<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 1994.
REGISTRATION NO. 33-51383
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
FIRST BANK SYSTEM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 6711 41-0255900
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
FIRST BANK PLACE
601 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402-4302
(612) 973-1111
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
RICHARD A. ZONA
FIRST BANK PLACE
601 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402-4302
(612) 973-1111
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
LEE R. MITAU, ESQ. R. HENRY KLEEMAN, ESQ.
DORSEY & WHITNEY WILDMAN, HARROLD, ALLEN & DIXON
220 SOUTH SIXTH STREET 225 WEST WACKER DRIVE
MINNEAPOLIS, MINNESOTA 55402-1498 CHICAGO, ILLINOIS 60606-1229
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of 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. [_]
---------------
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>
FIRST BANK SYSTEM, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NO. IN FORM S-4 LOCATION IN PROSPECTUS
-------------------- ----------------------
A. INFORMATION ABOUT THE TRANSACTION
<S> <C>
1.Forepart of Registration Facing page of registration statement;
Statement and Outside Front outside front cover page of Prospectus
Cover Page of Prospectus.......
2.Inside Front and Outside Back Available Information; Incorporation of
Cover Pages of Prospectus...... Certain Documents by Reference; Table of
Contents
3.Risk Factors, Ratio of Earnings Summary
to Fixed Charges and Other
Information....................
4.Terms of the Transaction......... Summary; The Merger
5.Pro Forma Financial Information.. Unaudited Pro Forma Combined Financial
Information
6.Material Contacts with the The Merger
Company Being Acquired.........
7.Additional Information Required *
for Reoffering by Persons and
Parties Deemed to Be
Underwriters...................
8.Interests of Named Experts and Legal Opinions
Counsel........................
9.Disclosure of Commission Position *
on Indemnification for
Securities Act Liabilities.....
B. INFORMATION ABOUT THE REGISTRANT
10.Information with Respect to S-3 Incorporation of Certain Documents by
Registrants.................... Reference; Summary; Business of FBS;
Description of FBS Capital Stock
11.Incorporation of Certain Incorporation of Certain Documents by
Information by Reference....... Reference
12.Information with Respect to S-2 *
or S-3 Registrants.............
13.Incorporation of Certain Incorporation of Certain Documents by
Information by Reference....... Reference
14.Information with Respect to *
Registrants other than S-3 or
S-2 Registrants................
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15.Information with Respect to S-3 *
Companies......................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. IN FORM S-4 LOCATION IN PROSPECTUS
-------------------- ----------------------
<S> <C>
16.Information with Respect to S-2 Incorporation of Certain Documents by
or S-3 Companies............. Reference; Summary; Business of Boulevard;
Selected Financial Data of Boulevard;
Management's Discussion and Analysis of
Boulevard; Index to Financial Statements
of Boulevard Bancorp, Inc.
17.Information with Respect to *
Companies other than S-3 or
S-2 Companies................
D. VOTING AND MANAGEMENT INFORMATION
18.Information if Proxies, Incorporation of Certain Documents by
Consents or Authorizations Reference; Information Concerning the
are to be Solicited.......... Special Meeting; The Merger; Management
and Additional Information
19.Information if Proxies, *
Consents or Authorizations
are not to be Solicited or in
an Exchange Offer............
</TABLE>
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*Answer is negative or item is not applicable.
<PAGE>
BOULEVARD BANCORP, INC.
410 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
[ ], 1994
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Boulevard Bancorp, Inc. ("Boulevard") to be held on [ ], 1994 at 10:00
A.M., local time, at the 410 Club, in the Wrigley Building, 410 North Michigan
Avenue, Chicago, Illinois 60611.
At the Special Meeting, you will be asked to consider and vote upon a
proposed Merger Agreement and Plan of Reorganization (the "Merger Agreement")
which provides for the merger (the "Merger") of BBI Acquisition Corp., a wholly
owned subsidiary of First Bank System, Inc. ("FBS"), into Boulevard. After the
proposed Merger described in the accompanying Proxy Statement/Prospectus
becomes effective, shareholders of Boulevard will receive .8132 shares of FBS
Common Stock for each share of Boulevard Common Stock owned by them. Any
fractional share of FBS Common Stock resulting from the application of the
exchange ratio will be paid in cash.
The proposed Merger has been approved by the Boards of Directors of Boulevard
and FBS and is subject to approval by the holders of a majority of the
outstanding Boulevard Common Stock. The Merger is also subject to the approval
of bank regulators.
The Board of Directors of Boulevard believes that the Merger is in the best
interest of Boulevard and its shareholders and therefore, recommends that you
vote in favor of the Merger. Details of the background and reasons for the
proposed Merger appear and are explained in the Proxy Statement/Prospectus.
Additional information regarding Boulevard and FBS also is set forth in the
Proxy Statement/Prospectus or is incorporated by reference therein from other
documents. I urge you to read this material carefully.
Boulevard's Board of Directors has received an opinion of Goldman, Sachs &
Co., Boulevard's financial advisors, that the exchange ratio is fair to
Boulevard's common shareholders. A copy of this opinion is included as Appendix
B to this Proxy Statement/Prospectus.
It is important that you consider carefully the terms of the proposed Merger
which are described in the Proxy Statement/Prospectus. In order to insure that
your vote is represented at the meeting, please indicate your choice on the
enclosed proxy form, date and sign it, and return it in the enclosed envelope.
You are welcome to attend the Special Meeting and vote in person even if you
have previously returned the proxy card.
Please do not send in any stock certificates at this time. If the Merger is
approved, you will be sent instructions regarding the surrender of your
existing stock certificates.
Very truly yours,
Richard T. Schroeder
President and Chief Executive
Officer
<PAGE>
BOULEVARD BANCORP, INC.
410 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
(312) 836-6500
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [ ], 1994
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Common Stock of Boulevard Bancorp, Inc. ("Boulevard") will be held
at the 410 Club, in the Wrigley Building, 410 North Michigan Avenue, Chicago,
Illinois, on [day of week], [date], 1994, at 10:00 a.m. local time. A Proxy
Card and a Proxy Statement/Prospectus for the Special Meeting are enclosed.
The Special Meeting is for the purpose of considering and acting upon:
1. A proposal to approve and adopt the Merger Agreement and Plan of
Reorganization by and among Boulevard, First Bank System, Inc. ("FBS"),
and BBI Acquisition Corp. ("Newco") dated September 29, 1993 (the "Merger
Agreement"), pursuant to which Boulevard would be acquired by FBS by
means of a merger of Newco (a wholly-owned subsidiary of FBS) with and
into Boulevard. Pursuant to the Merger Agreement, each outstanding share
of Common Stock, par value $0.04 per share, of Boulevard would be
converted into .8132 shares of Common Stock, par value $1.25 per share,
of FBS.
2. A proposal to adjourn the Special Meeting to a later date to permit
further solicitation of proxies in the event an insufficient number of
shares is present in person or by proxy at the Special Meeting to approve
the Merger Agreement.
3. Such other matters as may properly come before the Special Meeting or
any adjournment thereof.
The Board of Directors is not aware of any other business to come before the
Special Meeting.
Action may be taken on any one of the foregoing proposals at the Special
Meeting on the date specified above or on any date to which the Special Meeting
may be adjourned. The Board of Directors has fixed the close of business on
[ ], 1994, as the record date for determination of the shareholders
entitled to vote at the Special Meeting and any adjournments thereof.
You are requested to complete and sign the accompanying Proxy Card, which is
solicited by the Board of Directors, and mail it promptly in the enclosed
envelope. All proxies are important, so please complete each Proxy Card sent to
you and return it in the envelope provided. No proxy will be used if you attend
and vote at the Special Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Lawrence J. Schmidt
Secretary
Chicago, Illinois
[ ], 1994
IMPORTANT: PLEASE RETURN EACH PROXY CARD SENT TO YOU. AN ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 24, 1994.
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
OF
BOULEVARD BANCORP, INC.
TO BE HELD ON [ ], 1994
-----------
PROSPECTUS
OF
FIRST BANK SYSTEM, INC.
COMMON STOCK, $1.25 PAR VALUE
-----------
This Proxy Statement/Prospectus is being furnished by the Board of Directors
of Boulevard Bancorp, Inc. ("Boulevard") in connection with the solicitation of
proxies from the holders of Boulevard's outstanding common stock, par value
$0.04 per share ("Boulevard Common Stock"), for use at the special meeting of
shareholders of Boulevard to be held on [ ], 1994 (the "Special
Meeting"). At the Special Meeting, Boulevard shareholders will be asked to
consider and act upon a proposal to approve and adopt the Merger Agreement and
Plan of Reorganization by and among Boulevard, First Bank System, Inc. ("FBS"),
and BBI Acquisition Corp. ("Newco") dated September 29, 1993 (the "Merger
Agreement"), pursuant to which Boulevard would be acquired by FBS by means of a
merger of Newco (a wholly-owned subsidiary of FBS) with and into Boulevard. A
copy of the Merger Agreement is attached hereto as Appendix A and is
incorporated herein by reference.
In the Merger, each outstanding share of Boulevard Common Stock will be
converted into .8132 shares of FBS' common stock, par value $1.25 per share
("FBS Common Stock"). The outstanding shares of FBS Common Stock are, and the
shares of FBS Common Stock to be issued in the Merger are expected to be,
listed on the New York Stock Exchange (the "NYSE") under the symbol "FBS." The
last reported sale price of FBS Common Stock on the NYSE Composite Tape on
January 18, 1994, was $30.00 per share. Based on such last reported sale price,
the exchange ratio resulted in a per share purchase price for the Boulevard
Common Stock of $24.40. Because the number of shares of FBS Common Stock to be
received for each share of Boulevard Common Stock is fixed, a change in the
market price of FBS Common Stock before the Merger would affect the value of
the FBS Common Stock to be received in the Merger in exchange for Boulevard
Common Stock.
Notwithstanding the foregoing, Boulevard may, at its option, abandon and
terminate the Merger Agreement before it takes effect if both (i) the average
closing price of FBS Common Stock on the NYSE for the 20 consecutive trading
days commencing on the first business day after the Federal Reserve Board
issues
(continued on next page)
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF FBS COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND,
SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1994.
<PAGE>
an order approving the Merger (the "FBS Common Average Closing Price") is less
than $28.37 (85% of the closing price of FBS Common Stock on the NYSE on
September 29, 1993 (the date of execution of the Merger Agreement)), and (ii)
the number obtained by dividing the FBS Common Average Closing Price by the
closing price of FBS Common Stock on the NYSE on September 29, 1993 is less
than the number obtained by dividing the "Final Index Price" by the "Initial
Index Price" and subtracting .15 from such quotient. For purposes of the
foregoing, the "Initial Index Price" is the weighted average (weighted as
specified in the Merger Agreement) of the closing prices on September 28, 1993
(the trading day preceding the public announcement of the Merger Agreement) of
the common stocks of a group (the "Index Group") of 24 publicly traded bank
holding companies. The "Final Index Price" is the weighted average (weighted as
aforesaid) of the average closing prices of the respective Index Group common
stocks for the 20 consecutive trading days commencing on the first business day
after the Federal Reserve Board issues an order approving the Merger. For
additional information regarding this and the other terms of the Merger, see
the Merger Agreement and "The Merger" herein.
Consummation of the Merger is conditioned upon, among other things, receipt
of all required shareholder and regulatory approvals. If there are not
sufficient votes at the time of the Special Meeting to approve and adopt the
Merger Agreement, the shareholders of Boulevard may be asked to approve
adjournment of the Special Meeting to permit further solicitation of proxies.
See "Adjournment of Special Meeting" herein.
Goldman, Sachs & Co. has rendered its opinion dated [ ], 1994, to
the Board of Directors of Boulevard that the exchange ratio being offered in
the Merger is fair to the shareholders of Boulevard. See "The Merger--Opinion
of Boulevard Financial Adviser" herein.
THE BOARD OF DIRECTORS OF BOULEVARD UNANIMOUSLY RECOMMENDS THAT BOULEVARD
SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND FOR
ADJOURNMENT OF THE SPECIAL MEETING UNDER THE CIRCUMSTANCES DESCRIBED HEREIN.
This Proxy Statement/Prospectus and the form of proxy for the Special Meeting
are first being mailed to the shareholders of Boulevard on or about
[ ], 1994.
This Proxy Statement/Prospectus is included as part of a Registration
Statement on Form S-4 (together with all amendments and exhibits thereto,
including documents and information incorporated by reference, the
"Registration Statement") filed with the Securities and Exchange Commission by
FBS, relating to the registration under the Securities Act of 1933, as amended,
of the shares of FBS Common Stock to be issued in connection with the Merger.
<PAGE>
AVAILABLE INFORMATION
FBS and Boulevard are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information concerning FBS and Boulevard can be inspected
and copied at the public reference facilities of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at Seven World Trade Center, 13th Floor, New York, New York 10048 and 1400
Northwestern Atrium Center, 500 Madison Street, Chicago, Illinois 60661. Copies
of such materials can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Reports, proxy statements and other information concerning FBS also can
be inspected at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005.
FBS has filed a registration statement on Form S-4 (together with all
amendments and exhibits thereto, including documents and information
incorporated by reference, the "Registration Statement") with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), relating
to the shares of FBS Common Stock to be issued upon consummation of the Merger.
This Proxy Statement/Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement. Statements contained in
this Proxy Statement/Prospectus as to the contents of any document are not
necessarily complete, and in each instance reference is made to such document
itself, each such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS RELATING TO FBS
(EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN) ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST TO ANN E. UNDERBRINK, FIRST BANK
SYSTEM, INC., FIRST BANK PLACE, 601 SECOND AVENUE SOUTH, MINNEAPOLIS, MINNESOTA
55402-4302, TELEPHONE NUMBER (612) 973-1111. DOCUMENTS RELATING TO BOULEVARD
(EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN) ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST TO ROBERT MADAY, BOULEVARD BANCORP,
INC., 410 NORTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60611, TELEPHONE NUMBER
(312) 836-6662. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY [ ], 1994 [FIVE BUSINESS DAYS BEFORE THE
SPECIAL MEETING].
The following FBS documents which have been filed by FBS with the Commission
are hereby incorporated by reference in this Proxy Statement/Prospectus: (i)
Annual Report on Form 10-K for the year ended December 31, 1992; (ii) Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1993, June 30, 1993 and
September 30, 1993; (iii) Current Report on Form 8-K filed March 1, 1993
(relating to amendment of preferred stock purchase rights); (iv) Current
Reports on Form 8-K filed April 16, 1993, July 16, 1993 and January 18, 1994
(relating to earnings releases); (v) Form 8 Amendments dated March 22, 1993,
April 22, 1993 and May 28, 1993 (to Current Report on Form 8-K dated November
8, 1992); (vi) Current Report on Form 8-K filed May 3, 1993 (relating to
amendment of debt indentures); (vii) Current Reports on Form 8-K filed July 30,
1993 and August 13, 1993 (relating to restatement of December 31, 1992 and
March 31, 1993 financial statements and management's discussions to give effect
to Colorado National Bankshares acquisition); (viii) Current Report on Form 8-K
filed October 13, 1993 (relating to announcement of Boulevard Bancorp, Inc.
merger agreement); and (ix) the description of FBS Common Stock contained in
Item 1 of the FBS Registration Statement on Form 8-A dated March 19, 1984, as
amended in its entirety by that Form 8 Amendment dated February 26, 1993, and
any amendment or report filed for the purpose of updating such description
filed subsequent to the date of this Proxy Statement/Prospectus and prior to
the termination of the offering described herein; and the description of the
rights to purchase preferred stock contained in Item 1 of the FBS Registration
Statement on Form 8-A dated December 21, 1988, as amended by that Form 8
Amendment dated June 11, 1990 and as amended in its entirety by that Form 8
Amendment dated February 26, 1993, and any amendment or report filed for the
purpose of updating such description filed subsequent to the date of this Proxy
Statement/Prospectus and prior to the termination of the offering described
herein.
The following Boulevard documents which have been filed by Boulevard with the
Commission are hereby incorporated by reference in this Proxy
Statement/Prospectus: (i) Annual Report on Form 10-K for the year ended
December 31, 1992; (ii) Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1993, June 30, 1993 and September 30, 1993; (iii) Current Report on
Form 8-K dated June 14, 1993 (relating to disposition of automobile loans);
(iv) Current Report on Form 8-K dated August 18, 1993 (relating to the
engagement of Goldman, Sachs & Co.); and (v) Current Report on Form 8-K dated
October 12, 1993 (relating to announcement of FBS merger agreement).
3
<PAGE>
All documents filed by FBS pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date hereof and before the Special Meeting shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in
another subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
ALL INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS REGARDING BOULEVARD AND
ITS AFFILIATES HAS BEEN FURNISHED BY BOULEVARD, AND ALL INFORMATION HEREIN
REGARDING FBS AND ITS AFFILIATES HAS BEEN FURNISHED BY FBS. NO PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED
IN THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF
PROXIES AND OFFERING MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FBS OR
BOULEVARD. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION
OF A PROXY, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY
SECURITIES, IN ANY JURISDICTION IN WHICH SUCH SOLICITATION OR OFFER MAY NOT
LAWFULLY BE MADE. THIS PROXY STATEMENT/PROSPECTUS DOES NOT COVER ANY RESALES OF
THE FBS COMMON STOCK OFFERED HEREBY TO BE RECEIVED BY SHAREHOLDERS OF BOULEVARD
DEEMED TO BE "AFFILIATES" OF BOULEVARD OR FBS UPON THE CONSUMMATION OF THE
MERGER. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF FBS OR
BOULEVARD SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information................... 3
Incorporation of Certain Documents by
Reference.............................. 3
Summary................................. 5
The Companies.......................... 5
The Proposed Merger.................... 5
Special Meeting of Boulevard
Shareholders.......................... 6
Votes Required......................... 6
Recommendation of the Boulevard Board
of Directors.......................... 7
Interests of Certain Persons in the
Merger................................ 8
Opinion of Boulevard Financial Adviser. 10
Limitation on Negotiations; Option
Granted to FBS........................ 11
Regulatory Approvals Required.......... 11
Conditions, Waiver and Amendment, and
Termination........................... 11
Effective Time of the Merger........... 12
Exchange of Boulevard Stock
Certificates.......................... 12
Certain Federal Income Tax Consequences
to Boulevard Shareholders............. 13
Resales of FBS Common Stock............ 13
Accounting Treatment................... 13
No Dissenters' Rights of Appraisal..... 13
Markets and Market Prices.............. 14
Differences in Rights of Boulevard
Shareholders.......................... 14
Comparative Unaudited Per Share Data... 16
Selected Historical and Pro Forma
Financial Data........................ 18
Information Concerning the Special
Meeting................................ 24
General................................ 24
Solicitation, Voting and Revocability
of Proxies............................ 24
The Merger.............................. 25
Background of the Merger............... 25
Reasons of Boulevard for the Merger;
Recommendation of Boulevard Board of
Directors............................. 27
Reasons of FBS for the Merger.......... 28
Opinion of Boulevard Financial Adviser. 28
Terms of the Merger; Consideration to
be Received by Boulevard Shareholders. 33
Effective Time of the Merger........... 35
Exchange of Boulevard Common Stock
Certificates.......................... 35
Conditions to Consummation of the
Merger................................ 36
Regulatory Approvals Required.......... 38
Waiver and Amendment................... 39
Termination............................ 39
Limitation on Negotiations............. 40
Option Granted to FBS.................. 40
Conduct of Boulevard Business Pending
the Merger............................ 43
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Management and Operations of Boulevard
Following the Merger................. 45
Interests of Certain Persons in the
Merger............................... 45
Effect on Boulevard Employee Benefit
Plans and Stock Plans................ 48
No Dissenters' Rights of Appraisal.... 49
Certain Federal Income Tax
Consequences to Boulevard
Shareholders......................... 49
Stock Exchange Listing of FBS Common
Stock................................ 50
Resale of FBS Common Stock Received by
Boulevard Shareholders............... 50
FBS Dividend Reinvestment and Common
Stock Purchase Plan.................. 50
Accounting Treatment.................. 50
Expenses.............................. 51
Certain Differences in Rights of
Boulevard Shareholders............... 51
Business of FBS........................ 52
General............................... 52
Recent Developments................... 53
Business of Boulevard.................. 54
General............................... 54
Recent Developments................... 55
Selected Financial Data of Boulevard... 56
Management's Discussion and Analysis of
Boulevard............................. 57
Description of FBS Capital Stock....... 74
General............................... 74
Preferred Stock....................... 74
Common Stock.......................... 77
Description of Boulevard Capital Stock. 80
General............................... 80
Preferred Stock....................... 80
Common Stock.......................... 80
Adjournment of Special Meeting......... 81
Legal Opinions......................... 81
Experts................................ 81
Independent Accountants................ 81
Shareholder Proposals.................. 81
Management and Additional Information.. 82
Unaudited Pro Forma Combined Financial
Information........................... F-1
Index to Financial Statements of
Boulevard Bancorp, Inc................ F-9
Appendix A--Merger Agreement and Plan
of Reorganization..................... A-1
Appendix B--Opinion of Goldman, Sachs &
Co.................................... B-1
Appendix C--Index Group and Weighting
Factors Pursuant to Section 8(h)(ii)
of Merger Agreement................... C-1
</TABLE>
4
<PAGE>
SUMMARY
The following summary is not intended to be complete and is qualified in all
respects by the more detailed information included in this Proxy
Statement/Prospectus, the appendices hereto and the documents incorporated
herein by reference. As used in this Proxy Statement/Prospectus, the terms
"FBS" and "Boulevard" refer to First Bank System, Inc. and Boulevard Bancorp,
Inc., respectively, and, where the context so requires, to such corporations
and their respective subsidiaries. All information concerning FBS included
herein has been furnished by FBS, and all information included herein
concerning Boulevard has been furnished by Boulevard.
THE COMPANIES
FBS. FBS is a regional bank holding company headquartered in Minneapolis,
Minnesota. FBS is comprised of 9 banks, 5 trust companies and several nonbank
subsidiaries with more than 200 offices primarily in Minnesota, Colorado,
Montana, North Dakota, South Dakota and Wisconsin. Through its subsidiaries,
FBS provides commercial and agricultural finance, consumer banking, trust,
capital markets, cash management, investment management, data processing,
leasing, mortgage banking and brokerage services. At December 31, 1993, FBS and
its consolidated subsidiaries had consolidated assets of $26.4 billion,
consolidated deposits of $21.0 billion and shareholders' equity of $2.2
billion.
For further information concerning FBS, see "Business of FBS" herein and the
FBS documents incorporated by reference herein as described under
"Incorporation of Certain Documents by Reference." The principal executive
offices of FBS are located at First Bank Place, 601 Second Avenue South,
Minneapolis, Minnesota 55402-4302 (telephone (612) 973-1111).
Boulevard. Boulevard is a multi-bank holding company headquartered in
Chicago, Illinois. Boulevard's assets include four banks and several non-bank
subsidiaries. Its banking subsidiaries are Boulevard Bank National Association
located in the Wrigley Building in downtown Chicago, First National Bank of Des
Plaines, Citizens National Bank of Downers Grove and National Security Bank of
Chicago. Through its subsidiaries, Boulevard provides commercial and consumer
banking, trust, cash management, investment management and mortgage banking
services. At December 31, 1993, Boulevard and its consolidated subsidiaries had
consolidated assets of $1.6 billion, consolidated deposits of $1.2 billion and
shareholders' equity of $113.5 million.
For further information concerning Boulevard, see "Business of Boulevard"
herein and the Boulevard documents incorporated by reference herein as
described under "Incorporation of Certain Documents by Reference." The
principal executive offices of Boulevard are located in Suite 370, The Wrigley
Building, 410 North Michigan Avenue, Chicago, Illinois 60611 (telephone (312)
836-6500).
THE PROPOSED MERGER
The Merger Agreement provides for the merger of BBI Acquisition Corp.
("Newco"), a newly-formed, wholly-owned subsidiary of FBS, with and into
Boulevard, with Boulevard as the surviving corporation. As a result of the
Merger, Boulevard will become a wholly-owned subsidiary of FBS. Upon
consummation of the Merger, each outstanding share of Boulevard Common Stock
will be converted into .8132 shares of FBS Common Stock, with cash to be paid
in lieu of fractional shares of FBS Common Stock. See "The Merger--Terms of the
Merger; Consideration to be Received by Boulevard Shareholders." Each
outstanding share of FBS capital stock and Newco capital stock will remain
outstanding and unchanged following the Merger. Based on the number of shares
of Boulevard Common Stock actually outstanding on the record date for the
Special Meeting, holders of Boulevard Common Stock would receive an aggregate
of 5,920,471 shares of FBS Common Stock upon consummation of the Merger and
would hold in the aggregate approximately 5% of the FBS Common Stock
outstanding immediately after consummation of the Merger (based on the number
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of shares of FBS Common Stock outstanding at September 30, 1993). Based on the
total number of shares and rights to acquire shares of Boulevard Common Stock
outstanding on such record date, a maximum aggregate of 7,169,565 shares of FBS
Common Stock could be issued in the Merger, or approximately 6% of the FBS
Common Stock outstanding after consummation of the Merger (based on the number
of shares of FBS Common Stock outstanding at September 30, 1993).
Notwithstanding the foregoing, Boulevard may, at its option, abandon and
terminate the Merger Agreement before it takes effect if both (i) the average
closing price of FBS Common Stock on the NYSE for the 20 consecutive trading
days commencing on the first business day after the Federal Reserve Board
issues an order approving the Merger (the "FBS Common Average Closing Price")
is less than $28.37 (85% of the closing price of FBS Common Stock on the NYSE
on September 29, 1993 (the date of execution of the Merger Agreement)), and
(ii) the number obtained by dividing the FBS Common Average Closing Price by
the closing price of FBS Common Stock on the NYSE on September 29, 1993 is less
than number obtained by dividing the "Final Index Price" by the "Initial Index
Price" and subtracting .15 from such quotient. For purposes of the foregoing,
the "Initial Index Price" is the weighted average (weighted as specified in the
Merger Agreement) of the closing prices on September 28, 1993 (the trading day
preceding the public announcement of the Merger Agreement) of the common stocks
of a group (the "Index Group") of 24 publicly traded bank holding companies.
The "Final Index Price" is the weighted average (weighted as aforesaid) of the
average closing prices of the respective Index Group common stocks for the 20
consecutive trading days commencing on the first business day after the Federal
Reserve Board issues an order approving the Merger. See "The Merger--Terms of
the Merger; Consideration to be Received by Boulevard Shareholders" and "--
Termination" herein.
SPECIAL MEETING OF BOULEVARD SHAREHOLDERS
The Special Meeting of holders of Boulevard Common Stock to consider and vote
upon the Merger Agreement will be held at the 410 Club, in the Wrigley
Building, 410 North Michigan Avenue, Chicago, Illinois, on [day of week],
[date], 1994, at 10:00 a.m. local time. Only holders of record of Boulevard
Common Stock at the close of business on [ ], 1994 (the "Record
Date"), will be entitled to notice of and to vote at the Special Meeting. At
the close of business on the Record Date, there were outstanding and entitled
to vote 7,280,461 shares of Boulevard Common Stock. Each share of Boulevard
Common Stock is entitled to one vote on the Merger Agreement. See "Information
Concerning the Boulevard Special Meeting."
VOTES REQUIRED
Approval of the Merger Agreement requires the affirmative vote of at least a
majority of all shares of Boulevard Common Stock outstanding and entitled to
vote at the Special Meeting. Approval of the adjournment of the Special Meeting
requires the affirmative vote of at least a majority of the votes cast,
provided that a quorum is present at the Special Meeting. Approval of the
Merger Agreement by FBS shareholders is not required under applicable law.
It is expected that all of the 1,418,184 shares of Boulevard Common Stock
(excluding shares subject to stock options and warrants) beneficially owned by
directors and executive officers of Boulevard and their affiliates at the
Record Date (approximately 19% of the total number of outstanding shares of
Boulevard Common Stock at such date) will be voted for approval and adoption of
the Merger Agreement and for adjournment of the Special Meeting under the
circumstances described herein. In addition, Charles E. Schroeder, Chairman of
the Board of Directors of Boulevard, also is President and a director of Miami
Corporation, and T. Kimball Brooker, a director of Boulevard, is a director of
Miami Corporation. Miami Corporation directly owned 3,621,325 shares of
Boulevard Common Stock at the Record Date (49.7% of the total number of
outstanding shares of Boulevard Common Stock at such date). It is anticipated
that Miami Corporation will vote the shares of Boulevard Common Stock owned by
it for approval and adoption of the
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Merger Agreement and for adjournment of the Special Meeting under the
circumstances described herein. As of the Record Date, FBS beneficially owned
no shares of Boulevard Common Stock (excluding shares issuable to FBS under
certain conditions as described under "The Merger--Option Granted to FBS"), and
directors and executive officers of FBS beneficially owned no shares of
Boulevard Common Stock. See "Information Concerning the Special Meeting--
Solicitation, Voting and Revocability of Proxies."
RECOMMENDATION OF THE BOULEVARD BOARD OF DIRECTORS
The Board of Directors of Boulevard believes that the Merger is in the best
interest of Boulevard and Boulevard shareholders and has unanimously approved
the Merger Agreement. The Board of Directors of Boulevard approved the Merger
Agreement after careful study and evaluation. The Board of Directors of
Boulevard consulted with its legal and financial advisors as well as with
management of Boulevard and FBS and carefully considered a variety of factors
in evaluating the Merger, although it did not assign any relative or specific
weights to the factors considered. Among the factors it considered were the
following:
(i) Boulevard's business, results of operations, prospects and financial
condition, including its capital position, regulatory requirements and
future growth prospects were it to remain independent.
(ii) Economic conditions and prospects for the markets in which Boulevard
operates, particularly the greater Chicago metropolitan area and the
surrounding counties, in light of, among other things, intensifying
competitive pressures in the financial services industry in general, and,
in particular, in Boulevard's markets.
(iii) The concentration in the Chicago metropolitan banking industry and
the growing disparity in resources between larger bank holding companies
and Boulevard and the effect of such disparity on Boulevard's ability to
provide state-of-the-art services and products and otherwise compete in the
marketplace.
(iv) The historical market value, book value, earnings per share and
dividends of Boulevard as compared to the historical market value, book
value, earnings per share and dividends of FBS.
(v) The consideration offered by FBS in the Merger Agreement, including
the premium represented by the consideration offered to Boulevard
shareholders in relation to the historical per share market value of
Boulevard's Common Stock.
(vi) The strategic and competitive advantages expected to result from the
combination of Boulevard and FBS.
(vii) The anticipated tax free nature of the Merger to Boulevard's
shareholders receiving FBS Common Stock in exchange for shares of Boulevard
Common Stock.
(viii) The management, business, results of operations and financial
condition of FBS.
(ix) The future prospects of FBS including the prospect for a higher
current trading value for FBS shares and the anticipated strength and
synergies (including cost savings and efficiencies) anticipated from the
combination of Boulevard and FBS.
(x) The financial terms of other recent business combinations in the
banking industry.
(xi) The increased consolidation among banking institutions and the
increased competition from larger banking institutions in the markets in
which Boulevard competes.
(xii) The price obtainable for Boulevard's shares at this time compared
with the risks involved and possible price available for the shares at a
later date in light of Boulevard's prospects.
(xiii) The financial advice rendered by Goldman, Sachs & Co. to the
Boulevard Board of Directors and the opinion rendered by Goldman, Sachs &
Co. that the exchange ratio was fair to Boulevard's common shareholders.
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In addition, the Board of Directors considered the impact of the Merger on
its depositors, employees, customers and the communities in which it operates.
The Board of Directors also determined that the Merger is preferable to the
other alternatives available to Boulevard, such as remaining independent and
growing internally or through future acquisitions, or remaining independent for
a short period of time with a view toward being acquired in the future, or
engaging in a merger of equals with another party.
In connection with its evaluation of the transaction, the Board of Directors
reviewed various material including (i) historical information regarding
Boulevard and FBS; (ii) Goldman, Sachs & Co.'s fairness opinion and its
financial analysis of Boulevard and FBS; (iii) various analysts' reports and
public documents describing FBS' business and prospects; and (iv) drafts of the
Merger Agreement and related documents.
The Boulevard Board of Directors believes that FBS is currently well managed.
The Board of Directors believes that Boulevard's business will benefit
substantially from the resources and experience of FBS and that the Merger will
produce an entity better able to meet competitive challenges inherent in the
changing banking industry. The Board of Directors further believes that its
shareholders will benefit from the proposed Merger through the opportunity to
obtain, in a tax free exchange, ownership of shares of a larger enterprise with
greater financial resources.
For the reasons set forth above, the Board of Directors of Boulevard
unanimously recommends that Boulevard shareholders vote FOR the approval and
adoption of the Merger Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Effective as of June 21, 1993, Boulevard entered into employment agreements
with eight of its executive officers. Each such employment agreement has a term
running through June 30, 1996 and provides that if Boulevard terminates the
employee's employment before the end of the contract term without "Cause" (as
defined in the agreements), or if the employee quits his or her employment with
"Good Reason" (as defined in the agreements), Boulevard will pay to such
employee (with the exception of Richard T. Schroeder), within ten days after
such event, a lump sum amount equal to the present value of such employee's
base salary through the end of the contract term, determined by applying a
discount factor of 6% effective annual interest. In the case of Richard T.
Schroeder, Boulevard will continue to pay his base salary through June 30,
1996. The employment agreements provide for the following annual base salaries
for the indicated executive officers of Boulevard: Richard T. Schroeder,
$266,200; Timothy G. Towle, $196,500; David K. McNulty, $189,000; George H.
Cook, Jr., $172,750; and John M. Starkey, $115,950. The employment agreements
also provide that in such an event, the employee will receive certain
additional amounts and benefits. David K. McNulty has an agreement with FBS
relating to employment terms following the Merger. See "The Merger--Interests
of Certain Persons in the Merger--Employment Agreements."
Boulevard and Richard T. Schroeder, President and Chief Executive Officer of
Boulevard, have entered into an agreement (the "Supplemental Retirement
Agreement") dated as of September 29, 1993, which was originally authorized by
the Compensation Committee of the Board of Directors of Boulevard in March
1993, pursuant to which Boulevard has agreed to pay Mr. Schroeder (or, in the
event of his death, his designee or estate) a supplemental benefit (the
"Supplemental Benefit") in 120 approximately equal monthly installments
beginning in the first month following the earliest of Mr. Schroeder's reaching
age 60, his "total disability" (as defined in the Supplemental Retirement
Agreement), or his death. The total amount of the Supplemental Benefit is to be
$240,000 plus one-half of one percent thereof for each calendar month after
December 31, 1993, that elapses prior to the initial monthly payment. The
Supplemental Retirement Agreement provides that the portion of the Supplemental
Benefit which remains unpaid from time to time shall be deemed to continue to
grow during the payment period at a rate equal to the yield on United States
Treasury obligations with a 120-month maturity determined as of 60 days prior
to the initial monthly payment. It also provides
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that if Mr. Schroeder's employment is terminated by Boulevard with "Cause" (as
defined in the employment agreements described in the preceding paragraph) or
by Mr. Schroeder without "Good Reason" (as defined in such employment
agreements), then Mr. Schroeder shall cease to be entitled to receive the
Supplemental Benefit. See "The Merger--Interests of Certain Persons in the
Merger--Supplemental Retirement Agreement with Richard T. Schroeder."
Boulevard intends to pay approximately $400,000 in special bonuses among a
group of approximately 50 of its employees for their special efforts in
managing the business of Boulevard through consummation of the Merger. At the
present time, neither the exact identity of the approximately 50 individuals,
nor the amount of any specific bonus, has been finally determined, but the
group will not include any of the senior executive officers of Boulevard. See
"The Merger--Interests of Certain Persons in the Merger--Bonuses through
Effective Date of Merger."
The Merger Agreement requires Boulevard to redeem all of its outstanding
Class D Series 1 Preferred Stock prior to the effective date of the Merger.
Pursuant to its terms, the aggregate redemption price of such stock will equal
$10 million plus accrued and unpaid dividends to the redemption date at a 9%
per annum dividend rate. All of the outstanding Class D Series 1 Preferred
Stock is owned by Miami Corporation, which also is a majority owner of the
outstanding Boulevard Common Stock. In addition, Charles E. Schroeder, Chairman
of the Board of Directors of Boulevard, also is President and a director of
Miami Corporation, and T. Kimball Brooker, a director of Boulevard, is a
director of Miami Corporation. See "The Merger--Interests of Certain Persons in
the Merger--Redemption of Preferred Stock."
The Merger Agreement also requires Boulevard to use its best efforts to
obtain an agreement from Miami Corporation pursuant to which Miami Corporation
will agree to use its best efforts to cause Miami Corporation and individuals,
trusts, corporations and other entities affiliated with or associated with
Miami Corporation to maintain, for a period of three years after the effective
date of the Merger, its and their deposit and business relationships with the
banking subsidiaries of Boulevard at an aggregate average daily deposit level
of approximately $20 million, and it is a condition to FBS' and Newco's
obligation to effect the Merger that FBS shall have entered into an agreement
with Miami Corporation in form and substance satisfactory to FBS covering such
matters. See "The Merger--Interests of Certain Persons in the Merger--
Redemption of Preferred Stock."
The Merger Agreement provides that each warrant to purchase Boulevard Common
Stock originally issued in connection with Boulevard's acquisition of First
National Bank of Des Plaines will, in accordance with its terms, be deemed
modified so as to provide that the holders thereof shall receive upon exercise
shares of FBS Common Stock. See "--Terms of the Merger; Consideration to be
Received by Boulevard Shareholders." It also provides that FBS may offer
holders of such warrants FBS Common Stock in exchange for such warrants prior
to the effective date of the Merger. As of the date hereof, warrants to
purchase 990,000 shares of Boulevard Common Stock are outstanding, of which
31,000 are deemed beneficially owned by Charles E. Schroeder, Chairman of the
Board of Directors of Boulevard, 9,000 are deemed beneficially owned by John E.
Guth, Jr., a director of Boulevard, and 263,500 are deemed beneficially owned
by Frederick F. Webster, Jr., a director of Boulevard. The exercise price of
such warrants is $11.20 per share of Boulevard Common Stock. In December 1993,
FBS purchased, in privately negotiated transactions with holders of such
warrants, warrants to purchase a total of 18,600 shares of Boulevard Common
Stock. Such warrants were purchased by FBS for a weighted average price equal
to $11.26 per share of Boulevard Common Stock purchasable under such warrants
(including warrants to purchase 2,600 shares of Boulevard Common Stock
purchased from Frederick F. Webster III, the son of a director of Boulevard, at
a per share price of $10.93). FBS may from time to time purchase or otherwise
acquire additional warrants in privately negotiated transactions. See "The
Merger--Interests of Certain Persons in the Merger--Warrants."
First National Bank of Des Plaines, a banking subsidiary of Boulevard, leases
68,300 square feet for its banking operations in a 173,000 square-foot building
owned by Four-Ten Partners, a limited partnership. The partners of Four-Ten
Partners include Charles E. Schroeder, Chairman of the Board of Directors of
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Boulevard. The remainder of this building is leased by parties not affiliated
with Boulevard or the persons named above. Of the space leased by First
National Bank of Des Plaines, 66,600 square feet is leased through August 2008
at a present aggregate monthly rental of $7,067, and the remainder is leased on
a month-to-month basis at a monthly rental of $202. It is expected that at the
effective date of the Merger, FBS will purchase this building from Four-Ten
Partners for an aggregate purchase price of $6 million in cash. Four-Ten
Partners purchased this building in 1984 for $11.5 million from First National
Bank of Des Plaines at the time of Boulevard's acquisition of that bank. This
building was appraised for Boulevard at $5.9 million in January 1992.
Management of Boulevard believes that the terms of FBS' purchase of this
building are no more favorable to Four-Ten Partners than would be obtained from
an unaffiliated party in a "stand-alone" transaction. Following the Merger, it
is anticipated that First National Bank of Des Plaines will continue to house
its banking operations in this building. See "The Merger--Interests of Certain
Persons in the Merger--First National Bank of Des Plaines Building."
The Merger Agreement requires FBS to indemnify and hold harmless directors,
officers and employees of Boulevard and its subsidiaries from and against
certain claims and expenses arising out of or pertaining to the Merger
Agreement or out of such persons' activities in their capacities as such
directors, officers or employees. See "The Merger--Interests of Certain Persons
in the Merger--Indemnification."
The Merger Agreement provides that at the effective date of the Merger, all
options to purchase Boulevard Common Stock which are outstanding under
Boulevard's 1988 Equity Participation Plan shall, with the consent of the
optionholder, be assumed by FBS and converted into options to purchase shares
of FBS Common Stock. Under the Merger Agreement, such replacement options shall
be fully vested and immediately exercisable. Unvested Boulevard stock options
which will become vested pursuant to the foregoing provisions and their average
exercise price held by certain executive officers of Boulevard are as follows:
Richard T. Schroeder, 41,500 shares at $14.22 per share; Timothy G. Towle,
30,900 shares at $14.26 per share; David K. McNulty, 28,800 shares at $14.32
per share; George H. Cook, Jr., 27,700 shares at $14.23 per share; and John M.
Starkey, 17,200 shares at $14.43 per share. The Merger Agreement also provides
that restricted shares of Boulevard Common Stock previously awarded under
Boulevard's 1988 Equity Participation Plan which are not fully vested at the
effective date of the Merger will be converted in the Merger into fully vested
shares of FBS Common Stock on the same basis as other shares of Boulevard
Common Stock. The vesting of certain restricted shares of Boulevard Common
Stock held by eight executive officers was accelerated, with the consent of
FBS, and became vested on December 20, 1993. Of the shares vested on December
20, 1993, those held by the five most highly compensated executive officers
were as follows: Richard T. Schroeder, 9,853 shares; Timothy G. Towle, 9,356
shares; David K. McNulty, 9,074 shares; George H. Cook, Jr., 8,465 shares; and
John M. Starkey, 4,438 shares. See "The Merger--Effect on Boulevard Employee
Benefit Plans and Stock Plans."
In December 1993, Boulevard amended its 1993 Management Incentive
Compensation Plan to provide that payments be made on December 31, 1993 on the
basis of the Company's unaudited annual operating results according to the
plan's specifications. Prior to such amendment, payments would have been made
approximately at the beginning of the second calendar quarter of 1994 subject
to prior approval by the Compensation Committee of the Board of Directors of
Boulevard to participants who remained employed by Boulevard at the time of
such approval. Of the payments made in December 1993 under such plan, those
made to the five most highly compensated executive officers were as follows:
Richard T. Schroeder, $124,449; Timothy G. Towle, $83,535; David K. McNulty,
$80,325; George H. Cook, Jr., $73,420; and John M. Starkey, $39,423.
The foregoing interests of members of management of Boulevard in the Merger
may mean that such persons have personal interests in the Merger which may not
be identical to the interests of nonaffiliated shareholders.
OPINION OF BOULEVARD FINANCIAL ADVISER
Goldman, Sachs & Co. have rendered their written opinion to the Board of
Directors of Boulevard to the effect that, as of the date of this Proxy
Statement/Prospectus, the exchange ratio pursuant to the Merger Agreement is
fair to the holders of Boulevard Common Stock.
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For information on the assumptions made, matters considered and limits on the
review undertaken by Goldman, Sachs & Co., see "The Merger--Opinion of
Boulevard Financial Adviser" and the opinion of Goldman, Sachs & Co. attached
as Appendix B to this Proxy Statement/Prospectus.
LIMITATION ON NEGOTIATIONS; OPTION GRANTED TO FBS
The Merger Agreement provides that Boulevard will not, and will cause its
subsidiaries and Boulevard's and such subsidiaries' respective officers,
directors, employees, agents or affiliates, not to, directly or indirectly,
solicit, authorize or initiate submission of, any proposal, offer, tender offer
or exchange offer from any person or entity (including any of its or their
officers or employees) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of all or a
material portion of the assets of, or any equity interest in, Boulevard or any
of such subsidiaries or other similar transaction or business combination
involving Boulevard or any of such subsidiaries, or, unless Boulevard shall
have determined, after receipt of a written opinion of counsel to Boulevard (a
copy of which opinion shall be delivered to FBS), that the Board of Directors
of Boulevard has an obligation to do so, (i) participate in any negotiations in
connection with or in furtherance of any of the foregoing or (ii) permit any
person other than FBS and its representatives to have any access to the
facilities of, or furnish to any person other than FBS and its representatives
any information with respect to, Boulevard or any of such subsidiaries in
connection with or in furtherance of any of the foregoing. See "The Merger--
Limitation on Negotiations."
Simultaneously with the execution of the Merger Agreement and as a condition
to such execution, Boulevard granted FBS an option (the "Option") to purchase
newly issued shares of Boulevard Common Stock in a number approximately equal
to 19.9% of the number of shares of Boulevard Common Stock outstanding
immediately before exercise of the option. The exercise price of the Option is
$23.25 per share, subject to adjustment under specified circumstances. The
Option is exercisable only upon the occurrence of specified events relating
generally to the making by third parties of offers to acquire Boulevard and the
acquisition by third parties of specified percentages of Boulevard Common
Stock. To the best knowledge of Boulevard and FBS, no event giving rise to the
right to exercise the Option has occurred as of the date of this Proxy
Statement/Prospectus. See "The Merger--Option Granted to FBS."
The foregoing provisions may have the effect of discouraging competing offers
to acquire or merge with Boulevard.
REGULATORY APPROVALS REQUIRED
The Merger is subject to the prior approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") under the Bank Holding
Company Act of 1956, as amended (the "Bank Holding Company Act"). After
submission and review in draft form, FBS submitted its final application to the
Federal Reserve Bank of Minneapolis on December 17, 1993. The Merger also is
subject to prior approval by the Illinois Commissioner of Banks and Trust
Companies (the "Illinois Commissioner") under the Illinois Bank Holding Company
Act of 1957, as amended (the "Illinois Act"). FBS submitted its application for
approval of the Merger to the Illinois Commissioner under the Illinois Act on
November 23, 1993, and the application was accepted for processing by the
Illinois Commissioner on December 16, 1993. There can be no assurance that the
approval by the Federal Reserve Board or the Illinois Commissioner will be
obtained, or as to the date of such approval or certification. See "The
Merger--Regulatory Approvals Required."
CONDITIONS, WAIVER AND AMENDMENT, AND TERMINATION
The respective obligations of FBS and Boulevard to consummate the Merger are
subject the satisfaction of certain conditions, including, among others, the
receipt of all required regulatory approvals with respect to the Merger, the
approval of the Merger Agreement by the requisite vote of Boulevard
shareholders, and certain other conditions customary in transactions of this
kind. A failure of any such conditions to be satisfied, if not waived, would
prevent consummation of the Merger. See "The Merger--Conditions to Consummation
of the Merger."
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Any provision of the Merger Agreement may be waived at any time by the party
which is, or the shareholders of which are, entitled to the benefit thereof,
provided that such waiver, if material to Boulevard or its shareholders, may be
made only following due authorization by the Board of Directors of Boulevard.
The Merger Agreement may be amended or modified by an agreement in writing
executed on behalf of the parties thereto, provided that such amendment or
modification may be made only following due authorization by the respective
Boards of Directors of Boulevard, Newco and FBS, and provided further, that
after a favorable vote by the shareholders of Boulevard any such action shall
be taken by Boulevard only if, in the opinion of its Board of Directors, such
amendment or modification will not have any material adverse effect on the
benefits intended under the Merger Agreement for the shareholders of Boulevard
and will not require resolicitation of proxies from such shareholders. See "The
Merger--Waiver and Amendment."
The Merger Agreement may be terminated at any time before the Merger becomes
effective (i) by either FBS or Boulevard, if any of the conditions to such
party's obligation to consummate the transactions contemplated in the Merger
Agreement shall have become impossible to satisfy; (ii) by FBS if the
information provided pursuant to Boulevard's obligation to update schedules
contained in the Merger Agreement discloses matters that, in the aggregate,
have or would reasonably be expected to have a material adverse effect on the
business, financial condition or operations of Boulevard and its subsidiaries,
taken as a whole, or on Boulevard's ability to consummate the transactions
contemplated by the Merger Agreement; (iii) by either FBS or Boulevard, if the
Merger Agreement and Merger are not duly approved by the shareholders of
Boulevard at a meeting of shareholders (or any adjournment thereof) duly called
and held for such purposes; (iv) by either FBS or Boulevard if the Merger is
not effective on or before September 30, 1994 (unless the failure to consummate
the Merger by such date shall be due to the action or failure to act of the
party seeking to terminate the Merger Agreement in breach of such party's
obligations under such agreement); (v) by either FBS or Boulevard in the event
of a material breach of any covenant contained in the Merger Agreement that is
not cured within 30 days after written notice of such breach is received by
such other party from the party giving notice; and (vi) by mutual written
consent of Boulevard, FBS and Newco.
The Merger Agreement also may be terminated by Boulevard under certain
circumstances if the average closing price of FBS Common Stock on the NYSE for
the 20 consecutive trading days commencing on the first business day after the
Federal Reserve Board issues an order approving the Merger is less than $28.37.
See "--The Proposed Merger" above and "The Merger--Terms of the Merger;
Consideration to be Received by Boulevard Shareholders" and "--Termination"
herein.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of articles of merger
relating thereto with the Secretary of State of Delaware. The effective date of
the Merger will be agreed to by FBS and Boulevard, provided that in no event
will the date designated by FBS as the effective date be later than 31 days
following the date on which approvals of the Federal Reserve Board and any
other regulatory authorities have been received and any required waiting
periods with respect thereto have expired. The Merger cannot become effective
until Boulevard shareholders have approved and adopted the Merger Agreement,
all required regulatory approvals and actions have been obtained and taken, and
a 30-day waiting period following Federal Reserve Board approval has expired.
Thus, there can be no assurance as to whether or when the Merger will become
effective. See "The Merger--Effective Time of the Merger," "--Conditions to
Consummation of the Merger" and "--Regulatory Approvals Required."
EXCHANGE OF BOULEVARD STOCK CERTIFICATES
Promptly following the Merger, FBS or an Exchange Agent designated by FBS
will send a notice and transmittal form, with instructions, to each holder of
Boulevard Common Stock of record at the time the Merger becomes effective
advising such holder of the effectiveness of the Merger and of the procedure
for surrendering to FBS or such Exchange Agent their certificates formerly
evidencing Boulevard Common Stock
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<PAGE>
in exchange for new certificates evidencing FBS Common Stock. BOULEVARD
SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THE
NOTICE AND TRANSMITTAL FORM FROM FBS OR SUCH EXCHANGE AGENT. See "The Merger--
Exchange of Boulevard Common Stock Certificates."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO BOULEVARD SHAREHOLDERS
The obligations of both FBS and Boulevard to consummate the Merger are
conditioned on, among other things, the receipt of an opinion of counsel of
Wildman, Harrold, Allen & Dixon, counsel to Boulevard, to the effect that for
federal income tax purposes, (i) the statutory merger of Newco with and into
Boulevard will constitute a reorganization within the meaning of Section
368(a)(1)(A) and Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended (the "Code"); (ii) no gain or loss will be recognized by Boulevard as a
consequence of the transactions contemplated in the Merger Agreement; (iii) no
gain or loss will be recognized to the shareholders of Boulevard on the
exchange of their shares of Boulevard Common Stock for shares of FBS Common
Stock (disregarding for this purpose any cash received for fractional share
interests to which they may be entitled); (iv) the federal income tax basis of
the FBS Common Stock (including fractional share interests to which they may be
entitled) received by the shareholders of Boulevard Common Stock for their
shares of Boulevard Common Stock will be the same as the federal income tax
basis of the Boulevard Common Stock surrendered in exchange therefor; and (v)
the holding period of the FBS Common Stock received by a shareholder of
Boulevard will include the period for which the Boulevard Common Stock
exchanged therefor was held, provided the exchanged Boulevard Common Stock was
held as a capital asset by such shareholder on the date of the exchange.
Wildman, Harrold, Allen & Dixon has delivered to Boulevard an opinion of
counsel to the foregoing effect, which opinion is based upon various
representations and is subject to a number of assumptions. EACH BOULEVARD
SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISER CONCERNING THE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER, AS WELL AS ANY APPLICABLE STATE,
LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES, BASED UPON SUCH SHAREHOLDER'S OWN
PARTICULAR FACTS AND CIRCUMSTANCES. See "The Merger--Certain Federal Income Tax
Consequences to Boulevard Shareholders."
RESALES OF FBS COMMON STOCK
The shares of FBS Common Stock issuable to shareholders of Boulevard upon
consummation of the Merger may be traded freely by those shareholders who are
not "affiliates" of Boulevard or FBS. Boulevard has agreed in the Merger
Agreement to use its best efforts to obtain a signed representation letter from
each shareholder of Boulevard who may reasonably be deemed an "affiliate" of
Boulevard within the meaning of such term as used in Rule 145 under the
Securities Act to the effect that such person will not offer to sell, transfer
or otherwise dispose of shares of FBS Common Stock issued to him pursuant to
the Merger except in compliance with the applicable provisions of Rule 145
under the Securities Act, in a transaction that is otherwise exempt from the
registration requirements under the Securities Act or in an offering registered
under the Securities Act. See "The Merger--Resale of FBS Common Stock Received
by Boulevard Shareholders."
ACCOUNTING TREATMENT
FBS intends to account for the Merger using the purchase method under
generally accepted accounting principles. See "The Merger--Accounting
Treatment" and Unaudited Pro Forma Combined Financial Information.
NO DISSENTERS' RIGHTS OF APPRAISAL
Pursuant to Section 262(b)(1) of the Delaware General Corporation Law,
Boulevard shareholders will not have any dissenters' rights of appraisal as a
result of the matters to be voted upon at the Special Meeting. See "The
Merger--No Dissenters' Rights of Appraisal."
13
<PAGE>
MARKETS AND MARKET PRICES
FBS Common Stock is listed on the NYSE under the symbol "FBS" and Boulevard
Common Stock is listed on the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") National Market System under the symbol
"BLVD." The following table sets forth the closing price per share of FBS
Common Stock, the last reported sale price per share of Boulevard Common Stock
and the "equivalent per share price" (as defined below) of Boulevard Common
Stock as of (i) September 28, 1993, the last trading day before FBS and
Boulevard announced execution of the Merger Agreement, and (ii) January 18,
1994. The "equivalent per share price" of the Boulevard Common Stock as of such
dates equals the closing price per share of FBS Common Stock on such dates
multiplied times .8132, which is the number of shares of FBS Common Stock to be
issued in exchange for each share of Boulevard Common Stock pursuant to the
Merger Agreement.
<TABLE>
<CAPTION>
MARKET PRICE FBS COMMON BOULEVARD COMMON EQUIVALENT PER
PER SHARE AT: STOCK STOCK SHARE PRICE
------------- ---------- ---------------- --------------
<S> <C> <C> <C>
September 28, 1993............. $32.875 $23.25 $26.73
January 18, 1994............... $30.00 $24.00 $24.40
</TABLE>
FBS and Boulevard believe that Boulevard Common Stock presently trades on the
basis of the value of the FBS Common Stock expected to be issued in exchange
for such Boulevard Common Stock in the Merger, discounted for the time value of
money and for the uncertainties associated with any transaction. Apart from the
publicly-disclosed information concerning FBS which is included and
incorporated by reference in this Proxy Statement/Prospectus, FBS does not know
what factors account for changes in the market price of its stock.
Boulevard shareholders are advised to obtain current market quotations for
FBS Common Stock and Boulevard Common Stock. No assurance can be given as to
the market prices of FBS Common Stock or Boulevard Common Stock at any time
before the Merger becomes effective or as to the market price of FBS Common
Stock at any time thereafter. Because the exchange ratio of FBS Common Stock
for Boulevard Common Stock is fixed, it will not compensate Boulevard
shareholders for decreases in the market price of FBS Common Stock which could
occur before the Merger becomes effective. As a result, in the event the market
price of FBS Common Stock decreases, the value of the FBS Common Stock to be
received in the Merger in exchange for Boulevard Common Stock would decrease,
and, in the event the market price of FBS Common Stock instead increases, the
value of the FBS Common Stock to be received in the Merger in exchange for
Boulevard Common Stock would increase. Boulevard shareholders should note,
however, that the Merger Agreement may be terminated by Boulevard under certain
circumstances if the average closing price of FBS Common Stock on the NYSE for
the 20 consecutive trading days commencing on the first business day after the
Federal Reserve Board issues an order approving the Merger is less than $28.37.
See "--The Proposed Merger" above and "The Merger--Terms of the Merger;
Consideration to be Received by Boulevard Shareholders" and "--Termination"
herein.
Following the Merger, Boulevard Common Stock will no longer exist and, as a
result, will no longer be listed on the NASDAQ National Market System.
DIFFERENCES IN RIGHTS OF BOULEVARD SHAREHOLDERS
Upon consummation of the Merger, Boulevard shareholders will become FBS
shareholders. As a result, their rights as shareholders, which are now governed
by Delaware corporate law and Boulevard's Certificate of Incorporation and
Bylaws, will be governed by Delaware corporate law and FBS' Certificate of
Incorporation and Bylaws. Because of certain differences between the provisions
of Boulevard's Certificate of
14
<PAGE>
Incorporation and Bylaws and FBS' Certificate of Incorporation and Bylaws, the
current rights of Boulevard shareholders will change after the Merger. Material
differences include:
(i) calling of special meetings of shareholders (with holders of a
majority of Boulevard's voting shares having the power to call such a
meeting, and FBS shareholders not having such power);
(ii) quorums at shareholders meetings (with a majority of voting shares
required for a quorum at a Boulevard shareholders meeting, and one-third of
voting shares required at a FBS shareholders meeting);
(iii) notice requirements for shareholder nominations of directors (with
FBS requiring specified prior notice of such nominations, and Boulevard not
requiring such notice);
(iv) classification of board of directors (with FBS having a classified
board, and Boulevard not having one);
(v) shareholder action by written consent in lieu of shareholder meeting
(with Boulevard permitting such action, and FBS not permitting such
action);
(vi) removal of directors (with FBS shareholders having the right to
remove directors only for cause, and no such restriction in the case of
Boulevard);
(vii) supermajority voting (with FBS requiring supermajority voting in
order to approve certain business combinations with related persons, and
Boulevard not having such a requirement); and
(viii) shareholder rights plans (with FBS having a shareholder rights
plan which may have certain anti-takeover effects, and Boulevard not having
such a plan).
See "The Merger--Certain Differences in Rights of Boulevard Shareholders."
15
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table presents selected comparative unaudited per share data
for FBS on a historical and pro forma combined basis, and for Boulevard on a
historical and pro forma equivalent basis, giving effect to the Merger using
the purchase method of accounting. For the year ended December 31, 1992, the
income per share data also gives effect to FBS' acquisition of Bank Shares
Incorporated ("BSI"), which was consummated on December 31, 1992, using the
purchase method of accounting. The information presented below is derived from
the consolidated historical financial statements of FBS and Boulevard,
including the related notes thereto, incorporated by reference into this Proxy
Statement/Prospectus, the statement of income of BSI for the year ended
December 31, 1992, and the pro forma financial information (which includes the
acquisition of BSI for the year ended December 31, 1992), including the notes
thereto, appearing elsewhere herein. This information should be read in
conjunction with such historical and pro forma financial statements and the
related notes thereto. See "Incorporation of Certain Documents by Reference"
and Unaudited Pro Forma Combined Financial Information.
The per share data included within is not necessarily indicative of the
results of the future operations of the combined entity or the actual results
that would have been achieved had the Merger been consummated prior to the
periods indicated.
<TABLE>
<CAPTION>
BOULEVARD
FBS COMMON STOCK COMMON STOCK
-------------------- ---------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
September 30, 1993................ $17.72 $17.72 $13.24 $14.41
December 31, 1992................. 17.09 17.09 12.63 13.90
DIVIDENDS DECLARED (2):
Nine Months Ended:
September 30, 1993............... 0.75 0.75 0.05 0.61
Year Ended:
December 31, 1992................ 0.88 0.88 -- 0.72
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES
(3):
Nine Months Ended:
September 30, 1993............... 1.58 1.57 0.65 1.28
Year Ended:
December 31, 1992................ 1.18 0.89 0.66 0.72
PRIMARY AND FULLY DILUTED NET
INCOME (3):
Nine Months Ended:
September 30, 1993............... 1.58 1.57 0.65 1.28
Year Ended:
December 31, 1992................ 2.67 2.26 0.44 1.84
</TABLE>
16
<PAGE>
NOTES TO COMPARATIVE UNAUDITED PER SHARE DATA
(1) The pro forma combined book values per share of FBS Common Stock are based
upon the historical total common equity for FBS and Boulevard, divided by
the total pro forma common shares of the combined entity assuming the
issuance of FBS common stock for all the outstanding common stock, stock
options and warrants of Boulevard at the exchange ratio provided for in the
Merger Agreement, net of the related repurchases of existing FBS common
shares equal to the number of common shares to be issued in connection with
the Boulevard acquisition. The repurchase program was approved
simultaneously with and as an integral part of the Boulevard merger. The
pro forma equivalent book values per share of Boulevard Common Stock
represent the pro forma combined amounts multiplied by the exchange ratio.
