<PAGE> 1
As filed with the Securities and Exchange Commission on October ___, 2000.
REGISTRATION NO. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
COMPASS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 6711 63-0593897
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
15 SOUTH 20TH STREET
BIRMINGHAM, ALABAMA 35223
(205) 933-3000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------------------------
<TABLE>
<CAPTION>
<S> <C>
JERRY W. POWELL, ESQUIRE COPIES TO:
GENERAL COUNSEL REID A. GODBOLT, ESQUIRE
COMPASS BANCSHARES, INC. JONES & KELLER, P.C.
15 SOUTH 20TH STREET 1625 BROADWAY, 16TH FLOOR
BIRMINGHAM, ALABAMA 35233 DENVER, COLORADO 80202
(205) 933-3960 (303) 573-1600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
</TABLE>
-------------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable following the effective date of this Registration
Statement
-------------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
-------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================== =================== ======================= ======================== =======================
Title of each class Amount to Proposed Proposed Amount of
of securities be maximum offering maximum aggregate Registration
to be registered registered (1) price per share offering price (3) Fee
------------------------------- ------------------- ----------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
Common Stock, $2.00 par value 6,800,000 (2) $34,549,815 $9,122
=============================== =================== ======================= ======================== =======================
</TABLE>
(1) This amount is based upon the maximum number of shares anticipated to
be issued pursuant to an Agreement and Plan of Merger dated as of
August 23, 2000, as amended, between the Registrant and FirsTier
Corporation.
(2) Not applicable.
(3) Computed in accordance with Rule 457(f) under the Securities Act of
1933, as amended, based on $34,549,815, the book value as of August 31,
2000 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> 2
FIRSTIER CORPORATION COMPASS BANCSHARES, INC.
PROXY STATEMENT PROSPECTUS
This document is being sent to you by the Board of Directors
of FirsTier Corporation. The Board is asking for proxies to be voted at
the Special Meeting of shareholders to be held at ____ a.m. local time,
on _________________, 2000 at the offices of FirsTier at 11210 Huron
Street, Northglenn, Colorado 80234.
At the Special Meeting you will vote on the merger of FirsTier
and Compass Bancshares. In the merger, FirsTier shareholders will get a
total of 6,800,000 shares of Compass common stock in exchange for their
shares of FirsTier common stock. This means that for each share of
FirsTier stock you own, you will get approximately 0.881 shares of
Compass common stock, or, if certain outstanding options are exercised,
0.827 shares of Compass common stock. After the merger, FirsTier will
be a subsidiary of Compass.
Compass common stock is publicly traded through the Nasdaq
National Market. Compass' trading symbol is "CBSS". There is no public
trading market for FirsTier common stock.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 10.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS EITHER APPROVED OR DISAPPROVED OF THE COMPASS COMMON STOCK TO BE
ISSUED IN THE MERGER OR DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMPASS COMMON STOCK OFFERED BY THIS DOCUMENT ARE NOT SAVINGS
ACCOUNTS OR BANK DEPOSITS, ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING
OR NON-BANKING AFFILIATE OF COMPASS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
DATED _______, 2000 AND FIRST MAILED TO SHAREHOLDERS ON OR ABOUT _______, 2000.
<PAGE> 3
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION..................1
SUMMARY..............................................2
SELECTED FINANCIAL DATA..............................7
MARKET PRICES........................................9
RISK FACTORS........................................10
THE FIRSTIER SPECIAL MEETING........................11
General.........................................11
Matters to be Considered........................11
Record Date; Shares Entitled to Vote; Quorum....11
Votes Required; Voting and Revocation
of Proxies; Effect of Abstention; Non-Votes.11
Solicitation of Proxies.........................11
MERGER WITH FIRSTIER................................12
General.........................................12
Background and Reasons for the Merger...........13
Operations after the Merger.....................14
Other Terms and Conditions......................14
Modification of Structure.......................16
No Solicitation.................................16
Exercise of Convertible Securities..............17
Additional Agreements...........................17
Business Pending Effective Time.................18
Amendment.......................................18
Termination.....................................18
Exchange of Shares..............................20
Dissenters' Rights..............................21
Federal Income Tax Consequences.................21
Accounting Treatment............................22
GOVERNMENT APPROVALS................................23
SUPERVISION AND REGULATION..........................23
General.........................................23
Compass.........................................23
The Subsidiary Banks............................25
Other...........................................26
DESCRIPTION OF COMPASS COMMON AND PREFERRED STOCK...27
Compass Common Stock............................27
Compass Preferred Stock.........................28
COMPARISON OF RIGHTS OF SHAREHOLDERS OF
FIRSTIER AND COMPASS........................28
Charter and Bylaw Provisions Affecting
Compass Stock...............................28
Certain Differences Between the Corporation
Laws of Colorado and Delaware and
Corresponding Charter and Bylaw Provisions..28
RESALE OF COMPASS STOCK.............................32
INFORMATION ABOUT COMPASS...........................33
Incorporation of Certain Documents by Reference.33
Interests of Certain Persons....................33
Recent Developments.............................33
INFORMATION ABOUT FIRSTIER..........................33
Business........................................33
Summary Consolidated Financial Data.............37
Management's Discussion and Analysis of
Financial Condition and Results of
Operations..................................37
Effects of Inflation and Changing Prices........52
Recent Accounting Pronouncements................52
1999 Stock Incentive Plan.......................52
Certain Transactions and Related Parties........52
Beneficial Ownership of FirsTier Common Stock
by FirsTier Management and Principal
Shareholders................................53
Interests of Certain Persons....................55
RELATIONSHIPS WITH INDEPENDENT ACCOUNTANTS..........56
EXPERTS.............................................56
LEGAL OPINIONS......................................56
INDEMNIFICATION.....................................57
OTHER MATTERS.......................................57
Appendix I Agreement and Plan of Merger between
Compass and FirsTier dated August 23,
2000, as amended
Appendix II Dissenters' Rights of Appraisal
<PAGE> 4
WHERE YOU CAN FIND MORE INFORMATION
Compass and FirsTier file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that the
companies file at the Commission's public reference room in Washington, D.C. at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms.
Compass' and FirsTier's public filings are also available to the public
from commercial document retrieval services and at the Internet World Wide
Website maintained by the Commission at "http://www.sec.gov."
Compass has filed a registration statement with the Commission to
register the shares of Compass common stock to be issued to FirsTier
shareholders in the merger. This document is a part of that registration
statement and constitutes a prospectus of Compass and a proxy statement of
FirsTier for the Special Meeting.
Compass common stock is traded on the Nasdaq Stock Market under the
symbol "CBSS". Documents filed by Compass also can be inspected at the offices
of the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
As allowed by Commission rules, this document does not contain all the
information that shareholders can find in the registration statement or the
exhibits to the registration statement.
The Commission allows Compass to "incorporate by reference" information
into this document, which means that Compass can disclose important information
to you by referring you to another document filed separately with the
Commission. The information incorporated by reference is deemed to be part of
this document, except for any information superseded by information contained
directly in the document. This document incorporates by reference other
documents which are listed below that Compass has previously filed with the
Commission. The documents contain important information about its business and
financial condition that is not included in or delivered with this document.
Compass Filings (File No. 0-6032):
- Compass' Annual Report on Form 10-K for the fiscal year ended
December 31, 1999;
- Compass' Quarterly Reports on Form 10-Q for the quarters ended March
31, 2000 and June 30, 2000;
- Compass' Current Report on Form 8-K dated May 31, 2000 and filed
June 19, 2000;
- Compass' Proxy Statement dated March 22, 2000 and filed March 30,
1999, relating to its annual meeting of shareholders held on April
17, 2000; and
- The description of Compass common stock contained in its Proxy
Statement dated April 16, 1982 relating to its Annual Meeting held
May 17, 1982.
Compass incorporates by reference additional documents that it might
file with the Commission between the date of this document and the date of the
Special Meeting. These include periodic reports, such as Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Compass has supplied all information contained or incorporated by
reference in this document relating to Compass and FirsTier has supplied all
information contained in this document relating to FirsTier.
COPIES OF ANY OF THE DOCUMENTS INCORPORATED BY REFERENCE BY COMPASS
(EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN) ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM ED BILEK AT 15 SOUTH 20TH
STREET, BIRMINGHAM, ALABAMA 35233 (TELEPHONE NO. (205) 933-3331). TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY __________,
_____________, 2000.
You should rely only on the information contained or incorporated by
reference in this document in determining how to vote your shares at the Special
Meeting. Compass and FirsTier have not authorized anyone to provide you with
information that is different from what is contained in this document. This
document is dated ___________, 2000. You should not assume that the information
contained in this document is accurate as of any date other than that date, and
neither the mailing of this document to shareholders nor the issuance of
Compass' common stock in the merger shall create any implication to the
contrary.
1
<PAGE> 5
SUMMARY
This summary highlights selected information from this document and
may not contain all of the information that is important to you. To
understand the merger fully and for a more complete description of the legal
terms of the merger, you should carefully read this entire document,
including the Appendices, and the other documents Compass and FirsTier have
referred you to. For more information about Compass and FirsTier, see "WHERE
YOU CAN FIND MORE INFORMATION."
PARTIES TO THE MERGER
COMPASS BANCSHARES, INC...................... Compass is a Delaware corporation
which was organized in 1970. It
is a financial holding company
registered with the Board of
Governors of the Federal Reserve
System under the Bank Holding
Company Act. Most of Compass'
revenues are from its bank
subsidiaries located in Texas,
Alabama, Florida, Arizona,
Colorado and New Mexico.
On June 30, 2000, Compass and its
subsidiaries had consolidated
assets of $18.9 billion,
consolidated deposits of $13.7
billion, and total shareholders'
equity of $1.3 billion. SEE
"WHERE YOU CAN FIND MORE
INFORMATION"; "SELECTED FINANCIAL
DATA"; AND "INFORMATION ABOUT
COMPASS."
Compass' main offices are at 15
South 20th Street, Birmingham,
Alabama 35233, and its telephone
number is (205) 933-3000.
FIRSTIER CORPORATION......................... FirsTier began business as a
Nebraska corporation in 1963 and
in 1999 reincorporated in
Colorado. FirsTier is a
multibank holding company.
Most of FirsTier's revenues are
from its bank subsidiaries in
Colorado and Nebraska.
On June 30, 2000, FirsTier had
total assets of $874.5 million,
total deposits of $774.5 million,
and total shareholders' equity of
$31.4 million. SEE "WHERE YOU CAN
FIND MORE INFORMATION"; "SELECTED
FINANCIAL DATA"; AND "INFORMATION
ABOUT FIRSTIER."
FirsTier's main offices are at
11210 Huron Street, Northglenn,
Colorado 80234, and its telephone
number is (303) 451-1010.
THE SPECIAL MEETING
WHEN AND WHERE............................... The Special Meeting of the
shareholders of FirsTier will be
held on _____________, 2000, at
____ a.m. local time, at 11210
Huron Street, Northglenn,
Colorado 80234. SEE "THE FIRSTIER
SPECIAL MEETING."
WHY......................................... The purpose of the Special
Meeting is to vote on:
- the merger in which FirsTier
will become a subsidiary of
Compass and you will receive
shares of Compass common
stock in exchange for your
shares of FirsTier common
stock and
- any other business brought
up at the Special Meeting.
SEE "THE FIRSTIER SPECIAL
MEETING" AND "MERGER WITH
FIRSTIER."
VOTE REQUIRED............................... Two-thirds of the shares of
FirsTier of common stock must
vote to approve the merger of
FirsTier and Compass. Compass
shareholders do not have to
approve the merger. SEE "THE
FIRSTIER SPECIAL MEETING."
2
<PAGE> 6
SHARES ENTITLED TO VOTE..................... Only record holders at the close
of business on __________, 2000
will get notice of and be allowed
to vote at the Special Meeting.
On the record date, there were
7,718,069 shares of FirsTier
common stock outstanding, not
including shares issuable upon
exercise of options or warrants.
OWNERSHIP OF MANAGEMENT..................... Joel H. Wiens, Chairman of the
Board of FirsTier, has agreed
to vote the 5,847,749 shares
directly owned by him, or 75.8%
of the outstanding stock, in
favor of the merger agreement
and the merger. As a result, it
is almost certain that the
merger agreement and the merger
will be approved at the Special
Meeting, no matter how you vote.
SEE "SUMMARY--VOTE REQUIRED" AND
"MERGER WITH FIRSTIER--GENERAL."
MERGER WITH FIRSTIER
EFFECTS OF THE MERGER....................... In the merger, you will get
shares of Compass common stock
in exchange for your shares of
FirsTier common stock. After the
merger, FirsTier will be a
subsidiary of Compass. The
officers and directors of
FirsTier after the merger will
be appointed by Compass. SEE
"MERGER WITH FIRSTIER--GENERAL."
WHAT YOU WILL GET........................... If the merger is completed,
FirsTier shareholders will get a
total of 6,800,000 shares of
Compass common stock.
On the record date, there were
8,218,069 shares of FirsTier
common stock outstanding, on a
fully diluted basis. This amount
includes:
- 7,718,069 shares of FirsTier
common stock issued and
outstanding; and
- 500,000 shares of FirsTier
common stock issuable upon
exercise of options.
This means that for each share of
FirsTier common stock you own,
you will get approximately 0.881
shares of Compass common stock if
the outstanding options are not
exercised before the merger and
0.827 shares of Compass common
stock if the outstanding options
are exercised before the merger.
WHEN WILL THE MERGER HAPPEN................. The completion of the merger
depends on a number of
conditions being met. No matter
what, the merger will not happen
before January 1, 2001. SEE
"MERGER WITH FIRSTIER--OTHER
TERMS AND CONDITIONS."
OUR REASONS FOR THE MERGER.................. FirsTier's Board of Directors
believes the merger gives you
the opportunity to acquire an
interest in a larger, more
diversified financial
institution, whose shares are
more liquid and which does not
depend mainly on the economic
conditions in Colorado. SEE
"MERGER WITH FIRSTIER--BACKGROUND
AND REASONS FOR THE MERGER."
OUR RECOMMENDATION.......................... FirsTier's Board of Directors
believes the terms of the merger
are fair and in your best
interests and has unanimously
approved the merger agreement
and the merger. THE FIRSTIER
BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE
MERGER AGREEMENT AND THE MERGER.
SEE "MERGER WITH FIRSTIER--
BACKGROUND AND REASONS FOR THE
MERGER."
REGULATORY MATTERS......................... To complete the merger, Compass
must receive approvals from the
Federal Reserve System under the
Bank Holding Company Act, the
Colorado Division of Banking and
the Nebraska Department of
Banking and Finance. SEE "MERGER
WITH FIRSTIER--OTHER TERMS AND
CONDITIONS."
3
<PAGE> 7
TERMINATION................................ FirsTier and Compass can agree at
any time to terminate the merger
agreement without completing the
merger even if FirsTier's
shareholders have approved it.
Under certain circumstances,
either Compass or FirsTier may
unilaterally terminate the
merger agreement. If the merger
agreement is terminated because
FirsTier violates the exclusivity
provisions of the merger
agreement or because it receives
another proposal and, as a
result, does not consummate the
merger, FirsTier must pay
Compass a fee of $8,000,000. SEE
"MERGER WITH FIRSTIER--
TERMINATION."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. You should be aware that FirsTier
officers, directors and employees
may have interests in the merger
that are different from, or in
addition to, yours.
In connection with the completion
of the merger of FirsTier,
Compass will acquire Western
Management Corporation. Western
Management Corporation provides
management services to FirsTier's
Colorado and Nebraska banks
pursuant to management
agreements. Joel H. Wiens is the
sole shareholder of Western
Management Corporation. In the
acquisition, Mr. Wiens, as the
sole shareholder of Western
Management Corporation, will
receive a maximum of 9,000 shares
of Compass common stock. It is a
condition to the completion of
the merger that Compass also
acquire Western Management
Corporation. SEE "MERGER WITH
FIRSTIER--ADDITIONAL AGREEMENTS,"
"INFORMATION ABOUT
FIRSTIER--INTERESTS OF CERTAIN
PERSONS" AND APPENDIX I.
For five years after the merger,
Compass will indemnify the
officers, directors and employees
of FirsTier for all liabilities
arising before the merger to the
maximum extent permitted by law.
In addition, Compass agrees that
FirsTier may obtain "tail
coverage" under its existing
director's and officer's
liability policies for a period
of two years following the merger
subject to certain monetary
limitations. SEE "INFORMATION
ABOUT FIRSTIER--INTERESTS OF
CERTAIN PERSONS" AND APPENDIX I.
In addition, Joel H. Wiens will
enter into certain agreements
with Compass in connection with
the merger. SEE "MERGER WITH
FIRSTIER--ADDITIONAL AGREEMENTS"
AND "INFORMATION ABOUT
FIRSTIER--INTERESTS OF CERTAIN
PERSONS"
DISSENTERS' RIGHTS......................... Under Colorado law, you can
dissent from the merger. SEE
"MERGER WITH FIRSTIER--
DISSENTERS' RIGHTS," AND
APPENDIX II.
4
<PAGE> 8
FEDERAL INCOME TAX CONSEQUENCES........... The exchange of shares will be
tax-free to you for federal
income tax purposes, except for
taxes payable on any cash you
receive instead of fractional
shares.
TAX MATTERS ARE VERY COMPLICATED
AND THE TAX CONSEQUENCES OF THE
FIRSTIER MERGER TO YOU WILL
DEPEND ON THE FACTS OF YOUR
SITUATION. YOU ARE URGED TO
CONSULT YOUR TAX ADVISOR FOR A
FULL UNDERSTANDING OF THE TAX
CONSEQUENCES OF THE MERGER TO
YOU.
The merger will not be completed
if Compass and FirsTier do not
receive a legal opinion that the
merger will be treated for United
States federal income tax
purposes as a reorganization
within the meaning of Section
368(a) of the Internal Revenue
Code. SEE "MERGER WITH
FIRSTIER--FEDERAL INCOME TAX
CONSEQUENCES."
ADDITIONAL AGREEMENTS
EMPLOYMENT AGREEMENTS...................... Compass Bank and Timothy D.
Wiens, who is President and
Chief Executive Officer of
FirsTier and President and Chief
Executive Officer of FirsTier
Bank, as well as a director of
each company, entered into an
employment agreement which will
become effective upon completion
of the merger. Under the
employment agreement, Mr. Wiens
will serve as a senior officer
of Compass Bank for two years
beginning at the effective time
of the merger. Mr. Wiens will
receive an annual base salary
commensurate with that which he
is presently receiving from
FirsTier with merit increases
based upon performance and will
be able to participate in
Compass Bank's executive
incentive program. Mr. Wiens
will also receive benefits
available to Compass Bank
employees of equal title and
base salary. The employment
agreement also contains
noncompetition and
confidentiality provisions.
Compass Bank and Michael J.
Nelson, who is Executive Vice
President of FirsTier and
President of Firstate Bank, as
well as a director of each
company, entered into an
employment agreement which will
become effective upon completion
of the merger. Under the
employment agreement, Mr. Nelson
will serve as a senior officer of
Compass Bank for two years
beginning at the effective time
of the merger. Mr. Nelson will
receive an annual base salary
commensurate with that which he
is presently receiving from
FirsTier with merit increases
based upon performance and will
be able to participate in Compass
Bank's executive incentive
program. Mr. Nelson will also
receive benefits available to
Compass Bank employees of equal
title and base salary. The
employment agreement also
contains noncompetition and
confidentiality provisions. SEE
"MERGER WITH FIRSTIER--ADDITIONAL
AGREEMENTS."
In addition, certain other
officers of FirsTier are expected
to enter into employment
agreements with Compass Bank upon
completion of the merger.
5
<PAGE> 9
POOLING TRANSFER RESTRICTIONS AGREEMENTS...
Certain principal shareholders of
FirsTier entered into Pooling
Transfer Restrictions Agreements
in which they have agreed:
- not to transfer any of
their shares of FirsTier
common stock 30 days before
the merger;
- not to transfer any shares
of Compass common stock
they receive in the merger
until financial results
covering at least 30 days
of post-merger combined
operations of FirsTier and
Compass are published; and
- not to transfer Compass
common stock except in
compliance with the
applicable provisions of
the Securities Act of 1933
and the Securities Exchange
Act of 1934.
SEE "MERGER WITH FIRSTIER--ADDITIONAL AGREEMENTS."
6
<PAGE> 10
SELECTED FINANCIAL DATA
The following table summarizes, where indicated, certain pro forma
financial data for Compass, giving effect to the acquisition of FirsTier
assuming that the merger had been effective at the beginning of 1995. The
historical data of FirsTier as of and for the years ended December 31, 1999,
1998, 1997, 1996, and 1995 is derived from the audited financial statements of
FirsTier. The historical data of Compass as of and for the years ended December
31, 1999, 1998, 1997, 1996, and 1995 is derived from the audited financial
statements of Compass. The historical data of Compass and FirsTier as of and for
the six months ended June 30, 2000, is derived from the unaudited financial
statements of Compass and FirsTier, respectively. In the opinion of management
of Compass and FirsTier, all adjustments considered necessary for a fair
presentation have been included in the unaudited interim data. The pro forma
income information does not necessarily indicate the results of operations had
the proposed transaction occurred at the beginning of 1995, nor does it
necessarily indicate the results of future operations. This information should
be read with the historical consolidated financial statements and the related
notes included or incorporated by reference in this document.
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ------------------------------------------------------------------------
JUNE 30, 2000 1999 1998 1997 1996 1995
----------------- ------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
TOTAL ASSETS
Compass $18,937,492 $18,445,522 $17,573,433 $15,143,350 $13,960,193 $12,592,781
FirsTier 874,480 706,821 367,207 227,600 125,013 95,975
TOTAL DEPOSITS
Compass 13,712,944 13,049,599 12,249,849 11,110,993 11,138,267 9,781,568
FirsTier 774,546 601,994 319,480 200,294 101,387 78,041
LONG-TERM DEBT
Compass 2,065,999 2,465,127 2,046,780 1,431,953 736,212 626,592
FirsTier 54,977 67,795 17,440 4,380 --- ---
TOTAL SHAREHOLDERS'
EQUITY
Compass 1,325,040 1,229,225 1,227,970 1,097,226 976,144 893,932
FirsTier 31,419 25,704 20,706 16,911 13,749 12,244
NET INTEREST INCOME
Compass 336,407 653,444 590,160 551,591 498,702 454,823
FirsTier 17,934 23,488 14,000 8,782 4,788 3,889
NET INCOME FROM
CONTINUING OPERATIONS
Compass 116,803 223,902 187,838 170,176 149,951 135,943
FirsTier 4,499 5,066 3,375 2,497 1,570 1,442
NET INCOME PER COMMON SHARE
FROM CONTINUING OPERATIONS (1)
Compass
Historical (3) 0.98 1.90 1.61 1.47 1.31 1.19
Pro forma 0.97 1.84 1.55 1.41 1.25 1.14
FirsTier
Historical 0.59 0.68 0.46 0.36 0.24 0.22
Equivalent pro forma (2) 0.85 1.62 1.37 1.24 1.10 1.00
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -------------------------------------------------------------------------
JUNE 30, 2000 1999 1998 1997 1996 1995
---------------- -------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CASH DIVIDENDS PER
COMMON SHARE
Compass
Historical (3) 0.44 0.80 0.70 0.63 0.57 0.50
Pro forma 0.42 0.76 0.66 0.59 0.53 0.46
FirsTier
Historical --- --- --- --- --- ---
Equivalent pro 0.37 0.67 0.58 0.52 0.47 0.41
forma (2)
SHAREHOLDERS'
EQUITY
(BOOK VALUE) PER
COMMON SHARE
Compass
Historical (3) 10.96 10.50 10.28 9.35 8.33 7.64
Pro forma 10.62 10.13 9.88 8.96 7.97 7.30
FirsTier
Historical 4.07 3.39 2.82 2.30 2.10 1.87
Equivalent pro forma 9.36 8.92 8.70 7.89 7.02 6.43
(2)
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING
Compass
Historical 118,752 116,675 114,628 113,496 112,241 112,735
Pro forma 125,552 123,475 121,428 120,296 119,041 119,535
FirsTier
Historical 7,581 7,505 7,347 7,019 6,560 6,560
NUMBER OF COMMON
SHARES OUTSTANDING AT
END OF PERIOD
Compass
Historical 120,893 117,042 77,789 75,979 50,384 50,184
Pro forma 127,693 123,842 82,323 80,512 53,406 53,206
FirsTier
Historical 7,718 7,580 7,347 7,347 6,560 6,560
------------------------
</TABLE>
(1) Net income per common share from continuing operations represents basic
earnings per share.
(2) FirsTier's Equivalent Pro Forma per share amounts are computed by
multiplying Compass' Pro Forma amounts by the exchange ratio of 0.881.
If outstanding options to purchase 500,000 shares of FirsTier common
stock are exercised before the merger is completed, the exchange ratio
would be 0.827 and (i) equivalent pro forma net income per common share
from continuing operations would be 0.80 and 1.52 for the six months
ended June 30, 2000 and the year ended December 31, 1999, respectively,
(ii) equivalent pro forma cash dividends per common share would be 0.34
and 0.62 for the six months ended June 30, 2000 and the year ended
December 31, 1999, respectively, and (iii) equivalent pro forma
shareholders' equity (book value) per common share would be 8.79 and
8.38 for the six months ended June 30, 2000 and December 31, 1999,
respectively.
(3) For comparative purposes, data has been restated to reflect the
three-for-two stock split effected in April 1997 and the three-for-two
stock split effected in April 1999.
8
<PAGE> 12
MARKET PRICES
Compass common stock is traded through the Nasdaq National Market.
Since July 1984, Compass common stock has been quoted under the symbol "CBSS" on
the Nasdaq National Market.
The following table shows the high and low sales prices and dividends
declared for Compass common stock reported through the Nasdaq National Market
published in THE WALL STREET JOURNAL. The prices shown do not include retail
mark-ups, mark-downs or commissions. All share values have been rounded to the
nearest 1/8 of one dollar.
<TABLE>
<CAPTION>
COMPASS COMMON STOCK
---------------------------------------------------------------------------------
PERIOD HIGH LOW DIVIDEND DECLARED
----------------------- ----------------- ------------------ ------------------
<S> <C> <C> <C>
1998
----
First Quarter 35 1/2 27 5/8 0.175
Second Quarter 33 1/4 28 0.175
Third Quarter 31 5/8 22 0.175
Fourth Quarter 26 1/4 19 1/4 0.175
1999
----
First Quarter 26 23 0.200
Second Quarter 30 1/2 23 5/8 0.200
Third Quarter 30 1/8 24 7/8 0.200
Fourth Quarter 28 1/8 20 3/4 0.200
2000
----
First Quarter 20 1/2 15 3/4 0.220
Second Quarter 22 3/8 17 1/8 0.220
</TABLE>
The following table shows the last reported sales price per share of
Compass common stock, as reported on the Nasdaq National Market on September 1,
2000, the last business day before public announcement of the signing of the
merger agreement and __________, 2000, the latest practicable trading day before
the mailing of this document:
COMPASS COMMON STOCK
--------------------
September 1, 2000 18 5/8
__________, 2000 ____
You should obtain current market quotations for Compass common stock
since the market price of Compass common stock will continue to fluctuate
between the date of this document and the date on which the merger is completed
and afterwards.
There is no public trading market for FirsTier common stock, which is
rarely traded in private transactions.
9
<PAGE> 13
RISK FACTORS
COMPASS MAY HAVE DIFFICULTY COMBINING THE OPERATIONS OF ACQUIRED
ENTITIES WITH COMPASS' OWN OPERATIONS. Since January 1, 2000, Compass has
acquired two bank holding companies (Western Bancshares of Albuquerque, Inc. and
Founders Bancorp, Inc.) and a thrift holding company (MegaBank Financial
Corporation). Because the markets and industries in which Compass operates are
highly competitive, and because of the inherent uncertainties associated with
the integration of an acquired company, there can be no assurance that Compass
will be able to realize fully the strategic objectives and operating
efficiencies in all of its acquisitions, including FirsTier. In addition,
Compass may lose key personnel, either from the acquired entities or from
itself, as a result of acquisitions. These factors could contribute to the
benefits expected from acquisitions not being achieved within expected time
frames or not being achieved at all.
THE SHARES YOU GET MAY BE WORTH LESS THAN THEY ARE TODAY. The precise
value of the merger consideration to be paid to FirsTier's shareholders will not
be known at the time of the special meeting. The merger agreement provides that
6,800,000 shares of Compass common stock will be issued in the merger in
exchange for the shares of FirsTier common stock. This amount is fixed and will
not be adjusted to reflect any changes in the value of either FirsTier or
Compass common stock between the date of the merger agreement and the effective
time of the merger. This amount likewise will not be adjusted whether or not an
option to purchase 500,000 shares of FirsTier common stock is exercised, which
if exercised, will reduce from 0.881 to 0.827 the shares of Compass common stock
received for each share of FirsTier common stock. In addition, the value of the
Compass common stock will fluctuate prior to the effective time of the merger
and may be higher or lower than on the date of the merger agreement or the date
of the Special Meeting.
YOU WILL HAVE LESS INFLUENCE AS A SHAREHOLDER OF COMPASS THAN AS A
SHAREHOLDER OF FIRSTIER. You currently have the right to vote in the election of
the Board of Directors of FirsTier and on other matters affecting FirsTier. The
merger will transfer control of FirsTier to Compass. When the merger occurs, you
will become a stockholder of Compass with a percentage ownership much smaller
than your percentage ownership of FirsTier. Because of this, you will no longer
be able to influence the management policies of FirsTier's operations, and as a
stockholder of Compass with a small ownership percentage you will not be able to
influence the management policies of Compass.
COMPASS FACES SIGNIFICANT COMPETITION. Compass' bank subsidiaries
compete with other banks on the basis of service, convenience and price. Because
of 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 will continue.
CHANGES IN THE ECONOMY MAY NEGATIVELY AFFECT COMPASS' BUSINESS AND
STOCK PRICE. General economic conditions impact the banking industry. The credit
quality of Compass' loan portfolio reflects the general economic conditions
where it does business. The continued financial success of Compass and its
subsidiaries depends on things beyond Compass' control, like national and local
economic conditions, the supply and demand for investable funds, interest rates
and federal, state and local laws. Any deterioration in any of these conditions
could have a material adverse effect on Compass' financial condition and results
of operations, which would probably negatively affect the market price of
Compass common stock. SEE "MARKET PRICES."
COMPASS' CHARTER AND BYLAWS MAY MAKE HOSTILE TAKEOVERS MORE DIFFICULT.
Compass' Certificate of Incorporation and Bylaws contain provisions which may
make Compass a less attractive target for acquisition by anyone who does not
have the support of Compass' Board of Directors. These provisions include the
requirement of a supermajority vote of stockholders or directors to approve
certain business combinations and other corporate actions, a minimum price
provision, several special procedural rules and a staggered Board of Directors.
There is also a limitation that stockholder actions without a meeting may only
be taken by unanimous written stockholder consent. FirsTier's Articles of
Incorporation require a two-thirds vote by the shareholders for any merger or
consolidation, the sale of all of the corporation's assets or dissolution of the
corporation, and the Colorado Business Corporation Act requires that
shareholders may take action without a meeting only by unanimous written
consent. SEE "COMPARISON OF RIGHTS OF SHAREHOLDERS OF FIRSTIER AND
COMPASS--CHARTER AND BYLAW PROVISIONS AFFECTING COMPASS COMMON STOCK."
SEE "SUPERVISION AND REGULATION" for a description of the regulatory
considerations relating to the ownership of Compass common stock.
10
<PAGE> 14
THE FIRSTIER SPECIAL MEETING
GENERAL
FirsTier Corporation, a Colorado corporation ("FirsTier"), is sending
you this document to provide you with information concerning the Agreement and
Plan of Merger, dated as of August 23, 2000, as amended (the "Merger
Agreement"), by and among Compass Bancshares, Inc., a Delaware corporation
("Compass"), Compass Acquisition, Inc., a Colorado corporation and wholly owned
subsidiary of Compass ("Merger Sub"), and FirsTier. The Merger Agreement
provides for the merger of Merger Sub with and into FirsTier (the "Merger").
FirsTier's Board is soliciting your proxy for use at the Special Meeting to be
held on ____________, 2000 at the time and place set forth in the accompanying
notice and at any adjournments thereof for purposes of approving the Merger.
MATTERS TO BE CONSIDERED
At the Special Meeting, the shareholders of FirsTier will consider and
vote upon a proposal to approve and adopt the Merger Agreement and the Merger.
THE FIRSTIER BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT HOLDERS OF FIRSTIER COMMON
STOCK VOTE FOR THE MERGER AGREEMENT AND THE MERGER. SEE "MERGER WITH
FIRSTIER--BACKGROUND AND REASONS FOR THE MERGER."
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
The FirsTier Board of Directors has fixed the close of business on
___________, 2000 as the record date ("Record Date") for determining holders
entitled to notice of and to vote at the Special Meeting. As of the Record Date,
there were 7,718,069 shares of FirsTier common stock ("FirsTier Common Stock")
issued and outstanding, each of which entitled its holder to one vote. The
presence, either in person or by proxy, of the holders of a majority of the
issued and outstanding shares of FirsTier Common Stock entitled to vote at the
Special Meeting is necessary to constitute a quorum for the transaction of
business at the Special Meeting.
VOTES REQUIRED; VOTING AND REVOCATION OF PROXIES; EFFECT OF ABSTENTION;
NON-VOTES
The affirmative vote of the holders of two-thirds of the outstanding
shares of FirsTier Common Stock is required for approval of the Merger and the
Merger Agreement. You have the right to revoke your proxy at any time prior to
the Special Meeting by signing another proxy with a later date or giving notice
of such revocation to the Secretary of FirsTier at or prior to the Special
Meeting. Also, you can attend the meeting and vote your shares in person, even
if you previously completed and returned a proxy card.
Votes cast by proxy or in person at the Special Meeting will be
tabulated by the election inspectors appointed for the meeting and the election
inspectors will determine whether or not a quorum is present. The election
inspectors will treat abstentions as shares that are present and entitled to
vote for purposes of determining the presence of a quorum but as unvoted for
purposes of determining the approval of any matter submitted to the shareholders
for a vote. The failure to submit a proxy or to vote at the Special Meeting will
have the same effect as a vote against the Merger and the Merger Agreement.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF FIRSTIER. ACCORDINGLY, HOLDERS OF FIRSTIER
COMMON STOCK ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED
IN THIS DOCUMENT, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED
PROXY IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
SOLICITATION OF PROXIES
Proxies will be solicited by mail, and may also be solicited
personally, by telephone, facsimile transmission or other means by the
directors, officers and employees of FirsTier, 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 material to the beneficial owners
of FirsTier Common Stock held of record by such persons, and FirsTier may
reimburse such custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses that
11
<PAGE> 15
they incur in that regard. 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.
MERGER WITH FIRSTIER
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 document, 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 FirsTier are urged to read the Merger Agreement in its
entirety.
GENERAL
The Merger Agreement provides for the merger of Merger Sub with and
into FirsTier in accordance with the terms and conditions of the Merger
Agreement. FirsTier will be the surviving entity in the Merger and the separate
existence of Merger Sub will cease. After the effective time of the Merger (the
"Effective Time"), the officers and directors of Merger Sub will be the officers
and directors of the surviving entity.
The Merger Agreement provides that each share of FirsTier Common Stock
issued and outstanding immediately prior to the Effective Time, other than
dissenting shares, will, 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 ("Merger Consideration") to the
record holder, without interest, upon surrender of the certificate representing
such share. For the purposes of determining the number of shares issued and
outstanding, the number of shares issued and outstanding will be increased by
the number of shares that may be acquired upon exercise or conversion of any
warrant, option, convertible debenture or other security entitling the holder to
acquire shares which is in effect or outstanding prior to the Effective Time.
As Merger Consideration, Compass will issue to the holders of the
shares of FirsTier Common Stock an aggregate of 6,800,000 shares of the common
stock of Compass, par value $2.00 per share ("Compass Common Stock").
On the Record Date, there were 8,218,069 shares of FirsTier Common
Stock outstanding, on a fully diluted basis. This amount includes (1) 7,718,069
shares of FirsTier Common Stock issued and outstanding; and (2) 500,000 shares
of FirsTier Common Stock issuable prior to consummation of the Merger upon
exercise of options.
Assuming that the outstanding options are not exercised, there will be
7,718,069 shares of FirsTier Common Stock issued and outstanding immediately
prior to the Effective Time. If all conditions at closing are satisfied, each
shareholder of FirsTier (except shareholders choosing to exercise their
dissenters' rights) will be entitled to receive approximately 0.881 shares of
Compass Common Stock for each share of FirsTier Common Stock.
Assuming that the outstanding options are exercised in full, there will
be 8,218,069 shares of FirsTier Common Stock issued and outstanding immediately
prior to the Effective Time. If all conditions at closing are satisfied, each
shareholder of FirsTier (except shareholders choosing to exercise their
dissenters' rights) will be entitled to receive approximately 0.827 shares of
Compass Common Stock for each share of FirsTier Common Stock.
If some, but not all, of the outstanding options are exercised, each
shareholder of FirsTier (except shareholders choosing to exercise their
dissenters' rights) will be entitled to receive for each share of FirsTier
Common Stock a number of shares of Compass Common Stock between 0.827 and 0.881,
depending on the number of options exercised.
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 will be based on the average of the closing
sale price for Compass Common Stock as reported by the Nasdaq National Market
for the twenty days of trading immediately preceding the fifth trading day prior
to the closing of the Merger (the "Average Closing Price").
12
<PAGE> 16
The Merger Agreement also provides that the Merger Consideration will
be adjusted to give effect to any stock dividends or splits with respect to
Compass Common Stock where the Record Date or payment date occurs prior to the
Effective Time. SEE APPENDIX I.
The one share of common stock of Merger Sub issued and outstanding
immediately before the Effective Time will be converted into the aggregate
number of shares of the capital stock of FirsTier issued and outstanding at the
Effective Time of the Merger.
The Merger must be approved by the affirmative vote of the holders of
two-thirds of the outstanding shares of FirsTier Common Stock entitled to vote
thereon. Joel H. Wiens, Chairman of the Board of FirsTier, has agreed pursuant
to a Voting Agreement and Irrevocable Proxy ("Voting Agreement") to vote the
5,847,749 shares of FirsTier Common Stock directly owned by him, comprising
approximately 75.8% of the total shares of FirsTier Common Stock issued and
outstanding as of the Record Date, in favor of the Merger Agreement and the
Merger. SEE "SUMMARY--VOTES REQUIRED"; "MERGER WITH FIRSTIER--OTHER TERMS AND
CONDITIONS"; AND APPENDIX I.
Merger Sub has one share of common stock issued and outstanding, 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 Merger Sub, will approve the Merger Agreement in the manner
prescribed by the Colorado Business Corporation Act ("CBCA").
The Merger will be effected as soon as practicable following the
receipt of all necessary regulatory approvals and the satisfaction of all
conditions to the consummation of the Merger; provided, however, that the
Effective Time will not occur prior to January 1, 2001. At the Effective Time,
by operation of law, holders of FirsTier Common Stock (other than those
shareholders who perfect their dissenters' rights) will become owners of Compass
Common Stock and will no longer be owners of FirsTier Common Stock. After the
Effective Time, all certificates for FirsTier 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 "MERGER WITH
FIRSTIER--DISSENTERS' RIGHTS", APPENDIX I AND APPENDIX II.
BACKGROUND AND REASONS FOR THE MERGER
During the normal course of its business, FirsTier has received
inquiries regarding its willingness to consider an acquisition by, or
affiliation with, larger financial institutions. Consistent with its fiduciary
obligations to its shareholders, FirsTier has considered such inquiries and
evaluated them for the level and form of consideration proposed, the seriousness
and specificity which has been conveyed to FirsTier in terms of consideration,
the expected future operation of FirsTier, and other considerations and factors
deemed relevant by FirsTier. FirsTier has formulated its business plan with the
intent to provide maximum value to its shareholders by enhancing its franchise
and expanding its business operations. The Board of Directors of FirsTier has
continuously evaluated the cost of providing the increasingly broad array of
financial products and alternative delivery channels to remain competitive in
the marketplace, while implementing FirsTier's growth strategy and continuing to
deliver a wide array of services to its customers and provide competitive
returns to its shareholders.
As the nature of banking has become increasingly competitive, larger
organizations have demonstrated a willingness to pay a premium for attractive
franchises in high-growth markets such as Denver, Colorado. As a result, in
January 2000 Compass approached FirsTier. Thereafter, FirsTier provided
information regarding FirsTier to Compass pursuant to a confidentiality
agreement. As a result of this initial contact, FirsTier and Compass commenced
extensive negotiations in August 2000.
In evaluating whether to affiliate with Compass, FirsTier considered
the value of Compass Common Stock; competitive conditions in the market served
by FirsTier; the additional capital and resources needed for FirsTier's
operations to continue to grow; FirsTier's ability to provide, on a
cost-effective basis, the ever-increasing and broadening array of financial
services products demanded by customers; the fact that Compass Common Stock is
widely-traded, thereby representing a more liquid investment than FirsTier's
Common Stock; the appreciation in the price of Compass Common Stock over the
past ten years; and Compass' dividend history. In addition, FirsTier believed
that affiliating with Compass, a larger financial institution with significantly
greater resources and expertise, offered expansion opportunities and financial
products and services not otherwise available to FirsTier and its customers
which would better enable FirsTier to compete. FirsTier and its Board of
Directors determined
13
<PAGE> 17
that FirsTier's competitive position and the value of its stock could best be
enhanced through affiliation with Compass.
Following arm's-length negotiations between representatives of Compass
and FirsTier, Compass and FirsTier entered into the Merger Agreement. The
aggregate price to be paid to holders of FirsTier Common Stock resulted from
negotiations which considered the historical earnings and dividends of Compass
and FirsTier; the potential growth in FirsTier's market and earnings, both as an
independent entity and as a part of a larger organization such as Compass;
FirsTier's asset quality; and the effect of the Merger on the shareholders,
customers, and employees of FirsTier.
For the reasons set forth above, FirsTier's Board of Directors
unanimously approved the Merger Agreement and the Merger and recommends approval
of the Merger Agreement and the Merger by FirsTier's shareholders.
Subject to satisfaction of certain conditions contained in the Merger
Agreement, FirsTier's Board of Directors believes the Merger to be fair and in
the best interest of FirsTier's shareholders. FIRSTIER'S BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE FIRSTIER SHAREHOLDERS VOTE FOR APPROVAL OF THE
MERGER AGREEMENT AND THE MERGER and has authorized consummation thereof, subject
to approval of FirsTier's shareholders, federal and state bank regulators and
the satisfaction of certain other conditions.
OPERATIONS AFTER THE MERGER
Compass and FirsTier intend that following consummation of the Merger,
FirsTier's wholly-owned subsidiaries, FirsTier Bank and Firstate Bank (the
"Banks") through one or more transactions, will merge with and into Compass Bank
(the "Subsequent Merger"). Following the Subsequent Merger, the separate
existence of the Banks will cease, and Compass Bank will continue as the
surviving entity.
OTHER TERMS AND CONDITIONS
The Merger Agreement contains a number of terms, conditions,
representations and covenants which must be satisfied as of the Effective Time,
including, but not limited to, the following:
(1) 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 or early termination of any
applicable waiting periods with respect thereto. SEE
"GOVERNMENT APPROVALS";
(2) The closing of the Merger will not violate any injunction,
order or decree of any court or governmental body having
competent jurisdiction;
(3) The approval of the Merger Agreement by FirsTier's
shareholders entitled to vote at the Special Meeting;
(4) The registration statement covering the Compass Common Stock
to be issued in the Merger shall be effective under the
Securities Act of 1933, as amended ("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 by the Merger Agreement, shall be pending before
or threatened by the Commission or any applicable state
securities or blue sky authorities;
(5) The shares of Compass Common Stock to be issued in the Merger
shall have been approved for listing on the Nasdaq, subject to
official notice of issuance;
(6) All representations and warranties of FirsTier 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 closing;
14
<PAGE> 18
(7) FirsTier and Compass 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;
(8) There shall not have occurred a material adverse effect with
respect to FirsTier or its subsidiaries, or Compass;
(9) The directors of FirsTier and its subsidiaries shall have
delivered to Compass an instrument dated the Effective Time
releasing FirsTier and its subsidiaries from any and all
claims of such directors (except as to their deposits and
accounts and as to certain rights of indemnification) and
shall have delivered to Compass their resignations as
directors of FirsTier and its subsidiaries;
(10) The officers of FirsTier and its subsidiaries shall have
delivered to Compass an instrument dated the Effective Time
releasing FirsTier and its subsidiaries from any and all
claims of such executive officers (except as to deposits and
accounts and accrued compensation and to certain rights of
indemnification);
(11) Compass and FirsTier shall have received the opinions of
counsel to FirsTier, Compass and Merger Sub acceptable to
them;
(12) The holders of no more than the lesser of (a) 10% of the
shares or (b) such number of shares that shall not disqualify
the Merger for pooling-of-interest accounting treatment, shall
have demanded or be entitled to demand payment of the fair
value of their shares as dissenting shareholders.
(13) Compass shall have received a letter from Arthur Andersen, 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;
(14) The aggregate amount of all FirsTier indebtedness shall not
exceed $48,000,000 (subject to certain exclusions);
(15) Compass shall have received from holders of FirsTier Common
Stock receiving at least 50% of the total Merger Consideration
a representation that they have no present plan or intention
to sell or otherwise dispose of shares of FirsTier Common
Stock prior to and in connection with the Merger to FirsTier
or Compass or any party related to FirsTier or Compass and
shares of Compass Common Stock received pursuant to the Merger
to Compass or any party related to Compass;
(16) Compass shall have received from holders of FirsTier Common
Stock who are proposed to receive bonuses representations (a)
that they have no plan or intention to sell or otherwise
dispose of shares of FirsTier Common Stock prior to and in
connection with the Merger to FirsTier or Compass or any party
related to FirsTier or Compass, and shares of Compass Common
Stock received pursuant to the Merger to Compass or any party
related to Compass, and (b) that the bonuses were separately
bargained for at arms' length and do not represent additional
consideration for the acquisition of FirsTier Common Stock;
(17) FirsTier shall have delivered to Compass a schedule of all
transactions in FirsTier Common Stock of which FirsTier has
knowledge from and including the date of the Merger Agreement
through the Effective Time;
(18) Joel H. Wiens shall have entered into a noncompetition
agreement with Compass;
(19) Compass and FirsTier shall have received an opinion of counsel
that the Merger will qualify as a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"); SEE "SUMMARY--FEDERAL INCOME TAX CONSEQUENCES" AND
"MERGER WITH FIRSTIER--FEDERAL INCOME TAX CONSEQUENCES";
15
<PAGE> 19
(20) Compass shall have determined in its sole judgment that
certain liabilities and obligations of FirsTier do not have a
material adverse effect;
(21) FirsTier and its subsidiaries shall have accrued and paid
prior to the Effective Time all brokerage and professional
fees relating to the Merger and all premium expenses incurred
in connection with certain director's and officer's liability
policies;
(22) FirsTier and its subsidiaries shall have performed a detailed
assessment, acceptable to Compass, as to the adequacy of
FirsTier's and its subsidiaries' loan loss allowance and shall
have recorded the appropriate adjustments in the allowance, if
any, for the period ending December 31, 2000;
(23) All warrants, options, rights, convertible debentures or other
securities entitling the holder thereof to acquire FirsTier
Common Stock shall have been exercised or converted, or shall
have expired, lapsed or terminated, prior to the Effective
Time;
(24) The transactions contemplated by that certain Agreement and
Plan of Merger to be entered into between Western Management
Corporation and Compass (the "Ancillary Agreement") shall have
been simultaneously consummated with the Merger;
(25) FirsTier and its subsidiaries shall have delivered to the
directors and executive officers of FirsTier and its
subsidiaries an instrument dated the Effective Time releasing
such directors from any and all claims of FirsTier and its
subsidiaries (except as to indebtedness or other contractual
liabilities); provided, however, that such releases shall not
release an action against such directors and executive
officers by Compass or Merger Sub in connection with the
transactions contemplated by the Merger Agreement; and
(26) Compass and FirsTier shall have received certificates of the
other as to certain items described above.
Any condition to the consummation of the Merger may be waived in
writing by the party to the Merger Agreement entitled to the benefit of such
condition. SEE APPENDIX I.
MODIFICATION OF STRUCTURE
Compass may elect with the prior written consent of FirsTier (such
consent not to be unreasonably withheld), subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify the
structure of the transactions contemplated by the Merger Agreement so long as
(1) there are no material adverse federal income tax consequences to the
shareholders of FirsTier as a result of such modification, (2) the consideration
to be paid to the shareholders of FirsTier under the Merger Agreement is not
thereby changed in kind or reduced in amount solely because of such
modification, (3) such modification will not be likely to materially delay or
jeopardize receipt of any required regulatory approvals, and (4) such
modification will not adversely affect the rights, privileges and performances
of FirsTier's Subordinated Debentures (as defined in the Merger Agreement). SEE
APPENDIX I.
NO SOLICITATION
FirsTier has agreed under the Merger Agreement not to solicit or
encourage inquiries or proposals with respect to, or engage in any negotiations
concerning, or provide any confidential information to, or have any discussions
with, any person relating to any offer to acquire FirsTier or its subsidiaries.
In addition, FirsTier shall immediately cease any such discussions or
negotiations conducted prior to the date of the Merger Agreement and shall
promptly advise Compass following the receipt by FirsTier or any of its
subsidiaries of any such proposal. However, the Board of Directors of FirsTier
is not prohibited from furnishing information to, or entering into discussions,
negotiations or an agreement with, any person or entity that makes an
unsolicited proposal if the Board, after consultation with its financial
advisors and outside counsel, concludes in good faith that such acquisition
proposed would constitute a Superior Proposal (as defined in the Merger
Agreement) and that such action is necessary for the Board of Directors of
FirsTier to comply with its fiduciary duties to its shareholders under
applicable law.
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If FirsTier violates its obligations set forth in the Merger Agreement
and the Merger Agreement is terminated, FirsTier must pay to Compass an
aggregate termination fee of $8,000,000 in cash at the time of such termination.
SEE APPENDIX I.
EXERCISE OF CONVERTIBLE SECURITIES
FirsTier has agreed under the Merger Agreement to use its best efforts
to cause all outstanding warrants, options, rights, or convertible debentures to
be exercised or converted in full prior to the Effective Time. SEE APPENDIX I.
ADDITIONAL AGREEMENTS
VOTING AGREEMENT AND IRREVOCABLE PROXY. Joel H. Wiens, Chairman of the
Board of FirsTier, has agreed, pursuant to the Voting Agreement, to vote the
5,847,749 shares of FirsTier Common Stock directly owned by him, comprising
approximately 75.8% of the total shares of FirsTier Common Stock issued and
outstanding as of the Record Date, in favor of the Merger Agreement and the
Merger.
