with respect to acquiring security interests on real or personal
property.
(d) Compass shall notify the Company prior to any physical inspections of
Property, 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. If, as a result of any such
Environmental Inspection, further investigation ("secondary investigation")
including, without limitation, test borings, soil, water and other sampling is
deemed desirable by Compass, Compass shall notify the Company of the Properties
on which it intends to conduct a secondary investigation on or prior to the 52nd
day after the date hereof. The Company and its Subsidiaries will provide
notification to owners of Property on which Compass intends to conduct secondary
investigations and will use their best efforts to secure access to such property
for Compass. Compass shall notify the Company of any Properties that, in the
sole discretion of Compass, are not acceptable and require remediation on or
prior to the 102nd day after the date hereof.
(e) (1) With respect to any Controlled Property that Compass has notified
the Company is not acceptable and requires remediation, the Company shall
promptly prepare a remediation plan acceptable to Compass, and obtain approval
of such remediation plan by the Texas Natural Resource Conservation Commission
or any other appropriate governmental authority ("Environmental Regulatory
Authority") on or prior to the 240th day after the date hereof ("Remediation
Completion Date").
(2) With respect to any Collateral Property that Compass has notified
the Company is not acceptable and requires remediation, the Company agrees
promptly to, and shall cause its Subsidiaries to, add to their loan loss
reserves the lesser of (a) the written estimate of expenditures ("Remediation
Estimate") prepared by the environmental consultant engaged by Compass to
perform the Environmental Inspections, in connection with (i) additional
assessment, remediation, removal and/or monitoring (ii) correction of any
violation of any applicable Environmental Law, and (iii) preparing and obtaining
approval by the appropriate
37
<PAGE>
Environmental Regulatory Authority of remediation plans, or (b) the outstanding
balance of the loan or indebtedness secured by such Collateral Property. If the
expenditures set forth in clause (a) above would exceed 80% of the outstanding
balance of such loan or indebtedness, the Company will, and will cause its
Subsidiaries to, increase their loan loss reserves by the outstanding amount of
the loan or indebtedness.
(3) Notwithstanding the foregoing, and without limiting any rights of
Compass to terminate this Agreement, the Company shall not be obligated to incur
aggregate expenditures in excess of $250,000 in connection with additional
assessment, remediation or monitoring of any Property, preparing and obtaining
approval by the appropriate Environmental Regulatory Authority of remediation
plans with respect to Controlled Properties, and in connection with making
allocations to the Company's and its Subsidiaries' loan loss reserves.
(f) 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 (including its Subsidiaries) for making any report of such results
to any governmental authority.
(g) Compass shall have the right to terminate this Agreement in the
following circumstances:
(i) the Company's breach of any representation or warranty set forth
in Section 3.23;
(ii) the factual substance of any warranties set forth in Section
3.23 is not true and accurate irrespective of the knowledge or lack of knowledge
of the Company;
(iii) the results of such Environmental Inspection, secondary
investigation or other environmental survey are unacceptable to Compass because
the Environmental Inspection, secondary investigation or other environmental
survey identifies violations or potential violations of Environmental Laws;
38
<PAGE>
(iv) if the Environmental Inspection, secondary investigation or
other environmental survey identifies any past or present event, condition or
circumstance that, based on the estimates of the environmental professionals
referred to in this Section 6.10, may currently or in the future require (a)
expenditures by the Company, in connection with (1) investigation, remediation
or monitoring of any Controlled Property (including without limitation eventual
removal of asbestos-containing material), (2) preparing and obtaining approval
by the appropriate Environmental Regulatory Authority of remediation plans with
respect to Controlled Properties, (3) any violations of applicable Environmental
Laws, or (b) additions to loan loss reserve pursuant to Section 6.10(e), which
expenditures or additions to loan loss reserve individually or in the aggregate
may exceed $250,000;
(v) Compass is not permitted to conduct an Environmental Inspection
or secondary investigation of any Property to the extent it deems appropriate;
(vi) If on or before the Remediation Completion Date,
a) for each Controlled Property identified by Compass as
unacceptable and requiring remediation, the Company does not deliver to Compass
written evidence acceptable to Compass that the Company has developed a
remediation plan approved by the applicable Environmental Regulatory Authority,
b) for each Collateral Property identified by Compass as
unacceptable and requiring remediation, the Company does not provide evidence
acceptable to Compass that the Company and its Subsidiaries increased their
respective loan loss reserves in accordance with Section 6.10(e).
(h) 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
39
<PAGE>
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 GBVD and the Bank,
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.
SECTION 6.14 Exercise of Convertible Securities. Each holder of
----------------------------------
outstanding warrants, options, rights, convertible debentures, phantom shares or
other securities entitling the holder thereof to acquire Shares or compensation
in respect of Shares (collectively, the "Convertible Securities") has delivered
to Compass and the Company its agreement in the form of Exhibits E-1 and E-2
attached hereto, to the effect that the holders of Convertible Securities shall
receive Compass Common Stock for unexercised Convertible Securities in the
Merger ("Agreements Regarding Convertible Securities").
SECTION 6.15 Employee Bonuses. In the event the Effective Time is after
----------------
February 28, 1997, and unless paid by the Company on or prior to the Effective
Time, Company agrees to cause to be paid to the employees of the Company the
1997 bonuses, if any, due such employees under the Company's 1997 bonus plan
calculated consistent with past practices and prorated through the Effective
Time.
SECTION 6.16 Director and Officer Insurance and Indemnification. Compass
--------------------------------------------------
agrees to permit the Company to obtain an extended reporting period (otherwise
known as "tail coverage" for three years 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 $41,850. Compass agrees that all
rights to indemnification that the directors and officers of the Company, GBVD
and the Bank have pursuant to the Articles or Certificate of Incorporation or
Association of the Company, GBVD and the Bank shall survive the Merger and shall
continue in full force and effect. Nothing contained in this Section 6.16 shall
require Compass to indemnify any person who was
40
<PAGE>
a director or officer of the Company, GBVD or the Bank to a greater extent than
the Company, GBVD or the Bank is, as of the date of this Agreement, required to
indemnify any such person.
SECTION 6.17 Section 368 Certificates. The Company will provide 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 ("Section 368
Certificates") within 30 days after the date hereof.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver of the following conditions prior to the Effective Time:
(a) the receipt of regulatory approvals 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:
41
<PAGE>
(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, GBVD and the Bank shall have delivered
to Compass an instrument dated the Effective Time releasing the Company, GBVD
and the Bank from any and all claims of such directors (except as to their
deposits and accounts and rights of indemnification pursuant to the Articles or
Certificate of Association or Incorporation and Bylaws of the Company, GBVD or
the Bank) and shall have delivered to Compass their resignations as directors of
the Company, GBVD and the Bank;
(e) the officers of the Company and its Subsidiaries who have the title
Vice President or above shall have delivered to Compass an instrument dated the
Effective Time releasing the Company, GBVD and the Bank 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, GBVD or the Bank and
as to the rights of indemnification pursuant to the Articles or Certificate of
Incorporation or Association or Bylaws of the Company, GBVD or 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) there shall be no Company Indebtedness;
(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 plan or intention
42
<PAGE>
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
that the Merger will qualify as a reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended;
(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) the Company and the Bank shall have terminated, in a manner
satisfactory to Compass, on or before the Effective Time, the Executive
Supplemental Income Agreements executed February, 1996 with Allan W. Hanson,
Thomas H. Aughinbaugh, III, Karen Urban and Marsha Baker;
(o) the Company shall have terminated, in a manner satisfactory to
Compass, on or before the Effective Time, the Commerce National Bank Director's
Deferred Compensation Plan and Deferred Compensation Agreements with Billy C.
Presnal, Henry L. Presnal, James K. Presnal, Thomas H. Aughinbaugh, III, Allen
W. Hanson, Patricia Cornelison and James R. Bradley;
(p) 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;
(q) the Company shall have delivered to Compass the Section 368
Certificates within the time period specified by Section 6.17;
(r) the transactions contemplated by the Agreements Regarding Convertible
Securities shall have been, or shall simultaneously with Closing be,
consummated; and
(s) Compass shall have received certificates dated the Closing executed by
the Chairman of the Board of the Company and GBVD and by the Chairman of the
Board of the Bank, and the Secretary or Cashier of the Company, GBVD and the
Bank, respectively, certifying in such reasonable detail as Compass may
reasonably request, to the effect described in Sections 7.2(a), (b), (c), (g),
(i), (n), (o) and (p).
43
<PAGE>
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 G
attached hereto;
(d) the Company, GBVD and the Bank shall have delivered to the directors
of the Company, GBVD and the Bank an instrument dated the Effective Time
releasing such directors from any and all claims of the Company, GBVD and the
Bank (except as to indebtedness or other contractual liabilities); provided,
however, that such releases shall not release an action against such directors
by Compass or Compass Texas in connection with the transactions contemplated by
this Agreement;
(e) the shareholders of the Company shall have received an opinion of
counsel satisfactory to Compass that the Merger will qualify as a reorganization
under Section 368(a) of the Code; 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 VIII.
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;
(b) by Compass (i) if Compass learns or becomes aware of a state of facts
or breach or inaccuracy of any representation or
44
<PAGE>
warranty of the Company contained in Article III which constitutes a Material
Adverse Effect, (ii) pursuant to Section 6.10, (iii) if the Company shall not
have delivered the Section 368 Certificates within the time period specified by
Section 6.17, or (iv) if any of the conditions to Closing contained in Section
7.1 or 7.2 are not satisfied or waived in writing by Compass;
(c) by the Company (i) if the conditions to Closing contained in Section
7.1 or 7.3 are not satisfied or waived in writing by the Company, or (ii) if the
Company learns or becomes aware of a breach or inaccuracy of any representation
or warranty of Compass contained in Article IV which constitutes a Material
Adverse Effect;
(d) by Compass or the Company if the Effective Time shall not have
occurred on or before the expiration of 240 days from the date of this Agreement
or such later date agreed to in writing by Compass and the Company; provided,
however, that the Merger shall not be consummated prior to January 1, 1997; 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 Section 8.2 and Section 9.1. Nothing contained in this
Section 8.2 shall relieve any party from liability for any breach of this
Agreement.
SECTION 8.3 Amendment. (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 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
45
<PAGE>
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.
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, GBVD and the Bank, shall be
paid by the party incurring such costs and expenses. 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, GBVD or
the Bank for financial advisory fees, brokerage or commission fees, finder's
fees or other like payment in connection with the consummation of the
transactions contemplated hereby other than with respect to The Bank Advisory
Group, Inc. ("BAGI") which has been retained by the Company. The Company agrees
to and shall indemnify Compass and Compass Texas against any liability arising
from any fee or payment owed to BAGI.
SECTION 10.3 Entire Agreement; Assignment. This Agreement (a) constitutes
----------------------------
the entire agreement among the parties with respect
46
<PAGE>
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.
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, GBVD or the Bank, shall execute and deliver such further
agreements, documents, deeds, certificates and other instruments and shall take
or cause to be taken such other actions, including those as shall be necessary
to vest or perfect in or to confirm of record or otherwise the Company's or its
Subsidiaries' title to and possession of, all of its property, interests,
assets, rights, privileges, immunities, powers, franchises and authority, as
shall be reasonably necessary or advisable to carry out the purposes of and
effect the transactions contemplated by this Agreement.