See "The Merger--Consideration to be Received by Boulevard Shareholders."
(2) The pro forma combined dividends declared assume no changes in the
historical dividends declared per FBS common share. The pro forma
equivalent dividends per share of Boulevard Common Stock represent the cash
dividends declared on a share of FBS stock multiplied by the exchange
ratio. See "The Merger--Consideration to be Received by Boulevard
Shareholders."
(3) The pro forma combined income before cumulative effect of changes in
accounting principles and net income per share are based upon the combined
historical net income for FBS, Boulevard, and BSI and its subsidiaries
purchased by FBS, divided by the average pro forma common shares of the
combined entity. The pro forma equivalent income before cumulative effect
of changes in accounting principles and net income per share of Boulevard
Common Stock represents the pro forma combined income multiplied by the
exchange ratio. See "The Merger--Consideration to be Received by Boulevard
Shareholders."
The FBS results of operations for the year ended December 31, 1992
include the effect of two new accounting standards: Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," and
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions." Income before merger-related charges and cumulative effect of
changes in accounting principles for the year ended December 31, 1992 was
reduced by $56.6 million for increased income tax expense under SFAS No.
109 and $1.0 million for increased employee benefit expenses under SFAS No.
106. In addition, the net cumulative effect for prior years of adopting
SFAS No. 109 and SFAS No. 106 resulted in a $157.3 million increase in net
income in 1992.
Also included in FBS results of operations for the year ended December
31, 1992 are merger-related charges of $124.0 million ($81.8 million after
tax) associated with the acquisitions of Western Capital Investment
Corporation and BSI. These charges include a $13.6 million provision for
loan losses, a $26.4 million provision for losses on other real estate, and
$84.0 million in merger, integration and restructuring provisions. These
provisions were made to reflect FBS' intent with respect to the disposition
of problem assets and to provide for anticipated reorganization and
restructuring costs.
The FBS results of operations for the period ended September 30, 1993
include merger-related charges of $72.2 million ($50.0 million after tax)
associated with the acquisition of Colorado National Bankshares, Inc. These
charges include a $29.7 million provision for anticipated reorganization
and restructuring costs, systems conversions, and customer communication
costs and a $14.3 million write-down of premises and equipment related to
redundant main office and branch facilities. Other charges, totaling $28.2
million, primarily involve severance.
17
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables set forth certain selected historical consolidated
financial information for FBS and Boulevard, and certain unaudited pro forma
combined financial information giving effect to the Merger with Boulevard using
the purchase method of accounting. For a description of the purchase method of
accounting with respect to the Merger and the related effects on the historical
financial statements of FBS, see "The Merger--Accounting Treatment." The
unaudited pro forma combined income statement data and related selected
financial data for the year ended December 31, 1992 also gives effect to the
acquisition of BSI, which was consummated on December 31, 1992, using the
purchase method of accounting. The historical income statement data included in
the selected financial data for the year ended December 31, 1992, are derived
from audited consolidated financial statements of FBS and Boulevard. The
financial data for the nine months ended September 30, 1993 is derived from the
unaudited historical financial statements of FBS and Boulevard and reflect, in
the respective opinions of management of FBS and Boulevard, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such data. This information should be read in conjunction with
the consolidated financial statements of FBS and Boulevard, and the related
notes thereto, incorporated by reference or included elsewhere in this Proxy
Statement/Prospectus, and in conjunction with the unaudited pro forma financial
information, including the notes thereto, appearing elsewhere in this Proxy
Statement/Prospectus. See Unaudited Pro Forma Combined Financial Information.
The pro forma combined financial information included within is not
necessarily indicative of the results of the future operations of the combined
entity or the actual results that would have been achieved had the Merger been
consummated prior to the periods presented.
18
<PAGE>
HISTORICAL SELECTED FINANCIAL DATA
FIRST BANK SYSTEM, INC.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
------------------ DECEMBER 31,
1993 1992 1992
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) -------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA
Interest income.............................. $1,250.8 $1,273.9 $1,681.3
Interest expense............................. 407.5 537.7 686.2
-------- -------- --------
Net interest income......................... 843.3 736.2 995.1
Provision for credit losses.................. 98.2 130.5 183.4
-------- -------- --------
Net interest income after provision for
credit losses............................... 745.1 605.7 811.7
Noninterest income........................... 423.7 398.6 535.7
Noninterest expense.......................... 845.2 745.3 1,114.3
-------- -------- --------
Income before income taxes................... 323.6 259.0 233.1
Applicable income taxes...................... 121.5 87.4 78.6
-------- -------- --------
Income before cumulative effect of changes in
accounting principles....................... 202.1 171.6 154.5
Cumulative effect of changes in accounting
principles.................................. -- 157.3 157.3
-------- -------- --------
Net income................................... $ 202.1 $ 328.9 $ 311.8
======== ======== ========
Average common and common equivalent shares.. 113.7 104.8 105.4
PER COMMON SHARE
Income before cumulative effect of changes in
accounting principles....................... $ 1.58 $ 1.42 $ 1.18
Net income................................... 1.58 2.92 2.67
Dividends paid............................... 0.750 0.655 0.880
Common shareholders' equity.................. 17.72 16.89 17.09
CONSOLIDATED BALANCE SHEET DATA AT PERIOD END
Assets....................................... $ 25,941 $ 23,960 $ 26,625
Investment securities........................ 3,794 3,145 3,912
Loans........................................ 18,568 16,154 17,076
Deposits..................................... 20,466 18,969 21,188
Long-term debt............................... 1,030 921 822
Shareholders' equity......................... 2,276 2,143 2,318
SELECTED FINANCIAL DATA AT PERIOD END
Common shareholders' equity to assets........ 7.7% 7.4% 7.3%
Total shareholders' equity to assets......... 8.8 8.9 8.7
Tier 1 capital ratio (1)..................... 9.5 9.3 9.5
Total capital ratio (1)...................... 13.9 12.8 12.6
Allowance for credit losses.................. $ 427 $ 414 $ 448
Percentage of loans......................... 2.30% 2.56% 2.62%
Nonperforming assets (2)..................... $ 267 $ 434 $ 412
Percentage of total assets.................. 1.03% 1.81% 1.55%
SELECTED FINANCIAL DATA FOR THE PERIOD ENDED
Return on average assets before cumulative
effect of changes in accounting principles.. 1.07% 0.98% 0.65%
Return on average assets..................... 1.07 1.88 1.32
Return on average common equity before
cumulative effect of changes in accounting
principles.................................. 12.3 11.7 7.2
Return on average common equity.............. 12.3 24.2 16.4
Net interest margin--tax-equivalent basis.... 5.09 4.84 4.85
Net interest margin without taxable-
equivalent increments....................... 5.01 4.72 4.74
</TABLE>
See notes to historical selected financial data
19
<PAGE>
HISTORICAL SELECTED FINANCIAL DATA
BOULEVARD BANCORP, INC.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
-------------- DECEMBER 31,
1993 1992 1992
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) ------ ------ ------------
(UNAUDITED)
<S> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA
Interest income.................................. $ 69.3 $ 81.6 $107.2
Interest expense................................. 31.1 39.6 51.8
------ ------ ------
Net interest income............................. 38.2 42.0 55.4
Provision for credit losses...................... 1.8 4.7 5.9
------ ------ ------
Net interest income after provision for credit
losses.......................................... 36.4 37.3 49.5
Noninterest income............................... 17.4 15.6 21.4
Noninterest expense.............................. 46.5 48.1 63.8
------ ------ ------
Income before income taxes....................... 7.3 4.8 7.1
Applicable income taxes.......................... 1.9 1.3 1.9
------ ------ ------
Income before cumulative effect of changes in
accounting principles........................... 5.4 3.5 5.2
Cumulative effect of changes in accounting
principles...................................... -- (1.8) (1.8)
------ ------ ------
Net income....................................... $ 5.4 $ 1.7 $ 3.4
====== ====== ======
Average common and common equivalent shares...... 8.3 8.3 8.3
PER COMMON SHARE
Income before cumulative effect of changes in
accounting principles........................... $ 0.65 $ 0.45 $ 0.66
Net income....................................... 0.65 0.23 0.44
Dividends paid................................... 0.05 0.00 0.00
Common shareholders' equity...................... 13.24 12.43 12.63
CONSOLIDATED BALANCE SHEET DATA AT PERIOD END
Assets........................................... $1,668 $1,584 $1,564
Investment securities............................ 654 534 422
Loans............................................ 675 869 838
Deposits......................................... 1,196 1,315 1,267
Long-term debt................................... 14 14 14
Shareholders' equity............................. 108 102 103
SELECTED FINANCIAL DATA AT PERIOD END
Common shareholders' equity to assets............ 5.9% 5.8% 6.0%
Total shareholders' equity to assets............. 6.5 6.4 6.6
Tier 1 capital ratio (1)......................... 10.8 9.3 9.3
Total capital ratio (1).......................... 12.3 11.2 10.8
Allowance for credit losses...................... $ 20 $ 25 $ 24
Percentage of loans............................. 3.02% 2.90% 2.88%
Nonperforming assets (2)......................... $ 30 $ 47 $ 52
Percentage of total assets...................... 1.82% 2.99% 3.36%
SELECTED FINANCIAL DATA FOR THE PERIOD ENDED
Return on average assets before cumulative effect
of changes in accounting principles............. 0.48% 0.31% 0.34%
Return on average assets......................... 0.48 0.16 0.22
Return on average common equity before cumulative
effect of changes in accounting principles...... 6.6 4.2 4.8
Return on average common equity.................. 6.6 1.6 2.8
Net interest margin--tax-equivalent basis........ 3.90 4.30 4.20
Net interest margin without taxable-equivalent
increments...................................... 3.83 4.22 4.12
</TABLE>
See notes to historical selected financial data
20
<PAGE>
NOTES TO HISTORICAL SELECTED FINANCIAL DATA
(1) Capital ratios are computed based on 1992 Federal Reserve Board rules and
regulations.
(2) Includes non-accrual and restructured loans, other nonperforming assets and
other real estate owned.
(3) Financial results for FBS for 1993 and 1992 include merger-related charges
with an after tax effect of $50.0 million and $81.8 million, respectively.
21
<PAGE>
UNAUDITED PRO FORMA COMBINED SELECTED
FINANCIAL DATA--FIRST BANK SYSTEM, INC. AND BOULEVARD BANCORP, INC.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1993 1992
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) ------------- ------------
<S> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA
Interest income.................................... $1,312.0 $1,918.5
Interest expense................................... 438.0 804.3
-------- --------
Net interest income............................... 874.0 1,114.2
Provision for credit losses........................ 100.0 225.3
-------- --------
Net interest income after provision for credit
losses............................................ 774.0 888.9
Noninterest income................................. 441.1 599.2
Noninterest expense................................ 892.4 1,284.7
-------- --------
Income before income taxes......................... 322.7 203.4
Applicable income taxes............................ 122.4 72.6
-------- --------
Income before cumulative effect of changes in
accounting principles............................. 200.3 130.8
Cumulative effect of changes in accounting
principles........................................ -- 155.5
-------- --------
Net income......................................... $ 200.3 $ 286.3
======== ========
Average common and common equivalent shares........ 113.7 113.5
PER COMMON SHARE
Income before cumulative effect of changes in
accounting principles............................. $ 1.57 $ 0.89
Net income......................................... 1.57 2.26
Dividends paid..................................... 0.750 0.880
Common shareholders' equity........................ 17.72 17.09
CONSOLIDATED BALANCE SHEET DATA AT PERIOD END
Assets............................................. $ 27,529 $ 28,114
Investment securities.............................. 4,452 4,338
Loans.............................................. 19,247 17,919
Deposits........................................... 21,662 22,455
Long-term debt..................................... 1,045 837
Shareholders' equity (1)........................... 2,276 2,318
SELECTED FINANCIAL DATA AT PERIOD END
Common shareholders' equity to assets.............. 7.3% 6.9%
Total shareholders' equity to assets............... 8.3 8.2
Tier 1 capital ratio (2)........................... 8.6 8.5
Total capital ratio (2)............................ 12.9 11.6
Allowance for credit losses........................ $ 447 $ 472
Percentage of loans............................... 2.32% 2.63%
Nonperforming assets (3)........................... $ 297 $ 464
Percentage of total assets........................ 1.08% 1.65%
SELECTED FINANCIAL DATA FOR PERIOD ENDED:
Return on average assets before cumulative effect
of change in accounting principles................ 0.99% 0.48%
Return on average assets........................... 0.99 1.06
Return on average common equity before cumulative
effect of changes in accounting principles........ 12.2 5.3
Return on average common equity.................... 12.2 13.3
Net interest margin--tax-equivalent basis.......... 4.99 4.69
Net interest margin without taxable-equivalent
increments........................................ 4.91 4.59
</TABLE>
See notes to unaudited pro forma combined selected financial data
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA
(1) Pursuant to the Merger Agreement, Boulevard will establish such additional
accruals as may be necessary to reflect FBS' plan with respect to the
conduct of its business following the Merger and to provide for anticipated
reorganization and restructuring costs. Boulevard will, subject to the
satisfaction or waiver of all conditions to FBS' obligation to consummate
the Merger, including the receipt of all required regulatory approvals,
make such adjustments in its results of operations prior to the effective
date, based on information available at that time. It is currently
estimated that the total amount of the reorganization and restructuring
accruals to be recorded at the effective date will be approximately $20
million, which is net of tax benefits of $12 million. Such amounts are not
reflected in the pro forma combined statements of income as they are not
expected to have a continuing impact on FBS. In addition, certain purchase
accounting adjustments to reflect existing assets at their fair values will
be made at the effective date. See Notes C and D of Notes to the Unaudited
Pro Forma Consolidated Financial Information.
(2) Capital ratios are computed based on 1992 Federal Reserve Board rules and
regulations.
(3) Includes non-accrual and restructured loans, other nonperforming assets and
other real estate owned.
(4) Historical income statement results for BSI and its subsidiaries purchased
by FBS included in the unaudited pro forma combined selected financial data
for the year ended December 31, 1992 (net of purchase adjustments), were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992
------------
<S> <C>
Interest income................................ $141.9
Interest expense............................... 67.1
------
Net interest income............................ 74.8
Provision for credit losses.................... 36.0
------
Net interest income after provision for credit
losses........................................ 38.8
Noninterest income............................. 42.1
Noninterest expense............................ 105.8
------
Income before income taxes..................... (24.9)
Applicable income taxes (credit)............... (6.2)
------
Income before cumulative effect of changes in
accounting principles......................... (18.7)
Cumulative effect of changes in accounting
principles.................................... --
------
Net income..................................... $(18.7)
======
</TABLE>
23
<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of Boulevard
Common Stock as part of the solicitation of proxies by the Boulevard Board of
Directors for use at the Special Meeting to be held on [ ], 1994 and
at any adjournment thereof. This Proxy Statement/Prospectus, and the
accompanying Proxy Card, are being first mailed to Boulevard shareholders on or
about [ ], 1994.
The principal purpose of the Special Meeting is to consider and vote upon the
proposal to approve and adopt the Merger Agreement among Boulevard, FBS and
Newco dated September 29, 1993, which sets forth the terms and conditions of
the Merger. Upon consummation of the Merger, each outstanding share of
Boulevard Common Stock will be converted into .8132 shares of FBS Common Stock,
with cash paid in lieu of fractional shares. The Merger is subject to a number
of conditions, including the receipt of required regulatory and shareholder
approvals.
In addition to approval and adoption of the Merger Agreement, the
shareholders of Boulevard may be asked to approve a proposal to adjourn the
Special Meeting to permit further solicitation of proxies in the event there
are not sufficient votes at the time of the Special Meeting to approve and
adopt the Merger Agreement.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The Board of Directors of Boulevard has fixed the close of business on
[ ], 1994 as the Record Date for the determination of the shareholders of
Boulevard entitled to notice of and to vote at the Special Meeting.
Accordingly, only holders of record of shares of Boulevard Common Stock at the
close of business on such date will be entitled to vote at the Special Meeting,
with each share entitling its owner to one vote on all matters properly
presented at the Special Meeting. On the Record Date, there were approximately
480 holders of record of the 7,280,461 shares of Boulevard Common Stock then
outstanding. The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares of Boulevard Common Stock entitled to vote
at the Special Meeting is necessary to constitute a quorum at the Special
Meeting. Under Delaware law, the affirmative vote of at least a majority of the
total number of outstanding shares of Boulevard Common Stock entitled to vote
at the Special Meeting is required to approve and adopt the Merger Agreement.
Approval of the adjournment of the Special Meeting requires the affirmative
vote of at least a majority of the votes cast, provided that a quorum is
present at the Special Meeting. If an executed proxy card is returned and the
shareholder has abstained from voting on any matter, the shares represented by
such proxy will be considered present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote, but will not be
considered to have been voted in favor as to such matter. If an executed proxy
card is returned by a broker holding shares in street name which indicates that
the broker does not have discretionary authority as to certain shares to vote
on one or more matters, such shares will be considered present at the meeting
for purposes of determining a quorum, but will not be considered as represented
at the meeting for purposes of calculating the vote with respect to such
matter.
It is expected that all of the 1,418,184 shares of Boulevard Common Stock
(excluding shares subject to stock options and warrants) beneficially owned by
directors and executive officers of Boulevard and their affiliates at the
Record Date (approximately 19% of the total number of outstanding shares of
Boulevard Common Stock at such date) will be voted for approval and adoption of
the Merger Agreement and for adjournment of the Special Meeting under the
circumstances described herein. In addition, Charles E. Schroeder, Chairman of
the Board of Directors of Boulevard, also is President and a director of Miami
Corporation, and T. Kimball Brooker, a director of Boulevard, is a director of
Miami Corporation. Miami Corporation directly owned 3,621,325 shares of
Boulevard Common Stock at the Record Date (49.7% of the total number of
outstanding shares of Boulevard Common Stock at such date). It is anticipated
that Miami Corporation will vote the shares of Boulevard Common Stock owned by
it for approval and adoption of the
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Merger Agreement and for adjournment of the Special Meeting under the
circumstances described herein. As of the Record Date, FBS beneficially owned
no shares of Boulevard Common Stock (excluding shares issuable to FBS under
certain conditions as described under "The Merger--Option Granted to FBS"), and
directors and executive officers of FBS beneficially owned no shares of
Boulevard Common Stock.
If the accompanying Proxy Card is properly executed and returned to Boulevard
in time to be voted at the Special Meeting, the shares represented thereby will
be voted in accordance with the instructions marked thereon. Executed but
unmarked proxies will be voted for approval and adoption of the Merger
Agreement and for the proposal to adjourn the Special Meeting if necessary to
permit further solicitation of proxies. The Board of Directors of Boulevard
does not know of any matters other than those described in the notice of the
Special Meeting that are to come before the Special Meeting. If any other
matters are properly brought before the Special Meeting, one or more of the
persons named in the proxy card will vote the shares represented by such proxy
upon such matters as determined in their best judgment.
The presence of a shareholder at the Special Meeting will not automatically
revoke such shareholder's proxy. A shareholder may, however, revoke a proxy at
any time prior to its exercise by filing a written notice of revocation with,
or by delivering a duly executed proxy bearing a later date to, Corporate
Secretary, Boulevard Bancorp, Inc., 410 North Michigan Avenue, Chicago,
Illinois 60611, or by attending the Special Meeting and voting in person.
The cost of soliciting proxies for the Special Meeting will be borne by
Boulevard. In addition to use of the mails, proxies may be solicited personally
or by telephone or telegraph by directors, officers and employees of Boulevard,
who will not be specially compensated for such activities. Boulevard will also
request persons, firms and companies holding shares in their names or in the
name of their nominees, which are beneficially owned by others, to send proxy
materials to and obtain proxies from such beneficial owners. Boulevard will
reimburse such persons for their reasonable expenses incurred in that
connection.
THE MERGER
This section of the Proxy Statement/Prospectus describes certain aspects of
the proposed Merger. To the extent that it relates to the Merger Agreement, the
following description does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, a copy of which is attached
hereto as Appendix A and is incorporated herein by reference. All shareholders
are urged to read the Merger Agreement and the other appendices hereto in their
entirety.
BACKGROUND OF THE MERGER
The past several years have been a period of substantial consolidation in the
banking industry in general and in the greater Chicago metropolitan area, where
Boulevard competes, in particular. In light of the concentration that has
occurred in the Chicago metropolitan banking industry and the entry into the
area of large financial institutions, including out-of-state, regional, super-
regional and international financial organizations, the Boulevard Board of
Directors concluded that the growing disparity in resources between larger bank
holding companies and Boulevard would make it increasingly difficult for
Boulevard to be able to provide its customers with state-of-the-art services
and products, consider strategic and non-strategic acquisitions and, to a
lesser extent, attract and retain talented officers and employees.
Consequently, at its meeting on June 18, 1993, and as part of its general
strategic planning activities, the Boulevard Board of Directors decided to
explore strategic alternatives for increasing shareholder value. The Board also
discussed that Boulevard had, from time to time, received indications of
possible interest from financial institutions, none of which led to substantive
discussions.
As a result of these considerations, the Board decided to retain an
independent financial advisor to advise the Board on various strategic
alternatives, including the possible sale of Boulevard and to discuss and
explore possible merger candidates for Boulevard.
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Therefore, the Boulevard Board authorized the retention of Goldman, Sachs &
Co. as its financial advisor to explore various strategic alternatives,
including the possible sale of Boulevard. Goldman, Sachs & Co. was instructed
to survey the market and to seek proposals from potential buyers and to
determine whether any offered price was in the best interest of Boulevard
shareholders.
After conferring with Goldman, Sachs & Co., Boulevard directed Goldman, Sachs
& Co. to prepare a confidential offering memorandum which would be furnished to
potential acquirors of Boulevard. Boulevard and Goldman, Sachs & Co. also
agreed to: (i) deliver the offering memorandum to various interested parties,
(ii) request an initial indication of interest including preliminary pricing
information by a designated date, (iii) allow the interested party or parties
to conduct due diligence and (iv) request final offers on a designated date.
On July 23, 1993 the Boulevard Board of Directors met with Goldman, Sachs &
Co. to review the merger market for banks throughout the United States as well
as in Illinois and to discuss possible buyers.
During late June and early July, 1993 an offering memorandum was prepared and
distributed to over thirty institutions. On August 2, 1993, initial indications
of interest were received from eight institutions. On August 5, 1993 the
Executive Committee of the Boulevard Board of Directors met with Goldman, Sachs
& Co. to review the initial indications of interest which had been received.
After analyzing the initial indications of interest and discussing the various
companies with Goldman, Sachs & Co., the Executive Committee elected to invite
each of the companies expressing an initial indication of interest to send
representatives to Boulevard and do due diligence with respect to a possible
acquisition. Thereafter, between August 9 and September 13, 1993 those parties
indicating an interest conducted due diligence in Chicago. Numerous discussions
were also had during this period between interested parties and Boulevard, its
management, Goldman, Sachs & Co. and Boulevard's counsel and accountants.
The Boulevard Board of Directors met on August 20, 1993 to review the
institutions conducting due diligence and consider various scenarios related to
final bids from interested institutions.
Final bids were received on September 22, 1993 from three institutions. After
reviewing bids with Goldman, Sachs & Co. the Board of Boulevard determined that
the bid of FBS was higher than the other bids. Thereafter, Boulevard directed
Goldman, Sachs & Co. and Boulevard's counsel to proceed with the negotiation of
the Merger Agreement with FBS. Over the next week, Boulevard's financial and
legal advisors contacted FBS and its advisors to negotiate the terms of a
definitive merger agreement and warrant agreement.
On September 28, 1993 senior management of Boulevard traveled to Minneapolis,
Minnesota to perform due diligence on FBS. Boulevard representatives examined
and discussed financial and operating data about FBS, interviewed management
personnel and evaluated asset and credit quality. During the period,
representatives of Goldman, Sachs & Co. also traveled to Minneapolis, Minnesota
to perform due diligence on FBS.
On September 29, 1993, the Boulevard Board of Directors met with senior
management of Goldman, Sachs & Co. and Boulevard's legal counsel to consider
the FBS merger proposal. The FBS merger proposal was for a stock for stock tax
free transaction, with a fixed exchange ratio of .8132 shares of FBS common
stock for each share of Boulevard common stock. At the meeting, members of
Boulevard's senior management, together with Goldman, Sachs & Co. and
Boulevard's legal counsel, Wildman, Harrold, Allen & Dixon, reviewed with the
Boulevard Board of Directors, among other things, the background of the
proposed transaction, including the strategic rationale for the transaction,
due diligence findings, financial and valuation analyses of the transaction and
terms of the proposed agreements.
After discussion of the FBS bid, the Board again discussed other alternatives
available to Boulevard, including remaining independent and, after presentation
and recommendations by management and receipt of an oral opinion from Goldman,
Sachs & Co., that, as of September 29, 1993, the exchange ratio was fair to the
holders of Boulevard Common Stock, the Boulevard Board of Directors approved
the Merger and
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authorized execution of the Merger Agreement, including the Warrant Agreement.
Goldman, Sachs & Co. has since delivered its written opinion to the Board of
Directors that, as of September 29, 1993, the exchange ratio was fair to the
holders of Boulevard Common Stock.
REASONS OF BOULEVARD FOR THE MERGER; RECOMMENDATION OF BOULEVARD BOARD OF
DIRECTORS
The Board of Directors of Boulevard believes that the Merger is in the best
interest of Boulevard and Boulevard shareholders and has unanimously approved
the Merger Agreement. The Board of Directors of Boulevard approved the Merger
Agreement after careful study and evaluation. The Board of Directors of
Boulevard consulted with its legal and financial advisors as well as with
management of Boulevard and FBS and carefully considered a variety of factors
in evaluating the Merger, although it did not assign any relative or specific
weights to the factors considered. Among the factors it considered were the
following:
(i) Boulevard's business, results of operations, prospects and financial
condition, including its capital position, regulatory requirements and
future growth prospects were it to remain independent.
(ii) Economic conditions and prospects for the markets in which Boulevard
operates, particularly the greater Chicago metropolitan area and the
surrounding counties, in light of, among other things, intensifying
competitive pressures in the financial services industry in general, and,
in particular, in Boulevard's markets.
(iii) The concentration in the Chicago metropolitan banking industry and
the growing disparity in resources between larger bank holding companies
and Boulevard and the effect of such disparity on Boulevard's ability to
provide state-of-the-art services and products and otherwise compete in the
marketplace.
(iv) The historical market value, book value, earnings per share and
dividends of Boulevard as compared to the historical market value, book
value, earnings per share and dividends of FBS.
(v) The consideration offered by FBS in the Merger Agreement, including
the premium represented by the consideration offered to Boulevard
shareholders in relation to the historical per share market value of
Boulevard's Common Stock.
(vi) The strategic and competitive advantages expected to result from the
combination of Boulevard and FBS.
(vii) The anticipated tax free nature of the Merger to Boulevard's
shareholders receiving FBS Common Stock in exchange for shares of Boulevard
Common Stock.
(viii) The management, business, results of operations and financial
condition of FBS.
(ix) The future prospects of FBS including the prospect for a higher
current trading value for FBS shares and the anticipated strength and
synergies (including cost savings and efficiencies) anticipated from the
combination of Boulevard and FBS.
(x) The financial terms of other recent business combinations in the
banking industry.
(xi) The increased consolidation among banking institutions and the
increased competition from larger banking institutions in the markets in
which Boulevard competes.
(xii) The price obtainable for Boulevard's shares at this time compared
with the risks involved and possible price available for the shares at a
later date in light of Boulevard's prospects.
(xiii) The financial advice rendered by Goldman, Sachs & Co. to the
Boulevard Board of Directors and the opinion rendered by Goldman, Sachs &
Co. that the exchange ratio was fair to Boulevard's common shareholders.
In addition, the Board of Directors considered the impact of the Merger on
its depositors, employees, customers and the communities in which it operates.
The Board of Directors also determined that the Merger is preferable to the
other alternatives available to Boulevard, such as remaining independent and
growing
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internally or through future acquisitions, or remaining independent for a short
period of time with a view toward being acquired in the future, or engaging in
a merger of equals with another party.
In connection with its evaluation of the transaction, the Board of Directors
reviewed various material including (i) historical information regarding
Boulevard and FBS; (ii) Goldman, Sachs & Co.'s fairness opinion and its
financial analysis of Boulevard and FBS; (iii) various analysts' reports and
public documents describing FBS' business and prospects; and (iv) drafts of the
Merger Agreement and related documents.
The Boulevard Board of Directors believes that FBS is currently well managed.
The Board of Directors believes that Boulevard's business will benefit
substantially from the resources and experience of FBS and that the Merger will
produce an entity better able to meet competitive challenges inherent in the
changing banking industry. The Board of Directors further believes that its
shareholders will benefit from the proposed Merger through the opportunity to
obtain, in a tax free exchange, ownership of shares of a larger enterprise with
greater financial resources.
For the reasons set forth above, the Board of Directors of Boulevard
unanimously recommends that Boulevard shareholders vote FOR the approval and
adoption of the Merger Agreement.
REASONS OF FBS FOR THE MERGER
FBS' acquisition of Boulevard will provide FBS with entry into the Chicago
metropolitan market, which FBS believes has favorable growth and demographic
characteristics, and is expected to result in significant cost savings in
Boulevard's operations. See "--Management and Operations of Boulevard Following
the Merger." FBS believes that Boulevard's focus on lending to small and middle
market businesses complements FBS' business lending strategies and that
Boulevard's recent emphasis on marketing consumer financial products and
services creates opportunities for FBS' consumer-oriented products and
services.
OPINION OF BOULEVARD FINANCIAL ADVISER
The Board of Directors of Boulevard retained Goldman, Sachs & Co. to advise
it as to the fairness to the holders of Boulevard Common Stock of the exchange
ratio of .8132 shares of FBS Common Stock to be received for each share of
Boulevard Common Stock (the "Exchange Ratio") pursuant to the Merger Agreement.
Goldman, Sachs & Co., as part of their investment banking business, are
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. The Board
of Directors of Boulevard selected Goldman, Sachs & Co. on the basis of their
ability to evaluate the fairness of the Exchange Ratio to be received pursuant
to the Merger Agreement, their qualifications, their previous experience and
their reputation in the banking and investment banking communities.
Goldman, Sachs & Co. have delivered their written opinions to the Board of
Directors of Boulevard to the effect that, as of September 29, 1993 (the
"September Opinion") and the date of this Proxy Statement/Prospectus, the
Exchange Ratio pursuant to the Merger Agreement is fair to the holders of
Boulevard Common Stock.
The full text of the opinion of Goldman, Sachs & Co., dated the date of this
Proxy Statement/Prospectus, which sets forth the assumptions made, matters
considered and limits on the review undertaken, is attached as Appendix B to
this Proxy Statement/Prospectus. Boulevard shareholders are urged to read such
opinion
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in its entirety. The summary of the opinion of Goldman, Sachs & Co. set forth
in this Proxy Statement/Prospectus is qualified in its entirety by reference to
the full text of such opinion. Goldman, Sachs & Co.'s opinion is addressed only
to the Board of Directors of Boulevard, is directed only to the Exchange Ratio
and does not constitute a recommendation to any Boulevard shareholder as to how
such shareholder should vote at the Special Meeting. The September Opinion was
substantially identical to the opinion attached hereto.
In connection with the September Opinion, Goldman, Sachs & Co., among other
things, (a) reviewed the Merger Agreement, the Warrant Agreement dated
September 29, 1993, between FBS and Boulevard (the "Warrant Agreement"),
certain publicly available information concerning Boulevard and FBS, certain
other communications from Boulevard and FBS to their respective stockholders,
and certain internal financial analyses and forecasts for Boulevard and FBS
prepared by their respective managements; (b) held discussions with members of
the senior management of Boulevard and FBS regarding the past and current
business operations, financial condition and future prospects of their
respective companies; (c) reviewed with members of senior management of
Boulevard the results of Boulevard's due diligence examination of FBS, and held
discussions with the independent auditors of each of Boulevard and FBS
regarding the financial and accounting affairs of Boulevard and FBS; and (d)
reviewed the reported price and trading activity of shares of Boulevard Common
Stock and shares of FBS Common Stock, compared certain financial and stock
market information for Boulevard and FBS with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the banking industry
specifically and in other industries generally and performed such other studies
and analyses as they considered appropriate.
Goldman, Sachs & Co. relied without independent verification upon the
accuracy and completeness of all of the financial and other information
reviewed by them for purposes of their opinion. In that regard, Goldman, Sachs
& Co. assumed, with Boulevard's consent, that the financial and operating
forecasts, including, without limitation, projected cost savings and operating
synergies resulting from the Merger and projections regarding under performing
and non-performing assets and net charge-offs have been reasonably prepared on
a basis reflecting the best currently available judgments and estimates of
Boulevard and FBS and will be realized in the amounts and at the times
contemplated thereby. In addition, Goldman, Sachs & Co. assumed, with
Boulevard's consent, that allowances for losses with respect to loan portfolios
for each of Boulevard and FBS are in the aggregate adequate to cover all such
losses. Goldman, Sachs & Co. did not review individual credit files nor did
they make an independent evaluation or appraisal of the assets and liabilities
of Boulevard or FBS or any of their respective subsidiaries, and Goldman, Sachs
& Co. have not been furnished with any such evaluation or appraisal.
Set forth below is a summary of selected analyses performed by Goldman, Sachs
& Co. in reaching their opinions.
SUMMARY OF PROPOSALS
Goldman, Sachs & Co. summarized the sale process, including the parties
contacted and the preliminary level of interest expressed by each such party,
including the exchange ratios, the value of the aggregate consideration offered
based on the share price for the bidder's shares, the premiums of the offer
value over market value, and the resulting multiples of 1994 estimated earnings
per share ("EPS") and tangible book value of Boulevard.
Goldman, Sachs & Co. also compared the significant terms of the FBS proposal
to that of other bidders submitting final proposals, including the value of the
consideration offered. This analysis showed, among other things, that the value
of the FBS proposal, based upon the average closing share price of FBS Common
Stock for the five days immediately prior to the execution of the Merger
Agreement, was $25.25 per share of Boulevard Common Stock, which was higher
than the value per share offered by the other final bidders.
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COMPARISON OF FBS WITH OTHER BIDDERS
Goldman, Sachs & Co. compared selected historical stock market, earnings and
dividend data and financial ratios for FBS to the corresponding data and ratios
for other bidders that submitted final proposals to merge with Boulevard (FBS
and such other bidders are referred to collectively herein as the "Bidder
Group"). Such data and ratios included: tangible common equity to tangible
assets; non-performing assets to loans plus other real estate owned; loan loss
reserves to non-performing loans; 1993 estimated and 1994 estimated price to
earnings multiples based on Institutional Brokerage Estimate System ("IBES")
median estimates as of September 9, 1993; price to book value; dividend payout
ratios; dividend yields; latest twelve months ("LTM") return on average assets;
LTM return on average equity; efficiency ratio (non-interest expense divided by
net interest income plus non-interest income); and certain asset quality
ratios. Such data and ratios were based on data at or for the twelve months
ended June 30, 1993 and were pro forma for material pending acquisitions. This
analysis showed that the Bidder Group had a mean tangible common equity to
tangible asset ratio of 6.0% and a median of 6.1% as compared to a 6.3% ratio
for FBS; a mean non-performing assets to loans plus other real estate owned
ratio of 2.04% and a median of 1.91% as compared with a 1.96% ratio for FBS; a
mean loan loss reserves to non-performing loans ratio of 155.5% and a median of
158.3% as compared to 172.7% for FBS; a mean 1993 estimated price to earnings
multiple of 10.3 and a median of 10.7 as compared with 11.8 for FBS; a mean
1994 estimated price to earnings multiple of 9.5 and a median of 9.5 as
compared with 10.0 for FBS; a mean price to book value multiple of 1.7 and a
median of 1.7 as compared with 1.8 for FBS; a mean dividend payout of 31.1% and
a median of 33.4% as compared to 37.7% for FBS; a mean dividend yield of 3.1%
and a median of 2.9% as compared with 3.2% for FBS; a mean LTM return on
average assets of 1.12% and a median of 1.16% as compared with 1.29% for FBS; a
mean LTM return on average equity of 16.61% and a median of 16.72% as compared
with 15.10% for FBS; and a mean efficiency ratio (non-interest expense divided
by net interest income plus non-interest income) of 63.7% and a median of 63.7%
as compared with 61.9% for FBS.
In addition, Goldman, Sachs & Co. analyzed certain pro forma effects
resulting from the proposals submitted by the Bidder Group from the perspective
of such bidders and Boulevard, including pick-up/dilution in 1993 estimated EPS
and projected pick-up/dilution in 1994 estimated EPS based on IBES median
estimates as of September 9, 1993, the percentage change in the ratio of
tangible common equity to tangible assets, and the break even expense savings
in Boulevard's non-interest expense necessary for the acquisition to be anti-
dilutive to such bidder in 1994. Goldman, Sachs & Co. also calculated the net
present value at September 23, 1993 of $24 and $27 worth of the stock of each
member of the Bidder Group based on the present value of five years of
dividends earned on such stock and the then value of such stock at the end of
five years (i.e., at September 23, 1998). In performing this calculation,
Goldman, Sachs & Co. assumed three different earnings growth rates (10%, 12%
and 15%), terminal price to earnings multiples ranging from 8x to 13x, a
dividend pay-out of 35%, that dividends would be reinvested at a 4% after-tax
rate and a 12% discount rate for equity.
STOCK PRICE HISTORY
Goldman, Sachs & Co. examined the history of the stock trading price and
volume for the Boulevard Common Stock and the relationship between movements of
such stock prices to prices in the S&P 56 Financial and the Comparable Group
(as defined below).
COMPARISON WITH SELECTED COMPANIES
Goldman, Sachs & Co. compared selected financial ratios for Boulevard to the
corresponding ratios for certain other peer financial institutions of Boulevard
(the "Comparable Group"). Such ratios included: tangible common equity to
tangible assets; non-performing assets to loans plus other real estate owned;
loan loss reserves to non-performing loans; price to earnings based on
estimates of future earnings; and price to book value. This analysis showed
that the Comparable Group had a mean tangible common equity to tangible asset
ratio of 7.85% and a median of 6.93% as compared to a 5.67% ratio for
Boulevard; a mean non-
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performing assets to loans plus other real estate owned ratio of 1.8% and a
median of 1.9% as compared to a 4.6% ratio for Boulevard; a mean loan loss
reserves to non-performing loans ratio of 136.9% and a median of 132.1% as
compared to 117.6% for Boulevard; a mean 1993 estimated price-to-earnings
multiple (based on IBES median estimates as of September 16, 1993) of 14.8 and
a median of 14.6 as compared to 24.5 for Boulevard; a mean 1994 estimated
price-to-earnings multiple (based on IBES median estimates as of September 16,
1993) of 13.4 and a median of 13.1 as compared to 16.4 for Boulevard; and a
mean price to book value multiple of 1.6 and a median of 1.6 as compared to 1.8
for Boulevard.
ANALYSIS OF SELECTED MERGER TRANSACTIONS
Goldman, Sachs & Co. reviewed selected bank mergers involving acquisitions
over $100 million announced in 1992 and 1993 for the U.S. as a whole and for
the Midwest region in particular since 1991.
Goldman, Sachs & Co. calculated the percentage premiums of the offer value
over market value of the acquired company, the price/LTM EPS multiple and the
price/tangible book value multiple in each such merger. The calculations for
the transactions involving mergers over $100 million in 1993 in the U.S. as a
whole yielded a range of percentage premiums of offer values over market values
of 8% to 57% with a median of 32%; a price/LTM EPS multiple range of 7.2x to
39.9x with a median multiple of 16.3x; and a price/tangible book multiple range
of 1.2x to 2.7x with a median multiple of 2.3x. The calculations for the
transactions involving mergers over $100 million in 1992 in the U.S. as a whole
yielded a range of percentage premiums of offer values over market values of
(54)% to 87% with a median of 40%; a price/LTM EPS multiple range of 9.0x to
33.1x with a median multiple of 17.7x; and a price/tangible book multiple range
of 0.9x to 3.2x with a median multiple of 2.0x. For the Midwest region, the
calculations yielded a range of percentage premiums of offer values over market
values of 3% to 108% with a median of 37%; a price/LTM EPS multiple range of
9.3x to 18.2x with a median multiple of 16.2x; and a price/tangible book
multiple range of 1.3x to 3.0x with a median multiple of 2.05x. The percentage
premium of the offer value over market value represented by the Exchange Ratio
was 14.5% based on the market price of Boulevard Common Stock on September 29,
1993, 22.4% based on the market price of Boulevard Common Stock one day before
the announcement that Boulevard had retained Goldman, Sachs & Co. as their
financial advisor in connection with the possible sale of Boulevard, and 50%
based on the average stock price one month before July 29, 1993 (on July 29,
1993, Boulevard declared a dividend increase and, after this date, Boulevard's
trading volume increased substantially). The transaction has a price/tangible
book value multiple of 2.14x and a price/LTM EPS multiple of 30.3x.
No company or transaction used in the above analyses as a comparison is
identical to Boulevard, FBS or the contemplated transaction. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading value of the companies to which they are being
compared.
NET PRESENT VALUE ANALYSIS
Goldman, Sachs & Co. calculated the present value of a share of Boulevard
Common Stock at September 29, 1993 by adding the present value of five years of
dividends per share and the then value of a share of Boulevard Common Stock at
the end of five years (i.e., at September 29, 1998). In performing this
calculation, Goldman, Sachs & Co. applied three different income growth rates
to management's 1994 projected income (5%, 10% and 15%), three different
discount rates for equity (10%, 12.5% and 15%), terminal price to earnings
multiples ranging from 10x to 16x and a dividend pay-out ratio over the five
years of 35%. On the basis of such varying assumptions, Goldman, Sachs & Co.
calculated a present value per share of Boulevard Common Stock on a stand-alone
basis ranging from $10.45 per share to $27.23 per share.
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PRO FORMA MERGER ANALYSIS
Goldman, Sachs & Co. analyzed certain pro forma effects resulting from the
Merger from the perspective of FBS, including pick-up/dilution in 1993
estimated EPS and projected pick-up/dilution in 1994 estimated EPS, the
percentage change in the ratio of tangible common equity to tangible assets,
and the break even expense savings in Boulevard's non-interest expense
necessary for the Merger to be anti-dilutive to FBS in 1994. In conducting this
analysis Goldman, Sachs & Co. assumed, based on data provided to it by FBS,
cost savings to FBS of 40%. Goldman, Sachs & Co. further assumed positive
goodwill amortized over 20 years and negative goodwill amortized over 10 years,
opportunity cost of cash of 6% and a tax rate of 34%. This analysis, based on
the assumptions described above and assuming per share purchase prices for
Boulevard Common Stock ranging from $22 to $30, showed (assuming cost savings
resulting from the Merger being phased in at 10% in 1993 and 100% in 1994)
potential pick-up in 1993 estimated EPS ranging from 0.9% to 2.4% and potential
pick-up in 1994 estimated EPS ranging from 5.3% to 3.2%.
In connection with their written opinion dated as of the date of this Proxy
Statement/Prospectus, Goldman, Sachs & Co. also reviewed this Proxy
Statement/Prospectus, performed procedures to update certain of their analyses
and reviewed the assumptions on which such analyses were based and the factors
considered in connection therewith.
Although the summary set forth above does not purport to be a complete
description of the analyses performed by Goldman, Sachs & Co., the material
analyses performed by Goldman, Sachs & Co. in rendering their opinions have
been summarized above. However, the preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Goldman,
Sachs & Co. believe that their analyses and the summary set forth above must be
considered as a whole and that selecting portions of their analyses, without
considering all analyses, or selecting part or all of the above summary,
without considering all factors and analyses, would create an incomplete view
of the processes underlying the analyses set forth in the Goldman, Sachs & Co.
opinions. In addition, Goldman, Sachs & Co. may have given various analyses
more or less weight than other analyses, but no analysis was given materially
more weight than any other analysis. Also, Goldman, Sachs & Co. may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described above
should not be taken to be Goldman, Sachs & Co.'s view of the actual value of
Boulevard or the combined company. The fact that any specific analysis has been
referred to in the summary above is not meant to indicate that such analysis
was given greater weight than any other analysis.
In performing their analyses, Goldman, Sachs & Co. made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Boulevard and FBS.
The analyses performed by Goldman, Sachs & Co. are not necessarily indicative
of actual values or actual future results, which may be significantly more or
less favorable than suggested by such analyses. Such analyses were prepared
solely as part of Goldman, Sachs & Co.'s analysis of the fairness of the
Exchange Ratio to Boulevard's stockholders. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold
or the prices at which any securities may trade at the present time or at any
time in the future. In addition, as described above, Goldman, Sachs & Co.'s
opinion to the Boulevard Board of Directors was one of many factors taken into
consideration by that Board in making its determination to approve the Merger
Agreement.
Pursuant to a letter agreement dated June 23, 1993 (the "Engagement Letter"),
Boulevard has paid Goldman, Sachs & Co. for its services a fee of $100,000,
which will be applied against any transaction fee which may become payable
pursuant to the Engagement Letter. The Engagement Letter also provides that if
a sale of Boulevard is accomplished in one or a series of transactions,
Boulevard will pay Goldman, Sachs & Co. a transaction fee in cash equal to 1.1%
of the aggregate consideration paid in such transactions. If any portion of the
aggregate consideration is paid in the form of securities, the value of such
securities, for purposes of calculating the fees payable to Goldman, Sachs &
Co., will be determined by the average of the
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last sales prices for such securities on the five trading days ending five days
prior to the consummation of the transaction. Fees under the Engagement Letter
are payable to Goldman, Sachs & Co. upon consummation of each transaction.
Boulevard has also agreed to pay Goldman, Sachs & Co. for their reasonable out-
of-pocket expenses and to indemnify Goldman, Sachs & Co. against certain
liabilities.
Goldman, Sachs & Co. have also performed various investment banking services
for FBS from time to time, including having acted as co-managing underwriter of
a public offering of the Series 1989A and Series 1989B cumulative preferred
stock of FBS in 1989. In connection with such services, Goldman, Sachs & Co.
received customary compensation.
TERMS OF THE MERGER; CONSIDERATION TO BE RECEIVED BY BOULEVARD SHAREHOLDERS
At the time the Merger becomes effective, Newco, a newly-formed, wholly-owned
subsidiary of FBS, will merge with and into Boulevard, with Boulevard as the
surviving corporation. As a result of the Merger, Boulevard will become a
wholly-owned subsidiary of FBS. The certificate of incorporation and bylaws of
Newco as in effect immediately prior to the Merger will be the certificate of
incorporation and bylaws of the surviving corporation until further amended as
provided therein and in accordance with law; provided, that upon the
effectiveness of the Merger, the name of the surviving corporation will be
changed to "Boulevard Bancorp, Inc." When the Merger becomes effective, each
issued and outstanding share of Boulevard Common Stock will be converted into
.8132 shares of FBS Common Stock. See "Description of FBS Capital Stock." At
such time, (i) each outstanding option to purchase shares of Boulevard Common
Stock issued pursuant to Boulevard's 1988 Equity Participation Plan, whether
vested or unvested, will, with the consent of the holders thereof, be converted
into options to purchase FBS Common Stock and will become fully vested (see "--
Effect on Boulevard Employee Benefit Plans and Stock Plans"); (ii) each
outstanding restricted share of Boulevard Common Stock issued pursuant to
Boulevard's 1988 Equity Participation Plan, whether vested or unvested, will be
converted into fully vested shares of FBS Common Stock on the same basis as
other shares of Boulevard Common Stock (see "--Effect on Boulevard Employee
Benefit Plans and Stock Plans"); and (iii) each warrant to purchase Boulevard
Common Stock originally issued in connection with Boulevard's acquisition of
First National Bank of Des Plaines will, in accordance with its terms, be
deemed modified so as to provide that the holders thereof shall receive upon
exercise shares of FBS Common Stock. The Merger Agreement requires Boulevard to
redeem its outstanding Class D Series 1 Preferred Stock prior to the effective
date of the Merger at par plus accrued and unpaid dividends. See "--Conduct of
Boulevard Pending the Merger," "--Interests of Certain Persons in the Merger--
Redemption of Preferred Stock" and "Description of Boulevard Capital Stock--
Preferred Stock."
Because the exchange ratio of FBS Common Stock for Boulevard Common Stock is
fixed, it will not compensate Boulevard shareholders for decreases in the
market price of FBS Common Stock which could occur before the Merger becomes
effective. As a result, in the event the market price of FBS Common Stock
decreases, the value of the FBS Common Stock to be received in the Merger in
exchange for Boulevard Common Stock would decrease, and, in the event the
market price of FBS Common Stock instead increases, the value of the FBS Common
Stock to be received in the Merger in exchange for Boulevard Common Stock would
increase. The market prices of FBS Common Stock and Boulevard Common Stock as
of a recent date are set forth herein under "Summary--Markets and Market
Prices," and Boulevard shareholders are advised to obtain recent market
quotations for FBS Common Stock and Boulevard Common Stock. No assurance can be
given as to the market prices of FBS Common Stock or Boulevard Common Stock on
the date the Merger becomes effective or as to the market price of FBS Common
Stock thereafter.
Notwithstanding the foregoing, the Merger Agreement may be abandoned and
terminated by Boulevard prior to the effective date of the Merger, whether
before or after any shareholder action, in the event of a "Significant Decline"
(as defined below) in the average closing price of FBS Common Stock (the "FBS
Common Average Closing Price") as reported on the NYSE for the 20 consecutive
trading days commencing on the first business day following the date the
Federal Reserve Board issues an order approving consummation of the Merger (the
"20-Day Calculation Period"). A "Significant Decline" shall be deemed to
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have occurred if (i) the FBS Common Average Closing Price is less than 85% of
the closing price for FBS Common Stock on the date of execution of the Merger
Agreement (i.e., September 29, 1993) as reported on the NYSE, and (ii) the
number obtained by dividing the FBS Common Average Closing Price by the closing
price of FBS Common Stock as reported on the NYSE on the date of execution of
the Merger Agreement is less than the number obtained by dividing the "Final
Index Price" (as defined below) by the "Initial Index Price" (as defined below)
and subtracting .15 from such quotient. The closing price for FBS Common Stock
as reported on the NYSE on September 29, 1993 was $33.375 per share, and 85% of
such amount is $28.37 per share. For purposes of the foregoing provisions:
(i) The term "Index Group" means all of those 24 companies listed on
Appendix C to this Proxy Statement/Prospectus, the common stock of which is
publicly traded and as to which there is no pending publicly announced
proposal at any time during the 20-Day Calculation Period for such company
to be acquired or to acquire another company in exchange for its stock. In
the event that any such company or companies are so removed from the Index
Group, the weights attributed to the remaining companies shall be adjusted
proportionately.
(ii) The term "Initial Index Price" means the weighted average (weighted
in accordance with the factors listed on Appendix C to this Proxy
Statement/Prospectus) of the closing prices on the trading day immediately
preceding the public announcement of the Merger Agreement of the companies
comprising the Index Group.
(iii) The "Final Price" of any company belonging to the Index Group shall
mean the average of the daily closing sale prices of a share of common
stock of such company, as reported in the consolidated transaction
reporting system for the market or exchange on which such common stock is
principally traded, during the 20-Day Calculation Period.
(iv) The term "Final Index Price" means the weighted average (weighted in
accordance with the factors listed on Appendix C to this Proxy
Statement/Prospectus) of the Final Prices for all of the companies
comprising the Index Group.
(v) If FBS or any company belonging to the Index Group declares a stock
dividend or effects a reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the date of
the Merger Agreement and the end of the 20-Day Calculation Period, the
closing prices for the common stock of such company shall be appropriately
adjusted for the purposes of the definitions above so as to be comparable
to the price on the date of the Merger Agreement.
The Merger Agreement provides that if, prior to the effective date of the
Merger, (i) FBS shall declare a stock dividend or stock distribution upon or
subdivide, split up, reclassify, recapitalize or combine FBS Common Stock or
declare a dividend, or make a distribution on FBS Common Stock in any security
convertible into FBS Common Stock, or (ii) FBS shall take any other action
having a similar effect, then appropriate adjustment or adjustments will be
made in the exchange rate of FBS Common Stock for Boulevard Common Stock.
No certificate for fractional shares of FBS Common Stock will be issued by
FBS in connection with the conversion contemplated by the Merger, but in lieu
thereof, any holder of Boulevard Common Stock shall, upon surrender of the
certificate or certificates representing such Boulevard Common Stock, be paid
cash without interest by FBS for such fractional share on the basis of the
closing price of the FBS Common Stock on the NYSE on the third day immediately
preceding the effective date of the Merger during which shares of FBS Common
Stock are traded on the NYSE as reported in The Wall Street Journal.
Shares of FBS capital stock and Newco capital stock issued and outstanding at
the time the Merger becomes effective will remain issued and outstanding
thereafter and will not be affected by the Merger.
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EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of articles of merger
relating thereto with the Secretary of State of Delaware. The effective date of
the Merger will be agreed to by FBS and Boulevard, provided that in no event
will the date designated by FBS as the effective date be later than 31 days
following the date on which approvals of the Federal Reserve Board and any
other regulatory authorities have been received and any required waiting
periods with respect thereto have expired. The Merger cannot become effective
until Boulevard shareholders have approved and adopted the Merger Agreement,
all required regulatory approvals and actions have been obtained and taken, and
a 30-day waiting period following Federal Reserve Board approval has expired.
See "--Regulatory Approvals Required." Thus, there can be no assurance as to
whether or when the Merger will become effective.
EXCHANGE OF BOULEVARD COMMON STOCK CERTIFICATES
As soon as practicable after the Merger becomes effective, FBS or an Exchange
Agent designated by FBS will send a notice and transmittal form to each holder
of Boulevard Common Stock of record at the time the Merger becomes effective
advising such holder of the effectiveness of the Merger and of the procedure
for surrendering to FBS or such Exchange Agent their certificates formerly
evidencing Boulevard Common Stock in exchange for new certificates evidencing
FBS Common Stock. Upon surrender to FBS or such Exchange Agent of one or more
certificates formerly evidencing Boulevard Common Stock, together with a
properly completed and signed letter of transmittal, there will be issued and
mailed to the holder thereof a new certificate or certificates representing the
number of whole shares of FBS Common Stock to which such holder is entitled
under the Merger Agreement and, where applicable, a check for the amount of
cash payable in lieu of a fractional share of FBS Common Stock. BOULEVARD
SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THE
LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS FROM FBS OR SUCH EXCHANGE AGENT.
After the Merger becomes effective, each certificate formerly representing
Boulevard Common Stock will be deemed for all purposes to evidence the
ownership of the number of shares of FBS Common Stock into which such shares
have been converted pursuant to the Merger Agreement, except that, until
surrender of such certificates, the holder thereof will not be entitled to
receive any dividend or other payment or distribution payable to holders of FBS
Common Stock Common. Upon such surrender (or, in lieu of surrender, other
provisions reasonably satisfactory to FBS as are made as set forth in the next
following paragraph), there will be paid to the person entitled thereto the
aggregate amount of dividends or other payments or distributions (in each case
without interest) which became payable after the effective date of the Merger,
to the extent not previously paid to such person, on the whole shares of FBS
Common Stock represented by the certificates issued upon such surrender and
exchange or in accordance with such other provisions, as the case may be. For a
period of 60 days following the effective date of the Merger, former
shareholders of Boulevard will be entitled to vote at any meeting of FBS
shareholders the number of whole shares of FBS Common Stock into which their
respective shares of Boulevard Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing such
Boulevard Common Stock for certificates representing FBS Common Stock. After
the effective date of the Merger, the holders of certificates formerly
representing shares of Boulevard Common Stock will cease to have rights with
respect to such shares and, except as aforesaid, their sole rights will be to
exchange such certificates for shares of FBS Common Stock in accordance with
the Merger Agreement.
If any Boulevard shareholder is unable to produce his or her Boulevard stock
certificate for surrender as described above, such shareholder may instead
deliver to FBS (i) evidence to the reasonable satisfaction of FBS that such
certificate has been lost, wrongfully taken or destroyed, (ii) such security or
indemnity as reasonably may be requested by FBS to save it harmless, and (iii)
evidence to the reasonable satisfaction of FBS that such person is the owner of
the shares theretofore represented by such certificate and is entitled to
receive shares of FBS Common Stock pursuant to the Merger Agreement. Upon the
delivery of such items, FBS, in the absence of actual notice to it that any
shares theretofore represented by such certificate have been
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acquired by a bona fide purchaser, will deliver to such person the certificate
or certificates representing shares of FBS Common Stock (and any fractional
share payment) which such person would have been entitled to receive upon
surrender of such lost, wrongfully taken or destroyed certificate representing
shares of Boulevard Common Stock.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger will occur only if the Merger Agreement is approved and adopted by
the requisite vote of Boulevard shareholders. In addition, consummation of the
Merger is subject to the satisfaction of certain other conditions, unless
waived (to the extent such waiver is permitted by law). A failure of any of
such conditions to be satisfied, if not waived, would prevent consummation of
the Merger.
The obligations of both FBS and Boulevard to effect the Merger are subject to
the satisfaction of the following conditions at or prior to the effective date
of the Merger, among others: (i) the parties to the Merger Agreement shall have
received all necessary approvals of governmental agencies and authorities of
the transactions contemplated by the Merger Agreement, each of such approvals
shall remain in full force and effect at the effective date of the Merger, and
at such effective date, (a) no such party shall be subject to any order, decree
or injunction of a court or governmental agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger and (b) no statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any governmental authority which prohibits or makes
illegal consummation of the Merger; (ii) the registration statement of which
this Proxy Statement/Prospectus is a part shall have become effective by an
order of the Commission, the shares of FBS Common Stock to be exchanged in the
Merger shall have been qualified or exempted under all applicable state
securities laws, there shall have been no stop order issued or threatened by
the Commission that suspends or would suspend the effectiveness of such
registration statement, and no proceeding by the Commission shall have been
commenced, pending or overtly threatened for such purpose; (iii) the shares of
FBS Common Stock to be issued to the holders of Boulevard Common Stock shall be
listed for trading on the NYSE; and (iv) Wildman, Harrold, Allen & Dixon,
counsel to Boulevard, shall have issued its written opinion, dated as of the
effective date of the Merger, satisfactory to Boulevard, substantially to the
effect that for federal income tax purposes, (a) the statutory merger of Newco
with and into Boulevard will constitute a reorganization within the meaning of
Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Code, (b) no gain or loss
will be recognized by Boulevard as a consequence of the transactions
contemplated in the Merger Agreement, (c) no gain or loss will be recognized to
the shareholders of Boulevard on the exchange of their shares of Boulevard
Common Stock for shares of FBS Common Stock (disregarding for this purpose any
cash received for fractional share interests to which they may be entitled),
(d) the federal income tax basis of the FBS Common Stock (including fractional
share interests to which they may be entitled) received by the shareholders of
Boulevard Common Stock for their shares of Boulevard Common Stock will be the
same as the federal income tax basis of the Boulevard Common Stock surrendered
in exchange therefor, and (e) the holding period of the FBS Common Stock
received by a shareholder of Boulevard will include the period for which the
Boulevard Common Stock exchanged therefor was held, provided the exchanged
Boulevard Common Stock was held as a capital asset by such shareholder on the
date of the exchange; and there shall exist as of, at or immediately prior to,
such effective date, no facts or circumstances which would render such opinion
inapplicable in any respect to the transactions to be consummated under the
Merger Agreement.
The obligations of Boulevard to effect the Merger are subject to the
satisfaction of the following conditions at or prior to the effective date of
the Merger, among others: (i) there shall not have been any change in the
consolidated financial condition, aggregate net assets, shareholders' equity,
business, or operating results of FBS and its subsidiaries, taken as a whole,
from June 30, 1993 to such effective date that has had or would reasonably be
expected to have a material adverse effect on the business, financial condition
or operations of FBS and its subsidiaries, taken as a whole, or on its ability
to consummate the transactions contemplated by the Merger Agreement; (ii) all
representations by FBS and Newco contained in the Merger Agreement shall be
true in all material respects at, or as of, such effective date as though such
representations were made at and as of said date, except for changes
contemplated by the Merger Agreement and except for
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representations as of a specified time other than such effective date, which
shall be true in all material respects at such specified time; (iii) Boulevard
shall have received an opinion letter dated as of such effective date addressed
to Boulevard from Michael J. O'Rourke, Esq., Executive Vice President and
General Counsel of FBS, to the effect set forth in the Merger Agreement; (iv)
FBS and Newco shall have performed, in all material respects, all agreements
and conditions required by the Merger Agreement to be performed and satisfied
by it at or prior to such effective date; (v) Boulevard shall have received
opinions from Goldman, Sachs & Co. dated as of the date of the Merger Agreement
and as of the date of this Proxy Statement/Prospectus to the effect that, in
the opinion of such firm, the terms of the Merger Agreement are fair to the
holders of Boulevard Common Stock, and the latter opinion shall be in effect as
of the date the Merger Agreement is approved by Boulevard's shareholders; (vi)
FBS shall have furnished Boulevard a certificate, signed by the Chairman or
President or an Executive Vice President and by the Secretary or Assistant
Secretary of FBS and dated as of such effective date certifying as to the form
of and adoption of the resolution of the Board of Directors of FBS approving
the Merger Agreement and the Merger, and to the effect that the conditions
described in (i), (ii), and (iv) above have been fully satisfied as to it; and
(vii) as of such effective date, no suit, action or proceeding shall be pending
or overtly threatened before any court or other governmental agency by the
federal or state government in which it is sought to restrain or prohibit
consummation of the Merger, and no other third party suit, action or proceeding
shall be pending or overtly threatened and no liability or claim shall have
been asserted against FBS, Newco or any of its subsidiaries which Boulevard
shall in good faith determine, with advice of counsel, (a) has a reasonable
likelihood of being successfully prosecuted and (b) if successfully prosecuted,
would materially and adversely affect the benefits under the Merger Agreement
intended for Boulevard and its shareholders.