RIGHT OF FIRST REFUSAL AGREEMENT. Compass and Joel H. Wiens will enter
into a Right of First Refusal Agreement that provides Mr. Wiens a right of first
refusal to purchase Firstate Bank or all of the assets and liabilities relating
to Firstate Bank under certain circumstances. Specifically, if at anytime during
the five year period commencing two years after the Merger Compass receives an
offer from an unrelated third party to purchase Firstate Bank or all, or
substantially all, of its assets and liabilities, Compass will provide Mr. Wiens
a right of first refusal.
NONCOMPETITION AGREEMENT. It is a condition to the Merger that Joel H.
Wiens enter into a Noncompetition Agreement with Compass pursuant to which Mr.
Wiens will not compete with Compass in the Denver, Colorado or Kimball, Nebraska
areas for a period of two years following the Merger.
TRADENAME ASSIGNMENT. Compass has agreed that following the Merger it
will transfer to Joel H. Wiens the tradename "FirsTier" and any pending service
mark applications using the "FirsTier" name, subject to certain geographical
limitations.
EMPLOYMENT AGREEMENTS. Compass Bank and Timothy D. Wiens, who is
President and Chief Executive Officer of FirsTier and President and Chief
Executive Officer of FirsTier Bank, as well as a director of each company,
entered into an employment agreement which will become effective upon completion
of the Merger. Under the employment agreement, Mr. Wiens will serve as a senior
officer of Compass Bank for two years beginning at the effective time of the
Merger. Mr. Wiens will receive an annual base salary commensurate with that
which he is presently receiving from FirsTier with merit increases based upon
performance and will be able to participate in Compass Bank's executive
incentive program. Mr. Wiens will also receive benefits available to Compass
Bank employees of equal title and base salary. The employment agreement also
contains noncompetition and confidentiality provisions.
Compass Bank and Michael J. Nelson, who is Executive Vice President of
FirsTier and President of Firstate Bank, as well as a director of each company,
entered into an employment agreement which will become effective upon completion
of the Merger. Under the employment agreement, Mr. Nelson will serve as a senior
officer of Compass Bank for two years beginning at the effective time of the
Merger. Mr. Nelson will receive an annual base salary commensurate with that
which he is presently receiving from FirsTier with merit increases based upon
performance and will be able to participate in Compass Bank's executive
incentive program. Mr. Nelson will also receive benefits available to Compass
Bank employees of equal title and base salary. The employment agreement also
contains noncompetition and confidentiality provisions.
In addition, certain other officers of FirsTier are expected to enter
into employment agreements with Compass Bank upon completion of the Merger.
POOLING TRANSFER RESTRICTIONS AGREEMENTS. The directors, executive
officers and certain principal shareholders of FirsTier, including Joel H. Wiens
and Timothy D. Wiens, who together own and/or control 7,289,473 shares of the
outstanding FirsTier Common Stock, have entered into Pooling Transfer
Restrictions Agreements with Compass and FirsTier pursuant to which they have
agreed, among other things, (1) not to transfer
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any of their respective shares of FirsTier Common Stock within 30 days prior to
the Effective Time, (2) 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 FirsTier 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 (3) not otherwise to transfer such Compass Common Stock except in compliance
with the applicable provisions of the Securities Act and the Exchange Act of
1934, as amended ("Exchange Act"), and the respective rules and regulations
thereunder.
WESTERN MANAGEMENT CORPORATION MERGER AGREEMENT. In addition to the
Merger Agreement, Compass has entered into the Ancillary Agreement with Western
Management Corporation. It is a condition to the consummation of the Merger that
the transactions contemplated by the Ancillary Agreement (the "Ancillary
Merger") shall be consummated simultaneously with the Merger. SEE "MERGER WITH
FIRSTIER--OTHER TERMS AND CONDITIONS"; "INFORMATION ABOUT FIRSTIER--INTERESTS OF
CERTAIN PERSONS" AND APPENDIX I.
The Ancillary Agreement provides for the merger of a newly formed
subsidiary of Compass ("Ancillary Merger Sub") with and into Western Management
Corporation. Western Management Corporation will be the surviving entity in the
Ancillary Merger and the separate existence of Ancillary Merger Sub will cease.
After the effective time of the Ancillary Merger, the directors and officers of
Ancillary Merger Sub will be the directors and officers of the surviving entity.
The Ancillary Agreement provides that the shares of common shares of
Western Management Corporation issued and outstanding immediately prior to the
effective time of the Ancillary Agreement, shall, by virtue of the Ancillary
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 ("Ancillary Merger Consideration") to the holder of record thereof,
without interest thereon.
As Ancillary Merger Consideration, Compass shall issue to the sole
shareholder of Western Management Corporation an aggregate number of shares of
Compass Common Stock equal to the quotient of (1) 147,040, divided by (2) the
average closing sales price of the Compass Common Stock for the twenty days of
trading preceding the fifth trading day prior to the day of the consummation of
the Ancillary Merger. In the event the average closing price would result in the
number of shares of Compass Common Stock to be issued in the Ancillary Merger to
be greater than 9,000, Compass will issue to the sole shareholder of Western
Management Corporation and such shareholder will accept an aggregate number of
shares of Compass Common Stock equal to 9,000. SEE "INFORMATION ABOUT
FIRSTIER--INTERESTS OF CERTAIN PERSONS."
BUSINESS PENDING EFFECTIVE TIME
The Merger Agreement imposes certain limitations on the conduct of
FirsTier's business pending consummation of the Merger. Among other things,
FirsTier must conduct its businesses only in the ordinary course, consistent
with prudent banking practices. SEE "MERGER WITH FIRSTIER--OTHER TERMS AND
CONDITIONS"; AND APPENDIX I.
AMENDMENT
The Merger Agreement may be amended or supplemented at any time, before
or after the Special Meeting, by an instrument in writing duly executed by all
the parties thereto. However, no change which reduces the Merger Consideration
or materially and adversely affects the rights of FirsTier's shareholders can be
made after the Special Meeting without the required approval of FirsTier's
shareholders. SEE APPENDIX I.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned
at any time notwithstanding approval thereof by the shareholders of FirsTier,
but prior to the Effective Time:
(1) by mutual written consent duly authorized by the Boards of
Directors of Compass and FirsTier;
(2) by Compass:
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- if Compass learns or becomes aware of a state of
facts or breach or inaccuracy of any representation
or warranty of FirsTier contained in the Merger
Agreement which constitutes a material adverse
effect;
- if the factual substance of any warranties regarding
environmental compliance is not true and accurate
irrespective of the knowledge or lack of knowledge of
FirsTier, and losses, damages, environmental response
costs, liabilities, fines, penalties, costs and
expenses which might arise therefrom could reasonably
be expected to exceed $500,000;
- if the environmental inspection conducted pursuant to
the Merger Agreement identifies any past or present
event, condition or circumstance that, based on the
estimates of environmental professionals, may
currently or in the future require expenditures by
FirsTier or its subsidiaries or additions to loan
loss reserve, which expenditures or additions to loan
loss reserve individually or in the aggregate may
exceed $500,000;
- if Compass is not permitted to conduct an
environmental inspection of any property to the
extent it deems appropriate, consistent with the
provisions of the Merger Agreement;
- if on or before the closing of the Merger,
- for each controlled property identified by
Compass as unacceptable and requiring
environmental response, FirsTier does not
deliver to Compass written evidence
acceptable to Compass that FirsTier has used
best efforts to develop a remediation plan
approved by the applicable environmental
regulatory authority, and implemented the
same;
- for each collateral property identified by
Compass as unacceptable and which may
require environmental response, FirsTier
does not provide evidence acceptable to
Compass that FirsTier and its subsidiaries
increased their respective loan loss
reserves in accordance with the Merger
Agreement;
- if any of the conditions to closing contained in the
Merger Agreement are not satisfied or waived in
writing by Compass;
- if there is a breach of the exclusivity provisions of
the Merger Agreement; or
- if FirsTier shall have failed to unanimously
recommend the Merger or shall have withdrawn its
unanimous recommendation or modified such unanimous
recommendation in a manner adverse in any respect to
the interests of Compass;
(3) by Compass or FirsTier:
- if the Effective Time shall not have occurred on or
before May 23, 2001 or such later date agreed to in
writing by Compass and FirsTier;
- 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; or
- if the Ancillary Agreement is terminated; or;
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(4) by FirsTier:
- if any of the conditions to closing contained in the
Merger Agreement are not satisfied or waived in
writing by FirsTier;
- in the event FirsTier enters into an agreement with
respect to an acquisition proposal in accordance with
the provisions of the Merger Agreement; or
- if at any time during the two business day period
following the fifth trading day prior to the closing,
both of the following conditions are satisfied:
- the Average Closing Price is less than
$15.75; and
- (1) the number obtained by dividing the
Average Closing Price by the last reported
sale price per share of Compass Common Stock
on August 23, 2000 shall be less than (2)
the number obtained by dividing the Average
Index Value by the Index Value on August 23,
2000 and subtracting 0.15 from the quotient
in this clause.
For purposes hereof, "Average Index Value" means the average of the
Index Values for the twenty days of trading preceding the fifth trading day
prior to the closing; "Index Value" on a given date means the Index Value of the
Standard and Poors Bank Composite Index as published by Standard and Poors.
If FirsTier either (1) violates the exclusivity provision of the Merger
Agreement and the Merger Agreement is thereby terminated, or (2) prior to
termination of the Merger Agreement receives any acquisition proposal and the
Merger Agreement is thereby terminated, then FirsTier shall pay to Compass an
aggregate termination fee of $8,000,000 in cash at the time of such termination.
SEE APPENDIX I.
EXCHANGE OF SHARES
Prior to the Effective Time, and pursuant to an exchange agreement in
the form attached as Exhibit B to the Merger Agreement (the "Exchange Agent
Agreement"), Compass shall deposit with Continental Stock Transfer & Trust
Company (the "Exchange Agent"), (1) the shares of Compass Common Stock required
to effect the exchange of Compass Common Stock for FirsTier Common Stock, and
(2) cash in an aggregate amount estimated to be sufficient to make cash payments
to FirsTier's shareholders in lieu of fractional shares of Compass Common Stock.
Promptly after the Effective Time, the Exchange Agent will furnish each
holder of record of FirsTier Common Stock as of the Effective Time with
transmittal materials for use in exchanging certificates representing FirsTier
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 FirsTier
Common Stock certificates for exchange accompanied by the appropriate
transmittal materials.
Under the terms of the Merger Agreement, Compass will not issue
certificates representing fractional shares of Compass Common Stock, and in lieu
thereof will pay cash to any holder of FirsTier Common Stock otherwise entitled
to receive such fractional share. Such cash payment shall be based on the
Average Closing Price. SEE "MERGER WITH FIRSTIER--FEDERAL INCOME TAX
CONSEQUENCES" AND APPENDIX I.
Former shareholders of FirsTier shall be entitled to vote after the
Effective Time at any meeting of Compass shareholders the number shares of
Compass Common Stock into which their shares are converted, regardless of
whether such shareholders have exchanged their certificates. Immediately after
the Effective Time, shareholders of FirsTier shall be entitled to dividends with
respect to shares of Compass Common Stock received by them in the Merger,
provided that, no dividend will be disbursed with respect to the shares of
Compass Common Stock until the holder's shares of FirsTier Common Stock are
surrendered in exchange therefor.
Upon the Effective Time of the Merger, former FirsTier shareholders
will cease to have any rights as shareholders of FirsTier, and FirsTier's
shareholders shall have only the right to receive the Merger Consideration
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specified in the Merger Agreement or, in the case of dissenting shareholders, to
exercise their rights under Colorado law. SEE "MERGER WITH FIRSTIER--DISSENTERS'
RIGHTS."
DISSENTERS' RIGHTS
Pursuant to Sections 7-113-101 through 7-113-302 of the CBCA, copies of
which are attached to this document as Appendix II, shareholders of FirsTier may
dissent from, and obtain payment of the fair value of their FirsTier shares in
the event of the consummation of the Merger. A FirsTier shareholder who wishes
to assert dissenters' rights in connection with the Merger must (1) deliver to
FirsTier, before the Special Meeting, written notice of the shareholder's intent
to demand payment for the shareholder's FirsTier shares if the Merger is
effectuated and (2) not vote in favor of the Merger.
If the Merger is approved at the Special Meeting and if the other
conditions of the Merger are satisfied or waived, FirsTier will deliver a
written dissenters' notice to all FirsTier shareholders who have satisfied the
requirements described above to assert those rights. FirsTier will send the
dissenters' notice no later than 10 days after the Special Meeting, assuming
that the Merger is approved by the FirsTier shareholders.
The dissenters' notice delivered by FirsTier will (1) state that the
Merger was authorized and the effective date or proposed effective date of the
Merger; (2) state an address at which FirsTier will receive payment demands and
an address at which certificates for FirsTier shares must be deposited; (3)
inform holders of uncertificated shares to what extent transfer of the shares
will be restricted after the payment demand is received; (4) include a form for
demanding payment, which shall request a dissenter to state an address to which
payment is to be made; and (5) set a date by which FirsTier must receive the
payment demand and certificates for certificated FirsTier shares, which date may
not be less than 30 days after the date the dissenters' notice is given.
Additionally, FirsTier may state in its notice the requirement that when a
record holder of FirsTier shares dissents with respect to the shares held by any
one or more beneficial owners of FirsTier shares, each beneficial owner of
FirsTier shares must certify to FirsTier that both such beneficial owner and the
record holder of FirsTier shares beneficially owned by such beneficial owner
have asserted, or will timely assert, dissenters' rights as to all such FirsTier
shares. The dissenters' notice will include a copy of the CBCA Sections
7-113-101 through 7-113-302.
A FirsTier shareholder to whom a dissenters' notice is sent and who
wishes to exercise dissenters' rights must: (1) demand payment on the form
provided or in another writing within the time period set forth in the
dissenters' notice and (2) deposit certificates of certificated FirsTier shares
in accordance with the terms of the dissenters' notice. A shareholder of
FirsTier who demands payment as described above retains all rights of a
shareholder of FirsTier, except the right to transfer the shares, until the
Effective Time and thereafter has only the right to receive payment for his or
her FirsTier shares.
Upon receipt by FirsTier of a demand for payment from a shareholder
holding uncertificated shares, and in lieu of the deposit of certificates
representing the shares, FirsTier may restrict the transfer thereof. However, in
all other respects, the above procedure for demanding payment is applicable to
shareholders who own uncertificated shares.
A shareholder of FirsTier who does not demand payment and deposit
certificates as required is not entitled to payment under CBCA Sections
7-113-101 through 7-113-302.
FEDERAL INCOME TAX CONSEQUENCES
The following sets forth the opinion of Locke Liddell & Sapp LLP
("Locke Liddell & Sapp"), counsel to Compass, based upon current law, as to
certain federal income tax consequences of the Merger to Compass, Merger Sub,
FirsTier and holders of FirsTier Common Stock, assuming the Merger is
consummated as contemplated herein.
This discussion is based upon existing provisions of the Code,
applicable U.S. Treasury regulations promulgated or proposed thereunder,
administrative rulings by the Internal Revenue Service (the "IRS") and judicial
authority as of the date hereof, all of which are subject to change, possibly
with retroactive effect. Any such change could affect the continuing validity of
this discussion. This discussion assumes the holders of FirsTier Common Stock
hold their FirsTier Common Stock as capital assets within the meaning of Section
1221 of the Code. This discussion is based upon certain assumptions discussed
below, including that certain representations will be made by Compass, Merger
Sub, FirsTier, certain FirsTier shareholders and others as appropriate. If any
of these
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representations cannot be made or are inaccurate, the tax consequences of the
Merger could differ from those described herein. This discussion does not
address all aspects of income taxation that may be relevant to any particular
holder of FirsTier Common Stock in light of such holder's specific circumstances
or to certain types of holders subject to special treatment under the U.S.
federal income tax laws (for example, foreign persons, dealers in securities,
banks and other financial institutions, insurance companies, tax-exempt
organizations, holders who acquired FirsTier Common Stock pursuant to the
exercise of options or otherwise as compensation or through a tax-qualified
retirement plan and persons holding FirsTier Common Stock as part of a straddle
or conversion transaction), and it does not discuss any aspect of state, local,
foreign or other tax law. No ruling has been (or will be) sought from the IRS as
to the anticipated tax consequences of the Merger.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED HEREIN
FOR GENERAL INFORMATION ONLY. HOLDERS OF FIRSTIER COMMON STOCK SHOULD CONSULT
THEIR OWN TAX ADVISERS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND
FOREIGN INCOME AND OTHER TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES.
Based upon the foregoing, the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code, Compass, Merger Sub and FirsTier will each be a party to the
reorganization within the meaning of Section 368(b) of the Code and,
accordingly, the Merger will result in the following federal income tax
consequences:
1. Compass, Merger Sub and FirsTier will not recognize any gain
or loss as a result of the Merger;
2. No gain or loss will be recognized by holders of FirsTier
Common Stock who exchange their FirsTier Common Stock solely
for Compass Common Stock;
3. Any cash received by a holder of FirsTier Common Stock in lieu
of a fractional share of Compass Common Stock in the Merger
will be treated as received in exchange for such fractional
share and not as a dividend. As a result, a holder of FirsTier
Common Stock generally will recognize a capital gain or loss
with respect to the cash payment received in lieu of a
fractional share equal to the difference between the cash
received and the portion of the FirsTier shareholder's basis
in FirsTier Common Stock allocable to such fractional share,
unless such payment, under each such FirsTier shareholder's
particular facts and circumstances, is deemed to have the
effect of a dividend distribution and not a redemption treated
as an exchange under the principles of Section 302 of the
Code. Such gain or loss will be long-term capital gain or loss
to the extent that the FirsTier Common Stock allocable to such
fractional share was held for more than one year as of the
Effective Time of the Merger;
4. Each holder's aggregate tax basis in the Compass Common Stock
received in the Merger will equal his or her aggregate tax
basis in the FirsTier Common Stock exchanged therefore,
decreased by the amount of any tax basis allocable to any
fractional share interest for which cash is received; and
5. The holding period of the Compass Common Stock received in the
Merger will include the holding period of the FirsTier Common
Stock exchanged therefore.
It is a condition to the consummation of the Merger that Compass and
FirsTier receive the above opinions at the Effective Time of the Merger. These
opinions will not bind the IRS or the courts, and there can be no assurance that
the IRS or the courts will not take a contrary position. The opinions of Locke
Liddell & Sapp will be expressly based and conditioned upon customary
limitations set forth therein and upon the accuracy of certain assumptions and
the receipt of and the truth and accuracy of certain representations made at the
Effective Time of the Merger to such counsel by Compass, Merger Sub, FirsTier,
certain FirsTier shareholders and others as appropriate. SEE "MERGER WITH
FIRSTIER -- OTHER TERMS AND CONDITIONS."
ACCOUNTING TREATMENT
Compass expects to account for the Merger using the
"pooling-of-interests" method of accounting. Compass has received a letter from
Compass' independent public accountants which will be updated as of the
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Effective Time, to the effect that, based on information provided to its
independent public accountants and assuming that the Merger is consummated in
accordance with the terms of the Merger Agreement, the Merger will qualify for
pooling-of-interests accounting treatment. Under this accounting method, at the
Effective Time, FirsTier's assets and liabilities will be added at their
recorded book values to those of Compass, and its shareholders' equity will be
added to Compass' consolidated balance sheet. SEE "SELECTED FINANCIAL DATA" AND
"MERGER WITH FIRSTIER--OTHER TERMS AND CONDITIONS."
GOVERNMENT APPROVALS
Consummation of the Merger is subject to approval by the shareholders
of FirsTier, the receipt by Compass of required regulatory approvals from the
Federal Reserve under the Bank Holding Company Act of 1956, as amended, ("BHC
Act"), the Colorado Division of Banking (the "Division of Banking"), and the
Nebraska Department of Banking and Finance (the "Department of Banking") and the
satisfaction or waiver of a number of other conditions. In addition,
consummation of the Subsequent Merger of the Banks into Compass Bank is subject
to approval by the Federal Reserve, the Alabama Superintendent of Banks (the
"Superintendent"), the Division of Banking and the Department of Banking.
Applications under the BHC Act, the Colorado Banking Code of 1957 and
the Nebraska Bank Holding Company Act of 1995 for the Merger were filed by
Compass with the Federal Reserve, the Division of Banking and the Department of
Banking on October 13, 2000. An application under the Bank Merger Act for the
Subsequent Merger was also filed on October 13, 2000 with the Federal Reserve,
the Superintendent, the Division of Banking and the Department of Banking. The
Merger and the Subsequent Merger cannot be consummated until the expiration of a
15 to 30 day waiting period following such approval during which the Justice
Department, pursuant to the BHC Act and the Bank Merger Act, may bring an action
opposing the Merger and the Subsequent Merger.
No Justice Department objection or adverse action is anticipated with
respect to the Merger or the Subsequent Merger.
Article 6.4 of the Colorado Banking Code of 1957 allows out-of-state
bank holding companies to acquire bank holding companies that own or control
depository institutions located within Colorado. Similarly, Section 8.911 of the
Nebraska Bank Holding Company Act of 1995 allows out of state bank holding
companies to acquire banks chartered in Nebraska. SEE "MERGER WITH
FIRSTIER--TERMINATION" AND "SUPERVISION AND REGULATION."
SUPERVISION AND REGULATION
GENERAL
Financial holding companies and banks are regulated extensively under
both federal and state law. Compass is subject to regulation by the Federal
Reserve and its bank subsidiaries (the "Subsidiary Banks") are subject to
regulation by the Federal Reserve and the Federal Deposit Insurance Corporation
("FDIC") and the appropriate state banking departments. Compass' Subsidiary
Banks are Compass Bank, an Alabama state bank headquartered in Birmingham,
Alabama, and Central Bank of the South, an Alabama state bank headquartered in
Anniston, Alabama. Compass' wholly-owned commercial bank subsidiaries conduct a
general, full-service commercial and consumer banking business in Alabama,
Texas, Florida, Colorado, New Mexico and Arizona. 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. The
deposits of each of the Subsidiary Banks are insured by the FDIC. 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 "WHERE
YOU CAN FIND MORE INFORMATION."
COMPASS
Compass is a financial holding company within the meaning of the BHC
Act and is registered as such with the Federal Reserve. Financial holding
companies are bank holding companies that meet certain requirements relating to
capitalization and management and have filed a declaration with the Federal
Reserve electing to be a
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financial holding company. Bank holding companies that elect to become financial
holding companies remain subject to all of the rules and regulations governing
bank holding companies. However, financial holding companies may engage not only
in activities already permissible for bank holding companies but also in a full
range of financial activities, including not only banking, insurance and
securities activities, but also merchant banking and additional activities
determined to be "financial in nature." As a financial holding company, Compass
is 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.
The BHC Act requires a bank holding company to obtain the prior
approval of the Federal Reserve before it may acquire substantially all of the
assets of any bank or ownership or control of any voting shares of any bank if,
after such acquisition, it would own or control, directly or indirectly, more
than 5% of the voting shares of any such bank. The Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 ("Interstate Act") permits bank
holding companies to acquire banks located in any state without regard to
whether the transaction is prohibited under any state law (except that states
may establish the minimum age of their local banks (up to a maximum of 5 years)
subject to interstate acquisition of out-of-state bank holding companies).
The Federal Reserve Act generally imposes certain limitations on
extensions of credit and other transactions by and between banks which are
members of the Federal Reserve and other affiliates (which includes any holding
company of which such bank is a subsidiary and any other non-bank subsidiary of
such holding company). Further, federal law prohibits a bank holding company and
its subsidiaries from engaging in certain tie-in arrangements in connection with
any extension of credit, lease or sale of property, or the furnishing of
services.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") enacted major regulatory reforms, stronger capital standards for
savings associations and stronger civil and criminal enforcement provisions.
FIRREA allows the acquisition of healthy and failed savings associations by bank
holding companies and imposes no interstate barriers on such bank holding
company acquisitions. With certain qualifications, FIRREA also allows bank
holding companies to merge acquired savings and loans into their existing
commercial bank subsidiaries. FIRREA also provides that a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989 in connection with (1)
the default of a commonly controlled FDIC-insured depository institution, or (2)
any assistance provided by the FDIC to a commonly controlled FDIC-insured
depository institution in danger of default.
In December of 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") was enacted. This act recapitalized the Bank
Insurance Fund ("BIF"), of which the Subsidiary Banks are members, substantially
revised statutory provisions, including capital standards, restricted certain
powers of state banks, gave regulators the authority to limit officer and
director compensation and required holding companies to guarantee the capital
compliance of their banks in certain instances. Among other things, FDICIA
requires the federal banking agencies to take "prompt corrective action" with
respect to banks that do not meet minimum capital requirements. FDICIA
establishes five capital tiers: "well capitalized", "adequately capitalized",
"undercapitalized", "significantly undercapitalized" and "critically
undercapitalized", as defined by regulations 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. A depository institution is generally
prohibited from making capital distributions (including paying dividends) or
paying management fees to a holding company if the institution would thereafter
be undercapitalized.
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
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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 June 30, 2000, the Subsidiary Banks were "well capitalized," and
were not subject to any of the foregoing restrictions, including, without
limitation, those relating to brokered deposits. If the Subsequent Merger had
been consummated as of June 30, 2000, Compass Bank would have been
well-capitalized. 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 Act of 1996 (the "Funds Act"), which became
effective October 8, 1996, required the FDIC to impose a special assessment on
institutions holding deposits subject to assessment by the Savings Association
Insurance Fund ("SAIF"). Although the Subsidiary Banks are members of BIF, they
hold deposits subject to assessment by SAIF as a result of acquisitions of SAIF
deposits or SAIF-insured institutions. Compass' deposit liability under the
Funds Act was $7.2 million based upon $1.1 billion of SAIF deposits, after
certain discounts and exemptions.
The Gramm-Leach-Bliley Act ("GLBA"), which was enacted on November 12,
1999, among other things, expands the BHC Act framework to permit bank holding
companies with subsidiary banks meeting certain capital and management
requirements to elect to become "financial holding companies." Financial holding
companies may engage in a full range of financial activities, including not only
banking, insurance and securities activities, but also merchant banking and
additional activities determined to be "financial in nature." The GLBA also
provides that the list of permissible activities will be expanded as necessary
for a financial holding company to keep abreast of competitive and technological
change.
Although it preserves the Federal Reserve as the umbrella supervisor of
financial holding companies, the GLBA adopts an administrative approach to
regulation that defers to the actions and paperwork requirements of the
"functional" regulators of insurers, broker-dealers, investment companies, and
banks. Thus, the various state and federal regulators of a financial holding
company's operating subsidiaries retain their jurisdiction and authority over
such operating entities. As the umbrella supervisor, however, the Federal
Reserve has the potential to affect the operations and activities of financial
holding companies' subsidiaries through its power over the financial holding
company parent. In addition, the GLBA contains numerous trigger points related
to legal noncompliance and other serious problems affecting bank affiliates that
could lead to direct Federal Reserve involvement and to the possible exercise of
remedial authority affecting both financial holding companies and their
affiliated operating companies.
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
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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 are supervised, regulated and
regularly examined by the Alabama State Banking Department and Compass Bank is
also regulated and examined by the Federal Reserve. The Subsidiary Banks, as
participants in the BIF and the SAIF of the FDIC, are subject to the provisions
of the Federal Deposit Insurance Act and to examination by and regulations of
the FDIC.
The 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. As a member of the Federal Reserve System, Compass Bank
is 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 their capital stock while
in default in the payment of any assessment due to the FDIC except in those
cases where the amount of the assessment is in dispute and the insured bank has
deposited satisfactory security for the payment thereof.
The Community Reinvestment Act of 1977 ("CRA") and the regulations of
the Federal Reserve implementing that act are intended to encourage regulated
financial institutions to help meet the credit needs of their local community or
communities, including low and moderate income neighborhoods, consistent with
the safe and sound operation of such financial institutions. The CRA and such
regulations provide that the appropriate regulatory authority will assess the
records of regulated financial institutions in satisfying their continuing and
affirmative obligations to help meet the credit needs of their local communities
as part of their regulatory examination of the institution. The results of such
examinations are made public and are taken into account upon the filing of any
application to establish a domestic branch or to merge or 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, Arizona, Colorado, Florida,
New Mexico and Texas. 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. Empire
Title & Escrow Corporation, a wholly-owned subsidiary of Compass, and its
licensed agents and subsidiaries are subject to reporting and licensing
regulations of the Colorado Division of Insurance. Albrecht & Associates, Inc.,
a wholly-owned subsidiary of Compass Bank, is a financial advisor specializing
in the divestment of oil and gas properties and is subject to examination by the
Superintendent.
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References under the heading "SUPERVISION AND REGULATION" to applicable
statutes are brief summaries of portions thereof, do not purport to be complete
and are qualified in their entirety by reference to such statutes.
DESCRIPTION OF COMPASS COMMON AND PREFERRED STOCK
The following summary of the terms and provisions of the Compass Common
Stock and Compass preferred stock does not purport to be complete and is
qualified in its entirety by reference to Compass' 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
incorporated by reference to the registration statement of which this document
is a part.
COMPASS COMMON STOCK
Compass is incorporated under the Delaware General Corporation Law
("GCL"). Compass is authorized to issue 200,000,000 shares of Compass Common
Stock, of which 120,920,968 shares were issued and outstanding on September 30,
2000. Compass' Board of Directors may at any time, without additional approval
of the holders of Compass Common Stock, issue additional authorized but
previously unissued shares of Compass Common Stock.
DIVIDENDS
Holders of Compass Common Stock are entitled to receive dividends
ratably when, as and if declared by Compass' Board of Directors from assets
legally available therefor, after payment of all dividends on preferred stock,
if any is outstanding. Under the GCL, Compass may pay dividends out of surplus
or net profits for the fiscal year in which declared and/or for the preceding
fiscal year, even if its surplus accounts are in a deficit position. Dividends
paid by its Subsidiary Banks are the primary source of funds available to
Compass for payment of dividends to its stockholders 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 FIRSTIER AND COMPASS--DIVIDENDS AND
REPURCHASES OF SHARES"; "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 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. As of the date of
this document, Compass Bank has surplus in excess of this amount. As a member of
the Federal Reserve System, Compass Bank is also subject to dividend limitations
imposed by the Federal Reserve that are similar to those applicable to national
banks. SEE "WHERE YOU CAN FIND MORE INFORMATION"; "MERGER WITH
FIRSTIER--BACKGROUND AND REASONS FOR THE MERGER"; "RISK FACTORS"; "SELECTED
FINANCIAL DATA"; "MARKET PRICES"; "COMPARISON OF RIGHTS OF SHAREHOLDERS OF
FIRSTIER AND COMPASS--DIVIDENDS AND REPURCHASES OF SHARES"; AND "INFORMATION
ABOUT COMPASS."
PREEMPTIVE RIGHTS
The holders of Compass Common Stock do not have preemptive rights to
subscribe for a proportionate share of any additional securities issued by
Compass before such securities are offered to others. The absence of preemptive
rights increases Compass' flexibility to issue additional shares of Compass
Common Stock in connection with acquisitions, employee benefit plans and for
other purposes, without affording the holders of Compass Common Stock a right to
subscribe for their proportionate share of those additional securities. Any
further issuance of Compass Common Stock after the Effective Time may reduce
former FirsTier's shareholders' proportionate interest in Compass.
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VOTING RIGHTS
The holders of Compass Common Stock are entitled to one vote per share
on all matters presented to shareholders. Holders of Compass Common Stock are
not entitled to cumulate their votes in the election of directors. Cumulative
voting rights, if provided for, entitle shareholders to a number of votes equal
to the product of the number of shares held and the number of directors to be
elected and allow shareholders to distribute such votes among any number of
nominees for director or cast such votes entirely for one director. Cumulative
voting rights tend to enhance the voting power of minority shareholders. SEE
"COMPARISON OF RIGHTS OF SHAREHOLDERS OF FIRSTIER 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.
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. As of September 30,
2000, no shares of Compass preferred stock were issued and outstanding. SEE
"MERGER WITH FIRSTIER"; "RISK FACTORS" AND "COMPARISON OF RIGHTS OF SHAREHOLDERS
OF FIRSTIER AND COMPASS--DIVIDENDS AND REPURCHASES OF SHARES."
COMPARISON OF RIGHTS OF
SHAREHOLDERS OF FIRSTIER AND COMPASS
CHARTER AND BYLAW PROVISIONS AFFECTING COMPASS STOCK
Compass' Certificate of Incorporation 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 stockholders or directors to approve certain business combinations and
other corporation actions, a minimum price provision, several special procedural
rules, a staggered Board of Directors, and the limitation that stockholder
actions without a meeting may only be taken by unanimous written stockholder
consent. FirsTier's Articles of Incorporation require a two-thirds vote by the
shareholders for any merger, the sale of all of the corporation's assets or
dissolution, and the CBCA requires that shareholders may take action without a
meeting only by unanimous written consent.
The foregoing summary is qualified in its entirety by reference to
Compass' Certificate of Incorporation 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 FirsTier, which are available upon
request from FirsTier and which are on file with the Commission. SEE "WHERE YOU
CAN FIND MORE INFORMATION" AND "RISK FACTORS."
In addition to the foregoing differences between FirsTier's and
Compass' charters, as a result of the Merger, FirsTier's shareholders, whose
rights are governed by the CBCA, 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 COLORADO AND DELAWARE AND
CORRESPONDING CHARTER AND BYLAW PROVISIONS
Certain differences between the GCL and the CBCA, as well as a
description of the corresponding provisions contained in Compass' and FirsTier's
respective charter and bylaws, as such differences may affect the rights of
shareholders, are set forth below. The following summary does not purport to be
complete and is qualified in its entirety to the provisions of the CBCA and the
GCL and applicable charter and bylaw provisions.
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MERGER
The CBCA does not require a shareholder vote of the surviving
corporation in a merger if the merger agreement does not amend the existing
articles of incorporation, each shareholder of the surviving corporation whose
shares were outstanding immediately before the merger will hold the same number
of shares, with identical designations, preferences, limitations and relative
rights, immediately after the merger, the number of voting shares outstanding
immediately after the merger, plus the number of voting shares issuable as a
result of the merger or by the exercise of rights and warrants issued pursuant
to the merger, will not exceed by more than 20% the total number of shares of
the surviving corporation outstanding immediately before the merger, and the
number of participating shares outstanding immediately after the merger, plus
the number of participating shares issuable as a result of the merger either by
the conversion of securities issued pursuant to the merger or by the exercise of
rights and warrants issued pursuant to the merger, will not exceed by more than
20% the total number of participating shares outstanding immediately before the
merger.
The GCL generally permits a merger to become effective without the
approval of the surviving corporation's stockholders if the certificate of
incorporation of the surviving corporation does 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 Colorado law for
corporations formed after June 30, 1994 (such as FirsTier, which was
reincorporated in Colorado in 1999), and except as provided in a corporation's
articles of incorporation, a merger must be approved by the holders of a
majority of the shares entitled to vote thereon, unless any class of shares is
entitled to vote thereon as a class in which event the merger shall be approved
by the affirmative vote of the holders of a majority of the shares of each class
entitled to vote as a class. FirsTier's Articles of Incorporation require the
approval of two-thirds of all shares entitled to vote to approve the Merger.
Where stockholder 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 of Incorporation requires
supermajority approval by its Board of Directors and stockholders in certain
cases, as described above.
SEE "RISK FACTORS" AND "COMPARISON OF RIGHTS OF SHAREHOLDERS OF
FIRSTIER AND COMPASS--CHARTER AND BYLAW PROVISIONS AFFECTING COMPASS STOCK."
APPRAISAL RIGHTS
Under both Delaware and Colorado law, a shareholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights by which such shareholder may
receive cash in the amount of the fair market value of his or her shares in lieu
of the consideration he or she would otherwise receive in the transactions.
Under both Delaware and Colorado law, such fair market value is determined
exclusive of any element of value arising from the accomplishment or expectation
of the merger or consolidation.
The CBCA provides that dissenters' rights are not available (1) with
respect to the sale of all or substantially all of the assets of the corporation
or a merger if no vote of the shareholders is required to approve the
transaction under Colorado law or (2) to shareholders of shares which either
were listed on a national securities exchange registered under the Securities
Exchange Act of 1934 or on the national market system of the National
Association of Securities Dealers Automated System or were held of record by
more than 2,000 holders if such shareholders receive only shares of the
surviving corporation or shares of any other corporation that are either listed
on a national securities exchange registered under the Securities Exchange Act
of 1934 or on the national market system of the National Association of
Securities Dealers Automated Quotation System or held of record by more than
2,000 holders plus cash in lieu of fractional shares.
Under Delaware law, appraisal rights are not available (1) with respect
to the sale of all or substantially all of the assets of a corporation, (2) with
respect to a merger or consolidation by a corporation the shares of which are
either listed on a national securities exchange, designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or are held of record by more than 2,000 holders if
such shareholders receive only shares of the surviving corporation or shares of
any other corporation that are either listed on a national securities exchange,
designated as a national market system security on an interdealer
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quotation system by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 holders, plus cash in lieu of fractional shares of
such corporation, or (3) to shareholders of a corporation surviving a merger if
no vote of the shareholders of the surviving corporation is required to approve
the merger under Delaware law. SEE "MERGER WITH FIRSTIER--DISSENTERS' RIGHTS"
AND APPENDIX II.
SPECIAL MEETINGS
Colorado law provides that special meetings of the shareholders may be
called by a corporation's Board of Directors, the person or persons authorized
by the bylaws or resolution of the Board of Directors to call such a meeting or
by the record holders of at least 10% of all shares entitled to vote at the
meetings. FirsTier's Bylaws provide that special meetings of the shareholders
may be called by the Chairman of the Board, the President, the Board of
Directors, or by the holders of not less than 10% of all outstanding shares
entitled to vote at the meeting.
Stockholders of Delaware corporations do not have a right to call
special meetings unless such right is conferred upon the stockholders in the
corporation's Certificate of Incorporation or Bylaws. Compass' Certificate of
Incorporation prohibits stockholders from calling special meetings. SEE "RISK
FACTORS."
ACTIONS WITHOUT A MEETING
Colorado law provides that any action to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing is signed by
all of the shareholders entitled to vote with respect to the subject matter
thereof.
Delaware law provides that stockholders may take action without a
meeting if a consent in writing to such action is signed by the stockholders
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 of Incorporation prohibits stockholder action by written consent
except where such action is taken unanimously. SEE "RISK FACTORS."
ELECTION OF DIRECTORS
Colorado law provides that a corporation's articles of incorporation
may provide that shares otherwise entitled to vote cumulatively may not so vote.
FirsTier's Articles of Incorporation do not allow cumulative voting in the
election of directors. Holders of Compass Common Stock are not entitled to
cumulate their votes in the election of directors. SEE "DESCRIPTION OF COMPASS
COMMON AND PREFERRED STOCK--VOTING RIGHTS."
VOTING ON OTHER MATTERS
Both Colorado and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the outstanding voting shares of the corporation transferring such assets,
unless otherwise provided in the corporation's charter or bylaws. FirsTier's
Articles of Incorporation require a vote by the shareholders holding two-thirds
of the outstanding shares for the sale of all or substantially all of FirsTier's
assets. Compass' Certificate of Incorporation does not provide for a different
vote than that required by Colorado or Delaware law.
Both Colorado and Delaware law generally do not require class voting,
except in certain transactions involving an amendment to the certificate of
incorporation that adversely affects a specific class of shares or where the
class of securities designates such a right.
PREEMPTIVE RIGHTS
Under Colorado law, shareholders of a corporation in existence on June
30, 1994 have a preemptive right to acquire unissued shares except to the extent
the articles of incorporation limit or deny preemptive rights. FirsTier's
Articles of Incorporation provide that shareholders do not possess any
preemptive rights. Stockholders of Compass do not possess such preemptive
rights.
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DIVIDENDS AND REPURCHASES OF SHARES
Colorado law dispenses with the concepts of par value of shares as well
as statutory definitions of capital, surplus and the like. The concepts of par
value, capital and surplus are retained under Delaware law. Colorado law permits
a corporation to declare and pay dividends unless, after giving it effect, the
corporation would not be able to pay its debts as they become due in the usual
course of business, or the corporation's total assets would be less than the sum
of its total liabilities plus (unless the articles of incorporation permit
otherwise) the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
FirsTier's Bylaws allow the Board of Directors to, from time to time,
in the manner permitted by the CBCA, declare, and the corporation to pay,
dividends in money or property other than its own shares.
Delaware law permits a corporation to declare and pay dividends out of
surplus or if there is no surplus, out of net profits for the fiscal year as
long as the amount of capital of the corporation following the declaration and
payment of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having preference
upon the distribution of assets. In addition, Delaware law generally provides
that a corporation may redeem or repurchase its shares only if the capital of
the corporation is not impaired and such redemption or repurchase would not
impair the capital of the corporation.
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.
SEE "WHERE YOU CAN FIND MORE INFORMATION"; "SELECTED FINANCIAL DATA";
"MARKET PRICES"; AND "DESCRIPTION OF COMPASS COMMON AND PREFERRED STOCK."
LIMITATION OF LIABILITY AND INDEMNIFICATION
Colorado and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws of
both states also permit, with certain exceptions, a corporation to adopt a
provision in its articles of incorporation or certificate of incorporation, as
the case may be, eliminating the liability of a director to the corporation or
its shareholders for monetary damages for breach of the director's fiduciary
duty. There are nonetheless certain differences between the laws of the two
states respecting indemnification and limitation of liability.
FirsTier's Articles of Incorporation eliminate the liability of
directors to the corporation to the fullest extent permissible under Colorado
law. Colorado law does not permit the elimination of monetary liability where
such liability is based on breaches of the director's duty of loyalty to the
corporation or its stockholders, acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law, approving an
improper distribution, or receipt of an improper personal benefit.
FirsTier's Articles of Incorporation and Bylaws authorize
indemnification of officers and directors to the fullest extent permitted by
Colorado law.
Under Compass' Certificate of Incorporation, a director will not be
liable to Compass or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except (1) for breach of a director's duty of
loyalty, (2) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) unlawful payment of dividend or
unlawful stock purchase or redemption, or (4) any transaction from which the
director derived an improper personal benefit. Compass' Certificate of
Incorporation authorizes indemnification of officers, directors and others to
the fullest extent permitted by Delaware law.
Both Colorado and Delaware law require indemnification when the
individual has defended successfully the action on the merits or otherwise.
Expenses incurred by an officer or director in defending an action may
be paid in advance, under Colorado law and Delaware law, if such director or
officer undertakes to repay such amounts if it is ultimately determined that he
or she is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of
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indemnity insurance for the benefit of its officers, directors, employees and
agents whether or not the corporation would have the power to indemnify against
the liability covered by the policy. SEE "WHERE YOU CAN FIND MORE INFORMATION."
REMOVAL OF DIRECTORS
A director of a Colorado corporation may be removed, with or without
cause, unless the articles of incorporation provide that a director may be
removed for cause (a provision which is not in FirsTier's Articles of
Incorporation). A director may be removed by the shareholders only if the number
of votes cast for removal exceeds the number of votes cast against removal. A
different rule applies in the case in which the corporation has cumulative
voting for directors, which FirsTier does not have.
A majority of stockholders of a Delaware corporation may remove a
director with or without cause, unless the directors are classified and elected
for staggered terms, in which case, directors may be removed only for cause.
Compass' Certificate of Incorporation provides that the directors are classified
and elected for staggered terms, and any such removal must be for cause after a
supermajority vote (80%) of the stockholders.
INSPECTION OF BOOKS AND RECORDS
Under Colorado law, a shareholder is entitled to inspect and copy,
during regular business hours at the corporation's principal office, the records
of the corporation, if the shareholder gives the corporation written demand at
least five business days before the date on which the shareholder wishes to
inspect and copy such records. Under Delaware law, a stockholder has such right
upon written demand stating the purpose of such inspection.
ANTITAKEOVER PROVISIONS
Delaware has enacted antitakeover legislation. Compass has opted out of
such provisions as provided by the GCL. Certain provisions of Compass'
Certificate of Incorporation and Bylaws limiting a takeover without the support
of its Board of Directors are described in "COMPARISON OF RIGHTS OF SHAREHOLDERS
OF FIRSTIER AND COMPASS--CHARTER AND BYLAW PROVISIONS AFFECTING COMPASS STOCK."
Colorado has not enacted similar legislation.
Although certain of the specific differences between the voting and
other rights of FirsTier's shareholders and Compass' stockholders are discussed
above, the foregoing summary is not intended to be a complete statement of the
comparative rights of such shareholders under Colorado and Delaware law, or the
rights of such persons under the respective charters and bylaws of Compass and
FirsTier. 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 CBCA and the
GCL, and the specific provisions of Compass' Certificate of Incorporation and
Bylaws, and FirsTier's Articles of Incorporation and Bylaws, each as amended.
RESALE OF COMPASS STOCK
The Compass Common Stock to be issued to holders of FirsTier 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 FirsTier within the meaning of Rule 145 under the Securities Act. Such
affiliates are not permitted to transfer any Compass Common Stock except in
compliance with the Securities Act and the rules and regulations thereunder.
Such affiliates have already delivered to Compass a written agreement providing
that each such affiliate will not (1) sell, pledge, transfer or otherwise
dispose of any of such affiliate's FirsTier Common Stock within 30 days prior to
the effective time of the merger; (2) 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 FirsTier
and Compass, except for pledges by such affiliates of all or part of such
affiliate's Compass Common Stock acquired in the merger, provided the lender
agrees to be bound by the terms of such written agreement; or (3) transfer any
Compass Common Stock except in compliance with Rule 145 promulgated by the
Commission under the Securities Act and any new requirements imposed by the
Commission or the Financial Accounting Standards Board for Compass' accounting
of the Merger as a pooling of interests. SEE "MERGER WITH FIRSTIER--ACCOUNTING
TREATMENT"; AND APPENDIX I.
32
<PAGE> 36
It is a condition to Compass' obligations to consummate the Merger that
holders of shares of FirsTier Common Stock that will be entitled to receive at
least 50% of the aggregate Merger Consideration have represented to Compass that
they have no plan or intention to sell or otherwise dispose of (1) shares of
FirsTier prior to and in connection with the merger to FirsTier or any party
related to FirsTier or Compass and (2) the shares of Compass Common Stock
received in the Merger to Compass or any party related to Compass. SEE "MERGER
WITH FIRSTIER--OTHER TERMS AND CONDITIONS."
INFORMATION ABOUT COMPASS
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Certain documents filed by and relating to Compass, including Compass'
Annual Report on Form 10-K for the year ended December 31, 1999 and Compass'
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000 and June
30, 2000, are incorporated herein by reference. SEE "WHERE YOU CAN FIND MORE
INFORMATION."
INTERESTS OF CERTAIN PERSONS
No director or executive officer of Compass has any material direct or
indirect financial interest in FirsTier or the Merger, except as a director,
executive officer or shareholder of Compass or its subsidiaries.
RECENT DEVELOPMENTS
Compass' strategy for growth includes strengthening its presence in
core markets, expanding into contiguous markets and broadening its product
offerings.
INFORMATION ABOUT FIRSTIER
BUSINESS
OVERVIEW
FirsTier, a multi-bank holding company headquartered in the
metropolitan Denver, Colorado area owns two full service community banks located
in Colorado and Nebraska. FirsTier's Colorado bank currently has 16 banking
locations dispersed throughout the Front Range area of Colorado, which includes
the metropolitan areas of Denver, Boulder, Colorado Springs, Fort Collins and
their surrounding communities. FirsTier's Nebraska bank has two banking
locations in western and central Nebraska. As of June 30, 2000, FirsTier had
total assets of $874.5 million, loans of $731.7 million, deposits of $774.5
million and stockholders' equity of $31.4 million.
HISTORY
FirsTier was organized under Nebraska law in 1963 by founder and
Chairman, Joel H. Wiens, to purchase its first community bank, Firstate Bank, in
Kimball, Nebraska. In 1993, FirsTier began its Colorado banking operation
through the purchase of a bank in Northglenn, Colorado, which was renamed
Firstate Bank of Colorado. In 1995, FirsTier began its Colorado expansion
through establishing start-up branches in areas of the Front Range of Colorado
that FirsTier believed were well situated for deposit and loan growth. In
addition to its branch start-ups, FirsTier purchased a two-branch savings bank
in 1997 that has been assimilated into its Colorado bank. In September 1999,
FirsTier changed its name from First Western Corp. to FirsTier Corporation and
moved its state of incorporation from Nebraska to Colorado. FirsTier also
changed the name of its Colorado bank to FirsTier Bank.
THE BANKS
The Colorado bank is a Colorado state chartered bank with total assets
of $790.8 million, net loans of $668.1 million and total deposits of $704.7
million as of June 30, 2000. The Nebraska bank is a Nebraska state chartered
bank with total assets of $84.6 million, net loans of $61.4 million and total
deposits of $74.2 million as of June 30, 2000.
33
<PAGE> 37
The following table presents information about each of FirsTier's
banking locations.
<TABLE>
<CAPTION>
YEAR OPENED TOTAL ASSETS AT
BANKING LOCATION OR ACQUIRED JUNE 30, 2000
--------------------------------- --------------- --------------------
(IN THOUSANDS)
<S> <C> <C>
Colorado Bank:
Denver Metro Area:
Northglenn 1993 $90,552
Thornton 1995 13,299
Cherry Creek 1995 52,722
Westminster 1996 34,250
Denver Tech Center 1998 49,606
Downtown Denver 1999 13,840
Arvada 1999 1,419
Parker 1999 10,111
655 Broadway 2000 ---
Boulder Metro Area:
Boulder/Gunbarrel 1997 66,875
Lafayette 1998 40,392
Longmont 1999 18,423
Central Boulder 1999
Northern Colorado Area:
Greeley 1997 34,909
Loveland 1998 20,893
Fort Collins 1998 19,196
Colorado Springs Metro Area:
Colorado Springs(4) 1999 3,472
Nebraska Bank:
Kimball 1963 68,442
Elm Creek 1992 14,047
</TABLE>
PRIMARY MARKET AREAS
FirsTier's primary market areas include the Front Range area of
Colorado and, to a lesser extent, western and central Nebraska. The Front Range
area is the most densely populated area in the Rocky Mountain region. The Front
Range area lies along the eastern edge of the Rocky Mountains and covers the 10
county area from Pueblo through Fort Collins, including the Denver and Boulder
metropolitan areas. FirsTier's Nebraska market area includes the Nebraska
Panhandle, as well as the fringes of southeastern Wyoming and the northeastern
corner of Colorado, with service providers and agriculture being the primary
businesses.
LENDING ACTIVITIES
FirsTier provides a broad range of commercial and retail lending
services, including commercial and residential real estate loans, construction
loans, commercial loans and installment loans. FirsTier's primary lending focus
is on commercial lending for small to mid-sized businesses with borrowing needs
of $1 to $10 million. Loans in excess of $5 million are participated primarily
to other financial institutions in FirsTier's market areas. As of June 30, 2000,
substantially all of FirsTier's outstanding loans were to customers within its
primary market area.