SECTION 10.5 Enforcement of the Agreement. The parties hereto agree that
----------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
SECTION 10.6 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 10.7 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered if 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:
47
<PAGE>
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
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:
Henry L. Presnal, D.V.M.
Chairman of the Board
Greater Brazos Valley Bancorp, Inc.
2405 Texas Avenue South
College Station, Texas 77842
Telecopy No.: (409) 693-7485
with a copy to:
Charles E. Greef
Jenkens & Gilchrist
1445 Ross Avenue, Ste. 3200
Dallas, Texas 75202
Telecopy No. (214) 855-4300
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
48
<PAGE>
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.
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" 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, GBVD and the Bank 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,
49
<PAGE>
inspection or monitoring of Polluting Substances or protection of human health
or safety or the environment (including, without limitation, wildlife, air,
surface water, ground water, land surface, and subsurface strata), including,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, as amended ("SARA"), the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"), Hazardous and Solid Waste Amendments
of 1984, as amended ("HSWA"), the Hazardous Materials Transportation Act, as
amended ("HMTA"), the Toxic Substances Control Act ("TSCA"), Occupational Safety
and Health Act ("OSHA"), Federal Water Pollution Control Act, Clean Air Act, and
any and all regulations promulgated pursuant to any of the foregoing.
(d) "Polluting Substances" shall mean those substances included within the
statutory or regulatory definitions, listings or descriptions of "pollutant,"
"contaminant," "toxic waste," "hazardous substance," "hazardous waste," "solid
waste," or "regulated substance" pursuant to CERCLA, SARA, RCRA, HSWA, HMTA,
TSCA, OSHA, and/or any other Environmental Laws, as amended, and shall include,
without limitation, any material, waste or substance which is or contains
explosives, radioactive materials, oil or any fraction thereof, asbestos, or
formaldehyde. To the extent that the laws or regulations of the State of 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 with the title of vice president or
above (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.
50
<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.
[SIGNATURE PAGE FOLLOWS]
51
<PAGE>
ATTEST: COMPASS BANCSHARES, INC.
By /s/ Daniel B. Graves By /s/ Garrett R. Hegel
----------------------------- ----------------------------------
Its Assistant Secretary Its Chief Financial Officer
ATTEST: GREATER BRAZOS VALLEY BANCORP, INC.
By /s/ James R. Bradley By /s/ Henry L. Presnal, DVM
----------------------------- ----------------------------------
Its Secretary Its Chairman of the Board
Agreement and Plan of Merger
H1995A/71535-12
52
<PAGE>
EXHIBIT A
POOLING TRANSFER RESTRICTIONS AGREEMENT
---------------------------------------
This Pooling Transfer Restrictions Agreement (this "Agreement") is executed
and delivered this 2nd day of October, 1996 by and between Compass Bancshares,
Inc. ("Compass"), Greater Brazos Valley Bancorp, Inc. (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 October 2, 1996 ("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
<PAGE>
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:
The shares represented by this certificate are subject to a Pooling
Transfer Restrictions Agreement dated October 2, 1996 which
restricts any sale or other transfer of such shares prior to [insert
due date of filing of next Quarterly Report on Form 10-Q or Annual
Report on Form 10-K that will contain required combined financial
results]. The issuer will furnish to the record holder of this
certificate, without charge, upon written request to the issuer at
its principal place of business, a copy of the Pooling Transfer
Restrictions Agreement.
Compass agrees to instruct its transfer agent to remove the restrictive legend
from any certificates evidencing shares subject hereto promptly following the
expiration of the transfer restrictions described in Section 1.
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:_______________________________
GREATER BRAZOS VALLEY BANCORP, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
_____________________________________
Signature of Shareholder
_____________________________________
Printed Name of Shareholder
Pooling Transfer Restrictions Agreement
H1995A/714474.2
3
<PAGE>
EXHIBIT B
EXCHANGE AGENT AGREEMENT
------------------------
This Exchange Agent Agreement, dated as of _____, 1996, is made and entered
into by and among Compass Bancshares, Inc., a Delaware corporation ("Compass"),
_____________________, a Delaware corporation ("Compass Texas"), Greater Brazos
Valley Bancorp, Inc., a Texas corporation ("Company"), and River Oaks Trust
Company, a Texas trust company ("Exchange Agent").
PREAMBLE:
Pursuant to the Agreement and Plan of Merger dated as of October 2, 1996
("Merger Agreement") among Compass, Compass Texas and the Company, the Company
shall, at the Effective Time, be merged into Compass Texas. The name of the
surviving corporation shall be _________________ ("Surviving Corporation").
After the Effective Time, the outstanding shares of the Common Stock, par
value $1.00 per share (including for this purpose any shares of Common Stock
which can be acquired upon the exercise of any warrant, option, right,
convertible debt instrument or other security pursuant to which shares of Common
Stock may be obtained (collectively, "Derivative Securities")), of the 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:
<PAGE>
1. Appointment of Exchange Agent. River Oaks 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.
3. Duties of Exchange Agent. The Exchange Agent is authorized and
------------------------
directed to perform the following functions contemplated by the Merger Agreement
and the Letters of Transmittal (defined below):
(a) Distribution of Letters of Transmittal. The Exchange Agent shall
--------------------------------------
mail to the holders of record of Company Common Stock, by first class
United States mail, postage prepaid, copies of Letters of Transmittal,
including Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 in substantially the form attached hereto as Exhibit A
---------
("Letters of Transmittal"), and return envelopes to the Exchange Agent, at
the earliest practicable time following the Effective Time. A form of Stock
Assignment, Power of Attorney and Lost Stock Certificate Affidavit will be
provided to the Exchange Agent for use by shareholders if necessary.
(b) Acceptance of Certificates.
--------------------------
(i) The Exchange Agent will examine the Letters of Transmittal,
Certificates and other documents and instruments delivered to the Exchange
Agent by or on behalf of holders tendering Company Common Stock and shall
determine whether (i) the Letters of Transmittal have been completed and
executed properly, and are accompanied by proper evidence of authority,
(ii) Certificates corresponding to the names of the registered holders,
Certificate numbers and the number of shares represented thereby with the
information set forth in the Company's shareholder and other records and
which appear to be in negotiable, good delivery form, properly endorsed or
accompanied by stock powers with transfer tax stamps or evidence of payment
or exemption from transfer taxes affixed (where required), and (iii)
signatures are guaranteed (where required), all in accordance with the
terms and conditions of the Merger Agreement and the Letters of
Transmittal. The Exchange Agent shall accept Certificates which are
surrendered in accordance with the provisions of the Merger Agreement and
accompanied by the executed Letters of Transmittal. Such Certificates and
Letters of Transmittal shall only be accepted
- 2 -
<PAGE>
by the Exchange Agent and eligible for payment hereunder if they have been
properly executed and completed in accordance with the instructions
contained in the Letters of Transmittal and if the person or persons
surrendering such Certificates and Letters of Transmittal appears as a
shareholder of record of the number of shares surrendered on the list of
shareholders supplied and certified to the Exchange Agent by the Company
("Shareholder List") attached as Exhibit B hereto. In the event the
------- -
Exchange Agent shall have any questions as to whether a Certificate and
Letters of Transmittal have been properly executed and completed or whether
the Certificates have been surrendered by the holder of record thereof, the
Exchange Agent shall promptly refer such questions to Compass for
resolution by Compass and the Exchange Agent shall be able to rely on the
written instructions and decisions of any officer of Compass. Determination
of all questions as to the proper completion or execution of the Letters of
Transmittal or as to the proper form for transfer of the Certificates for
Company Common Stock shall be made by Compass together with its attorneys,
and such other persons as Compass shall designate, and such determinations
shall be final and binding; provided, however, that the rejection by
Compass of any Letters of Transmittal or Certificates deemed by Compass to
be ineffective to transfer the Certificates shall not affect the right of
any shareholder in or to his respective share of the Merger Consideration;
(ii) If any defect or irregularity appears to exist in connection
with a purported tender, the Exchange Agent will notify promptly the
persons by whom the tender was made and will return all documents delivered
in connection therewith or take such action as is necessary or advisable to
cause such defect or irregularity to be cured;
(iii) Tenders may be made only as set forth in the Letters of
Transmittal;
(iv) Letters of Transmittal, and facsimiles thereof submitted to the
Exchange Agent, shall be marked by the Exchange Agent's designated officers
to show the date and time of receipt and their review and acceptance
thereof;
(v) At the close of business each Friday, the Exchange Agent shall
provide Compass and First National Bank of Boston, Compass' transfer agent
and registrar ("Transfer Agent") with a list of shareholders who have
properly tendered their Company Common Stock. In addition, the Exchange
Agent shall inform Compass in writing of the number of shares of Company
- 3 -
<PAGE>
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
With a copy to: First National Bank of Boston
Post Office Box 1865
Boston, Massachusetts 02105
Attn: Caroline Rees, Shareholder
Services Officer
Telephone No. (617) 575-2571
(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:
(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 $_____.
- 4 -
<PAGE>
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.
(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
- 5 -
<PAGE>
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.
- 6 -
<PAGE>
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 only, and not the Exchange Agent, for the payment of any Merger
Consideration in respect of such Certificates.
9. Investment of Exchange Fund. At the direction of the Surviving
---------------------------
Corporation, the Exchange Agent shall invest portions of the Exchange Fund and
remit earnings thereon monthly to the Surviving Corporation, provided that all
such investments shall be in The Starburst Government Money Market Fund (the
"Fund"), managed by Compass Bank, an Alabama banking corporation and an
affiliate of Compass, or if for any reason the Fund is not available to the
Exchange Agent as an investment alternative, as otherwise directed by the
Surviving Corporation.
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:
- 7 -
<PAGE>
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:
River Oaks Trust Company
6990 Portwest, Suite 170
Houston, Texas 77024
Attn: Stephen K. Brownlow
Senior Vice President and Trust Officer
If to the Company prior
to the Effective Time:
Greater Brazos Valley Bancorp, Inc.
2405 Texas Avenue South
College Station, Texas 77842
Attn: Henry L. Presnal, D.V.M.
Chairman of the Board
If to Compass Texas or, following
the Effective Time, the
Surviving Corporation:
Compass Equitable Texas, Inc.
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]
- 8 -
<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:__________________________________
GREATER BRAZOS VALLEY BANCORP, INC.
By: ____________________________________
Name: __________________________________
Title:__________________________________
________________________________________
By: ____________________________________
Name: __________________________________
Title:__________________________________
RIVER OAKS TRUST COMPANY
By: ____________________________________
Name: __________________________________
Title:__________________________________
Exhibit A - Form of Letters of Transmittal
Exhibit B - Shareholder List
Exchange Agent Agreement
H1995A\71468-2
- 9 -
<PAGE>
EXHIBIT "A"
LETTER OF TRANSMITTAL
For Shares of Common Stock of
GREATER BRAZOS VALLEY BANCORP, INC.
Delivered Pursuant to the Agreement and Plan of Merger
dated as of October 2, 1996
By Mail or Overnight Delivery Service:
River Oaks Trust Company
6990 Portwest, Suite 170
Houston, Texas 77024
Attention: Mr. Stephen K. Brownlow
DO NOT HAND DELIVER
DESCRIPTION OF SHARES SURRENDERED
---------------------------------
Based on its stock transfer records, Greater Brazos Valley Bancorp, Inc.