The obligations of FBS and Newco to effect the Merger are subject to the
satisfaction of the following conditions at or prior to the effective date of
the Merger, among others: (i) there shall not have been any change in the
consolidated financial condition, aggregate net assets, shareholders' equity,
business or operating results of Boulevard and its subsidiaries, taken as a
whole, from June 30, 1993 to the effective date of the Merger that has had or
would reasonably be expected to have a material adverse effect on the business,
financial condition or operations of Boulevard and its subsidiaries, taken as a
whole, or on its ability to consummate the transactions contemplated by the
Merger Agreement; (ii) Boulevard shall not have paid cash dividends from June
30, 1993 to such effective date except as permitted under the Merger Agreement
(see "--Conduct of Boulevard Business Pending the Merger" below); (iii) all
representations by Boulevard contained in the Merger Agreement shall be true in
all material respects at, or as of, such effective date as though such
representations were made at and as of said date, except for changes
contemplated by the Merger Agreement and except for representations as of a
specified time other than such effective date, which shall be true in all
material respects at such specified time; (iv) FBS shall have received an
opinion letter dated as of such effective date addressed to FBS from Wildman,
Harrold, Allen & Dixon, counsel to Boulevard, to the effect set forth in the
Merger Agreement; (v) Boulevard shall have performed, in all material respects,
all agreements and conditions required by the Merger Agreement to be performed
and satisfied by it at or prior to such effective date; (vi) Boulevard shall
have furnished FBS a certificate, signed by the Chairman or President or its
Chief Financial Officer and by the Secretary or Assistant Secretary of
Boulevard and dated as of such effective date as to the form of and adoption of
the resolution of the Board of Directors of Boulevard approving the Merger
Agreement and the Merger, and to the effect that the conditions described in
(i), (iii) and (v) above have been fully satisfied as to it; (vii) FBS shall
have entered into an agreement with Miami Corporation in form and substance
satisfactory to FBS requiring Miami Corporation and individuals, trusts,
corporations and other entities affiliated or associated with Miami Corporation
to maintain certain levels of deposits with the banking subsidiaries of
Boulevard (see "--Conduct of Boulevard Business Pending the Merger" and "--
Interests of Certain Persons in the Merger--Miami Corporation Deposit
Arrangement" below); (viii) there shall not be threatened, instituted or
pending any action or proceeding before any court or governmental authority or
agency, domestic or foreign, (a) challenging or seeking to make illegal, or to
delay or otherwise directly or indirectly to restrain or prohibit, the
consummation of the transactions contemplated by the Merger Agreement or
seeking to obtain material damages in connection with the transactions
contemplated thereby, (b) seeking to prohibit direct or indirect ownership or
operation by FBS
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of all or a material portion of the business or assets of Boulevard or any of
its subsidiaries or of FBS or any of its subsidiaries, or to compel FBS or any
of its subsidiaries or Boulevard or any of its subsidiaries to dispose of or to
hold separately all or a material portion of the business or assets of FBS or
any of its subsidiaries or of Boulevard or any of its subsidiaries, as a result
of the transactions contemplated by the Merger Agreement, or (c) seeking to
require direct or indirect divestiture by FBS of any of its business or assets
or of Boulevard's or its subsidiaries' business or assets, but only insofar as
any action or proceeding threatened, instituted or pending by a party other
than a governmental or quasi-governmental authority or agency shall have a
reasonable likelihood of success on the merits with respect thereto; and (ix)
there shall not be any action taken, or any statute, rule, regulation,
judgment, order or injunction proposed, enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated by
the Merger Agreement by any federal, state or other court, government or
governmental authority or agency, which would reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in (viii) above.
REGULATORY APPROVALS REQUIRED
Under the Merger Agreement, the obligations of both FBS and Boulevard to
consummate the Merger are conditioned upon the receipt of all required
regulatory approvals (without certain restrictions or limitations) and the
lapse of all required regulatory waiting periods. See "--Conditions to
Consummation of the Merger." There can be no assurance that any applicable
regulatory authority will approve or take other required action with respect to
the Merger or as to the date of such regulatory approval or other action. FBS
and Boulevard are not aware of any governmental approvals or actions that are
required in order to consummate the Merger except as described below. Should
such other approval or action be required, it is contemplated that FBS and
Boulevard would seek such approval or action. There can be no assurance as to
whether or when any such other approval or action, if required, could be
obtained.
Federal Reserve Board. The Merger is subject to the prior approval of the
Federal Reserve Board under Section 3(a)(3) of the Bank Holding Company Act.
Under the Bank Holding Company Act, the Federal Reserve Board is required, in
approving a transaction such as the Merger, to take into consideration the
financial and managerial resources and future prospects of the existing and
proposed institutions and the convenience and needs of the communities to be
served. The Bank Holding Company Act prohibits the Federal Reserve Board from
approving the Merger if it would result in a monopoly or be in furtherance of
any combination or conspiracy to monopolize or to attempt to monopolize the
business of banking in any part of the United States. The Bank Holding Company
Act also prohibits the Federal Reserve Board from approving the Merger if its
effect in any section of the country may be substantially to lessen competition
or tend to create a monopoly, or if it would in any other manner result in a
restraint of trade, unless the Federal Reserve Board finds that the anti-
competitive effects of the Merger are clearly outweighed in the public interest
by the probable effect of the transaction in meeting the convenience and needs
of the communities to be served. In addition, under the Community Reinvestment
Act of 1977, as amended, the Federal Reserve Board must take into account the
record of performance of the existing institutions in meeting the needs of the
entire community, including low- and moderate-income neighborhoods, served by
such institutions. Additionally, the acquisition of Boulevard Common Stock by
FBS pursuant to the Option issued to FBS by Boulevard at the time the parties
entered into the Merger Agreement would be subject to approval by the Federal
Reserve Board under Section 3(a)(3) of the Bank Holding Company Act. See "--
Option Granted to FBS." Under the Bank Holding Company Act, the Merger cannot
be consummated until the 30th day following the date of Federal Reserve Board
approval, during which time the United States Department of Justice may
challenge the Merger on antitrust grounds. The commencement of an antitrust
action would stay the effectiveness of the Federal Reserve Board's approval
unless a court specifically ordered otherwise.
State of Illinois. As an "out of state bank holding company" proposing to
acquire control of an Illinois bank holding company, FBS is required to obtain
prior approval of the Merger by the Illinois Commissioner of Banks and Trust
Companies (the "Illinois Commissioner") under the Illinois Bank Holding Company
Act of 1957, as amended (the "Illinois Act"). The application for such approval
is required to contain information
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satisfactory to the Illinois Commissioner to the effect, among other things,
that (i) the acquisition will promote the safety and soundness of the
institution to be acquired; (ii) that the banks already controlled by the
applicant meet the convenience and needs of the communities served by them in
accordance with the Community Reinvestment Act of 1977, and that the applicant
intends adequately to meet the convenience and needs of the communities served
by the Illinois bank holding company proposed to be acquired in accordance with
such Act; and (iii) addressing the issue of how the transaction will bring net
new benefits to Illinois. The Illinois Commissioner may act on such an
application with or without a public hearing, in his or her sole discretion,
and may make approval of such an application subject to specified conditions or
restrictions. Additionally, the acquisition of Boulevard Common Stock pursuant
to the Option would be subject to approval by the Illinois Commissioner.
Current Status of Regulatory Approvals. After submission and review in draft
form, FBS submitted its final application to the Federal Reserve Bank of
Minneapolis on December 17, 1993. FBS submitted its application for approval of
the Merger to the Illinois Commissioner under the Illinois Act on November 23,
1993, and the application was accepted for processing by the Illinois
Commissioner on December 16, 1993.
WAIVER AND AMENDMENT
Any provision of the Merger Agreement may be waived at any time by the party
which is, or the shareholders of which are, entitled to the benefit thereof,
provided that such waiver, if material to Boulevard or its shareholders, may be
made only following due authorization by the Board of Directors of Boulevard.
The Merger Agreement may be amended or modified by an agreement in writing
executed on behalf of the parties thereto, provided that such amendment or
modification may be made only following due authorization by the respective
Boards of Directors of Boulevard, Newco and FBS, and provided further, that
after a favorable vote by the shareholders of Boulevard any such action shall
be taken by Boulevard only if, in the opinion of its Board of Directors, such
amendment or modification will not have any material adverse effect on the
benefits intended under the Merger Agreement for the shareholders of Boulevard
and will not require resolicitation of proxies from such shareholders.
TERMINATION
The Merger Agreement may be terminated at any time before the Merger becomes
effective (i) by either FBS or Boulevard, if any of the conditions to such
party's obligation to consummate the transactions contemplated in the Merger
Agreement shall have become impossible to satisfy; (ii) by FBS if the
information provided pursuant to Boulevard's obligation to update schedules
contained in the Merger Agreement discloses matters that, in the aggregate,
have or would reasonably be expected to have a material adverse effect on the
business, financial condition or operations of Boulevard and its subsidiaries,
taken as a whole, or on Boulevard's ability to consummate the transactions
contemplated by the Merger Agreement; (iii) by either FBS or Boulevard, if the
Merger Agreement and Merger are not duly approved by the shareholders of
Boulevard at a meeting of shareholders (or any adjournment thereof) duly called
and held for such purposes; (iv) by either FBS or Boulevard if the Merger is
not effective on or before September 30, 1994 (unless the failure to consummate
the Merger by such date shall be due to the action or failure to act of the
party seeking to terminate the Merger Agreement in breach of such party's
obligations under such agreement); (v) by either FBS or Boulevard in the event
of a material breach of any covenant contained in the Merger Agreement that is
not cured within 30 days after written notice of such breach is received by
such other party from the party giving notice; and (vi) by mutual written
consent of Boulevard, FBS and Newco. The Merger Agreement also may be
terminated by Boulevard under certain circumstances if the average closing
price of FBS Common Stock on the NYSE for the 20 consecutive trading days
commencing on the first business day after the Federal Reserve Board issues an
order approving the Merger is less than $28.37. See "--Terms of the Merger;
Consideration to be Received by Boulevard Shareholders" above.
In the event of termination of the Merger Agreement caused otherwise than by
a willful breach thereof by any of the parties thereto, none of FBS, Newco or
Boulevard will have any liability to any other party
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under the Merger Agreement of any nature whatever, including without limitation
any liability for damages, except for FBS' obligations related to the printing
of this Proxy Statement/Prospectus (see "--Expenses" below); provided, however,
that the duties of FBS and Newco with respect to confidential information as
set forth in the Merger Agreement will survive any such termination. In the
event of such a termination without willful breach, FBS, Newco and Boulevard
each will pay its own fees and expenses incident to the negotiation,
preparation and execution of the Merger Agreement, the Special Meeting and
actions of the parties and all other acts incidental to, contemplated by or in
pursuance of the transactions contemplated by the Merger Agreement, including
fees and expenses of their respective counsel, accountants and other experts
and advisors. If termination of the Merger Agreement is judicially determined
to have been caused by willful breach thereof, then, in addition to other
remedies at law or equity for such breach, the party found to have willfully
breached the Merger Agreement will indemnify the other parties for their
respective costs, fees and expenses of their counsel, accountants and other
experts and advisors as well as fees and expenses incident to negotiation,
preparation and execution of the Merger Agreement and related documentation and
the Special Meeting and consents.
LIMITATION ON NEGOTIATIONS
The Merger Agreement provides that Boulevard will not, and will cause its
subsidiaries and Boulevard's and such subsidiaries' respective officers,
directors, employees, agents or affiliates, not to, directly or indirectly,
solicit, authorize or initiate submission of, any proposal, offer, tender offer
or exchange offer from any person or entity (including any of its or their
officers or employees) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of all or a
material portion of the assets of, or any equity interest in, Boulevard or any
of such subsidiaries or other similar transaction or business combination
involving Boulevard or any of such subsidiaries, or, unless Boulevard shall
have determined, after receipt of a written opinion of counsel to Boulevard (a
copy of which opinion shall be delivered to FBS), that the Board of Directors
of Boulevard has an obligation to do so, (i) participate in any negotiations in
connection with or in furtherance of any of the foregoing or (ii) permit any
person other than FBS and its representatives to have any access to the
facilities of, or furnish to any person other than FBS and its representatives
any information with respect to, Boulevard or any of such subsidiaries in
connection with or in furtherance of any of the foregoing. The Merger Agreement
also requires Boulevard promptly to notify FBS if any such proposal or offer,
or any inquiry from or contact with any person with respect thereto, is made
and promptly to provide FBS with such information regarding such proposal,
offer, inquiry or contact as FBS may request. The foregoing provisions of the
Merger Agreement may have the effect of discouraging competing offers to
acquire or merge with Boulevard.
OPTION GRANTED TO FBS
Simultaneously with the execution of the Merger Agreement and as a condition
to such execution, Boulevard and FBS executed a Warrant Agreement dated
September 29, 1993 (the "Warrant Agreement"). The Warrant Agreement has been
filed as an exhibit to the registration statement of which this Proxy
Statement/Prospectus is a part. The following description of the Warrant
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Warrant Agreement, which is incorporated herein in its
entirety. Exercise of the Option granted by the Warrant Agreement is subject to
the prior approval of the Federal Reserve Board under the Bank Holding Company
Act and of the Illinois Commissioner under the Illinois Act. See "--Regulatory
Approvals Required."
Under the Warrant Agreement, Boulevard granted FBS the Option to purchase
newly issued shares of Boulevard Common Stock in a number approximately equal
to 19.9% of the number of shares of Boulevard Common Stock outstanding
immediately before exercise of the option. The exercise price of the Option is
$23.25 per share, subject to adjustment under specified circumstances (such
exercise price, as so adjusted, being referred to herein as the "Option
Price"). The Option is exercisable only if both an "Initial Triggering Event"
and a "Subsequent Triggering Event" occur prior to the occurrence of an
"Exercise Termination Event," as such terms are defined below.
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The Warrant Agreement defines the term "Initial Triggering Event" to include
any of the following events or transactions:
(i) Boulevard or any of its subsidiaries, without having received the
prior written consent of FBS, enters into an agreement to engage in an
"Acquisition Transaction" (as defined below) with any person other than FBS
or a subsidiary of FBS, or the Boulevard Board of Directors recommends that
Boulevard shareholders approve or accept any Acquisition Transaction other
than as contemplated by the Merger Agreement;
(ii) Any person other than FBS or a subsidiary of FBS acquires beneficial
ownership (as defined under Section 13(d) of the Exchange Act) or the right
to acquire beneficial ownership of 20% or more of the outstanding shares of
Boulevard Common Stock;
(iii) Any person other than FBS or a subsidiary of FBS makes a bona fide
proposal to Boulevard or its shareholders by public announcement or written
communication that is or becomes the subject of public disclosure to engage
in an Acquisition Transaction;
(iv) After a proposal is made by a third party to Boulevard or its
shareholders to engage in an Acquisition Transaction, Boulevard breaches
any covenant or obligation contained in the Merger Agreement and such
breach would entitle FBS to terminate the Merger Agreement and is not cured
within a specified time period;
(v) Any person other than FBS or a subsidiary of FBS, other than in
connection with a transaction to which FBS has given its prior written
consent, files an application or notice with the Federal Reserve Board or
other federal or state bank regulatory authority, which is accepted for
processing, for approval to engage in an Acquisition Transaction;
(vi) The shareholders of Boulevard shall not have approved the Merger at
the meeting held for that purpose or any adjournment thereof; or
(vii) The Merger Agreement shall have been terminated by Boulevard due to
the failure of Goldman, Sachs & Co. to deliver its opinions to Boulevard,
dated the date of the Merger Agreement and the date of this Proxy
Statement/Prospectus, to the effect that the terms of the Merger Agreement
are fair to the holders of the Boulevard Common Stock.
As used in the Warrant Agreement, the term "Acquisition Transaction" means (a)
a merger or consolidation, or any similar transaction, involving Boulevard or
any "significant subsidiary" (as defined in accounting rules under the Exchange
Act) of Boulevard, (b) a purchase, lease or other acquisition of all or
substantially all of the assets of Boulevard or any such significant subsidiary
or (c) a purchase or other acquisition (including by merger, consolidation,
share exchange or otherwise) of securities representing 20% or more of the
voting power of Boulevard or any such significant subsidiary.
The Warrant Agreement defines the term "Subsequent Triggering Event" to
include any of the following events or transactions: (i) The acquisition by any
person (other than FBS) of beneficial ownership of 30% or more of the then
outstanding Boulevard Common Stock; (ii) Boulevard or any of its subsidiaries,
without having received the prior written consent of FBS, enters into an
agreement to engage in an Acquisition Transaction with any person other than
FBS or a subsidiary of FBS, or the Boulevard Board of Directors recommends that
Boulevard shareholders approve or accept any Acquisition Transaction other than
as contemplated by the Merger Agreement; provided, that for purposes of the
definition of "Subsequent Triggering Event," the percentage referred to in
clause (c) of the definition of "Acquisition Transaction" above shall be 30%
rather than 20%; or (iii) the shareholders of Boulevard shall not have approved
the Merger at the meeting held for that purpose or any adjournment thereof; or
(iv) the Merger Agreement shall have been terminated by Boulevard due to the
failure of Goldman, Sachs & Co. to deliver its opinions to Boulevard, dated the
date of the Merger Agreement and the date of this Proxy Statement/Prospectus,
to the effect that the terms of the Merger Agreement are fair to the holders of
the Boulevard Common Stock.
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The Warrant Agreement defines the term "Exercise Termination Event" to mean
any of (i) the time the Merger becomes effective, (ii) termination of the
Merger Agreement in accordance with its provisions, if such termination occurs
prior to the occurrence of an Initial Triggering Event or (iii) the passage of
18 months after termination of the Merger Agreement, if such termination
follows the occurrence of an Initial Triggering Event.
If the Option becomes exercisable, it may be exercised in whole or in part
upon written notice from FBS within 30 days following the applicable Subsequent
Triggering Event, subject to extension of such period in order to obtain
required regulatory approvals and comply with applicable regulatory waiting
periods and to avoid liability under Section 16(b) of the Exchange Act. The
Option Price is subject to adjustment if Boulevard issues or agrees to issue
shares of Boulevard Common Stock (other than pursuant to specified options,
rights or plans) at a price less than the then current Option Price, and the
Option Price and the number of shares issuable under the Option are subject to
adjustment in the event of specified changes in the capital stock of Boulevard.
Upon the occurrence of a Subsequent Triggering Event that occurs prior to an
Exercise Termination Event, FBS will have the right for 30 days (subject to
extension as described in the Warrant Agreement) to demand that Boulevard
register the shares of Boulevard Common Stock issuable pursuant to the Option
under the Securities Act, subject to specified conditions and limitations. The
Warrant Agreement provides that Boulevard will bear the costs of such demand
registration.
Upon the occurrence of an event described in the next sentence, FBS will have
the right for 30 days (subject to extension as described in the Warrant
Agreement) to require Boulevard to repurchase the Option, or shares of
Boulevard Common Stock acquired by FBS upon exercise of the Option, at a
specified price, subject to specified conditions and limitations. This right
becomes exercisable if any person (whether by merger, consolidation, tender
offer, exchange offer or otherwise) acquires securities representing 50% or
more of the voting power of Boulevard prior to an Exercise Termination Event in
a merger or consolidation transaction that does not, or series of transactions
that do not, permit FBS to exercise the Option or sell the shares subject
thereto and participate in such transaction on a basis equivalent to that of
holders of Boulevard Common Stock generally. The repurchase price of the Option
would equal the amount by which the "Purchase Price," as defined in the Warrant
Agreement, exceeds the Option Price, multiplied times the number of shares
covered by the Option. The repurchase price of shares acquired by FBS upon
exercise of the Option would equal such "Purchase Price" multiplied times the
number of shares held. The Warrant Agreement defines the term "Purchase Price"
to mean the highest price per share of Boulevard Common Stock paid by the
person whose acquisition gives rise to the repurchase right during the two-year
period preceding FBS' exercise of such right.
The Warrant Agreement provides that neither FBS nor Boulevard may assign any
of its rights or obligations thereunder or under the Option without the written
consent of the other party, except that if a Subsequent Triggering Event occurs
prior to an Exercise Termination Event, FBS may, subject to limitations
contained in the Warrant Agreement, assign its rights and obligations under the
Warrant Agreement in whole or in part within 30 days following such Subsequent
Triggering Event (subject to extension as described in the Warrant Agreement);
provided, that until 30 days after the Federal Reserve Board approves an
application by FBS under the Bank Holding Company Act to acquire shares subject
to the Option, FBS may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase more than two percent of the voting shares
of Boulevard, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed public
distribution on FBS' behalf, or (iv) any other manner approved by the Federal
Reserve Board.
The foregoing provisions of the Warrant Agreement may have the effect of
discouraging competing offers to acquire or merge with Boulevard. To the best
knowledge of Boulevard and FBS, no event giving rise to the right to exercise
the Option has occurred as of the date of this Proxy Statement/Prospectus.
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CONDUCT OF BOULEVARD BUSINESS PENDING THE MERGER
The Merger Agreement provides that from the date thereof until the earlier of
the effective date of the Merger or the termination of the Merger Agreement,
except as disclosed on a schedule to the Merger Agreement or with the prior
written consent of FBS, among other things:
(i) Beginning on the date of the Merger Agreement and for each succeeding
calendar quarter thereafter prior to the calendar quarter in which the
Merger becomes effective, Boulevard (a) will not declare or pay any
dividends or make any distributions on shares of Boulevard Common Stock,
except dividends which shall not exceed $0.05 per share in cash per
calendar quarter, and (b) will not declare or pay any dividends or make any
distributions in any amount on Boulevard Common Stock in the calendar
quarter in which the Merger becomes effective and in which the shareholders
of Boulevard are entitled to receive regular quarterly dividends on the
shares of FBS Common Stock into which the shares of Boulevard Common Stock
have been converted (subject to specified exceptions).
(ii) The business of Boulevard and each of its subsidiaries shall be
conducted only in, and neither Boulevard nor any of such subsidiaries shall
take any action except in the ordinary course, on an arms-length basis and
in accordance, in all material respects, with all applicable laws, rules
and regulations and past practices.
(iii) Neither Boulevard nor any of its subsidiaries shall, directly or
indirectly, (a) issue or sell any additional shares of, or any options,
warrants, conversion privileges or rights of any kind to acquire any shares
of any of its capital stock, except (1) for the sale by Boulevard of
Boulevard Common Stock pursuant to the exercise of outstanding warrants or
options, (2) for the issuance by Boulevard of Boulevard Common Stock in
connection with the Boulevard Savings and Investment Plan or the Boulevard
Dividend Reinvestment Plan, or (3) as a result of its obligations pursuant
to fiduciary accounts to sell issued and outstanding shares of Boulevard
Common; (b) sell, assign, transfer, mortgage, pledge or encumber any of its
assets (including, without limitation, transfers to any employees,
shareholders or affiliates of Boulevard or any of its subsidiaries), except
in specified circumstances; (c) amend or propose to amend its Certificate
or Articles of Incorporation or Bylaws; (d) split, combine or reclassify
any outstanding shares of capital stock of Boulevard or any of its
subsidiaries, or declare, set aside or pay any dividend or other
distribution payable in cash, property or otherwise with respect to shares
of capital stock of Boulevard or any of such subsidiaries, except for
payment of regular quarterly dividends by Boulevard on the Boulevard Common
Stock as permitted by (i) above; (e) redeem, purchase or acquire or offer
to acquire, directly or indirectly, any shares of capital stock of
Boulevard or any of its subsidiaries or other securities of Boulevard or of
any of such subsidiaries, except (1) for any shares of Boulevard Common
Stock purchased by Boulevard in connection with the Boulevard Savings and
Investment Plan or the Boulevard Dividend Reinvestment Plan or (2) the
redemption of Boulevard's outstanding Class D Series 1 Preferred Stock by
Boulevard; (f) acquire (by merger, exchange, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership, joint venture
or other business organization or division or material assets thereof; (g)
except in connection with any liability or obligation incurred for the
purpose of redeeming Boulevard's outstanding Class D Series 1 Preferred
Stock, borrow any amount or incur or become subject to any material
liability, except liabilities incurred in the ordinary course of business,
but in no event will Boulevard or any of its subsidiaries enter into any
long-term borrowings with a term of greater than one year, except for
certificates of deposit and interest rate swaps, in each case with terms
not to exceed five years; (h) make any single or group of related material
capital expenditures or commitment therefor; (i) discharge or satisfy any
material lien or encumbrance on the properties or assets of Boulevard or
any of its subsidiaries or pay any material liability, except in the
ordinary course of business; (j) cancel any material debt or claims or
waive any rights of material value, except in the ordinary course of
business; or (k) enter into or propose to enter into, or modify or propose
to modify, any agreement, arrangement or understanding with respect to any
of the matters set forth in this paragraph (iii); provided, however,
notwithstanding anything herein to the contrary, the Boulevard's
subsidiaries which are banks may be merged into a single entity, and one of
such banks may, with the OCC's consent, open a branch facility in Des
Plaines, Illinois.
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(iv) Neither Boulevard nor any of its subsidiaries shall, directly or
indirectly, enter into or modify any employment, severance or similar
agreements or arrangements with, or grant any bonuses, wage, salary or
compensation increases, or severance or termination pay to, any director,
officer, employee, group of employees or consultant, other than bonuses,
increases or severance arrangements consistent with past practices.
(v) Neither Boulevard nor any of its subsidiaries shall adopt or amend
any bonus, profit sharing, stock option, pension, retirement, deferred
compensation, or other employee benefit plan, trust, fund, contract or
arrangement for the benefit or welfare of any employees, except as required
by law or the Merger Agreement.
(vi) Each of Boulevard and its subsidiaries shall use reasonable efforts
to cause its current insurance policies not to be canceled or terminated or
any of the coverage thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse, replacement policies providing coverage
substantially equal to the coverage under the canceled, terminated or
lapsed policies are in full force and effect.
(vii) Neither Boulevard nor any of its subsidiaries shall enter into any
settlement or similar agreement with respect to, or take any other
significant action with respect to the conduct of, any action, suit,
proceeding, order or investigation to which Boulevard or any of such
subsidiaries is a party or becomes a party after the date of the Merger
Agreement, without prior consultation with FBS; provided that no such
consultation shall be required for settlement of any action, suit or
proceeding involving less than $100,000.
(viii) Each of Boulevard and its subsidiaries shall use commercially
reasonable efforts to preserve intact in all material respects the business
organization and the goodwill of each of Boulevard and such subsidiaries
and to keep available the services of its officers and employees as a group
and preserve intact material agreements, and shall confer on a regular and
frequent basis with representatives of FBS, as reasonably requested by FBS,
to report on operational matters and the general status of ongoing
operations.
(ix) Neither Boulevard nor any of its subsidiaries shall take any action
with respect to investment securities held or controlled by any of them
inconsistent with past practices or alter its investment portfolio duration
policy as heretofore in effect without prior consultation with FBS.
(x) With respect to properties leased by Boulevard or any of its
subsidiaries, neither Boulevard nor any of such subsidiaries shall renew,
exercise an option to extend, cancel or surrender any lease of real
property nor allow any such lease to lapse without the consent of FBS
(other than leases with remaining terms of six months or less).
(xi) Boulevard will not change its or its subsidiaries' methods of
accounting in effect as of December 31, 1992, except as required by changes
in generally accepted accounting principles as concurred in by Price
Waterhouse, or change any of its methods of reporting income and deductions
for federal income tax purposes from those employed in the preparation of
Boulevard's federal income tax returns for the taxable year ending December
31, 1992, except as required by changes in law.
Pursuant to the Merger Agreement, Boulevard also is required to take certain
affirmative actions at or before the time the Merger becomes effective. These
include certain specified actions with respect to its stock plans, see "--
Effect on Boulevard Employee Benefit Plans and Stock Option Plans," and its
outstanding Class D Series 1 Preferred Stock, see "Description of Boulevard
Capital Stock--Preferred Stock." The Merger Agreement also prevents Boulevard
from negotiating for an acquisition of Boulevard by any other party, subject to
specified exceptions, see "--Limitations on Negotiations," and from taking any
action which would disqualify the Merger as a "reorganization" that would be
tax-free to shareholders of Boulevard pursuant to Section 368(a) of the Code,
see "--Certain Federal Income Tax Consequences to Boulevard Shareholders." In
addition, the Merger Agreement provides that at the request of FBS after
consultation with Boulevard, on the day before the Merger takes effect, each
banking subsidiary of Boulevard will establish such additional
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accruals and reserves as may be necessary (i) to conform the accounting and
credit loss reserve practices and methods of each banking subsidiary of
Boulevard to those of FBS (as such practices and methods are to be applied to
each such banking subsidiary from and after the effective date of the Merger)
and to FBS' plans with respect to the conduct of each such banking subsidiary's
business following the Merger and (ii) to provide for the costs and expenses
relating to the consummation by Boulevard of the Merger and the other
transactions contemplated to occur in connection therewith.
The Merger Agreement also requires Boulevard to use its best efforts to
obtain an agreement from Miami Corporation pursuant to which Miami Corporation
will agree to use its best efforts to cause Miami Corporation and individuals,
trusts, corporations and other entities affiliated with or associated with
Miami Corporation to maintain, for a period of three years after the effective
date of the Merger, its and their deposit and business relationships with the
banking subsidiaries of Boulevard at an aggregate average daily deposit level
of approximately $20 million. See "--Interests of Certain Persons in the
Merger" below.
MANAGEMENT AND OPERATIONS OF BOULEVARD FOLLOWING THE MERGER
After the Merger, it is expected that Boulevard, as the surviving corporation
and a wholly-owned subsidiary of FBS, will continue in existence as the holding
company for FBS' Illinois banking operations. FBS anticipates that significant
cost savings will result from Boulevard's inclusion in the FBS enterprise.
These cost savings are expected to result from personnel reductions, branch and
operational consolidations, and general reductions in corporate and
administrative support functions. FBS expects that the cost savings will range
from 30% to 40% of Boulevard's non-interest expenses, which are approximately
$61.3 million annually. The operating cost savings are expected to be achieved
in various amounts during the periods following the Merger and not ratably
over, or at the beginning or end of, such periods. It is also expected that the
annualized level of cost savings achieved at the beginning of each twelve-month
period will be less than the annualized level of cost savings achieved in the
latter part of such twelve-month period. During the first twelve months after
the Merger, FBS expects to realize aggregate cost savings of between $12
million and $20 million. By the end of the second twelve months, the aggregate
cumulative cost savings are expected to range from $18 million of $25 million.
There can be no assurance that the expected cost savings will be realized or
that they will be realized in the periods discussed above. Immediately after
consummation of the Merger, FBS expects to begin converting, under a master
services agreement, certain "back-office" administrative and support functions
of Boulevard's banking subsidiaries and to begin the process of revising such
subsidiaries' documentation (loans, accounts and other products) and data
processing capability to allow the offering of products offered by other FBS
affiliates.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Employment Agreements. Effective as of June 21, 1993, Boulevard entered into
employment agreements with eight of its executive officers. Each such
employment agreement has a term running through June 30, 1996 and provides that
if Boulevard terminates the employee's employment before the end of the
contract term without "Cause" (as defined in the agreements), or if the
employee quits his or her employment with "Good Reason" (as defined in the
agreements), Boulevard will pay to such employee (with the exception of Richard
T. Schroeder), within ten days after such event, a lump sum amount equal to the
present value of such employee's base salary through the end of the contract
term, determined by applying a discount factor of 6% effective annual interest.
In the case of Richard T. Schroeder, Boulevard will continue to pay his base
salary through June 30, 1996. The employment agreements provide for the
following annual base salaries for the indicated executive officers of
Boulevard: Richard T. Schroeder, $266,200; Timothy G. Towle, $196,500; David K.
McNulty, $189,000; George H. Cook, Jr., $172,750; and John M. Starkey,
$115,950. The employment agreements also provide that in such an event, the
employee will receive from Boulevard any accrued but unpaid bonus for the prior
calendar year; a pro rata portion of the bonus that would have been received by
the employee for the current year, based on number of months employed;
continuation of benefits for the remainder of the contract term under specified
insurance and medical benefit programs of Boulevard; continuation of specified
fringe benefits (such as use of a company car, mobile telephone, financial
planning
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allowance and club memberships) for the remainder of the contract term; amounts
equal to the matching contributions Boulevard would have made to its 401(k)
plan for the employee's account for the remainder of the contract term; and
customary outplacement services. One of the executive officers who is a party
to an employment agreement (who is not one of the five executive officers named
above) has entered into an agreement with Boulevard whereby the officer
received a lump sum payment of $115,000 in 1993. If, following the Merger, the
officer should become entitled to payments under the employment agreement upon
termination of employment of Boulevard (or its successor) without "Cause" or by
the officer for "Good Reason," such payments would be reduced by $115,000.
David K. McNulty has an agreement with FBS relating to employment terms
following the Merger. Pursuant to such agreement, if Mr. McNulty chooses to
terminate employment during the 30-day period following the one year
anniversary of the Merger, he will be entitled to the payments and benefits to
which he would be entitled upon termination of employment by Boulevard (or its
successor) without "Cause" or by him for "Good Reason" pursuant to the terms of
the Boulevard employment agreement. Additionally, with respect to the base
salary and bonus portions of such payments, such payments would be calculated
based on a termination date of the date of the Merger.
Supplemental Retirement Agreement with Richard T. Schroeder. Boulevard and
Richard T. Schroeder, President and Chief Executive Officer of Boulevard, have
entered into an agreement (the "Supplemental Retirement Agreement") dated as of
September 29, 1993, which was originally authorized by the Compensation
Committee of the Board of Directors of Boulevard in March 1993, pursuant to
which Boulevard has agreed to pay Mr. Schroeder (or, in the event of his death,
his designee or estate) a supplemental benefit (the "Supplemental Benefit") in
120 approximately equal monthly installments beginning in the first month
following the earliest of Mr. Schroeder's reaching age 60, his "total
disability" (as defined in the Supplemental Retirement Agreement), or his
death. The total amount of the Supplemental Benefit is to be $240,000 plus one-
half of one percent thereof for each calendar month after December 31, 1993,
that elapses prior to the initial monthly payment. The Supplemental Retirement
Agreement provides that the portion of the Supplemental Benefit which remains
unpaid from time to time shall be deemed to continue to grow during the payment
period at a rate equal to the yield on United States Treasury obligations with
a 120-month maturity determined as of 60 days prior to the initial monthly
payment. It also provides that if Mr. Schroeder's employment is terminated by
Boulevard with "Cause" (as defined in the employment agreements described above
under "--Employment Agreements") or by Mr. Schroeder without "Good Reason" (as
defined in such employment agreements), then Mr. Schroeder shall cease to be
entitled to receive the Supplemental Benefit.
Bonuses through Effective Date of Merger. Boulevard intends to pay
approximately $400,000 in special bonuses among a group of approximately 50 of
its employees for their special efforts in managing the business of Boulevard
through consummation of the Merger. At the present time, neither the exact
identity of the approximately 50 individuals, nor the amount of any specific
bonus, has been finally determined, but the group will not include any of the
senior executive officers of Boulevard.
Redemption of Preferred Stock. The Merger Agreement requires Boulevard to
redeem all of its outstanding Class D Series 1 Preferred Stock prior to the
effective date of the Merger. Pursuant to its terms, the aggregate redemption
price of such stock will equal $10 million plus accrued and unpaid dividends to
the redemption date at a 9% per annum dividend rate. See "Description of
Boulevard Capital Stock--Preferred Stock." All of the outstanding Class D
Series 1 Preferred Stock is owned by Miami Corporation, which also is a
majority owner of the outstanding Boulevard Common Stock. See "Information
Concerning the Special Meeting--Solicitation, Voting and Revocability of
Proxies." In addition, Charles E. Schroeder, Chairman of the Board of Directors
of Boulevard, also is President and a director of Miami Corporation, and T.
Kimball Brooker, a director of Boulevard, is a director of Miami Corporation.
Miami Corporation Deposit Arrangement. The Merger Agreement requires
Boulevard to use its best efforts to obtain an agreement from Miami Corporation
pursuant to which Miami Corporation will agree to use its best efforts to cause
Miami Corporation and individuals, trusts, corporations and other entities
affiliated with or associated with Miami Corporation to maintain, for a period
of three years after the effective
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date of the Merger, its and their deposit and business relationships with the
banking subsidiaries of Boulevard at an aggregate average daily deposit level
of approximately $20 million, and it is a condition to FBS' and Newco's
obligation to effect the Merger that FBS shall have entered into an agreement
with Miami Corporation in form and substance satisfactory to FBS covering such
matters. See "--Conditions to Consummation of the Merger." For information
concerning Miami Corporation's relationship to Boulevard, see "--Redemption of
Preferred Stock" above.
Warrants. The Merger Agreement provides that each warrant to purchase
Boulevard Common Stock originally issued in connection with Boulevard's
acquisition of First National Bank of Des Plaines will, in accordance with its
terms, be deemed modified so as provide that the holders thereof shall receive
upon exercise shares of FBS Common Stock. See "--Terms of the Merger;
Consideration to be Received by Boulevard Shareholders." It also provides that
FBS may offer holders of such warrants FBS Common Stock in exchange for such
warrants prior to the effective date of the Merger. As of the date hereof,
warrants to purchase 990,000 shares of Boulevard Common Stock are outstanding,
of which 31,000 are deemed beneficially owned by Charles E. Schroeder, Chairman
of the Board of Directors of Boulevard, 9,000 are deemed beneficially owned by
John E. Guth, Jr., a director of Boulevard, and 263,500 are deemed beneficially
owned by Frederick F. Webster, Jr., a director of Boulevard. The exercise price
of such warrants is $11.20 per share of Boulevard Common Stock. In December
1993, FBS purchased, in privately negotiated transactions with holders of such
warrants, warrants to purchase a total of 18,600 shares of Boulevard Common
Stock. Such warrants were purchased by FBS for a weighted average price equal
to $11.26 per share of Boulevard Common Stock purchasable under such warrants
(including warrants to purchase 2,600 shares of Boulevard Common Stock
purchased from Frederick F. Webster III, the son of a director of Boulevard, at
a per share price of $10.93). FBS may from time to time purchase or otherwise
acquire additional warrants in privately negotiated transactions. The Merger
Agreement also requires FBS to register under the Securities Act the FBS Common
Stock which becomes issuable upon exercise of the warrants and to keep such
registration in effect so long as any such warrants remain outstanding and
unexercised.
First National Bank of Des Plaines Building. First National Bank of Des
Plaines, a banking subsidiary of Boulevard, leases 68,300 square feet for its
banking operations in a 173,000 square-foot building owned by Four-Ten
Partners, a limited partnership. The partners of Four-Ten Partners include
Charles E. Schroeder, Chairman of the Board of Directors of Boulevard. The
remainder of this building is leased by parties not affiliated with Boulevard
or the persons named above. Of the space leased by First National Bank of Des
Plaines, 66,600 square feet is leased through August 2008 at a present
aggregate monthly rental of $7,067, and the remainder is leased on a month-to-
month basis at a monthly rental of $202. It is expected that at the effective
date of the Merger, FBS will purchase this building from Four-Ten Partners for
an aggregate purchase price of $6 million in cash. Four-Ten Partners purchased
this building in 1984 for $11.5 million from First National Bank of Des Plaines
at the time of Boulevard's acquisition of that bank. This building was
appraised for Boulevard at $5.9 million in January 1992. Management of
Boulevard believes that the terms of FBS' purchase of this building are no more
favorable to Four-Ten Partners than would be obtained from an unaffiliated
party in a "stand-alone" transaction. Following the Merger, it is anticipated
that First National Bank of Des Plaines will continue to house its banking
operations in this building.
Indemnification. The Merger Agreement provides that in the event of any
threatened or actual claim, action, suit, proceeding or investigation, whether
civil, administrative or criminal (each a "Proceeding") asserted or arising
before or after the effective date of the Merger in which any person who is or
has been a director, officer or employee of Boulevard or any of its
subsidiaries (each an "Indemnified Party") is, or is threatened to be, made a
party, based in whole or in part on, or arising in whole or in part out of, or
pertaining to the Merger Agreement, or any of the transactions contemplated
thereby, or by reason of the fact that such Indemnified Party was a director,
officer or employee, fiduciary or agent of Boulevard at any time on or before
such effective date (collectively, the "Transactions and Events"), the parties
to the Merger Agreement shall cooperate and use their best efforts to defend
against and respond to any such Proceeding. It further provides that FBS shall
indemnify and hold harmless, to the fullest extent permitted by Delaware law,
each Indemnified Party against any and all losses, claims, damages,
liabilities, costs, expenses (including reasonable
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attorneys' fees and expenses), judgments and fines, and amounts paid in
settlement, in connection with any threatened or actual Proceeding based, in
whole or in part, or arising in whole or in part, out of or pertaining to the
Transactions and Events (but only to the extent permitted by Delaware law) and,
without limiting the foregoing, in the event of any such threatened or actual
Proceeding (whether asserted or arising before or after the Effective Date),
FBS shall pay expenses in advance of the final disposition of any Proceeding to
each Indemnified Party to the fullest extent permitted by applicable law, and
shall use its best efforts to assist in the vigorous defense of any such
Proceeding; provided that FBS shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld). The Merger Agreement also requires FBS to insure that all rights to
indemnification and all limitations of liability existing in favor of the
Indemnified Parties as provided in Boulevard's Certificate of Incorporation and
Bylaws, or similar governing documents of any of its subsidiaries, as in effect
as of the date of the Merger Agreement with respect to claims or liabilities
arising from facts or events existing or occurring prior to the effective date
of the Merger shall survive the Merger and shall continue in full force and
effect, without any amendment thereto, for a period of not less than six years
from such Effective Date; provided, however, that all rights to indemnification
in respect of any claim asserted or made within such period shall continue
until the final disposition of such claim.
In addition to the foregoing, certain Boulevard stock plans, in which
executive officers of Boulevard also participate, will be affected by the
Merger. See "--Effect on Boulevard Employee Benefit Plans and Stock Plans"
below.
The foregoing interests of members of management of Boulevard in the Merger
may mean that such persons have personal interests in the Merger which may not
be identical to the interests of nonaffiliated shareholders.
EFFECT ON BOULEVARD EMPLOYEE BENEFIT PLANS AND STOCK PLANS
After the Merger becomes effective, the current employee benefit plans of
Boulevard will continue in force until amended or terminated in accordance with
their terms. Subject to the foregoing, Boulevard and FBS will have the right,
after the Merger becomes effective, to continue, amend or terminate any such
plans.
Stock Options. The Merger Agreement provides that at the effective date of
the Merger, all options to purchase Boulevard Common Stock which are
outstanding under Boulevard's 1988 Equity Participation Plan shall, with the
consent of the optionholder, be assumed by FBS and converted into options to
purchase that number of shares of FBS Common Stock equal to the number of
shares of Boulevard Common Stock subject to such unexercised options
immediately prior to the effective date multiplied by the exchange rate in the
Merger of FBS Common Stock for Boulevard Common Stock (.8132). The exercise
price of such options for shares of FBS Common Stock will be the exercise price
applicable to the options for shares of Boulevard Common Stock divided by such
exchange rate. The other terms and conditions of such options shall be the same
as those presently in effect, except that the replacement options shall be (i)
fully vested and immediately exercisable, and (ii) convertible into replacement
options to purchase securities or receive property of each successor to FBS in
the event of a merger or other reorganization of FBS as the holders of FBS
Common Stock exchanged their stock for securities or property of the
successor(s) to FBS, and converting the exercise price(s) by the exchange
rate(s) received by the holders of FBS Common Stock. Any such options not so
assumed with the consent of the optionholder will be terminated. Unvested
Boulevard stock options which will become vested pursuant to the foregoing
provisions and their average exercise price held by certain executive officers
of Boulevard are as follows: Richard T. Schroeder, 41,500 shares at $14.22 per
share; Timothy G. Towle, 30,900 shares at $14.26 per share; David K. McNulty,
28,800 shares at $14.32 per share; George H. Cook, Jr., 27,700 shares at $14.23
per share; and John M. Starkey, 17,200 shares at $14.43 per share. The Merger
Agreement also requires FBS to register under the Securities Act the FBS Common
Stock which becomes issuable upon exercise of the replacement options and to
keep such registration in effect so long as any such options remain outstanding
and unexercised.
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Restricted Stock. The Merger Agreement provides that restricted shares of
Boulevard Common Stock previously awarded under Boulevard's 1988 Equity
Participation Plan which are not fully vested at the effective date of the
Merger will be converted in the Merger into fully vested shares of FBS Common
Stock on the same basis as other shares of Boulevard Common Stock. The vesting
of certain restricted shares of Boulevard Common Stock held by eight executive
officers was accelerated, with the consent of FBS, and became vested on
December 20, 1993. Of the shares vested on December 20, 1993, those held by the
five most highly compensated executive officers were as follows: Richard T.
Schroeder, 9,853 shares; Timothy G. Towle, 9,356 shares; David K. McNulty,
9,074 shares; George H. Cook, Jr., 8,465 shares; and John M. Starkey, 4,438
shares.
Incentive Compensation Plan. In December 1993, Boulevard amended its 1993
Management Incentive Compensation Plan to provide that payments be made on
December 31, 1993 on the basis of the Company's unaudited annual operating
results according to the plan's specifications. Prior to such amendment,
payments would have been made approximately at the beginning of the second
calendar quarter of 1994 subject to prior approval by the Compensation
Committee of the Board of Directors of Boulevard to participants who remained
employed by Boulevard at the time of such approval. Of the payments made in
December 1993 under such plan, those made to the five most highly compensated
executive officers were as follows: Richard T. Schroeder, $124,449; Timothy G.
Towle, $83,535; David K. McNulty, $80,325; George H. Cook, Jr., $73,420; and
John M. Starkey, $39,423.
NO DISSENTERS' RIGHTS OF APPRAISAL
Pursuant to Section 262(b)(1) of the Delaware General Corporation Law,
Boulevard shareholders will not have any dissenters' rights of appraisal as a
result of the matters to be voted upon at the Special Meeting.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO BOULEVARD SHAREHOLDERS
The following is a summary description of certain federal income tax
consequences of the Merger; it is not intended to be a complete description of
the federal income tax consequences of the Merger. The following discussion
does not cover all aspects of federal income taxation that may be relevant to a
particular Boulevard shareholder in light of his or her individual
circumstances or to certain Boulevard shareholders subject to special treatment
under the federal income tax laws (for example, life insurance companies, tax-
exempt organizations and foreign corporations and individuals who are not
citizens or residents of the United States) and does not discuss any aspects of
state, local or foreign taxation. This discussion is based upon laws,
regulations, rulings and decisions now in effect and on proposed regulations,
all of which are subject to change (possibly with retroactive effect) by
legislation, administrative action or judicial decision. No ruling has been or
will be requested from the Internal Revenue Service (the "Service") on any tax
matters relating to the tax consequences of the Merger. EACH BOULEVARD
SHAREHOLDER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR REGARDING THE
SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO
SUCH SHAREHOLDER.
Boulevard will rely upon the opinion of Wildman, Harrold, Allen & Dixon, its
counsel, as to the following federal income tax consequences of the Merger to
Boulevard shareholders. The opinion of Wildman, Harrold, Allen & Dixon is based
on current law, assuming the Merger takes place as described in the Merger
Agreement. Unlike a ruling from the Service, an opinion of counsel is not
binding on the Service and there can be no assurance that the Service will not
take a position contrary to one or more of the positions reflected herein or
that the positions herein will be upheld by the courts if challenged by the
Service.
In the opinion of Wildman, Harrold, Allen & Dixon, for federal income tax
purposes, under the assumptions set forth above, the Merger will qualify as a
"reorganization" under section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). FBS and Boulevard have agreed in the Merger Agreement not
to take any action which would disqualify the Merger as a "reorganization"
under section 368(a) of the Code.
If the Merger qualifies as a reorganization under section 368(a) of the Code,
the following would, in the opinion of Wildman, Harrold, Allen & Dixon, be the
material federal income tax consequences of the Merger:
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(i) no gain or loss will be recognized by Boulevard by reason of the Merger;
(ii) a Boulevard shareholder will recognize no gain or loss for federal income
tax purposes to the extent FBS Common Stock is received in the Merger solely in
exchange for Boulevard Common Stock; (iii) the tax basis in the FBS Common
Stock received by the shareholder will be the same as the tax basis in the
Boulevard Common Stock surrendered in exchange therefor; and (iv) the holding
period for the FBS Common Stock received in exchange for Boulevard Common Stock
will include the period during which the Boulevard shareholder held the
Boulevard Common Stock surrendered in the exchange, provided that the Boulevard
Common Stock is held as a capital asset at the effective date of the Merger. If
Boulevard Common Stock is held as a capital asset at the effective date of the
Merger, the receipt of cash in lieu of a fractional share will result in
capital gain or loss measured by the difference, if any, between the amount of
cash received for such fractional share and the shareholder's basis in the
fractional share.
STOCK EXCHANGE LISTING OF FBS COMMON STOCK
It is anticipated that FBS will file a listing application with the NYSE
covering the shares of FBS Common Stock which are issuable upon consummation of
the Merger and that such application will be approved subject to notice of
issuance at or before the time the Merger becomes effective. It is a condition
to the obligations of Boulevard and FBS to consummate the Merger that such
shares have been listed for trading on the NYSE.
RESALE OF FBS COMMON STOCK RECEIVED BY BOULEVARD SHAREHOLDERS
The shares of FBS Common Stock issuable to shareholders of Boulevard upon
consummation of the Merger have been registered under the Securities Act. Such
shares may be traded freely without restriction by those shareholders who are
not deemed to be "affiliates" of Boulevard or FBS, as that term is defined in
the rules under the Securities Act.
Shares of FBS Common Stock received by those shareholders of Boulevard who
are deemed to be "affiliates" of Boulevard at the time of the Boulevard Special
Meeting may be resold without registration under the Securities Act as provided
for by Rule 145 under the Securities Act or as otherwise permitted under the
Securities Act. Boulevard has agreed in the Merger Agreement to use its best
efforts to obtain a signed representation letter from each shareholder of
Boulevard who may reasonably be deemed an "affiliate" of Boulevard within the
meaning of such term is used in Rule 145 under the Securities Act to the effect
that such person will not offer to sell, transfer or otherwise dispose of
shares of FBS Common Stock issued to such person pursuant to the Merger except
in compliance with the applicable provisions of Rule 145 under the Securities
Act, in a transaction that is otherwise exempt from the registration
requirements under the Securities Act or in an offering registered under the
Securities Act. This Proxy Statement/Prospectus does not cover any resales of
FBS Common Stock received by persons who are deemed to be "affiliates" of
Boulevard.
FBS DIVIDEND REINVESTMENT AND COMMON STOCK PURCHASE PLAN
FBS provides eligible shareholders with a simple and convenient method of
investing cash dividends and optional cash payments at 100% of the average
price (as defined) in additional shares of FBS Common Stock without payment of
any brokerage commission or service charge pursuant to its Automatic Dividend
Reinvestment and Common Stock Purchase Plan. The plan includes certain dollar
limitations on participation and provides for eligible shareholders to elect
dividend reinvestment on only a part of the shares registered in the name of a
participant (while continuing to receive cash dividends on remaining shares).
It is anticipated that the plan will continue after the Merger becomes
effective and that shareholders of Boulevard who receive FBS Common Stock in
the Merger will have the right to participate therein.
ACCOUNTING TREATMENT
The Merger will be accounted for by FBS under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations," as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their
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estimated values on the date the Merger becomes effective. Income of the
combined company will not include income or loss of Boulevard prior to the date
that the Merger becomes effective.
The pro forma financial information presented in this Proxy
Statement/Prospectus has been prepared using the purchase method of accounting
to account for the Merger. See "Summary--Selected Historical and Pro Forma
Financial Data" and Unaudited Pro Forma Combined Financial Information.
EXPENSES
The Merger Agreement provides that FBS and/or Newco will assume and pay all
expenses incident to the obtaining of the requisite regulatory consents and
approvals for the Merger, including, without limitation, (i) all legal and
other expenses and taxes incurred by Newco incident to the consummation of the
Merger, (ii) all legal and other expenses incurred by FBS incident to the
preparation and filing of the applications to the Federal Reserve Board, and
other requests for regulatory consents and approvals with the appropriate bank
regulatory agencies as set forth in or contemplated by the Merger Agreement,
and (iii) all legal and other expenses, if any, incurred in connection with the
registration of FBS Common Stock under federal and state securities laws. The
Merger Agreement also provides that FBS will pay the expenses of reproducing
this Proxy Statement/Prospectus. Pursuant to the Merger Agreement, the expenses
to be assumed and paid by FBS and/or Newco shall not include (a) any legal or
other expenses incurred by Boulevard in the negotiation of the Merger, (b) the
examination or review of documents by Boulevard or its agents for Boulevard's
own benefit, in connection with is own corporate proceedings or (c) payments to
Goldman, Sachs & Co. for services rendered on Boulevard's behalf. The Merger
Agreement also provides that Boulevard shall be responsible for its legal and
accounting fees associated with this Proxy Statement/Prospectus, including the
expenses and fees of Goldman, Sachs & Co. with respect to any opinion expressed
with respect to the fairness of the exchange rate of FBS Common Stock for
Boulevard Common Stock to the holders of Boulevard Common. Notwithstanding the
foregoing, however, if termination of the Merger Agreement is judicially
determined to have been caused by willful breach thereof, then, in addition to
other remedies at law or equity for such breach, the party so found to have
willfully breached the Merger Agreement will indemnify the other parties for
their respective costs, fees and expenses of their counsel, accountants and
other experts and advisors as well as fees and expenses incident to
negotiation, preparation and execution of the Merger Agreement and related
documentation and the Special Meeting and consents. See "--Termination" above.
CERTAIN DIFFERENCES IN RIGHTS OF BOULEVARD SHAREHOLDERS
The rights of Boulevard shareholders are governed by the Certificate of
Incorporation of Boulevard, as amended (the "Boulevard Certificate of
Incorporation"), the bylaws of Boulevard (the "Boulevard Bylaws") and the laws
of the State of Delaware. The rights of FBS shareholders are governed by the
Restated Certificate of Incorporation of FBS, as amended (the "FBS Certificate
of Incorporation"), the bylaws of FBS (the "FBS Bylaws") and the laws of the
State of Delaware. After the Merger becomes effective, the rights of Boulevard
shareholders who become FBS shareholders will be governed by the FBS
Certificate of Incorporation, the FBS Bylaws and the laws of the State of
Delaware. In many respects, the rights of Boulevard shareholders and FBS
shareholders are similar. See "Description of FBS Capital Stock" and
"Description of Boulevard Capital Stock." While it is not practical to describe
all changes in the rights of Boulevard shareholders that will result from the
differences between the Boulevard Certificate of Incorporation and Bylaws and
the FBS Certificate of Incorporation and Bylaws, the following is a summary of
all material differences.
Special Meetings of Shareholders. The Boulevard Bylaws provide that special
meetings of shareholders may be called by the Chairman of the Board or the
President and shall be called by the Secretary at the request of a majority of
the Board of Directors or at the written request of shareholders owning at
least 50% of Boulevard's issued and outstanding voting shares. The FBS Bylaws
provide that special meetings of shareholders may be called only by the Board
of Directors or the chief executive officer.
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Quorum at Shareholders Meetings. The Boulevard Bylaws provide that a majority
of Boulevard's issued and outstanding voting shares shall constitute a quorum
at any meeting of Boulevard shareholders. The FBS Bylaws provide that one-third
of FBS' issued and outstanding voting shares shall constitute a quorum at any
meeting of FBS shareholders.
Notice of Director Nominations. The FBS Bylaws require FBS shareholders to
give notice of director nominations not less than 90 days prior to the annual
meeting of shareholders and not less than seven days after the date that a
notice for a special meeting of shareholders for the election of directors is
given. The Boulevard Certificate of Incorporation and Bylaws do not contain a
similar provision.
Classification of Board of Directors. The FBS Certificate of Incorporation
and Bylaws provide for the classification of the FBS Board of Directors into
three classes of approximately equal sizes. Directors in each class serve a
term of three years, with directors in only one class standing for election in
any given year. The Boulevard Certificate of Incorporation and Bylaws do not
provide for a classified board.
Shareholder Action by Written Consent. The Boulevard Bylaws provide that
shareholders may take action by written consent signed by holders of at least
that number of shares the votes of which would be required to take such action
at a shareholders meeting. The FBS Certificate of Incorporation provides that
no shareholder action may be taken by means of a written consent in lieu of a
shareholders meeting.
Removal of Directors. The FBS Certificate of Incorporation provides that
shareholders may remove directors only for cause. The Boulevard Certificate of
Incorporation and Bylaws do not contain a similar provision.
Supermajority Voting. The FBS Certificate of Incorporation requires that
certain "Business Combinations" (as defined) involving a "Related Person" (as
defined) be approved by affirmative vote of at least 80% of the outstanding FBS
voting shares, unless certain "fair price" requirements are met or the
transaction is approved by the "Continuing Directors" (as defined). It also
requires supermajority shareholder voting at the 80% level in order to amend
certain provisions relating to fair price requirements and director numbers and
classification. The Boulevard Certificate of Incorporation and Bylaws do not
contain similar provisions.
Shareholder Rights Plan. FBS has adopted a shareholder rights plan which may
have certain anti-takeover effects. See "Description of FBS Capital Stock--
Common Stock--Preferred Stock Purchase Rights" herein for a description of this
plan. Boulevard has not adopted a similar plan.
General. The foregoing discussion of certain similarities and material
differences between the rights of Boulevard shareholders and the rights of FBS
shareholders under their respective Certificates of Incorporation and Bylaws is
only a summary of certain provisions and does not purport to be a complete
description of such similarities and differences, and is qualified in its
entirety by reference to the Delaware General Corporation Law, the common law
thereunder and the full text of the respective Certificates of Incorporation
and Bylaws. Such Certificates of Incorporation and Bylaws are filed or
incorporated by reference as exhibits to the Registration Statement of which
this Proxy Statement/Prospectus is a part.
BUSINESS OF FBS
GENERAL
FBS is a regional bank holding company headquartered in Minneapolis,
Minnesota. FBS is comprised of 9 banks, 5 trust companies and several nonbank
subsidiaries with more than 200 offices primarily in Minnesota, Colorado,
Montana, North Dakota, South Dakota and Wisconsin. Through its subsidiaries,
FBS provides commercial and agricultural finance, consumer banking, trust,
capital markets, cash management, investment management, data processing,
leasing, mortgage banking and brokerage services. At December 31, 1993, FBS and
its consolidated subsidiaries had consolidated assets of $26.4 billion,
consolidated deposits of $21.0 billion and shareholders' equity of $2.2
billion.
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The subsidiary banks of FBS engage in general commercial banking business,
principally in domestic markets, and provide banking and ancillary services to
individuals, businesses, institutional organizations, governmental entities and
other financial institutions. The largest subsidiary bank, First Bank National
Association ("FBNA"), had assets of $15.7 billion at December 31, 1993.
FBS is a legal entity separate and distinct from its banking and non-banking
affiliates. The principal sources of FBS' income are dividends, interest and
fees from FBNA and the other banking and non-banking affiliates. The bank
subsidiaries of FBS, including FBNA (the "Banks"), are subject to certain
restrictions imposed by federal law on any extensions of credit to, and certain
other transactions with, FBS and certain other affiliates, and on investments
in stock or other securities thereof. Such restrictions prevent FBS and such
other affiliates from borrowing from the Banks unless the loans are secured by
various types of collateral. Further, such secured loans, other transactions
and investments by any of the Banks are generally limited in amount as to FBS
and as to each of such other affiliates to 10% of such Bank's capital and
surplus and as to FBS and all of such other affiliates to an aggregate of 20%
of such Bank's capital and surplus. In addition, payment of dividends to FBS by
the subsidiary banks is subject to ongoing review by banking regulators and is
subject to various statutory limitations and in certain circumstances requires
approval by banking regulatory authorities.