Interest rates charged on loans vary with the degree of risk, the term,
the underwriting and the servicing costs, the principal amount and the extent of
other banking relationships, and are further subject to competitive pressures,
money market rates, the availability of funds and government regulations. As of
June 30, 2000, approximately 83.8% of FirsTier's loans were at variable interest
rates that change with FirsTier's base rate or some other reference rate.
34
<PAGE> 38
DEPOSIT ACTIVITIES
FirsTier offers a wide range of deposit products including regular
checking, checking with interest, money market accounts, regular savings
accounts, certificates of deposit, IRAs, corporate cash management and debit
cards. Deposits at FirsTier's banks are insured by the Federal Deposit Insurance
Corporation up to statutory limits. In addition to its banking locations,
FirsTier also provides additional access for its customers through on-line
internet banking, PC banking, telephone banking, Visa debit cards and 20
automatic teller machines. In addition, FirsTier's banks offer investment
products for individuals and businesses.
COMPETITION
The banking business in the Front Range area of Colorado is highly
competitive and is currently dominated by a number of large regional financial
institutions, including Wells Fargo & Company, U.S. Bancorp Inc., Banc One
Corporation, Zions Bancorporation and KeyCorp. In addition to these regional
banks, there are a number of community banks that operate in the area, including
Colorado Business Bank, Guaranty Bank and Trust Company, Colorado State Bank &
Trust, First Bank Holding Company of Colorado and Union Bank and Trust.
FirsTier's Nebraska bank competes with First National Bank of Omaha and American
National Bank in Kimball, Nebraska. FirsTier competes for loans and deposits
with other commercial banks, including those listed above, savings and loan
associations, finance companies, insurance companies, credit unions and mortgage
bankers. In addition to the traditional financial institutions, FirsTier also
competes for loans with brokerage and investment banking companies, nonfinancial
institutions, including retail stores that maintain their own credit programs,
and governmental agencies that make available low cost or guaranteed loans to
certain borrowers. Particularly in times of high interest rates, FirsTier also
faces significant competition for deposits from sellers of short-term money
market securities and other corporate and government securities. FirsTier
competes for loans and deposits principally through the scope and quality of the
services it provides.
By virtue of their larger capital bases or their affiliation with
larger multi-bank holding companies, many of FirsTier's competitors have
substantially greater capital resources and lending limits than FirsTier does.
As a result, FirsTier may experience greater competition in its primary service
areas. FirsTier's business, financial condition, results of operations and cash
flows may be adversely affected by an increase in competition. Moreover,
recently enacted and proposed legislation has focused on expanding the ability
of participants in the banking industry to engage in other lines of business.
The enactment of this legislation could put FirsTier at a competitive
disadvantage because it may not have the capital to participate in other lines
of business to the same extent as more highly capitalized bank holding
companies.
FirsTier faces competition for its personnel. Management believes that
FirsTier is able to compete for personnel effectively in its market areas.
PROPERTIES
FirsTier's principal offices, and those of its Colorado bank, are
located in a two story, 14,000 square foot building FirsTier owns at 11210 Huron
Street, Northglenn, Colorado. FirsTier also owns the Thornton, Cherry Creek,
Loveland, Fort Collins, Longmont, Arvada, Kimball and Elm Creek land and bank
buildings. All of FirsTier's other banking location offices are leased or will
be leased under long-term agreements with unaffiliated third parties. These
leases typically have five to 10 year terms, with options to extend at market
rates. With the exception of its principal offices, FirsTier's banking locations
range in size from 1,500 square feet to 8,500 square feet. On April 21, 2000,
FirsTier purchased a 6,000 square foot operations facility next to its Thornton
branch for $1,450,000 from a limited liability company owned by FirsTier's
Colorado bank and certain of FirsTier's officers and directors. SEE "INFORMATION
ABOUT FIRSTIER--CERTAIN TRANSACTIONS AND RELATED PARTIES." All of FirsTier's
properties are in good working condition. Total payments for FirsTier's leased
facilities are expected to be $948,000 for 2000.
INTELLECTUAL PROPERTY RIGHTS
FirsTier purchased the "FirsTier" mark, including the goodwill
associated with the mark, from U.S. Bank National Association on September 17,
1999, but agreed to certain restrictions. These include, among others, that
FirsTier would not use the mark in any form in Omaha, Nebraska and Lincoln,
Nebraska for a period of 24 months and that FirsTier would not use the mark in
connection with any logo, design or color scheme that was not clearly
35
<PAGE> 39
distinguishable from the logo, design and color scheme that previously were used
by U.S. Bancorp or U.S. Bank National Association. FirsTier licensed back to
U.S. Bancorp and U.S. Bank National Association the right to continue to use the
mark in connection with the advertising and sale of money market savings
services to their customers who purchased those services before September 17,
1999. FirsTier did not receive any representations or warranties about the mark.
If there are any defects in the chain of title for the mark or its registration,
FirsTier will have the responsibility for correction at its own cost and
expense. Compass has agreed that following the Merger it will transfer to Joel
H. Wiens the tradename "FirsTier," subject to the limitations in the prior
agreement with US. Bank National Association and U.S. Bancorp, and any pending
service Mark applications using the "FirsTier" name, subject to certain
geographical limitations. SEE "MERGER WITH FIRSTIER--ADDITIONAL AGREEMENTS" AND
"INFORMATION ABOUT FIRSTIER--INTERESTS OF CERTAIN PERSONS."
LEGAL PROCEEDINGS
FirsTier and its subsidiaries are from time to time parties to various
legal actions arising in the normal course of business. Management believes that
there is no proceeding threatened or pending against FirsTier or any of its
subsidiaries which, if determined against FirsTier, would have a material
negative effect on FirsTier's consolidated financial condition or results of
operations.
EMPLOYEES
As of June 30, 2000, FirsTier had approximately 290 full-time
equivalent employees.
36
<PAGE> 40
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS
AT OR FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------------------------------------------------
1996 1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Interest income $ 7,$08 $ 16,263 $ 26,754 $ 47,73 $ 19,152 $ 37,953
Interest expense 3,120 7,481 12,754 24,250 9,773 20,019
----------- ----------- ----------- ----------- ---------- ----------
Net interest income 4,788 8,782 14,000 23,488 9,379 17,934
Provision of loan losses 15 140 1,090 3,230 1,429 2,930
----------- ----------- ----------- ----------- ---------- ----------
Net interest income after provision for 4,773 8,642 12,910 20,258 7,950 15,004
loan losses
Non-interest income 1,251 1,708 2,840 3,695 1,899 3,479
Non-interest expenses 3,749 6,544 10,659 16,271 6,939 11,465
----------- ----------- ----------- ----------- ---------- ----------
Income before income taxes 2,275 3,806 5,091 7,682 2,910 7,018
Income tax expense 705 1,309 1,716 2,616 957 2,519
----------- ----------- ----------- ----------- ---------- ----------
Net income $ 1,$70 2,497 $ 3,375 $ 5,066 $ 1,953 $ 4,499
=========== =========== =========== =========== ========== ==========
Net income per common share--
basic and diluted 0.24 0.36 0.46 0.68 0.26 0.59
Weighted average common shares outstanding--
basic and diluted 6,559,529 7,018,696 7,346,673 7,504,835 7,502,002 7,581,171
BALANCE SHEET DATA:
Total assets 125,013 227,600 367,207 706,821 499,383 874,480
Loans 68,751 165,627 289,989 620,949 414,880 731,667
Allowance for loan losses 851 1,321 2,187 5,322 3,621 7,721
Investment securities 31,788 28,512 34,228 42,358 52,863 43,551
Deposits 101,387 200,294 319,480 601,994 428,512 774,546
Stockholders' equity 13,749 16,911 20,706 25,704 22,961 31,419
Book value per share 2.10 2.30 2.82 3.39 3.06 4.07
Tangible book value per share 2.10 2.18 2.70 3.32 2.95 4.05
KEY RATIOS:(1)
Net interest margin(2) 5.36% 5.27% 5.32% 4.92% 4.56% 4.77%
Net interest spread(2) 4.24 4.39 4.56 4.38 3.92 4.33
Return on average assets 1.52 1.35 1.18 0.97 0.91 1.16
Return on average common equity 11.42 16.31 17.94 21.66 17.82 31.67
Operating expenses to average assets 3.64 3.53 3.72 3.15 3.24 2.96
Efficiency ratio(3) 62.08 61.82 62.92 59.62 61.24 53.39
Nonperforming assets to total assets 0.10 0.60 0.30 0.16 0.14 0.42
Nonperforming loans to total loans 0.17 0.74 0.32 0.17 0.17 0.49
Allowance for loan losses to total loans 1.24 0.80 0.75 0.86 0.87 1.07
Allowance for loan losses to nonperforming 739.65 107.57 236.94 512.0 528.0 211.0
loans
Net charge-offs (recoveries) to average (0.13) (0.04) 0.10 0.02 (0.01) 0.08
loans
Tier I leverage ratio 12.95 7.53 5.70 5.15 9.67 5.13
Tier I risk-based capital ratio 17.36 9.02 6.44 5.16 9.98 5.37
Total risk-based capital ratio 18.36 9.74 7.22 8.23 10.83 7.96
</TABLE>
------------------
(1) Where appropriate, the ratios for the six months ended June 30, 1999 and
2000 have been annualized. These ratios are not necessarily indicative of
the results for the entire year.
(2) Calculated on a tax equivalent basis.
(3) The efficiency ratio represents non-interest expenses, excluding
amortization of goodwill, as a percentage of net interest income plus
non-interest income.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements of FirsTier and related notes included
elsewhere in this document. FirsTier's future operating results may be affected
by various trends and factors which are beyond its control. Past results and
trends may not be reliable indicators of future results or trends. With the
exception of historical information, the matters discussed below include
forward-looking statements that involve risks and uncertainties.
OVERVIEW
FirsTier has experienced significant growth since 1995 primarily due to
its start-up branch expansion strategy. To date, FirsTier has opened 14
locations and acquired two locations. Total assets have increased to $874.5
million as of June 30, 2000, from $706.8 million as of December 31, 1999, $367.2
million as of December 31, 1998 and $227.6 million as of December 31, 1997. Net
income was $4.5 million for the six months ended June 30, 2000,
37
<PAGE> 41
$5.1 million for the year ended December 31, 1999, $3.4 million for 1998 and
$2.5 million for 1997. FirsTier has increased its net income while opening new
branches and absorbing branch start up costs. FirsTier's new branches typically
take up to one year to achieve profitability. FirsTier's return on average
common equity was 21.66% for 1999, 17.94% for 1998, and 16.31% for 1997. For the
six months ended June 30, 2000, FirsTier's return on average common equity was
31.67% and was 17.82% for the same period in 1999. FirsTier's return on average
assets was 0.97% for 1999, 1.18% for 1998 and 1.35% for 1997. For the six months
ended June 30, 2000, FirsTier's return on average assets was 1.16% and was 0.91%
for the same period in 1999. The decrease in FirsTier's return on average assets
since 1995 primarily has been attributable to its significant asset growth and a
change in its deposit funding mix. FirsTier's return on average assets has been
further negatively impacted by loan loss allowance increases which FirsTier has
incurred since the fourth quarter of 1998 and the first quarter of 1999 when it
implemented a revised loan loss reserve methodology.
RESULTS OF OPERATIONS
NET INTEREST INCOME. FirsTier's net income is derived primarily from
net interest income. Net interest income is the difference between interest
income, principally from loans, investment securities and funds sold, and
interest expense, principally on customer deposits and other interest-bearing
liabilities. Changes in net interest income result from changes in volume, net
interest spread and net interest margin. Volume refers to the average dollar
levels of earning assets and interest-bearing liabilities. Net interest spread
refers to the difference between the average yield on earning assets and the
average cost of interest-bearing liabilities. Net interest margin refers to net
interest income divided by average earning assets and is influenced by the level
and relative mix of earning assets and interest-bearing liabilities and their
yields and rates.
38
<PAGE> 42
The following table presents the average balances, net interest income
and expense and average yields and rates for FirsTier's earning assets and
interest-bearing liabilities for the indicated periods on a tax equivalent basis
assuming a 34% tax rate. Yields and net interest margins for the nine month
periods are annualized.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1997 1998 1999
---------------------------- ---------------------------- ----------------------------
INTEREST INTEREST INTEREST
AVERAGE EARNED YIELD AVERAGE EARNED YIELD AVERAGE EARNED YIELD
BALANCE OR PAID OR COST BALANCE OR PAID OR COST BALANCE OR PAID OR COST
--------- --------- -------- --------- --------- -------- --------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning Assets:
Investment securities:
Taxable $22,190 $1,220 5.5% $22,797 $1,224 5.37% $33,911 $1,866 5.50%
Tax exempt (tax
equivalent)
Funds sold and 8,393 678 8.07 8,917 758 8.50 8,775 783 8.92
interest-bearing deposits 12,823 735 5.73 16,147 870 5.39 12,418 600 4.83
Loans held for sale 1,839 121 6.58 3,327 193 5.80 3,472 228 6.57
Loans(1) 126,914 13,739 10.83 218,214 23,967 10.98 428,107 44,527 10.40
Allowance for loan losses (1,176) -- (1,507) -- (3,572) -- --
-------- ------- -------- -------- ------- -------
Total earning assets 170,983 $16,493 9.65 $267,895 $27,012 10.08 $483,111 $48,004 9.94
======== ------- ======== -------- ======= -------
Interest-bearing deposits:
Demand, interest-bearing $23,097 $630 2.73 $31,240 $987 3.16 $68,652 $2,710 3.95
Savings 18,897 795 4.21 23,657 1,043 4.41 32,077 1,430 4.46
Certificates of Deposit:
Under $100,000 72,229 4,412 6.11 126,396 7,751 6.13 231,845 13,280 5.73
$100,000 and over 19,500 1,149 5.89 35,349 2,103 5.95 60,216 3,499 5.81
-------- ------- -------- -------- ------- -------
Total interest-bearing
deposits 133,723 6,986 5.22 216,642 11,884 5.49 392,790 20,919 5.33
Federal Home Loan Bank
borrowings, federal
funds purchased and
securities sold under
agreements to repurchase 7,031 382 5.43 10,703 571 5.33 19,424 1,090 5.61
Note payable 1,500 113 7.53 3,846 299 7.77 4,155 355 8.54
Company obligated
mandatorily redeemable
preferred securities of
subsidiary trust -- -- -- -- -- 20,117 1,886 9.38
-------- ------- -------- -------- ------- -------
Total interest-bearing
liabilities $142,254 7,481 5.26 $231,191 12,754 5.52 436,486 24,250 5.56
======== ------- ======== -------- ======= -------
Net interest income (tax
equivalent) $9,012 $14,258 $23,754
======= ======== =======
Net interest margin 5.27 5.32 4.92
Net interest spread 4.39% 4.56% 4.38%
Ratio of average
interest-bearing
liabilities to average
earning assets 83.20% 86.30% 90.35%
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------
1999 2000
---------------------------- ----------------------------
INTEREST INTEREST
AVERAGE EARNED YIELD AVERAGE EARNED YIELD
BALANCE OR PAID OR COST BALANCE OR PAID OR COST
--------- ------------------ --------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Investment securities:
Taxable $30,486 $809 5.31% $35,926 $987 5.50
Tax exempt (tax
equivalent)
Funds sold and 8,948 397 8.87 7,732 379 9.80
interest-bearing deposits 18,509 414 4.47 14,812 407 5.50
Loans held for sale 5,207 155 5.95 3,741 109 5.83
Loans(1) 355,838 17,488 9.87 698,820 36,118 10.34
Allowance for loan losses (3,066) -- -- (6,341) -- --
------- ------- ------- -------
Total earning assets $415,922 $19,263 9.26 $754,690 $38,000 10.07
======= ------- ======= -------
Interest-bearing deposits:
Demand, interest-bearing $56,059 $973 3.47 $102,167 $2,156 4.22
Savings 29,838 627 4.20 37,169 832 4.47
Certificates of Deposit:
Under $100,000 198,135 5,560 5.61 347,675 10,232 5.89
$100,000 and over 47,568 1,335 5.62 117,786 3,467 5.89
------- ------- ------- -------
Total interest-bearing
deposits 331,600 8,495 5.12 604,797 16,687 5.52
Federal Home Loan Bank
borrowings, federal
funds purchased and
securities sold under
agreements to repurchase 14,997 379 5.05 49,779 1,541 6.19
Note payable 2,206 84 7.62 19,520 713 7.31
Company obligated
mandatorily redeemable
preferred securities of
subsidiary trust 17,387 815 9.37 23,000 1,078 9.37
------- ------- ------- -------
Total interest-bearing
liabilities 366,190 9,773 5.34 697,096 20,019 5.74
======= ------- ======= -------
Net interest income (tax
equivalent) $9,490 $17,981
======= =======
Net interest margin 4.56 4.77
Net interest spread 3.92% 4.33%
Ratio of average
interest-bearing
liabilities to average
earning assets 88.0% 92.4%
</TABLE>
(1) Loans are net of unearned loan fees. Nonaccrual loans are included in
average loans outstanding. Loan fees included in interest income were
$5.0 million for 1999, $2.4 million for 1998 and $1.2 million for 1997.
Loan fees included in interest income were $3.0 million for the six
months ended June 30, 2000 and were $2.1 million for the six months
ended June 30, 1999.
39
<PAGE> 43
Net interest income increased $8.5 million, or 91.2%, to $17.9 million
for the six months ended June 30, 2000 compared to $9.4 million for the same
period in 1999. Interest income increased $18.8 million, or 98.2%, to $38.0
million for the six months ended June 30, 2000 compared to $19.2 million for
same period in 1999. The interest income increase was primarily due to higher
balances of earning assets. Average earning assets increased $338.8 million, or
81.5%, to $754.7 million for the six months ended June 30, 2000 from $415.9
million for the same period in 1999. The majority of the increase in earning
assets was attributable to a $346 million increase in average loans outstanding.
A large portion of the loans in FirsTier's loan portfolio have floating rates
and are tied to the prime rate. As a result of up to a 22.6% increase in the
average prime lending rate, the average yield on earning assets increased to
10.1% for the six months ended June 30, 2000 from 9.3% for the same period in
1999.
Interest expense increased $10.2 million, or 104.8%, to $20.0 million
for the six months ended June 30, 2000 compared to $9.8 million for the same
period in 1999. The increase was due to an increase in interest-bearing
deposits, principally in certificates of deposit. Average balances of
certificates of deposit under $100,000 increased $149.6 million, or 75.5%, to
$347.7 million for the six months ended June 30, 2000 from $198.1 million for
the same period in 1999. This increase was due to growth at FirsTier's banks, as
well as promotional campaigns. Average balances of certificates of deposit of
$100,000 and over increased $70.2 million, or 147.5%, to $117.8 million for the
six months ended June 30, 2000, from $47.6 million for the same period in 1999.
The increase in certificates of deposit of $100,000 and over was due primarily
to promotional campaigns. The increase in the average note payable to $19.5
million for the six months ended June 30, 2000 from $2.2 million for the same
period in 1999 was due to the payoff of FirsTier's line of credit in February
1999 and the subsequent reborrowing on the line of credit commencing in June
1999. The source of payment on FirsTier's line of credit was proceeds from its
public offering of trust preferred securities completed in February 1999. The
cost of interest-bearing liabilities for the six months ended June 30, 2000,
increased to 5.74% compared to 5.34% for the same period in 1999 primarily due
to a change in mix of interest-bearing liabilities, including issuance of $23.0
million of trust preferred securities in February 1999 and an increase in the
rates paid on interest-bearing demand accounts to 4.22% from 3.47%, which
increase was partially offset by a reduction in costs of certificates of
deposit.
Net interest income increased $9.5 million, or 67.8%, to $22.5 million
for 1999 compared to $14.0 million in 1998. The 1998 net interest income was an
increase of $5.2 million, or 59.4%, from $8.8 million in 1997. Interest income
increased $21.0 million, or 78.4%, to $47.7 million for 1999 compared to $26.8
million in 1998. The 1998 interest income was an increase of $10.5 million, or
64.5%, from $16.3 million in 1997. The 1999 increases compared to 1998 resulted
primarily from an increase of $215.2 million in average earning assets, or
80.3%, to $483.1 million in 1999 from $267.9 million in 1998. The 1998 increases
compared to 1997 resulted primarily from an increase of $96.9 million, or 56.7%,
in average earning assets to $267.9 million in 1998 from $171.0 million in 1997.
The majority of the asset growth in each of 1999 and 1998 compared to each prior
year was due to growth in FirsTier's loan portfolio. Asset growth in 1998 was
also impacted by FirsTier's acquisition of a two-branch savings bank in February
1997 which was assimilated into the Colorado bank and had assets of $33 million
at the time of acquisition. Average loans in 1999 increased $209.9 million, or
96.2%, to $428.1 million from $218.2 million in 1998. Average loans in 1998
increased $91.3 million, or 71.9%, from $126.9 million in 1997. The average
yield on earning assets decreased to 9.94% in 1999 from 10.08% in 1998. The
average yield on earning assets increased to 10.08% in 1998 from 9.65% in 1997.
These yearly increases resulted from increased percentages of FirsTier's loan
portfolio in the real estate and construction categories.
Interest expense in 1999 increased $11.5 million, or 90.1%, to $24.3
million from $12.8 million in 1998. Interest expense in 1998 increased $5.3
million, or 70.5%, from $7.5 million in 1997. The increase in 1999 from 1998 was
due to a $176.1 million increase, or a 81.3% increase, in average deposits. The
majority of this growth was realized in the certificate of deposit categories. A
$70.0 million increase in certificates of deposit accounted for $82.9 million of
the increase in 1998 compared to 1997. Certificates of deposit increased in 1998
compared to 1997 due to new branch additions. The cost of interest-bearing
liabilities was 5.56% for 1999, 5.52% for 1998 and 5.26% for 1997. These
increases were due principally to increases in certificates of deposit as a
percentage of total liabilities and increased rates paid on certificates of
deposit.
40
<PAGE> 44
The following table illustrates, for the periods indicated, the changes
in net interest income on a tax-equivalent basis due to changes in volume and
changes in interest rates. Changes in net interest income due to both volume and
rate have been allocated to volume and rate in proportion to the relationship of
the absolute dollar amounts of the change in each.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1996 COMPARED TO 1997 1997 COMPARED TO 1998 1998 COMPARED TO 1999
----------------------------- ---------------------------- -----------------------------
INCREASE (DECREASE) IN NET INCREASE (DECREASE) IN NET INCREASE (DECREASE) IN NET
INTEREST INCOME DUE TO INTEREST INCOME DUE TO INTEREST INCOME DUE TO
CHANGE IN CHANGE IN CHANGE IN
----------------------------- ---------------------------- -----------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
--------- --------- --------- -------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning Assets:
Investment securities:
Taxable $ (55) $ (17) $ (72) $ 32 $ (28) $ 4 $ 612 $ 30 $ 642
Tax exempt (tax
equivalent) (16) (73) (89) 45 35 80 (13) 38 25
Funds sold and
interest-bearing 253 59 312 179 (44) 135 (180) (90) (270)
deposits
Loans held for sale 87 4 91 86 (14) 72 10 25 35
Loans 7,827 256 8,083 10,032 196 10,228 21,831 (1,271) 20,560
------- ------- ------- ------- ------- ------- ------- ------- --------
Total earning assets 8,096 229 8,325 10,374 145 10,519 22,260 (1,268) 20,992
------- ------- ------- ------- ------- ------- ------- ------- --------
Interest-bearing liabilities:
Demand, interest
bearing 134 29 163 257 100 357 1,477 246 1,723
Savings 167 34 201 210 38 248 375 12 387
Certificates of
deposit:
Under $100,000 2,791 137 2,928 3,323 16 3,339 6,040 (511) 5,529
$100,000 and over 711 24 735 942 11 953 1,445 (49) 1,396
Federal Home Loan
Bank borrowings,
federal funds
purchased and
securities sold
under agreements to
repurchase 181 40 221 196 (7) 189 489 30 519
Company obligated
mandatorily
redeemable preferred
securities of
subsidiary trust -- -- -- -- -- -- 1,886 -- 1,886
Note payable 113 -- 113 182 4 186 26 30 56
------- ------- ------- ------- ------- ------- ------- --------
Total
interest-bearing
liabilities 4,097 264 4,361 5,110 162 5,272 11,738 (242) 11,496
------- ------- ------- ------- ------- ------- ------- ------- --------
Net increase
(decrease) in net
interest income (tax
equivalent) $ 3,999 $ (35) $ 3,964 $ 5,264 $ (17) $ 5,246 $10,522 $ (1,026) $ 9,496
======= ======= ======= ======= ======= ======= ======= ======== ========
</TABLE>
PROVISION FOR LOAN LOSSES. In response to a sustained significant
growth rate in it's loan portfolio, FirsTier reviewed and revised its
methodology for estimating the adequacy of the allowance for loan losses in the
fourth quarter of 1998. The methodology was further revised in the first quarter
of 1999. FirsTier believes this new methodology permits a closer match between
period provisions for loan losses and period loan originations. Key components
of this revised methodology included:
- estimation of inherent losses due to increasing growth in
period loan origination;
- estimated collectibility and prior loss experience of loans
and commitments to extend credit;
- changes in the nature and volume of the loan portfolio;
- quality of the overall loan portfolio;
- loan concentrations;
- specific problem loans and commitments; and
- current economic conditions that may affect a borrower's
ability to pay.
During the six months ended June 30, 2000, the provision for loan
losses increased $1.5 million, or 107.1%, to $2.9 million from $1.4 million in
the same period in 1999. During 1999, the provision for loan losses increased
$2.1 million, or 196.3%, to $3.2 million from $1.1 million in 1998. The 1998
provision for loan losses increased $950,000, or 678.6%, from $140,000 in 1997.
FirsTier anticipates continuing increases period over period in the provision
for loan losses in response to growth in its loan portfolio and other factors as
management deems appropriate.
41
<PAGE> 45
NON-INTEREST INCOME. The following table presents FirsTier's
non-interest income for the indicated periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------- ------------------------------
1997 1998 1999 1999 2000
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Fees for customer services $761 $1,015 $1,998 $872 1,376
Net gains from sale of loans 625 1,036 816 594 401
Commissions and fees from
brokerage activities 29 220 315 181 236
Investment securities
transactions, net -- (4) -- -- --
Other operating income 293 573 566 252 1,466
----------- ----------- ----------- ----------- -----------
Total non-interest income $1,708 $2,840 $3,695 $1,899 $3,479
=========== =========== =========== =========== ===========
</TABLE>
During the six months ended June 30, 2000, total non-interest income
increased $1.6 million, or 83.2%, to $3.5 million from $1.9 million for the
comparable period in 1999. Non-interest income for 1999 compared to 1998
increased by $855 million, or 30.1%. Non-interest income for 1998 compared to
1997 increased by $1.1 million, or 66.3%. In June 2000, a gain of $1.1 million
was recognized in other operating income in connection with the sale of a
building that formerly housed the Loveland branch of FirsTier Bank. The other
increases for all periods were due primarily to additional customer accounts at
FirsTier's branches, continued demand for residential mortgages that were
originated and sold by FirsTier into the secondary market and the expansion of
FirsTier's investment brokerage services into additional branch locations.
NON-INTEREST EXPENSES. The following table presents non-interest
expenses for the indicated periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------- ------------------------------
1997 1998 1999 1999 2000
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits $3,296 $5,489 $8,669 3,676 $6,175
Net occupancy expense of premises
989 1,616 2,333 1,030 1,774
Purchased services 842 1,342 1,790 755 899
Office supplies 182 318 491 229 341
Minority interest in income of
consolidated subsidiaries 101 111 -- -- --
Other operating expenses 1,134 1,783 2,988 1,249 2,276
----------- ----------- ----------- ----------- -----------
Total non-interest expenses $6,544 $10,659 $16,271 $6,939 $11,465
=========== =========== =========== =========== ===========
</TABLE>
During the six months ended June 30, 2000, total non-interest expenses
increased $4.5 million, or 65.2%, to $11.5 million from $6.9 million in the same
1999 period, primarily as a result of staff, facility and operating expenses
associated with operating six additional branch locations. Salaries and employee
benefits increased by $2.5 million due to staffing of new branch locations,
additions of corporate overhead and increases in the volume of commission-based
mortgage lending. The increase in net occupancy expenses was a direct result of
the increased number of branches. Purchased services included outside services,
primarily data processing, purchased by FirsTier to conduct operations. Expenses
for purchased services increased as a result of additional branches. During
1999, total non-interest expenses increased $5.6 million, or 52.6%, to $16.3
million from $10.7 million in 1998, with increases occurring among the various
components due primarily to the establishment of additional branches and other
internally generated growth. During 1998, total non-interest expenses increased
$4.2 million, or 62.9% to $10.7 million from $6.5 million in 1997, with
increases occurring among the various components due primarily to FirsTier's
purchase of a savings bank, the establishment of an additional branch and other
internally generated growth.
INCOME TAX EXPENSE. FirsTier's consolidated income tax rate varies from
statutory rates principally due to interest income from tax-exempt securities.
The provision for income taxes increased by $1.5 million to $2.5
42
<PAGE> 46
million for the six months ended June 30, 2000 from $1.0 million for the
comparable period in 1999. FirsTier recorded income tax expenses totaling $2.6
million in 1999, $1.7 million in 1998 and $1.3 million in 1997.
FINANCIAL CONDITION
LOAN PORTFOLIO COMPOSITION. The following table presents the
composition of FirsTier's loan portfolio by type of loan at the dates indicated.
Management believes that the balance sheet information as of the dates indicated
should be read in conjunction with the average balance information in the tables
above under "Results of Operations--Net Interest Income."
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------------------------------------------------- -------------------
1996 1997 1998 1999 2000
-------------------------------------- ------------------ ------------------ -------------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
--------- ------------------ --------- -------- --------- --------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural(1) $27,343 40.3% $41,500 25.3% $51,990 18.1% $82,982 13.5% $95,033 13.1%
Construction 10,062 14.8 37,235 22.7 85,782 29.8 135,367 22.0 279,104 38.6
Real estate 25,946 38.2 79,499 48.4 141,955 49.3 388,078 63.0 338,313 46.7
Installment loans to 5,226 7.7 7,693 4.7 11,057 3.8 16,335 2.7 21,493 3.0
individuals
Other 332 0.5 132 0.0 91 0.0 308 0.1 -- --
------- ----- -------- ---- -------- ---- -------- ------ -------- -----
Gross loans receivable 68,909 101.5 166,059 101.1 290,875 101.0 623,070 101.3 733,943 101.4
Less unearned loan fees (158) (0.2) (432) (0.3) (886) (0.3) (2,121) (0.4) (2,276) (0.3)
------- ----- -------- ---- -------- ---- -------- ------ -------- -----
Subtotal 68,751 101.3 165,627 100.8 289,989 100.7 620,949 100.9 731,667 101.1
Less allowance for loan
losses (851) (1.3) (1,321) (0.8) (2,187) (0.7) (5,322) (0.9) (7,721) (1.1)
------- ----- -------- ---- -------- ----- -------- ------ -------- -----
Net loans receivable $67,900 100.0% $164,306 100.0% $287,802 100.0% $615,627 100.0% $723,946 100.0%
======= ===== ======== ===== ======== ===== ======== ======= ======== =====
</TABLE>
-------------------
* In 1996, construction loans were not classified separately from real
estate loans.
(1) Agricultural loan balances were $18.6 million at June 30, 2000, $17.7
million at December 31, 1999 and $14.7 million at December 31, 1998.
Net loans receivable of $723.9 million as of June 30, 2000 were $108.3
million, or 17.6%, greater than net loans receivable of $615.6 million as of
December 31, 1999. FirsTier's two primary categories of loans, real estate loans
and construction loans, which constituted 85.3% of net loans receivable as of
June 30, 2000, in the aggregate increased as a percentage of total loans in the
periods indicated. The aggregate of real estate and construction loans totaled
$617.4 million as of June 30, 2000, $94.0 million, or 18.0%, over the $523.4
million balance as of December 31, 1999, which in turn was $295.7 million, or
129.8%, greater than these loans as of December 31, 1998. The significant loan
portfolio growth over the indicated periods was due primarily to FirsTier's
strategy of branch expansion and hiring and retaining experienced bank personnel
who possessed existing customer relationships.
Historically, FirsTier has had a high loan to deposit ratio. At June
30, 2000, net loans totaled 93.5% of total deposits and 82.8% of total assets.
At December 31, 1999, net loans totaled 102.3% of total deposits and 87.1% of
total assets.
LOAN MATURITIES. The following tables present loans by maturity in each
major category of FirsTier's portfolio at the dates indicated. Unearned loan fee
income has been matched with its respective loan categories and assigned to
maturity categories consistent with the underlying loans. Actual maturities may
differ from the contractual maturities shown below as a result of renewals and
prepayments. Loan renewals are evaluated in the same manner as new credit
applications. Additional information regarding FirsTier's real estate loan
portfolio is provided in "Business--Lending Activities." A significant portion
of FirsTier's loan portfolio has maturities of one year or less. In the event
these loans are renewed, they are subject to the same credit evaluation and
other underwriting criteria as are new loan applications, and are subject to new
terms and conditions as deemed appropriate by FirsTier's lending personnel.
43
<PAGE> 47
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------------------------------
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
---------------------------- ---------------------------
ONE YEAR
OR LESS FIXED RATE FLOATING RATE FIXED RATE FLOATING RATE TOTAL
------------ ------------- -------------- ------------ -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and $28,120 $4,832 $14,487 $569 $3,982 $51,990
agricultural
Construction 74,211 280 10,955 -- -- 85,446
Real estate 26,454 20,906 52,062 3,190 38,793 141,405
Installment loans to
individuals and other 1,060 4,739 4,315 518 516 11,148
---------- --------- ----------- --------- ---------- ----------
Total loans $129,845 $30,757 $81,819 $4,277 $43,291 $289,989
========== ========= =========== ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------------------------------------------
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
---------------------------- ---------------------------
ONE YEAR
OR LESS FIXED RATE FLOATING RATE FIXED RATE FLOATING RATE TOTAL
------------ ------------- -------------- ------------ -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $50,132 $9,190 $18,724 $850 $4,086 $82,982
Construction 117,722 6,349 8,292 --- 2,452 134,815
Real estate 130,358 38,565 94,530 14,555 108,501 386,509
Installment loans to
individuals and other 2,529 7,096 6,425 220 373 16,643
---------- --------- ----------- --------- ---------- ----------
Total loans $300,741 $61,200 $127,971 $15,625 $115,412 $620,949
========== ========= =========== ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 2000
-----------------------------------------------------------------------------------
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
---------------------------- ---------------------------
ONE YEAR
OR LESS FIXED RATE FLOATING RATE FIXED RATE FLOATING RATE TOTAL
------------ ------------- -------------- ------------ -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $53,606 $9,583 $12,968 $953 $4,599 $81,709
Construction 152,632 1,903 10,237 -- 713 165,485
Real estate 159,088 43,507 106,158 12,614 127,844 449,211
Installment loans to
individuals and other 6,457 7,972 9,518 8,246 3,069 35,262
---------- --------- --------- --------- ---------- ----------
Total loans $371,783 $62,965 $138,881 $21,813 $136,225 $731,667
========== ========= ========= ========= ========== ==========
</TABLE>
NONPERFORMING ASSETS. Nonperforming assets consist of loans 90 days or
more delinquent and still accruing interest, nonaccrual loans, restructured
loans and other real estate. When, in the opinion of management, a reasonable
doubt exists as to the collectibility of interest, regardless of the delinquency
status of a loan, the accrual of interest income is discontinued and accrued but
unpaid interest is reversed through a charge to current year's earnings. While a
loan is on nonaccrual status, interest income is recognized only upon receipt
and then only if, in the judgment of management, there is no reasonable doubt as
to the collectibility of the principal balance. Loans 90 days or more delinquent
generally are placed on nonaccrual status, unless the loan is in the process of
collection and management determines that full collection of principal and
accrued interest is probable.
Restructured loans are those for which concessions, including the
reduction of interest rates below a rate otherwise available to the borrower or
the deferral of interest or principal, have been granted due to the borrower's
weakened financial condition. Interest on restructured loans is accrued at the
restructured rates when it is anticipated that no loss of original principal
will occur. FirsTier did not have any restructured loans as of the dates
indicated in the table below.
44
<PAGE> 48
The following table presents information concerning nonperforming
assets at the dates indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------- ------------------------------
1997 1998 1999 1999 2000
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonperforming Loans:
Nonaccrual loans $484 $635 $962 $352 $3,568
Other loans 90 days past due 744 288 78 334 90
----------- ---------- ----------- ---------- -----------
Total nonperforming loans 1,228 923 1,040 686 $3,658
Other real estate 141 172 91 --- ---
----------- ---------- ----------- ---------- -----------
Total nonperforming assets $1,369 $1,095 $1,131 $686 $3,658
=========== ========== =========== ========== ===========
Ratio of total nonperforming
loans to total loans 0.74% 0.32% 0.17% 0.17% 0.49%
Ratio of total nonperforming
assets to total loans plus
other real estate 0.83 0.38 0.18 0.17 0.49
Ratio of nonperforming assets to
total assets 0.60 0.30 0.16 0.14 0.42
</TABLE>
As of each of the dates in the table above, there were no significant
amount of loans excluded from nonperforming loans, where known information about
possible credit problems of borrowers caused management to have serious doubts
as to the ability of the borrowers to comply with the present loan repayment
terms and which may have resulted in the loans becoming nonperforming.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses
represents management's recognition of the risks of extending credit and its
evaluation of the quality of the loan portfolio. The allowance for loan losses
is established and maintained through a provision for loan losses charged to
income. Loans are charged against the allowance for loan losses when management
believes that the collectibility of the principal is unlikely or, with respect
to consumer installment loans, according to an established delinquency schedule.
The allowance is an amount that management believes will be adequate to absorb
losses inherent in existing loans and commitments to extend credit, based on
evaluations of the collectibility and prior loss experience of loans and
commitments to extend credit. The evaluations also take into consideration such
factors as changes in the nature and volume of the loan portfolio, the overall
portfolio quality, loan concentrations, specific problem loans and commitments,
and current and anticipated economic conditions that may affect a borrower's
ability to pay.
45
<PAGE> 49
The following table presents information regarding changes in the
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------------------------------- ----------------------------
1996 1997 1998 1999 1999 2000
-------------- -------------- -------------- -------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Average total loans $54,515 $126,914 $218,214 $428,107 $343,437 $689,578
========== ======== ============ ============ ============ ===========
Total loans at end of period $68,751 $165,627 $289,989 $620,949 $414,880 $731,667
========== ============ ============ ============ ============ ===========
Allowance for loan losses at
beginning of period $767 $851 $1,321 $2,187 $2,187 $5,322
Charge-offs:
Commercial, financial and
agricultural 9 -- 344 136 -- 541
Construction -- -- -- -- -- --
Real estate 10 -- -- 5 -- 36
Installment loans to 3 58 54 48 26 10
---------- ------------ ------------ ------------ ------------ -----------
individuals
Total charge-offs 22 58 398 189 26 587
Recoveries:
Commercial, financial and
agricultural 86 94 51 80 25 48
Construction -- -- -- -- -- --
Real estate -- 10 101 1 1 --
Installment loans to 5 7 22 13 5 8
---------- ------------ ------------ ------------ ------------ -----------
individuals
Total recoveries 91 111 174 94 31 56
Net charge-offs (recoveries) (69) (53) 224 95 (5) 531
Provision for loan losses 15 140 1,090 3,230 1,429 2,930
Allowance for loan losses
balance of purchased
financial institution(1) -- 277 -- -- -- --
---------- ------------ ------------ ------------ ------------ -----------
Allowance for loan losses at
end of period 851 1,321 2,187 5,322 3,621 7,721
========== ============ ============ ============ ============ ===========
Ratio of net charge-offs
(recoveries) to average
total loans (0.13)% (0.04)% 0.10% 0.02% (0.01)% 0.08%
Allowance for loan losses to
total loans at end of 1.24 0.80 0.75 0.86 0.87 1.07
period
Allowance for loan losses to
nonperforming loans 739 108 237 512 528 211
</TABLE>
(1) In February 1997, FirsTier acquired 100% of First Northern Savings Bank,
including approximately $30 million in loans. There were no purchase
accounting adjustments recorded regarding the allowance for loan losses
in connection with this transaction.
The following table presents an allocation of the allowance for loan
losses by loan category as of the dates indicated. Portions of the allowance for
loan losses have been allocated to categories based on an analysis of the status
of particular loans. The allocation table should not be interpreted as an
indication of the specific amounts, by loan classification, to be charged to the
allowance for loan losses. Management believes that the table may be a useful
device for assessing the adequacy of the allowance for loan losses as a whole.
The table has been derived in part by applying historical loan loss ratios to
both internally classified loans and the portfolio as a whole in determining the
allocation of the loan losses attributable to each category of loans.
46
<PAGE> 50
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------------------------------------------------------------------- ---------------------
1996 1997 1998 1999 2000
--------------------- --------------------- ---------------------- ---------------------- ---------------------
LOANS IN LOANS IN LOANS IN LOANS IN LOANS IN
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
AS A AS A AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL OF TOTAL OF TOTAL
MOUNT OF GROSS AMOUNT OF GROSS AMOUNT OF GROSS AMOUNT OF GROSS AMOUNT OF GROSS
LLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS
-------- ----- --------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial and 2 39.9% $ 16 25.0% $ 158 17.9% $ 238 13.4% $ 969 12.5%
agricultural
Construction -- 14.7 68 22.4 10 29.5 230 21.7 2,915 37.8
Real estate 19 37.8 47 47.9 29 48.8 92 62.2 3,613 46.8
Installment loans
to individuals 8 7.6 33 4.7 12 3.8 49 2.7 224 2.9
Unallocated 822 1,157 1,978 4,713 --
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total allowance 851 100.0% $ 1,321 100.0% $ 2,187 100.0% $ 5,322 100.0% $ 7,721 100.0%
====== ------- ======= ------- ======= ------- ======= ------- ======= -------
</TABLE>
The total allowance for loan losses balance at June 30, 2000 was $7.7
million or 211.0% of nonperforming loans, and the portion of the loan loss
allowance directly allocated to specific loan categories was 47.4% of
nonperforming loans. The total allowance for loan losses balance at December 31,
1999 was $5.3 million or 511.7% of nonperforming loans, and the portion of the
loan loss allowance directly allocated to specific loan categories was 58.6% of
nonperforming loans.
INVESTMENTS. FirsTier's investment policy is designed to ensure
liquidity for cash flow requirements; to help manage interest rate risk; to
ensure collateral is available for public deposits, Federal Home Loan Bank
advances and repurchase agreements; and to manage asset quality diversification.
The asset/liability committees of each of FirsTier's banks are responsible for
implementing FirsTier's investment strategy, including ongoing review of the
performance of the investment portfolio, market values, market conditions,
current economic conditions, profitability, capital ratios, liquidity needs and
collateral positions with the Federal Home Loan Bank.
FirsTier's investment portfolio at June 30, 2000 was comprised of U.S.
Treasury and U.S. agency bonds and bills and general obligation and revenue
municipal bonds. The portfolio also included equity securities comprised of
Federal Home Loan Bank stock, correspondent bank stock and the stock of a small
number of publicly held bank holding companies. The portfolio contained no
derivatives, structured notes or similar instruments classified as high-risk
securities as defined by the Federal Financial Institutions Examinations
Council.
The following table presents the estimated fair value of the
available-for-sale securities and the amortized cost basis of held-to-maturity
securities in FirsTier's investment portfolio by type as of the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------- JUNE 30,
1997 1998 1999 2000
---------------- --------------- ---------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD-TO-MATURITY:
U.S. Treasury & agency securities $ 5,807 $ -- $ 495 $ --
State and political securities 7,235 7,146 5,494 4,376
Other bonds -- -- -- --
------------ ------------ ------------ -------------
Total held-to-maturity 13,042 7,146 5,989 4,376
------------ ------------ ------------ -------------
AVAILABLE-FOR-SALE:
U.S. Treasury & agency securities 11,986 23,085 30,691 32,562
State and political securities 1,611 2,228 3,008 4,180
Other bonds 201 23 -- --
Equity securities 1,672 1,746 2,670 2,433
------------ ------------ ------------ -------------
Total available-for-sale 15,470 27,082 36,369 39,175
------------ ------------ ------------ -------------
Total investments $28,512 $34,228 $42,358 $43,551
============ ============ ============ =============
</TABLE>
INVESTMENT MATURITIES AND YIELD. The following table presents the
estimated fair value of the available-for-sale securities and the amortized cost
basis of held-to-maturity securities with the approximate weighted yield of the
securities in the investment portfolio by type and stated maturity at June 30,
2000.
47
<PAGE> 51
<TABLE>
<CAPTION>
JUNE 30, 2000
--------------------------------------------------------------------------------------------
OVER ONE YEAR OVER 5 YEARS
ONE YEAR OR LESS THROUGH FIVE YEARS THROUGH 10 YEARS OVER 10 YEARS
---------------------- ---------------------- ---------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
---------- ----------- ----------- ---------- ----------- ---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. treasury & agency
securities $ 997 6.48% $ 28,545 6.07% $ 2,916 7.05% $ 104 4.73%
Municipal securities 541 4.97 3,705 6.24 696 6.29 3,614 5.89
---------- --------- --------- --------
Total investments in
debt securities $ 1,538 5.95% $ 32,250 6.09% $ 3,612 6.91% $ 3,718 5.86%
========== ========= ========== =-=======
</TABLE>
DEPOSITS. FirsTier's primary source of funds has historically been
deposits, principally certificates of deposit. For the six months ended June 30,
2000, total average certificates of deposit were $465.5 million or 69.1% of
average total deposits. Deposits have grown significantly in recent years, with
total deposits increasing to $774.5 million at June 30, 2000 from $602.0 million
at December 31, 1999, $319.5 million at December 31, 1998 and $200.3 million at
December 31, 1997. These increases were primarily a result of acquiring four
branches in 1998, opening six branches in 1999 and opening one branch in the
first six months of 2000. To attract deposits, FirsTier regularly conducts
promotional campaigns. Additionally, FirsTier uses the national certificates of
deposit market to generate time deposits of specific maturities as part of its
overall asset/liability management.
The following table presents the average balances for each major
category of deposits and the weighted average interest rates paid for
interest-bearing deposits for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------- ----------------------------------------
1997 1998 1999 1999 2000
---------------------------------------- -------------------- ----------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
AVERAGE INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE INTEREST
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE
-------- ----------- -------- ---------- --------- ---------- -------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand,
interest-bearing $12,184 2.09% $13,182 2.07% $19,238 2.12% $15,510 1.98% $18,063 1.96%
Money market
accounts 10,913 3.43 18,058 3.95 49,414 4.66 40,549 4.05 84,104 4.71
Savings 11,413 3.15 12,970 3.12 15,802 3.16 15,781 3.03 18,098 3.07
IRA deposits 7,484 5.82 10,687 5.97 16,275 5.72 14,057 5.52 19,071 5.81
Certificates of
deposit:
Under $100,000 72,229 6.11 126,396 6.13 231,845 5.73 198,135 5.61 347,675 5.89
$100,000 and over 19,500 5.89 35,349 5.95 60,216 5.81 47,568 5.62 117,786 5.89
------- -------- -------- ------- --------
Total
interest-bearing 133,723 5.22% 216,642 5.49% 392,790 5.33 331,600 5.12 604,797 5.52
deposits
Noninterest-bearing
demand deposits 24,654 33,845 48,938 46,435 69,024
------- -------- -------- ------- --------
Total deposits $158,377 $250,487 $441,728 $378,035 $673,821
======== ======== ======== ======== ========
</TABLE>
The following table presents the amount and maturity of IRA deposits
and certificates of deposit that had balances of $100,000 or more at June 30,
2000.
<TABLE>
<CAPTION>
REMAINING MATURITY: (IN THOUSANDS)
<S> <C>
Three months or less $ 14,860
Over three months through six months 40,454
Over six months through 12 months 55,464
Over 12 months 43,764
--------
Total $154,542
========
</TABLE>
SHORT-TERM BORROWINGS. FirsTier uses a revolving line of credit as well
as securities sold under agreements to repurchase as sources of short-term
funding. The outstanding balance on FirsTier's line of credit at June 30, 2000
was $23.5 million. In June 2000 FirsTier began to draw on its line of credit to
fund the growth of the Colorado bank. Advances from FirsTier's line of credit
have been contributed into its Colorado bank as capital.
FEDERAL HOME LOAN BANK BORROWINGS. FirsTier's banks are members of the
Federal Home Loan Bank of Topeka, which is one of 12 regional Federal Home Loan
Banks. The Federal Home Loan Bank system functions as a central bank providing
credit for members. As members of the Federal Home Loan Bank, FirsTier's banks
are
48
<PAGE> 52
entitled to borrow funds from the Federal Home Loan Bank and are required to own
Federal Home Loan Bank stock in an amount determined by a formula based upon
total assets and Federal Home Loan Bank borrowings. FirsTier's banks may use
Federal Home Loan Bank borrowings to supplement deposits as a source of funds.
See "Liquidity--Asset/Liability Management." Average Federal Home Loan Bank
borrowings for the six months ended June 30, 2000 were $8.5 million compared to
$10.5 million for the year ended December 31, 1999, $8.7 million for 1998 and
$4.2 million for 1997. At June 30, 2000, based on FirsTier's Federal Home Loan
Bank stockholdings, the aggregate available and unused borrowing capacity of
FirsTier's banks was approximately $64.5 million, which was available through a
line of credit and term advances. Federal Home Loan Bank borrowings are
collateralized by Federal Home Loan Bank stock, other investment securities and
a small amount of loans of FirsTier's subsidiary banks.
A variety of borrowing terms and maturities can be chosen from the
Federal Home Loan Bank. Maturities available range generally from one day to ten
years. Interest rates can be either fixed or variable and prepayment options are
available if desired. The Federal Home Loan Bank offers both amortizing and
non-amortizing advances.
CAPITAL ADEQUACY. Historically, FirsTier's capital needs have been to
fund the growth of its banking operations. Until 1998, internally generated
funds were sufficient for FirsTier's capital needs. However, in 1999 FirsTier
determined that, absent a significant capital addition, the growth in its
business would result in its regulatory capital falling below adequately
capitalized guidelines. Accordingly, in February 1999 FirsTier completed a $23.0
million offering of trust preferred securities with net proceeds of $21.9
million. At June 30, 2000, FirsTier's total capital approximately equaled the
total regulatory capital minimum requirements to be considered adequately
capitalized.
FirsTier management monitors compliance with bank and bank holding
company regulatory capital requirements, including risk-based capital guidelines
and leverage ratios. Under the risk-based capital method of capital measurement,
the ratio computed is dependent upon the amount and composition of assets
recorded on the balance sheet, and the amount and composition of off-balance
sheet items, in addition to the level of capital. Included in the risk-based
capital method are two measures of capital adequacy, tier 1 capital and total
capital, which consists of Tier 1 and Tier 2 capital.