(the "Company") has listed below your name, address and the certificate numbers
representing your shares of Common Stock, par value $1.00 per share ("Shares"),
of the Company. If any of the listed information appears to be incorrect,
please notify Mr. Stephen K. Brownlow at (713) 867-1101 at once.
<TABLE>
<CAPTION>
================================================================================
Name, Address and Social Security
Number of Registered Holders Certificate(s) Surrendered
- --------------------------------------------------------------------------------
<S> <C> <C>
Total Number of
Certificate Shares Represented
Number(s) by Certificate(s)
_______________________________ ______________ ____________________
Name ______________ ____________________
______________ ____________________
_______________________________
_______________________________
Address
_______________________________ Total Shares _________________
Social Security Number
================================================================================
</TABLE>
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Gentlemen:
I, as the registered holder of the above described Shares of the Company,
hereby tender to Compass Bancshares, Inc. ("Compass"), such Shares pursuant to
the Agreement and Plan of Merger dated as of October 2, 1996, as amended ("the
Merger Agreement"), by and between Compass, ______________________________
("Compass Texas"), and the Company. I hereby acknowledge receipt of the Proxy
Statement dated _______, 1996, which described the merger ("Merger") provided by
the Merger Agreement.
I represent and warrant to Compass and Compass 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 River Oaks 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.
The authority conferred in this Letter of Transmittal shall not be affected
by, and shall survive, my death or incapacity, and any obligation I may have
hereunder shall be binding upon my successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and personal and legal representatives.
I acknowledge that the tender of my Shares is irrevocable.
INSTRUCTIONS REGARDING ISSUANCE OF SHARES
If you wish to have the shares of Compass Common Stock to be issued
pursuant to the Merger Agreement in the name and at the address set forth above,
please sign and date this letter on page 3. If you wish to have the shares of
Compass Common Stock to be issued pursuant to the Merger Agreement in a name or
to an address other than the name and address specified above, please complete
the following section. You will be required to pay any transfer or other taxes
required by reason of the payment and delivery of Compass Common Stock to such
other person.
NEW CERTIFICATES TO BE ISSUED
IN A DIFFERENT NAME OR TO A DIFFERENT ADDRESS
If you are entitled to receive shares of Compass Common Stock and wish to
have certificates representing Compass Common Stock issued in a name or to an
address other than the name or address shown on your Company stock certificates,
please indicate the name and address of your assignee below:
Name and Address of Assignee
----------------------------
Name:________________________________ Taxpayer I.D. No. or
(Type or print full name) Social Security No.:_____________________
Address:________________________________________________________________________
City, State, Zip Code:__________________________________________________________
<PAGE>
PLEASE SIGN AND DATE BELOW AS INDICATED
THEN PLEASE COMPLETE SUBSTITUTE FORM W-9
Signatures _________________________________
_________________________________
Dated _________________________, 1996
Name(s) _____________________________________________________________
(Please Print)
Capacity _________________________________
(Full Title)
Address _________________________________
_________________________________
(Include Zip Code)
Area Code and Telephone Number _____________________________
Tax Identification or Social Security Number _____________________________
================================================================================
GUARANTEE OF SIGNATURES
(Must be signed by registered holder(s) as name(s) appear on the certificate(s)
or by person(s) authorized to become registered holder(s) by certificate(s) and
documents transmitted. If signing is by an officer or a corporation, or by an
attorney, executor, administrator, trustee, guardian, agent or other person
acting in a fiduciary or representative capacity, please set forth full title.
See Instruction 1.)
- -----------------
Authorized Signature __________________________________
Name __________________________________
(Please Print)
Title __________________________________
Name of Firm __________________________________
Address __________________________________
__________________________________
(Include Zip Code)
Area Code and Telephone Number __________________
Dated ____________________________, 1996
================================================================================
PLEASE COMPLETE SUBSTITUTE FORM W-9
IT IS THE LAST FORM IN THIS PACKAGE
===============================================================================
-3-
<PAGE>
DO NOT WRITE IN SPACE BELOW
Date Received:_______________ By:_______________ Date:_____________, 1996
<TABLE>
<CAPTION>
=====================================================================================================================
Company Compass No. of
Shares Shares Accepted Stock Certificate Fractional Cash Check
Surrendered for Exchange Certificate Nos. No. issued Shares Paid No.
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
=====================================================================================================================
</TABLE>
Accepted by:____________ Checked By:_____________ Date:____________, 1996
-4-
<PAGE>
LETTER OF TRANSMITTAL
INSTRUCTIONS
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; SIGNATURE GUARANTEES.
Please send all certificates for Shares to River Oaks Trust Company, as Exchange
Agent (the "Exchange Agent"), with the Letter of Transmittal, or a facsimile
thereof, fully completed and signed by you, the registered holder(s). Compass
retains the right to require that a signature on the Letter of Transmittal and
the Share certificates be guaranteed by an Eligible Institution. An Eligible
Institution is a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc. (the "NASD") or a commercial
bank or trust company having an office, branch or agency located in the United
States. If Compass wishes to have your signature guaranteed by an Eligible
Institution, you will be notified by separate letter.
If certificates are registered in the name of a person other than you,
the certificate(s) must be duly endorsed or accompanied by stock powers signed
by the registered holder and the Letter of Transmittal. If the Letter of
Transmittal is executed by an officer on behalf of a corporation or by an
executor, administrator, trustee, guardian, attorney, agent or other person
acting in a fiduciary or representative capacity, the Exchange Agent reserves
the right to require that proper documentary evidence of the authority of the
person executing the Letter of Transmittal. If the tendered certificates are
owned of record by two or more joint owners, each of you must sign the Letter of
Transmittal. Questions regarding such evidence of authority may be referred to
Mr. Stephen K. Brownlow, a representative of the Exchange Agent, at (713) 867-
1101.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND
RISK. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS STRONGLY RECOMMENDED.
2. ISSUANCE OF COMPASS COMMON STOCK. You will receive the Compass
Common Stock for your Shares only after receipt and acceptance by the Exchange
Agent and Compass of all of the certificates representing your Shares, a
properly completed and executed Letter of Transmittal, and any other required
documents and upon processing of the documents by the Exchange Agent .
3. PAYMENT FOR FRACTIONAL SHARES. As provided in Section 1.6(c) of
the Merger Agreement, Compass will not issue any certificates of Compass Common
Stock for fractional shares. In lieu of issuing fractional shares, Compass will
pay to any Company shareholder entitled to receive a fractional share of Compass
Common Stock, a cash payment based on a price of $______ per share.
4. NO CONDITIONAL TENDERS; WAIVER OF NOTICE. No alternative,
conditional, irregular or contingent deliveries of Shares will be accepted. By
execution of the Letter of Transmittal or any manually signed facsimile thereof,
you waive any rights to receive any notice of the acceptance of your Shares for
exchange.
5. SIGNATURES ON LETTER OF TRANSMITTAL. In order for the Letter of
Transmittal to be properly signed by you, the signature must correspond exactly
with the name(s) as written on the face of the certificate(s).
If the Shares tendered hereby are owned of record by two or more
joint owners, all of you must sign the Letter of Transmittal.
If your Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
-5-
<PAGE>
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.
If the Letter of Transmittal or any certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of corporation or other acting in a fiduciary or representative
capacity, such person should so indicate when signing, and the Exchange Agent
reserves the right to require proper evidence of their authority to so act.
6. IRREGULARITIES. All questions as to the validity, form, eligibility,
acceptance of and delivery of Shares and the issuance of Compass Common Stock
and the payment of cash in lieu of fractional shares will be determined by
Compass, which determination shall be final and binding. Compass reserves the
absolute right to reject any or all tenders determined by Compass not to be in
appropriate form or which would, in the opinion of Compass' counsel, be
unlawful. Compass also reserves the absolute right in its sole discretion, to
waive any of the conditions hereof, or any defect in any tender with respect to
any particular Shares of any particular shareholder, and Compass'
interpretations of the terms and conditions of the Merger Agreement and these
instructions shall be final and binding. The Exchange Agent and Compass shall
not be obligated to give notice of defects or irregularities in tenders, nor
shall they incur any liability for failure to give any such notice. Tenders
will be deemed not to have been made until all defects and irregularities have
been cured or waived.
7. 31% BACKUP WITHHOLDING. Under the Federal income tax law, you must
provide Compass with a correct taxpayer identification number ("TIN") unless an
exemption applies. If the correct TIN is not provided, a $50 penalty may be
imposed upon you by the Internal Revenue Service and you will be subject to
backup withholding of 31% of the payments to be received by you.
8. REQUEST FOR ASSISTANCE OF ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Letter of Transmittal may be directed
to the Exchange Agent at the address set forth at the top of page 1.
IMPORTANT TAX INFORMATION
Under the Federal income tax law, you are to provide Compass (as payer)
with a correct taxpayer identification number on Substitute Form W-9 below. If
Compass is not provided with the correct taxpayer identification number, you may
be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, all payments that are made to you with respect to Shares (including
any cash payable to you under the Merger Agreement in lieu of fractional shares)
may be subject to backup withholding.
Exempt shareholders (including among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. Nonetheless, exempt shareholders should complete the Substitute
Form W-9 below and so indicate their exempt status by writing "exempt" across
the face of the Substitute Form W-9. In order for a foreign individual to
qualify as an exempt recipient, that shareholder must submit a statement, signed
under penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Exchange Agent. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional information.
If backup withholding applies, Compass is required to withhold 31% of any
payments made to the shareholder. Backup withholding is not an additional tax.
Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a
-6-
<PAGE>
refund may be obtained.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to you with respect
to shares of Compass Common Stock acquired as a result of the Merger or with
respect to cash payments, if any, receivable in lieu of fractional shares
pursuant to the Merger Agreement, you are required to notify Compass of your
correct taxpayer identification number by completing the form below certifying
that the taxpayer identification number provided on Substitute Form W-9 is
correct (or that you are awaiting a taxpayer identification number).
What Number to Give
As the record owner of the Shares, you are required to give Compass
your Social Security Number or Employer Identification Number. If the Shares
are in more than one name or are not in the name of the actual owners, consult
the enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidelines on which number to report.
-7-
<PAGE>
SUBSTITUTE FORM W-9
Department of the Treasury
Internal Revenue Service
Taxpayer Identification Number
PART 1 - PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION [__________________]
NUMBER IN THE BOX AT RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW Social Security Number or
Employer Identification
Number
PART 2 - Check the following box if you are NOT subject to backup [_____]
withholding under the provisions of Section 3406(a)(1)(C)
of the Internal Revenue Code because (1) you have not been
notified that you are subject to backup withholding as a result of
failure to report all interest or dividends or (2) the Internal
Revenue Service has notified you that you are no longer subject to
backup withholding.
PART 3 - Check the following box if you are awaiting a Taxpayer [_____]
Identification Number.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
By checking the box in Part 3, I certify under penalties of perjury that a
taxpayer identification number has not been issued to me, and either (a) I have
mailed or delivered an application to receive a taxpayer identification number
to the appropriate Internal Revenue Service Center or Social Security
Administration Office, or (b) I intend to mail or deliver an application in the
near future. I understand that if I do not provide a taxpayer identification
number within sixty (60) days, 31% of all reportable payments made to me
thereafter will be withheld until I provide a number.