FBS was incorporated under Delaware law in 1929 and has functioned as a
multi-bank holding company since that time. Its principal executive offices are
located at First Bank Place, 601 Second Avenue South, Minneapolis, Minnesota
55402-4302 (telephone (612) 973-1111). For further information concerning FBS,
see the FBS documents incorporated by reference herein as described under
"Incorporation of Certain Documents by Reference."
RECENT DEVELOPMENTS
FBS reported fourth quarter 1993 earnings of $95.9 million, an increase of
$113 million from the fourth quarter 1992 loss of $17.1 million. On a per share
basis, earnings were $.81 in the fourth quarter of 1993 compared to a loss of
$.23 in the fourth quarter of 1992.
Reported net income for the year 1993 totaled $298 million, including after-
tax merger-related charges of $50 million recorded in the second quarter in
connection with the acquisition of Colorado National Bankshares, Inc. Reported
net income for 1992 was $311.8 million, which included net income of $157.3
million related to the cumulative effect of changes in accounting principles
and charges on an after-tax basis of $81.8 million related to the acquisition
of Western Capital Investment Corporation and Bank Shares Incorporated.
Earnings per share were $2.39 in 1993 and $2.67 in 1992.
Excluding merger-related charges and the cumulative effect of accounting
changes, earnings of $95.9 million ($.81 per share) for the fourth quarter of
1993 were $31.2 million or 48.2% higher than the fourth quarter 1992 earnings
of $64.7 million ($.54 per share) and earnings for the year 1993 of $348
million ($2.83 per share) were $111.7 million or 47.3% higher than the prior
year's earnings of $236.3 million ($1.96 per share).
The improvement in the fourth quarter 1993 earnings over the same period in
1992 resulted principally from an increase in net interest income on a taxable-
equivalent basis of $30 million or 11.4% and a decrease in the provision for
credit losses of $25.9 million or 49.0%. The 1992 provision included merger-
related charges of $13.6 million. Also contributing to the strong results for
the fourth quarter of 1993 was continuing progress on achieving cost savings
from the integration of recent acquisitions. Compared with noninterest expense
for the fourth quarter of 1992, excluding 1992 merger-related charges,
noninterest expense for the quarter declined $3.3 million or 1.3%.
The improvement in the 1993 annual earnings was due to the same factors. Net
interest income on a taxable-equivalent basis increased $132.8 million, or 13%
over 1992, the provision for credit losses decreased $58.2 million, or 31.7%
from the 1992 provision (1992 included $13.6 million of merger-related charges)
and 1993 noninterest expenses declined $13.8 million or 1.2%.
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Return on average assets was 1.45% in the fourth quarter of 1993 compared
with a negative .28% in the fourth quarter of 1992. Excluding the merger-
related charges, the 1992 fourth quarter return would have been 1.07%. For the
year 1993, the return on average assets was 1.17%, compared to 1.32% for 1992.
Nonperforming assets dropped to $226 million at the end of 1993, a decline of
$186.1 million or 45.2% from the end of 1992 and a decrease of $40.8 million or
15.3% from the third quarter of 1993. The ratio of the allowance for credit
losses to nonperforming loans continues to indicate strong reserve coverage,
increasing to 269% at the end of 1993 from 179% at the end of 1992 and 233% at
the end of the third quarter of 1993.
BUSINESS OF BOULEVARD
GENERAL
Boulevard was incorporated in Delaware in 1981 and is conducting business as
a bank holding company registered under the Bank Holding Company Act of 1956.
At December 31, 1993 Boulevard and its consolidated subsidiaries had
consolidated assets of $1.6 billion, consolidated deposits of $1.2 billion and
shareholders' equity of $113.5 million. Boulevard presently owns four
commercial banks as well as certain non-bank subsidiaries. Boulevard's banking
operations provide a full range of retail and commercial banking and trust
services to customers primarily within the greater Chicago metropolitan area.
Boulevard's four subsidiary banks are Boulevard Bank National Association
("Boulevard Bank"), First National Bank of Des Plaines ("First Des Plaines"),
Citizens National Bank of Downers Grove ("Citizens Bank") and National Security
Bank of Chicago ("National Security").
Boulevard Bank and its predecessors, National Boulevard Bank of Chicago and
Boulevard Bridge Bank, have conducted operations in the Wrigley Building on
Chicago's North Michigan Avenue since 1921. The principal offices of both
Boulevard and Boulevard Bank continue to be in the Wrigley Building.
First Des Plaines commenced business in 1913. First Des Plaines is
headquartered in downtown Des Plaines, a suburban community of approximately
53,400 people located near O"Hare International Airport.
National Security and its predecessor commenced business in 1906. National
Security is headquartered in the West Town area of Chicago.
Citizens Bank commenced business in 1940. Citizens Bank is headquartered in
downtown Downers Grove, a suburban community of approximately 46,600 located
west of Chicago in DuPage County.
The banks offer a broad range of financial services to customers located in
the greater Chicago metropolitan area. The banks furnish services in all areas
of commercial banking, including demand, savings and time deposits, real
estate, commercial and consumer loans, collection, exchange and safe deposit
facilities, and other services tailored for individual and corporate customers.
The banks' trust departments provide services as executor, administrator,
trustee, conservator, guardian, custodian and agent, and a wide variety of
services for employee benefit plans.
Boulevard's principal non-bank subsidiary is Boulevard Technical Services
("BTS"). In 1990 BTS began providing centralized accounting, auditing, data
processing, human resources and operations services to Boulevard and its
banking subsidiaries.
Boulevard is a legal entity separate and distinct from its banking and non-
banking subsidiaries. Dividends and management fees received from the
subsidiaries are Boulevard's principal source of income.
Boulevard's executive offices are located in Suite 370, The Wrigley Building,
410 North Michigan Avenue, Chicago, Illinois 60611, telephone (312) 836-6500.
For further information concerning Boulevard, see the Boulevard documents
incorporated by reference herein as described under "Incorporation of Certain
Documents by Reference."
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RECENT DEVELOPMENTs
Boulevard reported net income for the fourth quarter of 1993 of $1.9 million,
or $.23 per share, representing an increase of 17% when compared to $1.6
million in the same period of 1992. Net income for the year ended December 31,
1993 totaled $7.3 million, or $.88 per share. This represents a 40% increase
from $5.2 million for the year ended December 31, 1992, before the cumulative
effect of an accounting change, or a 33% increase on a per share basis.
In comparing 1993 results to the prior year, Boulevard reduced its provision
for possible loan losses and noninterest expenses were again lower, indicating
continued improvement in asset quality and cost control. The results include
the various expenses incurred in connection with the pending merger with FBS.
Boulevard experienced growth in noninterest income, which rose 16% before
security gains. These results were partially offset by a decrease in net
interest income from a year ago, primarily due to an overall decline in the
yield on earning assets as the mix of assets shifted to securities from loans.
In addition, Boulevard recognized certain State tax benefits associated with
previous years' tax losses and reduced its deferred tax asset valuation
allowance.
Return on average assets was .47% for the fourth quarter of 1993 compared
with .42% for the fourth quarter of 1992. For the year 1993, the return on
average assets was .48%, compared to .22% for 1992.
Nonperforming assets, comprised of nonaccruing and restructured loans and
other real estate, totaled $31.2 million at December 31, 1993, down 41% from
$52.5 million a year ago and up slightly from $30.3 million at September 30,
1993.
55
<PAGE>
SELECTED FINANCIAL DATA OF BOULEVARD
The following table sets forth selected financial data for Boulevard for the
nine months ended
September 30, 1993 and 1992 and for each of the five years in the period ended
December 31, 1992. Such data should be read in conjunction with the
consolidated interim financial statements and notes thereto and the
consolidated annual financial statements and notes thereto of Boulevard
included elsewhere or incorporated by reference herein. Results of operations
for the interim periods are not necessarily indicative of that which may be
expected for the entire year.
<TABLE>
<CAPTION>
NINE MONTHS
(dollars in thousands, ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
except per share amounts) --------------------- ---------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income.......... $ 69,268 $ 81,599 $ 107,230 $ 127,701 $ 152,014 $ 155,563 $ 134,859
Interest expense......... 31,094 39,572 51,820 72,788 90,490 91,419 75,075
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income...... 38,174 42,027 55,410 54,913 61,524 64,144 59,784
Provision for possible
loan losses............. 1,810 4,668 5,948 15,624 60,655 10,570 4,248
Other operating income... 17,455 15,604 21,444 19,618 14,391 13,472 14,541
Other operating expenses. 46,507 48,060 63,842 64,344 57,502 55,705 51,592
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes............ 7,312 4,903 7,064 (5,437) (42,242) 11,341 18,485
Income taxes (benefit)... 1,927 1,332 1,845 (3,140) (18,097) 2,627 5,019
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
accounting change....... 5,385 3,571 5,219 (2,297) (24,145) 8,714 13,466
Cumulative effect of
accounting change....... -- (1,826) (1,826) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........ $ 5,385 $ 1,745 $ 3,393 $ (2,297) $ (24,145) $ 8,714 $ 13,466
========== ========== ========== ========== ========== ========== ==========
Per Common Share Data:
Net income (loss)....... $ 0.65 $ 0.23 $ 0.44 $ (0.28) $ (3.38) $ 1.20 $ 1.79
Cash dividend declared.. 0.05 -- -- -- 0.36 0.48 0.45
Book value.............. 13.24 12.43 12.63 12.33 12.58 15.81 15.07
Weighted average common
and common equivalent
shares outstanding...... 8,331,996 8,259,995 8,263,106 7,870,680 7,077,431 8,096,156 8,063,805
Consolidated Average
Balance Sheet Data:
Total assets............ $1,496,781 $1,494,863 $1,511,101 $1,544,562 $1,649,933 $1,602,308 $1,519,600
Net loans............... 731,217 880,018 867,375 1,014,764 1,153,139 1,164,985 1,060,887
Total deposits.......... 1,202,003 1,271,000 1,275,984 1,322,616 1,428,371 1,383,847 1,304,565
Long-term debt.......... 14,214 14,113 14,026 13,902 12,857 15,869 17,604
Non-redeemable preferred
stock and common
shareholders' equity... 105,757 99,834 100,479 100,367 112,375 114,345 104,487
Return on average total
assets based on net
income.................. 0.48% 0.16% 0.22% (0.15)% (1.46)% 0.54% 0.89%
Return on average common
shareholders' equity
based on net income..... 6.58% 1.59% 2.76% (3.31)% (21.49)% 7.58% 12.81%
Average common
shareholders' equity to
average total assets.... 6.40% 6.01% 5.99% 5.96% 6.81% 7.13% 6.86%
Tier 1 Capital to total
risk-based assets at
period end.............. 10.75% 9.29% 9.29% 8.68% 6.40% N/A N/A
Total Capital to total
risk-based assets at
period end.............. 12.27% 11.23% 10.76% 10.60% 8.70% N/A N/A
Leverage ratio (Tier 1
capital to total average
quarterly assets)....... 6.53% 6.48% 6.25% 6.19% 5.20% N/A N/A
Non-performing loans to
total loans at period-
end..................... 2.44% 3.06% 4.14% 4.15% 3.88% 1.47% 1.03%
Allowance for possible
loan losses to total
loans at period-end..... 3.02% 2.90% 2.88% 3.14% 3.21% 1.31% 1.22%
Net charge-offs to
average total loans..... 0.75% 0.97% 1.24% 2.21% 3.33% 0.76% 0.17%
Net interest margin...... 3.90% 4.30% 4.20% 4.17% 4.36% 4.68% 4.63%
</TABLE>
56
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF BOULEVARD
The following discussion and analysis provides information regarding
Boulevard's financial condition and results of operations for the three month
and nine month periods ended September 30, 1993 and 1992, and for the years
ended December 31, 1992, 1991 and 1990. This discussion should be read in
conjunction with the consolidated interim financial statements and notes
thereto and the consolidated annual financial statements and notes thereto of
Boulevard included elsewhere, or incorporated by reference, in this Proxy
Statement/Prospectus. Results of operations for the interim periods are not
necessarily indicative of that which may be expected for the entire year.
Ratios for the three month and nine month periods are presented on an
annualized basis.
EARNINGS ANALYSIS
Net Income
Net income for the quarter ended September 30, 1993 was $2.0 million compared
with $1.5 million for the same period of the previous year, an increase of
29.8%. Earnings per share was 24 cents this quarter, compared to 19 cents for
the same period of 1992.
Net income for the nine months ended September 30, 1993 was $5.4 million, or
65 cents per share. Income before the cumulative effect of an accounting change
increased 50.8% from $3.6 million, or 45 cents per share for the nine months
ended September 30, 1992. For the first nine months of 1992, Boulevard reported
net income, including the cumulative effect of the January 1, 1992 adoption of
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes," of $1.7 million, or 23 cents per share.
The improvement in earnings for the three months ended September 30, 1993
compared to the same period of 1992 was attributable to a lower provision for
possible loan losses ($300,000 compared to a $994,000 or a 69.8% decrease), a
$562,000 or 11.5% increase in other operating income reflecting increased
revenues from deposit account services, as well as a $668,000 (4.2%) decrease
in other operating expenses.
The improvement in other operating expenses is comprised of a decrease in
salaries and employee benefits offset by fees for certain document processing
services. In addition, expenses related to other real estate decreased by
$616,000 offset in part by $243,000 in expenses related to the pending
acquisition by FBS. All other operating expenses in aggregate decreased
$344,000 compared to third quarter 1992. The positive comparison of operating
income and expense was offset by a decrease of $1.6 million (11.2%) in net
interest income.
Comparing earnings for the nine months ended September 30, 1993 and 1992, the
provision for possible loan losses was $2.9 million or 61.2% lower reflecting
improved asset quality. Other operating income increased $1.9 million or 11.9%.
Security gains decreased by $1.6 million offset by an increase of a like amount
from the sale of consumer and residential real estate mortgage loans. Gains on
sale of assets was $627,000 compared to a loss of $227,000 for the same period
during 1992. Investment advisory fees for mutual funds contributed $247,000 to
operating income during the nine months of 1993. A $1.0 million decrease in
expenses related to other real estate and $588,000 decrease in legal expense
contributed significantly to a $1.6 million (3.2%) decrease in operating
expenses. Increases in the cost of document processing services ($650,000) and
FDIC premiums ($219,000) were offset by decreases in employee related costs,
lower core deposit amortization and reduced corporate insurance premiums.
Similar to the three month comparison, net interest income decreased 9.2% or
$3.9 million reflecting the decline in the net interest margin as loan demand
remained soft and the interest earning asset mix has shifted to an increasing
concentration in securities.
Return on assets was .48% during the first nine months of 1993 compared to
.16% for the first nine months of 1992. Return on common equity was 6.58%
during the first nine months of 1993 compared to 1.59% during the same period
of last year.
For 1992, Boulevard reported net income of $3.4 million, or $.44 per share,
after a charge of $1.8 million, or $.22 per share, for the cumulative effect of
a change in the method of accounting for income taxes, compared to a net loss
of $2.3 million, or $.28 per share for 1991. Income before income taxes
increased to
57
<PAGE>
$7.1 million for 1992 from a loss of $5.4 million for 1991. The principal
factors in the improvement in 1992 over 1991 were a decrease in the provision
for possible loan losses of $9.7 million, an increase in other operating income
of $1.8 million and a decrease in expenses related to other real estate of $2.6
million, reflecting the improvement in the level of non-performing assets and
Boulevard's focus on non-credit revenue.
In 1991, Boulevard's net loss decreased $21.8 million (90%) to $2.3 million,
from a net loss of $24.1 million for the previous year. The principal reason
for this decrease was a lower provision for loan losses ($45.0 million) and
higher other operating income ($5.2 million) which were offset in part by
higher operating expenses ($6.8 million) and lower net interest income ($6.6
million).
Net Interest Income
Net interest income, or the difference between interest earned on interest
earning assets such as loans and securities and interest paid on sources of
funds such as deposits and borrowings, is a significant component of
Boulevard's earnings. Net interest income is affected by changes in both the
balances of and interest rates on interest earning assets and interest bearing
liabilities and the amount of interest earning assets funded with non-interest
bearing deposits.
Net interest income has declined $3.9 million to $38.2 million during the
nine months ended September 30, 1993 as compared to the same period of 1992.
Boulevard's net interest spread (the difference between average interest rate
earned and average interest rate paid) decreased to 3.43% during the first nine
months of 1993 from 3.75% during the nine months ended September 30, 1992. This
decline reflects a reduction in loans, which yield at higher interest rates,
and the redeployment of those funds to securities, which have lower yields.
Specifically, the average yield on loans outstanding for the first nine months
of 1993 was 8.41%, while average yields on securities was 5.42% for the same
period. Comparable average yields for the nine months ended September 30, 1992
were 9.05% and 7.13% for loans and securities, respectively. Average loans as a
percentage of total average interest earning assets decreased to 54.9% during
the first nine months of 1993 from 66.1% during the first nine months of 1992.
As of September 30, 1993, securities made up 55.6% of interest earning assets
compared to 38.8% as of December 31, 1992.
The following table sets forth the changes in interest income and interest
expense attributable to volume and rate variances comparing fiscal 1992 to 1991
and 1991 to 1990. Change due to volume is calculated by multiplying the annual
change in volume by the prior year's rate. The rate variance is calculated by
multiplying the annual change in rate by the prior year's volume. Changes which
are not solely due to change in volume or rate are allocated to volume and rate
changes on the basis of the absolute amount of volume and rate changes.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
(dollars in thousands) ---------------------------- ----------------------------
1992 OVER 1991 1991 OVER 1990
---------------------------- ----------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Investment securities*. $ 10,616 $ (5,671) $ 4,945 $ 4,586 $ (705) $ 3,881
Interest-bearing time
deposits in other
banks................. (188) (189) (377) (1,030) (204) (1,234)
Other short-term
investments........... (481) (861) (1,342) (1,577) (1,813) (3,390)
Loans*................. (13,820) (10,636) (24,456) (14,417) (10,395) (24,812)
-------- -------- -------- -------- -------- --------
Total................. (3,873) (17,357) (21,230) (12,438) (13,117) (25,555)
Interest-Bearing
Liabilities:
Savings and interest-
bearing demand
deposits.............. 893 (8,838) (7,945) 560 (2,592) (2,032)
Other time deposits.... (2,962) (8,457) (11,419) (7,182) (8,222) (15,404)
Short-term borrowings.. 814 (2,451) (1,637) 990 (1,344) (354)
Long-term borrowings... 16 17 33 139 (51) 88
-------- -------- -------- -------- -------- --------
Total................. (1,239) (19,729) (20,968) (5,493) (12,209) (17,702)
-------- -------- -------- -------- -------- --------
Net Interest Income
Change............... $ (2,634) $ 2,372 $ (262) $ (6,945) $ (908) $ (7,853)
======== ======== ======== ======== ======== ========
</TABLE>
- --------
*Interest income includes taxable-equivalent adjustments used to adjust
interest on tax-exempt assets to a fully taxable basis.
58
<PAGE>
Net interest income decreased moderately by $262,000 in 1992 as a result of
decreases in interest-earning assets and interest-bearing liabilities and
decreases in interest rates. Both interest-earning assets and interest-bearing
liabilities declined 1.2%. The average rate on interest-earning assets
decreased from 9.51% to 8.05% and the average rate on interest-bearing
liabilities decreased from 6.08% to 4.38%. In response to the falling rate
environment throughout 1992, management has effectively managed the levels and
maturity characteristics of Boulevard's interest bearing assets and
liabilities. Through specific hedging strategies, lending practices and deposit
origination programs, Boulevard has limited its exposure to falling rates while
remaining focused on its strategic markets.
The decrease in net interest income in 1991 was due to decreases in both
volume and interest rates. Average earning assets decreased $120.5 million in
1991 and average interest-bearing liabilities decreased $73.9 million. The
average rates on interest-earning assets decreased from 10.46% to 9.51% and the
average rates on interest-bearing liabilities decreased from 7.12% to 6.08%.
The net interest margin (net interest income on a fully taxable equivalent
basis divided by total interest earning assets) decreased to 3.90% during the
first nine months of 1993 from 4.30% for the first nine months of 1992. The
changing composition of interest earning assets toward the lower yielding
securities has had a negative effect on the net interest margin partially
offset by a decrease in the funding cost of interest bearing liabilities.
During comparable nine month periods for 1993 and 1992 the average cost of
funding sources decreased 85 basis points to 3.12%.
In order to minimize exposure to interest rate volatility Boulevard utilizes
interest rate swap agreements ("Swaps"). By using Swaps to hedge certain assets
and liabilities, Boulevard has reduced the effect of changes in interest rates
on net interest income. Swaps have increased net interest income $3.1 million
for the nine months ended September 30, 1993 compared to $1.9 million for the
same period during 1992.
The net interest margin decreased from 4.36% in 1990 to 4.17% in 1991 and
then increased to 4.20% in 1992. The net interest spread (the difference
between the average interest rate earned and the average interest rate paid)
increased from 3.34% in 1990 to 3.43% in 1991 and to 3.67% in 1992. Despite
decreases in loans, typically the assets with the highest yields, as a
percentage of total interest-earning assets to 64% in 1992 from 74% in 1991 and
78% in 1990, the net interest spread has increased over this same period.
Interest-bearing liabilities funded 86% of interest-earning assets in 1990, and
88% in 1991 and 1992. The positive variance between 1992 and 1991 in net
interest spread and margin are in part attributable to the decrease in non-
earning assets of $16.9 million during 1992. Decreases in non-performing loans
and other real estate of $4.1 million and $5.6 million, respectively, during
1992 contributed to this decline with a corresponding positive effect on net
interest spread and margin.
59
<PAGE>
The following table reflects the components of net interest income, setting
forth, for the periods indicated: (i) average assets, liabilities and
shareholders' equity, (ii) interest income earned on interest-earning assets,
interest expense paid on interest-bearing liabilities, and net interest income,
(iii) average rates earned on interest-earning assets and average rates paid on
interest-bearing liabilities, (iv) net interest spread, and (v) net interest
margin.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(dollars in thousands) -------------------------------------------------------------------------------
1992 1991 1990
------------------------- ------------------------- -------------------------
AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
---------- -------- ----- ---------- -------- ----- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning
Assets:
U.S. Treasury and
federal agency
securities........... $ 405,300 $ 26,998 6.66% $ 252,710 $ 21,153 8.37% $ 174,499 $ 15,101 8.65%
State, county and
municipal securities
(1).................. 11,987 1,157 9.65 18,270 1,856 10.16 28,259 2,851 10.09
Other securities...... 18,506 1,423 7.69 18,921 1,624 8.58 33,403 2,800 8.38
---------- -------- ---------- -------- ---------- --------
Total investment
securities........... 435,793 29,578 6.79 289,901 24,633 8.50 236,161 20,752 8.79
Interest-bearing time
deposits in other
banks................ -- -- 4,946 377 7.62 18,090 1,611 8.91
Other short-term
investments.......... 42,695 1,518 3.56 52,813 2,860 5.42 75,515 6,250 8.28
Net loans (1)(2)(3)... 867,375 77,237 8.90 1,014,764 101,693 10.02 1,153,139 126,505 10.97
---------- -------- ---------- -------- ---------- --------
Total interest-earning
assets............... 1,345,863 108,333 8.05 1,362,424 129,563 9.51 1,482,905 155,118 10.46
-------- -------- --------
Other Assets:
Cash and due from
banks................ 69,187 71,067 85,272
Premises and
equipment, net....... 23,703 25,395 26,673
Other assets.......... 72,348 85,676 55,083
---------- ---------- ----------
Total assets.......... $1,511,101 $1,544,562 $1,649,933
========== ========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-Bearing
Liabilities:
Savings and interest
bearing demand
deposits............. $ 465,681 $ 14,638 3.14% $ 447,356 $ 22,583 5.05% $ 437,218 $ 24,615 5.63%
Other time deposits
(3).................. 598,643 31,342 5.24 645,790 42,761 6.62 744,765 58,165 7.81
---------- -------- ---------- -------- ---------- --------
Total interest-bearing
deposits............. 1,064,324 45,980 4.32 1,093,146 65,344 5.98 1,181,983 82,780 7.00
Short-term borrowings. 104,388 3,969 3.80 89,658 5,606 6.25 75,720 5,960 7.87
Long-term borrowings.. 14,026 1,871 13.34 13,902 1,838 13.22 12,857 1,750 13.61
---------- -------- ---------- -------- ---------- --------
Total interest-bearing
liabilities.......... 1,182,738 51,820 4.38 1,196,706 72,788 6.08 1,270,560 90,490 7.12
-------- ----- -------- ----- -------- -----
Net Interest Spread.... 3.67% 3.43% 3.34%
===== ===== =====
Other Liabilities and
Shareholders' Equity:
Demand deposits....... 211,660 229,470 246,388
Other liabilities..... 16,224 18,019 20,610
Shareholders' equity.. 100,479 100,367 112,375
---------- ---------- ----------
Total liabilities and
shareholders' equity. $1,511,101 $1,544,562 $1,649,933
========== ========== ==========
Net Interest Income.... $ 56,513 $ 56,775 $ 64,628
======== ======== ========
Net Interest Margin:
Total interest income/
average earnings
assets............... 8.05% 9.51% 10.46%
Total interest
expense/ average
earning assets....... 3.85 5.34 6.10
----- ----- -----
Net interest margin.... 4.20% 4.17% 4.36%
===== ===== =====
</TABLE>
- --------
(1) Interest includes taxable-equivalent adjustments of $1,103 in 1992, $1,862
in 1991 and $3,104 in 1990 used to adjust interest on tax-exempt assets to
a fully taxable basis.
(2) Net loans include non-accrual loans but are after deducting unearned income
and allowance for possible loan losses.
60
<PAGE>
(3) Interest includes the effects of interest rate swap contracts accounted for
as hedges. The effect of these hedging strategies was to increase net
interest income $2,200 in 1992, $563 in 1991 and $130 in 1990.
PROVISION FOR POSSIBLE LOAN LOSSES
A provision for possible loan losses is charged against income based on the
size and quality of the loan portfolio measured against prevailing economic
conditions.
On a quarterly basis, management reviews the adequacy of the allowance for
possible loan losses. During this process, management considers numerous
factors, including the overall level of the allowance for possible loan losses,
the levels and quality of non-performing loans including non-accrual loans,
management's collection strategies, and the overall inherent risk of loss
considered to exist in the loan portfolio. Through this analysis, management
identifies those loans which it believes will most likely result in some loss
to Boulevard and a portion of the allowance is specifically allocated to those
problem credits. Additionally, a portion of the allowance is allocated to the
major categories of loans based upon the perceived risk within each category.
The remaining portion of the allowance for possible loan losses is categorized
as unallocated.
Boulevard's provision for loan losses decreased to $1.8 million during the
first nine months of 1993 from $4.7 million during the first nine months of
1992, while the allowance for possible loan losses as a percentage of total
loans as of period end increased to 3.02% as of September 30, 1993 from 2.88%
as of December 31, 1992 and 2.90% as of September 30, 1992. Net charge-offs
decreased to $5.1 million during the nine months ended September 30, 1993 from
$8.8 million during the nine months ended September 30, 1992. A significant
component of net charge-offs for 1993 was a third quarter charge of $4.3
million related to a single credit.
The provision for loan losses has decreased in the last two years from $60.7
million in 1990 to $15.6 million in 1991 and to $5.9 million in 1992. These
decreases relate to the decline in net loan charge-offs from $39.0 million to
$23.2 million to $11.1 million in these same periods and to the lower levels of
non-performing loans which decreased from $44.7 million to $38.8 million to
$34.7 million at December 31, 1990, 1991 and 1992, respectively.
The high level of loan loss provision in 1990 was due to a decrease in the
allowance for possible loan losses because of $39.0 million in net charge-offs
for the year. The increased provision also provided for increasing risk levels
associated with the overall portfolio, including the increase in non-performing
loans at December 31, 1990 to $44.7 million from $17.5 million the year before.
The following table shows activity affecting the allowance for possible loan
losses:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(dollars in thousands) ----------------------------------------------------
1992 1991 1990 1989 1988
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Average Loans Outstanding. $894,799 $1,047,638 $1,171,247 $1,179,630 $1,073,503
======== ========== ========== ========== ==========
Allowance for Possible
Loan Losses:
Balance at beginning of
year.................... $ 29,333 $ 36,913 $ 15,575 $ 13,930 $ 11,374
Loans charged off:
Commercial, industrial
and financial.......... 7,093 18,017 18,119 7,392 1,006
Real estate-construc-
tion................... 4,045 4,651 13,513 -- --
Real estate-mortgage.... 1,687 4,465 3,017 37 751
Consumer................ 2,526 4,363 5,053 3,259 1,136
-------- ---------- ---------- ---------- ----------
Total charge-offs...... 15,351 31,496 39,702 10,688 2,893
-------- ---------- ---------- ---------- ----------
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(dollars in thousands) --------------------------------------------------------
1992 1991 1990 1989 1988
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Recoveries:
Commercial, industrial
and financial......... 1,797 6,470 345 1,564 951
Real estate-construc-
tion.................. 58 29 -- -- --
Real estate-mortgage... 927 467 2 -- 38
Consumer............... 1,439 1,326 359 199 117
-------- ---------- ---------- ---------- ----------
Total recoveries..... 4,221 8,292 706 1,763 1,106
-------- ---------- ---------- ---------- ----------
Net loans charged off... 11,130 23,204 38,996 8,925 1,787
Provision for loan loss-
es..................... 5,948 15,624 60,655 10,570 4,248
Allowance applicable to
loans sold............. -- -- (321) -- --
Acquisition of subsidi-
ary.................... -- -- -- -- 95
-------- ---------- ---------- ---------- ----------
Balance at the end of
year................... $ 24,151 $ 29,333 $ 36,913 $ 15,575 $ 13,930
======== ========== ========== ========== ==========
Net Charge-Offs as a
Percentage of Average
Loans.................. 1.24% 2.21% 3.33% 0.76% 0.17%
======== ========== ========== ========== ==========
Allowance for Possible
Loan Losses as a
Percentage of Total
Loans at Period End.... 2.88% 3.14% 3.21% 1.31% 1.22%
======== ========== ========== ========== ==========
Allowance for Loan
Losses as a Percentage
of Non-Performing Loans
at Period End.......... 69.60% 75.55% 82.57% 88.94% 118.50%
======== ========== ========== ========== ==========
</TABLE>
The allowance for possible loan losses as a percentage of non-performing
loans increased to 123.66% as of September 30, 1993 from 69.60% as of December
31, 1992 and from 94.64% as of September 30, 1992.
The allowance for possible loan losses as a percentage of total loans as of
December 31, 1992 was 2.88%, down from 3.14% as of year-end 1991. This decrease
reflects the lower level of the allowance partially offset by the decline in
loans and is consistent with the decline in the level of non-performing loans.
The allowance as a percentage of non-performing loans declined to 69.6% at
December 31, 1992, continuing a trend from previous years. In reviewing this
decline, it is important to note that for many of the remaining non-performing
loans management does not expect any future losses.
The allocation of the allowance for possible loan losses, by major categories
of loans at the dates indicated, is summarized in the following table:
<TABLE>
<CAPTION>
DECEMBER 31,
(dollars in thousands) ---------------------------------------------------------------------
1992 1991 1990 1989 1988
------------- ------------- ------------- ------------- -------------
AMOUNT %* AMOUNT %* AMOUNT %* AMOUNT %* AMOUNT %*
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, industrial
and financial.......... $ 9,826 34.9 $10,101 33.1 $16,812 44.0 $ 8,130 46.9 $ 5,778 48.5
Real estate-
construction........... 2,734 4.0 4,598 6.8 5,350 6.8 3,031 5.3 1,217 2.7
Real estate-mortgage.... 4,072 37.9 7,691 40.4 7,811 34.0 757 27.7 866 24.0
Consumer................ 3,307 23.2 2,038 19.7 1,981 15.2 2,274 20.1 1,943 24.8
Not allocated........... 4,212 N/A 4,905 N/A 4,959 N/A 1,383 N/A 4,126 N/A
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total.................. $24,151 100.0 $29,333 100.0 $36,913 100.0 $15,575 100.0 $13,930 100.0
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- --------
*Percentage of loans in each category to total loans.
62
<PAGE>
Commercial real estate loans represented approximately 29% and 40% of 1991
and 1990 charge-offs, respectively, and approximately 51% and 50% of December
31, 1991 and 1990, non-performing loans, respectively, which is well in excess
of commercial real estate's 27% and 25% share of Boulevard's loan portfolio.
This disproportionate increase in real estate credit difficulties reflected a
considerable weakening of local area commercial real estate values and a slow-
down in overall real estate activity.
During 1990, management responded to the worsening economic environment by
increasing the provision each quarter ($1.9 million, $11.8 million, $16.8
million and $30.0 million, for the first through fourth quarters, respectively)
and devoting more resources to credit evaluation procedures. As part of the
deliberations for the fourth quarter's $30.0 million provision, management
performed an extensive review of the portfolio utilizing experienced personnel
not directly involved with the loans and re-evaluated its various collection
strategies. Management also considered the results of recently obtained
appraisals which reflected the harsh decline in the real estate market during
the year and the results of examinations by regulatory authorities. In addition
to the allocations to specific loans, the allocation to the major categories of
loans as of December 31, 1990 was substantially more than the amounts allocated
at December 31, 1989 because of the perceived increased level of risk within
each category. Finally, because of the uncertainties facing the national
economy and the potential effects on Boulevard's customers, management
determined that the unallocated portion of the allowance for loan losses at
December 31, 1990 should be at $5.0 million compared to $1.4 million at the
prior year-end. In 1992 and 1991, management continued its extensive reviews of
the loan portfolio and because of the continuing uncertainties facing the
national economy and the potential effects on Boulevard's customers, management
determined that the unallocated portion of the allowance for possible loan
losses should be maintained at the level of $4.2 million and $4.9 million at
December 31, 1992 and 1991, respectively.
OTHER OPERATING INCOME
Total other operating income during the first nine months of 1993 increased
11.9% to $17.5 million from $15.6 million during the first nine months of 1992.
Service charge income increased $807,000 or 18.8% reflecting the results of
management's increased emphasis on noncredit revenue sources. Security gains
decreased $1.6 million to $786,000 during the first nine months of 1993 as
compared to the same period last year; there were no sales of securities during
the third quarter of 1993. All securities sold during 1993 ($67.6 million) were
classified as available-for-sale as of December 31, 1992. Boulevard utilizes
securities available-for-sale primarily to provide liquidity.
Other income increased $2.2 million during the first nine months of 1993 to
$6.0 million from $3.7 million during the corresponding period of 1992.
Included for 1993 are increases of $2.4 million in income from the sale and
securitization of consumer loans as well as residential real estate mortgage
loan sales and originations. Additionally, gains on the disposal of other real
estate ($447,000) and sale of document processing equipment ($180,000) were
recorded during the nine months ended September 30, 1993. The loss on sale of
assets for the nine months ended September 30, 1992 ($227,000) resulted
primarily from the sale of real estate received in satisfaction of debt.
As shown in the following table, other operating income increased 36% from
$14.4 million in 1990 to $19.6 million in 1991, and increased 9.3% in 1992 to
$21.4 million.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
(dollars in thousands) -----------------------
1992 1991 1990
------- ------- -------
<S> <C> <C> <C>
Trust department income........................... $ 6,906 $ 6,376 $ 5,695
Service charges................................... 5,875 5,526 5,210
Security gains.................................... 2,922 4,622 36
Other income...................................... 5,741 3,094 3,450
------- ------- -------
Total............................................ $21,444 $19,618 $14,391
======= ======= =======
</TABLE>
63
<PAGE>
In 1992, a significant portion of the increase in other operating income is
due to other income of $1.1 million from the termination of two agreements
relating to previous securitizations of consumer loans and to gains of $1.9
million from sales of residential real estate mortgage loans. The increases in
other income, trust department income and service charges were partially offset
by a decrease in security gains of $1.7 million, to $2.9 million. In 1991,
$169.6 million in investment securities were sold resulting in security gains
of $4.6 million. Although it is Boulevard's general policy to hold investment
securities to maturity, these sales were made as part of Boulevard's overall
management of interest rate risk as well as to improve capital ratios. The
increase in other operating income of $5.2 million in 1991 was primarily due to
the $4.6 million increase in security gains and by increases in trust
department income and service charges, offset by a decrease in other income.
OTHER OPERATING EXPENSES
Other operating expenses decreased 3.2% to $46.5 million during the first
nine months of 1993 from $48.1 million for the same period during 1992.
Salaries and benefits decreased to $20.8 million during the first nine months
of 1993 or 1.3% from $21.1 million for the same period during 1992. This net
decrease includes a reduction of salaries of 7.4%, related to a decrease in the
number of employees due to cost control efforts, as well as the outsourcing of
certain document processing services. These reductions were offset by an
increase in benefits, principally pension, retiree medical and incentive
compensation costs. The effects of the cost control and outsourcing efforts are
more dramatic when analyzing salaries and wages during the third quarter of
1993, compared to 1992, evidencing a 10.4% reduction.
Boulevard has adopted Statement of Financial Accounting Standards ("SFAS")
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," effective January 1, 1993 and is amortizing the accumulated
postretirement obligation at that date, approximately $3.6 million, over 20
years. Expense recorded for the first nine months of 1993 amounted to $346,000.
Other expenses for the first nine months of 1993 decreased $1.5 million
(7.6%) to $18.4 million from $19.9 million during 1992. Lower costs associated
with other real estate, corporate insurance, legal expenses, and a decrease in
the amortization expense for core deposit intangibles served to more than
offset an increase in FDIC insurance premiums and the service fees for certain
document processing activities.
Excluding the effects of expenses related to other real estate, other
operating expenses decreased 2.7% during the first nine months of 1993 compared
to the same period last year.
Boulevard's other operating expenses of $63.8 million in 1992 represented a
$500,000 (.8%) decrease over the $64.3 million expense for 1991. Such expenses
increased $6.8 million (12%) to $64.3 million in 1991, from $57.5 million in
1990. In 1992, salaries and employee benefits increased $414,000 or 1.5% as a
result of increases in employee medical insurance and incentive compensation
offset by a reduction in pension expenses. Decreases in occupancy and equipment
expenses were relatively moderate in 1992. The decrease in other expenses was
primarily due to a reduction in expenses related to other real estate of $2.6
million partially offset by increases in other items which included an increase
in data processing expenses of $487,000 reflecting the first full year of
amortization of software acquired in conjunction with the data processing
services agreement entered into in 1990.
Excluding the effects of expenses related to other real estate, total other
operating expenses increased 3.5% in 1992. In 1991, other expense increased
$8.2 million (43%) to $27.0 million and was offset in part by modest decreases
in salaries and employee benefits (which in 1991 included no incentive
compensation), net occupancy expense and equipment expense. The $8.2 million
increase in other expense was primarily due to a $5.6 million increase in
expenses related to the carrying cost and writedown of other real estate. Other
categories of expense with substantial increases were data processing ($1.5
million), FDIC insurance ($1.1 million) and legal expense ($1.0 million). The
increase in FDIC insurance is the result of the increase in insurance premium
rates.
64
<PAGE>
The following table shows other operating expense information for the periods
indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
(dollars in thousands) -----------------------
1992 1991 1990
------- ------- -------
<S> <C> <C> <C>
Salary and employee benefits..................... $28,133 $27,719 $28,089
Net occupancy expense............................ 6,058 6,090 6,206
Equipment expense................................ 3,337 3,526 4,361
Other expense.................................... 26,314 27,009 18,846
------- ------- -------
Total........................................... $68,842 $64,344 $57,502
======= ======= =======
</TABLE>
INCOME TAXES
Boulevard recorded income tax expense of $1.9 million and $1.3 million for
the nine months ended September 30, 1993 and 1992, respectively. The income
taxes on a taxable-equivalent basis were 32.8% for 1993 and 37.9% for 1992.
Boulevard recorded income tax expense (benefit) of $1.8 million, ($3.1
million) and ($18.1 million) for the years ended December 31, 1992, 1991 and
1990, respectively. Income taxes as a percent of loss before income taxes were
42.8% in 1990 and 57.8% in 1991 primarily because of the losses in 1990 and
1991 and the carryback of a portion of these losses to years when the tax rate
was 46%. For 1992, income taxes as a percent of income before income taxes was
26.1%. Income tax expense or benefit on a taxable equivalent basis was 36.1%,
35.8% and 38.3% in 1992, 1991 and 1990, respectively.
Boulevard adopted Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," effective January 1, 1992. Boulevard has
net deferred tax assets of $9.1 million as of December 31, 1992, after
deducting a $500,000 valuation allowance. Management determined the level of
the valuation allowance taking into consideration expected future earnings, the
timing of reversal of temporary differences and carryback availability.
Earnings are expected to improve in the coming years as non-performing assets
and the provision for possible loan losses continue to decline and net interest
income and other operating income increase.
BALANCE SHEET ANALYSIS
Total assets as of September 30, 1993 were $1.7 billion, up $103.6 million,
or 6.6%, from year-end 1992. Earning assets increased 7.5% during the first
nine months of 1993 and represented 89.2% of total assets as of September 30,
1993 compared to 88.4% as of December 31, 1992. Interest bearing liabilities
increased 3.9% during the first nine months of 1993 and were 83.6% of earning
assets as of September 30, 1993 and were 86.6% as of December 31, 1992.
As a result of continued slow general economic conditions and weak loan
demand, the balance sheet reflects decreases in loans and increases in
securities. Total assets at December 31, 1992 were $1,564 million, up only $22
million or 1.4% from year-end 1991. Average earning assets decreased 1.2% in
1992 and represented 89.1% of average total assets for 1992.
SECURITIES
Securities increased $290.5 million or 54.2% to $826.2 million as of
September 30, 1993 from $535.7 million as of December 31, 1992. As of September
30, 1993 there are $81.1 million in securities held for investment for which
settlement is scheduled as of various dates to November 1, 1993. The
corresponding liability for these purchases is included in other liabilities.
Boulevard's securities portfolio is designed to provide liquidity, as well as
to supplement earnings and is also used to manage interest rate risk. As of
December 31, 1992, management determined that $114.1 million
65
<PAGE>
in U.S. government agency mortgage-backed securities were not intended to be
held to maturity and were therefore classified as available-for-sale and
carried at the lower of their aggregate cost or market. These securities have
expected maturities of within one year for $12.6 million and after one year
through five years for $101.5 million with weighted average yields of 7.79% and
7.14%, respectively. Securities available-for-sale are intended to meet
Boulevard's liquidity needs and changes in interest rate risk of other economic
factors. As of September 30, 1993 securities available-for-sale amounted to
$172.0 million. Purchases and sales of these securities during the first nine
months of 1993 totalled $185.5 million and $67.6 million, respectively.
Boulevard's general investment policy has been to invest in short-term (one
to five year maturity) highly-rated government and municipal obligations and to
hold those securities until maturity.
The book values and market values of investment securities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
(dollars in thousands) --------------------------
1992 1991 1990
-------- -------- --------
<S> <C> <C> <C>
Book Value:
U.S. Treasury and federal agencies........... $386,030 $339,821 $260,250
Obligations of states and political
subdivisions................................ 7,375 14,215 21,962
Other........................................ 28,142 11,265 31,232
-------- -------- --------
Total book value............................ $421,547 $365,301 $313,444
======== ======== ========
Total Market Value.......................... $422,233 $374,348 $318,014
======== ======== ========
</TABLE>
Included in U.S. Treasury and federal agencies securities are mortgage-backed
securities which amounted to $187.4 million, $224.6 million, and $127.2 million
for 1992, 1991 and 1990, respectively.
Beginning in 1990 Boulevard increased its investment in high quality
mortgage-backed securities with expected maturities beyond the traditional one
to five year maturity. These mortgage backed securities represented all of the
$51.9 million increase in investment securities from December 31, 1990 to
December 31, 1991. In 1992 Boulevard continued to buy mortgage-backed
securities increasing total holdings to $301.5 million at December 31, 1992,
with $114.1 million classified as "securities available-for-sale." However, the
1992 purchases were comprised of shorter term securities of two to five year
maturities and purchases of floating rate mortgage-backed securities. In
addition, Boulevard sold $111.3 million of the longer term fixed rate mortgage-
backed securities as described under Operating Income.
The Tax Reform Act of 1986 had the effect of reducing for banks the tax
benefits derived from income received from tax-free investments acquired after
August 7, 1986. Therefore, tax-free investments have decreased as a percentage
of the total investment portfolio.
The following table sets forth the maturities of investment securities owned
as of December 31, 1992:
<TABLE>
<CAPTION>
MATURING
(dollars in thousands) ------------------------------------------
AFTER
AFTER 5 YEARS
1 YEAR THROUGH
WITHIN THROUGH 10 AFTER
1 YEAR 5 YEARS YEARS 10 YEARS TOTAL
------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
U.S. Treasury and federal agencies*. $34,772 $203,200 $36,952 $111,106 $386,030
Obligations of state and political
subdivisions....................... 2,705 3,267 1,363 40 7,375
Other............................... 25 19,419 2,297 6,401 28,142
------- -------- ------- -------- --------
Total.............................. $37,502 $225,886 $40,612 $117,547 $421,547
======= ======== ======= ======== ========
</TABLE>
- --------
*Includes mortgage-backed securities.
66
<PAGE>
The weighted average yield for each range of maturities of investment is
shown below as of December 31, 1992. Yields on tax-exempt securities are
computed on a taxable-equivalent basis.
<TABLE>
<CAPTION>
MATURING
(dollars in thousands) --------------------------------
AFTER AFTER
1 YEAR 5 YEARS
WITHIN THROUGH THROUGH AFTER
1 YEAR 5 YEARS 10 YEARS 10 YEARS
------ ------- -------- --------
<S> <C> <C> <C> <C>
U.S. Treasury and federal agencies*........... 6.32% 5.31% 6.19% 5.73%
Obligations of states and political
subdivisions................................. 6.31% 6.26% 6.27% 9.18%
Other......................................... 5.50% 5.67% 5.53% 7.44%
</TABLE>
- --------
*Includes mortgage-backed securities.
LOANS
Loans decreased $163.8 million, or 19.5%, to $674.6 million during the first
nine months of 1993. The decrease in loans is primarily the result of the sale
and securitization of $106.1 million in consumer loans and the continuing trend
of weak loan demand which is a product of the uncertainty in general economic
conditions. Additionally, $84.0 million in residential real estate mortgage
loans were sold at a gain of $961,000. These loans were essentially all new
origination which were sold into the secondary market. Boulevard retained
servicing rights for these loans, as a source of noncredit revenue.
As of September 30, 1993, loans available-for-sale, which are carried at the
lower of aggregate cost or market, include $19.2 million in residential real
estate mortgage loans. The market value of these loans exceeded cost as of
September 30, 1993.
The following table shows the classification of loans, net of unearned
discount:
<TABLE>
<CAPTION>
DECEMBER 31,
(dollars in thousands) --------------------------------------------------
1992 1991 1990 1989 1988
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Commercial, industrial and
financial.................. $292,815 $309,438 $ 506,749 $ 558,756 $ 553,102
Real estate construction.... 33,402 63,768 78,748 62,751 30,462
Real estate mortgage........ 317,812 377,584 390,937 330,876 274,239
Consumer.................... 194,397 183,847 174,552 240,115 282,741
-------- -------- ---------- ---------- ----------
Total Loans................ $838,426 $934,637 $1,150,986 $1,192,498 $1,140,544
======== ======== ========== ========== ==========
</TABLE>
Loans decreased 10.3% as of December 31, 1992 from a year earlier and
decreased 18.8% as of December 31, 1991 from year-end 1990. The decrease in all
categories of loans in 1992 except consumer reflects the uncertainty in general
economic conditions which greatly reduced loan demand and management's plan to
reduce non-performing loans and improve asset quality. The 1992 decrease of
$96.2 million represents transfers of $8.1 million in loans to other real
estate, the acquisition of consumer loans of $16.6 million, the sale of
residential real estate mortgage loans of $84.6 million, and an excess of
collections and charge-offs on loans over new loans made as the remainder.
Boulevard's strategic direction is to emphasize lending to middle-market
companies located in the greater Chicago metropolitan area. The majority of the
commercial loans are secured. Floor plan and leasing lines of credit are
offered. Consumer loans are primarily installment loans which are made for the
purchase of automobiles and are made both directly to the banks' customers and
acquired indirectly through a number of local automobile dealers. Real estate
mortgages are both residential and non-residential and are made primarily
against property in the greater Chicago metropolitan area.
Boulevard has no significant loans to customers engaged in farming or oil and
gas exploration and has no loans to companies domiciled outside the United
States. Letters of credit are issued under the same credit analysis procedures
applicable to loans and totalled $23.2 million as of December 31, 1992.
67
<PAGE>
The following is a summary of maturities of certain loan categories at
December 31, 1992:
<TABLE>
<CAPTION>
DUE
AFTER
DUE IN 1 YEAR DUE
1 YEAR THROUGH AFTER
OR LESS 5 YEARS 5 YEARS TOTAL
(dollars in thousands) -------- -------- ------- --------
<S> <C> <C> <C> <C>
Commercial, industrial and financial......... $149,410 $ 96,305 $47,100 $292,815
Real estate construction..................... 20,495 12,907 -- 33,402
-------- -------- ------- --------
Total....................................... $169,905 $109,212 $47,100 $326,217
======== ======== ======= ========
</TABLE>
At December 31, 1992, $116.3 million in commercial, industrial and financial
loans and real estate construction loans due after one year had floating or
adjustable interest rates, and $40.1 million had fixed interest rates.
Substantially all floating or adjustable interest rates vary immediately with
the prime rate, and no material amount of floating or adjustable rate loans had
any restrictions on the amount of interest rate adjustments.
NON-PERFORMING ASSETS
Non-performing assets, which include non-accrual loans, restructured loans
and other real estate, declined $7.2 million during the third quarter of 1993
and $15.1 million during the first half of 1993 (a total of $22.1 million) to
$30.4 million as of September 30, 1993 from $52.5 million as of December 31,
1992.
In July 1991, Boulevard announced a program for the accelerated disposition
of approximately $50 million of non-performing assets (loans and other real
estate). As of December 31, 1992 the program was essentially complete.
Approximately $10.8 million of such assets remained in most instances pending
resolution of litigation which would allow for the sale of the asset. As a
result of this program, estimated losses of $7.1 million (including future non-
interest carrying costs) were charged to income during 1991. Of the $7.1
million, $2.9 million was included in the provision for loan losses and $4.2
million applicable to other real estate was included in other operating
expenses. As a result of the program and other collection efforts, the level of
non-performing assets at December 31, 1992 declined $40.2 million to $52.5
million from the high of $92.7 million at June 30, 1991. Management continues
the strategy of disposition of non-performing assets, however, a formal program
no longer exists.
Non-performing loans, consisting of non-accrual loans and restructured loans,
were $16.4 million, or 2.44% of loans, as of September 30, 1993, as compared to
$34.7 million, or 4.14%, as of December 31, 1992 and $26.6 million, or 3.06%,
as of September 30, 1992.
Loans are placed on a non-accrual basis generally when principal or interest
is past due for 90 days or when full collection of scheduled payments is
doubtful. Loans past due by 90 days or more which are adequately secured and in
the process of collection are continued on an accrual basis.
As a result of the decrease in non-accrual loans from 1990 to 1992 Boulevard
has decreased its allowance for possible loan losses as a percentage of total
loans from 3.21% at December 31, 1990 to 3.14% and 2.88% at December 31, 1991
and 1992, respectively. Substantially all of the $34.7 million of non-accrual
loans at December 31, 1992 are past due and not performing.
68
<PAGE>
The following table shows Bouelvard's non-performing assets and accruing
loans past due 90 days or more at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
(dollars in thousands) -------------------------------------------
1992 1991 1990 1989 1988
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Loans on a non-accrual basis...... $34,698 $38,824 $44,703 $17,466 $11,755
Restructured loans................ -- -- -- 45 --
------- ------- ------- ------- -------
Total non-performing loans........ 34,698 38,824 44,703 17,511 11,755
Other real estate................. 17,798 23,385 23,920 1,497 2,368
------- ------- ------- ------- -------
Total non-performing assets....... $52,496 $62,209 $68,623 $19,008 $14,123
======= ======= ======= ======= =======
Non-performing loans to total
loans as period-end.............. 4.14% 4.15% 3.88% 1.47% 1.03%
Non-performing assets to total
loans and other real estate at
period end....................... 6.13% 6.49% 5.84% 1.59% 1.24%
Accruing loans past due 90 days or
more............................. $ 2,506 $ 5,311 $11,930 $ 5,573 $ 3,140
======= ======= ======= ======= =======
</TABLE>
The following table shows loans and non-performing loans by major categories
of loans at December 31, 1992:
<TABLE>
<CAPTION>
NON-PERFORMING
LOANS
(dollars in thousands) ----------------
PERCENT
LOANS AMOUNT OF LOANS
-------- ------- --------
<S> <C> <C> <C>
Commercial, industrial and financial............ $292,815 $18,818 6.43%
Real estate--construction....................... 33,402 6,597 19.75%
Real estate--mortgage........................... 317,812 8,770 2.76%
Consumer........................................ 194,397 513 .26%
-------- -------
Total.......................................... $838,426 $34,698 4.14%
======== =======
</TABLE>
Other real estate, which is real property received in satisfaction of loans
or recorded as an insubstance foreclosure, was $13.8 million as of September
30, 1993, compared to $17.8 million as of year end 1992. It is estimated that
the proceeds from the sale of such remaining property will at least equal their
carrying values.
Other real estate was $17.8 million (net of a $1.1 million allowance) at
December 31, 1992, compared to $23.4 million at year-end 1991.
FOREIGN OUTSTANDINGS
At December 31, 1992, 1991 and 1990 Boulevard had only minor foreign
outstandings in the form of non-interest bearing deposits in Canadian and
British banks.
DEPOSITS
Total deposits decreased $71.5 million (5.6%) from $1.3 billion as of
December 31, 1992 to $1.2 billion as of September 30, 1993. Non-interest
bearing deposits decreased $28.9 million and interest bearing deposits
decreased $42.6 million. The decrease in interest bearing deposits results from
decreases in savings deposits of $1.3 million and time deposits of $51.5
million offset by increases in NOW and money market deposits of $10.2 million.
The decrease in time deposits consists primarily of decreases in deposits of
less than $100,000 of $42.2 million. Time deposits include brokered deposits,
which totalled $135.4 million or 11.3% of total deposits as of September 30,
1993, up $37.0 million from $98.4 million or 7.8% of total deposits of December
31, 1992.
Total average deposits decreased 7.4% from $1,428 million in 1990 to $1,323
million in 1991 and decreased 3.6% to $1,276 million in 1992. The decrease in
time deposits to $645.8 million in 1991 from $744.8 million in 1990 was the
result of a decrease in deposits of $100,000 or more offset in part by an
increase in deposits of less than $100,000.
69
<PAGE>
The following table sets forth the classification of average deposits for the
indicated periods:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(dollars in thousands) --------------------------------
1992 1991 1990
---------- ---------- ----------
<S> <C> <C> <C>
Non-interest bearing demand deposits..... $ 211,660 $ 229,470 $ 246,388
Interest bearing demand deposits......... 289,487 291,199 285,063
Savings deposits......................... 176,194 156,157 152,155
Time deposits............................ 598,643 645,790 744,765
---------- ---------- ----------
Total*.................................. $1,275,984 $1,322,616 $1,428,371
========== ========== ==========
</TABLE>
- --------
*Includes deposits maintained by Miami Corporation and related entities.
Boulevard's principal source of funds is deposits generated from targeted
customer segments within Boulevard's market area. Large deposits, generally
considered in excess of $100,000, are primarily from those customers who have
other commercial relationships with Boulevard's subsidiary banks. These
deposits typically bear a higher interest rate than savings and interest
bearing demand deposits or other time deposits. The customers having other
commercial relationships with Boulevard's subsidiary banks have historically
proved to be a reliable, stable source of funds. During 1991, Boulevard began
acquiring brokered deposits. At December 31, 1991 they amounted to $75 million
or 5.7% of total deposits and at December 31, 1992 were $98 million or 7.8% of
total deposits.
The following table set forth the maturity of time deposits of $100,000 or
more at December 31, 1992:
<TABLE>
<CAPTION>
CERTIFICATES
(dollars in thousands) OF DEPOSIT OTHER
------------ -------
<S> <C> <C>
Maturing within 3 months............................ $112,048 $61,701
After 3 but within 6 months......................... 13,470
After 6 but within 12 months........................ 18,659
After 12 months..................................... 73,705
-------- -------
Total.............................................. $217,882 $61,701
======== =======
</TABLE>
BORROWED FUNDS
Total borrowed funds increased to $250.4 million (55.0%) as of September 30,
1993 compared to $161.6 million as of December 31, 1992. While fed funds
purchased and notes payable declined $12.5 million (53.1%) and $4.0 million
(40.0%), respectively, securities sold under agreements to repurchase increased
86.8% to $216.9 million from December 31, 1992. Management has leveraged the
capital base to grow the level of interest earning assets. This strategy has
mitigated the decline in net interest income resulting from the decreasing
concentration of higher yielding loans in the interest earning asset base.
The following table sets forth certain information with regard to other short
term borrowings:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(dollars in thousands) ---------------------------
1992 1991 1990
-------- -------- -------
<S> <C> <C> <C>
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements:
Average balance during the year................... $ 85,157 $ 68,228 $50,605
Average interest rate during year................. 3.66% 6.10% 7.90%
Year-end balance.................................. $139,660 $ 55,209 $30,041
Average interest rate at December 31.............. 3.65% 4.20% 5.89%
Highest month-end balance......................... $139,660 $106,019 $62,266
Total Other Short-Term Borrowings:
Average balance during the year................... $ 97,126 $ 83,254 $63,200
Average interest rate during year................. 3.58% 6.06% 7.85%
Year-end balance................................... $151,595 $ 71,138 $52,449
Average interest rate at December 31............... 3.51% 4.23% 6.41%
Highest month-end balance.......................... $151,596 $127,255 $75,811
</TABLE>
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<PAGE>
CAPITAL AND REGULATORY ISSUES
Common shareholders' equity increased to $98.3 million, or $13.24 per share
as of September 30, 1993 from $93.2 million or $12.63 per share as of December
31, 1992. On October 22, 1993 Boulevard declared its second consecutive,
quarterly cash dividend of 5 cents per share on common stock. The dividend is
payable December 17, 1993 to shareholders of record on November 26, 1993.
Boulevard's dividend had been suspended during October 1990 in view of
performance problems related to asset quality. In light of the strengthened
balance sheet, improved asset quality and reduction of capital constraints due
to improved performance, the dividend was reinstated in the third quarter of
1993.
The regulatory authorities' leverage ratio guidelines are based on Tier 1
capital to total average assets and their risk-based capital guidelines
consider both balance sheet and off-balance sheet credit risk. At September 30,
1993 and December 31, 1992 and 1991 the leverage and risk based capital ratios
of Boulevard and each of its subsidiary banks exceeded the regulatory minimums.
The consolidated ratios for Boulevard were as follows:
<TABLE>
<CAPTION>
RISK-BASED
CAPITAL RATIO
--------------LEVERAGE
TIER 1 TOTAL RATIO
------ ---------------
<S> <C> <C> <C>
September 30, 1993................................. 10.8% 12.3% 6.5%
December 31, 1992.................................. 9.3% 10.8% 6.3%
Regulatory minimum................................. 4.0% 8.0% 4.0%
December 31, 1991.................................. 8.7% 10.6% 6.2%
Regulatory minimum................................. 3.6% 7.3% 4.0%
</TABLE>
The December 31, 1992 ratios for Boulevard's subsidiary banks were as
follows:
<TABLE>
<CAPTION>
RISK-BASED
CAPITAL RATIO
--------------LEVERAGE
TIER 1 TOTAL RATIO
------ ---------------
<S> <C> <C> <C>
Boulevard Bank..................................... 10.0% 11.3% 6.5%
First National of Des Plaines...................... 9.9% 11.1% 6.4%
Citizens of Downers Grove.......................... 10.0% 11.1% 6.5%
National Security Bank............................. 9.5% 10.7% 6.6%
Regulatory minimums................................ 4.0% 8.0% 4.0%
</TABLE>
In January and February 1991, the Federal Reserve Bank of Chicago (the "Fed")
conducted an examination of Boulevard and the Office of the Comptroller of the
Currency (the "OCC") conducted an examination of Boulevard Bank. As a result of
the examinations, agreements were entered into between the Fed and Boulevard
and between the OCC and Boulevard Bank regarding various aspects of their
respective operations. Effective May 12, 1992, the OCC unconditionally
terminated its agreement with Boulevard Bank. Effective March 8, 1993,
Boulevard's agreement with the Fed was replaced with a new less restrictive
agreement which only required Boulevard to notify the Fed in writing fifteen
days in advance of declaring any dividends or increasing its borrowing. On
August 3, 1993 the agreement between Boulevard and the Fed was unconditionally
terminated.
As a result of an examination of the First National Bank of Des Plaines
("First Des Plaines") by the OCC, First Des Plaines and the OCC entered into an
agreement in September 1991. The agreement required First Des Plaines to
implement or revise a number of plans, programs and procedures. During April of
1993 the OCC unconditionally terminated the agreement with First Des Plaines.