The following tables present FirsTier's capital ratios as of the
indicated dates.
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1999
--------------------------------------- ----------------------------------------
AMOUNT RATIO AMOUNT RATIO
------------------- ------------------- -------------------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Risk-Based Capital Ratios:
Tier 1 capital $20,139 6.44% $33,684 5.16%
Tier 1 capital minimum requirement 12,504 4.00 26,108 4.00
-------------- ----------------
Excess $7,635 $7,576
============== ================
Total capital $22,564 7.22% $53,730 8.23%
Total capital minimum requirement 25,009 8.00 $52,217 8.00
-------------- ----------------
Excess (deficit) $(2,445) $1,513
============== ================
Total risk adjusted assets $312,617 $652,717
============== ================
Leverage Ratios:(1)
Tier 1 capital $20,139 5.70% $33,684 5.15%
Minimum requirement 14,137 4.00 26,159 4.00
-------------- ----------------
Excess $6,002 $7,525
============== ================
Average total assets $353,415 $653,977
============== ================
</TABLE>
---------------------------
(1) The leverage ratio is defined as the ratio of Tier 1 capital to average
total assets.
LIQUIDITY
SOURCES OF LIQUIDITY. FirsTier continuously forecasts and manages its
liquidity in order to satisfy cash flow requirements of depositors and borrowers
and to allow FirsTier to meet its cash flow needs. FirsTier has developed
internal and external sources of liquidity to meet its growth needs. FirsTier's
internal sources of liquidity include cash flows from operations, investments in
securities and deposit growth. FirsTier's external sources of
49
<PAGE> 53
liquidity include borrowings from the Federal Home Loan Bank and other banks and
securities offerings to the capital markets.
FirsTier believes that it has developed sufficient internal and
external sources of liquidity to meet its cash needs for the foreseeable future.
At June 30, 2000, these sources included:
- the ability to raise deposits through branch promotional
campaigns;
- the maturity of overnight funds, of which $21.7 million was
available;
- the sale of unpledged available-for-sale securities, of which
$14 million was available;
- the availability of borrowing lines, of which $64.5 million
was available; and
- draws on increased borrowing lines available at the Federal
Home Loan Bank with the purchase of additional Federal Home
Loan Bank stock, of which $64.5 million was available.
CASH FLOWS. A major source of FirsTier's cash flow for the six month
periods ended June 30, 2000 and 1999 were from financing activities. FirsTier
realized cash flows of $160.7 million for the six month period ended June 30,
2000 and $130.2 million for the same period in 1999. Cash provided by financing
activities primarily consisted of net increases in deposits of $172.6 million
for the six month period ended June 30, 2000 and $109.0 million for the same
period in 1999. During the six month period ended June 30, 1999, FirsTier
received $23.0 million of cash from its trust preferred securities offering. For
the same period in 2000, FirsTier repaid $24.8 million of advances from the
Federal Home Loan Bank.
The primary use of FirsTier's cash is for its investing activities.
FirsTier used $164.3 million of cash for the six month period ended June 30,
2000 and $134.3 million of cash for the same period in 1999 in its investing
activities. For the six month period ended June 30, 2000, the primary components
of cash used in investing activities were $111.3 million used to fund loans and
purchases of federal funds sold of $52.9 million. For the same period in 1999,
the primary component of cash used in investing activities was $124.7 million
used to fund loans and purchases of investment securities available-for-sale of
$58.1 million.
ASSET/LIABILITY MANAGEMENT. A principal function of asset/liability
management is to coordinate the levels of interest-sensitive assets and
liabilities to minimize net interest income fluctuations in times of fluctuating
market interest rates. Interest-sensitive assets and liabilities are those that
are subject to repricing in the near term, including both variable rate
instruments and fixed-rate instruments which are approaching maturity. Changes
in net interest income arise when interest rates on earning assets change in a
different time period from that of interest rates on interest-bearing
liabilities. Changes in net interest income may also arise from changes in the
mix and volumes of earning assets and interest-bearing liabilities.
The following table presents the interest rate sensitivity of
FirsTier's assets and liabilities as of June 30, 2000, and the repricing dates
of FirsTier's earning assets and interest-bearing liabilities as of that date,
as well as FirsTier's interest rate sensitivity gap percentages for the periods
presented. Some assets and liabilities indicated as maturing or otherwise
repricing within a stated period may, in fact, mature or reprice at different
times and at different volumes than those indicated. Also, the renewal or
repricing of assets and liabilities can be discretionary and subject to
competitive and other pressures. Therefore, the following table does not and
cannot necessarily indicate the actual future impact of general interest rate
movements on FirsTier's net interest income.
50
<PAGE> 54
<TABLE>
<CAPTION>
ESTIMATED MATURITY OF REPRICING AT JUNE 30, 2000(1)
-----------------------------------------------------------------------------
THREE MONTHS
LESS THAN TO LESS THAN ONE TO OVER
THREE MONTHS ONE YEAR FIVE YEARS FIVE YEARS TOTAL
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Funds sold and interest-bearing
deposits $ 50,859 $ -- $ -- $ -- $ 50,859
Investment in securities
available-for-sale 2,433 1,037 30,524 5,181 39,175
Investment in securities -- 501 1,726 2,149 4,376
held-to-maturity
Gross loans and loans held for sale 491,681 89,673 145,263 11,431 738,048
----------- ----------- ----------- ----------- -----------
Total earning assets 544,973 $ 91,211 177,513 18,761 832,458
----------- ----------- ----------- ----------- -----------
INTEREST-BEARING LIABILITIES:
Deposits:
Demand, interest-bearing -- -- 15,335 3,834 19,169
Savings 10,090 30,269 55,533 3,794 99,686
Certificates of deposit and
IRAs:
Under $100,000 77,765 244,377 99,876 58 422,076
$100,000 and over 14,860 95,918 43,664 100 154,542
Other Liabilities:
Securities sold under
agreements to repurchase 7,859 -- -- -- 7,859
Federal Home Loan Bank 1,956 5,869 652 -- 8,477
borrowings
Note payable 23,500 -- -- -- 23,500
Company obligated mandatorily
redeemable preferred
securities of subsidiary trust -- -- 23,000 -- 23,000
----------- ----------- ----------- ----------- -----------
Total interest-bearing liabilities 136,030 376,433 238,060 7,786 758,309
----------- ----------- ----------- ----------- -----------
Interest rate gap $408,943 $(285,222) $(60,547) $10,975 $74,149
=========== =========== =========== =========== ===========
Cumulative interest rate gap at
June 30, 2000 $408,943 $123,721 $63,174 $74,149
=========== =========== =========== ===========
Cumulative interest rate gap to
total assets 49.1% 14.9% 7.6% 8.9%
</TABLE>
(1) Callable investment securities are assumed to mature at the earliest
call date. Loans are placed in the earliest time frame in which
maturity or repricing may occur, and are stated gross, before the
allowance for loan losses.
Due to the volume of loans that reprice with changes in the prime
lending rate and the volume of interest-bearing deposits, FirsTier has
experienced a positive maturity gap in assets and deposits that reprice or
mature in less than one year. Of the total earning assets at June 30, 2000,
76.4% reprice or mature in less than one year, while 67.6% of all
interest-bearing liabilities reprice or mature in that same time frame. A
positive maturity gap indicates that net income would increase in the event of
rising interest rates and would decrease in the event of decreasing interest
rates.
In the unlikely event of an immediate, parallel and sustained shift of
market interest rates, management estimates that net income during the twelve
months ended June 30, 2000 would likely have increased approximately 23.3%
compared to the like twelve month period if interest rates rose by 200 basis
points and likely fall by approximately 22.8% compared to the like twelve month
period if rates fell by the same amount. These are good faith estimates assuming
all other factors do not change materially and, in management's belief, are not
necessarily indicative of what actually could occur in the event of an immediate
interest rate increase or decease of 200 basis points. Management believes that
it is highly unlikely that these changes would occur in a short time period. As
earning assets and interest-bearing liabilities reprice at different time frames
and in different proportion to market interest rate movements, various
assumptions must be made based on historical relationships of these variables in
reaching any conclusion. Since these correlations are based on competitive and
market conditions, future results would, in management's belief, likely be
materially different from the foregoing estimates.
51
<PAGE> 55
EFFECTS OF INFLATION AND CHANGING PRICES
Substantially all of FirsTier's assets and liabilities are monetary in
nature. As a result, interest rates generally have a more significant impact on
FirsTier's performance than the general levels of inflation. Although interest
rates do not necessarily move in the same direction or to the same extent as the
prices of goods and services, increases in inflation generally have resulted in
increased interest rates.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement 133, "Accounting for Derivative Instruments and Hedging Activities"
(FAS 133). FAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging activities.
In June 1999, the FASB issued Statement 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement 133, an Amendment of FASB Statement 133" (FAS 137). FAS 137 defers the
effective date to no later than January 1, 2001.
In June 2000, the FASB issued Statement 138, "Accounting for Derivative
Instruments and Hedging Activities, and Amendment of FASB Statement 133" (FAS
138). FAS 138 is effective at the later of the first fiscal quarter beginning
after June 15, 2000 or upon the adoption of FAS 133, and should be adopted
concurrently with FAS 133. Management, at this time, does not anticipate the
adoption of this statement will have a material effect on the financial
statements of FirsTier.
1999 STOCK INCENTIVE PLAN
In September 1999, FirsTier adopted the 1999 Stock Incentive Plan. The
plan provides for the following stock and stock-based awards: restricted stock,
stock options, stock appreciation rights and performance shares. Up to 1,700,000
shares of FirsTier Common Stock may be issued under the plan. All of FirsTier's
employees, directors and consultants are eligible to participate in the plan.
The plan is administered by FirsTier's board of directors, or the board of
directors can designate a committee composed of at least two non-employee
directors to administer the plan. The board of directors or committee determines
the participants in the plan and the types of awards to be granted and the terms
and conditions of all awards. The plan requires that the exercise period for
stock options and restricted stock cannot exceed 10 years and prohibits, except
under limited circumstances, the transfer of any awards. On September 15, 1999,
Timothy D. Wiens was granted an option for 500,000 shares of common stock at an
exercise price of $12.00 per share, of which one-third vests on each anniversary
date of the grant, and all shares vest upon a change in control of FirsTier.
CERTAIN TRANSACTIONS AND RELATED PARTIES
FirsTier and each of its three subsidiaries have entered into
management agreements with Western Management Corporation, a corporation owned
by Joel H. Wiens. Each management agreement is effective for one year, subject
to renewal at the annual meeting of the board of directors of each entity.
Management services performed under each agreement include strategic planning,
tax planning and budgeting, business development, marketing, community and
industry relations, and assistance with the preparation and filing of Federal
Reserve reports. The management agreements require payment of monthly fees to
Western Management Corporation as follows: FirsTier - $750; the Colorado bank -
$750 plus $250 per branch; the Nebraska bank - $3,000; First Mtg. Bancorp -
$2,000. In addition to these monthly fees, Western Management Corporation bills
in December of each year for any additional amount of time spent over 100 hours
annually at $85 per hour for Joel H. Wiens and $65 per hour for its accounting
officer. The following table summarizes payments made to Western Management
Corporation for the periods indicated:
52
<PAGE> 56
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------------------- -----------------
1997 1998 1999 2000
---------------- --------------- ---------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FirsTier $ 19,000 $ 19,000 $ 19,000 $ 6,000
Colorado bank 28,000 36,500 57,250 27,000
Nebraska bank 86,000 86,000 84,300 39,000
First Mtg. Bancorp 34,000 39,000 34,000 16,500
------------- ------------- ------------- ------------
Total $ 167,000 $ 180,500 $ 195,050 $ 88,500
============= ============= ============= =============
</TABLE>
In 1995, Timothy D. Wiens sold assets of a mortgage company he owned to
FirsTier for $100,000 to be paid out of profits generated by mortgage operations
relating to those assets. Amounts due to Timothy D. Wiens under this agreement
were paid in full by December 31, 1998.
In May 1997, FirsTier issued 787,143 shares of common stock to six
persons, including Joel H. Wiens, Michael J. Nelson, Timothy D. Wiens and two of
his children, in exchange for shares they owned in the Colorado bank,
representing an 18.2% minority interest in the Colorado bank. The parties used a
valuation based solely on book value of the two entities in determining the
exchange ratio for the transaction. Accordingly, no goodwill was recognized by
FirsTier in the transaction. The book value of the minority interest was
approximately $632,000. After the exchange, the Colorado bank became
wholly-owned by FirsTier.
In March 1999, FirsTier issued 232,994 shares of common stock to five
persons, including Joel H. Wiens, Timothy D. Wiens and two of his children, and
Michael J. Nelson, in exchange for shares they owned in the Nebraska bank,
representing an 8.6% minority interest in the Nebraska bank. The parties used a
valuation based solely on book value of the two entities in determining the
exchange ratio for the transaction. Accordingly, no goodwill was recognized by
FirsTier in the transaction. The book value of the minority interest was
$683,000. After the exchange, the Nebraska bank became wholly-owned by FirsTier.
On April 21, 2000, FirsTier purchased its 6,000 square feet service
center from a limited liability company owned by FirsTier's Colorado bank and
certain of FirsTier's officers and directors. The purchase price of $1,450,000
paid by FirsTier was supported by an independent professional appraisal.
From time to time, Joel H. Wiens purchases loan participations from
FirsTier's subsidiaries. The participations are made on terms identical to those
of unaffiliated parties. Approximate loan principal balances outstanding under
these participations are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------- JUNE 30,
1997 1998 1999 2000
------------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Loan principal balances outstanding
which were purchased by Joel H. Wiens $1,420 $1,034 -- --
</TABLE>
Timothy D. Wiens and Michael J. Nelson, along with two officers of the
Nebraska bank and two unaffiliated persons, each own 16.67% of Insurance
Professionals, Inc., a Nebraska insurance agency. Insurance Professionals, Inc.
has rented office space at both the Kimball and Elm Creek branches of the
Nebraska bank for over 10 years for $100 per month per location on a month to
month basis.
BENEFICIAL OWNERSHIP OF FIRSTIER COMMON STOCK BY FIRSTIER MANAGEMENT AND
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of FirsTier Common Stock, as of October 13, 2000, by (1) each
shareholder known by FirsTier to be the beneficial owner of more than 5% of the
outstanding FirsTier Common Stock, (2) each director of FirsTier and certain
executive officers, and (iii) all directors and executive officers as a group.
Unless otherwise indicated, based on information furnished by such owners,
management believes that the shareholders listed below have sole investment and
voting power with respect to their shares.
53
<PAGE> 57
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
BENEFICIAL OWNER PERCENT NUMBER(1) PERCENT
------------------------------------- --------------------- ----------------------
<S> <C> <C>
Joel H. Wiens
11210 Huron Street
Northglenn, Colorado 80234 6,635,358(2) 86.0%
Timothy D. Wiens
11210 Huron Street
Northglenn, Colorado 80234 1,517,269(3) 18.5
Wiens Family Trust
11210 Huron Street
Northglenn, Colorado 80234 515,509 6.7
Michael J. Nelson
115 South Walnut
Kimball, Nebraska 69145 166,626(4) 2.2
Brian Svendsen
11210 Huron Street
Northglenn, Colorado 80234 -- --
Daniel L. Allen
1849 North Main Street
Longmont, Colorado 80501 6,452 *
Ronald B. Robinson
5299 DTC Boulevard
Greenwood Village, Colorado 80111 -- --
James M. Prince(5)
700 South Howard
Kimball, Nebraska 69145 94,457 1.2
Alan D. Linton
11210 Huron Street
Northglenn, Colorado 80234 4,839 *
Brigette M. Howorko
11210 Huron Street
Northglenn, Colorado 80234 -- --
All executive officers and
directors as a group (eight persons) 8,058,947(6) 98.1%
</TABLE>
-----------------------------------
* less than 1%.
(1) The number of shares beneficially owned by each shareholder is determined
under the rules issued by the Commission. The information is not
necessarily indicative of beneficial ownership for any other purpose.
Under these rules, beneficial ownership includes any shares as to which
the individual has sole or shared voting power and any shares as to which
the individual has the right to acquire beneficial ownership within 60
days after the date of this document through the exercise of any stock
option or other right.
(2) Of this amount, 5,847,749 shares are owned directly, 272,100 shares are
owned indirectly as agent for certain Wiens family members and other
persons, and 515,509 shares are owned indirectly as trustee of the Wiens
Family Trust.
(3) Of this amount, 512,325 shares are owned directly, 105,400 shares are
held by Joel H. Wiens as agent on behalf of the shareholder, 141,790
shares are owned indirectly through his minor children, 257,754 shares
are owned indirectly as a 50% beneficiary of the Wiens Family Trust, and
500,000 shares are issuable pursuant to options which are currently
exercisable or exercisable within 60 days.
(4) Of this amount, 163,726 shares are owned directly, and 2,900 shares are
held by Joel H. Wiens as agent on behalf of the shareholder.
(5) Mr. Prince has been a director of the Nebraska bank for over five years
and served as a Vice President of the Nebraska bank for over the past
five years until he retired on December 31, 1998.
(6) Of this amount, 500,000 shares are issuable to Timothy D. Wiens pursuant
to options which are currently exercisable or exercisable within 60 days.
The persons listed above will receive the same Merger Consideration
described in "Merger with FirsTier-General" as the other FirsTier shareholders
for each share of FirsTier Common Stock held at the Effective Time. Joel H.
Wiens is also the sole shareholder of Western Management Corporation.
54
<PAGE> 58
Joel H. Wiens, a director and executive officer of FirsTier, has agreed
to vote the 5,847,749 shares directly owned by him, or 75.8% of the outstanding
stock, in favor of the Merger Agreement and the Merger. SEE "SUMMARY--VOTE
REQUIRED" AND "THE MERGER--GENERAL."
INTERESTS OF CERTAIN PERSONS
You should be aware that FirsTier officers, directors and employees may
have interests in the Merger that are different from, or in addition to, yours.
WESTERN MANAGEMENT CORPORATION
In connection with the consummation of the Merger, Compass will acquire
Western Management Corporation. It is a condition to the completion of the
Merger that Compass also acquire Western Management Corporation, a corporation
owned by Joel H. Wiens. SEE "MERGER WITH FIRSTIER--ADDITIONAL AGREEMENTS" AND
"INFORMATION ABOUT FIRSTIER--CERTAIN TRANSACTIONS AND RELATED PARTIES."
EMPLOYMENT AGREEMENTS
Compass Bank and Timothy D. Wiens, who is President and Chief Executive
Officer of FirsTier and President and Chief Executive Officer of FirsTier Bank,
as well a director of each company, entered into an employment agreement which
will become effective upon completion of the Merger. Under the employment
agreement, Mr. Wiens will serve as a senior officer of Compass Bank for two
years beginning at the effective time of the merger. Mr. Wiens will receive an
annual base salary commensurate with that which he is presently receiving from
FirsTier with merit increases based upon performance and will be able to
participate in Compass Bank's executive incentive program. Mr. Wiens will also
receive benefits available to Compass Bank employees of equal title and base
salary. The employment agreement also contains noncompetition and
confidentiality provisions.
Compass Bank and Michael J. Nelson, who is Executive Vice President of
FirsTier and President of Firstate Bank, as well as a director of each company,
entered into an employment agreement which will become effective upon completion
of the Merger. Under the employment agreement, Mr. Nelson will serve as a senior
officer of Compass Bank for two years beginning at the effective time of the
merger. Mr. Nelson will receive an annual base salary commensurate with that
which he is presently receiving from FirsTier with merit increases based upon
performance and will be able to participate in Compass Bank's executive
incentive program. Mr. Nelson will also receive benefits available to Compass
Bank employees of equal title and base salary. The employment agreement also
contains noncompetition and confidentiality provisions.
In addition, certain other officers of FirsTier are expected to enter
into employment agreements with Compass Bank upon completion of the Merger.
INDEMNIFICATION
After the Merger, and for five years after, Compass will indemnify the
officers, directors and employees of FirsTier for all liabilities arising before
the Merger to the maximum extent permitted. In addition, Compass agrees that
FirsTier and its subsidiaries may obtain "tail coverage" or extended reporting
period coverage under their existing director's and officer's liability policies
or other similar coverage for a period of two years following the Effective
Time; provided, however, that the annual premium expense for such coverage can
not exceed 125% of FirsTier's current annual premium. SEE APPENDIX I.
RIGHT OF FIRST REFUSAL
Compass has agreed to execute and deliver a right of first refusal in
favor of Joel H. Wiens if Compass decides to sell Firstate Bank within the five
year period beginning two years after the Merger. SEE "MERGER WITH
FIRSTIER--ADDITIONAL AGREEMENTS."
55
<PAGE> 59
TRADEMARK ASSIGNMENT
Compass has agreed that following the Merger it will transfer to Joel
H. Wiens the tradename "FirsTier" and any pending service mark applications
using the "FirsTier" name, subject to certain geographical limitations. SEE
"MERGER WITH FIRSTIER--ADDITIONAL AGREEMENTS."
NONCOMPETITION AGREEMENT
It is a condition to the Merger that Joel H. Wiens enter into a
Noncompetition Agreement with Compass pursuant to which Mr. Wiens will not
compete with Compass in the Front Range of the State of Colorado or Kimball,
Nebraska areas for a period of two years following the Merger. SEE "MERGER WITH
FIRSTIER--ADDITIONAL AGREEMENTS."
RELATIONSHIPS WITH INDEPENDENT ACCOUNTANTS
Compass' Board of Directors appointed Arthur Andersen LLP as
independent auditors for Compass for the year ending December 31, 2000.
FirsTier's Board of Directors appointed Clifton Gunderson L.L.C., as
independent auditors for FirsTier for the year ending December 31, 2000. Clifton
Gunderson L.L.C. has served as FirsTier's and the Banks' independent auditors
continuously since 1997.
Compass has been advised by Arthur Andersen LLP that Arthur Andersen
LLP has no direct financial interest or any material indirect financial interest
in Compass other than arising from that firm's employment as auditor for
Compass.
FirsTier has been advised by Clifton Gunderson L.L.C. that Clifton
Gunderson L.L.C. has no direct financial interest or any material indirect
financial interest in FirsTier other than arising from that firm's employment as
auditor for FirsTier.
EXPERTS
The consolidated financial statements of Compass Bancshares, Inc.
incorporated in this prospectus by reference to its Annual Report on Form 10-K
for the year ended December 31, 1999, have been audited by Arthur Andersen LLP,
independent certified public accountants, as indicated in their report with
respect thereto and are included in this document in reliance upon the authority
of said firm as experts in giving said report.
The consolidated financial statements of FirsTier Corporation as of
December 31, 1999 and 1998 and for each of the years in the three-year period
ended December 31, 1999 have been incorporated herein and in the registration
statement in reliance upon the report of Clifton Gunderson L.L.C., independent
certified public accountants, incorporated by reference herein, 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 document and certain other matters. As of September 30,
2000, Mr. Powell was the beneficial owner of an aggregate of approximately
127,260 shares of Compass Common Stock. Locke 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. Jones & Keller, P.C.
and Locke Liddell & Sapp are also expected to render legal opinions as to
certain matters acceptable to FirsTier and Compass, respectively.
56
<PAGE> 60
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 FIRSTIER AND COMPASS--CERTAIN DIFFERENCES BETWEEN THE
CORPORATION LAWS OF COLORADO AND THE CORPORATION LAWS OF DELAWARE AND
CORRESPONDING CHARTER AND BYLAW PROVISIONS--LIMITATION OF LIABILITY AND
INDEMNIFICATION."
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Compass,
Compass has been informed that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
OTHER MATTERS
FirsTier's Board of Directors does not know of any matters to be
presented at the Special Meeting other than those set forth above. If any other
matters are properly brought before the Special Meeting or any adjournment
thereof, the enclosed proxy will be voted in accordance with the recommendations
of FirsTier's Board of Directors unless "Authority Withheld" is indicated in the
appropriate box on the proxy.
57
<PAGE> 61
================================================================================
INDEX TO FINANCIAL STATEMENTS
OF
FIRSTIER CORPORATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Auditors' Report regarding the December 31, 1997, 1998 and 1999
Consolidated Financial Statements F-2
2. Consolidated Balance Sheets-- December 31, 1998 and 1999 F-3
3. Consolidated Statements of Income--Years Ended
December 31, 1997, 1998 and 1999 F-4
4. Consolidated Statements of Stockholders' Equity--
Years Ended December 31, 1997, 1998 and 1999 F-5
5. Consolidated Statements of Cash Flows -- Years Ended
December 31, 1997, 1998 and 1999 F-6
6. Notes to Consolidated Financial Statements F-7
7. Consolidated Balance Sheets -- June 30, 2000 (Unaudited) and
December 31, 1999 F-31
8. Consolidated Statements of Income-- Three Months Ended
June 30, 2000 and 1999 (Unaudited) and Six Months Ended
June 30, 2000 and 1999 (Unaudited) F-32
9. Consolidated Statements of Cash Flows -- Six Months
Ended June 30, 2000 and 1999 (Unaudited) F-33
10. Notes to Consolidated Financial Statements-- Three Month Period
Ended June 30, 2000 and 1999 (Unaudited) F-34
</TABLE>
<PAGE> 62
INDEPENDENT AUDITOR'S REPORT
Board of Directors
FirsTier Corporation
Northglenn, Colorado
We have audited the consolidated balance sheets of FirsTier Corporation and
subsidiaries as of December 31, 1998 and 1999, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of FirsTier Corporation
and subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
/s/ Clifton Gunderson L.L.C.
Denver, Colorado
January 15, 2000
F-2
<PAGE> 63
FIRSTIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
ASSETS
Cash and due from banks $ 13,892 $ 27,049
Interest bearing deposits in other banks 3 3
Federal funds sold 13,270 --
Investment securities:
Available-for-sale, at fair value 27,082 36,369
Held-to-maturity, at amortized cost, fair value of
$7,250 in 1998 and $6,006 in 1999 7,146 5,989
--------- ---------
Total investment securities 34,228 42,358
--------- ---------
Loans held for sale 5,193 1,123
Gross loans receivable 290,875 623,070
Less:
Unearned loan fees (886) (2,121)
Allowance for loan losses (2,187) (5,322)
--------- ---------
Net loans receivable 287,802 615,627
--------- ---------
Premises and equipment, net 8,308 11,117
Preferred securities issuance cost, net -- 1,083
Other assets 4,511 8,461
--------- ---------
TOTAL ASSETS $ 367,207 $ 706,821
========= =========
LIABILITIES
Deposits:
Demand noninterest bearing $ 44,653 $ 58,648
Demand interest bearing 14,919 19,951
Time 259,908 523,395
========= =========
Total deposits 319,480 601,994
Securities sold under agreements to repurchase 5,080 8,150
Note payable 8,790 11,560
Federal Home Loan Bank borrowings 8,650 33,235
Other liabilities 3,818 3,178
--------- ---------
Total liabilities 345,818 658,117
--------- ---------
Minority interest in consolidated subsidiaries 683 --
--------- ---------
Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely Junior
Subordinated Debentures -- 23,000
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, 20,000,000 shares authorized; no shares issued
and outstanding at December 31, 1998 and 1999 -- --
Common stock, 50,000,000 shares authorized; shares issued
and outstanding: 7,346,673 at December 31, 1998 and
7,579,667 at December 31, 1999 837 1,520
Retained earnings 19,460 24,520
Accumulated other comprehensive income (loss) 409 (336)
--------- ---------
Total stockholders' equity 20,706 25,704
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 367,207 $ 706,821
========= =========
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-3
<PAGE> 64
FIRSTIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 13,860 $ 24,160 $ 44,755
Taxable investment securities 1,173 1,153 1,819
Nontaxable investment securities 447 500 517
Dividends on investment securities 47 71 47
Federal funds sold 690 855 598
Other interest 46 15 2
----------- ----------- -----------
Total interest income 16,263 26,754 47,738
----------- ----------- -----------
INTEREST EXPENSE
Deposits 6,986 11,884 20,919
Federal funds purchased 45 23 235
Securities sold under agreements to repurchase 113 120 233
Note payable 113 299 355
Trust preferred securities -- -- 1,886
Federal Home Loan Bank borrowings 224 428 622
----------- ----------- -----------
Total interest expense 7,481 12,754 24,250
----------- ----------- -----------
Net interest income 8,782 14,000 23,488
PROVISION FOR LOAN LOSSES 140 1,090 3,230
----------- ----------- -----------
Net interest income after provision for loan losses 8,642 12,910 20,258
----------- ----------- -----------
NON-INTEREST INCOME
Fees for customer services 761 1,015 1,998
Net gains from sale of loans 625 1,036 816
Commissions and fees from brokerage activities 29 220 315
Investment securities transactions, net -- (4) --
Other operating income 293 573 566
----------- ----------- -----------
Total non-interest income 1,708 2,840 3,695
----------- ----------- -----------
NON-INTEREST EXPENSES
Salaries and employee benefits 3,296 5,489 8,669
Net occupancy expense of premises 989 1,616 2,333
Purchased services 842 1,342 1,790
Office supplies 182 318 491
Minority interest in income of consolidated subsidiaries 101 111 --
Other operating expenses 1,134 1,783 2,988
----------- ----------- -----------
Total non-interest expenses 6,544 10,659 16,271
----------- ----------- -----------
Income before income tax expense 3,806 5,091 7,682
INCOME TAX EXPENSE 1,309 1,716 2,616
----------- ----------- -----------
NET INCOME $ 2,497 $ 3,375 $ 5,066
=========== =========== ===========
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized holding gains (losses) arising during the period 52 646 (1,183)
Unrealized holding gains (losses) on matured securities
reversing during the year -- -- 46
Income tax (expense) benefit related to items of other
comprehensive income (19) (226) 386
----------- ----------- -----------
Other comprehensive income, net of tax 33 420 (751)
----------- ----------- -----------
COMPREHENSIVE INCOME $ 2,530 $ 3,795 $ 4,315
=========== =========== ===========
INCOME PER SHARE
Basic and diluted earnings per share $ 0.36 $ 0.46 $ 0.68
=========== =========== ===========
Weighted average shares outstanding 7,018,696 7,346,673 7,504,835
=========== =========== ===========
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-4
<PAGE> 65
FIRSTIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON RETAINED COMPREHENSIVE
STOCK EARNINGS INCOME (LOSS) TOTAL
----- -------- ------------- -----
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 $ 205 $ 13,588 $ (44) $ 13,749
Net income for the year - 2,497 - 2,497
Issuance of 787,143 shares in exchange
for minority shares of FirsTier Bank 632 - - 632
Net changes in other comprehensive
income - - 33 33
---------- ----------- --------- -----------
BALANCE AT DECEMBER 31, 1997 837 16,085 (11) 16,911
Net income for the year - 3,375 - 3,375
Net changes in other comprehensive
income - - 420 420
---------- ----------- --------- -----------
BALANCE AT DECEMBER 31, 1998 837 19,460 409 20,706
Net income for the year - 5,066 - 5,066
Issuance of 232,994 shares in exchange
for minority shares of Firstate Bank
(Nebraska Bank) 683 (6) 6 683
Net changes in other comprehensive
income (loss) - - (751) (751)
---------- ----------- --------- -----------
BALANCE AT DECEMBER 31, 1999 $ 1,520 $ 24,520 $ (336) $ 25,704
========== =========== ========= ===========
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-5
<PAGE> 66
FIRSTIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,497 $ 3,375 $ 5,066
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 140 1,090 3,230
Provision for losses on other real estate owned 76 25 -
Depreciation and amortization 426 709 1,344
Net gains from sale of loans (625) (1,036) (816)
Proceeds from sale of loans held for sale 27,225 50,175 53,358
Origination of loans held for sale (29,800) (50,150) (48,472)
Investment securities transactions, net - 4 -
Increase in minority interest in consolidated subsidiaries 23 23 -
Changes in deferrals and accruals:
Other assets (449) (947) (3,713)
Other liabilities 3,375 310 (640)
----------- ----------- -----------
Net cash provided by operating activities 2,888 3,578 9,357
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold 1,710 (1,960) 13,270
Net (increase) decrease in interest bearing deposits in other banks (50) 146 -
Purchase of investment securities available-for-sale (1,643) (129,237) (72,321)
Purchase of investment securities held-to-maturity (765) (513) (786)
Proceeds from sale of investment securities available-for-sale 250 29,996 -
Proceeds from maturities/paydowns of investment securities 6,681 94,679 63,840
Net increase in loans (67,275) (125,348) (331,146)
Expenditures for bank premises and equipment (2,466) (3,835) (4,047)
Proceeds from sale of other real estate 256 705 172
Purchase of savings bank, net of $3,897 of cash and due from
banks acquired 154 - -
----------- ----------- -----------
Net cash used in investing activities (63,148) (135,367) (331,018)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 71,936 119,186 282,514
Net increase (decrease) in securities sold under agreements
to repurchase (5,941) 3,008 3,070
Advances from Federal Home Loan Bank 1,000 8,650 24,700
Payments on Federal Home Loan Bank advances (6,800) (1,000) (115)
Proceeds from note payable 3,380 6,940 11,560
Payments on note payable - (1,530) (8,790)
Proceeds from trust preferred securities - - 23,000
Debt issuance cost - - (1,121)
----------- ----------- -----------
Net cash provided by financing activities 63,575 135,254 334,818
----------- ----------- -----------
NET INCREASE IN CASH AND DUE FROM BANKS 3,315 3,465 13,157
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 7,112 10,427 13,892
----------- ----------- -----------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 10,427 $ 13,892 $ 27,049
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period
for:
Interest $ 5,028 $ 12,287 $ 25,009
=========== =========== ===========
Income taxes $ 1,137 $ 2,025 $ 3,608
=========== =========== ===========
NONCASH TRANSACTIONS
Conversion of loans to other real estate owned $ 197 $ 761 $ 91
=========== =========== ===========
Issuances of shares for minority interests of consolidated
subsidiaries $ 632 $ - $ 683
=========== =========== ===========
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-6
<PAGE> 67
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
FirsTier Corporation (the Company) was incorporated for the purposes of owning
shares of and acting as the parent holding company for Firstate Bank (the
Nebraska Bank) and FirsTier Bank (the Colorado Bank) (collectively referred to
as the "Banks"). The Banks provide a full range of banking services to
individual and corporate customers principally in the Front Range of Colorado
and the west and central Nebraska areas. A majority of the Company's loans are
related to real estate and commercial activities. The Company is subject to
competition from other financial institutions for loans and deposit accounts.
The Company and the Banks are also subject to regulation by certain governmental
agencies and undergo periodic examinations by those regulatory agencies.
On September 15, 1999, the Company reorganized as a Colorado corporation and
changed its name to FirsTier Corporation from First Western Corp. As a result of
the reorganization, the Company's common stock and surplus accounts have been
combined and the Company's shares have been split 52.48 for one. All share and
per share amounts contained in these financial statements have been restated for
this reorganization.
BASIS OF FINANCIAL STATEMENT PRESENTATION AND USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities as of the date of the balance sheet and revenues and expenses
for the period. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan losses. In
connection with the determination of the allowance for loan losses, management
obtains independent appraisals for significant properties and assesses estimated
future cash flows from borrowers' operations and the liquidation of loan
collateral.
Management believes that the allowance for loan losses is adequate. While
management uses available information to estimate future loan losses, changes in
economic conditions may necessitate revisions in future years. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Banks' allowance for loan losses. Such agencies may
require the Banks to make additional loan loss provisions based on their
judgments about information available to them at the time of their examination.
F-7
<PAGE> 68
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its respective subsidiaries. The Company currently owns 100 percent of the
Colorado Bank (having acquired the minority interest in a May 1997 exchange of
stock), the Nebraska Bank (having acquired the minority interest in a March 1999
exchange of stock), First Mortgage Bancorp, and FW Capital I. In connection with
the issuance of the preferred securities, as more fully described in Note 17,
the Company formed FW Capital I, a wholly owned subsidiary, in November 1998.
Prior to the issuance of the preferred securities described in Note 17, FW
Capital I was a shell company which had no assets nor operations. All material
intercompany transactions and balances have been eliminated in consolidation.
CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company has defined cash
equivalents as those amounts included in the balance sheet caption "cash and due
from banks."
INVESTMENT SECURITIES
Management determines the classification of debt securities at the time of
purchase. Debt securities are classified as held-to-maturity when the Banks have
the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost.
Debt securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are stated at fair value, with
the unrealized gains and losses, net of tax, reported as a component of
stockholders' equity.
The amortized cost of debt securities classified as held-to-maturity is adjusted
for amortization of premiums and accretion of discounts to maturity or, in the
case of mortgage-backed securities, over the estimated life of the security.
Such amortization and accretion is included as an adjustment to interest income
from investments. Realized gains and losses and declines in value judged to be
other-than-temporary are included in investment securities transactions, net in
the consolidated statements of income. The cost of securities sold is based on
the specific identification method.
LOANS HELD FOR SALE
Mortgage 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.
F-8
<PAGE> 69
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS RECEIVABLE
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal, adjusted for any charge-offs, the allowance for loan
losses, and any deferred fees or costs on originated loans.
Loan fees which represent adjustments to interest yield are deferred and
amortized over the estimated life of the loan. Most of the loans originated by
the Company are short-term.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
interest accrual is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent cash payments are
received. Impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's original effective interest rate. As
a practical matter, impairment may be measured based on the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. When the measure of the impaired loan is less than the recorded
investment in the loan, the impairment is recorded through a valuation
allowance.
The allowance for loan losses is established through a provision for loan losses
charged to income. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely or,
with respect to consumer installment loans, according to an established
delinquency schedule. The allowance is an amount that management believes will
be adequate to absorb losses inherent in existing loans and commitments to
extend credit, based on evaluations of the collectibility and prior loss
experience of loans and commitments to extend credit. The evaluations take into
consideration such factors as changes in the nature and volume of the portfolio,
overall portfolio quality, loan concentrations, specific problem loans and
commitments, and current and anticipated economic conditions that may affect the
borrowers' ability to pay. This evaluation is inherently subjective as it
requires estimates that are susceptible to significant revision as more
information becomes available.
PREMISES AND EQUIPMENT
Premises, including leasehold improvements, and equipment are stated at cost.
Depreciation is provided for in amounts sufficient to charge the cost of
depreciable assets to operations over their estimated service lives, principally
on the straight-line method.
OTHER REAL ESTATE
Real estate properties acquired through, or in lieu of, foreclosure are to be
sold and are initially recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure, management periodically
performs valuations and the real estate is carried at the lower of carrying
amount or fair value less cost to sell. Other real estate is carried in other
assets on the consolidated balance sheets. Revenue and expense from operations
and changes in the valuation allowance are included in other operating expenses.
F-9
<PAGE> 70
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
INTANGIBLE ASSETS
Intangible assets are included in other assets in the consolidated balance
sheets. Such intangible assets consist of goodwill arising from the February
1997 acquisition of a financial institution. The goodwill is being amortized on
a straight line basis over a period of fifteen years from the date of purchase.
COMPREHENSIVE INCOME
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income (SFAS No. 130), in
June 1997. SFAS No. 130 establishes standards for reporting and display of
comprehensive income (as defined) in a full set of general-purpose financial
statements. SFAS No. 130 requires classification of items of other comprehensive
income by their nature in a financial statement and display of the accumulated
balance of other comprehensive income separately from retained earnings in the
equity section of the consolidated balance sheet. The Company has only one item
of other comprehensive income and has elected to report comprehensive income in
the consolidated statements of income.
PER SHARE COMPUTATIONS
Basic earnings per share are based on the weighted average number of common
shares outstanding during each year presented. Diluted earnings per share is
computed based upon the weighted average number of shares outstanding during the
year plus the shares that would be outstanding assuming exercise of the dilutive
stock options which are considered to be common stock equivalents. The number of
shares that would be issued from the exercise of stock options has been reduced
by the number of shares that could have been purchased from the proceeds at the
average market price of the Company's stock.
Options to purchase 500,000 shares of common stock at $12 per share were
outstanding during the second half of 1999 but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares during 1999.
F-10
<PAGE> 71
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OPERATING SEGMENTS
The Company adopted Financial Accounting Standards Board Statement No. 131,
Disclosures About Segments of an Enterprise and Related Information (SFAS No.
131), effective January 1, 1998. This statement establishes standards for
reporting information about segments in annual and interim financial statements.
SFAS No. 131 introduces a new model for segment reporting called "management
approach." The management approach is based on the way the chief operating
decision-maker organizes segments within a company for making operating
decisions and assessing performance. Reportable segments are based on products
and services, geography, legal structure, management structure, and any other
segments into which management disaggregates a company. Based on the "management
approach" model, the Company has determined that its business is comprised of a
single operating segment and that SFAS No. 131 therefore has no impact on its
consolidated financial statements.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities, which
addresses the accounting for derivative transactions and hedging activities.
Subsequently, FASB issued Statement No. 137 which delayed the effective date of
Statement No. 133 by one year. The Company will adopt the new standard beginning
with its 2001 fiscal year, when adoption is first required. Management is
currently evaluating the reporting requirements under this new standard but does
not anticipate that adoption of the new standard will have any significant
impact on financial results of the Company.
NOTE 2 - ACQUISITIONS
In February 1997, the Company acquired 100 percent of First Northern Holdings,
L.T.D. and the remaining 18.5 percent minority interest not owned by it in First
Northern Savings Bank, Greeley, Colorado. The purchase price, approximately $3.8
million, was paid in cash. The excess purchase price over the fair value of the
net assets acquired (goodwill) of $966,000 is being amortized over a
fifteen-year period from the date of purchase. Both locations of First Northern
Savings Bank immediately became branches of the Colorado Bank and added
approximately $33 million in assets to the Company.
In May 1997, the Company exchanged 787,143 shares of its common stock for the
18.2 percent of the Colorado Bank that it did not own at the time. Individuals
already affiliated with the Company owned such minority shares. No goodwill was
recognized in connection with this transaction.
F-11
<PAGE> 72
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 2 - ACQUISITIONS (CONTINUED)
In March 1999, the Company exchanged 232,994 shares of its common stock for the
8.6 percent of the Nebraska Bank that it did not own at the time. Individuals
already affiliated with the Company owned such minority shares. As the Company
and its four shareholders at the time of the exchange owned 99.6 percent of the
Nebraska Bank and the remaining 0.4 percent was owned by other employees of the
Company, it was determined by the boards of both entities that a book value
exchange ratio represented a fair value for all parties. The fair value
determined for this transaction was $683,000. No goodwill was recognized in
connection with this transaction.
Following their respective acquisition dates, the Company included the results
of operations of all of the above-indicated acquisitions in its consolidated
statement of income.
NOTE 3 - INVESTMENT SECURITIES
At December 31, 1998, the Company had securities with the following amortized
cost and estimated fair values:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
<S> <C> <C> <C> <C>
Securities held-to-maturity:
State and political securities $ 7,146 $ 104 $ - $ 7,250
----------- ------- ------- -----------
TOTAL SECURITIES HELD-TO-MATURITY $ 7,146 $ 104 $ - $ 7,250
=========== ======= ======= ===========
Securities available-for-sale:
U.S. Treasury and agency
securities $ 23,080 $ 33 $ 28 $ 23,085
State and political securities 2,136 92 - 2,228
Other bonds 21 2 - 23
Equity securities 1,216 530 - 1,746
----------- ------- ------- -----------
TOTAL SECURITIES AVAILABLE-FOR-SALE $ 26,453 $ 657 $ 28 $ 27,082
=========== ======= ======= ===========
</TABLE>
F-12
<PAGE> 73
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 3 - INVESTMENT SECURITIES (CONTINUED)
At December 31, 1999, the Company had securities with the following amortized
cost and estimated fair values:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
<S> <C> <C> <C> <C>
Securities held-to-maturity:
U.S. Treasury and agency
securities $ 495 $ 3 $ - $ 498
State and political securities 5,494 48 34 5,508
----------- ------- -------- -----------
TOTAL SECURITIES HELD-TO-MATURITY $ 5,989 $ 51 $ 34 $ 6,006
=========== ======= ======== ===========
Securities available-for-sale:
U.S. Treasury and agency
securities $ 31,480 $ - $ 789 $ 30,691
State and political securities 3,049 73 114 3,008
Equity securities 2,348 322 - 2,670
----------- ------- -------- -----------
TOTAL SECURITIES AVAILABLE-FOR-SALE $ 36,877 $ 395 $ 903 $ 36,369
=========== ======= ======== ===========
</TABLE>
The amortized cost and estimated fair value of debt securities at December 31,
1999, by contractual maturity, are shown below. Actual maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
---------------- ------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 822 $ 826 $ 1,509 $ 1,507
Due after one year through five years 2,312 2,327 27,935 27,300
Due after five years through ten years 691 705 3,262 3,178
Due after ten years 2,164 2,148 1,823 1,714
---------- --------- ----------- -----------
Total debt securities 5,989 6,006 34,529 33,699
Equity securities - no maturity - - 2,348 2,670
---------- --------- ----------- -----------
TOTAL SECURITIES $ 5,989 $ 6,006 $ 36,877 $ 36,369
========== ========= =========== ===========
</TABLE>
Securities included in the accompanying consolidated balance sheets at December
31, 1998 and 1999, with a carrying value of $16,720,792 and $29,139,448,
respectively, are pledged as collateral for public deposits and for other
purposes as required or permitted by law.
F-13
<PAGE> 74
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 3 - INVESTMENT SECURITIES (CONTINUED)
In 1997, gross realized losses of $37 on sales of securities available-for-sale
were recognized. Gross realized losses of $4,205 on sales of securities
available-for-sale were recorded in 1998. There were no sales of securities
available-for-sale recorded in 1999.
NOTE 4 - LOANS RECEIVABLE
The components of the loan portfolio are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1998 1999
---- ----
<S> <C> <C>
Commercial, financial, and agricultural $ 51,990 $ 82,982
Construction 85,782 135,367
Real estate 141,955 388,078
Installment loans to individuals 11,057 16,335
Other 91 308
------------ -------------
Gross loans receivable 290,875 623,070
Less unearned loan fees (886) (2,121)
Less allowance for loan losses (2,187) (5,322)
------------ -------------
NET LOANS RECEIVABLE $ 287,802 $ 615,627
============ =============
</TABLE>
The Company, through its subsidiaries, grants real estate, construction,
commercial, agricultural, and other types of loans to customers primarily in the
Front Range of Colorado and west and central Nebraska. As the Company's loan
portfolio is concentrated in real estate and real estate-related loans, a
substantial portion of its debtors' ability to honor their contracts is
dependent upon the real estate economic sector. The Company had no loans
involving foreign activities (borrowers outside the United States) outstanding
at December 31, 1998 or December 31, 1999.
Activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Balance, at beginning of year $ 851 $ 1,321 $ 2,187
Provision for loan losses 140 1,090 3,230
Allowance from acquired savings bank 277 - -
Recoveries 111 174 94
Loans charged off (58) (398) (189)
---------- ---------- ----------
BALANCE, AT END OF YEAR $ 1,321 $ 2,187 $ 5,322
========== ========== ==========
</TABLE>
F-14
<PAGE> 75
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 4 - LOANS RECEIVABLE (CONTINUED)
The components of impaired loans are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1998 1999
---- ----
<S> <C> <C>
Outstanding principal balance of accruing loans
having payments delinquent more than 90 days $ 288 $ 78
Loans on which the accrual of interest has been
discontinued or reduced 635 962
</TABLE>
The average investments in impaired loans were $1,138,000 and $928,000 during
the years ended December 31, 1998 and 1999, respectively. Interest income on
impaired loans recognized for cash payments received during these years was not
significant. The amount of the allowance for loan losses allocated to impaired
loans at December 31, 1998 and 1999 was not significant.
The Company is not committed to lend funds to debtors whose loans have been
impaired.
Loans are made in the ordinary course of business to directors, officers, and
principal holders of equity securities of the Company and its subsidiaries and
to their affiliates. The terms of these loans, including interest rates and
collateral, are similar to those prevailing for comparable transactions with
others and do not involve more than a normal risk of collectibility. A summary
of activity in these loans is as follows:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Balance, at beginning of year $ - $ -
New loans - 1,742
Repayments - -
---------- ----------
BALANCE, AT END OF YEAR $ - $ 1,742
========== ==========
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1998 1999
---- ----
<S> <C> <C>
Cost:
Building and improvements $ 4,523 $ 5,398
Leasehold improvements 771 1,263
Equipment 3,782 5,970
Land 1,966 2,458
----------- -----------
Total cost 11,042 15,089
Less accumulated depreciation (2,734) (3,972)
----------- -----------
NET BOOK VALUE $ 8,308 $ 11,117
=========== ===========
</TABLE>
F-15
<PAGE> 76
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 6 - DEPOSITS
At December 31, 1999, the scheduled remaining maturities of time deposits are as
follows:
<TABLE>
<CAPTION>
DEPOSIT CATEGORY
----------------
UNDER $100,000
$100,000 OR MORE TOTAL
-------- ------- -----
<S> <C> <C> <C>
Three months or less $ 54,947 $ 16,058 $ 71,005
Over three months through twelve months 155,691 47,540 203,231
Over one year through three years 115,982 27,833 143,815
Over three years 220 - 220
------------ ----------- -------------
Total time deposits $ 326,840 $ 91,431 418,271
============ ===========
Deposits with no stated maturity 105,124
-------------
TOTAL DEPOSITS $ 523,395
=============
</TABLE>
NOTE 7 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase generally mature one day from the
transaction date. The securities underlying the repurchase agreements are held
by an agent of the Banks and are under the control of the Banks.
NOTE 8 - NOTE PAYABLE
The Company maintained a revolving line of credit with the National Bank of
Commerce in the amount of $15,000,000 at December 31, 1999. The outstanding
balance at December 31, 1998 and 1999 was $8,790,000 and $11,560,000,
respectively. The repayment schedule requires semi-annual interest payments with
the principal due at maturity (June 30, 2002). Interest is calculated at 250
basis points over the like "CMT" treasury (weighted total of 7.25% at December
31, 1999) with the next repricing date of March 31, 2000. The note is secured by
100 percent of the outstanding common stock of the Colorado Bank and 91 percent
of the outstanding common stock of the Nebraska Bank and is guaranteed by a
principal stockholder of the Company. The loan agreement also calls for the
Company to maintain the following financial ratios:
Maintain or cause each of its bank subsidiaries to maintain:
(i) for the Company, not less than a 6.5% tangible equity capital-to-assets
ratio and
(ii) for each of its subsidiary banks, not less than a 6.0% tangible equity
capital-to-assets ratio.
F-16
<PAGE> 77
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 9 - FEDERAL HOME LOAN BANK BORROWINGS
As of December 31, 1999, the Banks have available lines of credit totaling
$36,738,000 with the Federal Home Loan Bank (FHLB) secured by FHLB capital stock
and qualifying first mortgage residential loans. The advances outstanding at
December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
OUTSTANDING BALANCE
AT DECEMBER 31,
INTEREST -------------------------
RATE 1998 1999
---- ---- ----
<S> <C> <C> <C>
Maturity date of advance:
February 2, 2001 5.740% $ 2,500 $ 2,500
January 31, 2003 5.810% 5,000 5,000
December 1, 2008 5.572% 1,150 1,035
Various advances maturing prior to
February 15, 2000 5.640%-6.000% - 24,700
---------- -----------
TOTAL ADVANCES OUTSTANDING $ 8,650 $ 33,235
========== ===========
</TABLE>
NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONTINGENT
LIABILITIES
The Banks are parties to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of their customers.