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
Signature: __________________________ Date:_________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
________________________________________________________________________________
-8-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
- ---Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
============================================================= =============================================================
GIVE THE SOCIAL GIVE THE EMPLOYER
SECURITY NUMBER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: OF ---- FOR THIS TYPE OF ACCOUNT: NUMBER OF ----
============================================================= =============================================================
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
2. Two or more individuals (joint The actual owner of the number of the personal
account) account or, if combined representative or trustee
funds, any one of the unless the legal entity
individuals (1) itself is not designated in
the account title.) (5)
3. Husband and wife (joint The actual owner of the
account) account or, if joint funds,
either person(1)
4. Custodian account of a minor The minor(2) 10. Corporate account The corporation
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the minor 11. Religious, charitable, or The organization
account) is the only contributor, the educational organization
minor(1) account
12. Partnership account held in The partnership
the name of the business
6. Account in the name of The ward, minor, or 13. Association, club, or other The organization
guardian or committee for a incompetent person (3) tax-exempt organization
designated ward, minor, or
incompetent person
7. a The usual revocable savings The grantor-trustee(1) 14. A broker or registered The broker or nominee
trust account (grantor is nominee
also trustee)
b So-called trust account The actual owner(1) 15. Account with the The public entity
that is not a legal or Department of Agriculture
valid trust in the name of a public
under State law The owner(4) entity (such as a State or
local government, school
district, or prison) that
8. Sole proprietorship 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.
-9-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDINGS.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
-10-
<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;
<PAGE>
the stockholders are neither deprived of nor restricted in exercising those
rights for a period.
(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/71481-1
-2-
<PAGE>
EXHIBIT D
VOTING AGREEMENT AND IRREVOCABLE PROXY
--------------------------------------
This Voting Agreement and Irrevocable Proxy (this "Agreement") dated
as of October 2, 1996 is executed by and among Greater Brazos Valley Bancorp,
Inc. 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 October 2, 1996 (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 other agreements and
transactions contemplated thereby.
2. In order better to effect the provisions of Section 1, each
Shareholder hereby revokes any previously executed proxies and hereby
constitutes and appoints Compass (the "Proxy Holder"), with full power of
substitution, his true and lawful proxy and attorney-in-fact to vote at the
Meeting all of such Shareholder's Shares in favor of the authorization and
approval of
<PAGE>
the Merger Agreement and the other agreements and transactions contemplated
thereby, with such modifications to the Merger Agreement and the other
agreements and transactions contemplated thereby as the parties thereto may
make, in the event such Shareholder does not vote in favor of the authorization
and approval of the Merger Agreement and the other agreements and transactions
contemplated thereby; provided, however, that this proxy shall not apply with
respect to any vote on the Merger Agreement, and the other agreements and
transactions contemplated thereby, if the Merger Agreement shall have been
modified so as to reduce the amount of consideration to be received by the
Shareholders under the Merger Agreement in its present form.
3. Each Shareholder hereby covenants and agrees that until this
Agreement is terminated in accordance with its terms, each Shareholder will not,
and will not agree to, without the consent of Compass, directly or indirectly,
sell, transfer, assign, pledge, hypothecate, cause to be redeemed or otherwise
dispose of any of the Shares or grant any proxy or interest in or with respect
to any such Shares or deposit such shares into a voting trust or enter into
another voting agreement or arrangement with respect to such Shares except as
contemplated by this Agreement, unless the Shareholder causes the transferee of
such Shares to deliver to Compass an amendment to this Agreement whereby such
transferee or other holder becomes bound by the terms of this Agreement.
4. This proxy shall be limited strictly to the power to vote the
Shares in the manner set forth in Section 2 and shall not extend to any other
matters.
5. The Shareholders acknowledge that Compass and the 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, as it may be amended or extended from time to time, or (ii) the
consummation of the Merger. In no event shall this Agreement apply to shares of
common stock, par value $2.00 per share, of Compass to be received by the
Shareholders upon consummation of the Merger.
7. The vote of the Proxy Holder shall control in any conflict
between its vote of the Shares and a vote by the
2
<PAGE>
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 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
agreements contemplated thereby, embody the entire agreement and understanding
of the parties hereto in respect to the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings among the parties
with respect to such subject matter contained herein.
11. All notices, requests, demands and other communications required
or permitted hereby shall be in writing and shall be deemed to have been duly
given if delivered by hand or mail, certified or registered mail (return receipt
requested) with postage prepaid to the addresses of the parties hereto set forth
on below their signature on the signature pages hereof or to such other address
as any party may have furnished to the others in writing in accordance herewith.
12. This Agreement and the relations among the parties hereto arising
from this Agreement shall be governed by and construed in accordance with the
laws of the State of Texas.
[SIGNATURE PAGES FOLLOW]
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date above written.
GREATER BRAZOS VALLEY BANCORP, INC.
By:________________________________
Name:______________________________
Title:_____________________________
Address:
2405 Texas Avenue South
College Station, Texas 77842
Attention: Mr. Henry L. Presnal, D.V.M.
COMPASS BANCSHARES, INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
Address:
15 South 20th Street
Birmingham, Alabama 35233
Attention: Mr. Daniel B. Graves
Associate General Counsel
Voting Agreement and Irrevocable Proxy
H1995A/71515.1
4
<PAGE>
SHAREHOLDERS:
____________________________________
____________________________________
Address: _________________________
_________________________
____________ shares of Common Stock
Pledgee: _________________________
Address: _________________________
_________________________
Loan No.: _________________________
Voting Agreement and Irrevocable Proxy
H1995A\71515.1
5
<PAGE>
EXHIBIT E-1
AGREEMENT REGARDING CONVERTIBLE SECURITIES
------------------------------------------
(Incentive Stock Options)
-----------------------
This Agreement Regarding Convertible Securities (this "Agreement") is
entered into as of this 2nd day of October, 1996 between Compass Bancshares,
Inc. ("Compass") and _______ ("Holder").
WHEREAS, Compass and Greater Brazos Valley Bancorp, Inc. (the "Company")
entered into an Agreement and Plan of Merger of even date herewith ("Merger
Agreement") pursuant to which the Company will be merged with and into an
existing or to-be-formed subsidiary of Compass;
WHEREAS, the Holder and Commerce National Bank (the "Bank") entered into
that certain Incentive Stock Option Agreement for shares of common stock, par
value ___ per share of the Bank ("Bank Common Stock") dated _____________ (the
"Option Agreement");
WHEREAS, the Option Agreement was not amended to substitute shares of
common stock, par value $1.00 per share of the Company ("Company Common Stock")
for the Bank Common Stock issuable under such Incentive Stock Option Agreement;
WHEREAS, Compass has required as a condition to entering into the Merger
Agreement that the Holder sell, assign, and transfer to Compass the Option
Agreement;
WHEREAS, Compass desires to purchase and the Holder desires to sell, assign
and transfer to Compass the Option Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Purchase. Subject to the terms and conditions of this Agreement, at
--------
the Effective Time (as defined in the Merger Agreement) Compass shall purchase
and the Holder shall sell, assign, and transfer to Compass the Option Agreement,
including without limitation, all rights to purchase shares of Common Stock he
may have under the Option Agreement (the "Purchase").
2. Purchase Price. At the Effective Time, Compass shall pay to the
--------------
Holder a number of shares of Compass Common Stock determined by subtracting the
Exercise Price Per Share from the Selling Price Per Share and dividing that
difference by the Share Determination Market Value per share of Compass Common
Stock and multiplied by the number of Option Shares ("Purchase Price"). In
lieu of issuing any fractional share, the Holder shall be paid an amount in
<PAGE>
cash equal to the fractional share times the Share Determination Market Value.
3. Representation and Warranties: The Holder hereby makes the following
-----------------------------
representations and warranties to Compass:
(a) Ownership. The Holder is and will be at the Effective Time the
---------
record and beneficial owner and holder of, and have, and at the Effective Time
will have, good, valid and indefeasible record and beneficial title to, the
Option Agreement and the rights and benefits thereunder, free and clear of any
adverse claim of any other person, including without limitation any Encumbrance.
(b) Authority. The Holder has the absolute and unrestricted right,
---------
power, authority and capacity to execute and deliver this Agreement, to perform
his obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, the performance of his
obligations hereunder and the consummation of the transactions contemplated
hereby have been duly and validly authorized and approved by the Holder, and no
other proceedings on the part of the Holder are necessary to authorize the
execution and delivery of this Agreement, the performance of his obligations
hereunder, or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Holder, and
this Agreement constitutes the legal, valid and binding agreement of the Holder
enforceable against the Holder in accordance with its terms.
(c) Consents and Approvals; No Violation. No filing or registration
------------------------------------
with, no notices to and no governmental authorization, consent or approval of
any governmental authority, creditor or other person in a contractual
relationship with the Holder, is necessary in connection with the Holder's
execution and delivery of this Agreement, the performance of his obligations
hereunder, or the consummation of the transactions contemplated hereby. Neither
the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the compliance by the Holder with any of
the provisions hereof will, as of the Effective Time, (i) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
contract, agreement, commitment, bond, mortgage, indenture, license, lease,
pledge agreement or other instrument or obligation to which the Holder is a
party or by which the Holder or any of his respective properties or assets may
be bound, or (ii) violate or conflict with any provision of any legal
requirement binding upon the Holder.
2
<PAGE>
4. Conditions to the Purchase.
--------------------------
(a) The respective obligations of each party to effect the Purchase
are subject to the satisfaction or waiver of the following conditions:
(i) the receipt of regulatory approvals which approvals shall
not have imposed any condition or requirement which in the judgment of Compass
would adversely impact the economic or business benefits of the transactions
contemplated by this Agreement and the Merger Agreement or otherwise would in
the judgment of Compass be so burdensome as to render inadvisable the
consummation of the Purchase and the Merger, and the expiration of any
applicable waiting period with respect thereto;
(ii) the Purchase will not violate any injunction, order or
decree of any court or governmental body having competent jurisdiction; and
(iii) the consummation of the Merger occurring simultaneously
with the Purchase.
(b) The obligations of Compass to affect the Purchase are subject to
the satisfaction or waiver of the following conditions:
(i) all representations and warranties of the Holder shall be
true and correct in all respects as of the date hereof and at as of the
Effective Time, with the same force and effect as though made on and as of the
Effective Time;
(ii) the Holder shall have performed in all respects all
obligations and agreements and in all respects complied with all covenants and
conditions contained in this Agreement to be performed or complied with by him
prior to the Effective Time;
(iii) the Holder shall, pursuant to an instrument of assignment,
have transferred all of his rights to exercise the option granted by the Option
Agreement for shares of Company Common Stock or Bank Common Stock of any class
he may have under the Option Agreement, free and clear of all Encumbrances. No
claim shall have been filed, made or threatened by any person asserting that he
or it is entitled to any part of the Purchase Price; and
3
<PAGE>
(iv) the Holder shall have delivered to Compass a certificate dated
the Effective Time certifying in such reasonable detail as Compass may
reasonably request, to the effect described in Sections 4(b)(i) and (ii).
(c) The obligations of the Holder to effect the Purchase are subject
to the satisfaction or waiver of the condition that Compass shall have delivered
the Purchase Price to the Holder at the Effective Time.