The Federal Deposit Insurance Corporation ("FDIC") Improvement Act of 1991
("FDICIA"), enacted in December 1991, significantly expanded the regulatory and
enforcement powers of federal banking regulators, in particular the FDIC. A
major feature of FDICIA is the comprehensive directions it gives to federal
banking regulators to promptly direct or require the correction of problems at
inadequately capitalized banks in the manner that is least costly to the
federal deposit insurance funds. FDICIA establishes five tiers
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<PAGE>
of capital measurement for regulatory purposes and directs banking regulators
to take increasingly strong corrective steps, based on the capital tier of any
subject bank, to cause such bank to achieve and maintain capital inadequacy.
FDICIA directs federal banking regulatory agencies to issue new safety and
soundness standards governing operational and managerial activities of banks
and their holding companies, particularly in regard to internal control, loan
documentation, credit underwriting, interest rate exposure, asset growth and
compensation. Such agencies are also required to revise their current risk
level capital standards applicable to banks and their holding companies to
ensure that they adequately treat, among other things, interest rate risk,
credit concentration risk and risk of non-traditional activities. Additionally,
standards relating to the maximum percentage of classified assets, minimum
earnings and minimum ratios of market value to book value for publicly traded
shares are to be issued by the regulators.
FDICIA contains a number of other provisions that will affect depository
institutions, including the creating of additional reporting and independent
auditing requirements, review of accounting standards, and supplemental
disclosures and limits on the ability to acquire brokered deposits. Many
regulations have yet to be finalized and it is difficult to predict what their
effects will be. It is, however, anticipated that FDICIA will result in
increased costs for the banking industry, including Boulevard, due to higher
FDIC insurance assessments and additional operating and reporting requirements.
Boulevard is continually assessing the provisions of FDICIA and other
regulatory developments to ensure compliance therewith.
ASSET AND LIABILITY MANAGEMENT
Asset and liability management is a process that involves the development and
implementation of strategies to maximize net interest margin while minimizing
the risk associated with changing interest rates. The Asset-Liability
Management Committee has responsibility to manage this process within the
policy constraints of maintaining appropriate levels of capital adequacy,
liquidity and credit quality. Management believes it has been reasonably
effective in maintaining Boulevard's net interest margin during period of
fluctuating interest rates.
The following table set forth certain information relating to Boulevard's
rate-sensitive assets and liabilities and off-balance sheet items, which have
been classified according to their repricing dates, at December 31, 1992.
<TABLE>
<CAPTION>
(dollars in thousands) ONE
THROUGH AFTER
WITHIN FIVE FIVE
ONE YEAR YEARS YEARS TOTAL
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Interest-Earning Assets:
Investment securities................. $240,870 $174,447 $ 6,230 $ 421,547
Securities available-for-sale......... 51,582 62,540 114,122
Federal funds sold.................... 32,350 32,350
Net loans............................. 529,512 226,555 58,208 814,275
-------- -------- --------- ---------
Total................................ 854,314 463,542 64,438 1,382,294
-------- -------- --------- ---------
Non-interest-bearing deposits.......... 21,855 87,428 136,793 246,076
Interest-bearing deposits.............. 555,778 295,334 169,933 1,021,045
Borrowings and debt.................... 161,876 11,729 2,103 175,708
-------- -------- --------- ---------
Total................................ 739,509 394,491 308,829 1,442,829
-------- -------- --------- ---------
Net interest-bearing gaps.............. 114,805 69,051 (244,391) (60,535)
Effect of off-balance sheet items...... (105,000) 105,000
-------- -------- --------- ---------
Net gap position....................... $ 9,805 $174,051 $(244,391) $ (60,535)
======== ======== ========= =========
Cumulative gap position................ $ 9,805 $183,856 $ (60,535)
======== ======== =========
</TABLE>
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<PAGE>
For purposes of this table, variable rate assets are included in the period
in which interest rates are first scheduled to adjust. Fixed rate loans and
mortgage-backed securities are included in the periods of anticipated repayment
based on management's estimates of prepayments. The table also includes off-
balance sheet items (interest rate swap agreements), which in effect convert
fixed rate liabilities in the more than one year category into a variable rate
or short-term liability in the under one year category. In addition, only a
portion of Boulevard's savings and interest bearing demand accounts, which
generally are subject to immediate withdrawal, are deemed to mature or reprice
within one year based on prior retention of such deposits in changing interest
rate environments.
In evaluating Boulevard's exposure to interest rate risk, certain
shortcomings inherent in the method of analysis presented in the table must be
considered. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Additionally, the interest rates on
certain types of assets and liabilities may fluctuate in advance of changes in
market interest rates, while interest rates on other types may lag behind
changes in market rates. Certain assets, such as adjustable-rate mortgages or
mortgage-backed securities, have features which restrict changes in interest
rates on a short-term basis and over the life of the asset. The analysis shown
in the table could be substantially changed by external factors such as loan
prepayments or by factors controllable by Boulevard, such as asset sales, or by
a combination of the two factors.
The gap position shown is as of one day only and significant changes can
occur in the position as a result of market forces and management decisions.
With a $9.8 million excess of assets over liabilities subject to short-term
interest rate change within one year, an increase in interest rates would
increase net interest income whereas a decrease in interest rates would result
in a decrease in net interest income.
LIQUIDITY
Liquidity is the ability to meet financial obligations when due.
Historically, Boulevard has maintained a relatively stable base of demand,
savings, money market and certificates of deposit under $100,000 during periods
of rising and declining interest rates. However, deregulation and fluctuating
interest rates resulted in a significant movement of funds from savings and
non-interest bearing demand deposits into time certificates of deposit, money
market deposits and NOW accounts. More recently, time deposits have become less
attractive to potential depositors due to low rates and little optimism for
near term improvement. As such, downward pressure on all deposit categories is
evident as customers are finding better returns through alternative
investments. Over the years adjustments in asset mix and maturity structure
have been made to accommodate the changes in the liability composition. As a
result, funds were available for the decreases in deposits during 1991, 1992
and the nine months of 1993, while maintaining an adequate level of investment
securities, federal funds sold and securities available-for-sale.
As of September 30, 1993, liquidity, as measured by federal funds sold, cash
and amounts due from banks, investment securities with maturities of one year
or less, and securities available-for-sale, totalled approximately $289.0
million, or 24.3% of total deposits.
At December, 31, 1992, liquidity totalled approximately $266.1 million, or
21.0% of total deposits.
RECENTLY ISSUED ACCOUNTING STANDARDS
During May 1993, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." The Statement
requires that impaired loans, as defined, be measured based on the present
value of expected future cash flows discounted at the loan's effective interest
rate, the loan's observable market price, or the fair value of the collateral
if the loan is collateral dependent. This Statement applies to financial
statements for fiscal years beginning after December 15, 1994.
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<PAGE>
During May 1993, the FASB issued SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. The Statement requires
classification of debt and equity securities into three categories: held-to-
maturity, available-for-sale, or trading. The Statement expands the use of fair
value accounting for available-for-sale securities, but retains the use of the
amortized cost method for investment in debt securities where the company has
the positive intent and ability to hold to maturity. Unrealized holding gains
and losses for trading securities shall be included in earnings. Unrealized
holding gains and losses for available-for-sale securities shall be excluded
from earnings and reported as a net amount in a separate component of
shareholders' equity. This Statement is effective for fiscal years beginning
after December 15, 1993. It is to be initially applied as of the beginning of
the fiscal year and cannot be applied retroactively. However, the Statement may
be adopted as of December 31, 1993.
The method, timing and impact of adopting the foregoing Statements has not
been determined.
DESCRIPTION OF FBS CAPITAL STOCK
The following description of the capital stock of FBS does not purport to be
complete and is subject, in all respects, to applicable Delaware law and to the
provisions of the certificate of incorporation of FBS. The following
description is qualified by reference to the FBS Certificate of Incorporation,
the certificate of designation for each series of preferred stock of FBS, and
the agreements and documents referred to below under "--Common Stock--Preferred
Stock Purchase Rights" and "--Periodic Stock Purchase Rights and Risk Event
Warrants," copies of which are incorporated by reference as exhibits to the
Registration Statement of which this Proxy Statement/Prospectus is a part.
GENERAL
The authorized capital stock of FBS consists of 150,000,000 shares of FBS
Common Stock, par value $1.25 per share, and 10,000,000 shares of preferred
stock, par value $1.00 per share ("preferred stock of FBS"). Under the FBS
Certificate of Incorporation, the Board of Directors of FBS or a duly
authorized committee thereof has the power, without further action by the
shareholders unless action is required by applicable laws or regulations or by
the terms of outstanding preferred stock of FBS, to provide for the issuance of
preferred stock in one or more series and to fix the voting rights,
designations, preferences, and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, by
adopting a resolution or resolutions creating and designating such series. As
of September 30, 1993, there were 7,158,100 shares of preferred stock of FBS
outstanding, having an aggregate liquidation preference of $268,500,000, and
1,012,750 shares of preferred stock of FBS reserved for issuance. At September
30, 1993, 113,233,763 shares of FBS Common Stock were issued and outstanding,
7,317,095 shares were reserved for issuance under the FBS employee plans and
dividend reinvestment plan, 3,952,000 shares were reserved for issuance upon
conversion of the Series 1991A Convertible Preferred Stock described below, and
15,000,000 shares were reserved for issuance upon exercise of the Periodic
Stock Purchase Rights and Risk Event Warrants described below.
PREFERRED STOCK
General. FBS presently has three series of preferred stock issued and
outstanding and two series of preferred stock authorized for future issuance.
The Series 1989A Preferred Stock, Series 1989B Preferred Stock and Series 1991A
Convertible Preferred Stock, which are issued and outstanding, and the Series
1990A Preferred Stock, which is authorized for future issuance as described
below, rank on a parity with one another. The Series A Junior Participating
Preferred Stock (the "Junior Preferred Stock"), which is authorized for future
issuance as described below, ranks junior to the other five series of preferred
stock.
Series 1989A Preferred Stock. In April 1989, FBS issued in a public offering
3,560,000 shares of its Series 1989A Preferred Stock. 3,560,000 of such shares
remained outstanding at September 30, 1993. Such shares
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<PAGE>
bear a dividend rate of 10.5% per annum of the liquidation preference per
share. The shares of Series 1989A Preferred Stock are not convertible, are not
subject to any sinking fund provisions and have no preemptive rights. Such
shares provide for a liquidation preference of $25 per share plus accrued and
unpaid dividends, and are subject to redemption, upon at least 30 days' notice,
at the option of FBS at any time after April 1, 1994 at a redemption price
equal to $26.313 per share, declining to $25 per share after April 1, 1999,
plus in each case accrued and unpaid dividends; provided, however, that the
shares of Series 1989A Preferred Stock are not redeemable in part in the event
that full cumulative dividends have not been paid. Holders of Series 1989A
Preferred Stock do not have any voting rights, except as described under "--
Preferred Stock Voting Rights" below.
Series 1989B Preferred Stock. In April 1989, FBS issued in a public offering
1,500,000 shares of its Series 1989B Preferred Stock. 1,405,000 of such shares
remained outstanding at September 30, 1993. Such shares bear a dividend rate
which is adjusted quarterly based on the interest rate on certain U.S. Treasury
obligations and cannot exceed 14% nor be less than 7% per annum. The shares of
Series 1989B Preferred Stock are not convertible, are not subject to any
sinking fund provisions and have no preemptive rights. Such shares provide for
a liquidation preference of $50 per share plus accrued and unpaid dividends,
and are subject to redemption, upon at least 30 days' notice, at the option of
FBS at any time after April 1, 1994 at a redemption price equal to $51.50 per
share, declining to $50 per share after March 31, 1999, plus in each case
accrued and unpaid dividends; provided, however, that the shares of Series
1989B Preferred Stock are not redeemable in part in the event that full
cumulative dividends have not been paid. Holders of Series 1989B Preferred
Stock do not have any voting rights, except as described under "--Preferred
Stock Voting Rights" below.
Series 1990A Preferred Stock. In connection with the sale by FBS of
12,600,000 shares of FBS Common Stock and accompanying periodic stock purchase
rights and risk event warrants in a private placement in July 1990, FBS may
under certain circumstances be obligated to issue up to 12,750 shares of Series
1990A Preferred Stock. See "--Common Stock--Periodic Stock Purchase Rights and
Risk Event Warrants" below. The shares of Series 1990A Preferred Stock would,
if issued, provide for a liquidation preference of $100,000 per share, and the
dividend rate would be adjusted quarterly and would be determined at the time
of issuance. If, at the time of any annual meeting of shareholders for the
election of directors, the amount of accrued but unpaid dividends on the Series
1990A Preferred Stock were equal to at least six quarterly dividends on such
series, then the number of directors of FBS would be increased by one and the
holders of such series, voting separately as a series, would be entitled to
elect one additional director who would continue to serve the full term for
which he or she would have been elected, notwithstanding the declaration or
payment of any dividends on such series of preferred stock. Holders of Series
1990A Preferred Stock would not have any other voting rights, except as
description under "--Preferred Stock Voting Rights" below.
Series 1991A Convertible Preferred Stock. In November 1991, FBS issued in a
public offering 2,290,000 shares of its Series 1991A Convertible Preferred
Stock. 2,193,100 of such shares remained outstanding at September 30, 1993.
Such shares bear a dividend rate of 7.125% per annum of the liquidation
preference per share. The shares of Series 1991A Convertible Preferred Stock
are convertible at the option of the holder at any time at the rate of 1.7256
shares of FBS Common Stock for each such share, which is equivalent to a
conversion price of $28.975 per share of FBS Common Stock. The conversion rate
is subject to adjustment upon the occurrence of specified events. The shares of
Series 1991A Convertible Preferred Stock are not subject to any sinking fund
provisions and have no preemptive rights. Such shares provide for a liquidation
preference of $50 per share plus accrued and unpaid dividends, and are subject
to redemption upon at least 30 days' notice, at the option of FBS at any time
on or after January 1, 1996 at a redemption price equal to $52.1375 per share,
declining to $50 per share on or after January 1, 2002, plus in each case
accrued and unpaid dividends; provided, however, that the shares of Series
1991A Convertible Preferred Stock are not redeemable in part in the event that
full cumulative dividends have not been paid. Holders of Series 1991A
Convertible Preferred Stock do not have any voting rights, except as described
under "--Preferred Stock Voting Rights" below.
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<PAGE>
Junior Preferred Stock. FBS has issued preferred stock purchase rights to
holders of FBS Common Stock entitling such holders, under specified conditions,
to purchase Junior Preferred Stock of FBS. See "--Common Stock--Preferred Stock
Purchase Rights" below. If issued, each share of Junior Preferred Stock would
have a minimum liquidation preference of $100 per share plus accrued and unpaid
dividends and would be entitled to an aggregate payment equal to the
liquidation payment made on 100 shares of FBS Common Stock. In addition, each
share of Junior Preferred Stock would have a minimum preferential quarterly
dividend payment of $1.00 per share but would be entitled to an aggregate
payment equal to the dividends declared on 100 shares of FBS Common Stock. The
shares of Junior Preferred Stock would not be entitled to the benefit of any
sinking fund and would not be redeemable. Each share of Junior Preferred Stock
would have 100 votes, voting together with the FBS Common Stock.
Preferred Stock Voting Rights. The following voting provisions apply to all
series of the preferred stock at FBS other than the Junior Preferred Stock. The
voting rights of the Junior Preferred Stock, and certain additional voting
rights of the Series 1990A Preferred Stock, are described above under "--Series
1990A Preferred Stock" and "--Junior Preferred Stock."
If, at the time of any annual meeting of shareholders for the election of
directors, the amount of accrued but unpaid dividends on any preferred stock of
FBS is equal to at least six quarterly dividends on such series of preferred
stock of FBS, the number of the directors of FBS will be increased by two and
the holders of all outstanding series of preferred stock of FBS (excluding the
Series 1990A Preferred Stock), voting as a single class without regard to
series, will be entitled to elect such additional two directors until all
dividends in default on all preferred stock of FBS have been paid or declared
and set apart for payment.
The affirmative vote or consent of the holders of at least two-thirds of the
outstanding shares of any series of the preferred stock of FBS, voting as a
class, will be required for any amendment of the FBS Certificate of
Incorporation (including any certificate of designation or any similar document
relating to any series of preferred stock of FBS) which will adversely affect
the powers, preferences, privileges or rights of such series of preferred
stock. The affirmative vote or consent of the holders of any least two-thirds
of the outstanding shares of any series of preferred stock of FBS, voting as a
single class without regard to series, will be required to issue, authorize, or
increase the authorized amount of, or issue or authorize any obligation or
security convertible into or evidencing a right to purchase, any additional
class or series of stock ranking prior to such series of preferred stock as to
dividends or upon liquidation.
Additional Provisions. The rights of holders of FBS Common Stock will be
subject to, and may be adversely affected by, the rights of holders of any
preferred stock that may be issued in the future. Any such issuance may
adversely affect the interests of holders of the FBS Common Stock by limiting
the control which such holders may exert by exercise of their voting rights, by
subordinating their rights in liquidation to the rights of the holders of the
preferred stock of FBS, and otherwise. In addition, the issuance of preferred
stock of FBS may, in some circumstances, deter or discourage takeover attempts
and other changes in control of FBS, including takeovers and changes in control
which some holders of the FBS Common Stock may deem to be in their best
interests and in the best interests of FBS, by making it more difficult for a
person who has gained a substantial equity interest in FBS to obtain voting
control or to exercise control effectively. FBS has no current plans or
agreements with respect to the issuance of any shares of preferred stock except
as described above with respect to the Series 1990A Preferred Stock.
The FBS Certificate of Incorporation requires the affirmative vote of the
holders of 80% of the Voting Stock (as defined therein) of FBS to approve
certain mergers, consolidations, reclassifications, dispositions of assets or
liquidation, involving or proposed by certain significant shareholders, unless
certain price and procedural requirements are met or unless the transaction is
approved by the Continuing Directors as defined therein. In addition, the FBS
Certificate of Incorporation provides for classification of the Board of
Directors into three separate classes and authorizes action by the shareholders
of FBS only pursuant to a meeting and
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<PAGE>
not by a written consent. The Bylaws of FBS provide that special meetings of
shareholders may be called only by the Board of Directors or the chief
executive officer. The overall effect of these provisions may be to delay or
prevent attempts by other corporations or groups to acquire control of FBS
without negotiation with the Board of Directors.
COMMON STOCK
General. Each share of FBS Common Stock is entitled to such dividends as may
from time to time be declared by the Board of Directors from any funds legally
available for dividends. FBS may not declare any cash dividends on, or make any
payment on account of the purchase, redemption or other retirement of, FBS
Common Stock unless full dividends (including accumulated dividends, if
applicable) have been paid or declared or set apart for payment upon all
outstanding shares of the preferred stock of FBS and FBS is not in default or
in arrears with respect to any sinking or other analogous fund or other
agreement for the purchase, redemption or other retirement of any shares of
preferred stock of FBS. Holders of FBS Common Stock are entitled to one vote
per share. Shareholders do not have the right to cumulate their votes in the
election of directors. FBS Common Stock has no conversion rights and the
holders of FBS Common Stock have no preemptive or other rights to subscribe for
additional securities of FBS. In the event of liquidation of FBS, after the
payment or provision for payment of all debts and liabilities and subject to
the rights of the holders of preferred stock of FBS which may be outstanding,
the holders of FBS Common Stock will be entitled to share ratably in the
remaining assets of FBS. Shares of FBS Common Stock are fully paid and
nonassessable. The shares of FBS Common Stock are listed on the NYSE.
Preferred Stock Purchase Rights. On December 21, 1988, the Board of Directors
of FBS declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of FBS Common Stock. The dividend was paid on
January 4, 1989 ("the "Record Date") to the FBS shareholders of record on that
date. Each holder of shares of FBS Common Stock issued upon consummation of the
Merger will receive one Right for each share of FBS Common Stock.
Each Right initially entitles the registered holder to purchase from FBS one
one-hundredth of a share of Junior Preferred Stock of FBS at a price of $80.00,
subject to adjustment (the "Purchase Price"). The Rights are not and will not
be exercisable or represented by separate certificates until 10 days following
the earlier of a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") have acquired beneficial ownership
of 20% or more of the outstanding shares of FBS Common Stock or have commenced
or announced an intention to make a tender offer or exchange offer for 20% of
more of such outstanding shares of FBS Common Stock (the earlier of such dates
being called the "Distribution Date"). In the event that any person or group of
affiliated or associated persons becomes the beneficial owner of 20% or more of
the outstanding shares of FBS Common Stock, each Right (other than any Right
held by a person or group of affiliated or associated persons beneficially
owning 20% or more of the outstanding shares of FBS Common Stock, which Rights
will thereafter be void) will thereafter entitle the holder to receive upon
exercise that number of shares of FBS Common Stock having a market value of
twice the Purchase Price. In addition, in such event, the Board of Directors of
FBS will thereafter be entitled to exchange the outstanding Rights (other than
any Right held by an Acquiring Person, which Right shall thereafter be void),
in whole or in part, for shares of FBS Common Stock or Junior Preferred Stock
at an exchange ratio of one share of FBS Common Stock, or one one-hundredth
share of Junior Preferred Stock, per Right.
In the event that FBS is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are
sold, each Right will thereafter entitle the holder to receive upon exercise
that number of shares of common stock of the acquiring company having a market
value of twice the Purchase Price.
Prior to the Distribution Date, the Rights cannot be transferred apart from
FBS Common Stock and are represented solely by the FBS Common Stock
certificates. As soon as practicable following the
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<PAGE>
Distribution Date, separate certificates representing the Rights will be mailed
to holders of record of shares of FBS Common Stock as of such date, and the
Rights could then begin to trade separately from FBS Common Stock.
The Rights do not have any voting rights and are not entitled to dividends.
The terms of the Rights may be amended without the consent of the holders,
provided that, after a person becomes an Acquiring Person, such amendment may
not adversely affect the interests of the holders.
The terms of the Junior Preferred Stock issuable upon exercise of Rights are
described above under "--Preferred Stock--Junior Preferred Stock."
The Rights are not exercisable until the Distribution Date. The Rights will
expire on January 4, 1999, unless, before that date, all of the Rights are
either redeemed by FBS at a price of $.01 per Right prior to the acquisition by
a person or group of affiliated or associated persons of beneficial ownership
of 20% or more of the outstanding shares of FBS Common Stock, or are exchanged
by FBS for shares of FBS Common Stock or Junior Preferred Stock as described
above.
The Rights may have certain anti-takeover effects. The Rights may cause
substantial dilution to an Acquiring Person if it attempts to merge with, or
engage in certain other transactions with, FBS. The Rights should not, however,
interfere with any merger or other business combination approved by the Board
of Directors of FBS prior to the occurrence of the Distribution Date because
the Rights may be redeemed prior to such time.
The complete terms of the Rights are set forth in a Rights Agreement, dated
as of December 21, 1988, as amended, between FBS and First Chicago Trust
Company of New York (formerly Morgan Shareholder Services Trust Company), as
Rights Agent (the "Rights Agreement"). The description of the Rights set forth
herein does not purport to be complete and is qualified in its entirety by
reference to the complete Rights Agreement, a copy of which is incorporated by
reference as an exhibit to the Registration Statement of which this Proxy
Statement/Prospectus is a part.
Periodic Stock Purchase Rights and Risk Event Warrants. On May 30, 1990, FBS
entered into (i) a Stock Purchase Agreement, dated as of May 30, 1990 (the
"Stock Purchase Agreement"), by and among Corporate Partners, L.P. ("Corporate
Partners"), Corporate Offshore Partners, L.P. ("Offshore" and, together with
Corporate Partners, the "Partnerships"), The State Board of Administration of
Florida ("State Board") solely in its capacity as a managed account and not in
its individual capacity (State Board and the Partnerships being referred to
herein collectively as the "Purchasers"), Corporate Advisors, L.P. and FBS and
(ii) a Stock Purchase Agreement, dated as of May 30, 1990 (the "Florida Stock
Purchase Agreement"), by and between State Board in its individual capacity and
FBS. Pursuant to the Stock Purchase Agreement, FBS sold (a) to Corporate
Partners 8,856,241 shares of FBS Common Stock, ten Periodic Stock Purchase
Rights (each a "PSPR") and one Risk Event Warrant, (b) to Offshore 643,976
shares of FBS Common Stock, ten PSPRs and one Risk Event Warrant, and (c) to
State Board 939,783 shares of FBS Common Stock, ten PSPRs and one Risk Event
Warrant. Pursuant to the Florida Stock Purchase Agreement, FBS sold to State
Board 2,160,000 shares of FBS Common Stock, ten PSPRs and one Risk Event
Warrant. Effective as of May 30, 1990, FBS and First Chicago Trust Company of
New York entered into Amendment No. 1 to the Rights Agreement to exclude the
acquisition of shares of FBS Common Stock by the Purchasers and State Board
pursuant to the Stock Purchase Agreement and the Florida Stock Purchase
Agreement, respectively, and the transactions contemplated thereby and certain
other transactions from the operation of the Rights Agreement. See "--Preferred
Stock Purchase Rights" above.
The Stock Purchase Agreement and the Florida Stock Purchase Agreement contain
transfer restrictions with respect to the shares of FBS Common Stock acquired
thereunder and standstill provisions limiting further acquisitions of FBS
Common Stock by the Purchasers and State Board. The Stock Purchase Agreement
and the Florida Stock Purchase Agreement also grant each of the Purchasers and
State Board
78
<PAGE>
the right to purchase its pro rata share of any Voting Securities (as defined)
sold by FBS for cash, subject to certain exceptions. Pursuant to the Stock
Purchase Agreement, the Purchasers have designated one person to act as a non-
voting observer of the Board of Directors of FBS.
Each PSPR issued to the Purchasers and State Board relates to a specific
twelve-month period commencing with the twelve-month period following closing
of the transactions contemplated under the Stock Purchase Agreement and the
Florida Stock Purchase Agreement. Each PSPR shall become exercisable in the
event that a Dividend Shortfall (as defined) exists for the specific twelve-
month period to which such PSPR relates. A Dividend Shortfall will be deemed to
exist to the extent that FBS has not paid a cash dividend equal to $0.205 per
share of FBS Common Stock for each quarter within such twelve-month period. The
PSPRs will be exercisable for that number of shares of FBS Common Stock or
(subject to the prior approval of the Federal Reserve Board) depositary shares
representing one one-thousandth of a share of Series 1990A Preferred Stock
("Depositary Shares") such that the holders of PSPRs will receive value equal
to the Dividend Shortfall. Once a PSPR has become exercisable, it will remain
exercisable for a one-year period at an exercise price of $1.25 per share of
FBS Common Stock or $1.00 per Depositary Share. If a PSPR were to become
exercisable and were not redeemed by FBS as described below, the issuance of
Depositary Shares or FBS Common Stock upon exercise of a PSPR could adversely
affect the market price of the FBS Common Stock. If the PSPRs were to be
exercised for FBS Common Stock, there could be substantial dilution of the FBS
Common Stock.
Each Risk Event Warrant shall become exercisable in the event of certain
defined change of control events with respect to FBS where the value received
by holders of the FBS Common Stock is less than $13.875 per share, or in
certain circumstances in the event the FBS Common Stock is valued at less than
$13.875 per share on the tenth anniversary of the closing of the transactions
contemplated under the Stock Purchase Agreement. The Risk Event Warrants will
be exercisable for that number of shares of FBS Common Stock at an exercise
price of $1.25 per share or, in certain circumstances (subject to the prior
approval of the Federal Reserve Board), Depositary Shares such that the holders
of Risk Event Warrants will receive value equal to such shortfall. If the Risk
Event Warrants were to become exercisable and were not redeemed by FBS as
described below, the issuance of Depositary Shares or FBS Common Stock upon
exercise of a Risk Event Warrant could adversely affect the market price of the
FBS Common Stock. If the Risk Event Warrants were to be exercised for FBS
Common Stock, there could be substantial dilution of the FBS Common Stock. In
the event of a change in control at a time when the market price of the FBS
Common Stock is less than $13.875 per share, the Risk Event Warrants may have
the effect of reducing the price per share to be received by the holders of the
FBS Common Stock.
In the event of the exercise of a Risk Event Warrant upon the occurrence of
certain change of control events, FBS may, at its option (subject to the prior
approval of the Federal Reserve Board), elect to have such Risk Event Warrant
become exercisable for other securities of FBS acceptable to the holder of such
Risk Event Warrant in lieu of the shares of FBS Common Stock for which such
Risk Event Warrant would otherwise become exercisable. In addition, FBS has the
right (subject to the prior approval of the Federal Reserve Board) to redeem
any PSPR at a price equal to the Dividend Shortfall and any Risk Event Warrant
at a price equal to the Value Shortfall (as defined) or the Termination
Shortfall Amount (as defined), as applicable, after such PSPR or Risk Event
Warrant, as the case may be, shall have become exercisable. FBS also has
entered into a registration rights agreement with the Purchasers and with State
Board pursuant to which the Purchasers and State Board, respectively, are
granted certain rights to cause FBS to register with the Commission the FBS
Common Stock acquired pursuant to the Stock Purchase Agreement and the Florida
Stock Purchase Agreement and the securities acquired upon exercise of the PSPRs
and the Risk Event Warrants.
The foregoing is a summary of the transactions contemplated by the Stock
Purchase Agreement and the Florida Stock Purchase Agreement and related
documents and is qualified in its entirety by the more detailed information
contained in such agreements and documents, copies of which are incorporated by
reference as exhibits to the Registration Statement of which this Proxy
Statement/Prospectus is a part.
79
<PAGE>
DESCRIPTION OF BOULEVARD CAPITAL STOCK
The following description of the capital stock of Boulevard does not purport
to be complete and is subject, in all respects, to applicable Delaware law and
to the provisions of the certificate of incorporation of Boulevard. The
following description is qualified by reference to the Boulevard Certificate of
Incorporation, a copy of which is filed as an exhibit to the Registration
Statement of which this Proxy Statement/Prospectus is a part.
GENERAL
The authorized capital stock of Boulevard consists of 20,000,000 shares of
Boulevard Common Stock, par value $0.04 per share; 2,000 shares of Class A
Preferred Stock, par value $100 per share; 20,000 shares of Class B Preferred
Stock, par value $100 per share; 500 shares of Class C Preferred Stock, par
value $100 per share; and 400,000 shares of Class D Preferred Stock, par value
$100 per share. Under the Boulevard Certificate of Incorporation, the Board of
Directors of Boulevard has the power, subject to limitations prescribed by law
and without further action by the shareholders, to fix the designations,
rights, preferences, and limitations of each such class of preferred stock and
to authorize its issuance. As of September 30, 1993, there were 100,000 shares
of Class D Series 1 Preferred Stock issued and outstanding with an aggregate
liquidation preference of $10,000,000. At September 30, 1993, 7,195,961 shares
of Boulevard Common Stock were issued and outstanding and a total of 1,689,246
shares of Boulevard Common Stock were reserved for issuance upon exercise of
outstanding stock options and warrants, for future awards under the 1988 Equity
Participation Plan and for activity in Boulevard's dividend reinvestment plan.
PREFERRED STOCK
The outstanding Class D Series 1 Preferred Stock bears dividends at the rate
of $9.00 per annum on a cumulative basis, payable quarterly. The shares of
Class D Series 1 Preferred Stock are not convertible, are not subject to any
sinking fund provisions and have no preemptive rights. Such shares provide for
a liquidation preference of $100 per share plus accrued and unpaid dividends
and are subject to redemption, upon at least 30 days' notice, at the option of
Boulevard at a redemption price equal to $100 per share plus accrued and unpaid
dividends. Holders of Class D Series 1 Preferred Stock do not have any voting
rights except as otherwise required by law.
The Merger Agreement requires Boulevard to redeem the Class D Series 1
Preferred Stock pursuant to its terms prior to the effective date of the
Merger. All of the Class D Series 1 Preferred Stock is presently owned by Miami
Corporation, the majority shareholder of Boulevard. See "The Merger--Interests
of Certain Persons in the Merger."
COMMON STOCK
Each share of Boulevard Common Stock is entitled to such dividends as may
from time to time be declared by the Board of Directors from any funds legally
available for dividends. Boulevard cannot pay any dividend whatsoever, nor make
any other distribution (either in cash or property) on or in respect of, nor
expend any moneys or property for the redemption, retirement, purchase or other
acquisition of Boulevard Common Stock or any other class of stock, unless all
dividends on all outstanding shares of Class D Series 1 Preferred Stock for all
past dividend periods have been paid in full. Shareholders do not have the
right to cumulate their votes in the election of directors. Boulevard Common
Stock has no conversion rights and the holders of Boulevard Common Stock have
no preemptive or other rights to subscribe for additional securities of
Boulevard. In the event of liquidation of Boulevard, after the payment or
provision for payment of all debts and liabilities and subject to the rights of
the holders of any preferred stock of Boulevard which may be outstanding, the
holders of Boulevard Common Stock will be entitled to share ratably in the
remaining assets of Boulevard. Shares of Boulevard Common Stock are fully paid
and nonassessable. The shares of Boulevard Common Stock are listed on the
NASDAQ National Market System.
80
<PAGE>
ADJOURNMENT OF SPECIAL MEETING
In the event that there are not sufficient votes to approve and adopt the
Merger Agreement at the time of the Special Meeting, such proposal could not be
approved unless the Special Meeting were adjourned in order to permit further
solicitation of proxies from Boulevard shareholders. In order to allow proxies
that have been received by Boulevard at the time of the Special Meeting to be
voted for such adjournment, if necessary, Boulevard is submitting the question
of adjournment under such circumstances to its shareholders as a separate
matter for their consideration. If it is necessary to adjourn the Special
Meeting and the adjournment is for a period of less than 30 days, no notice of
the time and place of the adjourned meeting is required to be given to
shareholders other than an announcement of such time and place at the Special
Meeting. A majority of the shares represented and voting at the Special Meeting
is required to approve any such adjournment, provided that a quorum is present.
THE BOARD OF DIRECTORS OF BOULEVARD RECOMMENDS THAT BOULEVARD SHAREHOLDERS VOTE
FOR THE PROPOSAL TO ADJOURN THE SPECIAL MEETING IF NECESSARY TO PERMIT FURTHER
SOLICITATION OF PROXIES.
LEGAL OPINIONS
The validity of the securities offered hereby has been passed upon for FBS by
Dorsey & Whitney, Minneapolis, Minnesota. The Dorsey & Whitney firm and certain
of its members are indebted to and have other banking and trust relationships
with certain banking subsidiaries of FBS.
The opinion of counsel described under "The Merger--Certain Federal Income
Tax Consequences" has been rendered by Wildman, Harrold, Allen & Dixon, counsel
to Boulevard.
EXPERTS
The supplemental consolidated financial statements of FBS appearing in FBS'
Current Report on Form 8-K dated July 29, 1993 for the year ended December 31,
1992 have been audited by Ernst & Young, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference,
which, as to the years 1991 and 1990, are based in part on the report of
Deloitte & Touche, independent auditors, whose report is incorporated herein.
Such supplemental consolidated financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
The consolidated financial statements of Boulevard appearing in the Annual
Report on Form 10-K of Boulevard for the year ended December 31, 1992 have been
audited by Price Waterhouse, independent accountants, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
INDEPENDENT ACCOUNTANTS
Representatives of Price Waterhouse, Boulevard's independent accountants, are
expected to be present at the Special Meeting. They may be afforded the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
If the Merger is not consummated, Boulevard is expected to retain its
December 31 fiscal year end. In such event, in order to be eligible for
inclusion in Boulevard's proxy solicitation materials for its 1994 annual
meeting of shareholders, any shareholder proposal to be considered at such
meeting must be received by Boulevard's Corporate Secretary at Boulevard's main
office, 410 North Michigan Avenue, Chicago, Illinois 60611, no later than
December 1, 1993. Any such proposal shall be subject to the requirements of the
proxy rules adopted under the Exchange Act.
81
<PAGE>
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the management, executive compensation,
various benefit plans (including stock plans), voting securities and the
principal holders thereof, certain relationships and related transactions and
other related matters as to FBS and Boulevard is set forth in or incorporated
by reference in the respective Annual Reports on Form 10-K for the year ended
December 31, 1992 of FBS and Boulevard, which are incorporated by reference in
this Proxy Statement/Prospectus. See "Incorporation of Certain Documents by
Reference." FBS and Boulevard shareholders who wish to obtain copies of these
documents may contact FBS or Boulevard, as applicable, at its address or
telephone number set forth under "Incorporation of Certain Documents by
Reference."
82
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Balance Sheet as of September 30,
1993 combines the historical consolidated balance sheet of FBS and subsidiaries
and Boulevard and subsidiaries as if the Merger had been effective on September
30, 1993, after giving effect to certain adjustments described in the attached
Notes to Pro Forma Combined Financial Statements. The unaudited Pro Forma
Combined Statements of Income for the nine months ended September 30, 1993
present the combined results of operations of FBS and Boulevard as if the
Merger had been effective at the beginning of the period, after giving effect
to certain adjustments described in the attached Notes to Pro Forma Combined
Financial Statements. The unaudited Pro Forma Combined Statement of Income for
the year ended December 31, 1992 presents the combined results of operations of
FBS, Boulevard and Bank Shares Incorporated ("BSI") and its subsidiaries
purchased by FBS (acquisition of BSI consummated by FBS on December 31, 1992
using the purchase method of accounting) as if the mergers had been effective
at the beginning of the year, after giving effect to certain adjustments
described in the attached Notes to Pro Forma Combined Financial Statements.
The Boulevard acquisition has been reflected using the purchase method of
accounting. Under this method of accounting, the purchase price will be
allocated to assets acquired and liabilities assumed based on their estimated
fair values at the closing of the transaction. Purchase accounting adjustments
included in these unaudited pro forma combined financial statements may change
as additional information becomes available.
The pro forma combined financial information included within is not
necessarily indicative of the results of the future operations of the combined
entity or the actual results that would have been achieved had the acquisition
been consummated prior to the periods indicated.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Combined Balance Sheet at September 30,
1993................................... F-2
Pro Forma Combined Statements of Income:
Nine Months Ended September 30,
1993............................................... F-3
Year ended December 31,
1992....................................................... F-4
Notes to Pro Forma Combined Financial
Statements......................................... F-5
</TABLE>
F-1
<PAGE>
FIRST BANK SYSTEM, INC.
PRO FORMA COMBINED BALANCE SHEET
ACQUISITION OF BOULEVARD BANCORP, INC.
SEPTEMBER 30, 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FBS PURCHASE PRO FORMA
CONSOLIDATED BOULEVARD ADJUSTMENTS COMBINED
------------ --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks....... $ 1,773 $ 80 $ (16)(D)(F) $ 1,837
Federal funds sold............ 47 6 (53)(F) 0
Securities purchased under
agreements to resell......... 362 -- (149)(F) 213
Interest-bearing deposits with
banks........................ 1 -- 1
Trading account securities.... 140 -- 140
Securities held for sale...... 72 172 244
Investment securities......... 3,794 654 4 (B) 4,452
Loans......................... 18,568 674 5 (B) 19,247
Allowance for loan losses..... 427 20 447
------- ------ ----- -------
Net loans.................... 18,141 654 5 18,800
Bank premises and equipment... 393 23 (6)(D) 410
Interest receivable........... 143 10 153
Customers' liability on
acceptances.................. 167 -- 167
Other assets.................. 908 69 135 (C)(E) 1,112
------- ------ ----- -------
Total assets............... $25,941 $1,668 $ (80) $27,529
======= ====== ===== =======
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits
Domestic:
Noninterest-bearing......... $ 6,882 $ 217 $ 7,099
Interest-bearing............ 13,542 979 14,521
------- ------ ----- -------
Total deposits in domestic
offices................... 20,424 1,196 21,620
Foreign interest-bearing..... 42 -- 42
------- ------ ----- -------
Total deposits............. 20,466 1,196 21,662
Federal funds purchased....... 602 11 613
Securities sold under
agreements to repurchase..... 373 217 590
Other short-term funds
borrowed..................... 332 23 355
Long-term debt................ 1,030 14 $ 1 (B) 1,045
Acceptances outstanding....... 167 -- 167
Other liabilities............. 695 99 27 (C) 821
------- ------ ----- -------
Total liabilities.......... 23,665 1,560 28 25,253
Shareholders' Equity
Preferred stock.............. 269 10 (10)(F) 269
Common stock................. 144 1 6 (F) 151
Capital surplus.............. 676 41 154 (F) 871
Retained earnings............ 1,236 56 (56)(F) 1,236
Less: Treasury stock......... (49) -- (202)(F) (251)
------- ------ ----- -------
Total shareholders' equity. 2,276 108 (108) 2,276
------- ------ ----- -------
Total liabilities and
shareholders' equity...... $25,941 $1,668 $ (80) $27,529
======= ====== ===== =======
</TABLE>
See Notes to the Unaudited Pro Forma Combined Financial Statements.
F-2
<PAGE>
FIRST BANK SYSTEM, INC.
ACQUISITION OF BOULEVARD BANCORP, INC.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE FBS PURCHASE PRO FORMA
DATA) CONSOLIDATED BOULEVARD ADJUSTMENTS COMBINED
- ------------------------------ ------------ --------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans.......................... $1,046.0 $45.6 $(2.0)(B) $1,089.6
Investment securities:
Taxable....................... 171.3 22.8 (1.6)(B) 192.5
Exempt from federal income
taxes........................ 9.9 0.4 10.3
Trading account................ 3.5 -- 3.5
Federal funds sold and resale
agreements.................... 18.0 0.5 (4.5)(F) 14.0
Deposits with banks............ 2.1 -- 2.1
-------- ----- ----- --------
Total interest income........ 1,250.8 69.3 (8.1) 1,312.0
INTEREST EXPENSE
Deposits....................... 329.7 25.8 355.5
Federal funds purchased and
repurchase agreements......... 24.2 -- 24.2
Other short-term funds
borrowed...................... 14.1 3.9 18.0
Long-term debt................. 39.5 1.4 (0.6)(B) 40.3
-------- ----- ----- --------
Total interest expense....... 407.5 31.1 (0.6) 438.0
-------- ----- ----- --------
Net interest income............ 843.3 38.2 (7.5) 874.0
Provision for credit losses.... 98.2 1.8 100.0
-------- ----- ----- --------
Net interest income after
provision for credit losses... 745.1 36.4 (7.5) 774.0
NONINTEREST INCOME
Trust fees..................... 108.6 5.6 114.2
Service charges on deposit
accounts...................... 86.9 5.1 92.0
Credit card fees............... 99.6 -- 99.6
Insurance commissions.......... 15.6 -- 15.6
Trading account profits and
commissions................... 7.9 -- 7.9
Investment securities gains.... 0.3 0.8 1.1
Other.......................... 104.8 5.9 110.7
-------- ----- ----- --------
Total noninterest income..... 423.7 17.4 441.1
NONINTEREST EXPENSE
Salaries....................... 294.1 15.3 309.4
Employee benefits.............. 66.7 5.5 72.2
Net occupancy.................. 70.6 4.7 (3.5)(D) 71.8
Furniture and equipment........ 53.5 2.6 (1.1)(D) 55.0
FDIC insurance................. 34.9 2.4 37.3
Professional services.......... 26.0 2.0 28.0
Merger, integration and
restructuring................. 72.2 -- 72.2
Other.......................... 227.2 14.0 5.3 (E) 246.5
-------- ----- ----- --------
Total noninterest expense.... 845.2 46.5 0.7 892.4
-------- ----- ----- --------
Income before income taxes..... 323.6 7.3 (8.2) 322.7
Applicable income taxes
(credit)...................... 121.5 1.9 (1.0)(G) 122.4
-------- ----- ----- --------
Income before cumulative effect
of changes in accounting
principles.................... 202.1 5.4 (7.2) 200.3
Cumulative effect of changes in
accounting principles......... -- -- -- --
-------- ----- ----- --------
Net income..................... $ 202.1 $ 5.4 $(7.2) $ 200.3
-------- ===== ===== --------
Net income applicable to common
equity........................ $ 179.8 $ 178.0
======== ========
EARNINGS PER COMMON SHARE
Average common and common
equivalent shares............. 113,677,049 (A) 113,677,049
Primary and fully diluted
income before cumulative
effect of changes in
accounting principles......... $1.58 $1.57
Primary and fully diluted net
income........................ 1.58 1.57
</TABLE>
See Notes to unaudited Pro Forma Combined Financial Statements
F-3
<PAGE>
FIRST BANK SYSTEM, INC.
ACQUISITION OF BOULEVARD BANCORP, INC.
PRO FORMA COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1992
(UNAUDITED)
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT FBS PURCHASE PURCHASE PRO FORMA
SHARE DATA) CONSOLIDATED BSI ADJUSTMENTS BOULEVARD ADJUSTMENTS COMBINED
- -------------------- ------------ ------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans................... $1,418.8 $ 76.3 $76.5 $(2.6)(B) $1,569.0
Investment securities:
Taxable................ 186.4 64.2 $(1.6)(B) 28.4 (2.3)(B) 275.1
Exempt from federal
income taxes.......... 12.0 1.5 0.8 14.3
Trading account......... 6.4 0.2 -- 6.6
Federal funds sold and
resale agreements...... 46.2 1.3 1.5 (7.0)(F) 42.0
Deposits with banks..... 11.5 -- -- 11.5
-------- ------ ----- ----- ------ --------
Total interest income.. 1,681.3 143.5 (1.6) 107.2 (11.9) 1,918.5
INTEREST EXPENSE
Deposits................ 568.7 58.4 46.0 673.1
Federal funds purchased
and repurchase
agreements............. 37.1 7.6 -- 44.7
Other short-term funds
borrowed............... 14.3 1.0 4.0 19.3
Long-term debt.......... 66.1 0.1 1.8 (0.8)(B) 67.2
-------- ------ ----- ----- ------ --------
Total interest expense. 686.2 67.1 0.0 51.8 (0.8) 804.3
-------- ------ ----- ----- ------ --------
Net interest income..... 995.1 76.4 (1.6) 55.4 (11.1) 1,114.2
Provision for credit 183.4 36.0 5.9 225.3
losses................. -------- ------ ----- ----- ------ --------
Net interest income
after provision for
credit losses.......... 811.7 40.4 (1.6) 49.5 (11.1) 888.9
NONINTEREST INCOME
Trust fees.............. 127.8 5.3 6.9 140.0
Service charges on
deposit accounts....... 108.4 9.7 5.9 124.0
Credit card fees........ 116.9 0.1 -- 117.0
Insurance commissions... 27.3 1.6 -- 28.9
Trading account profits
and commissions........ 10.5 4.3 -- 14.8
Investment securities
gains.................. 1.9 3.7 2.9 8.5
Other................... 142.9 15.1 2.3 (D) 5.7 166.0
-------- ------ ----- ----- ------ --------
Total noninterest
income................ 535.7 39.8 2.3 21.4 599.2
NONINTEREST EXPENSE
Salaries................ 388.7 31.6 22.1 442.4
Employee benefits....... 85.5 5.9 6.1 97.5
Net occupancy........... 87.9 8.9 (0.2)(D) 6.1 (4.7)(D) 98.0
Furniture and equipment. 67.2 2.5 3.3 (1.5)(D) 71.5
FDIC insurance.......... 42.2 4.0 2.9 49.1
Professional services... 38.7 3.5 3.7 45.9
Other................... 404.1 40.7 8.9 (E) 19.6 7.0 (E) 480.3
-------- ------ ----- ----- ------ --------
Total noninterest 1,114.3 97.1 8.7 63.8 0.8 1,284.7
expense............... -------- ------ ----- ----- ------ --------
Income (loss) before
income taxes........... 233.1 (16.9) (8.0) 7.1 (11.9) 203.4
Applicable income taxes 78.6 (4.7) (1.5)(G) 1.9 (1.7)(G) 72.6
(credit)............... -------- ------ ----- ----- ------ --------
Income (loss) before
cumulative effect of
changes in accounting
principles............. 154.5 (12.2) (6.5) 5.2 (10.2) 130.8
Cumulative effect of
changes in accounting 157.3 -- -- (1.8) 155.5
principles............. -------- ------ ----- ----- ------ -----
Net income (loss)....... $ 311.8 $(12.2) $(6.5) $ 3.4 $(10.2) $ 286.3
======== ====== ===== ===== ====== ========
Net income applicable to $ 281.6 $ 256.1
common quality......... ======== ========
EARNINGS PER COMMON
SHARE
Average common and
common equivalent
shares................. 105,361,022 (A) 113,524,287
Primary and fully
diluted income before
cumulative effect of
changes in accounting
principles............. $1.18 $0.89
Primary and fully
diluted net income..... 2.67 2.26
</TABLE>
See Notes to unaudited Pro Forma Combined Financial Statements
F-4
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE A: BASIS OF PRESENTATION
On September 29, 1993, First Bank System, Inc. ("FBS") signed a definitive
agreement to acquire Boulevard Bancorp, Inc. ("Boulevard"), a $1.7 billion bank
holding company. The value of the FBS common stock to be issued in connection
with the merger and the fair value of Boulevard's stock options and warrants to
be converted into FBS stock options and warrants, respectively, is
approximately $202.3 million based on the average market price of FBS common
stock five days prior to the agreement on the terms of the merger. In
conjunction with the merger, FBS also announced that it would buy back existing
common shares equal to the number of shares issued at the time of closing on
the Boulevard transaction.
The merger with Boulevard will be accounted for by FBS under the purchase
method of accounting in accordance with APB No. 16 and, accordingly, this
method has been applied in the unaudited pro forma combined financial
statements. Under this method of accounting, the purchase price will be
allocated to assets acquired and liabilities assumed based on their estimated
fair value at the closing of the transaction. Estimates of the fair value of
Boulevard's assets and liabilities have been combined with the historical
consolidated balance sheet of FBS. Purchase accounting, reorganization and
restructuring costs adjustments included in these unaudited pro forma combined
financial statements may change as additional information becomes available.
On December 31, 1992, FBS consummated the acquisition of Bank Shares
Incorporated ("BSI") by issuing approximately 8.2 million shares of common
stock in exchange for the common stock of BSI. The acquisition of BSI was
accounted for by FBS under the purchase method of accounting in accordance with
APB No. 16. The unaudited Pro Forma Combined Statement of Income for the year
ended December 31, 1992 includes the results of BSI in accordance with the
disclosure requirements of APB No. 16. The financial results of BSI included in
the Pro Forma Combined Statement of Income for the year ended December 31, 1992
do not include the operating results of the subsidiaries that were repurchased
by certain BSI shareholders. The total assets acquired and liabilities assumed
at the time of acquisition were $2.1 billion and $1.9 billion, respectively.
The unaudited Pro Forma Combined Balance Sheet is based on the unaudited
consolidated balance sheets of FBS and subsidiaries and Boulevard and
subsidiaries as of September 30, 1993. The unaudited Pro Forma Combined
Statement of Income is based primarily on the unaudited consolidated statements
of income of FBS and subsidiaries and Boulevard and subsidiaries for the nine
months ended September 30, 1993. The unaudited Pro Forma Combined Statement of
Income for the year ended December 31, 1992 is based on the unaudited
consolidated financial statements of FBS and subsidiaries, Boulevard and
subsidiaries, and BSI and its subsidiaries purchased by FBS.
The FBS results of operations for the year ended December 31, 1992 include
the effect of two new accounting standards: Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes," and SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions." Income
before merger-related charges and cumulative effect of changes in accounting
principles for the year ended December 31, 1992 was reduced by $56.6 million as
a result of increased income tax expense under SFAS No. 109 and $1.0 million
for increased employee benefit expenses under SFAS No. 106. In addition, the
net cumulative effect for prior years of adopting SFAS No. 109 and SFAS No. 106
resulted in a $157.3 million increase in net income in 1992.
Also included in FBS results of operations for the year ended December 31,
1992 are merger-related charges of $124.0 million ($81.8 million after tax)
associated with the acquisitions of Western Capital Investment Corporation and
BSI. These charges include a $13.6 million provision for loan losses, a $26.4
million provision for losses on other real estate, and $84.0 million in merger,
integration and restructuring provisions. The provisions were made to reflect
FBS' intent with respect to the disposition of problem assets and to provide
for anticipated reorganization and restructuring costs.
F-5
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
The FBS results of operations for the period ended September 30, 1993 include
merger-related charges of $72.2 million ($50.0 million after tax) associated
with the acquisition of Colorado National Bankshares, Inc. These charges
include a $29.7 million provision for anticipated reorganization and
restructuring costs, systems conversions, and customer communication costs and
a $14.3 million write-down of premises and equipment related to redundant main
office and branch facilities. Other charges, totaling $28.2 million, primarily
involve severance.
Management estimates that as a result of the effects of purchase accounting
in the Boulevard merger, the combined company's results of operations will
reflect charges of approximately $11.1 million for the fiscal year subsequent
to the merger.
FBS expects to achieve operating cost savings primarily through reductions in
staff, the consolidation and elimination of certain office facilities, and the
consolidation of certain data processing and other back office operations. The
operating cost savings are expected to be achieved in various amounts at
various times during the years subsequent to the closing and not ratably over,
or at the beginning or end of, such periods. No adjustment has been included in
the unaudited pro forma combined financial statements for the anticipated
operating cost savings.
Certain amounts in the historical financial statements of Boulevard have been
reclassified in the unaudited pro forma combined financial statements to
conform to FBS' historical financial statement presentation.
NOTE B: INVESTMENT SECURITIES, LOANS AND LONG-TERM DEBT
BSI's securities were recorded at their estimated fair value at the
consummation of the acquisition, resulting in a $6.5 million premium from their
previously recorded values. The amortization of the premium has been included
in the unaudited Pro Forma Combined Statement of Income for the year ended
December 31, 1992 based on the estimated average life of the portfolio of four
years.
Boulevard's securities have been valued at their estimated fair value,
resulting in an estimated $4.2 million premium from their recorded values. The
amortization of the premium has been included in the unaudited Pro Forma
Combined Statements of Income based on the approximate average life of the
portfolio as of December 31, 1992 of two years.
Boulevard's loans have been valued at their estimated fair value, resulting
in an estimated $5.2 million premium from their recorded values. The
amortization of the premium has been included in the unaudited Pro Forma
Combined Statements of Income based on the approximate average life of the
portfolio as of December 31, 1992 of two years.
Boulevard's long-term debt has been valued at its estimated fair value
resulting in a $1.4 million premium from its recorded values. The amortization
of the premium has been included in the unaudited Pro Forma Combined Statement
of Income based on the debt's maturity date of October 31, 1994.
NOTE C: REORGANIZATION AND RESTRUCTURING ACCRUALS
Pursuant to the merger agreement, Boulevard will establish such additional
accruals as may be necessary to reflect FBS' plans with respect to the conduct
of its business following the merger and to provide for anticipated
reorganization and restructuring costs. Boulevard will, subject to the
satisfaction or waiver of all conditions to FBS' obligation to consummate the
merger, including the receipt of regulatory approval, make such adjustments in
its results of operations prior to the effective date, based on information
available at that time.
For purposes of the unaudited Pro Forma Combined Balance Sheet, accruals of
$20 million have been reflected in the Pro Forma Combined Balance Sheet,
representing severance, conversion costs, and certain other merger-related
costs. These adjustments have not been included in the Pro Forma Combined
Statements of Income, as they are not expected to have a continuing impact on
FBS.
F-6
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE D: PREMISES AND EQUIPMENT
In connection with the merger with Boulevard, it is expected that FBS will
purchase a 173,000 square foot building in suburban Chicago which houses a
branch facility for one of Boulevard's subsidiaries. At or subsequent to the
time of closing, FBS will purchase the building from cash on hand at its fair
value of $6 million. The unaudited Pro Forma Combined Statements of Income
include adjustments to record operating and depreciation expenses for the
building for the respective periods shown. Premises and equipment have also
been adjusted to their estimated fair value based on preliminary valuations and
other review procedures. A reserve of $12 million results from these valuations
and from anticipated expenses to be incurred in the closing of duplicate
facilities. This reserve will be recorded at or immediately prior to the
closing and has not been included in the unaudited Pro Forma Combined
Statements of Income, as it is not expected to have continuing impact on FBS.
Occupancy expense has been reduced to reflect the amortization of the fair
value adjustment to premises and equipment and the effect of closing duplicate
facilities.
As part of the merger agreement with BSI, FBS acquired a building in downtown
Minneapolis which houses the data processing and operations center for BSI by
assuming an existing $20 million mortgage. The unaudited Pro Forma Combined
Statement of Income for the year ended December 31, 1992 includes an adjustment
to record rental income and operating and depreciation expenses related to the
building for that period. In addition, premises and equipment were recorded at
their estimated fair value. A reserve of $18 million for this valuation and for
anticipated expenses to be incurred in the closing of duplicate facilities was
recorded. Occupancy expense has been adjusted to reflect the amortization of
the fair value adjustments to premises and equipment and the effect of closing
duplicate facilities.
NOTE E: OTHER ASSETS
Amortization expense related to goodwill and the core deposit intangible
resulting from the BSI acquisition has been included in the unaudited Pro Forma
Combined Statement of Income for the year ended December 31, 1992. The expense
was calculated based on the core deposit intangible of $34 million, which will
be amortized over the estimated lives of the deposits of approximately 10
years, and goodwill of $69 million, which will be amortized over 25 years.
As explained in Note A, purchase accounting adjustments for the Boulevard
Merger may change as additional information becomes available. When the final
allocation of the purchase price for Boulevard is made based on the fair values
assigned at the date of closing, intangible assets consisting of goodwill and
core deposit intangibles will be recorded for the excess purchase price. Based
on current estimates, the amount of aggregate intangible assets has been
calculated as described below.
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C> <C>
Purchase price............................................... $202
Common equity of Boulevard at September 30, 1993............. $ 98
Increase (decrease) to Boulevard's common equity as a result
of estimated fair value purchase adjustments:
Mark-to-market on investment securities.................... 4
Mark-to-market on loans.................................... 5
Mark-to-market on long-term debt........................... (1)
Elimination of Boulevard's goodwill........................ (6)
Record liability for post-retirement benefits.............. (3)
Net increase in income tax liability....................... (2)
Increase (decrease) to Boulevard's common equity as a result
of reorganization and restructuring costs:
Premises and equipment valuation........................... (12)
Severance and conversion reserve........................... (20)
Net decrease in income tax liability....................... 12
---- ----
Net equity balance........................................... 75
----
Intangible assets............................................ $127
====
</TABLE>
F-7
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)--(CONCLUDED)
Amortization expense relating to the Boulevard merger has been included in
the unaudited Pro Forma Combined Statements of Income for the nine months ended
September 30, 1993 and the year ended December 31, 1992, and was calculated
based on the intangible asset balance using the straight-line method over an
average estimated period of benefit for goodwill and core deposit intangibles
of 15 years. The final allocation of intangible assets between goodwill and
core deposits, as well as the methods of amortization, has not been determined.
Subsequent changes to the purchase adjustments, as well as the final allocation
of the intangible assets between goodwill and core deposits will result in an
adjustment to goodwill, which will have a corresponding impact on amortization
expense. Accordingly, pro forma combined income for the nine month period ended
September 30, 1993 and the year ended December 31, 1992, would also change, as
well as the related pro forma combined earnings per share amounts.
NOTE F: STOCKHOLDERS' EQUITY
Prior to the closing, Boulevard will redeem all of its outstanding preferred
stock at its redemption price of $10 million.
FBS will issue common shares for all the outstanding common stock of
Boulevard and convert Boulevard's outstanding stock options and warrants into
FBS stock options and warrants, respectively. The price per share of $31.05
represents the average stock price for the five days prior to FBS and Boulevard
reaching an agreement on the terms of the acquisition. Common stock in the
unaudited Pro Forma Combined Balance Sheet has been increased by the par value
of the FBS stock to be issued of $7.3 million, and additional paid-in capital
has been increased by $195.1 million, the difference between the market value
and the par value of the common stock to be issued. As part of the purchase
accounting adjustments, retained earnings of Boulevard have been eliminated.
FBS has announced its intention to repurchase common shares equal to the
number of shares to be issued in connection with the Boulevard acquisition. The
repurchase of these shares will take place between October 1993 and up to 90
days following the closing of the Boulevard acquisition. Accordingly, treasury
stock has been increased by $202 million as it is anticipated the aggregate
cost of these purchases will be approximately equal to the purchase price of
the Boulevard acquisition. FBS will fund these purchases with the proceeds from
the sale of federal funds sold and securities sold under agreements to
repurchase. The unaudited Pro Forma Combined Statements of Income include an
adjustment to reflect the reduction in interest income due to the sale of
securities.
NOTE G: INCOME TAX PROVISIONS
The income tax provision for adjustments related to the Boulevard and BSI
acquisitions reflected in the unaudited Pro Forma Combined Statements of Income
have been computed at FBS' effective combined federal and state marginal tax
rate.
F-8
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF BOULEVARD BANCORP, INC.