These financial instruments include commitments to extend credit and stand-by
letters of credit.
Those instruments involve, to a varying degree, elements of credit risk in
excess of the amount recognized in the consolidated balance sheets. The contract
amounts of those instruments reflect the extent of involvement the Banks have in
particular classes of financial instruments.
The Banks' exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and stand-by
letters of credit is represented by the contractual notional amount of those
instruments. The Banks use the same credit policies in making commitments and
conditional obligations as they do for on-balance-sheet instruments.
Financial instruments whose contract amounts represent credit risk are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1998 1999
---- ----
<S> <C> <C>
Commitments to extend credit $ 118,843 $ 225,506
Stand-by letters of credit 3,799 13,435
</TABLE>
F-17
<PAGE> 78
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONTINGENT
LIABILITIES (CONTINUED)
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of a 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 may expire without being
drawn upon or be participated to other financial institutions, the total
commitment amounts do not necessarily represent future cash requirements. The
Banks evaluate each customer's credit-worthiness on a case-by-case basis.
The amount of collateral obtained if deemed necessary by the Banks upon
extension of credit is based on management's credit evaluation. Collateral held
varies, but may include accounts receivable, inventory, property, plant, and
equipment, and income-producing commercial properties.
Stand-by letters of credit are conditional commitments issued by the Banks 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.
In the normal course of business there are outstanding various contingent
liabilities, such as claims and legal actions, which are not reflected in the
accompanying consolidated financial statements. Management believes, based on
consultation with counsel, that liabilities arising from these proceedings, if
any, will not be material to the Company's consolidated financial position.
NOTE 11 - LEASE COMMITMENTS
The Colorado Bank leases various branch office and ATM equipment space under
noncancelable operating leases. At December 31, 1999, future minimum lease
payments under these leases, expiring at various dates through 2009, are as
follows:
Year ending December 31:
2000 $ 948
2001 948
2002 978
2003 973
2004 916
Thereafter 2,428
----------
TOTAL FUTURE LEASE PAYMENTS $ 7,191
==========
Total lease expense for all operating leases was $241,866, $346,665, and
$630,199 for the years ended December 31, 1997, 1998, and 1999, respectively.
F-18
<PAGE> 79
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 12 - INCOME TAXES
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1998 and
1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Deferred tax assets:
Provision for loan losses $ 199 $ 1,332
Depreciation 133 145
Net unrealized loss on securities available-for-sale - 173
------- ----------
Total deferred tax assets 332 1,650
Deferred tax liabilities:
Net unrealized gains on securities available-for-sale 220 -
------- ----------
NET DEFERRED TAX ASSETS $ 112 $ 1,650
======= ==========
</TABLE>
Management believes that it is more likely than not that the Company will
realize the recorded deferred tax assets and, accordingly, no valuation
allowance has been established.
The effective income tax rate varies from the statutory federal rate because of
several factors, the most significant being nontaxable interest income earned on
obligations of state and political subdivisions. The following table reconciles
the Company's effective tax rate to the statutory federal rate:
<TABLE>
<CAPTION>
1997 1998 1999
---------------------- ---------------------- ----------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C> <C>
Tax expense at statutory rate $ 1,294 34.0% $ 1,731 34.0% $ 2,612 34.0%
Increase (decrease) in taxes
due to:
Tax exempt municipal
interest (142) (3.7) (152) (3.0) (176) (2.3)
State tax 81 2.1 162 3.2 166 2.2
Other 76 2.0 (25) (.5) 14 0.2
---------- ------- ---------- ------ --------- ------
TOTAL INCOME TAX EXPENSE $ 1,309 34.4% $ 1,716 33.7% $ 2,616 34.1%
========== ======= ========== ====== ========= ======
</TABLE>
F-19
<PAGE> 80
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 12 - INCOME TAXES (CONTINUED)
The consolidated provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Current tax provision:
Federal $ 1,191 $ 1,656 $ 3,352
State 123 246 397
---------- ---------- ----------
Total current tax provision 1,314 1,902 3,749
Deferred federal tax (5) (186) (1,133)
---------- ---------- ----------
TOTAL PROVISION FOR INCOME TAXES $ 1,309 $ 1,716 $ 2,616
========== ========== ==========
</TABLE>
NOTE 13 - RELATED PARTIES
The Company has sold loan participations to related parties (stockholders,
directors, family members, businesses related through common ownership). At
December 31, 1997 and 1998, the participations sold to related parties were
approximately $1.4 million and $1.0 million, respectively. There were no
participations sold to related parties at December 31, 1999. The Company's
related parties also have deposit activities with the Banks in the normal course
of business.
In accordance with the terms of management agreements, the Company and three of
its subsidiaries purchase services from Western Management Corporation, a
corporation owned by a principal stockholder. Such agreements are annually
renewable and are on terms that the Company believes would be similar to those
obtained from an unaffiliated party. The purchased services include strategic
planning, tax planning and budgeting, business development, and marketing.
Amounts expensed by the Company and its subsidiaries pursuant to the management
agreements are as follows:
YEARS ENDED DECEMBER 31,
------------------------
1997 1998 1999
---- ---- ----
$ 167.0 $ 180.5 $ 195.1
In 1995, the then Vice Chairman of the Company sold assets of a mortgage company
to the Company for a purchase price of $100,000 to be paid out of future profits
generated by mortgage operations relating to those assets. Through December 31,
1998, payments under the terms of this agreement totaled $100,000. The Company
believes that this transaction was made on terms similar to those that would
have been obtained with an unaffiliated party.
F-20
<PAGE> 81
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 14 - EMPLOYEE BENEFITS
The Company participates in a multiple-employer 401(k) profit sharing plan
involving other companies of its primary shareholder. The plan is available for
all Company personnel who have been employed for one year. Employees may
contribute up to 10 percent of their compensation with the Company's
discretionary matching within the limits defined for a 401(k) plan.
Contributions in 1997, 1998, and 1999 were $19,341, $37,478, and $48,731,
respectively.
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summary presents the methodologies and assumptions used to
estimate the fair value of the Company's financial instruments. The Company
operates as a going concern and, except for its investment portfolio, no active
market exists for its financial instruments. Much of the information used to
determine fair value is highly subjective and judgmental in nature and,
therefore, the results may not be precise. The subjective factors include, among
other things, estimates of cash flows, risk characteristics, credit quality, and
interest rates, all of which are subject to change. Since the fair value is
estimated as of the balance sheet date, the amounts which will actually be
realized or paid upon settlement or maturity of the various financial
instruments could be significantly different.
CASH AND DUE FROM BANKS, INTEREST BEARING DEPOSITS IN OTHER BANKS, AND FEDERAL
FUNDS SOLD
For these short-term instruments, the carrying amount approximates fair value.
INVESTMENT SECURITIES
For investment securities, fair value equals quoted market price, if available.
If a quoted market price is not available, fair value is estimated using quoted
market prices for similar securities. The carrying amount of accrued interest
receivable approximates its fair value.
LOANS
The fair value of fixed rate loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities. For variable
rate loans, the carrying amount is a reasonable estimate of fair value. For
loans where collections of principal are in doubt, an allowance for losses has
been estimated. Loans with similar characteristics were aggregated for purposes
of the calculations. The carrying amount of accrued interest receivable
approximates its fair value.
F-21
<PAGE> 82
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
DEPOSITS
The fair value of interest bearing deposits with no stated maturity is the
amount payable on demand at the reporting date (i.e., their carrying amount).
The fair value of fixed maturity interest bearing deposits is estimated using a
discounted cash flow calculation that applies the rates currently offered for
deposits of similar remaining maturities. The carrying amount of accrued
interest payable approximates its fair value.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
For securities sold under agreements to repurchase, the carrying amount is a
reasonable estimate of fair value.
OTHER BORROWINGS
The fair value of other borrowings is estimated by discounting the future cash
flows using the current rate at which a similar loan could be financed.
COMMITMENTS TO EXTEND CREDIT AND STAND-BY LETTERS OF CREDIT
The fair value of commitments is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present credit worthiness of the counterparts. For fixed-rate
loan commitments, fair value also considers the difference between current
levels of interest rates and the committed rates. The fair value of letters of
credit is based on fees currently charged for similar agreements or on the
estimated cost to terminate them or otherwise settle the obligations with the
counterparts at the reporting date.
The following table presents estimated fair values of the Company's financial
instruments as of December 31, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
---------------------------- -------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 13,892 $ 13,892 $ 27,049 $ 27,049
Interest bearing deposits in other
banks 3 3 3 3
Federal funds sold 13,270 13,270 - -
Investment securities:
Securities held-to-maturity 7,146 7,250 5,989 6,006
Securities available-for-sale 27,082 27,082 36,369 36,369
Loans held for sale 5,193 5,193 1,123 1,123
Net loans 287,802 287,349 615,627 608,975
Accrued interest receivable 2,902 2,902 4,979 4,979
</TABLE>
F-22
<PAGE> 83
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
---------------------------- ------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C>
Financial liabilities:
Deposits:
Noninterest bearing $ 44,653 $ 44,653 $ 58,648 $ 58,648
Interest bearing 274,827 272,881 543,346 540,363
Securities sold under agreements
to repurchase 5,080 5,080 8,150 8,150
Note payable 8,790 8,790 11,560 11,560
Federal Home Loan Bank borrowings 8,650 8,758 33,235 32,934
Accrued interest payable 3,348 3,348 2,550 2,550
Unrecognized financial instruments:
Commitments to extend credit 118,843 118,843 225,506 225,506
Stand-by letters of credit 3,799 3,799 13,435 13,435
</TABLE>
NOTE 16 - STOCKHOLDERS' EQUITY AND REGULATORY RESTRICTIONS
The payment of dividends to the Company by the subsidiaries is subject to
various state and federal regulatory limitations.
The Company (on a consolidated basis) and the Banks are subject to various
regulatory capital requirements administered by the federal and state 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 Company's consolidated
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and the Banks must meet
specific capital guidelines that involve quantitative measures of the Banks'
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company and the Banks' capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors. Prompt corrective action
provisions are not applicable to bank holding companies.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and Banks to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier 1 capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to
average assets (as defined). Management believes, as of December 31, 1999, that
the Company and the Banks meet all minimum capital adequacy requirements to
which they are subject.
F-23
<PAGE> 84
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 16 - STOCKHOLDERS' EQUITY AND REGULATORY RESTRICTIONS (CONTINUED)
As of December 31, 1999, the most recent notification, the Federal Deposit
Insurance Corporation categorized the Nebraska Bank as well capitalized and the
Colorado Bank as adequately capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, a bank must
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed either Bank's category. The
Company's and the Banks' actual capital amounts and ratios as of December 31,
1998 and 1999 are also presented in the table.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------
MINIMUM
TO BE WELL
MINIMUM CAPITALIZED
FOR CAPITAL UNDER PROMPT
ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES PROVISIONS
---------------------- ------------------------ --------------------------
RATIO RATIO
AMOUNT RATIO AMOUNT > OR = AMOUNT > OR =
------ ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Consolidated:
Total capital to risk
weighted assets $ 22,564 7.22% $ 25,009 8.00% $ N/A
Tier 1 capital to risk
weighted assets 20,139 6.44 12,504 4.00 N/A
Tier 1 capital to average
assets 20,139 5.70 14,137 4.00 N/A
Colorado Bank:
Total capital to risk
weighted assets $ 22,165 8.53% $ 20,780 8.00% $ 25,976 10.00%
Tier 1 capital to risk
weighted assets 20,828 8.02 10,390 4.00 15,585 6.00
Tier 1 capital to average
assets 20,828 7.39 11,275 4.00 14,094 5.00
Nebraska Bank:
Total capital to risk
weighted assets $ 8,546 16.31% $ 4,192 8.00% $ 5,240 10.00%
Tier 1 capital to risk
weighted assets 7,889 15.05 2,096 4.00 3,144 6.00
Tier 1 capital to average
assets 7,889 11.08 2,848 4.00 3,559 5.00
</TABLE>
F-24
<PAGE> 85
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 16 - STOCKHOLDERS' EQUITY AND REGULATORY RESTRICTIONS (CONTINUED)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------
MINIMUM
TO BE WELL
MINIMUM CAPITALIZED
FOR CAPITAL UNDER PROMPT
ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES PROVISIONS
------------------- ------------------------ ------------------------
RATIO RATIO
AMOUNT RATIO AMOUNT > OR = AMOUNT > OR =
------ ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Consolidated:
Total capital to risk
weighted assets $ 53,730 8.23% $ 52,217 8.00% $ N/A
Tier 1 capital to risk
weighted assets 33,684 5.16 26,108 4.00 N/A
Tier 1 capital to average
assets 33,684 5.15 26,159 4.00 N/A
Colorado Bank:
Total capital to risk
weighted assets $ 52,266 9.09% $ 45,998 8.00% $ 57,497 10.00%
Tier 1 capital to risk
weighted assets 47,876 8.33 22,999 4.00 34,498 6.00
Tier 1 capital to average
assets 47,876 8.33 22,989 4.00 28,736 5.00
Nebraska Bank:
Total capital to risk
weighted assets $ 9,004 14.15% $ 5,091 8.00% $ 6,363 10.00%
Tier 1 capital to risk
weighted assets 8,207 12.90 2,545 4.00 3,818 6.00
Tier 1 capital to average
assets 8,207 10.81 3,037 4.00 3,797 5.00
</TABLE>
The Federal Reserve Board requires banks to maintain reserve balances composed
of cash on hand and balances maintained at the Federal Reserve Bank. These
reserve balances are based primarily on deposit levels and totaled approximately
$1,071,000 and $2,183,000 at December 31, 1998 and 1999, respectively.
F-25
<PAGE> 86
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 17 - ISSUANCE OF PREFERRED SECURITIES
On February 16, 1999, the Company completed the issuance of 2,300,000 of Company
obligated mandatorily redeemable preferred securities of subsidiary trust
holding solely junior subordinated debentures. The preferred securities have
been structured to qualify as Tier 1 capital for regulatory purposes. However,
the securities cannot be used to constitute more than 25 percent of the
Company's total Tier 1 capital according to regulatory requirements. The Company
utilized a portion of the proceeds of this issuance to inject additional capital
into the Colorado Bank.
NOTE 18 - STOCK INCENTIVE PLAN
On September 15, 1999, the Company adopted the FirsTier Corporation 1999 Stock
Incentive Plan to provide incentives for eligible persons, including employees,
non-employee directors, and consultants to the Company and its subsidiaries. The
total number of Company shares to be issued under this plan shall not exceed
1,700,000 shares. Incentive awards may be granted by the Company's Board of
Directors under this plan. To date, all stock options granted permit the holder
to purchase, under certain limitations, the Company's common stock at a price
not less than 100 percent of the market value of the stock on the date the
option was granted. These options terminate, contingent upon continued
employment and other factors, approximately 10 years from the date of grant. At
the time of the initial adoption of the plan, 500,000 shares were granted under
this plan to an eligible person. The exercise price per share is $12.00 per
share. None of the options were exercisable at December 31, 1999.
The Company applies Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, in accounting for the plan and recognizes no
compensation costs in net earnings from the grant of options, as options are
granted at exercise prices equal to the current stock price. Had compensation
cost been determined under SFAS 123, Accounting for Stock-Based Compensation,
the Company's pro forma 1999 net income and income per share would have been as
follows:
Net income:
As reported $ 5,066
Pro forma 4,846
Income per share - basic and diluted:
As reported $ 0.68
Pro forma 0.65
F-26
<PAGE> 87
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 18 - STOCK INCENTIVE PLAN (CONTINUED)
In accordance with SFAS 123, the fair value of options at date of grant was
estimated using the Black-Scholes option pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1999
----
<S> <C>
Risk-free interest rate 6.44%
Expected life (years) 9.71
Expected volatility 32.00%
Expected dividend yield -
</TABLE>
In accordance with SFAS 123, the weighted average fair value of options granted
during 1999 was $6.86.
NOTE 19 - YEAR 2000 UNCERTAINTIES
Like most entities, the Company and its subsidiaries may be exposed to risks
associated with Year 2000 dating problems. This problem affects computer
software and hardware; transactions with customers, vendors, and other entities;
and equipment dependent on microchips. The Company recognizes that Year 2000
dating problems pose a risk beyond January 1, 2000 as errors may not become
evident until after that date. The Company has performed the remediation steps
it believes necessary to address Year 2000 dating problems. It is not possible
for any entity to guarantee the results of its own remediation efforts or to
accurately predict the impact of Year 2000 dating problems on third parties with
which the Company does business. If remediation efforts of the Company or third
parties with which it does business are not successful, it is possible the Year
2000 dating problem could negatively impact the Company's consolidated financial
condition and results of operations. The Company does not believe any
significant Year 2000 dating problems have occurred.
F-27
<PAGE> 88
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 20 - CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY
The following presents condensed parent company only financial statements for
FirsTier Corporation:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1998 1999
-------- --------
<S> <C> <C>
Assets:
Cash $ 15 $ 5
Investment in subsidiaries 29,925 57,905
Note receivable from nonbank subsidiary -- 2,490
Other assets 2,025 1,287
-------- --------
TOTAL ASSETS $ 31,965 $ 61,687
======== ========
Liabilities:
Note payable $ 8,790 $ 11,560
Income taxes payable 2,118 --
Accounts payable and accrued liabilities 351 712
Subordinated debenture payable to nonbank
subsidiary -- 23,711
-------- --------
Total liabilities 11,259 35,983
-------- --------
Stockholders' equity:
Common stock 837 1,520
Retained earnings 19,460 24,520
Accumulated other comprehensive income (loss) 409 (336)
-------- --------
Total stockholders' equity 20,706 25,704
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,965 $ 61,687
======== ========
</TABLE>
F-28
<PAGE> 89
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 20 - CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY (CONTINUED)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Income:
Dividends received from subsidiaries $ 937 $ 994 $ 2,012
Interest 5 -- 174
Other -- 2 --
-------- -------- --------
Total income 942 996 2,186
-------- -------- --------
Expenses:
Purchased services 294 294 311
Interest 113 299 2,300
Other 27 27 64
-------- -------- --------
Total expenses 434 620 2,675
-------- -------- --------
Income (loss) before income tax expense
(benefit) and equity in undistributed
income of subsidiaries 508 376 (489)
Income tax expense (benefit) 2 (401) (968)
-------- -------- --------
Income before equity in undistributed
income of subsidiaries 506 777 479
Equity in undistributed income of subsidiaries 1,991 2,598 4,587
-------- -------- --------
NET INCOME $ 2,497 $ 3,375 $ 5,066
======== ======== ========
</TABLE>
F-29
<PAGE> 90
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
NOTE 20 - CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,497 $ 3,375 $ 5,066
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income of subsidiaries (1,991) (2,598) (4,587)
Changes in deferrals and accruals:
Other assets (501) (852) (169)
Income taxes payable 639 809 --
Accounts payable and accrued liabilities 112 239 443
-------- -------- --------
Net cash provided by operating activities 756 973 753
-------- -------- --------
Cash flows from investing activities:
Capital injection into subsidiary bank (3,737) (6,550) (22,750)
Capital injection into trust subsidiary -- -- (711)
Purchase of savings bank (3,743) -- --
Net cash transfers with First Mortgage Bancorp 2,799 166 (2,662)
-------- -------- --------
Net cash used in investing activities (4,681) (6,384) (26,123)
-------- -------- --------
Cash flows from financing activities:
Proceeds from note payable 3,380 6,940 11,560
Payments on note payable -- (1,530) (8,790)
Proceeds from junior subordinated notes issued to
trust subsidiary -- -- 23,711
Debt issuance cost -- -- (1,121)
-------- -------- --------
Net cash provided by financing activities 3,380 5,410 25,360
-------- -------- --------
Net decrease in cash (545) (1) (10)
Cash at beginning of year 561 16 15
-------- -------- --------
CASH AT END OF YEAR $ 16 $ 15 $ 5
======== ======== ========
</TABLE>
This information is an integral part of the accompanying
consolidated financial statements.
F-30
<PAGE> 91
FIRSTIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2000 (Unaudited) and December 31, 1999
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and due from banks ..................................................... $ 26,174 $ 27,049
Interest bearing deposits in other banks .................................... 174 3
Federal funds sold .......................................................... 50,685 --
Investment securities:
Available-for-sale, at fair value ......................................... 39,175 36,369
Held-to-maturity, at amortized cost, fair value of $4,660, at June 30,
2000 (unaudited) and $6,006, at December 31, 1999 ..................... 4,376 5,989
------------ ------------
Total investment securities ........................................ 41,352 42,358
------------ ------------
Loans held for sale ......................................................... 7,674 1,123
Gross loans receivable: ..................................................... 733,942 623,070
Less: unearned loan fees .................................................. (2,275) (2,121)
allowance for loan losses ........................................... (7,721) (5,322)
------------ ------------
Net loans receivable ............................................... 723,946 615,627
------------ ------------
Premises and equipment, net ................................................. 11,462 11,117
Preferred securities issuance cost, net ..................................... 1,078 1,083
Other assets ................................................................ 9,736 8,461
------------ ------------
TOTAL ASSETS ....................................................... $ 874,480 $ 706,821
============ ============
LIABILITIES
Deposits:
Demand non-interest bearing ............................................... $ 79,074 $ 58,648
Demand interest bearing ................................................... 23,132 19,951
Time ...................................................................... 672,340 523,395
------------ ------------
Total deposits ..................................................... 774,546 601,994
Federal funds purchased and securities sold under agreements to repurchase 7,859 8,150
Note payable ................................................................ 23,500 11,560
Federal Home Loan Bank borrowings ........................................... 8,477 33,235
Other liabilities ........................................................... 5,679 3,178
------------ ------------
Total liabilities .................................................. 820,061 658,117
------------ ------------
Company obligated mandatorily redeemable preferred securities of subsidiary
trust holding solely Junior Subordinated Debentures ....................... 23,000 23,000
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, 20,000,000 shares authorized; no shares issued and
outstanding at December 31, 1999 and June 30, 2000 (unaudited) .......... -- --
Common stock, 50,000,000 shares authorized; shares issued and outstanding:
7,579,667 at December 31, 1999 and June 30, 2000 7,718,064
(unaudited) ............................................................. 2,805 1,520
Retained earnings ........................................................... 29,018 24,520
Accumulated other comprehensive income (loss) ............................... (404) (336)
------------ ------------
Total stockholders' equity ......................................... 31,419 25,704
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................... $ 874,480 $ 706,821
============ ============
</TABLE>
F-31
<PAGE> 92
FIRSTIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME Three
months ended June 30, 2000 and 1999 (Unaudited) and
Six months ended June 30, 2000 and 1999 (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees .................................. $ 18,971 $ 9,667 $ 36,227 $ 17,642
Taxable investment securities .......................... 500 503 987 809
Nontaxable investment securities ....................... 125 110 250 262
Dividends on investment securities ..................... 68 11 82 25
Federal funds sold ..................................... 386 234 407 414
----------- ----------- ----------- -----------
Total interest income ........................... 20,050 10,525 37,953 19,152
----------- ----------- ----------- -----------
Interest expense:
Deposits ............................................... 9,247 4,670 16,687 8,495
Federal funds purchased ................................ 14 21 168 24
Securities sold under agreements to repurchase ......... 73 58 142 101
Note payable ........................................... 494 -- 713 84
Trust preferred securities ............................. 539 545 1,078 815
Federal Home Loan Bank borrowings ...................... 352 139 1,231 254
----------- ----------- ----------- -----------
Total interest expense .......................... 10,719 5,433 20,019 9,773
----------- ----------- ----------- -----------
Net interest income ............................. 9,331 5,092 17,934 9,379
Provision for loan losses ................................ 2,176 514 2,930 1,429
----------- ----------- ----------- -----------
Net interest income after provision for loan losses ...... 7,155 4,578 15,004 7,950
----------- ----------- ----------- -----------
Non-interest income:
Fees for other customer services ....................... 723 463 1,376 872
Net gains from sale of loans ........................... 288 323 401 594
Commissions and fees from brokerage activities ......... 123 114 236 181
Investment securities transactions, net ................ -- -- -- --
Other operating income ................................. 1,267 139 1,466 252
----------- ----------- ----------- -----------
Total non-interest income ....................... 2,401 1,039 3,479 1,899
----------- ----------- ----------- -----------
Non-interest expenses:
Salaries and employee benefits ......................... 3,197 1,922 6,175 3,676
Net occupancy expense of premises ...................... 926 544 1,774 1,030
Purchased services ..................................... 452 440 899 755
Office supplies ........................................ 165 119 341 229
Other operating expenses ............................... 1,259 725 2,276 1,249
----------- ----------- ----------- -----------
Total non-interest expenses ..................... 5,999 3,750 11,465 6,939
----------- ----------- ----------- -----------
Income before income taxes ...................... 3,557 1,867 7,018 2,910
Income tax expense ....................................... 1,287 626 2,519 957
----------- ----------- ----------- -----------
NET INCOME ............................................... $ 2,270 $ 1,241 $ 4,499 $ 1,953
=========== =========== =========== ===========
Other comprehensive income:
Unrealized holding gains (losses) arising during the . (24) (441) (103) (577)
period
Unrealized holding gains (losses) arising during prior -- -- -- --
periods, realized during current period
----------- -----------
Income tax (expense) benefit related to items of other
comprehensive income ................................ 9 150 38 196
----------- ----------- ----------- -----------
Other comprehensive income, net of tax .......... (15) (291) (65) (381)
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME ..................................... $ 2,255 $ 950 $ 4,434 $ 1,572
=========== =========== =========== ===========
Income per share:
Basic and diluted earnings per share ..................... $ 0.30 $ 0.17 $ 0.59 $ 0.26
=========== =========== =========== ===========
Weighted average shares outstanding .................. 7,580,427 7,424,337 7,581,171 7,502,002
=========== =========== =========== ===========
</TABLE>
F-32
<PAGE> 93
FIRSTIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2000 and 1999 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------
2000 1999
---------- ---------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................... $ 4,499 $ 1,953
Adjustments to reconcile net income to cash provided by operating
activities:
Provision for loan losses ....................................... 2,930 1,454
Depreciation and amortization ................................... 651 555
Net gains from sale of loans .................................... (401) (594)
Proceeds from sale of loans held for sale ....................... 18,523 31,226
Origination of loans held for sale .............................. (24,673) (27,975)
Investment securities transactions, net ......................... 0 175
Changes in deferrals and accruals:
Other assets .................................................... (1,240) 1,933
Other liabilities ............................................... 2,501 (4,000)
--------- ---------
Net cash provided by operating activities ..................... 2,790 4,727
--------- ---------
Cash flows from investing activities:
Net (increase) decrease in federal funds sold ..................... (50,685) 10,770
Net (increase) decrease in interest bearing deposits in other banks (171) 3
Purchase of investment securities available-for-sale .............. (6,764) (58,148)
Purchase of investment securities held-to-maturity ................ -- (127)
Proceeds from maturities/paydowns of investment securities ........ 5,456 39,039
Net increase in loans ............................................. (111,250) (124,734)
Expenditures for bank premises and equipment ...................... (965) (1,254)
Proceeds from sale of real estate ................................. 162
owned ........................................................... --
--------- ---------
Net cash used in investing activities ......................... (164,379) (134,289)
--------- ---------
Cash flows from financing activities:
Net increase in deposits .......................................... 172,552 109,032
Advances from Federal Home Loan Bank .............................. (24,758) (57)
Proceeds from note payable ........................................ 11,940 3,600
Payments on note payable .......................................... -- (8,790)
Proceeds from trust preferred securities .......................... -- 23,000
Proceeds from sale of common ...................................... 1,285 --
stock
Debt issuance cost ................................................ (14) (1,102)
--------- ---------
Net cash provided by financing activities ..................... 160,714 130,166
--------- ---------
Net increase in cash and due from banks ................................ (875) 604
Cash and due from banks at beginning of period ......................... 27,049 13,892
--------- ---------
Cash and due from banks at end of period ............................... $ 26,174 $ 14,496
========= =========
</TABLE>
F-33
<PAGE> 94
FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six month period ended June 30, 2000 and 1999 (Unaudited)
1. Summary of significant accounting policies
The accompanying unaudited interim financial statements have been
prepared in accordance with the instructions for Form 10-QSB and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. All
adjustments that are, in the opinion of management, of a normal
recurring nature necessary for a fair statement of results for the
interim periods presented have been made. The results of operations for
such interim periods are not necessarily indicative of results of
operations for a full year. The statements should be read in
conjunction with the summary of significant accounting policies and
notes to consolidated financial statements of the Company included in
the Company's annual report on form 10-KSB for the year-end December
31, 1999.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the
financial position of the Company at June 30, 2000 and December 31,
1999, and the results of operations and cash flows for the six month
periods ended June 30, 2000 and 1999.
The consolidated financial statements include the accounts of the
Company's respective subsidiaries. All material intercompany
transactions have been eliminated in consolidation.
2. Nature of Operations
FirsTier Corporation (the "Company" or "FirsTier"), a multibank holding
company, offers full service community banking through 16 banking
locations in metropolitan Denver and northern Colorado, and two banking
locations in western and central Nebraska. FirsTier's Colorado bank
opened six new branches during 1999 and one branch in 2000.
3. Corporate Restructuring
On September 14, 1999 the Company changed its state of incorporation to
Colorado and changed its name to FirsTier Corporation from First
Western Corp. As a result of the re-incorporation, the Company's common
stock and surplus accounts have been combined. Also, the Company
effected a 52.47623 for one common stock split. All share and per share
amounts contained in these financial statements have been restated for
this reorganization.
4. 1999 Stock Incentive Plan
In September 1999 the Company adopted the 1999 Stock Incentive Plan to
provide incentives for eligible persons, including employees,
non-employee directors and consultants to the Company and its
subsidiaries. The number of shares of common stock of the Company to be
issued under this plan may not exceed 1,700,000. To date, all stock
options granted permit the holder to purchase, under certain
limitations, the Company's common stock at a price not less than 100%
of the market value of the stock on the date the option was granted. At
the time of the initial adoption of the plan, an option for 500,000
shares was granted under this plan to an executive officer at an
exercise price of $12.00 per share.
F-34
<PAGE> 95
5. Acquisition
In the first quarter of 1999, the Company exchanged 232,994 shares of
its common stock for the 8.6% of Firstate Bank (Kimball, NE) that it
did not own. Individuals already affiliated with the Company owned
these minority shares. As the Company and its four shareholders at the
time of the exchange owned 99.6% of the Nebraska bank and the remaining
0.4% was owned by other persons who were affiliated with the Company,
it was determined by the boards of both entities that a book value
exchange ratio represented a fair value for all parties. The fair value
determined for this transaction was $683,000. No goodwill was
recognized in connection with this transaction.
6. Offering of Trust Preferred Securities by FW Capital I
On February 16, 1999 the Company and its wholly owned subsidiary FW
Capital I (the "Trust"), completed the sale of $23.0 million of 9.375%
Cumulative Trust Preferred Securities of the Trust. Net proceeds were
approximately $21.9 million after payment of sales commissions and
other offering costs, and were invested in Junior Subordinated
Debentures maturing February 16, 2029, issued by the Company to the
Trust in connection with the public offering.
Interest on the Junior Subordinated Debentures is paid by the Company
to the Trust. This interest is the sole revenue of the Trust and the
source for distributions by the Trust to the holders of the Trust
Preferred Securities.
For financial reporting purposes, the Trust is treated as a subsidiary
of the Company, and accordingly, the accounts of the Trust are included
in the consolidated financial statements of the Company. The Trust
Preferred Securities are presented as a separate line item in the
consolidated balance sheet under the caption "Company obligated
mandatorily redeemable preferred securities of subsidiary trust holding
solely Junior Subordinated Debentures." For financial reporting
purposes, the Company records distributions payable on the Trust
Preferred Securities as interest expense in the consolidated statements
of income.
The Junior Subordinated Debentures are unsecured and rank junior and
are subordinate to all senior debt of the Company and constitute a full
and unconditional guarantee on a subordinated basis by the Company of
the obligations of the Trust under the Preferred Securities.
7. New Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement 133, "Accounting for Derivative Instruments and Hedging
Activities" (FAS 133). FAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities.
In June 1999, the FASB issued Statement 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of
FASB Statement 133, an Amendment of FASB Statement 133" (FAS 137). FAS
137 defers the effective date to no later than January 1, 2001.
In June 2000, the FASB issued Statement 138, "Accounting for Derivative
Instruments and Hedging Activities, and Amendment of FASB Statement
133" (FAS 138). FAS 138 is effective at the later of the first fiscal
quarter beginning after June 15, 2000 or upon the adoption of FAS 133,
and should be adopted concurrently with FAS 133. Management, at this
time, does not anticipate the adoption of this statement will have a
material effect on the financial statements of the Company.
F-35
<PAGE> 96
================
APPENDIX I
AGREEMENT AND
PLAN OF MERGER
================
<PAGE> 97
FOURTH AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This Fourth Amendment to Agreement and Plan of Merger (this
"Amendment") dated as of October 19, 2000 is entered into by and between Compass
Bancshares, Inc. ("Compass"), Compass Acquisition, Inc. ("Merger Sub") and
FirsTier Corporation (the "Company").
WHEREAS, Compass, Merger Sub and the Company entered into an Agreement
and Plan of Merger dated as of August 23, 2000, as amended by the Amendment to
Agreement and Plan of Merger dated as of September 22, 2000 the Second Amendment
to Agreement and Plan of Merger dated as of September 27, 2000 and the Third
Amendment to Agreement and Plan of Merger (as
WHEREAS, the parties desire to further 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. Section 2.2(a) to the Merger Agreement is hereby amended in its
entirety to read in full as follows:
(a) At or prior to the Effective Time, pursuant to an exchange
agent agreement in substantially the form attached hereto as
Exhibit B (the "Exchange Agreement"), Compass shall (i) deposit
with Continental Stock Transfer and Trust Company (the
"Exchange Agent") the shares of Compass Common Stock in the
amounts provided in Section 1.6 to effect the exchange of
Compass Common Stock for certificates formerly representing
shares of Company Common Stock; and (ii) deposit or cause to be
deposited with the Exchange Agent, prior to the Effective Time
cash in an aggregate amount estimated to be sufficient to make
the cash payments in lieu of fractional shares of Compass
Common Stock pursuant to Section 1.6 hereof (such amounts being
hereinafter referred to as the "Exchange Fund"). The Exchange
Agent shall, pursuant to irrevocable instructions jointly given
by the Company and Compass, promptly make the payments in lieu
of fractional shares out of the Exchange Fund upon surrender of
Shares in accordance with Section 2.2(b). Payments to
dissenting shareholders shall be made by the Surviving
Corporation as required by Article 113 of the
<PAGE> 98
CBCA. The Exchange Fund shall not be used for any other
purpose, except as provided in this Agreement.
4. Except as herein provided, the terms of the Merger Agreement
shall remain in full force and effect.
5. This Amendment may be executed in several counterparts, and by
the parties on separate counterparts, and all such counterparts, when so
executed and delivered, shall constitute but one and the same agreement.
[Signature Page Follows]
<PAGE> 99
IN WITNESS WHEREOF the parties have executed this Amendment as of the
date first written above.
ATTEST: COMPASS BANCSHARES, INC.
By: /s/ Jerry W. Powell By: /s/ Garrett R. Hegel
--------------------------------- --------------------------------
Its: Secretary Its: Chief Financial Officer
ATTEST: COMPASS ACQUISITION, INC.
By: /s/ Jerry W. Powell By: /s/ Garrett R. Hegel
---------------------------------- -------------------------------
Its: Secretary Its: Chief Financial Officer
ATTEST: FIRSTIER CORPORATION
By: /s/ Kathy Hight By: Timothy D. Wiens
--------------------------------- --------------------------------
Its: Administrative Its: President and
Assistant Chief Executive Officer
<PAGE> 100
THIRD AMENDMENT TO AGREEMENT AND PLAN OF MERGER
-----------------------------------------------
This Third Amendment to Agreement and Plan of Merger (this "Amendment")
dated as of October 13, 2000 is entered into by and between Compass Bancshares,
Inc. ("Compass"), Compass Acquisition, Inc. ("Compass-Colorado") and FirsTier
Corporation (the "Company").
WHEREAS, Compass and the Company entered into an Agreement and Plan of
Merger dated as of August 23, 2000, as amended by the Amendment to Agreement and
Plan of Merger dated as of September 22, 2000 and the Second Amendment to
Agreement and Plan of Merger dated as of September 27, 2000 (as amended, the
"Merger Agreement");
WHEREAS, the Merger Agreement requires that an existing or new
subsidiary of Compass shall be merged with the Company with the Company being
the surviving entity;
WHEREAS, Compass-Colorado is such existing or new subsidiary;
WHEREAS, Section 8.4(b) of the Merger Agreement requires Compass and
the Company to amend the Merger Agreement for the purpose of making
Compass-Colorado a party thereto; and
WHEREAS, the parties desire to further 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-Colorado shall become a
party to the Merger Agreement, and shall succeed to the rights and become
subject to the obligations of Merger Sub as provided in the Merger Agreement.
3. The execution of this Amendment shall not relieve Compass of its
obligation under the Merger Agreement.
4. Section 1.6(d) to the Merger Agreement is hereby amended in its
entirety to read in full as follows:
(d) Each share of capital stock of Merger Sub issued and
outstanding immediately before the Effective Time shall be converted
into the aggregate number of shares of the capital stock of the
Company issued and outstanding as of the Effective Time.
<PAGE> 101
5. Section 1.8 of the Merger Agreement is hereby amended by
substituting the date "October 16, 2000" with the date "October 20, 2000".
6. Section 7.2(q) of the Merger Agreement is hereby amended to read
in full as follows:
(q) [INTENTIONALLY OMITTED]
7. Section 7.2 of the Merger Agreement is hereby amended by adding a
new subsection (t) to read in full as follows:
(t) the transactions contemplated by the Agreement
and Plan of Merger to be entered into between Western
Management Corporation and Compass (the "Ancillary Agreement")
shall have been simultaneously consummated herewith; and
8. Section 8.1(b)(ix) of the Merger Agreement is hereby amended to
read in full as follows:
(ix) [INTENTIONALLY OMITTED]
9. Section 8.1 of the Merger Agreement is hereby amended by adding a
new subsection (i) which shall read in full as follows:
(i) By Compass or the Company in the event that the
Ancillary Agreement is terminated.
10. Exhibit L to the Merger Agreement is hereby amended in its
entirety to read in full as Exhibit A attached hereto.
11. Except as herein provided, the terms of the Merger Agreement
shall remain in full force and effect.
12. This Amendment may be executed in several counterparts, and by
the parties on separate counterparts, and all such counterparts, when so
executed and delivered, shall constitute but one and the same agreement.
[Signature Page Follows]
<PAGE> 102
IN WITNESS WHEREOF the parties have executed this Amendment as of the
date first written above.
<TABLE>
<CAPTION>
<S> <C>
ATTEST: COMPASS BANCSHARES, INC.
By: /s/ Jerry W. Powell By: /s/ Garrett R. Hegel
------------------------------- ---------------------------------------
Its: Secretary Its: Chief Financial Officer
ATTEST: COMPASS ACQUISITION, INC.
By: /s/ Jerry W. Powell By: /s/ Garrett R. Hegel
------------------------------- ---------------------------------------
Its: Secretary Its: President
ATTEST: FIRSTIER CORPORATION
By: /s/ Kathy Hight By: /s/ Timothy D. Wiens
------------------------------- ---------------------------------------
Its: Administrative Assistant Its: President and Chief Executive Officer
</TABLE>
<PAGE> 103
EXHIBIT A
EXHIBIT L
FORM OF TRADENAME ASSIGNMENT
TRADENAME ASSIGNMENT ("Assignment"), dated ____________, 2001 by and
between FirsTier Corporation, a Colorado corporation ("FirsTier"), and Joel H.
Wiens ("Wiens").
WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of
August 23, 2000, as amended (the "Merger Agreement"), between Compass
Bancshares, Inc. ("Compass") and FirsTier, such parties have agreed to the
Merger as defined therein;
WHEREAS, Wiens is desirous of acquiring, subject to the limitations set
forth in that certain Agreement dated September 17, 1999 by and among U.S.
Bancorp, U.S. Bank National Association and Firstate Bank of Colorado (the
"Prior Agreement"), the entire goodwill, right, title and interest in and to the
tradename "FirsTier", including all rights, goodwill, title and interest to any
pending service mark applications using the "FirsTier" name or any name
including the word "FirsTier" (the "Tradename"), subject to certain geographical
limitations described herein;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. FirsTier does hereby sell, assign and transfer unto Wiens or his
assigns, the entire goodwill, right, title and interest in and to the Tradename,
subject to the limitations set forth herein and in the Prior Agreement. FirsTier
agrees to execute and deliver any and all assignment documents and perform any
and all reasonable actions necessary to effect the assignment of the Tradename
to Wiens as contemplated by this Assignment.
2. FirsTier does hereby sell, assign and transfer unto Wiens all of
FirsTier's right, title and interest under the Prior Agreement. Wiens hereby
assumes all obligations of FirsTier under the Prior Agreement.
3. Wiens acknowledges and agrees that FirsTier, its affiliates and its
successors by merger, shall retain the right to recover for all past
infringement, if any, of the Tradename that may have occurred prior to the date
hereof.
4. In consideration for this Assignment, Wiens agrees that, for a
period of two years following the date hereof, neither he nor his affiliates,
assigns or successors, shall have the right and license to use the Tradename in
the Front Range of the State of Colorado, including without limitation the six
county Denver, Colorado metropolitan area, and Kimball County, Nebraska.
<PAGE> 104
5. Wiens acknowledges that some residual use of the Tradename may be
made by Compass Bank's customers following the Merger, including but not limited
to use on checks, deposit slips, debit cards, atm cards, releases, and
assignments. Wiens agrees that all such residual use does not constitute
infringement of the use of the Tradename or a breach of this Assignment and that
Wiens will not sue for infringement or breach on the basis of such residual use.
6. This Assignment shall be effective at the Effective Time of the
Merger (as defined in the Merger Agreement).
7. This Assignment shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
and their respective successors and assigns.
FIRSTIER CORPORATION, a Colorado
corporation
By: _____________________________ __________________________________
Name:____________________________ Joel H. Wiens
Title:___________________________
Compass Bancshares, Inc., on behalf of itself and each of its affiliates
(including FirsTier), hereby consents to the assignment by FirsTier of all
goodwill, title, right and interest in and to the Tradename to Wiens, in
accordance with the terms of the foregoing Assignment, and agrees not to use the
Tradename at any time in any manner except as provided in Section 5 of this
Assignment.
Dated: ______________, 2001 COMPASS BANCSHARES, INC.
By:_______________________________
Name:____________________________-
Title:____________________________
<PAGE> 105
SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER
------------------------------------------------
This Second Amendment to Agreement and Plan of Merger (this
"Amendment") dated as of September 27, 2000 is entered into by and between
Compass Bancshares, Inc. ("Compass") and FirsTier Corporation (the "Company").
WHEREAS, Compass and the Company entered into an Agreement and Plan of
Merger dated as of August 23, 2000, as amended by the Amendment to Agreement and
Plan of Merger dated as of September 22, 2000 (as amended, the "Merger
Agreement"); and
WHEREAS, the parties desire to further 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. Subsection 7.2(r) of the Merger Agreement is hereby renamed
subsection (s) and is hereby further amended to read in full as follows:
(s) Compass shall have received certificates dated
the Closing executed by the Chairman of the Board of
the Company and by the Chairman of the Board of its
Subsidiaries, and the Secretary or Cashier of the
Company and its Subsidiaries, respectively,
certifying in such reasonable detail as Compass may
reasonably request, to the effect described in
Section 7.2(a), (b), (c), (g), (i), (n), (p) and (r).
3. Section 7.2 of the Merger Agreement is hereby amended by
adding a new subsection (r) which shall read in full as follows:
(r) As a result of Compass' review of the loan files
and related information, the Company and its
Subsidiaries shall have performed a detailed
assessment, acceptable to Compass, as to the adequacy
of the Company's and its Subsidiaries' loan loss
allowance and shall have recorded the appropriate
adjustments in the allowance, if any; for the period
ending December 31, 2000; and
4. Section 8.1(b)(ix) of the Merger Agreement is hereby
amended by substituting the date "September 17, 2000" with the date "October 13,
2000."
<PAGE> 106
5. Except as herein provided, the terms of the Merger
Agreement shall remain in full force and effect.
6. This Amendment may be executed in several counterparts, and
by the parties on separate counterparts, and all such counterparts, when so
executed and delivered, shall constitute but one and the same agreement.
[Signature Page Follows]
<PAGE> 107
IN WITNESS WHEREOF the parties have executed this Amendment as of the
date first written above.
<TABLE>
<CAPTION>
<S> <C>
ATTEST: COMPASS BANCSHARES, INC.
By: /s/ Jerry W. Powell By: /s/ Garrett R. Hegel
---------------------------------------- -------------------------------------------
Its: Secretary Its: Chief Financial Officer
ATTEST: FIRSTIER CORPORATION
By: /s/ Kathy Hight By: /s/ Timothy D. Wiens
---------------------------------------- -------------------------------------------
Its: Administrative Assistant Its: President and Chief Executive Officer
</TABLE>
<PAGE> 108
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
-----------------------------------------
This Amendment to Agreement and Plan of Merger (this "Amendment") dated
as of September 22, 2000 is entered into by and between Compass Bancshares, Inc.
("Compass") and FirsTier Corporation (the "Company").
WHEREAS, Compass and the Company entered into an Agreement and Plan of
Merger dated as of August 23, 2000 (the "Merger Agreement"); and
WHEREAS, the parties desire to 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. The second sentence of Section 6.1(a) of the Merger Agreement is
hereby amended by substituting the date "September 27, 2000" for the date
"September 22, 2000."
3. The first sentence of Section 8.2 of the Merger Agreement is
hereby amended in by substituting the date "September 27, 2000" for the date
"September 22, 2000."
4. Except as herein provided, the terms of the Merger Agreement
shall remain in full force and effect.
5. This Amendment may be executed in several counterparts, and by
the parties on separate counterparts, and all such counterparts, when so
executed and delivered, shall constitute but one and the same agreement.
[Signature Page Follows]
<PAGE> 109
IN WITNESS WHEREOF the parties have executed this Amendment as of the
date first written above.
<TABLE>
<CAPTION>
<S> <C>
ATTEST: COMPASS BANCSHARES, INC.
By: /s/ Al Watkins By: /s/ Jerry W. Powell
-------------------------------- -------------------------------------------
Its: Assistant Secretary Its: General Counsel and Secretary
ATTEST: FIRSTIER CORPORATION
By: /s/ Kathy Hight By: /s/ Timothy D. Wiens
-------------------------------- -------------------------------------------
Its: Administrative Assistant Its: President and Chief Executive Officer
</TABLE>
<PAGE> 110
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
COMPASS BANCSHARES, INC.
AND
FIRSTIER CORPORATION
Dated as of August 23, 2000
<PAGE> 111
TABLE OF CONTENTS
PAGE
----
ARTICLE I. THE MERGER.........................................................1
SECTION 1.1 The Merger................................................1
SECTION 1.2 Effective Time............................................1
SECTION 1.3 Certain Effects of the Merger.............................2
SECTION 1.4 Articles of Incorporation and By-Laws.....................2
SECTION 1.5 Directors and Officers....................................2
SECTION 1.6 Conversion of Shares......................................2
SECTION 1.7 Shareholders' Meeting.....................................3
SECTION 1.8 Registration of the Compass Common Stock..................3
SECTION 1.9 Tax Consequences..........................................4
SECTION 1.10 Closing...................................................4
SECTION 1.11 Modification of Structure.................................5
ARTICLE II. DISSENTING SHARES; EXCHANGE OF SHARES.............................5
SECTION 2.1 Dissenting Shares.........................................5
SECTION 2.2 Exchange of Shares........................................5
ARTICLE III. 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..............................................8
SECTION 3.6 Consents and Approvals....................................9
SECTION 3.7 Regulatory Reports........................................9
SECTION 3.8 SEC Status; Securities Issuances..........................9
SECTION 3.9 Financial Statements.....................................10
SECTION 3.10 Absence of Certain Changes...............................10
SECTION 3.11 Company Indebtedness.....................................12
SECTION 3.12 Litigation...............................................12
SECTION 3.13 Tax Matters..............................................12
SECTION 3.14 Employee Benefit Plans...................................13
SECTION 3.15 Employment Matters.......................................16
SECTION 3.16 Leases, Contracts and Agreements.........................16
SECTION 3.17 Related Company Transactions.............................17
SECTION 3.18 Compliance with Laws.....................................17
SECTION 3.19 Insurance................................................17
SECTION 3.20 Loans....................................................18
SECTION 3.21 Fiduciary Responsibilities...............................18
SECTION 3.22 Patents, Trademarks and Copyrights.......................18
SECTION 3.23 Environmental Compliance.................................18
SECTION 3.24 Regulatory Actions.......................................19
SECTION 3.25 Title to Properties; Encumbrances........................20
SECTION 3.26 Shareholder List.........................................20
ii
<PAGE> 112
SECTION 3.27 Dissenting Shareholders..................................20
SECTION 3.28 Takeover Laws............................................20
SECTION 3.29 Employee Stock Options...................................21
SECTION 3.30 Accounting Matters.......................................21
SECTION 3.31 Year 2000 Representation.................................21
SECTION 3.32 Representations Not Misleading...........................21
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF COMPASS........................21
SECTION 4.1 Organization and Authority...............................21
SECTION 4.2 Authority Relative to Agreement..........................22
SECTION 4.3 Financial Reports........................................22
SECTION 4.4 Capitalization...........................................23
SECTION 4.5 Consents and Approvals...................................23
SECTION 4.6 Availability of Compass Common Stock.....................23
SECTION 4.7 Regulatory Actions.......................................24
SECTION 4.8 Takeover Laws............................................24
SECTION 4.9 Accounting Matters.......................................24
SECTION 4.10 Litigation...............................................24
SECTION 4.11 Absence of Certain Changes...............................24
SECTION 4.12 Representations Not Misleading...........................24
ARTICLE V. COVENANTS OF THE COMPANY..........................................24
SECTION 5.1 Affirmative Covenants of the Company.....................24
SECTION 5.2 Negative Covenants of the Company........................26
ARTICLE VI. ADDITIONAL AGREEMENTS............................................28
SECTION 6.1 Due Diligence Review; Continuing Access To, and
Information Concerning, Properties and Records...........28
SECTION 6.2 Filing of Regulatory Approvals...........................29
SECTION 6.3 Miscellaneous Agreements and Consents....................29
SECTION 6.4 Company Indebtedness.....................................29
SECTION 6.5 Best Good Faith Efforts..................................29
SECTION 6.6 Exclusivity..............................................29
SECTION 6.7 Public Announcement......................................31
SECTION 6.8 Employee Benefit Plans...................................31
SECTION 6.9 Merger of Banks..........................................32
SECTION 6.10 Environmental Investigation; Right to Terminate
Agreement................................................32
SECTION 6.11 Proxies..................................................33
SECTION 6.12 Exchange Agreement.......................................34
SECTION 6.13 Director and Officer Indemnification.....................34
SECTION 6.14 Exercise of Convertible Securities.......................35
SECTION 6.15 Removal of Personal Property.............................35
SECTION 6.16 Assignment of Name.......................................35
SECTION 6.17 Actions Respecting Debentures............................35
SECTION 6.18 Publication of 30 Days of Post Combination Results.......35
SECTION 6.19 Right of First Refusal...................................35
ARTICLE VII. CONDITIONS TO CONSUMMATION OF THE MERGER........................35
SECTION 7.1 Conditions to Each Party's Obligation to
Effect the Merger........................................35
iii
<PAGE> 113
SECTION 7.2 Conditions to the Obligations of Compass and
Merger Sub to Effect the Merger..........................36
SECTION 7.3 Conditions to the Obligations of the Company to
Effect the Merger........................................38
ARTICLE VIII. TERMINATION; AMENDMENT; WAIVER.................................39
SECTION 8.1 Termination..............................................39
SECTION 8.2 Special Compass Rights of Termination....................41
SECTION 8.3 Effect of Termination....................................41
SECTION 8.4 Amendment................................................42
SECTION 8.5 Extension; Waiver........................................42
SECTION 8.6 Termination Fee..........................................42
ARTICLE IX. SURVIVAL........................................................ 42
SECTION 9.1 Survival of Representations and Warranties...............42
ARTICLE X. MISCELLANEOUS.................................................... 42
SECTION 10.1 Expenses.................................................42
SECTION 10.2 Brokers and Finders......................................43
SECTION 10.3 Entire Agreement; Assignment.............................43
SECTION 10.4 Further Assurances.......................................43
SECTION 10.5 Enforcement of the Agreement.............................43
SECTION 10.6 Severability.............................................43
SECTION 10.7 Notices..................................................43
SECTION 10.8 Governing Law............................................45
SECTION 10.9 Descriptive Headings.....................................45
SECTION 10.10 Parties in Interest......................................45
SECTION 10.11 Counterparts.............................................45
SECTION 10.12 Incorporation by References..............................45
SECTION 10.13 Certain Definitions......................................45
ATTACHMENTS
EXHIBITS
A. Pooling Transfer Restrictions Agreement
B. Exchange Agent Agreement
C. Pooling of Interest Criteria
D. Voting Agreement and Irrevocable Proxy
E. Opinion of Counsel for the Company and the Banks
F. Opinion of Counsel for Compass and Merger Sub
G. Representations Certificate
H. Noncompetition Agreement
I. Release
iv
<PAGE> 114
J. Release
K. Officers with Knowledge
L. Tradename Assignment
M. Right of First Refusal
N. Tax Opinion
v
<PAGE> 115
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of August 23, 2000,
by and between Compass Bancshares, Inc., a Delaware corporation ("Compass"), and
FirsTier Corporation, a Colorado corporation ("Company").