5. Indemnification. The Holder unconditionally, absolutely and
---------------
irrevocably agrees to and shall defend, indemnify and hold harmless the Company,
Greater Brazos Valley Delaware Bancorp, Inc., Commercial National Bank, Compass,
and each of the Company's and Compass' subsidiaries, shareholders, affiliates,
officers, directors, employees, counsel, agents, contractors, successors,
assigns, heirs and legal and personal representatives (the Company, Compass and
such persons are collectively referred to as "Compass' Indemnified Persons")
from and against, and shall reimburse Compass' Indemnified Persons for, each and
every Loss, including without limitation those Losses arising out of the strict
liability or the negligence of any party, including Compass' Indemnified
Persons, whether such negligence be sole, joint or concurrent, active or
passive, paid, imposed on or incurred by Compass' Indemnified Persons, directly
or indirectly, relating to, resulting from or arising out of, any inaccuracy in
any representation or warranty of the Holder under this Agreement, or any
agreement, certificate or other document delivered or to be delivered by the
Holder pursuant to this Agreement, whether or not Compass' Indemnified Persons
relied thereon or had knowledge thereof, or any breach or nonfulfillment of any
covenant, agreement or other obligation of the Holders under this Agreement or
any agreement or document delivered pursuant hereto. The Holders shall
indemnify Compass' Indemnified Persons regardless of whether the act, omission,
facts, circumstances or conditions giving rise to such indemnification were
caused in whole or in part by the simple or gross negligence of Compass, the
Company or any other Compass Indemnified Person.
6. Definitions. For purposes of this Agreement, the terms set forth
-----------
below have the following definitions:
(a) "Option Shares" means the ______ shares of Company Common Stock or
Bank Common Stock that, at the Effective Time, but for this Agreement, could be
acquired upon the exercise of the Option Agreement, less those shares, if any,
exercised prior to the Effective Time.
(b) "Aggregate Dollar Value" is a number equal to (i) the aggregate
number of shares of Compass Common Stock issuable to the shareholders of the
Company pursuant to Section 1.6 of the Merger Agreement (inclusive of the shares
of Compass Common Stock issuable to the Holder and the Other Holders) times (ii)
the Share Determination Market Value.
4
<PAGE>
(c) "Selling Price Per Share" is a number equal to the sum of (i) the
Exercise Price Per Share times the Option Shares plus the Other Option Shares,
plus (ii) the Aggregate Dollar Value, and divide that sum by the Fully Diluted
Shares Outstanding.
(d) "Fully Diluted Shares Outstanding" means a number equal to the
number of shares of Company Common Stock issued and outstanding plus the number
and class of shares of Company Common Stock that may be acquired upon exercise
or conversion of any warrant, option, convertible debenture, phantom stock
share, or other security entitling the holder thereof to acquire shares of
Company Common Stock or compensation in respect of shares of Company Common
Stock which is in effect or outstanding prior to the Effective Time, including
the Option Shares and the Other Option Shares.
(e) "Exercise Price Per Share" means $15.00.
(f) "Other Option Shares" means the _______ shares of Company Common
Stock or Bank Common Stock that, at the Effective Time, but for the agreements
comparable to this Agreement could be acquired by ____________________,
______________________, and _________________, (collectively the "Other
Holders") under those certain Incentive Stock Option Agreements dated
__________, 199____ between such individuals and the Bank ("Other Option
Agreements"), less those shares, if any, exercised prior to the Effective Time.
(g) "Encumbrance" means any lien, pledge, hypothecation, charge,
mortgage, deed of trust, security interest, encumbrance, equity, trust,
equitable interest, claim, easement, right-of-way, servitude, right of
possession, lease tenancy, license, encroachment, burden, intrusion, covenant,
infringement, interference, proxy, option, right of first refusal, community
property interest, legend, defect, impediment, exception, condition,
restriction, reservation, limitation, impairment, imperfection of title,
restriction on or condition to the voting of any security, restriction on the
transfer of any security or other asset, restriction on the receipt of any
income derived from any security or other asset, and restriction on the
possession, use, exercise or transfer of any other attribute of ownership,
whether based on or arising from common law, constitutional provision, statute
or contract.
(h) "Liability" means any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unfixed, unliquidated, unsecured,
unmatured, unaccrued, unasserted, contingent, conditional, inchoate, implied,
vicarious, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles.
(i) "Loss" means any loss, damage, injury, harm, detriment, decline in
value, lost opportunity, Liability, exposure, claim, demand, Proceeding,
settlement, judgment, award, punitive
5
<PAGE>
damage award, fine, penalty, tax, fee, charge, cost or expense (including,
without limitation, costs of attempting to avoid or in opposing the imposition
thereof, interest, penalties, costs of preparation and investigation, and the
fees, disbursements and expenses of attorneys, accountants and other
professional advisors).
(j) "Proceeding" means any action, suit, litigation, arbitration,
lawsuit, claim, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination, investigation,
challenge, controversy or dispute commenced, brought, conducted or heard by or
before, or otherwise involving, any governmental authority or any arbitrator.
7. Termination. In the event that the Merger Agreement is terminated,
-----------
this Agreement shall automatically terminate and shall no longer have any force
or effect.
8. Miscellaneous. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Texas. This Agreement may not be
amended or modified except in a writing executed by all of the parties hereto.
This Agreement may be executed in multiple counterparts, each of which when
delivered shall constitute one and the same document.
[SIGNATURE PAGE FOLLOWS]
6
<PAGE>
IN WITNESS WHEREOF, the undersigned set their hands effective as of the day
first written above.
COMPASS BANCSHARES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
"HOLDER"
_____________________________________
Printed Name:________________________
Greater Brazos Valley Bancorp, Inc. hereby joins in this Agreement for the
purpose of consenting to the proposed assignment of the Option Agreement to
Compass.
GREATER BRAZOS VALLEY BANCORP, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
Agreement Regarding Convertible Securities
H1995A\72711-4
7
<PAGE>
EXHIBIT E-2
AGREEMENT REGARDING CONVERTIBLE SECURITIES
------------------------------------------
(Phantom Shares)
--------------
This Agreement Regarding Convertible Securities (this "Agreement") is
entered into as of this 2nd day of October, 1996 between Compass Bancshares,
Inc. ("Compass") and _______ ("Holder").
WHEREAS, Compass and Greater Brazos Valley Bancorp, Inc. (the "Company")
entered into an Agreement and Plan of Merger of even date herewith ("Merger
Agreement") pursuant to which the Company will be merged with and into an
existing or to-be-formed subsidiary of Compass;
WHEREAS, the Holder has been issued phantom shares ("Phantom Shares") of
common stock par value $1.00 per share of the Company ("Company Common Stock")
or phantom shares of common stock of Commerce National Bank, par value $__ per
share ("Bank Common Stock") pursuant to the Commerce National Bank, College
Station Performance Share Plan a/k/a the Commerce National Bank Executive
Incentive Program ("Program");
WHEREAS, Compass has required as a condition to entering into the Merger
Agreement that the Holder sell, assign, and transfer to Compass the Phantom
Shares and any rights he may have under the Program;
WHEREAS, Compass desires to purchase and the Holder desires to sell, assign
and transfer to Compass the Phantom Shares and any rights he may have under the
Program;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Purchase. Subject to the terms and conditions of this Agreement, at
--------
the Effective Time (as defined in the Merger Agreement) Compass shall purchase
and the Holder shall sell, assign, and transfer to Compass the Phantom Shares
and any rights he may have under the Program (the "Purchase").
2. Purchase Price. At the Effective Time, Compass shall pay to the
--------------
Holder a number of shares of Compass Common Stock determined by subtracting the
Exercise Price Per Share from the Selling Price Per Share and dividing that
difference by the Share Determination Market Value per share of Compass Common
Stock and multiplied by the number of Phantom Shares ("Purchase Price"). In
lieu of issuing any fractional share, the Holder shall be paid an amount in
<PAGE>
cash equal to the fractional share times the Share Determination Market Value.
3. Representation and Warranties: The Holder hereby makes the following
-----------------------------
representations and warranties to Compass:
(a) Ownership. The Holder is and will be at the Effective Time the
---------
record and beneficial owner and holder of, and have, and at the Effective Time
will have, good, valid and indefeasible record and beneficial title to, the
Phantom Shares and the rights and benefits under the Program, free and clear of
any adverse claim of any other person, including without limitation any
Encumbrance.
(b) Authority. The Holder has the absolute and unrestricted right,
---------
power, authority and capacity to execute and deliver this Agreement, to perform
his obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, the performance of his
obligations hereunder and the consummation of the transactions contemplated
hereby have been duly and validly authorized and approved by the Holder, and no
other proceedings on the part of the Holder are necessary to authorize the
execution and delivery of this Agreement, the performance of his obligations
hereunder, or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Holder, and
this Agreement constitutes the legal, valid and binding agreement of the Holder
enforceable against the Holder in accordance with its terms.
(c) Consents and Approvals; No Violation. No filing or registration
------------------------------------
with, no notices to and no governmental authorization, consent or approval of
any governmental authority, creditor or other person in a contractual
relationship with the Holder, is necessary in connection with the Holder's
execution and delivery of this Agreement, the performance of his obligations
hereunder, or the consummation of the transactions contemplated hereby. Neither
the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the compliance by the Holder with any of
the provisions hereof will, as of the Effective Time, (i) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
contract, agreement, commitment, bond, mortgage, indenture, license, lease,
pledge agreement or other instrument or obligation to which the Holder is a
party or by which the Holder or any of his respective properties or assets may
be bound, or (ii) violate or conflict with any provision of any legal
requirement binding upon the Holder.
2
<PAGE>
4. Conditions to the Purchase.
--------------------------
(a) The respective obligations of each party to effect the Purchase
are subject to the satisfaction or waiver of the following conditions:
(i) the receipt of regulatory approvals which approvals shall
not have imposed any condition or requirement which in the judgment of Compass
would adversely impact the economic or business benefits of the transactions
contemplated by this Agreement and the Merger Agreement or otherwise would in
the judgment of Compass be so burdensome as to render inadvisable the
consummation of the Purchase and the Merger, and the expiration of any
applicable waiting period with respect thereto;
(ii) the Purchase will not violate any injunction, order or
decree of any court or governmental body having competent jurisdiction; and
(iii) the consummation of the Merger occurring simultaneously
with the Purchase.
(b) The obligations of Compass to affect the Purchase are subject to
the satisfaction or waiver of the following conditions:
(i) all representations and warranties of the Holder shall be
true and correct in all respects as of the date hereof and at as of the
Effective Time, with the same force and effect as though made on and as of the
Effective Time;
(ii) the Holder shall have performed in all respects all
obligations and agreements and in all respects complied with all covenants and
conditions contained in this Agreement to be performed or complied with by him
prior to the Effective Time;
(iii) the Holder shall, pursuant to an instrument of assignment,
have transferred all of his rights to the Phantom Shares and any other rights
under the Program granted to Holder, free and clear of all Encumbrances. No
claim shall have been filed, made or threatened by any person asserting that he
or it is entitled to any part of the Purchase Price; and
(iv) the Holder shall have delivered to Compass a certificate
dated the Effective Time certifying in such reasonable
3
<PAGE>
detail as Compass may reasonably request, to the effect described in Sections
4(b)(i) and (ii).
(c) The obligations of the Holder to effect the Purchase are subject
to the satisfaction or waiver of the condition that Compass shall have delivered
the Purchase Price to the Holder at the Effective Time.