<TABLE>
<CAPTION>
PAGE
----
AUDITED ANNUAL FINANCIAL STATEMENTS
<S> <C>
Consolidated Balance Sheets at December 31, 1992 and 1991................. F-10
Consolidated Statements of Operations for Years Ended December 31, 1992,
1991 and 1990............................................................ F-11
Consolidated Statements of Changes in Shareholders' Equity for Years Ended
December 31, 1992, 1991 and 1990......................................... F-12
Consolidated Statements of Cash Flows for Years Ended December 31, 1992,
1991 and 1990............................................................ F-13
Notes to Consolidated Financial Statements................................ F-14
Report of Independent Accountants......................................... F-31
</TABLE>
UNAUDITED INTERIM FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Balance Sheets at September 30, 1993 and December 31, 1992
(unaudited).............................................................. F-32
Consolidated Statements of Operations for the Three Months and Nine Months
Ended September 30, 1993 and 1992 (unaudited)............................ F-33
Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 1993 and 1992 (unaudited)............................................ F-34
Notes to Consolidated Financial Statements (unaudited).................... F-35
</TABLE>
F-9
<PAGE>
BOULEVARD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1992 1991
---------- ----------
($ IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
ASSETS
Cash and due from banks................................ $ 82,102 $ 77,096
Investment securities (market value $422,233 and
$374,348 at December 31, 1992 and 1991, respectively). 421,547 365,301
Securities held for sale (market value $115,245)....... 114,122
Federal funds sold..................................... 32,350 86,175
Loans (net of unearned discount of $16,551 and $19,535
at December 31, 1992 and 1991, respectively).......... 838,426 934,637
Less--Allowance for possible loan losses............... 24,151 29,333
---------- ----------
Net loans........................................... 814,275 905,304
Premises and equipment, net............................ 22,664 24,394
Other real estate...................................... 17,798 23,385
Other assets........................................... 59,149 60,089
---------- ----------
Total assets....................................... $1,564,007 $1,541,744
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits........................ $ 246,076 $ 225,504
Interest bearing deposits............................ 1,021,045 1,080,487
---------- ----------
Total deposits..................................... 1,267,121 1,305,991
Notes payable.......................................... 10,000 7,000
Other short-term borrowings............................ 151,595 71,138
Other liabilities...................................... 17,940 43,263
Subordinated debentures................................ 11,203 10,766
Other long-term debt................................... 2,910 3,170
---------- ----------
Total liabilities.................................. 1,460,769 1,441,328
---------- ----------
Non-redeemable preferred stock--$100 par value:
Class D--400,000 shares authorized Series 1--100,000
shares issued and outstanding....................... 10,000 10,000
Common stock--$.04 par value; 20,000,000 shares
authorized and 7,137,389 and 7,071,907 shares issued
and outstanding at December 31, 1992 and 1991,
respectively.......................................... 285 283
Additional paid-in capital............................. 40,972 40,085
Retained earnings...................................... 52,541 50,048
Unearned compensation applicable to stock awards....... (560)
---------- ----------
Total non-redeemable preferred stock and common
shareholders' equity.............................. 103,238 100,416
---------- ----------
Total liabilities and shareholders' equity......... $1,564,007 $1,541,744
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-10
<PAGE>
BOULEVARD BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1992 1991 1990
--------- --------- ---------
($ IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans.................. $ 76,497 $ 100,427 $ 124,329
Interest on time deposits in other banks.... 377 1,611
Interest on investment securities:
Taxable................................... 28,421 22,777 17,901
Exempt from federal income tax............ 794 1,260 1,923
Income on federal funds sold................ 1,518 2,860 6,250
--------- --------- ---------
Total interest income................... 107,230 127,701 152,014
--------- --------- ---------
Interest Expense:
Interest on deposits........................ 45,980 65,344 82,780
Interest on short-term borrowings........... 3,969 5,606 5,960
Interest on long-term debt.................. 1,871 1,838 1,750
--------- --------- ---------
Total interest expense.................. 51,820 72,788 90,490
--------- --------- ---------
Net interest income........................... 55,410 54,913 61,524
Provision for possible loan losses............ 5,948 15,624 60,655
--------- --------- ---------
Net interest income after provision for
possible loan losses......................... 49,462 39,289 869
--------- --------- ---------
Other Operating Income:
Trust department income..................... 6,906 6,376 5,695
Service charges on deposit accounts......... 5,875 5,526 5,210
Security gains.............................. 2,922 4,622 36
Other income................................ 5,741 3,094 3,450
--------- --------- ---------
Total other operating income............ 21,444 19,618 14,391
--------- --------- ---------
Other Operating Expenses:
Salaries and employee benefits.............. 28,133 27,719 28,089
Net occupancy expense....................... 6,058 6,090 6,206
Equipment expenses.......................... 3,337 3,526 4,361
Other expenses.............................. 26,314 27,009 18,846
--------- --------- ---------
Total other operating expenses.......... 63,842 64,344 57,502
--------- --------- ---------
Income (loss) before income taxes............. 7,064 (5,437) (42,242)
Income taxes (benefit)........................ 1,845 (3,140) (18,097)
--------- --------- ---------
Income (loss) before cumulative effect of
accounting change............................ 5,219 (2,297) (24,145)
Cumulative effect of change in method of
accounting for income taxes.................. (1,826)
--------- --------- ---------
Net income (loss)............................. $ 3,393 $ (2,297) $ (24,145)
========= ========= =========
Per Common Share Data:
Income (loss) before cumulative effect of
accounting change.......................... $ 0.66 $ (0.28) $ (3.38)
Cumulative effect of change in method of
accounting for income taxes................ (0.22)
--------- --------- ---------
Net income (loss)........................... $ 0.44 $ (0.28) $ (3.38)
========= ========= =========
Average number of common and common equivalent
shares outstanding........................... 8,263,106 7,870,680 7,077,431
</TABLE>
The accompanying notes are an integral part of these statements.
F-11
<PAGE>
BOULEVARD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNEARNED
NON- COMPENSATION
REDEEMABLE ADDITIONAL APPLICABLE
PREFERRED COMMON PAID-IN RETAINED TREASURY TO STOCK
STOCK STOCK CAPITAL EARNINGS STOCK AWARDS
---------- ------ ---------- -------- -------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1989................... $ -- $270 $35,946 $ 81,162 $(1,660) $ --
Net loss................ (24,145)
Issuance of Common Stock
on exercise of
warrants............... 7 2,040 (1,736) 3,586
Purchase of Treasury
Stock.................. (1,926)
Cash dividends on Common
Stock.................. (2,411)
------- ---- ------- -------- ------- -----
Balance at December 31,
1990................... -- 277 37,986 52,870 -- --
Net loss................ (2,297)
Issuance of Common Stock
on:
Exercise of warrants.. 6 2,071
Award of Common Stock
under 1988 Equity
Participation Plan... 28
Issuance of Class D
Preferred Stock, Series
1...................... 10,000
Cash dividends on Class
D Preferred Stock,
Series 1............... (525)
------- ---- ------- -------- ------- -----
Balance at December 31,
1991................... 10,000 283 40,085 50,048 -- --
Net income.............. 3,393
Issuance of Common Stock
on:
Exercise of 1984
Warrants............. 95
Award of Common Stock
under 1988 Equity
Participation Plan... 2 774 (776)
Dividend Reinvestment
Plan................. 18
Amortization of Unearned
Compensation........... 216
Cash dividends on Class
D Preferred Stock,
Series 1............... (900)
------- ---- ------- -------- ------- -----
Balance at December 31,
1992................... $10,000 $285 $40,972 $ 52,541 $ -- $(560)
======= ==== ======= ======== ======= =====
</TABLE>
The accompanying notes are an integral part of these statements.
F-12
<PAGE>
BOULEVARD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1992 1991 1990
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................... $ 3,393 $ (2,297) $(24,145)
Adjustments to reconcile net income (loss) to
net cash:
Provision for possible loan losses............ 5,948 15,624 60,655
Depreciation and amortization................. 4,532 4,562 5,100
Decrease in interest receivable............... 1,475 4,894 2,571
Decrease in interest payable.................. (1,787) (1,687) (981)
Provision for (benefit of) deferred income
taxes........................................ 1,117 1,340 (8,824)
Gain on sale of loans......................... (1,907)
Loss (gain) on other real estate.............. 1,884 4,467 (49)
Gain on sale of investment securities......... (2,922) (4,622) (36)
Cumulative effect of accounting change........ 1,826
Other--net.................................... (1,101) (3,267) (9,579)
-------- -------- --------
Net cash flows provided by operating
activities................................. 12,458 19,014 24,712
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in interest-bearing time deposits
in other banks................................. 10,927 29,094
Net decrease (increase) in federal funds sold... 53,825 (54,875) 68,900
Purchases of investment securities.............. (437,007) (397,624) (148,902)
Proceeds from maturity of investment securities. 128,106 145,632 84,749
Proceeds from sale of investment securities..... 114,261 174,243 4,036
Acquisition of loans previously sold............ (16,566)
Proceeds from sale of loans..................... 86,514 53,512
Net decrease (increase) in loans................ 8,731 180,138 (77,008)
Additions to premises and equipment............. (1,165) (1,318) (4,954)
Proceeds from sale of other real estate......... 12,404 9,527 699
-------- -------- --------
Net cash flows (used) provided by investing
activities................................. (50,897) 66,650 10,126
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in non-interest bearing
deposits....................................... 20,572 (36,556) (16,012)
Net decrease in interest bearing deposits....... (59,442) (79,997) (26,088)
Proceeds from issuance of notes payable......... 3,000 9,000 3,000
Principal payments on notes payable............. (13,230) (2,000)
Net increase (decrease) in other short term
borrowings..................................... 80,457 18,689 (12,851)
Principal payments on other long term debt...... (260) (240) (76)
Issuance of preferred stock..................... 10,000
Issuance of common stock........................ 18 1,838 3,663
Purchase of treasury stock...................... (1,926)
Dividends paid:
Preferred stock............................... (900) (525)
Common stock.................................. (2,411)
-------- -------- --------
Net cash flows provided (used) by financing
activities................................. 43,445 (91,021) (54,701)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND DUE FROM
BANKS............................................ 5,006 (5,357) (19,863)
Cash and due from banks at beginning of year...... 77,096 82,453 102,316
-------- -------- --------
Cash and due from banks at end of year............ $ 82,102 $ 77,096 $ 82,453
======== ======== ========
Supplemental disclosures of cash flow information:
Interest paid................................... $ 53,075 $ 74,475 $ 91,471
Income taxes paid............................... $ 515 $ 390 $ 526
</TABLE>
The accompanying notes are an integral part of these statements.
F-13
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Boulevard Bancorp, Inc. (the "Company") and its majority owned subsidiaries
follow generally accepted accounting principles including, where applicable,
prevailing practices in the banking industry. The Company's principal
subsidiaries are Boulevard Bank National Association ("Boulevard Bank"), First
National Bank of Des Plaines ("First Bank"), National Security Bank of Chicago
("National Security"), Citizens National Bank of Downers Grove ("Citizens
Bank") (collectively, the "Banks") and Boulevard Technical Services, Inc.
("BTS"), an operations subsidiary. Miami Corporation owns a majority of the
Company's Common Stock.
Basis of Presentation
The Company's financial statements are presented on a consolidated basis and
include the accounts of the Company and its subsidiaries. All significant
intercompany balances and transactions have been eliminated. Certain
reclassifications, which had no effect on the Company's financial position or
results of operations, have been made to the 1991 and 1990 financial statements
to conform to the 1992 presentation.
Investment Securities
Securities are classified as investment securities when the Company has the
ability and the intent to hold them until maturity. Investment securities are
stated at cost, adjusted for the amortization of premium and accretion of
discount on the effective yield method. Gain or loss on the sale of investment
securities is based on the adjusted cost of the specific security sold.
Securities Held for Sale
Securities held for sale comprise securities for which management determined
as of December 31, 1992 it did not intend to hold to maturity. These securities
are stated at the lower of aggregate cost or market value.
Loans
Loans are stated at their principal amount, net of unearned discount. Certain
loan origination fees are deferred and recognized over the life of the related
loans under the interest method as an adjustment to the loan's interest income.
These deferred fees have been offset against loans in the accompanying balance
sheets.
Loans are placed on a nonaccrual basis generally when the principal or
interest is past due for ninety days or when full collection of scheduled
payments is doubtful. Nonaccrual loans are returned to an accrual status when a
loan is brought current and, in the opinion of management, the financial
position of the borrower indicates that there no longer is any reasonable doubt
as to the timely payment of principal or interest by the borrower. Restructured
loans represent those loans on which the original terms have been modified to
grant specific concessions to financially troubled borrowers.
Interest Rate Swaps
Interest rate swaps are used for hedging purposes within the Company's
overall strategy for managing assets and liabilities and related interest rate
risk. Net accrued settlements of these agreements are recognized as adjustments
to the yield of the hedged items over the term of the swap agreements.
Allowance for Possible Loan Losses
The allowance for possible loan losses is based upon management's evaluation
of the loan portfolio giving consideration to general economic conditions of
the Banks' market areas, the nature and volume of the loan portfolio and the
Banks' historical loss experience.
F-14
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Premises and Equipment
Premises and equipment are carried at cost less accumulated amortization and
depreciation. Amortization and depreciation are computed on straight line and
accelerated methods over the estimated useful lives of the premises and
equipment.
Other Real Estate
Real estate acquired in satisfaction of loans or substantively repossessed
from an accounting perspective (insubstance foreclosure) are recorded at the
lower of cost or appraised value at the date transferred to other real estate.
Write-downs as of the acquisition date are charged to the allowance for
possible loan losses. Subsequent write-downs required on the basis of later
evaluations and the net expenses incurred from maintaining such properties are
included in other expenses. Gains and losses on sale of other real estate are
included in other income.
Income Taxes
Under the deferred method of accounting for income taxes, which was used in
1991 and prior years, deferred income taxes were recognized for income and
expense items that are reported differently for financial reporting purposes
than for income tax purposes using tax rates applicable for the year in which
the items arose.
Investment tax credits resulting from acquisition of qualified assets have
been deferred and are being amortized over the estimated useful lives of the
acquired assets.
Statement of Cash Flows
The Company defines cash and cash equivalents as cash and due from banks.
2. ACCOUNTING CHANGE
In February, 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." The Company adopted the provisions of the new standard effective
January 1, 1992 and has separately reported the cumulative effect of the change
in accounting for income taxes in the amount of $1.8 million, or $0.22 per
share, in the Consolidated Statement of Operations for the year ended December
31, 1992. As a result of applying SFAS No. 109 in 1992, income before income
taxes for the 1992 year was decreased $221,000 due to the effects of
adjustments for prior purchase business combinations. As permitted by the
Statement, prior year financial statements have not been restated to reflect
the change in accounting method.
SFAS No. 109 requires a change from the deferred method of accounting for
income taxes to the asset and liability method. Under the asset and liability
method, 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. 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. Under SFAS No. 109 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.
3. PLEDGED ASSETS
Investment securities and securities held for sale carried at approximately
$206.6 million and $112.4 million at December 31, 1992 and 1991, respectively,
were pledged to secure certain deposits and for other purposes as permitted or
required by law.
Deposits required to be maintained at the Federal Reserve Bank averaged
approximately $15.6 million in 1992 and $23.3 million in 1991.
F-15
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INVESTMENT SECURITIES
The amortized cost and estimated market values of investment securities are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1992
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies..... $198,654 $1,752 $1,437 $198,969
Obligations of state and
political subdivisions........ 7,375 526 95 7,806
U.S. government agency
mortgage-backed securities.... 187,376 692 592 187,476
Other.......................... 28,142 61 221 27,982
-------- ------ ------ --------
Totals..................... $421,547 $3,031 $2,345 $422,233
======== ====== ====== ========
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1991
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies..... $115,230 $2,839 $11 $118,058
Obligations of state and
political subdivisions........ 14,215 511 40 14,686
U.S. government agency
mortgage-backed securities.... 224,591 5,163 3 229,751
Other.......................... 11,265 610 22 11,853
-------- ------ --- --------
Totals..................... $365,301 $9,123 $76 $374,348
======== ====== === ========
</TABLE>
The amortized cost and estimated market value of investment securities at
December 31, 1992, by contractual maturity, are in the following table.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without penalties.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Due in one year or less............................... $ 34,309 $ 34,836
Due after one year through five years................. 189,878 189,720
Due after five years through ten years................ 3,751 3,753
Due after ten years................................... 6,233 6,448
-------- --------
234,171 234,757
Mortgage-backed securities............................ 187,376 187,476
-------- --------
Totals............................................ $421,547 $422,233
======== ========
</TABLE>
F-16
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Realized gross gains and losses were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1992 1991 1990
--------- --------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Gross realized gains.......................... $ 2,953 $ 4,629 $ 50
Gross realized losses......................... 31 7 14
</TABLE>
5. SECURITIES HELD FOR SALE
Securities held for sale are comprised of $114.1 million in U.S. government
agency mortgage-backed securities stated at the lower of aggregate cost or
market value at December 31, 1992. The estimated market value was $115.2
million with gross unrealized gains and losses of $1.4 million and $299,000,
respectively, as of December 31, 1992.
6. LOANS
Loans classified by type are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1992 1991
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
Real estate--
Mortgage............................................. $317,854 $377,684
Development and construction......................... 33,402 63,768
Commercial, industrial and financial................... 292,865 309,534
Consumer............................................... 210,856 203,186
-------- --------
Total.............................................. 854,977 954,172
Less unearned discount................................. 16,551 19,535
-------- --------
Total loans........................................ $838,426 $934,637
======== ========
</TABLE>
The following table shows the principal balance and the effect on interest
income of nonaccrual and restructured loans:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1992 1991 1990
------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Principal amount at end of period................ $34,698 $38,824 $44,703
Gross amount of interest which would have been
recorded at original rate....................... 2,435 5,600 5,702
Interest that was reflected in income............ 879 2,166 3,202
</TABLE>
At December 31, 1992, the Company was not committed to lend additional
amounts on these loans.
The Banks' lending activities are concentrated in the greater Chicago
metropolitan area. Real estate mortgage loans of $317.9 million at December 31,
1992 are composed of $178.0 million of loans secured by 1 to 4 family
residential real estate and $139.9 million of loans secured by commercial and
other real estate. There was no significant exposure to any one industry as of
December 31, 1992.
F-17
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. ALLOWANCE FOR POSSIBLE LOAN LOSSES
The following table summarizes the changes in the allowance for possible loan
losses:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1992 1991 1990
------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year................... $29,333 $36,913 $15,575
Add (deduct):
Allowance applicable to loans sold........... (321)
Provision for possible loan losses........... 5,948 15,624 60,655
Loans charged-off............................ (15,351) (31,496) (39,702)
Recoveries................................... 4,221 8,292 706
------- ------- -------
Net loan charge-offs....................... (11,130) (23,204) (38,996)
------- ------- -------
Balance at end of year......................... $24,151 $29,333 $36,913
======= ======= =======
</TABLE>
8. PREMISES AND EQUIPMENT
The cost, accumulated amortization and depreciation and net book value of
premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1992 1991
------- -------
($ IN
THOUSANDS)
<S> <C> <C>
Land.................................................... $ 2,131 $ 2,131
Buildings and leasehold improvements.................... 24,162 22,783
Furniture and equipment................................. 20,838 21,390
Capital leases.......................................... 2,110 2,110
------- -------
Total............................................... 49,241 48,414
Less accumulated amortization and depreciation.......... 26,577 24,020
------- -------
Net book value.......................................... $22,664 $24,394
======= =======
</TABLE>
Amortization and depreciation expense was $2.9 million, $3.0 million and $3.4
million in 1992, 1991 and 1990, respectively.
9. LEASE COMMITMENTS
The facilities in which the Company and certain subsidiaries are located are
leased under operating leases, with various expiration dates through 2009. The
lease agreements provide for a minimum rental plus, in certain cases,
additional rental based on increases in building operating expenses and certain
economic indicators.
The amount of net rental expense on these leases is shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1992 1991 1990
------ ------ ------
($ IN THOUSANDS)
<S> <C> <C> <C>
Minimum rentals................................... $2,778 $2,779 $3,239
Rental adjustment................................. 762 560 324
Sublease income................................... (136) (54) (40)
------ ------ ------
Net rental expense............................ $3,404 $3,285 $3,523
====== ====== ======
</TABLE>
F-18
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
First Bank leases its principal banking facility. The lease has the
attributes normally associated with purchased property and is, therefore,
capitalized and included in premises and equipment. The property is amortized
on a straight line basis over the term of the lease and the amortization is
included in depreciation expense.
In 1990, the Company entered into an agreement to receive data processing
services. The cost of software acquired under this agreement has been recorded
as a capital lease and is included in other assets.
The obligations under the capital leases are included in other long-term
debt.
Future minimum lease payments under capital leases and operating leases at
December 31, 1992 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
($ IN THOUSANDS)
<S> <C> <C>
1993.................................................... $ 774 $ 2,412
1994.................................................... 774 2,454
1995.................................................... 662 2,518
1996.................................................... 439 2,547
1997.................................................... 439 2,561
Later years............................................. 19,989 24,102
------- -------
Total minimum lease payments............................ 23,077 $36,594
=======
Less: Executory costs................................... 8,738
Interest................................................ 11,429
-------
Present value of net minimum lease payments............. $ 2,910
=======
</TABLE>
10. NOTES PAYABLE
Notes payable totaling $10.0 million at December 31, 1992 are unsecured,
payable on demand to Miami Corporation and bear interest at the prime rate.
11. OTHER SHORT-TERM BORROWINGS
Other short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1992 1991
-------- -------
($ IN THOUSANDS)
<S> <C> <C>
Federal funds purchased and securities sold under
agreements to repurchase.............................. $139,660 $55,209
Other.................................................. 11,935 15,929
-------- -------
Total.............................................. $151,595 $71,138
======== =======
</TABLE>
12. SUBORDINATED DEBENTURES
The 8% Subordinated Debentures are unsecured and are due October 31, 1994.
They are carried at their principal amount of $12.4 million less unamortized
discount, based on an imputed interest rate of 14%, of $1.2 million at December
31, 1992. They were issued August 31, 1984, in connection with the acquisition
of First Bank.
F-19
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. NON-REDEEMABLE PREFERRED STOCK
The Class D Preferred Stock, Series 1 was established at 100,000 shares in
February 1991. This series of preferred stock bears cumulative annual dividends
at a rate of 9% per year and is callable at any time by the Company at par
value plus unpaid accrued dividends. On March 1, 1991, the Company issued this
series of preferred stock to Miami Corporation for $10.0 million. The
preferences for all authorized but unissued shares of preferred stock will be
established as the shares are issued.
14. WARRANTS AND EQUITY PARTICIPATION AND DIVIDEND REINVESTMENT PLANS
1984 Warrants
The 1984 Warrants to purchase 1,172,000 shares of common stock were issued on
August 31, 1984 in conjunction with the issuance of the 8% Subordinated
Debentures. Subsequent to issuance, the 1984 Warrants and Debentures are
separately transferable. The 1984 Warrants became exercisable on November 1,
1989 and are exercisable through October 31, 1994 to purchase shares of the
Company's Common Stock at the price of $11.20 per share, subject to certain
anti-dilution provisions. Warrants to purchase 9,500 shares were exercised in
1992 and warrants to purchase 1,106,000 and 1,115,500 shares were outstanding
and exercisable at December 31, 1992 and 1991, respectively.
1988 Equity Participation Plan
The 1988 Equity Participation Plan provides for awards to key officers and
employees of the Company and its subsidiaries up to a maximum of 600,000 shares
of the Company's Common Stock in the form of stock and stock equivalent awards,
stock options, stock appreciation rights and stock depreciation rights.
Stock options were granted from 1988 through 1991 which are exercisable after
three years of service, except in the case of death or permanent disability,
and expire ten years after the date of grant. The exercise price of the options
is the fair market value of the stock on the date of grant. The following table
summarizes activity in stock options under the 1988 Equity Participation Plan
for 1992:
<TABLE>
<CAPTION>
OPTION PRICE
SHARES PER SHARE
------- ---------------
<S> <C> <C>
December 31, 1991 Balance........................ 538,100 $12 1/4-$24 5/8
Canceled......................................... 70,950 12 1/4- 22 1/4
-------
December 31, 1992 Balance........................ 467,150 $12 1/4-$24 5/8
=======
</TABLE>
During 1992, options for 67,025 shares at exercise prices of $22 1/4 to $24
5/8 became exercisable and 3,800 of these shares at an exercise price of $22
1/4 were canceled. At December 31, 1992 options for 112,500 shares at exercise
prices of $20 3/8 to $24 5/8 were exercisable. The 70,950 shares canceled were
returned to the pool and are available for future awards.
Stock awards are granted under the 1988 Equity Participation Plan with
vesting requirements based on service, except in the case of death, permanent
disability, or an acceleration of the vesting date based on increases in the
market value of the stock. A certificate for the shares of Common Stock is
issued in the name of the recipient of the grant, but the certificate is held
in custody by the Company for the employee's account until the shares are
vested. Subject to the foregoing, the employee has the rights and privileges of
a Common Stockholder, including the right to receive dividends and the right to
vote the shares.
In 1992, 54,577 shares of Common Stock were issued as stock awards. The
vesting date is January 10, 1995 for 8,000 shares, May 11, 1995 for 1,000
shares and March 20, 2002 for 45,577 shares. The fair market
F-20
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
value of the Common Stock on the dates of the awards was $13 1/4 for the 8,000
shares, $14 1/2 for the 1,000 shares and $14 3/8 for the 45,577 shares. The
vesting date for the 45,577 shares may be accelerated if the market value of
the Common Stock equals or exceeds $18.00 per share before March 20, 2002. The
earliest the shares can vest is March 20, 1994 for 15,191 shares, March 20,
1995 for 15,195 shares and March 20, 1996 for 15,191 shares.
A 1991 stock award for 2,000 shares vested on December 31, 1992. The market
value on the date of grant was $12 3/4 per share.
The value of the stock awards on the date of grant is considered compensation
to be earned over the vesting period. Aggregate compensation applicable to
stock awards is amortized to expense ($216,000 for 1992) from the date of grant
to the earliest expected vesting date. Unearned compensation was $560,000 at
December 31, 1992 and is shown as a reduction of shareholders' equity in the
consolidated balance sheet.
Shares available for future awards totaled 76,073 and 59,700 at December 31,
1992 and 1991, respectively.
Dividend Reinvestment and Stock Purchase Plan
In 1992, the Company established a Dividend Reinvestment and Stock Purchase
Plan ("DRIP") which provides that registered shareholders may acquire
additional shares of common stock by reinvesting their dividends or by making
optional cash purchases of $50 to $5,000 per month. The Company has registered
with the Securities and Exchange Commission 100,000 shares of the Company's
Common Stock for issuance under the DRIP. The purchase price of the shares is
the average market price of the shares for the last 10 trading days before the
investment date less a 5% discount. The Company has reserved the right to
suspend, terminate or amend the DRIP at any time including changing the amount
of the discount and the amount of the monthly cash purchases permitted. During
1992, 1,405 shares were issued and at December 31, 1992, 98,595 shares were
reserved for issuance under the DRIP.
At December 31, 1992 and 1991, 1,747,818 shares and 1,713,300 shares,
respectively, of Common Stock were reserved for issuance upon exercise of the
1984 Warrants, exercise of outstanding stock options and awards under the 1988
Equity Participation Plan and activity in the DRIP.
15. SAVINGS AND INVESTMENT AND PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company has a contributory Savings and Investment Plan ("401(k) Plan")
which covers all salaried employees of the Company and its subsidiaries who
qualify as to age and length of service. Contributions by the Company and its
subsidiaries to the 401(k) Plan are based on the amount contributed by the
employees. This expense totaled $645,000, $566,000, and $487,000 in 1992, 1991
and 1990, respectively.
The Company has a noncontributory pension plan ("Pension") which covers all
salaried employees of the Company and its subsidiaries who qualify as to age
and length of service. Benefits payable upon retirement (normally age 65) are
generally based on years of service and average compensation as defined in the
Plan. The Company's pension expense (credit) was ($71,000), $257,000, and
$64,000 in 1992, 1991 and 1990, respectively.
F-21
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the Pension's funded status and amounts
recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1992 1991
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $15,743 and $13,438, respectively..... $(16,139) $(13,715)
======== ========
Projected benefit obligation for service rendered
to date........................................... (18,884) $(16,192)
Plan assets at fair value, primarily listed stocks... 19,694 19,460
-------- --------
Projected benefit obligation less than plan assets... 810 3,268
Unrecognized net gain from past experience different
from that assumed and effects of changes in
assumptions......................................... (2,976) (4,775)
Prior service cost not yet recognized in net periodic
pension cost........................................ 1,179 473
Unrecognized net obligation being recognized over
14.3 years.......................................... (271) (303)
-------- --------
Accrued pension cost included in other liabilities... $ (1,258) $ (1,337)
======== ========
</TABLE>
Net pension cost includes the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1992 1991 1990
------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during the
period...................................... $ 764 $ 669 $ 872
Interest cost on projected benefit
obligation.................................. 1,317 1,398 1,524
Actual return on plan assets................. (1,795) (4,491) (725)
Net amortization and deferral................ (357) 2,681 (1,166)
Curtailment benefit.......................... (441)
------- ------- -------
Net periodic pension cost (benefit).......... $ (71) $ 257 $ 64
======= ======= =======
</TABLE>
A discount rate of 8.25% and a rate of increase in future compensation level
of 5.0% were used in determining the actuarial present value of the projected
benefit obligation in 1992 and 1991. The expected long term rate of return on
assets was 10%, net of expenses, in 1992, 1991 and 1990.
In December 1990, FASB issued SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This Statement requires the
accrual of the expected cost of these benefits during the years that the
employee renders the necessary service. The costs are calculated in a manner
similar to the approach followed for pension expense which involves the use of
actuarial assumptions regarding employee population and estimated timing and
amount of future benefit costs. Through December 31, 1992 retirees were
eligible for certain medical and life insurance benefits, which under present
accounting practices, using the pay-as-you-go method, cost the Company $214,000
and $165,000 for the years 1992 and 1991, respectively. Effective January 1,
1993, these benefits are no longer provided to future retirees. Existing
retirees will continue to receive these benefits as in the past. The
accumulated postretirement benefit obligation as of January 1, 1993 has been
estimated to be approximately $3.6 million, with an annual net periodic cost of
approximately $460,000. The Company has adopted this statement effective
January 1, 1993 and is amortizing the accumulated postretirement obligation
over 20 years.
F-22
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. INCOME TAXES
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1992 1991 1990
------ ------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................... $1,012 $(3,071) $ (7,959)
State............................................. (284) (1,409) (1,314)
------ ------- --------
Total current................................... 728 (4,480) (9,273)
------ ------- --------
Deferred:
Federal........................................... 967 1,041 (8,153)
State............................................. 150 299 (671)
------ ------- --------
Total deferred.................................. 1,117 1,340 (8,824)
------ ------- --------
Total provision (benefit)....................... $1,845 $(3,140) $(18,097)
====== ======= ========
</TABLE>
A reconciliation between the reported income tax provision and the amount
computed by multiplying income before income taxes by the applicable statutory
Federal income tax rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1992 1991 1990
------ ------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Computed expected tax expense (benefit) at statutory
rate of 34%........................................ $2,403 $(1,849) $(14,362)
Increase (decrease) in tax resulting from:
Tax exempt municipal income....................... (676) (1,001) (1,832)
State income tax, net of Federal income tax
benefit.......................................... (88) (733) (1,310)
Refund of prior years' tax at rates in excess of
34%.............................................. -- (582) (1,849)
Net amortization of purchase accounting
adjustments...................................... 135 298 348
Other--net........................................ 71 727 908
------ ------- --------
Actual tax provision (benefit)...................... $1,845 $(3,140) $(18,097)
====== ======= ========
</TABLE>
The tax effect of temporary differences that comprise the Company's deferred
tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1992
----------------
($ IN THOUSANDS)
<S> <C>
Gross deferred tax assets:
Allowance for possible loan losses..................... $ 9,375
Accrued operating expenses............................. 3,401
Deferred loan fees..................................... 1,267
Other.................................................. 405
-------
Total gross deferred tax assets...................... 14,448
Less valuation allowance................................. (500)
-------
Subtotal............................................. 13,948
Gross deferred tax liabilities:
Adjustments for purchased business combinations........ (1,335)
Capitalized expenses................................... (579)
Discount on subordinated debentures.................... (460)
Other.................................................. (2,480)
-------
Total gross deferred tax liabilities................. (4,854)
-------
Net deferred tax assets.................................. $ 9,094
=======
</TABLE>
F-23
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The valuation allowance for deferred tax assets as of January 1, 1992 was
$500,000 and did not change during 1992.
For 1991 and 1990, deferred income tax expense resulted from the following
tax effects of timing differences in the recognition of income and expense for
income tax and financial reporting purposes:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1991 1990
------- -------
($ IN
THOUSANDS)
<S> <C> <C>
Tax loan loss deduction over (under) book provision.... $ 3,590 $(8,697)
Deferred loan fees..................................... 54 (103)
Loan sales............................................. (638) (190)
Book operating expenses under (over) tax deduction..... (1,681) 136
Direct lease financing................................. (576) (2)
Other--net............................................. 591 32
------- -------
Total.............................................. $ 1,340 $(8,824)
======= =======
</TABLE>
Current and deferred amounts for 1991 have been reclassified to reflect
amounts reported in the tax returns as filed. Such reclassifications do not
affect the total provision.
17. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, there are outstanding various commitments
and contingent liabilities, such as guarantees and commitments to extend credit
which are not reflected in the financial statements. There are also legal
proceedings pending against the banks in the ordinary course of business. In
the opinion of management, after consultation with legal counsel, liabilities
arising from these proceedings, if any, would not have a material adverse
effect on the Company's financial position.
On March 14, 1991, the seven former shareholders of Northwest Financial
Corporation, parent company of National Security, filed suit in the United
States District Court for the Northern District of Illinois seeking rescission
and damages in connection with its acquisition by the Company. On June 21,
1991, the District Court ruled in the Company's favor by granting the Company's
request for summary judgment. On July 16, 1991, the plaintiffs filed an appeal
of the judgment and on August 12, 1992 the United States Court of Appeals for
the Seventh Circuit ruled in the Company's favor. The plaintiffs filed a
petition for rehearing with the Court of Appeals which was denied.
The Company has an agreement to receive data processing services which
requires minimum annual payments of $1.9 million in 1993 and 1994 and $1.3
million in 1995 for a total of $5.1 million.
18. RELATED PARTY TRANSACTIONS
Loans are made, in the normal course of business, to directors, executive
officers and principal holders of equity securities of the Company and its
subsidiaries and to associates of such persons. The terms of these loans,
including interest rates and collateral, are similar to those prevailing for
comparable transactions with unrelated parties and do not involve more than a
normal risk of collectibility. The aggregate amount of these loans was $13.2
million and $14.8 million at December 31, 1992 and 1991, respectively. During
1992, new loans of $8.8 million were granted to these parties and repayments of
$7.1 million were received. Other changes were a net decrease of $3.3 million.
At December 31, 1992, none of these loans were included in nonaccrual,
restructured or 90 days past due loans.
F-24
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Average noninterest-bearing deposits of Miami Corporation and entities
related to it on deposit in the Banks were approximately 7.0%, 8.3% and 4.9% of
average total non-interest-bearing deposits during the years ended December 31,
1992, 1991 and 1990, respectively. Average interest-bearing deposits of Miami
Corporation and entities related to it on deposit in the Banks were
approximately 5.5%, 5.4% and 3.9% of the total average interest-bearing
deposits during the years ended December 31, 1992, 1991 and 1990, respectively.
The Company estimates that the net income attributable to non-interest-bearing
deposits of Miami Corporation and related entities was approximately $700,000,
$1.0 million and $700,000 for 1992, 1991 and 1990, respectively.
At December 31, 1992, directors, executive officers and principal holders of
equity securities of the Company and its subsidiaries and associates of such
persons held $4.6 million of Subordinated Debentures and 1984 Warrants to
purchase 379,000 shares of Common Stock.
First Bank leases its principal banking facility from a partnership in which
one director of the Company is a general partner and in which various members
of the family that owns Miami Corporation are directly or indirectly limited
partners.
19. BOULEVARD BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1992 1991
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash.................................................. $ 1,718 $ 265
Interest bearing time deposit......................... 339 1,419
Investment in subsidiaries............................ 112,343 104,048
Loans and advances to subsidiaries.................... 10,061 12,488
Other assets.......................................... 2,417 2,160
-------- --------
Total assets...................................... $126,878 $120,380
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable......................................... $ 10,000 $ 7,000
8% subordinated debentures............................ 11,203 10,766
Other................................................. 2,437 2,198
-------- --------
Total liabilities................................. 23,640 19,964
-------- --------
Non-redeemable preferred stock........................ 10,000 10,000
Common stock.......................................... 285 283
Additional paid-in capital............................ 40,972 40,085
Retained earnings..................................... 52,541 50,048
Unearned compensation on stock awards................. (560)
-------- --------
Total shareholders' equity........................ 103,238 100,416
-------- --------
Total liabilities and shareholders' equity........ $126,878 $120,380
======== ========
</TABLE>
F-25
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1992 1991 1990
------ ------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
OPERATING INCOME
Dividends from subsidiaries......................... $ 500 $ 1,325 $ 6,700
Interest on time deposits and loans................. 229 506 609
Management fee...................................... 1,507 1,321
Other............................................... 48
------ ------- --------
Total operating income.......................... 2,236 3,200 7,309
------ ------- --------
OPERATING EXPENSES
Interest expense.................................... 1,990 2,043 2,450
Other............................................... 2,280 2,765 2,001
------ ------- --------
Total operating expenses........................ 4,270 4,808 4,451
------ ------- --------
Income (loss) before income taxes................... (2,034) (1,608) 2,858
Income taxes (benefit).............................. (1,060) (831) 172
------ ------- --------
Income (loss) before cumulative effect of accounting
change ............................................ (974) (777) 2,686
Cumulative effect of accounting change.............. (1,086)
------ ------- --------
Loss before equity in undistributed earnings
(losses) of subsidiaries........................... (2,060) (777) (2,686)
Equity in undistributed earnings (losses) of
subsidiaries....................................... 5,453 (1,520) (26,831)
------ ------- --------
Net income (loss)............................... $3,393 $(2,297) $(24,145)
====== ======= ========
</TABLE>
Applicable laws and regulations limit the amount of dividends which can be
paid by banks without obtaining prior approval of bank regulatory authorities.
Under these limitations, at January 1, 1993 the Banks are able to pay dividends
in an aggregate amount of approximately $5.0 million without the need for prior
regulatory approval.
F-26
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1992 1991 1990
------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................. $ 3,393 $ (2,297) $(24,145)
Adjustment to reconcile net income (loss) to net
cash:
Cumulative effect of accounting change.......... 1,086
Undistributed (earnings) losses of subsidiaries. (5,453) 1,520 26,831
Amortization of debt discount and expense....... 532 470 419
Other, net...................................... ( 363) 34 85
------- -------- --------
Net cash flows (used) provided by operating
activities....................................... (805) (273) 3,190
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in interest bearing time deposits........ 1,080 2,475 (2,527)
Investment in and loans and advances to
subsidiaries................................... (3,200) (9,400) (3,500)
Collection on loans and advances to
subsidiaries................................... 2,627 902 820
Other, net...................................... (367) (702) 1,776
------- -------- --------
Net cash flows provided (used) by investing
activities..................................... 140 (6,725) (3,431)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable......... 3,000 9,000 3,000
Principal payments on notes payable............. (13,230) (2,000)
Issuance of preferred stock..................... 10,000
Issuance of common stock........................ 18 1,841 3,663
Purchase of treasury stock...................... (1,926)
Dividends paid:
Preferred stock............................... (900) (525)
Common stock.................................. (2,411)
------- -------- --------
Net cash flows provided by financing activities... 2,118 7,086 326
------- -------- --------
Net change in cash................................ 1,453 88 85
Cash at beginning of year......................... 265 177 92
------- -------- --------
Cash at end of year............................... $ 1,718 $ 265 $ 177
======= ======== ========
</TABLE>
20. COMPUTATION OF EARNINGS PER SHARE
Earnings per common share were computed by dividing net income, increased for
interest expense, net of tax, on the outstanding debentures and decreased for
dividends on Class D Preferred Stock, by the weighted average number of shares
of common stock and common stock equivalents outstanding during the period. The
number of common stock equivalents include the shares issuable on the exercise
of the 1984 Warrants at an exercise price of $11.20 per share (it is assumed
that the warrant holders will tender the outstanding debentures in payment of
the exercise price) and on the exercise of warrants and stock options based on
the treasury stock method.
The number of shares used in computing earnings or loss per share for the
year is an average of the number of shares used in each of the four quarters.
For quarters in which there is a net loss, the computation is based on common
shares outstanding (common equivalent shares are excluded because they are
anti-dilutive) and the net loss is not decreased for interest expense on the
outstanding debentures. As a result, the total of the earnings or loss per
share for the four quarters does not equal the loss per share for the years
1991 and 1990.
F-27
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Banks enter into financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of their customers. These
financial instruments include commitments to extend credit, financial and
performance standby letters of credit and commercial letters of credit. The
instruments involved, to varying degrees, contain elements of credit and
interest rate risk in excess of the amount recognized in the financial
statements. The Banks exposure to credit loss in the event of non-performance
by the other party to the financial instrument for loan commitments, commercial
letters of credit and standby letters of credit is represented by the
contractual amount of those instruments. The Banks use the same credit policies
in making commitments and conditional obligations as they do for on balance
sheet instruments. The loan commitments and letters of credit at December 31,
1992 are as follows:
<TABLE>
<CAPTION>
CONTRACTUAL AMOUNTS
-------------------
($ IN THOUSANDS)
<S> <C>
Financial instruments whose contract amounts
represent credit risk:
Loan Commitments................................. $155,473
Standby Letters of Credit........................ 22,400
Commercial Letters of Credit..................... 794
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the commitment.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee by a customer. Since a portion of the
commitments are expected to expire without having been drawn upon, the total
commitment amount does 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 of the counterparty.
Collateral held varies, but may include cash on deposit, securities, accounts
receivable, inventory, property, plant and equipment. The credit risk involved
in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers.
The Banks have also entered into interest rate swap agreements with a total
notional amount of $185.0 million outstanding at December 31, 1992. Under the
terms of these agreements the obligations are at a variable rate of interest.
These agreements expire at various dates through 1994.
22. OTHER EXPENSES
Other expenses are comprised of the following:
<TABLE>
<CAPTION>
1992 1991 1990
------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Data processing.................................. $ 4,546 $ 4,059 $ 2,509
Legal............................................ 2,226 2,141 1,167
Other real estate................................ 3,467 6,029 439
FDIC insurance................................... 2,915 2,865 1,720
Amortization of goodwill and core deposit
intangibles..................................... 1,555 1,514 1,694
All other........................................ 11,605 10,401 11,317
------- ------- -------
Total other expenses......................... $26,314 $27,009 $18,846
======= ======= =======
</TABLE>
F-28
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
23. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. Changes in assumptions or estimation
methodologies may have a material effect on these estimated fair values. SFAS
No. 107 excludes certain financial instruments and all nonfinancial instruments
from its disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the value of the Company.
The following methods and assumptions were used by the Company in estimating
the fair values of its financial instruments:
CASH AND CASH EQUIVALENTS: Fair values for cash and due from banks
approximate the carrying amounts reported in the Consolidated Balance Sheet.
INVESTMENT SECURITIES AND SECURITIES HELD FOR SALE: Fair values for
investment securities and securities held for sale are the same as their
estimated market values.
LOANS: The fair value of net loans is estimated using a discount rate
approximating current market rates for loans with similar terms to borrowers of
similar credit quality. The discount rate is applied to the expected cash flow
through maturity for fixed rate loans or through the repricing period for
variable rate loans. The fair value and carrying amount of net loans were
$820.8 million and $814.3 million, respectively, as of December 31, 1992.
INTEREST RATE SWAPS: Fair values for interest rate swap agreements are
estimated based on quoted market prices for similar agreements with like terms.
As of December 31, 1992, outstanding interest rate swaps had an estimated fair
value of $1.9 million.
LOAN COMMITMENTS: The fair value of outstanding loan commitments are based on
the fees currently charged for loan commitments with terms similar to those
remaining and with comparable credit risk. As of December 31, 1992 this amount
is estimated at $1.0 million.
DEPOSIT LIABILITIES: The fair values of non-interest bearing demand, interest
bearing demand, and savings deposits approximate their carrying amounts. Fair
values for time deposits are estimated using a discounted cash flow calculation
that applies a discount rate which approximates current market yields for
deposits with similiar terms, to a schedule of aggregate expected maturities of
these deposits. The fair value and carrying amount of time deposits were $611.0
million and $611.2 million, respectively, at December 31, 1992.
SHORT-TERM BORROWINGS AND NOTES PAYABLE: The fair values of Federal funds
purchased, repurchase agreements, other short term borrowings and notes payable
approximate their carrying amounts.
SUBORDINATED DEBENTURES: The fair value of the 8% Subordinated Debentures is
estimated using discounted cash flow analysis, based on current market rates of
interest for similar debt. As of December 31, 1992 the estimated fair value of
these debentures was $12.6 million and the carrying value plus accrued interest
was $11.4 million.
F-29
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
1984 WARRANTS: The fair value of the 1984 Warrants was $3.6 million as of
December 31, 1992 based on the difference between the market value of the
Company's Common Stock as of December 31, 1992 and the exercise price, $14.50
and $11.20, respectively, times the number of warrants outstanding.
LOAN SERVICING RIGHTS: The Company serviced $97.6 million of residential real
estate loans for nonaffiliates as of December 31, 1992. The fair value for
these rights, $976,000 as of December 31, 1992, is an approximation of current
market value based on estimation techniques prevalent in the mortgage banking
industry.
F-30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Boulevard Bancorp, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Boulevard Bancorp, Inc. and its subsidiaries at December 31, 1992 and 1991,
and the results of their operations and their cash flows for each of the three
years ended December 31, 1992, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As discussed in Note 2 to the financial statements, the Company changed its
method of accounting for income taxes in 1992.
Price Waterhouse
Chicago, Illinois
January 21, 1993
F-31
<PAGE>
BOULEVARD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1993 1992
------------- ------------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks............................. $ 79,511 $ 82,102
Securities:
Investments--
U.S. government agency mortgage-backed
securities (market value $220,010 and $187,476,
respectively).................................. 219,050 187,376
Other investment securities (market value
$439,495 and $234,757, respectively)........... 435,143 234,171
Available-for-sale--
U.S. government agency mortgage-backed
securities (market value $172,653 and $115,245,
respectively).................................. 172,028 114,122
---------- ----------
Total securities.............................. 826,221 535,669
Federal funds sold.................................. 6,125 32,350
Loans (including loans available-for-sale of $19,197
as of September 30, 1993).......................... 674,580 838,426
Less--Allowance for possible loan losses............ 20,339 24,151
---------- ----------
Net loans......................................... 654,241 814,275
Premises and equipment, net......................... 22,543 22,664
Other real estate................................... 13,840 17,798
Other assets........................................ 65,093 59,149
---------- ----------
Total assets.................................. $1,667,574 $1,564,007
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits..................... $ 217,225 $ 246,076
Interest bearing deposits......................... 978,440 1,021,045
---------- ----------
Total deposits................................ 1,195,665 1,267,121
Notes payable and other short-term borrowings....... 250,434 161,595
Other liabilities................................... 98,938 17,940
Subordinated debentures............................. 11,513 11,203
Other long-term debt................................ 2,701 2,910
---------- ----------
Total liabilities............................. 1,559,251 1,460,769
Non-redeemable preferred stock, Class D, $100 par
value, 400,000 shares authorized:
Series 1--100,000 shares issued and outstanding... 10,000 10,000
Common stock--$.04 par value; 20,000,000 shares
authorized and 7,195,961 and 7,137,389 shares
issued and outstanding, respectively............... 288 285
Additional paid-in capital.......................... 41,719 40,972
Retained earnings................................... 56,668 52,541
Unearned compensation applicable to stock awards.... (352) (560)
---------- ----------
Total non-redeemable preferred stock and
common shareholders' equity.................. 108,323 103,238
---------- ----------
Total liabilities and shareholders' equity.... $1,667,574 $1,564,007
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-32
<PAGE>
BOULEVARD BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1993 1992 1993 1992
--------- --------- --------- ---------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans.......... $ 14,037 $ 19,186 $ 45,569 $ 59,037
Interest on securities.............. 9,240 7,142 23,174 21,256
Income on federal funds sold........ 144 397 525 1,306
--------- --------- --------- ---------
Total interest income............. 23,421 26,725 69,268 81,599
--------- --------- --------- ---------
Interest Expense:
Interest on deposits................ 8,626 11,165 25,771 35,360
Interest on short-term borrowings... 1,513 703 3,898 2,813
Interest on long-term debt.......... 477 434 1,425 1,399
--------- --------- --------- ---------
Total interest expense............ 10,616 12,302 31,094 39,572
--------- --------- --------- ---------
Net interest income................... 12,805 14,423 38,174 42,027
Provision for possible loan losses.... 300 994 1,810 4,668
--------- --------- --------- ---------
Net interest income after provision
for possible loan losses............. 12,505 13,429 36,364 37,359
--------- --------- --------- ---------
Other Operating Income:
Trust department income............. 1,931 1,771 5,610 5,162
Service charges on deposit accounts. 1,793 1,478 5,108 4,301
Security gains...................... 257 786 2,395
Other income........................ 1,725 1,381 5,951 3,746
--------- --------- --------- ---------
Total other operating income...... 5,449 4,887 17,455 15,604
--------- --------- --------- ---------
Other Operating Expenses:
Salaries and employee benefits...... 6,591 6,983 20,845 21,116
Net occupancy expense............... 1,585 1,525 4,679 4,483
Equipment expenses.................. 873 865 2,564 2,526
Other expenses...................... 6,274 6,618 18,419 19,935
--------- --------- --------- ---------
Total other operating expenses.... 15,323 15,991 46,507 48,060
--------- --------- --------- ---------
Income before income taxes............ 2,631 2,325 7,312 4,903
Income taxes.......................... 647 797 1,927 1,332
--------- --------- --------- ---------
Income before cumulative effect of
accounting change.................... 1,984 1,528 5,385 3,571
--------- --------- --------- ---------
Cumulative effect of change in method
of accounting for income taxes....... (1,826)
--------- --------- --------- ---------
Net Income............................ $ 1,984 $ 1,528 $ 5,385 $ 1,745
========= ========= ========= =========
Per Common Share Data:
Income before cumulative effect of
accounting change.................. $ 0.24 $ 0.19 $ 0.65 $ 0.45
Cumulative effect of change in
method of accounting for income
taxes.............................. (0.22)
--------- --------- --------- ---------
Net Income.......................... $ 0.24 $ 0.19 $ 0.65 $ 0.23
========= ========= ========= =========
Cash dividends paid................. $ 0.05 -- $ 0.05 --
========= ========= ========= =========
Average number of common and common
equivalent shares outstanding........ 8,381,516 8,271,202 8,331,996 8,259,995
</TABLE>
The accompanying notes are an integral part of these statements.
F-33
<PAGE>
BOULEVARD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1993 1992
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 5,385 $ 1,745
Adjustments to reconcile net income to net cash:
Provision for possible loan losses........................ 1,810 4,668
Depreciation and amortization............................. 2,862 3,399
(Increase) decrease in interest receivable................ (1,074) 794
Decrease in interest payable.............................. (717) (2,135)
Provision (benefit) for deferred income taxes............. 450 (253)
Gain on sale of loans..................................... (2,361) (905)
Loss on other real estate................................. 39 1,942
Gain on sale of securities................................ (786) (2,395)
Cumulative effect of accounting change.................... 1,826
Other-net................................................. 2,671 920
-------- --------
Net cash flows provided by operating activities......... 8,279 9,606
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in federal funds sold.......................... 26,225 47,895
Purchases of securities..................................... (449,128) (334,718)
Proceeds from maturity of securities........................ 170,048 85,612
Proceeds from sale of securities............................ 68,379 116,027
Acquisition of loans previously sold........................ (16,566)
Proceeds from sale of loans................................. 186,056 40,916
Net (increase) decrease in loans............................ (33,618) 26,481
Additions to premises and equipment......................... (2,036) (894)
Proceeds from sale of equipment............................. 229
Proceeds from sale of other real estate..................... 6,220 8,577
-------- --------
Net cash flows provided (used) by investing activities.. (27,625) (26,670)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in non-interest bearing deposits............... (28,851) (3,989)
Net (decrease) increase in interest bearing deposits........ (42,605) 13,874
Net increase (decrease) in notes payable and other short-
term borrowings............................................ 88,839 (2,717)
Principal payments on other long-term debt.................. (209) (193)
Issuance of common stock.................................... 614 8
Preferred dividends paid.................................... (675) (675)
Common dividends paid....................................... (358)
-------- --------
Net cash flows provided by financing activities......... 16,755 6,308
-------- --------
NET DECREASE IN CASH AND DUE FROM BANKS..................... (2,591) (10,756)
Cash and due from banks at beginning of period.............. 82,102 77,096
-------- --------
Cash and due from banks at end of period.................... $ 79,511 $ 66,340
======== ========
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 31,365 $ 41,314
Income taxes paid......................................... $ 1,600 $ 370
</TABLE>
The accompanying notes are an integral part of these statements.
F-34
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of September 30, 1993, the consolidated
statements of operations for the three months and nine months ended September
30, 1993 and 1992, and the consolidated statements of cash flows for the nine
months ended September 30, 1993 and 1992 have been prepared by Boulevard
Bancorp, Inc. (the "Company") and are unaudited. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary for
a fair presentation of the financial position, results of operations and cash
flows as of September 30, 1993 and 1992, and the periods then ended, have been
made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these consolidated financial statements
be read in conjunction with the financial statements and notes thereto for the
fiscal year ended December 31, 1992, included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1992 (File No. 0-14936). The results
of operations for the three months or nine months ended September 30, 1993 are
not necessarily indicative of the operating results for the full year.
2. PENDING ACQUISITION
On September 29, 1993, Boulevard Bancorp entered into a Merger Agreement and
Plan of Reorganization ("Merger Agreement") to be acquired by First Bank
System, Inc. ("FBS"), a regional bank holding company based in Minneapolis (the
"Pending Acquisition"). FBS will issue .8132 shares of FBS common stock for
each share of the Company's common stock outstanding. The acquisition, which is
subject to shareholder and regulatory approvals, is expected to close to during
the second quarter of 1994.
3. LOANS
Loans classified by type are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1993 1992
------------- ------------
($ IN THOUSANDS)
<S> <C> <C>
Real Estate--
Mortgage........................................ $260,687 $317,854
Development and construction.................... 32,153 33,402
-------- --------
Total......................................... 292,840 351,256
-------- --------
Commercial, industrial and financial.............. 262,242 292,865
Consumer.......................................... 102,605 210,856
Available-for-sale................................ 19,197 --
-------- --------
Total......................................... 676,884 854,977
Less unearned discount............................ 2,304 16,551
-------- --------
Total loans................................... $674,580 $838,426
======== ========
</TABLE>
Loans available-for-sale include $19.2 million of residential real estate
mortgage loans stated at the lower of aggregate cost or market value as of
September 30, 1993. The estimated market value for these residential real
estate mortgage loans exceeded cost as of September 30,1993.
During May 1993, the Company sold and securitized $106.1 million in consumer
loans recognizing a gain of $1.4 million. In addition, $84.0 million in
residential real estate mortgage loans were sold during the first nine months
of 1993 at a gain of $961,000.
F-35
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. ALLOWANCE FOR POSSIBLE LOAN LOSSES
The following table summarizes the changes in the allowance for possible loan
losses:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1993 1992
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
Balance at beginning of year............................. $ 24,151 $ 29,333
Add (deduct):
Provision for possible loan losses..................... 1,810 4,668
Allowance applicable to loans sold..................... (500)
Loans charged-off...................................... (11,410) (12,275)
Recoveries............................................. 6,288 3,466
-------- --------
Net loan charge-offs................................. (5,122) (8,809)
-------- --------
Balance at end of period................................. $ 20,339 $ 25,192
======== ========
</TABLE>
5. NOTES PAYABLE
During May 1993, the Company entered into a $10.0 million unsecured revolving
line of credit agreement that expires in May 1994. Borrowings under the line
bear interest at the lender's prime rate plus an increment ranging from 0% to
2% based on the Company's level of non-performing assets, as defined.
Initially, $8.0 million was borrowed to retire notes payable to Miami
Corporation. As of September 30, 1993, borrowings under the line of credit
amounted to $6.0 million and the interest rate was 7%. Covenants contained in
this agreement provide for the maintenance of certain ratios and certain
limitations related to the redemption of preferred stock and payment of
dividends. As of September 30, 1993 the Company was in compliance with all
covenants.
During October 1993, the Company reduced the amount outstanding under the
line of credit to $5.0 million and the rate declined to 6%.
6. PREFERRED STOCK
The Class D non-redeemable $100 par value, Preferred Stock, Series 1, bears
cumulative annual dividends at a rate of 9% and is callable at any time by the
Company at par value plus unpaid accrued dividends. The Company expects to call
all the outstanding Preferred Stock in conjunction with the closing of the
Pending Acquisition.
Additionally, the Company has the following classes of non-redeemable
preferred stock, $100 par value, authorized but unissued:
Class A--2,000 shares
Class B--20,000 shares
Class C--500 shares
The preferences for these shares will be established when the shares are
issued.
7. WARRANTS AND EQUITY PARTICIPATION AND DIVIDEND REINVESTMENT PLANS
1984 Warrants
The 1984 Warrants to purchase 1,172,000 shares of common stock were issued on
August 31, 1984 in conjunction with the issuance of 8% Subordinated Debentures.
Subsequent to issuance, the 1984 Warrants and Debentures are separately
transferable. The 1984 Warrants became exercisable on November 1, 1989 and are
exercisable through October 31, 1994 to purchase shares of the Company's Common
Stock at the
F-36
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
price of $11.20 per share, subject to certain antidilution provisions. Warrants
to purchase 45,250 shares were exercised during the first nine months of 1993
and warrants to purchase 1,060,750 and 1,106,000 shares were outstanding and
exercisable as of September 30, 1993 and December 31, 1992, respectively.
1988 Equity Participation Plan
The 1988 Equity Participation Plan provides for awards to key officers and
employees of the Company and its subsidiaries up to a maximum of 600,000 shares
of the Company's Common Stock in the form of stock and stock equivalent awards,
stock options, stock appreciation rights and stock depreciation rights.
Stock options were granted from 1988 through 1991 and during 1993, which are
exercisable after three years of service, except in the case of death or
permanent disability, and expire ten years after the date of grant. The
exercise price of the options is the fair market value of the stock on the date
of grant. The following table summarizes activity in stock options under the
1988 Equity Participation Plan for the nine months ended September 30, 1993:
<TABLE>
<CAPTION>
SHARES OPTION PRICE PER SHARE
------- ----------------------
<S> <C> <C>
December 31, 1992 Balance.................... 467,150 $12 1/4-$24 5/8
Granted.................................... 89,598 $16 9/16
Exercised.................................. (600) $20 1/8-$22 1/4
Cancelled.................................. (32,925) $12 1/4-$22 1/4
-------
September 30, 1993 Balance................... 523,223 $12 1/4-$24 5/8
=======
</TABLE>
Options for 139,950 shares at exercise prices of $16 to $20 3/16 became
exercisable during the nine months ended September 30, 1993 and options for
19,325 shares of the exercisable options, at exercise prices of $20 1/8 to $22
1/4, were cancelled. As of September 30, 1993, options for 232,525 shares at
exercise prices of $16 to $24 5/8 were exercisable. The cancelled options for
32,925 shares were returned to the pool and are available for future awards.
As of September 30, 1993, 54,577 shares of Common Stock issued as stock
awards during 1992, were outstanding and not vested. The vesting date is
January 10, 1995 for 8,000 shares, May 11, 1995 for 1,000 shares, and March 20,
2002 for 45,577 shares. The fair market value of the Common Stock on the dates
of the awards was $13 1/4 for the 8,000 shares, $14 1/2 for the 1,000 shares,
and $14 3/8 for the 45,577 shares. The vesting date for the 45,577 shares may
be accelerated if the market value of the Common Stock equals or exceeds $18.00
per share before March 20, 2002. The earliest the shares can vest is March 20,
1994 for 15,191 shares, March 20, 1995 for 15,195 shares and March 20, 1996 for
15,191 shares.
The value of the stock awards on the date of grant is considered compensation
to be earned over the vesting period. Aggregate compensation applicable to
stock awards is amortized to expense ($208,000 for the first nine months of
1993) from the date of grant to the earliest expected vesting date. Unearned
compensation was $352,000 as of September 30, 1993 and is shown as a reduction
of shareholders' equity in the consolidated balance sheet.
Shares available for future awards totalled 19,400 and 76,073 as of September
30, 1993 and December 31, 1992, respectively.