WHEREAS, Compass desires to affiliate with the Company and its wholly
owned subsidiaries, FirsTier Bank, a Colorado banking corporation and Firstate
Bank, a Nebraska banking corporation (collectively, the "Banks"), and the
Company and the Banks desire to affiliate with Compass in the manner provided in
this Agreement; and
WHEREAS, Compass and the Company believe that the Merger (as defined
herein) of the Company with an existing or to-be-formed subsidiary ("Merger
Sub") of Compass incorporated under the laws of the State of Colorado, 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, Compass, Merger Sub and the Company intend the Merger to
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder; 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 Colorado Business Corporation Act (the
"CBCA"), Merger Sub shall be merged with and into the Company (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, the Company
shall continue as the surviving corporation (the "Surviving Corporation") and
the separate corporate existence of Merger Sub shall cease. Compass shall not be
deemed a party to the Merger for the purposes of Article 7-111-106 of the CBCA.
SECTION 1.2 EFFECTIVE TIME. The Merger shall be consummated by the
filing by the Colorado Secretary of State of Articles of Merger, in the form
required by and executed in accordance with the relevant provisions of the CBCA,
and by the issuance of a Certificate of Merger by the Secretary of State of
Colorado. (The date of such issuance and filing or such
<PAGE> 116
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 7-111-106 of the CBCA.
SECTION 1.4 ARTICLES OF INCORPORATION AND BY-LAWS. The Articles of
Incorporation and the By-Laws of the Company, in each case as in effect at the
Effective Time, shall be the Articles of Incorporation and By-Laws of the
Surviving Corporation.
SECTION 1.5 DIRECTORS AND OFFICERS. The directors and officers of
Merger Sub at the Effective Time shall be the directors and officers of the
Surviving Corporation and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation and By-Laws of the Surviving
Corporation, or as otherwise provided by law.
SECTION 1.6 CONVERSION OF SHARES.
(a) Each share of the Company's common stock ("Company Common Stock" or
"Shares"), issued and outstanding immediately prior to the Effective Time
("Common Shares Outstanding"), other than Dissenting Shares (as defined in
Section 2.1), shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and represent the right to receive the
consideration payable as set forth below (the "Merger Consideration") to the
holder of record thereof, without interest thereon, upon surrender of the
certificate representing such Share. For the purposes of determining the number
of Shares issued and outstanding, the number of Shares issued and outstanding
shall be increased by the number and class of Shares that may be acquired upon
exercise or conversion of any warrant, option, convertible debenture or other
security entitling the holder thereof to acquire Shares which is in effect or
outstanding prior to the Effective Time. At the Closing the Company shall
calculate and certify to Compass the Common Shares Outstanding.
(b) Each holder of Company Common Stock shall receive for each share of
Company Common Stock held immediately prior to the Effective Time Merger
Consideration equal to the quotient of 6,800,000 shares of Compass Common Stock,
par value $2.00 per share ("Compass Common Stock"), divided by the Common Shares
Outstanding. In no event, however, shall Compass be obligated to issue any more
than 6,800,000 shares of Compass Common Stock in exchange for all outstanding
Shares. The ratio of the 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,
where 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 average of the closing sale price for Compass Common Stock as
reported by the NASDAQ National Market System for the twenty
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days of trading immediately preceding the fifth trading day prior to the
Closing, as defined in Section 1.10 below ("Average Closing Price").
(d) Each share of capital stock of Merger Sub issued and outstanding
immediately before the Effective Time shall be converted into 8,218,064 shares
of common stock of the Surviving Corporation.
SECTION 1.7 SHAREHOLDERS' MEETING. The Company, acting through its
Board of Directors, shall, in accordance with applicable law:
(a) duly call, give notice of, convene and hold a meeting (the
"Shareholders' Meeting") of its shareholders as soon as practicable for the
purpose of approving and adopting this Agreement;
(b) require no greater than the minimum vote required by applicable law
or the Articles of Incorporation, if greater, 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, subject to
the conditions of Section 6.6; 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 or its Articles of Incorporation, if
greater. The letter to shareholders, notice of meeting, proxy statement and form
of proxy to be distributed to shareholders in connection with the Merger shall
be in form and substance reasonably satisfactory to Compass, and are
collectively referred to herein as the "Proxy Statement."
SECTION 1.8 REGISTRATION OF THE COMPASS COMMON STOCK.
(a) Compass shall prepare a registration statement on Form S-4 (the
"Registration Statement") to be filed by Compass 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, including the proxy statement and prospectus
and other proxy solicitation materials of the Company constituting a part
thereof (the "Proxy Statement"). The Company agrees to cooperate, and to cause
its Subsidiaries to cooperate, with Compass, its counsel and its accountants, in
the preparation of the Registration Statement and the Proxy Statement; and
provided that the Company and its Subsidiaries have cooperated as required
above, Compass agrees to file the Registration Statement with the SEC as
promptly as reasonably practicable and shall use reasonable efforts to cause
such filing to occur on or before October 16, 2000, subject to the receipt of
all necessary information on the part of the Company for inclusion in the
Registration Statement and Proxy Statement. Each of the Company and Compass
agrees to use all reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as
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reasonably practicable after filing thereof. Compass also agrees to use all
reasonable efforts to obtain, prior to or at the effective date of the
Registration Statement, all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the Merger contemplated by this Agreement.
The Company agrees to furnish to Compass all information concerning the Company,
its Subsidiaries, officers, directors and stockholders as may be requested in
connection with the foregoing.
(b) Each of the Company and Compass agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statement therein not misleading, and (ii) the
Proxy Statement and any amendment or supplement thereto will not, at the date of
mailing to the Company stockholders and at the time of the Shareholders' Meeting
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading or any statement which, in the light of the circumstances under
which such statement is made will be false or misleading, with respect to any
material fact, or which will omit to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier statement in the Proxy Statement or any amendment
or supplement thereto. Each of the Company and Compass further agrees that if it
shall become aware prior to the Effective Time of any information furnished by
it that would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading to
promptly inform the party thereof and to take the necessary steps to correct the
Proxy Statement.
(c) Compass agrees to advise the Company promptly after Compass
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order or the suspension of the qualification of Compass Common Stock for
offering or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose or of any request by the SEC for the amendment
or supplement of the Registration Statement.
(d) 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 TAX CONSEQUENCES. It is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section
368(a) of the Code, and the parties hereto hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
SECTION 1.10 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,
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of the conditions set forth in Article VII hereof, the Company and Merger Sub
shall execute and deliver the Articles 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; provided, however, that the
Effective Time shall not occur prior to January 1, 2001, unless otherwise
agreed. Prior to the filing referred to in this Section, a closing (the
"Closing") will be held at the office of Locke Liddell & Sapp LLP in Houston,
Texas (or such other place as the parties may agree) for the purpose of
confirming all of the foregoing.
SECTION 1.11 MODIFICATION OF STRUCTURE. Notwithstanding any provision
of this Agreement to the contrary, Compass may elect with the prior written
consent of the Company (such consent not to be unreasonably withheld), subject
to the filing of all necessary applications and the receipt of all required
regulatory approvals, to modify the structure of the transactions contemplated
hereby so long as (i) there are no material adverse federal income tax
consequences to the shareholders of the Company as a result of such
modification, (ii) the consideration to be paid to holders of Company Common
Stock under this Agreement is not thereby changed in kind or reduced in amount
solely because of such modification, (iii) such modification will not be likely
to materially delay or jeopardize receipt of any required regulatory approvals,
and (iv) such modification will not adversely affect the rights, privileges, and
preferences of the Company's Subordinated Debentures (as defined herein). In the
event of such election, the parties agree to execute an appropriate amendment to
this Agreement in order to reflect such election.
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 113 of the CBCA (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 CBCA. 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) At or prior to the Effective Time, pursuant to an exchange agent
agreement in substantially the form attached hereto as Exhibit B (the "Exchange
Agreement"), Compass shall (i) deposit with Continental Stock Transfer and Trust
Company (the "Exchange Agent") the shares of Compass Common Stock in the amounts
provided in Section 1.6 to effect the exchange of Compass Common Stock for
certificates formerly representing shares of Company Common Stock; and (ii)
deposit or cause to be deposited with the Exchange Agent, prior to the Effective
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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 113 of the CBCA. The Exchange Fund shall not be used
for any other purpose, except as provided in this Agreement.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder of an outstanding certificate or certificates which as of the
Effective Time represented Shares (the "Certificates"), a form letter of
transmittal approved by the Company and Compass (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates for payment
therefor. Upon surrender to the Exchange Agent of a Certificate, together with
such letter of transmittal duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor cash and Compass Common Stock in the
amount provided in Section 1.6 hereof, and such Certificate shall forthwith be
canceled. 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.
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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 will deliver to Compass a disclosure
memorandum ("Company Disclosure Memorandum") referred to in this Article III on
or prior to September 8, 2000. The Company agrees at the Closing to provide
Compass and Merger Sub with a supplemental memorandum reflecting any changes
thereto between the date of the Company Disclosure Memorandum and the date of
the Closing.
SECTION 3.1 ORGANIZATION AND QUALIFICATION. The Company is a Colorado
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 Colorado and all laws, rules, and regulations
applicable to bank holding companies. FirsTier Bank is a Colorado banking
corporation, duly organized, validly existing and in good standing under the
laws of the State of Colorado, and is not a member of the Federal Reserve
System. Firstate Bank is a Nebraska banking corporation, duly organized, validly
existing and in good standing under the laws of the State of Nebraska and is not
a member of the Federal Reserve System. Each of the Company and its Subsidiaries
(as defined in Section 10.13(a)) has all requisite corporate power and authority
to carry on its business as now being conducted and to own, lease and operate
its properties and assets as now owned, leased or operated. Except as set forth
in Section 3.17 of the Company Disclosure Memorandum, the Company does not own
or control any Affiliate (as defined in Section 3.17) other than the Bank.
Section 3.1 of the Company Disclosure Memorandum contains true and correct
copies of the Articles of Incorporation or Association and Bylaws of the Company
and its Subsidiaries, with all amendments thereto. The Company's Subsidiaries
are duly qualified or licensed to do business and are in good standing in the
States of their organization. The nature of the business of the Company and its
Subsidiaries and their respective activities, as currently conducted, do not
require them to be qualified to do business in any jurisdiction other than the
States of their organization.
SECTION 3.2 COMPANY CAPITALIZATION. As of the date hereof, the
authorized capital stock of the Company consists solely of (a) 50,000,000 shares
of Company Common Stock, of which 7,718,064 shares are issued and outstanding
and 500,000 shares are subject to options, and none of which are held in
treasury and (b) 20,000,000 shares of Preferred Stock (the "Undesignated
Preferred Stock"), none of which are issued or outstanding. Except as set forth
in Section 3.2 of the Company Disclosure Memorandum, there are no outstanding
subscriptions, options, convertible securities, rights, warrants, calls, or
other agreements or commitments of any kind issued or granted by, or binding
upon, the Company or its Subsidiaries to purchase or otherwise acquire any
security of or equity interest in the Company or its Subsidiaries. Except as set
forth in Section 3.2 of the Company Disclosure Memorandum, 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
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preemptive rights. There are no restrictions applicable to the payment of
dividends on the Shares except pursuant to the CBCA and applicable banking laws
and regulations and all dividends declared prior to the date hereof have been
paid.
SECTION 3.3 SUBSIDIARY CAPITALIZATION; OTHER SECURITIES. All of the
issued and outstanding shares of the capital stock of the Company's Subsidiaries
(i) are duly authorized, validly issued, fully paid and nonassessable, (ii)
except as referred to in Section 3.3 of the Company Disclosure Memorandum are
free and clear of any liens, claims, security interests and encumbrances of any
kind, and (iii) there are no irrevocable proxies with respect to such shares and
there are no outstanding or authorized subscriptions, options, warrants, calls,
rights, or other agreements or commitments of any kind restricting the transfer
of, requiring the issuance or sale of, or otherwise relating to any of such
shares of capital stock to any person. The Company owns, directly, all of the
issued and outstanding capital stock of its Subsidiaries. Set forth in Section
3.3 of the Company Disclosure Memorandum hereto is a list of all equity
ownership (including, without limitation, any partnership or joint venture
interest) by the Company or its Subsidiaries for the account of the Company or
its Subsidiaries in any other person other than the Banks (the "Other
Securities"). The Company or its Subsidiaries own each Other Security free and
clear of any lien, encumbrance, security interest or charge. The Other
Securities represent less than five percent of the outstanding equity securities
of each such person.
SECTION 3.4 AUTHORITY RELATIVE TO THE AGREEMENT. The Company has full
corporate power and authority, and, except for the approval by the Company's
shareholders, no further proceedings on the part of the Company are necessary,
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby which have been duly and validly authorized by its Board of
Directors. This Agreement has been duly executed and delivered by the Company
and is a duly authorized, valid, legally binding and enforceable obligation of
the Company, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to creditors' rights generally and
general equitable principles, and subject to such shareholder approvals and such
approval of regulatory agencies and other governmental authorities having
authority over the Company as may be required by statute or regulation. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with, or result in any
violation or breach of or default under the respective Articles of Incorporation
or By-Laws of the Company or its Subsidiaries.
SECTION 3.5 NO VIOLATION. Except as set forth in Section 3.5 of the
Company Disclosure Memorandum, neither the execution, delivery nor performance
of this Agreement in its entirety, nor the consummation of all of the
transactions contemplated hereby, following the receipt of such approvals as may
be required from the Company's shareholders, the SEC, the Federal Deposit
Insurance Corporation ("FDIC"), the Board of Governors of the Federal Reserve
System ("FRB"), the Colorado Division of Banking (the "Division"), the Nebraska
Department of Banking and Finance (the "Department") and the Alabama
Superintendent of Banks ("Superintendent") and the expiration or early
termination of the waiting period under the HSR Act, 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,
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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 in Section 3.5 of the
Company Disclosure Memorandum, 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 Merger Sub upon the consummation of the
transactions contemplated hereby or which would prevent or delay such
consummation. Except as set forth in Section 3.5 of the Company Disclosure
Memorandum, 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 resolved to recommend
approval and adoption of this Agreement by the Company's shareholders. Except as
described in Section 3.6 of the Company Disclosure Memorandum hereto, no prior
consent, approval or authorization of, or declaration, filing or registration
with any person, domestic or foreign, is required of the Company in connection
with the execution, delivery and performance by the Company of this Agreement
and the transactions contemplated hereby or the resulting change of control of
its Subsidiaries, except the filing of the Articles of Merger under the CBCA,
the Certificate of Merger, such approvals as may be required from the SEC, the
FRB, the FDIC, the Division, the Department, the Superintendent and holders of
Shares under the CBCA and the expiration or early termination of the waiting
period under the HSR Act.
SECTION 3.7 REGULATORY REPORTS. 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
Division, the Department, the FDIC, or any other regulatory authority having
jurisdiction over any such persons.
SECTION 3.8 SEC STATUS; SECURITIES ISSUANCES. All issuances of
securities by the Company and its Subsidiaries have been registered under the
Securities Act, the Securities Acts of the States of Colorado and Nebraska, and
all other applicable laws or were exempt from any such registration
requirements. The Company and its Subsidiaries have made all filings required to
be made in compliance with the Securities Act and the Exchange Act of 1934, as
amended (the "Exchange Act"). None of the information contained in any filing by
the Company or any Subsidiary is false or misleading with respect to any
material fact, or omitted to state any material fact necessary in order to make
the statements therein at the time such statements were made, in light of the
circumstances under which they were made, not misleading.
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SECTION 3.9 FINANCIAL STATEMENTS. The Company has provided Compass with
a true and complete copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as of December 31, 1999, and the related
consolidated statements of income, shareholders' equity and cash flows for the
years ended December 31, 1999 and 1998, and will provide in Section 3.9 of the
Company Disclosure Memorandum consolidating financial statements of the
Company's Subsidiaries, and the consolidated balance sheets of the Company and
its Subsidiaries as of March 31, 2000 and June 30, 2000 and the related
consolidated statements of income, shareholders' equity and cash flows for the
three - and six - month periods ended March 31 and June 30, 2000 and 1999 (such
consolidated balance sheets and the related consolidated statements of income,
shareholders' equity and cash flows are collectively referred to herein as the
"Consolidated Financial Statements"), plus all consolidating financial
statements for its Subsidiaries (collectively, with the Consolidated Financial
Statements and the notes and schedules thereto, referred to as the "Financial
Statements"). Except as described in the notes to the Consolidated Financial
Statements, the Consolidated Financial Statements, including the consolidated
balance sheets and the related consolidated statements of income, shareholders'
equity and 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 SEC, the FRB, the Division, the Department, and
the FDIC. Neither the Company nor its Subsidiaries have any liabilities or
obligations of a type which should be included in or reflected on the Financial
Statements if prepared in accordance with GAAP, whether related to tax or
non-tax matters, accrued or contingent, due or not yet due, liquidated or
unliquidated, or otherwise, except as and to the extent disclosed or reflected
in the Financial Statements. The Company will provide Compass with the unaudited
consolidated and unconsolidated balance sheets of the Company and its
Subsidiaries as of the end of each month hereafter, prepared on a basis
consistent with prior periods and promptly following their availability, the
Company will provide Compass with the Reports of Condition and Statements of
Income ("Call Reports") of its Subsidiaries for all periods ending after June
30, 2000. 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 in Section 3.10 of the Company Disclosure Memorandum, since June 30,
2000 (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));
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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 for regular salary increases granted in the ordinary course
of business within the Company's or its Subsidiaries' 2000 budgets 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 stock or other of its securities, except for dividends
paid to the Company by its Subsidiaries;
(j) organized or acquired any capital stock or other equity securities
or acquired any equity or ownership interest in any person (except through
settlement of indebtedness, foreclosure, the exercise of creditors' remedies or
in a fiduciary capacity, the ownership of which does not expose the Company or
its Subsidiaries to any liability from the business, operations or liabilities
of such person);
(k) issued, reserved for issuance, granted, sold or authorized the
issuance of any shares of its capital stock or subscriptions, options, warrants,
calls, rights or commitments of any kind relating to the issuance or sale of or
conversion into shares of its capital stock;
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(l) made any or acquiesced with any change in any accounting methods,
principles or practices except changes required by changes in GAAP or regulatory
requirements;
(m) experienced any material adverse change in relations with customers
or clients of the Company or its Subsidiaries in the aggregate;
(n) except for the transactions contemplated by this Agreement or as
otherwise permitted hereunder, entered into any transaction, or entered into,
modified or amended any contract or commitment, other than in the ordinary
course of business and consistent with prudent banking practices; or
(o) agreed, whether in writing or otherwise, to take any action the
performance of which would change the representations contained in this Section
3.10 in the future so that any such representation would not be true in all
material respects as of the Closing.
SECTION 3.11 COMPANY INDEBTEDNESS. Section 3.11 of the Company
Disclosure Memorandum contains true and complete copies of all loan documents
("Company Loan Documents") related to indebtedness of the Company and its
Subsidiaries, other than deposits ("Company Indebtedness"), and will make
available to Compass all material correspondence concerning the status of
Company Indebtedness.
SECTION 3.12 LITIGATION. Except as set forth in Section 3.12 of the
Company Disclosure Memorandum, there are no actions, suits, claims,
investigations, reviews or other proceedings pending or, to the knowledge of the
Company or its Subsidiaries, threatened against the Company or any of its
Subsidiaries or involving any of their respective properties or assets, at law
or in equity or before or by any foreign federal, state, municipal, or other
governmental court, department, commission, board, bureau, agency, or other
instrumentality or person or any board of arbitration or similar entity
("Proceeding"). The Company will notify Compass immediately in writing of any
Proceedings against the Company or its Subsidiaries other than mechanic's liens
arising in the ordinary course of business in respect of the loan assets of the
Company and its Subsidiaries.
SECTION 3.13 TAX MATTERS. The Company and its Subsidiaries have duly
and timely filed all tax returns that they were required to file (the "Filed
Returns"). All such Filed Returns were correct and complete in all material
respects. 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. None of the Company or its Subsidiaries currently is the beneficiary of
any extension of time within which to file any tax return. 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 Section 3.13 of the Company Disclosure Memorandum, 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. There are no liens for any taxes on any assets of the Company or
its Subsidiaries
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except for liens for taxes not yet due or for taxes being contested in good
faith and for which adequate reserves have been established in accordance with
GAAP. Except as set forth in Section 3.13 of the Company Disclosure Memorandum,
the Company has not entered into any tax sharing agreement or other agreement
regarding the allocation of the tax liability of the Company or the Banks or
similar arrangement with its other Subsidiaries. Section 3.13 of the Company
Disclosure Memorandum contains a copy of each Filed Return relating to periods
beginning on and after January 1, 1997 and each amended return filed for any
period for which statutory periods of limitation have not expired. Except as set
forth in Section 3.13 of the Company Disclosure Memorandum, neither the Company
nor its Subsidiaries have filed any Internal Revenue Service ("IRS") Forms 1139
(Application for Tentative Refund). Except as set forth in Section 3.13 of the
Company Disclosure Memorandum, 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 assessment or
deficiency against the Company or its Subsidiaries for any period. The Company
and its Subsidiaries have withheld and paid over all taxes to the proper
governmental authorities all amounts required to be so withheld and paid over in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party. Except as set forth in Section 3.13
of the Company Disclosure Memorandum, the Company and its Subsidiaries are
neither obligated to make any payments nor are they parties to any agreement
that under certain circumstances could obligate them to make any payments that
will not be deductible under Section 280G of the Code. Except as disclosed in
Section 3.13 of the Company Disclosure Memorandum, the Company and its
Subsidiaries have never agreed to make, nor is the Company or its Subsidiaries
required to make, any adjustment under Section 481(a) of the Code by reason of a
change in the method of accounting or otherwise. The Company and its
Subsidiaries have not, with regard to any assets held, acquired or to be
acquired, filed a consent to the application of Section 341(f) of the Code. None
of the Company and its Subsidiaries has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Except
as set forth in Section 3.13 of the Company Disclosure Memorandum, none of the
Company and its Subsidiaries (i) has been a member of an affiliated group filing
a consolidated federal income tax return (other than a group the common parent
of which was the Company) or (ii) has any liability for the taxes of any person
(other than any of the Company and its Subsidiaries) under Reg. Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise. Neither the Company nor any of its
Subsidiaries has any reason to believe that any conditions exist that might
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code. There has not been an ownership change,
as defined in Section 382(g) of the Code, of the Company or its Subsidiaries
that occurred during or after any taxable period in which the Company or its
Subsidiaries incurred an operating loss that carries over to any taxable period
ending after the fiscal year of the Company or its Subsidiaries immediately
preceding the date of this Agreement. For the purposes of this Agreement, the
term "tax" shall include all federal, state, local and foreign 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:
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(a) Section 3.14(a) of the Company Disclosure Memorandum 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 any entity which is a member of a controlled
group or affiliated service group with the Company or any of its Subsidiaries
under ERISA Section 4001 or Section 414 of the Code (such Subsidiaries and
entities collectively, "ERISA Affiliates") or to which the Company or ERISA
Affiliates contribute or are required to contribute, including any multiemployer
welfare plan (such employee welfare benefit plans being hereinafter collectively
referred to as the "Welfare Benefit Plans") and sets forth (i) the amount of any
liability of the Company or ERISA Affiliates 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) Section 3.14(b) of the Company Disclosure Memorandum 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 an
ERISA Affiliate or to which the Company or ERISA Affiliates contribute or are
required to contribute, including any multiemployer plan (as defined in Section
3(37) of ERISA) (such employee pension benefit plans being hereinafter
collectively referred to as the "Pension Benefit Plans");
(c) Section 3.14(c) of the Company Disclosure Memorandum 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 ERISA Affiliates (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 in all material respects, and have
complied in all material respects in the past, both as to form and operation, to
the extent applicable, 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);
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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 or after January 1, 1975, neither the Company, any Company
Subsidiary nor any plan fiduciary of any Welfare Benefit Plan or Pension Benefit
Plan has engaged in any transaction in violation of Section 406 of ERISA (for
which transaction no exemption exists under Section 408 of ERISA) or in any
"prohibited transaction" as defined in Section 4975(c)(1) of the Code (for which
no exemption exists under Section 4975(c)(2) or 4975(d) of the Code);
(g) Neither the Company nor any ERISA Affiliate 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 or any ERISA Affiliate maintained or participated in
any employee pension benefit plan (defined in Section 3(2) of ERISA) subject to
the provision of Title IV of ERISA. In addition, neither the Company nor any
ERISA Affiliate (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 three most recent plan years, have been furnished to
Compass;
(i) All Welfare Benefit Plans, Pension Benefit Plans, and Other
Programs related trust agreements or annuity contracts (or any other funding
instruments), are legally valid and binding and in full force and effect and
there are no promised increases in benefits (whether expressed, implied, oral or
written) under any of these plans nor any obligations, commitments or
understandings to continue any of these plans (whether expressed, implied, oral
or written) except as required by Section 4980B of the Code and Sections 601-608
of ERISA;
(j) There are no claims pending with respect to, or under, any Pension
Benefit Plan, Welfare Benefit Plan or any Other Program, other than routine
claims for plan benefits, and there are no disputes or litigation pending or, to
the knowledge of the Company or its Subsidiaries, 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 the Company, or to the knowledge of the Company any
other person or entity, to
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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 Section 3.14(l) of the Company
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transaction contemplated hereby will (i) result in any
payment to be made by the Company or any ERISA Affiliate (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 in Section 3.15 of
the Company Disclosure Memorandum, neither the Company nor any Company
Subsidiary is a party to any oral or written contracts or agreements granting
benefits or rights to employees or any collective bargaining agreement or to any
conciliation agreement with the Department of Labor, the Equal Employment
Opportunity Commission or any federal, state or local agency which requires
equal employment opportunities or affirmative action in employment. There are no
unfair labor practice complaints pending against the Company or any Company
Subsidiary before the National Labor Relations Board and no similar claims
pending before any similar state, local or foreign agency. To the knowledge of
the Company, there is no activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any employees of the
Company or any Company Subsidiary, nor of any strikes, slowdowns, work
stoppages, lockouts, or threats thereof, by or with respect to any such
employees. The Company and its Subsidiaries are in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and neither
the Company nor its Subsidiaries are engaged in any unfair labor practice.
SECTION 3.16 LEASES, CONTRACTS AND AGREEMENTS. Section 3.16 of the
Company Disclosure Memorandum sets forth an accurate and complete description of
all leases, subleases, licenses, contracts, instruments, and agreements to which
the Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary is bound which obligate or may obligate the Company or any
Company Subsidiary for an amount in excess of $50,000 per lease, sublease,
license, contract, instrument, or agreement over the entire term of any such
agreement or any leases, subleases, licenses, contracts, instruments, or
agreements with a current term of one year or longer (the "Contracts"). Section
3.16 of the Company Disclosure Memorandum contains 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 customers of
the Banks for trust services, or deposits by the Company or its Subsidiaries,
but does include unfunded loan commitments and letters of credit issued by the
Company or its Subsidiaries where the borrowers' total direct and indirect
indebtedness to its Subsidiaries is in excess of $50,000. Except as set forth in
Section 3.16 of the Company Disclosure Memorandum, 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
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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 Section 3.16 of the Company
Disclosure Memorandum, all rent and other payments by the Company and its
Subsidiaries under the Contracts are current, there are no existing defaults by
the Company or its Subsidiaries under the Contracts and no termination,
condition or other event has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute a default. The Company and each of its Subsidiaries has a good and
valid leasehold interest in each parcel of real property leased by it free and
clear of all mortgages, pledges, liens, encumbrances and security interests.
Section 3.16 of the Company Disclosure Memorandum sets forth a complete and
accurate description of all termination fees and penalties for all Contacts.
Schedule 3.16 of the Company Disclosure Memorandum further sets forth the amount
of all termination fees and penalties for all Contracts in the event such
Contracts are terminated as of the date of this Agreement. The Company will
provide Compass true and correct copies of the Contracts during the Due
Diligence Period (as defined in Section 6.1(a) below).
SECTION 3.17 RELATED COMPANY TRANSACTIONS. Except as set forth in
Section 3.17 of the Company Disclosure Memorandum, there are no agreements,
instruments, commitments, extensions of credit, tax sharing or allocation
agreements or other contractual agreements of any kind between or among the
Company, whether on its own behalf or in its capacity as trustee or custodian
for the funds of any employee benefit plan (as defined in ERISA), and any of its
Affiliates (including its Subsidiaries). The term "Affiliate" as used in this
Agreement means, with respect to any person, any person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
person in question. For the purposes of this definition, "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with") as used with respect to any person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such person, whether through the ownership of voting securities
or by contract or otherwise.
SECTION 3.18 COMPLIANCE WITH LAWS. Except as set forth in Section 3.18
of the Company Disclosure Memorandum, neither the Company nor any of 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) in any material respect,
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 any of its Subsidiaries. The Company and its Subsidiaries
have all permits, licenses, and franchises from governmental agencies required
to conduct their businesses as they are now being conducted.
SECTION 3.19 INSURANCE. The Company and its Subsidiaries have in effect
the insurance coverage (including fidelity bonds) described in Section 3.19 of
the Company Disclosure Memorandum and have had similar types of insurance in
force for the last 5 years. Except as described in Section 3.19 of the Company
Disclosure Memorandum, there have been no claims under such bonds within the
last 5 years and neither the Company nor its Subsidiaries
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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 3.19 of the Company Disclosure Memorandum contains true
and accurate copies of the policies and declaration pages evidencing such
insurance coverage.
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 such loans. The Company's Subsidiaries do not have in their
portfolios any loan exceeding their legal lending limit, and except as disclosed
in Section 3.20 of the Company Disclosure Memorandum, the Company's Subsidiaries
have no known significant delinquent, substandard, doubtful, loss, nonperforming
or problem loans.
SECTION 3.21 FIDUCIARY RESPONSIBILITIES. The Company and its
Subsidiaries have performed in all material respects all of their respective
duties as a trustee, custodian, guardian or as an escrow agent in a manner which
complies in all material respects with all applicable laws, regulations, orders,
agreements, instruments and common law standards.
SECTION 3.22 PATENTS, TRADEMARKS AND COPYRIGHTS. Except as set forth in
Section 3.22 of the Company Disclosure Memorandum, 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 Section 3.22 of the Company Disclosure Memorandum.
SECTION 3.23 ENVIRONMENTAL COMPLIANCE. Except as set forth in Section
3.23 of the Company Disclosure Memorandum:
(a) The Company, its Subsidiaries and any Property owned or operated by
any of them have been and are in compliance with all applicable Environmental
Laws (as defined in Section 10.13(c)). There is no past or present event,
condition or circumstance that could (1) interfere with the conduct of the
business of the Company or its Subsidiaries in the manner now conducted relating
to such entity's compliance with Environmental Laws, (2) constitute a violation
of, or serve as the basis of liability pursuant to, any Environmental Law or (3)
which could have a Material Adverse Effect upon the Company or any Company
Subsidiary.
(b) The Company, its Subsidiaries, and their Properties have not been,
and are not now subject to any actual or, to the knowledge of the Company or any
Company Subsidiary, any potential or threatened Proceeding pursuant to any
Environmental Law and neither the Company nor any Company Subsidiary has
received any notice (whether from any regulatory body or private person) of any
actual or alleged violation of, or liability pursuant to, any Environmental Law.
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(c) There is no Property for which the Company or any Company
Subsidiary is or was required to obtain any permit, license, or other
authorization under RCRA, FWPCA, TSCA, CAA, or any state or local counterparts
to any of the foregoing.
(d) Neither the Company nor any Company Subsidiary has generated any
Hazardous Substances for which it was required under an Environmental Law to
execute any hazardous waste disposal manifest.
(e) There are no underground or above ground storage tanks on or under
any Property nor any Hazardous Substances (except for asbestos containing
material ("ACM")) at, in, on, under or emanating from any Property in any
quantity or concentration exceeding any standard or limit established pursuant
to any Environmental Law.
(f) There is no ACM present in any Controlled Property except
non-friable ACM which can be managed in place in compliance with Environmental
Laws without air monitoring, removal or encapsulation and which is managed under
and in compliance with an operations and maintenance program.
(g) For purposes of this Section 3.23 and Section 6.10, "Property"
includes (1) any property (whether real or personal) which the Company or any
Company Subsidiary currently or in the past has leased, operated or owned or
managed in any manner including without limitation any property acquired by
foreclosure or deed in lieu thereof ("Controlled Property") and (2) property now
held as security for a loan or other indebtedness by the Company or any Company
Subsidiary or property currently proposed as security for loans or other credit
the Company or any Company Subsidiary is currently evaluating whether to extend
or has committed to extend ("Collateral Property"). With respect to any
Collateral Property, the representations of this Section 3.23 shall be limited
to the knowledge of the Company. With respect to any Controlled Property
formerly leased, operated, owned or managed by the Company or any Company
Subsidiary, the representations of this Section 3.23 shall be construed to
relate to conditions, events, facts or circumstances which existed, occurred or
commenced prior to the latest date of any leasehold interest, operation,
ownership or management of such Controlled Property by the Company or any
Company Subsidiary.
SECTION 3.24 REGULATORY ACTIONS. Except as set forth in Section 3.24 of
the Company Disclosure Memorandum, 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 SEC, the FRB, the FDIC, the
Division, the Department, the Environmental Protection Agency, the Colorado
Department of Health and Environment, the Nebraska Department of Environmental
Quality, or any other nation or government, any state or political subdivision
thereof, or any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government. Except as set forth
in Section 3.24 of the Company Disclosure Memorandum, neither the Company nor
any of its Subsidiaries are subject to a formal or informal agreement,
memorandum of understanding, enforcement action with or any type of financial
assistance by any regulatory authority having jurisdiction over such entity.
Neither the Company nor any of its Subsidiaries have taken or agreed to take any
action or has knowledge of any fact or circumstance that would materially impede
or delay receipt of any required regulatory approval. Except as set forth in
Section 3.24 of the Company Disclosure
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Memorandum, 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 in
Section 3.25 of the Company Disclosure Memorandum or for such encumbrances
arising by operation of law, the Company and each of its Subsidiaries has
unencumbered, good, legal, and indefeasible title to all its properties and
assets, real and personal, including, without limitation, all the properties and
assets reflected in the Financial Statements except for those properties and
assets disposed of for fair market value in the ordinary course of business and
consistent with prudent banking practice since the date of the Financial
Statements. Except as set forth in Section 3.25 of the Company Disclosure
Memorandum, 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 in Section 3.25 of the Company Disclosure
Memorandum, the Company owns all furniture, equipment, art and other property
used to transact business presently located on its premises. Except as set forth
in Section 3.25 of the Company Disclosure Memorandum, no Property has been deed
recorded or otherwise been identified in public records or should have been
recorded or so identified as containing Hazardous Substances.
SECTION 3.26 SHAREHOLDER LIST. The Company has provided to Compass as
of 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 the date hereof containing
the names, addresses and number of Shares or such other securities held of
record, which is accurate in all respects as of such date, and the Company will
promptly, and in any event prior to the mailing of the Proxy Statement, advise
Compass of any significant changes thereto.
SECTION 3.27 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 113 of the CBCA.
SECTION 3.28 TAKEOVER LAWS. This Agreement and the Merger contemplated
hereby are not subject to the requirements of any "moratorium," "control share,"
"fair price," "affiliate transactions," "business combination" or other
antitakeover laws and regulations of any state applicable to the Company or any
of its Subsidiaries.
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SECTION 3.29 EMPLOYEE STOCK OPTIONS. Except as set forth in Section
3.29 of the Company Disclosure Memorandum, there are no Company employee stock
option plans or provisions in any other plan, program, or arrangement providing
for the issuance or grant of any other interest in respect of the capital stock
of the Company or any Company Subsidiary.
SECTION 3.30 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 3.31 YEAR 2000 REPRESENTATION. All software, firmware,
hardware, equipment, microprocessing chips and other data processing devices and
services (both as a recipient and as a provider), capabilities and facilities
utilized by, and material to the business operations or financial condition of,
the Company and its Subsidiaries are or will be able to record and process all
calendar dates (whether before, in or after the year 2000) correctly and will be
able to communicate with other applicable systems to accept date data in a
manner that resolves any ambiguities as to century in a properly defined manner
(collectively, "Year 2000 Compliant"). The Company and its Subsidiaries have
adequately assessed the Year 2000 Compliant status of all vendors, suppliers,
service providers and business partners or venturers ("Critical Third Parties")
whose goods, services or business activities are material to the business
operations or financial condition of the Company or its Subsidiaries.
SECTION 3.32 REPRESENTATIONS NOT MISLEADING. No representation or
warranty by the Company in this Agreement, nor any written statement, summary,
exhibit or schedule furnished to Compass or Merger Sub by the Company or its
Subsidiaries under and pursuant to this Agreement, contains or will contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF COMPASS
Compass hereby makes the representations and warranties set forth in
this Article IV to the Company.
SECTION 4.1 ORGANIZATION AND AUTHORITY.
(a) Compass is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to conduct its business as now conducted, to own,
lease and operate its properties and assets as now owned, leased or operated and
to enter into and carry out its obligations under this Agreement.
(b) Compass is a financial holding company under the Bank Holding
Company Act of 1956, as amended, and in good standing under all laws, rules and
regulations applicable to bank holding companies. Compass is duly qualified or
licensed and in good standing in each
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jurisdiction which requires such qualification where it owns or leases
properties or conducts business.
SECTION 4.2 AUTHORITY RELATIVE TO AGREEMENT. Compass has full corporate
power and authority and no further corporate proceedings on the part of Compass
are necessary to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, all of which have been duly and validly
authorized by Compass' Board of Directors. This Agreement has been duly executed
and delivered by Compass and is a duly authorized, valid, legally binding and
enforceable obligation of Compass, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to
creditors' rights generally and general equitable principles, and subject to
such shareholder approvals and such approval of regulatory agencies and other
governmental authorities having authority over Compass as may be required by
statute or regulation. Compass is not in violation of or default under its
Certificate of Incorporation or By-Laws or any agreement, document or instrument
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 in Section 4.2 of the disclosure memorandum provided by
Compass to the Company ("Compass Disclosure Memorandum"), 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, the
Commissioner and the Superintendent and the expiration or early termination of
the waiting period under the HSR Act 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 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 in Section 4.2 of the Compass Disclosure Memorandum, 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 Section
4.2 of the Compass Disclosure Memorandum, 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 1999 Annual Report to Shareholders,
which Report (the "Compass 1999 Annual Report") includes, among other things,
consolidated balance sheets
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of Compass and its Subsidiaries as of December 31, 1999 and 1998, the related
consolidated statements of income, shareholders' equity and cash flows for the
years ended December 31, 1999, 1998 and 1997 and (ii) Compass' quarterly reports
on Form 10-Q for the quarters ended March 31, and June 30, 2000 (the "Quarterly
Reports") which reports includes among other things unaudited balance sheets of
Compass and its Subsidiaries as of March 31, and June 30, 2000 and 1999,
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,
2000 and 1999. The financial statements contained in the Compass 1999 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, 1999 and 1998
contained in the Compass 1999 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, 2000 and 1999, contained in Compass' Quarterly
Reports, fairly present the financial condition, the results of 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 1999 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 July 31, 2000, Compass had 120,899,291 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
CBCA, and such approvals as may be required from the SEC, the FRB, the Division,
the Department, the Superintendent and the FDIC and the expiration or early
termination of the waiting period under the HSR Act.
SECTION 4.6 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
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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 4.7 REGULATORY ACTIONS. Neither Compass nor any of its
Subsidiaries have taken any action 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 by Compass of the Merger or the other transactions
contemplated by this Agreement.
SECTION 4.8 TAKEOVER LAWS. This Agreement and the Merger contemplated
hereby are not subject to the requirements of any "moratorium," "control share,"
"fair price," "affiliate transactions," "business combination" or other
antitakeover laws and regulations of any state applicable to Compass or any of
its Subsidiaries.
SECTION 4.9 ACCOUNTING MATTERS. Neither Compass 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 4.10 LITIGATION. There are no material Proceedings pending, or
to the knowledge of Compass or its Subsidiaries, threatened against Compass or
its Subsidiaries or involving any of their respective properties or assets which
are required to be disclosed, but have not been so disclosed, in filings
required to be made with the SEC pursuant to the Exchange Act.
SECTION 4.11 ABSENCE OF CERTAIN CHANGES. Since June 30, 2000, no event
has occurred or circumstances arisen that, individually, or taken together, with
all other facts, circumstances and events, would have required a filing with the
SEC pursuant to the Exchange Act which has not been so filed.
SECTION 4.12 REPRESENTATIONS NOT MISLEADING. No representation or
warranty by Compass in this Agreement, nor any written statement or exhibit
furnished to the Company under and pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE V.
COVENANTS OF THE COMPANY
SECTION 5.1 AFFIRMATIVE COVENANTS OF THE COMPANY. For so long as this
Agreement is in effect, the Company shall, and shall use its best efforts to
cause its Subsidiaries (collectively, the "Acquired Companies") to, from the
date of this Agreement to the Closing, except as specifically contemplated by
this Agreement:
(a) operate and conduct the businesses of the Acquired Companies in the
ordinary course of business and consistent with prudent banking practices;
(b) preserve intact the Acquired Companies' corporate existence,
business organization, assets, licenses, permits, authorizations, and business
opportunities;
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(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 Section 3.19 of the Company Disclosure
Memorandum (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
Merger Sub in satisfying the conditions in this Agreement, (ii) assist Compass
and Merger Sub in obtaining as promptly as possible all consents, approvals,
authorizations and rulings, whether regulatory, corporate or otherwise, as are
necessary for Compass and Merger Sub 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 SEC, the FRB, the Division, the Department,
and the FDIC, all financial statements and other reports required to be so filed
by any of the Acquired Companies and to the extent permitted by applicable law,
promptly thereafter deliver to Compass copies of all financial statements and
other reports required to be so filed;
(g) comply in all material respects with all applicable laws and
regulations, domestic and foreign;
(h) promptly notify Compass upon obtaining knowledge of any default,
event of default or condition with which the passage of time or giving of notice
would constitute a default or an event of default under the Company Loan
Documents and promptly notify and provide copies to Compass of any material
written communications concerning the Company Loan Documents;
(i) between the date of this Agreement and Closing, promptly give
written notice to Compass upon obtaining knowledge of any event or fact that
would cause any of the representations or warranties of the Company contained in
or referred to in this Agreement to be untrue or misleading in any material
respect;
(j) deliver to Compass a list, 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, dated as of the Effective Time, showing
all liabilities and obligations of the Acquired Companies, except those arising
in the ordinary course
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of their respective businesses, incurred since the Balance Sheet Date, certified
by an officer of Company;
(l) shall continue to have contingency plans for cash availability and
liquidity sources;
(m) promptly notify Compass of any material change or inaccuracies in
any data previously given or made available to Compass or Merger Sub 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 the
Banks, or any other Subsidiary of the Company, to, from the date of this
Agreement to the Closing:
(a) make any amendment to its articles of incorporation or association
or bylaws;
(b) make any change in the methods used in allocating and charging
costs, except as may be required by applicable law, regulation or GAAP and after
notice to Compass;
(c) make any change in the number of shares of the capital stock issued
and outstanding, or issue, reserve for issuance, grant, sell or authorize the
issuance of any shares of its capital stock or subscriptions, options, warrants,
calls, rights or commitments of any kind relating to the issuance or sale of or
conversion into shares of its capital stock;
(d) contract to create any obligation or liability (absolute, accrued,
contingent or otherwise) except in the ordinary course of business and
consistent with prudent banking practices;
(e) contract to create any mortgage, pledge, lien, security interest or
encumbrances, restrictions, or charge of any kind (other than statutory liens
for which the obligations secured thereby shall not become delinquent), except
in the ordinary course of business and consistent with prudent banking
practices;
(f) cancel any debts, waive any claims or rights of value or sell,
transfer, or otherwise dispose of any of its material properties or assets,
except in the ordinary course of business 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;
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(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 for the proposed bonuses ("Bonuses") and stay-to-pay
payments, each of which is described in Section 5.2(i) of the Company Disclosure
Memorandum, and except as otherwise set forth in Section 3.10 of the Company
Disclosure Memorandum and except for regular salary increases and year-end
bonuses granted in the ordinary course of business within the Company or its
Subsidiaries' 2000 budgets and consistent with prior practices, grant any
increase in compensation or directors' fees, or pay or agree to pay or accrue
any bonus or like benefit to or for the credit of any director, officer,
employee or other person or enter into any employment, consulting or severance
agreement or other agreement with any director, officer or employee, or adopt,
amend or terminate any Employee Benefit Plan or change or modify the period of
vesting or retirement age for any participant of such a plan;
(j) declare, pay or set aside for payment any dividend or other
distribution or payment in respect of shares of its capital stock, except for
dividends from the Banks to the Company;
(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 series of capital expenditures in
excess of $100,000 in the aggregate;
(m) make any income tax or franchise tax election or settle or
compromise any federal, state, local or foreign income tax or franchise tax
liability, or, except in the ordinary course of business consistent with prudent
banking practices, make any other tax election or settle or compromise any other
federal, state, local or foreign tax liability;
(n) except for negotiations and discussions between the parties hereto
relating to the transactions contemplated by this Agreement or as otherwise
permitted hereunder, enter into any transaction, or enter into, modify or amend
any contract or commitment other than in the ordinary course of business and
consistent with prudent banking practices;
(o) except as contemplated by this Agreement, adopt a plan of complete
or partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, or other reorganization or business combination of the Company
or any of its Subsidiaries;
(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;
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(s) modify any outstanding loan, make any new loan, or acquire any loan
participation, unless such modification, new loan, or participation is made in
the ordinary course of business and in accordance with prudent banking
practices;
(t) sell or contract to sell any part of the Company's or its
Subsidiaries' premises;
(u) change any fiscal year or the length thereof;
(v) take or agree to take any action that would prevent Compass from
accounting for the business combination to be effected by the Merger as a
pooling of interests, including, without limitation, any action inconsistent
with the provisions of Exhibit C hereto;
(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 DUE DILIGENCE REVIEW; CONTINUING ACCESS TO, AND INFORMATION
CONCERNING, PROPERTIES AND RECORDS.
(a) The Company acknowledges that, as of the date of this Agreement, it
has not permitted Compass to perform a complete pre-acquisition due diligence
review. Upon execution hereof, Compass shall be entitled forthwith to commence
its due diligence review of the books, records and operations of the Company and
its Subsidiaries, including, but not limited to, a review of the loan
portfolios, other real estate owned and classified assets, investment portfolios
and properties, to verify the quality of such assets, the adequacy of any
allowances or reserves which have been provided against them and the
reasonableness of earnings projections, growth projections and sustained
earnings prospects after consummation of the Merger at reasonable growth rates;
provided, however, that such review shall be completed on September 22, 2000
(the "Due Diligence Period"). The scope of Compass' due diligence during the Due
Diligence Period shall be subject to such restrictions as mutually agreed to by
Compass and the Company. Due diligence, at the Company or its Subsidiaries'
locations, during the Due Diligence Period shall be at such times as determined
by the Company. Nothing in this Section 6.1(a) shall be construed to limit the
right of Compass to continue its due diligence review through the Effective Time
pursuant to any other provisions of this Agreement.
(b) 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
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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.
SECTION 6.2 FILING OF REGULATORY APPROVALS. As soon as reasonably
practicable, Compass and the Company shall use their reasonable efforts to file
all notices and applications to the FRB, the Division, the Department, the
Superintendent, and the FDIC which Compass deems necessary or appropriate to
complete the transactions contemplated herein, including the merger of the Banks
and Compass Bank ("Compass Bank") and all filings and notices required pursuant
to the HSR Act and in requesting early termination of any applicable waiting
period under the HSR Act. Compass shall be responsible for paying the filing fee
for any filing or notices required pursuant to the HSR Act. Compass will deliver
to the Company and its counsel, and the Company will deliver to Compass and its
counsel, 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
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 on or
before January 31, 2001.