5. Indemnification. The Holder unconditionally, absolutely and
---------------
irrevocably agrees to and shall defend, indemnify and hold harmless the Company,
Greater Brazos Valley Delaware Bancorp, Inc., Commercial National Bank, Compass,
and each of the Company's and Compass' subsidiaries, shareholders, affiliates,
officers, directors, employees, counsel, agents, contractors, successors,
assigns, heirs and legal and personal representatives (the Company, Compass and
such persons are collectively referred to as "Compass' Indemnified Persons")
from and against, and shall reimburse Compass' Indemnified Persons for, each and
every Loss, including without limitation those Losses arising out of the strict
liability or the negligence of any party, including Compass' Indemnified
Persons, whether such negligence be sole, joint or concurrent, active or
passive, paid, imposed on or incurred by Compass' Indemnified Persons, directly
or indirectly, relating to, resulting from or arising out of, any inaccuracy in
any representation or warranty of the Holder under this Agreement, or any
agreement, certificate or other document delivered or to be delivered by the
Holder pursuant to this Agreement, whether or not Compass' Indemnified Persons
relied thereon or had knowledge thereof, or any breach or nonfulfillment of any
covenant, agreement or other obligation of the Holders under this Agreement or
any agreement or document delivered pursuant hereto. The Holders shall
indemnify Compass' Indemnified Persons regardless of whether the act, omission,
facts, circumstances or conditions giving rise to such indemnification were
caused in whole or in part by the simple or gross negligence of Compass, the
Company or any other Compass Indemnified Person.
6. Definitions. For purposes of this Agreement, the terms set forth
-----------
below have the following definitions:
(a) "Phantom Shares" means the ______ shares of Company Common Stock
or Bank Common Stock issued to the Holder pursuant to the Program.
(b) "Aggregate Dollar Value" is a number equal to (i) the aggregate
number of shares of Compass Common Stock issuable to the shareholders of the
Company pursuant to Section 1.6 of the Merger Agreement (inclusive of the shares
of Compass Common Stock issuable to the Holder and the Other Holders) times (ii)
the Share Determination Market Value.
(c) "Selling Price Per Share" is a number equal to the sum of (i) the
Exercise Price Per Share times the Phantom Shares plus the Other Phantom Shares,
plus (ii) the Aggregate Dollar Value, and divide that sum by the Fully Diluted
Shares Outstanding.
4
<PAGE>
(d) "Fully Diluted Shares Outstanding" means a number equal to the
number of shares of Company Common Stock issued and outstanding plus the number
and class of shares of Company Common Stock that may be acquired upon exercise
or conversion of any warrant, option, convertible debenture, phantom stock
share, or other security entitling the holder thereof to acquire shares of
Company Common Stock or compensation in respect of shares of Company Common
Stock which is in effect or outstanding prior to the Effective Time, including
the Phantom Shares and the Other Phantom Shares.
(e) "Exercise Price Per Share" means $0.00.
(f) "Other Phantom Shares" means the _______ shares of Company Common
Stock or Bank Common Stock issued to ______________, __________________, and
_____________, (collectively the "Other Holders") pursuant to the Program.
(g) "Encumbrance" means any lien, pledge, hypothecation, charge,
mortgage, deed of trust, security interest, encumbrance, equity, trust,
equitable interest, claim, easement, right-of-way, servitude, right of
possession, lease tenancy, license, encroachment, burden, intrusion, covenant,
infringement, interference, proxy, option, right of first refusal, community
property interest, legend, defect, impediment, exception, condition,
restriction, reservation, limitation, impairment, imperfection of title,
restriction on or condition to the voting of any security, restriction on the
transfer of any security or other asset, restriction on the receipt of any
income derived from any security or other asset, and restriction on the
possession, use, exercise or transfer of any other attribute of ownership,
whether based on or arising from common law, constitutional provision, statute
or contract.
(h) "Liability" means any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unfixed, unliquidated, unsecured,
unmatured, unaccrued, unasserted, contingent, conditional, inchoate, implied,
vicarious, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles.
(i) "Loss" means any loss, damage, injury, harm, detriment, decline in
value, lost opportunity, Liability, exposure, claim, demand, Proceeding,
settlement, judgment, award, punitive damage award, fine, penalty, tax, fee,
charge, cost or expense (including, without limitation, costs of attempting to
avoid or in opposing the imposition thereof, interest, penalties, costs of
preparation and investigation, and the fees, disbursements and expenses of
attorneys, accountants and other professional advisors).
(j) "Proceeding" means any action, suit, litigation, arbitration,
lawsuit, claim, proceeding (including any civil,
5
<PAGE>
criminal, administrative, investigative or appellate proceeding and any informal
proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination, investigation, challenge, controversy or dispute commenced,
brought, conducted or heard by or before, or otherwise involving, any
governmental authority or any arbitrator.
7. Termination. In the event that the Merger Agreement is terminated,
-----------
this Agreement shall automatically terminate and shall no longer have any force
or effect.
8. Miscellaneous. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Texas. This Agreement may not be
amended or modified except in a writing executed by all of the parties hereto.
This Agreement may be executed in multiple counterparts, each of which when
delivered shall constitute one and the same document.
[SIGNATURE PAGE FOLLOWS]
6
<PAGE>
IN WITNESS WHEREOF, the undersigned set their hands effective as of the day
first written above.
COMPASS BANCSHARES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
"HOLDER"
_____________________________________
Printed Name:________________________
Greater Brazos Valley Bancorp, Inc. hereby joins in this Agreement for the
purpose of consenting to the proposed assignment of the Phantom Shares to
Compass.
GREATER BRAZOS VALLEY BANCORP, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
Agreement Regarding Convertible Securities
H1995A\79189-1
7
<PAGE>
EXHIBIT F
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. GBVD is a
Delaware 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 Delaware. 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
1,000,000 shares of Company Common Stock (as defined in the Agreement) of which
_________ shares are issued and outstanding (none of which are held in the
treasury) and 1,000,000 shares of preferred stock (of which no shares are issued
or outstanding and no shares are held in treasury); the Company is the record
holder of all of the issued and outstanding capital stock of GBVD; GBVD 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 GBVD and the Bank
is validly fully paid and, except as provided in the National Bank Act,
nonassessable; and to the best of our knowledge, none of such stock was issued
in violation of the preemptive rights of any person;
<PAGE>
(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, GBVD, 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, GBVD, or the
Bank, (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 or decree, or any other restriction of any kind or character known to
us to which the Company, GBVD, or the Bank is a party or by which the Company,
GBVD 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, GBVD, 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, GBVD, 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, GBVD, 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
-2-
<PAGE>
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\71483-2
-3-
<PAGE>
EXHIBIT G
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
<PAGE>
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;
(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\71513.1
-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 October
2, 1996 by and between Compass Bancshares, Inc. and Greater Brazos Valley
Bancorp, Inc. (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 ___________, 199_
("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.
<PAGE>
IN WITNESS WHEREOF, Compass Texas has executed this Certificate this
_____ day of ____________, 199_.
________________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
Compass Texas Representations Certificates
H1995A\71509-2
2
<PAGE>
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
-----------------------------------------------
This First Amendment to Agreement and Plan of Merger (this "Amendment")
dated as of January 17, 1997 is entered into by and among Compass Bancshares,
Inc. ("Compass"), Compass Banks of Texas, Inc. ("Compass Banks") and Greater
Brazos Valley Bancorp, Inc. (the "Company").
WHEREAS, Compass and the Company entered into an Agreement and Plan of
Merger dated as of October 2, 1996 (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, Compass Banks 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 Compass Banks 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, Compass Banks 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.
3. Section 1.6(a) is hereby amended to read in full as follows:
(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
<PAGE>
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. At
the Closing, the Company shall calculate and certify to Compass the
Common Shares Outstanding.
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]
2
<PAGE>
IN WITNESS WHEREOF the parties have executed this Amendment as of the date
first written above.
ATTEST: COMPASS BANCSHARES, INC.
/s/ Daniel B. Graves /s/ Garrett R. Hegel
By:__________________________ By: ______________________________________
Its: Assistant Secretary Its: Chief Financial Officer
ATTEST: COMPASS BANKS OF TEXAS, INC.
/s/ Daniel B. Graves /s/ Garrett R. Hegel
By:__________________________ By: ______________________________________
Its: Assistant Secretary Its: Treasurer
ATTEST: GREATER BRAZOS VALLEY BANCORP, INC.
/s/ Henry L. Presnal D.V.M.
By:__________________________ By: ______________________________________
Its: Its: Chairman
H1995A/94565.2
3
<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 requiring the special
authorization of the shareholders as provided by this Act;
(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
shares of which are listed on a national securities exchange, or are held of
record by not less than 2,000 holders, on the record date fixed to determine the
shareholders entitled to vote on the plan of merger or the plan of exchange, and
(2) the shareholder is not required by the terms of the plan of merger or the
plan of exchange to accept for his shares any consideration other than (a)
shares of a corporation that, immediately after the effective time of the merger
or exchange, will be part of a class or series of shares of which are (i)
listed, or authorized for listing upon official notice of issuance, on a
national securities exchange, or (ii) held of record by not less than 2,000
holders, and (b) cash in lieu of fractional shares otherwise entitled to be
received.
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
Appendix II
-1-
<PAGE>
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
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
Appendix II
-2-
<PAGE>
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.
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
Appendix II
-3-
<PAGE>
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.
Appendix II
-4-
<PAGE>
[LETTERHEAD OF THE BANK ADVISORY GROUP, INC.]
______________, 1997
Board of Directors
Greater Brazos Valley Bancorp, Inc.
College Station, Texas
Gentlemen:
You have requested that The Bank Advisory Group, Inc. act as an independent
financial analyst and advisor to the common shareholders of Greater Brazos
Valley Bancorp, Inc. ("Greater Brazos") and its wholly-owned bank subsidiary,
Commerce National Bank ("CNB"). Specifically, we have been asked to render
advice and analysis in connection with the proposed merger (the "Merger") of
Greater Brazos with and into Compass Banks of Texas, Inc., a wholly-owned
subsidiary of Compass Bancshares, Birmingham, Alabama ("Compass"). In our role
as an independent financial analyst, you have requested our opinion with regard
to the fairness -- from the perspective of the common shareholders of Greater
Brazos -- of the financial terms of the proposed merger pursuant to the
provisions of the Agreement and Plan of Merger (the "Agreement") dated October
2, 1996.
In conjunction with our review of the Agreement, our understanding is that
Compass proposes to consummate the Merger pursuant to the following financial
terms:
. Holders of Greater Brazos common stock, other than the shares any
holders who have duly exercised and perfected their dissenters'
rights, shall receive aggregate merger consideration of 216,000 shares
of Compass Common Stock less the number of shares of Compass Common
Stock ("Option Shares") issued to the holders of incentive stock
options and phantom shares of Greater Brazos Common Stock
(collectively "Convertible Securities"). Therefore, holders of Greater
Brazos common stock at the effective time of the Merger (the
"Effective Time") shall receive for each share of Greater Brazos
common stock a number of shares of Compass Common Stock equal to (i)
the quotient of 216,000 shares of Compass Common Stock less such
number of shares of Compass Common Stock issued to the holders of
Convertible Securities, (ii) divided by the number of shares of
Greater Brazos common stock outstanding immediately prior to the
Effective Time.