Dividend Reinvestment and Stock Purchase Plan
During 1992, the Company established a Dividend Reinvestment and Stock
Purchase Plan ("DRIP") which provides that registered shareholders may acquire
additional shares of common stock by reinvesting their dividends or by making
optional cash payments of $50 to $5,000 per month. The Company has
F-37
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
registered with the Securities and Exchange Commission 100,000 shares of the
Company's Common Stock for issuance under the DRIP. The purchase price of the
shares is the average market price of the shares for the last 10 trading days
before the investment date subject to a minimum or threshold price established
each month for the investment of optional cash payments. The Company eliminated
a 5% discount on the purchase of shares effective November 1, 1993. The Company
has reserved the right to suspend, terminate or amend the DRIP at any time.
During the first nine months of 1993, 12,722 shares were issued and as of
September 30, 1993, 85,873 shares were reserved for issuance under the DRIP.
As of September 30, 1993 and December 31, 1992, 1,689,246 shares and
1,747,818 shares, respectively, of Common Stock were reserved for issuance upon
exercise of the 1984 Warrants and outstanding stock options, for future awards
under the 1988 Equity Participation Plan and for activity in the DRIP.
8. IMPACT OF PENDING ACQUISITION ON 1984 WARRANTS, STOCK OPTIONS AND STOCK
AWARDS
Based on the terms of the Merger Agreement and in accordance with the terms
of the 1984 Warrants, as of the closing date of the Pending Acquisition, the
1984 Warrants will be deemed modified to reflect the .8132 exchange rate and to
provide that holders thereof shall receive upon exercise shares of FBS common
stock.
Based on the terms of the Merger Agreement and in accordance with the
provisions of the 1988 Equity Participation Plan, as of the closing of the
Pending Acquisition all outstanding stock options shall, with the consent of
the option holder, be assumed by FBS and converted into fully vested,
immediately exercisable options to purchase FBS common stock using the .8132
exchange rate. Any options not so assumed will be terminated.
Those shares issued as stock awards and not fully vested as of the closing
date shall be converted into fully vested shares of FBS common stock based on
the .8132 exchange rate.
9. COMPUTATION OF EARNINGS PER SHARE
Earnings per common share were computed by dividing net income, increased for
interest expense, net of tax, on the outstanding debentures and decreased for
dividends on Class D Preferred Stock, by the weighted average number of shares
of common stock and common stock equivalents outstanding during the period. The
number of common stock equivalents include the shares issuable on the exercise
of the 1984 Warrants at an exercise price of $11.20 per share (it is assumed
that the warrant holders will tender the outstanding debentures in payment of
the exercise price) and on the exercise of stock options based on treasury
stock method.
10. OTHER EXPENSES
Other Expenses are comprised of the following:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
30,
---------------
1993 1992
------- -------
($ IN
THOUSANDS)
<S> <C> <C>
Data processing............................................. $ 3,975 $ 3,477
Legal....................................................... 952 1,540
Other real estate........................................... 1,972 3,033
FDIC insurance.............................................. 2,418 2,199
Amortization of goodwill and core deposit intangibles....... 671 1,165
All other................................................... 8,431 8,521
------- -------
Total other expenses...................................... $18,419 $19,935
======= =======
</TABLE>
F-38
<PAGE>
BOULEVARD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
11. PENDING LITIGATION
In March, 1993, Boulevard Bank was sued in the United States District Court
for the Northern District of Illinois by Jackson National Life Insurance
Company ("Jackson") (Jackson National Life Insurance Co. v. Gofen and
Glossberg, Inc., et al., No. 93 C 1539). Boulevard held certain debentures with
a face value of $6.5 million in a custodial account for the benefit of Jackson.
The successor in interest to the issuer of the debentures became insolvent and
Jackson sued Boulevard under alternate theories of breach of the custodial
agreement and detrimental reliance alleging that Boulevard failed to advise
Jackson of an offer to exchange the debentures for other securities prior to
the insolvency of the issuer. Jackson also sued Gofen and Glossberg, its
investment advisor. Jackson seeks money damages. Management believes that the
ultimate resolution of the suit will not have a material adverse effect on the
Company's financial position or its results of operations.
F-39
<PAGE>
APPENDIX A
MERGER AGREEMENT AND PLAN OF REORGANIZATION
MERGER AGREEMENT AND PLAN OF REORGANIZATION dated September 29, 1993
(hereinafter called the "Merger Agreement"), by and among BOULEVARD BANCORP,
INC., a Delaware corporation (hereinafter called "Boulevard"), FIRST BANK
SYSTEM, INC., a Delaware corporation (hereinafter called "Parent"), and BBI
ACQUISITION CORP., a Delaware corporation and wholly-owned subsidiary of Parent
(hereinafter called "Newco").
INTRODUCTION
Boulevard owns, directly and indirectly, all of the issued and outstanding
shares of capital stock of Boulevard Bank National Association, First National
Bank of Des Plaines, National Security Bank of Chicago and Citizens National
Bank of Downers Grove (collectively, the "Boulevard Banks") and of Boulevard
Technical Services, Inc. and the other corporations listed on Exhibit A hereto
(the "Companies") (the Boulevard Banks and the Companies are hereinafter
referred to collectively as the "Subsidiaries" and each, sometimes, as a
"Subsidiary"); and
Newco has been organized by Parent for the sole purpose of consummating a
merger transaction with Boulevard; and
The respective Boards of Directors of Boulevard, Newco and Parent have each
approved this Merger Agreement and the consummation of the transactions
contemplated hereby and have approved the execution and delivery of this Merger
Agreement which provides for the merger of Newco with and into Boulevard upon
the terms and conditions of this Merger Agreement (the "Merger"); and
Boulevard will be the surviving corporation of the Merger, and from and after
the time the Merger shall become effective as set forth in Section 5 of this
Merger Agreement, and as and when required by this Merger Agreement, Parent
will issue shares of its common stock, $1.25 par value ("Parent Common"), which
shall be exchanged for all of the issued and outstanding shares of common stock
of Boulevard; and
It is understood by each of the parties hereto that Parent seeks, as a result
of the Merger, to acquire Boulevard, the Boulevard Banks and the Companies and
all of their respective assets and liabilities, subject to the terms and
conditions of this Merger Agreement, and all parties to this Merger Agreement
will exert their best efforts to obtain such regulatory approvals and to effect
such other actions as are necessary or appropriate to consummate the Merger.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained in this Merger Agreement, the parties agree
as follows:
1. Definitions.
"20-Day Calculation Period" shall have the meaning given such term in
Section 8(h) hereof.
"1933 Act" shall have the meaning given such term in Section 10(g)
hereof.
"1934 Act" shall have the meaning given such term in Section 10(g)
hereof.
"Bank Holding Company Act" shall mean Section 1841 et. seq. of Title
12, United States Code.
"Blue Sky Laws" shall have the meaning given such term in Section
12(d) hereof.
"Board" shall have the meaning given such term in Section 10(b)
hereof.
"Boulevard" shall have the meaning given such term in the preamble
hereto.
"Boulevard Banks" shall have the meaning given such term in the
recitals hereto.
A-1
<PAGE>
"Boulevard Common" shall mean Boulevard's common stock, $.04 par
value per share.
"Boulevard Preferred" shall mean Boulevard's Class D Series 1
Preferred Stock.
"Boulevard Reports" shall have the meaning given such term in Section
14(q) hereof.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"Companies" shall have the meaning given such term in the recitals
hereto.
"Delaware Law" shall mean the Delaware General Corporation Law.
"Effective Date" shall have the meaning given such term in Section 5
hereof.
"Environmental Laws" shall mean any federal, state, local or
municipal statute, ordinance or regulation, or order, ruling or other
decision of any court, administrative agency or other governmental
authority pertaining to the release of hazardous substances (as defined
in CERCLA) into the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1971, as amended.
"Exchange" shall mean the New York Stock Exchange.
"Exchange Agent" shall mean an agent designated by Parent with
authority to act in Parent's behalf and distribute the Parent Common,
the Replacement Options, and any monies to Boulevard shareholders in
accordance with the terms of this Merger Agreement.
"Exchange Rate" shall have the meaning given such term in Section
8(a) hereof.
"FDIA" shall mean the Federal Deposit Insurance Act.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Final Price" shall have the meaning given such term in Section 8(h).
"Final Index Price" shall have the meaning given such term in Section
8(h).
"HSR Act" shall have the meaning given such term in Section 12(d)
hereof.
"Indemnified Party" and "Indemnified Parties" shall have the meanings
given such terms in Section 20(a) hereof.
"Index Group" shall have the meaning given such term in Section 8(h)
hereof.
"Initial Index Price" shall have the meaning given such term in
Section 8(h) hereof.
"Material Adverse Effect" shall mean a material adverse change in the
business, financial condition or operations of Parent and its
subsidiaries, or Boulevard and its Subsidiaries, as the case may be,
taken as a whole, or on their ability, respectively, to consummate the
transactions contemplated hereby.
"Merger" shall have the meaning given such term in the recitals
hereto.
"Newco" shall have the meaning given such term in the preamble
hereto.
"OCC" shall mean the Office of the Comptroller of the Currency.
"Old Warrants" shall mean those certain warrants to purchase the
common stock of Boulevard originally issued in connection with
Boulevard's acquisition of the outstanding capital stock of the First
National Bank of Des Plaines.
"Options" shall mean those certain stock options to acquire the
common stock of Boulevard issued pursuant to Boulevard's 1988 Equity
Participation Plan.
"Parent" shall have the meaning given such term in the preamble
hereto.
"Parent Common" shall have the meaning given such term in the
recitals hereto.
"Parent Common Average Closing Price" shall have the meaning given
such term in Section 8(h) hereof.
A-2
<PAGE>
"Parent Preferred" shall have the meaning given such term in Section
12(b) hereof.
"Parent Reports" shall have the meaning given such term in Section
12(j) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Proceeding(s)" shall have the meaning given such term in Section
20(a) hereof.
"Proxy Statement" shall have the meaning given such term in Section
10(d) hereof.
"Regulatory Agencies" shall have the meaning given such term in
Section 12(k) hereof.
"Regulatory Reports" shall have the meaning given such term in
Section 14(s) hereof.
"Replacement Options" shall have the meaning given such term in
Section 8(f) hereof.
"Series 1991A Preferred" shall have the meaning given such terms in
Section 12(b) hereof.
"Significant Decline" shall have the meaning given such term in
Section 8(h) hereof.
"State Regulator" shall have the meaning given such term in Section
12(k) hereof.
"Subsidiary" and "Subsidiaries" shall have the meanings given such
terms in the recitals hereto.
"Surviving Corporation" shall have the meaning given such term in
Section 3 hereof.
"Transactions and Events" shall have the meaning given such term in
Section 20(a) hereof.
2. The Merger. Subject to the terms and conditions of this Merger
Agreement, Newco shall be merged with and into Boulevard pursuant to and in
accordance with Section 251 of the Delaware Law.
3. Name. The name of the surviving corporation (hereinafter called the
"Surviving Corporation" whenever reference is made to it) as of the
Effective Date shall be "Boulevard Bancorp, Inc."
4. Business. The business of the Surviving Corporation shall be that of a
bank holding company. The Surviving Corporation shall exist by virtue of,
and be governed by the laws of the State of Delaware and shall have its
principal office located at 410 North Michigan Avenue, Chicago, Illinois
60611.
5. Effective Date. The Merger shall become effective upon the filing of
appropriate articles of merger and other appropriate documents with the
Delaware Secretary of State as provided in Sections 251 and 103 and other
applicable sections of the Delaware Law. The date on which the Merger shall
become effective is referred to herein as the "Effective Date."
The Certificate of Incorporation of Newco in effect as of the Effective
Date shall be the Certificate of Incorporation of the Surviving Corporation
(except that upon filing of a articles of merger relating to the Merger
with the Secretary of State of Delaware on the Effective Date the
Certificate of Incorporation shall be amended to change the name of the
Surviving Corporation to "Boulevard Bancorp, Inc.), and the By-Laws of
Newco in effect as of the Effective Date shall be the By-Laws of the
Surviving Corporation.
6. Effect of Merger. At the Effective Date, the separate corporate
existence of Boulevard and Newco, respectively, shall, as provided in
applicable provisions of the Delaware Law, be merged into and continued in
Boulevard as the Surviving Corporation, which shall be deemed to be the
same corporation as Boulevard and Newco. All rights, franchises and
interests of Boulevard and Newco, respectively, in and to every type of
property, real, personal and mixed, and chooses in action, shall be
transferred to and vested in Boulevard as the Surviving Corporation by
virtue of the Merger without any deed or other transfer in the same manner
and to the same extent as such rights, franchises and interests were held
or enjoyed by Boulevard and Newco, respectively, at the Effective Date, as
provided in applicable provisions of the Delaware Law.
7. Liabilities upon Merger. The Surviving Corporation shall be
responsible for all of the liabilities of every kind and description of
Boulevard and Newco existing as of the Effective Date.
A-3
<PAGE>
8. Conversion of Shares.
(a) At the Effective Date:
(i) Each share of Boulevard Common that is issued and outstanding
immediately prior to the Effective Date shall thereupon and without
further action be converted into .8132 shares of Parent Common (the
"Exchange Rate"). The Exchange Rate shall be subject to (i) the
antidilution adjustment provisions of Section 8(i) of this Merger
Agreement, and (ii) the provisions set forth in Section 8(c) with
respect to fractional shares.
(ii) The 1,000 shares of Common Stock of Newco issued and
outstanding immediately prior to the Effective Date shall, thereupon
and without further notice, continue to be issued and outstanding
shares of common stock of the Surviving Corporation.
(b) Boulevard's shareholders of record at the Effective Date, for the
shares of Boulevard Common then held by them, respectively, shall be
allocated and be entitled to receive (upon surrender of certificates
formerly representing shares of Boulevard Common for cancellation)
certificates for an aggregate number of shares of Parent Common as
shall be equal to the number of shares of Boulevard Common outstanding
immediately prior to the Effective Date multiplied by the Exchange
Rate.
(c) No certificate for fractional shares of Parent Common will be
issued by Parent in connection with the conversion contemplated by the
Merger, but in lieu thereof, any holder of Boulevard Common shall, upon
surrender of the certificate or certificates representing such
Boulevard Common, be paid cash without interest by Parent for such
fractional share on the basis of the closing price of the Parent Common
on the Exchange on the third day immediately preceding the day on which
the Effective Date occurs during which shares of Parent Common are
traded on the Exchange as reported in The Wall Street Journal.
(d) As soon as practicable after the Effective Date, and subject to
the provisions set forth above relating to fractional shares, Parent
will, or will cause an Exchange Agent (to be designated by Parent), to
distribute to the former holders of Boulevard Common (or their
respective designees) in exchange for and upon surrender for
cancellation by such holders of a certificate or certificates formerly
representing shares of Boulevard Common, the certificate(s) for shares
of Parent Common in accordance with the Exchange Rate. Each certificate
formerly representing Boulevard Common shall be deemed for all purposes
to evidence the ownership of the number of shares of Parent Common into
which such shares have been converted pursuant to the Exchange Rate
except, however, that, until such surrender of a holder's certificates
or certificates formerly representing shares of Boulevard Common, the
holder thereof shall not be entitled to receive any dividend or other
payment or distribution payable to holders of Parent Common. Upon such
surrender (or, in lieu of surrender, other provisions reasonably
satisfactory to Parent as are made as set forth in the next following
paragraph), there shall be paid to the person entitled thereto the
aggregate amount of dividends or other payments or distributions (in
each case without interest) which became payable after the Effective
Date, to the extent not previously paid to such person, on the whole
shares of Parent Common represented by the certificates issued upon
such surrender and exchange or in accordance with such other
provisions, as the case may be. For a period of sixty (60) days
following the Effective Date, former shareholders of Boulevard shall be
entitled to vote at any meeting of Parent shareholders the number of
whole shares of Parent Common into which their respective shares of
Boulevard Common are converted, regardless of whether such holders have
exchanged their certificates representing such Boulevard Common for
certificates representing Parent Common in accordance with this
subparagraph (d). In addition, after the Effective Date the holders of
certificates formerly representing shares of Boulevard Common shall
cease to have rights with respect to such shares, and, except as
aforesaid, their sole rights shall be to exchange said certificates for
shares of Parent Common in accordance with this Merger Agreement.
A-4
<PAGE>
Certificates formerly representing shares of Boulevard Common
surrendered for cancellation by each shareholder entitled to exchange
shares of Boulevard Common for shares of Parent Common by reason of the
Merger shall be accompanied by such appropriate, executed letter of
transmittal as Parent may reasonably require; provided, however, that
if there be delivered to Parent by any person who is unable to produce
any such certificate formerly representing shares of Boulevard Common
for surrender: (i) evidence to the reasonable satisfaction of Parent
that any such certificate has been lost, wrongfully taken or destroyed,
(ii) such security or indemnity as reasonably may be requested by
Parent to save it harmless, and (iii) evidence to the reasonable
satisfaction of Parent that such person is the owner of the Shares
theretofore represented by each certificate and to receive shares of
Parent Common pursuant to this Merger Agreement, then Parent, in the
absence of actual notice to it that any shares theretofore represented
by any such certificate have been acquired by a bona fide purchaser,
shall deliver to such person the certificate(s) representing shares of
Parent Common (and any fractional share payment) which such person
would have been entitled to receive upon surrender of each such lost,
wrongfully taken or destroyed certificate representing shares of
Boulevard Common.
(e) As of the Effective Date, the Old Warrants shall, in accordance
with their terms, including, without limitation, Section 4(a)(1) of the
Old Warrant, be deemed modified so as to provide that holders of the
Old Warrants shall receive upon exercise shares of Parent Common.
(f) As of June 30, 1993, there are 529,723 outstanding and
unexercised Options. Upon the Effective Date, all outstanding
unexercised Options shall, with the consent of the optionholder, be
assumed by Parent and converted into options to purchase that number of
shares of Parent Common equal to the number of shares of Boulevard
Common subject to such unexercised options immediately prior to the
Effective Date multiplied by the Exchange Rate (the "Replacement
Options"). The exercise price of such options for shares of Parent
Common shall be the exercise price applicable to the options for shares
of Boulevard Common divided by the Exchange Rate. The other terms and
conditions of the Options shall be the same as those presently in
effect, except that the Replacement Options shall be (A) fully vested
and immediately exercisable, and (B) convertible into replacement
options to purchase securities or receive property of each successor to
Parent in the event of a merger or other reorganization of the Parent
(and its successors) as the holders of Parent Common exchanged their
stock for securities or property of the successor(s) to Parent, and
converting the exercise price(s) by the exchange rate(s) received by
the holders of Parent Common. Any Options not so assumed with the
consent of the optionholder shall be terminated.
(g) As of June 30, 1993, there are 55,577 shares outstanding of
Boulevard Common issued under the Boulevard Bancorp, Inc. 1988 Equity
Participation Plan as to which the holders are not fully vested in
their respective rights of ownership and transferability. These shares
of Boulevard Common shall be converted into fully vested shares of
Parent Common as provided in paragraph 8(a) hereof, and the share
certificates shall bear no legends or restrictions on the holder's
ownership or transfer rights (other than as specified in Exhibit B
hereto with respect to shares of Parent Common to be received by
affiliates of Boulevard).
(h) This Merger Agreement may be abandoned and terminated by
Boulevard prior to the Effective Date, whether before or after any
shareholder action, in the event of a Significant Decline (as defined
below) in the average closing price of Parent Common ("Parent Common
Average Closing Price") as reported on the Exchange for the twenty (20)
consecutive trading days commencing on the first business day following
the date the Board of Governors of the Federal Reserve System issues an
order approving consummation of the Merger (the "20-Day Calculation
Period"). A "Significant Decline" shall be deemed to have occurred if
(i) the Parent Common Average Closing Price is less than 85 percent of
the closing price for Parent Common on the date of execution hereof as
reported on the Exchange, and (ii) the number obtained by dividing the
Parent Company Average Closing Price by the closing price of Parent
Common as reported on the Exchange on the date of execution hereof is
less than the number obtained by dividing the Final
A-5
<PAGE>
Index Price (as defined below) by the Initial Index Price (as defined
below) and subtracting .15 from such quotient. For purposes of this
subparagraph (h)(ii):
(1) The "Index Group" shall mean all of those companies listed on
Schedule 8(h), the common stock of which is publicly traded and as
to which there is no pending publicly announced proposal at any time
during the 20-Day Calculation Period for such company to be acquired
or to acquire another company in exchange for its stock. In the
event that any such company or companies are so removed from the
Index Group, the weights attributed to the remaining companies shall
be adjusted proportionately.
(2) The "Initial Index Price" shall mean the weighted average
(weighted in accordance with the factors listed on Schedule 8(h)) of
the closing prices on the trading day immediately preceding the
public announcement of this Agreement of the companies comprising
the Index Group.
(3) The "Final Price" of any company belonging to the Index Group
shall mean the average of the daily closing sale prices of a share
of common stock of such company, as reported in the consolidated
transaction reporting system for the market or exchange on which
such common stock is principally traded, during the 20-Day
Calculation Period.
(4) The "Final Index Price" shall mean the weighted average
(weighted in accordance with the factors listed on Schedule 8(h)) of
the Final Prices for all of the companies comprising the Index
Group.
(5) If Parent or any company belonging to the Index Group declares
a stock dividend or effects a reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction
between the date of this Agreement and the end of the 20-Day
Calculation Period, the closing prices for the common stock of such
company shall be appropriately adjusted for the purposes of the
definitions above so as to be comparable to the price on the date of
this Agreement.
(i) If prior to the Effective Date, (i) Parent shall declare a stock
dividend or stock distribution upon or subdivide, split up, reclassify,
recapitalize or combine Parent Common or declare a dividend, or make a
distribution on Parent Common in any security convertible into Parent
Common, or (ii) Parent shall take any other action having a similar
effect, then appropriate adjustment or adjustments will be made in the
Exchange Rate.
(j) The Boulevard Preferred shall be redeemed by Boulevard prior to
the Effective Date at a price equal to par plus any accrued and unpaid
dividends in accordance with the terms of the Boulevard Preferred.
9. Board of Directors and Employees; Best Efforts.
(a) The directors of Newco immediately prior to the Effective Date
shall serve as the directors of the Surviving Corporation immediately
following the Effective Date, and until the next annual or special
meeting of shareholders at which their respective successors are
elected and qualified. The officers of the Surviving Corporation
immediately following the Effective Date shall be the officers of
Boulevard immediately prior to the Effective Date. The directors,
officers and employees of the Subsidiaries immediately following the
Effective Date shall be the directors, officers and employees of the
respective Subsidiaries immediately before the Effective Date.
(b) Parent and Boulevard will use its best efforts to procure the
requisite corporate and regulatory approvals for the Merger.
10. Undertakings of the Parties. Boulevard, Newco and Parent further
agree as follows:
(a) This Merger Agreement shall be submitted to the shareholders of
Boulevard for approval at a meeting to be called and held in accordance
with the Delaware Law and the Certificate of Incorporation and By-laws
of Boulevard. Such shareholders' meeting will be scheduled to be held
at a time mutually acceptable to Boulevard and Parent approximately
thirty (30) days following
A-6
<PAGE>
the mailing by Boulevard of its proxy statement to its shareholders,
which mailing will promptly follow the effective date of the
registration statement to be filed by Parent with the Securities and
Exchange Commission as provided in Section 10(d). Boulevard and Parent
will cooperate with each other in order to facilitate the preparation,
filing and clearance of the registration statement and the proxy
statement under federal and state securities laws to be used with
respect to such shareholder's meeting and the exchange of shares as
contemplated by this Merger Agreement.
(b) Following the execution of this Merger Agreement, Parent will
promptly prepare and file an application (believed in good faith by
Parent to be substantially complete in form and substance) to the Board
of Governors of the Federal Reserve System (the "Board") under
appropriate provisions of Section 3 of the Bank Holding Company Act,
for prior approval of the proposed acquisition of Boulevard and the
Subsidiaries by Parent and the Merger. Boulevard will furnish Parent
such information, appropriate representations and documents as may be
reasonably requested by Parent in connection therewith. Parent will use
its best efforts to cause such application to be approved by the Board
and to obtain such other regulatory consents and approvals as may be
necessary on the part of Parent or Newco to facilitate the Merger and
will promptly provide Boulevard with copies of all such applications
together with correspondence to or from the Board related thereto.
(c) After receipt of the Board's approval of the Merger and Parent's
acquisition of Boulevard, after the receipt of any other required
regulatory consents or approvals and after the approval of the Merger
by the shareholders of Boulevard, as provided in Section 10(a), the
Merger shall become effective on the Effective Date. The Effective Date
shall be agreed to by the Parent and Boulevard, subject to Section 24
of this Merger Agreement. In no event will the date designated by
Parent as the Effective Date be sooner than the day following the day
on which all approvals of the Board and any other regulatory
authorities have been received and any required waiting periods with
respect thereto have expired, nor will the date designated by Parent as
the Effective Date be later than thirty-one (31) days following the
date on which approvals of the Board and any other regulatory
authorities have been received and any required waiting periods with
respect thereto have expired; provided further, however, that no party
may terminate this Merger Agreement by reason of the provisions of
Section 24(b)(iv) of this Merger Agreement during the period beginning
with the date at which the approvals of the Board and any other
regulatory authorities have been received and any mandatory waiting
periods associated therewith have expired and ending on the 31st day
following such beginning date.
(d) Parent will promptly prepare and file with the Securities and
Exchange Commission and use its best efforts to cause to become
effective as soon as possible, a registration statement, including the
related prospectus and proxy statement referred to in Section 10(a)
above (the "Proxy Statement"), and any required amendments thereto or
supplements to any prospectus contained therein, relating to the
exchange of Parent Common for Boulevard Common contemplated by this
Merger Agreement. Parent shall use its best efforts to have the shares
of Parent Common qualified or exempted from qualification under all
applicable state securities laws and listed for trading on the Exchange
prior to the Effective Date. In the event that a stop order has been
issued, or threatened, by the Securities and Exchange Commission, that
suspends or would suspend the effectiveness of the registration
statement, Parent shall use its best efforts to promptly remove, or
cause not to be issued, any such stop order.
(e) Parent and/or Newco will assume and pay all expenses incident to
the obtaining of the requisite regulatory consents and approvals.
Without limiting the generality of the foregoing, the expenses to be
assumed and paid by Parent and/or Newco shall include (i) all legal and
other expenses and taxes incurred by Newco incident to the consummation
of the Merger contemplated by this Merger Agreement, (ii) all legal and
other expenses incurred by Parent incident to the preparation and
filing of the applications to the Board, and other requests for
regulatory consents and approvals with the appropriate bank regulatory
agencies as set forth in or contemplated by this Merger Agreement, and
(iii) all legal and other expenses, if any, incurred in connection with
the
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registration of Parent Common under federal and state securities laws.
The expenses to be assumed and paid by Parent and/or Newco shall not
include (i) any legal or other expenses incurred by Boulevard in the
negotiation of the Merger, (ii) the examination or review of documents
by Boulevard or its agents for Boulevard's own benefit, in connection
with is own corporate proceedings or (iii) payments to Goldman, Sachs &
Co. for services rendered on Boulevard's behalf. Parent will pay the
expenses of reproducing the Proxy Statement. Boulevard shall be
responsible for its legal and accounting fees associated with the Proxy
Statement, including the expenses and fees of Goldman, Sachs & Co. with
respect to any opinion expressed with respect to the fairness of the
Exchange Rate to the holders of Boulevard Common.
(f) Boulevard, Parent and Newco each will hold, and will cause its
respective officers, directors, employees, consultants, advisors and
agents to hold, in confidence, unless compelled to disclose by judicial
or administrative process or by other requirement of law, including,
but not limited to, the fiduciary duties owed by the Board of Directors
of Boulevard to the shareholders of Boulevard, all confidential
documents and information concerning the parties furnished to any other
party in connection with the transactions contemplated by this Merger
Agreement, except to the extent that such information can be shown to
have been (i) previously known on a non-confidential basis by the
disclosing party; (ii) in the public domain; or (iii) later lawfully
acquired by the disclosing party from sources other than as a result of
the transactions contemplated herein; provided that each party may
disclose such information to its officers, directors, employees,
consultants, advisors and agents in connection with the transactions
contemplated by this Merger Agreement, so long as such persons are
informed of the confidential nature of such information and are
directed to treat such information confidentially in accordance
herewith. Each party's obligation to hold any such information in
confidence shall be satisfied if it exercises the same care with
respect to such information as it would take to preserve the
confidentiality of its own similar information. Subject to the
foregoing and Section 10(i) hereof, each party shall keep confidential
the terms of this Merger Agreement and of the transactions contemplated
hereby except to the extent such information is legally required to be
disclosed. If this Merger Agreement is terminated, such confidence
shall be maintained and each party will, and will use its best efforts
to cause its officers, directors, employees, consultants, advisors and
agents to, destroy or deliver to each other party, upon request, all
documents and other materials, and all copies thereof, obtained by such
party in connection with this Merger Agreement, that are subject to
such confidence. Parent and Newco's obligations under this paragraph
10(f) shall terminate on the Effective Date.
(g) Parent will provide Boulevard with copies of all filings made by
Parent with the Securities and Exchange Commission in connection with
the Merger prior to the Effective Date under the Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and the respective rules and regulations
of the Securities and Exchange Commission thereunder reasonably in
advance of making such filings, will provide Boulevard and its counsel
a reasonable opportunity to comment on such filings and will give due
consideration to any comments of Boulevard and its counsel before
making any such filing. Each of Parent and Boulevard agree to provide
to the other party copies of all reports and other documents filed
within the Securities and Exchange Commission by it between the date
hereof and the Effective Date within five days after the date such
reports or other documents are filed with such Commission.
(h) Parent and Newco will furnish Boulevard all information
concerning Parent and Newco reasonably required by Boulevard in
connection with the preparation of proxy solicitation materials for use
in soliciting proxies in connection with the meeting of Boulevard's
shareholders called for the purpose of voting on the Merger and will
promptly advise Boulevard if Parent determines that any of such
information is or becomes false or misleading in any material respect.
Boulevard will furnish to Parent all information concerning Boulevard
and the Subsidiaries reasonably required by Parent in connection with
Parent's preparation of the registration statement (including the
related prospectus) and any required amendments or supplements thereto,
or in connection with other filings by Parent relating to the
registration of its shares and will promptly advise Parent if
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Boulevard determines that any such information is or becomes false or
misleading in any material respect.
(i) No press release or other public disclosure of matters related to
this Merger Agreement or any of the transactions contemplated hereby
shall be made by Boulevard or Parent unless the other party shall have
provided its prior consent to the form and substance thereof; provided,
however, that nothing herein shall be deemed to prohibit any party
hereto from making any disclosure which its counsel deems necessary or
advisable in order to fulfill such party's disclosure obligations
imposed by law.
(j) Parent has voted all the shares of Newco to approve and adopt the
proposal to merge Newco with Boulevard by means of a written consent of
Parent in its capacity as sole shareholder of Newco which consent was
adopted in lieu of a meeting to approve the Merger and adopt this
Merger Agreement.
(k) For not less than the three-year period immediately following the
Effective Date, Parent shall make available adequate current public
information about itself as that terminology is used in and as required
by Rule 144(c) of the 1933 Act.
(l) Parent will vote any shares of Boulevard Common held by it or any
of its subsidiaries to approve and adopt this Merger Agreement and the
Merger at a meeting of the Boulevard shareholders held to approve the
Merger and adopt this Merger Agreement; provided, however, Parent shall
have no obligation to vote any shares of Boulevard Common held in a
fiduciary account of Parent or any of its subsidiaries.
(m) Parent and Boulevard shall each provide the other with adequate
opportunity to conduct such reviews and examinations of the business,
properties and conditions (financial and otherwise) of the other as
Parent and Boulevard, respectively, shall deem prudent, provided that
such investigations shall not interfere unreasonably with the normal
operations of the party being reviewed.
(n) On or before the 90th day following the Effective Date, Parent
shall prepare and file a registration statement with the Securities and
Exchange Commission in compliance with the 1933 Act for the purpose of
registering the Parent Common which is issuable upon the exercise of
the Replacement Options and the Old Warrants. The Parent shall use its
best efforts to cause such registration statement to become effective,
and to keep such registration statement effective, so long as any of
the Replacement Options or Old Warrants remain outstanding and
unexercised.
(o) Boulevard will furnish to Parent a complete and accurate list as
of the end of each calendar month commencing with September, 1993,
within 25 days after the end of each such calendar month, of (a) all of
each Boulevard Bank's periodic internal credit quality reports prepared
during such calendar month (which reports will be prepared in a manner
consistent with past practices), (b) all loans of each Boulevard Bank
classified as non-accrual, as restructured and as 90 days past due and
as still accruing, (c) all real estate owned by each Boulevard Bank,
including in substance foreclosures and real estate in judgment, (d)
any current repurchase obligations of each Boulevard Bank with respect
to any loans, loan participations or state or municipal obligations or
revenue bonds and (e) any standby letters of credit issued by each
Boulevard Bank.
(p) Fifteen business days prior to the Effective Date and as of the
Effective Date, Boulevard will update Schedule 14 referred to in this
Merger Agreement in the event that changes with respect to items
required to be set forth in such Schedule result in such Schedule
omitting or misstating information. Schedule 14 shall be updated only
for the purpose of making the representations and warranties contained
in this Merger Agreement to which the Schedule 14 relates true and
correct in all material respects as of the date such Schedule is
updated, and the updated Schedule shall not have the effect of making
any representation or warranty contained in this Merger Agreement true
and correct in all material respects as of a date prior to the date of
such updated Schedule. Representations may be updated as of a
subsequent date on or prior to the Effective Date only for
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occurrences or events subsequent to the date hereof, or subsequent to
the most recent updated representations, as applicable.
(q) Boulevard will not, and will cause the Subsidiaries and
Boulevard's and the Subsidiaries' respective officers, directors,
employees, agents or affiliates, not to, directly or indirectly,
solicit, authorize or initiate submission of, any proposal, offer,
tender offer or exchange offer from any person or entity (including any
of its or their officers or employees) relating to any liquidation,
dissolution, recapitalization, merger, consolidation or acquisition or
purchase of all or a material portion of the assets of, or any equity
interest in, Boulevard or any of the Subsidiaries or other similar
transaction or business combination involving Boulevard or any of the
Subsidiaries, or, unless Boulevard shall have determined, after receipt
of a written opinion of counsel to Boulevard (a copy of which opinion
shall be delivered to Parent), that the Board of Directors of Boulevard
has an obligation to do so, (a) participate in any negotiations in
connection with or in furtherance of any of the foregoing or (b) permit
any person other than Parent and its representatives to have any access
to the facilities of, or furnish to any person other than Parent and
its representatives any information with respect to, Boulevard or any
of the Subsidiaries in connection with or in furtherance of any of the
foregoing. Boulevard shall promptly notify Parent if any such proposal
or offer, or any inquiry from or contact with any person with respect
thereto, is made, and shall promptly provide Parent with such
information regarding such proposal, offer, inquiry or contact as
Parent may request.
(r) Boulevard shall use its best efforts to obtain and deliver to
Parent prior to the Effective Date a signed representation letter
substantially in the form of Exhibit B hereto from each shareholder of
Boulevard who may reasonably be deemed an "affiliate" of Boulevard
within the meaning of such term as used in Rule 145 under the 1993 Act.
(s) At the request of Parent after consultation with Boulevard, on
the day prior to the Effective Date, each Boulevard Bank shall
establish such additional accruals and reserves as may be necessary (a)
to conform each Boulevard Bank's accounting and credit loss reserve
practices and methods to those of Parent (as such practices and methods
are to be applied to each Boulevard Bank from and after the Effective
Date) and to Parent's plans with respect to the conduct of each
Boulevard Bank's business following the Merger and (b) to provide for
the costs and expenses relating to the consummation by Boulevard of the
Merger and the other transactions contemplated to occur in connection
therewith. The establishment of such accruals and reserves shall not,
in and of itself, constitute a breach of any representation or warranty
of Boulevard contained in this Merger Agreement or constitute a
Material Adverse Effect.
(t) Boulevard will use its best efforts to obtain an agreement from
Miami Corporation pursuant to which Miami Corporation will agree to use
its best efforts to cause Miami Corporation, and individuals, trusts,
corporations and other entities affiliated with or associated with
Miami Corporation to maintain, for a period of three years after the
Effective Date, its and their deposit and business relationships with
the Boulevard Banks at an aggregate average daily deposit level of
approximately $20,000,000.
(u) Neither Boulevard nor any of the Subsidiaries nor Parent shall
take any action which would disqualify the Merger as a "reorganization"
that would be tax free to the shareholders of Boulevard pursuant to
Section 368(a) of the Code.
(v) Boulevard shall take such action as is necessary to cause Options
outstanding on the Effective Date to terminate unless such option has
been converted into an option to purchase Parent Common pursuant to
Section 8(f).
(w) Parent shall take such appropriate action as is necessary to
assume the Options pursuant to Section 8(f).
(x) The parties agree that Parent may offer holders of the Old
Warrants Parent Common in exchange for such Old Warrants prior to the
Effective Date.
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11. Tax Opinion. Boulevard shall receive from Wildman, Harrold, Allen &
Dixon a written opinion addressed to Boulevard and its shareholders, that:
(a) The statutory merger of Newco with and into Boulevard will
constitute a reorganization within the meaning of Section 368(a)(1)(A)
and Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended;
(b) No gain or loss will be recognized by Boulevard as a consequence
of the transactions herein contemplated;
(c) No gain or loss will be recognized to the shareholders of
Boulevard on the exchange of their shares of Boulevard Common for
shares of Parent Common (disregarding for this purpose any cash
received pursuant to the exercise of statutory dissenters' rights, if
any, or for fractional share interests to which they may be entitled);
(d) The federal income tax basis of the Parent Common (including
fractional share interests to which they may be entitled) received by
the shareholders of Boulevard Common for their shares of Boulevard
Common will be the same as the federal income tax basis of the
Boulevard Common surrendered in exchange therefor; and
(e) The holding period of the Parent Common received by a shareholder
of Boulevard will include the period for which the Boulevard Common
exchanged therefor was held, provided the exchanged Boulevard Common
was held as a capital asset by such shareholder on the date of the
exchange.
12. Representations and Warranties of Parent. Parent represents and
warrants to Boulevard that, except as otherwise indicated below:
(a) Parent is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and is a
registered bank holding company under the Bank Holding Company Act.
Parent has full corporate power and authority to engage in the
businesses and activities now conducted by it. Parent (including each
of its subsidiaries) is not subject to any formal or informal agreement
or understanding with, nor is it subject to any order of, any bank
regulatory authority restricting or prohibiting or attempting to
restrict or prohibit any activities or conduct of Parent where such
agreement or understanding has, or would be likely to cause, a Material
Adverse Effect.
(b) The authorized capital stock of Parent consists of 150,000,000
shares of Parent Common and 10,000,000 shares of preferred stock, par
value $1.00 per share (the "Parent Preferred"). As of June 30, 1993,
(a) 113,229,578 shares of Parent Common were outstanding, 7,597,093
shares of Parent Common were reserved for issuance pursuant to Parent's
1987 Stock Option Plan, 1991 Stock Incentive Plan, Restated Employee
Stock Purchase Plan and Dividend Reinvestment Plan and the Western
Capital Investment Corp. 1984 Stock Option and Incentive Plan, and
3,952,000 shares of Parent Common were reserved for issuance upon
conversion of Parent's $3.5625 Cumulative Preferred Stock, Series l991A
(the "Series l991A Preferred"); (b) 8,440,000 shares of Parent
Preferred, consisting of 1,000,000 shares of Adjustable Rate Cumulative
Preferred Stock, Series 1983A, 3,650,000 shares of 10.5% Preferred
Stock, Series 1989A, 1,500,000 shares of Adjustable Rate Cumulative
Preferred Stock, Series 1989B and 2,290,000 shares of Series l991A
Preferred, were outstanding; (c) 12,750 shares of Adjustable Rate
Cumulative Preferred Stock, Series 1990A were reserved for issuance
pursuant to certain periodic stock purchase rights and risk events
warrants issued by Parent; and (d) 700,000 shares of Series A Junior
Participating Preferred Stock were reserved for issuance upon exercise
of rights to purchase shares of Junior Participating Preferred Stock of
parent pursuant to the Rights Agreement dated as of December 21, 1988,
between Parent and First Chicago Trust Company of New York, as Rights
Agent. All of the issued and outstanding shares of Parent's capital
stock are duly authorized, validly issued, fully paid, nonassessable
and subject to no preemptive rights. Except as contemplated by the
plans and instruments listed above in this Section 12(b) hereof, Parent
has not issued or granted and is not a party to any outstanding
warrants, options, rights, calls or commitments of any kind relating
to, or
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any presently effective agreements or understandings with respect to,
the capital stock of Parent, whether issued or unissued, or securities
convertible into capital stock of Parent. Subject only to obtaining the
required regulatory approvals, Parent is, and at all times after the
date of this Merger Agreement to and including the Effective Date will
be, authorized to effect the Merger under Delaware law.
(c) Parent has furnished to Boulevard copies of the following
financial statements relating to Parent and its consolidated
subsidiaries: (i) the audited Consolidated Balance Sheets of Parent as
of December 31, 1992, 1991 and 1990, and the Consolidated Statements of
Income, Shareholders' Equity and Cash Flows for the years then ended,
together with the notes thereto, as audited by Ernst & Young,
independent auditors; and (ii) the unaudited Consolidated Balance Sheet
of Parent as of June 30, 1993 and the unaudited Consolidated Statements
of Income and Shareholders' Equity for the period then ended, together
with the notes thereto. Each of the aforementioned financial statements
present fairly, in accordance with generally accepted accounting
principles (applied on a consistent basis except as disclosed in the
footnotes thereto), the consolidated financial position and results of
operations of Parent as of the dates and for the periods therein set
forth. Such financial statements do not, as of the dates thereof,
include any material asset or omit any material liability, absolute or
contingent, or other fact, the inclusion or omission of which renders
such financial statements, in light of the circumstances under which
they were made, misleading in any material respect. Since June 30,
1993, there has not been any change in the financial condition, results
of operations or business of Parent and its subsidiaries that would
have a Material Adverse Effect.
(d) The Boards of Directors of Parent and Newco, and Parent, in its
capacity as the sole shareholder of Newco, have duly authorized the
execution and delivery of this Merger Agreement and approved the Merger
as contemplated by said Merger Agreement. No authorization of this
Merger Agreement or of the transactions hereby contemplated is required
by the shareholders of Parent. Parent and Newco have all requisite
corporate power and authority to enter into this Merger Agreement and
Parent and Newco have the corporate authority to consummate the
transactions contemplated hereby. This Merger Agreement constitutes the
valid and legally binding and enforceable obligation of each of Parent
and Newco, and this Merger Agreement and the consummation of the Merger
have been duly authorized and approved on behalf of Parent and Newco by
all requisite corporate action. Provided the required approvals are
obtained from the Board and the States of Delaware and Illinois, and
provided all approvals, if any, are obtained from, and all filings are
made with, any governmental or regulatory authority pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act, as amended, (the "HSR
Act"), the 1933 Act and the rules and regulations thereunder, the 1934
Act and the rules and regulations thereunder, state securities or blue
sky laws and the rules and regulations thereunder (the "Blue Sky Laws")
and the rules of the Exchange, neither the execution and delivery of
this Merger Agreement nor the consummation of the Merger will conflict
with, result in the breach of, constitute a default under or accelerate
the performance provided by the terms of any law, or any rule or
regulation of any governmental agency or authority or any judgment,
order, writ, decree or injunction of any court, bank regulatory agency
or other governmental agency to which Parent or Newco is subject, any
contract, agreement or instrument to which Parent or Newco is a party
or by which Parent or Newco is bound or committed, or the Certificate
of Incorporation or By-laws of Parent or the Certificate of
Incorporation or By-laws of Newco, or constitute an event which with
the lapse of time or action by a third party, could result in the
default under any of the foregoing or result in the creation of any
lien, charge or encumbrance upon any of the assets or properties of
Parent or Newco or upon any of the stock of Parent or Newco or
adversely affect the ability of Parent to consummate the transactions
contemplated hereby, except, in the case of contracts, agreements or
instruments, such defaults, conflicts or breaches which either (i) will
be cured or waived prior to the Effective Date or (ii) if not so cured
or waived would not, in the aggregate, be material.
(e) Except as may be disclosed in the financial statements referred
to in Section 12(c), there is no litigation, action, suit,
investigation or proceeding pending or threatened, against or affecting
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Parent or its subsidiaries or involving any of their respective
properties or assets, at law or in equity, before any federal, state,
municipal, local or other governmental authority, which is reasonably
likely to be resolved adversely to the interest of Parent or its
subsidiaries and, if so resolved, would have a Material Adverse Effect
or materially impair its ability, or that of Newco, to perform under
this Merger Agreement, and to the best of the knowledge and belief
after due inquiry of Parent and its executive officers, no one has
reasonable or valid grounds on which it reasonably can be expected that
anyone will assert or initiate any such litigation, action, suit,
investigation or proceeding against Parent based upon the wrongful
action or inaction of Parent or its subsidiaries or any of their
respective officers, directors or employees.
(f) At the Effective Date and on such subsequent dates when the
former shareholders of Boulevard surrender their certificates of
Boulevard Common for cancellation, the shares of Parent Common to be
exchanged with the former shareholders of Boulevard will have been duly
authorized and validly issued by Parent and will be fully paid and
nonassessable and subject to no preemptive rights.
(g) Parent and its subsidiaries have complied with all laws,
regulations and orders applicable to them and to the conduct of their
businesses, including without limitation, all statutes, rules,
regulations, orders, writs and decrees, pertaining to the conduct of
banking activities except for violations which together with any
penalty which results therefrom has not had and will not have a
Material Adverse Effect. Neither Parent nor any of its subsidiaries is
in default under, and no event has occurred which, to the best of
Parent's knowledge, after due inquiry, is likely to result in their
default under, the terms of any judgment, decree, order, writ, rule or
regulation of any governmental authority or court, whether federal,
state or local and whether at law or in equity, in each case where the
default has had or is likely to have a Material Adverse Effect.
(h) Parent and Newco have not incurred, and will not incur directly
or indirectly, any liability for brokerage, finders', agents' or
investment bankers' fees or commissions in connection with this Merger
Agreement or the transactions contemplated hereby.
(i) With respect to all information set forth therein relating to
Parent, the Parent Common, the Merger Agreement, and the Merger,
neither the Proxy Statement nor the related registration statement nor
any amendment or supplement thereto that is filed with the Securities
and Exchange Commission in connection with the transactions
contemplated hereby shall contain (in the case of information relating
to the Proxy Statement, at the time it is mailed and in the case of
information relating to the registration statement at the time it
becomes effective) any untrue statement of a material fact or shall
omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are
made, not misleading. The registration statement and any amendments or
supplements thereto that are filed with the Securities and Exchange
Commission in connection with the transactions contemplated hereby will
comply as to form in all material respects with the provisions of the
1933 Act and the rules and regulations promulgated thereunder.
(j) Since January 1, 1991, Parent has timely filed all reports and
other documents required to be filed by it under the 1934 Act. Parent's
Annual Report on Form 10-K for the year ended December 31, 1992 and its
Quarterly Reports on Form 10-Q for the periods ended March 31 and June
30, 1993 (collectively, the "Parent Reports"), as of their respective
dates, did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(k) Since January 1, 1991, Parent and each of its subsidiaries have
filed all material reports, registrations and statements, together with
any amendments required to be made with respect thereto, that they were
required to file with (i) the Federal Reserve Board, (ii) the OCC,
(iii) the FDIC and (iv) any state banking commissioner or other
regulatory authority ("State Regulator") (collectively, the "Regulatory
Agencies") and all other material reports and statements required to
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be filed by them with any regulatory authority, including, without
limitation, any report or statement required to be filed pursuant to
the laws, rules or regulations of the United States, the Federal
Reserve Board, the OCC, the FDIC, or any State Regulator and have paid
all fees or assessments due and payable in connection therewith. As of
their respective dates, or as subsequently amended prior to the date
hereof, each of the reports filed with the Regulatory Agencies was true
and correct in all material respects and complied in all material
respects with applicable laws, rules and regulations. Except for normal
examinations conducted by the applicable Regulatory Agency in the
regular course of the business of Parent and its subsidiaries, no
Regulatory Agency has initiated any material proceeding or, to the best
of the knowledge and belief of Parent, material investigation into the
business or operations of Parent or any of its subsidiaries within the
past three years.
(l) There is no fact known to Parent which has not been disclosed in
the Parent Reports or pursuant to this Merger Agreement which may
reasonably be expected to result in a Material Adverse Effect.
(m) As of the date hereof, Parent is not aware of any reason that the
regulatory approvals specified in Section 12(d) and required to be
obtained by Parent would not be obtained.
13. Representations and Warranties of Newco. Newco represents and
warrants to Boulevard that, except as otherwise indicated below:
(a) Newco is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware, and is or will
be qualified to do business and in good standing in the State of
Illinois together with all other jurisdictions where it is both
required to so qualify and where the failure to so qualify would have a
Material Adverse Effect and Newco has full corporate power and
authority (including all licenses, franchises, permits and other
governmental authorizations which are legally required) to engage in
the businesses and activities now conducted by it. Newco does not have
any significant assets or liabilities and has not engaged in any
business other than as contemplated by this Merger Agreement. As of the
date hereof, the authorized capital stock of Newco consists of 1,000
shares of common stock with par value of $.01 per share of which a
total of 1,000 shares are issued and outstanding, all of which are
owned by Parent free and clear of all liens, security interests or
other encumbrances.
(b) The Board of Directors of Newco has duly authorized execution of
this Merger Agreement and approved the acquisition of Boulevard as
contemplated by said Merger Agreement. Parent, the sole shareholder of
Newco, has voted all the shares of Newco to approve the Merger and
adopt this Merger Agreement. Newco has all requisite corporate power
and authority to enter into this Merger Agreement and has the authority
to consummate the transactions contemplated hereby. This Merger
Agreement constitutes the valid and legally binding obligation of Newco
and this Merger Agreement and the consummation hereof have been duly
authorized and approved on behalf of Newco by all requisite corporate
action. Provided the required approvals are obtained from the Board and
the States of Delaware and Illinois, and provided all approvals, if
any, are obtained from, and all filings are made with, any governmental
or regulatory authority pursuant to the HSR Act, the 1933 Act and the
rules and regulations thereunder, the 1934 Act and the rules and
regulations thereunder, the Blue Sky Laws and the rules of the
Exchange, neither the execution and delivery of this Merger Agreement
nor the consummation of the Merger will conflict with, result in the
breach of, constitute a default under or accelerate the performance
provided by the terms of any law, or any rule or regulation of any
government agency or authority or any judgment, order or decree of any
court, bank regulatory agency or other governmental agency to which
Newco may be subject, any contract, agreement or instrument to which
Newco is a party or by which Newco is bound or committed, or the
Certificate of Incorporation or By-laws of Newco, or constitute an
event which with the lapse of time or action by a third party, could,
to the best of Newco's knowledge, result in the default under any of
the foregoing or result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of Newco or adversely
affect the ability of Parent to consummate
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the transactions contemplated hereby, except in the case of contracts,
agreements or instruments, such defaults, conflicts or breaches, which
either (a) will be cured or waived prior to the Effective Date, or (b)
if not so cured or waived, would not in the aggregate, be material.
14. Representations and Warranties of Boulevard. Boulevard represents and
warrants to Parent that, except as set forth in Schedule 14, and except as
otherwise indicated below:
(a) Boulevard is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and is a
registered bank holding company under the Bank Holding Company Act and
each Subsidiary is a corporation duly organized and validly existing in
good standing under the laws of the United States or its respective
state of incorporation. The copies of the Articles or Certificate of
Incorporation and By-laws of each of Boulevard and the Subsidiaries
which have been furnished to Parent prior to the date of this Merger
Agreement are correct and complete and reflect all amendments made
thereto through such date. Boulevard and the Subsidiaries have full
power and authority (including all licenses, franchises, permits and
other governmental authorizations which are legally required) to engage
in the businesses and activities now conducted by them, respectfully.
Each of Boulevard and the Subsidiaries is qualified to do business and
is in good standing in each state and each other jurisdiction where it
is both required to so qualify and where the failure to so qualify
would have a Material Adverse Effect. Boulevard (including each of the
Subsidiaries) is not subject to any formal or informal agreement or
understanding with, nor is it subject to any order of, any bank
regulatory authority restricting or prohibiting or attempting to
restrict or prohibit any activities or conduct of Boulevard. As of June
30, 1993, the authorized capital stock of Boulevard consisted of (i)
20,000,000 shares of Boulevard Common, of which 7,158,613 shares were
issued and outstanding and none of which were treasury shares owned by
Boulevard, and (ii) 422,500 shares of preferred stock of which 100,000
shares of Boulevard Preferred were issued and outstanding. All of the
issued and outstanding shares of capital stock of each of Boulevard and
the Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and none are issued in violation of the preemptive rights
of any shareholder.
(b) As of June 30, 1993, Boulevard has outstanding: (i) 1,090,750 Old
Warrants which expire on October 31, 1994; (ii) Options, as listed on
Schedule 14 hereto, for the purchase of Boulevard Common; (iii) 8%
Subordinated Debentures in the principal amount of $12,238,800 which
mature on October 31, 1994; and (iv) stock appreciation rights as
listed on Schedule 14. Boulevard has heretofore delivered to Parent
true and correct copies of all agreements and plans relating to the Old
Warrants, the Options, the 8% Subordinated Debentures and such stock
appreciation rights. Other than the Old Warrants, Options, and stock
appreciation rights listed above, there are no outstanding options,
warrants or commitments of any kind related to any class or series of
Boulevard's capital stock of Boulevard or any of the Subsidiaries
(including any stock appreciation rights or similar rights).
(c) Boulevard has furnished or made available to Parent copies of the
following financial statements relating to Boulevard and the
Subsidiaries on a consolidated basis: (i) the audited Consolidated
Balance Sheet of Boulevard as of December 31, 1992, 1991 and 1990, and
Consolidated Statements of Income, Stockholders' Equity and Cash Flows
for the years then ended, together with the notes thereto, as audited
by Price Waterhouse, Independent Accountants; and (ii) the unaudited
Consolidated Balance Sheet of Boulevard as of June 30, 1993 and the
unaudited Consolidated Statements of Income and Cash Flows for the
period then ended, together with the notes thereto. Each of the
aforementioned financial statements presents fairly, in accordance with
generally accepted accounting principles (applied on a consistent basis
except as disclosed in the footnotes thereto), the consolidated
financial position and results of operations of Boulevard as of the
dates and for the periods therein set forth. Such financial statements
do not, as of the dates thereof, include any material asset or omit any
material liability, absolute or contingent, or other fact, the
inclusion or omission of which renders such financial statements, in
light of the circumstances under which they were made, misleading in
any material respect. Since June 30, 1993,
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there has not been any change in the financial condition, results of
operations or business of Boulevard and the Subsidiaries that would
have a Material Adverse Effect.
(d) The Board of Directors of Boulevard has duly authorized the
execution and delivery of this Merger Agreement and approved the Merger
as contemplated by the Merger Agreement, and the Board of Directors
will recommend the Merger Agreement to the Boulevard shareholders for
approval; provided, however, that the Board of Directors of Boulevard
may take any action, or refrain from taking any action, as it deems
necessary in its sole discretion to satisfy its fiduciary duties to the
Boulevard shareholders, including, but not limited to, making no
recommendation, reversing any existing recommendation or making any
other recommendation if the Board shall have determined, after receipt
of a written opinion of counsel to Boulevard (a copy of which opinion
shall be delivered to Parent) that the Board has an obligation to take
or refrain from taking such action. Boulevard and/or one or more of its
Subsidiaries own beneficially and of record all of the outstanding
shares of each of the Subsidiaries. Subject to the approval by the
shareholders of Boulevard, this Merger Agreement constitutes the valid,
legally binding and enforceable obligation of Boulevard, and Boulevard
has all requisite power and authority to enter into this Merger
Agreement, and Boulevard has the authority to consummate the
transactions contemplated hereby so that, provided all required
shareholder and regulatory approvals are obtained from the Board, and
the States of Delaware and Illinois, and provided all approvals are
obtained, if any, from, and all filings are made with, any governmental
or regulatory authority pursuant to the HSR Act, the 1933 Act and the
rules and regulations thereunder, the 1934 Act and the rules and
regulations thereunder and the Blue Sky Laws, and the rules of the
Exchange, neither the execution and delivery of this Merger Agreement
nor the consummation of the Merger will conflict with, result in the
breach of, constitute a default under or accelerate the performance
provided by the terms of any law, or any rule or regulation of any
governmental agency or authority or any judgment, order or decree of
any court, bank regulatory agency or other governmental agency to which
Boulevard or any of the Subsidiaries is subject, any contract,
agreement or instrument to which Boulevard or any of the Subsidiaries
is a party or by which Boulevard is bound or committed, or the
Certificate of Incorporation or By-Laws of Boulevard or any of the
Subsidiaries, or constitute an event which with the lapse of time or
action by a third party, could, to the best of Boulevard's knowledge,
result in the default under any of the foregoing or result in the
creation of any lien, charge or encumbrance upon any of the assets or
properties of Boulevard or any of the Subsidiaries or upon any of the
capital stock of Boulevard or any of the Subsidiaries; except, in the
case of contracts, agreements or instruments, such defaults, conflicts
or breaches which either (i) will be cured or waived prior to the
Effective time or (ii) if not so cured or waived would not, in the
aggregate, have a Material Adverse Effect.
(e) The reserve for possible loan and lease losses shown on the
December 31, 1992 and June 30, 1993 Consolidated Balance Sheets of
Boulevard and its Subsidiaries are adequate in all material respects
under the requirements of generally accepted accounting principles to
provide for possible losses on loans outstanding as of such dates.
(f) Except as disclosed in the financial statements referred to in
Section 14(c), there is no litigation, action, suit, investigation or
proceeding pending or, to the best of the knowledge after due inquiry
of Boulevard and its executive officers, overtly threatened, against or
affecting Boulevard or any of its Subsidiaries or involving any of
their respective properties or assets, at law or in equity, before any
federal, state, municipal, local or other governmental authority which
is reasonably likely to be resolved adversely to the interest of
Boulevard or its Subsidiaries and, if so resolved, would have a
Material Adverse Effect or materially impair its ability to perform
under this Merger Agreement, and to the best of knowledge and belief
after due inquiry of Boulevard and its executive officers, no one has
reasonable or valid grounds on which it reasonably can be expected that
anyone will assert or initiate any such litigation, action, suit,
investigation or proceeding against Boulevard based upon the wrongful
action or inaction of Boulevard or any of its Subsidiaries or any of
their respective officers, directors or employees.
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(g) Boulevard and its Subsidiaries have good and marketable title to
all their respective assets and properties, whether real or personal,
tangible or intangible, including without limitation, all assets and
properties reflected in Boulevard's Balance Sheet as of June 30, 1993
or acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of for fair value in the ordinary
course of business since June 30, 1993). Such assets and properties are
subject to no liens, mortgages, security interests, encumbrances,
pledges or charges of any kind, except (i) as noted in the December 31,
1992 Balance Sheet or the notes thereto or as they relate to assets and
properties acquired in the ordinary course of business subsequent
thereto; (ii) statutory liens for taxes not yet delinquent; and (iii)
minor defects and irregularities in title and encumbrances which do not
materially impair the use thereof for the purposes for which they are
held; and such liens, mortgages, security interests, encumbrances and
charges do not, in the aggregate, have a Material Adverse Effect.
Boulevard and its Subsidiaries as lessees have the right under valid
and subsisting leases to occupy, use, possess and control all property
leased by Boulevard and its Subsidiaries, except for such limitations
set forth in Schedule 14. At the Effective Date any limitations
affecting such properties will not, in the aggregate, have a Material
Adverse Effect.
(h) To the best of the knowledge after due inquiry of Boulevard and
its executive officers, Boulevard and its Subsidiaries have complied
with all laws, regulations and orders applicable to them and to the
conduct of their businesses, including without limitation, all
statutes, rules and regulations pertaining to the conduct of banking
activities except for violations which together with any penalty which
results therefrom has not had and will not have a Material Adverse
Effect. Neither Boulevard nor any of its Subsidiaries is in default
under, and no event has occurred which, to the best of Boulevard's
knowledge, after due inquiry, is likely to result in their default
under the terms of any judgment, decree, order, writ, rule or
regulation of any governmental authority or court, whether federal,
state or local and whether at law or in equity, in each case when the
default has had or is likely to have a Material Adverse Effect.