SECTION 6.6 EXCLUSIVITY. (a) The Company agrees that it shall not, and
shall cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents and advisors and
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affiliates not to, solicit or encourage inquiries or proposals with respect to,
or engage in any negotiations concerning, or provide any confidential
information to, or have any discussions with, any person relating to, any
Acquisition Proposal. It shall immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties. The Company shall promptly advise Compass following
the receipt by the Company or any of its Subsidiaries of any Acquisition
Proposal and the substance thereof (including the identity of the person making
such Acquisition Proposal), and advise Compass of any developments with respect
to such Acquisition Proposal immediately upon the occurrence thereof. For
purposes of this Section 6.6 an "Acquisition Proposal" means any tender or
exchange offer, proposal for a merger, consolidation or other business
combination or similar transaction involving the Company or its Subsidiaries or
any proposal or offer to purchase or acquire in any manner all or a majority of
the voting ownership, beneficial ownership or right to vote securities in, or a
majority of the assets or deposits of the Company or any of its Subsidiaries,
other than the transaction contemplated by this Agreement, provided, however,
that nothing contained in this Section 6.6 shall prohibit the Board of Directors
of the Company from furnishing information to, or entering into discussions,
negotiations or an agreement with, any person or entity that makes an
unsolicited Acquisition Proposal after the date hereof if, and only to the
extent that the Board of Directors of the Company, after consultation with
outside counsel, concludes in good faith that such action is necessary for the
Board of Directors of the Company, to comply with its fiduciary duties to its
shareholders under applicable law.
(b) The Board of Directors of the Company shall not (i) withdraw or
modify the approval or recommendation by such Board of Directors of this
Agreement or the Merger, (ii) approve or recommend an Acquisition Proposal or
(iii) enter into any agreement with respect to any Acquisition Proposal, unless
the Company receives an Acquisition Proposal and (A) the Board of Directors of
the Company concludes in good faith (after consultation with its financial
advisors) that such acquisition proposed would constitute a Superior Proposal,
and (B) the Board of Directors of the Company concludes in good faith, after
consultation with outside counsel, that in order to comply with its fiduciary
duties to its shareholders under applicable law it is necessary for the Board of
Directors to withdraw or modify its approval or recommendation of this Agreement
or the Merger, approve or recommend such Acquisition Proposal or enter into an
agreement with respect to such Acquisition Proposal. Notwithstanding anything
contained in this Agreement to the contrary, any action by the Board of
Directors permitted by this Section 6.6(b) shall not constitute a breach of this
Agreement by the Company.
(c) For purposes of this Agreement, "Superior Proposal" means a bona
fide Acquisition Proposal made by a third person that the Board of Directors of
the Company determines in its good faith judgment to be more favorable to the
Company's stockholders than the Merger (taking into account, in good faith, the
written opinion, with only customary qualifications, of the Company's
independent financial advisor that the value of the consideration to the
Company's stockholders provided for in such proposal exceeds the value of the
consideration to the Company's stockholders provided for in the Merger) and for
which financing, to the extent required, is then committed or which, in the good
faith judgment of the Board of Directors of the Company (taking into account, in
good faith, the written advice of the Company's independent financial advisor),
is reasonably capable of being obtained by such third person.
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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 Effective Time, Compass, the Company and its Subsidiaries will not
make additional contributions to the employee benefit plans that were sponsored
by the Company or an ERISA Affiliate immediately prior to the Effective Time.
Compass agrees that the employees of the Company and its Subsidiaries who are
retained as employees of Compass or Compass Bank will be entitled to participate
as newly hired employees in the employee benefit plans and programs maintained
for employees of Compass and its affiliates, in accordance with the respective
terms of such plans and programs, and Compass shall take all actions necessary
or appropriate to facilitate coverage of the Company's and its Subsidiaries'
employees in such plans and programs from and after the Effective Time, subject
to the following:
(i) Employee Welfare Benefit Plans and Programs: Each employee of the
Company and its Subsidiaries retained by Compass will be entitled to credit for
prior service with the Company and its Subsidiaries for all purposes under the
employee welfare benefit plans and other employee benefit plans and programs
(other than those described in subparagraph (ii) below and any stock option
plans) sponsored by Compass to the extent the Company or any of its Subsidiaries
sponsored a similar type of plan which the Company or Company Subsidiary
employee participated in immediately prior to the Effective Time. To the extent
permitted under Compass' existing insurance contracts, any preexisting condition
exclusion applicable to such plans and programs shall be waived with respect to
any such Company or Company Subsidiary employee. For purposes of determining
each Company or Company Subsidiary employees' benefit for the year in which the
Merger occurs under the Compass vacation program, any vacation taken by a
Company or Company Subsidiary employee preceding the Effective Time for the year
in which the Merger occurs will be deducted from the total Compass vacation
benefit available to such employee for such year. Compass agrees that for
purposes of determining the number of vacation days available with respect to
each Company employee for the year in which the Merger occurs, that the number
of vacation days for such year shall be determined under the Company or its
Subsidiaries vacation policies in effect as of January 1, 1999.
(ii) Employee Pension Benefit Plans: Each Company and Company
Subsidiary employee retained by Compass 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.
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On or before, but effective as of the Effective Time, the Company and
its ERISA Affiliates 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 BANKS. Compass presently intends to cause the
Banks to merge into Compass Bank immediately after the Effective Time, and the
Company agrees to cause the Banks and its other 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 the Banks 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, at the sole cost and expense of Compass, to the same extent that the
Company and its Subsidiaries have such right, but not the obligation or
responsibility, to inspect any Property, including, without limitation, for the
purpose of conducting asbestos surveys and sampling, and other environmental
assessments and investigations ("Environmental Inspections"). Compass' right to
conduct Environmental Inspections shall include the right to sample and analyze
air, sediment, soil and groundwater of any Property to the same extent that the
Company or its Subsidiaries have such right. Compass may conduct such
Environmental Inspections at any time subject to Section 6.10(c) below.
(b) Using an approach and scope which is equivalent to the
environmental policies of Compass, the Company and its Subsidiaries shall cause
to be performed, and subsequently evaluate the results of, an environmental
investigation of any Property acquired, leased, foreclosed, managed or
controlled by the Company or its Subsidiaries, or in which the Company or its
Subsidiaries acquires a security interest, in each case between the date hereof
and the Closing Date, and the scope and results of which shall be acceptable to
Compass in its sole reasonable discretion.
(c) Compass shall notify the Company of any Environmental Inspections
of Property which it intends to conduct, and the Company may place reasonable
restrictions on the time of such inspections. Upon Compass' notification to the
Company of the Property upon which it intends to conduct such physical
inspections, the Company and its Subsidiaries shall notify the owner of such
Property and use their best efforts to secure access to such Property for
Compass. Compass shall notify the Company on or prior to the 102nd day after the
date hereof of any Properties that, in the sole discretion of Compass, are not
acceptable and require further assessment, remediation, correction, or
monitoring ("Environmental Response").
(d) (1) With respect to any Controlled Property that Compass has
notified the Company is not acceptable and requires Environmental Response, the
Company shall promptly prepare a remediation plan acceptable to Compass, and use
best efforts to obtain approval of such remediation plan by the Colorado
Department of Health and Environment, the Nebraska Department of Environmental
Quality, or any other appropriate governmental authority
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("Environmental Regulatory Authority"), if approval is necessary, and implement
the same on or prior to Closing.
(2) On or before the expiration of the Due Diligence Period,
Compass agrees to notify the Company of any Collateral Property the
environmental condition of which Compass believes may require Environmental
Response, and any increase in loan loss reserve which Compass believes is
appropriate in light of the environmental condition of such Collateral Property.
With respect to any such Collateral Property, the Company agrees promptly to,
and shall cause the Company's Subsidiaries to, add to their respective loan loss
reserves the lesser of (a) the addition to loan loss reserve proposed by
Compass, or (b) the outstanding balance of the loan or indebtedness secured by
such Collateral Property. If the addition to loan loss reserve proposed by
Compass would exceed 80% of the outstanding balance of such loan or
indebtedness, the Company will, and will cause its Subsidiaries to, increase
their respective 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 $500,000 in connection
with Environmental Response, 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.
(e) Each party hereto agrees to indemnify and hold harmless the other
party for any claims for damage to the Property or injury or death to persons in
connection with any Environmental Inspection 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. 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, but such reporting shall remain the responsibility
of and within the discretion of the Company. Compass shall have no liability to
the Company or its Subsidiaries for making any report of such results to any
governmental authority.
(f) The Company agrees to make available to Compass and its
consultants, agents and representatives all documents and other material
relating to environmental conditions of the Property in its possession
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
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Agreement and the transactions contemplated hereby, subject to required
regulatory approvals, and that they will retain the right to vote such Shares
during the term of this Agreement and have given Compass a proxy to vote such
Shares in favor of the Merger if they should fail to do so, pursuant to a Voting
Agreement and Irrevocable Proxy in substantially the form attached hereto as
Exhibit D.
SECTION 6.12 EXCHANGE AGREEMENT. Immediately prior to the Effective
Time, the Company and Compass agree to enter into, and Compass agrees to cause
Merger Sub 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 be mutually agreed to by the Company and Compass.
SECTION 6.13 DIRECTOR AND OFFICER INDEMNIFICATION.
(a) Following the Effective Time and for a period of five years
thereafter, Compass shall indemnify, defend, and hold harmless the present and
former directors, officers and employees of the Company and its Subsidiaries
(each, an "Indemnified Party") against all costs or expenses, including
reasonable attorneys' fees, judgments, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative, or investigative,
arising out of actions or omissions accruing at or prior to the Effective Time)
including, without limitation, the transactions contemplated by this Agreement)
to the fullest extent that the Company and its Subsidiaries are permitted to
indemnify (and advance expenses to) its directors, officers and employees under
the Company's and its Subsidiaries' Articles of Incorporation, the Company's and
the Subsidiaries' By-laws and indemnification agreements between the Company and
any of its Subsidiaries and their respective directors and officers, as in
effect on the date hereof; provided that any determination required to be made
with respect to whether an officer's, director's, or employee's conduct complies
with the standard set forth under the Company's Articles, the Company's and the
Subsidiaries' By-laws, and other indemnification agreements between the Company
or its Subsidiaries and their respective directors and officers shall be made by
independent counsel (which shall not be counsel that provides material services
to Compass, the Company or the person seeking indemnification hereunder)
selected by Compass and reasonably acceptable to such officer or director or
employee. The indemnification provisions currently contained in the Articles of
Incorporation, Bylaws and written agreements of the Company and its Subsidiaries
shall not be amended after the date hereof.
(b) Any Indemnified Party wishing to claim indemnification under
Section 6.14(a) upon learning of any action, claim, suit, proceeding or
investigation described above shall promptly notice Compass thereof; provided,
that the failure to so notify shall not affect the obligations of Compass under
Section 6.13(a) unless and to the extent that Compass is actually prejudiced as
a result of such failure.
(c) If Compass or any of its successors or assigns shall consolidate
with or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any entity, then and in each case, proper provisions shall
be made so that the successors and assigns of Compass shall assume the
obligations set forth in this Section 6.13.
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(d) Compass agrees that the Company and its Subsidiaries may obtain
"tail coverage" or extended reporting period coverage under their existing
director's and officer's liability policies or other similar coverage for a
period of two years following the Effective Time; provided, however, that the
annual premium expense for such coverage shall not exceed 125% of the Company's
current annual premium.
SECTION 6.14 EXERCISE OF CONVERTIBLE SECURITIES. The Company shall use
its best efforts to cause each holder of outstanding warrants, options, rights,
convertible debentures or other securities entitling the holder thereof to
acquire Shares (collectively, the "Convertible Securities") to exercise or
convert such Convertible Securities in full prior to the Effective Time.
SECTION 6.15 REMOVAL OF PERSONAL PROPERTY. On or before the Closing
Date, Joel H. Wiens may remove his personally owned property from the premises
of the Company and the Banks.
SECTION 6.16 ASSIGNMENT OF NAME. Compass agrees to execute and deliver
at Closing an assignment of rights in the name "FirsTier" pursuant to a
tradename assignment in substantially the form of Exhibit L attached hereto.
SECTION 6.17 ACTIONS RESPECTING DEBENTURES. Compass and the Company
agree to take such actions as are necessary to satisfy the requirements of the
Indenture relating to the FW Capital I 9.375% Junior Subordinated Debentures
("Company Subordinated Debentures") in the event of a business combination
between the Company and Compass.
SECTION 6.18 PUBLICATION OF 30 DAYS OF POST COMBINATION RESULTS.
Compass shall publish at the earliest opportunity following the first full
calendar month after the Effective Time combined financial results of Compass
and the Company covering 30 days of post combination operations so as to permit
Company Affiliates and Compass Affiliates to sell immediately after such
publication shares of Compass Common Stock under the rules applicable to
"pooling of interests" accounting treatment; provided, however, that Compass
shall not be required to so publish financial results if the Effective Time
occurs in the second month of any calendar quarter.
SECTION 6.19 RIGHT OF FIRST REFUSAL. Subject to its permissibility
under pooling-of-interests accounting, Compass agrees to execute and deliver at
Closing a right of first refusal in substantially the form of Exhibit M attached
hereto in favor of Joel Wiens with respect to a sale by Compass of Firstate
Bank.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver of the following conditions prior to the Effective Time:
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(a) the receipt of regulatory approvals (including, without limitation,
pursuant to the HSR Act), 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 or early
termination of any applicable waiting period with respect thereto or under the
HSR Act;
(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;
(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;
(e) the shares of Compass Common Stock to be issued in the Merger shall
have been approved for listing on the NASDAQ, subject to official notice of
issuance; and
(f) Compass and the Company shall have received an opinion of counsel
from counsel to Compass in substantially the form attached hereto as Exhibit N
to the effect that on the basis of certain facts, representations, and opinions
set forth in such opinion that the Merger will qualify as a reorganization under
Section 368(a) of the Code. In rendering such opinion, such counsel may require
and rely upon and may incorporate by reference representations and covenants,
including those contained in certificates of officers and/or directors of
Compass, Merger Sub, the Company and others.
SECTION 7.2 CONDITIONS TO THE OBLIGATIONS OF COMPASS AND MERGER SUB TO
EFFECT THE MERGER. The obligations of Compass and Merger Sub to effect the
Merger are subject to the satisfaction or waiver of the following conditions
prior to the Effective Time:
(a) all representations and warranties of the Company shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing;
(b) the Company shall have performed in all material respects all
obligations and agreements and in all material respects complied with all
covenants and conditions, contained in this Agreement to be performed or
complied with by it prior to the Effective Time;
(c) there shall not have occurred a Material Adverse Effect with
respect to the Company or its Subsidiaries;
(d) the directors of the Company and its Subsidiaries shall have
delivered to Compass an instrument in the form of Exhibit I attached hereto
dated the Effective Time
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releasing the Company and its Subsidiaries from any and all claims of such
directors (except as to their deposits and accounts, and as to their rights of
indemnification pursuant to the Articles of Incorporation, Association or Bylaws
of the Company and the Bank) and shall have delivered to Compass their
resignations as directors of the Company and its Subsidiaries;
(e) the officers of the Company and its Subsidiaries shall have
delivered to Compass an instrument in the form of Exhibit I attached hereto
dated the Effective Time releasing the Company and its Subsidiaries from any and
all claims of such officers (except as to deposits and accounts and accrued
compensation permitted by their respective agreements with the Company or its
Subsidiaries and as to their rights of indemnification pursuant to the Articles
of Incorporation, Association or Bylaws of the Company and the Bank);
(f) Compass shall have received the opinions of counsel to the Company
acceptable to it as to the matters set forth on Exhibit D attached hereto;
(g) the holders of no more than the lesser of (i) 10% of the Shares or
(ii) such number of Shares that shall not disqualify the Merger for
pooling-of-interest accounting treatment, 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 Arthur Andersen, LLP,
dated on or before September 22, 2000 ("Initial Pooling Letter") and a letter
from Arthur Andersen, LLP dated as of the Effective Time, each to the effect
that the Merger will qualify for pooling-of-interests accounting treatment if
closed and consummated in accordance with this Agreement;
(i) the aggregate principal amount of all Company Indebtedness shall
not exceed $48,000,000 (exclusive of Federal Home Loan Bank borrowings, federal
funds purchased and securities sold under agreements to repurchase in the
ordinary course of business and consistent with prudent banking practices);
(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 to sell or otherwise dispose of (i) shares
of the Company prior to and in connection with the Merger to the Company or
Compass or any party related to the Company or Compass and (ii) shares of
Compass Common Stock received pursuant to the Merger to Compass or any party
related to Compass;
(k) Compass shall have received from holders of the Company's capital
stock who are proposed to receive Bonuses as disclosed in the Company Disclosure
Memorandum representations (i) that they have no plan or intention to sell or
otherwise dispose of (A) shares of the Company prior to and in connection with
the Merger to the Company or Compass or any party related to the Company or
Compass, and (B) shares of Compass Common Stock received pursuant to the Merger
to Compass or any party related to Compass, and (ii) that the Bonuses were
separately bargained for at arms-length and do not represent additional
consideration for the acquisition of the Company capital stock;
(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
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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 listed by the Company pursuant to Section 5.1(k) do
not have a Material Adverse Effect;
(n) all warrants, options, rights, convertible debentures or other
securities entitling the holder thereof to acquire Shares shall have been
exercised or converted, or shall have expired, lapsed or terminated, prior to
the Effective Time;
(o) Joel H. Wiens shall have entered into a noncompetition agreement
with Compass or one of its Affiliates, in the form of Exhibit H attached hereto;
(p) the Company and its Subsidiaries shall have accrued and paid prior
to the Effective Time all brokerage and professional fees relating to the
transactions contemplated by this Agreement and all premium expenses incurred
pursuant to Section 6.13(b) hereof;
(q) Timothy D. Wiens, Mike Nelson and such other individuals who are
mutually identified by Compass and the Company during the Due Diligence Period
shall have entered into employment agreements with Compass or an affiliate and
acceptable to Compass on or before September 17, 2000; and
(r) Compass shall have received certificates dated the Closing executed
by the Chairman of the Board of the Company and by the Chairman of the Board of
its Subsidiaries, and the Secretary or Cashier of the Company and its
Subsidiaries, respectively, certifying in such reasonable detail as Compass may
reasonably request, to the effect described in Section 7.2(a), (b), (c), (g),
(i), (n) and (p).
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 Merger Sub shall have performed in all material
respects all obligations and agreements and in all material respects complied
with all covenants and conditions contained in this Agreement to be performed or
complied with by either of them prior to the Effective Time;
(c) the Company shall have received the opinion of counsel to Compass
and Merger Sub acceptable to it, as to the matters set forth on Exhibit E
attached hereto;
(d) the Company and its Subsidiaries shall have delivered to the
directors of the Company and its Subsidiaries an instrument in the form of
Exhibit J attached hereto dated the Effective Time releasing such directors from
any and all claims of the Company and its
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Subsidiaries (except as to indebtedness or other contractual liabilities);
provided, however, that such releases shall not release an action against such
directors by Compass or Merger Sub in connection with the transactions
contemplated by this Agreement;
(e) there shall not have occurred a Material Adverse Effect with
respect to Compass; and
(f) the Company shall have received certificates dated the Closing,
executed by appropriate officers of Compass and Merger Sub, respectively,
certifying, in such detail as the Company may reasonably request, to the effect
described in Section 7.3(a), (b) and (e).
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 warranty of the Company contained
in Article III which constitutes a Material Adverse Effect,
(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, and losses, damages, Environmental Response costs, liabilities
(INCLUDING WITHOUT LIMITATION, STRICT LIABILITIES), fines, penalties, costs and
expenses which might arise therefrom could reasonably be expected to exceed
$500,000;
(iii) if the Environmental Inspection identifies any past or
present event, condition or circumstance that, based on the estimates of the
environmental professionals referred to in Section 6.10, may currently or in the
future require (a) expenditures by the Company or its Subsidiaries, in
connection with (1) Environmental Response 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(d), which expenditures or additions to loan
loss reserve individually or in the aggregate may exceed $500,000;
(iv) Compass is not permitted to conduct an Environmental
Inspection of any Property to the extent it deems appropriate, consistent with
the provisions of Section 6.10(a);
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(v) If on or before Closing,
a) for each Controlled Property identified by Compass as
unacceptable and requiring Environmental Response, the Company does not deliver
to Compass written evidence acceptable to Compass that the Company has used best
efforts to develop a remediation plan approved by the applicable Environmental
Regulatory Authority, and implemented the same;
b) for each Collateral Property identified by Compass as
unacceptable and which may require Environmental Response, 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(d);
(vi) if the Company Disclosure Memorandum is not delivered to
Compass on or before September 8, 2000;
(vii) if the Company Disclosure Memorandum is not acceptable to
Compass;
(viii) if Compass does not receive the Initial Pooling Letter on or
before September 22, 2000;
(ix) if Timothy D. Wiens and Mike Nelson and such other individuals
who are mutually identified by Compass and the Company during the Due Diligence
Period shall not have entered into employment agreements with Compass or an
affiliate and acceptable to Compass on or before September 17, 2000;
(x) if any of the conditions to Closing contained in Section 7.1 or
7.2 are not satisfied or waived by writing by Compass;
(c) by the Company if the conditions to Closing contained in Section
7.1 or 7.3 are not satisfied or waived in writing by the Company;
(d) by Compass or the Company if the Effective Time shall not have
occurred on or before the expiration of nine months from the date of this
Agreement or such later date agreed to in writing by Compass and the Company;
(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;
(f) by the Company in the event the Company enters into an agreement
with respect to an Acquisition Proposal in accordance with the provisions of
Section 6.6(b) of this Agreement; provided, however, that the Company may only
terminate this Agreement pursuant to this subsection (f) if it simultaneously
with such termination delivers to Compass the termination fee provided for in
Section 8.6 hereof;
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(g) by Compass (a) if there shall have been a breach of Section 6.6
hereof, or (b) if at anytime, the Company shall have failed to make its
recommendation referred to in Section 1.7 hereof, withdrawn such recommendation
or modified or changed such recommendation in a manner adverse in any respect to
the interests of Compass; or
(h) by the Company at any time during the two business day period
following the fifth trading day prior to the Closing, if both of the following
conditions are satisfied:
(1) the Average Closing Price is less than $15.75; and
(2) (i) the number obtained by dividing the Average Closing Price
by the Starting Price shall be less than (ii) the number obtained by dividing
the Average Index Value by the Index Value on the Starting Date and subtracting
0.15 from the quotient in this clause 2(ii).
For purposes of this Section 8.1(h), the following terms shall
have the meanings indicated:
"Average Index Value" means the average of the Index Values for
the twenty days of trading preceding the fifth trading day prior to the Closing.
"Index Value" on a given date means the Index Value of the
Standard & Poors Bank Composite Index as published by Standards & Poors.
"Starting Date" means date of this Agreement.
"Starting Price" shall mean the last reported sale price per share
of Compass Common Stock on the Starting Date, as reported by NASDAQ/National
Market System.
SECTION 8.2 SPECIAL COMPASS RIGHTS OF TERMINATION. For $100.00, the
execution and delivery of this Agreement, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged by the
Company, and in recognition of the fact that, as of the date hereof, Compass has
not had an opportunity to perform a complete due diligence review of the Company
or its Subsidiaries, in addition to, and not in limitation of, the termination
rights set forth in Section 8.1, Compass shall have the right to terminate this
Agreement in its sole, absolute and unfettered discretion for any reason on or
before 6:00 p.m. Birmingham, Alabama time, on September 22, 2000 by the delivery
of written notice to the Company in accordance with Section 10.7. Nothing in
this Section 8.2 shall be construed to limit the right of Compass to continue
its due diligence review of the Company and its Subsidiaries through the
Effective Time.
SECTION 8.3 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 Sections 6.10, 8.2, 8.6, 9.1, 10.1 and 10.8. Nothing contained in
this Section 8.3 shall relieve any party from liability for any breach of this
Agreement.
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SECTION 8.4 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, Merger Sub 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 Merger Sub as a party hereto, which
amendment shall be made prior to any submission of this Agreement to
shareholders of the Company for their approval. As a condition to the Company's
entry into such an amendment, Merger Sub shall deliver to the Company a
certificate in substantially the form of Exhibit G attached hereto.
SECTION 8.5 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
SECTION 8.6 TERMINATION FEE. If the Company either (x) violates its
obligations set forth in Section 6.6 hereof and this Agreement is terminated
pursuant to Section 8.1(g)(a), or (y) prior to termination of this Agreement
receives any Acquisition Proposal and this Agreement is thereafter terminated
pursuant to Sections 8.1(f) or 8.1(g) as a result of receipt of such Acquisition
Proposal, then the Company shall pay to Compass an aggregate fee of $8,000,000
in cash at the time of such termination.
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 Closing.
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
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of the Company and its Subsidiaries, shall be paid by the party incurring such
costs and expenses. Compass shall be responsible for paying the filing fee for
any filing or notice required pursuant to the HSR Act. 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. Except as set forth in the Company
Disclosure Memorandum, 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, Merger Sub, the Company or its Subsidiaries for
financial advisory fees, brokerage or commission fees, finder's fees or other
like payment in connection with the consummation of the transactions
contemplated hereby.
SECTION 10.3 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof, and (b) shall not be assigned by operation of law or otherwise,
provided that Compass may assign its rights and obligations or those of Merger
Sub 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, or its Subsidiaries, shall execute and deliver such
further agreements, documents, deeds, certificates and other instruments and
shall take or cause to be taken such other actions, including those as shall be
necessary to vest or perfect in or to confirm of record or otherwise the
Company's or its Subsidiaries' title to and possession of, all of their
respective property, interests, assets, rights, privileges, immunities, powers,
franchises and authority, as shall be reasonably necessary or advisable to carry
out the purposes of and effect the transactions contemplated by this Agreement.
SECTION 10.5 ENFORCEMENT OF THE AGREEMENT. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
SECTION 10.6 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 10.7 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered if in person, by cable, telegram or telex or by
telecopy, or five business days after
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<PAGE> 158
mailing if delivered by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
if to Compass or Merger Sub:
Charles E. McMahen
Vice Chairman
Compass Bank
24 Greenway Plaza
Houston, Texas 77046
Telecopy No.: (713) 993-8535
Jerry W. Powell
General Counsel
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Telecopy No.: (205) 933-3043
with a copy to:
Annette L. Tripp
Locke Liddell & Sapp LLP
3400 Chase Tower, 600 Travis
Houston, Texas 77002
Telecopy No.: (713) 223-3717
if to the Company:
Joel H. Wiens
FirsTier Corporation
11210 Huron
Northglenn, Colorado 80234
Telecopy No.: (303) 450-5046
Timothy D. Wiens
FirsTier Corporation
11210 Huron
Northglenn, Colorado 80234
Telecopy No.: (303) 450-5046
44
<PAGE> 159
with a copy to:
Reid A. Godbolt, Esq.
Jones & Keller, P.C.
1625 Broadway, Suite 1600
Denver, Colorado 80202
Telecopy No.: (303) 573-8133
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 10.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 10.9 DESCRIPTIVE HEADINGS. The descriptive headings are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 10.10 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 10.11 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 10.12 INCORPORATION BY REFERENCES. Any and all schedules,
exhibits, annexes, statements, reports, certificates or other documents or
instruments referred to herein or attached hereto are incorporated herein by
reference hereto as though fully set forth at the point referred to in the
Agreement.
SECTION 10.13 CERTAIN DEFINITIONS.
(a) "Subsidiary" or "Subsidiaries" shall mean, when used with reference
to an entity, any corporation, fifty percent 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 event, change,
circumstance, or occurrence, together with any other event, change,
circumstance, or occurrence, that has a material adverse effect on the financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
reserves, business, results of operations, or prospects of the Company and its
Subsidiaries taken as a whole (or when the reference is to Compass, to Compass
and its Subsidiaries, taken as a whole) excluding the impact of (A) changes in
banking laws and other laws of general applicability, (B) changes in GAAP or
regulatory accounting requirements
45
<PAGE> 160
applicable to banks and their holding companies generally, (C) changes in
general economic conditions affecting banks and their holding companies
generally, (D) actions or omissions of a party to this Agreement taken with the
prior written consent of the other party to this Agreement, in contemplation of
the transactions contemplated hereby, and (E) any modifications or changes to
valuation policies and practices in connection with the Merger or restructuring
charges, in each case taken with the prior approval of Compass or the Company,
as the case may be; provided further that; with respect to each of clause (A),
(B), or (C), to the extent that such change does not materially effect the
affected party in a way that materially differs from the way the change affects
other banking organizations.
(c) "Environmental Laws" shall mean all federal, state and local laws,
ordinances, rules, common law, regulations, guidance documents, directives, and
decisions, interpretations and orders of courts or administrative agencies or
authorities, relating to the release, threatened release, recycling, processing,
use, handling, transportation treatment, storage, disposal, remediation,
removal, inspection or monitoring of, or exposure to, Hazardous 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, as amended ("FWPCA"), Clean Air Act, and
any and all regulations promulgated pursuant to any of the foregoing, as
amended.
(d) "Hazardous Substances" shall mean those substances included within
the statutory or regulatory definitions, listings or descriptions of
"pollutant," "hazardous material," "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 States of Colorado and Nebraska establish a meaning for
"hazardous substance," "hazardous waste," "hazardous material," "solid waste,"
"pollutant," "contaminant," "regulated substance," or "toxic waste," which is
broader than that specified in any of CERCLA, SARA, RCRA, HSWA, HMTA, TSCA, OSHA
or any other Environmental Law 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 normal course of
46
<PAGE> 161
performing his duties. 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 serving in the
capacities set forth on Exhibit K hereto (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.
(g) "HSR Act" - the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, or any successor law, and regulations and rules issued
pursuant to such act or any successor law.
[SIGNATURE PAGE FOLLOWS]
47
<PAGE> 162
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
ATTEST: COMPASS BANCSHARES, INC.
By: /s/ Jerry W. Powell By: /s/ Garrett R. Hegel
----------------------------------- ---------------------------------
Its: General Counsel and Secretary Its: Chief Financial Officer
ATTEST: FIRSTIER CORPORATION
By: /s/ Timothy D. Wiens By: /s/ Joel H. Wiens
----------------------------------- ---------------------------------
Its: President/CEO Its: Chairman
<PAGE> 163
EXHIBIT A
POOLING TRANSFER RESTRICTIONS AGREEMENT
This Pooling Transfer Restrictions Agreement (this "Agreement") is
executed and delivered this ____ day of _________, 2000 by and between Compass
Bancshares, Inc. ("Compass"), FirsTier Corporation (the "Company"), and the
undersigned shareholder of the Company (the "Shareholder").
WHEREAS, Compass and the Company entered into an Agreement and Plan of
Merger dated _________, 2000 ("Merger Agreement") pursuant to which the Company
will be merged with an existing or to-be-formed subsidiary of Compass (the
"Merger"), and
WHEREAS, Compass has required as a condition to entering into the
Merger Agreement that the Company and the Shareholder and each other affiliate
of the Company deliver to Compass an agreement in substantially the form hereof,
NOW, THEREFORE, in consideration of Compass' agreement to enter into
the Merger Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned, intending to be
legally bound, hereby agree as follows:
1. The Shareholder agrees that he will not sell, pledge, transfer or
otherwise dispose of any shares of the Company's common stock, par value $1.00
per share ("Company Common Stock"), within 30 days prior to the Effective Time
(as defined in the Merger Agreement). The Shareholder further agrees that until
the publication of financial results covering at least 30 days of post-Merger
combined operations of the Company and Compass, he will not sell, pledge,
transfer or otherwise dispose of any shares of the Compass Common Stock to be
acquired by him in the Merger, except for pledges by the Shareholder of all or
part of such Shareholder's Compass Common Stock acquired in the Merger to secure
loans, provided the lender accepts any pledge of such Compass Common Stock
subject to the terms of this Agreement. The Shareholder further agrees that he
will not sell, pledge, transfer or otherwise dispose of any shares of the
Compass Common Stock to be acquired by him in the Merger except in a manner
which is consistent with any additional requirements for Compass' accounting for
the Merger as a pooling of interests, including without limitation any new
requirements imposed by the applicable provisions of the Securities Act of 1933,
the Securities Exchange Act of 1934, and the respective rules and regulations
thereunder.
2. The Shareholder further acknowledges and agrees that he will be
subject to Rule 145 promulgated by the Securities and Exchange Commission under
the Securities Act, and agrees not to transfer any Compass Common Stock received
by him in the Merger except in compliance with the applicable provisions of the
Securities Act, the Exchange Act, and the respective rules and regulations
thereunder.
<PAGE> 164
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 _______ __, 2000 which restricts
any sale or other transfer of such shares prior to the earlier to occur
of (i) public release by Compass Bancshares, Inc. of 30 days of
post-merger combined operations of ___________ and Compass Bancshares,
Inc., or (ii) [insert due date of next Quarterly Report on Form 10-Q or
Annual Report on Form 10-K that will contain required 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> 165
IN WITNESS WHEREOF, the undersigned set his hand effective as of the
day first written above.
COMPASS BANCSHARES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
FIRSTIER CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
_____________________________________
Signature of Shareholder
_____________________________________
Printed Name of Shareholder
3
<PAGE> 166
EXHIBIT B
EXCHANGE AGENT AGREEMENT
------------------------
This Exchange Agent Agreement, dated as of _____, 2000, is made and
entered into by and among Compass Bancshares, Inc., a Delaware corporation
("Compass"), ________________, a Delaware corporation ("Merger Sub"), FirsTier
Corporation, a Colorado corporation ("Company"), and Continental Stock Transfer
& Trust Company, a New York banking corporation ("Exchange Agent").
PREAMBLE:
Pursuant to the Agreement and Plan of Merger dated as of ________, 2000
("Merger Agreement") among Compass, Merger Sub and the Company, the Company
shall, at the Effective Time, be merged with Merger Sub. The name of the
surviving corporation shall be FirsTier Corporation ("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:
1. APPOINTMENT OF EXCHANGE AGENT. Continental Stock Transfer & Trust
Company is hereby appointed as the Exchange Agent for payment of the Merger
Consideration to shareholders of the Company. Such appointment shall be in
accordance with the terms and conditions set forth herein.
<PAGE> 167
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 the executed Letters of
Transmittal accompanied by Certificates which are surrendered in
accordance with the provisions of the Merger Agreement. Such
Certificates and Letters of Transmittal shall only be accepted by the
Exchange Agent and eligible for payment hereunder if they have been
properly executed and completed in accordance with the instructions
contained in the Letters of Transmittal and, subject to the following
sentence, if the person or persons surrendering such Certificates and
Letters of Transmittal appear as a holder of record of the number of
shares surrendered on the list of shareholders ("Shareholder List")
supplied and certified to the Exchange Agent by the Company attached as
EXHIBIT B hereto. In the event the Exchange Agent shall have any
questions as to whether a Certificate and Letters of Transmittal have
<PAGE> 168
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) From time to time as requested by Compass, the Exchange
Agent shall provide Compass with a list of shareholders who have
properly tendered their Company Common Stock. In addition, the Exchange
Agent shall inform Compass in writing of the number of shares of
Company Common Stock which have been properly tendered and the number
which have been improperly tendered to the Exchange Agent during the
week then ended and on a cumulative basis through that day. The
Exchange Agent shall provide Compass such other information concerning
the Company Common Stock as it may reasonably request. Such
communications should be sent to:
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attn: Jerry W. Powell
Telephone No. (205) 933-3960
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<PAGE> 169
(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. Merger Sub 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 Merger Sub and the Company as follows:
(i) COMPANY COMMON STOCK. Each holder of Company
Common Stock shall receive Merger Consideration equal to
______ shares of Compass Common Stock for each share of
Company Common Stock held immediately prior to the Effective
Time.
(ii) FRACTIONAL SHARES. For each fractional share
of Compass Common Stock which would be delivered upon the
surrender of Company Common Stock, each holder of Stock shall
receive cash in an amount equal to the product of such
fraction and $_____.
As soon as practicable after acceptance of properly executed
Certificates and accompanying Letters of Transmittal in accordance with
the terms of paragraph 3(b) hereof, the Exchange Agent shall 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.
-4-
<PAGE> 170
(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
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.
-5-
<PAGE> 171
7. PAYMENT OF AMOUNTS DUE DISSENTING SHAREHOLDERS. In the event that
qualified dissenting shareholders of the Company exercise the rights afforded
them under the Colorado Business Corporation Act, such shareholders may be
entitled to payment of an amount other than the Merger Consideration. Any
payment for shares other than the Merger Consideration will be paid only upon
the written instructions of the Surviving Corporation. The Exchange Agent may
request and shall be provided additional funds from the Surviving Corporation in
order to make any required payment to dissenting shareholders, and the Exchange
Agent shall return to Compass any Merger Consideration which would have
otherwise been payable to such persons. The Exchange Agent shall rely on the
instructions of the Surviving Corporation as to all matters covered by this
paragraph, including, without limitation, the time and amount of payment to
dissenting shareholders.
8. UNCLAIMED FUNDS. Any moneys or certificates deposited hereunder
which shall remain unclaimed by the holders of shares of Company Common Stock
for a period of six (6) months following the Effective Time shall, upon written
request of the Surviving Corporation, be returned to Compass, plus interest
earned on the cash portion thereof and the shareholders of Certificates not
theretofore presented to and accepted by the Exchange Agent shall look to
Compass only, and not the Exchange Agent, for the payment of any Merger
Consideration in respect of such Certificates.
9. INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall deposit
portions of the Exchange Fund only as directed or consented to in writing by the
Surviving Corporation.
10. AMENDMENT. Except as otherwise expressly provided herein, neither
this Agreement nor any provision hereof may be amended, modified, waived,
discharged or terminated except in a writing signed by all of the parties hereto
prior to the Effective Time or by Compass and the Exchange Agent after the
Effective Time; provided, however, that no amendment shall be made if such
modification shall reduce the amount of or eliminate the opportunity of any
shareholder to receive his share of the Merger Consideration contemplated by the
Merger Agreement.
11. SECTION HEADINGS. The section headings used herein are for
convenience of reference only and shall not define or limit the provisions of
this Agreement.
12. GOVERNING LAW. THIS AGREEMENT AND THE APPOINTMENT OF THE EXCHANGE
AGENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AND SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON THE SUCCESSORS
AND ASSIGNS OF THE PARTIES HERETO.
-6-
<PAGE> 172
13. NOTICES. Notices under this Agreement shall be deemed given if made
in writing and sent via prepaid first-class United States mail, or by nationally
recognized overnight courier, to:
If to Compass:
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attn: Jerry W. Powell
Associate General Counsel
If to the Exchange Agent:
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, New York 10004
Attn: Steven G. Nelson
Chairman of the Board
If to the Company prior to the Effective Time:
FirsTier Corporation
11210 Huron
Northglenn, Colorado 80234
Attn: Joel H. Wiens
Chairman
And to:
FirsTier Corporation
11210 Huron
Northglenn, Colorado 80234
Attn: Timothy D. Wiens
President
If to Merger Sub or, following
the Effective Time, the
Surviving Corporation:
_____________________________
c/o Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attn: Jerry W. Powell
-7-
<PAGE> 173
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> 174
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: ___________________________
FIRSTIER CORPORATION
By: ______________________________
Name: ____________________________
Title: ___________________________
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By: ______________________________
Name: ____________________________
Title: ___________________________
__________________________________
By: ______________________________
Name: ____________________________
Title: ___________________________
Exhibit A - Form of Letters of Transmittal
Exhibit B - Shareholder List
-9-
<PAGE> 175
Exhibit A
LETTER OF TRANSMITTAL
For Shares of Common Stock of FirsTier Corporation
Delivered Pursuant to the Agreement and Plan of Merger dated
as of ________, 2000
By Mail or Overnight Delivery
Service to the Exchange Agent: Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, New York 10004
Attention: Reorganization Department
DESCRIPTION OF SHARES SURRENDERED
---------------------------------
Gentlemen:
I, as the registered holder of the below described Shares of FirsTier
Corporation ("Company") hereby surrender to Compass Bancshares, Inc.
("Compass"), such Shares pursuant to the Agreement and Plan of Merger dated as
of ______________, as amended ("Merger Agreement"), by and between Compass,
______________________________ ("Merger Sub"), and the Company in exchange for
____ shares of Compass Common Stock for each Share so surrendered. I hereby
acknowledge receipt of the Proxy Statement dated__________, 2000, which
described the merger ("Merger") provided by the Merger Agreement.
I represent and warrant to Compass and Merger Sub that I am the true
and lawful owner of the Shares, and have full capacity, power and authority to
exchange the Shares, free and clear of all liens, restrictions and encumbrances
of any kind whatsoever, and the Shares will not be subject to any adverse claim.
I understand that Continental Stock Transfer & Trust Company, as Exchange Agent
for this exchange, may require additional documentation, and I agree, upon
request, to execute and deliver any additional documents or instruments deemed
by the Exchange Agent or Compass reasonably necessary to complete the exchange
of the Shares.
<TABLE>
<CAPTION>
========================================================================= =========================================================
Name, Address and Social Security Number of Registered Holders Certificate(s) Surrendered
(correct if wrong)
------------------------------------------------------------------------- -------------------------------- ------------------------
<S> <C> <C>
Certificate Number(s) Total Number of Shares
Represented
by Certificate(s)
------------------------------- -------------------------
------------------------------- -------------------------
------------------------------- -------------------------
Total Shares ______________________
========================================================================= ================================ ========================
<CAPTION>
INSTRUCTIONS REGARDING ISSUANCE OF SHARES
If you wish to have the shares of Compass Common Stock to be issued
pursuant to the Merger Agreement in the name and at the address set forth above,
please sign and date this letter in the space below
<S> <C> <C> <C>
SIGNATURES _____________________________________ Date____________________
_____________________________________ Date____________________
Printed Name(s) _____________________________________ TIN or SSN# _________________________
_____________________________________
Capacity (Full Title)__________________________________
Address _________________________________
(Include Zip Code) _________________________________ Area Code and Telephone No.__________________________
===================================================================================================================================
<CAPTION>
NEW CERTIFICATES TO BE ISSUED IN A DIFFERENT NAME OR TO A DIFFERENT ADDRESS
If you are entitled to receive shares of Compass Common Stock and wish
to have certificates representing Compass Common Stock issued in a name or to an
address other than the name or address shown on your Company stock certificates,
please indicate the name and address of your assignee below ( You will be
required to pay any transfer or other taxes required by reason of the payment
and delivery of Compass Common Stock to such other person.) (Assignees must
execute the Substitute W-9 enclosed):
Name and Address of Assignee
----------------------------
<S> <C> <C> <C> <C> <C>
Name:______________________________________ Taxpayer I.D. No. or
(Type or print full name) Social Security No.:_____________________________
Address:__________________________________________________________________________________________
City, State, Zip Code:____________________________________________________________________________
===================================================================================================================================
<CAPTION>
GUARANTEE OF SIGNATURES (See Instruction 1.)
-------------------
AUTHORIZED SIGNATURE __________________________________ Date_____________________, 2000
Printed Name __________________________________
Title __________________________________ PLACE MEDALLION GUARANTY IN SPACE BELOW
Below Name of Firm __________________________________
Address __________________________________
__________________________________ Area Code and Telephone No.________________________
===================================================================================================================================
</TABLE>
<PAGE> 176
================================================================================
PLEASE COMPLETE SUBSTITUTE FORM W-9. IT IS THE LAST FORM IN THIS PACKAGE
================================================================================
LETTER OF TRANSMITTAL INSTRUCTIONS
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; SIGNATURES;
SIGNATURE GUARANTEES. Please send all certificates for Shares to the Exchange
Agent (the "Exchange Agent"), with the Letter of Transmittal, or a facsimile
thereof, fully completed and signed by you, the registered holder(s). Compass
retains the right to require that a signature on the Letter of Transmittal and
the Share certificates be guaranteed by a participant in a Securities Transfer
Association recognized signature program. If Compass wishes to have your
signature guaranteed, you will be notified by separate letter.
If certificates are registered in the name of a person other than
you, the certificate(s) must be duly endorsed or accompanied by stock powers
signed by the registered holder and the Letter of Transmittal. If the Letter of
Transmittal is executed by an officer on behalf of a corporation or by an
executor, administrator, trustee, guardian, attorney, agent or other person
acting in a fiduciary or representative capacity, the Exchange Agent reserves
the right to require that proper documentary evidence of the authority of the
person executing the Letter of Transmittal. If your Shares are registered in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate Letters of Transmittal as there are different
registrations of certificates. If the tendered certificates are owned of record
by two or more joint owners, each of you must sign the Letter of Transmittal.
Questions regarding evidence of authority, requests for assistance or additional
copies of the Letter of Transmittal may be referred to the Reorganization
Department of the Exchange Agent, at (212) 509-4000, extension 535.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
STRONGLY RECOMMENDED.
2. ISSUANCE OF COMPASS COMMON STOCK AND PAYMENT FOR FRACTIONAL SHARES.
You will receive the Compass Common Stock for your Shares only after receipt and
acceptance by the Exchange Agent and Compass of all of the certificates
representing your Shares, a properly completed and executed Letter of
Transmittal, and any other required documents and upon processing of the
documents by the Exchange Agent. In lieu of issuing fractional shares, Compass
will pay to any Company shareholder entitled to receive a fractional share of
Compass Common Stock, a cash payment based on a price of $_____ per share.
3. TRANSFERS. If the certificate(s) representing the Shares transmitted
hereby are registered in your name and the Letter of Transmittal is properly
signed by you, no endorsements of certificates or separate stock powers are
required. In all other cases, the certificate(s) representing the Shares
transmitted hereby must be endorsed or accompanied by appropriate stock powers,
in either case signed exactly as the name(s) of the registered holder(s) appear
on the certificate(s), and if required, signature(s) on such certificate(s) or
stock power(s) must be guaranteed by an Eligible Institution.
4. IRREGULARITIES. All questions as to the validity, form, eligibility,
acceptance of and delivery of Shares and the issuance of Compass Common Stock
and the payment of cash in lieu of fractional shares will be determined by
Compass, which determination shall be final and binding. Compass reserves the
absolute right to reject any or all tenders determined by Compass not to be in
appropriate form or which would, in the opinion of Compass' counsel, be
unlawful. Compass also reserves the absolute right in its sole discretion, to
waive any of the conditions hereof, or any defect in any tender with respect to
any particular Shares of any particular shareholder, and Compass'
interpretations of the terms and conditions of the Merger Agreement and these
instructions shall be final and binding. The Exchange Agent and Compass shall
not be obligated to give notice of defects or irregularities in tenders, nor
shall they incur any liability for failure to give any such notice. Tenders will
be deemed not to have been made until all defects and irregularities have been
cured or waived.
5. LOST CERTIFICATES. If your share certificates are lost, contact the
Exchange Agent in writing for further instructions.
IMPORTANT TAX INFORMATION
Under the Federal income tax law, you are to provide Compass (as payer)
with a correct taxpayer identification number on Substitute Form W-9 below. As
the record owner of the Shares, you are required to give Compass your Social
Security Number or Employer Identification Number. If the Shares are in more
than one name or are not in the name of the actual owners, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidelines on which number to report. If Compass is not
provided with the correct taxpayer identification number, you may be subject to
a $50 penalty imposed by the Internal Revenue Service. In addition, all payments
that are made to you with respect to Shares (including any cash payable to you
under the Merger Agreement in lieu of fractional shares) may be subject to
backup withholding in which event Compass will be required to withhold 31% of
any payments made to the shareholder.
Exempt shareholders should complete the Substitute Form W-9 below and
so indicate their exempt status by writing "exempt" across the face of the
Substitute Form W-9. In order for a foreign individual to qualify as an exempt
recipient, that shareholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Exchange Agent. See the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 for additional
information.
<PAGE> 177
COMPASS BANCSHARES, INC.
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
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.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
SIGNATURE: ______________________________________
DATE:_______________________________________
PRINTED NAME:_____________________________________
ADDRESS:_____________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
----------------------------------------------------------------------
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE
THE PAYER.---Social Security numbers have nine digits separated by two
hyphens: i.e. 000-00-0000. Employer identification numbers have nine
digits separated by only one hyphen: i.e. 00-0000000. The table below
will help determine the number to give the payer.
<TABLE>
<CAPTION>
-------------------------------- ------------------------ -------------------------------- ------------------------
GIVE THE SOCIAL GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SECURITY NUMBER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER
OF ---- OF ----
-------------------------------- ------------------------ --------------------------------- ------------------------
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate, The legal entity (Do
or pension trust not furnish the
2. Two or more individuals The actual owner of identifying number of
(joint account) the account or, if the personal representative
combined funds, any or trustee unless the
one of the individuals legal entity itself is
(1) not designated in the
account title.) (5)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a The minor(2) 10. Corporate account The corporation
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the 11. Religious, The organization
account) minor is the only charitable, or
contributor, the educational
minor(1) organization
account The partnership
12. Partnership account
held in the name of
the business
</TABLE>
<PAGE> 178
<TABLE>
<S> <C> <C> <C>
6. Account in the name of The ward, minor, or 13. Association, club, or The organization
guardian or committee incompetent person (3) other tax-exempt
for a designated ward, organization
minor, or
incompetent person
7. a The usual revocable The grantor-trustee(1) 14. A broker or registered The broker or nominee
savings trust account nominee
(grantor is
also trustee)
b So-called trust The actual owner(1) 15. Account with the The public entity
account that Department of
is not a legal or Agriculture
valid trust in the name of a
under State law public entity (such as a
State or local government,
school district, or prison)
8. Sole proprietorship account The owner(4) that receives agricultural
program payments
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the
number will be considered to be that of the first name listed.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
A corporation.
A financial institution.
An organization exempt from tax under section 501(a), or an
individual retirement plan.
The United States or any agency or instrumentality thereof.
A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof.
A foreign government, a political subdivision of a foreign
government, or any agency or instrumentality thereof.
An international organization or any agency, or instrumentality
thereof.
A registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
A real estate investment trust.
A common trust fund operated by a bank under section 584(a).
An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1).
An entity registered at all times under the Investment Company
Act of 1940.
A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
Payments to nonresident aliens subject to withholding under
section 1441.
Payments to partnerships not engaged in a trade or business in
the U.S. and which have at least one nonresident partner.
Payments of patronage dividends where the amount received is not
paid in money.
Payments made by certain foreign organizations.
Payments made to a nominee.
Payments of interest not generally subject to backup withholding
include the following:
Payments of interest on obligations issued by individuals. Note:
You may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or
business and you have not provided your correct taxpayer
identification number to the payer.
Payments of tax-exempt interest (including exempt-interest
dividends under section 852).
Payments described in section 6049(b)(5) to nonresident aliens.
Payments on tax-free covenant bonds under section 1451.
Payments made by certain foreign organizations.
Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE
FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST,
DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDINGS.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE> 179
EXHIBIT C
POOLING OF INTEREST CRITERIA
----------------------------
ATTRIBUTES OF COMBINING ENTERPRISES
-----------------------------------
(a) Autonomy Condition. Each of the combining enterprises is autonomous and
has not been a subsidiary or division of another enterprise within two
years before the plan of combination is initiated.
(b) Independence Condition. Each of the combining enterprises is
independent of the other combining enterprises.
MANNER OF COMBINING INTERESTS
-----------------------------
(c) One-Year Rule. The combination is effected in a single transaction or
is completed in accordance with a specific plan within one year after
the plan is initiated.
(d) Common-Stock-for-Common-Stock-Condition. An enterprise offers and
issues only common stock with rights identical to those of the majority
of its outstanding voting common stock in exchange for substantially
all of the voting common stock interest of another enterprise at the
date the plan of combination is consummated.
(e) Change-in-Equity-Interests Condition. None of the combining enterprises
changes the equity interest of the voting common stock in contemplation
of effecting the combination either within two years before the plan of
combination is initiated or between the dates the combination is
initiated and consummated; changes in contemplation of effecting the
combination may include distributions to stockholders and additional
issuances, exchanges, and retirements of securities.
(f) Treasury-Stock Condition. Each of the combining enterprises reacquires
shares of voting common stock only for purposes other than business
combinations, and no enterprise reacquires more than a normal number of
shares between the dates the plan of combination is initiated and
consummated.
(g) Proportionate-Interest Condition. The ratio of the interest of an
individual common stockholder to those of other common stockholders in
a combining enterprise remains the same as a result of the exchange of
stock to effect the combination.
(h) Voting-Rights Condition. The voting rights to which the common stock
ownership interests in the resulting combined enterprise are entitled
are exercisable by the stockholders; the stockholders are neither
deprived of nor restricted in exercising those rights for a period.
<PAGE> 180
(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.
<PAGE> 181
EXHIBIT D
VOTING AGREEMENT AND IRREVOCABLE PROXY
--------------------------------------
This Voting Agreement and Irrevocable Proxy (this "Agreement") dated as
of ________ __, 2000 is executed by and among FirsTier Corporation, a Colorado
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 _______ ___, 2000 (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 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
<PAGE> 182
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 7-107-302 of the Colorado 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 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.
2
<PAGE> 183
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 Colorado.
[SIGNATURE PAGES FOLLOW]
3
<PAGE> 184
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date above written.
FIRSTIER CORPORATION
By:_______________________________________
Name:____________________________________
Title:_____________________________________
Address:
11210 Huron
Northglenn, Colorado 80234
Attention: Mr. Joel H. Wiens and Mr. Timothy D.
Wiens
COMPASS BANCSHARES, INC.
By: ______________________________________
Name: ____________________________________
Title: _____________________________________
Address:
15 South 20th Street
Birmingham, Alabama 35233
Attention: Mr. Jerry W. Powell
Secretary and General Counsel
4
<PAGE> 185
SHAREHOLDERS:
_______________________________________
_______________________________________
Address: ______________________________
______________________________
____________ shares of Common Stock
Pledgee: ____________________________
Address: ____________________________
____________________________
Loan No.: ____________________________
5
<PAGE> 186
EXHIBIT E
OPINIONS REQUIRED FROM COUNSEL
TO THE COMPANY AND THE BANKS
(i) the Company is a Colorado 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 Colorado.
FirsTier Bank is a Colorado banking corporation, duly organized, validly
existing and in good standing under the laws of the State of Colorado. Firstate
Bank is a Nebraska banking corporation, duly organized, validly existing and in
good standing under the laws of the State of Nebraska. First Mtg. Bancorp is a
Colorado corporation, duly organized, validly existing and in good standing
under the laws of the State of Colorado. FW Capital I is a Delaware statutory
business trust. The Company and its Subsidiaries have all requisite corporate
power and authority to carry on their business as we know them to be conducted
and to own, lease and operate their properties and assets as now owned, leased
or operated. The Company and its Subsidiaries are duly qualified and in good
standing in each jurisdiction where qualification is required;
(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
50,000,000 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 20,000,000 shares of preferred stock, none of which is issued and
outstanding; the Company is the record holder of all of the issued and
outstanding capital stock of the Company's Subsidiaries other than FW Capital I;
the Company is the record holder of all the outstanding common voting securities
of FW Capital I; all of the outstanding shares of the Company Common Stock are
validly issued, fully paid and nonassessable and all of the capital stock of the
Company's Subsidiaries is validly fully paid and nonassessable; and to the best
of our knowledge, none of such stock was issued in violation of the preemptive
rights of any person;
(iv) to the best of our knowledge and except as set forth in Section
3.2 of the Company Disclosure Memorandum, there are no outstanding
subscriptions, options, rights,
<PAGE> 187
warrants, calls, convertible securities, irrevocable proxies, or other
agreements or commitments obligating the Company or its Subsidiaries to issue
any shares of, restricting the transfer of, or otherwise relating to shares of
their respective capital stock of any class;
(v) the execution and delivery by the Company of the Agreement does not
and the consummation of the transactions contemplated thereby will not
contravene or violate any provision of or constitute a default under (a) the
articles of incorporation or association or bylaws of the Company or its
Subsidiaries, (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 or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries or any of their respective
assets or properties is bound, and (c) to the best of our knowledge and except
as disclosed in the Agreement, any law, regulation, rule, administrative
regulation or decree of any court or any governmental agency or body whether
domestic or foreign applicable to the Company or any of its Subsidiaries, 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 Merger Sub, 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 Section 3.12 of the Company Disclosure
Memorandum, to the best of our knowledge, neither the Company nor any of its
Subsidiaries is a party to any Proceeding (as defined in the Agreement), nor to
the best of our knowledge, is any Proceeding threatened against or affecting the
Company or any of its Subsidiaries, which by the terms of the Agreement would
required to be set forth in Section 3.12 of the Company Disclosure Memorandum;
(viii) to the best of our knowledge and except as set forth on Section
3.18 of the Company Disclosure Memorandum, neither the Company nor any of its
Subsidiaries 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 Colorado, and upon filing by
the Secretary of State of Colorado of a Certificate of Merger the Merger will
have been legally consummated in accordance with the laws of the State of
Colorado with the consequences specified in Section 7-111-106 of the Colorado
Business Corporation Act.
<PAGE> 188
EXHIBIT F
OPINIONS REQUIRED FROM COUNSEL
TO COMPASS AND MERGER SUB
-------------------------
(i) Compass and Merger Sub are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and Compass is a financial holding company under the Bank Holding Company Act of
1956, as amended. Compass and Merger Sub 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
Merger Sub are duly qualified and in good standing in the respective states
where such qualification is required;
(ii) Compass and Merger Sub 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 Merger Sub (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 Merger Sub enforceable against Compass and
Merger Sub 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 Merger Sub 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 Merger Sub, (b) to
the best of our knowledge and except as disclosed in the Agreement, any note,
license, instrument, mortgage, deed of trust, or other agreement or
understanding, permit, authorization or contract, order, arbitration award,
judgment of decree, or any other restriction of any kind known to us to which
Compass or Merger Sub is a party or by which Compass or Merger Sub 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,
<PAGE> 189
regulation, rule, administrative regulation or decree of any court or any
governmental agency or body applicable to Compass or Merger Sub 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 Merger Sub of the Agreement;
(vi) to the best of our knowledge, neither Compass nor Merger Sub is in
violation of or default under the respective Certificates of Incorporation or
Bylaws of Compass or Merger Sub or any agreement, document or instrument under
which Compass or Merger Sub is obligated or bound, or any law, order, judgment,
or regulation applicable to Compass or Merger Sub 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.
<PAGE> 190
EXHIBIT G
---------
REPRESENTATIONS CERTIFICATE
____________ ("Merger Sub") 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
_________________, 2000 by and between Compass Bancshares, Inc. and FirsTier
Corporation (the "Agreement").
1. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado, 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. Merger Sub has full corporate power and authority and no further
corporate proceedings on the part of Merger Sub are necessary to execute and
deliver the Amendment to Agreement and Plan of Merger dated ___________, 2000
("Amendment") and to consummate the transactions contemplated thereby, all of
which have been duly and validly authorized by Merger Sub's' Board of Directors.
The Amendment has been duly executed and delivered by Merger Sub and is a duly
authorized, valid, legally binding and enforceable obligation of Merger Sub,
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
Merger Sub 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 FRB, the FDIC, the Division, the Department, the
Superintendent and the expiration or early termination of the waiting period
under the HSR Act 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 Merger Sub.
3. No representation or warranty by Merger Sub in the Amendment, nor
any statement or exhibit furnished to the Company or the Bank under and pursuant
to, or in anticipation of the Amendment, contains or will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained herein or therein not misleading.
IN WITNESS WHEREOF, Merger Sub has executed this Certificate this _____
day of ____________, 2000.
______________________________________
By:___________________________________
Name:_________________________________
Title:________________________________
<PAGE> 191
EXHIBIT H
NONCOMPETITION AGREEMENT
------------------------
NONCOMPETITION AGREEMENT, dated _______________, 2000 by and among
Compass Bancshares, Inc., a Delaware corporation ("Compass"), and Joel H. Wiens
("Owner").
WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of
_______________, 2000 (the "Merger Agreement"), between Compass and FirsTier
Corporation, a Colorado corporation (the "Company"), such parties have agreed to
the Merger as defined therein;
WHEREAS, Owner is a director and _______ % shareholder of the Company
and as a result of the Merger will receive substantial consideration;
WHEREAS, the Merger Agreement requires, as a condition to the closing,
that Owner execute and deliver this agreement to Compass; and
WHEREAS, Owner acknowledges that the restrictions against competition
and the other agreements set forth in this Agreement have constituted a
substantial inducement to Compass to enter into the Merger Agreement, and that
none of such restrictions or agreements set forth in the Agreement will be
unduly burdensome on Owner.
NOW, THEREFORE, for and in consideration of the payment of $1,000, the
consideration under the Merger Agreement, and of the mutual promises set forth
in this Agreement, the parties hereto agree as follows:
1. DEFINITIONS. Terms used but not defined in this Agreement shall have
the meanings ascribed to them in the Merger Agreement.
2. NONCOMPETITION.
(a) NONCOMPETITION. Owner agrees that for a period of two years
following the Closing, he will not, directly or indirectly, (i) solicit, hire,
employ or engage any past, present or future employee of Compass or its
affiliates or the Company or its affiliates, (ii) compete for or solicit
banking, lending, deposit taking or any other banking or trust services business
for or on behalf of any bank or other financial institution with a place of
business in the Front Range of the State of Colorado, including without
limitation the six county Denver, Colorado metropolitan area, and Kimball
County, Nebraska (the "Noncompetition Area"), or own, operate, participate in,
undertake any employment with or have any interest in any bank or other
financial institution with a place of business in the Noncompetition Area,
except owning publicly traded stock for investment purposes only in which Owner
owns less than 5%, (iii) compete for or solicit banking, lending, deposit taking
or any other banking or trust services business from any
<PAGE> 192
customer of the Company or any of its Subsidiaries (or its successors by
merger), or (iv) use in any competition, solicitation or marketing effort any
proprietary list of or other information concerning customers of the Company,
Compass or their affiliates developed by the Company, Compass or their
affiliates.
(b) RESTRICTIONS REASONABLE. The restrictions against competition set
forth above are considered by the parties to be reasonable for the purposes of
protecting the value intended to be received by Compass in connection with the
transactions contemplated by the Merger Agreement. If any such restriction is
found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too broad a range of activities or
over too large a geographic area, such restriction shall be interpreted and
reformed to extend only over the maximum period of time, range of activities or
geographic area as to which it may be enforceable.
(c) SPECIFIC PERFORMANCE. Owner acknowledges that Compass would be
irreparably harmed and that monetary damages would not provide an adequate
remedy in the event of a breach of the provisions of this Section 2.
Accordingly, Owner agrees that Compass shall be entitled to injunctive relief,
in addition to any other remedies available to Compass, and that Compass shall
be entitled to receive reimbursement for its reasonable attorney's fees and
disbursements incurred in enforcing any such provision.
3. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains every obligation and
understanding between the parties relating to the subject matter hereof and
merges all prior discussions, negotiations and agreements, if any, between them,
and none of the parties shall be bound by any conditions, definitions,
understanding, warranties or representations other than as expressly provided or
referred to herein.
(b) GOVERNING LAW This Agreement has been entered into and shall, be
construed and enforced in accordance with the laws of the State of Colorado
without reference to the choice of law principles thereof. Any lawsuit or claim
involving the interpretation or enforcement of this Agreement must be filed in a
court of competent jurisdiction in the State of Colorado.
(c) WAIVER AND AMENDMENT. Any representation, warranty, covenant, term
or condition of this Agreement which may be legally waived, may be waived, or
the time of performance thereof extended, at any time by the party hereto
entitled to the benefit thereof, and any term, condition or covenant hereof
(including, without limitation, the period during which any condition is to be
satisfied or any obligation performed) may be amended by the parties hereto at
any time. Any such waiver, extension or amendment shall be evidenced by an
instrument in writing executed by Owner and by Compass (by its Chairman, and
Chief Executive Officer or any Vice President or other person, who has been
authorized by its Board of Directors to execute waivers, extensions or
amendments on its behalf). No waiver by any party hereto
<PAGE> 193
whether express or implied, of its rights under any provision of this Agreement
shall constitute a waiver of such party's rights under such provisions at any
other time or a waiver of such party's rights under any other provision of this
Agreement. No failure by any party hereto to take any action against any breach
of this Agreement or default by another party shall constitute a waiver of the
former party's right to enforce any provision of this Agreement or to take
action against such breach or default or any subsequent breach or default by
such other party.
(d) ASSIGNMENT. This Agreement shall inure to the benefit of Compass,
its subsidiaries and affiliates, and their successors and assigns.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered if delivered in person, by cable, telegram or telex or
by telecopy; five business days after mailing, if delivered by registered or
certified mail (postage prepaid, return receipt requested); and two business
days after sending if delivered by overnight courier; to the respective parties
as follows (or at such other address as a party may specify by notice to the
others):
If to Owner, to:
Joel H. Wiens
____________________________
____________________________
If to Compass, to:
Mr. Jerry W. Powell
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Telecopy No.: (205) 933-3043
(f) SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall be declared invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force and
effect, and such invalid, void or unenforceable provision shall be interpreted
as closely as possible to the manner in which it was written.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(h) SECTION HEADINGS. The section headings in this Agreement are for
the convenience of reference only and shall not be deemed to alter or affect any
provision hereof.
[Signature page follows]
<PAGE> 194
IN WITNESS WHEREOF, each of the parties hereto have duly executed this
Agreement as of the date set forth above.
____________________________________
Joel H. Wiens, as an individual
COMPASS BANCSHARES, INC.
By:_________________________________
Its:________________________________
<PAGE> 195
EXHIBIT I
RELEASE OF CLAIMS
-----------------
THIS RELEASE OF CLAIMS ("Release") dated the ___ day of ____, 2000, is
executed and delivered by FirsTier Corporation, a Colorado corporation (the
"Company"), FirsTier Bank, a Colorado banking corporation, Firstate Bank, a
Nebraska banking corporation and First Mtg. Bancorp, a Colorado corporation
(collectively, the "Subsidiaries").
WHEREAS, the persons listed on EXHIBIT A attached hereto and made a
part hereof constitute the duly elected directors ("Directors") of the Company
and the Subsidiaries on the date hereof;
WHEREAS, Compass Bancshares, Inc., a Delaware corporation ("Compass"),
is to acquire the Company pursuant to that certain Agreement and Plan of Merger
dated as of ______________, 2000 by and between Compass and the Company, as
amended ("Agreement"), whereby the Company will be merged with a wholly-owned
subsidiary of Compass; and
WHEREAS, the Company has required as a condition to such acquisition
that the Directors be released of any claims by the Company or its Subsidiaries
against the Directors;
NOW, THEREFORE, in consideration of the premises contained herein and
ten dollars and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and its Subsidiaries
hereby agree as follows:
Section 1. RELEASE. The Company and the Subsidiaries hereby RELEASE and
FOREVER DISCHARGE the Directors from all manners of action, causes of action,
suits, debts, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, premises, variances,
trespasses, damages, judgments, executions, claims and demands whatsoever in law
or in equity which the Company or the Subsidiaries ever had, now have, or
hereafter can, shall or may have against the Directors, in respect of any and
all agreements and obligations incurred on or prior to the date hereof, or in
respect of any event occurring or circumstances existing on or prior to the date
hereof; provided, however, that no Director shall be released from (i) any
action arising from intentional fraud, deceit or wilful misconduct in connection
with the transactions contemplated by the Agreement or otherwise, or (ii) his or
her obligations or liabilities to the Company or the Subsidiaries in connection
with any indebtedness or any contractual obligation or liability of such
Director to the Company or the Subsidiaries existing on the date hereof.
Section 2. SUCCESSORS. This Release shall be binding upon the Company,
and the Subsidiaries and their respective successors and assigns and shall inure
to the benefit of the Directors and their respective heirs, devisees,
administrators, executors, successors and assigns.
<PAGE> 196
Section 3. GOVERNING LAW. This Release shall be governed by and
construed in accordance with the laws of the State of Colorado, without giving
effect to Colorado principles of conflicts of law.
Section 4. COUNTERPARTS. This Release may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
Section 5. MODIFICATION. This Release may be modified as to any
Director only by a written instrument executed by the undersigned and such
Director.
IN WITNESS WHEREOF, the Company and the Subsidiaries have executed this
Release effective as of the date first above written.
FIRSTIER CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
FIRSTIER BANK
By:__________________________________
Name:________________________________
Title:_______________________________
FIRSTATE BANK
By:__________________________________
Name:________________________________
Title:_______________________________
FIRST MTG. BANCORP
By:__________________________________
Name:________________________________
Title:_______________________________
2
<PAGE> 197
STATE OF COLORADO )
)
COUNTY OF ___________ )
This instrument was acknowledged before me on ________, 2000 by
____________________, the ______________ of FirsTier Corporation.
__________________________________
Notary Public in and for the
State of Colorado
__________________________________
Notary's Name Typed or Printed
__________________________________
My Commission Expires:
STATE OF COLORADO )
)
COUNTY OF ________ )
This instrument was acknowledged before me on ______, 2000 by
___________________, the __________________ of FirsTier Bank, a Colorado bank.
__________________________________
Notary Public in and for the
State of Colorado
__________________________________
Notary's Name Typed or Printed
__________________________________
My Commission Expires:
3
<PAGE> 198
STATE OF COLORADO )
)
COUNTY OF ________ )
This instrument was acknowledged before me on ________, 2000 by
____________________, the ______________ of Firstate Bank, a Nebraska bank.
__________________________________
Notary Public in and for the
State of Colorado
__________________________________
Notary's Name Typed or Printed
__________________________________
My Commission Expires:
STATE OF COLORADO )
)
COUNTY OF ________ )
This instrument was acknowledged before me on ________, 2000 by
____________________, the ______________ of First Mtg. Bancorp, a Colorado
corporation.
__________________________________
Notary Public in and for the
State of Colorado
__________________________________
Notary's Name Typed or Printed
__________________________________
My Commission Expires:
4
<PAGE> 199
EXHIBIT A
---------
Directors
<PAGE> 200
EXHIBIT J
RELEASE OF CLAIMS
-----------------
THIS RELEASE OF CLAIMS ("Release") dated the __ day of ______, 2000, is
executed and delivered by the person executing below to FirsTier Corporation, a
Colorado corporation (the "Company"), First Mtg. Bancorp, a Colorado
corporation, FirsTier Bank, a Colorado banking corporation and Firstate Bank, a
Nebraska banking Corporation.
WHEREAS, Compass Bancshares, Inc. ("Compass") is to acquire the Company
pursuant to that certain Agreement and Plan of Merger dated as of _____________,
2000, by and between Compass and the Company, as amended (the "Agreement"),
whereby the Company will be merged with a wholly-owned subsidiary of Compass;
and
WHEREAS, Compass has required as a condition to such acquisition that
the undersigned execute and deliver this Release to confirm the absence of any
claims by the undersigned against the Company or its subsidiaries, including the
Banks ("Subsidiaries");
NOW, THEREFORE, in consideration of the premises contained herein and
ten dollars and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby agrees as
follows:
Section 1. RELEASE. The undersigned hereby RELEASES and FOREVER
DISCHARGES the Company and its Subsidiaries from all manners of action, causes
of action, suits, debts, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, premises,
variances, trespasses, damages, judgments, executions, claims and demands
whatsoever in law or in equity which the undersigned ever had, now has, or
hereafter can, shall or may have against the Company or its Subsidiaries, in
respect of any and all agreements and obligations incurred on or prior to the
date hereof, or in respect of any event occurring or circumstances existing on
or prior to the date hereof; provided, however, that the Company and its
Subsidiaries shall not be released from any of their respective obligations or
liabilities to the undersigned (i) in respect of accrued compensation permitted
by any written agreement with the Company or its Subsidiaries which is attached
hereto as EXHIBIT A or which has been scheduled and made part of the Agreement;
(ii) in connection with any indebtedness or contractual obligation or liability
to the undersigned existing on the date hereof; and (iii) as to rights of
indemnification pursuant to the Articles of Incorporation or Association of the
Company and its Subsidiaries.
Section 2. SUCCESSORS. This Release shall be binding upon the
undersigned and his or her heirs, devisees, administrators, executors, personal
representatives, successors and assigns and shall inure to the benefit of the
Company and its Subsidiaries and their respective successors and assigns.
<PAGE> 201
Section 3. GOVERNING LAW. This Release shall be governed by and
construed in accordance with the laws of the State of [Colorado] [Nebraska],
without giving effect to [Colorado] [Nebraska] principles of conflicts of law.
Section 4. COUNTERPARTS. This Release may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
Section 5. MODIFICATION. This Release may be modified only by a written
instrument executed by the undersigned and the Company and its Subsidiaries.
IN WITNESS WHEREOF, the undersigned has executed this Release effective
as of the date first above written.
___________________________
Signature
___________________________
Printed Name
STATE OF __________ )
)
COUNTY OF _________ )
This instrument was acknowledged before me on ________, 2000 by
____________________.
_______________________________
Notary Public in and for the
State of __________
_______________________________
Notary's Name Typed or Printed
_______________________________
My Commission Expires:
2
<PAGE> 202
EXHIBIT A
<PAGE> 203
EXHIBIT K
OFFICERS WITH KNOWLEDGE
Joel H. Wiens
Timothy D. Wiens
Michael J. Nelson
Alan D. Linton
Brigette M. Howorko
Ronald B. Robinson
Daniel L. Allen
<PAGE> 204
EXHIBIT L
---------
FORM OF TRADENAME ASSIGNMENT
----------------------------
TRADENAME ASSIGNMENT ("Assignment"), dated ____________, 2001 by and
between FirsTier Corporation, a Colorado corporation ("FirsTier"), and Joel
Wiens ("Wiens").
WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of
___________, 2000 (the "Merger Agreement"), between Compass Bancshares, Inc.
("Compass") and FirsTier, such parties have agreed to the Merger as defined
therein;
WHEREAS, Wiens is desirous of acquiring the entire goodwill, right,
title and interest in and to the tradename "FirsTier", including all rights,
goodwill, title and interest to any pending service mark applications using the
"FirsTier" name or any name including the word "FirsTier" (the "Tradename"),
subject to certain geographical limitations described herein;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. FirsTier does hereby sell, assign and transfer unto Wiens or his
assigns, the entire goodwill, right, title and interest in and to the Tradename.
FirsTier agrees to execute and deliver any and all assignment documents and
perform any and all reasonable actions necessary to effect the assignment of the
Tradename to Wiens as contemplated by this Assignment.
2. Wiens acknowledges and agrees that FirsTier, its affiliates and its
successors by merger, shall retain the right to recover for all past
infringement, if any, of the Tradename that may have occurred prior to the date
hereof.
3. In consideration for this Assignment, Wiens agrees that, for a
period of two years following the date hereof, neither he nor his affiliates,
assigns or successors, shall have the right and license to use the Tradename in
the Front Range of the State of Colorado, including without limitation the six
county Denver, Colorado metropolitan area, and Kimball County, Nebraska.
4. Wiens acknowledges that some residual use of the Tradename may be
made by Compass Bank's customers following the Merger, including but not limited
to use on checks, deposit slips, debit cards, atm cards, releases, and
assignments. Wiens agrees that all such residual use does not constitute
infringement of the use of the Tradename or a breach of this Assignment and that
Wiens will not sue for infringement or breach on the basis of such residual use.
5. This Assignment shall be effective at the Effective Time of the
Merger (as defined in the Merger Agreement).
6. This Assignment shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
and their respective successors and assigns.
<PAGE> 205
FIRSTIER CORPORATION, a Colorado
corporation
By:____________________________ _____________________________
Name:__________________________ Joel Wiens
Title:_________________________
Compass Bancshares, Inc., on behalf of itself and each of its affiliates
(including FirsTier), hereby consents to the assignment by FirsTier of all
goodwill, title, right and interest in and to the Tradename to Wiens, in
accordance with the terms of the foregoing Assignment, and agrees not to use the
Tradename at any time in any manner except as provided in Section 4 of this
Assignment.
Dated: ______________, 2001 COMPASS BANCSHARES, INC.
By:________________________
Name:______________________
Title:_____________________
2
<PAGE> 206
EXHIBIT M
---------
FORM OF RIGHT OF FIRST REFUSAL AGREEMENT
----------------------------------------
THIS RIGHT OF FIRST REFUSAL (this "Agreement") is made and entered into
effective as of _________, 2000, by and between Compass Bancshares, Inc.
("Compass Bancshares"), and Joel Wiens ("Wiens").
RECITALS
WHEREAS, Compass Bancshares and FirsTier Corporation have entered into
an Agreement and Plan of Merger (the "Merger Agreement") dated as of _______,
2000;
WHEREAS, as a condition to the closing of the transactions contemplated
by the Merger Agreement, Compass Bancshares has agreed to grant Wiens a right of
first refusal with respect to (i) the sale by Compass Bancshares of Firstate
Bank, a Nebraska banking corporation ("Firstate") or (ii) the sale or transfer
by Compass Bancshares of all, or substantially all, of the assets and
liabilities of Firstate relating to locations within the state of Nebraska (the
assets and liabilities of Firstate relating to locations within the state of
Nebraska are referred to as the "Nebraska Franchise");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
AGREEMENT
1. RIGHT OF FIRST REFUSAL. Subject to the restrictions in SECTION 2,
Compass Bancshares hereby grants to Wiens a right of first refusal (the "Right")
to purchase Firstate or the Nebraska Franchise, as the case may be, upon the
following terms and conditions. If anytime during the five year period
commencing two years after the date of the closing of the Merger Agreement,
Compass Bancshares receives a bona fide offer, whether solicited or not, from an
unrelated third party to purchase Firstate or all, or substantially all, of the
Nebraska Franchise, and Compass Bancshares desires to accept such offer, Compass
Bancshares shall provide Wiens prompt written notice thereof, setting forth the
identity of the party making such offer (the "Buyer") and detailing the terms
and provisions of such offer (the "Offer Notice"). Wiens shall, within ten (10)
business days after receipt of the Offer Notice, either (i) advise Compass
Bancshares in writing (the "Rejection Notice") that he does not intend to
exercise the Right, in which case Compass Bancshares shall be entitled to sell
Firstate or the Nebraska Franchise to the Buyer according to the terms and
provisions set forth in the Offer Notice, and this Agreement shall no longer be
in force or effect so long as Compass Bancshares consummates the sale to the
Buyer within nine months of the date of the Rejection Notice, or (ii) advise
Compass Bancshares in writing (the "Exercise Notice") that he is electing to
exercise the Right and intends to purchase Firstate or the Nebraska Franchise
upon the terms and provisions set forth in the Offer Notice, in
<PAGE> 207
which case all parties shall proceed diligently and in good faith to execute and
enter into a contract containing the terms and provisions specified in the Offer
Notice. If Wiens fails to deliver to Compass Bancshares a Rejection Notice or
Exercise Notice within ten (10) business days after receipt of the Offer Notice,
Compass Bancshares shall be entitled to sell Firstate or the Nebraska Franchise
to the Buyer according to the terms and provisions set forth in the Offer
Notice, and this Agreement shall no longer be in force or effect so long as
Compass Bancshares consummates the sale to the Buyer within nine months of the
date of the Offer Notice.
2. RESTRICTIONS ON THE RIGHT. Wiens may not exercise the Right, unless
Wiens clearly and convincingly demonstrates to Compass Bancshares, in writing,
within ten (10) business days of receipt of the Offer Notice, that Wiens, or an
entity owned or controlled by Wiens, is legally and financially capable of
consummating the purchase of Firstate or the Nebraska Franchise and has the
ability to consummate the purchase within nine months from the date of the Offer
Notice.
3. CHOICE OF LAWS. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Alabama, without regard
to its conflict of law provisions.
4. HEADINGS. All headings contained in this Agreement are for reference
only and shall not affect the meaning or interpretation of this Agreement in any
manner.
5. INVALID PROVISIONS. Should any provision of this Agreement for any
reason be declared invalid, such decision shall not affect the validity of any
other provisions of this Agreement, which remaining provisions shall remain in
full force and effect as if this Agreement had been executed with the invalid
provisions thereof eliminated.
6. NOTICES. All notices and other communications required or permitted
to be delivered pursuant to any provision of this Agreement shall be in writing
and addressed as follows:
If to Wiens, to:
Joel Wiens
_________________________________
_________________________________
Facsimile:_______________________
If to Compass Bancshares, to:
Compass Bancshares, Inc.
24 Greenway Plaza
Houston, Texas 77057
Attention: Charles E. McMahen
Facsimile: (713) 993-8535
<PAGE> 208
with a copy to:
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attention: Jerry W. Powell
Facsimile: (205) 933-3043
The address of either party set forth above may be changed by such party by
delivering notice of such change to the other party to this Agreement. Any
notice mailed shall be deemed to have been given and received on the third
business day following the day of deposit in the United States mail.
7. ENTIRE AGREEMENT; NO ORAL CHANGE. This Agreement embodies the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior agreements and understandings between the parties
with respect to the subject matter hereof. This Agreement may only be changed by
written instrument signed by the party to be charged.
8. ASSIGNMENTS. The rights and obligations of the parties under this
Agreement may not be assigned, except that (i) Compass Bancshares may, at its
option, assign one or more of its rights or obligations under this Agreement to
any of its affiliates or in connection with a transfer of all or substantially
all of the assets or stock of Compass Bancshares or a merger or consolidation of
Compass Bancshares with and into another corporation or other entity and (ii)
Wiens' rights and obligations under this Agreement may be transferred by
applicable laws of descent and distribution.
[Signature Page Follows]
<PAGE> 209
IN WITNESS WHEREOF the parties hereto have executed this Right of First
Refusal Agreement as of the date first above written.
COMPASS BANCSHARES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
____________________________________
Joel Wiens
<PAGE> 210
EXHIBIT N
TAX OPINION
_____________, 2001
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
FirsTier Corporation
11210 Huron
Northglenn, Colorado 80234
The Shareholders of
FirsTier Corporation
Gentlemen:
We have acted as counsel to Compass Bancshares, Inc., a Delaware
corporation ("Compass"), in connection with the planned merger (the "Merger ")
of ___________________, a Colorado corporation ("Merger Sub") and a wholly-owned
first-tier subsidiary of Compass, with and into FirsTier Corporation, a Colorado
corporation ("FirsTier"), pursuant to an Agreement and Plan of Merger, dated as
of _____________, 2000, as amended, between Compass, Merger Sub and FirsTier
(the "Merger Agreement"), pursuant to which the stockholders of FirsTier (the
"Stockholders") will receive solely Compass Common Stock in exchange for their
FirsTier Common Stock (with the exception of cash payments in lieu of fractional
shares). This opinion is being rendered to the parties to whom this letter is
addressed pursuant to Sections 7.1(f) of the Merger Agreement. All capitalized
terms, unless otherwise specified, have the meaning assigned to them in the
Merger Agreement.
For purposes of the opinion set forth below, we have reviewed and
relied upon (i) the Merger Agreement, (ii) the Proxy Statement included in the
Registration Statement and (iii) such other documents, records and instruments
as we have deemed necessary or appropriate in order to enable us to render our
opinion. In addition, in rendering our opinion, we have relied upon certain
statements and representations made by certain Stockholders of FirsTier and
certain officers of Compass, Merger Sub and FirsTier (the "Certified
Representations") as well as statements and representations contained in the
Merger Agreement, which we have neither
<PAGE> 211
Compass Bancshares, Inc.
____________________, 2001
Page 2
investigated nor verified. We have assumed that all such statements and
representations are true, correct, complete and not breached, and that no
actions that are or would be inconsistent with such statements and
representations have been or will be taken. We have also assumed that all
representations made "to the knowledge of" any person or entity will be true,
correct and complete as if made without such qualification.
In addition, we have assumed that (i) the Merger will be consummated in
accordance with the Merger Agreement (including satisfaction of all covenants
and conditions to the obligations of the parties without amendment or waiver
thereof), (ii) the Merger will qualify as a merger under the applicable laws of
the State of Colorado, (iii) each of Compass, Merger Sub and FirsTier will
comply with all reporting obligations with respect to the Merger required under
the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
Regulations promulgated thereunder and (iv) the Merger Agreement and all of the
documents and instruments referred to therein are valid and binding in
accordance with their terms. Any inaccuracy in, or breach of, any of the
aforementioned statements, representations and assumptions could adversely
affect our opinion.
Our opinion is based upon existing provisions of the Code, Treasury
Regulations promulgated or proposed thereunder, and interpretations thereof by
the Internal Revenue Service ("IRS") 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. No ruling has been
or will be sought from the IRS by Compass, Merger Sub or FirsTier as to the
federal income tax consequences of any aspect of the Merger. The opinion
expressed herein is not binding on the IRS or any court, and there can be no
assurance that the IRS or a court of competent jurisdiction will not disagree
with such opinion.
Based upon and subject to the foregoing as well as the limitations set
forth below, it is our opinion that (i) the Merger of Merger Sub with and into
FirsTier will qualify as a reorganization within the meaning of Section 368(a)
of the Code and (ii) Compass, Merger Sub and FirsTier will each be a party to
the reorganization within the meaning of Section 368(b) of the Code.
Accordingly, the Merger will have the following United States federal
income tax consequences:
1. Compass, Merger Sub and FirsTier will not recognize any gain or loss as
a result of the Merger;
2. No gain or loss will be recognized by holders of FirsTier Common Stock
who
<PAGE> 212
Compass Bancshares, Inc.
____________________, 2001
Page 3
exchange their FirsTier Common Stock solely for Compass Common Stock;
3. Any cash received by a holder of FirsTier Common Stock in lieu of a
fractional share of Compass Common Stock in the Merger will be treated
as received in exchange for such fractional share and not as a
dividend. As a result, a holder of FirsTier Common Stock generally will
recognize a capital gain or loss with respect to the cash payment
received in lieu of a fractional share equal to the difference between
the cash received and the portion of the FirsTier shareholder's basis
in FirsTier Common Stock allocable to such fractional share, unless
such payment, under each such FirsTier shareholder's particular facts
and circumstances, is deemed to have the effect of a dividend
distribution and not a redemption treated as an exchange under the
principles of Section 302 of the Code. Such gain or loss will be
long-term capital gain or loss to the extent that the FirsTier Common
Stock allocable to such fractional share was held for more than one
year as of the Effective Time of the Merger;
4. Each holder's aggregate tax basis in the Compass Common Stock received
in the Merger will equal his or her aggregate tax basis in the FirsTier
Common Stock exchanged therefore, decreased by the amount of any tax
basis allocable to any fractional share interest for which cash is
received; and
5. The holding period of the Compass Common Stock received in the Merger
will include the holding period of the FirsTier Common Stock exchanged
therefore.
No opinion is expressed as to any matter not specifically addressed
above. Also, no opinion is expressed as to the tax consequences of the Merger
under any foreign, state or local tax law. Furthermore, our opinion is based on
current federal income tax law and administrative practice, and we do not
undertake to advise you as to any changes after the Effective Time of the Merger
in federal income tax law or administrative practice that may affect our
opinion. This opinion is being furnished only to you in connection with Merger
and solely for your benefit in connection therewith and may not be used or
relied upon for any other purpose and may not be circulated, quoted or otherwise
referred to for any other purpose without our express written consent.
Locke Liddell & Sapp LLP
By:___________________________
Name:_________________________
<PAGE> 213
================================================================================
APPENDIX II
DISSENTERS' RIGHTS OF
APPRAISAL
================================================================================
<PAGE> 214
PROVISIONS OF COLORADO BUSINESS CORPORATION ACT
RELATING TO RIGHTS OF DISSENTING SHAREHOLDERS
COLORADO BUSINESS CORPORATION ACT
DISSENTERS' RIGHTS
7-113-101 -- DEFINITIONS.
For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held
in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102 -- RIGHT TO DISSENT.
(1) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation
is a party if:
(I) Approval by the shareholders of that corporation
is required for the merger by section 7-111-103 or 7-111-104
or by the articles of incorporation; or
(II) The corporation is a subsidiary that is merged
with its parent corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired;
(c) Consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property of the
corporation for which a shareholder vote is required under section
7-112-102 (1); and
(d) Consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property of an entity
controlled by the corporation if the shareholders of the corporation
were entitled to vote upon the consent of the corporation to the
disposition pursuant to section 7-112-102 (2).
1
<PAGE> 215
(1.3) A shareholder is not entitled to dissent and obtain payment,
under subsection (1) of this section, of the fair value of the shares of any
class or series of shares which either were listed on a national securities
exchange registered under the federal "Securities Exchange Act of 1934", as
amended, or on the national market system of the national association of
securities dealers automated quotation system, or were held of record by more
than two thousand shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine
the shareholders entitled to receive notice of the shareholders'
meeting at which the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate
action; or
(c) The effective date of the corporate action if the
corporate action is authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section
shall not apply if the shareholder will receive for the shareholder's shares,
pursuant to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of
the plan of merger or share exchange;
(b) Shares of any other corporation which at the effective
date of the plan of merger or share exchange either will be listed on a
national securities exchange registered under the federal "Securities
Exchange Act of 1934", as amended, or on the national market system of
the national association of securities dealers automated quotation
system, or will be held of record by more than two thousand
shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash
in lieu of fractional shares.
(2) (Deleted by amendment, L. 96, p. 1321, sec. 30, effective June 1,
1996.)
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103 -- DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number, if
any, of each person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1) are
determined as if the shares as to which the record shareholder dissents and the
other shares of the record shareholder were registered in the names of different
shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the
shares held on the beneficial shareholder's behalf only if:
2
<PAGE> 216
(a) The beneficial shareholder causes the corporation to
receive the record shareholder's written consent to the dissent not
later than the time the beneficial shareholder asserts dissenters'
rights; and
(b) The beneficial shareholder dissents with respect to all
shares beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial
shareholders, each such beneficial shareholder must certify to the corporation
that the beneficial shareholder and the record shareholder or record
shareholders of all shares owned beneficially by the beneficial shareholder have
asserted, or will timely assert, dissenters' rights as to all such shares as to
which there is no limitation on the ability to exercise dissenters' rights. Any
such requirement shall be stated in the dissenters' notice given pursuant to
section 7-113-203.
7-113-201 -- NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the notice
of the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this
title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (1).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (2).
7-113-202 -- NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting and if
notice of dissenters' rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201 (1), a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is
taken, written notice of the shareholder's intention to demand payment
for the shareholder's shares if the proposed corporate action is
effectuated; and
(b) Not vote the shares in favor of the proposed corporate
action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201 (2), a
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection
(1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
3
<PAGE> 217
7-113-203 -- DISSENTERS' NOTICE.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the corporate
action creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state
the effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive
payment demands and the address of a place where certificates for
certificated shares must be deposited;
(c) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(d) Supply a form for demanding payment, which form shall
request a dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the
payment demand and certificates for certificated shares, which date
shall not be less than thirty days after the date the notice required
by subsection (1) of this section is given;
(f) State the requirement contemplated in section 7-113-103
(3), if such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 -- PROCEDURE TO DEMAND PAYMENT.
(1) A shareholder who is given a dissenters' notice pursuant to section
7-113-203 and who wishes to assert dissenters' rights shall, in accordance with
the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which
may be the payment demand form contemplated in section 7-113-203 (2)
(d), duly completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated
shares.
(2) A shareholder who demands payment in accordance with subsection (1)
of this section retains all rights of a shareholder, except the right to
transfer the shares, until the effective date of the proposed corporate action
giving rise to the shareholder's exercise of dissenters' rights and has only the
right to receive payment for the shares after the effective date of such
corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209 (1) (b), the
demand for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set in the
dissenters' notice is not entitled to payment for the shares under this article.
7-113-205 -- UNCERTIFICATED SHARES.
(1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
thereof.
4
<PAGE> 218
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206 -- PAYMENT.
(1) Except as provided in section 7-113-208, upon the effective date of
the corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is later,
the corporation shall pay each dissenter who complied with section 7-113-204, at
the address stated in the payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, the
amount the corporation estimates to be the fair value of the dissenter's shares,
plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall
be accompanied by:
(a) The corporation's balance sheet as of the end of its most
recent fiscal year or, if that is not available, the corporation's
balance sheet as of the end of a fiscal year ending not more than
sixteen months before the date of payment, an income statement for that
year, and, if the corporation customarily provides such statements to
shareholders, a statement of changes in shareholders' equity for that
year and a statement of cash flow for that year, which balance sheet
and statements shall have been audited if the corporation customarily
provides audited financial statements to shareholders, as well as the
latest available financial statements, if any, for the interim or
full-year period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair
value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment
under section 7-113-209; and
(e) A copy of this article.
7-113-207 -- FAILURE TO TAKE ACTION.
(1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after the date
set by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new dissenters'
notice, as provided in section 7-113-203, and the provisions of sections
7-113-204 to 7-113-209 shall again be applicable.
7-113-208 -- SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT
OF PROPOSED CORPORATE ACTION.
(1) The corporation may, in or with the dissenters' notice given
pursuant to section 7-113-203, state the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action creating
dissenters' rights under section 7-113-102 and state that the dissenter shall
certify in writing, in or with the dissenter's payment demand under section
7-113-204, whether or not the dissenter (or the person on whose behalf
dissenters' rights are asserted) acquired beneficial ownership of the shares
before that date. With respect to any dissenter who does not so certify in
writing, in or with the payment demand, that the dissenter or the person on
whose behalf the dissenter asserts dissenters' rights acquired beneficial
ownership of the shares before such date, the corporation may, in lieu of making
the payment provided in section 7-113-206, offer to make such payment if the
dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206 (2).
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7-113-209 -- PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair
value of the shares or that the interest due was incorrectly
calculated;
(b) The corporation fails to make payment under section
7-113-206 within sixty days after the date set by the corporation by
which the corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates
or release the transfer restrictions imposed on uncertificated shares
as required by section 7-113-207 (1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
7-113-301 -- COURT ACTION.
(1) If a demand for payment under section 7-113-209 remains unresolved,
the corporation may, within sixty days after receiving the payment demand,
commence a proceeding and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in
subsection (1) of this section in the district court of the county in this state
where the corporation's principal office is located or, if the corporation has
no principal office in this state, in the district court of the county in which
its registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unresolved parties to the proceeding
commenced under subsection (2) of this section as in an action against their
shares, and all parties shall be served with a copy of the petition. Service on
each dissenter shall be by registered or certified mail, to the address stated
in such dissenter's payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, or as
provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302 -- COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under section
7-113-301 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation; except that the court may assess costs
against all or some of
6
<PAGE> 220
the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if
the court finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters,
in favor of any other party, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by this
article.
(3) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to said counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited.
7
<PAGE> 221
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, Section 102(b)(7) of the
GCL.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Compass
pursuant to the foregoing provisions, or otherwise, Compass has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by Compass of expenses incurred or paid by a director, officer or
controlling person of Compass in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Compass will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
ITEM 21: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
An index to Exhibits appears at pages II-4 through II-6 hereof.
II-1
<PAGE> 222
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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
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 the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant 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.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE> 223
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Birmingham,
State of Alabama, on October 20, 2000.
COMPASS BANCSHARES, INC.
By: *
------------------------------------
D. Paul Jones, Jr., Director
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Director, Chairman and Chief October 20, 2000
-------------------------------- Executive Officer
D. Paul Jones, Jr.
* Chief Financial Officer October 20, 2000
-------------------------------- (Principal Financial Officer)
Garrett R. Hegel
* Chief Accounting Officer October 20, 2000
--------------------------------
Timothy L. Journy
* Director October 20, 2000
--------------------------------
James H. Click, Jr.
* Director October 20, 2000
--------------------------------
Charles W. Daniel
* Director October 20, 2000
--------------------------------
W. Eugene Davenport
* Director October 20, 2000
--------------------------------
Marshall Durbin, Jr.
* Director October 20, 2000
--------------------------------
Tranum Fitzpatrick
* Director October 20, 2000
--------------------------------
Carl J. Gessler, Jr., M.D.
* Director October 20, 2000
--------------------------------
John S. Stein
* Director October 20, 2000
--------------------------------
Robert J. Wright
*By: /s/ Jerry W. Powell
-------------------
Jerry W. Powell,
Attorney-in-fact
</TABLE>
II-3
<PAGE> 224
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
-------------- -----------------------
2(a) Agreement and Plan of Merger dated as of August 23,
2000 by and between Compass Bancshares, Inc. and
FirsTier Corporation, as amended, (included as
Appendix I to the Proxy Statement/Prospectus in Part
I of this Registration Statement)
*3(a) Restated Certificate of Incorporation of the
Registrant dated May 17, 1982 (Filed with the
December 31, 1982 Form 10-K of the Registrant and
incorporated herein by reference) (File No. 0-6032)
*3(b) Certificate of Amendment dated May 20, 1986 to
Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 4(b) to Registration
Statement on Form S-8, Registration No. 33-39095, and
incorporated herein by reference) (File No. 0-6032)
*3(c) Certificate of Amendment dated May 15, 1987 to
Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 3.1.2 to Post-Effective
Amendment No. 1 to Registration Statement on Form
S-4, Registration No. 33-10797 and incorporated
herein by reference) (File No. 0-6032)
*3(d) Certificate of Amendment dated November 8, 1993 to
Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 3(d) to Registration
Statement on Form S-4 Registration No. 33-51919 and
incorporated herein by reference) (File No. 0-6032)
*3(e) Certificate of Amendment, dated September 19, 1997,
to the Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 3.5 to Registration
Statement on Form S-4 Registration No. 33-55899, and
incorporated herein by reference) (File No. 0-6032)
*3(f) Certificate of Amendment, dated June 2, 1998, to
Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 4.6 to Registration
Statement on Form S-3 Registration No. 333-60725 and
incorporated herein by reference) (File No. 0-6032)
*3(g) 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 Locke Liddell & Sapp LLP,
regarding certain tax matters
*10(a) Compass Bancshares, Inc., 1982 Long Term Incentive
Plan (incorporated by reference to Exhibit 1 to the
Company's Registration Statement on Form S-8 filed
July 15, 1983, with the Commission)
*10(b) Compass Bancshares, Inc. 1989 Long Term Incentive
Plan (filed as Exhibit 28 to Registration Statement
on Form S-8 Registration (No. 39095 and incorporated
herein by reference) (File No. 0-6032)
II-4
<PAGE> 225
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
-------------- -----------------------
*10(c) Compass Bancshares, Inc. 1996 Long Term Incentive
Plan (filed as Exhibit 4(g) to Registration Statement
on Form S-8 Registration No. 333-15117 filed October
30, 1996, with the Commission and incorporated herein
by reference) (File No. 0-6032)
*10(d) Compass Bancshares, Inc., 1999 Omnibus Incentive
Compensation Plan (incorporated by reference to
Exhibit 10(a) to the Registration Statement on Form
S-8, Registration No. 333-86455, filed September 2,
1999 with the Commission).
*10(e) Employment Agreement dated December 14, 1994, between
Compass Bancshares, Inc. and D. Paul Jones, Jr.
(filed as Exhibit 10(d) to the December 31, 1994 Form
10-K of the Registrant and incorporated herein by
reference) (File No. 0-6032)
*10(f) Employment Agreement dated December 14, 1994, between
Compass Bancshares, Inc. and Jerry W. Powell (filed
as Exhibit 10(e) to the December 31, 1994 Form 10-K
of the Registrant and incorporated herein by
reference) (File No. 0-6032)
*10(g) Employment Agreement dated December 14, 1994, between
Compass Bancshares, Inc. and Garrett R. Hegel (filed
as Exhibit 10(f) to the December 31, 1994 Form 10-K
of the Registrant and incorporated herein by
reference) (File No.0-6032)
*10(h) Employment Agreement dated December 14, 1994, between
Compass Bancshares, Inc. and Charles E. McMahen
(filed as Exhibit 10(h) to the December 31, 1994 Form
10-K of the Registrant and incorporated herein by
reference) (File No. 0-6032)
*10(I) Employment Agreement dated December 14, 1994, between
Compass Bancshares, Inc. and G. Ray Stone (filed as
Exhibit 10(i) to the Registration Statement on Form
S-4 Registration No. 333-15373 filed November 1, 1996
with the Commission and incorporated herein by
reference) (File No. 0-6032)
*10(j) Compass Bancshares, Inc., Employee Stock Ownership
Benefit Restoration Plan, dated as of May 1, 1997
(filed as Exhibit 10(j) to the December 31, 1997 Form
10-K of the Registrant and incorporated herein by
reference)(File No. 0-6032)
*10(k) Compass Bancshares, Inc., Supplemental Retirement
Plan, dated as of May 1, 1997 (filed as Exhibit 10(k)
to the December 31, 1997 Form 10-K of the Registrant
and incorporated herein by reference)(File No.
0-6032)
*10(l) Deferred Compensation Plan for Compass Bancshares,
Inc., dated as of February 1, 1996 (filed as Exhibit
10(l) to the December 31, 1997 Form 10-K of the
Registrant and incorporated herein by reference)(File
No. 0-6032)
*13(a) The Registrant's Annual Report to Shareholders and
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (File No. 0-6032)
II-5
<PAGE> 226
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
-------------- -----------------------
*13(b) The Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998 (File No. 0-6032)
*13(c) The Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 (File No. 0-6032)
21 List of Subsidiaries of Compass Bancshares, Inc.
23(a) Consent of Arthur Andersen LLP, Independent Certified
Public Accountants--Compass Bancshares, Inc.
23(b) Consent of Clifton Gunderson L.L.C., Independent
Certified Public Accountants--FirsTier Corporation
23(c) Consent of Locke Liddell & Sapp LLP (included in the
opinion in Exhibit 8(a))
24(a) Power of Attorney
24(b) Compass Board of Directors Resolutions
99(a) Notice of Special Meeting of Shareholders of FirsTier
99(b) Form of Proxy for Special Meeting of Shareholders of
FirsTier
99(c) Chairman's Letter to FirsTier Shareholders
-----------
* Incorporated by Reference
II-6