. In the event the average closing sale price of Compass Common Stock as
reported by the NASDAQ National Market System for the five (5) days of
trading preceding the fifth business day prior to the Effective Time
(the "Share Determination Market Value") is less than $30 per share,
Compass may either (i) terminate the Agreement, or (ii) agree to issue
an aggregate number of shares of Compass Common Stock (including the
Option Shares) equal to the quotient of $6,480,000 divided by the
Share Determination Market Value.
. Holders of Convertible Securities will receive a number of shares of
Compass Common Stock determined by subtracting the exercise price per
share of the stock from the selling price per share of the stock and
dividing that difference by the Share Determination Market Value and
multiplying that resulting number by the number of the holders' Option
Shares. The "selling price per share" is a number equal to the sum of
(i) the exercise price per share times all the Option Shares, plus
(ii) the aggregate dollar value, and dividing that sum by the number
of fully-diluted shares outstanding. The "aggregate dollar value" is a
number equal to (i) 216,0000 shares of Compass Common Stock times the
Share Determination Market Value. The "number of fully-diluted shares
outstanding" represents the sum of Greater Brazos common shares
outstanding as of the Effective time, plus the Option Shares.
<PAGE>
BOARD OF DIRECTORS
GREATER BRAZOS VALLEY BANCORP, INC.
_____________,1997
PAGE 2
. No fractional shares of Compass Common Stock will be issued and, in
lieu thereof, holders of shares of Greater Brazos common stock who
would otherwise be entitled to a fractional share interest will be
paid an amount in cash. Such cash payment shall be based on the Share
Determination Market Value.
The Bank Advisory Group, Inc., as part of its line of professional services,
specializes in rendering valuation opinions of banks and bank holding companies
in connection with mergers and acquisitions nationwide. Prior to our retention
for this assignment, The Bank Advisory Group provided financial advisory
services to Greater Brazos and CNB. Specifically, on February 29, 1996, The Bank
Advisory Group issued a report and valuation opinion letter setting forth the
conclusions of The Bank Advisory Group regarding the estimated cash fair market
value range of 100% of the outstanding common stock of Greater Brazos as of
December 31, 1995 (the "Valuation Conclusion"). The revenues derived from the
delivery of such services, including revenues derived from delivery of the
Valuation Conclusion, were insignificant when compared to The Bank Advisory
Group's total gross revenues. For reference purposes, the aggregate dollar
value of the proposed Merger equals or exceeds the Valuation Conclusion.
In April 1996, and after delivery of the Valuation Conclusion, Greater Brazos
-----
engaged The Bank Advisory Group to act as a consultant to the Board of Directors
of Greater Brazos in soliciting parties potentially interested in the
acquisition of Greater Brazos. A nominal retainer fee was paid to The Bank
Advisory Group by Greater Brazos for the preparation of a Confidential
Descriptive Memorandum submitted to parties potentially interested in the
acquisition of Greater Brazos. A Confidential Descriptive Memorandum was
provided to Compass. As a result of our efforts on behalf of Greater Brazos in
connection with the proposed Merger and assuming the Merger with Compass reaches
the point of consummation, Greater Brazos has agreed to pay The Bank Advisory
Group a "brokerage fee" equal to one and eighty-hundredths percent (1.80%) of
the aggregate dollar value of the proposed Merger. Based on the closing price
of Compass Common Stock as of December 13, 1996, the aggregate dollar value of
the proposed Merger equals $8,275,500 (216,000 shares times $38.3125 per share);
therefore, the brokerage fee would equal $148,959 ($8,275,500 times 1.80%).
The Bank Advisory Group has not provided any services to Compass Bancshares
In connection with this opinion and with respect to GREATER BRAZOS we have
reviewed, among other things:
1. Audited consolidated financial statements for Greater Brazos for the
years ended December 31, 1995 and 1994;
2. Parent company only financial statements for Greater Brazos, on form
FR Y-9SP, for the year ended December 31, 1995 and for the six month
period ended June 30, 1996, as filed with the Federal Reserve System;
3. Parent company only financial statements for Greater Brazos Valley
Delaware Bancorp, Inc., on form FR Y-9SP, for the year ended December
31, 1995 and for the six month period ended June 30, 1996, as filed
with the Federal Reserve System;
4. Reports of Condition and Income for CNB for the years ended December
31, 1995, 1994, and 1993, and for the nine month period ended
September 30, 1996, as filed with Federal bank regulatory agencies;
5. The economy in general and, in particular, the local economies in
which CNB operates;
6. Certain internal financial analyses and forecasts for CNB prepared by
the management of CNB, including projections of future performance;
<PAGE>
BOARD OF DIRECTORS
GREATER BRAZOS VALLEY BANCORP, INC.
_____________,1997
PAGE 3
7. Certain other summary materials and analyses with respect to CNB's
loan portfolio, securities portfolio, deposit base, fixed assets, and
operations including, but not limited to: (i) schedules of loans and
other assets identified by management as deserving special attention
or monitoring given the characteristics of the loan/asset and the
local economy, (ii) analyses concerning the adequacy of the loan loss
reserve, (iii) schedules of "other real estate owned," including
current carrying values and recent appraisals, and (iv) schedules of
securities, detailing book values, market values, and lengths to
maturity; and
8. Such other information -- including financial studies, analyses,
investigations, and economic and market criteria -- that we deem
relevant to this assignment.
In connection with this opinion and with respect to COMPASS, we have reviewed,
among other things:
1. Audited consolidated financial statements for Compass, in Annual
Report Form and Form 10-K, for the years ended December 31, 1995,
1994, and 1993;
2. Quarterly financial statements for Compass, in both "press release"
and quarterly report format, for the 1995 calendar quarters, and the
first three calendar quarters of 1996;
3. Consolidated financial statements for Compass, on form FR Y-9C, for
the years ended 1995, 1994, and 1993, together with consolidated
statements for the nine month period ended September 30, 1996;
4. Equity research reports regarding Compass prepared by various analysts
who cover the financial institutions sector;
5. The condition of the commercial banking industry, as indicated in
financial reports filed with various Federal bank regulatory
authorities by all Federally-insured commercial banks;
6. The economy in general and, in particular, the major trade areas in
which Compass and its subsidiaries operate; and
7. Such other information -- including financial studies, analyses,
investigations, and economic and market criteria -- that we deem
relevant to this assignment.
In connection with this opinion and with respect to the proposed Merger, we have
reviewed, among other things:
1. The Agreement, and any amendments thereto, that sets forth, among
other items, the terms, conditions to closing, pending litigation
against both Greater Brazos and Compass, and representations and
warranties of Greater Brazos and Compass with respect to the proposed
Merger;
2. The Proxy Statement-Prospectus, to which this opinion is appended,
that is being furnished to the shareholders of Greater Brazos in
connection with the proposed Merger;
3. The financial terms and price levels for commercial banks with assets
between $25 million and $125 million recently acquired in the United
States -- and specifically in Texas -- together with the financial
performance and condition of such banks;
4. The financial terms and stated price levels of other Texas banking
organizations with assets below $250 million acquired by Compass with
Compass Common Stock, the announcement of which occurred
<PAGE>
BOARD OF DIRECTORS
GREATER BRAZOS VALLEY BANCORP, INC.
_____________,1997
PAGE 4
subsequent to January 1, 1995 and prior to the date of this Opinion,
and for which the transaction terms, including price, were disclosed;
5. The price-to-equity and price-to-earnings multiples of banking
organizations based in the United States that have publicly-traded
common stock, together with the financial performance and condition of
such banking organizations, compared with the price-to-equity and
price-to-earnings multiples for Compass common stock; and
6. Such other information -- including financial studies, analyses,
investigations, and economic and market criteria -- that we deem
relevant to this assignment.
Based on our experience, we believe our review of, among other things, the
aforementioned items provides a reasonable basis for our opinion, recognizing
that we are expressing an informed professional opinion--not a certification of
value.
We have relied upon the information provided by the management of Greater Brazos
and Compass, or otherwise reviewed by us, as being complete and accurate in all
material respects. Furthermore, we have not verified through independent
inspection or examination the specific assets or liabilities of Greater Brazos
and Compass or their subsidiary banks. We have also assumed that there has been
no material change in the assets, financial condition, results of operations, or
business prospects of Greater Brazos and Compass since the date of the last
financial statements made available to us. We have met with the management of
Greater Brazos for the purpose of discussing the relevant information that has
been provided to us.
Based on all factors that we deem relevant and assuming the accuracy and
completeness of the information and data provided to us, we conclude that the
terms of the proposed Merger, as outlined herein, are fair, from a financial
standpoint, to the common shareholders of Greater Brazos Valley Bancorp, Inc.
This opinion is available for disclosure to the shareholders of Greater Brazos.
Accordingly, we hereby consent to the inclusion of our opinion as an appendix to
the Proxy Statement/Prospectus relating to the proposed Merger, and to the
reference of our firm in the Proxy Statement/Prospectus.
Respectfully submitted,
THE BANK ADVISORY GROUP, INC.
By___________________________________________
<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
<PAGE>
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-6 hereof.
Item 22: Undertakings.
- ------- ------------
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
<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 January 17, 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.
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Director, Chairman and Chief January 17, 1997
- -------------------------------------- Executive Officer
D. Paul Jones, Jr.
* Chief Financial Officer January 17, 1997
- --------------------------------------
Garrett R. Hegel
* Chief Accounting Officer January 17, 1997
- -------------------------------------- and Controller
Michael A. Bean
* Director January 17, 1997
- --------------------------------------
Charles W. Daniel
* Director January 17, 1997
- --------------------------------------
W. Eugene Davenport
* Director January 17, 1997
- --------------------------------------
Marshall Durbin, Jr.
* Director January 17, 1997
- --------------------------------------
Tranum Fitzpatrick
* Director January 17, 1997
- --------------------------------------
George W. Hansberry, M.D.
* Director January 17, 1997
- --------------------------------------
John S. Stein
* Director January 17, 1997
- --------------------------------------
Robert J. Wright
*By:/s/ Daniel B. Graves January 17, 1997
----------------------------------
Daniel B. Graves, Attorney-in-fact
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
2 Agreement and Plan of Merger by and between Compass Bancshares, Inc.
and Greater Brazos Valley Bancorp, Inc., dated as of October 2, 1996, 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, 1994, to the Restated
Certificate of Incorporation of the Registrant (filed as Exhibit 3.5 to
Registration Statement on Form S-4 Registration No. 33-55899, and
incorporated herein by reference) (File No. 0-6032)
*3(f) Bylaws of the Registrant (Amended and Restated as of March 15, 1982)
(Filed with the December 31, 1982 10-K of the Registrant and incorporated
herein by reference) (File No. 0-6032)
5 Opinion and consent of Jerry W. Powell, Esquire, as to the legality of the
securities being registered
8 Opinion and consent of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.,
regarding tax matters
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
*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)
*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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
*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, 1995 (File No. 0-6032)
*13(b) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 (File No. 0-6032)
*13(c) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996 (File No. 0-6032)
*13(d) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 (File No. 0-6032)
21 List of Subsidiaries of Compass Bancshares, Inc.
23(a) Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants--Compass Bancshares, Inc.
23(b) Consent of Fisk & Robinson, P.C., Independent Certified Public
Accountants-Greater Brazos Valley Bancorp, Inc.