(i) Since June 30, 1993, neither Boulevard nor any of the
Subsidiaries has:
(i) issued or sold any of its equity securities, securities
convertible into or exchangeable for its equity securities,
warrants, options or other rights to acquire its equity securities,
or any bonds or other securities, except deposit obligations in the
ordinary course of business and except for Boulevard Common issued
upon the exercise of Old Warrants and Options by the holders
thereof;
(ii) redeemed, purchased, acquired or offered to acquire, directly
or indirectly, any shares of its or any affiliate's capital stock or
other securities, or declared or paid any dividends payable in cash,
property or otherwise with respect to any shares of its capital
stock or other securities, except for (A) regular quarterly cash
dividends paid on the Boulevard Common as permitted pursuant to
Section 15(a) and (B) purchases or issuances of Boulevard Common in
connection with the Boulevard Savings and Investment Plan or the
Boulevard Dividend Reinvestment Plan;
(iii) borrowed any amount or incurred or become subject to any
material liability, except liabilities incurred in the ordinary
course of business, but in no event has Boulevard or any of the
Subsidiaries entered into any long-term borrowings with terms of
greater than one year, except for certificates of deposit and
interest rate swaps, in each case with terms not in excess of five
years; provided, however, that Boulevard may borrow money to redeem
the Boulevard Preferred;
(iv) discharged or satisfied any material lien or encumbrance on
the properties or assets of Boulevard or any of the Subsidiaries or
paid any material liability other than in the ordinary course of
business;
(v) mortgaged, pledged or subjected to any lien or other
encumbrance any of the assets of Boulevard or any of the
Subsidiaries except (A) in the ordinary course of business, (B)
liens
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and encumbrances for current property taxes not yet due and payable
and (C) liens and encumbrances which do not materially affect the
value of, or interfere with the past or future use or ability to
convey, the property subject thereto or affected thereby;
(vi) sold, assigned or transferred (including, without limitation,
transfers to any employees, shareholders or affiliates of Boulevard
or any of the Subsidiaries), any material assets, except assets
sold, assigned or transferred in the ordinary course of business;
(vii) canceled any material debts or claims or waived any rights
of material value, except in the ordinary course of business or upon
payment in full;
(viii) suffered any theft, damage, destruction or loss of or to
any property or properties owned or used by it, whether or not
covered by insurance, which would, individually or in the aggregate,
have a Material Adverse Effect;
(ix) made or granted any bonus or any wage, salary or compensation
increase or severance or termination pay to any director, officer,
employee, group of employees or consultant, or entered into any
employment contract, other than bonuses, compensation increases or
severance arrangements consistent with past practices;
(x) made or granted any increase in the benefits payable under any
employee benefit plan or arrangement, or amended or terminated any
existing employee benefit plan or arrangement, or adopted any new
employee benefit plan or arrangement, except as required by law;
(xi) made any single or group of related material capital
expenditures or commitment therefor;
(xii) taken any other action or entered into any other transaction
other than in the ordinary course of business; or
(xiii) agreed to do any of the foregoing.
(j) Neither Boulevard nor any of its Subsidiaries is a party to or
bound by any written or oral (i) employment or consulting contract
which is not terminable by Boulevard or the Subsidiaries on sixty (60)
days or less notice; (ii) employee bonus, deferred compensation,
pension, stock bonus or purchase, profit-sharing, retirement or stock
option plan; (iii) other employee benefit or welfare plan; or (iv)
other executory material agreements as defined by the instructions to
Exhibit 10 under Item 601 of Securities and Exchange Commission
Regulation S-K. All such pension, stock bonus, profit-sharing,
retirement, health and welfare plans (other than any multi-employer
plans) set forth in Schedule 14 are hereinafter referred to
collectively as the "Boulevard Plans." Boulevard has heretofore
delivered to Parent true and correct copies of the Boulevard Plans and
all other agreements and instruments listed on Schedule 14 pursuant to
this Section 14(j). Those Boulevard Plans which purport to be qualified
plans under Section 401(a) of the Internal Revenue Code are so
qualified. All of the Boulevard Plans which constitute employee pension
benefit plans or employee welfare plans subject to ERISA have been
maintained in compliance in all material respects with ERISA. All
material notices, reports and other filings required under applicable
law to be given or made to or with any governmental agency with respect
to the Boulevard Plans have been timely filed or delivered. Boulevard
has no knowledge either of any circumstances which would adversely
affect the qualification of the Boulevard Plans or their compliance
with ERISA, would result or have resulted in liability under Title IV
of ERISA or of any unreported "reportable event" (as such term is
defined in Section 404(b) of ERISA) or "prohibited transaction" (as
such term is defined in Section 406 of ERISA and Section 4975(c) of the
Internal Revenue Code) which has occurred since the date on which said
sections became applicable to the Boulevard Plans and which could
reasonably be expected to result in any material liability of Boulevard
or any Subsidiary to the PBGC, the Department of Treasury, the
Department of Labor or any multi-employer plan. Those Boulevard Plans
which are defined benefit plans within the meaning of ERISA meet the
minimum funding standards set forth in the Internal Revenue Code and
ERISA and the assets of such
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Boulevard Plans equal or exceed the present value of accrued benefits
under such Boulevard Plans as of the most recent plan valuation date.
There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have
been asserted or instituted against the Boulevard Plans, any
fiduciaries thereof with respect to their duties to the Boulevard Plans
or the assets of any of the trusts under any of the Boulevard Plans
which could reasonably be expected to result in any material liability
of Boulevard or any of its Subsidiaries to the PBGC, the Department of
Treasury, the Department of Labor or any multi-employer plan.
(k) Boulevard and/or its Subsidiaries have duly filed all federal,
state, county and local income, franchise, bank, excise, real and
personal property and other tax returns and reports (including, but not
limited to, those relating to social security, withholding,
unemployment insurance, and occupation (sales) and use taxes and those
filed on a consolidated, combined or unitary basis) required to have
been filed by Boulevard or its Subsidiaries up to the date hereof.
Boulevard undertakes to promptly provide Parent with a copy of its
federal income tax return for the year 1992. All of the foregoing
returns are true and correct in all material respects, and Boulevard
has paid or, prior to the Effective Date, will pay all taxes, interest
and penalties shown on such returns or reports as being due or (except
to the extent the same are contested in good faith and, if material,
summarized in Schedule 14) or claimed to be due to any federal, state,
county, local or other taxing authority, and there is, and at the
Effective Date will be, no basis for any additional claim or assessment
which might have a Material Adverse Effect, except for those being
contested in good faith and summarized in Schedule 14. Boulevard has
paid or made adequate provision in its financial statements or its
books and records for all taxes payable in respect of all periods
ending on or before the date hereof. Boulevard has, or at the Effective
Date will have, no material liability for any taxes, interest or
penalties of any nature whatsoever, except for those taxes which may
have arisen up to the Effective Date in the ordinary course of business
and are properly accrued on the books of Boulevard as of the Effective
Date or are being contested in good faith and have, if material, been
summarized in Schedule 14.
(l) Boulevard has in effect insurance coverage with reputable
insurers which in respect of amounts, premiums, types and risks
insured, constitutes reasonably adequate coverage against all risks
customarily insured against by bank holding companies comparable in
size and operation to Boulevard.
(m) Boulevard has not incurred and will not incur any liability for
brokerage, finders', agents', or investment bankers' fees or
commissions in connection with this Merger Agreement or the
transactions contemplated hereby other than to Goldman, Sachs & Co. in
an amount previously disclosed to Parent.
(n) With respect to all information set forth therein relating to
Boulevard, the Boulevard Common, this Merger Agreement, and the Merger,
neither the Proxy Statement nor the related registration statement or
any amendment or supplement thereto shall contain (in the case of
information relating to the Proxy Statement, at the time it is mailed
and in the case of information relating to the registration statement,
at the time it becomes effective) any untrue statement of a material
fact or shall omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which
they are made, not misleading. The Proxy Statement that is filed with
the Securities and Exchange Commission in connection with the meeting
of the shareholders of Boulevard will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder. The statements made in Schedule 14
and any attachments thereto shall be deemed to constitute
representations and warranties of Boulevard under this Merger Agreement
to the same extent as if herein set forth in full. Anything disclosed
in Schedule 14 or the attachments thereto shall be considered to have
been disclosed for purposes of all representations and warranties under
this Merger Agreement.
(o) No employee of Boulevard or a Subsidiary is represented, for
purposes of collective bargaining, by a labor organization of any type.
Boulevard is unaware of any efforts during the past
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five years to unionize or organize any employees of Boulevard or the
Subsidiaries, and no claim related to such employees under the Fair
Labor Standards Act, National Labor Relations Act, Civil Rights of
1964, Walsh-Healy Act, Davis Bacon Act, Civil Rights Act of 1866, Age
Discrimination in Employment Act, Equal Pay Act of 1963, Executive
Order No. 11246, Federal Unemployment Tax Act, Vietnam Era Veterans
Readjustment Act, Occupational Safety and Health Act, or any state or
local employment related law, order, ordinance or regulation, no unfair
labor practice, discrimination or wage-and-hour claim is pending or, to
the best of Boulevard's knowledge, threatened against Boulevard or any
Subsidiary, which claim has had or is reasonably likely to have a
Material Adverse Effect.
(p) With respect to Boulevard (i) there are no material actions,
proceedings or investigations pending or, to the actual knowledge of
Boulevard and its executive officers, threatened before any federal or
state environmental regulatory body, or before any federal or state
court, alleging non-compliance by Boulevard or any Subsidiary, with
CERCLA or any other Environmental Laws; and (ii) to the actual
knowledge of Boulevard and its executive officers: (A) there is no
reasonable basis for the institution of any material action, proceeding
or investigation against Boulevard or any Subsidiary under any
Environmental Law; (B) neither Boulevard nor any Subsidiary is
responsible in any material respect under any Environmental Law for any
release by any person at or in the vicinity of real property of any
hazardous substance (as defined by CERCLA), caused by the spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of any such hazardous
substance into the environment; (C) neither Boulevard nor any
Subsidiary is responsible for any material costs of any remedial action
required by virtue of any release of any toxic or hazardous substance,
pollutant or contaminant into the environment including, without
limitation, costs arising from security fencing, alternative water
supplies, temporary evacuation and housing and other emergency
assistance undertaken by any environmental regulatory body; (D)
Boulevard and each Subsidiary are, in all material respects, in
compliance with all applicable Environmental Laws; and (E) no real
property used, owned, managed or controlled by Boulevard or any
Subsidiary (including any property owned, managed or controlled by any
of the Boulevard Banks in connection with its lending or trust
operations) contains any toxic or hazardous substance including,
without limitation, any asbestos, PCBs or petroleum products or
byproducts in any form, the presence, location or condition of which
(a) violates any Environmental Law in any material respect, or (b)
otherwise would pose any significant health or safety risk unless
remedial measures were taken.
(q) Since January 1, 1991, Boulevard has timely filed all reports and
other documents required to be filed by it under the 1933 Act and the
1934 Act. Boulevard's Annual Report on Form 10-K for the year ended
December 31, 1992 and its Quarterly Reports on Form 10-Q for the
periods ended March 31 and June 30, 1993 (collectively, the "Boulevard
Reports"), as of their respective dates, did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(r) The deposits of each Subsidiary of Boulevard that is a depository
institution are insured by the FDIC in accordance with the FDIA, and
such depository institution has paid all assessments and filed all
reports required under the FDIA.
(s) Since January 1, 1991, Boulevard and the Subsidiaries have filed
all material reports, registrations and statements, together with any
amendments required to be made with respect thereto ("Regulatory
Reports"), that they were required to file with the Regulatory Agencies
and all other material reports and statements required to be filed by
them, including, without limitation, any report or statement required
to be filed pursuant to the laws, rules or regulations of the United
States, the Federal Reserve Board, the OCC, the FDIC, or any State
Regulator and have paid all fees or assessments due and payable in
connection therewith. Boulevard has provided Parent with copies or
access to copies of all Regulatory Reports. As of their respective
dates, or as subsequently
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amended prior to the date hereof, each of the Regulatory Reports was
true and correct in all material respects and complied in all material
respects with applicable laws, rules and regulations. Except for normal
examinations conducted by the applicable Regulatory Agency in the
regular course of the business of Boulevard and the Subsidiaries and as
described in Schedule 14, no Regulatory Agency has initiated any
material proceeding or, to the best of the knowledge and belief of
Boulevard, material investigation into the business or operations of
Boulevard or any of the Subsidiaries within the past three years.
(t) The documentation relating to all loans made by each of the
Boulevard Banks and to all security interests, mortgages and other
liens with respect to all collateral for such loans, taken as a whole,
is adequate for the enforcement of the material terms of such loans,
security interests, mortgages and other liens, except for inadequacies
in such documentation which will not, in the aggregate, have a Material
Adverse Effect.
(u) Schedule 14 correctly sets forth the jurisdiction of
incorporation of each Subsidiary. All of the issued and outstanding
shares of capital stock of each Subsidiary are owned by Boulevard or a
Subsidiary free and clear of any lien, pledge, security interest,
encumbrance or charge of any kind. Neither Boulevard nor any of the
Subsidiaries owns, directly or indirectly, any stock, partnership
interest, joint venture interest or any other security issued by any
other corporation, organization or entity, except (i) stock of the
Subsidiaries, (ii) as otherwise disclosed on Schedule 14 and (iii)
securities owned by the Subsidiaries in the ordinary course of their
respective businesses.
(v) No executive officer or director of Boulevard or any of the
Subsidiaries, nor any member of the immediate family of any such
officer or director (which for purposes hereof shall mean a spouse,
minor child or adult child living at the home of any such officer or
director), nor any entity which any of such persons "controls" (within
the meaning of Regulation O of the Board of Governors of the Federal
Reserve System), has any loan agreement, note or borrowing arrangement
or any other agreement with Boulevard or any of the Subsidiaries (other
than normal employment arrangements, participation in employee benefit
and dividend reinvestment plans, deposit and retirement account
agreements, trust agreements, automatic deposits and transfer
arrangements, residential mortgages and credit lines less than
$150,000) or any interest in any property, real, personal or mixed,
tangible or intangible, used in or pertaining to the business of
Boulevard or any of the Subsidiaries.
(w) Each Subsidiary has properly administered all accounts for which
it acts as a fiduciary, including but not limited to, accounts for
which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in
accordance with the terms of the governing documents and applicable
state and federal law and regulation and common law, except to the
extent that the failure to so properly administer would not have a
Material Adverse Effect. Neither Boulevard, any Subsidiary, nor any
director, officer or employee of Boulevard or any Subsidiary has
committed any breach of trust with respect to any such fiduciary
account which has resulted or could reasonably be expected to result in
a Material Adverse Effect, and the accountings for each such fiduciary
account are true and correct in all material respects and accurately
reflect the assets of such fiduciary account in all material respects.
(x) This Merger Agreement, the Boulevard Reports and Schedule 14
hereto, taken together as a whole, do not contain any untrue statement
of a material fact relating to Boulevard and the Subsidiaries or omit a
material fact necessary to make the statements relating to Boulevard
and the Subsidiaries contained herein or therein not misleading. There
is no fact known to Boulevard and the Subsidiaries which has not been
disclosed to Parent pursuant to this Merger Agreement and Schedule 14
hereto and the Boulevard Reports, all taken together as a whole, which
may reasonably be expected to result in a Material Adverse Effect.
(y) As of the date hereof, Boulevard is not aware of any reason that
the regulatory approvals specified in Section 12(d) and required to be
obtained by Parent would not be obtained.
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15. Action by Boulevard Pending Effective Date. Boulevard agrees that
from the date of this Merger Agreement until the earlier of the Effective
Date or the time that this Merger Agreement is terminated, except as
disclosed on Schedule 15 or with the prior written permission of Parent:
(a) Beginning on the date hereof and for each succeeding calendar
quarter thereafter prior to that calendar quarter in which the
Effective Date shall occur, Boulevard:
(i) will not declare or pay any dividends or make any
distributions on shares of Boulevard Common, except dividends which
shall not exceed $0.05 per share in cash per calendar quarter.
(ii) except as hereinbelow provided, will not declare or pay any
dividends or make any distributions in any amount on Boulevard
Common in the calendar quarter in which the Effective Date shall
occur and in which the shareholders of Boulevard are entitled to
receive regular quarterly dividends on the shares of Parent Common
into which the shares of Boulevard Common have been converted. It is
the intent of this part (ii) to provide that the holders of
Boulevard Common will receive either the payment of dividends on
their shares of Boulevard Common as permitted under (a)(i) of this
Section 15 or the payment of cash dividends as the holders of shares
of Parent Common received in exchange for the shares of Boulevard
Common for the calendar quarter during which the Effective Date
shall occur, but will not receive and will not become entitled to
receive for the same calendar quarter both the payment of a
permitted dividend as shareholders of Boulevard and the payment of a
cash dividend as the holders of the shares of Parent Common received
in exchange for the shares of Boulevard Common. In the event that
Boulevard does not declare and pay permitted dividends on its
Boulevard Common in a particular calendar quarter because of
Boulevard's reasonable expectation that the Effective Date would
occur in said calendar quarter wherein the holders of Boulevard
Common would have become entitled to receive cash dividends for such
calendar quarter on the shares of Parent Common to have been
exchanged for the shares of Boulevard Common, and the Effective Date
does not in fact occur in said calendar quarter, then, as a result
thereof, Boulevard shall be entitled to declare and pay a permitted
dividend (within the limitations of this Section 15) on said shares
of Boulevard Common for said calendar quarter as soon thereafter as
reasonably practicable.
The declaration of any or all dividends within the limitations of
this paragraph shall remain within the discretion of the Board of
Directors of Boulevard.
(b) The business of Boulevard and each of the Subsidiaries shall be
conducted only in, and neither Boulevard nor any of the Subsidiaries
shall take any action except in the ordinary course, on an arms-length
basis and in accordance, in all material respects, with all applicable
laws, rules and regulations and past practices.
(c) Neither Boulevard nor any of the Subsidiaries shall, directly or
indirectly:
(i) issue or sell any additional shares of, or any options,
warrants, conversion privileges or rights of any kind to acquire any
shares of any of its capital stock, except (A) for the sale by
Boulevard of Boulevard Common pursuant to the exercise of the Old
Warrants or the Options, (B) for the issuance by Boulevard of
Boulevard Common in connection with the Boulevard Savings and
Investment Plan or the Boulevard Dividend Reinvestment Plan, or (C)
as a result of its obligations pursuant to fiduciary accounts to
sell issued and outstanding shares of Boulevard Common;
(ii) sell, assign, transfer, mortgage, pledge or encumber any of
its assets (including, without limitation, transfers to any
employees, shareholders or affiliates of Boulevard or any of the
Subsidiaries), except (x) in the ordinary course of business, (y)
liens and encumbrances for current property taxes not yet due and
payable and (z) liens and encumbrances which do not materially
affect the value of, or interfere with the past or future use or
ability to convey, the property subject thereto or affected thereby;
(iii) amend or propose to amend its Certificate or Articles of
Incorporation or Bylaws;
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(iv) split, combine or reclassify any outstanding shares of
capital stock of Boulevard or any of the Subsidiaries, or declare,
set aside or pay any dividend or other distribution payable in cash,
property or otherwise with respect to shares of capital stock of
Boulevard or any of the Subsidiaries, except for payment of regular
quarterly dividends by Boulevard on the Boulevard Common as
permitted by Section 15(a);
(v) redeem, purchase or acquire or offer to acquire, directly or
indirectly, any shares of capital stock of Boulevard or any of the
Subsidiaries or other securities of Boulevard or of any of the
Subsidiaries, except (A) for any shares of Boulevard Common
purchased by Boulevard in connection with the Boulevard Savings and
Investment Plan or the Boulevard Dividend Reinvestment Plan or (B)
the redemption of the Boulevard Preferred by Boulevard;
(vi) acquire (by merger, exchange, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership, joint
venture or other business organization or division or material
assets thereof;
(vii) except in connection with any liability or obligation
incurred for the purpose of redeeming the Boulevard Preferred,
borrow any amount or incur or become subject to any material
liability, except liabilities incurred in the ordinary course of
business, but in no event will Boulevard or any of the Subsidiaries
enter into any long-term borrowings with a term of greater than one
year, except for certificates of deposit and interest rate swaps, in
each case with terms not to exceed five years;
(viii) make any single or group of related material capital
expenditures or commitment therefor;
(ix) discharge or satisfy any material lien or encumbrance on the
properties or assets of Boulevard or any of the Subsidiaries or pay
any material liability, except in the ordinary course of business;
(x) cancel any material debt or claims or waive any rights of
material value, except in the ordinary course of business; or
(xi) enter into or propose to enter into, or modify or propose to
modify, any agreement, arrangement or understanding with respect to
any of the matters set forth in this Section 15(c); provided,
however, notwithstanding anything herein to the contrary, the
Boulevard Banks may be merged into a single entity, and one of the
Boulevard Banks may, with the OCC's consent, open a branch facility
in Des Plaines, Illinois.
(d) Neither Boulevard nor any of the Subsidiaries shall, directly or
indirectly, enter into or modify any employment, severance or similar
agreements or arrangements with, or grant any bonuses, wage, salary or
compensation increases, or severance or termination pay to, any
director, officer, employee, group of employees or consultant, other
than bonuses, increases or severance arrangements consistent with past
practices.
(e) Neither Boulevard nor any of the Subsidiaries shall adopt or
amend any bonus, profit sharing, stock option, pension, retirement,
deferred compensation, or other employee benefit plan, trust, fund,
contract or arrangement for the benefit or welfare of any employees,
except as required by law or this Merger Agreement.
(f) Each of Boulevard and the Subsidiaries shall use reasonable
efforts to cause its current insurance policies not to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse,
replacement policies providing coverage substantially equal to the
coverage under the canceled, terminated or lapsed policies are in full
force and effect.
(g) Neither Boulevard nor any of the Subsidiaries shall enter into
any settlement or similar agreement with respect to, or take any other
significant action with respect to the conduct of, any action, suit,
proceeding, order or investigation to which Boulevard or any of the
Subsidiaries is a
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party or becomes a party after the date of this Merger Agreement,
without prior consultation with Parent; provided that no such
consultation shall be required for settlement of any action, suit or
proceeding involving less than $100,000.
(h) Each of Boulevard and the Subsidiaries shall use commercially
reasonable efforts to preserve intact in all material respects the
business organization and the goodwill of each of Boulevard and the
Subsidiaries and to keep available the services of its officers and
employees as a group and preserve intact material agreements, and shall
confer on a regular and frequent basis with representatives of Parent,
as reasonably requested by Parent, to report on operational matters and
the general status of ongoing operations.
(i) Neither Boulevard nor any of the Subsidiaries shall take any
action with respect to investment securities held or controlled by any
of them inconsistent with past practices or alter its investment
portfolio duration policy as heretofore in effect without prior
consultation with Parent.
(j) With respect to properties leased by Boulevard or any of the
Subsidiaries, neither Boulevard nor any of the Subsidiaries shall
renew, exercise an option to extend, cancel or surrender any lease of
real property nor allow any such lease to lapse without the consent of
Parent (other than leases with remaining terms of six months or less).
(k) Boulevard will not change its or its Subsidiaries' methods of
accounting in effect as of December 31, 1992, except as required by
changes in generally accepted accounting principles as concurred in by
Price Waterhouse, or change any of its methods of reporting income and
deductions for federal income tax purposes from those employed in the
preparation of Boulevard's federal income tax returns for the taxable
year ending December 31, 1992, except as required by changes in law.
(l) Boulevard will afford Parent, its officers and other authorized
representatives, such access to all books, records, tax returns,
leases, contracts and documents of Boulevard and its Subsidiaries and
will furnish to Parent such information with respect to the assets and
business of Boulevard and its Subsidiaries as Parent may from time to
time reasonably request in connection with this Merger Agreement and
the transactions contemplated hereby.
(m) Boulevard will promptly advise Parent in writing of all material
corporate actions taken by the directors and shareholders of Boulevard,
and furnish Parent with copies of all monthly and other interim
financial statements of Boulevard as they become available.
16. Action by Parent Pending Effective Date. Parent agrees that from the
date of this Agreement until the Effective Date, except with prior written
permission of Boulevard:
(a) Parent will not adopt or implement any amendment to its Articles
of Incorporation (other than an amendment increasing the number of
shares of authorized Parent Common) or any plan of reorganization which
would affect in any manner the terms and provisions of the shares of
Parent Common or the rights of the holders of such shares or reclassify
the Parent Common (it being understood that a plan of reorganization
adopted to effectuate a merger in which additional Parent Common is
issued, but where Parent Common is otherwise not affected, will not
violate this covenant).
(b) Parent will afford Boulevard, its officers and other authorized
representatives, such access to all books, records, bank examination
reports, tax returns, leases, contracts and documents of Parent and its
subsidiaries and will furnish to Boulevard such information with
respect to the assets, earnings and business of Parent and its
subsidiaries as Boulevard may from time to time reasonably request in
connection with this Merger Agreement and the transactions contemplated
hereby.
(c) Parent will not, and will cause its subsidiaries not to, make or
agree to take any action that adversely affects its ability or the
ability of Newco to consummate the transactions contemplated by this
Merger Agreement.
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17. Conditions to Obligations of Parent and Newco. The obligations of
Parent and Newco to effect the Merger are subject, unless waived by Parent,
to the satisfaction of the following conditions on or prior to the
Effective Date:
(a) There shall not have been any change in the consolidated
financial condition, aggregate net assets, shareholders' equity,
business or operating results of Boulevard and its Subsidiaries, taken
as a whole, from June 30, 1993 to the Effective Date that has had or
would reasonably be expected to have a Material Adverse Effect.
(b) Boulevard shall not have paid cash dividends from June 30, 1993
to the Effective Date except as permitted under this Merger Agreement.
(c) All representations by Boulevard contained in this Merger
Agreement shall be true in all material respects at, or as of, the
Effective Date as though such representations were made at and as of
said date, except for changes contemplated by the Merger Agreement, and
except also for representations as of a specified time other than the
Effective Date, which shall be true in all material respects at such
specified time.
(d) Parent shall have received an opinion letter dated as of the
Effective Date addressed to Parent from Wildman, Harrold, Allen &
Dixon, based on customary reliance and subject to customary
qualifications, to the effect that:
(i) Boulevard is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
Boulevard is registered as a bank holding company under the Bank
Holding Company Act.
(ii) Each of the Boulevard Banks is a national banking association
duly organized, validly existing and in good standing under the laws
of the United States.
(iii) The articles of merger required by this Agreement have been
duly authorized and executed by Boulevard.
(iv) Each of the Companies is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation.
(v) Each of Boulevard and the Subsidiaries has the requisite
corporate power and authority (including all licenses, permits and
authorizations) to own and operate its properties and to carry on
its business as now conducted. Each of Boulevard and the
Subsidiaries is licensed or qualified to do business in every
jurisdiction in which the nature of its business or its ownership of
property requires it to be licensed or qualified, except where the
failure to be so licensed or qualified would not have or would not
be reasonably expected to have a Material Adverse Effect.
(vi) The execution and delivery of this Merger Agreement by
Boulevard and the consummation of the transactions contemplated
hereby will not constitute a breach, default or violation under (A)
the respective Certificates of Incorporation or By-laws of Boulevard
or any of the Subsidiaries, (B) any agreement, arrangement or
understanding known to such counsel to which Boulevard or any of the
Subsidiaries is a party, (C) any license, franchise or permit or (D)
any law, regulation, order, judgment or decree known to such
counsel.
(vii) The authorized capital stock of Boulevard consists of (i)
20,000,000 shares of Boulevard Common, of which 7,158,613 shares
were issued and outstanding as of June 30, 1993 and none of which
were treasury shares owned by Boulevard, and (ii) 422,500 shares of
preferred stock of which 100,000 shares of Boulevard Preferred were
issued and outstanding as of the date of this Merger Agreement; all
of the issued and outstanding shares of the capital stock of
Boulevard are duly authorized, validly issued, fully paid and
nonassessable. No holder of the capital stock of Boulevard is
entitled to any preemptive or other similar rights with respect to
the capital stock of Boulevard.
(viii) All of the issued and outstanding shares of each of the
Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable.
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<PAGE>
(ix) Except as set forth in Schedule 14, to the knowledge of such
counsel, there are no actions, suits, proceedings, orders or
investigations pending or threatened against Boulevard or any of the
Subsidiaries, at law or in equity, or before or by any federal,
state or other governmental department, commission, board, bureau,
agency or instrumentality.
(x) Boulevard has the corporate power to consummate the
transactions on its part contemplated by this Merger Agreement.
Boulevard has duly taken all requisite corporate action to authorize
this Merger Agreement and this Merger Agreement has been duly
executed and delivered by Boulevard and constitutes the valid and
binding obligation of Boulevard enforceable in accordance with its
terms, subject as to the enforcement of remedies to applicable
bankruptcy, insolvency, moratorium and other laws affecting the
rights of creditors generally and to judicial limitations on the
enforcement of equitable remedies.
(xi) No authorization, consent or approval of, or filing with any
public body, court or public authority, is necessary for the
consummation by Boulevard or any of the Subsidiaries of the
transactions contemplated hereby which has not been obtained or
made.
(e) Boulevard shall have performed, in all material respects, all
agreements and conditions required by this Merger Agreement to be
performed and satisfied by it at or prior to the Effective Date.
(f) Boulevard shall have furnished Parent a certificate, signed by
the Chairman or President or its Chief Financial Officer and by the
Secretary or Assistant Secretary of Boulevard and dated as of the
Effective Date as to the form of and adoption of the resolution of the
Board of Directors of Boulevard approving the Merger Agreement and the
Merger, and to the effect that the conditions described in Paragraphs
(a), (c) and (e) of this Section 17 have been fully satisfied as to it.
(g) Parent shall have entered into an agreement with Miami
Corporation in form and substance satisfactory to Parent covering the
matters described in Section 10(t).
(h) There shall not be threatened, instituted or pending any action
or proceeding before any court or governmental authority or agency,
domestic or foreign, (i) challenging or seeking to make illegal, or to
delay or otherwise directly or indirectly to restrain or prohibit, the
consummation of the transactions contemplated hereby or seeking to
obtain material damages in connection with the transactions
contemplated hereby, (ii) seeking to prohibit direct or indirect
ownership or operation by Parent of all or a material portion of the
business or assets of Boulevard or any of the Subsidiaries or of Parent
or any of its subsidiaries, or to compel Parent or any of its
subsidiaries or Boulevard or any of the Subsidiaries to dispose of or
to hold separately all or a material portion of the business or assets
of Parent or any of its subsidiaries or of Boulevard or any of the
Subsidiaries, as a result of the transactions contemplated hereby, or
(iii) seeking to require direct or indirect divestiture by Parent of
any of its business or assets or of Boulevard's or the Subsidiaries'
business or assets, but only insofar as any action or proceeding
threatened, instituted or pending by a party other than a governmental
or quasi-governmental authority or agency shall have a reasonable
likelihood of success on the merits with respect thereto.
(i) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction proposed, enacted, entered,
enforced, promulgated, issued or deemed applicable to the transactions
contemplated hereby by any federal, state or other court, government or
governmental authority or agency, which would reasonably be expected to
result, directly or indirectly, in any of the consequences referred to
in paragraph (h) above.
18. Conditions to Obligations of Boulevard. The obligations of Boulevard
to effect the Merger are subject, unless waived by Boulevard, to the
satisfaction on or prior to the Effective Date of the following conditions:
(a) There shall not have been any change in the consolidated
financial condition, aggregate net assets, shareholders' equity,
business, or operating results of Parent and its subsidiaries, taken as
a whole, from June 30, 1993 to the Effective Date that has had or would
reasonably be expected to have a Material Adverse Effect.
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<PAGE>
(b) All representations by Parent and Newco contained in this Merger
Agreement shall be true in all material respects at, or as of, the
Effective Date as though such representations were made at and as of
said date, except for changes contemplated by this Merger Agreement,
and except also for representations as of a specified time other than
the Effective Date, which shall be true in all material respects at
such specified time.
(c) Boulevard shall have received an opinion letter dated as of the
Effective Date addressed to Boulevard from Michael J. O'Rourke, Esq.,
Executive Vice President and General Counsel of Parent, based on
customary reliance and subject to customary qualifications, to the
effect that:
(i) Parent is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. Newco
is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Each of Parent and
Newco is registered as a bank holding company under the Bank Holding
Company Act.
(ii) Each of Parent and Newco has the corporate power to
consummate the transactions on its part contemplated by this
Agreement. Each of Parent and Newco has taken all requisite
corporate action to authorize this Agreement, and this Agreement has
been duly executed and delivered by Parent and Newco and constitutes
the valid and binding obligation of each of Parent and Newco
enforceable in accordance with its terms, subject as to the
enforcement of remedies to applicable bankruptcy, insolvency,
moratorium and other laws affecting the rights of creditors
generally and to judicial limitations on the enforcement of
equitable remedies.
(iii) The articles of merger required by this Agreement have been
duly authorized and executed by Parent and Newco.
(iv) The execution and delivery of this Agreement by Parent and
Newco and the consummation of the transactions contemplated hereby
will not constitute a breach, default or violation under (A)
Parent's or Newco's Certificates of Incorporation or By-laws, (B)
any agreement, arrangement or understanding known to such counsel to
which Parent or Newco is a party, (C) any license, franchise or
permit or (D) any law, regulation, order, judgment or decree known
to such counsel.
(v) No authorization, consent or approval of, or filing with, any
public body, court or authority is necessary for the consummation by
Parent of the transactions contemplated hereby which has not been
obtained or made.
(vi) The shares of Parent Common Stock to be issued pursuant to
this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable.
(d) Parent and Newco shall have performed, in all material respects,
all agreements and conditions required by this Merger Agreement to be
performed and satisfied by it at or prior to the Effective Date.
(e) Boulevard shall have received opinions from Goldman, Sachs & Co.
dated as of the date of this Merger Agreement and as of the date of the
Proxy Statement, to the effect that, in the opinion of such firm, the
terms of this Merger Agreement are fair to the holders of Boulevard
Common, and the letter opinion shall be in effect as of the date this
Merger Agreement is approved by Boulevard's shareholders.
(f) Parent shall have furnished Boulevard a certificate, signed by
the Chairman or President or an Executive Vice President and by the
Secretary or Assistant Secretary of Parent and dated as of the
Effective Date certifying as to the form of and adoption of the
resolution of the Board of Directors of Parent approving the Merger
Agreement and the Merger, and to the effect that the conditions
described in Paragraphs (a), (b), and (d) of this Section 18 have been
fully satisfied as to it.
(g) As of the Effective Date, no suit, action or proceeding shall be
pending or overtly threatened before any court or other governmental
agency by the federal or state government in which it is
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<PAGE>
sought to restrain or prohibit consummation of the Merger, and no other
third party suit, action or proceeding shall be pending or overtly
threatened and no liability or claim shall have been asserted against
Parent, Newco or any of its subsidiaries which Boulevard shall in good
faith determine, with advice of counsel (i) has a reasonable likelihood
of being successfully prosecuted and (ii) if successfully prosecuted,
would materially and adversely affect the benefits hereunder intended
for Boulevard and its shareholders.
19. Conditions to Obligations of All Parties. In addition to the
provisions of Sections 17 and 18 hereof, the obligations of Parent and
Boulevard to effect the Merger shall be subject to the satisfaction of the
following conditions on or prior to the Effective Date:
(a) The parties hereto shall have received all necessary approvals of
governmental agencies and authorities of the transactions contemplated
by this Merger Agreement and each of such approvals shall remain in
full force and effect at the Effective Date. Parent and Boulevard shall
notify the other party promptly upon receipt of all necessary
governmental approvals. At the Effective Date, (i) no party hereto
shall be subject to any order, decree or injunction of a court or
governmental agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger; and (ii) no statute, rule,
regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any governmental authority which
prohibits or makes illegal consummation of the Merger.
(b) The registration statement required to be filed by Parent
pursuant to Section 10(d) of this Merger Agreement shall have become
effective by an order of the Securities and Exchange Commission, the
shares of Parent Common to be exchanged in the Merger shall have been
qualified or exempted under all applicable state securities laws, and
there shall have been no stop order issued or threatened by the
Securities and Exchange Commission that suspends or would suspend the
effectiveness of the registration statement, and no proceeding by the
Securities and Exchange Commission shall have been commenced, pending
or overtly threatened for such purpose.
(c) This Merger Agreement and the Merger shall have been duly
approved and adopted by the requisite affirmative vote of the
shareholders of Boulevard.
(d) The shares of Parent Common to be issued to the holders of
Boulevard Common shall be listed for trading on the Exchange.
(e) Wildman, Harrold, Allen & Dixon shall have issued its written
opinion, dated as of the day of the Effective Date, satisfactory to
Boulevard, substantially to the effect set forth in clauses (a) through
(e) of Section 11 of this Merger Agreement and there shall exist as of,
at or immediately prior to the Effective Date, no facts or
circumstances which would render such opinion inapplicable in any
respect to the transactions to be consummated hereunder.
20. Indemnification.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, administrative or criminal
(collectively, such events are referred to singularly and collectively
as a "Proceeding(s)") asserted or arising before or after the Effective
Date in which any person who is now, or has been at any time prior to
the date hereof, or who becomes prior to the Effective Date, a
director, officer or employee of Boulevard or any of its subsidiaries
(individually an "Indemnified Party" and collectively the "Indemnified
Parties") is, or is threatened to be, made a party, based in whole or
in part on, or arising in whole or in part out of, or pertaining to (i)
this Merger Agreement, (ii) any of the transactions contemplated
hereby, or (iii) by reason of the fact that such Indemnified Party was
a director, officer or employee, fiduciary or agent of Boulevard at any
time on or before the Effective Date (collectively, the "Transactions
and Events"), the parties hereto agree to cooperate and use their best
efforts to defend against and respond to such Proceeding(s).
(b) It is understood and agreed that, upon the Merger becoming
effective, Parent shall indemnify and hold harmless, to the fullest
extent permitted by Delaware Law, each Indemnified
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Party against any and all losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses), judgments
and fines, and amounts paid in settlement, in connection with any
threatened or actual Proceeding(s) based, in whole or in part, or
arising in whole or in part, out of or pertaining to the Transactions
and Events (but only to the extent permitted by Delaware Law) and,
without limiting the foregoing, in the event of any such threatened or
actual Proceeding(s) (whether asserted or arising before or after the
Effective Date), (i) Parent shall pay expenses in advance of the final
disposition of any Proceeding(s) to each Indemnified Party to the
fullest extent permitted by applicable law, and (ii) Parent shall use
its best efforts to assist in the vigorous defense of any such
Proceeding(s); provided that Parent shall not be liable for any
settlement effected without its prior written consent (which consent
shall not be unreasonably withheld). Any Indemnified Party wishing to
claim indemnification under this Section 20 shall, upon learning of any
such Proceeding(s), notify Parent thereof, provided that the failure so
to notify shall not affect the obligations of Parent under this Section
20 except to the extent such failure materially prejudices it.
(c) Parent shall insure that all rights to indemnification and all
limitations of liability existing in favor of the Indemnified Parties
as provided in Boulevard's Certificate of Incorporation and By-laws, or
similar governing documents of any of its subsidiaries, as in effect as
of the date hereof with respect to claims or liabilities arising from
facts or events existing or occurring prior to the Effective Date shall
survive the Merger and shall continue in full force and effect, without
any amendment thereto, for a period of not less than six (6) years from
the Effective Date; provided, however, that all rights to
indemnification in respect of any claim asserted or made within such
period shall continue until the final disposition of such claim.
(d) The obligations of Parent under this Section 20 are intended to
be the continuing and joint and several obligations of Parent and the
Surviving Corporation and to benefit, and be enforceable against Parent
and the Surviving Corporation directly by, the Indemnified Parties, and
shall be binding on all respective successors and permitted assigns of
Parent and the Surviving Corporation.
(e) In the event Parent or the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger, or (ii) transfers or conveys
all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of Parent or the Surviving Corporation, as the
case may be, assumed the obligations set forth in this Section 20.
21. Non-Survival of Representations and Warranties. The respective
representations and warranties of Boulevard contained in this Merger
Agreement shall not survive the Effective Date.
22. Governing Law. This Merger Agreement shall be construed and
interpreted according to the applicable laws of the State of Illinois,
except as the laws of the State of Delaware are expressly applicable to the
Merger.
23. Assignment. This Merger Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Merger
Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent
of the other parties.
24. Satisfaction of Conditions; Termination.
(a) Parent and Newco agree to use all reasonable efforts to promptly
obtain satisfaction of the conditions of this Merger Agreement insofar
as they relate to Parent and Newco, and Boulevard agrees to use all
reasonable efforts to promptly obtain the satisfaction of the
conditions of this Merger Agreement insofar as they relate to
Boulevard, and in each case as soon as possible; provided, however,
that in the case of Boulevard no action shall be required to be taken
or not taken if such action or inaction, respectively, would, in the
determination of the Board of Boulevard based upon a written opinion of
counsel to Boulevard (a copy of which opinion shall be delivered to
Parent), be inconsistent with the Board's fiduciary duties to the
Boulevard shareholders.
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(b) This Merger Agreement may be terminated at any time prior to the
Effective Date, whether before or after approval of the Merger by
Boulevard's shareholders, upon the occurrence of any of the following
by written notice from Parent to Boulevard, or by written notice from
Boulevard to Parent as the case may be as follows:
(i) by (A) either Parent or Boulevard, if any of the conditions to
such party's obligation to consummate the transactions contemplated
in Section 19 hereof shall have become impossible to satisfy; (B) by
Parent if any of the conditions to its obligation to consummate the
transactions contemplated in Section 17 hereof shall have become
impossible to satisfy; and (C) by Boulevard if any of the conditions
to its obligation to consummate the transactions contemplated in
Section 18 hereof shall have become impossible to satisfy;
(ii) by Parent if the information provided pursuant to Boulevard's
obligation to update Schedule 14 contained in Section 10(p)
discloses matters that, in the aggregate, have or would reasonably
be expected to have a Material Adverse Effect;
(iii) by either Parent or Boulevard, if this Merger Agreement and
the Merger are not duly approved by the shareholders of Boulevard at
a meeting of shareholders (or any adjournment thereof) duly called
and held for such purposes; and
(iv) by either Parent or Boulevard if the Effective Date is not on
or before September 30, 1994 (unless the failure to consummate the
Merger by such date shall be due to the action or failure to act of
the party seeking to terminate this Merger Agreement in breach of
such party's obligations under this Merger Agreement).
(v) by either Parent or Boulevard in the event of a material
breach of any covenant contained in this Merger Agreement that is
not cured within thirty (30) days of the time that written notice of
such breach is received by such other party from the party giving
notice.
(c) This Merger Agreement may be terminated and abandoned (whether
before or after approval of the Merger by Boulevard's shareholders) by
mutual written consent of Boulevard, Newco and Parent.
(d) In the event of termination of this Merger Agreement caused
otherwise than by a willful breach of this Merger Agreement by any of
the parties hereto, this Merger Agreement shall cease and terminate,
the acquisition of Boulevard as provided herein shall not be
consummated, and none of Parent, Newco nor Boulevard shall have any
liability to any other party under this Merger Agreement of any nature
whatever, including without limitation, any liability for damages,
except for Parent's obligations related to the printing of the proxy
solicitation materials, provided, however, that the duties of Parent
and Newco with respect to confidential information as set forth in
Section 10(f) shall survive any such termination. If the Merger is not
consummated as the result of termination of this Merger Agreement
caused otherwise than by willful breach of a party hereto, Parent,
Newco and Boulevard each shall pay its own fees and expenses incident
to the negotiation, preparation and execution of this Merger Agreement,
the respective shareholders' meetings and actions of the parties and
all other acts incidental to, contemplated by or in pursuance of the
transactions contemplated by this Merger Agreement, including fees and
expenses of their respective counsel, accountants and other experts and
advisors.
(e) If termination of this Merger Agreement shall be judicially
determined to have been caused by willful breach of this Merger
Agreement, then, in addition to other remedies at law or equity for
breach of this Merger Agreement, the party so found to have willfully
breached this Merger Agreement shall indemnify the other parties for
their respective costs, fees and expenses of their counsel, accountants
and other experts and advisors as well as fees and expenses incident to
negotiation, preparation and execution of this Merger Agreement and
related documentation and their shareholders' meetings and consents.
25. Waivers; Amendments. Any of the provisions of this Merger Agreement
may be waived at any time by the party which is, or the shareholders of
which are, entitled to the benefit thereof, provided,
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however, such waiver, if material to Boulevard or its shareholders, may be
made only following due authorization by the Board of Directors of
Boulevard. This Merger Agreement may be amended or modified in whole or in
part by an agreement in writing executed in the same manner (but not
necessarily by the same persons) as this Merger Agreement and which makes
reference to this Merger Agreement, provided, however, such amendment or
modification may be made only following due authorization by the respective
Boards of Directors of Boulevard, Newco and Parent; provided, further,
however, that after a favorable vote by the shareholders of Boulevard any
such action shall be taken by Boulevard only if, in the opinion of its
Board of Directors, such amendment or modification will not have any
material adverse effect on the benefits intended under this Merger
Agreement for the shareholders of Boulevard and will not require
resolicitation of any proxies from such shareholders.
26. Entire Agreement. Subject to the exceptions noted in the next
following sentence, this Merger Agreement supersedes any other agreement,
whether written or oral, that may have been made or entered into on or
prior to the date hereof by Boulevard, Newco and Parent or by any officer
or officers of such parties relating to the acquisition of the business or
the capital stock of Boulevard and/or its Subsidiaries by Parent or Newco
(other than the Warrant Agreement dated the date hereof between Parent and
Boulevard). Except for such Warrant Agreement the Exhibits and Schedules
hereto and any attachments thereto, this Merger Agreement constitutes the
entire agreement by the parties, and there are no agreements or commitments
except as set forth herein and therein.
27. Captions; Counterparts. The captions in this Merger Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Merger Agreement.
This Merger Agreement may be executed in several counterparts, each of
which shall constitute one and the same instrument.
28. Materiality. Unless the context otherwise requires, any reference in
this Merger Agreement to "material" or "materiality" with respect to any
party shall be deemed to be with respect to such party and its
subsidiaries, taken as a whole.
29. Notices. All notices and other communications hereunder shall be in
writing and be deemed to have been given (i) one business day after
delivery to a nationally recognized overnight courier service for overnight
delivery, or (ii) three days after being mailed, certified mail, return
receipt requested, postage prepaid, or (iii) upon being sent by facsimile
transmission. Notice to Parent shall be deemed to be notice to Newco.
(a) If to Parent, to:
First Bank System, Inc.
First Bank Place
601 Second Avenue South
Minneapolis, MN 55402-4302
Attn: Richard A. Zona
Vice Chairman and Chief Financial Officer
Fax Number: 1-612-973-4072
With a required copy to:
Dorsey & Whitney
220 South Sixth Street
Minneapolis, MN 55402-1498
Attn: Lee R. Mitau
Fax Number: 1-612-340-8738
(b) If to Boulevard, to:
BOULEVARD BANCORP, INC.
410 North Michigan Avenue
Chicago, Illinois 60611
A-31
<PAGE>
Attention: Charles E. Schroeder, Chairman
Fax Number: 1-312-644-7868
With a required copy to:
WILDMAN, HARROLD, ALLEN & DIXON
225 West Wacker Drive
Chicago, Illinois 60606-1229
Attention: Sheldon P. Migdal
Fax Number: 1-312-201-2555
IN WITNESS WHEREOF, this Merger Agreement and Plan of Reorganization has been
executed the day and year first above written.
Attest: First Bank System, Inc.
/s/ Lee R. Mitau /s/ Richard A. Zona
- ------------------------------------- By:----------------------------------
Attest: Boulevard Bancorp, Inc.
/s/ Lawrence J. Schmidt /s/ Charles E. Schroeder
- ------------------------------------- By:----------------------------------
Attest: BBI Acquisition Corp.
/s/ Lee R. Mitau /s/ Richard A. Zona
- ------------------------------------- By:----------------------------------
LIST OF EXHIBITS AND SCHEDULES OMITTED:
Exhibit A
--
Subsidiaries of Boulevard other than Banking Subsidiaries and
Boulevard Technical Services, Inc.
Exhibit B
-- Form of "Affiliate" Letter.
Schedule
8(h)
-- Index Group and Weightings.
Schedule
14
-- Exceptions to Section 14 of Merger Agreement.
Schedule
15
-- Exceptions to Section 15 of Merger Agreement.
A-32
<PAGE>
APPENDIX B
[Letterhead of Goldman, Sachs & Co.]
[ ], 1994
Board of Directors
Boulevard Bancorp, Inc.
410 North Michigan Avenue
Chicago, Illinois 60611-4181
Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $0.04 per share (the "Shares"),
of Boulevard Bancorp, Inc. (the "Company") of the exchange ratio of 0.8132
shares of Common Stock, par value $1.25 per share (the "First Bank System
Common Stock"), of First Bank System, Inc. ("First Bank System") to be received
for each Share (the "Exchange Ratio") pursuant to the merger (the "Merger")
contemplated by the Merger Agreement and Plan of Reorganization dated as of
September 29, 1993, among First Bank System, BBI Acquisition Corp., a wholly-
owned subsidiary of First Bank System, and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services
to the Company from time to time, including having acted as managing
underwriter for the initial offering of common stock of the Company to the
public (the "Initial Public Offering") in 1986, and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We are also familiar with First Bank
System having provided certain investment banking services to First Bank System
from time to time, including having acted as co-manager in a public offering of
the Series 1989A and Series 1989B cumulative preferred stock of First Bank
System in 1989, and may provide investment banking services to First Bank
System in the future. Goldman, Sachs & Co. is a full service securities firm
and in the course of its trading activities it may from time to time effect
transactions and hold positions in securities of the Company and First Bank
System.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Warrant Agreement dated September 29, 1993, between First Bank
System and the Company; [the Registration Statement on Form S-4, including the
Proxy Statement/Prospectus relating to the Special Meeting of Stockholders of
the Company to be held in connection with the Agreement]; Annual Reports to
Stockholders and Annual Reports on Form 10-K of the Company and First Bank
System for the five fiscal years ended December 31, 1992; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company and
First Bank System; certain other communications from the Company and First Bank
System to their respective stockholders; and certain internal financial
analyses and forecasts for the Company and First Bank System prepared by their
respective managements. We also have held discussions with members of the
senior management of the Company and First Bank System regarding the past and
current business operations, financial condition and future prospects of their
respective companies. We also have reviewed with members of senior management
of the Company the results of the Company's due diligence examination
B-1
<PAGE>
of First Bank System. We also have held discussions with the independent
auditors of each of the Company and First Bank System regarding the financial
and accounting affairs of the Company and First Bank System. In addition, we
have reviewed the reported price and trading activity for the Shares and First
Bank System Common Stock and compared certain financial and stock market
information for the Company and First Bank System with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the banking
industry specifically and in other industries generally and performed such
other studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed, with your consent,
that the financial and operating forecasts, including, without limitation,
projected cost savings and operating synergies resulting from the Merger and
projections regarding under performing and non-performing assets and net
charge-offs have been reasonably prepared on a basis reflecting the best
currently available judgments and estimates of the Company and First Bank
System and will be realized in the amounts and at the times contemplated
thereby. We are not experts in the evaluation of loan portfolios for purposes
of assessing the adequacy of the allowances for losses with respect thereto and
have assumed, with your consent, that such allowances for each of the Company
and First Bank System are in the aggregate adequate to cover all such losses.
In addition, we have not reviewed individual credit files nor have we made an
independent evaluation or appraisal of the assets and liabilities of the
Company or First Bank System or any of their respective subsidiaries and we
have not been furnished with any such evaluation or appraisal.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair to the holders of the Shares.
B-2
<PAGE>
APPENDIX C
INDEX GROUP AND WEIGHTING FACTORS
PURSUANT TO SECTION 8(H)(II) OF MERGER AGREEMENT
<TABLE>
<CAPTION>
WEIGHTING
INDEX COMPANY FACTOR
- ------------- ---------
<S> <C>
BANC ONE Corp......................................................... 10.16%
Bancorp Hawaii........................................................ 0.86
BankAmerica Corp...................................................... 12.36
Bank of Boston........................................................ 1.90
Barnett Banks, Inc.................................................... 3.17
Comerica.............................................................. 2.44
CoreStates Financial.................................................. 2.50
First Interstate...................................................... 3.60
First Security........................................................ 0.81
First Union Corp...................................................... 5.79
Fleet Financial Group................................................. 3.50
KeyCorp............................................................... 2.82
Mellon Bank........................................................... 2.57
National City......................................................... 3.15
NationsBank........................................................... 9.34
NBD Bancorp........................................................... 3.92
Norwest Corp.......................................................... 5.74
PNC Financial......................................................... 5.16
Shawmut National...................................................... 1.75
Society Corp.......................................................... 2.77
SunTrust Banks........................................................ 3.98
U.S. Bancorp.......................................................... 1.89
Wachovia Corp......................................................... 4.75
Wells Fargo & Co...................................................... 5.08
------
100.00%
======
</TABLE>
C-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<S> <C> <C>
8.1 Opinion and consent of Wildman, Harrold, Allen & Dixon as to certain federal
income tax consequences described in the Proxy Statement/Prospectus.
23.2 Consent of Wildman, Harrold, Allen & Dixon. (Included in Exhibit 8.1.)
99.3 Form of proxy for Special Meeting of shareholders of Boulevard Bancorp, Inc.
</TABLE>
II-1
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
MINNEAPOLIS, STATE OF MINNESOTA, ON JANUARY 21, 1994.
First Bank System, Inc.
/s/ John F. Grundhofer
By __________________________________
John F. Grundhofer
Chairman, President and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE AND TITLE DATE
------------------- ----
<S> <C>
/s/ John F. Grundhofer
- -------------------------------------------
John F. Grundhofer, January 21, 1994
Chairman, President, Chief Executive
Officer
and Director (principal executive officer)
/s/ Richard A. Zona
- -------------------------------------------
Richard A. Zona, January 21, 1994
Vice Chairman and Chief Financial Officer
(principal financial officer)
/s/ Susan E. Lester
- -------------------------------------------
Susan E. Lester, January 21, 1994
Executive Vice President and Controller
(principal accounting officer)
Coleman Bloomfield*
- -------------------------------------------
Coleman Bloomfield, Director January 21, 1994
- -------------------------------------------
Roger L. Hale, Director
John H. Kareken*
- -------------------------------------------
John H. Kareken, Director January 21, 1994
Richard L. Knowlton*
- -------------------------------------------
Richard L. Knowlton, Director January 21, 1994
Kenneth A. Macke*
- -------------------------------------------
Kenneth A. Macke, Director January 21, 1994
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE AND TITLE DATE
------------------- ----
<S> <C>
Thomas F. Madison*
- -------------------------------------------
Thomas F. Madison, Director January 21, 1994
Marilyn C. Nelson*
- -------------------------------------------
Marilyn C. Nelson, Director January 21, 1994
Will F. Nicholson, Jr.*
- -------------------------------------------
Will F. Nicholson, Jr., Director January 21, 1994
Nicholas R. Petry*
- -------------------------------------------
Nicholas R. Petry, Director January 21, 1994
Edward J. Phillips*
- -------------------------------------------
Edward J. Phillips, Director January 21, 1994
James J. Renier*
- -------------------------------------------
James J. Renier, Director January 21, 1994
- -------------------------------------------
S. Walter Richey, Director
Richard L. Robinson*
- -------------------------------------------
Richard L. Robinson, Director January 21, 1994
Richard L. Schall*
- -------------------------------------------
Richard L. Schall, Director January 21, 1994
Lyle E. Schroeder*
- -------------------------------------------
Lyle E. Schroeder, Director January 21, 1994
</TABLE>
/s/ Susan E. Lester
*By__________________________________
Susan E. Lester,
Pro se and as Attorney-in-Fact
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
8.1 Opinion and consent of Wildman, Harrold, Allen & Dixon as to certain federal
income tax consequences described in the Proxy Statement/Prospectus.
23.2 Consent of Wildman, Harrold, Allen & Dixon. (Included in Exhibit 8.1.)
99.3 Form of proxy for Special Meeting of shareholders of Boulevard Bancorp, Inc.
</TABLE>
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF WILDMAN, HARROLD, ALLEN & DIXON]
January 21, 1994
BOULEVARD BANCORP, INC.
410 North Michigan Avenue
Chicago, IL 60611
THE SHAREHOLDERS OF BOULEVARD BANCORP, INC.
c/o Secretary
410 North Michigan Avenue
Chicago, IL 60611
Gentlemen:
You have requested our opinion as to the federal income tax consequences of
the merger (the "Merger") of BBI Acquisition Corp. ("Newco"), a wholly owned
subsidiary of First Bank System, Inc. ("Parent"), into Boulevard Bancorp, Inc.
("Company"). The Merger will be effected pursuant to the Merger Agreement and
Plan of Reorganization by and among Boulevard Bancorp, Inc., First Bank System,
Inc. and BBI Acquisition Corp. (the "Agreement"), dated as of September 29,
1993.
For purposes of our opinion, we have examined the Agreement and such other
records, documents and instruments, and have considered such matters of law, as
in our judgment were necessary or appropriate. In our examination, we have
assumed the genuineness of all signatures, the legal capacity of all natural
persons, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as photocopies
and the authenticity of the originals of such copies. In addition, in rendering
our opinion, we have relied on certain representations made to us by the
management of Parent and Company. Although we have not independently
investigated the accuracy of such representations, we are aware of no
misstatement of a material fact contained therein or of any omission to state a
material fact necessary to make the statements therein not misleading. Any
failure of the representations to be accurate or any change after the date
hereof in the law applicable to the Merger, could adversely affect our opinion.
Based on the foregoing, it is our opinion that:
(1) The merger will constitute a reorganization within the meaning of Section
368(a)(1)(A) and (a)(2)(E) of the Internal Revenue Code of 1986, as
amended (the "Code");
<PAGE>
(2) No gain or loss will be recognized by Company in the Merger;
(3) Pursuant to Section 354(a)(1) of the Code, each Company stockholder will
recognize no gain or loss upon his exchange of Company Common Stock ($.04
par value per share) in the Merger for shares of Parent Common Stock ($1.25
par value per share) pursuant to the Agreement (disregarding for this
purpose any cash received for fractional share interests to which they may
be entitled);
(4) Pursuant to Section 358(a)(1) of the Code, each Company stockholder's basis
in his Parent Common Stock received in the Merger in exchange for Company
Common Stock will in the aggregate be the same as the aggregate basis of
the Company Common Stock surrendered in exchange therefor (disregarding
for this purpose any stock for which cash was received for fractional
share interests to which they may be entitled); and
(5) Pursuant to Section 1223(1) of the Code, each Company stockholder's
holding period for his Parent Common Stock received in the Merger will
include the period during which the Company Common Stock surrendered in
the Merger was held, provided that the Company Common Stock surrendered
is held as a capital asset at the time of the Merger.
This opinion relates solely to the federal income tax consequences of the
Merger and no opinion is expressed as to the tax consequences under any foreign,
state or local tax law.
We hereby consent to the use of this opinion as an Exhibit to Registration
Statement No. 33-51383 on Form S-4 filed by First Bank System, Inc. and to the
use of our name under the heading "Certain Federal Income Tax Consequences to
Boulevard Shareholders" in the Prospectus/Proxy Statement included therein.
Sincerely,
WILDMAN, HARROLD, ALLEN
& DIXON
By: /s/ SHELDON P. MIGDAL
-----------------------
Sheldon P. Migdal
SPM/rlr
<PAGE>
Exhibit 99.3
FRONT OF CARD
PROXY
Boulevard Bancorp, Inc. SPECIAL MEETING OF SHAREHOLDERS
410 North Michigan Avenue ----------------------, 1994
Chicago, Illinois 60611
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Richard T. Schroeder and George H. Cook, Jr. as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of Boulevard Bancorp, Inc. (BBI) held of record by the undersigned on
_________, 1994, at a special meeting of shareholders to be held on __________,
1994 or any adjournment thereof (the "Special Meeting").
Please complete, date and sign this proxy ON THE REVERSE SIDE and mail this
proxy in the enclosed postage-prepaid envelope. All proxies are important, so
please complete each proxy sent to you and return the proxy in the envelope
provided.
<PAGE>
REVERSE OF CARD
X Please mark your votes as in this example.
----------
This proxy when properly executed will be voted as directed by the undersigned
shareholder, but if no instructions are made, this proxy will be voted for the
proposals as stated. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the Special Meeting. At
the present time, the Board of Directors knows of no other business to be
presented at the Special Meeting. The undersigned acknowledges receipt from
BBI, prior to the execution of this proxy, of notice of the Special Meeting and
a proxy statement/prospectus dated ____________________________________, 1994.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
FOR WITHHELD ABSTAIN
1. Merger Agreement and Plan of Reorganization ----- ------ -----
by and among BBI, First Bank System, Inc.
("FBS"), and BBI Acquisition Corp. ("Newco"),
dated September 29, 1993, pursuant to which
BBI would be acquired by FBS by means of a
merger of Newco with and into BBI and each
outstanding share of Common Stock, par value
$.04 per share, of BBI would be converted
into .8132 shares of Common Stock, par value
$1.25, of FBS.
2. The adjournment of the Special Meeting to ----- ------ -----
permit further solicitations of proxies in
the event there are not sufficient votes at
the time of the Special Meeting to approve
the Merger Agreement.
SIGNATURE(S) ___________________________ DATE(S) ____________
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