23(c) 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 Greater Brazos
99(b) Form of Proxy for Special Meeting of Shareholders of Greater Brazos
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
99(c) Chairman's letter to Greater Brazos Shareholders
</TABLE>
___________________________
*Incorporated by reference
<PAGE>
EXHIBIT 5
January 17, 1997
Board of Directors
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Re: Compass Bancshares, Inc. -- Registration of 216,000 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 216,000 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
January 17, 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 Greater Brazos Valley Bancorp, Inc., a Texas corporation
("Greater Brazos"), 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 Greater
Brazos with and into Compass Banks of Texas, Inc. ("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 Greater Brazos 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.
<TABLE>
<CAPTION>
Name of Subsidiary Place of Incorporation
- ------------------ ----------------------
<S> <C>
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 Bank Florida
River Oaks Trust Company Texas
Compass Texas Management, Inc. Texas
River 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
</TABLE>
<PAGE>
EXHIBIT 23(a)
ACCOUNTANT'S 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.
Our report refers to changes in the method of accounting for income taxes and in
the method of accounting for certain investments in debt and equity securities.
KPMG PEAT MARWICK LLP
Birmingham, Alabama
January 13, 1997
<PAGE>
EXHIBIT 23(b)
ACCOUNTANT'S 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.
Our report refers to changes in the method of accounting for income taxes and in
the method of accounting for certain investments in debt and equity securities.
FISK & ROBINSON, P.C.
Dallas, Texas
January 16, 1997
<PAGE>
EXHIBIT 24(a)
POWER OF ATTORNEY
WHEREAS, Compass Bancshares, Inc. (the "Company") has agreed to file
registration statements and amendments thereto under the Securities Act of 1933,
as amended, with respect to the issuance and sale of shares of common stock of
the Company in connection with the acquisition by the Company of Greater Brazos
Valley Bancorp, Inc.;
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that the Company and the
undersigned directors and officers of said Company, individually as a director
and/or as an officer of the Company, hereby make, constitute and appoint each of
D. Paul Jones, Jr., Garrett R. Hegel, Jerry W. Powell, and Daniel B. Graves
their true and lawful attorney-in-fact for each of them and in each of their
names, places and steads to sign and cause to be filed with the Securities and
Exchange Commission said registration statement and any appropriate amendments
thereto, to be accompanied by prospectuses and any appropriately amended
prospectuses and any necessary exhibits.
The Company hereby authorizes said persons or any one of them to execute
said registration statement and amendments thereto on its behalf as attorney-in-
fact for it and its authorized officers, and to file the same as aforesaid.
The undersigned directors and officers of the Company hereby authorize said
persons or any of 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 16th day of December, 1996.
COMPASS BANCSHARES, INC.
By:/s/ D. Paul Jones, Jr.
-----------------------------------------------
D. Paul Jones, Jr.
Its Chairman and Chief Executive Officer
/s/ D. Paul Jones, Jr.
--------------------------------------------------
D. Paul Jones, Jr.
/s/ Garrett R. Hegel
--------------------------------------------------
Garrett R. Hegel
/s/ Michael A. Bean
--------------------------------------------------
Michael A. Bean
<PAGE>
/s/ Charles W. Daniel
--------------------------------------------------
Charles W. Daniel
/s/ W. Eugene Davenport
--------------------------------------------------
W. Eugene Davenport
/s/ Marshall Durbin, Jr.
--------------------------------------------------
Marshall Durbin, Jr.
/s/ Tranum Fitzpatrick
--------------------------------------------------
Tranum Fitzpatrick
/s/ George W. Hansberry, M.D.
--------------------------------------------------
George W. Hansberry, M.D.
/s/ John S. Stein
--------------------------------------------------
John S. Stein
/s/ Robert J. Wright
--------------------------------------------------
Robert J. Wright
<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 GREATER BRAZOS VALLEY BANCORP, INC.,
COLLEGE STATION, TEXAS
I, the undersigned Assistant Secretary of Compass Bancshares, Inc., a
Delaware corporation, and a 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 December 16, 1996:
RESOLVED, that the Board of Directors of Compass Bancshares, Inc., a
Delaware corporation (the "Corporation"), has determined that it is
desirable and in the best interests of the Corporation and its stockholders
to acquire (the "Greater Brazos Bancorp Acquisition") Greater Brazos Valley
Bancorp, Inc. (the "Company"), and its wholly owned subsidiary, Commerce
National Bank (the "Bank"), the principal offices of which are located in
College Station, 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; and further
RESOLVED, that the negotiation, execution, attestation, and delivery
of the Agreement and Plan of Merger by and between the Corporation and the
Company, dated as of October 2, 1996, by the officers of the Corporation
are hereby ratified and approved, and the proper officers of the
Corporation, in consultation with counsel, are further authorized,
empowered, and directed to negotiate, execute, attest, and deliver, in such
form as they, in their sole discretion, shall approve, such approval to be
conclusively evidenced by their execution, attestation and delivery
thereof, any amendments or supplements to such agreement, 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 (such agreement dated as of October 2, 1996, and any
amendments or supplements being referred to collectively herein as 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 Greater Brazos Valley 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 Greater Brazos Valley 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 Greater Brazos
Valley Acquisition or the Agreement, and the Board of Directors of the
Corporation hereby approves, authorizes, and ratifies the Greater Brazos
Valley Acquisition and the Agreement as the stockholder of its
<PAGE>
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 Greater Brazos Valley Acquisition or the
Agreement by the Corporation as a stockholder; and further
RESOLVED, that the Corporation's and the Corporation's subsidiaries'
officers are authorized, empowered, and directed to prepare, or cause to be
prepared, and to execute, attest, and file all applications, or requests
for waiver of application requirements, which they shall deem necessary or
appropriate with the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the Office of Thrift Supervision,
the Office of the Comptroller of the Currency, the Texas Department of
Banking, the Texas Savings and Loan Department and any other appropriate
bank and bank holding company regulatory authorities with respect to the
Greater Brazos Valley Acquisition; and further
RESOLVED, that 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 Greater Brazos Valley 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 Greater
Brazos Valley 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 of 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 be issued in connection with the Greater Brazos Valley
Acquisition, to execute, acknowledge, verify, deliver, file or cause to be
published any application, surety bonds, reports, irrevocable consents to
service of process, appointment of attorneys for service of process, and
any other documents or instruments that may be required under such laws,
and to take any and all further action that they may deem necessary or
advisable in order to maintain any such registration, qualification, or
exemption for so long as they deem necessary as required by law; and
further
<PAGE>
RESOLVED, that the Corporation hereby consents to service of process
in any state or jurisdiction in which such consent is required under the
blue sky laws as a precondition to the offer and sale of securities of the
Corporation to be issued in the Greater Brazos Valley Acquisition, and that
Jerry W. Powell, General Counsel and Secretary of the Corporation, is
hereby designated as agent for service of process in connection with the
Registration Statement and any consent to service of process that may be
required by the blue sky laws of any jurisdiction as a precondition to the
offer and sale of such securities; and further
RESOLVED, that the appropriate officers of the Corporation are hereby
authorized, empowered, and directed to do any and all other or further
acts, and to prepare, or cause to be prepared, and to execute, attest, and
deliver all other or further instruments, certificates, applications,
reports, and documents, including without limitation obtaining any
necessary or appropriate regulatory approvals, all on behalf of the
Corporation as they, in their discretion, may deem necessary or appropriate
to effectuate the purposes of these resolutions, and that all acts and
things undertaken and completed heretofore by the proper officers of the
Corporation in connection with the Greater Brazos Valley 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 17th day of January, 1997.
/s/ Daniel B. Graves
---------------------------------------------
Daniel B. Graves
Assistant Secretary
Compass Bancshares, Inc.
<PAGE>
EXHIBIT 99(a)
GREATER BRAZOS VALLEY BANCORP, INC.
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a Special Meeting of Shareholders ("Meeting")
of Greater Brazos Valley Bancorp, Inc., a Texas corporation ("Greater Brazos"),
will be held at the offices of Commerce National Bank, located at 2405 Texas
Avenue South, College Station, Texas, on ________, ________, 1997, at 5:30 p.m.,
Central time, for the following purposes:
(1) To approve, ratify, confirm and adopt an Agreement and Plan
of Merger dated as of October 2, 1996 ("Merger Agreement"),
as amended, providing for the merger ("Merger") of Greater
Brazos with and into Compass Banks of Texas, Inc., 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
Greater Brazos encourages each shareholder to review
carefully; and
(2) To consider and transact such other business as may properly come
before the Meeting or any adjournment thereof.
The Board of Directors of Greater Brazos 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 adjournment thereof. Only the holders of shares
of Greater Brazos' common stock of record at the close of business on ________,
1997, are entitled to notice of, and to vote at, the Meeting or 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 Greater Brazos Valley Bancorp, Inc.
___________________________________________
Chairman of the Board
College Station, Texas
________, 1997
<PAGE>
EXHIBIT 99(b)
PROXY GREATER BRAZOS VALLEY BANCORP, INC. PROXY
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
________, 1997
The undersigned hereby appoints James R. Bradley, Neeley C. Lewis and Bill
C. Presnal, 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 Greater Brazos
Valley Bancorp, Inc. to be held at the offices of Commerce National Bank,
located at 2405 Texas Avenue South, College Station, Texas, on ________,
________, 1997 at 5:30 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 October 2, 1996,
as amended, by and between Compass Bancshares, Inc. and
Greater Brazos Valley Bancorp, Inc.
[_] For [_] Against [_] Abstain
(2) In their discretion, upon any other business which may
properly come before said meeting.
This Proxy will be voted as you specify above. If no specification is
made, the Proxy will be voted FOR proposal (1) above. Receipt of the Notice of
Special Meeting and the Proxy Statement/Prospectus dated ________, 1997 is
hereby acknowledged.
THIS PROXY IS SOLICITED BY THE GREATER BRAZOS VALLEY BANCORP, INC. BOARD OF
DIRECTORS.
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Please sign your name exactly as it appears below. Joint owners must each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as it appears hereon. If held by a corporation, please sign in
full corporate name by the president or other authorized officer. If held by a
partnership, please sign in the partnership's name by an authorized partner or
officer.
Dated________________________________________, 1997
___________________________________________________
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 Greater Brazos Valley
Bancorp, Inc., a Texas corporation ("Greater Brazos"), will be held at the
offices of Commerce National Bank located at 2405 Texas Avenue South, College
Station, Texas, on _______, ________, 1997 at 5:30 p.m., Central time. At the
Meeting, Greater Brazos' shareholders will consider and vote to approve, ratify,
confirm and adopt an Agreement and Plan of Merger pursuant to which it is
proposed that Greater Brazos merge (the "Merger") with and into Compass Banks of
Texas, Inc. ("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
Greater Brazos, Compass Texas and Compass. We urge you to read these materials
carefully.
Your Board of Directors believes that the affiliation of Greater Brazos
with Compass through the Merger will enable Greater Brazos to serve its
customers and communities better and to compete more effectively with other
financial institutions. After the Merger, Greater Brazos' 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 Greater Brazos' common stock must vote in favor of the
Merger. THE BOARD OF DIRECTORS OF GREATER BRAZOS 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.
Allan Hanson at (409) 693-6930.
Very truly yours,
____________________________________________
Chairman of the Board
H1995A\82453-6
